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REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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GEO SPECIALTY CHEMICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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OHIO 2819 34-1708689
(State or Other Jurisdiction of 3295 (I.R.S. Employer
Incorporation or Organization) (Primary Standard Industrial Identification Number)
Classification Code Number)
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GEORGE P. AHEARN
GEO SPECIALTY CHEMICALS, INC.
28601 CHAGRIN BOULEVARD, SUITE 210
CLEVELAND, OHIO 44122
(216) 464-5564
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Principal Executive Offices and Agent For Service)
Copies to:
CRAIG R. MARTAHUS, ESQ.
THOMPSON HINE & FLORY LLP
3900 KEY CENTER
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114
(216) 566-5500
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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 to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title Of Each Proposed Maximum Amount Of
Class Of Securities Aggregate Offering Registration
To Be Registered Price (1) Fee
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10 1/8% Senior Subordinated Notes due 2008...... $120,000,000 $33,360
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE 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 OR UNTIL THIS 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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Subject to completion, dated December 31, 1998
PROSPECTUS
GEO SPECIALTY CHEMICALS
EXCHANGE OFFER FOR
$120,000,000
10 1/8% SENIOR SUBORDINATED
NOTES DUE 2008
GEO Specialty Chemicals, Inc. is offering to exchange 10 1/8% Senior
Subordinated Notes due 2008 for its outstanding 10 1/8% Senior Subordinated
Notes due 2008. The offered notes are identical to the outstanding notes, except
that the offered notes have been registered under the federal securities laws
and will not bear any legend restricting their transfer. The offered notes will
represent the same debt as the outstanding notes and will be issued under the
same Indenture. The principal features of the Exchange Offer are as follows:
- - Expires 12:00 midnight, Eastern Standard Time, on , 1999,
unless extended
- - All outstanding notes that are validly tendered and not validly withdrawn will
be accepted for exchange
- - Tenders must be made through the enclosed Letter of Transmittal or as
otherwise specified in this Prospectus
- - Subject to sole condition that the Exchange Offer not violate applicable law
or any Securities and Exchange Commission position
- - Tenders may be withdrawn at any time before the expiration of the Exchange
Offer
- - GEO will not receive any proceeds from the Exchange Offer, but is making the
Exchange Offer to comply with contractual obligations
- - The exchange of notes in the Exchange Offer should be a tax-free event for
United States federal tax purposes
- - The offered notes will not be listed on any securities exchange or automated
quotation system
Broker-dealers receiving offered notes in exchange for outstanding notes
acquired for their own account through market-making or other trading activities
must deliver a prospectus in any resale of the offered notes. For 60 days after
the expiration of the Exchange Offer, GEO will make this Prospectus available to
broker-dealers for use in such resales.
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SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT YOU SHOULD CONSIDER BEFORE MAKING AN INVESTMENT IN THE OFFERED NOTES.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1999
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WHERE YOU CAN FIND MORE INFORMATION ABOUT GEO
As a result of filing a registration statement for the offered notes with
the Securities and Exchange Commission (the "SEC"), GEO will become subject to
the filing requirements of the Securities Exchange Act of 1934. In accordance
with such requirements, GEO will file periodic and other reports with the SEC.
You can obtain these materials in any of the following ways:
- GEO will furnish you with copies of these materials within 15 days
after they are filed with
the SEC, as long as any of the offered notes are outstanding;
- you can inspect and copy these materials at the SEC's Public
Reference Room located at 450 Fifth Street, N.W., Washington, D.C.
20549 (information on the operation of the SEC's
Public Reference Room can be obtained by calling the SEC at
1-800-SEC-0330);
- you can inspect and copy these materials at the SEC's regional
offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60611 and 7 World Trade Center, 13th Floor, New York, New
York 10048;
- you can obtain copies of these materials (at prescribed rates) by
writing to the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549; and
- you can view and obtain copies of these materials from the SEC's
website on the Internet located at http://www.sec.gov.
In accordance with the rules of the SEC, this Prospectus excludes certain
portions of GEO's registration statement for the offered notes, including the
exhibits and schedules. The registration statement has been filed with the SEC
and may be examined (without charge) and copied (at prescribed rates) at the
public reference facilities of the SEC listed above. In addition, statements
made in this Prospectus as to the contents of any agreement or other document
are summaries only and not necessarily complete. You should refer to the
complete copies of such agreements and documents, which have been filed with the
registration statement, for complete descriptions of the particular topics.
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PROSPECTUS SUMMARY
The following summary highlights selected information from this Prospectus
and may not contain all of the information that is important to you. This
Prospectus contains a more complete description of the offered notes, as well as
detailed financial data and information regarding GEO's business. You should
read this Prospectus in its entirety before deciding whether to make an
investment in the offered notes.
GEO'S BUSINESS
GEO develops, manufactures and markets a wide variety of specialty
chemicals. Through the implementation of a "buy and build" strategy, GEO has
successfully positioned itself as a leading supplier of a broad variety of niche
products sold to a diverse customer and market base. GEO manufactures over 300
products sold to major industrial customers for such diverse end-use
applications as water treatment, pulp and paper processing, oil and gas
production, coatings and construction. GEO believes that it has a significant
operating advantage due to its extensive network of plants and versatility to
produce a broad range of products. For the nine months ended September 30, 1998,
on a pro forma basis GEO generated net sales of $110.5 million and EBITDA (as
defined below on page 9) of $18.8 million.
GEO manages its products within two primary operating groups: Process
Additives and Performance Chemicals. Process Additives are primarily chemical
components that improve the properties of customers' products. GEO's Process
Additives consist principally of surfactant and dispersant chemicals. GEO is a
leading U.S. producer of naphthalene sulfonate condensates, used as dispersants
in concrete admixture, gypsum board, ceramics, polymerization and oil field
applications. In addition, GEO is a leading U.S. manufacturer and supplier of
proppant intermediates used in the stimulation of oil and gas wells. Through its
recent acquisition of the TRIMET Technical Products Division of Mallinckrodt
Inc., GEO gained a line of functionally unique and versatile polyol additives
used within the rapidly growing water-borne polyurethane coating systems and
high performance resin markets. Process Additives represented approximately 43%
of GEO's total net sales on a pro forma basis for the nine months ended
September 30, 1998.
Performance Chemicals are primarily products used by customers to enhance
the productivity of their operations and decrease their operating costs. GEO's
Performance Chemicals consist principally of chemicals used in water treatment
and pulp and paper processing. GEO is a leading U.S. producer and marketer of
aluminum-based flocculants and coagulants used in water treatment. GEO is also
the largest U.S. producer and marketer of calcium stearates for paper coating
applications and is a recognized leader in defoamers used in various papermaking
processes. Performance Chemicals represented approximately 45% of GEO's total
net sales on a pro forma basis for the nine months ended September 30, 1998.
In addition to Process Additives and Performance Chemicals, GEO
manufactures and supplies certain raw materials and intermediates under a
long-term reciprocal supply agreement with Henkel Corporation. GEO also produces
calcium formate as a by-product, which is sold in the merchant market, and as a
result of the acquisition of TRIMET produces formaldehyde as a raw material for
internal consumption, with any surplus production sold in the regional market.
These activities represented approximately 12% of GEO's total net sales on a pro
forma basis for the nine months ended September 30, 1998.
GEO'S COMPETITIVE STRENGTHS
GEO believes that its market leadership positions and significant
opportunities for continued growth and increased profitability are primarily
attributable to the following strengths:
Leader in Selected Niche Markets. GEO is the U.S. market leader in liquid
calcium stearate used in the paper coating process, which GEO markets under the
brand name NOPCOTE(R). GEO is also a U.S. market leader in the production of
naphthalene sulfonate condensates, marketed
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under the brand name LOMAR(R), which are used in a wide variety of applications,
including admixtures which increase the strength of concrete and dispersants
which shorten the drying time and improve the properties of manufactured gypsum
board. As a result of the acquisition of TRIMET, GEO is also the leading global
supplier of dimethylolpropionic acid, marketed under the brand name DMPA(R), and
trimethylolethane, marketed under the brand name TRIMET(R), two functionally
unique and versatile polyols that service a specific segment of the water-based
polyurethane coatings and high performance resin markets.
Broad Product Portfolio and Strong Customer Base. GEO manufactures over 300
products with applications in a wide variety of end-use markets, and sells these
products to approximately 1,000 customers. For the nine months ended September
30, 1998 on a pro forma basis (excluding sales under GEO's supply agreement with
Henkel Corporation), GEO's top ten customers accounted for approximately 25% of
its net sales and no single customer accounted for more than 5% of its net
sales. GEO sells its products to a base of large multinational companies with
which it has a longstanding relationship, including International Paper Company,
Georgia-Pacific Corporation, Eastman Kodak Company, Master Builders, Inc.,
United States Gypsum Company, Zeneca Inc., PPG Industries, Inc., Baker Hughes
Incorporated and Westvaco Corporation. GEO believes that the diversity of its
customer base, products and end markets provides it with a broad base to grow
sales, expand customer relationships and minimize exposure to any particular
customer or economic cycle.
Strong Manufacturing Capability. GEO enjoys a competitive advantage in the
versatility, flexibility and location of its manufacturing facilities. GEO's
major manufacturing facilities have the ability and flexibility to produce and
formulate multiple products, allowing it to meet changing customer requirements
for customized products. In addition, GEO has strategically acquired nine small
plants located in the Southeast in close proximity to the major U.S. paper
mills. The location of these plants provides GEO with key regional supply points
for its pulp and paper chemicals business and other major industrial accounts.
GEO believes that this network decreases the shipping and warehouse costs of its
customers and provides GEO with a distinct advantage over other suppliers.
Proven Acquisition Expertise. GEO's senior management has developed
significant expertise in identifying, effecting and integrating acquisitions
within targeted markets. Since GEO's formation in 1993, management has
successfully completed five acquisitions. Through these acquisitions, GEO has
developed efficient techniques for integrating acquired companies' plants,
personnel and customers into its business. Management believes that its
acquisition expertise will allow it to continue to successfully acquire and
integrate businesses within certain niche markets of the specialty chemicals
industry.
Experienced Management Team. GEO's senior management led by George P.
Ahearn and William P. Eckman has an average of 25 years of operating experience
in the chemical industry, primarily in specialty chemicals. In addition, GEO has
assembled a strong and experienced management team as a result of its
acquisitions and has actively worked at developing a unified culture of
participative management. Senior management owns approximately 20.72% of GEO's
equity.
GEO'S BUSINESS STRATEGY
GEO's management has developed and implemented a business strategy designed
to increase GEO's sales, profitability and share within targeted markets. The
key components of GEO's business strategy include:
Continue Focus on Niche Products. Consistent with its history, GEO will
continue to focus on manufacturing or acquiring businesses which produce
value-added niche products for its customer base. In particular, GEO will
continue to work with its customer base to develop innovative solutions and
products. For example, GEO has established the leading position in the
manufacture and supply of proppant intermediates to the oil
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and gas industry by working closely with the two leading suppliers of proppants.
In addition, GEO has become a "prototype" supplier to several major construction
companies due to its broad product range and technological expertise, as well as
its cooperative marketing efforts with these key customers. Based upon its
historical accomplishments, GEO believes that it will continue to be successful
in developing innovative, value-added products in niche markets.
Utilize Strong Manufacturing Capability. GEO intends to utilize the
versatility, flexibility and location of its manufacturing facilities to
capitalize on a growing trend among the major suppliers to the water treatment,
pulp and paper and oil field markets to outsource a portion of their
manufacturing. This trend is being driven in part by these suppliers' efforts to
focus greater resources on their product development, technical, and sales and
servicing businesses as opposed to their manufacturing operations. GEO intends
to focus part of its marketing and sales efforts on this outsourcing trend by
promoting such products as defoamers, flocculants and polymer blends.
Pursue Strategic Acquisitions. GEO has successfully grown through
acquisitions and intends to pursue additional strategic acquisitions that will
allow it to further improve its market position in targeted markets and in other
high growth specialty chemicals markets, such as fine chemicals and inorganic
chemicals with high-tech applications. Consistent with its current acquisition
strategy, GEO intends to target value-added businesses, especially non-core
businesses being divested by large companies and spin-offs generated by merger
and acquisition activity. GEO will evaluate potential acquisition candidates
based upon the ability of GEO to:
- expand its product offerings;
- provide access to complementary raw materials, customers and markets;
- enhance its manufacturing capabilities; and
- extend its geographic reach both domestically and internationally.
Maximize Operating Efficiencies. GEO has historically been successful in
optimizing operating costs with each of its prior acquisitions. GEO believes
that it can continue to achieve operating efficiencies resulting in reduced raw
material and manufacturing costs and improved cash flow through:
- cross-selling its expanded product line across a broader distribution and
customer network;
- consolidating raw material purchases to increase purchasing economies of
scale;
- leveraging expenses over a broader revenue base; and
- consolidating certain manufacturing and distribution operations.
PROCEEDS FROM THE OFFERING OF THE OUTSTANDING NOTES
GEO will not receive any cash proceeds from the Exchange Offer. GEO used
the net cash proceeds from the offering of the outstanding notes (approximately
$115.0 million), along with other funds, to:
- complete the July 31, 1998 acquisition of substantially all of the assets
of the TRIMET Technical Products Division of Mallinckrodt Inc. for
approximately $59.7 million; and
- refinance approximately $62.2 million of indebtedness, incurred by GEO
primarily in its March 25, 1997 acquisition of the paper, construction
and process chemicals business of Henkel Corporation and Henkel Canada
Limited.
FORWARD-LOOKING STATEMENTS
Certain of the information contained in this Prospectus, including
information regarding GEO's strategy, business plans and expectations, are
forward-looking statements. For a discussion of important factors that could
cause actual results to differ materially from the forward-looking statements
included in this Prospectus, you should read the section entitled "Risk
Factors."
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RISK FACTORS
You should consider carefully the specific matters discussed under "Risk
Factors" in addition to the other information and financial data included in
this Prospectus before making an investment in the offered notes.
GEO'S EXECUTIVE OFFICES
GEO's principal executive offices are located at 28601 Chagrin Boulevard,
Suite 210, Cleveland, Ohio 44122 and its telephone number there is (216)
464-5564.
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SUMMARY OF THE EXCHANGE OFFER
THE EXCHANGE OFFER
Offer by GEO to exchange 10 1/8% Senior Subordinated Notes for its
currently outstanding 10 1/8% Senior Subordinated Notes, in $1,000 increments.
As of the date of this Prospectus, $120.0 million aggregate principal amount of
notes are outstanding. The terms of the offered notes are substantially
identical to the terms of the outstanding notes, except that the offered notes
have been registered under the federal securities laws and will not bear any
legend restricting their transfer. The offered notes will represent the same
debt as the outstanding notes and will be issued under the same Indenture.
REGISTRATION RIGHTS AGREEMENT
GEO sold the outstanding notes on July 31, 1998 in a private placement in
reliance upon Section 4(2) of the Securities Act of 1933, and the initial
purchaser immediately resold the notes in reliance upon Rule 144A under the
Securities Act of 1933. In connection with the private placement, GEO entered
into a registration rights agreement with the initial purchaser of the
outstanding notes which requires GEO to effect the Exchange Offer. In addition,
GEO is required under the registration rights agreement to:
- file a registration statement for the Exchange Offer and the offered
notes on or before March 13, 1999;
- cause the registration statement filed for the Exchange Offer and the
offered notes to be declared effective by the SEC on or before April 27,
1999; and
- complete the Exchange Offer on or before May 27, 1999.
TRANSFERABILITY OF THE
OFFERED NOTES
Based on an SEC interpretation of the federal securities laws, GEO believes
that you may transfer the offered notes without compliance with the registration
and prospectus delivery requirements of the Securities Act of 1933, provided
that:
- you acquire the offered notes in the ordinary course of your business;
- you are not participating in and do not intend to participate in any
distribution of the offered notes;
- you have no arrangement or understanding with any person to participate
in any distribution of the offered notes; and
- you are not an "affiliate" of GEO.
If GEO's belief is inaccurate and you transfer any offered note without
delivering a prospectus meeting the requirements of the Securities Act of 1933
or without an exemption from such requirements, you may incur liability under
the Securities Act of 1933. GEO is not indemnifying you against any such
liability.
Broker-dealers receiving offered notes in exchange for outstanding notes
acquired for their own account through market-making or other trading activities
must acknowledge that they will deliver a prospectus in connection with any
resale of the offered notes. For 60 days after the expiration of the Exchange
Offer, GEO will make this Prospectus available to broker-dealers for use in such
resales.
EFFECT OF NOT TENDERING
Any outstanding notes that are not tendered or that are tendered but not
accepted will continue to be subject to the existing restrictions upon transfer.
GEO will have no further obligation to provide for the registration under the
federal securities laws of such notes.
EXPIRATION DATE
The Exchange Offer will expire at 12:00 midnight, Eastern Standard Time, on
, 1999, unless it is extended by GEO.
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PROCEDURES FOR TENDERING
OUTSTANDING NOTES
To accept the Exchange Offer, you must complete the Letter of Transmittal
which accompanies this Prospectus (or a copy thereof) in accordance with the
instructions contained therein and in this Prospectus. You should then mail or
otherwise deliver the Letter of Transmittal (or a copy thereof), together with
any other documents required by the Letter of Transmittal, to The Chase
Manhattan Bank, the exchange agent, at one of the addresses provided in this
Prospectus on page 54. IF YOU HOLD YOUR NOTES THROUGH THE DEPOSITORY TRUST
COMPANY, YOU MAY ACCEPT THE EXCHANGE OFFER THROUGH THE DEPOSITORY TRUST
COMPANY'S AUTOMATED TENDER OFFER PROGRAM, BY WHICH YOU WILL AGREE TO BE BOUND BY
THE LETTER OF TRANSMITTAL.
By executing or agreeing to be bound by the Letter of Transmittal, you will
represent to GEO that:
- you are acquiring the offered notes in the ordinary course of your
business;
- you are not participating in and do not intend to participate in any
distribution of the offered notes;
- you have no arrangement or understanding with any person to participate
in any distribution of the offered notes;
- you are not an "affiliate" of GEO; and
- you are not acting on behalf of any person or entity who could not
truthfully make the foregoing representations.
WITHDRAWAL RIGHTS
You may withdraw tendered notes any time before the expiration of the
Exchange Offer. Any notes not accepted for exchange for any reason will be
returned without expense to you promptly after the expiration of the Exchange
Offer.
INTEREST ON THE OFFERED NOTES
AND THE OUTSTANDING NOTES
Interest on the offered notes will accrue from:
- the date of the last periodic payment of interest on the outstanding
notes; or
- if no interest has yet been paid, from the date of issuance of the
outstanding notes.
No additional interest will be paid on any notes tendered and accepted for
exchange.
CONDITIONS TO THE EXCHANGE OFFER
GEO will not be required to complete the Exchange Offer, and may terminate
or amend it, if at any time before GEO accepts any tendered notes for exchange,
GEO determines that the Exchange Offer violates any applicable law,
interpretation of the SEC or order of any governmental agency or court.
ACCEPTANCE OF TENDERED NOTES AND
DELIVERY OF THE OFFERED NOTES
GEO will accept for exchange any of its outstanding notes which are validly
tendered (and not validly withdrawn) before 12:00 midnight, Eastern Standard
Time, on , 1999. GEO will deliver the offered notes
promptly following the expiration of the Exchange Offer.
FEDERAL INCOME TAX
CONSIDERATIONS
The exchange of notes in the Exchange Offer should be a tax-free event for
federal income tax purposes. You should, however, consult your own tax advisor
as to the particular consequences to you of exchanging your notes for offered
notes, including the applicability and effect of any state, local or foreign tax
laws.
EXCHANGE AGENT
The Chase Manhattan Bank is serving as the exchange agent for the Exchange
Offer. You should make all tenders to the exchange agent at one of the addresses
listed in this Prospectus on page 54, unless you accept the Exchange Offer
through the Depository Trust Company's Automated Tender Offer Program.
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SUMMARY OF THE OFFERED NOTES
THE OFFERED NOTES
$120.0 million aggregate principal amount of 10 1/8% Senior Subordinated
Notes maturing on August 1, 2008.
INTEREST PAYMENT DATES
Interest on the offered notes will be payable semi-annually in arrears on
February 1 and August 1 of each year, commencing on , 1999.
OPTIONAL REDEMPTION
GEO may redeem the offered notes on or after August 1, 2003, at the
redemption prices set forth in this Prospectus (plus accrued and unpaid interest
to the date of redemption). In addition, at any time on or before August 1,
2001, GEO may redeem up to 35% of the aggregate principal amount of the offered
notes with the net cash proceeds of one or more public offerings of its equity,
at a redemption price equal to 110.125% of the principal amount of the notes
(plus accrued and unpaid interest to the date of redemption). However, GEO may
effect such a redemption only if at least 65% of the principal amount of the
offered notes originally issued remain outstanding immediately after such
redemption.
RANKING
The offered notes will be unsecured senior subordinated obligations of GEO
and will be subordinated in right of payment to all existing and future senior
debt of GEO. The offered notes will also be effectively subordinated to all
obligations of any future subsidiaries of GEO. The offered notes will rank on an
equal basis with any future senior subordinated indebtedness of GEO and will
rank senior in right of payment with all existing and future subordinated
indebtedness of GEO. As of September 30, 1998, GEO had no senior debt
outstanding (excluding the unused availability of $25.0 million under its senior
credit facility).
CHANGE OF CONTROL
Upon certain changes of control of GEO, each noteholder will have the
right, subject to certain conditions, to require GEO to repurchase such
noteholder's notes at a price equal to 101% of the principal amount of such
notes (plus accrued and unpaid interest to the date of repurchase).
CERTAIN COVENANTS
The Indenture that will govern the offered notes contains certain covenants
that limit the ability of GEO to, among other things and subject to certain
qualifications and exceptions:
- incur additional indebtedness;
- pay dividends;
- make certain investments and payments;
- complete certain asset sales;
- incur liens;
- merge or consolidate with any other person or entity;
- sell or otherwise dispose of all or substantially all of its assets; or
- enter into certain transactions with its affiliates.
In addition, GEO will be required under certain circumstances to offer to
repurchase some of the offered notes at a purchase price equal to 100% of the
principal amount of the notes (plus accrued and unpaid interest to the date of
repurchase) with the proceeds of certain asset sales.
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The table shown on the next page includes the following summary financial
data of GEO:
- historical operating, balance sheet and other data of GEO's predecessor
for the years ended December 31, 1995 and 1996;
- historical operating, balance sheet and other data of GEO's predecessor
and GEO combined for the year ended December 31, 1997;
- historical operating, balance sheet and other data of GEO's predecessor
for the period from January 1, 1997 through March 24, 1997 and of GEO for
the period from March 25, 1997 through September 30, 1997;
- historical operating, balance sheet and other data of GEO's predecessor
and GEO combined for the nine month period ended September 30, 1997 and
of GEO for the nine month period ended September 30, 1998; and
- pro forma operating and other data of GEO for the nine month period ended
September 30, 1998 as if the acquisition of TRIMET, the issuance of
$120.0 million of notes and the refinancing of GEO's senior credit
facility each occurred on January 1, 1998.
GEO is referred to as the "Predecessor" for the period from February 8,
1993 (the date of its inception) through March 24, 1997 and as the "Successor"
for the period from March 25, 1997 through September 30, 1998. This reflects the
purchase of a 79% interest in GEO by Charter Oak Partners on March 25, 1997,
which was accounted for as a purchase of GEO to the extent of the ownership
change.
The period-to-period comparability of the summary financial data shown
below is materially affected by the five acquisitions that GEO has completed
since its inception in 1993. See "GEO's Business -- History."
The pro forma data for the nine month period ended September 30, 1998 does
not represent what the results of operations of GEO would have been had the
acquisition of TRIMET, the issuance of $120.0 million of notes and the
refinancing of GEO's senior credit facility actually occurred on January 1,
1998. The pro forma data also does not project the results of operations of GEO
for the current year or any future period.
All of the summary financial data shown below has been derived from the
financial statements of GEO and its predecessor or the unaudited pro forma
condensed combined financial statements of GEO, which are included later in this
Prospectus on pages 17 and F-1 through F-48.
You should read the summary financial data presented below along with the
financial statements of GEO and its predecessor and the following sections of
this Prospectus: "Unaudited Pro Forma Financial Data," "Selected Historical
Financial Data," and "Management's Discussion and Analysis of Financial
Condition and Results of Operation."
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
PREDECESSOR AND SUCCESSOR
PREDECESSOR AND SUCCESSOR COMBINED HISTORICAL
YEARS ENDED COMBINED JANUARY 1 MARCH 25 NINE MONTHS NINE MONTHS
DECEMBER 31, YEAR ENDED THROUGH THROUGH ENDED ENDED
----------------- DECEMBER 31, MARCH 24, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1997 1997 1997 1997 1998
------- ------- ------------- ------------- ------------- ------------- -------------
(PREDECESSOR) (SUCCESSOR) (SUCCESSOR)
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OPERATING DATA:
Net sales............. $21,187 $23,869 $100,836 $ 9,109 $ 63,161 $ 72,270 $ 92,454
Gross profit.......... 3,075 3,220 19,668 567 13,899 14,466 16,964
Operating income
(loss).............. 1,004 1,029 7,782 (241) 6,840 6,599 7,369
Interest expense...... 1,164 1,118 5,600 420 3,464 3,884 5,978
Net income (loss)..... 209 (66) 813 (676) 2,415 1,739 (508)
OTHER FINANCIAL DATA:
EBITDA (2)............ $ 1,630 $ 1,846 $ 12,066 $ 107 $ 9,557 $ 9,664 $ 12,462
Capital
expenditures........ 531 559 3,304 127 1,581 1,708 3,806
Depreciation,
depletion and
amortization........ 792 1,022 4,697 363 2,581 2,944 4,993
Ratio of earnings to
fixed charges (3)... 1.2x 1.0x 1.4x -- 2.0x 1.7x 1.3x
Ratio of EBITDA to
interest expense.... 2.8x 2.5x 2.1x
BALANCE SHEET DATA:
Working capital....... $ (581) $(2,198) $ 8,781 $ 7,700 $ 7,700 $ 17,898
Total assets.......... 14,484 25,458 98,312 100,835 100,835 165,287
Total debt............ 6,828 16,053 62,374 64,360 64,360 120,760
Shareholders'
equity.............. 1,443 1,377 16,390 17,316 17,316 21,882
<CAPTION>
PRO FORMA
COMBINED
NINE MONTHS
ENDED
SEPTEMBER 30,
1998(1)
-------------
<S> <C>
OPERATING DATA:
Net sales............. $110,543
Gross profit.......... 23,887
Operating income
(loss).............. 11,353
Interest expense...... 9,692
Net income (loss)..... 1,056
OTHER FINANCIAL DATA:
EBITDA (2)............ $ 18,848
Capital
expenditures........ 3,806
Depreciation,
depletion and
amortization........ 7,425
Ratio of earnings to
fixed charges (3)... 1.2x
Ratio of EBITDA to
interest expense.... 1.9x
BALANCE SHEET DATA:
Working capital.......
Total assets..........
Total debt............
Shareholders'
equity..............
</TABLE>
- ---------------
(1) The pro forma combined nine months ended September 30, 1998 reflects the
historical nine month period ended September 30, 1998 as adjusted for the
same pro forma items and dollar amounts described in the Unaudited Pro Forma
Financial Data below beginning at page 17.
(2) EBITDA represents income (loss) before income taxes, interest expense,
depreciation, depletion, amortization and other non-recurring items. EBITDA
is a widely accepted financial indicator of a company's ability to incur and
service debt. EBITDA does not represent net income or cash flows from
operations as those terms are defined by generally accepted accounting
principles and does not necessarily indicate whether cash flows will be
sufficient to fund cash needs. GEO's measure of EBITDA may not be comparable
to those reported by other companies.
(3) For purposes of calculating the ratio of earnings to fixed charges, earnings
represent income (loss) before income taxes plus fixed charges. Fixed
charges consist of interest expense and the portion of operating rental
expense which management believes is representative of the interest
component of rent expense. The deficiency in the amount of earnings as
compared to fixed charges for the period January 1 through March 24, 1997
was $676.
9
<PAGE> 13
RISK FACTORS
You should consider carefully the following factors in addition to the
other information and financial data included in this Prospectus before making
an investment in the offered notes.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS
GEO's outstanding indebtedness is substantial in relation to the book value
of its shareholders' equity. As of September 30, 1998, GEO had total
indebtedness of $120.8 million and shareholders' equity of $21.9 million. The
significant borrowings of GEO has several important consequences for both GEO
and the holders of the offered notes, including that: (a) a substantial portion
of GEO's cash flow from operations must be dedicated to debt service and will be
unavailable for other purposes; (b) GEO's ability to obtain additional financing
in the future for working capital, acquisitions, capital expenditures or to
refinance the offered notes may be significantly impaired; and (c) GEO's
substantial leverage may make it more vulnerable to economic downturns and limit
its ability to withstand competitive pressures or to take advantage of business
opportunities. See "Unaudited Pro Forma Financial Data" and "Selected Historical
Financial Data."
GEO's ability to make cash payments on the offered notes and to satisfy its
other debt obligations will depend on its future operating performance, which
will be affected by business, competitive, financial, general economic and other
factors, many of which are beyond GEO's control. GEO believes that its expected
cash flow from operations, together with available borrowings under its senior
credit facility and its other sources of liquidity, will be sufficient to fund
its debt service obligations, anticipated working capital requirements, lease
payments and capital expenditures. As of September 30, 1998, GEO had
approximately $25.0 million available for borrowing under its senior credit
facility, which is subject to compliance with the conditions contained in the
credit agreement. GEO can provide no assurance, however, that GEO's business
will continue to generate cash flow at or above current levels or that estimated
cost savings or anticipated growth can be achieved. If GEO is unable to service
its indebtedness, it will be forced to adopt an alternative strategy that may
include actions such as: (a) reducing or delaying capital or research and
development expenditures; (b) selling assets; (c) restructuring or refinancing
its indebtedness; or (d) seeking additional equity capital. GEO can provide no
assurance that any of these strategies could be effected on satisfactory terms,
if at all.
GEO's senior credit facility matures before the maturity of the offered
notes. If GEO cannot refinance its senior credit facility at maturity or repay
the facility with cash on hand or through asset sales, equity sales or
otherwise, its ability to repay the principal and interest on the offered notes
could be adversely affected. In addition, because GEO's obligations under its
senior credit facility will bear interest at floating rates, an increase in
interest rates could adversely affect the ability of GEO to meet its debt
service obligations.
CONSEQUENCES OF THE TRIMET ACQUISITION
To achieve the full benefits from the combination of GEO and TRIMET and
capture the efficiencies and growth that management expects to result from the
acquisition, GEO must integrate product lines, coordinate sales efforts and
implement appropriate operational, financial and managerial systems and
controls. Additionally, to achieve such benefits, GEO must integrate some of the
manufacturing, engineering, administrative, finance and sales and marketing
organizations of TRIMET. GEO can provide no assurance that it will be able to
integrate the operations of TRIMET successfully. Business, competitive,
financial, general economic and other factors, many of which are beyond the
control of management, will affect the timing and ultimate success of the
integration of TRIMET and the realization of any benefits from the acquisition.
The diversion of management's attention from day-to-day operations to the
integration of
10
<PAGE> 14
TRIMET, as well as any other difficulties which may be encountered in the
integration process, could adversely affect GEO's business, financial condition
or results of operations.
The acquisition of TRIMET has also significantly increased the sales of GEO
into European markets. Although GEO has sold specialty chemicals in Europe
before the acquisition of TRIMET, GEO can provide no assurance that it will be
able to successfully maintain or achieve an increase in the level of overseas
sales made by the TRIMET business. Any decrease in such sales could adversely
affect GEO's business, financial conditions or results of operations.
Completion of the acquisition of TRIMET will present GEO with other
business challenges generally associated with acquisitions, including the
management of a larger enterprise. Although GEO expects that the business
operations of GEO and TRIMET will be enhanced by the acquisition, GEO can
provide no assurance that unexpected difficulties will be avoided. If GEO's
management is unable to manage growth effectively, the quality of GEO's products
or its business, financial condition or results of operations could be adversely
affected.
RISKS RELATING TO GEO'S GROWTH STRATEGY
GEO's growth strategy includes making acquisitions, but GEO can provide no
assurance that suitable acquisition candidates will continue to be available. In
addition, acquisitions that GEO may make will involve risks, including the
successful integration and management of acquired operations, personnel and
technology. The integration of acquired businesses may also lead to the loss of
key employees of the acquired companies and diversion of management attention
from ongoing business concerns. GEO can provide no assurance that any additional
acquisitions will be made, that it will be able to obtain the financing
necessary to effect such transactions or that any acquisition made will be
successful. GEO's senior credit facility and the Indenture that will govern the
offered notes limit GEO's ability to make acquisitions and to incur indebtedness
in connection with acquisitions.
RESTRICTIVE FINANCING COVENANTS
GEO's senior credit facility and the Indenture that will govern the offered
notes contain a number of covenants that restrict the operations of GEO and any
of its future subsidiaries. In addition, GEO's senior credit facility will
require GEO to comply with specified financial ratios and tests, including a
minimum interest coverage ratio and a maximum leverage ratio. GEO can provide no
assurance that it will be able to comply with such ratios and tests in the
future. GEO's ability to comply with such ratios and tests may be affected by
events beyond its control, including prevailing economic, financial and industry
conditions. The breach by GEO of any such covenants or requirements could result
in a default under its senior credit facility that would permit the lenders to
(a) declare all outstanding amounts to be immediately due and payable and (b)
terminate any commitments to make further extensions of credit. See "Description
of GEO's Senior Credit Facility" and "Description of the Offered Notes."
SUBORDINATION OF THE OFFERED NOTES
The payment of all amounts on the offered notes will be subordinated to the
prior payment in full of all existing and future senior debt of GEO, including
all amounts owing under its senior credit facility. In the event of a
bankruptcy, liquidation or reorganization of GEO, GEO's assets will be available
to pay obligations on the offered notes only after all senior debt of GEO has
been paid in full. GEO can provide no assurance that, in such an event, there
will be sufficient assets remaining to pay amounts due on any of the offered
notes.
The offered notes will not be secured by any of GEO's assets. The Indenture
that will govern the offered notes permits GEO to incur certain secured
indebtedness, including indebtedness incurred under its
11
<PAGE> 15
senior credit facility, which is secured by liens against all tangible and
intangible assets of GEO. Should GEO default on its senior credit facility or
other secured indebtedness or enter bankruptcy, liquidation or reorganization,
these assets will be available to satisfy the secured obligations before any
payment will be made on the offered notes. The offered notes will also be
structurally subordinated to all indebtedness and other liabilities of any
future subsidiaries of GEO. Should any of GEO's future subsidiaries default on
any indebtedness or enter bankruptcy, liquidation or reorganization, the assets
of any such subsidiary would be available to satisfy obligations on its
indebtedness before any payment would be made on the offered notes. See
"Description of the Offered Notes -- Subordination."
ABILITY TO ACHIEVE ANTICIPATED EFFICIENCIES OR REVENUE GROWTH
The statements concerning potential efficiencies and revenue growth
contained in this Prospectus are forward-looking statements that are based on
estimates and assumptions made by GEO. Although GEO believes such statements to
be reasonable, results are difficult to predict and such statements are
therefore inherently uncertain. You should not place undue reliance upon such
statements. The following important factors, among others, could cause GEO to
not achieve the results contemplated in this Prospectus or otherwise cause GEO's
business, financial condition or results of operations to be adversely affected
in the future: (a) loss of key customers or continued or increased competitive
pressures; (b) changes in customer spending levels; (c) incurrence of
unanticipated costs related to the integration of TRIMET; (d) loss or retirement
of key members of management; (e) increases in interest rates or GEO's cost of
borrowing or a default under any material debt agreement; (f) unavailability of
funds for capital expenditures or research and development; (g) changes in
governmental, environmental or other regulations; or (h) changes in general
economic conditions.
CHANGE OF CONTROL
The occurrence of certain events that would constitute a "change of
control" of GEO under its senior credit facility or the Indenture that will
govern the offered notes may result in a default or require repayment of
indebtedness under these agreements. In addition, GEO's senior credit facility
prohibits the repayment of the offered notes by GEO upon such a change of
control, unless and until GEO's credit facility is repaid in full. GEO's failure
to make such repayments upon a change of control would result in a default under
both its senior credit facility and the Indenture. GEO can provide no assurance
that, in the event of a change of control, it would have sufficient assets to
satisfy all of its obligations under its senior credit facility or the
Indenture. Future indebtedness of GEO may also contain restrictions or repayment
requirements upon certain changes of control of GEO. See "Description of the
Offered Notes -- Change of Control."
FLUCTUATIONS IN COST AND SUPPLY OF RAW MATERIALS
GEO uses a variety of specialty and commodity chemicals as raw materials in
its manufacturing processes. These raw materials are generally available from
several suppliers and are purchased under agreements negotiated annually with
two or more vendors per raw material. However, certain of these raw materials
could become subject to significant movements in price. Although it has
historically passed on price increases to its customers within 90 to 120 days,
GEO can provide no assurance that it will be able to do so in the future.
TECHNOLOGICAL CHANGE
The market for GEO's products and services is characterized by changing
technology and continuing process development. GEO's future success will be
influenced by its ability to (a) maintain and enhance its technological
capabilities, (b) develop and market products and applications that meet
changing customer
12
<PAGE> 16
needs, and (c) anticipate or respond to technological changes on a
cost-effective and timely basis. GEO can provide no assurance that it will
effectively respond to technological changes in its market segments.
POTENTIAL RISK OF PRODUCT LIABILITY
Because many of GEO's products provide critical performance attributes to
its customers' products, the sale by GEO of such products includes the potential
risk of product liability claims. A successful product liability claim, or
series of claims, against GEO in excess of its insurance coverage could
adversely affect GEO's business, financial condition or results of operations.
COMPETITION
GEO competes with a variety of specialty chemical manufacturers. Certain of
GEO's principal competitors are less highly leveraged and have greater financial
resources than GEO. Accordingly, these competitors may be better able to
withstand volatility within the industry or the economy as a whole while
maintaining significantly greater operating and financial flexibility than GEO.
In addition, a number of GEO's product applications are customized or sold into
specialized markets. GEO can provide no assurance that these specialized markets
will not attract additional competitors with greater financial, technological or
manufacturing resources than GEO.
DEPENDENCE ON KEY PERSONNEL
The success of GEO's business is dependent upon the continued services of
George P. Ahearn, its President and Chief Executive Officer, William P. Eckman,
its Executive Vice President and Chief Financial Officer, and other key officers
and employees. The loss of Messrs. Ahearn or Eckman or such other key personnel
due to death, disability or termination of employment could adversely affect
GEO's business, financial condition or results of operations.
CONTROLLING SHAREHOLDERS
Approximately 78.7% of the capital stock of GEO is owned by Charter Oak
Partners and its affiliate, Charter Oak Capital Partners. As a result, Charter
Oak Partners is able to direct the election of the members of GEO's Board of
Directors and the management and policies of GEO. In addition, approximately
20.72% of the capital stock of GEO is owned by George P. Ahearn and William P.
Eckman, either directly or through GEO Chemicals, Ltd., an Ohio limited
liability company the sole members of which are Messrs. Ahearn and Eckman. The
interests of Charter Oak Partners and Messrs. Ahearn and Eckman may differ from
the interests of the holders of the offered notes. See "Shareholders."
ENVIRONMENTAL MATTERS
GEO is subject to extensive federal, state and local laws relating to,
among other things, (a) the discharge of materials into the environment, (b) the
handling and disposal of solid and hazardous wastes, (c) the remediation of
contamination and protection of the environment, and (d) employee health and
safety. Accordingly, GEO's operations and the environmental condition of its
real property could give rise to liabilities under applicable environmental
laws. GEO can provide no assurance that material costs will not be incurred by
it in connection with these laws or that its current and former real properties
will not require environmental remediation in the future. Although GEO believes
that any costs relating to such remediation not covered by indemnification or
insurance would be immaterial, it can provide no assurance to such effect.
Environmental laws are constantly changing and if they become more stringent in
the future, GEO's cost of compliance could increase. If GEO cannot pass on
future costs to its customers, any
13
<PAGE> 17
increases could adversely affect GEO's business, financial condition or results
of operations. See "GEO's Business -- Environmental Matters."
GOVERNMENTAL REGULATION AND PERMITS
GEO is subject to extensive federal, state and local laws relating to its
manufacturing operations and employee health and safety. GEO is required to
obtain certain permits for the operation of its business, and such permits are
subject to renewal, modification and, in certain circumstances, revocation by
governmental agencies. The loss of such permits could adversely affect GEO's
business, financial condition or results of operations. GEO expects to incur
ongoing capital, operating and administrative expenses to maintain compliance
with its permits and with applicable laws. GEO cannot predict the laws that may
be enacted in the future or how existing or future laws will be administered or
interpreted. GEO could, in the future, incur increased costs in connection with
the enactment of new laws or the more vigorous enforcement or stricter
interpretation of existing laws. GEO can provide no assurance that any such
costs would be immaterial.
"YEAR 2000" COMPLIANCE AND CONVERSION OF TRIMET TO GEO'S INFORMATION SYSTEMS
In May 1997, GEO initiated a program to upgrade its information technology
systems. The major components of this program include enterprise level
integrated applications software, communications software and wide area network
and server computers. These components were acquired from leading vendors,
including Digital Equipment Corporation, Oracle Corporation, International
Business Machines Corporation, Ross Systems, Inc. and MCI Communications
Corporation. Each purchased component was represented as being "Year 2000"
compliant. GEO has also instituted procedures to centralize and standardize the
purchase of personal computers, laptop computers and peripheral equipment to,
among other things, ensure compatibility and security within the context of
GEO's base information systems. GEO currently plans to complete the information
technology systems upgrade by the middle of 1999. Although GEO believes that the
technology upgrade will be effected efficiently and according to its schedule,
it can provide no assurance that the process will occur without unexpected
difficulty, delay or expense.
The "Year 2000" issue refers to computer programs being written using two
digits rather than four to define an applicable year. Any hardware, date-driven
automated equipment or computer software that has a two-digit field to define
the year may recognize a date using "00" as the year 1900 rather than the year
2000. This faulty recognition could result in a system failure, disruption of
operations or inaccurate information or calculations. Although GEO believes that
its recently-acquired information systems are "Year 2000" compliant, it can
provide no assurance that difficulties will not arise with respect to any of
these systems or any other systems that GEO is utilizing at the year 2000. In
addition, GEO could face disruption of its operations or difficulties in serving
its customers if GEO's vendors or customers experience "Year 2000" compliance
problems. As part of its "Year 2000" compliance efforts, GEO routinely
participates in various survey requests from customers, vendors and bankers. GEO
also continuously interviews and surveys its vendors and suppliers.
ABSENCE OF PUBLIC MARKET FOR THE OFFERED NOTES
There has been no public market for the outstanding notes before the
Exchange Offer. There is currently no established market for the offered notes,
and GEO does not intend to apply for a listing of the offered notes on any
securities exchange or automated dealer quotation system. GEO can provide no
assurance as to the liquidity of any market that may develop for the offered
notes, the ability of any holder of the offered notes to sell any of the notes
or the prices at which such notes could be sold. If any market for the offered
notes were to exist, the offered notes could trade at prices lower than their
initial market value, depending upon many factors, including prevailing interest
rates. The liquidity of, and trading market for, the offered notes could also be
adversely affected by general declines in the market for similar
14
<PAGE> 18
securities. Such a decline could adversely affect the liquidity of, and trading
market for, the offered notes independent of the financial performance and
business prospects of GEO.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including statements
containing the words "believes," "anticipates," "intends," "expect," "should,"
"may," "will," "continue" and "estimate," and similar words, constitute
"forward-looking statements" under the federal securities laws. These
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
GEO or its industry to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Important factors that could cause actual results to differ
materially from GEO's expectations are disclosed in this section ("Risk
Factors") and elsewhere in this Prospectus, including in conjunction with the
forward-looking statements. Given these uncertainties, you should not place
undue reliance upon such forward-looking statements.
15
<PAGE> 19
PROCEEDS FROM THE OFFERING OF THE OUTSTANDING NOTES
GEO will not receive any cash proceeds from the Exchange Offer. GEO is
effecting the Exchange Offer to comply with its obligations under the
registration rights agreement entered into with the initial purchaser of the
outstanding notes. GEO used the net cash proceeds from the July 31, 1998
offering of the outstanding notes (approximately $115.0 million), along with
other funds, to:
- complete the July 31, 1998 acquisition of substantially all of the
assets of the TRIMET Technical Products Division of Mallinckrodt
Inc. for approximately $59.7 million; and
- refinance approximately $62.2 million of indebtedness, incurred by
GEO primarily in its March 25, 1997 acquisition of the paper,
construction and process chemicals business of Henkel Corporation
and Henkel Canada Limited.
The credit facility refinanced by GEO consisted of Tranche A and Tranche B
loans and a revolving line of credit. The Tranche A loan was set to mature in
September 2002 and bore interest, at GEO's option, at either (a) 1.5% above the
higher of an adjusted certificate of deposit rate plus 0.5% or the prime lending
rate of Bankers Trust Company or (b) 2.75% above an adjusted Eurodollar rate.
The Tranche B loan was set to mature upon payment in full and bore interest, at
GEO's option, at either (a) 2% above the higher of an adjusted certificate of
deposit rate plus 0.5% or the prime lending rate of Bankers Trust Company or (b)
3.25% above an adjusted Eurodollar rate. The revolving line of credit was set to
expire in September 2002 and bore interest according to the same formula as the
Tranche A loan. As of July 31, 1998, the interest rate on the Tranche A loan was
8.625%, the interest rate on the Tranche B loan was 9.125%, and the interest
rate on amounts outstanding under the revolving line of credit ranged from
8.4375% to 8.75%.
16
<PAGE> 20
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma condensed combined statements of
operations for the twelve months ended December 31, 1997 and the nine months
ended September 30, 1998 illustrate the effects of the following transactions as
if each had occurred on January 1, 1997:
- the acquisition of the paper, construction and process additive chemicals
business of Henkel Corporation and Henkel Canada Limited;
- the acquisition by Charter Oak Partners of a 79% interest in GEO (which
was accounted for as a purchase of GEO to the extent of the ownership
change);
- the acquisition of substantially all of the assets of the TRIMET
Technical Products Division of Mallinckrodt Inc.; and
- the issuance of the outstanding notes and the related refinancing of
GEO's senior debt.
The Henkel and TRIMET acquisitions were accounted for as purchases, with
the assets acquired and the liabilities assumed being recorded at estimated fair
market value.
The unaudited pro forma condensed combined statements of operations are not
necessarily indicative of the results that would have occurred if the Henkel and
TRIMET acquisitions actually occurred on January 1, 1997 or that will occur in
the current year or any future period.
The unaudited pro forma condensed combined statements of operations should
be read in conjunction with the historical financial statements of GEO, TRIMET
and the paper, construction and process additive chemicals business of Henkel
Corporation and Henkel Canada Limited, which are included later in this
Prospectus beginning at page F-1.
17
<PAGE> 21
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GEO TRIMET HENKEL
HISTORICAL HISTORICAL HISTORICAL
JAN. 1, 1997 JAN. 1, 1997 JAN. 1, 1997
THROUGH THROUGH THROUGH PRO FORMA PRO FORMA
DEC. 31, 1997(1) DEC. 31, 1997 MARCH 24, 1997(2) ADJUSTMENTS COMBINED
---------------- ------------- ----------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales................ $100,836 $28,519 $17,991 $ 0 $147,346
Cost of sales............ 81,168 19,278 16,861 0 117,307
-------- ------- ------- -------- --------
Gross profit............. 19,668 9,241 1,130 0 30,039
2,286(3)
(880)(4)
Selling, general and (307)(5)
administrative
expenses............. 11,886 3,419 2,222 34(6) 18,660
-------- ------- ------- -------- --------
Income (loss) from
operations............. 7,782 5,822 (1,092) (1,133) 11,379
Other income (expense)
Interest expense....... (5,600) 0 0 (7,432)(7) (13,032)
Other.................. 135 (160) 0 0 (25)
-------- ------- ------- -------- --------
Total other income
(expense)......... (5,465) (160) 0 (7,432) (13,057)
-------- ------- ------- -------- --------
Income (loss) before
taxes and extraordinary
item................... 2,317 5,662 (1,092) (8,565) (1,678)
Provision for income
taxes.................. 999 2,299 0 (3,952)(8) (654)
-------- ------- ------- -------- --------
Income (loss) before
extraordinary loss..... 1,318 3,363 (1,092) (4,613) (1,024)
Extraordinary loss on
early extinguishment of
debt, net.............. (505) 0 0 505(9) 0
-------- ------- ------- -------- --------
Net income (loss)........ $ 813 $ 3,363 $(1,092) $ (4,108) $ (1,024)
======== ======= ======= ======== ========
</TABLE>
- ---------------
(1) The historical statements of GEO include the Successor and the Predecessor
combined. See "Selected Historical Financial Data."
(2) GEO acquired the paper, construction and process additive chemicals business
of Henkel Corporation and Henkel Canada Limited on March 25, 1997.
(3) Reflects depreciation and amortization for assets created as a result of the
TRIMET and Henkel acquisitions and the purchase of a 79% interest in GEO by
Charter Oak Partners.
(4) Reflects the reduction of corporate cost transfers from Mallinckrodt Inc. to
TRIMET for allocated research and development expenses, strategic planning,
internal audit services, aviation, information systems, finance services,
communications, science and technology, site services and other general
corporate overhead. After being acquired by GEO, TRIMET is no longer
allocated these costs.
(5) Reflects the reduction of selling, general and administrative expense
related to environmental remediation costs incurred by TRIMET. Mallinckrodt
Inc. is required to indemnify GEO for remediation costs with respect to the
TRIMET property which arise out of acts that occurred prior to the closing.
(6) Reflects additional bank fees related to the issuance of the outstanding
notes and GEO's senior credit facility.
(7) Reflects interest expense related to the issuance of the outstanding notes
and GEO's senior credit facility and reflects interest expense on debt
retired from the issuance of the outstanding notes.
(8) Reflects the tax effect of the pro forma adjustments as well as the effect
of the combined companies effective tax rate.
(9) Reflects the elimination of the extraordinary loss on early extinguishment
of debt, net of tax.
18
<PAGE> 22
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GEO TRIMET
HISTORICAL HISTORICAL
JAN. 1, 1998 JAN. 1, 1998
THROUGH THROUGH PRO FORMA PRO FORMA
SEPT. 30, 1998 JULY 31, 1998(1) ADJUSTMENTS COMBINED
-------------- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales.............................. $92,454 $ 18,089 $ 0 $110,543
Cost of sales.......................... 75,490 11,166 0 86,656
------- -------- -------- --------
Gross profit........................... 16,964 6,923 0 23,887
1,832(2)
(442)(3)
Selling, general and administrative
expenses............................. 9,595 2,482 (933)(4) 12,534
------- -------- -------- --------
Income from operations................. 7,369 4,441 (457) 11,353
Other income (expense)
Interest expense..................... (5,978) 0 (3,714)(5) (9,692)
Other................................ 100 (30) 0 70
------- -------- -------- --------
Total other income (expense)....... (5,878) (30) (3,714) (9,622)
------- -------- -------- --------
Income before taxes and extraordinary
item................................. 1,491 4,411 (4,171) 1,731
Provision for income taxes............. 502 1,791 (1,618)(6) 675
------- -------- -------- --------
Income before extraordinary loss....... 989 2,620 (2,553) 1,056
Extraordinary loss on early
extinguishment of debt, net.......... (1,497) 0 1,497(7) 0
------- -------- -------- --------
Net income (loss)...................... $ (508) $ 2,620 $ (1,056) $ 1,056
======= ======== ======== ========
</TABLE>
- ---------------
(1) GEO acquired the TRIMET Technical Products Division of Mallinckrodt Inc. on
July 31, 1998.
(2) Reflects depreciation and amortization for assets created as a result of the
TRIMET acquisition.
(3) Reflects the reduction of corporate cost transfers from Mallinckrodt Inc. to
TRIMET for allocated research and development expenses, strategic planning,
internal audit services, aviation, information systems, finance services,
communications, science and technology, site services and other general
corporate overhead. After being acquired by GEO, TRIMET is no longer
allocated these costs.
(4) Reflects the reduction of selling, general and administrative expense
related to environmental remediation costs incurred by TRIMET. Mallinckrodt
Inc. is required to indemnify GEO for remediation costs with respect to the
TRIMET property which arise out of acts that occurred prior to the closing.
(5) Reflects interest expense related to the issuance of the outstanding notes
and GEO's senior credit facility and reflects interest expense on debt
retired from the issuance of the outstanding notes.
(6) Reflects the tax effect of the pro forma adjustments as well as the effect
of the combined companies effective tax rate.
(7) Reflects the elimination of the extraordinary loss on early extinguishment
of debt, net of tax.
19
<PAGE> 23
SELECTED HISTORICAL FINANCIAL DATA
The table shown on the next page includes the following summary financial
data of GEO:
- historical operating and other data of GEO's predecessor for the period
from February 8, 1993 (the date of its inception) through December 31,
1993 and for the year ended December 31, 1994;
- historical operating and other data of GEO's predecessor for the years
ended December 31, 1995 and 1996;
- historical operating and other data of GEO's predecessor for the period
from January 1, 1997 through March 24, 1997 and of GEO for the period
from March 25, 1997 through December 31, 1997;
- historical operating and other data of GEO's predecessor and GEO combined
for the year ended December 31, 1997;
- historical operating and other data of GEO's predecessor and GEO combined
for the nine month period ended September 30, 1997 and of GEO for the
period from March 25, 1997 through September 30, 1997 and for the nine
month period ended September 30, 1998; and
- balance sheet data as of December 31, 1993, 1994, 1995, 1996 and 1997 and
September 30, 1998.
GEO is referred to as the "Predecessor" for the period from February 8,
1993 (the date of its inception) through March 24, 1997 and as the "Successor"
for the period from March 25, 1997 through September 30, 1998. This reflects the
purchase of a 79% interest in GEO by Charter Oak Partners on March 25, 1997,
which was accounted for as a purchase of GEO to the extent of the ownership
change.
The period-to-period comparability of the summary financial data shown
below is materially affected by the five acquisitions that GEO has completed
since its inception in 1993. See "GEO's Business -- History."
All of the summary financial data shown below has been derived from the
financial statements of GEO and its predecessor, which are included later in
this Prospectus beginning at page F-1 (other than those financial statements
relating to the first bullet point above).
You should read the summary financial data presented below along with the
financial statements of GEO and its predecessor and "Management's Discussion and
Analysis of Financial Condition and Results of Operation."
20
<PAGE> 24
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR PREDECESSOR PREDECESSOR
------------------------------------------------------ AND AND
SUCCESSOR SUCCESSOR
FEB. 8 SUCCESSOR COMBINED SUCCESSOR COMBINED
(DATE OF --------- ----------- --------- -----------
INCEPTION) JANUARY 1 MARCH 25 YEAR MARCH 25 NINE MOS.
THROUGH YEARS ENDED DEC. 31, THROUGH THROUGH ENDED THROUGH ENDED
DEC. 31, --------------------------- MARCH 24, DEC. 31, DEC. 31, SEPT. 30, SEPT. 30,
1993 1994 1995 1996 1997 1997 1997 1997 1997
---------- ------- ------- ------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales............ $11,366 $14,852 $21,187 $23,869 $ 9,109 $ 91,727 $100,836 $ 63,161 $ 72,270
Cost of sales........ 9,871 12,429 18,112 20,649 8,542 72,626 81,168 49,262 57,804
------- ------- ------- ------- -------- -------- -------- -------- --------
Gross profit......... 1,495 2,423 3,075 3,220 567 19,101 19,668 13,899 14,466
Selling, general and
administrative
expenses........... 1,235 1,842 2,071 2,191 808 11,078 11,886 7,059 7,867
------- ------- ------- ------- -------- -------- -------- -------- --------
Income (loss) from
operations......... 260 581 1,004 1,029 (241) 8,023 7,782 6,840 6,599
Other income
(expense):
Interest expense..... (550) (852) (1,164) (1,118) (420) (5,180) (5,600) (3,464) (3,884)
Other................ 50 (12) 369 136 (15) 150 135 136 121
------- ------- ------- ------- -------- -------- -------- -------- --------
(500) (864) (795) (982) (435) (5,030) (5,465) (3,328) (3,763)
Income (loss) before
taxes and
extraordinary
loss............... (240) (283) 209 47 (676) 2,993 2,317 3,512 2,836
Provision for income
taxes.............. -- -- -- -- -- 999 999 592 592
------- ------- ------- ------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary
loss............... (240) (283) 209 47 (676) 1,994 1,318 2,920 2,244
Extraordinary loss on
early
extinguishment of
debt, net.......... -- -- -- (113) -- (505) (505) (505) (505)
------- ------- ------- ------- -------- -------- -------- -------- --------
Net income (loss).... $ (240) $ (283) $ 209 $ (66) $ (676) $ 1,489 $ 813 $ 2,415 $ 1,739
======= ======= ======= ======= ======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA(1)............ $ 637 $ 1,032 $ 1,630 $ 1,846 $ 107 $ 11,959 $ 12,066 $ 9,557 $ 9,664
Capital
expenditures....... 206 756 531 559 127 3,177 3,304 1,581 1,708
Depreciation,
depletion and
amortization....... 542 732 792 1,022 363 4,334 4,697 2,581 2,944
Ratio of earnings to
fixed charges(2)... -- -- 1.2x 1.0x -- 1.6x 1.4x 2.0x 1.7x
<CAPTION>
SUCCESSOR
---------
NINE
MOS.
ENDED
SEPT. 30,
1998
---------
<S> <C>
OPERATING DATA:
Net sales............ $ 92,454
Cost of sales........ 75,490
--------
Gross profit......... 16,964
Selling, general and
administrative
expenses........... 9,595
--------
Income (loss) from
operations......... 7,369
Other income
(expense):
Interest expense..... (5,978)
Other................ 100
--------
(5,878)
Income (loss) before
taxes and
extraordinary
loss............... 1,491
Provision for income
taxes.............. 502
--------
Income (loss) before
extraordinary
loss............... 989
Extraordinary loss on
early
extinguishment of
debt, net.......... (1,497)
--------
Net income (loss).... $ (508)
========
OTHER FINANCIAL DATA:
EBITDA(1)............ $ 12,462
Capital
expenditures....... 3,806
Depreciation,
depletion and
amortization....... 4,993
Ratio of earnings to
fixed charges(2)... 1.3x
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR
------------------------------------- SUCCESSOR
AS OF DEC. 31, --------------------
----------------- DEC. 31, SEPT. 30,
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................... $ -- $ -- $ -- $ -- $ 696 $ 1,222
Total assets................................ 5,826 11,968 14,484 25,458 98,312 165,287
Total debt, excluding current portion....... 2,362 4,507 5,801 13,456 58,814 120,000
Shareholders' equity........................ 767 1,234 1,443 1,377 16,390 21,882
</TABLE>
- ---------------
(1) EBITDA represents income (loss) before income taxes, interest expense,
depreciation, depletion, amortization and other non-recurring items. EBITDA
is a widely accepted financial indicator of a company's ability to incur and
service debt. EBITDA does not represent net income or cash flows from
operations as those terms are defined by generally accepted accounting
principles and does not necessarily indicate whether cash flows will be
sufficient to fund cash needs. GEO's measure of EBITDA may not be comparable
to those reported by other companies.
(2) For purposes of calculating the ratio of earnings to fixed charges, earnings
represent income (loss) before income taxes plus fixed charges. Fixed
charges consist of interest expense and the portion of operating rental
expense which management believes is representative of the interest
component of rent expense. The deficiency in the amount of earnings compared
to fixed charges was $240 for the period ended December 31, 1993; $283 for
the period ended December 31, 1994; and $676 for the period ended March 24,
1997.
21
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion along with the financial
statements of GEO which appear later in this Prospectus beginning at Page F-1.
SALES AND COST OF SALES
GEO's fiscal 1997 net sales were generated by a mix of sales to various
industries, including: (a) pulp and paper processing (42%); (b)
construction-related applications (14%); (c) water treatment (13%); (d) oil and
gas production (6%); and (e) miscellaneous (25%), which includes sales pursuant
to GEO's reciprocal supply agreement with Henkel Corporation (10%). Generally,
the demand for the type of products supplied by GEO exceeds the basic growth
rate for the industries it supplies due to the increasing use of specialty
chemicals. In several applications, such as papermaking and water treatment,
tighter environmental restrictions have prompted greater use of the types of
products supplied by GEO.
GEO's cost of sales is primarily comprised of: (a) the cost of raw
materials (70%); (b) depreciation (5%); and (c) normal operating expenses (25%),
which include personnel costs, ongoing maintenance materials and services,
utilities, operating supplies, property and casualty insurance, property taxes
and leasing expenses. The raw materials required to produce GEO's products are
generally available from several suppliers and are typically purchased under
agreements negotiated annually with two or more vendors per raw material. The
raw materials which comprise a majority of these purchases include sulfuric
acid, naphthalene, formaldehyde, paraffin oils, glycols, aluminum/aluminas and
fatty acids. Additionally, GEO has an agreement with Henkel Corporation to
purchase various products previously purchased by the business units acquired by
GEO from Henkel plants excluded from the acquisition. Purchases under the supply
agreement, depending upon the particular product, are made at market prices or
at prices tied to standard costs as of December 1996. The duration of the supply
agreement, depending upon the classification of the product, is three or five
years. Purchases under this agreement were approximately 10% of GEO's total raw
material costs in fiscal 1997.
GEO's selling, general and administrative expenses include all operating
costs unrelated to plant operations. Approximately 50% of these expenses are
incurred by the pulp and paper chemicals business, which includes approximately
40 sales, marketing and technical support employees. These expenses also include
typical expenses such as office rent, general management, finance and
accounting, information systems, human resources, legal, purchasing, certain
types of corporate liability insurance and amortization of deferred charges.
RESULTS OF OPERATIONS
The following table shows certain income statement data for GEO expressed
in millions of dollars and as a percentage of net sales.
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1997 1997 1998
------------- ------------- -------------- ------------- -------------
$ % $ % $ % $ % $ %
----- ----- ----- ----- ------ ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............ $21.2 100.0% $23.9 100.0% $100.8 100.0% $72.3 100.0% $92.5 100.0%
Cost of Sales........ 18.1 85.4 20.7 86.6 81.1 80.5 57.8 79.9 75.5 81.6
Gross Profit......... 3.1 14.6 3.2 13.4 19.7 19.5 14.5 20.1 17.0 18.4
SG&A Expenses........ 2.1 9.9 2.2 9.2 11.9 11.8 7.9 10.9 9.6 10.4
EBITDA............... 1.6 7.5 1.8 7.5 12.1 12.0 9.7 13.4 12.5 13.5
</TABLE>
22
<PAGE> 26
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997
Net Sales. Net sales for the nine months ended September 30, 1998 were
$92.5 million, representing a $20.2 million or 27.9% increase compared with net
sales of $72.3 million during the comparable period in 1997. The increase in net
sales was primarily attributable to the impact of two separate acquisitions. In
March 1997, GEO acquired two business units from Henkel Corporation and Henkel
Canada Limited which manufacture specialty chemicals sold to the paper industry
and additive chemicals sold to the construction, oilfield and ceramic
industries. In July 1998, GEO acquired the TRIMET Technical Products Division of
Mallinckrodt Inc. which produces additives used in the coatings and resins
industries. Excluding the impact of these acquisitions, GEO's Aluminum Products
group experienced a $1.1 million increase in net sales due to both volume and
price increases. Offsetting this increase was a $1.8 million decline in net
sales due in part to lower pricing at GEO's Process Chemicals unit and a $2.2
million decline in sales to the paper industry due largely to the discontinuance
of certain products acquired from Henkel.
Cost of Sales. The cost of sales for the nine months ended September 30,
1998 was $75.5 million, or 81.6% of net sales, representing a $17.7 million or a
30.6% increase compared to the nine months ended September 30, 1997, when the
cost of sales was $57.8 million or 79.9% of net sales. The increase in cost of
sales was driven primarily by increased net sales resulting from the previously
mentioned acquisitions. Additionally, several other factors influenced the
increase in cost of sales, particularly as a percent of net sales, including
higher depreciation expenses caused by a write-up of fixed assets, a less
favorable sales mix and relatively higher freight expenses.
Gross Profit. Gross profit for the nine months ended September 30, 1998 was
$17.0 million, or 18.4% of net sales, representing a $2.5 million or 17.2%
increase compared with a gross profit of $14.5 million, or 20.1% of net sales,
during the comparable period in 1997. The increase in gross profit was primarily
attributable to the previously mentioned acquisitions. The decline in gross
margin as a percent of net sales reflects the effect of: (a) price pressures in
the construction market, (b) relatively higher freight expenses, (c) increased
depreciation due to the write-up of certain fixed assets, and (d) a change in
the sales mix resulting from increased sales of aluminum products.
Selling, General and Administrative Expenses. SG&A expenses for the nine
months ended September 30, 1998 were $9.6 million, or 10.4% of net sales,
representing a $1.7 million or 22% increase compared to the nine months ended
September 30, 1997. The increase in SG&A expenses was attributable to the
previously mentioned acquisitions. The decline as a percent of net sales
reflects the impact of limiting general and administrative expense increases
while adding net sales via acquisitions.
EBITDA. EBITDA for the nine months ended September 30, 1998 was $12.5
million, or 13.5% of net sales, representing a $2.8 million or 28.9% increase
compared to an EBITDA of $9.7, or 13.4% of net sales, during the comparable
period in 1997. The increase in EBITDA was primarily attributable to the
previously mentioned acquisitions.
FISCAL 1997 COMPARED TO FISCAL 1996
Net Sales. Net sales for fiscal 1997 were $100.8 million, representing a
$76.9 million or 321.8% increase over fiscal 1996. The Henkel acquisition
contributed $61.0 million of the increase. Excluding the Henkel acquisition, net
sales were $39.8 million, representing a $15.9 million or 66.5% increase over
fiscal 1996. This increase in net sales was primarily attributable to the Cytec
acquisition which was completed in December 1996.
Cost of Sales. Cost of sales were $81.1 million, representing a $60.4
million or 291.8% increase over fiscal 1996. As a percentage of net sales, cost
of sales decreased from 86.6% in fiscal 1996 to 80.5% in
23
<PAGE> 27
fiscal 1997. Excluding the Henkel acquisition, cost of sales for fiscal 1997 was
$36.5 million, representing a $15.8 million or 76.3% increase over fiscal 1996.
As a percentage of net sales, cost of sales increased to 91.7% in fiscal 1997
from 86.6% in fiscal 1996. The Cytec acquisition accounted for essentially all
of the increase in cost of sales and caused cost of sales as percent of net
sales to increase due to the product mix associated with the Cytec acquisition.
Gross Profit. Gross profit for fiscal 1997 was $19.7 million, representing
a $16.5 million or 515.6% increase compared to fiscal 1996. As a percentage of
net sales, gross profit improved from 13.4% in fiscal 1996 to 19.5% in fiscal
1997. Excluding the Henkel acquisition, gross profit for fiscal 1997 was $3.3
million, representing a $0.1 million or 3.1% increase over fiscal 1996. As a
percentage of net sales, gross profit margin decreased to 8.3% in fiscal 1997
from 13.4% in fiscal 1996. This decrease was related to the product mix
associated with the Cytec acquisition.
Selling, General and Administrative Expenses. SG&A expenses for fiscal 1997
were $11.9 million, representing a $9.7 million or a 440.9% increase from fiscal
1996. As a percentage of net sales, SG&A expenses increased to 11.8% in fiscal
1997 from 9.2% in fiscal 1996. This increase was primarily related to increased
sales commissions, sales discounts and freight allowances associated with the
Henkel acquisition. Excluding the Henkel acquisition, SG&A expenses were $2.6
million, representing a $0.4 million or 18.2% increase from fiscal 1996. As a
percentage of net sales, SG&A expense decreased to 6.5% in fiscal 1997 from 9.2%
in fiscal 1996 due to the Cytec acquisition which added relatively low operating
expenses.
EBITDA. EBITDA for fiscal 1997 was $12.1 million, representing a $10.3
million or 572.2% increase compared to fiscal 1996. As a percentage of net
sales, EBITDA increased to 12.0% in fiscal 1997 from 7.5% in fiscal 1996.
Excluding the Henkel acquisition, EBITDA was $2.8 million, representing a $1.0
million or 55.6% increase over fiscal 1996. As a percentage of net sales, EBITDA
decreased to 7.0% in fiscal 1997 from 7.5% in fiscal 1996. The percentage of
sales decrease resulted from the lower margin mix of sales and the overall
magnitude of sales associated with the Cytec acquisition. The Cytec acquisition
approximately doubled GEO's annual sales with a portfolio of relatively lower
margin products.
FISCAL 1996 COMPARED TO FISCAL 1995
Net Sales. Net sales in fiscal 1996 were $23.9 million, representing a $2.7
million or 12.7% increase compared to fiscal 1995. The Cytec acquisition in
December 1996 accounted for $1.1 million of the increase. The remaining increase
was due to a $1.2 million increase in sales of aluminum compounds, especially
dry alum, and a $0.4 million increase in merchant clay net sales due essentially
to GEO's change from being a toller of merchant clay to a regular supplier.
Cost of Sales. Cost of sales in fiscal 1996 were $20.7 million,
representing a $2.6 million or 14.4% increase compared to fiscal 1995. As a
percentage of net sales, cost of sales increased slightly in fiscal 1996 to
86.6% from 85.4% in fiscal 1995. The Cytec acquisition in December accounted for
$1.0 million of the increase. GEO's change from being a toller of merchant clay
to a regular supplier added $0.4 million to cost of sales since GEO had to
purchase raw materials that were previously supplied by its customers. The
remaining increase of $1.2 million was due to higher sulfuric acid costs and the
requirement to source alumina from third parties for producing aluminum sulfate.
Gross Profit. Gross profit was $3.2 million, representing a $0.1 million or
3.2% increase compared to fiscal 1995. As a percentage of net sales, gross
profit margin decreased from 14.6% in fiscal 1995 to 13.4% in fiscal 1996. The
decrease was due to relatively larger increases in raw material costs compared
to selling prices during fiscal 1996.
24
<PAGE> 28
Selling, General and Administrative Expenses. SG&A expenses in 1996 were
$2.2 million, representing a $0.1 million or 4.8% increase compared to fiscal
1995. Most of the increase was related to changes in the General Manager
position. As a percentage of net sales, SG&A expenses decreased to 9.2% in
fiscal 1996 from 9.9% in fiscal 1995, as SG&A expenses were held essentially
flat as sales increased due to the pass through of higher raw material costs and
the Cytec acquisition.
EBITDA. EBITDA for fiscal 1996 was $1.8 million, representing a $0.2
million or 12.5% increase compared to fiscal 1995. As a percentage of net sales,
EBITDA remained the same. The Cytec acquisition accounted for a majority of the
increase.
LIQUIDITY AND CAPITAL RESOURCES
GEO's primary cash needs are working capital, capital expenditures and debt
service. GEO has financed, and intends to continue to finance, these needs from
internally generated cash flow, in addition to periodic draws on its senior
credit facility. Net cash provided from operations for the periods ended
September 30, 1997 and 1998 was essentially the same at $4.2 million. Capital
expenditures were $1.7 million for the nine months ended September 30, 1997 and
$3.8 million for the nine months ended September 30, 1998. GEO currently has no
material commitments for capital expenditures.
In connection with the TRIMET acquisition, GEO refinanced its existing
senior debt by issuing $120.0 million of 10 1/8% Senior Subordinated Notes and
amending its credit facility to include $25.0 million of available borrowings
under a new revolving senior credit facility. The new $25.0 million senior
credit facility has a five year duration and no interim amortization
requirements. As of September 30, 1998, GEO had $25.0 million available for
borrowing under the senior credit facility. Borrowings under the senior credit
facility bear interest, at GEO's option, at:
- 1.25% above the higher of (a) an adjusted certificate of
deposit rate plus 0.5% or (b) the prime lending rate of
Bankers Trust Company; or
- an adjusted Eurodollar rate plus 2.25%.
As of September 30, 1998, GEO's interest rate under the senior credit
facility would have equaled 9.5%. The senior credit facility contains customary
covenants which include the maintenance of certain financial ratios. For a more
complete description of the senior credit facility, see "Description of GEO's
Senior Credit Facility" below.
GEO believes that cash generated from operations, together with amounts
available under its senior credit facility, will be adequate to meet its debt
service requirements, capital expenditures and working capital needs for the
foreseeable future, although no assurance can be given in this regard.
The overall effects of inflation on GEO's business during the periods
discussed have not been significant. GEO monitors the prices it charges for its
products on an ongoing basis and believes that it will be able to adjust those
prices to take into account any future changes in the rate of inflation.
"YEAR 2000" COMPLIANCE
In May 1997, GEO initiated a program to upgrade its information technology
systems. The major components of this program include enterprise level
integrated applications software, communications software and wide area network
and server computers. These components were acquired from leading vendors,
including Digital Equipment Corporation, Oracle Corporation, International
Business Machines Corporation, Ross Systems, Inc. and MCI Communications
Corporation. Each purchased component was represented as being "Year 2000"
compliant. GEO has also instituted procedures to centralize and standardize the
purchase of personal computers, laptop computers and peripheral equipment to,
among
25
<PAGE> 29
other things, ensure compatibility and security within the context of GEO's base
information systems. GEO currently plans to complete the information technology
systems upgrade by the middle of 1999. Although GEO believes that the technology
upgrade will be effected efficiently and according to its schedule, it can
provide no assurance that the process will occur without unexpected difficulty,
delay or expense.
The "Year 2000" issue refers to computer programs being written using two
digits rather than four to define an applicable year. Any hardware, date-driven
automated equipment or computer software that has a two-digit field to define
the year may recognize a date using "00" as the year 1900 rather than the year
2000. This faulty recognition could result in a system failure, disruption of
operations or inaccurate information or calculations. Although GEO believes that
its recently-acquired information systems are "Year 2000" compliant, it can
provide no assurance that difficulties will not arise with respect to any of
these systems or any other systems that GEO is utilizing at the year 2000. In
addition, GEO could face disruption of its operations or difficulties in serving
its customers if GEO's vendors or customers experience "Year 2000" compliance
problems. As part of its "Year 2000" compliance efforts, GEO routinely
participates in various survey requests from customers, vendors and bankers. GEO
also continuously interviews and surveys its vendors and suppliers.
26
<PAGE> 30
GEO'S BUSINESS
GEO TODAY
GEO develops, manufactures and markets a wide variety of specialty
chemicals. Through the implementation of a "buy and build" strategy, GEO has
successfully positioned itself as a leading supplier of a broad variety of niche
products sold to a diverse customer and market base. GEO manufactures over 300
products sold to major industrial customers for such diverse end-use
applications as water treatment, pulp and paper processing, oil and gas
production, coatings and construction. GEO believes that it has a significant
operating advantage due to its extensive network of plants and versatility to
produce a broad range of products.
HISTORY
GEO was formed by George P. Ahearn and William P. Eckman to build,
primarily through acquisitions, a specialty chemical business targeted in
strategic market segments. GEO's initial acquisition occurred in February 1993
with the purchase of the Gulf Coast Aluminum Sulfate business, a manufacturer
and supplier of paper processing chemicals and processed clays located in the
Southeastern United States, from Rhone-Poulenc, Inc., for $3.6 million. In July
1994, GEO acquired the assets of Courtney Industries, Inc., a manufacturer of
aluminum-based chemicals used in water treatment and industrial applications,
for $5.1 million. The acquisition of Courtney Industries also provided GEO with
complementary products to its existing aluminum sulfate business. During 1995,
GEO purchased the customer list relating to the dry aluminum sulfate business of
Rhone-Poulenc, Inc. In December 1996, GEO acquired seven plants comprising the
business and assets of the aluminum sulfate business of Cytec Industries Inc.,
for $7.1 million. The acquisition of Cytec Industries further improved GEO's
position in the aluminum sulfate market and expanded its network of
strategically located plants in the Southeastern United States.
In March 1997, GEO purchased from Henkel Corporation two modern ISO 9002
certified manufacturing plants located in the United States and involved in the
development, manufacture and supply of specialty paper chemicals and
construction and process additive chemicals, for approximately $55 million.
Through the Henkel acquisition, GEO became one of the most diversified specialty
chemical suppliers to the paper industry with over 200 products. The Henkel
acquisition also provided GEO with over 100 products in niche applications
within the construction, oil and gas, and ceramic industries. Concurrently with
the Henkel acquisition, Charter Oak Partners recapitalized GEO with $15.0
million of new common equity and became a partner and source of strategic
capital for GEO. Founded in 1976, Charter Oak Partners is a private investment
partnership based in Westport, Connecticut which principally invests in both
private and publicly owned companies. Charter Oak Partners focuses on making
private equity investments in management buyouts, acquisitions and
recapitalizations.
In July 1998, GEO acquired substantially all of the assets of the TRIMET
Technical Products Division of Mallinckrodt Inc., for approximately $60.0
million. As a result of the acquisition of TRIMET, GEO became the leading global
supplier of dimethylolpropionic acid, marketed under the brand name DMPA(R), and
trimethylolethane, marketed under the brand name TRIMET(R), two functionally
unique and versatile polyols that service a specific segment of the water-based
polyurethane coatings and high performance resins markets. In connection with
the acquisition of TRIMET, GEO issued the outstanding notes.
27
<PAGE> 31
COMPETITIVE STRENGTHS
GEO believes that its market leadership positions and significant
opportunities for continued growth and increased profitability are primarily
attributable to the following strengths:
Leader in Selected Niche Markets. GEO is the U.S. market leader in liquid
calcium stearate used in the paper coating process, which GEO markets under the
brand name NOPCOTE(R). GEO is also a U.S. market leader in the production of
naphthalene sulfonate condensates, marketed under the brand name LOMAR(R), which
are used in a wide variety of applications, including admixtures which increase
the strength of concrete and dispersants which shorten the drying time and
improve the properties of manufactured gypsum board. As a result of the
acquisition of TRIMET, GEO is also the leading global supplier of
dimethylolpropionic acid, marketed under the brand name DMPA(R), and
trimethylolethane, marketed under the brand name TRIMET(R), two functionally
unique and versatile polyols that service a specific segment of the water-based
polyurethane coatings and high performance resin markets.
Broad Product Portfolio and Strong Customer Base. GEO manufactures over 300
products with applications in a wide variety of end-use markets, and sells these
products to approximately 1,000 customers. For the nine months ended September
30, 1998 on a pro forma basis (excluding sales under GEO's supply agreement with
Henkel Corporation), GEO's top ten customers accounted for approximately 25% of
its net sales and no single customer accounted for more than 5% of its net
sales. GEO sells its products to a base of large multinational companies with
which it has a longstanding relationship, including International Paper Company,
Georgia-Pacific Corporation, Eastman Kodak Company, Master Builders, Inc.,
United States Gypsum Company, Zeneca Inc., PPG Industries, Inc., Baker Hughes
Incorporated and Westvaco Corporation. GEO believes that the diversity of its
customer base, products and end markets provides it with a broad base to grow
sales, expand customer relationships and minimize exposure to any particular
customer or economic cycle.
Strong Manufacturing Capability. GEO enjoys a competitive advantage in the
versatility, flexibility and location of its manufacturing facilities. GEO's
major manufacturing facilities have the ability and flexibility to produce and
formulate multiple products, allowing it to meet changing customer requirements
for customized products. In addition, GEO has strategically acquired nine small
plants located in the Southeast in close proximity to the major U.S. paper
mills. The location of these plants provides GEO with key regional supply points
for its pulp and paper chemicals business and other major industrial accounts.
GEO believes that this network decreases the shipping and warehouse costs of its
customers and provides GEO with a distinct advantage over other suppliers.
Proven Acquisition Expertise. GEO's senior management has developed
significant expertise in identifying, effecting and integrating acquisitions
within targeted markets. Since GEO's formation in 1993, management has
successfully completed five acquisitions. Through these acquisitions, GEO has
developed efficient techniques for integrating acquired companies' plants,
personnel and customers into its business. Management believes that its
acquisition expertise will allow it to continue to successfully acquire and
integrate businesses within certain niche markets of the specialty chemicals
industry.
Experienced Management Team. GEO's senior management led by George P.
Ahearn and William P. Eckman has an average of 25 years of operating experience
in the chemical industry, primarily in specialty chemicals. In addition, GEO has
assembled a strong and experienced management team as a result of its
acquisitions and has actively worked at developing a unified culture of
participative management. Senior management owns approximately 20.72% of GEO's
equity.
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<PAGE> 32
BUSINESS STRATEGY
GEO's management has developed and implemented a business strategy designed
to increase GEO's sales, profitability and share within targeted markets. The
key components of GEO's business strategy include:
Continue Focus on Niche Products. Consistent with its history, GEO will
continue to focus on manufacturing or acquiring businesses which produce
value-added niche products for its customer base. In particular, GEO will
continue to work with its customer base to develop innovative solutions and
products. For example, GEO has established the leading position in the
manufacture and supply of proppant intermediates to the oil and gas industry by
working closely with the two leading suppliers of proppants. In addition, GEO
has become a "prototype" supplier to several major construction companies due to
its broad product range and technological expertise, as well as its cooperative
marketing efforts with these key customers. Based upon its historical
accomplishments, GEO believes that it will continue to be successful in
developing innovative, value-added products in niche markets.
Utilize Strong Manufacturing Capability. GEO intends to utilize the
versatility, flexibility and location of its manufacturing facilities to
capitalize on a growing trend among the major suppliers to the water treatment,
pulp and paper and oil field markets to outsource a portion of their
manufacturing. This trend is being driven in part by these suppliers' efforts to
focus greater resources on their product development, technical, and sales and
servicing businesses as opposed to their manufacturing operations. GEO intends
to focus part of its marketing and sales efforts on this outsourcing trend by
promoting such products as defoamers, flocculants and polymer blends.
Pursue Strategic Acquisitions. GEO has successfully grown through
acquisitions and intends to pursue additional strategic acquisitions that will
allow it to further improve its market position in targeted markets and in other
high growth specialty chemicals markets, such as fine chemicals and inorganic
chemicals with high-tech applications. Consistent with its current acquisition
strategy, GEO intends to target value-added businesses, especially non-core
businesses being divested by large companies and spin-offs generated by merger
and acquisition activity. GEO will evaluate potential acquisition candidates
based upon the ability of GEO to:
- expand its product offerings;
- provide access to complementary raw materials, customers and markets;
- enhance its manufacturing capabilities; and
- extend its geographic reach both domestically and internationally.
Maximize Operating Efficiencies. GEO has historically been successful in
optimizing operating costs with each of its prior acquisitions. GEO believes
that it can continue to achieve operating efficiencies resulting in reduced raw
material and manufacturing costs and improved cash flow through:
- cross-selling its expanded product line across a broader
distribution and customer network;
- consolidating raw material purchases to increase purchasing
economies of scale;
- leveraging expenses over a broader revenue base; and
- consolidating certain manufacturing and distribution
operations.
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<PAGE> 33
PRODUCTS AND MARKETS OVERVIEW
The following table shows GEO's principal operating groups by product line,
primary end-markets and as a percentage of sales for the nine months ended
September 30, 1998 on a pro forma basis.
<TABLE>
<CAPTION>
PERCENTAGE
OPERATING GROUP PRODUCT LINE PRIMARY END-MARKETS OF SALES
--------------- ------------ ------------------- ----------
<S> <C> <C> <C>
Performance Chemicals Aluminum Products Pulp & Paper, Water 24%
Treatment
Formulated Products Pulp & Paper 14
Stearates Pulp & Paper 7
---
Total Performance Chemicals........................................... 45
Process Additives Naphthalene Sulfonate Construction, Oil 23
Condensates/Other field
Chemicals
Polyols Coatings 16
Clay Products Oil field 4
---
Total Process Additives............................................... 43
Other(1) 12
---
Total................................................................. 100%
</TABLE>
- ---------------
(1) Comprised of formaldehyde, calcium formate and sales pursuant to GEO's
reciprocal supply agreement with Henkel Corporation.
PERFORMANCE CHEMICALS
Pulp & Paper. The United States produces approximately one-third of the
world's pulp and paper, using approximately $5.1 billion of commodity and
specialty chemicals in 1996. Specialty pulp and paper chemicals include a wide
range of chemicals, most of which are proprietary formulations that require
extensive customer support. Unlike commodity pulp and paper chemicals that are
sold on the basis of a specification and are the same for every manufacturer,
specialty pulp and paper chemicals are unique products produced or formulated to
accomplish a specific mill application. In addition, some pulp and paper
chemicals are classified as specialty chemicals due to the niche nature of the
markets they serve and the high barriers of entry associated with those markets.
Specialty pulp and paper chemicals are generally sold based upon performance
considerations. In particular, their value in the marketplace stems from the
level of innovation provided to the customer and the degree to which the
products are tailored to meet a customer's needs.
Specialty pulp and paper chemicals are used in such diverse applications as
improving the strength characteristics of printed paper, enhancing paper
printability and optimizing the pulp and paper process. Major purchasers of pulp
and paper specialty chemicals include International Paper Company, Champion
International Corporation, Kimberly-Clark Corporation, Consolidated Papers,
Inc., Fort James Co., The Mead Corporation, Inland Container Corporation, Stone
Container Corporation and Weyerhaeuser Corporation. Sales of specialty pulp and
paper chemicals were estimated to be $2.8 billion in 1996 and are projected to
grow at 2% to 3% rate per annum through 2001. The pulp and paper specialty
chemical market is primarily driven by: (a) the overall growth of the pulp and
paper industry; (b) trends to improve mill efficiencies; (c) developments in
paper production technology; (d) various environmental regulations; and (e)
mandated paper recycling.
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<PAGE> 34
Within the pulp and paper specialty chemical industry, GEO markets over 200
products in the following major areas: defoamers, coatings and lubricants,
polyaluminum chloride and aluminum sulfate, and other specialty pulp and paper
chemicals.
Defoamers. GEO's specialty pulp and paper chemicals used in the defoaming
process of papermaking are used to prevent excess foaming in equipment and to
eliminate air bubbles during various stages of the papermaking process. The
product type and amount used vary by mill depending on the type of pulp used and
the operating conditions. A broad spectrum of chemicals are used to prevent
foam, and they usually contain fatty acids, oils, waxes or alcohols. GEO markets
approximately 80 products in the defoaming segment and maintains approximately
13% market share. GEO's comprehensive product line coupled with its sales and
marketing strategy of supplying Tier I suppliers as well as directly to paper
mills has resulted in significant sales and market share. GEO competes primarily
with Callaway Chemical Company, a chemical company of Vulcan Materials Company,
Nalco Chemical Company, Vinings Industries, Inc. and Betz-Dearborn Incorporated
in this segment of the pulp and paper industry.
Coatings/Lubricants. GEO's specialty pulp and paper chemicals are used in
the coating and lubricating aspects of the papermaking process, primarily to
improve the efficiency and performance of the manufacturing process. GEO markets
approximately 40 products providing glossing ease, processing efficiency,
surface smoothness and printability enhancement. Within this segment, GEO has
focused on calcium stearate-based lubricants, marketed under the trade name
NOPCOTE(R), of which GEO is the market leader, maintaining an approximate 40%
market share. GEO's brand recognition in conjunction with its reputation for
consistently providing high quality products for over 40 years has created
strong customer relationships and a resulting strong market share in this
segment. GEO competes primarily with BASF Corporation and Sequa Corporation in
this segment of the pulp and paper industry.
Polyaluminum Chloride/Aluminum Sulfate. GEO's polyaluminum chloride and
aluminum sulfate products are used in the sizing aspects of the papermaking
process as well as a flocculant and coagulant in the treatment of the pulp and
paper mills' wastewater. GEO believes it is one of the leading sellers of these
products in the U.S. pulp and paper industry, providing approximately 10
products and maintaining a market share of approximately 35%. GEO's proprietary
manufacturing process for polyaluminum chloride allows it to be the low cost
producer and the price and quality leader. GEO competes primarily with General
Chemical Corporation, Gulbrandsen Co., Inc. and Southern Ionics, Inc. in this
segment of the pulp and paper industry.
Other. GEO also supplies sizing agents, cleaners, dry and wet strength
resins, wetting and re-wetting, and deposit control agents to the specialty pulp
and paper chemical market. These products are used in such diverse applications
as maintaining the integrity of paper fibers, improving the ability of paper to
withstand various temperature conditions and ensuring an efficient manufacturing
process. GEO markets approximately 75 of these products and competes with a
variety of companies, including Huntsman Corporation, Hercules Incorporated and
Buckman Laboratories International Inc.
Water Treatment. The U.S. specialty chemical water treatment market is
approximately $2.7 billion in size. The specialty chemical water treatment
market is comprised of two segments: (a) industrial water treatment which
represents approximately $2.5 billion; and (b) municipal water treatment which
represents approximately $0.2 billion. The industrial water treatment segment of
the market primarily uses specialty chemicals to purify water for manufacturing
processes, as the use of untreated water results in unusable products,
inconsistent product quality and accelerated equipment degradation. In addition
to the voluntary usage of specialty chemicals to ensure product quality and an
enhanced manufacturing process, the industrial segment is also required by
environmental regulations to treat its wastewater. Therefore, demand for
specialty chemicals in the industrial water treatment market is driven by both
the level of industrial production and the regulations stipulated under
environmental legislation.
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<PAGE> 35
The municipal water treatment market uses specialty chemicals primarily to
purify and clarify water sources into a potable form. Similar to the industrial
segment, municipalities are also required to comply with environmental
regulations. Currently, the Environmental Protection Agency, to comply with the
1996 amendments to the Safe Drinking Water Act, has regulations pending which
will tighten the requirements of municipalities. These pending regulations will
contribute to the increased use of specialty water treatment chemicals such as
flocculants and coagulants. The confluence of the following factors is expected
to result in continued growth for specialty water treatment chemicals: (a)
increased industrial production; (b) more stringent environmental regulations;
(c) increased scarcity of potable water; and (d) population growth.
Within the specialty chemical water treatment industry GEO markets over 70
products in the following major areas: flocculants and coagulants.
Flocculants and Coagulants. GEO is a leading U.S. manufacturer of aluminum
sulfate, which is used primarily as a flocculant and as a coagulant for the
treatment of water in the pulp and paper, industrial and municipal markets.
Flocculants and coagulants remove suspended matter from water and are essential
to the treatment of drinking water, industrial processing water and wastewater.
Coagulants are used to achieve primary separation, enabling the removal of fine
and stable colloidal suspensions. Flocculants are added after the primary
coagulant to cause the destabilized colloidal particles to clump together and
settle out more rapidly. GEO is also a leading manufacturer of aluminum chloride
solutions, aluminum chlorhydrate and polyaluminum chloride. GEO markets
approximately 55 products in this segment and maintains an approximate 30%
market share.
GEO derives its strong market position from the strategic location of its
plants and its low cost producer status. In particular, the close proximity of
GEO's nine small plants to its customer base, most notably its pulp and paper
customers, provides GEO with a distinct advantage over its competitors as it is
able to deliver its products in a more timely and cost effective manner. In
addition, GEO's kaolin clay source, which is used as a raw material in GEO's
production of aluminum sulfate, provides a strategic raw material allowing GEO
to be a low cost supplier in the market. These factors along with high turbidity
of the water located in the Southeastern U.S., where GEO primarily operates, has
resulted in strong market share and revenue and profit growth. In this segment
of its business, GEO competes with General Chemical Corporation, Gulbrandsen
Co., Inc., Summit Research Labs, Kemwater North America Company, a subsidiary of
Pioneer Companies, Inc. and Delta Chemical Corp.
PROCESS ADDITIVES
Construction. GEO participates primarily in two segments of the
construction industry: concrete admixtures and gypsum board. GEO is the U.S.
market leader in the production of napthalene sulfonate condensates used in a
wide variety of applications, including admixtures which increase the strength
of concrete and dispersants which shorten the drying time and improve the
properties of manufactured gypsum board.
Concrete Admixtures. In the concrete segment of the construction market,
GEO's napthalene sulfonate condensates products are primarily used as an
admixture in superplasticizers, whereby the water content of concrete is reduced
allowing for increased workability and cured strength. The increased strength of
concrete created by GEO's napthalene sulfonate condensates improve the ability
of concrete to withstand deterioration due to temperature variations and
corrosive agents. Major markets for GEO's napthalene sulfonate condensates
products include roadway construction and repair and nonresidential and
residential construction. In some cases, the use of superplasticizers in cement
admixtures is mandated by local building codes for the construction of bridges,
high-rises and other structures. GEO markets approximately 30 products and
maintains an approximate 40% market share due to its breadth of products
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<PAGE> 36
and trademark recognition. GEO competes with the Hampshire Division of The Dow
Chemical Company and the Handy Chemical Division of Alcan Chemical Corp. in this
segment of the construction specialty chemical market.
Gypsum Board. GEO is also the leading U.S. manufacturer of napthalene
sulfonate condensates products to the gypsum board market. GEO's napthalene
sulfonate condensates products act as a dispersant resulting in the de-watering
of the gypsum board which shortens the drying time and expedites the
manufacturing process. Demand for GEO's napthalene sulfonate condensates
products is primarily a function of the level of residential and commercial
construction. GEO markets approximately 10 products for gypsum board use and
maintains an approximate 65% market share. GEO developed the application of
napthalene sulfonate condensates in this market and is considered to be the
technology leader. GEO also is a leading manufacturer of foaming agents and
defoamers to the gypsum board industry. Major customers include the four leading
gypsum board producers: United States Gypsum Company, Georgia-Pacific
Corporation, National Gypsum and James Hardie. GEO competes primarily with the
Hampshire Division of The Dow Chemical Company and the Handy Chemical Division
of Alcan Chemical Corp. in the gypsum board market.
Coatings. The global market for paint and coatings was over $54 billion in
1996. Primarily concentrated in the world's developed nations, particularly the
United States, Western Europe and Japan, the market for paint and coating
chemicals is primarily split into two applications: construction, primarily new
home construction, and consumer durables, including motor vehicles, home
furnishings, outdoor equipment and household appliances. Demand for paint and
coating chemicals is principally a function of construction expenditures, motor
vehicle output and general consumer spending.
In addition, demand for paint and coating chemicals has been driven by
increased environmental concerns with many paints and coatings, particularly the
high solid, solvent-borne products due to their high lead content. Reformulation
efforts of paints and coatings have centered on the reduction of volatile
organic compound emissions. These environmental concerns have resulted in
increased demand for more environmentally friendly water-based, high solids,
electrodeposition powders and non-solvent paints and coatings and the specialty
chemicals used in their production processes. This increase in water-based paint
and coatings products has been most pronounced in the construction industry,
where most household paints currently use water-based paint and coatings. In the
1990s, the shift towards water-based paints and coatings spread to the consumer
durables sector and other industrial sectors as well, resulting in continued
growth in the paint and coatings chemicals market.
Within the specialty paint and coating chemicals markets, GEO manufacturers
and supplies two products: DMPA and TME.
DMPA. GEO's dimethylolpropionic acid ("DMPA") is a specialty polyol with a
unique chemical functionality that makes it extremely versatile. DMPA is used as
a modifier in the production of polyurethanes and epoxy resins for water-borne
systems in such applications as wood varnishes, leather coatings, adhesives and
automotive parts. Water-borne systems have historically been difficult to
formulate with the properties required for industrial or specialized
applications. Solvent-borne polyurethane and epoxy type coatings traditionally
had superior performance for durability, gloss and hardness and have been used
in many industrial or specialized applications. However, with improved
properties and environmental regulations to lower volatile organic compound
emissions, water-borne polyurethanes have experienced significant growth at the
expense of their organic solvent-based counterparts. GEO believes that its DMPA
product, with its low-impact environmental profile and superior performance,
will benefit from the worldwide trend towards more stringent environmental
standards for many paint and coating products. GEO is the only producer of DMPA
in the world and supplies such major manufacturers as Zeneca Corp., PPG
Industries, Inc. and Reichhold Chemicals, Inc.
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TME. Similar to DMPA, GEO's trimethylolethane ("TME") product is a polyol
with a unique chemical functionality that makes it extremely versatile. TME is
widely used as a raw material in the manufacturing of alkyd and polyester resins
used in high solid and powder coating applications. These coatings are used in
such applications as: automotive finishes, where it improves gloss and hardness;
outdoor equipment, where ultra-violet resistance is enhanced; and decorative
finishes for home furnishings, where it improves water resistance. TME is also
used as a surface treatment for titanium dioxide where it improves
dispersibility of the titanium dioxide and the hardness in such applications as
can coatings and architectural paints. GEO believes that its TME product, with
its low-impact environmental profile and superior properties, will also benefit
from the worldwide trend towards more stringent environmental standards for many
paint and coating products. GEO has no direct competition for its TME product
and supplies such major manufacturers as McWorter Corporation, Reichhold
Chemicals, Inc., Cook Composites Company and Kerr-McGee Chemical Corporation.
Oilfield. The North American oilfield chemical market was approximately
$3.3 billion in 1996. The oilfield industry uses many specialty chemicals for
drilling, completion and workover, cementing, stimulation and production
operations. Demand for oilfield specialty chemicals is a function of exploration
expenditures, oil and gas production and crude oil and gas prices. The increased
exploration efforts in the Gulf of Mexico, particularly at the deeper depths, in
conjunction with increased oil production in Canada and Mexico will drive demand
in North America for oilfield specialty chemicals.
Within the oilfield specialty chemical market GEO markets approximately 25
products in the following major areas: cementing, fracturing and production.
Cementing. In the approximately $740 million cementing market, GEO's
napthalene sulfonate condensates products are used to enhance the physical
properties of the cement used for well casings. In particular, GEO's napthalene
sulfonate condensates products allow for improved handling of cement, resulting
in reduced energy requirements for pumping at greater depths. In this market,
GEO competes with the Hampshire Division of The Dow Chemical Company and several
alternative specialty chemicals. B.J. Services is a major customer of GEO.
Fracturing. GEO manufactures calcined clay and bauxite used as an
intermediate in the manufacturing of clay proppants. Clay proppants are used in
the well fracturing process to improve the productivity of oil and natural gas
wells. GEO markets 12 products and maintains an approximate 40% market share in
this segment. GEO's major customers include Carbo Ceramics, Inc. and
Norton-Alcoa Proppants. GEO competes primarily with CE Minerals, Inc.
Production. GEO also manufactures its napthalene sulfonate condensates
products for oil production. GEO's napthalene sulfonate condensates products
serve primarily as de-emulsifiers which facilitate the de-watering of crude-oil.
GEO competes primarily with Witco Corporation in this market.
SALES AND MARKETING
GEO markets its products through a variety of strategies, depending upon
the nature of the product being sold. Performance Chemicals are generally
marketed through direct, on-site visits to process industry manufacturers, such
as pulp and paper manufacturers. Such on-site visits typically include trial
applications and demonstrations of the cost-effectiveness of the Performance
Chemicals and involve follow-up on-site visits and ongoing technical assistance.
In such direct, on-site marketing efforts GEO succeeds by demonstrating the
superior performance of its product.
Process Additives are generally marketed through a cooperative effort with
customers at the research and development phase of the manufacturing process.
Representatives of GEO work with customers in developing a desired product by
providing up-front technical assistance. This marketing method involves
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GEO's Process Additives being included in the customers' formulations, thereby
allowing GEO to establish long-term relationships with customers in this product
segment.
GEO also relies upon more traditional methods of marketing for certain
segments of its products. GEO markets to distributors through purchasing agents
for the sale of many products in its aluminum flocculants line. GEO also sells
numerous products to indirect suppliers and distributors, including such
products as aluminum chlorhydrate, aluminum chloride solutions and liquid and
dry aluminum sulfate. The use of purchasing agents, indirect suppliers and
distributors has enabled GEO to market its products on a wide geographic scale,
including the West Coast and other locations where GEO has no regional sales
coverage, and into smaller markets that are not economically feasible for GEO to
target directly.
GEO markets certain products by participating in formal bid procedures,
most commonly in connection with the supply of specialty chemicals to
municipalities that operate water treatment, recirculation and effluent
treatment facilities and manufacturers in the pulp and paper industry.
GEO is able to market certain of its products through brand recognition and
industry leadership. GEO is the largest domestic producer of calcium stearate,
which it sells under its trade name NOPCOTE(R), and naphthalene sulfonate
condensates products, which are used as dispersants in the concrete, gypsum,
oilfield, ceramics and polymerization industries and are sold by GEO under its
trade name LOMAR(R). GEO is also the second largest domestic producer and
technical marketer of aluminum sulfate, a leader in the market for
aluminum-based flocculants and coagulants used in the treatment of water, sold
by GEO under the trade name ULTRAFLOC(R), and a recognized leader in the
manufacture of defoamers used in papermaking, sold by GEO under the trade name
GEO FM(TM).
GEO's TRIMET products are marketed through several sales representatives
and one distributor that were retained as part of the TRIMET acquisition. The
TRIMET sales representatives include a manager and two direct salesmen located
in the United States and a direct salesman located in Europe. GEO plans to
improve the marketing of TRIMET products through the addition of customer
service and technical support personnel dedicated to the TRIMET customer base.
RAW MATERIALS
GEO uses a variety of specialty and commodity chemicals in its
manufacturing processes. These raw materials are generally available from
several suppliers and are purchased by GEO under agreements negotiated annually
with two or more vendors per raw material. GEO currently has in place multiple
long-term supply contracts ranging in duration from 3 to 6 years for key raw
materials, including fatty acids, kaolin and bauxite clay and propoxylated
butanols. GEO is vertically integrated with its own source of kaolin clay used
in the manufacture of certain of its aluminum and clay products and formaldehyde
used in the manufacture of DMPA and TME.
INTELLECTUAL PROPERTY
GEO believes that trademarks are important competitive factors in a number
of the markets in which it competes. The use of trademarks often represents
quality and performance as well as industry leadership. A number of GEO's
principal products are sold under registered trademarks, including liquid
calcium stearate used as coatings and lubricants in the papermaking process
(NOPCOTE(R)), trimethylolethane (TRIMET(R)) and dimethylolpropionic acid
(DMPA(R)) used in the coatings and resins markets, napthalene sulfonate
condensates used as dispersants in the concrete, gypsum, oilfield, ceramics and
polymerization industries (LOMAR(R)), aluminum-based flocculants and coagulants
used in the treatment of water (ULTRAFLOC(R)), and defoamers used in papermaking
(GEO FM(TM)). GEO's trademarks should remain protected under federal law as long
as they are commercially used by GEO.
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FACILITIES
GEO's manufacturing operations are conducted at the facilities described
below.
<TABLE>
<CAPTION>
APPROXIMATE
CAPACITY
LOCATION PRODUCTS MANUFACTURED TONS/YEAR OWNED/LEASED
-------- --------------------- ----------- ------------
<S> <C> <C> <C>
Baltimore, Maryland aluminum chlorhydrate, aluminum variable Owned
chloride solutions and
polyaluminum chloride
Bastrop, Louisiana aluminum sulfate -- liquid, dry 60,500 Owned
and anhydrous, aluminum chloride
and polyaluminum chloride
Chattanooga, Tennessee aluminum sulfate 25,000 Owned
Coosa Pines, Alabama aluminum sulfate 40,000 Owned(1)
Counce, Tennessee aluminum sulfate blended products 20,000 Owned
Demopolis, Alabama aluminum sulfate 21,000 Owned
DeRidder, Louisiana aluminum sulfate 45,000 Owned(2)
Georgetown, South Carolina aluminum sulfate 45,000 Owned
Little Rock, Arkansas calcined bauxite and kaolin 100,000 Owned(3)
Monticello, Mississippi aluminum sulfate 32,000 Owned
Naheola, Alabama aluminum sulfate 24,000 Owned(2)
Plymouth, North Carolina aluminum sulfate 38,000 Owned
Allentown, Pennsylvania DMPA, TME, formaldehyde and 69,500 Owned(4)
calcium formate
Cedartown, Georgia over 200 formulated products 66,500 Owned
Harrison, New Jersey calcium stearate and defoamers 18,000 Owned
</TABLE>
- ---------------
(1) The Coosa Pines plant is held 4.9 acres in fee and 15.8 acres in leasehold.
(2) The DeRidder and Naheola plants are located on leased land.
(3) The Little Rock facility is held 512 acres in fee and 29.9 acres under land
contract.
(4) Although GEO owns the Allentown facility, it holds the underlying 95.56
acres under a lease agreement that extends for up to 29 years and 11 months.
GEO will take title in fee simple to the 95.56 acres when it is subdivided
from an adjacent 290.28 acre parcel. GEO also leases a warehouse and a
sludge processing facility on the adjacent parcel, apart from the real
property on which it is located.
GEO's executive offices are located in Cleveland, Ohio. GEO maintains sales
offices in Little Rock, Arkansas; Baltimore, Maryland; Charlotte, North
Carolina; and Horsham, Pennsylvania. GEO also has financial and treasury staff
located in Lafayette, Indiana and administrative and technical support
facilities located in Horsham, Pennsylvania and Charlotte, North Carolina. GEO
believes that its facilities are in good operating condition and adequate to
meet anticipated requirements in the near future.
EMPLOYEES
As of the closing of the TRIMET acquisition, GEO employed approximately 387
persons, the majority of whom are involved in production and operations, with
the balance engaged in administration, research and development, sales, customer
service and clerical work. Approximately 69 employees located at the Cedartown,
Georgia facility, 55 employees at the Allentown, Pennsylvania facility, 16
employees at the Bastrop, Louisiana facility, 10 employees at the Baltimore,
Maryland facility, 6 employees at the Georgetown, South Carolina facility, and 4
employees at the Chattanooga, Tennessee facility are unionized
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and covered by collective bargaining agreements. These collective bargaining
agreements have expiration dates ranging between February 1999 and March 2002.
The unionized employees of GEO located at the Allentown, Bastrop and Baltimore
facilities are represented by the International Chemical and Atomic Workers,
those located at the Cedartown facility by the United Food Workers, those
located at the Georgetown facility by the United Paper Workers, and those
located at the Chattanooga facility by the United Steel Workers. GEO believes
that its relationship with its employees is good. GEO has experienced no work
stoppages at any of its facilities since its inception in 1993.
LITIGATION
In the ordinary course of business, GEO is periodically named as a
defendant in a variety of lawsuits. Currently, GEO is one of 102 named
defendants in a toxic tort lawsuit commenced in Harrison County, Texas. The
plaintiffs in the action are employees, former employees and the families of
such employees of the Monarch Tile Company tile plant in Marshall, Texas. The
plaintiffs allege that they were exposed to hazardous substances in the course
of their employment at the Monarch plant and that GEO or its predecessor was a
manufacturer of one of those substances. GEO intends to vigorously defend this
action and disputes that its substances are hazardous or responsible for the
plaintiffs' alleged injuries. GEO believes that its pending cases will not have
a material adverse affect on its business, financial condition or results of
operations.
ENVIRONMENTAL MATTERS
GEO believes that it is in substantial compliance with the environmental
laws applicable to its facilities. GEO has no reason to believe that the
discovery of presently unknown environmental conditions or changes in the scope,
interpretation or enforcement of any environmental laws will have a material
adverse affect on GEO's operations, business or financial condition or results
of operations. See "Risk Factors -- Environmental Matters."
Aluminum Sulfate Facilities. Although the aluminum sulfate facilities do
not generate hazardous wastes, those facilities that use the kaolinitic ore
process generate a process silica solid waste which historically has been
managed in on-site process silica impounds. These process silica impounds have
historically impacted groundwater hydraulics and quality, consisting of elevated
levels of pH, aluminum sulfate and metals. GEO is addressing this issue at each
of its impacted facilities. Certain facilities, including Naheola, Alabama;
Plymouth, North Carolina; Georgetown, South Carolina; and Springhill, Louisiana,
are working with their respective state agencies to address groundwater
contamination associated with the monitoring and/or closure of such process
silica impounds. The costs of closing each of these impounds vary by facility,
depending on the requirements of the state environmental protection agency.
Estimates for the in-place closure of these impounds range from $30,000 to
$700,000. Monitoring and reporting would typically be required for five to ten
years following closure, and the associated costs range from $10,000 to $25,000
annually per facility. Two of the aluminum sulfate facilities use the liquid
trihydrate system, and these facilities do not produce process silica waste
material. Therefore, these facilities do not involve similar groundwater
contamination issues and are not subject to the monitoring and closure
requirements applicable to the process silica impounds.
On February 10, 1998, the Bastrop, Louisiana facility received a compliance
order from the Louisiana Department of Environmental Quality regarding a solid
waste issue associated with design and operational issues in connection with an
aluminum mud impoundment at the facility. The facility has not been fined in
connection with this order. GEO believes that it has addressed the issues raised
in the order and is working with the state to resolve this matter.
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<PAGE> 41
Former Henkel Facilities. The Harrison, New Jersey facility is subject to a
Declaration of Environmental Restrictions, dated June 9, 1994. This deed
restriction relates to a portion of the facility that has been capped due to the
presence of contaminants from prior operations.
Former operators of the Cedartown, Georgia facility buried in five trenches
on the property approximately 1,500 gallons of tall oil pitch and 700 drums of
waste containing obsolete off-specification products and raw materials. As a
result of these previous disposal practices, in 1990 a portion of the Cedartown
facility was listed as a "Superfund" site on the National Priorities List,
promulgated pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and was identified as the Diamond
Shamrock Landfill Site. Henkel Corporation and the U.S. Environmental Protection
Agency entered an Administrative Order on Consent EPA Docket No. 90-64-C on
November 2, 1990 related to this Superfund site. On behalf of Henkel, GEO
conducts all groundwater and surface water monitoring and complies with the
reporting obligations associated with the Administrative Order. Pursuant to the
asset purchase agreement between the parties, Henkel is responsible for paying,
and must indemnify GEO for, all such compliance costs.
The Cedartown, Georgia facility is subject to a Corrective Action Consent
Order No. EPD-HW-1048 between Henkel Corporation and the Georgia Department of
Natural Resources dated September 21, 1993. The Consent Order relates to the
remediation of surface and groundwater contaminated by ethylene dichloride
resulting from prior operations at the facility. The facility is listed in the
State of Georgia Master Sites List for Hazardous Waste Sites. On behalf of
Henkel, GEO conducts the groundwater and surface water remediation and also
complies with the monitoring and reporting requirements under the Consent Order.
Pursuant to the asset purchase agreement between the parties, Henkel is
responsible for paying, and must indemnify GEO for, all such compliance costs.
Little Rock Mining Facility. Upon completion of mining activities at the
Little Rock, Arkansas facility, two impounded pits must be reclaimed. GEO will
comply with all reclamation requirements, but does not anticipate material costs
associated with these requirements.
TRIMET Properties. Through the acquisition of TRIMET, GEO acquired
approximately 95 acres of an approximately 385 acre site. GEO did not purchase
the larger site, which Mallinckrodt Inc. will continue to own, but will lease a
very small portion, consisting of a warehouse and wastewater treatment system.
With respect to the larger site, there is groundwater and soil contamination
associated with former explosive manufacturing operations. From time to time,
the larger site has been the subject of federal and state investigations. The
portion of the site that GEO will own is subject to extensive air, water, solid
waste and hazardous substances regulations. Mallinckrodt has installed state of
the art pollution control equipment throughout the smaller site to comply with
requirements pertaining to the air, soil, surface water and groundwater.
Mallinckrodt will indemnify GEO for all pre-closing environmental liabilities
associated with the larger site. Subject to deductibles and cost-sharing methods
outlined in the asset purchase agreement between the parties, Mallinckrodt will
also indemnify GEO for all pre-closing liabilities associated with the smaller
site. See "Risk Factors -- Environmental Matters."
Environmental Reserves. At December 31, 1997, GEO had environmental
reserves of $3,355,000 for environmental liabilities. At September 30, 1998, GEO
had environmental reserves of $2,391,000.
38
<PAGE> 42
MANAGEMENT
DIRECTORS, OFFICERS AND OPERATING MANAGEMENT
The following table shows certain information regarding each of GEO's
directors, officers and operating management.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
George P. Ahearn 63 President, Chief Executive Officer and Director
William P. Eckman 46 Executive Vice President, Chief Financial Officer and
Director
Dennis S. Grandle 48 Vice President/General Manager, Clay Products and
Corporate Accounts Performance Chemicals
David B. Heller, Jr. 44 Vice President/General Manager, Process Industries
Michael B. Linscott 43 Vice President/General Manager, Performance Chemicals
Robert S. Zacker 40 Vice President/General Manager, TRIMET Products
Jorge J. Tena 51 Vice President, Manufacturing
Donald D. Smith 64 Manufacturing Manager, Aluminum Products
Anatole G. Penchuk 45 Director
George W. Rapp, Jr. 63 Director
A. Elliott Archer 55 Director
</TABLE>
- ---------------
George P. Ahearn has been President, Chief Executive Officer and Director
of GEO since its inception in 1993. Prior to that time, Mr. Ahearn was President
and Chief Operating Officer of Hall Chemical Company, a maker of specialty
metal-based chemicals. Prior to that, Mr. Ahearn was employed for 28 years by
Exxon Corporation and Exxon Chemical, holding various executive positions
including Division Manager of Exxon Chemical's Energy Chemicals Business and
Worldwide Manager of Exxon Chemical's Specialty Chemicals Technology
Organization. Mr. Ahearn was also a founder, owner and director of
Pharmaceutical Fine Chemicals, S.A., a Luxembourg fine chemicals company built
through acquisition. Mr. Ahearn divested his interest in Pharmaceutical Fine
Chemicals, S.A. when the business was sold to DLJ Merchant Banking Fund Group,
an affiliate of Donaldson Lufkin & Jenrette Securities Corporation, in September
1997. Mr. Ahearn was formerly a director of Chemtech Industries of St. Louis,
Missouri and President of SSC Industries of Atlanta, Georgia. Since 1995 Mr.
Ahearn has been a director of The Flood Company of Hudson, Ohio, a
privately-held company in the coatings and wood stains and preservatives
business. Mr. Ahearn received his B.A. in chemistry from the City University of
New York and M.S. and Ph.D. in chemistry from Rutgers University.
William P. Eckman has been Executive Vice President, Chief Financial
Officer and Director of GEO since its inception in 1993. Prior to that time, Mr.
Eckman was involved in acquisitions, joint venture development, product
management and strategic planning for Exxon Chemical's specialty chemical
business in Latin America and Mexico. Mr. Eckman was also a corporate treasurer
for Exxon Chemical Americas with responsibility for Latin America. Mr. Eckman
also served in the Controller's department at Exxon Chemical's Baton Rouge,
Louisiana plant. Mr. Eckman was a founder and owner of Pharmaceutical Fine
Chemicals, S.A. and a director of certain of its affiliates. Mr. Eckman divested
his interest to DLJ Merchant Banking Fund Group in September 1997. Mr. Eckman
received his B.A. in business administration from Marian College and M.B.A. and
economics degrees from New York University. Mr. Eckman also pursued studies in
international economics at the University of Paris.
Dennis S. Grandle has been Vice President/General Manager, Clay Products
and Corporate Accounts Performance Chemicals of GEO since 1996. Mr. Grandle has
over 25 years of experience in the chemical
39
<PAGE> 43
and oil industries, primarily at Exxon Chemical, where he worked in the
specialty chemicals area in sales and product management, both in the United
States and overseas. Mr. Grandle also has considerable overseas experience with
ARAMCO in oil field chemicals. Mr. Grandle received his B.S. in chemistry from
the University of California.
David B. Heller, Jr. has been Vice President/General Manager, Process
Industries of GEO since 1997. With more than 20 years of experience in the
chemicals industry, Mr. Heller has held various management positions at Henkel
Corporation, D.B. Western, Melamine Chemicals, W.R. Grace and Johnson Matthey.
Mr. Heller received his B.S. in chemistry from Bucknell University and his
M.B.A. from the University of Pennsylvania.
Michael B. Linscott joined GEO as Vice President/General Manager,
Performance Chemicals in August 1998. Prior to joining GEO, Mr. Linscott was
Director of Marketing and Sales for National Starch and Chemical's Papermaking
Chemicals business, after a career with them in the paper chemicals area of more
than 20 years during which he held a variety of marketing, sales and technical
management positions within the United States and Europe. Mr. Linscott received
his B.S. in chemical engineering from the University of Maine-Orono.
Robert S. Zacker has been Vice President/General Manager, TRIMET Products
of GEO since July 1998 and General Manager of the TRIMET facility in Allentown,
Pennsylvania since 1996. From 1981 to 1996, Mr. Zacker held various positions
with Mallinckrodt Chemical, Inc., including Process Engineer, Regional Sales
Representative, Senior Product Engineer, Production Supervisor and Plant
Manager. Mr. Zacker received his B.S. in chemical engineering from Clemson
University.
Jorge J. Tena has held various positions with Henkel Corporation and
Diamond Shamrock since 1974. Mr. Tena has served as Process Engineer, Group
Leader and Production Manager, as well as Manager of the Harrison, New Jersey
plant. Mr. Tena has also been a management team member for the Paper Coatings
business, which has involved extensive travel to Central and South America. Mr.
Tena received his B.S. in chemical engineering from New York University.
Donald D. Smith has been Manufacturing Manager, Aluminum Products of GEO
since 1996. From 1994 to 1996, Mr. Smith served GEO in various positions,
including Plant Manager of GEO's Baltimore, Maryland facility and Manager of the
Gulf Coast alum plants and the Cytec plants. With 30 years of experience in
chemical manufacturing management, Mr. Smith has also served as district
manufacturing manager at General Chemical Corporation's northern district
aluminum sulfate plants. Mr. Smith received his B.S. from Penn State University.
Anatole G. Penchuk has been a Director of GEO since August 1998. Mr.
Penchuk is currently the Managing Director of Charter Oak Partners, a
Connecticut partnership and the majority shareholder of GEO, and has served in
that position since April 1998. Prior to joining Charter Oak Partners, Mr.
Penchuk held various positions from 1992 to 1998 with The CIT Group, including
Team Leader and Vice President of the Chemicals, Plastics and Forestry Products
Group in its Industrial Finance-Corporate Lending Group, Vice President and
Industry Specialist to the chemicals and plastics industries in its Capital
Equipment Finance Group, and Vice President in its Business Credit Group. Prior
to that, Mr. Penchuk held various management and technical positions with the
Climax Specialty Chemicals and Climax Metals Divisions of Amax, Inc. and the
National Starch and Chemical Division of Unilever Corporation. Mr. Penchuk
received his B.S. in chemistry from the Stevens Institute of Technology, his
M.S. in chemistry from the University of Illinois, and his M.B.A. from Columbia
University.
George W. Rapp, Jr. has been a Director of GEO since 1997. Mr. Rapp is
currently Chairman of the Board of ITM Corporation and a member of the
Management Committee of Metal Power Products, LLC. In the past, Mr. Rapp has
held such positions as Vice President of Marketing & Sales of Brinly Hardy
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<PAGE> 44
Company, Advanced Process Systems and Anaconda Aluminum, Senior Vice President
of Arco Metals, President of American Brass and Vice Chairman of the Board of
Simcala, Inc. Mr. Rapp received his B.S. in industrial administration from Yale
University and his M.B.A. from the University of Louisville.
A. Elliott Archer has been a Director of GEO since 1997. Mr. Archer is
currently the President and Chief Executive Officer of Metal Powder Products,
LLC and the President and Chief Executive Officer of Archer Industries Group, a
company formed by him to provide equity capital to businesses. In the past, Mr.
Archer held such positions as President of the Chemicals Division of Church and
Dwight Company, Inc., Manager of Strategic Planning for Mobil Chemical Company,
General Manager of the Styrenics business of United States Steel Corp. and
Analytical Chemist for Mobay Chemical Company. Mr. Archer received his B.S. in
chemistry from Marshall University and in 1986 completed the executive program
at Stanford University.
41
<PAGE> 45
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows certain information concerning the compensation
paid by GEO during the last three fiscal years to its Chief Executive Officer
and its other most highly compensated executive officers whose annual salary and
bonus for the fiscal year ended December 31, 1997 exceeded $100,000.
<TABLE>
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
--------------------------- ---- -------- ------- ---------------
<S> <C> <C> <C> <C>
George P. Ahearn 1997 $231,286 $50,000 $22,956
President and Chief 1996 125,000 -- 12,810
Executive Officer 1995 125,000 -- 12,280
William P. Eckman 1997 $179,399 $38,250 $13,523
Executive Vice President 1996 95,000 -- 5,807
and Chief Financial Officer 1995 95,000 -- 5,740
Dennis L. Holland(2) 1997 $126,600 -- $ 3,000
Group President, 1996 -- -- --
Paper Chemicals 1995 -- -- --
Dennis S. Grandle(3) 1997 $115,000 -- $ 8,725
Vice President/General 1996 71,875 -- 3,594
Manager, Clay Products 1995 -- -- --
and Corporate Accounts
Performance Chemicals
</TABLE>
- ---------------
(1) Includes contributions made by GEO to its 401(k) retirement plan and defined
contribution retirement plan and, in the case of Messrs. Ahearn and Eckman,
life insurance premiums paid by GEO on behalf of each executive officer.
(2) Mr. Holland joined GEO as Group President, Paper Chemicals on May 12, 1997.
Mr. Holland resigned from this position effective December 31, 1997.
(3) Mr. Grandle joined GEO as Vice President/General Manager, Clay Products and
Corporate Accounts Performance Chemicals on May 15, 1996.
EMPLOYMENT AGREEMENTS
GEO has entered into employment agreements with George P. Ahearn, the
President and Chief Executive Officer of GEO, and William P. Eckman, the
Executive Vice President and Chief Financial Officer of GEO. Each of these
agreements was executed on March 25, 1997, extends for a period of five years
from such date and, unless notice is provided by GEO or the employee to the
other party, will be automatically extended for additional one year periods
after such initial term. The respective employment agreements provide that Mr.
Ahearn will be the Chairman, and Mr. Eckman will be a member, of the Board of
Directors of GEO.
Mr. Ahearn's employment agreement entitles him to a base salary of $250,000
per year, which is subject to annual increase based upon the review of the Board
of Directors, bonus compensation, which is based in the first year of the
employment term on the earnings of GEO and thereafter on performance targets set
by the Board of Directors, and certain other benefits, including medical and
life insurance and participation in GEO's standard retirement plans. In fiscal
year 1997, Mr. Ahearn received bonus compensation in the amount of $50,000. If
Mr. Ahearn is terminated by GEO other than for "cause," he is entitled to
receive his annual base salary and benefits for the remainder of the employment
term or one year, whichever period is greater. Mr. Ahearn is prohibited by
certain non-competition provisions, for the duration of the employment term or
one year after termination of his employment, whichever period is
42
<PAGE> 46
greater, from either soliciting business from or competing with GEO for the
business of any customer of GEO or becoming involved in any business that
competes with GEO.
The terms of Mr. Eckman's employment agreement are substantially identical
to the terms of Mr. Ahearn's employment agreement, except that Mr. Eckman is
entitled to receive an initial base salary of $190,000 per year. Pursuant to the
terms of his employment agreement, in fiscal year 1997 Mr. Eckman received bonus
compensation in the amount of $38,250.
GEO has also entered into an employment agreement with Dennis S. Grandle,
the Vice President/ General Manager, Clay Products and Corporate Accounts
Performance Chemicals of GEO. Mr. Grandle's employment agreement was executed on
May 20, 1996, extended for an initial two year term from such date and was
automatically renewed thereafter for an indefinite period, subject to either
party's right to terminate the agreement upon thirty days notice. Mr. Grandle's
employment agreement entitles him to a base salary of $115,000 per year, bonus
compensation in an amount determined annually in accordance with GEO's
Management Incentive Program and the right to participate in the general
employee benefit programs of GEO. If Mr. Grandle is terminated by GEO without
"cause," he is entitled to receive three months base salary and certain moving
benefits as severance pay. Mr. Grandle is prohibited by certain proprietary
information and non-competition provisions from disclosing any confidential
information of GEO during the employment term and within five years thereafter
and from competing with GEO or soliciting GEO's customers or employees for a
period of one year after termination of the employment term.
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<PAGE> 47
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Board of Directors of GEO determined the 1997 compensation of Mr.
George P. Ahearn, Mr. William P. Eckman and the operating management of GEO. The
Board of Directors is responsible for the following compensation matters:
- determination of the compensation and bonus arrangements of Messrs.
Ahearn and Eckman;
- approval of the compensation policies and programs for the operating
management and other employees of GEO;
- administration of the benefit plans in which the executive officers,
operating management and other employees of GEO participate.
The Board of Directors believes that GEO's compensation program should
support the goals and objectives of GEO. These goals and objectives seek to
balance the importance of annual financial performance with long-term growth and
profitability. The Board believes that executive compensation should be strongly
correlated with the overall performance of GEO as well as the compensation paid
by comparable companies. The Board currently uses salary, bonus and various
benefit plans to compensate and motivate its executive officers. The manner of
application of these compensation tools by the Board for individual executive
officers and operating management is based upon the nature and scope of the
particular employee's responsibilities.
In 1997, the Board of Directors approved employment contracts with Messrs.
Ahearn and Eckman that provided for (a) annual base salary for Mr. Ahearn in the
amount of $250,000 and for Mr. Eckman in the amount of $190,000 and (b) bonus
compensation for Messrs. Ahearn and Eckman tied in 1997 to the earnings of GEO
and thereafter to performance targets established by the Board. For 1997, Mr.
Ahearn was paid $50,000 and Mr. Eckman was paid $38,250 in bonus compensation.
The base salary and bonus compensation arrangements of Messrs. Ahearn and Eckman
were determined based upon the compensation history of these employees, their
expected individual contribution to GEO and the compensation paid to the
executive officers of similar companies. The compensation arrangements of the
operating management of GEO for 1997 were determined by GEO in accordance with
these same factors.
The bonus compensation payable to the operating management of GEO is
determined in accordance with GEO's Management Incentive Program. The Management
Incentive Program provides for the payment of certain ranges of bonus
compensation depending upon the achievement of annual corporate and individual
performance goals. Under the Management Incentive Program, the managers of GEO
are eligible to receive bonus compensation in ranges from 5%-10% to as high as
10%-30% of base salary.
The Board administers a number of other benefit plans for its executive
officers and operating management, including a 401(k) retirement plan and
defined contribution retirement plan, and monitors the benefits provided to its
officers and managers under these plans in order to further the goals and
objectives of GEO's compensation program.
Members of the Board of Directors:
George P. Ahearn
William P. Eckman
Anatole G. Penchuk
George W. Rapp, Jr.
A. Elliott Archer
March 19, 1998
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<PAGE> 48
INDEMNIFICATION OF DIRECTORS AND OFFICERS
GEO's Code of Regulations provides that GEO will, subject to certain
exceptions, indemnify each of its directors and officers against any expenses,
judgments, fines and amounts paid in settlement in connection with any
proceeding, whether civil, criminal, administrative or investigative, arising by
reason of the fact that such person is or was a director or officer of GEO.
GEO's Code of Regulations further provides that GEO will pay in advance of the
final determination of any such proceeding any expenses incurred by the director
or officer in the defense thereof, provided that the director or officer
provides an undertaking to GEO that such director or officer will repay the
amount of any such advance if it is ultimately determined that the director or
officer is not entitled to be indemnified by GEO. GEO's Code of Regulations also
allows GEO to purchase liability insurance covering any liability that might be
asserted against any director or officer of GEO as a result of their status as
such. Accordingly, GEO maintains director's and officer's liability insurance in
favor of each of the directors and officers of GEO.
KEY PERSON LIFE INSURANCE
GEO currently maintains two term life insurance policies on the life of
George P. Ahearn in the aggregate amount of $2,000,000, and one term life
insurance policy on the life of William P. Eckman in the amount of $600,000. GEO
is the sole beneficiary under each of these insurance policies.
COMPENSATION OF DIRECTORS
GEO pays directors who are not employees of GEO or Charter Oak Partners
(which currently includes George W. Rapp, Jr. and A. Elliott Archer) a fee of
$10,000 per year for service on the Board of Directors. GEO reimburses each of
its directors for reasonable out-of-pocket expenses incurred in connection with
their travel to and attendance at meetings of the Board of Directors.
BOARD OF DIRECTOR INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of GEO determines the salaries and bonus
compensation of GEO's executive officers. George P. Ahearn, the President and
Chief Executive Officer of GEO, and William P. Eckman, the Executive Vice
President and Chief Financial Officer of GEO, are members of the Board of
Directors and participate in the deliberations concerning executive
compensation. However, Messrs. Ahearn and Eckman do not vote with respect to the
determination of their own compensation.
45
<PAGE> 49
SHAREHOLDERS
The following table shows the number and percent of GEO's common shares
beneficially owned by each shareholder of GEO as of the date of this Prospectus.
GEO believes that the persons and entities listed in the table have sole voting
and investment power as to all common shares shown as beneficially owned by
them, subject to community property laws, where applicable.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON SHARES
OF GEO
--------------------
NAME AND ADDRESS NUMBER OF
OF BENEFICIAL OWNER SHARES PERCENT
------------------- --------- -------
<S> <C> <C>
Charter Oak Partners........................................ 85.431 62.89%
Building B, 10 Wright Street
Westport, Connecticut 06880
Charter Oak Capital Partners................................ 21.478 15.81%
Building B, 10 Wright Street
Westport, Connecticut 06880
GEO Chemicals, Ltd.(1)...................................... 25.994 19.14%
28601 Chagrin Boulevard
Cleveland, Ohio 44122
George P. Ahearn............................................ 2.146 1.58%
28601 Chagrin Boulevard
Cleveland, Ohio 44122
George W. Rapp, Jr.......................................... 0.608 0.45%
Building B, 10 Wright Street
Westport, Connecticut 06880
A. Elliott Archer........................................... 0.178 0.13%
Building B, 10 Wright Street
Westport, Connecticut 06880
Directors and executive officers as a group (4 persons)..... 28.926 21.30%
</TABLE>
- ---------------
(1) George P. Ahearn and William P. Eckman are the sole members of GEO
Chemicals, Ltd., which is an Ohio limited liability company. Mr. Ahearn
holds a percentage interest in GEO Chemicals, Ltd. of approximately 62%, and
Mr. Eckman holds a percentage interest in GEO Chemicals, Ltd. of
approximately 38%.
46
<PAGE> 50
DESCRIPTION OF GEO'S SENIOR CREDIT FACILITY
Concurrently with the closing of the TRIMET acquisition and the offering of
the outstanding notes, GEO entered into an amended and restated credit agreement
with various financial institutions and Bankers Trust Company, as the
administrative agent, providing for a new $25.0 million senior revolving credit
facility. GEO used the senior credit facility to fund a portion of the TRIMET
acquisition and the refinancing of its former credit facility.
The obligations of GEO under the senior credit facility are secured by a
first priority security interest on all tangible and intangible assets of GEO.
In addition, the senior credit facility will be, under the terms of the
Indenture that will govern the offered notes, expressly senior in right of
payment to the offered notes. As of September 30, 1998, GEO had no indebtedness
outstanding under the senior credit facility.
The senior credit facility allows GEO to obtain revolving credit loans to
fund ongoing general corporate purposes, including working capital. All
commitments will terminate, and all revolving loans under the senior credit
facility will mature, on July 31, 2003. GEO's borrowings under the senior credit
facility bear interest, at GEO's option, at:
- 1.25% above the higher of (a) an adjusted certificate of
deposit rate plus 0.5% or (b) the prime lending rate of
Bankers Trust Company; or
- an adjusted Eurodollar rate plus 2.25%.
Amounts borrowed under the senior credit facility may be repaid and
reborrowed before the final maturity date. GEO is required to pay the lenders
under the senior credit facility a commission equal to 0.5% per year, payable in
arrears on a quarterly basis, on the daily average unused portion of the senior
credit facility. For each letter of credit issued to GEO, it must pay the
lenders a fee equal to 2.25% of the daily stated amount of the letter of credit
per year. GEO must also pay to each lender issuing a letter of credit, a facing
fee of 0.25% on the daily stated amount of the letter of credit (subject to
certain minimum amounts) and customary charges in connection with the issuance,
payment or amendment of any letter of credit.
The senior credit facility contains covenants that require GEO to achieve
and maintain certain levels of performance, as measured by certain financial
ratios, and restrict GEO from taking various actions. The senior credit facility
includes covenants relating to: minimum interest coverage; maximum leverage
ratio; capital expenditures; investments; indebtedness; liens; dividends; sales
of assets; guarantee obligations; prepayments of other indebtedness; mergers,
acquisitions and sales of assets; change in business activities; affiliate
transactions; issuance of equity; certain corporate activities; and other
matters customarily restricted in such agreements. GEO's ability to obtain
revolving credit loans under the senior credit facility is subject to, among
other things, GEO's compliance with the foregoing covenants.
The senior credit facility also contains customary events of default,
including: the nonpayment of principal, interest or fees; violation of
covenants; inaccuracy of representations or warranties in any material respect;
default under certain other indebtedness; bankruptcy; material judgments; and
certain changes of control of GEO.
47
<PAGE> 51
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER;
TRANSFERABILITY OF THE OFFERED NOTES
In connection with the issuance by GEO of the outstanding notes on July 31,
1998, GEO entered into a registration rights agreement with the initial
purchaser of the outstanding notes. The registration rights agreement requires
GEO to file a registration statement under the federal securities laws for the
Exchange Offer and the offered notes and, when the registration statement is
declared effective by the SEC, to offer the holders of the outstanding notes the
opportunity to exchange their notes for an equal amount of the registered notes.
The registered notes (the notes offered in this Prospectus) are to be issued
without a restrictive legend and generally may be reoffered and resold by the
holder without registration under the Securities Act of 1933. The registration
rights agreement provides that GEO must use its reasonable best efforts to:
- file the registration statement for the Exchange Offer and
the offered notes on or before March 13, 1999;
- cause the registration statement filed for the Exchange Offer
and the offered notes to be declared effective by the SEC on
or before April 27, 1999; and
- complete the Exchange Offer on or before May 27, 1999.
Upon the completion of the Exchange Offer, GEO's obligations to register
the outstanding notes and the offered notes will terminate. However, GEO will be
required to file a "shelf" registration statement for a continuous offering
pursuant to Rule 415 under the Securities Act of 1933 in respect of the
outstanding notes if: (a) because of any change in law or applicable
interpretations by the staff of the SEC, GEO cannot effect the Exchange Offer;
(b) the Exchange Offer is not completed by May 27, 1999; (c) the initial
purchaser of the outstanding notes so requests with respect to any unsold
allotment of the outstanding notes; (d) the holders of a majority in aggregate
principal amount of the outstanding notes determine before January 27, 1999 that
the interests of the holders would be materially and adversely affected by the
completion of the Exchange Offer; or (e) any holder of at least $5 million in
aggregate principal amount of offered notes does not receive freely transferable
notes in the Exchange Offer. If GEO is obligated to file a "shelf" registration
statement, it will be required to keep such "shelf" registration statement
effective for at least two years. Other than as stated above, no holder will
have the right to participate in the "shelf" registration statement or otherwise
require that GEO register such holder's notes under the federal securities laws.
This summary of the registration rights agreement is not complete. For a
full description, you should refer to the complete copy of the registration
rights agreement which has been filed as an exhibit to the registration
statement relating to the Exchange Offer and the offered notes.
Based on an interpretation by the staff of the SEC set forth in no-action
letters issued to parties unrelated to GEO, GEO believes that the offered notes
may be offered for resale, resold and otherwise transferred by you or any other
person receiving such notes, whether or not such person is the registered
holder, without compliance with the registration and prospectus delivery
requirements of the Securities Act of 1933, provided that:
- you (or the person or entity receiving such notes) are
acquiring the offered notes in the ordinary course of
business;
- neither you nor any such person or entity is engaging in or
intends to engage in a distribution of such notes;
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- neither you nor any such person or entity has an arrangement
or understanding with any person or entity to participate in
any distribution of the offered notes;
- neither you nor any such person or entity is an "affiliate"
of GEO (within the meaning of Rule 405 promulgated under the
Securities Act of 1933); and
- you are not acting on behalf of any person or entity who
could not truthfully make the foregoing representations.
To participate in the Exchange Offer, you must represent as the holder of
outstanding notes that each of the foregoing is true. Any noteholder who tenders
in the Exchange Offer for the purpose of participating in a distribution of the
offered notes cannot rely on this interpretation by the staff of the SEC and
must comply with the registration and prospectus delivery requirements of the
Securities Act of 1933 in connection with any resale transaction.
Broker-dealers receiving offered notes in exchange for outstanding notes
acquired for their own account through market-making or other trading activities
must acknowledge that they will deliver a prospectus in connection with any
resale of the offered notes. For 60 days after the expiration of the Exchange
Offer, GEO will make this Prospectus available to broker-dealers for use in such
resales. See "Plan of Distribution."
EFFECT OF NOT TENDERING
The holders of outstanding notes not tendered into the Exchange Offer will
have no further registration rights (except for the limited registration rights
described above under the heading "Purpose of the Exchange Offer;
Transferability of the Offered Notes") and such notes will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of the
market for the outstanding notes could be adversely affected upon completion of
the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
Subject to the terms and conditions described in this Prospectus and the
Letter of Transmittal, GEO will accept any of its outstanding notes validly
tendered (and not validly withdrawn) before 12:00 midnight, Eastern Standard
Time, on , 1999. GEO will issue $1,000 principal amount of
the offered notes in exchange for each $1,000 principal amount of outstanding
notes accepted in the Exchange Offer. Noteholders may tender some or all of
their notes pursuant to the Exchange Offer. However, outstanding notes may be
tendered only in $1,000 increments.
The form and terms of the offered notes are substantially identical to the
form and terms of the outstanding notes, except that the offered notes have been
registered under the Securities Act of 1933 and will not bear any legend
restricting their transfer. The offered notes will represent the same debt as
the outstanding notes and will be issued pursuant to the same Indenture.
As of the date of this Prospectus, outstanding notes representing $120.0
million in aggregate principal amount were outstanding and there was one
registered holder, a nominee of the Depository Trust Company ("DTC"). This
Prospectus, along with the Letter of Transmittal, is being sent to such
registered holder and to others believed to have beneficial interests in the
outstanding notes. GEO intends to conduct the Exchange Offer in accordance with
the applicable requirements of the federal securities laws.
GEO will be deemed to have accepted validly tendered notes when and if it
has given oral or written notice of such acceptance to The Chase Manhattan Bank,
the exchange agent. The exchange agent will act as agent for the tendering
holders for the purpose of receiving the offered notes from GEO. If any tendered
notes are not accepted for exchange because of an invalid tender, the occurrence
of certain other events
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<PAGE> 53
described in this Prospectus or otherwise, certificates for any such unaccepted
notes will be returned (without expense) to the tendering noteholder promptly
after the expiration of the Exchange Offer.
Holders who tender outstanding notes in the Exchange Offer 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 notes
in the Exchange Offer. GEO will pay all charges and expenses, other than certain
applicable taxes, in connection with the Exchange Offer. See "Transfer Taxes" in
this section below.
EXPIRATION DATE; EXTENSIONS; AMENDMENT
The Exchange Offer will expire at 12:00 midnight, Eastern Standard Time, on
, 1999, unless GEO extends the Exchange Offer. To extend
the Exchange Offer, GEO will notify the exchange agent and each registered
holder of any extension by oral or written notice before 9:00 a.m., Eastern
Standard Time, on the next business day after the previously scheduled
expiration date. GEO reserves the right, in its sole discretion, to delay
accepting any tendered notes, to extend the Exchange Offer or, if any of the
conditions described below under the heading "Conditions to the Exchange Offer"
have not been satisfied, to terminate the Exchange Offer, by giving oral or
written notice of such delay, extension or termination to the exchange agent.
GEO also reserves the right, in its sole discretion, to amend the terms of the
Exchange Offer in any manner.
PROCEDURES FOR TENDERING
Only holders of outstanding notes may tender such notes into the Exchange
Offer. To tender notes into the Exchange Offer, you must use one of the
following methods.
- Complete the Letter of Transmittal provided with this Prospectus (or a
copy thereof), have the signatures on the Letter of Transmittal
guaranteed (if required by the Letter of Transmittal), and deliver the
Letter of Transmittal (or a copy thereof) to the exchange agent before
the expiration of the Exchange Offer.
- IF YOU HOLD YOUR NOTES THROUGH DTC, YOU MAY ACCEPT THE
EXCHANGE OFFER THROUGH DTC'S AUTOMATED TENDER OFFER PROGRAM,
AS DESCRIBED BELOW UNDER THE HEADING "BOOK-ENTRY TRANSFER."
- Follow the book-entry transfer procedures described below
under the heading "Book-Entry Transfer."
- Follow the guaranteed delivery procedures described below
under the heading "Guaranteed Delivery Procedures."
In addition, either (a) certificates for tendered notes must be received by the
exchange agent along with the Letter of Transmittal before the expiration of the
Exchange Offer, (b) a confirmation of a book-entry transfer of such outstanding
notes into the exchange agent's account at DTC pursuant to the procedures for
book-entry transfer must be received by the exchange agent before the expiration
of the Exchange Offer, or (c) certificates for tendered notes must be delivered
or a book-entry transfer must be made in accordance with the guaranteed delivery
procedures described below.
The tender by a noteholder that is not withdrawn before the expiration of
the Exchange Offer will constitute an agreement between the noteholder and GEO
in accordance with the terms and conditions described in this Prospectus and the
Letter of Transmittal.
The method of delivery of outstanding notes and the Letter of Transmittal
and all other required documents to the exchange agent is at the election and
risk of the noteholder. Instead of delivery by mail, you should use an overnight
or hand delivery service. In all cases, you should allow for sufficient time to
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<PAGE> 54
ensure delivery to the exchange agent before the expiration of the Exchange
Offer. You may request your broker, dealer, commercial bank, trust company or
nominee to effect these transactions for you. YOU SHOULD NOT SEND ANY TENDERED
NOTE, LETTER OF TRANSMITTAL OR OTHER REQUIRED DOCUMENT TO GEO.
If your notes are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and you desire to tender, you should (a)
contact the registered holder promptly and instruct the registered holder to
tender on your behalf or (b) if you wish to tender on your own behalf, before
completing and executing the Letter of Transmittal and delivering your notes
either make appropriate arrangements to register ownership of the outstanding
notes in your name or obtain a properly completed bond power from the registered
holder. Please note, however, that the transfer of registered ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal must be
guaranteed unless the outstanding notes are tendered (a) by a registered holder
who has not completed the box entitled "Special Delivery Instructions" on the
Letter of Transmittal or (b) for the account of an eligible guarantor
institution. Signature guarantees must be made by an "eligible guarantor
institution" that is a member of or participant in the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Program, the Stock Exchange Medallion Program, or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities Exchange
Act of 1934, including (as such terms are defined in Rule 17Ad-15): (1) a bank;
(2) a broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker or government securities dealer; (3) a credit
union; (4) a national securities exchange, registered securities association or
learning agency; or (5) a savings association that is a participant in a
Securities Transfer Association recognized program.
If the Letter of Transmittal is signed by a person other than the
registered holder of the outstanding notes listed in the Letter of Transmittal,
the outstanding notes must be endorsed or accompanied by a properly completed
bond power, in each case signed by the registered holder as that registered
holder's name appears on the outstanding notes. Signatures on such outstanding
notes and bond powers must be guaranteed by an "eligible guarantor institution."
If you sign the Letter of Transmittal or any outstanding notes or bond
power as a trustee, executor, administrator, guardian, attorney-in-fact, officer
of a corporation or other fiduciary or in any representative capacity, you
should so indicate when signing. Evidence satisfactory to GEO of your authority
to so act must be submitted with the Letter of Transmittal, unless waived by
GEO.
All questions as to the validity, form, eligibility, time of receipt,
acceptance and withdrawal of tendered notes will be determined by GEO in its
sole discretion, which determination will be final and binding on all parties.
GEO reserves the right to reject any outstanding notes not properly tendered or
any outstanding notes the acceptance of which would, in the opinion of counsel
for GEO, be unlawful. GEO also reserves the right to waive any defects,
irregularities or conditions of tender as to particular tendered notes. GEO's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of outstanding notes must be cured within such time as GEO determines. Although
GEO intends to notify noteholders of defects or irregularities with respect to
tenders of outstanding notes, none of GEO, the exchange agent or any other
person will be liable for any failure to give such notification. Tenders of
outstanding notes will be deemed to have been made only when such defects or
irregularities have been cured or waived. Any outstanding notes received by the
exchange agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the exchange
agent to the tendering noteholders, unless otherwise provided in the Letter of
Transmittal, promptly following the expiration of the Exchange Offer.
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<PAGE> 55
In addition, GEO reserves the right, in its sole discretion, to (a) make
offers for or purchase any outstanding notes that are not tendered into the
Exchange Offer or (b) to terminate the Exchange Offer (as described below under
the heading "Conditions to the Exchange Offer") and, to the extent permitted by
applicable law, purchase some or all of the outstanding notes in the open
market, in privately negotiated transactions or otherwise. The terms of any such
offers or purchases could differ from the terms of the Exchange Offer.
In all cases, the exchange of offered notes for outstanding notes will be
made only after timely receipt by the exchange agent of certificates for such
outstanding notes or a timely book-entry confirmation of such outstanding notes
into the exchange agent's account at DTC, a properly completed and duly executed
Letter of Transmittal (or, in the case of book-entry transfer, an electronic
acknowledgment to be bound by the Letter of Transmittal), and all other required
documents. If any tendered notes are not accepted for any reason described in
the terms and conditions of the Exchange Offer or if outstanding notes are
submitted for a greater principal amount than the holder desires to exchange,
such unaccepted or non-exchanged notes will be returned without expense to the
tendering noteholder (or, in the case of outstanding notes tendered by
book-entry transfer, such nonexchanged notes will be credited to an account
maintained with DTC) promptly after the expiration or termination of the
Exchange Offer.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the outstanding notes at DTC for purposes of the Exchange Offer within two
business days after the date of this Prospectus. Any financial institution that
is a participant in DTC's systems may make book-entry delivery of outstanding
notes being tendered by causing DTC to transfer such outstanding notes into the
exchange agent's account in accordance with DTC's procedures for transfer.
However, although delivery of outstanding notes may be effected through
book-entry transfer at DTC, the Letter of Transmittal (or a copy thereof) must
be completed and transmitted to the exchange agent before the expiration of the
Exchange Offer, unless (a) the Exchange Offer is accepted through DTC's
Automated Tender Offer Program (as described in the next paragraph) or (b) the
guaranteed delivery procedures described below are complied with.
To accept the Exchange Offer through DTC's Automated Tender Offer Program,
participants in DTC must send electronic instructions to DTC through DTC's
communication system in lieu of sending a signed Letter of Transmittal. DTC is
obligated to communicate those electronic instructions to the exchange agent. To
tender outstanding notes through the Automated Tender Offer Program, the
electronic instructions sent to DTC and transmitted by DTC to the exchange agent
must contain the character by which the participant acknowledges to be bound by
the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
If you are a registered holder of outstanding notes and desire to tender
your notes but (a) your notes are currently unavailable, (b) insufficient time
exists for your notes or other required documents to reach the exchange agent
before the expiration of the Exchange Offer, or (c) you cannot complete the
procedure for book-entry transfer on a timely basis, you may effect a tender if
each of the following steps are taken.
- You must effect your tender through an "eligible guarantor
institution" (which includes any institution that is a member
of or participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature
Program, the Stock Exchange Medallion Program and any
"eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934).
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- The exchange agent must receive from such "eligible guarantor
institution," before the expiration of the Exchange Offer, a
properly completed Letter of Transmittal and Notice of
Guaranteed Delivery by telegram, telex, facsimile
transmission, mail or hand delivery.
- The Notice of Guaranteed Delivery (which has been provided
with this Prospectus) must (1) include the name and address
of the holder of the outstanding notes and the amount of
outstanding notes tendered, (2) state that the tender is
being made thereby, and (3) guarantee that within three New
York Stock Exchange trading days after the date of execution
of the Notice of Guaranteed Delivery, the certificates for
all tendered notes (in proper form for transfer) or a
book-entry confirmation, and any other documents required by
the Letter of Transmittal, will be deposited by the "eligible
guarantor institution" with the exchange agent.
- Certificates for all tendered notes (in proper form for
transfer) or a book-entry confirmation, and any other
documents required by the Letter of Transmittal, must be
received by the exchange agent within three New York Stock
Exchange trading days after the date of execution of the
Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of outstanding notes may be withdrawn at any time before 12:00
midnight, Eastern Standard Time, on , 1999. For a
withdrawal to be effective, a written notice of withdrawal (or, for DTC
participants, an electronic transmission through DTC's Automated Tender Offer
Program) must be received by the exchange agent before the expiration of the
Exchange Offer. Any notice of withdrawal must:
- specify the name of the person having deposited the notes to
be withdrawn;
- identify the notes to be withdrawn (including the certificate
number or numbers and principal amount of such notes);
- be signed by the noteholder in the same manner as the
original signature on the Letter of Transmittal by which such
notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer
sufficient to have the trustee under the Indenture governing
the outstanding notes register the transfer of such notes
into the name of the person withdrawing the tender; and
- specify the name in which any such notes are to be
registered, if different from that of the registered holder.
All questions as to the validity, form, eligibility and time of receipt of
such notices will be determined by GEO, whose determination will be final and
binding on all parties. Any notes so withdrawn will be deemed to not have been
validly tendered for exchange for purposes of the Exchange Offer. Any
outstanding notes which have been tendered for exchange but which are not
exchanged for any reason will be returned (without cost) to the noteholder
promptly after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn notes may be retendered into the Exchange Offer at any
time on or before the expiration of the Exchange Offer by following one of the
procedures described above under the heading "Procedures for Tendering."
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CONDITIONS TO THE EXCHANGE OFFER
GEO will not be required to accept for exchange, or to issue the offered
notes in exchange for, any outstanding notes and may terminate or amend the
Exchange Offer if at any time before the acceptance or exchange of any notes,
GEO determines that the Exchange Offer violates applicable law, any applicable
interpretation of the staff of the SEC or any order of any governmental agency
or court of competent jurisdiction.
These conditions are for the sole benefit of GEO and may be asserted by GEO
regardless of the circumstances giving rise to any such condition or may be
waived by GEO in whole or in part at any time or from time to time in its sole
discretion. The failure by GEO at any time to exercise any of these rights will
not be deemed a waiver of any such rights. Each such right will be deemed an
ongoing right which may be asserted by GEO at any time or from time to time.
In addition, GEO will not accept for exchange any tendered notes, and no
offered notes will be issued in exchange for any tendered notes, if any stop
order is threatened or in effect with respect to (a) the registration statement
for the Exchange Offer and the offered notes or (b) the qualification under the
Trust Indenture Act of 1939 of the Indenture that will govern the offered notes.
In any such event, GEO is required to use its reasonable best efforts to obtain
the withdrawal of any such stop order at the earliest possible moment.
TRANSFER TAXES
Noteholders who tender outstanding notes for exchange will not be obligated
to pay any transfer taxes in connection with such tender. However, holders who
instruct GEO to (a) register any offered notes in the name of a person other
than the registered tendering holder or (b) request that outstanding notes not
tendered or not accepted in the Exchange Offer be returned to a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax arising from such transfer.
THE EXCHANGE AGENT
The Chase Manhattan Bank is serving as the exchange agent for the Exchange
Offer. ALL EXECUTED LETTERS OF TRANSMITTAL SHOULD BE DIRECTED TO THE EXCHANGE
AGENT AT ONE OF THE ADDRESSES LISTED BELOW. Questions, requests for assistance
and requests for additional copies of this Prospectus or the Letter of
Transmittal should be directed to the exchange agent at one of the addresses or
telephone numbers listed below.
THE CHASE MANHATTAN BANK
<TABLE>
<S> <C> <C>
By Courier: By Hand: By Registered Mail:
Chase Bank of Texas, N.A. The Chase Manhattan Bank Chase Bank of Texas, N.A.
Corporate Trust Services Corporate Trust-Securities Corporate Trust Services
1201 Main Street, 18th Floor Window P.O. Box 219052
Dallas, TX 75202 55 Water Street Dallas, TX 75221-9053
Room 234, North Building
New York, NY 10041
</TABLE>
By Facsimile: (214) 672-5932
Confirm by Telephone: (214) 672-5678 or (212) 946-3487
Originals of all documents sent by facsimile should be promptly sent to the
exchange agent by registered or certified mail, by hand, or by overnight
delivery service.
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DESCRIPTION OF THE OFFERED NOTES
ISSUANCE OF THE OFFERED NOTES
The offered notes will be issued under the Indenture, dated July 31, 1998,
between GEO and Chase Manhattan Trust Company, National Association, as the
trustee, pursuant to which the outstanding notes were issued. GEO will furnish a
copy of the Indenture, upon request, to any holder of its outstanding or offered
notes. Upon the effectiveness of the Exchange Offer, the Indenture will be
subject to and governed by the Trust Indenture Act of 1939.
The offered notes will be issued in fully registered form only, without
coupons, in $1,000 increments. The trustee under the Indenture will act as the
paying agent and registrar for the offered notes. The offered notes may be
presented for registration or transfer and exchange at the offices of the
registrar, which initially will be the trustee's corporate trust office. No
service charge will be made for any registration of transfer or exchange of the
offered notes, but GEO may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in connection with any
such transfer or exchange. GEO will make all payments on the offered notes at
the trustee's designated corporate trust office. At GEO's option, interest may
be paid at the trustee's corporate trust office or by check mailed to the
registered addresses of the noteholders. GEO may change the paying agent and
registrar without notice to the noteholders.
The offered notes and any of the outstanding notes that are not tendered
into the Exchange Offer will be treated as a single class of securities under
the Indenture. Accordingly, references in this section of the Prospectus to
"notes" includes the offered notes and any of the outstanding notes that are not
tendered into the Exchange Offer, unless otherwise indicated. The following
summary of certain provisions of the Indenture and the notes is not complete.
For a full description, you should refer to the complete copy of the Indenture,
which has been filed as an exhibit to the registration statement relating to the
Exchange Offer and the offered notes. You should also refer to the Trust
Indenture Act of 1939, certain terms of which are made a part of the Indenture
by reference.
PRINCIPAL, MATURITY AND INTEREST
The notes are limited in aggregate principal amount to $200.0 million, of
which up to $120.0 million in aggregate principal amount will be issued in the
Exchange Offer. The notes will mature on August 1, 2008. Additional notes may be
issued from time to time, subject to the limitations in the Indenture related to
the incurrence of additional indebtedness by GEO and restrictions contained in
GEO's senior credit facility. Interest on the notes will accrue at the rate of
10% per annum and will be payable semi-annually in cash on February 1 and August
1 of each year, to the registered noteholders as of the close of business on the
15th day of the month immediately preceding the applicable interest payment
date. Interest on the offered notes will accrue from (a) the date of the last
periodic payment of interest on the outstanding notes or (b) if no interest has
yet been paid, from the date of issuance of the outstanding notes.
The notes are not entitled to the benefit of any mandatory sinking fund.
REDEMPTION
Optional Redemption. GEO may redeem the notes, in whole at any time or in
part from time to time, on and after August 1, 2003, upon notice to the
noteholders of not less than 30 nor more than 60 days. Any such redemption must
be effected at the following redemption prices (plus accrued and unpaid interest
to the date of redemption), if redeemed during the twelve-month period
commencing on August 1 of the year listed below. The redemption prices are
expressed as percentages of the principal amount of the notes.
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<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003........................................................ 105.063%
2004........................................................ 103.375%
2005........................................................ 101.688%
2006 and thereafter......................................... 100.000%
</TABLE>
Optional Redemption Upon Public Equity Offerings. GEO may, at any time or
from time to time on or before August 1, 2001, use the net cash proceeds of one
or more public equity offerings to redeem up to 35% of the notes at a redemption
price equal to 110.125% of the principal amount of such notes (plus accrued and
unpaid interest thereon to the date of redemption). However, GEO may effect such
a redemption only if at least 65% of the principal amount of the notes
originally issued remain outstanding immediately after such redemption. To
effect such a redemption, GEO must make the redemption within 90 days after the
completion of any such public equity offering.
SELECTION AND NOTICE OF REDEMPTION
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption (a) in compliance with the requirements of the
principal national securities exchange on which such notes are listed or (b) if
the notes are not listed on a national securities exchange at such time, on a
pro rata basis, by lot or by such method as the trustee deems to be fair and
appropriate. However, no notes of a principal amount of $1,000 or less will be
redeemed in part. In addition, if a partial redemption is made with the proceeds
of a public equity offering, selection of the notes or portions thereof for
redemption will be made by the trustee on a pro rata basis or on as nearly a pro
rata basis as is practicable, unless such method is otherwise prohibited.
GEO must provide any notice of redemption by first-class mail at least 30
days but not more than 60 days before the redemption date to each noteholder
whose notes are to be redeemed. If any note is to be redeemed in part, the
notice of redemption will state the portion of the principal amount of the
applicable note to be redeemed. In any such case, a new note in a principal
amount equal to the unredeemed portion will be issued in the name of the
noteholder upon cancellation of the partially-redeemed note. On and after the
redemption date, interest will cease to accrue on notes or portions thereof
called for redemption as long as GEO has deposited with the paying agent funds
in satisfaction of the redemption price.
SUBORDINATION
The notes are unsecured senior subordinated obligations of GEO. The payment
of all obligations on the notes is subordinated in right of payment to the prior
payment in full of all obligations on senior debt of GEO (which includes GEO's
senior credit facility). Upon any liquidation, dissolution, bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating to
GEO or its property, all obligations upon all of GEO's senior debt must first be
paid in full before any payment is made on the notes. In the event of the
insolvency of GEO, because of the subordination of the notes, holders of the
notes may recover less, ratably, than the holders of GEO's senior debt. As of
September 30, 1998, GEO had no senior debt outstanding (excluding the unused
availability of $25.0 million under its senior credit facility).
If any default occurs and is continuing in the payment when due of any
amounts under any senior debt of GEO, GEO may not make any payment on the notes.
In addition, GEO may not make any payment on or acquire any of the notes for a
period of 180 days if (a) any other event of default occurs and is continuing
with respect to any designated senior debt of GEO (which includes GEO's senior
credit facility) permitting such debt to be accelerated and (b) the
representative for the designated senior debt gives written notice of the
default to the trustee, unless and until all events of default have been cured
or waived or the
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representative for the designated senior debt terminates the 180-day blockage
period. In no event will a blockage period extend beyond 180 days and only one
such blockage period may be commenced within any 360 consecutive days. No event
of default which existed on the commencement of any blockage period will be the
basis for the commencement of a second blockage period, unless such event of
default has been cured or waived for a period of at least 90 days.
CHANGE OF CONTROL
Upon the occurrence of a change of control of GEO, each noteholder will
have the right to require GEO to repurchase all or a portion of such
noteholder's notes pursuant to the offer described below, at a purchase price
equal to 101% of the principal amount of the notes (plus accrued and unpaid
interest to the date of purchase). Within 30 days after any change of control,
GEO must (a) offer to repay in full and terminate all commitments under GEO's
senior credit facility and all other senior debt of GEO and repay the amounts
owed to each lender which accepts the offer or (b) obtain all consents required
under GEO's senior credit facility and all other senior debt of GEO to permit
the repurchase of the notes. Neither GEO nor the trustee may waive the covenant
relating to a noteholder's right to redemption upon a change of control of GEO.
Within 30 days after the change of control, GEO must send a notice by
first-class mail to each noteholder and the trustee. Such notice will govern the
terms of GEO's offer. The notice must include, among other things, the purchase
date, which must be no earlier than 30 days nor later than 45 days from the date
the notice is mailed, unless otherwise required by law.
GEO can provide no assurance that, upon a change of control, it will have
sufficient funds available to pay the purchase price for all the notes that
might be delivered by noteholders seeking to accept the offer to repurchase. If
it is required to repurchase notes upon a change of control, GEO expects that it
would seek third party financing to the extent it lacks sufficient funds to meet
its purchase obligations. However, GEO can provide no assurance that it would be
able to obtain such financing on satisfactory terms, if at all.
Restrictions in the Indenture on the ability of GEO to incur additional
indebtedness, to grant liens on its property and to make certain asset sales may
make more difficult or discourage a takeover of GEO, whether favored or opposed
by management. The completion of any such transaction may in certain
circumstances require redemption or repurchase of the notes, and GEO can provide
no assurance that it or the acquiring party will have sufficient funds to effect
any such redemption or repurchase. In addition, the restrictions in the
Indenture, including the restrictions on transactions with affiliates, may make
more difficult or discourage any leveraged buyout of GEO by management. Although
such restrictions cover a wide variety of arrangements which have traditionally
been used to effect highly leveraged transactions, the Indenture may not protect
noteholders in all circumstances from the adverse aspects of a highly leveraged
transaction.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants which limit
the operation of GEO's business while the notes are outstanding:
Limitation on Incurrence of Additional Indebtedness. GEO may not, directly
or indirectly, incur, acquire or otherwise become responsible for the payment of
any additional indebtedness, other than certain permitted indebtedness (which
includes amounts under GEO's senior credit facility and capital lease and
purchase money obligations of $5.0 million or less at any time outstanding).
However, if no event of default has occurred and is continuing, GEO may incur
additional indebtedness, including certain acquired indebtedness, if on the date
of the incurrence of such indebtedness, after giving effect to the incurrence
thereof, the consolidated fixed charge coverage ratio of GEO is greater than 2.0
to 1.0.
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Limitation on Restricted Payments. GEO may not make any of the following
restricted payments if, at the time of or immediately after such restricted
payment, (a) an event of default has occurred and is continuing, (b) GEO is
unable to incur at least $1.00 of additional indebtedness in compliance with the
covenant in the Indenture restricting the incurrence of additional indebtedness,
or (c) the aggregate amount of such restricted payments made after the issue
date of the outstanding notes (including the proposed payment) exceeds the sum
of, among other things, 50% of GEO's cumulative consolidated net income from
such issue date and 100% of the aggregate net cash proceeds received by GEO from
the sale of its capital stock or an equity contribution by any of its
shareholders:
- pay any dividend or make any distribution (other than
dividends or distributions payable in qualified capital stock
of GEO) on shares of GEO's capital stock;
- purchase, redeem or otherwise acquire any capital stock of
GEO or any warrants, options or other rights to purchase
shares of GEO's capital stock;
- make any principal payment on, purchase, prepay or otherwise
acquire, before any scheduled maturity or repayment date, any
indebtedness of GEO that is subordinate or junior in right of
payment to the notes; or
- make any investment, other than certain permitted investments
(which includes investments of $5.0 million or less at any
time outstanding).
However, these restrictions do not prohibit GEO from, among other things
and so long as no event of default has occurred and is continuing, effecting
certain repurchases of its common stock from its employees, upon the death,
disability or termination of employment of such employees, in an aggregate
amount not to exceed in any calendar year $750,000 plus the aggregate cash
proceeds from any applicable life insurance policies for which GEO is the
beneficiary.
Limitation on Asset Sales. GEO may not effect certain asset sales unless:
- it receives consideration at the time of such asset sale at
least equal to the fair market value of the assets sold;
- at least 80% of the consideration received from the asset
sale is in the form of cash, cash equivalents or replacement
assets and is received at the time of sale; and
- it applies the net cash proceeds from the asset sale within
180 days of receipt to either prepay any senior debt of GEO
(and effect a permanent reduction in the availability under
the senior debt if it is a revolving credit facility), make
an investment in replacement assets or a combination of such
prepayment and investment.
If GEO determines to not apply the net cash proceeds from any such asset
sale, it must make an offer to purchase, from all noteholders on a pro rata
basis, that amount of notes equal to the net cash proceeds not applied to prepay
senior debt or purchase replacement assets, at a price equal to 100% of the
principal amount of the notes (plus accrued and unpaid interest to the date of
repurchase). In addition, if any non-cash consideration received by GEO in
connection with any such asset sale is converted into cash, such conversion will
be deemed to be an asset sale for purposes of this covenant. GEO may defer any
required offer until there is an aggregate unutilized net cash proceeds of at
least $5.0 million resulting from one or more applicable asset sales.
If GEO transfers substantially all, but less than all, of its assets in a
transaction permitted under the Indenture, the successor corporation will be
deemed to have sold the properties and assets of GEO not so
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transferred for purposes of this covenant, and must comply with the provisions
of this covenant with respect to such deemed sale.
Limitation on Liens. GEO may not incur any lien on any of its assets unless
(a) in the case of liens securing indebtedness that is expressly subordinate or
junior in right of payment to the notes, the notes are secured by a lien on such
assets or proceeds that is senior in priority to such liens and (b) in all other
cases, the notes are equally and ratably secured. Liens expressly exempted from
this covenant include (1) liens securing GEO's senior credit facility and other
senior debt and (2) liens securing refinancing indebtedness which is incurred to
refinance indebtedness secured by permitted liens (provided that such liens
cover no additional assets and are no more favorable to the lienholders than the
liens securing the refinanced indebtedness).
Prohibition on Incurrence of Senior Subordinated Debt. GEO may not incur or
suffer to exist any indebtedness that is senior in right of payment to the notes
and subordinate in right of payment to any other indebtedness of GEO.
Merger, Consolidation and Sale of Assets. GEO may not consolidate or merge
with or into any entity, or sell or otherwise dispose of all or substantially
all of its assets unless, among other things:
- the surviving or acquiring entity, as applicable, expressly
assumes all payments on the notes and the performance of
every covenant of the Indenture;
- immediately after giving effect to such transaction, GEO or
such surviving or acquiring entity, as applicable, has a
consolidated net worth equal to or greater than the
consolidated net worth of GEO immediately before such
transaction; and
- immediately before and immediately after giving effect to
such transaction, no event of default has occurred or is
continuing under the Indenture.
The Indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of GEO in accordance
with this covenant, in which GEO does not survive, the surviving or acquiring
entity, as applicable, will succeed to and may exercise every right and power of
GEO under the Indenture and the notes.
Limitations on Transactions with Affiliates. GEO may not enter into any
transaction with or for the benefit of any of its affiliates, subject to certain
exceptions, including:
- transactions on terms that are no less favorable than those
that might have been obtained in a comparable transaction on
an arm's-length basis from a non-affiliate of GEO;
- reasonable compensation paid to and indemnity provided on
behalf of, officers, directors, employees or consultants of
GEO as determined in good faith by GEO's Board of Directors
or senior management; and
- any agreement in effect as of the issue date of the
outstanding notes or any amendment thereto or any transaction
contemplated thereby.
The Board of Directors of GEO must approve all transactions with affiliates
involving more than $250,000 by a resolution stating that it has determined that
the transaction complies with this covenant. In addition, if GEO enters into any
such transaction that involves more than $2.5 million, GEO must obtain a
favorable opinion from an independent financial advisor as to the fairness of
the transaction to GEO from a financial point of view.
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Conduct of Business. GEO may not engage in any business which is not
reasonably related to the businesses in which GEO was engaged on the issue date
of the outstanding notes.
Reports to Noteholders. GEO is required to provide to all noteholders
copies of the quarterly, annual and other reports which GEO is required to file
with the SEC pursuant to the reporting requirements of the federal securities
laws. If at any time GEO is not subject to the reporting requirements of the
federal securities laws, GEO will file with the SEC (to the extent permitted)
and provide to all noteholders with such annual, quarterly and other reports
that it would be required to file if it were subject to such reporting
requirements.
Other Covenants. The Indenture also includes covenants relating to the
following matters: the preservation of GEO's corporate existence; the payment of
taxes; the maintenance of properties and insurance; compliance with laws;
preventing restrictions on the ability of GEO's future subsidiaries to make
certain payments to GEO; limitation on GEO's future subsidiaries to issue
preferred stock; and limitation on GEO's future subsidiaries to guarantee any
indebtedness. In addition, many of the covenants in the Indenture expressly
apply to certain subsidiaries of GEO. Although GEO currently has no
subsidiaries, such covenants would apply to subsidiaries formed or acquired by
GEO while the notes are outstanding.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "events of default,"
subject to certain exceptions and qualifications:
- the failure to pay interest on any of the notes when such
interest becomes due and payable, for a period of 30 days;
- the failure to pay the principal on any of the notes, when
such principal becomes due and payable (including the failure
to purchase notes upon certain asset sales or changes of
control of GEO);
- a default in the observance of any other provision of the
Indenture which continues for a period of 30 days after GEO
receives written notice of the default from the trustee or
the holders of at least 25% of the notes;
- the failure to pay the principal amount of any indebtedness
of GEO, at the final maturity or upon the acceleration of
such indebtedness, if the aggregate principal amount of such
indebtedness, together with the principal amount of any other
indebtedness of GEO in default, aggregates $2.5 million or
more at any time;
- one or more judgments in an aggregate amount more than $2.5
million rendered against GEO and remaining undischarged,
unpaid or unstayed for a period of 60 days after such
judgment or judgments become final and non-appealable; or
- certain events of bankruptcy of GEO.
If an event of default has occurred and is continuing and is not waived by
the holders of a majority in principal amount of the notes, the trustee or the
holders of at least 25% in principal amount of the notes may declare the
principal and accrued interest on the notes to be due and payable by notice in
writing to GEO and the trustee. Upon certain events of bankruptcy of GEO, all
unpaid principal and accrued interest on the notes will become immediately due
and payable without any declaration or other act on the part of the trustee or
any noteholder.
At any time after a declaration of acceleration has been delivered, the
holders of a majority in principal amount of the notes may rescind such
declaration if, among other things, all events of default have been
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cured or waived (except for the nonpayment of principal or interest that has
become due solely because of the acceleration).
The holders of a majority in principal amount of the notes may waive any
existing event of default under the Indenture, except for a default in the
payment of the principal of or interest on any of the notes.
Noteholders may not enforce the Indenture or the notes except as provided
in the Indenture and the Trust Indenture Act of 1939. Subject to the provisions
of the Indenture relating to the duties of the trustee, the trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the noteholders, unless such noteholders
have offered the trustee reasonable indemnity. The holders of a majority in
principal amount of the notes have the right to direct the time, method and
place of conducting any proceeding for any remedy or power available to the
trustee, subject to the provisions of the Indenture and applicable law.
Under the Indenture, GEO must provide an officers' certificate to the
trustee promptly upon any officer of GEO obtaining knowledge of the occurrence
of any event of default. GEO must provide such certification at least annually
whether or not any event of default is known by any of its officers.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
GEO may, at any time, elect to have its obligations under the notes legally
defeased. Legal defeasance means that GEO will be deemed to have paid and
discharged the entire indebtedness and all of its obligations under the notes,
subject to certain conditions, including (a) the right of noteholders to receive
payments in respect of the principal of and interest on the notes when such
payments become due and (b) GEO's compliance with the legal defeasance
provisions of the Indenture.
In addition, GEO may, at any time, elect to have its obligations with
respect to certain covenants in the Indenture defeased. Covenant defeasance
means that GEO will be released from its obligations under the applicable
covenants and any failure by GEO to comply with such obligations will thereafter
not constitute an event of default under the Indenture. If covenant defeasance
occurs, certain events (other than non-payment, bankruptcy and insolvency
events) will no longer be events of default under the Indenture.
GEO may effect legal or covenant defeasance upon the satisfaction of
certain conditions, including, among other things, that:
- GEO irrevocably deposit with the trustee sufficient funds to
pay the principal of and interest on the notes on the
applicable due dates;
- GEO deliver to the trustee an opinion of counsel confirming
that the noteholders will be subject to federal income tax in
the same manner as if such legal or covenant defeasance had
not occurred; and
- no event of default has occurred and is continuing on the
date of such deposit or, if such event of default results
from the bankruptcy or insolvency of GEO, at any time in the
period ending on the 91st day after the deposit.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect as
to all of the notes, subject to certain exceptions, when either:
- all previously authenticated and delivered notes have been
delivered to the trustee for cancellation; or
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- all notes not previously delivered to the trustee for
cancellation have become due and payable and GEO has
irrevocably deposited with the trustee sufficient funds to
pay and discharge the entire indebtedness on such notes, and
no event of default under the Indenture has occurred and is
continuing on the date of such deposit or will occur as a
result of such deposit.
MODIFICATION OF THE INDENTURE
GEO and the trustee may amend the Indenture, without the consent of the
noteholders, for certain specified purposes, including curing ambiguities,
defects or inconsistencies, if such amendment does not adversely affect the
rights of any of the noteholders. Certain amendments to the Indenture may be
made only with the consent of the holders of a majority in principal amount of
the notes, including any amendment that would:
- reduce the amount of notes whose holders must consent to an
amendment;
- reduce the rate, or change the time for payment, of interest
on the notes;
- reduce the principal, or change the maturity, of the notes;
- change the date on which the notes may be subject to
redemption or reduce any redemption price;
- change any provision in the Indenture that protects the right
of each noteholder to receive the principal of and interest
on the notes or to bring suit to enforce such payment;
- change the provision in the Indenture that permits the
holders of a majority in principal amount of the notes to
waive events of default;
- amend in any material respect the obligation of GEO to
repurchase notes upon certain assets sales or changes of
control of GEO, after any such obligation arises; or
- change any provision of the Indenture affecting the
subordination or ranking of the notes in a manner which
adversely affects the noteholders.
GOVERNING LAW
The Indenture and the notes will be governed by the laws of the State of
New York.
THE TRUSTEE
Chase Manhattan Trust Company, National Association is the trustee under
the Indenture. The Indenture provides that, except during the continuance of an
event of default, the trustee will perform only such duties as are specifically
stated in the Indenture. During the existence of an event of default, the
trustee will exercise such rights and powers vested in it by the Indenture and
use the same degree of care and skill in such exercise as a prudent person would
use under the same circumstances in the conduct of his own affairs.
The Indenture and the provisions of the Trust Indenture Act of 1939 contain
certain limitations on the rights of the trustee, should it become a creditor of
GEO, to obtain payments of claims in certain cases or to realize on certain
property received in respect of any such claim. Subject to the Trust Indenture
Act of 1939, the trustee will be permitted to engage in other transactions.
However, if the trustee acquires any
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conflicting interest as described in the Trust Indenture Act of 1939 and an
event of default exists, the trustee must eliminate such conflict or resign as
trustee.
FORM AND DELIVERY OF THE OFFERED NOTES
The offered notes will initially be issued in the form of one or more
registered notes in global form without coupons, except as described below. Each
global note will be deposited on the date of the issuance of the offered notes
with, or on behalf of, the Depository Trust Company (the "Depository") and
registered in the name of a nominee of the Depository.
The Depository has advised GEO that it is (a) a limited purpose trust
company organized under the laws of the State of New York, (b) a member of the
Federal Reserve System, (c) a "clearing corporation" within the meaning of the
Uniform Commercial Code, and (d) a "Clearing Agency" registered pursuant to
Section 17A of the Securities Exchange Act of 1934. The Depository was created
to hold securities for its participants and facilitates the clearance and
settlement of securities transactions between participants through electronic
book entry changes to the accounts of its participants, thereby eliminating the
need for physical movement of certificates. The Depository's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. Indirect access to the
Depository's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
GEO expects that pursuant to procedures established by the Depository (a)
upon deposit of the global notes, the Depository will credit, on its internal
system, the principal amount of the offered notes to the respective accounts of
participants with an interest in any of the global notes and (b) ownership of
the offered notes will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by the Depository (with respect to
the interest of participants), participants and indirect participants. The laws
of some states require that certain persons take physical delivery in definitive
form of securities that they own and that security interests in negotiable
instruments can only be perfected by delivery of certificates representing the
instruments. Consequently, the ability of persons in such states to transfer the
offered notes or to pledge the offered notes as collateral will be limited to
such extent.
So long as the Depository or its nominee is the registered owner of the
global notes, the Depository or such nominee will be considered the sole owner
or holder of the notes represented by such global notes for all purposes under
the Indenture. Except as provided below, owners of beneficial interests in a
global note will not be (a) entitled to have notes represented by such global
note registered in their names, (b) entitled to receive physical delivery of
certificated securities (as discussed in the next section), or (c) considered
the owners or holders of the offered notes under the Indenture for any purpose,
including with respect to the giving of any direction, instruction or approval
to the trustee. As a result, the ability of a person having a beneficial
interest in any of the notes represented by a global note to pledge such
interest to persons or entities that do not participate in the Depository's
system or to otherwise take action with respect to such interest may be affected
by the lack of a physical certificate evidencing such interest.
Accordingly, to exercise any right of a noteholder under the Indenture or
such global note, each holder of a beneficial interest in a global note must
rely on the procedures of the Depository and, if such noteholder is not a
participant or an indirect participant of the Depository, on the procedures of
the participant through which such noteholder owns its interest. GEO understands
that under existing industry practice: (a) if GEO requests any action of the
noteholders, the Depository and the Depository's participants would act upon the
instructions of such noteholders; and (b) if the owner of a beneficial interest
in a global note desires to take any action that the Depository is entitled to
take, as the holder of the global note, the Depository would authorize the
Depository's participants to take such action and the participants
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would authorize the noteholders owning through such participants to take such
action. Neither GEO nor the trustee under the Indenture will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of the offered notes by the Depository, or for
maintaining, supervising or reviewing any records of the Depository relating to
such notes.
The trustee under the Indenture will make all payments on any offered notes
represented by a global note to or at the direction of the Depository or its
nominee, in its capacity as the registered holder of the global notes. Under the
terms of the Indenture, GEO and the trustee may treat the persons in whose names
the offered notes (including the global notes) are registered as the owners of
such notes for the purpose of receiving payment on such notes and for any other
purpose whatsoever. Consequently, neither GEO nor the trustee will have any
responsibility or liability to make payments to the beneficial owners of the
offered notes, or to immediately credit the accounts of the Depository
participants with such payments. Payments by participants and indirect
participants of the Depository to the beneficial owners of the offered notes
will be governed by standing instructions and customary practice and will be the
responsibility of such participants and indirect participants.
CERTIFICATED SECURITIES
Securities in registered definitive form without coupons will be issued to
each person that the Depository identifies as the beneficial owner of notes
represented by the global notes (upon surrender by the Depository of its global
notes) if: (a) GEO notifies the trustee in writing that the Depository is no
longer willing or able to act as the depository for the notes and GEO is unable
to locate a qualified successor within 90 days; (b) GEO notifies the trustee in
writing that it elects to cause the issuance of notes in definitive form under
the Indenture; or (c) upon the occurrence of certain other events. In addition,
subject to certain conditions, any person having a beneficial interest in a
global note may, upon request to the trustee, exchange such beneficial interest
for securities in registered definitive form. Upon any such issuance, the
trustee is required to register such notes in the name of such person (or such
person's nominee) and deliver the notes to such person.
Neither GEO nor the trustee will be liable for any delay by the Depository
or any of the Depository's participants or indirect participants in identifying
the beneficial owners of the offered notes. GEO and the trustee may rely
conclusively upon, and will be protected in relying upon, instructions from the
Depository for all purposes (including with respect to the registration and
delivery of notes to be issued and the principal amounts of any such notes).
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of outstanding notes for offered notes pursuant to the
Exchange Offer should not constitute a significant modification of the terms of
the outstanding notes and, therefore, should not constitute an exchange for
federal income tax purposes. Accordingly, such exchange of notes should have no
federal income tax consequences to holders of outstanding notes.
The preceding discussion is a summary only and is not a complete analysis
of all potential tax effects of the Exchange Offer. The discussion is based upon
the Internal Revenue Code of 1986, as amended, Treasury regulations, Internal
Revenue Service rulings and pronouncements and judicial decisions now in effect,
all of which are subject to change at any time by legislative, judicial or
administrative action. Any such changes may be applied retroactively in a manner
that could adversely affect a holder of the offered notes. The description does
not consider the effect of any applicable foreign, state, local or other tax
laws or estate or gift tax considerations. YOU SHOULD CONSULT YOUR OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF EXCHANGING YOUR NOTES
FOR OFFERED NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN TAX LAWS.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives offered notes for its own account in
exchange for outstanding notes in the Exchange Offer, where such outstanding
notes were acquired by the broker-dealer as a result of market-making or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such offered notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with such resales. GEO has agreed that, for a period of 60 days after
the expiration of the Exchange Offer, it will make this Prospectus, as amended
or supplemented, available to any broker-dealer for use in connection with any
such resale.
In addition, until , 1999 (90 days after the date of
this Prospectus), all dealers that effect transactions in the offered notes,
whether or not participating in this offering, may be required to deliver a
Prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
GEO will not receive any proceeds from any sale of offered notes by
broker-dealers. Offered notes received by broker-dealers for their own account
pursuant to the Exchange Offer 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 offered 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 or the purchasers of any such offered notes. Any broker-dealer
that resells the offered notes that were received by it for its own account in
the Exchange Offer and any broker-dealer that participates in a distribution of
such offered notes may be deemed to be an "underwriter" within the meaning of
the Securities Act of 1933, and any profit on any such resale of offered notes
and any commissions or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act of 1933. The Letter of
Transmittal states that by acknowledging that it will deliver, and by
delivering, a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act of 1933.
For a period of 60 days after the expiration of the Exchange Offer, GEO
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. GEO has agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for the holders of the
outstanding notes) other than commissions or concessions of any broker-dealer
and will indemnify holders of the outstanding notes (including any
broker-dealer) against certain liabilities, including certain liabilities under
the Securities Act of 1933.
LEGAL MATTERS
Thompson Hine & Flory LLP has passed upon the validity of the offered notes
for GEO.
EXPERTS
The financial statements of GEO as of December 31, 1997 and for the period
from January 1, 1997 through March 24, 1997 and for the period from March 25,
1997 through December 31, 1997 that appear in this Prospectus have been audited
by Crowe, Chizek and Company LLP, independent certified public accountants, and
are included in reliance upon the report of such firm given upon their authority
as experts in auditing and accounting.
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The financial statements of GEO as of December 31, 1996 and for each of the
two years in the period ended December 31, 1996 that appear in this Prospectus
have been audited by Arthur Andersen LLP, independent public accountants, and
are included in reliance upon the report of such firm given upon their authority
as experts in auditing and accounting.
The financial statements of the Paper Chemicals and Construction and
Processing Chemicals, businesses of Henkel Corporation and Henkel Canada Limited
as of December 31, 1996 and March 24, 1997 and for the year ended December 31,
1996 and the period from January 1, 1997 through March 24, 1997 that appear in
this Prospectus have been audited by Crowe, Chizek and Company LLP, independent
certified public accountants, and are included in reliance upon the report of
such firm given upon their authority as experts in auditing and accounting.
The financial statements of TRIMET as of June 30, 1998 and 1997 and for
each of the three years in the period ended June 30, 1998 that appear in this
Prospectus have been audited by Crowe, Chizek and Company LLP, independent
certified public accountants, and are included in reliance upon the report of
such firm given upon their authority as experts in auditing and accounting.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS OF GEO SPECIALTY CHEMICALS, INC.
Report of Independent Auditors.............................. F-3
Report of Independent Accountants........................... F-4
Balance Sheets (as of December 31, 1996 and 1997 and
September 30, 1998)....................................... F-5
Statements of Operations (for the years ended December 31,
1995, 1996 and 1997 and for the nine month period ended
September 30, 1998)....................................... F-6
Statements of Shareholders' Equity (for the years ended
December 31, 1995, 1996 and 1997 and for the nine month
period ended September 30, 1998).......................... F-7
Statements of Cash Flows (for the years ended December 31,
1995, 1996 and 1997 and for the nine month period ended
September 30, 1998)....................................... F-8
Notes to Financial Statements............................... F-12
FINANCIAL STATEMENTS OF THE PAPER CHEMICALS AND CONSTRUCTION
AND PROCESSING CHEMICALS, BUSINESSES OF HENKEL CORPORATION
AND HENKEL CANADA LIMITED
Report of Independent Auditors.............................. F-26
Balance Sheets (as of December 31, 1996 and March 24,
1997)..................................................... F-27
Statements of Operations (for the year ended December 31,
1996 and for the period from January 1, 1997 through March
24, 1997)................................................. F-28
Statements of Divisional Equity (for the year ended December
31, 1996 and for the period from January 1, 1997 through
March 24, 1997)........................................... F-29
Statements of Cash Flows (for the year ended December 31,
1996 and for the period from January 1, 1997 through March
24, 1997)................................................. F-30
Notes to Financial Statements............................... F-31
FINANCIAL STATEMENTS OF THE TRIMET TECHNICAL PRODUCTS
DIVISION OF MALLINCKRODT INC.
Report of Independent Auditors.............................. F-37
Balance Sheets (as of June 30, 1997 and 1998)............... F-38
Statements of Operations (for the years ended June 30, 1996,
1997 and 1998)............................................ F-39
Statements of Divisional Equity (for the years ended June
30, 1996, 1997 and 1998).................................. F-40
Statements of Cash Flows (for the years ended June 30, 1996,
1997 and 1998)............................................ F-41
Notes to Financial Statements............................... F-42
</TABLE>
F-1
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GEO SPECIALTY CHEMICALS, INC.
Cleveland, Ohio
FINANCIAL STATEMENTS
December 31, 1997 and 1996
F-2
<PAGE> 72
REPORT OF INDEPENDENT AUDITORS
Board of Directors
GEO Specialty Chemicals, Inc.
Cleveland, Ohio
We have audited the accompanying balance sheet of GEO Specialty Chemicals,
Inc. (the successor) as of December 31, 1997 and the statements of operations,
shareholders' equity, and cash flows for the period March 25, 1997 through
December 31, 1997 and the statements of income, shareholders' equity, and cash
flows for the period January 1, 1997 through March 24, 1997 for GEO Specialty
Chemicals, Inc. (the predecessor). 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 1997 financial statements referred to above present
fairly, in all material respects, the financial position of GEO Specialty
Chemicals, Inc. as of December 31, 1997, and the results of its operations and
its cash flows for the periods March 25, 1997 through December 31, 1997 and
January 1, 1997 through March 24, 1997 in conformity with generally accepted
accounting principles.
Crowe, Chizek and Company LLP
Oak Brook, Illinois
March 24, 1998
F-3
<PAGE> 73
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
GEO Specialty Chemicals, Inc.
Cleveland, Ohio
We have audited the accompanying balance sheet of GEO Specialty Chemicals,
Inc. (an Ohio corporation) as of December 31, 1996 and the related statements of
operations, shareholders' equity and cash flows for each of the years in the
two-year period ended December 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 financial position of GEO Specialty Chemicals,
Inc. as of December 31, 1996, and the results of its operations and its cash
flows for each of the years in the two-year period ended December 31, 1996 in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Cleveland, Ohio
March 7, 1997
F-4
<PAGE> 74
GEO SPECIALTY CHEMICALS, INC.
BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1996 1997 1998
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash...................................................... $--..... $ 696 $ 1,222
Trade accounts receivable, net of allowance for doubtful
accounts of $112 in 1996, $186 in 1997, and $172 in
1998................................................... 3,453 14,580 20,773
Other receivables......................................... 502 506 633
Inventory................................................. 1,913 8,004 9,943
Prepaid expenses and other current assets................. 72 460 624
Refundable income taxes................................... -- -- 526
Deferred taxes............................................ -- 236 236
------- ------- --------
Total current assets.............................. 5,940 24,482 33,957
Property and equipment, net................................. 13,928 67,851 91,773
Other assets
Intangible assets, net.................................... 813 3,384 5,476
Goodwill, net............................................. 2,661 969 32,623
Other accounts receivable................................. 1,392 1,032 751
Other..................................................... 724 594 707
------- ------- --------
5,590.. 5,979 39,557
------- ------- --------
$25,458.. $98,312 $165,287
======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt......................... $ 2,597 $ 3,560 $ 760
Checks written in excess of bank balance.................. 518 -- --
Accounts payable.......................................... 2,760 8,041 9,662
Other accounts payable.................................... 448 448 448
Accrued expenses and other current liabilities............ 1,815 3,652 5,189
------- ------- --------
Total current liabilities......................... 8,138 15,701 16,059
Revolving line of credit.................................... 1,483 3,639 --
Long-term debt.............................................. 11,973 55,175 --
Senior subordinated notes................................... -- -- 120,000
Other long-term liabilities................................. 1,015 4,853 5,257
Other accounts payable...................................... 1,472 1,059 680
Deferred taxes.............................................. -- 1,495 1,409
------- ------- --------
15,943.. 66,221 127,346
Shareholders' equity
Class A voting common stock, $1 par value, 1,035 shares
and 535 authorized, 42, 104, and 136 shares issued and
outstanding at December 31, 1996 and 1997 and September
30, 1998, respectively................................. -- -- --
Class B nonvoting common stock, $1 par value, 215 shares
authorized, 104, 0, and 0 shares issued and outstanding
at December 31, 1996 and 1997 and September 30, 1998,
respectively........................................... -- -- --
Additional paid-in capital................................ 1,757 14,901 20,901
Retained earnings (accumulated deficit)................... (380) 1,489 981
------- ------- --------
1,377 16,390 21,882
------- ------- --------
$25,458 $98,312 $165,287
======= ======= ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 75
GEO SPECIALTY CHEMICALS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
(SEE NOTE 2) (SEE NOTE 2)
----------------------------- ----------------------------------------
YEARS ENDED PERIOD PERIOD PERIOD NINE MONTHS
DECEMBER 31, JAN. 1 TO MARCH 25 MARCH 25 ENDED
----------------- MARCH 24, TO DEC. 31, TO SEPT. 30, SEPT. 30,
1995 1996 1997 1997 1997 1998
------- ------- --------- ----------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net sales.................... $21,187 $23,869 $9,109 $91,727 $63,161 $92,454
Cost of sales................ 18,112 20,649 8,542 72,626 49,262 75,490
------- ------- ------ ------- ------- -------
GROSS PROFIT................. 3,075 3,220 567 19,101 13,899 16,964
Selling, general, and
administrative expenses.... 2,071 2,191 808 11,078 7,059 9,595
------- ------- ------ ------- ------- -------
INCOME (LOSS) FROM
OPERATIONS................. 1,004 1,029 (241) 8,023 6,840 7,369
Other income (expense)
Interest expense........... (1,164) (1,118) (420) (5,180) (3,464) (5,978)
Other...................... 369 136 (15) 150 136 100
------- ------- ------ ------- ------- -------
(795) (982) (435) (5,030) (3,328) (5,878)
------- ------- ------ ------- ------- -------
INCOME (LOSS) BEFORE TAXES,
AND EXTRAORDINARY ITEM..... 209 47 (676) 2,993 3,512 1,491
Provision for income taxes... -- -- -- 999 592 502
------- ------- ------ ------- ------- -------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM......... 209 47 (676) 1,994 2,920 989
Extraordinary loss on early
extinguishment of debt,
net........................ -- (113) -- (505) (505) (1,497)
------- ------- ------ ------- ------- -------
NET INCOME (LOSS)............ $ 209 $ (66) $ (676) $ 1,489 $ 2,415 $ (508)
======= ======= ====== ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 76
GEO SPECIALTY CHEMICALS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER NUMBER
OF OF RETAINED
CLASS A CLASS B ADDITIONAL EARNINGS
COMMON COMMON PAID-IN (ACCUMULATED
SHARES SHARES CAPITAL DEFICIT) TOTAL
------- ------- ---------- ------------ -------
<S> <C> <C> <C> <C> <C>
PREDECESSOR
Balance January 1, 1995......... 42 104 $ 1,757 $ (523) $ 1,234
Net income...................... -- -- -- 209 209
--- --- ------- ------- -------
Balance December 31, 1995....... 42 104 1,757 (314) 1,443
Net loss........................ -- -- -- (66) (66)
--- --- ------- ------- -------
Balance December 31, 1996....... 42 104 1,757 (380) 1,377
Net loss........................ -- -- -- (676) (676)
--- --- ------- ------- -------
Balance March 24, 1997.......... 42 104 $ 1,757 $(1,056) $ 701
=== === ======= ======= =======
SUCCESSOR
Stock issued.................... 104 -- $14,901 $ -- $14,901
Net income for period March 25,
1997 through December 31,
1997.......................... -- -- -- 1,489 1,489
--- --- ------- ------- -------
Balance December 31, 1997....... 104 -- 14,901 1,489 16,390
Stock issued.................... 32 -- 6,000 -- 6,000
Net loss for period January 1,
1998 through September 30,
1998 (unaudited).............. -- -- -- (508) (508)
--- --- ------- ------- -------
Balance September 30, 1998
(unaudited)................... 136 -- $20,901 $ 981 $21,882
=== === ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 77
GEO SPECIALTY CHEMICALS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
(SEE NOTE 2) (SEE NOTE 2)
------------------------------ ----------------------------------------
YEARS ENDED PERIOD PERIOD PERIOD NINE MONTHS
DECEMBER 31, JAN. 1 TO MARCH 25 MARCH 25 ENDED
------------------ MARCH 24, TO DEC. 31, TO SEPT. 30, SEPT. 30,
1995 1996 1997 1997 1997 1998
------- -------- --------- ----------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss)............. $ 209 $ (66) $ (676) $ 1,489 $ 2,415 $ (508)
Adjustments to reconcile net
income (loss) to net cash
from operating activities
Depreciation, depletion,
and amortization......... 792 1,022 363 4,334 2,831 5,502
Gain on sale of property,
plant, and equipment..... (335) -- -- -- -- --
Extraordinary loss on early
extinguishment of debt... -- 113 -- 505 505 1,497
Deferred income tax expense
(benefit)................ -- -- 389 259 (86)
Bad debt expense........... -- -- -- 63 -- --
Noncash other income
related to the Courtney
settlement agreement..... -- (136) -- -- -- --
Change in assets and
liabilities net of effects
from acquisitions
Accounts
receivable -- trade...... (2,495) (729) (1,367) (1,654) (1,366) (2,293)
Other accounts
receivable............... -- -- (494) 854 661 69
Inventories................ (242) 170 (179) (1,422) (242) 236
Prepaid expenses and other
assets................... (44) (159) (30) (344) (503) (1,109)
Accounts payable and
accrued expenses......... 2,702 1,025 416 2,495 2,230 940
Other accounts payable..... -- 261 (110) -- -- --
Checks written in excess of
bank balance............. 201 (91) 562 (1,080) (1,080) --
------- -------- ------- -------- -------- --------
Net cash from
operating
activities.......... 788 1,410 (1,515) 5,629 5,710 4,248
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of property, plant,
and equipment.............. (531) (559) (127) (3,177) (1,581) (3,806)
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE> 78
GEO SPECIALTY CHEMICALS, INC.
STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
(SEE NOTE 2) (SEE NOTE 2)
------------------------------ ----------------------------------------
YEARS ENDED PERIOD PERIOD PERIOD NINE MONTHS
DECEMBER 31, JAN. 1 TO MARCH 25 MARCH 25 ENDED
------------------ MARCH 24, TO DEC. 31, TO SEPT. 30, SEPT. 30,
1995 1996 1997 1997 1997 1998
------- -------- --------- ----------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Acquisition of paper and
construction processing
businesses from Henkel
Corporation, net of assumed
liabilities................ $ -- $ -- $ -- $(54,210) $(54,210) $ --
Acquisition of Trimet business
from Mallinckrodt Inc., net
of assumed liabilities..... -- -- -- -- -- (59,816)
Proceeds from sale of
property, plant, and
equipment.................. 344 -- -- -- -- --
Proceeds from sale of
Andersonville mining
facility................... -- 4,000 -- -- -- --
Acquisition of land and
mineral reserves from
National Refractories &
Minerals Corporation....... -- (199) -- -- -- --
Acquisition of aluminum
sulphate business and
Andersonville mining
facility of Cytec
Industries Inc., net of
assumed liabilities........ -- (11,345) -- -- -- --
------- -------- ------- -------- -------- --------
Net cash from
investing
activities.......... (187) (8,103) (127) (57,387) (55,791) (63,622)
CASH FLOWS FROM FINANCING
ACTIVITIES
Revolving line of credit
borrowings (payments),
net........................ 464 (511) 2,017 139 1,499 (3,640)
Proceeds from bank
borrowing.................. -- 14,000 -- 65,500 65,500 --
Proceeds from issuance on
subordinated notes......... -- -- -- -- -- 120,000
Payments made on long-term
borrowing.................. (1,039) (5,580) (372) (20,963) (20,344) (57,975)
Payment on note payable to
seller of Courtney......... -- (380) -- -- -- --
Payments on capital leases.... (21) (24) (3) (23) (10) --
</TABLE>
See accompanying notes to financial statements.
F-9
<PAGE> 79
GEO SPECIALTY CHEMICALS, INC.
STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
(SEE NOTE 2) (SEE NOTE 2)
------------------------------ ----------------------------------------
YEARS ENDED PERIOD PERIOD PERIOD NINE MONTHS
DECEMBER 31, JAN. 1 TO MARCH 25 MARCH 25 ENDED
------------------ MARCH 24, TO DEC. 31, TO SEPT. 30, SEPT. 30,
1995 1996 1997 1997 1997 1998
------- -------- --------- ----------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Proceeds from stock
issuance................... $ -- $ -- $ -- $ 14,754 $ 14,754 $ 6,000
Payment of deferred financing
costs...................... (5) (812) -- (3,731) (3,731) (4,485)
Cash consideration paid to
predecessor shareholder.... -- -- -- (3,222) (3,222) --
------- -------- ------- -------- -------- --------
Net cash from
financing
activities.......... (601) 6,693 1,642 52,454 54,446 59,900
------- -------- ------- -------- -------- --------
Net change in cash.............. -- -- -- 696 4,365 526
Cash at beginning of period..... -- -- -- -- -- 696
------- -------- ------- -------- -------- --------
CASH AT END OF PERIOD........... $ -- $ -- $ -- $ 696 $ 4,365 $ 1,222
======= ======== ======= ======== ======== ========
Supplemental disclosures of cash
flow information
Cash paid for
Interest................. $ 527 $ 956 $ 1,147 $ 3,076 $ 1,990 $ 4,216
Taxes.................... 10 -- -- 242 (142) 440
Supplemental schedule of noncash
investing and financing
activities
In conjunction with the
acquisition of Henkel
Corporation, liabilities
were assumed as follows:
Fair value of assets
acquired............ -- -- -- 59,884 59,884 --
Cash paid............. -- -- -- (54,210) (54,210) --
------- -------- ------- -------- -------- --------
Liabilities
assumed.......... -- -- -- 5,674 5,674 --
In conjunction with the
change in control of the
Company on March 24,
1997, liabilities were
assumed as follows:
Fair market value of
assets.............. -- -- -- 30,917 30,917 --
Predecessor basis of
shareholder's
equity.............. -- -- -- (105) (105)
Cash received......... -- -- -- (14,754) (14,754) --
------- -------- ------- -------- -------- --------
Liabilities
assumed.......... -- -- -- 16,058 16,058 --
</TABLE>
See accompanying notes to financial statements.
F-10
<PAGE> 80
GEO SPECIALTY CHEMICALS, INC.
STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
(SEE NOTE 2) (SEE NOTE 2)
------------------------------ ----------------------------------------
YEARS ENDED PERIOD PERIOD PERIOD NINE MONTHS
DECEMBER 31, JAN. 1 TO MARCH 25 MARCH 25 ENDED
------------------ MARCH 24, TO DEC. 31, TO SEPT. 30, SEPT. 30,
1995 1996 1997 1997 1997 1998
------- -------- --------- ----------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
In conjunction with the
acquisition of Trimet
from Mallinckrodt Inc.,
liabilities were assumed
as follows:
Fair value of assets
acquired............ $ -- $ -- $ -- $ -- $ -- $ 62,412
Cash paid............. -- -- -- -- -- (59,816)
------- -------- ------- -------- -------- --------
Liabilities
assumed.......... -- -- -- -- -- 2,596
Seller note on acquisition of
land and mineral reserves from
National Refractories &
Minerals Corporation.......... -- 1,890 -- -- -- --
Assumed liabilities in
acquisition of aluminum
sulphate business and
Andersonville mining facility
of Cytec Industries Inc....... -- 586 1,000 -- -- --
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE> 81
GEO SPECIALTY CHEMICALS, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE DATA)
NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business: GEO Specialty Chemicals, Inc. (the Company) was
incorporated in the state of Ohio for the purpose of owning and operating
specialty chemical businesses. The Company's manufacturing process produces a
variety of specialty chemical products for use in various major chemical
markets. The Company produces more than 300 products. These products are used
primarily in the construction, paper, water treating and oil field industries.
The Company sells these products to customers located throughout the United
States and in some European markets.
The Company operates in an environment with many financial and operating
risks, including, but not limited to, intense competition, fluctuations in cost
and supply of raw materials, technological changes, and environmental matters.
As discussed in Notes 7 and 8, the Company has a high level of indebtedness
which creates liquidity and debt service risks.
Revenue Recognition: Revenues are recognized upon transfer of the goods to
the customer.
Use of Estimates in the Preparation of Financial Statements: The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Reclamation reserves and
mineral reserves are particularly subject to change.
Interim Financial Statements: In the opinion of management, the unaudited
balance sheet as of September 30, 1998 and statements of operations and cash
flows for the period March 25, 1997 through September 30, 1997 and for the nine
months ended September 30, 1998 included herein reflect all normal recurring
adjustments necessary for a fair presentation of the results of the interim
periods reflected. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted from the financial statements pursuant
to applicable rules and regulations of the Securities and Exchange Commission.
The results for interim periods are not necessarily indicative of results to be
expected for the year.
Fair Value of Financial Instruments: The Company's financial instruments
are comprised of cash, trade accounts receivable, other accounts receivable,
accounts payable, other accounts payable, accrued expenses and other current
liabilities, long term debt, revolving line of credit and other long term
liabilities. The carrying value of these instruments approximates fair value.
Property and Equipment: Property and equipment are depreciated on a
straight-line method over their estimated useful lives ranging from 5 to 40
years. Mineral reserves are depleted on a units-of-production basis.
Inventories: Inventories are stated at the lower of cost or market, with
cost being determined on a first-in, first-out (FIFO) basis.
Income Taxes: The Company accounts for its income taxes based on the amount
of taxes due on its tax return plus deferred taxes computed based on the
expected future tax consequences of temporary differences between the carrying
amounts and tax bases of assets and liabilities, using enacted tax rates. The
Company also recognizes the deferred tax asset for the benefit of operating loss
carryforwards.
F-12
<PAGE> 82
GEO SPECIALTY CHEMICALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT SHARE DATA)
Intangible Assets: Intangible assets, which consist principally of deferred
financing costs, are amortized on a straight-line basis over 15 years or the
terms of the respective financing agreements.
Goodwill: Goodwill is amortized on a straight-line basis over 15 years. The
Company periodically assesses whether a change in circumstances has occurred
subsequent to an acquisition which would indicate whether the future useful life
of an asset should be revised. The Company considers the future earnings
potential of the acquired business in assessing the recoverability of goodwill.
Environmental Expenditures: The Company accrues for environmental expenses
resulting from existing conditions that relate to past operations when costs are
probable and reasonably estimable.
Accounting Standards: The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," effective January 1, 1996. SFAS
No. 121 requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever circumstances indicate that the carrying amount
of an asset may not be recoverable. The adoption of this new standard did not
have a material impact on the financial statements. Management periodically
reviews the long-lived assets of the Company in accordance with SFAS No. 121.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income,"
and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information." SFAS No. 130 establishes standards for the reporting and
displaying of comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of general purpose financial statements. SFAS
No. 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in financial reports issued to stockholders. The Company has adopted
SFAS No. 130 and will adopt SFAS No. 131 for the year ending December 31, 1998.
Management does not expect these new pronouncements to significantly impact the
presentation of the Company's financial statements and notes thereto.
Reclassification: Certain 1995 and 1996 balances have been reclassified in
order to conform to the December 31, 1997 and September 30, 1998 presentation.
NOTE 2 -- ACQUISITIONS
On March 25, 1997, the Company purchased certain assets and assumed certain
liabilities of the Paper Chemicals and Construction and Processing Chemicals,
business of Henkel Corporation and Henkel Canada Limited (collectively, Henkel).
The contractual purchase price was $55,000, adjusted by $1,260 to reflect
Henkel's actual working capital amount at closing. The purchase price was funded
through the refinancing of the Company's debt and proceeds received from the
issuance of common stock.
In conjunction with the Henkel acquisition, the Company redeemed all the
Class A voting common stock and Class B nonvoting common stock owned by
shareholders, Key Equity Capital Corporation (Key) and Key Equity Partners
(KEPI), and repaid the subordinated debt, together with accrued interest
thereon, owed to Key and KEPI for total consideration of $5,754. The purchased
shares were
F-13
<PAGE> 83
GEO SPECIALTY CHEMICALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT SHARE DATA)
immediately retired. Simultaneously, the Company sold 82.31 shares of Class A
voting common stock, representing a 79% interest, to Charter Oak Partners
(Charter Oak) for $14,754.
In conjunction with the above acquisition of Henkel and the change of
ownership of the Company, the Company accounted for both transactions as a
purchase and, accordingly, the purchase price was allocated to 100% of the
assets acquired and liabilities assumed from Henkel and 79% of the assets and
liabilities assumed of the Company, in accordance with Accounting Principles
Board Opinion No. 16, "Business Combinations" and the Emerging Issues Task Force
Issue Number 88-16. As a result, all assets including inventories and property,
plant, and equipment of Henkel were stated at fair value and the property,
plant, and equipment of the Company were stated at fair value and allocated
based upon the ownership percentage change at March 25, 1997. The total goodwill
associated with the above transactions was approximately $1,045 (see Note 5).
Additionally, the Company incurred approximately $3,731 of financing costs
associated with the above acquisitions, which is being amortized over the life
of the respective loans.
In December 1996, the Company purchased certain assets and assumed certain
liabilities of the aluminum sulfate business and the Andersonville mining
facility of Cytec Industries Inc. (Cytec). The cash purchase consideration was
approximately $11,345, inclusive of transaction costs of $179. The purchase
price was funded through the refinancing of the Company's credit facility (Note
8). Immediately subsequent to the acquisition, the Company sold the
Andersonville mining facility for $4,000. No gain or loss resulted from the
sale. The proceeds from the sale were used to repay debt. The Cytec acquisition
was accounted for under Accounting Principles Board Opinion No. 16, "Business
Combinations." As a result, inventories were stated at fair value and property,
plant, and equipment were stated at allocated acquisition cost. Pro forma data
of the Company and Cytec for the year ended 1996 is not available.
In October 1996, the Company purchased certain land and mineral reserves
from National Refractories & Minerals Corporation (National). The purchase price
was $2,089, inclusive of transaction costs of $89. The purchase price was funded
through borrowings against the Company's credit facility and a $1,890 seller
note (Note 8).
NOTE 3 -- INVENTORIES
Inventories consist of the following components:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1996 1997 1998
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials......................................... $ 854 $3,364 $2,878
Work in progress...................................... -- 236 11
Finished goods........................................ 1,059 4,404 7,054
------ ------ ------
$1,913 $8,004 $9,943
====== ====== ======
</TABLE>
F-14
<PAGE> 84
GEO SPECIALTY CHEMICALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT SHARE DATA)
NOTE 4 -- PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following major
classifications:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
<S> <C> <C>
Land.............................................. $ 358 $ 3,238
Mineral reserves.................................. 2,157 2,136
Building and improvements......................... 1,555 18,467
Equipment......................................... 11,304 46,330
Construction in progress.......................... 231 1,305
------- -------
15,605 71,476
Accumulated depreciation and depletion............ (1,677) (3,625)
------- -------
$13,928 $67,851
======= =======
</TABLE>
NOTE 5 -- INTANGIBLE ASSETS AND GOODWILL
Costs incurred in obtaining financing have been deferred and are being
amortized on a straight-line basis over the terms of the related credit
agreements. Accumulated amortization of deferred financing costs was $72 and
$548 at December 31, 1996 and 1997, respectively. Amortization expense related
to deferred financing costs of $200, $205, $0, and $548 is included in interest
expense in the accompanying statements of operations for the years ended
December 31, 1995 and 1996 and for the periods ended March 24, 1997 and December
31, 1997, respectively. The Company refinanced its bank credit and secured
additional financing to purchase assets from Henkel Corporation as discussed in
Notes 2 and 8. This financing replaced the refinancing that occurred in December
1996, as discussed in Note 8. In the period ended December 31, 1997, the Company
charged off the remaining $765, net of taxes of $260, of deferred financing
costs which related to the 1996 credit agreement. In 1996, the Company charged
off the remaining $113 of costs that pertained to the previous credit agreement.
The charge incurred in each year is included as an extraordinary loss in the
accompanying statement of operations.
In 1997, the excess purchase price of acquiring the fair value of net
assets of Henkel Corporation (Henkel) was recorded as Goodwill and is being
amortized on a straight-line basis over 15 years. Additionally, goodwill of $373
was recorded in relation to the Company's 79% change of ownership. Accumulated
amortization at December 31, 1996 and 1997 amounted to $179 and $76,
respectively.
In 1997 and 1996, other deferred costs include organization costs, covenant
not to compete costs, and deferred land stripping costs. These costs are being
amortized either on a units-of-production basis or on a straight-line basis over
one to five years. Accumulated amortization of other deferred costs was $96 and
$219 at December 31, 1996 and 1997, respectively.
NOTE 6 -- OTHER ACCOUNTS RECEIVABLE AND OTHER ACCOUNTS PAYABLE
At December 31, 1997 and 1996, the Company held options to purchase, at a
fixed price, a certain raw material from a vendor. Total payments made to the
vendor for the purchase of options which were unexercised at December 31, 1996
and 1997 were $1,858 and $1,498, respectively, and are included in
F-15
<PAGE> 85
GEO SPECIALTY CHEMICALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT SHARE DATA)
other accounts receivable in the accompanying balance sheets. When exercised,
the option payments will be applied as a reduction of the purchase price of the
raw material.
In connection with the above, at December 31, 1997 and 1996, the Company
had sold to a customer options of equal quantities and prices for the sale, at a
fixed price, of a certain product. The product to be sold is made from the raw
material which the Company purchases pursuant to the options discussed in the
previous paragraph. Total payments received by the Company from the customer for
options which were unexercised at December 31, 1996 and 1997 were $1,886 and
$1,500, respectively, and are included in other accounts payable in the
accompanying balance sheets. When the options are exercised by the customer, the
purchase price of the options will be applied as a reduction of the sales price
of the related product.
NOTE 7 -- REVOLVING LINE OF CREDIT
In connection with the March 25, 1997 transaction discussed in Note 2, the
Company entered into a $15 million revolving line of credit agreement which
expires in September 2002. The loan bears interest, at the Company's option, at
either (a) 1.5% above the higher of (i) .5% in excess of the adjusted
certificate of deposit rate, as defined in the agreement, or (ii) the prime
lending rate or (b) 2.75% above the Eurodollar rate, as defined in the
agreement. At December 31, 1997, the rate was 8.625%. The note is secured by
virtually all of the Company's assets and subject to affirmative and negative
covenants as described in Note 8. The Company pays .5% for the amount of unused
credit available during the year. At December 31, 1997, the Company had borrowed
$3,639 under the agreement. At December 31, 1996, the Company's revolving credit
facility provided for borrowings up to $7 million subject to a borrowing base
calculation. The amount outstanding at December 31, 1996 was $1,483 at an
interest rate of 9.5%. The maturity of these amounts is included in Note 8.
NOTE 8 -- LONG-TERM DEBT
The Company's long-term debt obligations consist of the following as of
December 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Tranche Loan A which bears interest, at the Company's
option, at either (a) 1.5% above the higher of (i) .5% in
excess of the adjusted certificate of deposit rate, as
defined, or (ii) the prime lending rate or (b) 2.75% above
the Eurodollar rate, as defined. Quarterly principal
payments of $625 began in June 1997 and continue through
March 1999, $1,250 commencing June 1999 through March
2002, and $5,000 in each of June 2002 and September
2002...................................................... $ -- $28,125
Tranche Loan B which bears interest, at the Company's
option, at either (a) 2% above the higher of (i) .5% in
excess of the adjusted certificate of deposit rate, as
defined, or (ii) the prime lending rate or (b) 3.25% above
the Eurodollar rate, as defined. Semiannual principal
payments of $150 began September 1997 and continue through
September 2002, $9,450 commencing March 2003 through
payment in full........................................... -- 29,850
</TABLE>
F-16
<PAGE> 86
GEO SPECIALTY CHEMICALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Term Loan A payable to a bank which bears interest at 1.75%
above the bank's prime rate. The loan required monthly
payments of $167 beginning March 1, 1999 and continuing
until paid in full. This amount was refinanced through the
above Tranche A and B notes. The loan was secured by
accounts receivable, inventories, a mortgage and security
interest in all of the Company's real property, and a
$1,000 key man life insurance policy on a certain
officer................................................... 5,500 --
Term Loan B payable to a bank which bears interest at 2.25%
above the bank's prime rate. Monthly principal payments of
$181 began in January 1997 and the loan was repaid in full
through the Tranche A and B notes. The loan was secured by
accounts receivable, inventories, a mortgage and security
interest in all of the Company's real property, and a
$1,000 key man life insurance policy on a certain
officer................................................... 4,500 --
Subordinated note payable to the seller of Courtney which
bears interest at 2% above the prime lending rate, 10.5%
at December 31, 1997 and 1996. The Company deferred its
required July 1997 payment until a dispute between the
Company and Courtney can be resolved, at which time the
forgone principal and accrued interest will be due. Final
payment will be due in July 1998. The entire principal is
shown as current on the 1997 financial statements......... 760 760
Subordinated note payable to the seller of National which
bears interest at 15%. The note was paid during the
refinancing of the Company using the Tranche A and B
notes..................................................... 1,890 --
Subordinated note payable to Key, a former shareholder,
pursuant to a subordinated note agreement. The note
carried interest at 12% and was repaid through the
refinancing of the Tranche A and B notes.................. 820 --
Subordinated notes payable to Key ($779) and an affiliate of
Key, KEPI ($330), pursuant to subordinated note
agreements. The notes bear interest at 12% and were paid
in full through the refinancing of the Tranche A and B
notes..................................................... $ 1,100 $ --
------- -------
14,570 58,735
Current portion............................................. 2,597 3,560
------- -------
Long-term portion........................................... $11,973 $55,175
======= =======
</TABLE>
The future maturities of interest-bearing, long-term debt which includes
the revolving line of credit follows:
<TABLE>
<S> <C>
1998......................................... $ 3,560
1999......................................... 4,675
2000......................................... 5,300
2001......................................... 5,300
2002......................................... 10,190
</TABLE>
In accordance with the credit agreement in effect at December 31, 1997,
upon the occurrence of certain events, the Company is required to make
additional principal payments on the term loans. The credit agreement requires
the Company to meet certain affirmative and negative covenants which include
F-17
<PAGE> 87
GEO SPECIALTY CHEMICALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT SHARE DATA)
meeting certain earnings, interest coverage, and debt to earnings ratios. At
December 31, 1997, the Company was in compliance with these covenants.
NOTE 9 -- SUPPLY AND PURCHASE CONTRACTS
The Company has entered into two supply contract agreements with Henkel.
One agreement calls for the Company to supply an amount of a product to Henkel
and Henkel to purchase this amount from the Company at prices as indicated in
the supply agreement. The agreement will remain in effect for a term of three to
five years with respect to the product.
The second agreement calls for the Company to purchase an amount of product
from Henkel and Henkel to supply this amount to the Company at prices as
indicated in the agreement. The agreement will also remain in effect for a term
of three to five years for some products and three years for others. Upon
termination of the initial contracts, both are renewable annually thereafter
until written termination is provided one year in advance of its intent to
terminate the agreement. The Company sold $8.1 million to Henkel during the
period March 25, 1997 through December 31, 1997 under this agreement and
purchased $5.7 million from Henkel during the same period.
NOTE 10 -- 401(k) PLAN AND DEFINED CONTRIBUTION PLAN
The Company sponsors a qualified 401(k) plan and a defined contribution
money purchase plan which cover all eligible employees except those who are
members of the Cedartown, Georgia plant union (see Note 12).
At December 31, 1997, under the terms of the 401(k) plan, which was amended
twice during 1997 and once during 1996, all eligible employees can elect to
defer up to 12% of their annual salary. In 1997, the Company elected to match
50% of the employee's deferred contribution up to 6% of the employee's salary.
Total 401(k) expense for the period ended December 31, 1997 and the period ended
March 24, 1997 approximated $200 and $0, respectively. In 1996 and 1995, the
amount of the Company's discretionary matching contribution was limited to 6% of
each participant's qualifying compensation. In 1996 and 1995, the Company
elected not to match the employee deferral. In 1997, the Company could elect, on
a discretionary basis, to contribute an additional amount to be distributed to
plan participants as outlined in the plan document. The Company made no
discretionary contributions in 1997.
Under the terms of the money purchase plan, the Company will contribute to
the plan on behalf of each eligible participant an amount equal to 5% of the
participant's qualifying compensation. The Company's contribution requirements
for the years ended December 31, 1995 and 1996 and for the periods ended March
24, 1997 and December 31, 1997 were $133, $144, $51, and $453, respectively.
NOTE 11 -- UNION EMPLOYEE DEFINED BENEFIT PENSION PLAN
The Company has a defined benefit pension plan covering substantially all
of its Cedartown, Georgia union employees. The benefits are based on years of
service through the date of retirement, multiplied by a predetermined amount
payable in a monthly annuity for life, vested over a five-year period with
reductions for early retirement. The benefits are also reduced by the accrued
benefit as of
F-18
<PAGE> 88
GEO SPECIALTY CHEMICALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT SHARE DATA)
March 25, 1997, under the Henkel Corporation Consolidated Union Retirement Plan.
The Company's funding policy is to contribute amounts sufficient to satisfy
regulatory funding standards.
The following table summarizes the plan's funded status and the amounts
recognized in the Company's balance sheet at December 31, 1997.
Actuarial present value of benefit obligations:
<TABLE>
<S> <C>
Accumulated benefit obligation, including vested benefit of
$60 at December 31, 1997.................................. $ 229
-----
Projected benefit obligation................................ 229
Plan assets at fair value................................... --
-----
Plan assets less than projected benefit obligation.......... (229)
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions........ 9
Unrecognized prior service costs............................ 161
Additional plan liability................................... (170)
-----
Accrued pension cost included in the balance sheet........ $(229)
=====
Intangible asset.......................................... $ 161
=====
Net pension expense for 1997 consisted of the following:
Net amortization and deferral interest cost................. $ 9
Service cost................................................ 58
-----
Net periodic pension cost................................. $ 67
=====
</TABLE>
The weighted average discount rate used in determining the pension expense
and the actuarial present value of benefit obligations for the year ended
December 31, 1997 was 6.25%.
The provisions of Statement of Financial Accounting Standards (SFAS) No.
87, "Employers' Accounting for Pensions," require recognition in the balance
sheet of an additional minimum liability and related intangible asset for
pension plans with accumulated benefits in excess of plan assets. At December
31, 1997, an additional liability of $170 and an intangible asset of equal
amount, less amortization of $9 during 1997, are reflected in the consolidated
balance sheets. The increase after March 25, 1997 was due to changes in the plan
provisions for salaried employees including a change in the definition of final
average earnings and recognition of past service credit for predecessor
employees.
NOTE 12 -- POST-RETIREMENT BENEFIT PLANS
The Company sponsors two post-retirement benefit plans that cover
substantially all union employees of the Cedartown, Georgia plant who have
attained age 55 and have 5 years of service and their spouses. One plan provides
medical benefits and the other provides life insurance benefits. The
post-retirement health care plan is contributory. The life insurance plan is
noncontributory.
F-19
<PAGE> 89
GEO SPECIALTY CHEMICALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT SHARE DATA)
The following table sets forth the plans' combined funded status reconciled
with the amount included in other long-term liabilities at December 31, 1997.
Accumulated post-retirement benefit obligations:
<TABLE>
<S> <C>
Retirees.................................................... $ 162
Fully eligible plan participants............................ 708
Other active plan participants.............................. 719
-------
1,589
Plan assets at fair value................................... --
Accumulated post-retirement benefit obligation in excess of
plan assets............................................... (1,589)
Unrecognized net loss from past experience different from
that assumed and from changes in assumptions.............. 320
-------
Accrued post-retirement benefit cost........................ $(1,269)
=======
</TABLE>
Post-retirement benefit cost for the period ended December 31, 1997
includes the following components:
<TABLE>
<S> <C>
Service cost (3/26/97 -- 12/31/97).......................... $ 30
Interest cost on accumulated post-retirement benefit
obligation................................................ 68
----
Post-retirement benefit cost................................ $ 98
====
</TABLE>
For measurement purposes, a 9% annual rate of increase in the per capita
cost of covered health care benefits was assumed for the period beginning after
December 31, 1997; the rate was assumed to decrease gradually to 5.5% at 2003
and remain at that level thereafter. The health care cost trend rate assumption
has a significant effect on the amounts reported. Increasing the assumed health
care cost trend rates by one percentage point in each year would increase the
accumulated post-retirement benefit obligation as of December 31, 1997 by $242
and the aggregate of the service and interest cost components of post-retirement
expense for the period then ended by $29.
The weighted-average discount rate used in determining the accumulated
post-retirement benefit obligation was 7%.
NOTE 13 -- LEASE COMMITMENTS
The Company has entered into numerous noncancellable operating lease
agreements for various autos, trucks, railroad cars, land, and office facilities
with lease terms expiring at various dates through the year 2002. Rent expense
under these leases for the years ended December 31, 1995 and 1996 and for the
periods ended March 24, 1997 and December 31, 1997 approximated $2, $12, $37,
and $688, respectively. Total minimum rentals under noncancellable operating
leases as of December 31, 1997 over future years are:
F-20
<PAGE> 90
GEO SPECIALTY CHEMICALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<S> <C>
1998.......................................... $1,109
1999.......................................... 858
2000.......................................... 557
2001.......................................... 486
2002.......................................... 411
------
$3,421
======
</TABLE>
NOTE 14 -- INCOME TAXES
The income tax provision is comprised of the following:
<TABLE>
<CAPTION>
PERIOD
JANUARY 1, PERIOD
DECEMBER 31, 1997 TO MARCH 25 TO
--------------- MARCH 24, DECEMBER 31,
1995 1996 1997 1997
------ ------ ---------- ------------
<S> <C> <C> <C> <C>
Current payable.............................. $ -- $ -- $ -- $610
Deferred income taxes........................ -- -- -- 389
------ ------ ------ ----
$ -- $ -- $ -- $999
====== ====== ====== ====
</TABLE>
The difference between the effective tax rate and the statutory rate is
reconciled below:
<TABLE>
<CAPTION>
PERIOD
JANUARY 1, PERIOD
DECEMBER 31, 1997 TO MARCH 25 TO
------------------------------------------- MARCH 24, DECEMBER 31,
1995 1996 1997 1997
-------------------- -------------------- -------------------- --------------------
DOLLARS PERCENTAGE DOLLARS PERCENTAGE DOLLARS PERCENTAGE DOLLARS PERCENTAGE
------- ---------- ------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statutory rate....... $71 34.0% $16 34.0% $(230) (34.0)% $1,026 34.0%
Permanent items...... -- -- -- -- -- -- 69 3.0
Valuation
allowance.......... (71) (34.0) (16) (34.0) 230 34.0 (96) (3.0)
--- ----- --- ----- ----- ----- ------ ----
$-- --% $-- --% $ -- --% $ 999 34.0%
=== ===== === ===== ===== ===== ====== ====
</TABLE>
F-21
<PAGE> 91
GEO SPECIALTY CHEMICALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT SHARE DATA)
Significant components of the deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
<S> <C> <C>
Deferred tax liabilities
Property, plant, and equipment......................... $ 1,281 $ 5,931
Other liabilities...................................... 90 255
------- -------
1,371 6,186
Deferred tax assets
Net operating loss carryforwards....................... 908 1,776
Post retirement benefit................................ -- 507
Pond closure reserve................................... 406 1,206
Other assets........................................... 153 1,438
------- -------
1,467 4,927
Valuation allowance.................................... (96) --
------- -------
1,371 4,927
------- -------
Net deferred tax (liability) asset................... $ -- $(1,259)
======= =======
</TABLE>
Income tax carryforwards approximated and consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------ ------
<S> <C> <C>
Net operating loss carryforward............................. $2,270 $4,440
====== ======
AMT credit carryforwards.................................... $ 2 $ 362
====== ======
</TABLE>
As of December 31, 1997, net operating loss carryforwards listed above
expire through the year 2012.
NOTE 15 -- COMMITMENTS AND CONTINGENCIES
Contracts
Pursuant to the terms of a shareholder's agreement and employment
agreements with certain individuals who are partners in GEO Chemicals, Ltd.
(GCL) and members of the key management of the Company, the Company has the
right and, in certain cases, the obligation to repurchase specified percentages
of the stock held by GCL in the event of termination of employment of these
individuals. The redemption prices are based on the higher of fair value or
original cost. The agreement also obligates the Company to maintain disability
insurance and specified levels of life insurance coverage on these individuals
to fund any such redemption.
During 1995, the Company purchased the customer list relating to the
Houston, Texas dry alum business of Rhone-Poulenc, Inc. (Rhone-Poulenc). In
accordance with the purchase agreement, the Company is required to pay a 7.5%
commission on its gross sales of dry alum product until such time as the
cumulative commission payments equal $375, plus an additional lump sum payment
based on a formula calculation, as defined, of the increase in dry alum sales
over a specified period of time. The lump sum payment cannot exceed $120. For
the years ended December 31, 1995 and 1996 and for the
F-22
<PAGE> 92
GEO SPECIALTY CHEMICALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT SHARE DATA)
periods ended March 24, 1997 and December 31, 1997, the Company charged $76,
$169, $23, and $66, respectively, against operations for commissions applicable
to dry alum sales.
Litigation
In the ordinary course of business, the Company is periodically named as a
defendant in a variety of lawsuits. Currently, the Company is one of 102 named
defendants in a toxic tort lawsuit commended in Harrison County, Texas. The
plaintiffs in the action are employees, former employees and the families of
such employees of the Monarch Tile Company tile plant in Marshall, Texas. The
plaintiffs allege that they were exposed to hazardous substances in the course
of their employment at the Monarch plant and that the Company or its predecessor
was a manufacturer of one of those substances. The Company intends to vigorously
defend this action and disputes that its substances are hazardous or responsible
for the plaintiffs' alleged injuries. The Company believes, that its pending
cases will not have a material adverse effect on its business, financial
condition or results of operations.
Environmental Matters
The Company believes that it is in substantial compliance with
environmental laws applicable to its facilities. The Company has no reason to
believe that the discovery of presently unknown environmental conditions or
changes in the scope, interpretation or enforcement of any environmental laws
will have a material adverse effect on the Company's operations, business or
financial condition or results of operations.
NOTE 16 -- OTHER INCOME
During 1995, the Company sold a parcel of land for $344. The sale resulted
in a gain of $335 which is included in other income in the accompanying
statement of operations.
During 1996, the principal amount of the Courtney note payable was reduced
by $136 in connection with a mutual release by all parties of all claims,
disputes and losses related to the acquisition of Courtney. Such amount is
included in other income for 1996.
NOTE 17 -- INTERIM SIGNIFICANT EVENTS (UNAUDITED)
On July 31, 1998, pursuant to the acquisition agreement dated June 29,
1998, the Company purchased substantially all of the assets of TRIMET Technical
Products, a Division of Mallinckrodt Inc. (TRIMET) from Mallinckrodt Inc. and
its affiliates. The TRIMET business produces specialty chemicals used primarily
in the coatings industry to customers located in the United States and Europe.
The contractual purchase price was $60 million, adjusted by $280 thousand for
the post retirement health benefit accrual. Concurrently with the acquisition of
TRIMET, the Company refinanced its current debt structure. The purchase price of
TRIMET and refinancing of the Company's debt was funded through the offering of
$120,000, 10 1/8% Senior Subordinated Notes due 2008 and an equity contribution
of $6 million from the Company's shareholders.
As indicated above, the Company has issued $120,000, 10 1/8% Senior
Subordinated Notes due 2008. Based upon the terms of the Subordinated Note
(Notes) agreement, interest accrues from the issue date (July 31, 1998) and is
payable semi-annually in arrears on each February 1 and August 1, commencing
F-23
<PAGE> 93
GEO SPECIALTY CHEMICALS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT SHARE DATA)
February 1, 1999. The notes are redeemable, in whole or in part, at the option
of the Company on or after August 1, 2003, as specified in the agreement. The
Company has also agreed to adhere to certain covenants.
As a result of the above refinancing and debt issuance, the financing cost
associated with the previous debt structure was charged to expense and is
included in the income statement as an extraordinary loss, net of income taxes
of $770.
F-24
<PAGE> 94
PAPER CHEMICALS AND CONSTRUCTION
AND PROCESSING CHEMICALS,
BUSINESSES OF HENKEL CORPORATION AND
HENKEL CANADA LIMITED
FINANCIAL STATEMENTS
December 31, 1996 and March 24, 1997
F-25
<PAGE> 95
REPORT OF INDEPENDENT AUDITORS
Board of Directors
GEO Specialty Chemicals, Inc.
Cleveland, Ohio
We have audited the accompanying balance sheets of Paper Chemicals and
Construction and Processing Chemicals, businesses of Henkel Corporation and
Henkel Canada Limited, as of December 31, 1996 and March 24, 1997 and the
related statements of operations, divisional equity, and cash flows for the year
ended December 31, 1996 and for the period January 1, 1997 to March 24, 1997.
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 from
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 financial position of Paper Chemicals and
Construction and Processing Chemicals, businesses of Henkel Corporation and
Henkel Canada Limited, as of December 31, 1996 and March 24, 1997 and the
results of operations and cash flows for the year ended December 31, 1996 and
for the period January 1, 1997 to March 24, 1997, in conformity with generally
accepted accounting principles.
As explained in Note 1, the financial statements include significant costs
and expenses of Henkel Corporation and Henkel Canada Limited allocated to Paper
Chemicals and Construction and Processing Chemicals, businesses of Henkel
Corporation and Henkel Canada Limited.
Crowe, Chizek and Company LLP
Oak Brook, Illinois
October 22, 1998
F-26
<PAGE> 96
PAPER CHEMICALS AND CONSTRUCTION AND PROCESSING
CHEMICALS, BUSINESSES OF HENKEL CORPORATION
AND HENKEL CANADA LIMITED
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 24,
1996 1997
------------ ---------
<S> <C> <C>
ASSETS
Current assets
Accounts receivable -- less allowance for doubtful
accounts of $15 in 1996 and $13 in 1997................ $ 7,472 $ 7,996
Inventory................................................. 5,279 4,638
Prepaid expenses.......................................... 5 5
Deferred income taxes..................................... 372 382
------- -------
Total current assets................................... 13,128 13,021
Property, plant, and equipment, net......................... 34,485 32,777
------- -------
Total assets........................................... $47,613 $45,798
======= =======
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities
Accounts payable.......................................... $ 3,216 $ 3,126
Accrued expenses.......................................... 2,636 1,578
------- -------
Total current liabilities.............................. 5,852 4,704
Other long-term liabilities................................. 1,904 1,968
Deferred income taxes....................................... 1,834 1,697
Divisional equity........................................... 38,023 37,429
------- -------
Total liabilities and divisional equity................ $47,613 $45,798
======= =======
</TABLE>
See accompanying notes to financial statements.
F-27
<PAGE> 97
PAPER CHEMICALS AND CONSTRUCTION AND PROCESSING
CHEMICALS, BUSINESSES OF HENKEL CORPORATION
AND HENKEL CANADA LIMITED
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD
JANUARY 1,
YEAR ENDED 1997 TO
DECEMBER 31, MARCH 24,
1996 1997
------------ ----------
<S> <C> <C>
Net sales................................................... $78,172 $18,327
Cost of sales............................................... 71,247 17,423
------- -------
GROSS PROFIT................................................ 6,925 904
Operating expenses
Selling, general, and administrative...................... 11,039 2,520
------- -------
OPERATING LOSS.............................................. (4,114) (1,616)
Other expense............................................... (68) --
------- -------
LOSS BEFORE INCOME TAX BENEFIT.............................. (4,182) (1,616)
Income tax benefit.......................................... 1,663 645
------- -------
NET LOSS.................................................... $(2,519) $ (971)
======= =======
</TABLE>
See accompanying notes to financial statements.
F-28
<PAGE> 98
PAPER CHEMICALS AND CONSTRUCTION AND PROCESSING
CHEMICALS, BUSINESSES OF HENKEL CORPORATION AND
HENKEL CANADA LIMITED
STATEMENTS OF DIVISIONAL EQUITY
(IN THOUSANDS)
<TABLE>
<S> <C>
Balance, January 1, 1996.................................... $43,660
Net loss for the year ended December 31, 1996............... (2,519)
Net distributions to Henkel Corporation and Henkel Canada
Limited................................................... (3,118)
-------
Balance, December 31, 1996.................................. 38,023
Net loss for the period January 1, 1997 to March 24, 1997... (971)
Net capital contributions from Henkel Corporation and Henkel
Canada Limited............................................ 377
-------
Balance, March 24, 1997..................................... $37,429
=======
</TABLE>
See accompanying notes to financial statements.
F-29
<PAGE> 99
PAPER CHEMICALS AND CONSTRUCTION AND PROCESSING
CHEMICALS, BUSINESSES OF HENKEL CORPORATION
AND HENKEL CANADA LIMITED
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD
JANUARY 1,
YEAR ENDED 1997 TO
DECEMBER 31, MARCH 24,
1996 1997
------------ ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $(2,519) $ (971)
Adjustments to reconcile net loss to net cash from
operating activities
Depreciation.............................................. 7,719 1,943
Deferred income taxes..................................... (1,378) (147)
Loss on disposal of property, plant, and equipment........ 68 --
Changes in assets and liabilities
Accounts receivable.................................... 693 (524)
Inventory.............................................. 283 641
Accounts payable and accrued expenses.................. 235 (1,148)
Other long-term liabilities............................ (40) 64
------- -------
Net cash from operating activities................... 5,061 (142)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment........................ (1,943) (235)
------- -------
Net cash from investing activities..................... (1,943) (235)
CASH FLOWS FROM FINANCING ACTIVITIES
Net capital contribution/(distribution) from Henkel
Corporation and Henkel Canada Limited................. (3,118) 377
------- -------
Net cash from financing activities................... (3,118) 377
------- -------
Net change in cash.......................................... -- --
Cash at beginning of period................................. -- --
------- -------
CASH AT END OF PERIOD....................................... $ -- $ --
------- -------
Supplemental disclosure of cash flow information
Income taxes received..................................... $ 285 $ 398
</TABLE>
See accompanying notes to financial statements.
F-30
<PAGE> 100
PAPER CHEMICALS AND CONSTRUCTION AND PROCESSING
CHEMICALS, BUSINESSES OF HENKEL CORPORATION AND
HENKEL CANADA LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND MARCH 24, 1997
(IN THOUSANDS)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and practices followed by Paper
Chemicals and Construction and Processing Chemicals, businesses of Henkel
Corporation and Henkel Canada Limited, (the Company) are as follows:
Description of Business: The Company manufactures, sells, and distributes
chemicals used in the paper, pulp, construction, oil field, latex and SBR
polymerization, and ceramic industries. The Company has customers located
throughout the world, but primarily in the United States.
Environmental Expenditures: The Company accrues for environmental expenses
resulting from existing conditions that relate to past operations when costs are
probable and reasonably estimable.
Revenue Recognition: The Company recognizes revenue, net of allowances for
estimated returns, upon shipment of the product.
Inventories: Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
Property, Plant, and Equipment: Property, plant, and equipment are stated
at cost and are depreciated on a straight-line method over their estimated
useful lives ranging from 3 to 30 years.
Fair Value of Financial Instruments: The Company's financial instruments
are comprised of trade accounts receivable and accounts payable. The carrying
value of these instruments approximate fair value.
Income Taxes: Henkel Corporation and Henkel Canada Limited have allocated
income taxes to the Company on the same basis as if the Company had filed a
separate income tax return. Deferred taxes are computed based on the expected
future tax consequences of temporary differences between the carrying amounts
and tax basis of assets and liabilities, using enacted tax rates.
Allocations and Use of Estimates: During the year ended December 31, 1996
and for the period January 1, 1997 to March 24, 1997, the Company was allocated
certain operational and administrative expenses from Henkel Corporation and
Henkel Canada Limited. Allocations were based on various methods including
relative sales volume, headcount, and estimates of time spent. Management
believes that these allocations are based on reasonable methods. Sales, returns,
material cost, and direct labor cost were specifically identified to the Company
and were not based on allocations.
Management must make estimates and assumptions in preparing financial
statements that affect the amounts reported therein and the disclosures
provided. These estimates, allocations, and assumptions may change in the future
and future results could differ.
F-31
<PAGE> 101
PAPER CHEMICALS AND CONSTRUCTION AND PROCESSING
CHEMICALS, BUSINESSES OF HENKEL CORPORATION
AND HENKEL CANADA LIMITED
NOTES TO FINANCIAL
STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
NOTE 2 -- INVENTORIES
Inventories consist of the following components:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 24,
1996 1997
------------ ---------
<S> <C> <C>
Raw materials............................................. $1,998 $1,900
Finished goods............................................ 3,281 2,738
------ ------
Total inventory................................... $5,279 $4,638
====== ======
</TABLE>
NOTE 3 -- PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 24,
1996 1997
------------ ---------
<S> <C> <C>
Land and improvements..................................... $ 1,029 $ 1,029
Buildings................................................. 28,278 28,307
Manufacturing equipment................................... 65,542 65,937
Office equipment.......................................... 3,093 3,115
------- -------
97,942 98,388
Accumulated depreciation.................................. 64,322 66,239
------- -------
33,620 32,149
Construction in progress.................................. 865 628
------- -------
$34,485 $32,777
======= =======
</TABLE>
NOTE 4 -- INCOME TAXES
The income tax benefit is comprised of the following:
<TABLE>
<CAPTION>
PERIOD
JANUARY 1,
YEAR ENDED 1997 TO
DECEMBER 31, MARCH 24,
1996 1997
------------ ----------
<S> <C> <C>
Current.............................................. $ 285 $498
Deferred............................................. 1,378 147
------ ----
$1,663 $645
====== ====
</TABLE>
F-32
<PAGE> 102
PAPER CHEMICALS AND CONSTRUCTION AND PROCESSING
CHEMICALS, BUSINESSES OF HENKEL CORPORATION
AND HENKEL CANADA LIMITED
NOTES TO FINANCIAL
STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
Income tax benefit is reconciled to the tax benefit that would result from
applying regular statutory rates to pretax income (loss) as follows:
<TABLE>
<CAPTION>
PERIOD
JANUARY 1,
YEAR ENDED 1997 TO
DECEMBER 31, MARCH 24,
1996 1997
------------ ----------
<S> <C> <C>
Income tax benefit at the statutory rate............. $1,422 $549
State tax benefit, net of federal benefit............ 241 96
------ ----
$1,663 $645
====== ====
</TABLE>
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 24,
1996 1997
------------ ---------
<S> <C> <C>
Current deferred items
Accounts receivable allowance......................... $ 6 $ 5
Inventory valuation................................... 111 121
Vacation accrual...................................... 255 256
------- -------
372 382
Noncurrent deferred items
Depreciation.......................................... (2,596) (2,484)
Accrued post-retirement cost.......................... 762 787
------- -------
(1,834) (1,697)
------- -------
$(1,462) $(1,315)
======= =======
</TABLE>
NOTE 5 -- RELATED PARTY TRANSACTIONS
The Company has been allocated certain operational and administrative costs
from Henkel Corporation and Henkel Canada Limited which approximated $1,726 and
$390 for the year ended December 31, 1996 and for the period January 1, 1997 to
March 24, 1997, respectively. During the periods indicated, the costs related to
these services were allocated to the Company as discussed in Note 1.
The Company had sales to other divisions of Henkel Corporation and Henkel
Canada Limited. Sales to these other divisions were approximately $8,432 and
$1,783 for the year ended December 31, 1996 and for the period January 1, 1997
to March 24, 1997, respectively. These sales were recorded at the Company's cost
with no profit recognized.
F-33
<PAGE> 103
PAPER CHEMICALS AND CONSTRUCTION AND PROCESSING
CHEMICALS, BUSINESSES OF HENKEL CORPORATION
AND HENKEL CANADA LIMITED
NOTES TO FINANCIAL
STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
The Company also had sales to entities owned by Henkel Corporation and
Henkel Canada Limited. Sales to those entities were approximately $1,747 and
$419 for the year ended December 31, 1996 and for the period January 1, 1997 to
March 24, 1997, respectively. Amounts due to the Company for these sales were
$515 and $681 as of December 31, 1996 and March 24, 1997, respectively, and are
included with accounts receivable.
The Company's cash collections and cash disbursements are administered by
Henkel Corporation and Henkel Canada Limited. The overall net amount of cash
received and cash disbursed is reflected as net capital
contribution/(distribution) in the Statements of Cash Flows.
NOTE 6 -- COMMITMENTS
The Company leases machinery and equipment on a month to month basis. Rent
expense for the year ended December 31, 1996 and for the period January 1, 1997
to March 24, 1997 approximated $163 and $41, respectively.
NOTE 7 -- EMPLOYEE BENEFIT PLANS
Retirement Income Plans: Employees of the Company not covered by a
collective bargaining agreement participate in a Henkel Corporation defined
benefit pension plan. Henkel Corporation funding policy is to contribute an
amount meeting the required employer contribution in accordance with Section
401(a)(17) of the Internal Revenue Code.
A separate pension plan is maintained for employees of the Company covered
by a collective bargaining agreement. The plan calls for benefits to be paid to
eligible employees at retirement based upon years of service multiplied by a
monthly compensation factor. Participants are fully vested after five years.
Summarized information about the Henkel Corporation plans with projected
benefit obligations in excess of plan assets at December 31, 1996 is as follows:
Accumulated benefit obligations -- $186,056; projected benefit
obligations -- $236,415; plans' assets -- $173,467; service costs -- $10,049.
The amortization of prior service costs, interest costs, unrecognized prior
service costs, unamortized transactions liability, and actual return on assets
were not available.
The Company's expense for these plans for the year ended December 31, 1996
was approximately $140. The weighted average discount rate used to measure the
projected benefit obligations are 9% and the expected long-term rates of return
on assets are 12.1% for the year ended December 31, 1996.
The actual calculations of the plans' assets, liabilities, and expense
components as of March 24, 1997 and for the period January 1, 1997 to March 24,
1997 were not available. Management of the Company believes that those unfunded
liabilities existing at December 31, 1996 resemble those at March 24, 1997. The
Company's expense for these plans were approximately $35 for the period January
1, 1997 to March 24, 1997.
F-34
<PAGE> 104
PAPER CHEMICALS AND CONSTRUCTION AND PROCESSING
CHEMICALS, BUSINESSES OF HENKEL CORPORATION
AND HENKEL CANADA LIMITED
NOTES TO FINANCIAL
STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
Post-retirement Benefits Other Than Pensions: The Company also participated
in a post-retirement benefit plan maintained by Henkel. Employees retiring from
the Company after attaining specified age and service requirements may become
eligible for post-retirement health care benefits.
As of December 31, 1996 and March 24, 1997, the Company's share of the
accrued post-retirement liabilities was $1,904 and $1,968, respectively. There
are no plan assets. The Company's expense for post-retirement health care
benefits for the year ended December 31, 1996 and for the period January 1, 1997
to March 24, 1997 was approximately $15 and $7, respectively. The assumptions
used to calculate the accrued post-retirement at March 24, 1997 are as follows:
7% weighted average discount rate used in determining the actuarial present
value of the accumulated post-retirement benefit obligations and 5.5% assumed
health care cost trend.
NOTE 8 -- SUBSEQUENT EVENT
On March 24, 1997, Henkel Corporation and Henkel Canada Limited sold
certain assets net of certain liabilities of the Company for approximately
$55,000.
F-35
<PAGE> 105
TRIMET TECHNICAL PRODUCTS,
A DIVISION OF MALLINCKRODT INC.
FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1998
F-36
<PAGE> 106
REPORT OF INDEPENDENT AUDITORS
Board of Directors
GEO Specialty Chemical, Inc.
Cleveland, Ohio
We have audited the accompanying balance sheets of TRIMET Technical
Products, A Division of Mallinckrodt Inc. as of June 30, 1997 and 1998, and the
related statements of operations, divisional equity and cash flows for each of
the years in the three-year period ended June 30, 1998. 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 from
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 financial position of TRIMET Technical Products, A
Division of Mallinckrodt Inc. as of June 30, 1997 and 1998 and the results of
its operations and its cash flows for each of the years in the three-year period
ended June 30, 1998, in conformity with generally accepted accounting
principles.
As explained in Note 1, the financial statements include significant costs
and expenses of Mallinckrodt Inc. allocated to TRIMET Technical Products, A
Division of Mallinckrodt Inc.
Crowe, Chizek and Company LLP
Indianapolis, Indiana
August 7, 1998
F-37
<PAGE> 107
TRIMET TECHNICAL PRODUCTS,
A DIVISION OF MALLINCKRODT INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
------------------
1997 1998
------- -------
<S> <C> <C>
ASSETS
Current assets
Accounts receivable -- less allowance for doubtful
accounts of $47 in 1997 and $59 in 1998................ $ 4,302 $ 4,189
Inventories (Note 2)...................................... 1,552 1,866
Prepaid expenses.......................................... 223 135
Deferred income taxes (Note 4)............................ 414 389
------- -------
Total current assets.............................. 6,491 6,579
Property and equipment, net (Note 3)........................ 9,790 12,434
Other assets (Note 5)....................................... 612 607
------- -------
$16,893 $19,620
======= =======
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities
Accounts payable.......................................... $ 1,358 $ 1,934
Accrued expenses.......................................... 682 191
------- -------
Total current liabilities......................... 2,040 2,125
Other long-term liabilities (Note 5)........................ 1,383 1,541
Deferred income taxes (Note 4).............................. 1,334 1,727
Divisional equity (Note 6).................................. 12,136 14,227
------- -------
$16,893 $19,620
======= =======
</TABLE>
See accompanying notes to financial statements.
F-38
<PAGE> 108
TRIMET TECHNICAL PRODUCTS,
A DIVISION OF MALLINCKRODT INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-----------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
NET SALES.............................................. $25,689 $26,768 $29,505
Cost of sales.......................................... 17,596 18,519 18,897
------- ------- -------
GROSS PROFIT........................................... 8,093 8,249 10,608
Operating expenses
Selling and marketing................................ 1,313 1,464 1,150
General and administrative (Note 6).................. 1,441 1,947 1,724
Environmental remediation (Note 9)................... 135 228 1,042
Research and development............................. 77 11 11
------- ------- -------
2,966 3,650 3,927
------- ------- -------
Operating income....................................... 5,127 4,599 6,681
Other expense, net..................................... 44 149 37
------- ------- -------
INCOME BEFORE INCOME TAXES............................. 5,083 4,450 6,644
Provision for income taxes (Note 4).................... 2,065 1,810 2,700
------- ------- -------
NET INCOME............................................. $ 3,018 $ 2,640 $ 3,944
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-39
<PAGE> 109
TRIMET TECHNICAL PRODUCTS,
A DIVISION OF MALLINCKRODT INC.
STATEMENTS OF DIVISIONAL EQUITY
(IN THOUSANDS)
<TABLE>
<S> <C>
BALANCE, JULY 1, 1995....................................... $ 9,049
Net Income.................................................. 3,018
Net capital contributions from Mallinckrodt Inc. (Note 6)... 204
-------
BALANCE, JUNE 30, 1996...................................... 12,271
Net income.................................................. 2,640
Net distributions to Mallinckrodt Inc. (Note 6)............. (2,775)
-------
BALANCE, JUNE 30, 1997...................................... 12,136
Net income.................................................. 3,944
Net distributions to Mallinckrodt Inc. (Note 6)............. (1,853)
-------
BALANCE, JUNE 30, 1998...................................... $14,227
=======
</TABLE>
See accompanying notes to financial statements.
F-40
<PAGE> 110
TRIMET TECHNICAL PRODUCTS,
A DIVISION OF MALLINCKRODT INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $3,018 $2,640 $3,944
Adjustment to reconcile net income to net cash from
operating activities
Deferred income taxes................................ 969 367 418
Depreciation......................................... 643 665 843
Provision for doubtful accounts...................... 7 12 12
Changes in assets and liabilities
Accounts receivable............................... (1,715) 266 101
Inventories....................................... (71) 636 (314)
Prepaid expenses and other assets................. (12) (476) 93
Accounts payable and accrued expenses............. 361 83 85
Other long-term liabilities....................... (1,189) 71 158
------ ------ ------
Net cash from operating activities.............. 2,011 4,264 5,340
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment........................ (2,215) (1,489) (3,487)
------ ------ ------
Net cash from investing activities................... (2,215) (1,489) (3,487)
CASH FLOWS FROM FINANCING ACTIVITIES
Net capital contribution/(distribution)
Mallinckrodt Inc..................................... 204 (2,775) (1,853)
------ ------ ------
Cash flows from financing activities.............. 204 (2,775) (1,853)
------ ------ ------
Net change in cash.......................................... -- -- --
Cash at beginning of year................................... -- -- --
------ ------ ------
CASH AT END OF YEAR......................................... $ -- $ -- $ --
====== ====== ======
Supplemental disclosures of cash flow information
Cash paid during the year for income taxes paid........... $1,096 $1,443 $2,282
</TABLE>
See accompanying notes to financial statements.
F-41
<PAGE> 111
TRIMET TECHNICAL PRODUCTS,
A DIVISION OF MALLINCKRODT INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and practices followed by TRIMET
Technical Products, a division of Mallinckrodt Inc. (the Company) are as
follows:
Description of Business: The Company, based in Allentown, Pennsylvania, is
a leading producer of two chemically unique specialty polyols (DMPA(R) and TME).
The Company is a Division of Mallinckrodt Inc. (Mallinckrodt) and sells its
products to customers in the United States, Europe, and other selected
countries. All operating assets are located in the United States.
In June 1998, Mallinckrodt Chemical, Inc. was merged with Mallinckrodt
Medical, Inc. and the name of the surviving corporation was changed to
Mallinckrodt Inc. The merger and subsequent name change had no effect on the
financial position of the TRIMET Technical Products Division.
Fiscal Year: The Company's fiscal year begins on July 1 and ends on June 30
of each year.
Revenue Recognition: The Company recognizes revenue, net of allowances for
estimated returns, upon shipment of the product.
Inventories: Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
Property and Equipment: Property and equipment are stated at cost.
Expenditures for repairs and maintenance are charged to expense as incurred and
expenditures for additions and improvements which significantly extend the lives
of assets are capitalized. Upon sale or other retirement of depreciable
property, the cost and accumulated depreciation are removed from the related
accounts and any gain or loss is reflected in operations.
Manufacturing equipment and office equipment are depreciated over the
estimated useful lives of the assets, ranging from 5 to 15 years, using the
straight-line method.
Income Taxes: Mallinckrodt has allocated income taxes to the Company on the
same basis as if the Company had filed a separate income tax return.
The deferred tax liability or asset at each balance sheet date is measured
by applying enacted tax laws to future amounts that will result from differences
in the financial statement and tax bases of assets and liabilities.
Financial Instruments: The carrying value of accounts receivable and
accounts payable approximates fair value because of the short maturity of these
items.
Allocations and Use of Estimates: During the years ended June 30, 1996,
1997 and 1998 the Company was allocated certain operational and administrative
expenses from Mallinckrodt Inc. Allocations were based on various methods
including asset cost, relative sales volume, headcount, and estimates of time
spent. Management believes these allocations are based on reasonable methods.
Sales, returns, material cost, and direct labor cost were specifically
identified to the Company and were not based on allocations.
F-42
<PAGE> 112
TRIMET TECHNICAL PRODUCTS,
A DIVISION OF MALLINCKRODT INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
Management must make estimates and assumptions in preparing financial
statements that affect the amounts reported therein and the disclosures
provided. These estimates, allocations and assumptions may change in the future
and future results could differ.
Foreign Currency Translations: The accounts receivable of the Company's
outstanding international sales are translated into U.S. dollars and adjusted at
the end of each period. Any gains or losses from these transactions are included
in the statement of operations.
NOTE 2 -- INVENTORIES
Inventories consist of the following components:
<TABLE>
<CAPTION>
JUNE 30,
----------------
1997 1998
------ ------
<S> <C> <C>
Raw materials............................................. $ 343 $ 632
Work in process........................................... 163 171
Finished goods............................................ 1,046 1,063
------ ------
Total inventory................................... $1,552 $1,866
====== ======
</TABLE>
NOTE 3 -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following major classifications:
<TABLE>
<CAPTION>
JUNE 30,
-----------------
1997 1998
------ -------
<S> <C> <C>
Land and improvements..................................... $1,727 $ 1,730
Buildings................................................. 1,878 2,248
Manufacturing equipment................................... 19,014 22,755
Office equipment.......................................... 198 309
------ -------
22,817 27,042
Accumulated depreciation.................................. 15,226 15,184
------ -------
7,591 11,858
Construction in progress.................................. 2,199 576
------ -------
$9,790 $12,434
====== =======
</TABLE>
NOTE 4 -- INCOME TAXES
The income tax provision is comprised of the following:
<TABLE>
<CAPTION>
JUNE 30,
--------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Current payable...................................... $1,096 $1,443 $2,282
Deferred income taxes................................ 969 367 418
------ ------ ------
$2,065 $1,810 $2,700
====== ====== ======
</TABLE>
F-43
<PAGE> 113
TRIMET TECHNICAL PRODUCTS,
A DIVISION OF MALLINCKRODT INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
Income tax expense is reconciled to the tax expense that would result from
applying regular statutory rates to pretax income as follows:
<TABLE>
<CAPTION>
JUNE 30,
--------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Income taxes at the statutory rate..................... $1,728 $1,513 $2,259
State taxes, net of federal benefit.................... 337 297 441
------ ------ ------
$2,065 $1,810 $2,700
====== ====== ======
</TABLE>
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
JUNE 30,
------------------
1997 1998
------- -------
<S> <C> <C>
Current deferred items
Accounts receivable allowance............................ $ 19 $ 24
Inventory valuation...................................... 395 365
------- -------
414 389
Noncurrent deferred items
Prepaid pension cost..................................... (248) (247)
Accrued post-employment and post-retirement cost......... 561 626
Depreciation............................................. (1,647) (2,106)
------- -------
(1,334) (1,727)
------- -------
$ (920) $(1,338)
======= =======
</TABLE>
NOTE 5 -- EMPLOYEE BENEFIT PLANS
Retirement Income Plans: Employees of the Company not covered by a
collective bargaining agreement participate in a Mallinckrodt Inc. defined
benefit pension plan. Mallinckrodt Inc.'s funding policy is to contribute an
amount meeting the required employer contribution under the Employee Retirement
Income Security Act of 1974 (ERISA). Plan assets are invested in corporate
equity and U.S. government securities and units in a short-term investment fund.
The Company's expense for this plan for the years ended June 30, 1996, 1997 and
1998 was $(4), $85 and $80, respectively. Pension expense was allocated based on
actuarial calculations.
Summarized information about the Mallinckrodt Inc. plans with assets in
excess of accumulated benefits at June 30, 1998 is as follows: Accumulated
benefit obligation -- $365,100; Projected benefit obligation -- $461,700; Plan
assets -- $427,200; Accrued liability -- $35,300; Service cost -- $21,100;
Interest -- $34,800; Return on assets -- ($104,500); Amortization of prior
service costs -- $71,000; Special termination benefits gains/losses,
net -- $7,500; Net expense -- $29,900. The assumptions used to calculate the
accrued pension cost are as follows: 7.75%, 8.0% and 7.0% weighted average
discount rates used in determining the actuarial present value of the projected
benefit obligation, 5%, 5% and 4.5% expected rates of compensation increase, and
9.0%, 9.5% and 9.5% long-term rates of return on assets for the years ended June
30, 1996, 1997 and 1998, respectively.
F-44
<PAGE> 114
TRIMET TECHNICAL PRODUCTS,
A DIVISION OF MALLINCKRODT INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
A separate pension plan is maintained for employees of the Company covered
by a collective bargaining agreement. The plan calls for benefits to be paid to
eligible employees at retirement based upon years of service multiplied by a
monthly compensation factor. Liabilities of the collectively bargained pension
plan are actuarially calculated based upon negotiated benefit amounts, overall
plan provisions and plan demographics. Participants are fully vested after five
years.
Pension expense for this plan for the years ended 1996, 1997, and 1998
includes the following components:
<TABLE>
<CAPTION>
1996 1997 1998
------- ----- -------
<S> <C> <C> <C>
Service cost........................................ $ 20 $ 31 20
Interest cost on projected benefit obligation....... 391 383 380
Actual return on assets............................. (1,076) (466) (1,714)
Net amortization of prior service cost, transition
liability, and net gain........................... 755 135 1,319
------- ----- -------
Pension expense..................................... $ 90 $ 83 $ 5
======= ===== =======
</TABLE>
The following sets forth the funded status of the plan and the amounts
shown in the accompanying balance sheets at June 30, 1997 and 1998:
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits........................................... $(5,002) $(4,741)
Nonvested benefits........................................ (29) (249)
------- -------
Accumulated benefit obligation.............................. $(5,031) $(4,990)
======= =======
Projected benefit obligation................................ $(5,031) $(4,990)
Fair value of assets held in the plan....................... 5,683 6,836
------- -------
Plan assets in excess of projected benefit obligation....... 652 1,846
Unrecognized net gain from the effects of changes in
assumptions............................................... (455) (1,549)
Unrecognized prior service cost............................. 16 10
Unamortized transition liability............................ 399 300
------- -------
Pension asset............................................... $ 612 $ 607
======= =======
</TABLE>
The weighted average discount rates used to measure the projected benefit
obligation are 7.75%, 8.0% and 7.0% for the years ended June 30, 1996, 1997, and
1998, respectively, and the expected long-term rates of return on assets are
9.0%, 9.5% and 9.5% for the years ended June 30, 1996, 1997, and 1998,
respectively. The Company uses the straight-line method of amortization for
prior service cost and unrecognized gains and losses.
The Company also participates in a Mallinckrodt Inc. defined contribution
plan. Participation in the plan is voluntary. Substantially all employees are
eligible to participate. Expenses related to the plan consist primarily of
Company contributions, which are based on percentages of employee contributions,
F-45
<PAGE> 115
TRIMET TECHNICAL PRODUCTS,
A DIVISION OF MALLINCKRODT INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
plus discretionary amounts determined on an annual basis. Defined contribution
investment plan expense for 1996, 1997 and 1998 was $86, $79 and $94,
respectively.
Post-retirement Benefits Other Than Pensions: The Company also participates
in a post-retirement benefit plan maintained by Mallinckrodt Inc. Employees
retiring from the Company on or after attaining specified age and service
requirements may become eligible for post-retirement health care benefits. The
Company's expense for post-retirement health care benefits for the years ended
June 30, 1996, 1997 and 1998 was $266, $200 and $178, respectively.
As of June 30, 1997 and 1998, Mallinckrodt Inc. had an accrued
post-retirement benefit liability of $161,900 and $169,200, respectively. There
are no plan assets. The Company's share of the accrued post-retirement costs as
of June 30, 1997 and 1998 is $1,262 and $1,397, respectively, which was recorded
by the Company. The assumptions used to calculate the accrued post-retirement
cost at June 30, 1996, 1997 and 1998 are as follows: 7.75%, 8.0% and 7.0%
weighted average discount rates used in determining the actuarial present value
of the accumulated post-retirement benefit obligations, and 9.0%, 8.5% and 8.0%
assumed health care cost trends, declining gradually to an ultimate rate of
4.75%. A one percentage point increase in the healthcare cost trend would
increase the Mallinckrodt Inc. accumulated post-retirement obligation for 1998
by $11,400 and the aggregate service and interest cost by $1,200.
In addition, the Company provides certain post-employment benefits to its
employees. These include disability benefits and continuation of health care
benefits to former employees after employment but before retirement.
Post-employment benefit expense for the years ended June 30, 1996, 1997 and 1998
was $34, $35 and $35, respectively. The Company's share of the accrued
post-employment costs is $121 and $144 as of June 30, 1997 and 1998,
respectively.
NOTE 6 -- RELATED PARTY TRANSACTIONS
The Company has been allocated costs from Mallinckrodt Inc. in the amounts
of $941, $1,671 and $1,349 for the years ended June 30, 1996, 1997 and 1998,
respectively. The amounts represent costs associated with human resources,
information systems, aviation, internal audit, strategic planning, property,
franchise and other taxes, risk management, regulatory affairs, treasury
functions, legal services and centralized financial shared services.
The expenses related to these services were allocated to the Company as
discussed in Note 1.
The Company's cash collections and cash disbursements are administered by
Mallinckrodt Inc. The overall net amount of cash received and cash disbursed is
reflected as a net capital contribution/distribution in the Statements of
Divisional Equity.
F-46
<PAGE> 116
TRIMET TECHNICAL PRODUCTS,
A DIVISION OF MALLINCKRODT INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
NOTE 7 -- GEOGRAPHIC SALES
The following summarizes sales in the geographic locations:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-----------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Revenues
United States.................................. $17,766 $16,635 $18,313
Europe......................................... 4,772 6,511 7,761
Other geographical areas....................... 3,151 3,622 3,431
------- ------- -------
$25,689 $26,768 $29,505
======= ======= =======
Accounts Receivable
United States.................................. $ 2,254 $ 2,514
Europe......................................... 1,161 1,182
Other geographical areas....................... 887 493
------- -------
$ 4,302 $ 4,189
======= =======
</TABLE>
NOTE 8 -- EMPLOYEE STOCK OPTIONS
Certain employees of the Company have stock options in Mallinckrodt Inc.
The exercise price of the options granted by Mallinckrodt Inc. has generally
been equal to or greater than fair market value at the date of the grant. As of
June 30, 1998, there were approximately 7,200 shares granted under this plan.
Trimet employees hold options to purchase approximately 28 shares of common
stock.
The Company applies APB Opinion 25 in accounting for its stock compensation
plans. Accordingly, no compensation cost has been recognized for the plan in
1996, 1997 or 1998. Had compensation cost been determined on the basis of fair
value pursuant to FASB Statement No. 123, net income would not have been reduced
by a material amount.
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
The Company has incurred environmental remediation costs resulting from
past operations. These costs have been incurred primarily on property which is
not currently used in the operations and is to be retained by Mallinckrodt Inc.
as part of the transaction described in Note 10. Remediation costs incurred and
charged to operations in 1996, 1997 and 1998 were $135, $228 and $1,042,
respectively.
The Company is subject to extensive laws and regulations pertaining to the
discharge of material into the environment, the handling and disposal of solid
and hazardous wastes, and the remediation of contamination, and otherwise
relating to health, safety and protection of the environment. As such, the
Company's operations and the environment condition of its real property could
give rise to liabilities under applicable environmental laws and there can be no
assurance that material costs will not be incurred in connection with such
liabilities. There can be no assurance that the Company's facilities will not
require environmental remediation in the future. 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. Should environmental laws become more stringent,
F-47
<PAGE> 117
TRIMET TECHNICAL PRODUCTS,
A DIVISION OF MALLINCKRODT INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
the cost of compliance could increase. If the Company cannot pass on future
costs to its customers, such increases may have an adverse effect on the
Company's financial condition or results of operations.
There are currently no known environmental remediation activities or any
requests by any governmental agency to remediate in regards to the property to
be sold by Mallinckrodt Inc. other than activities for which costs are
specifically being paid by Mallinckrodt Inc.
NOTE 10 -- SUBSEQUENT EVENT
On July 31, 1998, Mallinckrodt Inc. sold substantially all of the assets of
the TRIMET Technical Products Division. The sale included the assumption of the
certain identified liabilities and obligations of the business.
F-48
<PAGE> 118
- ------------------------------------------------------
- ------------------------------------------------------
GEO HAS NOT AUTHORIZED ANYONE TO PROVIDE ANY INFORMATION IN CONNECTION
WITH THIS OFFERING OTHER THAN THE INFORMATION CONTAINED IN THIS PROSPECTUS. YOU
SHOULD RELY ONLY UPON THE INFORMATION CONTAINED IN THIS PROSPECTUS IN DECIDING
WHETHER TO MAKE AN INVESTMENT IN THE OFFERED NOTES. THIS PROSPECTUS IS NOT AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE
OFFERED NOTES. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR THE SOLICITATION OF
AN OFFER TO BUY TO ANY PERSON IN A JURISDICTION WHERE THE OFFER OR SOLICITATION
IS NOT PERMITTED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED, OR TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. THE DELIVERY OF AND ANY SALE MADE UNDER THIS PROSPECTUS DOES NOT
IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF GEO SINCE THE DATE OF THIS
PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Where You Can Find More Information About
GEO...................................... i
Prospectus Summary......................... 1
Risk Factors............................... 10
Proceeds from the Offering of the
Outstanding Notes........................ 16
Unaudited Pro Forma Financial Data......... 17
Selected Historical Financial Data......... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 22
GEO's Business............................. 27
Management................................. 39
Management Compensation.................... 42
Shareholders............................... 46
Description of GEO's Senior Credit
Facility................................. 47
The Exchange Offer......................... 48
Description of the Offered Notes........... 55
Form and Delivery of the Offered Notes..... 63
Certificated Securities.................... 64
Federal Income Tax Considerations.......... 64
Plan of Distribution....................... 65
Legal Matters.............................. 65
Experts.................................... 65
Index to Financial Statements.............. F-1
</TABLE>
UNTIL , 1999 (90 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS THAT EFFECT TRANSACTIONS IN THE OFFERED NOTES, WHETHER
OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
EXCHANGE OFFER FOR
$120,000,000
10 1/8% SENIOR SUBORDINATED
NOTES DUE 2008
GEO SPECIALTY CHEMICALS
PROSPECTUS
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 119
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the issuance and distribution of the securities
being registered are estimated (other than with respect to the SEC registration
fee) to be as follows:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 33,360
Exchange Agent Fees and Expenses............................ $ 1,000
Printing Fees and Expenses.................................. $100,000
Accounting Fees and Expenses................................ $400,000
Legal Fees and Expenses..................................... $ 75,000
Miscellaneous............................................... $ 5,000
--------
Total............................................. $614,360
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Paragraph (E) of Section 1701.13 of the Ohio Revised Code grants each
corporation organized under the laws of the State of Ohio, such as GEO, the
power to indemnify its directors, officers and other specified persons.
Provisions relating to indemnification of directors and officers of GEO and
other specified persons have been adopted pursuant to Ohio law and are contained
in GEO's Code of Regulations.
GEO's Code of Regulations provides that GEO will, subject to certain
exceptions, indemnify each of its directors and officers against any expenses,
judgments, fines and amounts paid in settlement in connection with any
proceeding, whether civil, criminal, administrative or investigative, arising by
reason of the fact that such person is or was a director or officer of GEO.
GEO's Code of Regulations further provides that GEO will pay in advance of the
final determination of any such proceeding any expenses incurred by the director
or officer in the defense thereof, provided that the director or officer
provides an undertaking to GEO that such director or officer will repay the
amount of any such advance if it is ultimately determined that the director or
officer is not entitled to be indemnified by GEO. GEO's Code of Regulations also
allows GEO to purchase liability insurance covering any liability that might be
asserted against any director or officer of GEO as a result of their status as
such. Accordingly, GEO maintains director's and officer's liability insurance in
favor of each of the directors and officers of GEO.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On March 25, 1997, GEO issued 82.31 common shares to Charter Oak Partners
for a purchase price of $14,754,251.87 in reliance upon the exemption from
registration set forth in Section 4(2) of the Securities Act of 1933. On the
same date, GEO issued to Charter Oak Partners and Chemical Specialties
Enterprises, Inc. (whose successor-in-interest by merger is GEO Chemicals, Ltd.)
warrants to purchase common shares of GEO in reliance upon the exemption from
registration set forth in Section 4(2) of the Securities Act of 1933. The
warrant granted to Charter Oak Partners allows it to purchase over four years,
upon the failure of GEO to achieve certain specified earnings targets in such
years, common shares in an amount equal to a maximum of 8% of the outstanding
equity of GEO. The warrant granted to Chemical Specialties Enterprises, Inc.
allows it to purchase, upon the achievement by Charter Oak of a certain rate of
return on its investment in GEO, common shares in an amount equal to a maximum
of
II-1
<PAGE> 120
5% of the outstanding equity of GEO. The agreements underlying these warrants
were amended and restated on July 31, 1998.
On July 31, 1998, GEO issued 31.645 common shares to its shareholders and
their affiliates for an aggregate cash purchase price of $6.0 million in
reliance upon the exemption from registration set forth in Section 4(2) of the
Securities Act of 1933.
On July 31, 1998, GEO sold $120,000,000 aggregate principal amount of its
10 1/8% Senior Subordinated Notes due 2008 in a private placement to BT
Alex.Brown Incorporated in reliance upon the exemption from registration
provided in Section 4(2) of the Securities Act of 1933, at a price equal to 97%
of the stated principal amount of such notes. BT Alex.Brown Incorporated
immediately resold such notes in reliance upon the exemption from registration
provided in Rule 144A promulgated under the Securities Act of 1933.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<C> <S>
2.1 Asset Purchase Agreement, dated June 29, 1998, by and among
GEO Specialty Chemicals, Inc., Mallinckrodt Inc. (a Delaware
corporation) and Mallinckrodt Inc. (a New York corporation)*
2.2 Asset Sale and Purchase Agreement, dated February 10, 1997,
by and among GEO Specialty Chemicals, Inc., Henkel
Corporation and Henkel Canada Limited*
2.3 Asset Purchase Agreement, dated December 5, 1996, by and
between GEO Specialty Chemicals, Inc. and Cytec Industries
Inc.*
2.4 Amended and Restated Asset Sale Agreement, dated July 15,
1994, by and among GEO Specialty Chemicals, Inc., Courtney
Industries, Inc. and C Associates*
2.5 Asset Purchase Agreement, dated June 5, 1992, by and between
GEO Specialty Chemicals, Inc. and Rhone-Poulenc Basic
Chemicals Co.*
3.1 Amended Articles of Incorporation of GEO Specialty
Chemicals, Inc.
3.2 Amended Code of Regulations of GEO Specialty Chemicals, Inc.
4.1 Indenture, dated July 31, 1998, by and between GEO Specialty
Chemicals, Inc. and Chase Manhattan Trust Company, National
Association, as the trustee
4.2 Form of outstanding Senior Subordinated Note (included in
Exhibit 4.1)
4.3 Form of offered Senior Subordinated Note (included in
Exhibit 4.1)
5.1 Opinion of Thompson Hine & Flory LLP regarding the legality
of the offered 10 1/8% Senior Subordinated Notes due 2008
10.1 Share Purchase Agreement, dated March 25, 1997, by and
between GEO Specialty Chemicals, Inc. and Charter Oak
Partners
10.2 Amended and Restated Shareholders Agreement, dated July 31,
1998, by and among GEO Specialty Chemicals, Inc., Charter
Oak Partners, Charter Oak Capital Partners, GEO Chemicals,
Ltd., George P. Ahearn, William P. Eckman, George W. Rapp,
Jr. and A. Elliott Archer
10.3 Amended and Restated Warrant Agreement, dated July 31, 1998,
by and between GEO Specialty Chemicals, Inc. and Charter Oak
Partners
10.4 Amended and Restated Warrant Agreement, dated July 31, 1998,
by and between GEO Specialty Chemicals, Inc. and GEO
Chemicals, Ltd.
10.5 Employment Agreement, dated March 25, 1997, by and between
GEO Specialty Chemicals, Inc. and George P. Ahearn
10.6 Employment Agreement, dated March 25, 1997, by and between
GEO Specialty Chemicals, Inc. and William P. Eckman
</TABLE>
II-2
<PAGE> 121
<TABLE>
<C> <S>
10.7 Employment Agreement, dated May 20, 1996, by and between GEO
Specialty Chemicals, Inc. and Mr. Dennis S. Grandle
10.8 Supply Agreement (Supply to Buyer), dated March 25, 1997, by
and between GEO Specialty Chemicals, Inc. and Henkel
Corporation
10.9 Supply Agreement (Supply to Henkel), dated March 25, 1997,
by and between GEO Specialty Chemicals, Inc. and Henkel
Corporation
10.10 Purchase Agreement, dated July 31, 1998, by and between GEO
Specialty Chemicals, Inc. and BT Alex.Brown Incorporated
10.11 Registration Rights Agreement, dated July 31, 1998, by and
between GEO Specialty Chemicals, Inc. and BT Alex.Brown
Incorporated
10.12 Provisional Lease Agreement, dated July 29, 1998, by and
between GEO Specialty Chemicals, Inc. and Mallinckrodt Inc.
(a Delaware corporation)
10.13 Lease Agreement, dated July 29, 1998, by and between GEO
Specialty Chemicals, Inc. and Mallinckrodt Inc. (a Delaware
corporation)
10.14 Credit Agreement, dated March 25, 1997 and amended and
restated as of July 31, 1998, by and among GEO Specialty
Chemicals, Inc., various lending institutions and Bankers
Trust Company, as the administrative agent
10.15 GEO Specialty Chemicals, Inc. 1997 Management Incentive
Program
12.1 Computation of ratio of earnings to fixed charges
21.1 Subsidiaries of GEO Specialty Chemicals, Inc.
23.1 Consent of Thompson Hine & Flory LLP (included in Exhibit
5.1)
23.2 Consent of Crowe, Chizek and Company LLP, independent
accountants (to be filed by amendment)
23.3 Consent of Arthur Andersen LLP, independent accountants (to
be filed by amendment)
24.1 Power of Attorney
25.1 Statement of eligibility and qualification of Chase
Manhattan Trust Company, National Association, as the
trustee under the Indenture filed as Exhibit 4.1 (Form T-1)
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
* The schedules to these agreements have not been filed with this registration
statement pursuant to Item 601(b)(2) of Regulation S-K. GEO will
supplementally provide copies of such schedules to the Securities and Exchange
Commission upon request.
(b) Financial Statement Schedules:
All schedules are omitted since the required information is not present or
is not present in the amounts sufficient to require submission of the schedules,
or because the information required is included in the financial statements and
notes thereto.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually
II-3
<PAGE> 122
or in the aggregate, represent a fundamental change in the information
set forth in the registration statement; notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-4
<PAGE> 123
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Cleveland, state of Ohio,
on December 31, 1998.
GEO SPECIALTY CHEMICALS, INC.
By: /s/ GEORGE P. AHEARN
-----------------------------------
George P. Ahearn
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ GEORGE P. AHEARN President and Chief Executive Officer;
- ----------------------------------------------------- Principal Executive Officer; Director
George P. Ahearn
/s/ WILLIAM P. ECKMAN Executive Vice President; Chief Financial
- ----------------------------------------------------- Officer;
William P. Eckman Principal Financial and Accounting Officer;
Director
/s/ ANATOLE G. PENCHUK Director
- -----------------------------------------------------
Anatole G. Penchuk
/s/ GEORGE W. RAPP, JR. Director
- -----------------------------------------------------
George W. Rapp, Jr.
/s/ A. ELLIOTT ARCHER Director
- -----------------------------------------------------
A. Elliott Archer
By: /s/ GEORGE P. AHEARN December 31, 1998
------------------------------------------------
George P. Ahearn, Attorney-in-Fact
for the Officers and Directors
signing in the capacities indicated
</TABLE>
II-5
<PAGE> 124
EXHIBIT INDEX
<TABLE>
<C> <S>
2.1 Asset Purchase Agreement, dated June 29, 1998, by and among
GEO Specialty Chemicals, Inc., Mallinckrodt Inc. (a Delaware
corporation) and Mallinckrodt Inc. (a New York corporation)*
2.2 Asset Sale and Purchase Agreement, dated February 10, 1997,
by and among GEO Specialty Chemicals, Inc., Henkel
Corporation and Henkel Canada Limited*
2.3 Asset Purchase Agreement, dated December 5, 1996, by and
between GEO Specialty Chemicals, Inc. and Cytec Industries
Inc.*
2.4 Amended and Restated Asset Sale Agreement, dated July 15,
1994, by and among GEO Specialty Chemicals, Inc., Courtney
Industries, Inc. and C Associates*
2.5 Asset Purchase Agreement, dated June 5, 1992, by and between
GEO Specialty Chemicals, Inc. and Rhone-Poulenc Basic
Chemicals Co.*
3.1 Amended Articles of Incorporation of GEO Specialty
Chemicals, Inc.
3.2 Amended Code of Regulations of GEO Specialty Chemicals, Inc.
4.1 Indenture, dated July 31, 1998, by and between GEO Specialty
Chemicals, Inc. and Chase Manhattan Trust Company, National
Association, as the trustee
4.2 Form of outstanding Senior Subordinated Note (included in
Exhibit 4.1)
4.3 Form of offered Senior Subordinated Note (included in
Exhibit 4.1)
5.1 Opinion of Thompson Hine & Flory LLP regarding the legality
of the offered 10 1/8% Senior Subordinated Notes due 2008
10.1 Share Purchase Agreement, dated March 25, 1997, by and
between GEO Specialty Chemicals, Inc. and Charter Oak
Partners
10.2 Amended and Restated Shareholders Agreement, dated July 31,
1998, by and among GEO Specialty Chemicals, Inc., Charter
Oak Partners, Charter Oak Capital Partners, GEO Chemicals,
Ltd., George P. Ahearn, William P. Eckman, George W. Rapp,
Jr. and A. Elliott Archer
10.3 Amended and Restated Warrant Agreement, dated July 31, 1998,
by and between GEO Specialty Chemicals, Inc. and Charter Oak
Partners
10.4 Amended and Restated Warrant Agreement, dated July 31, 1998,
by and between GEO Specialty Chemicals, Inc. and GEO
Chemicals, Ltd.
10.5 Employment Agreement, dated March 25, 1997, by and between
GEO Specialty Chemicals, Inc. and George P. Ahearn
10.6 Employment Agreement, dated March 25, 1997, by and between
GEO Specialty Chemicals, Inc. and William P. Eckman
10.7 Employment Agreement, dated May 20, 1996, by and between GEO
Specialty Chemicals, Inc. and Mr. Dennis S. Grandle
10.8 Supply Agreement (Supply to Buyer), dated March 25, 1997, by
and between GEO Specialty Chemicals, Inc. and Henkel
Corporation
10.9 Supply Agreement (Supply to Henkel), dated March 25, 1997,
by and between GEO Specialty Chemicals, Inc. and Henkel
Corporation
10.10 Purchase Agreement, dated July 31, 1998, by and between GEO
Specialty Chemicals, Inc. and BT Alex.Brown Incorporated
10.11 Registration Rights Agreement, dated July 31, 1998, by and
between GEO Specialty Chemicals, Inc. and BT Alex.Brown
Incorporated
10.12 Provisional Lease Agreement, dated July 29, 1998, by and
between GEO Specialty Chemicals, Inc. and Mallinckrodt Inc.
(a Delaware corporation)
10.13 Lease Agreement, dated July 29, 1998, by and between GEO
Specialty Chemicals, Inc. and Mallinckrodt Inc. (a Delaware
corporation)
</TABLE>
II-6
<PAGE> 125
<TABLE>
<C> <S>
10.14 Credit Agreement, dated March 25, 1997 and amended and
restated as of July 31, 1998, by and among GEO Specialty
Chemicals, Inc., various lending institutions and Bankers
Trust Company, as the administrative agent
10.15 GEO Specialty Chemicals, Inc. 1997 Management Incentive
Program
12.1 Computation of ratio of earnings to fixed charges
21.1 Subsidiaries of GEO Specialty Chemicals, Inc.
23.1 Consent of Thompson Hine & Flory LLP (included in Exhibit
5.1)
23.2 Consent of Crowe, Chizek and Company LLP, independent
accountants (to be filed by amendment)
23.3 Consent of Arthur Andersen LLP, independent accountants (to
be filed by amendment)
24.1 Power of Attorney
25.1 Statement of eligibility and qualification of Chase
Manhattan Trust Company, National Association, as the
trustee under the Indenture filed as Exhibit 4.1 (Form T-1)
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
- ---------------
* The schedules to these agreements have not been filed with this registration
statement pursuant to Item 601(b)(2) of Regulation S-K. GEO will
supplementally provide copies of such schedules to the Securities and Exchange
Commission upon request.
II-7
<PAGE> 1
Exhibit 2.1
ASSET PURCHASE AGREEMENT
AMONG
GEO SPECIALTY CHEMICALS, INC.,
MALLINCKRODT INC. (a New York corporation),
and
MALLINCKRODT INC. (a Delaware corporation)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. SALE AND PURCHASE OF ASSETS..........................................................1
1.1 Transferred Assets..........................................................1
1.2 Excluded Assets.............................................................3
2. ASSUMED AND RETAINED LIABILITIES.....................................................3
2.1 Assumption of Liabilities...................................................4
2.2 Retained Liabilities........................................................5
3. PURCHASE PRICE.......................................................................5
3.1 Purchase Price..............................................................5
3.2 Post-Closing Purchase Price Adjustment......................................5
3.3 Preparation of Postretirement Medical Benefits Closing Statement............6
3.4 Acknowledgment; Confidentiality.............................................7
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS BY SELLER.................................8
4.1 Organization and Qualification..............................................8
4.2 Corporate Authorization.....................................................8
4.3 Consents and Approvals......................................................8
4.4 Non-contravention...........................................................8
4.5 Binding Effect..............................................................9
4.6 Financial Statements........................................................9
4.7 No Material Adverse Change Since the Balance Sheet Date....................10
4.8 Litigation and Claims......................................................11
4.9 Tax Matters................................................................11
4.10 Employee Benefits..........................................................11
4.11 Compliance with Laws.......................................................13
4.12 Environmental Matters......................................................13
4.13 Intellectual Property......................................................15
4.14 Labor Matters..............................................................16
4.15 Contracts..................................................................17
4.16 Real Property..............................................................18
4.17 Property Used..............................................................19
4.18 Employees; Wage Increases..................................................19
4.19 No Undisclosed Liabilities.................................................19
4.20 Products...................................................................20
4.21 Inventory..................................................................20
4.22 Accounts Receivable........................................................20
4.23 Accounts Payable...........................................................20
4.24 Personal Property..........................................................21
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
4.25 Licenses...................................................................21
4.26 Customers..................................................................21
4.27 Suppliers..................................................................21
4.28 Insurance..................................................................22
4.29 Product Service Obligations, Warranties and Guarantees.....................22
4.30 Prepayments and Deposits...................................................22
4.31 Financial Records..........................................................22
4.32 Finder's Fees..............................................................22
4.33 Computer Software and Databases............................................22
4.34 Transactions in Euros......................................................22
4.35 Material Information.......................................................23
5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS BY BUYER.................................23
5.1 Organization and Qualification.............................................23
5.2 Corporate Authorization....................................................23
5.3 Consents and Approvals.....................................................23
5.4 Binding Effect.............................................................23
5.5 Non-contravention..........................................................23
5.6 Finder's Fees..............................................................24
5.7 Material Information.......................................................24
6. COVENANTS OF BUYER AND SELLER.......................................................24
6.1 Conduct of Business Prior to the Closing Date; Affirmative Covenants.......24
6.2 Conduct of Business Prior to the Closing Date; Negative Covenants..........24
6.3 Conditions; Other Consents.................................................25
6.4 Advise Buyer of Adverse Change.............................................25
6.5 Pre-Closing Access to Information; Confidentiality.........................26
6.6 Post-Closing Access to Information.........................................26
6.7 Updating of General Information and Schedules..............................27
6.8 HSR Act....................................................................27
6.10 Use of Treated Water.......................................................29
6.11 Certain Agreements Concerning Real Property................................30
6.12 Distributor/Sales Agent Contracts..........................................32
7. EMPLOYMENT MATTERS..................................................................32
7.1 Employment by Buyer........................................................32
7.2 Terms of Employment of Transferred Employees...............................32
7.3 Welfare Benefit Plans......................................................33
7.4 Pension Plan for Non-Union Employees.......................................33
7.5 Savings Plan for Non-Union Employees.......................................33
7.6 Union Employees............................................................33
8. ENVIRONMENTAL INDEMNIFICATION.......................................................34
</TABLE>
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<TABLE>
<S> <C>
8.1 Environmental Definitions..................................................34
8.2 Indemnification by Seller for Environmental Claims.........................35
8.3 Limited Indemnification by Seller for Shared Environmental Claims..........35
8.4 Control of Remediation.....................................................36
9. CONDITIONS TO OBLIGATIONS OF BUYER..................................................37
9.1 Representations and Warranties True on Closing Date........................37
9.2 Compliance with Agreement..................................................37
9.3 No Litigation..............................................................37
9.4 Third Party Consents and Approvals; Estoppel Certificates..................37
9.5 Material Adverse Change....................................................38
9.6 HSR Act....................................................................38
9.7 Legal Opinion..............................................................38
9.8 Title Insurance............................................................38
9.9 Satisfaction of Buyer with Updated Schedules...............................38
9.10 European Operations........................................................38
9.11 Reliance Letter............................................................38
10. CONDITIONS TO OBLIGATIONS OF SELLER.................................................38
10.1 Representations and Warranties True on Closing Date........................38
10.2 Compliance with Agreement..................................................38
10.3 No Litigation..............................................................39
10.4 License Transfers..........................................................39
10.5 HSR Act....................................................................39
10.6 Legal Opinion..............................................................39
11. CLOSING; PROCEDURES.................................................................39
11.1 Date and Time..............................................................39
11.2 Procedures.................................................................39
12. FURTHER ASSURANCES..................................................................40
13. ALLOCATION..........................................................................40
14. TAXES...............................................................................41
15. NON COMPETITION COVENANT............................................................41
16. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS (INCLUDING
INDEMNIFICATION) ...................................................................42
17. MAXIMUM AGGREGATE LIABILITY OF THE PARTIES..........................................43
</TABLE>
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<TABLE>
<S> <C>
18. DEDUCTIBLE..........................................................................43
19. INDEMNIFICATION.....................................................................43
19.1 By Seller..................................................................43
19.2 By Buyer...................................................................43
19.3 Measure of Damages.........................................................44
19.4 Defense of Claims..........................................................44
20. SPECIFIC PERFORMANCE................................................................45
21. TERMINATION.........................................................................45
22. PRORATIONS..........................................................................46
23. USE OF NAME.........................................................................46
24. EXPENSES............................................................................46
25. NOTICES.............................................................................46
26. PUBLIC ANNOUNCEMENTS AND PRESS RELEASES.............................................47
27. GOVERNING LAW.......................................................................47
28. COUNTERPARTS........................................................................47
29. SCHEDULES...........................................................................48
30. ENTIRE AGREEMENT....................................................................48
31. SUCCESSORS AND ASSIGNS..............................................................48
32. SEVERABILITY........................................................................48
33. MISCELLANEOUS DEFINITIONS...........................................................48
</TABLE>
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<TABLE>
EXHIBITS
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<S> <C>
Exhibit 7.2 Severance Payment Principles
Exhibit 11.2(a) Assignment and Assumption Agreement
Exhibit 11.2(c) Transitional Services Agreement
Exhibit 11.2(e) Bill of Sale
Exhibit 13 Allocation Statement
SCHEDULES
- ---------
Schedule 1.1(a) Owned Real Property
Schedule 1.1(b) Leased Real Property
Schedule 1.2(d) Retained Real Estate
Schedule 1.2(f) Excluded Assets List
Schedule 2.1(c) Assumed Employee Accrual List
Schedule 2.1(f) Postretirement Medical Benefits
Schedule 3.2(d) Working Capital Calculation
Schedule 3.3(a) Deviations from GAAP
Schedule 4.3 Consents and Approvals
Schedule 4.4 Contravention
Schedule 4.6(a)(i) Financial Statements
Schedule 4.6(a)(ii) Exceptions to GAAP
Schedule 4.6(a)(iii) Preparation of the Balance Sheet in accordance with Seller's Accounting
Principles
Schedule 4.7 Material Changes
Schedule 4.8 Litigation and Claims
Schedule 4.9 Tax Matters
Schedule 4.10 Employee Benefits
Schedule 4.11 Non-compliance with Laws
Schedule 4.12 Environmental Matters
Schedule 4.13 Intellectual Property Description
Schedule 4.14 Labor Matters
Schedule 4.15 Contracts List
Schedule 4.16(a) Real Property
Schedule 4.16(b) Encumbrances
Schedule 4.16(d) Encroachments; Structures Scheduled for Demolition
Schedule 4.17(a) Assets Used in Business and Not Being Transferred
Schedule 4.17(b) Interests of Other Persons
Schedule 4.18 Employees; Wage Increases
Schedule 4.19 Undisclosed Liabilities
Schedule 4.20(a) Products
Schedule 4.20(b) Product Compliance; Product Failures or Defects
Schedule 4.21 Inventory
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
Schedule 4.22 Accounts Receivable List
Schedule 4.23 Accounts Payable List
Schedule 4.24 Personal Property Description
Schedule 4.25 License List
Schedule 4.26 Customer List
Schedule 4.27 Supplier List
Schedule 4.28 Insurance List
Schedule 4.29 Product Service Agreements; Standard Product and Service Warranties
Schedule 4.30 Prepayments and Deposits
Schedule 4.33 Computer Software and Databases
Schedule 4.34 Transactions in Euros
Schedule 5.3 Consents and Approvals
Schedule 6.9(b) Scrap Yard Site
Schedule 6.9(c) Lagoon Sites
Schedule 6.11(a) Principal Terms of Provisional Lease Agreement
Schedule 6.11(d) Principal Terms of New Lease Agreement
Schedule 7.1 Employees on the Closing Date
Schedule 9.4 Contract Consents
</TABLE>
(vi)
<PAGE> 8
INDEX OF DEFINED TERMS
----------------------
Affiliate...................................................................48
Agreement................................................................... 1
Antitrust Division..........................................................27
Assumed Liabilities..........................................................4
Audited Financial Statements.................................................9
Balance Sheet................................................................9
Balance Sheet Date...........................................................9
Beneficiary.................................................................44
Books and Records............................................................3
Business.....................................................................1
Business Day................................................................48
Buyer........................................................................1
CERCLA......................................................................14
Closing.....................................................................39
Closing Date................................................................39
Closing Date Payment.........................................................5
Competing Business..........................................................42
Computer Software and Databases.............................................22
Confidentiality Agreement...................................................26
Contracts....................................................................2
Conveyance Deadline.........................................................30
Customers...................................................................21
Deductible..................................................................43
Direct Claim................................................................45
DMPA.........................................................................1
Encumbrance..................................................................1
Environmental Claims........................................................35
Environmental Laws..........................................................13
Escrow Sum..................................................................31
Estimated Post-Retirement Medical Benefits...................................5
Excluded Assets..............................................................3
Financial Statements.........................................................9
FTC.........................................................................27
GAAP.........................................................................6
Governmental Authority......................................................35
Governmental Authorizations.................................................13
Governmental Rule...........................................................35
Hazardous Substances........................................................14
HSR Act......................................................................8
Income Statement.............................................................9
Indemnitor..................................................................44
(vii)
<PAGE> 9
Independent Actuaries........................................................7
Independent Environmental Consultants.......................................36
Independent Public Accountants...............................................6
Insurances..................................................................22
Intellectual Property Description...........................................15
Intellectual Property Rights................................................16
Inventory...................................................................20
IRC.........................................................................12
Laws........................................................................13
Leased Real Property.........................................................1
Licenses....................................................................21
Losses......................................................................35
Major Supplier..............................................................21
Mallinckrodt Chemical........................................................1
Materialmen Liens...........................................................21
New Lease Agreements........................................................31
Notice of Dispute............................................................6
Offer Notice................................................................42
Other Documents.............................................................8
Owned Real Property..........................................................1
Permitted Encumbrances......................................................18
Personal Property............................................................2
Postretirement Medical Benefits Notice of Dispute............................7
Postretirement Medical Benefits..............................................7
Postretirement Medical Benefits Closing Statement............................6
Products.....................................................................1
Prohibited Names............................................................46
Project.....................................................................28
Project Contracts...........................................................28
Proposed Access Easement....................................................32
Provisional Lease Agreement.................................................30
Purchase Price...............................................................5
Qualified Plan..............................................................12
RCRA........................................................................14
Real Property................................................................1
Remedial Action.............................................................36
Retained Businesses..........................................................1
Retained Liabilities.........................................................5
Retained Real Estate.........................................................3
Security Instrument.........................................................30
Seller.......................................................................1
Seller Benefit Plans........................................................12
Seller's Accounting Principles..............................................22
(viii)
<PAGE> 10
Seller's knowledge..........................................................48
Seller's Non-Union Pension Plan.............................................33
Seller's Non-Union Savings Plan.............................................33
Shared Environmental Claims.................................................35
Subdivision Plan............................................................31
Tax Returns.................................................................11
Taxes.......................................................................11
Third Party Claim...........................................................44
Title Company...............................................................40
TME..........................................................................1
Transferred Assets...........................................................1
Transferred Employees.......................................................32
Transferred Union Employees.................................................33
TRIMET.......................................................................1
TSCA........................................................................14
Voluntary Environmental Investigation.......................................35
Working Capital..............................................................6
Working Capital Statement....................................................5
WTA.........................................................................29
WTA Agreement...............................................................29
(ix)
<PAGE> 11
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made this 29th day
of June, 1998, by and between GEO Specialty Chemicals, Inc., an Ohio corporation
("Buyer"), and Mallinckrodt Inc., a Delaware corporation ("Mallinckrodt
Chemical"), and Mallinckrodt Inc., a New York corporation (together with
Mallinckrodt Chemical, "Seller"). Seller owns certain assets that are used in
connection with its TRIMET Technical Products Division ("TRIMET"), which carries
on the business (the "Business") of manufacturing, marketing and supplying
Dimethylolpropionic Acid ("DMPA"), Trimethylolethane ("TME"), Formaldehyde and
Calcium Formate (collectively, the "Products"). The businesses of the Seller
other than the Business are hereinafter referred to as the "Retained
Businesses." Seller desires to sell, and Buyer desires to purchase,
substantially all of the assets of Seller used in connection with the operation
of the Business, in accordance with the terms and conditions set forth in this
Agreement.
In consideration of the payments and the covenants, and on the terms
and subject to the conditions described in this Agreement, the parties hereby
agree as follows:
1. SALE AND PURCHASE OF ASSETS.
1.1 Transferred Assets. Seller will, on the Closing Date (as defined in
Section 11.1), transfer to Buyer all of Seller's rights, title and interest in
and to the following assets and rights (the "Transferred Assets"), free and
clear of any lien, charge, encumbrance, security interest, option or any other
restriction or third-party right of any kind (an "Encumbrance"), other than
Permitted Encumbrances (as defined in Section 4.16(b):
(a) Owned Real Property. The land (consisting of approximately
96 acres), buildings, improvements, fixtures and other real property
and the easements, rights of way and appurtenances thereon or thereto
owned by Seller and located at Seller's plant in South Whitehall
Township, north of Allentown, Pennsylvania as described in Schedule
1.1(a) (the "Owned Real Property").
(b) Leased Real Property. The warehouse space and sludge
pressing facility and other buildings, improvements and fixtures,
together with certain easements, rights of way and appurtenances
thereto, owned by Seller and located at Seller's plant in South
Whitehall Township, north of Allentown, Pennsylvania as described in
Schedule 1.1(b), which are to be leased to Buyer (the "Leased Real
Property") pursuant to the New Lease Agreement (as defined in Section
6.11(d)). (The Owned Real Property and the Leased Real Property,
together with the land on which the Leased Real Property is situated,
is herein collectively referred to as the "Real Property").
(c) Personal Property. The personal property that is owned by
Seller and used solely or principally in the operation of the Business,
including, without limitation, all of the machinery, equipment and
other items identified on the Personal Property Description
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attached to this Agreement as Schedule 4.24, and all other items of
furniture, fixtures, machinery, equipment, motor vehicles, tools,
parts, supplies and office equipment owned by Seller and used solely or
principally in the operation of the Business (the "Personal Property").
(d) Contracts. All rights and interests of Seller in and to
all contracts and other agreements that are listed on the Contracts
List marked as Schedule 4.15 and all other contracts to which Seller is
a party on the Closing Date that solely or principally relate to or
arise out of the operation of the Business that are not required to be
listed on Schedule 4.15 and which were entered into in the ordinary
course of the Business (collectively, the "Contracts").
(e) Licenses and Permits. All rights and interests of Seller
under all permits and approvals issued to Seller by any Governmental
Authority (as defined in Section 8.1) or other jurisdiction or
instrumentality and relating solely or principally to the Business,
including those marked on the License List attached hereto as Schedule
4.25.
(f) Intellectual Property. All Intellectual Property Rights
(as defined in Section 4.13(h)) that are solely or principally used or
held for use in or relate to the Business and in which Seller and/or
any Affiliate (as defined in Section 33) of Seller have any right,
title or interest, including, without limitation, all of Seller's
current concepts, ideas and technologies relating solely or principally
to the Business and also including, without limitation, those items
identified on the Intellectual Property Description marked as Schedule
4.13.
(g) Cash. All of Seller's petty cash and letters of credit
relating solely to the Business.
(h) Inventory. All inventories, including finished products,
samples, work-in-process, raw materials and packaging materials of the
Business.
(i) Accounts Receivable. All accounts, promissory notes and
other notes receivable, deferred charges, chattel paper and other
rights to receive payments arising from the operation of the Business.
(j) Prepayments. All prepaid expenses and other prepayments
relating to the Business, including prepaid real estate taxes.
(k) Documents. All records, including, without limitation,
locally maintained copies of all books of account, locally maintained
copies of tax records, customer lists, supplier lists, employee
personnel files, local public records, file materials, engineering
data, logs, programming records, consultants' reports, budgets,
financial reports and projections, sales and marketing reports and
plans, operating and business plans, product files and specifications
and correspondence solely or principally used or held for use in the
operation of
2
<PAGE> 13
the Business or necessary to show compliance with any law or regulation
applicable to the Business or the operation of the Business or relating
to the ownership, use, manufacture, maintenance or repair of any of the
Transferred Assets ("Books and Records").
(l) Intangibles. All claims, choses in action and other
general intangibles to the extent that they relate solely or
principally to the Business.
(m) Goodwill. All goodwill of the Business, including the
exclusive right for Buyer to represent itself as the successor to the
Business and the right to the use of the name "TRIMET."
(n) Other Assets. All of the other tangible and intangible
property and rights that are owned by Seller and used solely or
principally in connection with the operation of the Business.
1.2 Excluded Assets. Notwithstanding the foregoing, the following
assets of Seller, as well as all assets of Seller solely or principally related
to the Retained Businesses (collectively, the "Excluded Assets"), will be
retained by Seller and will not be included in the Transferred Assets:
(a) Corporate Record Books. The articles of incorporation,
bylaws, minute books, stock transfer records and all other corporate
books and records relating to the corporate affairs of Seller;
(b) Benefit Plans. Except as otherwise provided in Section 7,
any contracts or assets related to any employee benefit plan in which
any employees of Seller or any of its Affiliates participate;
(c) Tax Records. Any records related to income Taxes (as
defined in Section 4.9(a)) paid or payable by Seller or any of its
Affiliates;
(d) Certain Real Property. The owned real property of Seller
located adjacent to the Owned Real Property, as described in Schedule
1.2(d) (the "Retained Real Estate"), except to the extent of Buyer's
interest therein under the New Lease Agreement;
(e) Intercompany Receivables and Liabilities. Liabilities of
Seller to, and receivables of Seller from, any Affiliate of Seller; and
(f) Excluded Assets List. Those specific assets identified on
the Excluded Assets List attached to this Agreement as Schedule 1.2(f).
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<PAGE> 14
2. ASSUMED AND RETAINED LIABILITIES.
2.1 Assumption of Liabilities. Upon the transfer of the Transferred
Assets on the Closing Date in accordance with this Agreement, Buyer shall assume
the following liabilities and obligations of Seller (the "Assumed Liabilities"):
(a) Contracts. All liabilities and obligations of Seller under
the Contracts to the extent, in the case of each particular Contract,
that the rights and benefits under the Contract have been assigned to
Buyer;
(b) Accounts Payable. Accounts payable and other current
liabilities arising in the ordinary course of the operation of the
Business that are reflected in the Working Capital Statement (as
defined in Section 3.2(a));
(c) Employee Accruals. To the extent set forth on the Assumed
Employee Accrual List attached to this Agreement as Schedule 2.1(c),
liabilities to employees of the Business to be employed by Buyer after
the Closing Date in respect of accrued vacation and sick days, whether
or not reflected on the Working Capital Statement;
(d) Post-Closing Environmental Liabilities. All liabilities
relating to the Owned Real Property arising out of: (i) the making,
storage, handling, treatment, disposal of, generation, recycling or
transportation after the Closing Date by Buyer of Hazardous Substances
(as defined in Section 4.12(a)(iv)) in violation of any applicable
Environmental Law (as defined in Section 4.12(a)(i)), (ii) the release
after the Closing Date by any person of Hazardous Substances at, on,
under or from the Owned Real Property, (iii) the failure after the
Closing Date by Buyer to comply with applicable Environmental Laws,
(iv) the use after the Closing Date by any person of any above or below
ground storage tank for the storage of any Hazardous Substances on or
under the Owned Real Property, (v) the failure by Buyer after the
Closing Date to retain in force any required Governmental
Authorizations (as defined in Section 4.12(a)(i)) which Seller shall
have in force on the Closing Date, and (vi) any environmental matters
attributable to events occurring or conditions first existing after the
Closing Date in connection with the operation of the Business by Buyer
except, in any such case, to the extent that such liabilities arise
from or relate to (y) the use or ownership by Seller of, or (z) any
event, occurrence, act or omission relating to the Retained Businesses
or the Retained Real Estate whether prior to, on or after the Closing
Date;
(e) Warranty Obligations. Warranty obligations relative to the
Products and services of the Business that have arisen in the ordinary
and normal course of business and are required to be performed after
the Closing Date;
(f) Certain Postretirement Medical Benefits. The liability to
make payments in respect of those postretirement medical benefits
described on Schedule 2.1(f). The accumulated postretirement benefit
obligation as of the Closing Date will be reflected in the
Postretirement Medical Benefits Closing Statement (as defined in
Section 3.3).
4
<PAGE> 15
(g) Pre-Closing Liabilities in the Ordinary and Normal Course
of Business. All other liabilities or obligations of the Business
existing on the Closing Date, to the extent they arise out of the
ordinary and normal course of business and are reflected on the Working
Capital Statement (if and as appropriate), including Buyer's pro rata
portion of calendar 1998 real estate taxes (except for long-term
indebtedness, if any, of the Business and any Encumbrances arising as a
consequence thereof); and
(h) Post-Closing Liabilities. Except as otherwise provided for
herein, all other liabilities, including tax liabilities, to the extent
arising out of or to the extent related to the operation of the
Business by Buyer or its Affiliates or successors after the Closing
Date.
2.2 Retained Liabilities. Except for the liabilities and obligations
expressly referred to in Section 2.1 or except as specifically agreed to herein,
Buyer will not assume or otherwise be responsible for any other liabilities or
obligations of Seller or any of Seller's Affiliates or any other liabilities or
obligations that arise out of the Business or the Transferred Assets, regardless
of their nature (the "Retained Liabilities"). All of the Retained Liabilities
shall be retained by and remain liabilities and obligations of Seller.
3. PURCHASE PRICE.
3.1 Purchase Price. Subject to adjustment in accordance with Sections
3.2, 3.3 and 9.9, the purchase price for the Transferred Assets (the "Purchase
Price") shall be Sixty Million Dollars ($60,000,000) less the sum of (i)
$280,000, being the estimated accumulated postretirement benefit obligation for
certain postretirement medical benefits of certain union employees of the
Business (the "Estimated Postretirement Medical Benefits"), and (ii) $5,000,000,
being the amount to be deposited and held in escrow in accordance with Section
6.11(c) hereof (the "Closing Date Payment"). The Closing Date Payment shall be
payable on the Closing Date by wire transfer of immediately available funds to
Seller's designated bank account.
3.2 Post-Closing Purchase Price Adjustment.
(a) Working Capital Statement. As soon as practicable following the
Closing Date (and in no event later than sixty (60) days following the Closing
Date), Seller will prepare and deliver to Buyer a statement calculated in a
manner consistent with Schedule 3.2(d) showing the book value of the current
assets acquired and the current liabilities assumed of the Business as of the
Closing Date (the "Working Capital Statement"). The Working Capital Statement
will be based upon the books and records of TRIMET and prepared in accordance
with the same accounting principles and practices used in determining the
current assets and the current liabilities shown on the Balance Sheet, except
the Working Capital Statement will not include reserves for uncollectible
accounts receivable or accruals for any employee bonus or incentive arrangement
obligations retained by Seller in accordance with Section 7.3.
(b) Review of Working Capital Statement. Following receipt of the
Working Capital Statement, Buyer will be afforded a period of forty-five (45)
days to review the Working Capital
5
<PAGE> 16
Statement. To assist in any such review, Seller will make available to Buyer any
work sheets and other papers prepared in connection with the Working Capital
Statement. At or before the end of the forty-five (45) day review period, Buyer
will either (i) accept the Working Capital Statement in its entirety or (ii)
deliver to Seller a written notice setting forth a detailed explanation of those
items in the Working Capital Statement that Buyer disputes (a "Notice of
Dispute"). If Buyer does not deliver a Notice of Dispute to Seller within the
forty-five (45) day review period, Buyer will be deemed to have accepted the
Working Capital Statement in its entirety. If Buyer delivers a Notice of Dispute
in which it disputes some, but not all, of the items in the Working Capital
Statement, Buyer will be deemed to have accepted all of the items not disputed
other than those not directly disputed but which are affected by the items
disputed.
(c) Resolution of Disputes. Within a period of thirty (30) days after
the delivery of a Notice of Dispute, the parties will attempt to resolve in good
faith any disputed items. If they are unable to do so, the remaining disputed
items will be referred to a nationally recognized firm of independent
accountants whose services have not previously been significantly utilized by
the parties hereto for resolution (the "Independent Public Accountants"). The
parties will share equally the cost of the Independent Public Accountants. The
resolution of the disputed items, as determined by the Independent Public
Accountants, will be binding on the parties.
(d) Adjustment in Amount of the Purchase Price. If the book value of
current assets, less the book value of the current liabilities, shown in the
Working Capital Statement, after the resolution of any dispute pursuant to
Section 3.2(c) (the "Working Capital"), is less than $4,793,000 (which amount
was calculated as set forth in Schedule 3.2(d)), the Purchase Price shall be
reduced by the amount by which $4,793,000 exceeds the Working Capital. If the
Working Capital is more than $4,793,000, the Purchase Price shall be increased
by the amount by which the Working Capital exceeds $4,793,000. Within ten (10)
days after the adjustment to the Purchase Price pursuant to this Section 3.2 has
been finally determined, Buyer shall pay to Seller or Seller shall pay to Buyer,
as applicable, the relevant amount, plus simple interest thereon at the rate of
six percent (6%) per annum from the Closing Date to the date of payment. Any
such payment hereunder shall be made by wire transfer of immediately available
funds to an account designated by the party entitled to payment or in such other
manner as such party shall reasonably request.
3.3 Preparation of Postretirement Medical Benefits Closing Statement.
(a) Postretirement Medical Benefits Closing Statement. As soon as
practicable following the Closing Date (and in no event later than sixty (60)
days following the Closing Date), Seller will prepare and deliver to Buyer a
statement (the "Postretirement Medical Benefits Closing Statement") showing the
accumulated postretirement benefit obligation for postretirement medical
benefits to union Transferred Employees (as defined in Section 7.1) arising from
or relating to any period prior to the Closing Date. The Postretirement Medical
Benefits Closing Statement will be prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis, except as
provided in Schedule 3.3(a) attached hereto.
6
<PAGE> 17
(b) Review of Postretirement Medical Benefits Closing Statement.
Following receipt of the Postretirement Medical Benefits Closing Statement,
Buyer will be afforded a period of forty-five (45) days to review the
Postretirement Medical Benefits Closing Statement. To assist in any such review,
Seller will make available to Buyer any plan document, participant data and
actuarial assumptions and methods. At or before the end of the forty-five (45)
day review period, Buyer will either (i) accept the Postretirement Medical
Benefits Closing Statement in its entirety or (ii) deliver to Seller a written
notice setting forth a detailed explanation of those items in the Postretirement
Medical Benefits Closing Statement that Buyer disputes (a "Postretirement
Medical Benefits Notice of Dispute"). If Buyer does not deliver a Postretirement
Medical Benefits Notice of Dispute to Seller within the forty-five (45) day
review period, Buyer will be deemed to have accepted the Postretirement Medical
Benefits Closing Statement in its entirety. If Buyer delivers a Postretirement
Medical Benefits Notice of Dispute in which it disputes some, but not all, of
the items in the Postretirement Medical Benefits Closing Statement, Buyer will
be deemed to have accepted all of the items not disputed other than those not
directly disputed but which are affected by the items disputed.
(c) Resolution of Disputes. Within a period of thirty (30) days after
the delivery of a Postretirement Medical Benefits Notice of Dispute, the parties
will attempt to resolve in good faith any disputed items. If they are unable to
do so, the remaining disputed items will be referred to a nationally recognized
firm of independent actuaries whose services have not previously been
significantly utilized by the parties hereto for resolution (the "Independent
Actuaries"). The parties will share equally the cost of the Independent
Actuaries. The liability for such disputed items, as determined by the
Independent Actuaries, will be binding on the parties.
(d) Adjustment in Amount of the Purchase Price. If the accumulated
postretirement benefit obligation for postretirement medical benefits to the
union Transferred Employees arising from or relating to any period prior to the
Closing Date, as shown in the Postretirement Medical Benefits Closing Statement,
after the resolution of any dispute pursuant to Section 3.3(c) (the
"Postretirement Medical Benefits"), are greater than the Estimated
Postretirement Medical Benefits, the Purchase Price shall be reduced by the
amount by which the Postretirement Medical Benefits exceed the Estimated
Postretirement Medical Benefits. If the Postretirement Medical Benefits are less
than the Estimated Postretirement Medical Benefits, the Purchase Price shall be
increased by the amount by which the Estimated Postretirement Medical Benefits
exceed the Postretirement Medical Benefits. Within ten (10) days after the
adjustment to the Purchase Price pursuant to this Section 3.3 has been finally
determined, Buyer shall pay to Seller or Seller shall pay to Buyer, as
applicable, the relevant amount, plus simple interest thereon at the rate of six
percent (6%) per annum from the Closing Date to the date of payment. Any such
payment hereunder shall be made by wire transfer of immediately available funds
to an account designated by the party entitled to payment or in such other
manner as such party shall reasonably request.
3.4 Acknowledgment; Confidentiality. Subject to the express provisions
of this Agreement, the parties acknowledge that Buyer shall not be precluded
from claiming at any time that any of the representations or warranties of
Seller contained in Section 4 is or was untrue or misleading or has been
breached by reason of the fact that it may have expressly or impliedly agreed
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<PAGE> 18
or approved the Working Capital Statement or the Postretirement Medical Benefits
Closing Statement or any item set out or referred to therein; provided that, it
is not the intent of the parties hereto that Buyer shall be able to recover any
Losses (as defined in Section 8.2) hereunder for breach of any of Seller's
representations and warranties set forth in Section 4 if, and to the extent,
such recovery would amount to a double recovery of any Losses paid or resolved
as a consequence of the procedures set forth in Section 3.2. Seller shall treat
as strictly confidential all financial information contained in the Working
Capital Statement and the Postretirement Medical Benefits Closing Statement or
any of the work sheets and other papers prepared in connection therewith.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS BY SELLER. Seller
represents and warrants to and agrees with Buyer, as of date hereof and as of
the Closing Date, as follows.
4.1 Organization and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own and operate the Transferred Assets and to carry on the Business
as currently conducted by it. Seller is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the ownership
or operation of the Transferred Assets or the conduct of the Business by it
requires such qualification and good standing, except where the failure to be so
qualified or in good standing, as the case may be, would not have, individually
or in the aggregate, a material adverse effect on the Business.
4.2 Corporate Authorization. Seller has full power, authority and legal
right to execute and deliver this Agreement and the other deeds and instruments
of transfer and other documents, certificates and agreements for which provision
is made herein (the "Other Documents") and to perform its obligations under this
Agreement and the Other Documents.
4.3 Consents and Approvals. Except as required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), or as set forth
on Schedule 4.3, no consent, approval, waiver, authorization, registration or
qualification is required to be obtained by Seller from, and no notice or filing
is required to be given by Seller to or made by Seller with, any Governmental
Authority or other third-party in connection with the execution, delivery and
performance by Seller of this Agreement and the Other Documents, except where
the failure to obtain such consent, approval, waiver or authorization, or to
give or make such notice or filing, would not, individually or in the aggregate,
have a material adverse effect on the Business or materially impair or delay the
ability of Seller to perform its obligations under this Agreement or the Other
Documents or to effect the Closing or consummate the transactions contemplated
by this Agreement and the Other Documents.
4.4 Non-contravention. Except as set forth on Schedule 4.4, the
execution, delivery and performance by Seller of this Agreement and the Other
Documents, and the consummation of the transactions contemplated hereby and
thereby, does not and will not (i) violate any provision of the charter, bylaws
or other organizational documents of Seller, (ii) subject to obtaining the
consents referred to in Section 4.3, conflict with, or result in the breach of,
or constitute a default under, or result in the termination, cancellation or
acceleration of (whether after the filing of notice or the lapse
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<PAGE> 19
of time or both) any right or obligation of Seller under, or in a loss of any
benefit to which Seller is entitled under, any of the Contracts or result in the
creation of any Encumbrance in respect of or upon any of the Transferred Assets,
or (iii) violate or result in a breach of or constitute a default under any law,
rule, regulation, judgment, injunction, order, decree or other restriction of
any Governmental Authority to which Seller is subject, including any license,
permit, certificate and other authorization or approval required under any
applicable law to carry on the Business as currently conducted by Seller; other
than, in the cases of clauses (ii) and (iii), any conflict, breach, termination,
default, cancellation, acceleration, loss, violation or Encumbrance which,
individually or in the aggregate, would not have a material adverse effect on
the Business or materially impair or delay the ability of Seller to perform its
obligations under this Agreement or the Other Documents or to effect the Closing
or consummate the transactions contemplated by this Agreement or the Other
Documents.
4.5 Binding Effect. This Agreement has been duly executed and delivered
by Seller, and this Agreement and the Other Documents, when executed and
delivered, are or will be (as appropriate) the valid and binding obligations of
Seller, enforceable against it in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally, by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
4.6 Financial Statements.
(a) The audited balance sheet of the Business as of June 30, 1997, the
audited statement of operations of the Business for the year ended June 30,
1997, the audited statement of cash flows of the Business for the year ended
June 30, 1997, and the statement of divisional equity of the Business as of June
30, 1997 (all of the foregoing collectively, the "Audited Financial
Statements"), the unaudited balance sheet of the Business at March 31, 1998 (the
"Balance Sheet" and "Balance Sheet Date," respectively), the unaudited statement
of operations of the Business for the twelve month period ended March 31, 1998
(the "Income Statement") are attached hereto on Schedule 4.6(a)(i) (the Audited
Financial Statements, the Balance Sheet and the Income Statement together, the
"Financial Statements"). Except as set forth on Schedule 4.6(a)(ii), the Audited
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis. Except as set forth on Schedule 4.6(a)(iii), the Balance Sheet
and the Income Statement have been prepared in accordance with the Seller's
Accounting Principles (as defined in Section 4.31) consistently maintained and
applied with respect to the Business. The Balance Sheet and the Income
Statement, in all material respects, accurately present the financial position
of the Business as of March 31, 1998 and the results of operations of the
Business for the twelve month period ended March 31, 1998 and, in all material
respects, accurately set forth the information purported to be shown therein.
There has been no material adverse change in the assets, financial condition or
performance of the Business since the Balance Sheet Date which, if it had
occurred, would be required to be reflected on a balance sheet and/or income
statement with respect to the Business, as of any applicable period subsequent
to the Balance Sheet Date, prepared in a manner consistent with the Balance
Sheet and the Income Statement.
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(b) All of the liabilities reflected on the Balance Sheet are related
exclusively to the Business and arose out of or were incurred in the conduct of
the Business.
(c) The information provided to Buyer relating to the corporate and
divisional overhead charges of Seller for the years ended on June 30, 1996,
1997, and 1998 is true and correct in all material respects.
4.7 No Material Adverse Change Since the Balance Sheet Date. Except as
set forth on Schedule 4.7, since the Balance Sheet Date, the Business has been
conducted by Seller in the ordinary course consistent with past practice, and
there has not been:
(a) any material adverse change in the assets, liabilities,
financial condition or operation of the Business;
(b) any damage or destruction, whether or not covered by
insurance, materially affecting the Transferred Assets, operations or
properties, whether owned or leased, of the Business;
(c) any labor dispute or employee matter materially and
adversely affecting the financial position or operations of the
Business;
(d) any sale (other than in the ordinary course of business),
transfer or assignment of, or imposition of any Encumbrance (other than
Permitted Encumbrances) on, any of the Transferred Assets;
(e) any transaction or commitment made, or any Contract or
agreement entered into or amended, relating to the Business or any
Transferred Asset or any relinquishment of any Contract or other right,
other than transactions and commitments made in the ordinary course of
business consistent with past practice;
(f) any change in any method of accounting or accounting
practice with respect to the Business except for any such change after
the date of this Agreement required by reason of a concurrent change in
GAAP;
(g) any employment, deferred compensation, severance,
retirement or other similar agreement entered into with any employee of
the Business, or any amendment to any such existing agreement, or,
change in compensation or other benefits payable to any employee of the
Business pursuant to any severance or retirement plan or policy;
(h) any other event or condition of any character pertaining
to, and materially and adversely affecting, the financial position,
results of operations or prospects of the Business; or
(i) any agreement or commitment to do any of the foregoing.
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4.8 Litigation and Claims. Except as set forth on Schedule 4.8, there
is no civil, criminal or administrative action, suit, demand, claim, hearing,
proceeding, arbitration or investigation pending or, to Seller's knowledge,
threatened involving the Business or any of the Transferred Assets which, if
determined adversely, would, individually or in the aggregate, have a material
adverse effect on the Business or materially impair or delay the ability of
Seller to effect the Closing or which seeks to prevent or enjoin the
transactions contemplated by this Agreement or the Other Documents. Except as
set forth on Schedule 4.8, neither the Business nor the Transferred Assets is
subject to any order, writ, judgment, award, injunction or decree of any
Governmental Authority of competent jurisdiction or any arbitrator.
4.9 Tax Matters.
(a) Except as set forth on Schedule 4.9, with respect to the Business
or the Transferred Assets, (i) all reports, returns, statements, information
statements and the like ("Tax Returns") required to be filed by Seller on or
before the Closing Date with respect to any federal, state, local or foreign
taxes ("Taxes") have been or will be filed when due in accordance with all
applicable laws; (ii) all Taxes shown on such Tax Returns have been or will be
paid in timely fashion; (iii) there is no action, suit, proceeding,
investigation (to Seller's knowledge), audit or claim now pending with respect
to any Taxes of Seller; (iv) there are no outstanding agreements extending the
statutory period of limitation applicable to any claim for, or the period for
the collection or assessment of, Taxes due from Seller; (v) there are no liens
for any Tax on the Transferred Assets, except for Taxes not yet due and payable;
(vi) neither Seller nor Mallinckrodt Chemical GmbH are subject to withholding
under Section 1445 of the Code with respect to the sale of the Transferred
Assets or other assets subject to sale under the Other Documents; (vii) as of
the time of filing, the Tax Returns correctly reflected the facts regarding the
income, business, assets, operations, activities and status of Seller and any
other information required to be shown therein; (viii) the charges, accruals and
reserves for Taxes with respect to Seller for any pre-Closing Tax period
(including any taxable period for which no Tax Return has yet been filed)
reflected on the books of Seller (excluding any provision for deferred Taxes),
as disclosed to Buyer, are adequate to cover such Taxes; (ix) Seller is not
delinquent in the payment of any Taxes; and (x) Seller has not participated in
any arrangement (including by way of a tax sharing agreement) whereby any
income, revenues, receipts, gain, loss or Tax asset of Seller was determined or
taken into account for Tax purposes with reference to or in conjunction with any
income, revenues, receipts, gain, loss, asset, liability or Tax asset of any
other person other than an Affiliate.
(b) None of the Transferred Assets is tax-exempt use property within
the meaning of Section 168(h) of the Code. None of the Transferred Assets is
property that is or will be required to be treated as being owned by another
person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately prior to the enactment of the
Tax Reform Act of 1986. None of the Transferred Assets is subject to a lease,
other than a "true lease" for federal income tax purposes.
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4.10 Employee Benefits.
(a) Schedule 4.10 lists each employee benefit plan, as defined in
Section 3(3) of ERISA, and each bonus or other incentive compensation, stock
option, change-in-control, employment, severance, retirement, post-employment,
health, medical, disability, workers' compensation, reduction in force,
relocation, salary continuation for sickness or other disability, vacation or
educational assistance program, plan, arrangement or agreement (written or
unwritten) to which Seller is a party, contributes or has an obligation to
contribute or which Seller maintains, in each case on behalf of employees
employed in the Business (collectively, the "Seller Benefit Plans"). With
respect to each Seller Benefit Plan, Seller has delivered or made available to
Buyer a true, correct and complete copy of: (i) each writing constituting a part
of such Seller Benefit Plan, including without limitation, all plan documents,
plan amendments, benefit schedules, trust agreements and insurance contracts and
other funding vehicles; (ii) the most recent actuarial report, annual report
(Form 5500 Series) and accompanying schedules, if any; (iii) the current summary
plan description, if any; (iv) the most recent determination letter from the
Internal Revenue Service, if any; and (v) any accounting study of
post-employment life or medical benefits provided under any Seller Benefit Plan.
Each Seller Benefit Plan has been maintained in compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations in all material respects (including, without limitation, ERISA and
the Internal Revenue Code of 1986, as amended (the "IRC")), which are applicable
to such Seller Benefit Plan.
(b) Schedule 4.10 identifies each Seller Benefit Plan that is intended
to be a "qualified plan" within the meaning of Section 401(a) of the IRC (a
"Qualified Plan"). With respect to each Qualified Plan, either (i) the Internal
Revenue Service has issued a favorable determination letter that has not been
revoked or (ii) a timely application for such a determination letter has been
filed and the remedial amendment period with respect to such Qualified Plan
remains open. In the case of either clause (i) or (ii) of the immediately
preceding sentence, there are no existing circumstances or any events that have
occurred that would adversely affect the qualified status of any Qualified Plan
or the related trust.
(c) No Seller Benefit Plan is a "multiemployer plan" within the meaning
of Section 4001(a)(3) of ERISA or a plan that has two or more contributing
sponsors at least two of whom are not under common control within the meaning of
Section 4063 of ERISA.
(d) Except as a result of any provisions contained or prescribed herein
or as set forth on Schedule 4.10, no employee employed in the Business will
become entitled to any retirement, severance or similar benefit or enhanced or
accelerated benefit solely as a result of the transactions contemplated hereby,
provided Buyer complies with its obligations hereunder. Without limiting the
generality of the foregoing, no amount required to be paid or payable to or with
respect to any such employee in connection with the transactions contemplated
hereby (either solely as a result thereof or as a result of such transactions in
conjunction with any other event) will be an "excess parachute payment" within
the meaning of Section 280G of the IRC.
(e) Seller has timely provided or will timely provide all notices and
any continuation of health benefit coverage required to be provided to any
employees or former employees of Seller
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employed in the Business, spouses and former spouses of any such employees, and
dependents and former dependents of any such employees under COBRA and
applicable state law to the extent and for the periods provided therein.
4.11 Compliance with Laws. Except as set forth on Schedule 4.11 or
4.12, (a) the conduct of the Business complies in all material respects with all
applicable laws, statutes, ordinances, rules, regulations, codes, orders,
judicial decisions, permits, judgments, decrees and injunctions, including any
laws incorporated expressly by reference or by operation of law into, or
otherwise applicable to, any contract made with the United States of America and
including the laws, rules and regulations of any state, province, municipality
or country (collectively, "Laws"), except where the failure to so comply,
individually or in the aggregate, would not have a material adverse effect on
the Business and (b) Seller has all licenses, permits, certificates and other
authorizations and approvals required under all applicable Laws necessary for
the conduct of the Business as currently conducted, other than those the absence
of which would not have a material adverse effect on the Business. Except as set
forth on Schedule 4.11 or 4.12, to Seller's knowledge, Seller is not under
investigation by any Governmental Authority with respect to, and Seller has not
been threatened to be charged with or given notice of, any violation of any Laws
applicable to the Business or the Transferred Assets.
4.12 Environmental Matters.
(a) Except as set forth on Schedule 4.12:
(i) the Business is in compliance with all applicable Laws (to
the extent now in effect or as they may be in effect on the Closing
Date, but not as such laws are hereafter amended or changed) relating
to (x) the protection of the environment (including, without
limitation, air, water, vapor, surface water, groundwater, drinking
water and surface or subsurface land), (y) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing,
handling, labeling, protection, release or disposal of, pollutants,
contaminants, wastes or chemicals or any toxic, radioactive, or
hazardous substance, waste or material or (z) the effect on the
environment or human health or safety ((x), (y) and (z) collectively,
"Environmental Laws") and all licenses, permits, certificates and other
authorizations and approvals required under all applicable
Environmental Laws to carry on the Business as it is currently
conducted ("Governmental Authorizations"), and to the knowledge of
Seller, there are no facts, conditions, situations or sets of
circumstances, which could reasonably be expected to result in
liability under any Environmental Law with respect to the Business or
the Transferred Assets, except for any such non-compliances or
liabilities which would not have a material adverse effect on the
Business;
(ii) Seller has received no notice, request for information,
citation, complaint, summons or order relating to any violation or
alleged violation of, or any liability under, any Environmental Law in
connection with the Business or the Transferred Assets during the past
three (3) years or, if not resolved, any previous years;
(iii) there are no writs, injunctions, decrees, orders or
judgments outstanding, or any actions, suits, proceedings or
investigations pending or, to Seller's knowledge,
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threatened, relating to compliance with or liability under any
Environmental Law affecting the Business or the Transferred Assets;
(iv) except to the extent it would not have a material adverse
effect on the Business or the Transferred Assets, no "hazardous
substances" (within the meaning of Section 101(14) of the Comprehensive
Environmental Response Compensation and Liability Act, 42 U.S.C.
Section 9601(14) ("CERCLA")), or any pollutant, contaminant, waste,
chemical or other toxic, radioactive, or hazardous substance, waste or
material that, in each case, is regulated under any Environmental Law,
including, without limitation, petroleum, petroleum derivatives,
petroleum by-products or other hydrocarbons, asbestos-containing
materials, polychlorinated biphenyls and urea formaldehyde (each a
"Hazardous Substance" and, collectively, "Hazardous Substances") has
been discharged, disposed of, dumped, injected, pumped, deposited,
spilled, leaked, emitted or released at, on or under any of the
properties now or previously owned, leased or operated by Seller in the
conduct of the Business at any time within the last seven (7) years;
(v) there is and has been no friable asbestos or urea
formaldehyde on the Real Property which has not been encapsulated or
otherwise addressed in compliance with all Environmental Laws;
(vi) the Real Property is not now and has never been operated
by Seller or, to Seller's knowledge, by any former owner or operator of
such property, in each case, as a Treatment, Storage, or Disposal
facility for Hazardous Waste (as such terms are defined under the
Resource Conservation and Recovery Act ("RCRA") or any similar state
statute);
(vii) Seller has not (y) received any written studies or
reports relating to the existence of any chemical substance or mixture
which could present a substantial risk to human health or the
environment reportable under Section 8(e) of the Toxic Substances
Control Act ("TSCA") or (z) received any health and safety studies
reportable under Section 8(d) of TSCA, in each case, in respect of the
Business;
(viii) there are no active or inactive underground or
above-ground storage tanks presently located at any of the Owned Real
Properties or the Leased Real Properties; and
(ix) none of the Owned Real Properties or the Leased Real
Properties or, to Seller's knowledge, any property to which Seller (in
connection with the conduct of the Business) has transported, or
arranged for the disposal of Hazardous Substances is listed or proposed
for listing, on the National Priorities List, CERCLIS or any similar
federal, state, local or foreign list of sites requiring investigation
or clean-up.
(b) Schedule 4.12 sets forth all Governmental Authorizations required
under applicable Environmental Laws in connection with the Business, the
Transferred Assets, the Owned Real Properties and the Leased Real Properties.
Except as set forth on Schedule 4.12, no such Governmental Authorizations
require consent, notification or other action to remain in full force and effect
immediately following the consummation of the transactions contemplated hereby.
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(c) To Seller's knowledge, there has been no significant environmental
investigation, study, audit, test, report or other analysis conducted or
prepared in relation to the Business, any Transferred Asset or any of the Owned
Real Properties or Leased Real Properties, other than those which have been
delivered or made available to Buyer.
4.13 Intellectual Property.
(a) Schedule 4.13 sets forth a list (the "Intellectual Property
Description"), which is accurate and complete in all material respects, of all
(i) patents, patent applications, patent rights, trademarks (registered and
unregistered), trademark applications, trade names (registered and
unregistered), service marks (registered and unregistered), service mark
applications, copyrights, copyright applications, publication rights and
computer programs and other computer software (including source codes and object
codes) included in the Transferred Assets, (ii) unexpired licenses of
Intellectual Property Rights (as defined in Section 4.13(h) below) included in
the Transferred Assets that have been granted to or by the Seller and/or any of
its Affiliates, (iii) other agreements relating to Intellectual Property Rights
that relate solely or principally to the Transferred Assets or the Business,
together with a complete listing of all liens, security interests, claims and
rights to use of third-parties with respect to each listed item of Intellectual
Property Rights included in the Transferred Assets.
(b) Seller owns and has the right to use, and to license others to use,
all of the Intellectual Property Rights included in the Transferred Assets. Such
ownership and right to use are free and clear of all liens, security interests,
claims and rights to use of third-parties.
(c) Except to the extent it would not have a material adverse effect on
the Business, Seller has taken steps sufficient to safeguard and maintain the
secrecy and confidentiality of, or its proprietary rights in, all of the
unpatented know how, technology, proprietary processes, formulae and other
information comprised in the Transferred Assets.
(d) Except for licenses listed on Schedule 4.13 as royalty bearing,
there are no royalties, honoraria, fees or other payments payable by Seller to
any person by reason of the ownership, use, license, sale or disposition of any
Intellectual Property Rights included in the Transferred Assets.
(e) Seller is not infringing the right or claimed right of any other
party with respect to any Intellectual Property Rights included in the
Transferred Assets. Except as set forth on Schedule 4.13, Seller has not
received notice of nor has it any knowledge of any alleged or claimed
infringement by any other party with respect to any Intellectual Property Rights
that relates to any product or process manufactured, used, sold or under
development by or for Seller relating solely or principally to the Business.
(f) None of the independent contractors who have performed services for
Seller in connection with the Business has any right, title or interest in the
Intellectual Property Rights included in the Transferred Assets.
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(g) The execution, delivery and performance of this Agreement by
Seller, and the consummation of the transactions contemplated hereby, will not
(x) breach, violate or conflict with any agreement governing the Intellectual
Property Rights included in the Transferred Assets, (y) cause the forfeiture or
termination of, give rise to a right of forfeiture or termination of or impair
the right of Seller to sell, assign and transfer any of such Intellectual
Property Rights to Buyer or (z) impair the right of Buyer after the Closing Date
to use, sell, license, or dispose of, any of such Intellectual Property Rights.
(h) For purposes of this Agreement, the term "Intellectual Property
Rights" means intellectual property rights, including patents, patent
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service mark applications, copyrights, copyright applications,
publication rights, computer programs and other computer software (including
source codes and object codes), inventions, know how, trade secrets, technology,
proprietary processes and formulae.
(i) For purposes of this Agreement, the term "use," with respect to
Intellectual Property Rights, includes make, reproduce, display or perform
(publicly or otherwise), prepare derivative works based on, sell, distribute,
disclose and otherwise exploit such Intellectual Property Rights and products
incorporating such Intellectual Property Rights; provided however that all of
the foregoing relate solely to the manner in which such Intellectual Property is
currently being used.
4.14 Labor Matters. Except as disclosed on Schedule 4.14, with respect
to the Business:
(a) except for the existing collective bargaining agreement
covering the hourly employees of the Business (a copy of which is
attached hereto as part of Schedule 4.14), Seller is not a party to any
labor or collective bargaining agreement with respect to employees of
the Business, no employees of the Business are represented by any labor
organization, no union has been certified as a collective bargaining
representative of any employees of the Business, Seller has not
recognized and is not obligated to bargain with any union, and, to
Seller's knowledge, there are no organizing activities (including any
demand for recognition or certification proceedings pending or
threatened to be brought or filed with the National Labor Relations
Board or other labor relations tribunal) involving the employees of the
Business;
(b) there are no strikes, work stoppages, slowdowns, lockouts,
unfair labor practice charges, arbitrations, grievances, or any actions
by the Department of Labor or the National Labor Relations Board
pending or, to Seller's knowledge, threatened against or involving
Seller;
(c) there are no lawsuits, complaints, charges or claims
including, without limitation, employment lawsuits or civil rights,
equal employment opportunity or OSHA complaints or charges, pending or,
to Seller's knowledge, threatened against Seller relating to the
Business, and there are no settlements, consent orders or prior decrees
of any Governmental Authority requiring any continued observance by
Seller;
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(d) Seller is in compliance in all material respects with all
federal, state and local laws and orders relating to the employment of
labor, including, without limitation, all such laws and orders relating
to wages, hours, collective bargaining, discrimination, civil rights,
safety and health, workers' compensation and the collection and payment
of withholding and/or Social Security taxes and similar taxes;
(e) within the three (3) year period immediately preceding the
date of this Agreement, Seller has not received: (i) any written
complaint from any of the Business' current or former employees that
Seller or any of its current or former employees, agents or consultants
have engaged in harassment of any kind towards, or treated unfairly in
any way, the complaining employee; (ii) any written complaint or
objection (from employees or otherwise) regarding discrimination in
employment; or (iii) written notice that any of the Business' employees
have been the subject of a claim of harassment of any kind or unfair
treatment by a current or former employee of Seller; and
(f) during the two (2) year period immediately preceding the
date of the Agreement, there have been no layoffs of the Business'
employees by Seller.
4.15 Contracts.
(a) The Contracts List attached to this Agreement as Schedule 4.15
contains a list of all material contracts, agreements (including, without
limitation, any noncompetition agreements with employees and former employees of
the Business), understandings, commitments, personal property leases, product
warranty agreements, barter and trade arrangements and service agreements
relating solely or principally to the Transferred Assets or the conduct of the
Business. Except for contracts identified on the Contracts List and contracts
not included in the Transferred Assets or unrelated to the conduct of the
Business, Seller is not a party to or bound by any oral or written:
(i) contract for employment or personal services or any
severance agreement or arrangement that is not terminable, without
liability or expense, by Seller upon thirty (30) days' notice or less;
(ii) contract for capital expenditures in excess of $100,000
(other than anticipated capital projects relative to demolition, site
clean-up or remediation);
(iii) contract for the purchase of equipment, inventory,
materials or supplies or the purchase of services involving more than
$100,000;
(iv) contract with any Affiliate of Seller or agreement
otherwise not negotiated at "arm's length";
(v) trade or barter contract, to be performed on or after the
Closing Date, that could impose more than $100,000 of obligations
(monetary or otherwise) on Seller;
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(vi) contract for the production of goods or the provision of
services that, to Seller's knowledge, will cause Buyer to incur a loss
after the Closing Date in the performance thereof; or
(vii) contract not made in the ordinary course of business.
(b) Seller has delivered or made available to Buyer copies of all of
the items listed on the Contracts List, all of which copies are complete and
accurate. Each of the Contracts is a legal, valid and binding obligation of
Seller, enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally, by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law) or by an implied covenant of good faith and
fair dealing and, to Seller's knowledge, is a legal, valid and binding
obligation of the other party or parties thereto. Each of the Contracts is in
full force and effect. There has been no material default by Seller or, to
Seller's knowledge, by any other party or parties thereto, and no event has
occurred or failed to occur which, with the giving of notice, the passage of
time, or both, would constitute a material default by Seller or, to Seller's
knowledge, by the other party or parties under any of the Contracts. To Seller's
knowledge, none of the Contracts is subject to any impending cancellation or
breach that would materially and adversely affect the Business or the
Transferred Assets. Contracts required to be set forth on the Contracts List or
contracts in excess of $100,000 which either (i) require the consent of a third
party to assignment or (ii) are non-assignable are identified separately on the
Contracts List.
4.16 Real Property.
(a) Seller has no interest in any real property used or occupied in
connection with the conduct of the Business other than as described on the Real
Property Description attached to this Agreement as Schedule 4.16(a). Seller is
in possession of the Real Property. Seller has a good and valid fee estate as to
the Real Property.
(b) The Real Property is free and clear of all mortgages, security
interests, title defects, pledges, liens, charges and encumbrances except for
(i) real estate taxes and assessments, both general and special, including,
without limitation, assessments for water and sewer, that are a lien but not yet
due and payable, (ii) other matters affecting title that would not, individually
or in the aggregate, materially detract from the value of the real property used
in connection with the conduct of the Business or materially impair the use or
conduct thereof, and (iii) the matters set forth on Schedule 4.16(b) hereof((i),
(ii) and (iii) together, the "Permitted Encumbrances"); provided, that
notwithstanding the foregoing, Seller acknowledges that Buyer has not had the
opportunity to review and locate by survey the items set forth on Schedule
4.16(b) hereof and Seller represents and warrants to Buyer that such items do
not materially interfere with the conduct of the Business as currently
conducted. Seller has not voluntarily granted, is not a party to any agreement
providing for, and is not aware of, any easements, conditions, reservations,
covenants, restrictions, leases, subleases, rights, options or any other matters
that would materially and adversely affect the use of any of the Real Property
for the same purposes and uses as the Real Property has been used by Seller.
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(c) The primary operations of Seller currently conducted on the Owned
Real Property and the Leased Real Property are not in material violation of
applicable zoning laws or regulations. To Seller's knowledge, with respect to
the Real Property, there are neither any (i) applications, ordinances,
petitions, resolutions or other matters pending before any Governmental
Authority having jurisdiction to act on zoning changes that would prohibit or
make nonconforming the use of any of the Real Property nor (ii) any pending or
threatened condemnation or eminent domain proceedings, or proposed sale in lieu
thereof.
(d) That portion of the Owned Real Property referred to as Lot No. 1 on
the Subdivision Plan dated 6/19/98 prepared by McTish, Kunkel & Associates (the
"Subdivision Plan"), is contiguous to and has direct vehicular access to Cedar
Crest Boulevard, providing access for ingress to and egress from all plants,
buildings and structures thereon, and further has access to all appropriate
public utilities, in each case to the extent necessary for the conduct of the
Business as currently conducted. That portion of the Owned Real Property
referred to as Lot No. 2 on the Subdivision Plan has direct vehicular access to
Lot No. 1 over a strip of railroad property by way of an agreement dated June 7,
1934 between Trojan Powder Company and Reading Company, providing access to Lot
No. 1 for ingress to and egress from all plants, buildings and structures
thereon, and further has access to all appropriate public utilities, in each
case to the extent necessary for the conduct of the Business as currently
conducted. The Leased Real Property has, or shall have as of the Closing Date,
(i) vehicular access to the Owned Real Property and to public roads for ingress
to and egress from all plants, buildings and structures thereon as provided in
Schedule 6.11(d) , and (ii) access to all appropriate public utilities to the
extent necessary for the conduct of the Business as currently conducted. Except
as set forth on Schedule 4.16(d), none of the material structures on the Real
Property encroaches upon real property of another person or entity and no
structure of any other person or entity encroaches upon any of the Real
Property. The buildings and other structures and improvements located on the
Real Property are not subject to any material structural defects, except for
such structures and buildings as have been scheduled for demolition or removal,
as described on Schedule 4.16(d).
4.17 Property Used. Except as set forth on Schedule 4.17(a), the
Transferred Assets and the New Lease Agreement constitute all of the assets,
properties and rights used to conduct the Business in the manner in which it is
currently being conducted and as of the Closing Date all of such assets,
properties and rights shall be transferred to Buyer. No person or entity other
than Seller has any interest in any of the property used in the conduct of the
Business, except as set forth on the Interests of Other Persons List attached to
this Agreement as Schedule 4.17(b).
4.18 Employees; Wage Increases. Schedule 4.18 sets forth a true and
complete list of all employees of the Business, showing their names, job titles,
current rates of compensation, rates of compensation before the most recent
change in those rates and the date or dates on which those rates of compensation
most recently changed. No employee of the Business has expressed a formal intent
to resign or retire as a result of the transactions contemplated by this
Agreement or within one year after the Closing Date or, to Seller's knowledge,
is unwilling to become an employee of Buyer.
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4.19 No Undisclosed Liabilities. Seller does not have any obligations
or liabilities whatsoever relating to the Business, whether accrued, contingent,
absolute, determined, determinable or otherwise, that will be included in the
Assumed Liabilities, other than:
(a) current liabilities to be fully reserved against in the
Working Capital Statement or the Postretirement Medical Benefits;
(b) obligations to be performed under the Contracts; and
(c) liabilities disclosed on Schedule 4.19 or any other
schedule to this Agreement.
The foregoing list shall not be construed to expand the definition of Assumed
Liabilities.
4.20 Products.
(a) Schedule 4.20(a) sets forth a list, which is complete and accurate
in all material respects, of the products and product lines of Seller relating
to the Business as well as the revenues derived from each separate product
category for the years ended June 30, 1996 and 1997, and for the period from
July 1, 1997 through March 31, 1998, respectively.
(b) Except as set forth on Schedule 4.20(b), since January 1, 1993,
none of the products produced or sold by Seller in connection with the Business
at any time up to and including the sale thereof has failed to be in compliance
in all material respects with all applicable federal, state, local and foreign
laws and regulations. Except as set forth on Schedule 4.20(b), there is no
design defect with respect to any of such products, and there is no recall of
any such product currently under consideration by Seller.
4.21 Inventory. Schedule 4.21 will set forth a listing of the dollar
value (calculated in accordance with Seller's Accounting Principles consistently
maintained and applied with respect to the Business) of all inventory used or
held for sale in the Business as of June 30, 1998 (the "Inventory"). Except as
disclosed on Schedule 4.21, Seller has good title to all of the Inventory, free
and clear of any Encumbrances, other than Permitted Encumbrances. Since the
Balance Sheet Date, the Inventory has been maintained in the ordinary course of
business consistent with the past practice of Seller. The Inventory is of the
quality and is in such condition, as to be readily saleable or usable in the
normal course of the Business. Such Inventory is in quantities reasonably
sufficient (but not excessive) for the normal operation of the Business as the
Business exists on and as of the date hereof and the Closing Date.
4.22 Accounts Receivable. The Accounts Receivable List attached to this
Agreement as Schedule 4.22 identifies by debtor, amount and age all accounts
receivable of Seller relating to the Business as of April 30, 1998. The Accounts
Receivable List will be updated (to the extent accurate information is
available) as of a date within 5 Business Days prior to the Closing Date. All of
the accounts receivable of Seller relating to the Business on the date of this
Agreement are (a) valid and existing receivables arising from bona fide
transactions, (b) are fully collectible, and will be fully collectible within
120 days after the Closing Date after using commercially reasonable efforts, and
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(c) are not subject to any counterclaim, set off or adjustment. In the event any
account receivable listed on Schedule 4.22 is not fully collectible within such
120 day period, Buyer may elect to (i) forego any claim for indemnification and
retain such account receivable or (ii) obtain or receive indemnification and
transfer to Seller such uncollected account receivable without recourse.
4.23 Accounts Payable. The Accounts Payable List attached to this
Agreement as Schedule 4.23 identifies by creditor, amount and age all accounts
payable of Seller relating to the Business as of April 30, 1998. The Accounts
Payable List will be updated (to the extent accurate information is available)
as of a date within 5 Business Days prior to the Closing Date. Since the Balance
Sheet Date, Seller has paid vendors, taxes, employees, employee reimbursable
expenses and other liabilities on a timely basis and consistently with past
practice. Since the Balance Sheet Date, Seller has not altered or amended its
payment practices, and except as listed on Schedule 4.23, no accounts payable
have aged beyond their due date.
4.24 Personal Property. Each item of tangible Personal Property owned
by Seller which is not fully depreciated is reflected (in as much detail as
reasonably possible) on the Personal Property Description marked as Schedule
4.24. Seller has good and marketable title to the Personal Property, free and
clear of all security interests, title defects, pledges and Encumbrances
whatsoever, including any conditional sale or other title retention agreements,
other than liens imposed by operation of law in favor of persons providing
repairs or other services with respect to the personal property that, in each
case, do not interfere with the use or possession of such property, and as to
which Seller discharges the underlying obligation in the ordinary course of
business ("Materialmen Liens"). The Personal Property has been properly
maintained in a manner consistent with reasonable business practice and, except
as set forth on Schedule 4.24, is in good condition and repair, reasonable wear
and tear excepted.
4.25 Licenses. All material licenses, permits, registrations and
authorizations granted and issued by any Governmental Authority and currently
held by Seller relating solely or principally to the Business (the "Licenses")
and all applications of Seller pending before any Governmental Authority
relating to the Business are listed on the License List attached to this
Agreement as Schedule 4.25. Except as identified on Schedule 4.25, no material
license, permit, registration or authorization is required for the conduct of
the Business as currently conducted or for the ownership of the Transferred
Assets. The Licenses are in full force and effect in all material respects and
are free and clear of any conditions that would have any material adverse effect
on the Business as currently conducted.
4.26 Customers. The Customer List attached to this Agreement as
Schedule 4.26 lists all customers of the Business since July 1, 1995 through the
date of this Agreement (the "Customers"). To Seller's knowledge, no customer
intends to reduce the amount of Products it purchases at any time prior to or
following the consummation of the transaction contemplated by this Agreement,
and Seller is not aware of any substantial deterioration in the creditworthiness
of any of Seller's customers.
4.27 Suppliers. The Supplier List attached to this Agreement as
Schedule 4.27 sets forth a list, which is complete and accurate in all material
respects, of the 25 largest suppliers (by dollar
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volume) of products and services to TRIMET during the nine (9) month period
ended on the Balance Sheet Date and during the period from the Balance Sheet
Date through April 30, 1998, respectively (each such firm a "Major Supplier").
There are no sole-source suppliers of significant materials or services to
TRIMET with respect to which practical alternative sources of supply are not
available on relatively comparable terms and conditions. Since the Balance Sheet
Date, no Major Supplier has declined to continue to act as such or indicated any
present or future intention to cease to do so or to materially change the terms
of such arrangements.
4.28 Insurance. The Insurance List attached to this Agreement as
Schedule 4.28 lists all insurance policies and bonds in force solely or
principally with respect to the Business (the "Insurances"). All of the
Insurances are in full force and effect, are valid and enforceable, and will
remain in full force and effect through the Closing Date.
4.29 Product Service Obligations, Warranties and Guarantees. Schedule
4.29 contains copies of the standard product service agreements and the standard
product and service warranties and guarantees currently used by Seller in the
conduct of the Business. Seller's practices and policies in the conduct of the
Business with respect to the provision of warranties and guarantees and the
handling of warranty and guarantee claims has remained unchanged since the
Balance Sheet Date.
4.30 Prepayments and Deposits. Schedule 4.30 sets forth all customer
prepayments and deposits received by Seller in connection with the Business as
of April 30, 1998. Schedule 4.30 will be updated as of 5 Business Days prior to
the Closing Date.
4.31 Financial Records. All material books of account and other
financial records of Seller relating to the Business and the Transferred Assets
are complete and correct in all material respects and have been made available
to Buyer. All of such books and records have been prepared and maintained in
accordance with Seller's customary business practices and in conformity with
Seller's accounting principles ("Seller's Accounting Principles"), consistently
maintained and applied with respect to the Business.
4.32 Finder's Fees. Except for the agreement between Seller and J.P.
Morgan Securities, Inc. relative to the transaction contemplated herein, there
is no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of Seller or any of Seller's
Affiliates and which might be entitled to any fee or commission from Seller in
connection with the transactions contemplated by this Agreement.
4.33 Computer Software and Databases. Schedule 4.33 sets forth all
computer software and databases owned, licensed, leased, internally developed or
otherwise used in connection with the Business and included in the Transferred
Assets ("Computer Software and Databases"). Seller has all Computer Software and
Databases that are necessary to conduct the Business as currently conducted. The
Computer Software and Databases perform in accordance with the documentation
related thereto or used in connection therewith and are free of material defects
in programming and operation. Except as set forth on Schedule 4.33 the Computer
Software and Databases and the respective computer hardware of Seller relating
to the Business will process dates correctly prior to,
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during and after the calendar year 2000, including, without limitation, century
recognition, calculations that accommodate same century and multi-century
formulas and date values, and interface values that reflect the century and
century changes.
4.34 Transactions in Euros. Schedule 4.34: (a) describes those steps,
if any, taken by Seller to ensure that TRIMET will be able to deal with
transactions undertaken in Euros and (b) contains copies of all warranties,
representations or undertakings given to or received by Seller in connection
with the Business or the Transferred Assets in relation to Seller's or any third
party's ability to transact business in Euros.
4.35 Material Information. No representation or warranty set forth in
this Section 4 or in any schedule referred to herein contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading.
5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS BY BUYER. Buyer
represents and warrants to and agrees with Seller, as of the date hereof and as
of the Closing Date, as follows:
5.1 Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Ohio and has all requisite corporate power and authority to carry on its
business as currently conducted.
5.2 Corporate Authorization. The board of directors of Buyer has
approved the execution, delivery and performance of this Agreement and the Other
Documents to which it is or shall be a party. Buyer has full power, authority
and legal right to execute and deliver this Agreement and the Other Documents to
which it is a party and to perform its obligations under this Agreement and the
Other Documents.
5.3 Consents and Approvals. Except as required by the HSR Act, or as
set forth on Schedule 5.3, no consent, approval, waiver, authorization,
registration or qualification is required to be obtained by Buyer from, and no
notice or filing is required to be given by Buyer to or made by Buyer with, any
Governmental Authority or other third-party in connection with the execution,
delivery and performance by Buyer of this Agreement and the Other Documents,
other than where the failure to obtain such consent, approval, waiver or
authorization, or to give or make such notice or filing, would not, individually
or in the aggregate, materially impair or delay the ability of Buyer to perform
its obligations under this Agreement or the Other Documents or to effect the
Closing or consummate the transactions contemplated by this Agreement or the
Other Documents.
5.4 Binding Effect. This Agreement has been duly executed and delivered
by Buyer, and this Agreement and the Other Documents, when executed and
delivered, are or will be (as appropriate) the valid and binding obligations of
Buyer, enforceable against it in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
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5.5 Non-contravention. Neither the execution and delivery of this
Agreement by Buyer, nor the performance by Buyer of its obligations under this
Agreement, will (i) violate any provision of the charter, bylaws or other
organizational documents of Buyer or (ii) violate or result in a breach of or
constitute a default under any law, rule, regulation, judgment, injunction,
order, decree or other restriction of any court or Governmental Authority to
which Buyer is subject, including any license, permit, certificate and other
authorization or approval required under any applicable law; other than, in the
cases of clauses (i) and (ii), any conflict, breach, termination, default,
cancellation, acceleration, loss, violation or encumbrance which, individually
or in the aggregate, would not materially impair or delay the ability of Buyer
to perform its obligations under this Agreement or the Other Documents or to
effect the Closing or consummate the transactions contemplated by this Agreement
or the Other Documents.
5.6 Finder's Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Buyer or any of its Affiliates and which might be entitled to any fee or
commission from Buyer in connection with the transactions contemplated by this
Agreement.
5.7 Material Information. No representation or warranty set forth in
this Section 5, or in any schedule referred to herein, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading.
6. COVENANTS OF BUYER AND SELLER. Buyer and Seller agree to comply with
their respective covenants set forth in this Section 6:
6.1 Conduct of Business Prior to the Closing Date; Affirmative
Covenants. Between the date of this Agreement and the Closing Date, in
connection with the Business, Seller shall:
(a) operate in the usual and ordinary course of business in
accordance with past practice and conduct the Business in all material
respects in compliance with all applicable laws, rules and regulations
and perform its obligations in relation to the Contracts;
(b) use, repair and, if necessary, replace its assets in a
reasonable manner consistent with past practice and maintain its assets
in substantially their current condition, ordinary wear and tear
excepted;
(c) use all reasonable efforts to preserve intact its present
business organization, keep available the services of its present
officers and employees, preserve its relationships with customers and
others having business relationships with it (which shall include an
obligation to pay suppliers, taxes and other liabilities on a timely
basis and consistent with past practice), and refrain from changing any
of its business policies (including, without limitation, advertising,
marketing, pricing, purchasing, personnel, sales and budget policies);
(d) maintain its present Insurances in full force and effect,
with policy limits and scope of coverage not less than is now provided
by its present insurance; and
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(e) maintain its books of account and records in the usual and
ordinary manner and in accordance with Seller's Accounting Principles
as historically applied.
6.2 Conduct of Business Prior to the Closing Date; Negative Covenants.
Between the date of this Agreement and the Closing Date, in connection with the
Business, Seller shall not:
(a) other than in the ordinary course of business, incur any
debt, obligation or liability (whether accrued, contingent, absolute,
determined, determinable or otherwise) that includes obligations
(monetary or otherwise) to be performed by Buyer after the Closing
Date;
(b) sell, transfer, lease, mortgage, pledge or subject to an
Encumbrance (other than Permitted Encumbrances and Materialmen Liens)
any of the Transferred Assets;
(c) without the prior written consent of Buyer (which consent
shall not be unreasonably withheld or delayed) and other than in the
ordinary course of business modify or extend any Contract or enter into
any contract that would have been a Contract or a property lease had it
been in existence on the date of this Agreement;
(d) make or grant any wage or salary increase to any employee
or pay any bonus or consultancy fee to any officer or employee or any
Affiliate of such person;
(e) make any change in the accounting principles, methods or
practices followed by it or depreciation or amortization policies or
rates;
(f) make any loans or make any non-cash dividends or non-cash
distributions other than in relation to Excluded Assets;
(g) other than in the ordinary course of business, cancel or
compromise any debt or claim, or waive or release any right, of
material value;
(h) buy any items of machinery or equipment with an aggregate
cost in excess of $100,000;
(i) directly or indirectly (through a representative or
otherwise) solicit from or furnish any information to any prospective
buyer, commence or conduct negotiations with any party (other than
Buyer and its representatives), disclose any confidential or
proprietary information, or enter into any agreement with any party
(other than Buyer) concerning the sale, lease or other disposition of
the Business, the Transferred Assets or any part of the Business or
Transferred Assets; and
(j) enter into any agreement to do any of the things referred
to in clauses (a) through (i) above.
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6.3 Conditions; Other Consents. Buyer and Seller shall use commercially
reasonable efforts to satisfy the conditions to the other party's obligations as
described in Sections 9 and 10 and to obtain any other consents, transfers,
authorizations or approvals required for the consummation of the transactions
contemplated by this Agreement and the Other Documents.
6.4 Advise Buyer of Adverse Change. Between the date of this Agreement
and the Closing Date, Seller shall promptly advise Buyer of the occurrence of
any material adverse change in the financial condition or the results of its
operations of the Business or the occurrence of any event or condition that has
or would materially and adversely affect the Business.
6.5 Pre-Closing Access to Information; Confidentiality. From the date
of this Agreement until the Closing Date, upon reasonable notice, Seller shall
provide Buyer and its representatives access at mutually agreeable times to all
properties, equipment, books, accounts, contracts and documents of, or related
to, and information regarding the Transferred Assets and the operation of the
Business and shall permit Buyer and its representatives to perform, at Buyer's
expense, any audits, studies and other examinations as the Buyer shall
reasonably deem appropriate (except that Buyer shall not be permitted to conduct
any environmental studies or audits of the Real Property without the prior
written consent of Seller). Buyer shall be provided access to certain key TRIMET
customers (including Zeneca/Stahl, McWhorter, PPG, Reichhold, and BASF) and
employees. Subject to the immediately preceding sentence, each of Buyer and
Seller shall satisfy their respective obligations under the confidentiality
agreement between them, dated January 19, 1998 (the "Confidentiality
Agreement").
6.6 Post-Closing Access to Information.
(a) Subject to Section 6.6(b), after the Closing, upon request, Seller
and its representatives shall be permitted reasonable access, during normal
business hours, to and to make inspection of the Books and Records transferred
to Buyer hereunder, which records are to be maintained by Buyer in accordance
with the requirements of applicable law and otherwise in accordance with its
customary records retention policy, and to make copies thereof as is reasonably
necessary to allow Seller to obtain information in Buyer's possession (but
excluding attorney work product or other privileged communications). Seller
shall pay Buyer's reasonable out-of-pocket costs incurred in connection with
satisfying such requests. In the event that Buyer determines to destroy or
otherwise dispose of any such Books and Records at any time within seven (7)
years of the Closing Date, it shall provide Seller with at least thirty (30)
days prior written notice before proceeding with any such destruction or other
disposal. Seller shall have the right, upon receipt of such notice, to elect
prior to the date scheduled for such destruction or disposal to obtain all or
any portion of the Books and Records to be destroyed or disposed of unless, in
the reasonable opinion of counsel to Buyer, Seller's possession of such Books
and Records, or portion thereof, would result in the waiver of any privilege to
which Buyer was then entitled, in which case Buyer may, at its option, refuse to
provide the affected portion of such Books and Records to Seller. Promptly
following notification to Buyer of its election to obtain any such Books and
Records, Seller shall arrange for the delivery of such Books and Records to
Seller or its agent, at Seller's sole expense, and Buyer shall cooperate
therewith. After seven (7) years have expired from the Closing Date, Buyer shall
be permitted to dispose of the Books and Records without restriction. This
Section 6.6(a)
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shall survive the Closing and shall continue in full force and effect until such
time as Buyer and Seller mutually agree that the Books and Records are no longer
necessary for any tax audit disclosures. Seller shall keep any information
obtained by it pursuant to this Section 6.6(a) in confidence and shall not,
unless required by law, disclose it to any person.
(b) Seller acknowledges that Buyer intends to install and utilize a new
computer system following the consummation of the transaction contemplated by
this Agreement. As a result, Seller acknowledges that, notwithstanding Section
6.6(a), there can be no assurances that Buyer will be able to maintain for seven
(7) years information not in writing or in hard copy form.
(c) After the Closing and upon request, Buyer and its representatives
shall be permitted reasonable access, during normal business hours, to and to
make inspection of the books and records retained by Seller that relate in any
way to the Business, the Transferred Assets or the Assumed Liabilities
(including, without limitation, books and records relating to the financial
performance of the Business during the three (3) year period prior to the
Closing Date) which records are to be maintained by Seller in accordance with
the requirements of applicable law and otherwise in accordance with its
customary records retention policy, and to make copies of the portions thereof
relating to the Business, the Transferred Assets or the Assumed Liabilities as
is reasonably necessary to allow Buyer to obtain information relating thereto in
Seller's possession (but excluding attorney work product and other privileged
communications). Buyer shall pay Seller's reasonable out-of-pocket costs
incurred in connection with satisfying such requests. For a period of seven (7)
years following the Closing Date, in the event that Seller determines to destroy
or otherwise dispose of any such books and records at any time, it shall provide
Buyer with at least thirty (30) days prior written notice before proceeding with
any such destruction or other disposal so that Buyer may have a reasonable
opportunity to exercise its inspection rights as provided in the first sentence
of this Section 6.6(c). In addition, upon request Seller shall provide
reasonable assistance to Buyer in connection with Buyer's examination of such
books and records.
(d) With respect to Taxes, Seller and Buyer will provide each other
with such cooperation and information as either of them may reasonably request
of the other in the filing of any Tax Return, determining a liability for or a
right to refund of Taxes or in conducting any audit or other proceeding in
respect of Taxes.
6.7 Updating of General Information and Schedules. Between the date of
this Agreement and the Closing Date, Seller will promptly deliver to Buyer, on a
weekly basis, information relating to the operation of the Business, including
weekly sales reports and such other financial information that may be reasonably
requested by Buyer. If following the date hereof Seller becomes aware of matters
which, if in existence or known to Seller on the date hereof, would have been
required to be disclosed in any Schedule hereto or would be required to modify
any representation or warranty contained herein, Seller shall be permitted, by
written notice in accordance with Section 25, to inform Buyer of the relevant
matter and the Schedule or provision of this Agreement to which it relates. Upon
such notice being given to the Buyer the relevant Schedule shall be deemed to be
updated and amended to the extent of the disclosure.
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6.8 HSR Act. Each party has filed with the Federal Trade Commission
(the "FTC") and the Antitrust Division of the United States Department of
Justice (the "Antitrust Division") notification and report forms in accordance
with the HSR Act with respect to the transactions contemplated by this
Agreement. Each party will promptly furnish to the FTC and the Antitrust
Division any additional information requested by either of them pursuant to the
HSR Act. Buyer shall be responsible for the payment of the filing fees in
connection with such notification and report forms.
6.9 Demolition and Clean Up. (a) Buyer and Seller agree that, from and
after the date hereof and for some period of time subsequent to the Closing
Date, work will have to be done on the Owned Real Property to accomplish the
following:
(i) the demolition of certain vacant structures and
buildings located on the Owned Real Property
(described on Schedule 4.16(d)),
(ii) the clean-up of that portion of the Owned Real
Property currently utilized by the Business as an
onsite scrap and unused equipment storage area
(located in the approximate area shown on Schedule
6.9(b)), and
(iii) the closing of certain lagoons located on the Owned
Real Property (as more fully described on Schedule
6.9(c)), but not including ongoing groundwater
monitoring subsequent to closure.
The task described in the immediately preceding sentence shall hereinafter be
referred to as the "Project".
(b) Buyer and Seller agree, from and after the date hereof, jointly to
define the scope of work necessary to accomplish all aspects of the Project in
the most cost-effective manner possible, bearing in mind the need in all cases
to minimize any disruption caused to Buyer or the Business. Notwithstanding the
immediately preceding sentence, with respect to that portion of the Project
described in clause (iii) of subsection (a) above, the closure of lagoons shall
be performed in accordance with the requirements of applicable law and the
Pennsylvania Department of Environmental Protection but, subject to the
immediately foregoing, in accordance with the manner and method of closure
specified by Seller. Buyer and Seller also agree, after the Closing Date,
jointly to select the (i) contractor or contractors who will perform the work
necessary to accomplish the Project and (ii) an engineering firm that will be
responsible for the daily supervision and management of contractor efforts in
completing the Project. Each of the contractors and the engineering firm will be
required to post payment and performance bonds to secure its performance. The
parties agree to make any refinements to the agreed upon scope of work as may be
necessary, in the reasonable view of the selected contractor(s) and/or
engineering firm, to accomplish the Project in a manner consistent with the
first and second sentences of this subsection (b), as applicable, and consistent
with the requirements of all applicable laws.
(c) It is understood that, as the Project progresses and subject to
subsection (b) set forth immediately above, Buyer will have the overall right
and responsibility to direct the Project and the
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efforts of those carrying out tasks necessary to complete the Project. Thus,
upon final agreement by Buyer and Seller as to the precise scope of work with
respect to the Project and selection of the appropriate contractor(s) and
engineering firm, Buyer shall enter into such bonded contracts with said
contractor(s) and engineering firm as are appropriate and customary relative to
their performance of the Project scope of work ("Project Contracts"); provided
that, Seller shall have been allowed to review and approve (which approval shall
not unreasonably be withheld or delayed) the terms of the Project Contracts (and
especially, but not exclusively, the terms thereof relating to the amount and
timing of any compensation) at the time of their preparation and negotiation.
Provided that Buyer has complied with the requirements of this Section 6.9,
Seller shall be responsible to pay to Buyer all amounts due under the Project
Contracts within twenty (20) days of written notification to Seller by Buyer of
any amounts due thereunder, which notification shall be accompanied by a copy of
all invoices and supporting documentation given to Buyer in connection with such
amounts by any one or more of the contractor(s) or the engineering firm. All
change orders to Project Contracts that affect the scope of work of the Project
in any significant manner or that increase the cost thereof must be approved in
advance by Seller (which approval shall not unreasonably be withheld or
delayed).
(d) Although Buyer generally will have the right to direct the Project,
Buyer agrees that it will seek advance advice and consultation from Seller, on a
continuing basis and until the Project has been completed, on all meaningful
aspects of, decisions to be made with respect to, or notices or correspondence
to be given in connection with, the Project. Buyer will deliver or make
available to Seller all correspondence or documents concerning the Project in
Buyer's possession and will grant Seller access to its premises, upon reasonable
advance notice and during normal business hours, to inspect the work being done
in connection with the Project as often as Seller shall deem reasonably
necessary.
(e) The Project Contracts shall obligate the contractor(s) and the
engineering firm to take all steps that are reasonably necessary to ensure (i)
that the work being performed in connection with the Project is performed in a
competent, safe and workmanlike manner and (ii) that all firms or persons
performing any task in connection with the Project take all reasonable
precautions to avoid (A) the unnecessary exposure of any person to Hazardous
Substances, (B) the release or discharge of Hazardous Substances to the
environment or (C) any other act or omission to act that might give rise to an
Environmental Claim.
(f) Seller shall indemnify Buyer (including its officers, directors,
employees, agents or representatives) from and against any Losses incurred by
Buyer by reason of, resulting from or arising out of (i) any exposure by any
person to any Hazardous Substances as a consequence of the performance of any
task in connection with the Project or (ii) any Environmental Claims that occur
solely and only as a consequence of the Project; provided that, Seller will not
be so obligated to indemnify Buyer if and to the extent any Losses are incurred
as a consequence of any failure by Buyer to perform its obligations under this
Section 6.9 or as a consequence of the negligent act, negligent omission to act
or willful misconduct of any employee, agent or representative of Buyer. The
indemnification obligation set forth in this subsection (f) is in addition to
Seller's indemnification obligations under Sections 8 and 19.1 herein and shall
survive the completion of the portion of the Project (as delineated in clauses
(i), (ii) and (iii) of Section 6.9(a)) giving rise to such
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obligation for a period of five (5) years and shall not otherwise be limited
except as set forth in this subsection (f). The provisions of Section 19.4
hereof shall apply with respect to any claims for indemnification made by Buyer
under this subsection (f).
6.10 Use of Treated Water. Mallinckrodt Chemical is a party to an
agreement among Seller, TRIMET and the Whitehall Township Authority ("WTA")
dated March 22, 1995 (the "WTA Agreement") pursuant to which TRIMET is required
to pump ground-water from WTA wells, pipe such ground-water to a holding lagoon
located on the Retained Real Estate, pipe and treat the same in its wastewater
treatment plant located on the Owned Real Estate and discharge it pursuant to
the site's wastewater discharge permit. Buyer agrees, from and after the Closing
Date, to provide Seller with reasonable cooperation (including granting Seller
access to its facilities upon reasonable advance notice to Buyer during normal
business hours) in connection with Mallinckrodt Chemical's continuing
performance and administration of the WTA Agreement, including, without
limitation, accepting and using water as necessary from WTA wells generally in
the manner and to the same extent as currently utilized by the Business, such
acceptance and use by Buyer to continue until remediation of all WTA wells
ceases and to recommence if remediation, once ceased, resumes for any reason.
6.11 Certain Agreements Concerning Real Property.
(a) The parties acknowledge that the land comprising the Owned Real
Property, to be conveyed by Seller to Buyer hereunder, is situated on portions
of two existing tax parcels. Seller has advised Buyer that, as a condition to
the conveyance of fee simple title to the Owned Real Property, Seller must
obtain subdivision approvals from the appropriate governmental authorities, and
that Seller does not expect to obtain such approvals until approximately two to
three months after the Closing Date. Accordingly, the parties agree that, in the
event Seller is unable to convey to Buyer fee simple title to the Owned Real
Property on the Closing Date, Seller and Buyer shall enter into a lease
agreement containing the terms set forth on Schedule 6.11(a) and such other
terms as are customary for similar commercial leases (the "Provisional Lease
Agreement"). The parties shall, at Buyer's request, enter into a Memorandum of
Lease, containing such terms as may be required by law and such other terms
reasonably requested by Buyer, which may, if permitted by law, be recorded by
Buyer in the appropriate land records of the county in which the Owned Real
Property is located; provided, that Buyer agrees not to record such Memorandum
unless Buyer, in its discretion, determines that its rights in the Owned Real
Property may be insecure in any way. Seller shall pay any recording or transfer
fees in connection with the Provisional Lease Agreement. Seller unconditionally
agrees that, within one calendar year following the Closing Date (the
"Conveyance Deadline"), Seller shall obtain the necessary subdivision or other
approvals necessary to convey to Buyer fee simple title to the Owned Real
Property, and convey fee simple title to the Owned Real Property to Buyer, and
Buyer shall accept the same from Seller, in accordance with the terms of this
Agreement, provided that Seller shall make every reasonable effort to procure
such approvals as soon as possible after the Closing Date. The parties further
acknowledge that the portion of the Owned Real Property identified as Lot No. 2
on the Subdivision Plan is landlocked, and Seller agrees to use its best,
commercially reasonably efforts to obtain (i) a perpetual easement, benefitting
and appurtenant to Lot No. 2, over land to the north of Lot No. 4 currently
owned by Jeras Corporation as identified on the Subdivision Plan, for ingress
and egress purposes to Mauch Chunk Road, which
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area is partially identified on the Subdivision Plan as the "North Easement" and
(ii) a perpetual easement, benefitting and appurtenant to Lot No. 2, over land
to the west of Lot No. 4 currently owned by Jeras Corporation as identified on
the Subdivision Plan, for ingress and egress purposes to and from Cedar Crest
Blvd, which area is partially identified on the Subdivision Plan as the "West
Easement" (either of such easements is herein referred to as the "Necessary
Access Easement"). Seller shall grant to Buyer an easement or easements for
ingress and egress over that portion of the area described as the "Proposed
Access Easement" located on Lot No. 4 as shown on the Subdivision Plan, for
access to the North Easement, and over the western most 60 feet of Lot No. 4 as
shown on the Subdivision Plan, for access to the West Easement.
(b) In order to secure the performance of Seller's obligations under
Section 6.11(a) above and all damages arising from the breach thereof or from
the failure to obtain the Necessary Access Easement (either pursuant to clause
6.11(a)(i) or (ii)), Seller agrees to grant and deliver to Buyer on the Closing
Date a mortgage or deed of trust (the "Security Instrument") encumbering the
entire tax parcels, and all improvements thereon, on which all or any portion of
the Owned Real Property is situated. Seller shall pay any recording fees or
mortgage tax in connection with the Security Instrument. Buyer shall have the
right to foreclose the Security Instrument in the event of a default by Seller
under the Security Instrument, including the failure to convey title to the
Owned Real Property by the Conveyance Deadline.
(c) In order to further secure the performance of Seller's obligations
under Section 6.11(a) above and to assure the conveyance to Buyer of the
Necessary Access Easement, Seller agrees that, out of the total Purchase Price
to be paid on the Closing Date, the sum of Five Million Dollars ($5,000,000.00)
shall be deposited and held in escrow with the Title Company (defined in Section
11.2(h) below). Such sum shall be placed in an interest bearing account (such
sum, and any interest thereon, is herein referred to as the "Escrow Sum") and
shall be disbursed to Seller upon the conveyance of the Owned Real Property to
Buyer in accordance with the terms hereof on or prior to the Conveyance
Deadline. In the event that Seller fails to convey to Buyer fee title to the
Owned Real Property and also the Necessary Access Easement in accordance with
the terms hereof on or prior to the Conveyance Deadline, the Title Company shall
disburse the Escrow Sum to Buyer, without limiting the right of Buyer to pursue
any other remedies or damages by reason of such breach, including, without
limitation, the right to specific performance and to institute foreclosure
proceedings pursuant to the Security Instrument. The parties agree to enter into
an escrow agreement with the Title Company governing the Escrow Sum consistent
with the terms set forth above prior to the Closing Date.
(d) The parties further agree to enter into and deliver to each other,
on the Closing Date, lease agreements relating to the Leased Real Property
containing the terms set forth on Schedule 6.11(d) and such other terms as may
be customary for similar commercial leases (the "New Lease Agreement"). The
parties acknowledge that the New Lease Agreement shall contain a right of first
offer to purchase the Leased Real Property in accordance with the terms set
forth on Schedule 6.11(d).
(e) Upon obtaining the subdivision approval referred to in Section
6.11(a) above, the parties agree to reexecute or amend, at Buyer's election, the
New Lease Agreement to include the
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adjusted descriptions of the parcels subject to such leases (i.e. Lot Nos. 3 and
4 as identified on the Subdivision Plan) and to record a memorandum of such
lease. Concurrently therewith, Seller will deliver, with respect to the Leased
Real Property, a leasehold owner's insurance policy (ALTA form), if available,
insuring the leasehold title of Buyer in such real estate, including affirmative
insurance covering the option to purchase contained in the New Lease Agreement,
subject only to any applicable Permitted Encumbrances, in an amount of $600,000
or such other amount as may be agreed to in the Allocation Statement referenced
in Section 13 if it has been determined (provided, however, that Buyer may (at
its expense) increase such amount for title insurance coverage purposes, but
Buyer will pay for any resulting increase in the cost of the title insurance or
the amount of transfer or conveyance taxes otherwise payable by Buyer and Seller
in accordance with Section 14 hereof), with standard exceptions deleted, with
affirmative insurance as to any appurtenant easements, and containing a "same
land as survey" endorsement with reference to Lot Nos. 3 and 4 only, which title
policy shall be in form reasonably acceptable to Buyer and issued by
Commonwealth Land Title Insurance Company or another title insurance company
mutually acceptable to the parties.
(f) Seller will deliver, at its expense, a survey of each parcel
comprising the Owned Real Property to be conveyed by Seller to Buyer, which
survey shall be prepared in accordance with ALTA/ACSM Minimum Standard Detail
Requirements, showing all Table A items thereof (except items 5 and 12 and such
other items as may not be reasonably necessary or feasible), and certified in
favor of Seller, Buyer, Buyer's lender and the title company. If such survey
cannot be delivered by the Closing Date, Seller shall deliver such surveys to
Buyer by the Conveyance Deadline.
(g) Buyer agrees that Seller may reserve, in the special warranty
deeds, an easement or easements for ingress and egress over the Owned Real
Property, along the area identified on the Subdivision Plan as the Proposed 33
foot wide access easement (the "Proposed Access Easement") to the extent such
Proposed Access Easement is located within the bounds of the Owned Real
Property, to enable Seller's access to Cedar Crest Blvd from each of lots nos. 3
and 4 as described on the Subdivision Plan. The final location and the terms of
such easements, as well as the easements referred to in Section 6.11(a), shall
be subject to the mutual agreement of Buyer and Seller. Each party shall share
in the cost of maintaining any roads on the Proposed Easement Area in relation
to the relative burden placed on the roads by the users thereof.
6.12 Distributor/Sales Agent Contracts. The parties hereto acknowledge
that, with respect to certain contracts listed on Schedule 4.15 (as reflected in
the notes column), Seller is not assigning to Buyer Seller's right and
obligations under such contracts to the extent that such rights and obligations
do not relate to the Business or the Transferred Assets.
7. EMPLOYMENT MATTERS.
7.1 Employment by Buyer. Each employee listed on Schedule 7.1 who is
employed in connection with the operation of the Business on the Closing Date
(and who is not on disability leave as of that date) shall become an employee of
Buyer from and after the Closing Date, unless any such employee otherwise elects
(the "Transferred Employees"). Buyer shall have no liability for the payment of
wages (or withholdings in respect thereof) or the provision of any benefits
(including,
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without limitation, severance benefits) payable to the employees of Seller other
than the Transferred Employees. Any employee who, on the Closing Date, is on
short-term disability (but not long-term disability) or otherwise on a leave of
absence available to such employee under applicable law or in accordance with
Seller's general policies applicable to all employees, may also elect to become
a Transferred Employee provided such employee returns from short-term disability
leave or any permissible leave of absence within ninety (90) days after the
Closing Date.
7.2 Terms of Employment of Transferred Employees. Buyer shall (a)
employ each Transferred Employee for base compensation at least equal to each
such Transferred Employee's base compensation with Seller immediately prior to
the Closing Date, (b) offer each Transferred Employee benefits in accordance
with Sections 7.3 through 7.6, and (c) otherwise employ each Transferred
Employee on terms and conditions that are comparable in the aggregate to the
terms and conditions of their employment with Seller prior the Closing Date.
During the one-year period following the Closing Date, Buyer will (x) not
terminate any Transferred Employee other than for cause, (y) maintain each
Transferred Employee in the same position that such Transferred Employee held
with Seller prior to the Closing Date or a position comparable in responsibility
and authority to such position (except for any change to which any such
Transferred Employee consents) and (z) continue to offer the Transferred
Employees compensation and benefits in accordance with the first sentence of
this Section 7.2 hereto. In the event Buyer terminates any Transferred Employee
other than for cause during such one-year period, Buyer shall make a severance
payment to such Transferred Employee in accordance with the principles set forth
on Exhibit 7.2.
7.3 Welfare Benefit Plans. Notwithstanding Section 7.3 above, Buyer
will have complete discretion, on and as of the Closing Date, to establish
coverage for and enroll the Transferred Employees in welfare benefit plans of
its choice, subject to any established eligibility requirements, except that (a)
pre-existing medical conditions will not be an eligibility requirement for
enrollment in (and treatment of such conditions will be covered as if the onset
of such conditions occurred after coverage began under) any medical, vision, or
dental plan; (b) any such welfare benefits provided to any Transferred Employee
must be provided to all Transferred Employees; and (c) the benefits provided by
Buyer to the Transferred Employees will not, on average, be worth less to the
Transferred Employees as a whole than the welfare benefits that they were
receiving from Seller immediately prior to the Closing Date. With respect to all
such welfare benefit plans, Buyer will grant all Transferred Employees credited
service for all employment with Seller up to and including the Closing Date for
purposes of eligibility and vesting. No assets will be transferred from Seller
to Buyer, from trustee to trustee, or from funding agent to funding agent with
respect to the funding of any employee welfare benefit plans. Notwithstanding
the foregoing, (i) Buyer's retiree medical benefits will cover only those
Transferred Employees required to be covered for such benefits by existing
collective bargaining agreements, and Seller shall have full liability and
responsibility for the payment of, and shall reimburse Buyer for any amounts
paid by Buyer for, retiree medical benefits with respect to employees who were
employed in the operation of the Business who did not become Transferred
Employees by reason of retirement prior to the Closing Date or otherwise; (ii)
Seller will be liable and responsible for paying, in full, any amount due to any
Transferred Employee under any of Seller's Welfare Benefit Plans covering such
Transferred Employees; and (iii) Seller shall have full liability and
responsibility for the payment of any amounts due under any stay bonus or
incentive arrangement put into place by Seller in anticipation of the
transaction
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contemplated by this Agreement prior to the Closing, no matter when such amounts
may be due or payable, and any employee bonus or incentive arrangements to the
extent related to or payable with respect to periods ending on or before the
Closing Date.
7.4 Pension Plan for Non-Union Employees. No assets will be transferred
from Seller to Buyer or from trustee to trustee on account of any qualified
pension plan covering the non-union employees (the "Seller's Non-Union Pension
Plan"). Seller will amend the Seller's Non-Union Pension Plan to vest, as of the
Closing Date, the interest of each Non-Union Employee, if not otherwise vested.
Buyer will enroll all of such Non-Union Employees in the qualified pension plan
that Buyer has established for similarly situated employees, subject to the
eligibility requirements stated in such plan. Buyer will amend such plan to
recognize service with Seller for purposes of determining vesting and
eligibility to receive benefits. Buyer will have sole and exclusive control and
administration of the Buyer's Non-Union Pension Plan.
7.5 Savings Plan for Non-Union Employees. Effective as of the Closing
Date, participation of Transferred Employees in any qualified savings plan of
Seller covering Non-Union Employees (the "Seller's Non-Union Savings Plan")
shall cease, and contributions to Seller's NonUnion Savings Plan from and with
respect to Transferred Employees shall cease. Buyer will enroll all of such
Non-Union Employees in the qualified savings plan that Buyer has established for
similarly situated employees, subject to the eligibility requirements stated in
such plan. As soon as reasonably practical following the Closing Date, Buyer and
Seller will arrange for a trustee-to-trustee transfer of the accounts of such
Non-Union Employees from Seller's Non-Union Savings Plan to the qualified
savings plan of Buyer.
7.6 Union Employees. (a) Notwithstanding Section 7.3 above, with
respect to union employees of the Business on and as of the Closing Date
("Transferred Union Employees"), Buyer will assume all liability and
responsibility for all welfare plans and benefits provided for in all union
collective bargaining agreements that exist on and after the Closing Date and
will make all payments and perform all acts required thereunder after the
Closing Date, except that Seller shall reimburse Buyer for all payments to be
made thereunder to the extent they relate to periods of employment through the
Closing Date. The liability of Buyer and Seller with respect to the savings and
pension plans covering Transferred Union Employees is fully delineated in the
balance of this Section 7.6 set forth below.
(b) Benefits under Seller's Union Savings Plan. Effective as of the
Closing Date, participation of Transferred Union Employees in the Investment and
Savings Plan for Hourly Employees (the "Seller's Union Savings Plan") shall
cease, and contributions to Seller's Union Savings Plan from and with respect to
Transferred Union Employees shall cease.
(c) Benefits under Buyer's Union Savings Plan. Effective as of the
Closing Date, the Transferred Union Employees shall commence participation in
Buyer's Union Savings Plan which shall provide such benefits as may be required
under the applicable collective bargaining agreement. There shall be no transfer
of assets or liabilities from Seller's Union Savings Plan to Buyer's Union
Savings Plan.
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(d) Benefits under Seller's Union Pension Plan. Effective as of the
Closing Date, the accrual of benefits of Transferred Union Employees under the
TRIMET Hourly Employee Retirement Plan (the "Seller's Union Pension Plan") shall
cease. Benefits accrued up to the Closing Date to each Transferred Union
Employee under Seller's Union Pension Plan shall be fully vested, and Seller
shall provide to Buyer a schedule listing such accrued benefits for each
Transferred Union Employee within ninety (90) days after the Closing Date.
Seller shall pay or cause to be paid to the Transferred Union Employees all
accrued benefits under the Seller's Union Pension Plan on and as of the Closing
Date when such benefits shall be payable pursuant to the terms thereof.
(e) Benefits under Buyer's Union Pension Plan. On or before the Closing
Date, Buyer shall either amend an existing pension plan or plans or establish a
new pension plan or plans as necessary to provide each Transferred Union
Employee the pension benefits required under the applicable collective
bargaining agreement (collectively, the "Buyer's Union Pension Plan"), which
shall be effective as of the Closing Date. The benefits payable under Buyer's
Union Pension Plan shall be reduced by the benefits available to such
Transferred Union Employee under Seller's Union Pension Plan as of the date of
the commencement of benefits to such Transferred Union Employee under Buyer's
Union Pension Plan (whether or not the Transferred Union Employee elects to
receive benefits under Seller's Union Pension Plan as of such date). There shall
be no transfer of assets or liabilities from Seller's Union Pension Plan to
Buyer's Union Pension Plan.
8. ENVIRONMENTAL INDEMNIFICATION.
8.1 Environmental Definitions. In this Agreement, the following defined
terms shall have the following meanings:
"Governmental Authority" shall mean any foreign, federal,
state or local government, or any entity, authority, agency, commission
or other similar body exercising executive, legislative, judicial,
regulatory or administrative authority or functions of or pertaining to
government, including any court or arbitration or similar tribunal.
"Governmental Rule" shall mean any foreign, federal, state or
local law, judgment, order, decree, statute, ordinance, rule or
regulation.
"Environmental Claims" shall mean all claims that are
asserted, obligations that are imposed and actions that are required by
Governmental Authorities or private parties under Environmental Laws
which arise other than as a result of Voluntary Environmental
Investigations undertaken by Buyer after the Closing Date. Such claims
shall also include all claims and actions required by any Environmental
Law involving the investigation, monitoring, containment, restoration
or cleanup of soils, structures, ground water, surface water, vapors or
other features of any sites (whether waste disposal sites, former plant
sites or other sites) on which any Hazardous Substances may be found
which claims, obligations or actions arise other than as a result of
Voluntary Environmental Investigations undertaken by Buyer after the
Closing Date.
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"Shared Environmental Claims" shall mean all claims that are
asserted, obligations that are imposed and actions that are required by
Governmental Authorities or private parties under Environmental Laws
which arise as a result of Voluntary Environmental Investigations
undertaken by Buyer after the Closing Date. Such claims shall also
include all claims and actions required by any Environmental Law
involving the investigation, monitoring, containment, restoration or
cleanup of soils, structures, ground water, surface water, vapors and
other features of any sites (whether waste disposal sites, former plant
sites or other sites) on which any Hazardous Substances may be found,
which claims, obligations or actions arise as a result of Voluntary
Environmental Investigations undertaken by Buyer after the Closing
Date.
"Voluntary Environmental Investigation" shall mean any
investigation or monitoring conducted by or on behalf of Buyer other
than pursuant to a requirement (not itself imposed as a consequence of
any voluntary action by or on behalf of Buyer) of any Environmental
Law, other legal obligation or under any Governmental Rule.
8.2 Indemnification by Seller for Environmental Claims. Seller shall
indemnify Buyer against any loss, cost, liability or expense (including, without
limitation, costs and expenses of litigation and, to the extent not prohibited
by law, reasonable attorneys' fees) (all of which are referred to as "Losses")
incurred by Buyer by reason of, resulting from or arising out of any and all
Environmental Claims that in turn result from or arise out of (a) the operation
of the Business on or prior to the Closing Date or (b) the ownership or use of
the Retained Businesses or the Retained Real Estate prior to, on or after the
Closing Date.
8.3 Limited Indemnification by Seller for Shared Environmental Claims.
Notwithstanding the provisions of Section 8.2 above, Seller shall, to the extent
set forth below, indemnify Buyer against Losses incurred by Buyer by reason of,
resulting from or arising out of any and all Shared Environmental Claims related
to the Transferred Assets or arising from the operation of the Business on or
prior to the Closing Date upon receiving notice of such Shared Environmental
Claims from Buyer during the periods set forth below:
(a) Shared Environmental Claims notified to Seller on or
before the first anniversary of the Closing Date to the extent that
Losses therefrom are in excess of Three Million Dollars ($3,000,000),
and then only for Eighty Percent (80%) of such Losses;
(b) Shared Environmental Claims notified to Seller after the
first anniversary but on or before the second anniversary of the
Closing Date to the extent that Losses therefrom are in excess of Two
Million Four Hundred Thousand Dollars ($2,400,000), and then only for
Sixty Percent (60%) of such Losses;
(c) Shared Environmental Claims notified to Seller after the
second anniversary but on or before the third anniversary of the
Closing Date to the extent that Losses therefrom are in excess of One
Million Eight Hundred Thousand Dollars ($1,800,000), and then only for
Forty Percent (40%) of such Losses;
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(d) Shared Environmental Claims notified to Seller after the
third anniversary but on or before the fourth anniversary of the
Closing Date to the extent that Losses therefrom are in excess of One
Million Two Hundred Thousand Dollars ($1,200,000), and then only for
Twenty Percent (20%) of such Losses; and
(e) Shared Environmental Claims notified to Seller after the
fourth anniversary but on or before the fifth anniversary of the
Closing Date to the extent that Losses therefrom are in excess of Six
Hundred Thousand Dollars ($600,000), and then only for Ten Percent
(10%) of such Losses.
8.4 Control of Remediation. The party which is responsible for the
majority of the cost of any Remedial Action (as defined in Section 8.4(a)) shall
be permitted to control such action, subject to the provisions set forth below.
For purposes of irrevocably determining which party is responsible for the
majority of the cost of the Remedial Action, the parties will attempt to assess
such costs in good faith prior to commencement of any Remedial Action. If they
are unable to agree on the amount of such costs, the matter of estimating such
costs will be referred for resolution to a nationally recognized firm of
environmental consultants whose services have not previously been significantly
utilized by the parties hereto (the "Independent Environmental Consultants").
The parties will share equally the cost of the Independent Environmental
Consultants. The amount of costs determined by the Independent Environmental
Consultants will be binding on the parties only for the purpose of determining
which party shall control any Remedial Action.
(a) Seller Controlled Remediation. With respect to any Losses arising
under this Section 8 for which the liability of Seller is greater than Buyer and
to the extent that such liability involves or may involve the implementation of
any action required by Environmental Law to investigate, clean up, remove, treat
or in any other way address Hazardous Substances ("Remedial Action"), Seller
shall have the right to control, direct and implement (if and as appropriate)
any such Remedial Action, but Buyer shall have the right to review and provide
Seller with written comments in advance of (i) the Seller's selection of
consultants and contractors designated to perform the Remedial Action and (ii)
Seller's final determination of the scope of work for, and type of, the Remedial
Action to be implemented, and in connection with such right of review Buyer
shall have access to Seller's personnel and relevant records and data as
necessary. Seller shall review and reasonably consider Buyer's comments. Seller
shall provide all plans, reports and submissions to any Governmental Authority
regarding any such Remedial Action in draft form to Buyer a reasonable time
prior to transmission of such items to such Governmental Authority and Seller
shall review and reasonably consider any of Buyer's comments on such plans,
reports and submissions.
(b) Buyer Controlled Remediation. With respect to any Losses arising
under this Section 8 for which the liability of Buyer is greater than Seller and
to the extent that such liability involves or may involve the implementation of
any action required by any Environmental Law for Remedial Action, Buyer shall
have the right to control, direct and implement (if and as appropriate) any such
Remedial Action, but Seller shall have the right to review and provide Buyer
with written comments in advance of (i) Buyer's selection of consultants and
contractors designated to perform the Remedial Action and (ii) Buyer's final
determination of the scope of work for, and type of, the Remedial Action to be
implemented, and in connection with such right of review Seller shall have
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access to Buyer's personnel and relevant records and data as necessary. Buyer
shall review and reasonably consider Seller's comments. Buyer shall provide all
plans, reports and submissions to any Governmental Authority regarding any such
Remedial Action in draft form to Seller a reasonable time prior to transmission
of such items to such Governmental Authority and Buyer shall review and
reasonably consider any of Seller's comments on such plans, reports and
submissions.
9. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer under
this Agreement are subject to the satisfaction or waiver by Buyer on or prior to
the Closing Date of the following conditions.
9.1 Representations and Warranties True on Closing Date. The
representations and warranties of Seller made in this Agreement are true in all
respects as set forth herein as of the Closing Date.
9.2 Compliance with Agreement. Seller has performed and complied in all
material respects with all of its obligations under this Agreement that are to
be performed or complied with by it prior to or on the Closing Date.
9.3 No Litigation. No litigation, proceeding, investigation or inquiry
is pending or threatened which, if sustained, would enjoin or prevent the
consummation of the transactions contemplated by this Agreement or would
materially and adversely affect Buyer's right to continue the operation of the
Business as presently conducted.
9.4 Third Party Consents and Approvals; Estoppel Certificates. Seller
shall have obtained all third-party consents and approvals required for the
transfer or continuance, as the case may be, of the Contracts and Licenses
designated on Schedule 9.4 as requiring third party consent or approval, and
such third parties shall have provided consents, approvals, estoppel
certificates, nondisturbance agreements and/or written clarifications of the
rights of Buyer thereunder, in each case, in form and substance reasonably
satisfactory to Buyer.
9.5 Material Adverse Change. There shall not have occurred any material
adverse change in the Transferred Assets or the Business' operations, financial
condition or prospects.
9.6 HSR Act. All required registrations and filings under the HSR Act
shall have been made and any waiting period applicable to the transactions
contemplated hereby pursuant to the HSR Act shall have expired or been
terminated.
9.7 Legal Opinion. Buyer shall have received from counsel for Seller an
opinion that the transactions contemplated hereby have been duly authorized by
all necessary corporate action and that this Agreement and the Other Documents
represent the binding obligation of Seller enforceable in accordance with their
terms, subject only to standard enforceability exceptions.
9.8 Title Insurance. Seller shall have delivered to Buyer the title
insurance policies or other assurance of title as described in Section 11.2(h).
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9.9 Satisfaction of Buyer with Updated Schedules. To the extent that
Seller modifies the Schedules pursuant to Section 6.7 hereof and such
modifications disclose or reflect in the aggregate a material increase in the
liabilities being assumed by Buyer, a material decrease in the value or material
change in the condition of, or a material encumbrance on, the assets, properties
or rights being purchased by Buyer, Buyer shall have the right to terminate this
Agreement. For the purposes of this Section 9.9, the term "material" shall mean
an amount equal to or greater than $300,000.
9.10 European Operations. Arrangements reasonably satisfactory to Buyer
shall have been made concerning (i) TRIMET's European operations carried on by
Seller or its Affiliates' overseas employees and (ii) the ability of Buyer to
continue to provide products and services to established and potential customers
of the Business in Europe.
9.11 Reliance Letter. Buyer shall have received a reliance letter from
Environmental Resources Management reasonably satisfactory to Buyer and its
lenders.
10. CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller
under this Agreement are subject to the satisfaction or waiver by Seller on or
prior to the Closing Date of the following conditions:
10.1 Representations and Warranties True on Closing Date. Buyer's
representations and warranties made in this Agreement are true in all respects
as set forth herein as of the Closing Date.
10.2 Compliance with Agreement. Buyer has performed and complied in all
material respects with all of its obligations under this Agreement that are to
be performed or complied with by it prior to or on the Closing Date.
10.3 No Litigation. No litigation, proceeding, investigation or inquiry
is pending or threatened which, if sustained, would enjoin or prevent the
consummation of the transactions contemplated by this Agreement.
10.4 License Transfers. Seller shall have obtained all material
third-party consents and approvals required for the transfer or continuance, as
the case may be, of the Licenses.
10.5 HSR Act. All required registrations and filings under the HSR Act
shall have been made and any waiting period applicable to the transactions
contemplated hereby pursuant to the HSR Act shall have expired or been
terminated.
10.6 Legal Opinion. Seller shall have received from counsel for Buyer
an opinion that the transactions contemplated hereby have been duly authorized
by all necessary corporate action and that this Agreement and the Other
Documents represent the binding obligation of Buyer enforceable in accordance
with their terms, subject only to standard enforceability exceptions.
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11. CLOSING; PROCEDURES.
11.1 Date and Time. The closing of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of Thompson, Hine
& Flory LLP at 3900 Key Center, 127 Public Square, Cleveland, Ohio, or at the
offices of Seller at 675 McDonnell Blvd., Hazelwood, Missouri, at 10:00 a.m. on
July 31, 1998 (or such other date and place as the parties may mutually agree).
The actual date of the Closing is referred to as the "Closing Date."
11.2 Procedures. If all of the conditions specified in Sections 9 and
10 have been fulfilled or are waived in writing by Buyer or Seller, as the case
may be, on or by the Closing Date, then, on the Closing Date:
(a) Seller and Buyer will execute and deliver an assignment
and assumption agreement substantially in the form attached as part of
Exhibit 11.2(a);
(b) Seller and Buyer will execute and deliver the New Lease
Agreement;
(c) Buyer and Seller shall enter into an agreement
substantially in the form of Exhibit 11.2(c) hereto, whereby Seller
will provide to Buyer certain transitional services which are currently
provided to TRIMET by the Retained Businesses for a period of five (5)
months after the Closing Date;
(d) Buyer and Seller shall each cause to be delivered to the
other the opinions referenced in Sections 9.7 and 10.6, as appropriate;
(e) Seller will execute and deliver a bill of sale of the
Transferred Assets substantially in the form attached as part of
Exhibit 11.2(e);
(f) Seller will execute and deliver separate assignments, or
other appropriate instruments of transfer with respect to any of the
Transferred Assets not appropriately transferred by an assignment and
assumption agreement and bill of sale, in each case, in form reasonably
satisfactory to Buyer, if and as necessary in the reasonable opinion of
Buyer;
(g) Seller will deliver special warranty deeds, in form and
substance reasonably acceptable to Buyer, transferring all Owned Real
Property to Buyer, subject to any and all Permitted Encumbrances, and
shall also execute and deliver to Buyer the Necessary Access
Easement(s) and other easements over the Retained Real Estate provided
in Section 6.11(a); or, if Seller is unable to deliver the special
warranty deeds on the Closing Date, Seller and Buyer will execute and
deliver the Provisional Lease Agreement and Seller will deliver to
Buyer the Security Instrument pursuant to Section 6.11 above, pending a
completion of the transfer as provided in Section 6.11(a) above.
(h) Seller will deliver at Seller's cost, with respect to the
Owned Real Property, an owner's title insurance policy (ALTA form),
insuring the fee simple title of Buyer in such real property, including
insurance covering the Necessary Access Easement(s), subject only
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to any applicable Permitted Encumbrances, in an amount of $2,400,000 or
such other amount as may be agreed to in the Allocation Statement
referenced in Section 13 if it has been determined (provided, however,
that Buyer may (at its expense) increase such amount for title
insurance coverage purposes, but Buyer will pay for any resulting
increase in the cost of the title insurance or the amount of transfer
or conveyance taxes otherwise payable by Buyer and Seller in accordance
with Section 14 hereof), with standard exceptions deleted, with
affirmative insurance as to any appurtenant easements, and containing a
"same land as survey" endorsement, which title policy shall be in form
reasonably acceptable to Buyer and issued by Commonwealth Land Title
Insurance Company or another title insurance company mutually
acceptable to the parties (the "Title Company"); provided, that if
Seller is unable to deliver to Buyer fee simple title to Buyer as
provided herein on the Closing Date, Seller will deliver a leasehold
insurance policy insuring Buyer's leasehold estate under the
Provisional Lease Agreement (in the amount of $2,400,000) and a loan
policy of title insurance (in the amount of $2,400,000) insuring
Buyer's Security Instrument, each in accordance with the applicable
terms set forth above; and
(i) Buyer will deliver the Closing Date Payment to Seller by
wire transfer.
12. FURTHER ASSURANCES. Seller will, from time to time after the
Closing, upon the reasonable request of Buyer, execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered, all such further
assignments and assurances as may be reasonably required to transfer to and vest
in Buyer all right, title and interest of Seller in and to the Transferred
Assets and the Business and to protect the right, title and interest of Buyer in
and to the Transferred Assets and the Business.
13. ALLOCATION. Buyer and Seller mutually agree that the Purchase Price
shall be allocated among the Transferred Assets in the manner required by
Section 1060 of the IRC within 120 days after the Closing Date or with respect
to the Owned Real Property, as soon as possible after the subdivision plan
relating thereto is finally approved by the appropriate Governmental
Authorities, but in no event later than December 1, 1998. In making such
allocation, the allocation set forth on the Allocation Statement attached or to
be attached hereto as Exhibit 13 shall apply, which will be agreed upon and
delivered by the parties on the Closing Date or as promptly thereafter as
practicable.
14. TAXES. Unless otherwise expressly set forth herein, Seller and
Buyer will each pay one half of all sales, use and transfer taxes and conveyance
fees, if any, applicable to the transfer of the Transferred Assets and the other
transactions provided for by this Agreement.
15. NON COMPETITION COVENANT.
15.1 Subject to Section 15.5, Seller agrees and warrants that neither
it nor its Affiliates will at any time within five (5) years immediately
following the Closing Date, do any of the following, either directly or
indirectly:
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(a) manufacture, market or distribute any of the Products, or
invest in any company, partnership, organization, proprietorship or
other entity which manufactures, markets or distributes the Products;
(b) sell, solicit or accept business or orders from customers
or prospective customers of the Business with respect to products which
are competitive with the Products, with the term "customer" including
any purchaser of Products from the Business at any time during the 12
months immediately preceding the date of this Agreement;
(c) interfere with, disrupt or attempt to disrupt
relationships, contractual or otherwise, of Buyer with its employees,
contractors, suppliers or customers in the operation of the Business;
(d) operate or perform, in connection with any of the
Products, any advisory or consulting services for any company,
partnership, organization, proprietorship or other entity which
develops, manufactures, prepares, sells or distributes the Products or
Products which are competitive with the Products; or
(e) Permit any person or entity to use any of Seller's names
in furtherance of any activity included in clauses (a) through (d) of
this Section 15.1.
15.2 Any breach of the provisions of Section 15.1 of this Agreement
shall automatically toll and suspend the period of restraint for the amount of
time that the breach continues.
15.3 Notwithstanding the provisions of Section 32 below, if any
provision or provisions of this Section 15 are void or are so declared, the
provision or provisions, as the case may be, shall be considered, and shall be,
severed from this Agreement, and this Agreement shall otherwise remain in full
force and effect. Notwithstanding the immediately preceding sentence, while the
restrictions contained in clauses (a) through (e) of Section 15.1 are considered
by the parties to be reasonable in all the circumstances, it is recognised that
restrictions of the nature in question may fail for technical or other reasons
not reasonably foreseeable and, accordingly, it is hereby agreed and declared
that if any such restrictions shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, but would be valid or enforceable if
part of the wording thereof were deleted or the periods thereof were reduced or
the range of activities dealt with thereby were reduced in scope, the said
restriction shall apply with such modifications as may be necessary to make it
valid and effective, such modifications to be supplied by the parties hereto and
to be as close in intent and effect to the original provisions hereof as
possible.
15.4 Buyer shall have the right to restrain by injunction any breach or
threatened breach of this Section 15 and shall have the right to compel specific
performance of the terms of this Section 15.
15.5 The obligation referred to in Section 15.1 shall not prevent
Seller or any of its Affiliates from (i) acquiring any other company or business
which is engaged in a competitive business so long as the revenues of the
acquired company or business attributable to the competitive
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businesses do not exceed 20% of the total revenue of the acquired company or
business (a "Competing Business") or (ii) acquiring and/or holding the stock,
equity securities or debt of any publicly traded company so long as the
ownership thereof does not exceed 10% of any class of stock, securities or debt
of the acquired company. As soon as possible (and in any event within six (6)
months) after an acquisition of the type described in clause (i) of the first
sentence of this Section 15.5, Seller shall serve a written notice (an "Offer
Notice") to Buyer offering to sell to Buyer the Competing Business (and in such
notice shall provide a description of the Competing Business giving sufficient
details to enable Buyer to fully evaluate such offer) together with the price at
which and the terms upon which Seller would be prepared to sell, which price and
terms shall be fair under all of the circumstances. Within two months after the
service of an Offer Notice, Buyer shall give a counter-notice to Seller
accepting or refusing such offer and, if requested by Buyer, there shall be
consultation between the parties, and Seller shall make available to Buyer (in
confidence and not for use other than for the purpose of evaluating an
appropriate response to an Offer Notice) such information concerning the
Competing Business as Buyer may reasonably require during the time within which
the counter-notice must be given. If the offer contained in the Offer Notice is
accepted, the Competing Business shall be sold to Buyer at the price specified
by Seller or at a price agreed between the parties. The closing of any sale
shall take place as soon as practical after the price has been agreed. In the
event Buyer does not accept such offer, Seller shall thereafter be free to sell
the Competing Business to any third party which Seller shall attempt to do at a
price and on terms no less attractive than those set forth in the Offer Notice
sent to Buyer in connection with the Competing Business. To the extent Seller is
unable to sell the Competing Business upon the terms and conditions set forth in
the Offer Notice sent to Buyer, Seller shall be required to reoffer the
Competing Business to Buyer prior to offering the Competing Business to a third
party at a price or upon terms less attractive than those set forth in the Offer
Notice.
16. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS (INCLUDING
INDEMNIFICATION). The representations and warranties that are contained in this
Agreement will survive until the second anniversary of the Closing Date and will
survive, and any liability of Seller to Buyer for breach of any such
representation or warranty shall not be reduced or otherwise affected by, any
investigation and inquiry made by or on behalf of Buyer or Seller, as the case
may be; except that the representations and warranties regarding authority, any
matter that is fraudulently or deliberately concealed by the party from whom
indemnification is sought, and the representations regarding title to the
Transferred Assets shall survive indefinitely, and the representations regarding
any taxes (as set forth in Sections 4.9 and 4.10) shall survive the Closing Date
through the expiration of the relevant statute of limitations. Except when
another time period is specified herein, all of the covenants in this Agreement
(including for indemnification) will survive until they have been performed in
full. The indemnifications by Seller in Sections 8 and 19.1(e) shall survive for
a period of five (5) years.
17. MAXIMUM AGGREGATE LIABILITY OF THE PARTIES. The maximum aggregate
indemnification liability of each of Seller under Sections 8.2, 8.3, 19.1(a) and
19.1(e) and Buyer under Sections 19.2(a) and 19.2(d) shall not exceed the sum of
Fifteen Million Dollars ($15,000,000). The limitation in this Section 17 does
not apply to indemnification under any sections other than the Sections
referenced in the preceding sentence or any other agreement between the parties.
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18. DEDUCTIBLE. Buyer will not be entitled to indemnification under
Section 19.1(a) or 19.1(e) of this Agreement, and Seller will not be entitled to
indemnification under Section 19.2(a) or 19.2(d), unless the Losses incurred by
Seller or Buyer, as the case may be, exceed Six Hundred Thousand Dollars
($600,000) (the "Deductible"). If the aggregate amount of such Losses exceed the
Deductible, the indemnifying party will be required to pay only the amount by
which such Losses exceed the Deductible. The limitation in this Section 18 does
not apply to indemnification under (i) any sections other than Sections 19.1(a)
and 19.1(e) (with respect to claims for indemnification made by Buyer) and
19.2(a) and (d) (with respect to claims for indemnification by Seller) or (ii)
any other agreement between the parties.
19. INDEMNIFICATION.
19.1 By Seller. In addition to any liability Seller may have to Buyer
under Section 8 hereof, Seller agrees to indemnify Buyer (including its
officers, directors, employees and agents) against any Losses incurred by Buyer
by reason of, resulting from or arising out of (a) the incorrectness of any of
the representations or warranties of Seller contained in this Agreement, (b) the
breach of any of the covenants or agreements of Seller contained in this
Agreement or in any other instrument executed or delivered by Seller or its
Affiliates in connection with this Agreement or given on the Closing Date, (c)
Seller's breach, on or before the Closing Date, of any agreements with third
parties, (d) the assertion against Buyer of any Retained Liability, (e) the
operation of the Business or the ownership of the Transferred Assets by Seller
prior to the Closing Date, or (f) the Retained Businesses and/or the Retained
Real Estate.
19.2 By Buyer. In addition to any payments for which Buyer may be
responsible under Section 8 hereof, after the Closing Date, Buyer agrees to
indemnify Seller (including its officers, directors, employees and agents)
against any Losses incurred by Seller by reason of, resulting from or arising
out of (a) the incorrectness of any of the representations or warranties of
Buyer contained in this Agreement, (b) the breach of any of the covenants or
agreements of Buyer contained in this Agreement or in any other instrument
executed or delivered by Buyer in connection with this Agreement or given on the
Closing Date, (c) Buyer's breach, after the Closing Date, of any agreements with
third parties, (d) the operation of the Business or the ownership of the
Transferred Assets by Buyer after the Closing Date, or (e) the assertion against
Seller of any Assumed Liability.
19.3 Measure of Damages. Except in the case of Losses of the Buyer
indemnifiable pursuant to Sections 19.1(d) and (f), Seller shall not be liable
to indemnify Buyer for damages that are consequential, special, exemplary,
punitive or indirect, except and to the extent such damages are awarded by a
court or other tribunal or administrative authority with respect to a claim that
is otherwise indemnifiable hereunder.
19.4 Defense of Claims.
(a) Promptly after receipt by Buyer or Seller, as the case may be (in
any such case, the "Beneficiary"), of notice of any claim or potential claim or
the commencement of any action by any person that is not a party to this
Agreement (a "Third Party Claim"), which could give rise to a right
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to indemnification pursuant to Sections 19.1 or 19.2, the Beneficiary shall give
the party who may become obligated to provide indemnification hereunder (the
"Indemnitor") written notice describing the Third Party Claim in reasonable
detail.
(b) If the Indemnitor acknowledges in writing that it would be required
to indemnify the Beneficiary against a Third Party Claim which is the subject of
a notice provided pursuant to Section 19.4(a), then the Indemnitor shall have
the right, at its option, to participate in or, by giving written notice to the
Beneficiary, to elect to assume the defense of such Third Party Claim, at the
Indemnitor's own expense and by its own counsel. If the Indemnitor shall
undertake to assume the defense of any Third Party Claim, it shall promptly
notify the Beneficiary of its intention to do so, and the Indemnitor shall not
be liable for any expenses subsequently incurred by the Beneficiary in
connection with the defense thereof; provided, that the Indemnitor has taken
reasonable steps necessary to defend diligently such Third Party Claim. If the
Indemnitor fails promptly to assume the defense of the Third Party Claim or if
it fails to take reasonable steps to defend diligently such Third Party Claim,
the Beneficiary may assume the defense of such Third Party Claim, and the
Indemnitor shall be liable for all reasonable costs or expenses paid or incurred
in connection therewith. The Beneficiary shall cooperate fully with, and provide
appropriate documentation as reasonably requested by, the Indemnitor and its
counsel in the compromise of, or defense against, any such Third Party Claim. In
any event, the Beneficiary shall have the right, at its own expense, to
participate in the defense of any Third Party Claim as to which the Indemnitor
has assumed the defense and compromise.
(c) Without the prior written consent of the Beneficiary, the
Indemnitor shall not enter into any settlement of any Third Party Claim which
would lead to liability or create any financial or other obligation on the part
of the Beneficiary for which the Beneficiary is not entitled to indemnification
hereunder. If a firm offer is made to settle a Third Party Claim without leading
to liability or the creation of a financial or other obligation on the part of
the Beneficiary for which the Beneficiary is not entitled to indemnification
hereunder and the Indemnitor desires to accept such offer, the Indemnitor shall
give written notice to the Beneficiary to that effect. If the Beneficiary fails
to consent to such offer within ten (10) Business Days after its receipt of the
Indemnitor's notice, the Beneficiary may continue to contest or defend such
Third Party Claim and, in such event, the maximum liability of the Indemnitor as
to such Third Party Claim shall not exceed the amount of such settlement offer,
plus costs and expenses paid or incurred by the Beneficiary through the earlier
of (i) the date on which the Beneficiary received notice that the Indemnitor
agreed to assume the defense of the Third Party Claim and (ii) the end of such
ten (10) Business Day period. If the Beneficiary adjusts, settles or compromises
any Third Party Claim without the prior written consent of the Indemnitor, which
consent shall not be unreasonably withheld, the Beneficiary shall thereby waive
any right to indemnity therefor by the Indemnitor. The Indemnitor shall be
liable for any Losses arising due to it unreasonably withholding such consent.
(d) Any claim by a Beneficiary on account of Losses that does not
result from a Third Party Claim (a "Direct Claim") shall be asserted by giving
the Indemnitor reasonably prompt written notice of the nature of such claim and
the nature of any Losses that are or may be indemnifiable hereunder (as and when
known by the Beneficiary), but in any event not later than twenty (20) Business
Days after the Beneficiary becomes aware of such Direct Claim.
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(e) A failure to give timely notice or to include any specified
information in any notice as provided in this Section 19.4 will not affect the
rights or obligations of any party hereunder except and only to the extent that,
as a result of such failure, any party which was entitled to receive such notice
was deprived of its right to recover any payment under its applicable insurance
coverage or was otherwise damaged as a result of such failure.
20. SPECIFIC PERFORMANCE. The parties acknowledge that the Business and
the Transferred Assets are of a unique and extraordinary character and that
money damages would not be a sufficient remedy for any breach by Seller of its
obligations under this Agreement; therefore, in addition to any other rights or
remedies Buyer may have, Buyer shall be entitled to the remedies of specific
performance or injunctive relief in connection with a breach by Seller of its
obligations contained in this Agreement.
21. TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time on or prior to the Closing Date:
(a) by the mutual written consent of Buyer and Seller;
(b) by Buyer (i) if any of the conditions set forth in Section
9 of this Agreement have become incapable of fulfillment on or before
the Closing Date (or other specified date), (ii) Buyer has given Seller
ten (10) Business Days notice of such matter, (iii) Seller has failed
to cause such condition to be fulfilled or capable of fulfillment
within the ten (10) Business Days, and (iv) Buyer is not otherwise in
material default;
(c) by Seller (i) if any of the conditions set forth in
Section 10 of this Agreement have become incapable of fulfillment on or
before the Closing Date (or other specified date), (ii) Seller has
given Buyer ten (10) Business Days notice of such matter, (iii) Buyer
has failed to cause such condition to be fulfilled or capable of
fulfillment within the ten (10) Business Days, and (iv) Seller is not
otherwise in material default; or
(d) by Seller or by Buyer if the Closing has not occurred on
or before September 30, 1998 (and the terminating party is not
otherwise in material default).
If this Agreement is terminated in a manner permitted by subsections (a) through
(d) of this Section 21, this Agreement will become void and of no further force
and effect, and neither of the parties hereto will have any liability to the
other party in respect of such termination of this Agreement; provided, however,
that nothing in this Section 21 shall relieve any party from liability it may
have hereunder for a breach of this Agreement prior to such termination,
including the liability of Seller to Buyer under Section 20 (specific
performance) and, provided, further, that the parties shall remain subject to
the Confidentiality Agreement according to its terms and shall remain subject to
the provisions of Section 24 hereof.
22. PRORATIONS. The parties agree to prorate items in such a way that
Seller or its Affiliates will be responsible for and receive the benefit of such
items to the extent that they relate
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to the period ending on or prior to the Closing Date and Buyer will be
responsible for and receive the benefit of such items to the extent that they
relate to periods after the Closing Date; provided however that there shall be
no proration of items to the extent reflected on the Working Capital Statement.
To the extent that proration is necessary, Seller shall reimburse Buyer or Buyer
shall reimburse Seller, as the case may be, the net amount owed at the Closing.
23. USE OF NAME. After the Closing:
(a) Seller shall cease using any name or names which include
the words "TRIMET Technical Products Division," "TRIMET Technical
Products," "TRIMET" or any colorable imitation thereof (the "Prohibited
Names"); and
(b) Seller shall not establish any division or business entity
with a name including any of the Prohibited Names.
24. EXPENSES. Whether or not the transactions contemplated hereby are
consummated, each of Buyer and Seller will pay, except as otherwise provided
herein, its respective expenses, income and other taxes and costs (including,
without limitation, the fees, disbursements and expenses of its attorneys,
accountants and consultants) incurred by it in negotiating, preparing, closing
and carrying out the transactions contemplated by this Agreement.
25. NOTICES. Any notice, request or instruction to be given hereunder
by any party to the other parties will be deemed to have been given (i) when it
is delivered, (ii) the Business Day after it is sent by overnight courier, or
(iii) when it is sent by facsimile, with confirmation of receipt, addressed as
follows or to such other address(es) as may be designated by written notice to
the other party:
if to Buyer:
GEO Specialty Chemicals, Inc.
28601 Chagrin Boulevard, Suite 450
Cleveland, Ohio 44122
Attention: George P. Ahearn
Fax No.: (216) 765-1307
with a copy to:
Craig R. Martahus, Esq.
Thompson Hine & Flory LLP
3900 Key Center
127 Public Square
Cleveland, OH 44114
Fax No.: (216) 566-5800
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if to Seller:
Mallinckrodt Inc.
675 McDonnell Blvd.
Hazelwood, Missouri 63134
Attn.: Richard T. Higgons, Vice President,
Corporate Development
Fax No.: (314) 654-3137
with a copy to:
Mallinckrodt Inc.
675 McDonnell Blvd.
Hazelwood, Missouri 63134
Attn: Roger A. Keller, Vice President and General Counsel
Fax No.: (314) 654-5366
26. PUBLIC ANNOUNCEMENTS AND PRESS RELEASES. Buyer and Seller will
consult with each other before issuing any press release or making any public
statement with respect to this Agreement or the transactions contemplated by it
and will not issue any such press release or make any such public statement
prior to such consultation.
27. GOVERNING LAW. The interpretation and enforcement of this Agreement
will be determined in accordance with the laws of the State of New York,
notwithstanding any conflict of law provision to the contrary.
28. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of which shall
together constitute but one and the same instrument.
29. SCHEDULES. The schedules and exhibits attached to this Agreement
and the other documents delivered pursuant hereto are hereby made a part of this
Agreement as if set forth in full herein.
30. ENTIRE AGREEMENT. This Agreement and the other agreements
contemplated to be executed in connection with this Agreement and the
Confidentiality Agreement contain the entire agreement among the parties hereto
with respect to their respective subject matters and supersede all negotiations,
prior discussions, agreements, letters of intent and understandings, written or
oral, relating to those respective subject matters.
31. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that, neither Buyer nor Seller may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
the prior written consent of the other party; provided further, that Buyer may
grant a security interest of its rights under this Agreement to any one or more
of its institutional lenders.
48
<PAGE> 59
32. SEVERABILITY. If any provision of this Agreement is held to be
unenforceable, invalid or void to any extent and for any reason, that provision
shall remain in force and effect to the maximum extent allowable, and the
enforceability and validity of the remaining provisions of this Agreement shall
not be affected thereby.
33. MISCELLANEOUS DEFINITIONS. For the purposes of this Agreement, (a)
any representation or warranty made to "Seller's knowledge" or words of like
import shall mean after due inquiry into the subject matter of the relevant
representation or warranty, the actual knowledge of Messrs. Zacher, Hachey,
Sporka, Weber, Holt, Higgons, Riordan, and Cannova and Ms. Levy with respect to
the matter in question, (b) an "Affiliate" of any party means, in all cases, any
person or entity controlling, controlled by or under common control with such
party, and (c) "Business Day" shall mean any day which is not a Saturday, Sunday
or other day on which banks in New York City are authorized to close.
[Remainder of the page intentionally left blank]
49
<PAGE> 60
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed and delivered by a duly authorized officer as of the date first
above written.
MALLINCKRODT INC. GEO SPECIALTY CHEMICALS, INC.
(a Delaware corporation)
By: /s/ Richard T. Higgons By: /s/ George P. Ahearn
------------------------------------------ ---------------------------
Name: Richard T. Higgons Name: George P. Ahearn
---------------------------------------- ---------------------------
Title: VP - Corporate Development Title: President
---------------------------------------- --------------------------
Mallinckrodt Inc. - NY
MALLINCKRODT INC.
(a New York corporation)
By: /s/ Richard T. Higgons
------------------------------------------
Name: Richard T. Higgons
----------------------------------------
Title: VP - Corporate Development
----------------------------------------
<PAGE> 1
Exhibit 2.2
CONFIDENTIAL
ASSET SALE AND PURCHASE AGREEMENT
dated FEBRUARY 10, 1997
between
HENKEL CORPORATION AND HENKEL CANADA LIMITED, AS SELLER
and
GEO SPECIALTY CHEMICALS, INC., AS BUYER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Index to Defined Terms ................................................... v
Schedules, Exhibits ...................................................... viii
ARTICLE I - Transfer of Assets, Assumption of Liabilities and Purchase Price
1.1 Transfer of Assets .................................................. 1
1.2 Excluded Assets ..................................................... 3
1.3 Consents to Certain Assignments ..................................... 5
1.4 Assumption of Liabilities ........................................... 5
1.5 Purchase Price and Payment .......................................... 6
1.6 Transfer Taxes ...................................................... 6
ARTICLE II - Closing and Post-Closing Purchase Price Adjustment
2.1 Closing ............................................................. 6
2.2 Deliveries by Seller ................................................ 6
2.3 Deliveries by Buyer ................................................. 8
2.4 Post-Closing Purchase Price Adjustment .............................. 8
2.4.1 Closing Date Net Working Capital Statement .................... 8
2.4.2 Objections: Resolution of Disputes ............................ 8
2.4.3 Adjustment Payment ............................................ 9
2.5 Allocation of Purchase Price ........................................ 9
ARTICLE III - Representations and Warranties of Seller
3.1 Organization ........................................................ 10
3.2 Authorization ....................................................... 10
3.3 No Conflicts or Violations: No Consents or Approvals Required ....... 10
3.4 Financial Statements ................................................ 11
3.5 Title to Transferred Assets ......................................... 11
3.6 Contracts ........................................................... 11
3.7 Inventory ........................................................... 11
3.8 Accounts Receivable ................................................. 12
3.9 Conduct of Business Since the Balance Sheet Date .................... 12
3.10 Compliance with Law and Permits ..................................... 12
3.11 Environmental Matters ............................................... 12
3.12 Litigation .......................................................... 12
3.13 Transferred Patents/Transferred Trademarks .......................... 13
3.14 Labor Matters ....................................................... 13
3.15 Employee Benefit Plans .............................................. 13
3.16 Taxes ............................................................... 14
3.17 Entire Business ..................................................... 14
3.18 Brokers and Finders ................................................. 14
3.19 Disclosure .......................................................... 14
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV - Representations and Warranties of Buyer
4.1 Organization ........................................................ 14
4.2 Authorization ....................................................... 14
4.3 No Violations; No Consents or Approvals Required .................... 15
4.4 Sufficient Funds .................................................... 15
4.5 Brokers and Finders ................................................. 15
ARTICLE V - Covenants Pending the Closing
5.1 Conduct of the Business ............................................. 15
5.2 Access .............................................................. 15
5.3 HSR Act ............................................................. 16
5.4 Best Efforts ........................................................ 16
ARTICLE VI - Employment Matters
6.1 Transfer of Employees ............................................... 16
6.1.1 Offers of Employment .......................................... 16
6.1.2 Employee Definitions .......................................... 16
6.1.3 Terms of Employment of Transferred Non-Represented Employees .. 17
6.1.4 Credit for Service with Seller ................................ 17
6.2 Pension Benefits For Non-Represented Employees ...................... 18
6.2.1 Benefits under Seller's Pension Plan .......................... 18
6.2.2 Benefits under Buyer's Pension Plans .......................... 18
6.2.3 Status of Buyer's Pension Plans After the Closing ............. 18
6.3 Savings Plans For Non-Represented Employees .......................... 19
6.3.1 Benefits Under Seller's Savings Plan .......................... 19
6.3.2 Transfer of Account Balances .................................. 19
6.3.3 Loan Balances ................................................. 19
6.4 Welfare Benefit Plans For Non-Represented Employees ................. 19
6.5 Bargaining Unit Employees ........................................... 20
6.5.1 Union Contract ................................................ 20
6.5.2 Benefits Under Seller's Union Pension Plan .................... 20
6.5.3 Benefits Under Buyer's Union Pension Plan ..................... 20
6.5.4 Welfare Benefit Plans For Bargaining Unit Employees ........... 21
6.6 Severance Liability ................................................. 21
6.7 Earned Vacation ..................................................... 21
6.8 Regulatory Filings and Further Assurances ........................... 21
ARTICLE VII - Conditions to Closing
7.1 Conditions to Buyer's Obligation to Close ........................... 22
7.2 Conditions to Seller's Obligation to Close .......................... 23
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII - Environmental Matters
8.1 Indemnification by Seller ........................................... 23
8.2 Indemnification by Buyer ............................................ 24
8.3 Limitations on Indemnification ...................................... 24
8.4 Compliance with ISRA ................................................ 25
8.5 Compliance with Environmental Restrictions .......................... 25
8.5.1 Harrison Facility ............................................. 25
8.5.2 Cedartown Facility ............................................ 26
(a) Compliance with Administrative Order on Consent ........... 26
(b) Compliance with Corrective Action Consent Order ........... 26
8.6 Notices ............................................................. 26
8.7 Post Closing Release Reports ........................................ 27
8.8 Discharge of Environmental Claims ................................... 27
8.9 Right of Participation .............................................. 27
8.10 Access and Cooperation .............................................. 27
8.11 Computation of Losses ............................................... 28
ARTICLE IX - Termination
9.1 Termination ......................................................... 28
9.2 Effect of Termination ............................................... 29
ARTICLE X - Indemnification
10.1 Obligation of Parties to Indemnify .................................. 29
10.1.1 Indemnification by Seller .................................... 29
10.1.2 Indemnification By Buyer ..................................... 29
10.2 Indemnification Procedure for Third Party Claims .................... 29
10.3 Computation of Losses ............................................... 30
10.4 Limitations on Indemnification ...................................... 30
10.5 Remedies Exclusive .................................................. 30
ARTICLE XI - Additional Agreements
11.1 Seller's Covenant Not to Compete .................................... 31
11.1.1 Definition of Paper/CPC Industries ........................... 31
11.2 Buyer's Covenant Not To Use Transferred Intellectual Property in
Retained Industries ................................................. 32
11.2.1 Definition of the Retained Industries ....................... 32
11.3 Certain Services provided by Seller and Seller's Affiliates ......... 32
11.4 Seller's and Buyer's Access to Information .......................... 33
11.5 Public Announcements ................................................ 33
11.6 Termination of Insurance ............................................ 33
11.7 Further Assurances .................................................. 33
11.8 Export Sales ........................................................ 33
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE XII - Miscellaneous
12.1 Expenses ........................................................... 34
12.2 Notices ............................................................ 34
12.3 Entire Agreement; Amendment; Waiver ................................ 35
12.4 Severability ....................................................... 35
12.5 Assignment ......................................................... 35
12.6 Affiliates ......................................................... 35
12.7 Knowledge of Seller ................................................ 35
12.8 Governing Law ...................................................... 35
12.9 Captions ........................................................... 35
12.10 Defined Terms ...................................................... 36
12.11 Counterparts ....................................................... 36
12.12 Bulk Sales Law ..................................................... 36
</TABLE>
iv
<PAGE> 6
INDEX TO DEFINED TERMS
----------------------
<TABLE>
<CAPTION>
SECTION
- -------
<S> <C>
"Accounts Receivable" 1.1(v)
"Adhesives Industry" 11.2.1(v)
"Administrative Services Agreement" 2.2(iv)
"Affiliate" 12.6
"Agreement Preamble
"Agricultural Industries" 11.2.1(iii)
"Antitrust Division" 5.3
"AOC" 8.5.2(a)(i)
"Assumed Liabilities" 1.4
"Balance Sheet" 3.4
"Balance Sheet Date" 3.4
"Bargaining Unit Employees" 6.1.2
"best of Seller's Knowledge" 12.7
"Bill of Sale and Assignment and Assumption
Agreement" 2.2(vi)
"Business" Recitals
"Buyer" Preamble
"Buyer's Pension Plans" 6.2.2
"Buyer's Savings Plans" 6.3.2
"Buyer's Union Pension Plans" 6.5.3
"Buyer's Union Welfare Benefit Plans" 6.5.4
"Buyer's Welfare Benefit Plans" 6.4
"CACO" 8.5.2(b)(i)
"Cedartown Facility" 1.1(i)
"Charter Oak" Acknowledgement and Consent
"Closing" 2.1
"Closing Date" 2.1
"Closing Date Net Working Capital" 2.4.1
"Closing Date Net Working Capital Statement" 2.4.1
"Closing Date Payment" 1.5
"Coatings and Inks Industry" 11.2.1(ii)
"COBRA" 6.4
"Code" 3.15
"Construction and Processing Chemicals Industry" 11.1.1(ii)
"Contracts" 1.1(vii)
"Deed Restriction" 8.5.1(i)
"DER" 8.5.1(i)
"EDC" 1.4(vi)
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
SECTION
- -------
<S> <C>
"Environmental Laws" 3.11
"Environmental Matters" 8.1(ii)
"Equipment" 1.1(ii)
"ERISA" 3.15
"Excluded Assets" 1.2
"Export Sales" 11.8
"Financial Statements" 3.4
"FTC" 5.3
"Harrison Facility" 1.1(i)
"HSR" 5.3
"Income Taxes" 1.2(vii)
"Indemnified Party" 10.2
"Indemnifying Party" 10.2
"Independent Auditor" 2.4.2
"Inventory" 1.1(iii)
"ISRA" 8.4.1
"Laws" 3.10
"Leather Industry" 11.2.1(vi)
"Lease Agreement" 2.2(viii)
"License Agreements" 2.2(iii)
"Liens" 3.3
"Losses" 8.1
"Net Working Capital" 2.4.1
"NFS" 11.1
"NJDEP" 8.4.1
"Non-Represented Employees" 6.1.2
"Notice of Objection" 2.4.2
"Owned Real Property" 1.1(i)
"Paper Industries" 11.1.1(i)
"Paper/CPC Industries" 11.1.1.(ii)
"Patent and Technology License Agreements 2.2(iii)
"Permits" 1.1(ix)
"Permitted Liens" 3.5
"Plastic Additives Industry" 11.2.1(iv)
"Prepaid Expenses" 1.1(v)
"Retained Businesses 1.1(x)
"Retained Intellectual Property" 1.2(i)
"Retained Liabilities" 1.4
"Seller" Preamble
"Seller's Benefit Plans" 6.1.3
</TABLE>
vi
<PAGE> 8
<TABLE>
<CAPTION>
SECTION
- -------
<S> <C>
"Seller's Pension Plans" 6.2.1
"Seller's Savings Plans" 6.3.1
"Seller's Welfare Benefit Plans" 6.4
"Supply Agreements" 2.2(ii)
"Textile Industry" 11.2.1(i)
"Third Party Claim" 10.2
"Trademark License Agreements 2.2(iii)
"Transferred Assets" 1.1
"Transferred Bargaining Unit Employees" 6.1.2
"Transferred Employees" 6.1.2
"Transferred Intellectual Property" 1.1(xii)
"Transferred Non-Represented Employees" 6.1.2
"Transferred Patents" 1.1(x)
"Transferred Technology" 1.1(xii)
"Transferred Trademarks" 1.1(xi)
"Undisclosed Liability Losses" 10.4
"Union" 6.1.2
"Union Contract" 6.1.2
</TABLE>
vii
<PAGE> 9
<TABLE>
S C H E D U L E S
-----------------
<S> <C>
Schedule 1.1(i) Legal Description of the Owned Real Property
Schedule 1.1(ii) Material Items of Equipment
Schedule 1.1(iii) Location of Inventory
Schedule 1.1(iv) Charlotte and Ambler Equipment
Schedule 1.1(xii) Transferred Technology
Schedule 1.2(xi) Harrison Pilot Plant Assets
Schedule 1.2(xii) Data Processing Equipment at Owned Real Property
Schedule 2.5 Allocation of Purchase Price
Schedule 3.4(A) Pro Forma Unaudited Statements of Net Assets of the Business
and Pro Forma Unaudited Profit and Loss Statements
Schedule 3.4(B) Accounting Principles and Practices
Schedule 3.4(C) Deviations from GAAP
Schedule 3.5 Liens
Schedule 3.6 Contracts
Schedule 3.9 Conduct of Business Since the Balance Sheet Date
Schedule 3.10 Compliance with Law and Permits
Schedule 3.11 Environmental Matters
Schedule 3.12 Litigation
Schedule 3.13(A) U.S. and Canadian Transferred Patents
Schedule 3.13(B) U.S. and Canadian Transferred Trademarks
Schedule 3.14 Labor Matters
Schedule 3.15 Employee Benefit Plans
Schedule 3.17 Condition of Machinery and Equipment
Schedule 6.1(A) Employees of the Business
Schedule 6.1(B) Employees on Short Term Disability
Schedule 6.1.3 Retention Incentives
Schedule 11.7 Export Sales
Schedule 12.7 Knowledge of Seller
E X H I B I T S
---------------
Exhibit A-1 Supply Agreement (Supply to Buyer)
Exhibit A-2 Supply Agreement (Supply to Henkel)
Exhibit B-1 Patent and Technology License Agreement (License to Buyer)
Exhibit B-2 Patent and Technology License Agreement (License to Henkel)
Exhibit C-1 Trademark License Agreement (License from Henkel)
Exhibit C-2 Trademark License Agreement (License to Henkel)
Exhibit D Administrative Services Agreement
Exhibit E Lease Agreement
</TABLE>
viii
<PAGE> 10
ASSET SALE AND PURCHASE AGREEMENT
ASSET SALE AND PURCHASE AGREEMENT (this "Agreement") made and entered
into this 10th day of February, 1997, by and among HENKEL CORPORATION, a
corporation organized under the laws of Delaware and HENKEL CANADA LIMITED, a
corporation organized under the laws of Ontario, Canada (collectively,
"Seller"), and GEO SPECIALTY CHEMICALS, INC., a corporation organized under the
laws of Ohio ("Buyer").
Seller wishes to sell to Buyer and Buyer wishes to purchase from Seller
substantially all of the assets relating to Seller's United States and Canadian
paper chemicals and construction and process chemicals businesses, as presently
conducted by Seller and as defined by the sources of revenue contained within
the Financial Statements (as defined in Section 3.4) dated December 31, 1996
(the "Business"), subject to certain liabilities relating thereto, all on the
terms and conditions of this Agreement.
Accordingly, Seller and Buyer agree as follows:
ARTICLE I
TRANSFER OF ASSETS, ASSUMPTION OF LIABILITIES AND PURCHASE PRICE
1.1 TRANSFER OF ASSETS. At the Closing (as defined in Section 2.1),
Seller shall sell, convey, transfer, assign and deliver to Buyer, and Buyer
shall purchase, acquire and accept from Seller, the following assets of Seller
relating to the Business, as they exist on the Closing Date (as defined in
Section 2.1), but excluding the Excluded Assets (as defined in Section 1.2)
(collectively, the "Transferred Assets"):
(i) all of the land, buildings, improvements, fixtures and other real
property and the easements, rights of way and appurtenances thereon or
thereto owned by Seller and located at Seller's plants in Harrison, New
Jersey (the "Harrison Facility") and Cedartown, Georgia (the "Cedartown
Facility") as more fully described in SCHEDULE 1.1(i) (collectively, the
"Owned Real Property");
(ii) all tangible assets and properties, including machinery and
equipment, spare parts and supplies, vehicles, accessories, furniture,
office and laboratory equipment and supplies, furnishings and fixtures
physically located on the Owned Real Property (the "Equipment") and
specifically including any material items of Equipment (i.e. original
acquisition cost of Ten Thousand Dollars ($10,000.00) or more) listed on
SCHEDULE 1.1(ii);
<PAGE> 11
(iii) all inventories, including finished products, samples,
work-in-process, raw materials and packaging materials physically located
on (or in transit from or to) the Owned Real Property and all inventories
of the Business, including finished products, samples, work-in-process,
raw materials and packaging materials, in (or in transit from or to) the
locations listed in SCHEDULE 1.1(iii) (the "Inventory");
(iv) the office equipment and laboratory equipment located at
Seller's Charlotte, North Carolina and Ambler, Pennsylvania facilities
listed in SCHEDULE 1.1(iv);
(v) all accounts and notes receivable, deferred charges, chattel
paper and other rights to receive payments arising from the operation of
the Business (the "Accounts Receivable");
(vi) all prepayments, deposits, claims for refunds and prepaid
expenses relating to the Business, other than prepaid insurance (the
"Prepaid Expenses");
(vii) subject to Section 1.3, all rights of Seller under contracts,
commitments, understandings, binding arrangements, leases of real and
personal property, licenses, purchase orders and other agreements of any
kind or nature, written or oral, to which Seller is a party or by which
Seller or any of the Transferred Assets is bound on the Closing Date and
to the extent that they relate to the Business, except to the extent any
of the foregoing relate to the Excluded Assets or the Retained
Liabilities (as defined in Section 1.4) (the "Contracts ");
(viii) all books and records in Seller's possession that relate
solely to the Business, including sales reports, inventory reports,
product specifications, drawings, correspondence, engineering,
maintenance, operating and production records, advertising materials,
customer lists, cost and pricing information, supplier lists, business
plans, catalogs, quality control records and manuals, blueprints,
research and development files, laboratory books, patent and trademark
files, litigation files, personnel records of Transferred Employees (as
defined in Section 6.1.2) and credit records of customers, other than
records kept for financial reporting or tax purposes and excluding any of
the foregoing related to the Excluded Assets or the Retained Liabilities;
(ix) to the extent transfer is permitted under applicable law or
regulation, all permits, approvals, franchises, licenses or other rights
granted to Seller by governmental authorities and necessary for the
lawful ownership of the Transferred Assets or the lawful conduct of the
Business as presently conducted by Seller (the "Permits");
(x) those U.S. and Canadian patents and patent applications used or
held for use exclusively or primarily in the Business which are listed in
SCHEDULE 3.13(A) (the "Transferred Patents"). Those Transferred Patents
which are used primarily but not exclusively in the Business shall be
licensed to the Seller under the Patent and Technology License Agreements
attached hereto as EXHIBIT B-2 for use in businesses of Seller other than
the Business. Businesses of Seller other than the Business shall
hereafter be referred to as
2
<PAGE> 12
the "Retained Businesses." U.S. and Canadian patents and patent
applications that are used primarily in the Retained Businesses but also
in the Business shall be licensed to Buyer under the Patent and
Technology License Agreement attached hereto as EXHIBIT B-1;
(xi) those United States and Canadian trade names, service marks and
service names and applications and registrations therefor used in the
Business which are listed in SCHEDULE 3.13(B), together with the goodwill
associated therewith (the "Transferred Trademarks"). Those Transferred
Trademarks that are used also by Seller in its Retained Businesses shall
be licensed to Seller under the Trademark License Agreement attached
hereto as EXHIBIT C-2. U.S. and Canadian trademarks that are used by the
Business but which are not Transferred Trademarks shall be licensed to
Buyer under the Trademark License Agreement attached hereto as
EXHIBIT C-1;
(xii) for the United States and Canada, formulas for the products
listed in SCHEDULE 1.1(xii) and all unpatented know-how, manufacturing
methods and processes, inventions, discoveries, trade secrets,
improvements and other technology used or held for use exclusively or
primarily in connection with the products, including the developmental
products, listed in SCHEDULE 1.1(xii) of the Business (the "Transferred
Technology") (together with the Transferred Patents and the Transferred
Trademarks, the "Transferred Intellectual Property"). Transferred
Technology that is used primarily but not exclusively in the Business
shall be licensed to Seller under the Patent and Technology License
Agreement attached hereto as EXHIBIT B-2 for use in the Retained
Businesses. Technology that is used primarily in the Retained Businesses
but also in the Business shall be licensed to Buyer under the Patent and
Technology License Agreement attached hereto as EXHIBIT B-1;
(xiii) subject to any consent requirements, all computer software
(including, without limitation, application, operating, process control,
security or programming software) owned or licensed by Seller and used
exclusively in the Business;
(xiv) all claims, choses in action and other general intangibles to
the extent that they relate to the Business; and
(xv) all goodwill of the Business, including the exclusive right to
represent oneself as the successor to the Business of Seller.
1.2 EXCLUDED ASSETS. The parties understand and agree that Seller is
not transferring to Buyer any assets or properties not specifically referred to
in Section 1.1, including without limitation those assets of Seller set forth
below (collectively, the "Excluded Assets"):
(i) technology, patents and trademarks used by the Business other
than Transferred Intellectual Property including, without limitation, all
formulas, technology, patents, patent applications, invention records,
and other intellectual property relating to Seller's digester additive
product developments (the "Retained Intellectual Property");
3
<PAGE> 13
(ii) all rights corresponding to Transferred Intellectual Property
outside the United States and Canada, including the right to make foreign
patent applications claiming priority of Transferred Patents;
(iii) cash, cash equivalents, investments and bank accounts;
(iv) any accounts receivable or other current assets, contracts,
customer lists and other books and records, licenses and permits,
intellectual property, or goodwill to the extent related directly to or
arising directly from the Retained Businesses or the Retained
Liabilities;
(v) any intercompany receivables owed to Seller by any Affiliate of
Seller or any other current intercompany assets of Seller, other than any
trade accounts receivable or other accounts receivable or other current
assets reflected on the Closing Date Net Working Capital Statement (as
defined in Section 2.4.1);
(vi) except as otherwise provided in Article VI, any contracts or
assets related to any employee benefit plan in which any employees of
Seller or any of its Affiliates participate;
(vii) any refunds, claims to refunds or rights to receive refunds
from Federal, state, local and foreign taxing authorities with respect to
income, net worth, capital, value added, franchise or other taxes
measured by or based upon income or profits ("Income Taxes") paid or to
be paid by Seller or any of its Affiliates;
(viii) any records related to Income Taxes paid or payable by Seller
or any of its Affiliates;
(ix) any insurance policies relating to the Transferred Assets or the
Business;
(x) Seller's corporate charter documents, minute books, stockholder
records, stock transfer records, corporate seal and similar corporate
records;
(xi) all tangible assets, including machinery and equipment, spare
parts and supplies, accessories, furniture, office and laboratory
equipment and supplies, furnishings and fixtures physically located in
the pilot plant on the Harrison Facility and listed on SCHEDULE 1.2(xi);
(xii) data processing equipment listed in SCHEDULE 1.2(xii) located
at the Owned Real Property which is part of Seller's central data
processing system;
(xiii) all inventories of the Business other than the Inventory.
Buyer shall grant to Seller access to the Owned Real Property after the Closing
Date to remove any Excluded Assets not removed prior to the Closing Date.
4
<PAGE> 14
1.3 CONSENTS TO CERTAIN ASSIGNMENTS. If the sale, conveyance, transfer or
assignment of any Contract, Permit or other Transferred Asset requires the
consent of any third party, this Agreement shall not constitute an agreement to
complete such sale, conveyance, transfer or assignment unless and until such
consent has been obtained. If Seller does not obtain the consent to the
assignment of any such Transferred Asset prior to the Closing Date, the Closing
shall nonetheless take place, and Seller will take all steps (not including the
payment of consideration) reasonably requested by Buyer to secure such consent
after the Closing Date or otherwise will provide to Buyer the benefits of such
Transferred Asset.
1.4 ASSUMPTION OF LIABILITIES. On the Closing Date, Buyer shall assume
and thereafter pay, honor and discharge when due and payable all liabilities and
obligations of Seller relating to the Business or the Transferred Assets, of any
kind or nature, except for the following:
(i) indebtedness for borrowed money, which shall not include any
trade accounts payable or other accounts payable reflected on the Closing
Date Net Working Capital Statement;
(ii) obligations and liabilities of Seller or any of its Affiliates
for Income Taxes, and all deficiencies, fines, assessments, charges,
interest, additions to such Income Taxes and penalties associated
therewith imposed by any taxing authority, relating to or accrued in any
period prior to the Closing Date;
(iii) any accounts payable or contracts or other liabilities to the
extent related to or arising from the Excluded Assets or the Retained
Liabilities;
(iv) any intercompany accounts payable owing by Seller to any
Affiliate of Seller or any other current intercompany liabilities of
Seller, other than any trade accounts payable or other accounts payable
or other current liabilities reflected on the Closing Date Net Working
Capital Statement;
(v) those obligations and liabilities related to employment matters
that are expressly retained by Seller pursuant to Article VI hereof;
(vi) liabilities and obligations relating to the claims and lawsuits
described in SCHEDULE 3.12, including the obligations and liabilities of
Seller pursuant to (a) with respect to the Harrison Facility, ISRA Case
#86335/87219 and the two Administrative Orders on Consent titled "In the
Matter of Diamond Shamrock Chemicals Company" and "In the Matter of
Oxy-Diamond Holding Corporation, Oxy Process Chemicals, Inc.", dated
August 29, 1986 and March 27, 1987 respectively; (b) with respect to the
Cedartown Facility (1) remediation of surface and groundwater
contaminated with ethylene dichloride ("EDC") as specifically set forth
in Corrective Action Consent Order No. EPD-HW-1048 between Henkel
Corporation and the Georgia Department of Natural Resources, dated
September 21, 1993 and (2) the Diamond Shamrock Landfill Site
Administrative Order on Consent, EPA Docket No. 90-64-C between Henkel
Corporation and the United States Environmental Protection
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Agency, dated November 2, 1990 including, without limitation, all ongoing
monitoring and reporting obligations required by all of the above;
(vii) liabilities and obligations relating to Seller's acts and
omissions (other than those relating to Environmental Matters as defined
in Section 8.1) that occurred in connection with its operation of the
Business during the five year period prior to the Closing Date; PROVIDED,
HOWEVER, that Buyer shall, at Seller's election, obtain at Seller's
expense and with Seller's cooperation, an insurance policy with a
reasonable deductible insuring against such liabilities and obligations,
whereupon such insured-against liabilities and obligations shall no
longer be Retained Liabilities under this Section 1.4.
The liabilities and obligations of Seller referred to in clauses (i) through
(vii) above are referred to herein collectively as the "Retained Liabilities".
All liabilities and obligations relating to the Business or the Transferred
Assets of any kind or nature other than the Retained Liabilities are referred to
herein collectively as the "Assumed Liabilities".
1.5 PURCHASE PRICE AND PAYMENT. The purchase price for the Transferred
Assets is Fifty-five million dollars ($55,000,000.00), subject to adjustment in
accordance with Section 2.4. (Such amount, prior to such adjustment, is referred
to herein as the "Closing Date Payment".) Buyer will pay the Closing Date
Payment to Seller on the Closing Date by wire transfer of immediately available
funds to an account designated by Seller.
1.6 TRANSFER TAXES. Buyer shall pay all sales, use, excise and transfer
taxes arising from the transfer of the Transferred Assets pursuant to this
Agreement.
ARTICLE II
CLOSING AND POST-CLOSING PURCHASE PRICE ADJUSTMENT
2.1 CLOSING. The closing of the transactions contemplated hereby (the
"Closing") shall be held at the offices of Seller at 2200 Renaissance Boulevard,
Suite 200, Gulph Mills, Pennsylvania, at 10:00 a.m. on the earlier of (i)
March 31, 1997 or (ii) the fifth businss day after expiration or termination of
the statutory waiting period under the HSR Act, or at such other place or on
such other date and time as the parties may agree. The date on which the Closing
takes place is referred to herein as the "Closing Date". The Closing shall be
deemed to be effective as of the close of business on the business day prior to
the Closing Date.
2.2 DELIVERIES BY SELLER. At the Closing, Seller will deliver to Buyer
the following duly executed documents:
(i) deeds in recordable form to the Owned Real Property sufficient to
transfer to Buyer good and marketable title thereto free of all Liens (as
defined in Section 3.3) other than Permitted Liens (as defined in
Section 3.5); as built surveys for all Owned Real Property prepared by a
registered surveyor in accordance with the minimum standard detail
requirements for ALTA/ACSM Title Surveys or otherwise in form and
substance sufficient
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to eliminate any "survey exceptions" which materially adversely affect
Buyer's ability to conduct the Business immediately after Closing in the
same manner as conducted immediately prior to the Closing by Seller from
the title insurance policies covering said property; and a title
insurance commitment from a title insurance company previously insuring
title, insuring Buyer's fee simple ownership of the Owned Real Property
and that Buyer's interests in the Owned Real Property are good and
marketable and free and clear of all Liens except Permitted Liens;
(ii) supply agreements in the form of EXHIBIT A-1 providing for the
supply by Seller to Buyer after the Closing of products previously
supplied to the Business by the Retained Businesses of Seller and in the
form of EXHIBIT A-2 providing for the supply by Buyer to Seller after the
Closing of products used in connection with the Retained Businesses of
Seller (the "Supply Agreements");
(iii) license agreements in the form of EXHIBIT B-1 and EXHIBIT C-1
providing for the use by Buyer of certain of the Retained Intellectual
Property in connection with the Business and license agreements in the
form of EXHIBIT B-2 and EXHIBIT C-2 providing for the use by Seller of
certain of the Transferred Intellectual Property in connection with
Retained Businesses of Seller. EXHIBITS B-1 and B-2 shall be referred to
as the "Patent and Technology License Agreements". EXHIBITS C-1 and C-2
shall be referred to as the "Trademark License Agreements".
(Collectively, EXHIBITS B-1, B-2, C-1 and C-2 shall be referred to as the
"License Agreements");
(iv) an administrative services agreement in the form of EXHIBIT D
("Administrative Services Agreement") requested by Buyer pursuant to
Section 11.3;
(v) assignments in recordable form of the Transferred Patents and
Transferred Trademarks;
(vi) an assignment and assumption agreement providing for the
assignment to Buyer of the Contracts and the Permits and the assumption
by Buyer of the Assumed Liabilities (the "Bill of Sale and Assignment and
Assumption Agreement");
(vii) a bill of sale covering Transferred Assets not otherwise
provided for in this Section 2.2;
(viii) a lease agreement in the form of EXHIBIT E ("Lease Agreement")
providing for the lease by Buyer to Seller of the pilot plant on the
Harrison Facility;
(ix) a servicing agreement pursuant to Section 8.5;
(x) any additional assurances, transfers, assignments or other
instruments necessary or reasonably required to transfer the Transferred
Assets to Buyer with good (and in the case of the Owned Real Property,
marketable) title, free and clear of all Liens except Permitted Liens.
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2.3 DELIVERIES BY BUYER. At the Closing, Buyer will deliver to Seller the
following:
(i) immediately available funds in an amount equal to the Closing
Date Payment in the manner set forth in Section 1.5;
(ii) duly executed Supply Agreements (as defined in Section 2.2);
(iii) duly executed License Agreements (as defined in Section 2.2);
(iv) a duly executed Administrative Services Agreement (as defined in
Section 2.2) requested by Buyer pursuant to Section 11.3;
(v) a duly executed Assignment and Assumption Agreement (as defined
in Section 2.2); and
(vi) a duly executed Lease Agreement (as defined in Section 2.2).
(vii) a duly executed servicing agreement pursuant to Section 8.5.
2.4 POST-CLOSING PURCHASE PRICE ADJUSTMENT.
2.4.1 CLOSING DATE NET WORKING CAPITAL STATEMENT. Within forty-five
(45) days after the Closing Date, Seller shall deliver to Buyer a statement (the
"Closing Date Net Working Capital Statement") of the Net Working Capital (as
defined below) of the Business as of the close of business on the business day
prior to the Closing Date (the "Closing Date Net Working Capital"). As used
herein, "Net Working Capital" shall mean the book value of (i) the Accounts
Receivable, Inventories and Prepaid Expenses less (ii) trade accounts payable
and current accrued liabilities and expenses of the Business, excluding any of
the foregoing to the extent related to or arising from the Excluded Assets or
the Retained Liabilities. The Closing Date Net Working Capital shall be
calculated using the same principles, practices, methods and policies as were
used in determining Net Working Capital on the Balance Sheet (as defined in
Section 3.4 below). The book value of Inventory included on the Closing Date Net
Working Capital Statement shall reflect a physical count of the Inventory
conducted on the business day prior to the Closing Date and shall exclude any
Inventory which is obsolete or otherwise not usable or salable in the ordinary
course of business. The physical count of the Inventory shall be conducted by
Seller and its representatives. Buyer and its representatives shall have the
right to observe the physical count of the Inventory. After the Closing Date,
Buyer shall cause its employees to assist Seller and its representatives in the
preparation of the Closing Date Net Working Capital Statement and shall provide
to Seller and its representatives access at all reasonable times to the
personnel, properties, books and records of the Business for such purpose.
2.4.2 OBJECTIONS: RESOLUTION OF DISPUTES. Unless Buyer notifies
Seller in writing within twenty (20) days after Buyer's receipt of the Closing
Date Net Working Capital Statement of any objection to the valuation of the
Closing Date Net Working Capital set forth therein (the "Notice of Objection"),
such valuation shall be final and binding. During such twenty (20) day period,
Buyer
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and its representatives shall be permitted to review the working papers of
Seller and Seller's accountants relating to the Closing Date Net Working Capital
Statement. The Notice of Objection shall specify in reasonable detail the basis
for the objections set forth therein and shall include only objections based on
(i) mathematical errors in the computation of the Closing Date Net Working
Capital or (ii) the Closing Date Net Working Capital not having been calculated
in accordance with the consistent application of the accounting principles and
practices used in the preparation of the Balance Sheet (as defined in
Section 3.4), so that the Closing Date Net Working Capital Statement fails to
reflect only the change in Net Working Capital resulting from the operation of
the Business from the Balance Sheet Date (as defined in Section 3.4) to the
Closing Date. Seller and Buyer acknowledge that (a) the sole purpose of the
determination of the Closing Date Net Working Capital is to adjust the Closing
Date Payment so as to reflect only the change in Net Working Capital resulting
from the operation of the Business from the Balance Sheet Date to the Closing
Date and (b) such change can be measured only if the calculation is done using
the same principles, practices, methods and policies at both dates. If Buyer
provides such Notice of Objection to Seller within such twenty (20) day period,
Buyer and Seller shall, during the thirty (30) day period following Buyer's
delivery of such Notice of Objection to Seller, attempt in good faith to resolve
Buyer's objections. During such thirty (30) day period, Seller and its
representatives shall be permitted to review the working papers of Buyer and
Buyer's accountants relating to the Notice of Objection and the basis therefor.
If Buyer and Seller are unable to resolve all such objections within such
period, the matters remaining in dispute shall be submitted to Coopers and
Lybrand (the "Independent Auditor"). The resolution of disputed items by the
Independent Auditor shall be final and binding. The fees and expenses of the
Independent Auditor shall be borne equally by Buyer and Seller. After final
determination of the Closing Date Net Working Capital Statement, Buyer shall
have no further right to challenge the Closing Date Net Working Capital on any
basis.
2.4.3 ADJUSTMENT PAYMENT. Within ten (10) days after the Closing Date
Net Working Capital has been finally determined in accordance with
Section 2.4.2, (i) if such final Closing Date Net Working Capital exceeds U.S.
$9,577,000 (utilizing a U.S./Canadian exchange rate of .75), Buyer shall pay to
Seller an amount equal to such excess, plus simple interest thereon at the rate
of six and one-half percent (6.5%) per annum from the Closing Date to the date
of payment and (ii) if such final Closing Date Net Working Capital is less than
U.S. $9,577,000 (utilizing a U.S./Canadian exchange rate of .75), Seller shall
pay to Buyer an amount equal to such shortfall, plus simple interest thereon at
the rate of six and one-half percent (6.5%) per annum from the Closing Date to
the date of payment. Any such payment hereunder shall be made by wire transfer
of immediately available funds to an account designated by the party entitled to
payment or in such other manner as such party shall reasonably request.
2.5 ALLOCATION OF PURCHASE PRICE. The purchase price shall be allocated
among the Transferred Assets as set forth in SCHEDULE 2.5 hereto. Buyer and
Seller shall report the tax consequences of the transactions contemplated hereby
in a manner consistent with such allocation and shall not take any position
inconsistent therewith in connection with any examination of any tax return, any
refund claim or in any litigation, investigation or other proceeding relating
thereto.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
3.1 ORGANIZATION. Henkel Corporation is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware.
Henkel Canada Limited is a corporation duly incorporated, validly existing and
in good standing under the laws of Ontario, Canada. Seller is duly qualified to
do business as a foreign corporation and is in good standing in each state in
which any Owned Real Property is located.
3.2 AUTHORIZATION. Seller has full corporate power and authority to carry
on the Business as now conducted and to own or lease the Transferred Assets
owned or leased by it. Seller has full corporate power and authority to execute
and deliver this Agreement and all other documents contemplated hereby to be
executed and delivered by Seller and to consummate the transactions contemplated
hereby and thereby. Seller has taken all corporate action required by its
Certificate of Incorporation and By-laws to authorize the execution and delivery
of this Agreement and all other documents contemplated hereby to be executed and
delivered by Seller and to authorize the consummation of the transactions
contemplated hereby and thereby. This Agreement has been duly and validly
executed and delivered by Seller and is a legal, valid and binding obligation of
Seller, enforceable against it in accordance with its terms. All other documents
contemplated hereby to be executed and delivered by Seller will on the Closing
Date be duly and validly executed by Seller and be legal, valid and binding
obligations of Seller, enforceable against it in accordance with their
respective terms.
3.3 NO CONFLICTS OR VIOLATIONS: NO CONSENTS OR APPROVALS REQUIRED.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) conflict with or violate any provision
of the Certificate of Incorporation or By-laws of Seller, (ii) conflict with or
violate any Laws (as defined in Section 3.10) applicable to Seller in respect of
the Business or by which any of the Transferred Assets is bound, or (iii)
conflict with or result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would constitute a default) under any
agreement or other instrument to which Seller is a party or by which any of the
Transferred Assets is bound which would result in the creation of any mortgage,
pledge, lien, claim, charge or other encumbrance of any kind (collectively,
"Liens"), other than Permitted Liens (as defined in Section 3.5), on any of the
Transferred Assets. Except for required consents of other parties to the
Contracts and Permits, and except as set forth in Section 8.4 and Section 8.5
(Compliance with ISRA and Compliance with Environmental Restrictions,
respectively) and in Section 5.3 (HSR Act), no notice, declaration, report or
other filing or registration with, and no waiver, consent, approval or
authorization of, any governmental or regulatory authority or any other person
or entity is required to be made or obtained by Seller in connection with the
execution and delivery of this Agreement by Seller or the consummation by Seller
of the transactions contemplated hereby.
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3.4 FINANCIAL STATEMENTS. Attached as SCHEDULE 3.4(A) are the pro forma
unaudited statement of net assets of the Business at December 31, 1996 and the
related pro forma unaudited profit and loss statement for the year ended
December 31, 1996 (collectively, the "Financial Statements"). (The pro forma
unaudited statement of net assets at December 31, 1996 is referred to herein as
the "Balance Sheet" and December 31, 1996 is referred to herein as the "Balance
Sheet Date".) The Financial Statements were prepared in accordance with the
accounting principles and practices set forth in SCHEDULE 3.4(B), consistently
applied throughout the periods covered thereby, and fairly present in all
material respects the financial condition of the Business at the respective
dates thereof and the sales and operating profits of the Business for the
respective periods then ended. SCHEDULE 3.4(C) sets forth the manner in which
the accounting principles and practices used in preparing the Financial
Statements deviate from generally accepted accounting principles.
3.5 TITLE TO TRANSFERRED ASSETS. Seller has good title to the Transferred
Assets, including good and marketable title to the Owned Real Property, free and
clear of any Liens other than Permitted Liens. As used herein, the term
"Permitted Liens" means (i) Liens for taxes, assessments or governmental charges
or levies not yet due and delinquent or being diligently contested in good
faith, (ii) statutory Liens of carriers, warehousemen, mechanics, materialmen
and the like arising in the ordinary course of business that do not impair in
any material respect the conduct of the business or the use of the Transferred
Assets in the manner currently used by Seller, (iii) easements, encroachments
and other minor imperfections of title which do not impair in any material
respect the conduct of the Business or the use of the Transferred Assets in the
manner currently used by Seller and (iv) Liens set forth on SCHEDULE 3.5,
including those described in Section 8.5.
3.6 CONTRACTS. SCHEDULE 3.6 sets forth a list of all Contracts in effect
on the date of this Agreement, except (i) orders for the purchase of raw
materials or supplies used in the manufacture of products, in each case with a
remaining balance of $50,000 or less and a remaining term of six months or less;
(ii) orders from customers for the purchase of products, in each case with a
remaining balance of $50,000 or less and a remaining term of six months or less;
(iii) agreements for the maintenance of the Owned Real Property or any part
thereof or any of the Equipment, in each case with a remaining balance of
$50,000 or less and a remaining term of six (6) months or less; (iv) standard
form employment agreements; (v) routine waste disposal agreements; (vi)
confidentiality agreements; and (vii) Contracts listed in SCHEDULE 3.13 AND
SCHEDULE 3.14. Seller has delivered or made available to Buyer copies of all
written Contracts and descriptions of the terms of all oral Contracts listed on
SCHEDULE 3.6. Seller and, to the best of Seller's knowledge, each other party to
each Contract in effect on the date of this Agreement is in compliance in all
material respects with the terms thereof. Except as set forth on SCHEDULE 3.6,
no consents from any third parties are required for the assignment to Buyer of
the Contracts.
3.7 INVENTORY. The Inventory reflected on the Closing Date Net Working
Capital Statement will (i) have been manufactured or purchased in the ordinary
course of the Business, (ii) be usable or salable in the ordinary course of the
Business, except to the extent of any reserve established in the determination
of Closing Date Net Working Capital, and (iii) be of an amount and mix
consistent with historical operations of the Business.
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3.8 ACCOUNTS RECEIVABLE. The Accounts Receivable reflected on the Closing
Date Net Working Capital Statement will have arisen out of sales of goods in the
ordinary course of the Business.
3.9 CONDUCT OF BUSINESS SINCE THE BALANCE SHEET DATE. Except as set forth
in SCHEDULE 3.9, since the Balance Sheet Date Seller has conducted the Business
only in the ordinary course in a manner consistent with past practice and there
has been no material adverse change in the Business or the Transferred Assets.
Without limiting the generality of the foregoing, since the Balance Sheet Date
except as set forth in SCHEDULE 3.9, Seller has not:
(i) amended in any material respect, or terminated, any Contract
listed on SCHEDULE 3.6, 3.13, OR 3.14;
(ii) changed its method of accounting;
(iii) materially increased or written down the value of any
Inventory;
(iv) lost any material customers of the Business or experienced any
material decrease in the volume of its sales related to the Business or
the profit margins relating to those sales; or
(v) received any material product quality complaints.
3.10 COMPLIANCE WITH LAW AND PERMITS. Except as set forth in
SCHEDULE 3.10 (or SCHEDULE 3.11 with respect to environmental matters), to the
best of its knowledge Seller is in compliance in all material respects with all
applicable statutes, laws, rules, regulations, orders, ordinances, judgments and
decrees of all governmental and regulatory authorities (collectively, "Laws")
and the terms of all environmental, operational and other material Permits.
SCHEDULE 3.10 sets forth a list of all such Permits. All such Permits are in
full force and effect and no proceedings are pending or, to the best knowledge
of Seller, threatened that may result in the revocation, cancellation or
suspension thereof.
3.11 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.11, to the
best of its knowledge, Seller is in compliance in all material respects with all
applicable Laws pertaining to environmental matters ("Environmental Laws") and
has obtained and is in compliance in all material respects with the terms of all
Permits required thereunder and Seller has not received any written notice from
any governmental authority or private party that it is in violation of
applicable Environmental Laws. To the best knowledge, of Seller, except as set
forth in SCHEDULE 3.11, there has not been any release, spill or leak of any
toxic or hazardous waste, pollutant, contaminant or other substance regulated
under applicable Environmental Laws at the Owned Real Property that was or is
reportable to any governmental or regulatory authority under applicable
Environmental Laws.
3.12 LITIGATION. Except as set forth in SCHEDULE 3.12, no claim, action,
suit, proceeding or, to the best of Seller's knowledge, investigation (including
without limitation any of the foregoing arising or resulting from any warranty
or product liability claim for personal injury, property damage,
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economic loss or other relief) is pending or, to the best knowledge of Seller,
threatened before any court, arbitrator, or governmental agency which affects
the Business or the Transferred Assets or in which any person or entity seeks to
prohibit the consummation of the transactions contemplated by this Agreement. No
such claim, action, suit, proceeding or investigation is reasonably likely to
have a material adverse effect on the Business or the Transferred Assets.
3.13 TRANSFERRED PATENTS/TRANSFERRED TRADEMARKS. The Transferred Patents
and the Transferred Trademarks listed in SCHEDULE 3.13(A) AND (B), are in full
force and effect and have, to the best of Seller's knowledge, been validly
issued. Except as set forth in SCHEDULE 3.13(A) AND (B), Seller owns all rights
to the Transferred Patents and Transferred Trademarks and has not granted to any
third party any license or other right to any of the Transferred Patents and
Transferred Trademarks. The Transferred Patents and Transferred Trademarks
include all patents and trademarks currently used by Seller in the Business
except Retained Intellectual Property. Except as set forth in SCHEDULE 3.13, no
claim is pending or, to the best of Seller's knowledge, threatened that Seller's
use of the Transferred Patents and Transferred Trademarks infringes the rights
of any person or entity and, to the best of Seller's knowledge, such use does
not infringe any such rights. To the best of Seller's knowledge, no other person
or entity is infringing Seller's rights in the Transferred Patents and
Transferred Trademarks.
3.14 LABOR MATTERS. The only collective bargaining agreement with a labor
organization involving employees of Seller engaged in the Business is listed in
SCHEDULE 3.14. Except as disclosed in SCHEDULE 3.14, there is not pending or, to
the best knowledge of Seller, threatened any strike, lock-out, work-stoppage,
union organizing effort or other labor dispute, unfair labor practice proceeding
or labor arbitration involving employees of Seller engaged in the Business.
Seller has complied with its obligations under the collective bargaining
agreement and, in all material respects, with all applicable Laws relating to
employment and employment practices, including those regarding wages, hours and
social security and similar taxes, and has not engaged in any unfair labor
practices.
3.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 3.15 contains a list of Seller's
Benefit Plans (as defined in Section 6.1.3). True, correct and complete copies
of all written Seller's Benefit Plans and related documentation have been
provided or made available to Buyer. Seller, with respect to Seller's Benefit
Plans, is in compliance in all material respects with applicable provisions of
the Employee Retirement Income Security Act ("ERISA") and the Internal Revenue
Code (the "Code"), and with respect to Seller's Union Pension Plan and Seller's
Union Welfare Benefit Plans, is in compliance with applicable provisions of
ERISA and the Code. Seller has not, with respect to any Seller's Benefit Plan,
engaged in a prohibited transaction which would subject it to any tax or penalty
under Section 4975 of the Code or Section 502 of ERISA which would have a
material adverse effect on the Business. No liability to the PBGC has been
incurred by Seller with respect to Seller's Benefit Plans, and no event has
occurred that presents a material risk of termination of any of Seller's Benefit
Plans by the PBGC. None of Seller's Benefit Plans has an "accumulated funding
deficiency" within the meaning of Section 412(a) of the Code, and none of
Seller's Benefit Plans is a "multi- employer plan" within the meanings of
Sections 3(37) or 4001(a)(3) of ERISA.
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3.16 TAXES. All Federal, state, local and foreign tax returns, reports
and declarations of any kind required to be filed by or on behalf of Seller with
respect to the Business prior to the Closing Date have been or will be timely
filed. Except for taxes due and payable after the Closing Date that are to be
accrued as liabilities on the Closing Date Net Working Capital Statement and
transfer and similar taxes for which Buyer is liable under Section 1.6, Seller
has paid or will pay all taxes validly imposed on it with respect to the
Business which relate to or accrue in any period ending on or prior to the
Closing Date and the portion ending on the Closing Date of any period which
includes but ends after the Closing Date.
3.17 ENTIRE BUSINESS. The Transferred Assets together with the rights and
obligations of Buyer under the Supply Agreements and under the License
Agreements are sufficient to permit the continued operation of the Business by
Buyer after the Closing in substantially the same manner as currently conducted.
Except as set forth on SCHEDULE 3.17, all of the buildings and improvements used
in the operation of the Business and material items of Equipment listed in
SCHEDULE 1.1(ii) are in good condition and repair, normal wear and tear
excepted.
3.18 BROKERS AND FINDERS. With the exception of Young & Partners, LLC,
which will be paid by Seller, Seller has not been represented by any person,
firm, corporation or entity that may be entitled to any brokerage fee or other
commission in respect of the execution of this Agreement or the consummation of
the transactions contemplated hereby.
3.19 DISCLOSURE. No representation or warranty by Seller hereunder, or
information contained in the Schedules, contains any untrue statement of
material fact or omits to state a material fact that gives rise to a claim and
was necessary in order to make the statements contained therein or herein, in
light of the circumstances in which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
4.1 ORGANIZATION. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of Ohio.
4.2 AUTHORIZATION. Buyer has full corporate power and authority to
execute and deliver this Agreement and all other documents contemplated hereby
to be executed and delivered by Buyer and to consummate the transactions
contemplated hereby and thereby. Buyer has taken all corporate action required
by its certificate or articles of incorporation and By-laws to authorize the
execution and delivery of this Agreement and all other documents contemplated
hereby to be executed and delivered by Buyer and to authorize the consummation
of the transactions contemplated hereby and thereby. This Agreement has been
duly and validly executed and delivered by Buyer and is a legal, valid and
binding obligation of Buyer, enforceable against it in accordance with its
terms. All other documents contemplated hereby to be executed and delivered by
Buyer will on the Closing Date be
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duly and validly executed by Buyer and be legal, valid and binding obligations
of Buyer, enforceable against it in accordance with their respective terms.
4.3 NO VIOLATIONS; NO CONSENTS OR APPROVALS REQUIRED. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) conflict with or violate any provision
of the certificate or articles of incorporation or By-laws of Buyer, (ii)
conflict with or violate any Laws applicable to Buyer or (iii) conflict with or
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would constitute a default) under any agreement or other
instrument to which Buyer is a party. No notice, declaration, report or other
filing or registration with, and no waiver, consent, approval or authorization
of, any governmental or regulatory authority or any other person or entity is
required to be made or obtained by Buyer in connection with the execution,
delivery and performance of this Agreement by Buyer or the consummation by Buyer
of the transactions contemplated hereby.
4.4 SUFFICIENT FUNDS. Buyer shall use its best efforts to obtain the
financing necessary to complete the transactions contemplated on the terms set
forth in this Agreement and, if related, the refinancing of Buyer.
4.5 BROKERS AND FINDERS. Buyer has not incurred any liability for
finder's or similar fees to any finders, brokers, agents or others in connection
with the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS PENDING THE CLOSING
5.1 CONDUCT OF THE BUSINESS. Between the date of this Agreement and the
Closing Date, Seller will, except as otherwise agreed to in writing by Buyer,
(i) carry on the Business only in the ordinary course in substantially the same
manner as currently conducted; (ii) perform its obligations under the Contracts,
the Permits and applicable Laws; (iii) give prompt written notice to Buyer of
any material adverse change in the Business or any material damage by fire or
other casualty to any material Transferred Asset, (iv) advise Buyer promptly in
writing of any fact that, if known at the Closing Date, would have been required
to be set forth or disclosed in or pursuant to this Agreement by Seller, or that
would result in the breach in any material respect by Seller of any of its
representations, warranties, covenants or agreements hereunder; (v) not enter
into any new employee benefit plan, program or arrangement or grant any increase
in compensation to employees of the Business, other than in the ordinary course
of business consistent with past practice or as required by applicable Laws;
(vi) not directly or indirectly (through a representative or otherwise) solicit
or furnish any information to any prospective buyer, commence or conduct
negotiations with any party other than Buyer, or enter into any agreement with
any party other than Buyer concerning the sale, lease or other disposition of
the Business, the Transferred Assets, or any material parts thereof.
5.2 ACCESS. From the date of this Agreement to the Closing Date, Seller
will give to Buyer and its representatives reasonable access during normal
business hours to its properties, books,
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records and Contracts relating to the Business, and furnish to Buyer such
documents and information concerning the Business as Buyer may reasonably
request to verify the accuracy of the representations and warranties of Seller
set forth herein.
5.3 HSR ACT. Each party will file as soon as reasonably practicable with
the Federal Trade Commission (the "FTC") and the Antitrust Division of the
United States Department of Justice (the "Antitrust Division") notification and
report forms in accordance with the Hart-Scott Rodino Anti-Trust Improvements
Act of 1976, as amended (the "HSR") Act with respect to the transactions
contemplated by this Agreement. Each party will promptly furnish to the FTC and
the Antitrust Division any additional information requested by either of them
pursuant to the HSR Act in connection with such filings.
5.4 BEST EFFORTS. Each party will use its best efforts to take or cause
to be taken all actions and to do or cause to be done all things necessary or
appropriate to perform its obligations hereunder, to satisfy the conditions to
the Closing and to consummate the transactions contemplated hereby. Buyer will
use its best efforts to obtain the financing necessary to complete the
transactions contemplated on the terms set forth in this Agreement and, if
related, the refinancing of Buyer. Buyer will provide Seller with evidence of
Commitment Letter(s).
ARTICLE VI
EMPLOYMENT MATTERS
6.1 TRANSFER OF EMPLOYEES.
6.1.1 OFFERS OF EMPLOYMENT. SCHEDULE 6.1(A) contains a list of all
current employees dedicated solely to the Business. Effective as of the Closing
Date, Buyer shall offer employment, on the terms set forth in this Article VI,
to all current (i.e. on-the-job) employees of the Business except those
employees listed on SCHEDULE 6.1(B), which schedule shall not contain more than
ten (10) names of current employees. Buyer shall also offer employment,
effective as of the date any such employee is able to return to work, to each
employee of the Business who is on short-term disability or other approved or
statutory leave of absence or who is receiving workers' compensation benefits on
the Closing Date, as indicated in SCHEDULE 6.1(B).
6.1.2 EMPLOYEE DEFINITIONS. For purposes of this Agreement, (1) the
term "Bargaining Unit Employees" shall mean all Employees who are covered by the
Collective Bargaining Agreement between Seller and the United Food & Commercial
Workers, AFL-CIO, Local 354 (the "Union") dated October 17, 1994 (the "Union
Contract"), relating to hourly paid individuals at the Cedartown Facility, (2)
the term "Non-Represented Employees" shall mean all employees of the Business
other than Active Bargaining Unit Employees, (3) the term "Transferred
Non-Represented Employees" shall mean all Non-Represented Employees who accept
Buyer's offer of employment, (4) the term "Transferred Bargaining Unit
Employees" shall mean all Bargaining Unit Employees who accept Buyer's offer of
employment and (5) the term "Transferred Employees"
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shall mean all Transferred Non-Represented Employees and all Transferred
Bargaining Unit Employees.
6.1.3 TERMS OF EMPLOYMENT OF TRANSFERRED NON-REPRESENTED EMPLOYEES.
Buyer shall (i) employ each Transferred Non-Represented Employee for base
compensation at least equal to each such Transferred Employee's base
compensation with Seller immediately prior to the Closing Date, (ii) make each
Transferred Non-Represented Employee who is eligible to receive incentive
compensation from Seller eligible to receive incentive compensation from Buyer
pursuant to a program or policy that provides incentive compensation comparable
to that provided by Seller's incentive compensation program applicable to such
Transferred Non-Represented Employee, (iii) offer each Transferred
Non-Represented Employee benefits that are comparable in the aggregate to the
benefits provided for under the employee benefit plans, arrangements and
programs provided by Seller to the employees engaged in the Business
(collectively, "Seller's Benefit Plans") and (iv) otherwise employ each
Transferred Non-Represented Employee on terms and conditions that are comparable
in the aggregate to the terms and conditions of their employment prior to the
Closing Date. During the one-year period following the Closing Date, Buyer will
(a) not terminate any Transferred Non-Represented Employee other than for good
cause; and (b) maintain each Transferred Non-Represented Employee in the same
position that such Employee held prior to the Closing Date or a position at
least comparable in responsibility and authority to such position (except for
any reduction in responsibility and authority to which any such Transferred
Non-Represented Employee consents) and (c) continue to offer the Transferred
Non-Represented Employees compensation and benefits in accordance with the first
sentence of this Section 6.1.3. In the event Buyer terminates any Transferred
Non-Represented Employee other than for good cause during such one-year period,
Buyer shall continue to pay to such Transferred Non-Represented Employee the
Transferred Non-Represented Employee's base compensation and benefits, in
addition to severance benefits, for the remainder of such one-year period.
During a period of at least one (1) year following the Closing Date, Buyer will
provide severance benefits at least as favorable as those offered by Seller
prior to the Closing Date to Transferred Non-Represented Employees. Buyer shall
be expressly liable for obligations contained in the retention incentives listed
on SCHEDULE 6.1.3 to the extent that the obligations apply after the Closing
Date.
6.1.4 CREDIT FOR SERVICE WITH SELLER. In administering any employee
benefit plans for the Transferred Non-Represented Employees after the Closing
Date, Buyer will grant full credit to each Transferred Non-Represented Employee
for all years of service of such Transferred Non- Represented Employee credited
by Seller for any purpose, including without limitation for purposes of
determining the amount of benefit coverage under any plan of Buyer providing for
post-retirement medical, dental and prescription drug coverage, calculation of
severance pay, vesting of benefits, determination of vacation time, sick leave
or leave of absence. As soon as practicable after the Closing Date, but not
later than thirty (30) days thereafter, Seller shall provide to Buyer a schedule
of the years of service credited to each Transferred Non-Represented Employee as
of the Closing Date under Seller's Benefit Plans.
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6.2 PENSION BENEFITS FOR NON-REPRESENTED EMPLOYEES.
6.2.1 BENEFITS UNDER SELLER'S PENSION PLAN. Effective as of the
Closing Date, the accrual of benefits of Transferred Non-Represented Employees
under the Henkel Corporation Retirement Plan ("Seller's Pension Plans") shall
cease and the Transferred Non-Represented Employees shall commence participation
in Buyer's Pension Plans (as defined in Section 6.2.2). Benefits accrued up to
the Closing Date to each Transferred Non-Represented Employee under Seller's
Pension Plans (including any early retirement benefit or special retirement
benefit for which the Transferred Employee has satisfied the eligibility
conditions) shall be fully vested, regardless of the Transferred Employee's
years of service with Seller, and Seller shall provide to Buyer a schedule
listing such accrued benefits for each Transferred Employee within ninety (90)
days after the Closing Date. Seller shall pay or cause to be paid to the
Transferred Employees the benefits accrued under Seller's Pension Plans when the
same shall be payable pursuant to the terms thereof, provided that any benefit
enhancements to Seller's Pension Plans effective after the Closing Date shall
not apply to such accrued benefits. A Transferred Employee who had not satisfied
the eligibility conditions for any early retirement benefit or special
retirement benefit as of the Closing Date but who subsequently completes
sufficient service with Buyer to satisfy such eligibility conditions and takes
early retirement within ten (10) years from the Closing Date shall receive from
Seller a pro rata portion of such benefit based on the number of years of
service with Seller compared to the total number of years of service required
for such benefit.
6.2.2 BENEFITS UNDER BUYER'S PENSION PLANS. As soon as practicable
after the Closing Date, Buyer shall either amend an existing pension plan or
plans or establish a new pension plan or plans (collectively, "Buyer's Pension
Plans"), which plans shall be effective as of the Closing Date. Each Transferred
Employee shall be given full credit under Buyer's Pension Plans for all years of
service that were credited by Seller to such Transferred Employee for pension
purposes, including for purposes of eligibility, vesting and benefit accrual.
Buyer's Pension Plans shall provide to the Transferred Employees amounts and
forms of pension benefits that, in respect of such credited years of service, at
least equal those provided under Seller's Pension Plans, provided that the
benefits payable under Buyer's Pension Plans shall be reduced by the benefits
due to such Transferred Employee under Seller's Pension Plans as of the date of
the commencement of benefits to such Transferred Employee under Buyer's Pension
Plans (whether or not the Transferred Employee elects to receive benefits under
Seller's Pension Plans as of such date).
6.2.3 STATUS OF BUYER'S PENSION PLANS AFTER THE CLOSING. Buyer
represents and warrants to Seller that it has no intention of terminating
Buyer's Pension Plans at any time after the Closing Date or amending Buyer's
Pension Plans to reduce the benefits payable thereunder and, in any event, Buyer
will not, within the one-year period following the Closing Date, terminate
Buyer's Pension Plans in whole or in part or amend Buyer's Pension Plans to
reduce the benefits payable thereunder. Buyer will provide Seller with a copy of
Buyer's Pension Plans within ninety (90) days after the Closing Date.
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6.3 SAVINGS PLANS FOR NON-REPRESENTED EMPLOYEES.
6.3.1 BENEFITS UNDER SELLER'S SAVINGS PLAN. Effective as of the
Closing Date, participation of Transferred Non-Represented Employees in the
Henkel Corporation Investment Plan ("Seller's Savings Plan") and Seller's
obligation to make contributions to Seller's Savings Plan with respect to
Transferred Non-Represented Employees shall cease and the Transferred
Non-Represented Employees shall commence participation in Buyer's Savings Plan
(as defined in Section 6.3.2). Each Transferred Non-Represented Employee shall
be fully vested in the company matching account of the Seller's Savings Plan as
of the Closing Date. Account balances in the Seller's Savings Plan shall
continue to receive earnings and/or interest until such balances are
transferred to Buyer's Savings Plan in accordance with Section 6.3.2.
6.3.2 TRANSFER OF ACCOUNT BALANCES. Buyer shall cooperate with
Seller in providing information to the Transferred Non-Represented Employees
prior to the Closing Date regarding transfers of their account balances and any
related loan balances from Seller's Savings Plan into one or more defined
contribution plans designated by Buyer ("Buyer's Savings Plans") and
established or maintained by Buyer or one of its Affiliates, which plan(s)
shall be qualified under Sections 401(a) and 401(k) of the Code and the related
trust(s) shall be exempt from tax under Section 501(a) of the Code. The
information provided to the Transferred Non-Represented Employees shall
describe the investment options available under Buyer's Savings Plans and shall
solicit investment directions from the Transferred Non-Represented Employees.
As soon as practicable after the Closing Date, Seller shall transfer to the
Buyer the amount of the Transferred Non-Represented Employees' aggregate
account balances under Seller's Savings Plans as of the transfer date, each
payable to the trustee of the applicable Buyer's Savings Plan, together with a
list specifying the amount (as of the transfer date) of each Transferred
Non-Represented Employee's account balance. Buyer shall accept such transfers
on behalf of such trustee and shall cause each Transferred Non-Represented
Employee's account balance to be deposited in the applicable Buyer's Savings
Plan in accordance with such Transferred Non-Represented Employee's investment
directions within seven (7) days after the later of (i) the receipt of such
transfers from Seller or (ii) receipt of such investment directions from such
Transferred Non-Represented Employee. Seller's obligation to make contributions
to Seller's Savings Plans with respect to Transferred Non-Represented Employees
shall cease as of the Closing Date.
6.3.3 LOAN BALANCES. Any outstanding loan balances as of the Closing
Date shall be repaid by the Transferred Non-Represented Employees to Buyer's
Savings Plans in accordance with the applicable terms of said loans. Following
the transfer to Buyer's Savings Plans of the account and loan balances of the
Transferred Non-Represented Employees as provided herein, Buyer's Savings Plans
shall be solely liable for the payment of benefits to Transferred Non-
Represented Employees whose account and loan balances were so transferred and
to their beneficiaries.
6.4 WELFARE BENEFIT PLANS FOR NON-REPRESENTED EMPLOYEES. Effective
as of the Closing Date, Buyer shall establish or cause to be established, at
its own expense, benefit plans ("Buyer's Welfare Benefit Plans") to provide
life insurance, health care, dental care, accidental death and dismemberment
insurance, disability and other group non-pension benefits for the Transferred
Non-
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Represented Employees from and after the Closing Date. Buyer shall assume all
responsibility for maintenance and administration of continuing coverage under
the Comprehensive Budget Reconciliation Act of 1986 ("COBRA") for dependents of
Transferred Non-Represented Employees. Effective as of the Closing Date, the
Transferred Non-Represented Employees shall cease to participate in Seller's
life insurance, health care, dental care, disability and other group non-pension
benefit arrangements (collectively, "Seller's Welfare Benefit Plans") and shall
commence participation in Buyer's Welfare Benefit Plans. No waiting period or
exclusion from coverage on account of any pre-existing medical condition shall
apply to any such Transferred Non-Represented Employee's participation in any
employee benefit plan of Buyer after the Closing Date. All charges and expenses,
if any, of each Transferred Employee and his or her eligible dependents that
were applied to the deductible and out-of-pocket maximums under any health,
medical, dental, disability, workers' compensation, life insurance or other
Benefit Plan of Seller during the plan year of Seller in which the Closing Date
falls shall be credited toward any deductible and out-of-pocket maximum
applicable under Buyer's Welfare Benefit Plans in the plan year of Buyer in
which the Closing Date falls. Seller shall retain responsibility under Seller's
Welfare Benefit Plans for all amounts payable by reason of claims incurred by
the Transferred Non-Represented Employees prior to the Closing Date, and Buyer
shall be responsible under Buyer's Welfare Benefit Plans for all amounts payable
by reason of claims incurred by the Transferred Non-Represented Employees on or
after the Closing Date. For purposes of this Section 6.4, a claim shall be
deemed to have been incurred on the date of the occurrence of (i) death in the
case of claims under life insurance, (ii) the date of the initial disability in
the case of claims under disabilities policies or (iii) the date on which the
charge or expense giving rise to such claim is incurred in the case of all other
claims.
6.5 BARGAINING UNIT EMPLOYEES.
6.5.1 UNION CONTRACT. Buyer agrees to recognize the Union Contract
and perform all obligations relating to the Union Contract.
6.5.2 BENEFITS UNDER SELLER'S UNION PENSION PLAN. Effective as of the
Closing Date, the accrual of benefits of Transferred Bargaining Unit Employees
under the Henkel Corporation Consolidated Union Retirement Plan shall cease and
the Transferred Bargaining Unit Employees shall commence participation in the
Buyer's Union Pension Plans, as defined in Section 6.5.3. Benefits accrued up to
the Closing Date to each Transferred Bargaining Unit Employee under the Henkel
Corporation Consolidated Union Retirement Plan shall be fully vested, and Seller
shall provide to Buyer a schedule listing such accrued benefits for each
Transferred Bargaining Unit Employee within ninety (90) days after the Closing
Date. Seller shall pay or cause to be paid to the Transferred Bargaining Unit
Employees the benefits accrued under the Henkel Corporation Consolidated Union
Retirement Plan when the same shall be payable pursuant to the terms thereof,
provided that any benefit enhancements to the Henkel Corporation Consolidated
Union Retirement Plan effective after the Closing Date shall not apply to such
accrued benefits.
6.5.3 BENEFITS UNDER BUYER'S UNION PENSION PLAN. On or before the
Closing Date, Buyer shall either amend an existing pension plan or plans or
establish a new pension plan or plans as are necessary to provide to each
Transferred Bargaining Unit Employee the pension benefits required under the
Union Contract (collectively, "Buyer's Union Pension Plans"), which plans shall
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be effective as of the Closing Date. The benefits payable under Buyer's Union
Pension Plans shall be reduced by the benefits available to such Transferred
Bargaining Unit Employee under the Henkel Corporation Consolidated Union
Retirement Plan as of the date of the commencement of benefits to such
Transferred Bargaining Unit Employee under Buyer's Union Pension Plans (whether
or not the Transferred Bargaining Unit Employee elects to receive benefits under
the Henkel Corporation Consolidated Union Retirement Plan as of such date).
6.5.4 WELFARE BENEFIT PLANS FOR BARGAINING UNIT EMPLOYEES. On or
before the Closing Date, Buyer shall establish such welfare benefit plans as are
necessary to provide to each Transferred Bargaining Unit Employee the benefits
required under the Union Contract ("Buyer's Union Welfare Benefit Plans").
Effective as of the Closing Date, the Transferred Bargaining Unit Employees
shall cease to participate in Seller's benefits arrangements provided pursuant
to the Union Contract and shall commence participation in Buyer's Union Welfare
Benefit Plans. No waiting period or exclusion from coverage on account of any
pre-existing medical condition shall apply to any such Transferred Bargaining
Unit Employee's participation in Buyer's Union Welfare Benefit Plans. All
charges and expenses, if any, of each Transferred Bargaining Unit Employee and
his or her eligible dependents that were applied to the deductible and
out-of-pocket maximums under any health, medical, dental or other benefit plan
of Seller during the plan year of Seller in which the Closing Date falls shall
be credited toward any deductible and out-of-pocket maximum applicable under
Buyer's Union Welfare Benefit Plans in the plan year of Buyer in which the
Closing Date falls. Seller shall retain responsibility under Seller's benefit
plans for all amounts payable by reason of claims incurred by the Transferred
Bargaining Unit Employees prior to the Closing Date, and Buyer shall be
responsible under Buyer's Union Welfare Benefit Plans for all amounts payable by
reason of claims incurred by the Transferred Bargaining Unit Employees on or
after the Closing Date. For purposes of this Section , a claim shall be deemed
to have been incurred on the date of the occurrence of (i) death in the case of
claims under life insurance, (ii) the date of the initial disability in the case
of claims under disabilities policies or (iii) the date on which the charge or
expense giving rise to such claim is incurred in the case of all other claims.
6.6 SEVERANCE LIABILITY. Seller shall be responsible for severance
benefits payable to employees other than the Transferred Employees. Buyer shall
be responsible for severance benefits payable to the Transferred Employees upon
termination of their employment with Buyer.
6.7 EARNED VACATION. Buyer shall assume and discharge the Seller's
obligations and liabilities to the Transferred Employees with respect to paid
vacation time earned but not taken prior to the Closing Date.
6.8 REGULATORY FILINGS AND FURTHER ASSURANCES. Seller and Buyer will
make all required filings and otherwise use their best efforts to obtain all
necessary regulatory approvals and take all necessary actions so as to
effectuate the provisions and intent of this Article VI.
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ARTICLE VII
CONDITIONS TO CLOSING
7.1 CONDITIONS TO BUYER'S OBLIGATION TO CLOSE. The obligation of Buyer to
purchase the Transferred Assets, assume the Assumed Liabilities and otherwise
consummate the transactions contemplated hereby shall be subject to the
satisfaction (or waiver by Buyer), at or before the Closing, of the following
conditions:
7.1.1 No Law shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or any governmental or
regulatory authority or instrumentality that prohibits the consummation of or
substantially affects the transactions contemplated hereby, and no action or
proceeding shall be pending that is brought by any governmental or regulatory
authority or instrumentality seeking any of the foregoing or seeking to recover
any damages or obtain other relief as a result of the consummation of such
transactions.
7.1.2 All required registrations and filings (if any) with any
government or governmental or regulatory authority shall have been made and any
waiting period applicable to the transactions contemplated hereby pursuant to
any applicable Laws shall have expired or been terminated.
7.1.3 Seller shall have performed in all material respects the
obligations required under this Agreement to be performed by it at or prior to
the Closing.
7.1.4 The representations and warranties of Seller contained herein
shall have been true and correct in all material respects when made and shall be
repeated at the Closing Date and shall be true and correct in all material
respects at and as of the Closing Date, except that any representation or
warranty that by its terms is stated to be true as of a particular date need be
true and correct only as of such date.
7.1.5 Seller and Buyer shall have entered into the Supply Agreements,
the License Agreements, and the Assignment and Assumption Agreement.
7.1.6 Buyer shall have received an affidavit of Seller in compliance
with section 1.1445-2(b)(2) of the Regulations under the Code stating that
Henkel Corporation is not a foreign person and its name, address and U.S.
employer identification number.
7.1.7 Seller shall have delivered to Buyer the closing documents
referred to in Section 2.2.
7.1.8 Buyer shall have obtained financing in an amount sufficient to
permit Buyer to complete the transactions contemplated by this Agreement.
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7.2 CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The obligation of Seller
to sell, convey, transfer and assign the Transferred Assets and otherwise
consummate the transactions contemplated hereby shall be subject to the
satisfaction (or waiver by Seller), at or before the Closing, of the following
conditions:
7.2.1 No Law shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or any governmental or
regulatory authority or instrumentality that prohibits the consummation of or
substantially affects the transactions contemplated hereby, and no action or
proceeding shall be pending that is brought by any governmental or regulatory
authority or instrumentality seeking any of the foregoing or seeking to recover
any damages or obtain other relief as a result of the consummation of such
transactions.
7.2.2 All required registrations and filings (if any) with any
government or governmental or regulatory authority shall have been made and any
waiting period applicable to the transactions contemplated hereby pursuant to
any applicable Laws shall have expired or been terminated.
7.2.3 Buyer shall have performed in all material respects the
obligations required under this Agreement to be performed by it at or prior to
the Closing.
7.2.4 The representations and warranties of Buyer contained herein
shall have been true and correct in all material respects when made and shall be
repeated at the Closing Date and shall be true and correct in all material
respects at and as of the Closing Date, except that any representation or
warranty that by its terms is stated to be true as of a particular date need be
true and correct only as of such date.
7.2.5 Buyer shall have paid to Seller the Closing Date Payment in
accordance with Section 1.5.
7.2.6 Buyer and Seller shall have entered into the Supply Agreements,
License Agreements, the Assignment and Assumption Agreement, the Lease
Agreement, and a servicing agreement pursuant to Section 8.5.
7.2.7 Buyer shall have delivered to Seller the closing documents
referred to in Section 2.3.
ARTICLE VIII
ENVIRONMENTAL MATTERS
8.1 INDEMNIFICATION BY SELLER. From and after the Closing Date, Seller
shall indemnify, defend and hold harmless Buyer from and against any and all
claims, losses, damages, liabilities, deficiencies, obligations or expenses,
including without limitation reasonable legal fees and expenses (collectively,
"Losses"), arising or resulting from:
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(i) subject to Section 8.2(ii), any environmental contamination of
the soil or groundwater at the Owned Real Property that is present on the
Closing Date, whether or not the nature or extent thereof is known to
Seller; or
(ii) the off-site transport, treatment, recycling, storage or
disposal by or on behalf of Seller of any material or waste generated by
Seller in the course of its operation of the Business or use of the
Transferred Assets prior to the Closing Date (collectively 8.1(i) and
8.1(ii) shall be referred to as "Environmental Matters"; PROVIDED,
HOWEVER, that Environmental Matters shall not include Retained
Liabilities).
Notwithstanding the foregoing, Seller shall have no liability for
indemnification under this Section 8.1 to the extent such liability arises as a
result of a change in the use of the Owned Real Property or other Transferred
Asset to a non-industrial use. Except as may be necessary for the operation of
the Business (including expansion of facilities and construction of
improvements) or as required by Environmental Laws, Buyer will not conduct any
environmental assessment, audit or evaluation of the Owned Real Property
relating to soil or groundwater and will not otherwise seek to impose on Seller
any obligations in respect of environmental matters in addition to those set
forth in this Section 8.1 or take any voluntary or discretionary action that
would accelerate the timing or increase the cost of any obligation of Seller
under this Section 8.1.
8.2 INDEMNIFICATION BY BUYER. From and after the Closing Date, Buyer
shall indemnify, defend and hold harmless Seller from and against any and all
Losses arising or resulting from:
(i) any environmental contamination of the soil or groundwater at the
Owned Real Property other than environmental contamination for which
Seller is responsible pursuant to Section 8.1(i) above;
(ii) from and after the fifth anniversary of the Closing Date, any
environmental contamination related to the Business of the soil or
groundwater at the Owned Real Property, regardless of when such
contamination was generated, provided however, if on that date such
contamination is the subject of a continuing indemnification claim timely
given by Buyer, Seller shall continue to indemnify Buyer with respect
thereto; or
(iii) the off-site transport, treatment, recycling, storage or
disposal by or on behalf of Buyer of any material or waste generated by
Buyer in the course of its operation of the Business or use of the
Transferred Assets after the Closing Date.
8.3 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the foregoing
provisions of this Article VIII, (i) Seller shall not be responsible for any
indemnifiable Losses suffered by the Buyer arising out of Environmental Matters
unless a claim therefor is asserted in writing on or prior to the second
anniversary of the Closing Date, (ii) Buyer shall be responsible for the first
$250,000.00 of any such Losses suffered by Buyer arising out of Environmental
Matters, (iii) Seller shall reimburse Buyer for seventy-five percent (75%) of
the next $10,000,000.00 (Ten Million Dollars) of any such Losses incurred and
paid by Buyer, and (iv) Seller shall be responsible for any and all such Losses
in excess thereof only with respect to claims made within two (2) years after
the Closing Date; it
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being understood, however, that payments by Seller under this Section 8.3 shall
be included in the calculation of the aggregate liability of Seller for purposes
of Section 10.4.
8.4 COMPLIANCE WITH ISRA.
8.4.1 Seller has notified Buyer that the transaction contemplated
hereunder is subject to the provisions of the New Jersey Industrial Site
Recovery Act ("ISRA"). Buyer and Seller understand that execution of an option
to purchase, letter of intent or agreement of sale will trigger an ISRA review
of the Harrison, New Jersey, facility, and is likely to require submission by
Seller of a preliminary assessment Report to the New Jersey Department of
Environment Protection ("NJDEP"). Seller has also notified Buyer that Seller
anticipates filing a Negative Declaration Affidavit with NJDEP to obtain a No
Further Action letter, thereby completing the ISRA requirements triggered by
Seller's acquisition of the Harrison Facility in 1987.
8.4.2 Following the Closing Date, Seller shall submit a Preliminary
Assessment and take such steps, if any, as may be required to obtain a No
Further Action letter, Negative Declaration or equivalent approval as defined by
N.J.S.A. 13:1K-9(d). Seller shall provide Buyer with copies of all ISRA filings
(and replies thereto), submitted to NJDEP pursuant to the transaction
contemplated hereunder.
8.4.3 Following the Closing Date, Buyer shall cooperate with Seller
in Seller's efforts to complete the actions required by ISRA and NJDEP.
8.4.4 Following the Closing Date, Seller shall maintain, at its own
expense, until released by NJDEP a financial assurance mechanism such as a
Self-Insurance Guarantee (as such term is defined under ISRA), satisfactory in
form and content to NJDEP.
8.5 COMPLIANCE WITH ENVIRONMENTAL RESTRICTIONS.
8.5.1 HARRISON FACILITY.
(i) Seller has notified Buyer that certain areas of the Harrison
facility, the Affected Areas are subject to a Declaration of
Environmental Restrictions ("Deed Restriction"), dated June 9, 1994; such
Deed Restriction and any modifications thereto mandated by NJDEP shall be
referred to herein, collectively, as the "DER". Buyer agrees to take the
property subject to the use restrictions placed on the Affected Areas and
further agrees not to violate any of the conditions of the Deed
Restriction. Seller shall obtain final approval of the Deed Restriction
and file such Deed Restriction with the recorder of deeds in the county
in which the Harrison Facility is located.
(ii) Buyer understands that the Deed Restriction is not intended to
create a lien or encumbrance against the property but merely is intended
to reflect the regulatory and statutory obligations imposed as a
condition for using non-residential clean-up standards.
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(iii) Buyer understands that the use restrictions are enforceable by
NJDEP against any person who knowingly violates the Deed Restriction.
Buyer further understands that following the Closing Date, the Deed
Restriction shall become binding upon Buyer, Buyer's successors and
assigns.
8.5.2 CEDARTOWN FACILITY.
(a) COMPLIANCE WITH ADMINISTRATIVE ORDER ON CONSENT.
(i) Seller has notified Buyer that each deed, title or other
instrument conveying an interest in the portion of the Cedartown Facility
identified as the Diamond Shamrock Landfill Site in the Administrative
Order on Consent, EPA Docket No. 90-64-C dated November 2, 1990 (the
"AOC") shall reference the recorded location of the AOC, and any
restrictions, obligations or covenants thereunder and shall specify where
the AOC is recorded.
(ii) Seller has further notified Buyer that the deed restrictions
or restrictive covenants are intended to prevent groundwater usage and
drilling and include the maintenance (at Seller's cost) of site access
restrictions, such as fencing and signage. Buyer shall comply with by the
AOC and all restrictions, obligations and covenants thereunder.
(iii) Seller has notified Buyer that, pursuant to the AOC, Seller
is conducting a groundwater and surface water monitoring program to
confirm that natural attenuation processes are effective in mitigating
existing contamination. Buyer shall at Seller's cost and upon the terms
set forth in a servicing agreement, continue the groundwater and surface
water monitoring program and fulfill all monitoring and reporting
requirements, on behalf of Seller, in accordance with the protocol
established pursuant to the AOC until applicable State standards are met.
(b) COMPLIANCE WITH CORRECTIVE ACTION CONSENT ORDER.
(i) Seller has notified Buyer that Seller is conducting
remediation of surface and groundwater contaminated with ethylene
dichloride (EDC) pursuant to Corrective Action Consent Order No.
EPD-HW-1048 (the "CACO") between Seller and the Georgia Department of
Natural Resources dated September 21, 1993. Buyer shall at Seller's cost
and upon the terms set forth in a servicing agreement continue the
groundwater and surface water remediation program and fulfill all
monitoring and reporting requirements, on behalf of Seller, in accordance
with the protocol established pursuant to the CACO until applicable State
standards are met.
8.6 NOTICES. Upon receiving notice or obtaining information that a claim
or proceeding has been commenced or initiated against or by a party to this
Agreement which may give rise to any liability on the part of the other party
under this Article VIII, the party receiving such notice or obtaining such
information shall as promptly as practicable provide notice thereof to such
other
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party. Such notice shall be by any reasonable means but, if not in writing,
shall be followed within five (5) working days by written notice of the claim or
proceeding.
8.7 POST CLOSING RELEASE REPORTS. Following the Closing Date and provided
an Environmental Matter is subject to Seller's indemnification obligation under
this Article VIII, Buyer shall provide to Seller a copy of all information and
reports required to be provided to the National Response Center or other
federal, state or local agency concerning all reportable spills, discharges and
other releases of hazardous substances into the environment from the Owned Real
Property or otherwise related to the Transferred Assets. As soon as practicable
following any such event, Buyer shall provide to Seller copies of all
photographs depicting any such event or the effects thereof.
8.8 DISCHARGE OF ENVIRONMENTAL CLAIMS. In the event that Buyer notifies
Seller of any claim that may be subject to Seller's indemnification obligation
under this Article VIII, Seller shall have sixty (60) days from the date of
receipt of notice within which to acknowledge and assume all or a portion of the
liability asserted. During such 60-day period, Buyer shall not take any action
or incur any expenses with respect to such claim except to the extent such
action or incurrence is (i) legally required, (ii) reasonably required in the
operation of Buyer's business or the defense of such claim or (iii) approved by
Seller, which approval shall not be unreasonably withheld. If Seller agrees
within such 60-day period to assume liability for not less than 51% of the
estimated claim and provide written acknowledgment thereof to Buyer, then Seller
shall have the right to control, manage and direct all discussions, proceedings
and activities regarding the satisfaction and discharge of the liability or
obligation that is the object of the claim; provided that Buyer shall have the
right to approve any material actions relating to any claim affecting the
Transferred Assets or the Business, which approval shall not be unreasonably
withheld. Buyer shall reimburse Seller or otherwise pay its share, if any, of
the costs and expenses of such claim on a current basis as such costs and
expenses are incurred.
8.9 RIGHT OF PARTICIPATION. Under any circumstances in which a party
could incur any liability under this Article VIII, such party shall have the
full right, at its own expense, to consult, through counsel or otherwise, with
respect to all meetings and proceedings with adverse parties or governmental
authorities and with respect to all activities pertaining to that matter. Prior
to either party's initiating, or participating in, any meeting or proceeding in
which decisions or discussions adverse to the other party may be made, such
party attending the meeting or proceeding shall consult with such other party.
This right of consultation shall not apply to confidential meetings or documents
in cases where the parties are disputing or litigating claims against each other
in a judicial or administrative proceeding.
8.10 ACCESS AND COOPERATION. Each party shall assist the other to fulfill
its obligations under this Article VIII by affording reasonable access to its
properties (including but not limited to the right to enter upon, investigate,
drill wells, take soil borings, excavate, monitor, test, and use available land
for the testing and implementation of remedial technologies) and employees and
to all relevant documents and records regarding the Retained Liabilities and a
matter as to which a claim is asserted; provided that such access may be
conditioned or restricted to the extent necessary to protect the operation of
properties, to ensure the safety of personnel and facilities or to protect
confidential or privileged information. To the extent permitted by law, the
parties will use their best
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efforts and cooperate with each other to minimize costs with respect to any
action that may give rise to a claim for indemnification or payment of costs by
or to either party under this Article VIII. To effectuate the intent of this
Article VIII and consistent with the terms hereof, the parties shall provide all
other cooperation, assistance and consultation to each other that is reasonably
requested with respect to Retained Liabilities and to matters covered by this
Article VIII.
8.11 COMPUTATION OF LOSSES. For purposes of this Article VIII, all
amounts for which either party seeks indemnification shall be computed net of
(i) any actual income tax benefit resulting therefrom to the indemnified party
(after giving effect to any income tax payable with respect to the indemnity
payments) and (ii) any amounts recovered from any third party based on claims
the indemnified party has against such third party which reduce the Losses that
would otherwise be sustained; PROVIDED, HOWEVER, that in all cases, the timing
of the receipt or realization of income tax benefits or recoveries from third
parties shall be taken into account in determining the amount of reduction of
Losses. Each indemnified party agrees to use its best efforts to pursue (or, at
its election, to assign to the indemnifying party) any claims or rights it may
have against any third party which would reduce the amount of Losses otherwise
incurred by such indemnified party.
ARTICLE IX
TERMINATION
9.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing:
(i) by mutual consent of Buyer and Seller; or
(ii) by either of the parties if it is not in breach of this
Agreement and if the Closing shall not have occurred by March 31, 1997.
(iii) by Buyer if, for the period between the date hereof and the
Closing Date, there is a material adverse change in the physical
condition of the Cedartown or Harrison Plants or a material reduction in
the financial performance of the Business relative to the financial
performance of the Business as reflected on the Financial Statements.
(iv) by Seller, on or after February 25, 1997, if Buyer has not
obtained a Commitment Letter in a dollar amount sufficient (together with
the equity financing commitment by Charter Oak Partners) to conclude the
transactions contemplated on the terms set forth in this Agreement;
(v) by Buyer if, at the Closing Date, any of the conditions in
Section 7.1 have not been met or have not been waived by Buyer; and
(vi) by Seller if, at the Closing Date, any of the conditions in
Section 7.2 have not been met or have not been waived by Seller.
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9.2 EFFECT OF TERMINATION. No termination of this Agreement pursuant to
Section 9.1 above shall affect or diminish any rights accruing to either party
pursuant to this Agreement at or prior to such termination.
ARTICLE X
INDEMNIFICATION
10.1 OBLIGATION OF PARTIES TO INDEMNIFY.
10.1.1 INDEMNIFICATION BY SELLER. Subject to the limitations set
forth in Section 10.4 and the other terms and provisions of this Article X,
Seller shall indemnify, defend and hold harmless Buyer from and against any and
all Losses arising or resulting from any of the following:
(i) the failure of Seller to pay or otherwise discharge the Retained
Liabilities;
(ii) the non-fulfillment by Seller of any agreement or covenant of
Seller hereunder; and
(iii) the breach of any representation or warranty made by Seller
herein.
10.1.2 INDEMNIFICATION BY BUYER. Subject to the limitations set
forth in Section 10.4 and the other terms and provisions of this Article X,
Buyer shall indemnify, defend and hold harmless Seller from and against any and
all Losses arising or resulting from any of the following:
(i) the failure of Buyer to pay or otherwise discharge the Assumed
Liabilities;
(ii) the non-fulfillment by Buyer of any agreement or covenant of
Buyer hereunder; and
(iii) the breach of any representation or warranty made by Buyer
herein.
10.2 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS. If either party
(the "Indemnified Party") receives written notice of the commencement of any
action or proceeding or the assertion of any claim by a third party or the
imposition of any penalty or assessment for which indemnity may be sought under
this Article X (a "Third Party Claim"), and the Indemnified Party intends to
seek indemnity pursuant to this Article X, the Indemnified Party shall promptly
provide the other party (the "Indemnifying Party") with notice of such Third
Party Claim. The Indemnifying Party shall, upon acknowledgement of its
obligation to indemnify the Indemnified Party, be entitled to participate in or,
at its option, assume the defense or settlement of such Third Party Claim. Such
defense or settlement shall be conducted through counsel selected by the
Indemnifying Party and approved by the Indemnified Party, which approval shall
not be unreasonably withheld, and the Indemnified Party shall fully cooperate
with the Indemnifying Party in connection therewith. In the event that the
Indemnifying Party fails to assume the defense or settlement of any Third Party
Claim
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within twenty (20) days after receipt of notice thereof from the Indemnified
Party, the Indemnified Party shall have the right to undertake the defense or
settlement of such Third Party Claim at the expense and for the account of the
Indemnifying Party. The Indemnifying Party shall not settle any Third Party
Claim the defense or settlement of which is controlled by it without the
Indemnified Party's prior written consent, unless the terms of such settlement
or compromise release such Indemnified Party from any and all liability with
respect to such Third Party Claim and impose no obligations or restrictions on
the Indemnified Party or its business or assets.
10.3 COMPUTATION OF LOSSES. For purposes of this Article X, all amounts
for which either party seeks indemnification shall be computed net of (i) any
actual income tax benefit resulting therefrom to the Indemnified Party (after
giving effect to any income tax payable with respect to the indemnity payments)
and (ii) any amounts recovered from any third party based on claims the
Indemnified Party has against such third party which reduce the Losses that
would otherwise be sustained; PROVIDED, HOWEVER, that in all cases, the timing
of the receipt or realization of income tax benefits or recoveries from third
parties shall be taken into account in determining the amount of reduction of
Losses. Each Indemnified Party agrees to use its best efforts to pursue (or, at
its election, to assign to the Indemnifying Party) any claims or rights it may
have against any third party which would reduce the amount of Losses otherwise
incurred by such Indemnified Party.
10.4 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the foregoing
provisions of this Article X, but excepting Losses arising from a breach of
Seller's obligations under Article VIII hereof, (i) neither party shall be
responsible for any indemnifiable Losses suffered by the other party arising (x)
out of breaches of the representations and warranties of such other party herein
or in the License Agreements unless a claim therefor is asserted in writing on
or prior to the first anniversary of the Closing Date or (y) from liabilities
and obligations relating to the Business that were known to Seller on the
Closing Date and should have been disclosed in Schedule 3.12 or the Financial
Statements but were not so disclosed ("Undisclosed Liability Losses") unless a
claim therefor is asserted in writing on or prior to the fifth anniversary of
the Closing Date; (ii) neither party shall be liable for any Losses (other than
Undisclosed Liability Losses) suffered by the other party arising out of the
breaches of the indemnifying party's representations and warranties until all
such Losses exceed Two Million Dollars ($2,000,000.00), in which event the
indemnifying party's indemnity obligation shall apply only to the extent of any
such excess, and (iii) the aggregate liability of either party hereunder for (x)
Losses suffered by the other party arising out of breaches of the indemnifying
party's representations and warranties, (y) Undisclosed Liability Losses, plus
(z) Losses suffered by the other party arising under Article VIII shall in no
event exceed Forty Million Dollars ($40,000,000.00).
10.5 REMEDIES EXCLUSIVE. Except to the extent the parties may be
entitled to the remedy of specific performance of any covenant or agreement
contained in this Agreement or any related document specifically referred to
herein or any other equitable remedy, the remedies provided in this Article X
shall be exclusive and shall preclude assertion by the Indemnified Party of any
other rights or the seeking of any and all other remedies against the
Indemnifying Party for claims based on this Agreement; PROVIDED, HOWEVER, that
claims made with respect to the matters addressed in Article VIII may only be
made pursuant to such Article VIII.
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ARTICLE XI
ADDITIONAL AGREEMENTS
11.1 SELLER'S COVENANT NOT TO COMPETE. Seller acknowledges that an
important part of the benefit that Buyer will receive in connection with the
transactions contemplated hereby is the ability to carry on the Business in the
U.S. and Canada free from competition by Seller. In order that Buyer may enjoy
such benefits, for a period of seven (7) years from and after the Closing Date,
Seller will not engage, or have any ownership interest in any corporation,
partnership or other business entity that engages, directly or indirectly, in
the manufacture or sale in the U.S. and Canada of any products for the Paper/CPC
Industries, as hereafter defined) (other than the manufacture of products
pursuant to the Supply Agreement); PROVIDED, HOWEVER, that (i) Seller may own as
an investment, directly or indirectly, securities of any corporation or other
entity which are publicly traded if Seller does not, directly or indirectly,
beneficially own five percent (5%) or more of the outstanding shares of such
entity; (ii) Seller may have an ownership interest otherwise proscribed by this
Section if such interest arises as a result of the acquisition of a business
entity not principally engaged (i.e., less than Five Million Dollars (U.S.
$5,000,000.00) in annual sales) in activities proscribed by this Section and
(iii) Seller may manufacture and sell products sold by both the Business and the
Retained Businesses to the industries other than the Paper/CPC Industries.
Nothing contained herein shall prevent Seller from engaging directly or
indirectly in the manufacture and/or sale of products for the oilfield drilling
and production industry with products other than naphthalene
formaldehydesulfonate ("NFS") products and the current oilfield products of the
Business. Seller's PETROFREE oilfield chemicals are not part of the Business.
11.1.1 DEFINITION OF PAPER/CPC INDUSTRIES.
(i) "Paper Industry" shall mean the market for process aids
and functional additives (additives, coating lubricants, defoamers,
dispersants, felt conditioners, cleaners, wet strength resins and
deinking chemicals) for use in paper coating, pulping, papermaking and
recycling;
(ii) "Construction and Processing Chemicals Industry" shall
mean the market for NFS, dispersants, defoamers, foaming agents and
surfactants for use in concrete admixture, gypsum board manufacture and
conventional ceramic materials processing. NFS fly ash in concrete
manufacture and car battery applications; calcium stearate as a
waterproofing agent for concrete blocks, amine-based corrosion inhibitors
for rebar in concrete; NFS-based oilfield drilling and production
chemicals; NFS for cement slurry for oil-well casings and Latex/SBR
polymerization; and green strength products for the manufacture of
ceramics;
(collectively, the "Paper/CPC Industries").
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11.2 BUYER'S COVENANT NOT TO USE TRANSFERRED INTELLECTUAL PROPERTY IN
RETAINED INDUSTRIES. Buyer acknowledges that an important consideration for
Seller in this transaction is to not adversely impact on Seller's Retained
Businesses. Therefore, for a period of seven (7) years from the Closing Date,
Buyer agrees not to use the Transferred Intellectual Property in the
Agricultural Chemicals Industry, the Plastic Additives Industry, the Adhesives
Industry, and the Leather Industry, and for a period of ten (10) years from the
Closing Date, in the Textile Industry and the Coatings and Inks Industry;
collectively, the Retained Industries, as hereafter defined. Buyer shall,
however, be free to acquire other technology or to develop its own technology to
compete against Seller in the Retained Industries anywhere in the world.
11.2.1 DEFINITION OF THE RETAINED INDUSTRIES.
(i) "Textile Industry" shall mean the market for process aids
and functional additives, including defoamers, sold to manufacturers of
fibers and textiles and to formulators of process aids and functional
additives for fibers and textiles;
(ii) "Coatings and Inks Industry" shall mean the market for
process aids and functional additives, including defoamers, sold to
manufacturers of paints, coatings and inks;
(iii) "Agricultural Chemicals Industry" shall mean the market
for dispersants, wetting agents and defoamers sold to manufacturers and
formulators of pesticides, herbicides, adjuvant formulations, plant
growth regulators, defoliants and miticides;
(iv) "Plastic Additives Industry" shall mean the market for
process aids and functional additives (except calcium stearate),
including defoamers, sold to manufacturers of plastics;
(v) "Adhesives Industry" shall mean the market for process
aids and functional additives, including defoamers, sold to adhesive
formulators; and
(vi) "Leather Industry" shall mean the market for leather
treatment chemicals.
11.3 CERTAIN SERVICES PROVIDED BY SELLER AND SELLER'S AFFILIATES. Buyer
acknowledges that the Business currently receives from Seller and Seller's
Affiliates certain administrative sales and corporate services, including
without limitation computer and information processing and accounting services;
legal services; export sales support; payroll services; office space and human
resource support. Buyer acknowledges that such services will terminate as of the
Closing Date and will not be provided to the Business thereafter, except that
upon Buyer's written request received prior to the Closing Date, Seller will
continue to make certain of such services available to Buyer for a period of up
to one (1) year after the Closing Date for the fees specified in and subject to
a transitional services agreement in the form of Exhibit D (the"Administrative
Services Agreement").
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11.4 SELLER'S AND BUYER'S ACCESS TO INFORMATION. (i) After the Closing
Date, Buyer shall grant to Seller at no charge such access to financial records
and other information in Buyer's possession related to Seller's conduct of the
Business prior to the Closing Date and, at Seller's expense, such cooperation
and assistance as shall be reasonably required to enable Seller to complete its
financial reports and tax returns for any period ending on or prior to or
including the Closing Date. In the event that any tax return of Seller for any
such period becomes the subject of any audit or investigation, Buyer will, at
Seller's expense, give Seller all reasonable cooperation, access and assistance
as needed during normal business hours with respect to books and records and
other financial data included in the Transferred Assets to enable Seller to
defend any such audit or investigation. Buyer will, for a period of six (6)
years after the Closing Date plus any additional time during which Seller
advises Buyer that there is an ongoing tax audit or investigation with respect
to such periods, keep such materials reasonably accessible and not destroy or
dispose of such materials without the written consent of Seller. Until Buyer is
notified by Seller that the U.S. Department of Justice Grand Jury Investigation
into possible violations of federal anti-trust laws in the sodium hydrosulfite
industry, in conjunction with which Seller has responded to a subpoena duces
tecum, has been terminated, Buyer shall keep, and shall not destroy or dispose
of, any materials, documents and records of the Business relating to the sodium
hydrosulfite industry and shall grant Seller reasonable access to such records
and Transferred Employees as may be required by Seller in conjunction with this
matter. (ii) For a period of three (3) years beginning on the Closing Date,
Seller shall grant to Buyer at no charge such access to financial records and
other information in Seller's possession related to Seller's conduct of the
Business during the three year period prior to the Closing Date and, at Buyer's
expense, such cooperation and assistance as shall be reasonably required to
enable Buyer to prepare financial summaries or statements reflecting the
performance of the Business during such period.
11.5 PUBLIC ANNOUNCEMENTS. Neither party will issue any press release or
other public announcement with respect to this Agreement or the transactions
contemplated hereby without the prior written approval of the other party,
except as may be required by applicable Laws.
11.6 TERMINATION OF INSURANCE. Buyer acknowledges that Seller's insurance
coverage for the Transferred Assets shall terminate as of midnight on the day
prior to the Closing Date.
11.7 FURTHER ASSURANCES. After the Closing, each party shall take such
further actions and execute such further documents as may be necessary or
reasonably requested by the other party in order to effectuate the intent of
this Agreement and to provide such other party with the benefits of this
Agreement.
11.8 EXPORT SALES. As a limited exception to the Business being United
States and Canada business only, Buyer shall continue export sales of the
Business as listed in SCHEDULE 11.7 ("Export Sales"), setting forth the export
countries and products sold in each export country, for a period of three (3)
years after the Closing Date on terms and conditions which are reasonably
comparable to the terms and conditions for such sales prior to the Closing Date;
PROVIDED, HOWEVER, that this obligation shall not require Buyer to make such
Export Sales of products at a price which is less than Buyer's actual cost.
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ARTICLE XII
MISCELLANEOUS
12.1 EXPENSES. Each of the parties hereto shall pay its own legal,
accounting and other fees and expenses incurred in connection with the
preparation, execution and delivery of this Agreement and all documents and
instruments executed pursuant hereto and the consummation of the transactions
contemplated hereby and any other costs and expenses incurred by such party,
except as otherwise expressly set forth herein.
12.2 NOTICES. Any notice or other communication given under this
Agreement shall be in writing and shall be (i) delivered personally; (ii) sent
by documented overnight delivery service; (iii) sent by facsimile transmission,
provided that a confirmation copy thereof is sent no later than the business day
following the day of such transmission by documented overnight delivery service
or first class mail, postage prepaid; or (iv) sent by first class mail, postage
prepaid. Such notice shall be deemed to have been duly given (i) on the date of
delivery, if delivered personally; (ii) on the business day after dispatch by
documented overnight delivery service, if sent in such manner; (iii) on the date
of facsimile transmission, if so transmitted; or (iv) on the fifth business day
after sent by first-class mail, postage prepaid, if sent in such manner. Notices
or other communications shall be directed to the following addresses:
Notices to Seller:
Henkel Corporation
2200 Renaissance Boulevard
Suite 200, The Triad
Gulph Mills, Pennsylvania 19406
Attention: Monika Krug, Vice President
with a copy to:
Henkel Corporation
2200 Renaissance Boulevard
Suite 200, The Triad
Gulph Mills, Pennsylvania 19406
Attention: Ernest G. Szoke, Vice President
Notices to Buyer:
Geo Specialty Chemicals, Inc.
28601 Chagrin Boulevard
Suite 450
Cleveland, Ohio 44122
Attention: George P. Ahearn, President
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with a copy to:
Thompson Hine & Flory L.L.P.
3900 Key Tower
127 Public Square
Cleveland, Ohio 44114
Attention: Craig R. Martahus, Esquire
Either party may, by notice given in accordance with this Section 12.2, specify
a new address for notices under this Agreement.
12.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement and the exhibits
and schedules annexed hereto constitute the entire understanding between the
parties with respect to the subject matter hereof, and supersede all other
understandings and negotiations with respect thereto. This Agreement may be
amended only in a writing signed by both parties hereto. Any provision of this
Agreement may be waived only in a writing signed by the party to be charged with
such waiver. No course of dealing between the parties shall be effective to
amend or waive any provision of this Agreement.
12.4 SEVERABILITY. In the event that any provision contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any jurisdiction, such provision shall be ineffective as to such jurisdiction
to the extent of such invalidity, illegality or unenforceability without
invalidating or affecting the remaining provisions hereof or affecting the
validity, legality or enforceability of such provision in any other
jurisdiction.
12.5 ASSIGNMENT. This Agreement may not be assigned by either party
without the prior written consent of the other party; PROVIDED, HOWEVER, that
nothing contained herein shall prohibit Buyer from granting a security interest
on its rights hereunder to one or more of its lenders.
12.6 AFFILIATES. For purposes of this Agreement, an "Affiliate" of any
party means any person or entity controlling, controlled by or under common
control with such party.
12.7 KNOWLEDGE OF SELLER. Any representations or warranties made to the
"best of Seller's knowledge" or words of like import shall be deemed to be
breached only if the persons set forth on SCHEDULE 12.7 had actual knowledge of
the falsity of such representation or of the breach of such warranty.
12.8 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware applicable to agreements made and to be performed entirely
therein.
12.9 CAPTIONS. The captions in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the interpretation
hereof.
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12.10 DEFINED TERMS. References to defined terms in the singular shall
include the plural and references to defined terms in the plural shall include
the singular.
12.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.12 BULK SALES LAW. Buyer hereby waives compliance with the provisions
of all applicable bulk sales Laws.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
GEO SPECIALTY CHEMICALS, INC. HENKEL CORPORATION
By: /s/ George P. Ahearn By: /s/ Monika Krug
----------------------------- ------------------------------
Name: George P. Ahearn Name: Monika Krug
Title: President Title: Vice President
HENKEL CANADA LIMITED
By: /s/ Ullrich Reckert
-----------------------------
Name: Ullrich Reckert
Title: President
ACKNOWLEDGEMENT AND CONSENT
---------------------------
WHEREAS, Charter Oak Partners ("Charter Oak") acknowledges that a
determinative factor in Seller's decision into enter in the above Agreement with
Buyer is Charter Oak's commitment to provide equity financing, as provided
below, sufficient for Buyer to consummate the transactions contemplated by the
Agreement and Charter Oak's commitment to use its best efforts to assist Buyer
in obtaining any necessary debt financing to consummate the transactions.
NOW, THEREFORE, intending that Seller may rely thereon, intending to be
legally bound, and in consideration of the benefits that will inure to Charter
Oak as majority shareholder of Buyer, Charter Oak hereby consents to the terms
of the above Agreement and commits and agrees:
1. to provide equity financing of no less than $15 million to facilitate
Buyer's consummation of the transactions contemplated by the above Agreement;
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2. to use its best efforts to assist Buyer in obtaining any necessary
debt financing; and
3. to take all other reasonable actions (other than direct loans to
Buyer) necessary or appropriate for the consummation of the transactions
contemplated by the above Agreement.
CHARTER OAK PARTNERS
By: /s/ Anthony J. Dowd
-------------------------------
Name: Anthony J. Dowd
Title: Director of Private Investments
Date: February 10, 1997
---------------------------------
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Exhibit 2.3
ASSET PURCHASE AGREEMENT
------------------------
ASSET PURCHASE AGREEMENT, dated December 5, 1996, by and between Cytec
Industries Inc., a Delaware corporation (the "Seller"), and GEO Specialty
Chemicals, Inc., an Ohio corporation, or its permitted designee (the
"Purchaser").
W I T N E S S E T H:
--------------------
WHEREAS, prior to the date hereof, the Seller has engaged in the
business of (i) producing, distributing and selling aluminum sulfate at
facilities located in Chattanooga, Tennessee, Coosa Pines, Alabama, Demopolis,
Alabama, DeRidder, Louisiana, Georgetown, South Carolina, Mobile, Alabama,
Monticello, Mississippi, and Plymouth, North Carolina and (ii) owning and
operating a kaolin clay mine (including related mineral reserves) and calcining
plant in Andersonville, Georgia and manufacturing, distributing and selling
calcined kaolin (the "Business"); and
WHEREAS, the Seller desires to sell and transfer to the Purchaser, and
the Purchaser desires to purchase and assume from the Seller, certain of the
assets and liabilities relating to the Business, all as more specifically
provided herein;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and intending to be legally bound, the Seller and the Purchaser agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. CERTAIN DEFINITIONS. As used in this Agreement, the
following terms have the respective meanings set forth below.
"Acid Supply Agreement" means the Sulfuric Acid Supply Agreement to be
entered into by and between the Purchaser and the Seller at Closing in
substantially the form of Exhibit D attached hereto.
"Affiliate" means, with respect to any Person, any other Person who
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlled" and "controlling" have meanings correlative thereto.
"Agreement" means this Asset Purchase Agreement and all Exhibits and
Schedules thereto.
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"Alum Tolling Agreement" means the Alum Tolling Agreement to be entered
into by and between the Purchaser and the Seller at Closing in substantially the
form of Exhibit E attached hereto.
"Appropriate Remedial Measures" mean the minimum actions necessary to
address Environmental Claims including, without limitation, the investigation,
monitoring, containment, restoration, cleanup, risk assessment methodologies, no
action alternatives, and closure and post-closure responsibility for the
Landfills and Impoundments, as required under applicable Environmental Laws.
Such minimum actions shall also include reasonable usage restrictions such as
declarations of environmental restrictions, deed restrictions, engineering
controls, and institutional controls, whenever such usage restrictions would
reduce the costs (not considering diminished property value) of implementing
Appropriate Remedial Measures without materially affecting the Purchaser's
ability to operate the Business or the cost thereof. Appropriate Remedial
Measures shall also include reasonable attorneys fees and disbursements and
other legal costs related to Environmental Claims, or sanctions for failure to
comply or conform with Environmental Laws including, without limitation, fines,
penalties, and affirmative duties. Appropriate Remedial Measures relating to
groundwater shall include the costs of addressing any soil contamination
relating thereto.
"Assumed Contracts" means all Contracts that are listed on Schedule
3.17 (other than those Contracts identified thereon as being retained by the
Seller, which shall not constitute Assumed Contracts) and all other Contracts to
which the Seller is a party on the Closing Date (other than those Contracts
relating primarily to the Excluded Assets or the Retained Liabilities) that
relate primarily to or arise primarily out of the operation of the Business that
are not required to be listed on Schedule 3.17 and which were entered into in
the ordinary course of the Business, in each case, to the extent such Contracts
are assignable.
"Assumed Liabilities" means the liabilities and obligations of the
Business described in the form of the Assignment and Assumption Agreement set
forth as Exhibit C; all liabilities and obligations, whether known or unknown,
of the Business that exist as of the Closing Date which are not Assumed
Liabilities are referred to herein as the "Retained Liabilities."
"Books and Records" means all the documents and records used by the
Seller solely in or solely relating to the ownership, operation, use,
maintenance or repair of the Transferred Property, the other Transferred Assets
or the Business, whether recorded in hard copy, in computerized or electronic
data bases, or otherwise, including, without limitation, construction records,
maintenance records, surveys, title reports, maps, drawings, plans, blueprints,
payroll and personnel records and files relating to the Transferred Employees,
customer lists, marketing studies and/or surveys, lists of suppliers, Inventory
records, written production procedures, bills of material, production routings,
cost records, inspection and quality control records, and financial, tax and
accounting records, but excluding, all other financial records and other
documents.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks in New Jersey are open for the general transaction of business.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" means the Confidentiality Agreement, dated
May 10, 1996, by and between the Purchaser and the Seller.
"Contracts" has the meaning set forth in Section 3.17.
"Encumbrance" means any lien, claim, charge, mortgage, pledge, security
interest, equity, restriction or other encumbrance.
"Environmental Claims" mean all claims that are or could be asserted,
obligations that are or could be imposed, and actions that are or could be
required by Governmental Authorities or private parties under Environmental Laws
including, without limitation, claims arising out of the use, storage,
recycling, treatment, disposal, arrangement for disposal, generation,
transportation, processing, handling, production, release (as that term is
defined in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA")), or threatened release of any Regulated
Substance. Such claims shall also include all claims and actions involving the
investigation, monitoring, containment, restoration, or cleanup of soils,
structures, ground water, surface water, vapors, and other features of any sites
(whether waste disposal sites, former plant sites or other sites) on which any
Regulated Substance may be found. The term "Environmental Claim" shall apply
without regard to whether the activity giving rise to the claim was lawful or
unlawful at the time of occurrence.
"Environmental Laws" mean any applicable Governmental Rule issued,
promulgated or entered into by any Governmental Authority relating to the
protection of human health or the environment, the preservation or reclamation
of natural resources, or the management or remediation of Regulated Substances.
"Environmental Permits" has the meaning set forth in Section 3.20.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means those Contracts and other assets owned or
leased by the Seller that relate to the Business but that are not being sold or
assigned to Purchaser hereunder, such definition shall include, without
limitation, the following:
(a) headquarters, administrative and support, and sales
offices utilized by other operations of the Seller;
(b) the Seller's Mobile, Alabama facility and all machinery,
equipment, and other items of personal property located thereat;
(c) the Owned Real Property on which the landfill,
impoundments and sand bed filters are located at the Seller's
Chattanooga, Tennessee facility, as shown on the survey of such
facility previously provided to the Purchaser;
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(d) cash, money on deposit or in the process of collection
with banks, factors and others, certificates of deposit, commercial
paper, letters of credit, stock, bonds, and other investment
securities;
(e) accounts and notes receivable and all reserves, deposits
and guarantees related thereto;
(f) utility deposits, prepaid insurance premiums and other
prepaid expenses not transferable to Purchaser;
(g) all claims, credits, and choses in action relating solely
and exclusively to the Excluded Assets, all rights and claims under the
Seller's insurance policies existing on the date hereof, and those
claims, credits and choses in action listed on Schedule 1.1A;
(h) all right, title and interest to the name "Cytec" and any
related trademarks, servicemarks, or related rights, subject to the
provisions of Section 5.9;
(i) all Proprietary Rights (subject to the terms of the
Technology Transfer Agreement) except Recent Know-How;
(j) all rights under those Contracts that are not Assumed
Contracts;
(k) all right, title and interest in and to the inactive
landfill located in Monticello, Mississippi and more fully described on
Schedule 1.1B;
(l) all effluent ponds or impoundments previously utilized by
the Seller, or its predecessor in interest, as permitted by the terms
of the DeRidder Lease, but not constituting a portion of the demised
premises included in the Leased Real Property (which the Purchaser
acknowledges it shall not use for any purpose after the Closing); and
(m) the Excluded Permits.
"Excluded Permits" means all Permits and Environmental Permits relating
primarily to the Excluded Assets.
"GAAP" means generally accepted accounting principles as in effect in
the United States on the date of this Agreement.
"Governmental Authority" means any foreign, federal, state or local
government, or any entity, authority, agency, commission or other similar body
exercising executive, legislative, judicial, regulatory or administrative
authority or functions of or pertaining to government, including any, court or
arbitration or similar tribunal.
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"Governmental Rule" means any foreign, federal, state or local law,
judgment, order, decree, statute, ordinance, rule or regulation.
"Impoundments" mean all active and inactive impoundments at the
Transferred Property, except impoundments constituting Excluded Assets.
"Inventory" means all raw material inventories and stockpiles,
work-in-process and finished products, including without limitation, spare
parts, manufacturing supplies, packaging and shipping materials used or held for
sale solely and exclusively in the Business and readily usable by the Purchaser
in the Business after the Closing.
"Landfills" mean the active landfills on the Transferred Property,
except landfills constituting Excluded Assets.
"Leased Real Property" means that real property located in (i)
DeRidder, Louisiana and leased to the Seller pursuant to the terms of a
Sublease, dated as of January 1, 1977, by and between Bosie Southern Company and
American Cyanamid Company ("Cyanamid") (the "DeRidder Lease"), and (ii) Coosa
Pines, Alabama (only to the extent of the landfill located thereat) and leased
to the Seller pursuant to the terms of a Lease Agreement, Restrictive Covenant
and Easement, dated July 16, 1980, among Stephens Properties, Inc., Cyanamid and
the Industrial Development Board of the City of Childersburg, Alabama.
"Material Adverse Change" means a material adverse change in the
financial condition or results of operations of the Business.
"Mine" means the kaolin clay mine and calcining plant owned and
operated by the Seller on Owned Real Property located in Andersonville, Georgia
(and shall include all Owned Real Property located in Andersonville, Georgia).
"Other Documents" means, collectively, the Acid Supply Agreement, the
Alum Tolling Agreement, the Technology Transfer Agreement and all other deeds
and instruments of transfer and other documents, certificates, instruments and
agreements executed and delivered pursuant to or in connection with the
Agreement.
"Owned Real Property" means all real property and interests therein
(including all land, mineral reserves, ground water and surface water) and all
buildings and improvements thereto owned by the Seller and used solely and
exclusively in the operation of the Business including, without limitation, all
real property described in Schedule 3.6(a).
"Permits" shall have the meaning set forth in Section 3.11.
"Permitted Encumbrances" means (i) any Encumbrance disclosed in
Schedule 3.3, Schedule 3.5 or Schedule 3.6, (ii) any mechanics', carriers',
workmen's, repairmen's, and other like Encumbrances arising or incurred in the
ordinary course of business but only to the extent they attach to personal
property, (iii) any Encumbrance for taxes, assessments and other
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governmental charges that are not yet due and payable or that may thereafter be
paid without penalty, or that are being contested in good faith by appropriate
proceedings, and (iv) any imperfection of title or other Encumbrance that,
individually or in the aggregate with such other imperfections and encumbrances,
is not substantial in character or amount and does not materially interfere with
the use of the Transferred Assets in the Business as presently conducted.
"Person" means an individual, partnership, corporation, joint stock
company, limited liability company, unincorporated organization or association,
trust or joint venture, or a governmental agency or political subdivision
thereof.
"Phase I and Phase II Site Assessments" mean the Phase I and Phase II
Site Assessments performed by the Seller for the Business properties in
Chattanooga, Tennessee, Coosa Pines, Alabama, Demopolis, Alabama, Georgetown,
South Carolina, Monticello, Mississippi and
Plymouth, North Carolina, and the Mine.
"Proprietary Rights" means the patents, trademarks, service marks and
copyrights, all applications and registrations relating thereto, and the
technology, inventions, trade secrets, know-how, processes, and other
intellectual property and proprietary information or rights used solely and
exclusively in the Business as presently conducted.
"Regulated Substances" means pollutants, contaminants, toxic or
hazardous substances, compounds or related materials or chemicals, hazardous
materials or hazardous waste or other substances regulated under applicable
Environmental Laws.
"Technology Transfer Agreement" means the Technology Transfer Agreement
to be entered into by and between the Purchaser and Cytec Technology Corp.
("CTC") at Closing in substantially the form of Exhibit F attached hereto.
"Transferred Assets" means all of Seller's right, title and interest in
and to the Transferred Property and any and all personal property, tangible and
intangible, directly and exclusively related to the ownership, operation, use,
maintenance and repair of the Transferred Property or the Business, other than
the Excluded Assets. The Transferred Assets shall include, without limitation,
the following:
(a) all Inventory owned by the Seller for utilization solely
and exclusively in the Business;
(b) all machinery, equipment, rotary kilns, storage vessels
and associated pumping and piping equipment, tools, vehicles, office
furniture, leasehold improvements together with all other items of
personal property owned by the Seller and used exclusively in the
Business, including, without limitation, those items listed on Schedule
3.7;
(c) subject to any consent requirements, all of Seller's
interest in and under the Assumed Contracts;
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(d) to the extent transferable, all of Seller's rights in and
under the Permits and the Environmental Permits (other than the
Excluded Permits);
(e) business know-how related solely and exclusively to the
Business;
(f) the Proprietary Rights, if any, used solely and
exclusively in the Business as presently conducted to the extent
developed by the Seller after December 17, 1993 (the "Recent
Know-How");
(g) the Books and Records related solely and exclusively to
the Business;
(h) the Transferred Claims; and
(i) all other assets owned by the Seller for use solely and
exclusively in the conduct of the Business, whether or not reflected
on the Books and Records of the Seller, including without limitation,
the Business as a going concern, its goodwill and franchises.
"Transferred Claims" means all claims and choses in action that relate
solely and exclusively to the Transferred Property, the other Transferred Assets
or the Business and that are not Excluded Assets.
"Transferred Employees" shall have the meaning set forth in Section
5.11(a).
"Transferred Property" means the Owned Real Property and the Leased
Real Property, other than the Excluded Assets.
Section 1.2. INTERPRETATION. Unless otherwise indicated to the contrary
herein by the context or use thereof: (i) the words, "herein," "hereto,"
"hereof," "hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular Section or paragraph hereof; (ii) words
importing the masculine gender shall also include the feminine and neutral
genders, and vice versa; and (iii) words important the singular shall also
include the plural, and vice versa.
ARTICLE II
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES;
ADDITIONAL COVENANTS
Section 2.1. PURCHASE AND SALE OF ASSETS. Upon the terms and subject
to the conditions of this Agreement and on the basis of the representations,
warranties and agreements contained herein, at the Closing (as defined in
Section 2.5), the Seller shall sell, assign, transfer, convey and deliver to
the Purchaser all of the Seller's right, title and interest in and to the
Transferred Assets and the Purchaser shall purchase such Transferred Assets
from the Seller and shall assume only the Assumed Liabilities. NOTWITHSTANDING
THE FOREGOING, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, THE
PURCHASER IS
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NOT ASSUMING, NOR SHALL IT IN ANY MANNER BECOME LIABLE FOR, ANY
OTHER LIABILITIES OR OBLIGATIONS OF ANY KIND OR NATURE WHATSOEVER OF
THE SELLER OR ITS AFFILIATES.
Section 2.2. PURCHASE PRICE. The aggregate purchase price (the
"Purchase Price") to be paid by the Purchaser shall be $11,035,000, subject to
adjustment as set forth below in this Article II (the "Purchase Price"). The
Purchase Price shall be paid at Closing by wire transfer of immediately
available funds as follows: (i) $10,335,000 to an account specified by the
Seller, and (ii) $700,000 to an account specified by CTC.
Section 2.3. SETTLEMENT OF THE PURCHASE PRICE. (a) The Purchaser and
the Seller shall jointly make a physical count of the Inventory as of the
Closing Date. The Purchaser and the Seller shall each have the right to have
their respective independent accountants present at and to participate in the
physical count. The Purchaser and the Seller shall jointly prepare a report (the
"Inventory Report") of the results of the inventory count no later than the end
of the tenth Business Day following the Closing Date. If the Purchaser and the
Seller cannot agree on the content of the Inventory Report, such disagreement
shall be resolved by recounting the affected items of Inventory or by such other
means as the Purchaser and the Seller may agree no later than 20 Business Days
after the Closing Date. All Inventory shall be valued as set forth on Schedule
2.3. The value of the Inventory shown on the Inventory Report, calculated as set
forth herein, shall be the "Closing Inventory Amount."
(b) If the Closing Inventory Amount exceeds $500,000 with respect to
the alum portion of the Business or $300,000 with respect to the Mine and
calcining portion of the Business, then the Purchaser shall pay to the Seller an
amount equal to such excess, together with simple interest thereon from the
Closing Date to the date of payment at the rate of 6.5% per annum. If the
Closing Inventory Amount is less than said amounts then the Seller shall pay to
the Purchaser an amount equal to such deficit, together with simple interest
thereon from the Closing Date to the date of payment at the rate of 6.5% per
annum. Notwithstanding the foregoing, the Purchaser shall not be obligated to
pay the Seller for calcined kaolin included in such Inventory in excess of
$197,000 plus $5,400 for each day (or portion thereof) in the period commencing
on December 4, 1996 and ending on the Closing Date, subject to an aggregate
limit of $220,000.
(c) Any amount payable pursuant to Section 2.3(b) shall be paid by
certified check or checks payable to the order of the Purchaser or the Seller,
as the case may be, as soon as practicable following the Closing Date and in no
event more than five Business Days following the final determination of the
Closing Inventory Amount.
Section 2.4. ALLOCATION OF THE PURCHASE PRICE. The Purchase Price shall
be allocated as set forth in Exhibit A hereto. The Purchaser and the Seller
shall use such allocation in filing their respective Internal Revenue Service
Form 8594s, and such allocation will be controlling for purposes of reporting
any federal, state, local or foreign tax consequences resulting from the
transactions contemplated hereby. Each party will provide the other with a draft
of any tax
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return, reports and forms required by Section 1060 of the Code at least ten days
prior to the filing thereof.
Section 2.5. CLOSING. The closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of counsel to the
Purchaser at 10:00 A.M. local time within five Business Days of the satisfaction
or waiver of the conditions set forth in Article VI, or at such other time and
place as is mutually agreed to by the Purchaser and the Seller. The time and
date of the Closing is herein called the "Closing Date".
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser as follows:
Section 3.1. ORGANIZATION OF THE SELLER. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has the corporate power and authority to own or lease its
property and assets and to carry on the Business as presently conducted. The
Seller is duly qualified to do business as a foreign corporation and is in good
standing in each of the states in which any Transferred Property is located. The
Business is conducted solely through the Seller, except for the ownership of
certain Proprietary Rights which are owned by Cytec Technology Corp.
Section 3.2. AUTHORIZATION. The Seller has the corporate power and
authority to execute and deliver this Agreement and the Other Documents to which
it is a party and to perform its obligations hereunder and thereunder, all of
which have been duly authorized by all requisite corporate action. Each of this
Agreement and the Other Documents to which the Seller is a party has been or, in
the case of any document delivered after the date hereof, will be duly
authorized, executed and delivered by the Seller and constitutes or, in the case
of any document delivered after the date hereof, will constitute a valid and
binding agreement of the Seller, enforceable against the Seller in accordance
with its terms.
Section 3.3. NON-CONTRAVENTION. Except as set forth in Schedule 3.3,
neither the execution and delivery of this Agreement or the Other Documents to
which the Seller is a party nor the performance by the Seller of its obligations
hereunder and thereunder will (i) contravene any provision contained in the
Seller's Certificate of Incorporation or by-laws, (ii) violate or result in a
material breach (with or without the lapse of time, the giving of notice or
both) of or constitute a material default under (A) any contract, agreement,
commitment, indenture, mortgage, lease, pledge, note, license, permit or other
instrument or obligation or (B) any judgment, order, decree, law, rule or
regulation or other restriction of any Governmental Authority, in each case to
which the Seller is a party or by which it is bound or to which any of its
assets or properties are subject, other than violations, breaches or defaults
which, individually or in the aggregate, would not adversely affect the
Business, (iii) result in the creation or imposition of any Encumbrance on any
of the Transferred Assets, except Permitted
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Encumbrances, or (iv) result in the acceleration of, or permit any Person to
accelerate or declare due and payable prior to its stated maturity, any Assumed
Liability.
Section 3.4. NO CONSENTS. Except as set forth in Schedule 3.4, no
notice to, filing with, or authorization, registration, consent or approval of
any Governmental Authority or other Person is necessary for the execution,
delivery or performance by the Seller of this Agreement or the Other Documents
to which it is a party or the consummation of the transactions contemplated
hereby or thereby by the Seller.
Section 3.5. TITLE TO PERSONAL PROPERTY. Except as set forth in
Schedule 3.5, the Seller has good title to (or valid leasehold or contractual
interests in) all personal property comprising Transferred Assets, free and
clear of any Encumbrances, other than Permitted Encumbrances. Schedule 3.5 lists
all personal property comprising Transferred Assets which the Seller leases or
otherwise does not own.
Section 3.6. REAL PROPERTY. (a) Schedule 3.6 contains accurate legal
descriptions of the Owned Real Property, other than the Excluded Assets. The
Seller holds good and marketable fee simple title to the Owned Real Property
included in the Transferred Property (including related surface rights and
mineral rights), free and clear of any Encumbrances, other than Permitted
Encumbrances.
(b) Except as set forth on Schedule 3.6 and except as contemplated
hereby, no surface or mineral (i) leases, (ii) subleases, (iii) licenses or (iv)
other occupancy or tenancy rights affecting any portion of the Owned Real
Property included in the Transferred Property are now in effect or being
negotiated by the Seller.
(c) Except as set forth on Schedule 3.6 and except as contemplated
hereby, no agreements are now in effect or being negotiated by the Seller
regarding the sale of any portion of the Owned Real Property included in the
Transferred Property (including any mineral rights therein) or the granting of
any right of first refusal or option to purchase any portion of such Owned Real
Property (including any mineral rights therein).
(d) Except as set forth in Schedule 3.6, the use and occupancy of the
Transferred Property, as presently being used and occupied by the Seller, is in
compliance with all applicable Federal, State and local laws, regulations and
ordinances (including, without limitation all zoning laws, building codes, and
subdivision and land use laws, but excluding Environmental Laws which are
expressly covered in Section 3.20) affecting the Transferred Property, except
where the failure to be in compliance therewith would not have a material
adverse affect on the use or occupancy of the Transferred Property or the
operation of the Business as presently conducted.
(e) Neither the whole nor any portion of the Transferred Property is
subject to any governmental decree or order to be sold nor, to the Seller's
knowledge, have any proceedings for the condemnation, appropriation or other
taking of all or any portion of the Transferred Property been instituted or
threatened, with or without payment therefor.
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(f) Schedule 3.6 contains a true and complete list of all surveys,
studies, estimates or reports which are within the Seller's possession or
subject to its control relating to the mineral reserves contained within the
Owned Real Property located at Andersonville, Georgia, copies of which have
previously been provided to the Purchaser.
(g) With respect to the farmhouse situated on the Andersonville,
Georgia property, any occupants thereof are in possession of such farmhouse
pursuant to verbal permission granted by the Seller for a temporary period only,
and the Seller has not granted any lease or other legal right of occupancy.
Section 3.7. PLANT AND EQUIPMENT OF THE BUSINESS. Schedule 3.7 sets
forth a list of (i) the plants, property and other Transferred Property owned or
leased by the Seller and utilized exclusively by the Business, and (ii) all
machinery, equipment and other items of personal property acquired after January
1, 1980 utilized in the Business (other than at the Seller's Mobile, Alabama
facility) and having a gross acquisition cost of $25,000 or more. Schedule 3.7
also lists certain other property utilized exclusively in the Business having a
gross acquisition cost of less than $25,000.
Except as set forth on Schedule 3.7, the Transferred Assets currently
being used in the Business are in good operating condition, ordinary wear and
tear excepted. Other than the Excluded Assets, the Transferred Assets comprise
all of the material assets that the Seller uses in the conduct of the Business
as presently conducted and are sufficient to conduct the Business as presently
conducted.
Section 3.8. INVENTORY. Schedule 3.8 sets forth a true and complete
listing of the dollar value (calculated at the Seller's full standard cost) of
all Inventory used or held for sale exclusively in the Business as of September
30, 1996. Except as disclosed in Schedule 3.5, the Seller has good title to all
of its Inventory, free and clear of any Encumbrances, other than Permitted
Encumbrances.
Section 3.9. FINANCIAL SUMMARY. The Unaudited Pro Forma Financial
Summary (including the explanatory notes contained therein) attached hereto as
Schedule 3.9 (the "Financial Summary") fairly and accurately presents the
financial data stated therein and, except as set forth in Schedule 3.9, has been
prepared on a basis consistent with the Seller's overall accounting practices
and standards. The "gross property, plant and equipment" for the Owned Real
Estate located in Andersonville, Georgia as shown on Schedule 3.9 includes
acquisition costs of approximately $174,000 for the purchase of the real
property at Andersonville, Georgia, but does not otherwise reflect the value of
the mineral reserves located thereat.
Section 3.10. ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth in
Schedule 3.10, since September 30, 1996 there has not been any Material Adverse
Change. Except as set forth in Schedule 3.10, since September 30, 1996 the
Seller has conducted the Business in the ordinary course, and, except as set
forth on Schedule 3.10, since September 30, 1996, the Seller has neither lost
any material customers of the Business nor experiences any material decrease in
the volume of its sales attributable to the Business or the profit margins
relating thereto.
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Section 3.11. GOVERNMENTAL AUTHORIZATIONS; LICENSES; ETC. Except as set
forth in Schedule 3.11, the Business is being operated in material compliance
with all applicable laws, rules and regulations of all Governmental Authorities
(excluding Environmental Laws, which are addressed in Section 3.20 herein).
Except as set forth in Schedule 3.11, the Seller has all permits licenses and
approvals, and has made all notifications, registrations and filings with all
Governmental Authorities (excluding permits, licenses and approvals and
notifications, registrations and filings required by Environmental Laws, which
are addressed in Section 3.20 herein) necessary (i) for the current use and
occupancy of the Transferred Property by the Seller and (ii) the operation of
the Business as currently conducted by the Seller (collectively, the "Permits").
Section 3.12. LITIGATION. Schedule 3.12 sets forth as of the date
hereof a true and complete list of all actions, suits or proceedings relating to
the Business currently pending or overtly threatened in writing against the
Seller by any Governmental Authority or other Person. Except as set forth in
Schedule 3.12 there are no outstanding orders, judgments or decrees binding upon
or relating to the Business.
Section 3.13. TAXES. Except as set forth in Schedule 3.13, all federal,
state and local tax returns and reports of the Seller required to be filed which
relate to or affect the Business have been filed. Except as set forth in
Schedule 3.13, all federal, state and local taxes (including all income,
withholding and employment taxes), assessments (including interest and
penalties), fees and other governmental charges with respect to the Business
have been paid or duly provided for, or are being contested in good faith by
appropriate proceedings, or have arisen after the date hereof in the ordinary
course of business. There are no tax liens on any of the Transferred Assets,
other than Permitted Encumbrances.
Section 3.14. EMPLOYEE MATTERS. (a) Schedule 3.14 contains a true and
complete list as of October 31, 1996 of the employees currently employed by the
Seller exclusively in the conduct of the Business, listing the base
compensation, overtime and cash bonuses payable by the Seller to each such
employee.
(b) Except as set forth on Schedule 3.14, (i) the Seller has not
entered into any contract with any of its employees currently employed by it
exclusively in the conduct of the Business who will become employees of the
Purchaser after the Closing or any collective bargaining agreements with respect
to such employees, (ii) there is no labor strike, dispute, slowdown or work
stoppage or lockout pending or, to the Seller's knowledge, overtly threatened
against the Business, (iii) to the Seller's knowledge, no union organization
campaign is currently in progress on the date hereof with respect to any
non-union employees employed in the Business, and no question concerning
representation exists respecting such employees, (iv) there is no unfair labor
practice, charge or complaint pending or, to the Seller's knowledge, overtly
threatened against the Seller arising out of the conduct of the Business, and
(v) the Seller has not entered into any agreement, arrangement or understanding
restricting its ability to terminate the employment of any or all of its
employees in the Business at any time, for any lawful or no reason, without
penalty or liability.
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Section 3.15. EMPLOYEE BENEFIT PLANS. Schedule 3.15 lists all bonus,
deferred compensation, pension, retirement, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase, restricted stock and
stock option plans, all employment or severance contracts, health and medical
insurance plans, life insurance and disability insurance plans, other material
employee benefit plans, contracts or arrangements which cover employees of the
Business including, but not limited to, "employee benefit plans" within the
meaning of Section 3(3) of ERISA (collectively, the "Employer Benefit Plans").
Except as set forth on Schedule 3.15, neither the Seller nor any of its
Affiliates sponsors, contributes to, or is otherwise obligated to, any
multi-employer plan as defined in ERISA.
Section 3.16. PROPRIETARY RIGHTS. Except as set forth on Schedule 3.16,
to the Seller's knowledge the Seller is not in violation in the conduct of the
Business of any patent, trademark, trade name, service mark, copyright or
intellectual property of any other Person. Except as set forth in Schedule 3.16,
there is no claim pending or, to the Seller's knowledge, overtly threatened that
the conduct of the Business by the Seller conflicts with, violates or infringes
the intellectual property rights of any other Person.
Section 3.17. CONTRACTS. (a) Schedule 3.17 lists all contracts (except
for purchase orders executed by the Seller or customers of the Seller in the
ordinary course of Business executed after the date hereof), agreements,
Employee Benefit Plans, leases, commitments, instruments, plans, permits or
licenses, whether written or oral, with respect to the Business to which the
Seller is a party or is otherwise bound (collectively, the "Contracts") of the
type described below:
(i) all agreements or commitments for the sale by the
Business of products or services, or the purchase by the Business of
raw materials, products or services, other than those that are for
amounts not to exceed $100,000 in any calendar year;
(ii) all agreements or commitments of the purchase by the
Business of machinery, equipment or other personal property other than
those that are for amounts not to exceed $25,000 in any calendar year;
(iii) all capitalized leases, pledges, conditional sale or
title retention agreements;
(iv) all leases of Transferred Property;
(v) all collective bargaining agreements (the "Collective
Bargaining Agreements") and Employee Benefit Plans;
(vi) all agreements relating to the consignment or lease of
personal property (whether the Seller is lessee, sublessee, lessor or
sublessor) involving the payment of more than $10,000 in any calendar
year;
(vii) all license, royalty or other agreements relating to
the Proprietary Rights;
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(viii) all agreements prohibiting the Seller from freely
engaging in the Business in the Territory (as defined in Section 5.10)
and any other agreement not to compete to which Seller is a party
(whether as obligor or obligee) and which related to the Business;
(ix) all distributorship, agency, servicing, or marketing
agreements to which the Seller is a party and which relate to the
Business;
(x) all freight agreements or other agreements for the
transport of supplies, raw materials, work-in-process or finished goods
to which the Seller is a party relating solely and exclusively to the
Business;
(xi) all service, maintenance, repair or construction
contracts relating to the Transferred Assets to which the Seller is a
party or by which it is bound involving the payment of more than
$10,000 in any calendar year;
(xii) all swap, barter or similar agreements to which the
Seller is a party relating to the Business and involving the delivery
or receipt of more than $10,000 in value in any calendar year; and
(xiii) any agreement other than those covered by clauses (i)
through (xii) above relating to the Business and involving payment or
receipt of more than $25,000 in any calendar year.
(b) Except as disclosed in Schedule 3.17, to the Seller's knowledge, as
of the date hereof none of the other parties to any such Contracts has given
written notice to the Seller that it intends to terminate or materially alter
the provisions of such Contracts either as a result of transactions contemplated
hereby or otherwise.
(c) Except as set forth on Schedule 3.17, no event or condition has
occurred or presently exists which constitutes a material default or breach or,
after notice or lapse of time or both, would constitute a material default or
breach by the Seller, or to Seller's knowledge, any other party thereto, under
any of the Contracts. Except as disclosed in Schedule 3.17, as of the date
hereof the Seller has not received notice that it is in, nor has the Seller
given notice of, any material default or claimed, purported or alleged material
default on the part of any party in the performance of any of the Contracts.
(d) True and complete copies of all written Contracts, including any
amendments thereto, have been made available to the Purchaser as part of its
investigation of the Business.
Section 3.18. CERTAIN OBLIGATIONS. Schedule 3.18 identifies all bonds,
letters of credit, corporate guarantees and similar instruments issued by or at
the request of the Seller to Governmental Authorities in connection with the
Business pursuant to any Environmental Law or otherwise (collectively, the
"Other Obligations"). The Other Obligations are in full force and effect and are
sufficient for material compliance by the Seller with all requirements of
applicable law and of all agreements to which it is a party.
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Section 3.19. FINANCIAL RECORDS. All material books of account and
other financial records of the Seller relating solely and exclusively to the
Business, the Transferred Property and the other Transferred Assets are complete
and correct in all material respects and have been made available to the
Purchaser. All of such books and records have been prepared and maintained in
accordance with the Seller's customary business practices and, where applicable,
in conformity with GAAP.
Section 3.20. ENVIRONMENTAL MATTERS. (a) Schedule 3.20(a) lists all of
the permits issued pursuant to or in connection with Environmental Laws (the
"Environmental Permits") currently held by Seller relating to the ownership, use
and operation of the Business, other than the Excluded Permits. True and
complete copies of the Environmental Permits have been made available to
Purchase for its review. No Environmental Permits other than those listed on
Schedule 3.20(a) are required for the ownership, use or operation of the
Business as of the Closing Date. All of the Environmental Permits are valid and
are in full force and effect, and the Seller is in material compliance with all
of the terms, covenants and conditions of each of the Environmental Permits.
(b) Except as set forth on Schedule 3.20(b), to the best of the
Seller's knowledge, (i) the Phase I and Phase II Site Assessments and other
environmental data listed on Schedule 3.20(b), copies of which have previously
been provided to Purchaser, accurately disclose, in all material respects, the
current environmental condition of each of the Transferred Properties, (ii) none
of the Transferred Properties is currently listed on the National Priorities
list pursuant to CERCLA or any similar publicly available listing under
comparable state law, and (iii) since December 31, 1993, the Seller's ownership
and operation of the Business and the use of the Transferred Assets has been,
and as of the Closing Date will be, in material compliance with all
Environmental Laws.
(c) Seller has provided Purchaser with full access to all environmental
records, assessments, audits, surveys, studies, correspondence, reports,
pleadings and analyses prepared by or on behalf of Seller or its predecessors,
and that are in Seller's possession or subject to its control, and that relate
to the Business, the Transferred Property or the other Transferred Assets (other
than the Excluded Assets);
(d) Except as disclosed in the Phase I and Phase II Site Assessments or
in Schedule 3.20(d), to the best of Seller's knowledge, the soil and groundwater
of the Transferred Property contain no underground storage tanks,
polychlorinated biphenyls, dioxin or chlorinated compounds or solvents.
(e) Schedule 3.20(e) lists (i) all reports, filings or notices that the
Seller has issued, submitted or filed within the three-year period prior to the
date hereof with respect to the Transferred Property or the Business (other than
the Excluded Assets) with any Governmental Authority relating to any leak,
spill, discharge, leaching, emission, escape or release of any Regulated
Substance (other than in accordance with the terms of any Environmental Permit),
and (ii) all written notices, citations and/or complaints that the Seller has
received within the three-year period prior to the date hereof with respect to
the Transferred Property or the Business
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(other than the Excluded Assets) from any Governmental Authority or any other
Person regarding any actual or alleged violation or liability under any
Environmental Law or Environmental Permit. True and complete copies of all items
referred to in subsections (i) and (ii) have been made available to the
Purchaser for its review. All alleged violations in such notices, citations, and
complaints have been resolved in all materials respects.
Section 3.21. BROKERS. With the exception of EVEREN Securities, Inc.,
no Person is or will be entitled to a broker's, finder's, investment banker's,
financial adviser's or similar fee from the Seller in connection with this
Agreement or any of the transactions contemplated hereby. The fees and expenses
of EVEREN Securities, Inc. are the sole responsibility of, and shall be paid
by, the Seller.
Section 3.22. DISCLOSURE. No representation or warranty made by the
Seller hereunder (as such representations and warranties may be modified by the
information contained in the Schedules hereto) contains any untrue statement of
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading. Certain matters reflected in the Schedules
referred to in this Article III are not necessarily required by this Agreement
to be reflected in such Schedules. Such additional matters are merely set forth
for informational purposes and do not necessarily include other matters of a
similar nature not required to be disclosed hereunder. In addition to the
foregoing, any matter disclosed on a Schedule pursuant to one provision of this
Agreement shall be deemed to be disclosed for all purposes hereunder on each
other Schedule pursuant to such other provisions of this Agreement as are
reasonably related thereto.
Section 3.23. DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH
IN ARTICLE III HEREOF, THE SELLER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, OF
ANY KIND OR NATURE WHATSOEVER AND THE SELLER EXPRESSLY DISCLAIMS ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, OR ARISING BY COURSE OF DEALING OR PERFORMANCE,
CUSTOM OR USAGE IN THE TRADE OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, ANY
IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR
OTHERWISE.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
Section 4.1. ORGANIZATION. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and has the corporate power and authority to own or lease its property and
assets and to carry on its business as presently conducted.
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Section 4.2. AUTHORIZATION. The Purchaser has the corporate power and
authority to execute and deliver this Agreement and the Other Documents and to
perform is obligations hereunder and thereunder, all of which have been duly
authorized by all requisite corporate action. Each of this Agreement and the
Other Documents has been or, in the case of any document delivered after the
date hereof, will be duly authorized, executed and delivered by the Purchaser
and constitutes or, in the case of any document delivered after the date hereof,
will constitute a valid and binding agreement of the Purchaser, enforceable
against the Purchaser in accordance with its terms.
Section 4.3. NON-CONTRAVENTION. The Purchaser is not subject to any
provision of its Certificate of Incorporation or by-laws or any agreement,
instrument, law, rule, regulation, order, decree or judgment of any Governmental
Authority or other restriction that would prevent the consummation of the
transactions contemplated by this Agreement and the Other Documents.
Section 4.4. NO CONSENTS. Except for consents required in connection
with the Purchaser's assumption of the Assumed Liabilities, no notice to, filing
with, or authorization, registration, consent or approval of any Governmental
Authority or other Person is necessary for the execution, delivery or
performance of this Agreement, the instruments of transfer and the Other
Documents or the consummation of the transactions contemplated hereby and
thereby by the Purchaser.
Section 4.5. FINANCIAL RESOURCES. The Purchaser has cash or credit
facilities presently available to meet all of its payment obligations set forth
herein.
Section 4.6. BROKERS. No Person is or will be entitled to broker's,
finder's, investment banker's financial advisor's or similar fee from the
Purchaser in connection with this Agreement or any of the transactions
contemplated hereby.
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1. ACCESS AND INFORMATION. Prior to the Closing, the
Purchaser shall be entitled to make or cause to be made such reasonable
investigation of the Business, and the financial and legal condition thereof, as
the Purchaser deems reasonably necessary or advisable, and the Seller shall
cooperate with any such investigation. In furtherance of the foregoing, but not
in limitation thereof, the Seller shall permit the Purchaser and its agents and
representatives or cause them to be permitted to have reasonable access to the
premises, books and records of the Seller pertaining to the Business upon
reasonable notice during regular business hours as the Purchaser shall
reasonably request from time to time in a manner so as not to interfere with the
normal business operations of the Seller. All information provided to the
Purchaser pursuant to this Section 5.1 shall be subject to the provisions of the
Confidentiality Agreement.
Section 5.2. AFFIRMATIVE COVENANTS. From the date hereof until the
Closing, except as otherwise expressly provided herein the Seller shall:
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(a) conduct the Business only in the ordinary and regular
course of business consistent with past practices;
(b) use commercially reasonable efforts to keep in full force
and effect all material rights, franchises, Proprietary Rights and
goodwill relating or obtaining to the Business;
(c) use commercially reasonable efforts to retain those
employees actively employed in the Business and preserve the Business'
present relationships with customers, suppliers, contractors,
distributors and such employees, and continue to compensate such
employees consistent with past practices;
(d) use commercially reasonable efforts to maintain the
Proprietary Rights so as not to affect adversely the validity or
enforcement thereof; maintain the other Transferred Assets in customary
repair, order and condition, and in the event of any material casualty,
loss or damage to any of the Transferred Assets, either repair or
replace such assets with assets of comparable quality;
(e) use commercially reasonable efforts to obtain all
authorizations, consents, waivers, approvals or other actions
reasonably necessary or desirable to consummate the transactions
contemplated hereby and to cause the other conditions to the
Purchaser's obligation to close to be satisfied;
(f) maintain the Books and Records on a basis consistent with
past practice; and
(g) promptly inform the Purchaser in writing upon becoming
aware of any material breach of or change in the representations and
warranties contained in Article III hereof.
Section 5.3. NEGATIVE COVENANTS. From the date hereof until the
Closing, without the prior written consent of the Purchaser, except as
otherwise expressly provided in Article V hereof, the Seller will not:
(a) enter into any contract, agreement or commitment (other
than in the ordinary course of business) which, if entered into prior
to the date of this Agreement, would cause any representation or
warranty of the Seller to be untrue in any respect or be required to be
disclosed on one or more Schedules referred to in Article III;
(b) take or omit to be taken any action, or permit its
Affiliates to take or to omit to take any action, which would result in
a Material Adverse Change;
(c) sell any Inventory at a discount (except normal credit
discounts for prompt payment) or otherwise transfer, assign, lease, or
otherwise dispose of any Inventory or any of the Transferred Assets
other than in the ordinary course;
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(d) increase the rate of compensation paid, or pay any bonus
to, any employee of the Business, except in accordance with the
Seller's past practices other than a one-time bonus to be paid to
salaried employees in connection with the sale of the Business;
(e) cancel, release, or relinquish any material debts of or
claims against others held by the Seller with respect to the
Transferred Assets or the Business or waive any material rights
relating thereto;
(f) except to the extent required to transfer the Transferred
Assets and unless agreed to by the Purchaser in advance, terminate or
materially modify any of the Contracts;
(g) do or omit any act that would cause a material default by
the Seller under, or material breach by the Seller of, any of the
Contracts; or
(h) directly or indirectly (through a representative or
otherwise) solicit or furnish any information to any prospective buyer,
commence or conduct negotiations with any party other than the
Purchaser, or enter into any agreement with any party other than the
Purchaser concerning the sale, lease or other disposition of the
Business, the Transferred Assets, or any part thereof.
Section 5.4. CERTAIN REAL PROPERTY MATTERS. (a) The Seller shall use
its commercially reasonable efforts to obtain within 30 days of the Closing Date
an access easement benefitting the Owned Real Property located at Georgetown,
South Carolina from Praxair, Inc. for the benefit of the Purchaser, its
successors and assigns. The Seller shall coordinate its efforts in that regard
with the Purchaser's counsel.
(b) In the event that the Seller does not deliver the survey of the
Georgetown, South Carolina property to the Purchaser by the Closing, the Seller
shall, within fourteen days following the Closing Date, cause such survey to be
completed at its sole expense and delivered to the Purchaser. The survey shall
include a description of the access drive subject to the Reciprocal Easement
Agreement benefitting the property. The survey shall contain such certifications
as may be reasonably required by the Purchaser, consistent with the
certifications provided on other surveys delivered by the Seller hereunder.
(c) The Seller has requested that Weyerhauser Corporation grant an
access easement benefitting the Plymouth, North Carolina property (the "Access
Easement"). Following the Closing Date, the Seller shall obtain the Access
Easement in favor of the Purchaser and shall cause the Access Easement to be
recorded in the real estate records in the County in which the property is
located within sixty days following the Closing Date. The Access Easement shall
contain such terms as shall be approved by the Purchaser in the good faith
exercise of its reasonable business judgment, which approval shall not be
unreasonably withheld or delayed.
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Section 5.5. CLOSING DOCUMENTS. The Seller shall, prior to or on the
Closing Date, execute and deliver, or cause to be executed and delivered to the
Purchaser, the documents or instruments described in Section 6.2. The Purchaser
shall, prior to or on the Closing Date, execute and deliver, or cause to be
executed and delivered, to the Seller, the documents or instruments described in
Section 6.3.
Section 5.6. ACCESS TO RECORDS AFTER THE CLOSING. (a) After the
Closing, upon request the Seller and its representatives shall be permitted
reasonable access, during normal business hours, to and to make inspection of
the Books and Records transferred to the Purchaser hereunder so long as such
records are maintained by the Purchaser in accordance with its customary records
retention policy and to make copies thereof as is reasonably necessary to allow
the Seller to obtain information in the Purchaser's possession (but excluding
attorney work product or other privileged communications). The Seller shall pay
the Purchaser's reasonable out-of-pocket costs incurred in connection with
satisfying such requests. In the event that the Purchaser determines to destroy
or otherwise dispose of any such Books and Records, it shall provide the Seller
with at least 60 days' prior written notice before proceeding with any such
destruction or other disposal. The Seller shall have the right, upon receipt of
such notice, to elect prior to the date scheduled for such destruction or
disposal to obtain all or any portion of the Books and Records to be destroyed
or disposed of unless, in the reasonable opinion of counsel to the Purchaser,
the Seller's possession of such Books and Records, or a portion thereof, would
result in the waiver of any privilege to which the Purchaser was then entitled,
in which case the Purchaser may, at its option, refuse to provide the affected
portion of such Books and Records to the Seller. Promptly following notification
to the Purchaser of its election to obtain any such Books and Records, the
Seller shall arrange for the delivery of such Books and Records to the Seller or
its agent, at the Seller's sole expense, and the Purchaser shall cooperate
therewith. This paragraph shall survive the Closing and shall continue in full
force and effect until such time as the Purchaser and the Seller agree that the
Books and Records are no longer necessary for any tax audit disclosures.
(b) After the Closing, upon request the Purchaser and its
representatives shall be permitted reasonable access, during normal business
hours, to and to make inspection of the books and records retained by the Seller
that relate to the Transferred Assets or the Assumed Liabilities (including, but
not limited to, books and records relating to the financial performance of the
Business during the three-year period prior to the Closing Date) so long as such
records are maintained by the Seller in accordance with its customary records
retention policy and to make copies of the portions thereof relating to such
Transferred Assets and Assumed Liabilities as is reasonably necessary to allow
the Purchaser to obtain information relating thereto in the Seller's possession
(but excluding attorney work product or other privileged communications). The
Purchaser shall pay the Seller's reasonable out-of-pocket costs incurred in
connection with satisfying such requests. For a period of two years following
the Closing Date, in the event that the Seller determines to destroy or
otherwise dispose of any such books and records, it shall provide the Purchaser
with at least 15 days' prior written notice before proceeding with any such
destruction or other disposal so that the Purchaser may have a reasonable
opportunity to exercise its inspection rights as provided in the first sentence
of this clause (b). In addition, upon request the Seller shall provide
reasonable assistance to the Purchaser in connection with the Purchaser's
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examination of such books and records. Neither the Seller, nor the Seller's
Affiliates nor their respective successors, permitted assigns, officers,
directors, employees or agents shall have any liability to the Purchaser or any
third party from either the Purchaser's use of such books and records or the
Seller's assistance with respect thereto and, subject to the provisions of
Article IX hereof, the Purchaser shall indemnify and hold harmless the Seller
and such other Persons against any and all Damages (as defined in Section 9.2)
arising therefrom.
Section 5.7. TRANSFER AND PROPERTY TAXES. (a) The Purchaser shall pay
or cause to be paid the first $25,000 in aggregate amount of any transfer,
sales, use, stamp, recording or similar tax or fee under the laws of any
Governmental Authority arising out of or resulting from the purchase of the
Transferred Assets and the assumption of the Assumed Liabilities and the Seller
shall pay the balance thereof. The Purchaser shall prepare and file the required
tax returns and other required documents with respect to the taxes and fees
required to be paid pursuant to the preceding sentence and shall promptly
provide the Seller with evidence of the payment of such taxes and fees.
(b) The Seller shall (i) prepare and file all tax returns reporting the
income attributable to the Transferred Assets or the operation of the Business
for all periods ending prior to the close of business on the day immediately
preceding the Closing Date, (ii) prepare and file all income tax returns
reporting the income of the Seller arising on the Closing Date from the sale to
the Purchaser of the Transferred Assets and the assumption by the Purchaser of
the Assumed Liabilities, (iii) be responsible for the conduct of all tax
examinations relating to the tax returns referred to in (i) and (ii) above, and
(iv) pay all taxes attributable to the Transferred Assets or the operation of
the Business due with respect to the tax returns referred to in (i) and (ii)
above. The Purchaser shall prepare and file all tax returns reporting the income
attributable to the ownership of the Transferred Assets and the operation of the
Business by the Purchaser for all periods beginning on or after the Closing Date
and shall be liable for and pay all taxes due in respect of such tax returns.
(c) All real property taxes imposed with respect to the Transferred
Assets shall be apportioned as of the Closing Date in accordance with Section
164(d) of the Code. All personal property, motor vehicle (including road use)
and ad valorem taxes, water charges and sewer rents, if any, vault charges, if
any, an all other taxes, charges or assessments levied or imposed upon the
Transferred Assets by any Governmental Authority, for the taxable year beginning
before and ending on or after the Closing Date shall be apportioned and pro
rated on a per diem basis between the Purchaser and the Seller as of 11:59 p.m.
on the day before the Closing Date (the "Adjustment Time"). The Seller shall pay
or cause to be paid, on or prior to the Closing Date, all real property and ad
valorem taxes and any other taxes and assessments against the Transferred Assets
for all taxable periods ending prior to the Closing Date. The Purchaser shall
pay all real property and ad valorem taxes and any other taxes and assessments
against the Transferred Assets for all periods beginning on or after the Closing
Date. For taxable periods in which the Closing occurs, such taxes and
assessments shall be apportioned and pro rated on a per diem basis between the
Purchaser and the Seller as of the Adjustment Time. If the Closing Date shall
occur before the tax rate for the taxable period including the Closing is fixed
by the appropriate taxing authority, the apportionment of any such taxes shall
be upon the basis of the
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tax rate for the preceding year applied to the latest assessed valuation and
shall be readjusted promptly after such tax rates are known. The tax proration
amount due from the Seller at Closing shall be paid by the Seller to the
Purchaser. Such obligation to readjust shall survive the Closing. If tax
reduction proceedings have been commenced with respect to the Transferred
Property contained in the Transferred Assets for the year in which the Closing
occurs, any refunds or savings in the payment of taxes resulting from such tax
reduction proceedings applicable to the period prior to the Adjustment Time
shall belong to and be the property of the Seller and any refunds or savings in
the payment of taxes resulting from such tax reduction proceedings applicable to
the period prior to the Adjustment Time shall belong to and be the property of
the Seller and any refunds or savings in the payment of taxes applicable to the
period from and after the Adjustment Time shall belong to and be the property of
the Purchaser. All attorneys' fees and other expenses incurred in obtaining such
refunds or savings shall be apportioned between the Purchaser and the Seller in
proportion to the gross amount of such refunds or savings payable to the
Purchaser or the Seller, respectively.
Section 5.8. PRORATION OF EXPENSES. Except as provided in Section
5.11(d), all credit memos, charges, rents and expenses existing as of the
Closing Date with respect to the Assumed Contracts and all utilities,
unreimbursed travel expenses and other expenses ordinarily incurred in the
operation of the Business shall be apportioned as of the Closing Date such that
the Seller shall pay or cause to be paid, on or prior to the Closing Date, all
such charges and expenses for periods prior to the Closing Date and the
Purchaser shall pay all such charges and expenses for periods on or after the
Closing Date.
Section 5.9. USE OF NAME. Effective as of the Closing, the Seller
hereby grants to the Purchaser, the limited, nonexclusive personal right to use
the name "Cytec" and any related trademarks or servicemarks for up to 30 days
from the Closing to the extent, but only to the extent, necessary to enable the
Purchaser to sell any items of Inventory (including packaging materials)
included in the Transferred Assets. Except as provided in this Section 5.9, the
Purchaser shall have no right to the use of the name "Cytec", any derivative
form thereof or any trademark, servicemark, or related right, all of which are
assets being retained by the Seller.
Section 5.10. NON-COMPETITION AGREEMENT. For a period of five years
after the Closing Date, neither the Seller nor its Affiliates will, directly or
indirectly, engage in the manufacture or sale of aluminum sulfate or calcined
kaolin within a 200 mile radius of the Mine or any alum manufacturing facility
currently used in the conduct of the Business (as intended to be sold) (the
"Territory"); provided, however, that the Seller and its Affiliates may (a) sell
all inventory remaining at its Mobile, Alabama facility at the expiration of the
Alum Tolling Agreement, (b) produce aluminum sulfate within the Territory (i)
for their own internal requirements and (ii) as an intermediate step in any
production process utilized by the Seller or its Affiliates on or after the date
hereof, (c) manufacture and sell products that contain aluminum sulfate as a
component thereof, and (d) own as a passive investment up to an aggregate of 5%
of the voting securities of any entity engaged in the Business in the Territory.
Notwithstanding the foregoing, the Seller and its Affiliates may acquire and
operate an entity which engages in the Business in the Territory; provided, that
the revenues of such entity within the Territory attributable to the Business
(excluding sales to the Seller and its Affiliates) in the fiscal year ending
immediately
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prior to the date of acquisition by the Seller or an Affiliate do not exceed the
lesser of (x) 10% of the total revenues of such entity during such fiscal year,
or (y) $10,000,000.
The Seller shall have the right to use the Proprietary Rights
(including, without limitation, the Recent Know-How) to the extent that such use
does not violate the provisions of this Section 5.10.
The Seller acknowledges that the restrictions contained in this Section
5.10 are reasonable and necessary to protect the legitimate interests of the
Purchaser and that any breach by the Seller of any provision hereof will result
in irreparable injury to the Purchaser. The Seller acknowledges that, in
addition to all remedies available at law, the Purchaser shall be entitled to
apply for equitable relief, including injunctive relief, arising from such
breach.
Section 5.11. EMPLOYMENT MATTERS.
(a) EMPLOYMENT BY THE PURCHASER. Each employee listed on Schedule 3.14
(other than five employees (the "Excluded Employees") previously identified by
the Purchaser and disclosed to the Seller) who is employed in connection with
the Business on the Closing Date (and who is not on any disability leave as of
that date) shall become an employee of the Purchaser from and after the Closing,
unless any such employee otherwise elects (the "Transferred Employees"). The
Purchaser shall have no liability for the payment of wages (or withholding in
respect thereof) or the provision of any benefits (including, without
limitation, severance benefits) payable to the Excluded Employees. Any employee
who is on disability on the Closing Date (other than an Excluded Employee) may
also elect to become a Transferred Employee provided such employee returns from
disability leave within 60 days after the Closing. The employment of the
Transferred Employees shall be upon such terms and conditions as the Purchaser
determines, but which terms and conditions shall be generally consistent with
those in effect at similar operations maintained by Purchaser as of the Closing
Date. The Purchaser shall cooperate with the Seller upon its reasonable request
in attempting to cause each Transferred Employee to execute and deliver to the
Seller a written release and waiver, in a form to be provided by the Seller, of
any rights such Transferred Employee may have under the terms of any employment
agreement between such Transferred Employee and the Seller or its predecessors;
provided, however, that the receipt of such releases and waivers shall not be a
condition to the obligations of the parties hereunder.
(b) BENEFITS. The Purchaser shall not be required to provide (or to
cause its Affiliates to provide) the Transferred Employees with benefits that
are similar to those provided by Seller pursuant to the Employee Benefits Plans.
Notwithstanding the foregoing, the Purchaser shall provide to each Transferred
Employee benefits and pay that are generally consistent with those provided by
Purchaser at its similar operations from time to time.
(c) PARTICIPATION IN BENEFIT PLANS. Transferred Employees shall be
given credit for all service with the Seller or any of its Affiliates (or
service credited by the Seller or any of its Affiliates) under all employee
benefit plans and arrangements of the Purchaser or any of its subsidiaries in
which Transferred Employees become participants for purposes of eligibility and
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vesting, to the same extent as if such service were rendered to the Purchaser.
The Purchaser shall cause to be waived any pre-existing condition limitation
under its welfare plans that might otherwise apply to a Transferred Employee, or
shall take such other action (such as self-insurance or direct reimbursement to
affected Transferred Employees) as may be necessary to provide the equivalent of
such waiver to all Transferred Employees. The Purchaser shall recognize (or
cause to be recognized) the dollar amount of all expenses incurred by
Transferred Employees during the 1996 calendar year for purposes of satisfying
the 1996 calendar year deductibles and co-payments limitations under the
relevant benefit plans of Purchaser; provided, however, that Seller and/or one
or more of its Employee Benefit Plans shall be responsible for all valid claims
incurred thereunder prior to the Closing Date including, without limitation, all
claims for "extended benefits" for disabilities incurred prior to the Closing
Date. In lieu of establishing any severance plan, the Purchaser shall not
terminate any Transferred Employee, except for "cause" (as determined by the
Purchaser in the good faith exercise of its business judgment), during the
six-month period following the Closing Date.
(d) VACATION AND OTHER PAY. The Purchaser shall assume the obligations
of the Seller and/or its Affiliates with respect to accrued but untaken vacation
and sick and holiday pay earned by Transferred Employees as of the Closing Date.
(e) WARN ACT. The Seller shall provide any required notice under the
Worker Adjustment and Retraining Notification Act as amended (the "WARN Act"),
and any similar statute, and to otherwise comply with any such statute relating
to any "plant closing" or "mass layoff" (as defined in the WARN Act) or similar
event affecting the employees of the Business and occurring on or before the
Closing Date. The Seller shall indemnify and hold harmless the Purchaser and its
Affiliates with respect to any liability under the WARN Act or similar statute
arising from the actions of the Seller or its Affiliates on or before the
Closing Date.
The Purchaser shall provide any required notice under the WARN Act, and
any similar statute, and to otherwise comply with any such statute relating to
any "plant closing" or "mass layoff" (as defined in the WARN Act) or similar
event affecting the employees of the Business and occurring on or before the
Closing Date. The Purchaser shall indemnify and hold harmless the Seller and its
Affiliates with respect to any liability under the WARN Act or similar statute
arising from the actions of the Purchaser or its Affiliates on or before the
Closing Date.
Section 5.12. COMMERCIAL EFFORTS: FURTHER ASSURANCES; CONSUMMATION.
Subject to the terms and conditions herein provided, each of the parties hereto
shall use its commercially reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things reasonably necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement. Each of the Seller
and the Purchaser will use their respective commercially reasonable efforts to
obtain consents of all Governmental Authorities and third parties necessary to
the consummation of the transactions contemplated by this Agreement. In the
event that at any time after Closing any further action is necessary to carry
out the purposes of this Agreement, the Seller or the Purchaser, as the case may
be, shall take all such action without any further consideration therefor.
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It is the intention of the parties hereto to transfer full and complete
ownership of the Business (other than the Excluded Assets and the Retained
Liabilities) on the Closing Date as contemplated hereby. In the event that a
complete transfer of such ownership cannot be accomplished because of required
governmental approvals, consents to assignment of the Assumed Contracts or other
matters beyond the reasonable control of the parties hereto, the Purchaser may
nevertheless consummate the transactions contemplated hereby to the extent such
transfer may be made, and, for a period of one year after the Closing Date, the
parties hereto shall cooperate in entering into such other arrangements as will,
insofar as possible, produce the same economic effect upon the parties hereto as
if such transfer had been made, such as operation by the Seller for the account
of the Purchaser for an interim period of time.
Section 5.13. TRANSITION SERVICES. (a) For a period of 30 days after
the Closing, upon the reasonable request of the Purchaser the Seller shall
provide certain transition services to the Purchaser, including, but not limited
to, processing of customer orders, generating and mailing invoices, and other
data processing functions (collectively, "Transition Services"). The Seller
shall be obligated to provide such Transition Services only if, in the Seller's
good faith judgement, the provision of such Transition Services would not
materially disrupt or otherwise interfere with the conduct of the Seller's
business. The Seller shall not be entitled to any fee for providing Transition
Services to the Purchaser hereunder. However, the Purchaser shall reimburse the
Seller on demand for any reasonable out-of-pocket expenses incurred by the
Seller in connection therewith.
(b) The Seller shall have no liability to the Purchaser for any Damage
(as defined in Section 9.2) incurred by the Purchaser as a result of the
Seller's provision of Transition Services hereunder, except to the extent
resulting exclusively from the Seller's gross negligence or willful misconduct.
The Purchaser shall indemnify the Seller, its Affiliates and their respective
successors, assigns, officers, directors, employees and agents against any and
all Damages arising from the Seller's provision of Transition Services
hereunder, except to the extent resulting exclusively from the Seller's gross
negligence or willful misconduct.
Section 5.14. CERTAIN POST-CLOSING MATTERS. (a) In the event the
Purchaser shall receive cash or checks in payment of products sold or delivered
prior to the Closing, the Purchaser shall promptly deliver the payments to the
Seller, endorsed where necessary, without recourse, in favor of the Seller. In
the event the Seller shall receive cash or checks in payment or products sold or
delivered after the Closing, the Seller shall promptly deliver the payments to
the Purchaser, endorsed where necessary, without recourse, in favor of the
Purchaser.
(b) If product(s) shipped prior to the Closing are returned by a
customer to the Purchaser after the Closing, the Purchaser shall notify the
Seller in writing of all details of the return. At the Purchaser's option, the
Seller shall arrange for the disposition of such products. If the Purchaser uses
or resells the product(s), the Purchaser will promptly notify the Seller in
writing and remit payment for the product(s) to the Seller at the Seller's cost.
(c) The Seller shall pay for the repairs necessary to restore the
chimney at the Andersonville facility to good working order. The cost of such
repairs has been estimated to be
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approximately $59,000. The Seller and the Purchaser shall cooperate so as to
effect the prompt completion of such repairs so as to minimize any interruption
to the Business.
(d) The Seller shall be solely responsible for the payment of the
Transferred Employees and the Excluded Employees for all periods up to and
including the Closing Date. To facilitate the orderly transition of the Business
from the Seller to the Purchaser, if requested by the Purchaser at least five
Business Days in advance, the Seller shall pay, on behalf of the Purchaser and
solely as the agent of the Purchaser, the first payroll due the Transferred
Employees after the Closing Date at their respective rates of pay in effect
immediately prior to the Closing (net of all required withholdings).
Notwithstanding the foregoing, the Purchaser shall remain solely responsible for
paying to any Governmental Authority the employer's portion of any social
security, Medicare, unemployment and other payroll taxes attributable to the
employment of the Transferred Employees by the Purchaser. The Purchaser shall
reimburse the Seller on demand for all amounts the Seller may pay to the
Transferred Employees on the Purchaser's behalf pursuant to this clause (d).
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1. MUTUAL CONDITIONS. The respective obligations of the
parties to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to Closing of the following conditions:
(a) No Governmental Authority of competent jurisdiction shall
have (i) enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree, injunction or other order which is
in effect; or (ii) commenced or threatened any action or proceeding,
which in either case would prohibit consummation of the transactions
contemplated by this Agreement;
(b) Subject to the provisions of Section 5.12, all consents,
authorizations, orders or approvals of, and filings or registrations
with, any Governmental Authority and all consents and approvals of
third parties which are required in connection with the execution and
delivery of this Agreement and the Other Documents and the consummation
of the transactions contemplated hereby and thereby shall have been
obtained or made and shall be in full force and effect;
(c) The Collective Bargaining Agreements shall have been
modified in writing such that the execution and delivery of this
Agreement and the performance by the Purchaser of its obligations under
this Agreement shall not cause a breach of any of the Collective
Bargaining Agreements as so modified; and
(d) Estoppel certificates executed by each landlord for each
of the Leased Real Properties included in the Transferred Property
shall have been delivered to the Purchaser reflecting the absence of
any defaults under the leases for such Leased Real Property.
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Section 6.2. CONDITIONS TO THE PURCHASER'S OBLIGATIONS. The obligations
of the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment prior to or at Closing of each of the
following conditions:
(a) All representations and warranties made by the Seller in this
Agreement and the Schedules hereto and the Other Documents to which it is a
party shall be true, correct and complete in all material respects on the date
hereof and as of the Closing Date as though such representations and warranties
were made as of the Closing Date (or on the date when made in the case of any
representation or warranty which specifically relates to an earlier date), and
the Seller shall have duly performed or complied in all material respects with
all of the covenants, obligations and conditions to be performed or complied
with by it under the terms of this Agreement and the Other Documents to which it
is a party on or prior to or at Closing.
(b) Prior to or at Closing, the Seller shall have delivered to the
Purchaser all instruments of assignment, transfer and conveyance identified
herein and such other closing documents as shall be requested by the Purchaser
in form and substance reasonably acceptable to the Purchaser's counsel,
including the following:
(i) such instruments of sale, transfer, assignment,
conveyance and delivery (including all vehicle titles), in form and
substance reasonably satisfactory to counsel for the Purchaser
(including without limitation one or more bargain and sale deeds
with limited or special warranty covenants against grantor's acts,
or the equivalent thereof, in recordable form, the bill of Sale set
forth as Exhibit B and the Assignment and Assumption Agreement set
fort as Exhibit C), as are required in order to transfer to the
Purchaser good and marketable title to the Transferred Assets free
and clear of all Encumbrances except Permitted Encumbrances;
(ii) the other Documents;
(iii) certificates from the appropriate state office for the
states of Delaware and all other jurisdictions where the Transferred
Property is located, dated as of a recent date, to the effect that the
Seller is in good standing under the laws of that jurisdiction;
(iv) a certificate of an authorized officer of the Seller,
dated the Closing Date, to the effect that (1) the Person signing such
certificate is familiar with this Agreement and (2) the conditions
specified in Section 6.2(a) have been satisfied;
(v) a certificate of the Secretary or an Assistant Secretary
of the Seller, dated the Closing Date, as to the incumbency of any
officer of the Seller executing this Agreement, the Other Documents to
which the Seller is a party or any document related thereto and
covering such other matters as the Purchaser may reasonably request;
(vi) a certified copy of (1) the Certificate of Incorporation
and by-laws of the Seller and all amendments thereto and (2) the
resolutions of the Seller's Board of Directors authorizing the
execution, delivery and consummation of this Agreement, the
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Other Documents to which the Seller is a party and the transactions
contemplated hereby and thereby; and
(vii) such other documents or instruments as the Purchaser
reasonably requests to effect the transactions contemplated hereby.
(c) The Seller shall have delivered, or caused to have been delivered,
to Purchaser, at Seller's sole cost and expense, current as-built surveys for
all Owned Real Property included in the Transferred Assets prepared by a
registered surveyor in accordance with the minimum standard detail requirements
for ALTA/ACSM Title Surveys and otherwise in form and substance sufficient to
delete any and all "survey exceptions" from the title insurance policies
covering said property.
(d) The Purchaser shall have received a title insurance policy (or a
binding commitment to issue a title insurance policy) from a title insurance
company satisfactory to Purchaser, insuring Purchaser's fee simple ownership of
the Owned Real Property included in the Transferred Property and that the
Purchaser's leasehold interest in the Leased Real Property included in the
Transferred Property are good and marketable and free and clear of all liens and
Encumbrances except Permitted Encumbrances, and deleting the "standard
exceptions" thereto.
(e) No Material Adverse Change shall have occurred subsequent to the
date of this Agreement.
Section 6.3. CONDITIONS TO THE SELLER'S OBLIGATIONS. The obligations of
the Seller to consummate the transactions contemplated by this Agreement shall
be subject to the fulfillment at or prior to the Closing of each of the
following conditions.
(a) All representations and warranties made by the Purchaser in this
Agreement shall be true, correct and complete in all material respects on the
date hereof and as of the Closing Date as though such representations and
warranties were made as of the Closing Date (or on the date when made in the
case of any representation or warranty which specifically relates to an earlier
date), and the Purchaser shall have duly performed or complied in all material
respects with all of the covenants, obligations and conditions to be performed
or complied with by it under the terms of this Agreement on or prior to or at
Closing.
(b) Prior to or at Closing, the Purchaser shall have delivered to the
Seller such closing documents as shall be reasonably requested by the Seller in
form and substance reasonably acceptable to the Seller's counsel, including the
following:
(i) the Assignment and Assumption Agreement;
(ii) the Other Documents;
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(iii) a certificate of an authorized officer of the Purchaser,
dated the Closing Date, to the effect that (1) the Person signing such
certificate is familiar with this Agreement and (2) the conditions
specified in Section 6.3(a) have been satisfied;
(iv) a certificate of the Secretary or Assistant Secretary of
the Purchaser, dated the Closing Date, as to the incumbency of any
officer of the Purchaser executing this Agreement, the Other Document
or any document related thereto and covering such other matters as the
Seller may reasonably request;
(v) a certified copy of (1) the Certificate of Incorporation
and by-laws of the Purchaser and all amendments thereto and (2) the
resolutions of the Purchaser's Board of Directors authorizing the
execution, delivery and consummation of this Agreement, the Other
Documents and the transactions contemplated hereby and thereby; and
(vi) such other documents or instruments as the Seller
reasonably requests to effect the transactions contemplated hereby.
(c) The Purchaser shall have paid the Purchase Price in full as
specified in Section 2.2.
ARTICLE VII
TERMINATION
Section 7.1. TERMINATION. This Agreement may be terminated at any time
prior to Closing as follows:
(a) by mutual consent of the Seller and the Purchaser;
(b) by either the Seller or the Purchaser if the other party
hereto shall breach in any material respect any of its representations,
warranties or obligations contained in this Agreement; provided, that
such breach is not cured in all material respects within a thirty-day
period commencing on the date written notice of such breach is received
by the breaching party;
(c) by the Purchaser, in the event that the conditions to its
obligations set forth in Article VI hereof have not been satisfied or
waived by the Purchaser;
(d) by the Seller, in the event that the conditions to its
obligations set forth in Article VI hereof have not been satisfied or
waived by the Seller; and
(e) by either the Seller or the Purchaser if the transactions
contemplated by this Agreement shall not have been consummated on or
before December 15, 1996 (or such later date as may be agreed upon in
writing by the parties hereto), other than as a
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result of a delay caused by the party seeking to terminate this
Agreement or as a result of such party's failure to perform its
obligations hereunder.
Section 7.2. EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 7.1 hereof, all rights and obligations of the Seller and the
Purchaser hereunder shall terminate and no party shall have any liability to the
other party, except for obligations of the parties hereto in Sections 5.1, 10.2
and 10.9, which shall survive the termination of this Agreement, and except
nothing herein will relieve any party from liability for any breach of any
representation, warranty, agreement or covenant contained herein prior to such
termination.
ARTICLE VIII
ENVIRONMENTAL MATTERS
Section 8.1. ENVIRONMENTAL OBLIGATIONS. (a) The Purchaser shall assume
liability for, and indemnify the Seller, its Affiliates, and their respective
directors, officers, employees, successors and assigns against, all
Environmental Claims related to the Transferred Property or the other
Transferred Assets or arising from the operation of the Business on or prior to
the Closing Date ("Assumed Environmental Liabilities"), except for the following
(the "Retained Environmental Claims"):
(i) All Environmental Claims relating to the Excluded
Assets;
(ii) All Environmental Claims involving allegations of air
pollution, improper air emissions giving rise to any alleged nuisance
or tort or other airborne violations of any Environmental Law that
arise from events that occurred prior to the Closing Date and that
relate to the Transferred Property or the Business;
(iii) All Environmental Claims that relate to the "off-site"
treatment, storage, use or disposal by Seller of any Regulated
Substance used in or generated by the Business. For purposes of this
subsection (iii), "off-site" shall refer to any property other than the
Transferred Property;
(iv) Subject to the provisions of Section 9.1, all
Environmental Claims that relate to a breach by Seller of any of its
representations or warranties contained in this Agreement, including,
without limitation, Section 3.20 or the Schedules relating thereto; and
(v) Subject to the provisions of Section 8.1(b) all "Shared
Groundwater Environmental Claims" shall mean all Environmental Claims
that (A) arise out of events that occurred prior to the Closing Date,
(B) relate to the groundwater contained within the Transferred Property
(but not the Excluded Assets), (C) do not relate to a breach by Seller
of any of its representations or warranties contained in this Agreement
or the Schedules relating thereto, and (D) involve assertions that such
groundwater does not comply with any Environmental Law for any reason
OTHER THAN (i) decreased pH levels, (ii) elevated
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levels of aluminum or sulfate, (iii) elevated levels of total dissolved
solids, or (iv) the presence of heavy metals related to the manufacture
of aluminum sulfate and/or native soil or groundwater conditions.
(b) Seller shall retain liability for, and indemnify Purchaser, its
Affiliates, and their respective directors, officers, employees, successors and
assigns against, all Retained Environmental Claims; provided, however, that with
respect to Shared Groundwater Environmental Claims, the Seller's sole obligation
shall be to reimburse Purchaser for seventy-five (75) percent of the expenses
actually paid for Appropriate Remedial Measures relating to the shared
Groundwater Environmental Claims (the "Remediation Expenses") during the first
year following the Closing Date; fifty (50) percent of such Remediation expenses
actually paid during the second year following the Closing Date; and twenty-five
(25) percent of such Remediation Expenses actually paid thereafter; provided,
that the Appropriate Remedial Measures to which the Remediation Expenses relate
were commenced prior to the expiration of the third year following the Closing
Date ("Qualifying Measures"); and provided, further, that the Seller shall have
no further obligation or liability for any Remediation Expenses related to
Qualifying Measures incurred or paid after the fourth anniversary of the Closing
Date. In addition, from and after the third anniversary of the Closing Date, the
seller shall have no further obligation or liability with respect to any Shared
Groundwater Environmental Claims asserted after said date or any Appropriate
Remedial Measures relating to the Shared Groundwater Environmental Claims
commenced after said date, and thereafter all Shared Groundwater Environmental
Claims, whether then existing or thereafter arising, shall become Assumed
Environmental Liabilities. The Purchaser shall notify the Seller in writing
prior to commencing any Appropriate Remedial Measures relating to the Shared
Groundwater Environmental Claims for which it intends to seek partial
reimbursement from the Seller pursuant to the terms of this Section 8.1(b),
which notice shall include a non-binding, good faith estimate of the cost and
timing of such Appropriate Remedial Measures. Thereafter, the Purchaser shall
provide the Seller with copies of all invoices relating to such Appropriate
Remedial Measures approved for payment by the Purchaser. Provided that the
Purchaser has timely provided the Seller with the notice specified above, within
ten days of receipt of such invoices, the Seller shall pay to the Purchaser its
share of the amounts indicted on such invoices (less a proportionate share of
any applicable discounts or credits received by the Purchaser with respect
thereto) and the Purchaser shall promptly use the amounts paid to its by the
Seller for the sole purpose of paying such invoices in full following its
receipt thereof.
(c) Seller shall be solely responsible for the proper and lawful
closure of the Excluded Assets and any monitoring costs associated therewith.
(d) Purchaser shall assume and be responsible for all of the
reclamation expenses at the Mine required by all Environmental Laws, provided,
however, that Purchaser's obligations under this subsection (d) shall not result
in Purchaser assuming any Retained Environmental Claims relating to the Mine.
(e) So long as Seller is responsible for a portion of the Remediation
Expenses incurred with respect to the Shared Groundwater Environmental Claims,
the Purchaser shall
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promptly provide Seller with copies of all written notices, citations, and
complaints that relate solely and exclusively to the Business that Purchaser
receives from Governmental Authorities or any other Person of any actual or
alleged violation or liability under any Environmental Law or Environmental
Permit. In addition, during such period, the Purchaser shall provide Seller with
written reports from time to time, and any event no less frequently than twelve
months describing in reasonable detail the on-going environmental condition of
the Transferred Property and the other Transferred Assets, including, but not
limited, to, information relating to any leak, spill, discharge, leaching,
emission, escape or release of any Regulated Substance (other than in accordance
with the terms of any Environmental Permit), any written notices, citations
and/or complaints that Purchaser has received with respect to the Transferred
Property from any Governmental Authority or any other Person regarding any
actual or alleged violation or liability under any Environmental Law or
Environmental Permit, information relating to any Appropriate Remedial Measures
completed since the date of Purchaser's last report, and the status of any
Appropriate Remedial Measures then being undertaken by Purchaser. So long as
Seller is responsible for a portion of the Remediation Expenses incurred with
respect to the Shared Groundwater Environmental Claims, in addition to the
Seller's rights under Section 5.6 hereof, Seller and its representatives shall
be permitted reasonable access, during normal business hours, to inspect and to
make copies of Purchaser's books and records relating to the Transferred
Properties and the other Transferred Assets for the purpose of verifying (i) the
information contained in any of such reports, and (ii) the expenses incurred in
connection with any Appropriate Remedial Measures.
(f) So long as the Purchaser owns the Transferred Property located in
Chattanooga, Tennessee and the Seller owns the Excluded Assets located in
Chattanooga, Tennessee, during the three-year period following the Closing, the
Seller shall promptly provide the Purchaser with copies of all written notices,
citation, and complaints that relate solely and exclusively to such Excluded
Assets that the Seller receives from Governmental Authorities or any other
Person of any actual or alleged violation or liability under any Environmental
Law or Environmental Permit. In addition, so long as the Seller owns such
Excluded Assets, during the three-year period following the Closing, the Seller
shall provide the Purchaser with information relating to any leak, spill,
discharge, leaching, emission, escape or release or any Regulated Substance
(other than in accordance with the terms of any Excluded Permit), any written
notices, citations and/or complaints that Seller has received with respect to
such Excluded Assets from any Governmental Authority or any other Person
regarding any actual or alleged violation or liability under any Environmental
Law or Excluded Permit.
(g) So long as the Purchaser owns the Transferred Property located in
Chattanooga, Tennessee and the Seller owns the Excluded Assets located at
Chattanooga, Tennessee, during the three-year period following the Closing, the
Purchaser and the Seller shall provide each other with reasonable access during
normal business hours to all data generated by the monitoring wells located at
the Chattanooga facility.
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ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
Section 9.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties provided for in this Agreement shall survive the
Closing for one year from the Closing Date for the benefit of the parties hereto
and their successors and assigns, except that the representations and warranties
contained (i) in Section 3.5 shall survive indefinitely, (ii) in Section 3.13
shall survive the Closing until the expiration of the application statute of
limitations, and (iii) in Sections 3.12, 3.15 and 3.20 shall survive the Closing
for three (3) years from the Closing Date (the "Survival Periods").
Section 9.2. INDEMNIFICATION BY THE SELLER. Subject to the limitation
set forth in Section 9.4, the Seller shall indemnify and hold harmless the
Purchaser, its Affiliates and their respective successors, permitted assigns,
officers, directors, employees and agents against any and all costs, expenses,
damages, liabilities on losses (including, without limitation, reasonable
counsel's fees and other reasonable out-of-pocket costs incident to any suit,
action or proceeding) ("Damages") to the extent caused by (i) the breach of any
representation or warranty made by the Seller in this Agreement for the
applicable Survival Period, (ii) the breach by the Seller of any covenant or
agreement to be performed by it hereunder (including, without limitation, the
Seller's obligations under Article VIII), (iii) the failure of the Seller to
obtain the Access Easement as required by Section 5.4(c), (iv) any Retained
Liability, and (v) subject to the provisions of Article VIII, any liability,
damage or obligation arising out of the Seller's ownership or operation of the
Excluded Assets. Notwithstanding the foregoing, in the event that the Purchaser
agrees to undertake or is required to undertake any remedial measures resulting
from a breach of Section 3.20 by the Seller, the Purchaser's "Damages" for such
remedial measures shall be limited to the actual costs of performing the
Appropriate Remedial Measures proximately caused by such breach unless a
Governmental Authority orders or otherwise requires more extensive remedial
measures.
Section 9.3. INDEMNIFICATION BY THE PURCHASER. Subject to the
provisions of Section 9.4, the Purchaser shall indemnify and hold harmless the
Seller, its Affiliates and their respective successors, permitted assigns,
officers, directors, employees and agents against any and all Damages to the
extent caused by (i) the breach of any representation or warranty made by the
Purchaser in this Agreement for the applicable Survival Period, (ii) the breach
by the Purchaser of any covenant or agreement to be performed by it hereunder
(including, without limitation, the Purchaser's obligations under Article VIII),
(iii) any Assumed Liability, and (iv) subject to the provisions of Article VIII,
the operation of the Business from and after the Closing.
Section 9.4. LIMITATIONS ON INDEMNIFICATION. The indemnification
obligations contained in this Article IX shall be subject to the following
limitations:
(a) The Seller and the Purchaser, respectively, shall have no liability
under Sections 9.2(i) and 9.3(i), respectively, with respect to any claims for
Damages pursuant to said respective Sections until the aggregate of all such
claims against such party total $500,000 (the "Threshold Amount"), in which
event such party's indemnity obligation shall apply to the
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aggregate of all claims against it in excess of the Threshold Amount. All such
claims made during the applicable Survival Periods pursuant to this Agreement
and the Technology Transfer Agreement shall be counted in determining whether
the thresholds specified above have been achieved.
(b) The Seller's maximum aggregate indemnification liability under
Section 9.2 shall not exceed the Purchase Price (as adjusted pursuant to Section
2.4).
(c) In computing the amount of Damages hereunder, the Damages suffered
by the Indemnified Party shall be computed net of any tax benefit to the extent
recognized and utilized prior to or in the year in which such Damages are paid
to offset or reduce the tax liability of the Indemnified Party. Any payment in
respect of indemnification hereunder shall be treated as an adjustment of the
Purchase Price.
Section 9.5. SOLE AND EXCLUSIVE REMEDY; WAIVER. Any Person providing
indemnification pursuant to the provisions of Article VIII or this Article IX is
hereinafter referred to as an "Indemnifying Party" and any Person entitled to be
indemnified pursuant to the provisions of Article VIII or this Article IX is
hereafter referred to as an "Indemnified Party." The provisions of Article VIII
and Article IX shall constitute the sole and exclusive remedy of any Indemnified
Party after the Closing for (i) Damages arising out of, resulting from or
incurred in connection with any inaccuracy and/or breach by the Indemnifying
Party of any of its representations or warranties under this Agreement, the
Other Documents, the Schedules hereto or any certificate delivered in connection
herewith (except as otherwise provided in the Technology Transfer Agreement),
(ii) the failure of the Indemnifying Party to perform any covenant or agreement
under this Agreement or the Other Documents; provided, however, that nothing in
this clause (ii) shall limit or otherwise restrict any party's right to seek or
obtain injunctive or other equitable relief (including, without limitation,
specific performance) as a result of a breach by the other party of any of its
covenants or agreements under this Agreement or the Other Documents, (iii) any
other act or omission by the Indemnifying Party under this Agreement or the
Other Documents or relating to the subject matter hereof or thereof, or (iv) any
Environmental Claim relating to the Business or the Transferred Assets. Any
other rights to indemnification or Damages to which an Indemnified Party might
otherwise be entitled after the Closing, whether now existing or hereafter
arising, are hereby waived to the maximum extent permitted by applicable law.
The Purchaser and the Seller, on their own behalf and on behalf of their
respective Affiliates, their respective officers, directors, employees, agents
and representatives, and any Person claiming by or through any of them, hereby
waive, to the maximum extent permitted by applicable law, any and all other
claims which may arise hereunder against the officers, directors, employees,
agents and representatives of the other party hereto. The Purchaser acknowledges
that, pursuant to the terms of the Environmental Matters Agreement, dated
December 17, 1993, a true and complete copy of which has been provided to the
Purchaser, the Seller has previously agreed to indemnify Cyanamid, its
predecessor in interest, against certain environmental liabilities relating to,
among other things, the Business and the Transferred Assets. Accordingly, the
Purchaser shall not make any claims against Cyanamid or its successors in
interest (other than the Seller) in respect of any such environmental
liabilities relating to the Business or the Transferred Assets. NOTWITHSTANDING
ANYTHING TO
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THE CONTRARY CONTAINED IN THIS AGREEMENT, UNDER NO CIRCUMSTANCES WILL THE SELLER
BE LIABLE TO THE PURCHASER OR THE PURCHASER BE LIABLE TO THE SELLER FOR ANY
CONSEQUENTIAL, INCIDENTAL, INDIRECT, PUNITIVE OR SPECIAL DAMAGES OF ANY NATURE
WHATSOEVER, INCLUDING WITHOUT LIMITATION ANY DAMAGES ARISING OUT OF OR IN
CONNECTION WITH ANY MALFUNCTIONS, DELAYS, LOSS OF DATA, LOSS OF PROFIT,
INTERRUPTION OF SERVICE OR LOSS OF BUSINESS OR ANTICIPATORY PROFITS, EVEN IF THE
OTHER PARTY HAS BEEN APPRAISED OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING.
Section 9.6. PROCEDURES FOR THIRD PARTY CLAIMS. In the case of any
claim for indemnification arising from a claim of a third party (a "Third Party
Claim"), an Indemnified Party shall give prompt written notice to the
Indemnifying Party of any claim or demand of which such Indemnified Party has
knowledge and as to which it may request indemnification hereunder. The
Indemnifying Party shall have the right to defend and to direct the defense
against any such Third Party Claim, in its name or in the name of the
Indemnified Party, as the case may be, at the expense of the Indemnifying Party,
and with counsel selected by the Indemnifying Party unless (i) such Third Party
Claim seeks an order, injunction or other equitable relief against the
Indemnified Party, or (ii) the Indemnified Party shall have reasonably concluded
that (x) there is a conflict of interest between the Indemnified Party and the
Indemnifying Party in the conduct of the defense of such Third Party Claim or
(y) the Indemnified Party has one or more defenses not available to the
Indemnifying Party. Notwithstanding anything in this Agreement to the contrary,
the Indemnified Party shall, at the expense of the Indemnifying Party, cooperate
with the Indemnifying Party and keep the Indemnifying Party fully informed, in
the defense of such Third Party Claim. The Indemnified Party shall have the
right to participate in the defense of any Third Party Claim with counsel
employed at its own expense; provided, however, that, in the case of any Third
Party Claim or demand described in clause (i) or (ii) of the second preceding
sentence or as to which the Indemnifying Party shall not in fact have employed
counsel to assume the defense of such Third Party Claim, the reasonable fees and
disbursements of such counsel shall be the expense of the Indemnifying Party.
The Indemnifying Party shall have no indemnification obligations with respect to
any such Third Party Claim or demand which shall be settled by the Indemnified
Party without the prior written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or delayed.
Section 9.7. PROCEDURES FOR INTER-PARTY CLAIMS. In the event that an
Indemnified Party determines that it has a claim for Damages against an
Indemnifying Party hereunder (other than as a result of a Third Party Claim),
the Indemnified Party shall give prompt written notice thereof to the
Indemnifying Party, specifying the amount of such claim and any relevant facts
and circumstances relating thereto. The Indemnified Party shall provide the
Indemnifying Party with reasonable access to its Books and Records for the
purpose of allowing the Indemnifying Party a reasonable opportunity to verify
any such claim for Damages. The Indemnified Party and the Indemnifying Party
shall negotiate in good faith regarding the resolution of any disputed claims
for Damages.
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ARTICLE X
MISCELLANEOUS
Section 10.1. NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally, by
facsimile or sent by certified, registered or express air mail, postage prepaid,
and shall be deemed given when so delivered personally, or by facsimile, or if
mailed, five days after the date of mailing, as follows:
If to the Purchaser: GEO Specialty Chemicals, Inc.
28601 Chagrin Boulevard, Suite 450
Cleveland, OH 44122
Telephone: (216) 464-5564
Facsimile: (216) 765-1307
Attention: George P. Ahearn, President
With a copy to: Thompson Hine & Flory, LLP
3900 Key Center
Cleveland, Ohio 44114
Telephone: (216) 566-5500
Facsimile: (216) 566-5800
Attention: Craig R. Martahus, Esq.
If to the Seller: Cytec Industries Inc.
Five Garret Mountain Plaza
West Paterson, New Jersey 07424
Telephone: (201) 357-3100
Facsimile: (201) 357-3058
Attention: Corporate Secretary
or to such other address as any party hereto shall notify the other parties
hereto (as provided above) from time to time.
Section 10.2. EXPENSES. Regardless of whether the transactions provided
for in this Agreement are consummated, except as otherwise provided herein, each
party hereto shall pay its own expenses incident to this Agreement and the
transactions contemplated herein.
Section 10.3. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement
(and all matters arising, directly or indirectly, from it) shall be governed by,
and construed in accordance with, the internal laws of the State of New Jersey,
without reference to the choice of law principles thereof. Each of the parties
hereto irrevocably submits to the exclusive jurisdiction of the courts of the
State of New Jersey and the United States District Court for the District of New
Jersey for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties
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hereto irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.
Section 10.4. ASSIGNMENT; SUCCESSORS AND ASSIGNS; NO THIRD PARTY
RIGHTS. This Agreement may not be assigned by operation of law or otherwise, and
any attempted assignment shall be null and void except that this agreement may
be assigned in whole or in part by Purchaser to any wholly owned subsidiary of
the Purchaser; provided, however, that the Purchaser shall remain liable for the
performance of its obligations hereunder. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors,
permitted assigns and legal representatives. This Agreement shall be for the
sole benefit of the parties to this Agreement and their respective successors,
permitted assigns and legal representatives and is not intended, nor shall be
construed, to give any Person, other than the parties hereto and their
respective successors, permitted assigns and legal representatives, any legal or
equitable right, remedy or claim hereunder. Nothing contained in this Section
10.4 shall restrict the Purchaser's ability to grant a security interest in its
rights hereunder to one or more of its lenders.
Section 10.5. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original agreement, but all of
which together shall constitute one and the same instrument.
Section 10.6. TITLES AND HEADINGS. The headings and table of contents
in this Agreement are for reference purposes only, and shall not in any way
affect the meaning or interpretation of this Agreement.
Section 10.7. ENTIRE AGREEMENT. This Agreement, including the Schedules
and Exhibits attached thereto, constitutes the entire agreement among the
parties with respect to the matters covered hereby and supersedes all previous
written, oral or implied understandings among them with respect to such matters.
In the event of a conflict between the terms of this Agreement and the terms of
any Other Document, the provisions of this Agreement shall control.
Section 10.8. AMENDMENT AND MODIFICATION. This Agreement may only be
amended or modified in writing signed by the party against whom enforcement of
such amendment or modification is sought.
Section 10.9. PUBLIC ANNOUNCEMENT. Except as may be required by law,
neither the Seller, on the one hand, nor the Purchaser, on the other hand, shall
issue any press release or otherwise publicly disclose this Agreement or the
transactions contemplated hereby or any dealings between or among the parties in
connection with the subject matter hereof without the prior approval of the
other. In the event that any such press release or other public disclosure shall
be required, the party required to issue such release or other disclosure shall
consult in good faith with the other party hereto with respect to the form and
substance of such release or other
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disclosure prior to the public dissemination thereof. No party shall disclose
the Purchase Price, whether prior to, on or after the Closing Date, except as
may be required by applicable laws or regulations or the rules of any securities
exchange or association binding on the Purchaser or the Seller, as the case may
be.
Section 10.10. WAIVER. Any of the terms or conditions of this Agreement
may be waived at any time by the party or parties entitled to the benefit
thereof, but only by a writing signed by the party or parties waiving such terms
or conditions.
Section 10.11. SEVERABILITY. The invalidity of any portion hereof shall
not affect the validity, force or effect of the remaining portions hereof. If it
is ever held that any restriction hereunder is too broad to permit enforcement
of such restriction to its fullest extent, such restriction shall be enforced to
the maximum extent permitted by law.
Section 10.12. NO STRICT CONSTRUCTION. Each of the Purchaser and the
Seller acknowledge that this Agreement has been prepared jointly by the parties
hereto, and shall not be strictly construed against either party.
Section 10.13. BULK SALES. Each of the Purchaser and the Seller hereby
waives compliance with Article 6 of the Uniform Commercial Code, or any
comparable bulk sales law, as adopted by each of the jurisdictions in which the
Transferred Assets are located to the extent, if any, that it is applicable to
the transactions contemplated by this Agreement. The Seller shall indemnify and
hold harmless the Purchaser and its directors, officers, shareholders,
employees, agents and representatives from and against any Damages arising out
of such waiver.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
CYTEC INDUSTRIES INC.
By: /s/ Stephen M. Crum
----------------------------------
Name: Stephen M. Crum
Title: Executive Vice President
GEO SPECIALTY CHEMICALS, INC.
By: /s/ George P. Ahearn
----------------------------------
Name: George P. Ahearn
Title: President
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<PAGE> 1
Exhibit 2.4
AMENDED AND RESTATED ASSET SALE AGREEMENT
THIS AMENDED AND RESTATED ASSET SALE AGREEMENT (the "Agreement") is
made and entered into this 15th day of July, 1994 by and between Courtney
Industries, Inc., a Maryland corporation having its principal office at 1920
Benhill Avenue, Baltimore, MD 21226 ("Courtney") and C Associates, a Maryland
General Partnership ("C Associates", Courtney and C Associates jointly, as the
context requires, being referred to herein as the "Sellers") and GEO Specialty
Chemicals, Inc., an Ohio Corporation having its principal office at 28601
Chagrin Boulevard, Suite 450, Cleveland, Ohio, 44122 ("Purchaser").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Sellers are engaged in the business of, among other things,
the manufacturing and marketing specialty chemicals used primarily in water
treatment applications, and in the owning and leasing of real property used in
such business (all of the businesses in which the Sellers are engaged shall be
referred to collectively as the "Business"); and
WHEREAS, Purchaser desires to purchase, and Sellers desire to sell,
certain assets of Sellers, including the goodwill and all assets necessary for
the operation of the Business, on the terms and conditions set forth in this
Agreement; and
NOW, THEREFORE, in consideration of the premises, and of the promises,
agreements, representations and warranties hereinafter set forth, Sellers, and
Purchaser hereby agree as follows:
ARTICLE 1
PURCHASE OF ASSETS
------------------
Section 1.01. CLOSING DATE. Subject to the terms and conditions hereof,
the consummation of the transactions described herein (the "Closing") will take
place on or before 10:00 a.m., July 15, 1994 at the offices of Whiteford, Taylor
& Preston, 210 West Pennsylvania Avenue, Towson, Maryland 21204, or at such
other time and date as the parties mutually may determine (the "Closing Date").
Regardless of the actual Closing Date, the transactions contemplated by this
Agreement are deemed by the parties hereto to be effective as of 11:59 p.m. the
day prior to closing, and all calculations, determinations, and adjustments,
including adjustments to the purchase price as contemplated by Section 1.04
hereof, will be made as of that date.
Section 1.02. PURCHASE AND SALE OF ASSETS. Subject to Section 1.03, at
the Closing, Sellers will sell, convey, transfer and deliver to Purchaser, and
Purchaser will purchase and receive from Sellers, all of the assets, rights, and
tangible and intangible property of Sellers owned by Sellers and used in the
Business on the Closing Date (the "Purchased Assets"). Subject to Section 1.03,
the Purchased Assets shall include all property and assets owned by Sellers and
used in the Business, of every kind and description, wherever located,
including,
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without limitation, all Working Capital, as hereinafter defined (but excluding
cash), property, tangible or intangible, real, personal or mixed, accounts
receivable, securities, deposits on contractual obligations or otherwise,
claims and rights under contracts, Sellers' right to use the names "Courtney
Industries", C Associates" and any derivatives or combinations thereof,
Sellers' right to use any trade names now or previously used by Sellers, any
logo or mark used by Sellers, and all books and records of Sellers relating to
the Business, all as the same shall exist on the Closing Date, including,
without limitation, the assets and property listed or described in the Schedule
of Purchased Assets attached hereto as Schedule 1.02. Sellers, or any of
shareholders or general partners who have been shareholders or partners for any
part of the five (5) year period prior to the Closing Date, shall, however,
upon reasonable notice to Purchaser, have the right at any time for a period of
five (5) years following the Closing Date to review any or all of the books and
records of the Sellers, and to secure originals or copies thereof if, in the
reasonable opinion of Sellers or any of their shareholders or partners, such
records are required for the purpose of responding to inquiries from state,
federal or local tax or other regulatory authorities, or in order to defend or
prosecute any claim which will or may result in an order directing the Sellers
or their shareholders or partners to make any payment or take or cease taking
any action against the will of the Sellers, their shareholders or their
partners.
Section 1.03. EXCLUDED ASSETS. The Purchased Assets shall not include
those assets of Sellers listed or described on Schedule 1.03 (the "Excluded
Assets").
Section 1.04. PURCHASE PRICE. The purchase price (the "Purchase Price")
for the Purchased Assets, and for the benefits and rights conferred upon
Purchaser hereunder, shall be an amount equal to:
(a) Five Million Three Hundred Fifty Thousand Dollars
($5,350,000.00) (the "Cash Purchase Price") adjusted in accordance with
the provisions of Section 1.05; plus
(b) Assumption by Purchaser of the Assumed Liabilities, as
hereinafter defined; plus
(c) The Performance Payments as defined in Schedule 1.04(c),
the calculation of which shall be made by the independent accountants
for Purchaser (subject to review and approval by Sellers' accountants)
utilizing generally accepted accounting principles, consistently
applied.
Section 1.05. PAYMENT OF PURCHASE PRICE. The Purchase Price described
in Section 1.04 shall be paid as follows:
(a) The Cash Purchase Price shall be paid as follows:
(i) Three Million Six Hundred Thousand Dollars
($3,600,000.00) shall be paid by certified check, or by another other
manner acceptable to Sellers, at closing.
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<PAGE> 3
(ii) One Hundred Fifty Thousand Dollars ($150,000.00) (the
"Hold Back Amount") shall be paid by certified check, or by any other
manner acceptable to Sellers, on or before August 20, 1994.
(iii) One Million Six Hundred Thousand Dollars
($1,600,000.00) shall be paid by the delivery, on the Closing Date of a
Subordinated Promissory Note of the Purchaser (the "Note") in the form
attached hereto as Schedule 1.05 bearing interest at a rate equal to
the prime rate of interest charged by Mercantile Safe-Deposit and Trust
Company (the "Prime Rate") as it may be from time to time during the
term of the Note, plus two percent (2.0%), with the principal sum to be
paid, absent any prepayment by Purchaser, in four equal, annual
installments, the first to be paid one year after the Closing, and with
accumulated interest to be paid on the due date of each annual
installment.
(b) The Performance Payments shall be paid by Purchaser to
Sellers in accordance with Schedule 1.04(c).
(c) The Cash Purchase Price shall be subject to the
following adjustments:
(i) NET WORKING CAPITAL ADJUSTMENT. The Cash Purchase Price
shall be adjusted upward to account for any increase or downward to
account for any decrease in Sellers' Net Working Capital as of the
Closing Date as compared to Sellers' Net Working Capital as reflected
on Sellers' unaudited February 28, 1994 financial statements. Sellers'
Net Working Capital as of the Closing Date shall be calculated and
agreed to by Purchaser and Sellers no later than August 15, 1994. To
the extent Sellers' New Working Capital increased, Purchaser shall pay
such amount to Sellers by certified check or by such other manner
acceptable to Sellers on or before August 20, 1994 together with
interest thereon at the Prime Rate provided in Section 1.05(a)(iii)
hereof. To the extent Sellers' Net Working Capital decreased, Purchaser
shall reduce the Hold Back Amount by the amount of that decrease and
pay the net amount of the Hold Back Amount to Sellers on or before
August 20, 1994. In the event that the decrease in the Sellers' Net
Working Capital exceeds the amount of the Hold Back Amount, the entire
Hold Back Amount shall be retained by Purchaser and the principal
amount of the Note shall be reduced (retroactive to the Closing) by the
amount by which said decrease exceeds the Hold Back Amount. Sellers'
Net Working Capital as of February 28, 1994 and as of May 31, 1994 is
set forth in Schedule 1.05(c)(i). Sellers' Net Working Capital as of
the Closing shall be calculated accordingly.
(ii) LOSS OF KEY CUSTOMER ADJUSTMENT. The Cash
Purchase Price shall be adjusted downward in the event that Purchaser,
at its option, declares a Key Customer Loss as that term is defined in
Schedule 1.05(c)(ii). The amount of the Key Customer Loss shall be
calculated in accordance with Schedule 1.05(c)(ii) and the principal
amount of the Note shall be reduced (retroactive to the Closing) by the
amount of said Key Customer Loss.
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(iii) UNCOLLECTED RECEIVABLE ADJUSTMENT. In the event
that any account receivable included within the Purchased Assets
remains uncollected for ninety (90) days following the Closing (an
"Uncollectible Receivable"), Purchaser, at its option, may declare the
Uncollectible Receivable to be an Excluded Asset in which case, (1)
Purchaser shall assign the Uncollectible Receivable to Sellers without
recourse, (2) the Sellers' Net Working Capital as of the Closing shall
be reduced by the face amount of the Uncollectible Receivable, and (3)
the principal amount of the Note shall be reduced (retroactive to the
Closing) by the face amount of the Uncollectible Receivable.
Section 1.06. LIABILITIES ASSUMED. Subject to the conditions herein set
forth, on the Closing Date, Purchaser shall deliver to Sellers an Assignment and
Assumption Agreement in the form attached hereto as Schedule 1.06, pursuant to
which Purchaser shall assume certain debts, obligations, contracts, leases and
liabilities of Sellers, as expressly set forth in said Assignment and Assumption
Agreement (the "Assumed Liabilities"). Purchaser shall assume no debts,
obligations, contracts, leases or liabilities of the Sellers other than the
Assumed Liabilities and such other incidental liabilities (e.g. repair parts,
office supplies, maintenance costs and current, unbilled utility charges) of
Sellers that have been incurred in the ordinary course of Sellers' business
prior to the Closing Date (the debts, obligations, contracts, leases and
liabilities not expressly assumed by Purchaser shall be referred to herein as
the "Excluded Liabilities").
Section 1.07. ALLOCATION OF PURCHASE PRICE. After due negotiation, the
parties agree that the consideration described in Section 1.04 shall be
allocated among the Purchased Assets in the manner set forth in Schedule 1.07
hereof. To the extent not otherwise required by Generally Accepted Accounting
Principles, the Note, and any adjustments thereto, shall be deemed a portion of
the consideration paid for goodwill.
Section 1.08. CHANGE AND USE OF NAME. Concurrently with the Closing,
Sellers shall take all actions required (including filing appropriate charter
amendments with the Maryland State Department of Assessments and Taxation) to
enable Purchaser to use the names "Courtney Industries, Inc." and "C Associates"
and any derivative or combination thereof that it may elect, and Seller shall
make no further use of any of such names.
Section 1.09. PHYSICAL INVENTORY. Immediately prior to Closing, the
parties shall take a physical inventory count of all inventory included in the
Purchased Assets. The raw material inventory shall be valued at the lower of
cost or market. The finished goods inventory shall be valued using the unit
values described on Schedule 1.09 hereto. Any work-in-progress shall be valued
as if 50% of the work-in-progress is raw material and 50% is finished goods.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
As a material inducement to Purchaser to enter into and perform its
obligations under this Agreement, Sellers, jointly and severally, hereby
represent and warrant to Purchaser as follows:
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<PAGE> 5
Section 2.01. ORGANIZATION AND QUALIFICATION, ETC. Courtney is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Maryland and C Associates is a general partnership duly
organized and validly existing pursuant to the laws of the State of Maryland.
Sellers each have the power and authority to own, lease or operate all of their
properties and assets and to carry on their businesses as and where it is now
being conducted, and Sellers are qualified to do business in each jurisdiction
wherein the nature and extent of their activities require such qualification.
Section 2.02. OWNERSHIP; SUBSIDIARIES. (a) The authorized, issued and
outstanding capital stock of Courtney is as set forth on Schedule 2.02. Except
as disclosed on Schedule 2.02, all of the issued and outstanding shares of
Courtney are owned of record by its stockholders, free and clear of all liens,
security interests, options, claims and encumbrances or other restrictions or
rights in others of any kind, and no shares are held in the treasury of
Courtney. Courtney has no outstanding stock or securities convertible or
exchangeable for any shares of its capital stock, nor does it have outstanding
any rights or options to subscribe for or to purchase any capital stock, or any
capital stock or securities convertible into or exchangeable for any capital
stock. Except as disclosed on Schedule 2.02, Courtney is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock. Schedule 2.02 further sets out the
percentage interest of each of the general partners of C Associates. As to each
partner their interest in the partnership is free and clear of all liens,
security interests, charging orders, claims or encumbrances of any kind, and no
interest or portion thereof is subject to any obligation to sell or be assigned
to any person.
(b) Courtney has no subsidiaries and neither Courtney nor C
Associates has any commitment to purchase or acquire any interest in any other
corporation, partnership, firm or other business enterprise.
Section 2.03. AUTHORITY RELATIVE TO AGREEMENT. Courtney has the
corporate power and authority and C Associates, by its general partner, has the
authority, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Sellers and the consummation of the transactions contemplated on their
part have been authorized by, as to Courtney, its Board of Directors and
stockholders, and as to C Associates by all of its general partners. No other
proceedings on the part of Courtney or C Associates are necessary to authorize
the execution and delivery of this Agreement by either of them or the
consummation by either of them of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Sellers and is a valid and
binding agreement of Sellers, enforceable in accordance with its terms.
Section 2.04. NO BREACH; CONSENTS. The negotiation, execution, delivery
and performance of this Agreement by Sellers and the consummation of the
transactions contemplated hereby, (a) do not and will not conflict with or
result in any breach of any of the provisions of, constitute a default under,
result in a violation of, result in the creation of any lien, security interest,
charge, encumbrance or other restriction upon the Purchased Assets under, or
require any authorization, consent, approval, exemption or other action by or
notice to any third
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party, under the provisions of the Charter or By-Laws of Courtney or the
partnership agreement of C Associates or any license, permit, contract,
franchise, indenture, mortgage, lease, loan agreement or other agreement (oral
or written) or instrument to which either is a party or under which the
properties of the Sellers, or either of them is bound, and (b) does not require
any authorization, consent, approval, exemption or other action by or notice to
any court or governmental body under any law, statute, rule, regulation or
decree to which Sellers are subject.
Section 2.05. FINANCIAL STATEMENTS. (a) Each of the Sellers has
previously delivered to Purchaser copies of (i) the balance sheets of Sellers as
of December 31, 1990, 1991, 1992, and 1993 and the related statements of income,
retained earnings and changes in financial position for the respective
twelve-month periods then ended, and (ii) as to Courtney a copy of the unaudited
balance sheet of Courtney Industries, Inc. as of February 28, 1994 and the
related statements of income, retained earnings, and changes in position for the
two (2) month period then ended, (collectively, the "Financial Statements"). All
of such Financial Statements are attached hereto as Schedule 2.05. Such
Financial Statements (including in all cases the notes thereto) fairly present
the financial condition and results of operations of Sellers in conformity with
G.A.A.P. applied on a consistent basis throughout the periods presented.
(b) The Sellers have previously delivered to the Purchaser a
reconciliation in the form attached hereto as Schedule 2.05(b) which, to the
best of Sellers' knowledge, information and belief, is based on reasonable
assumptions and, based upon such assumptions, accurately reconciles Sellers'
EBITDA as set forth in the descriptive memorandum to the EBITDA set forth in
Sellers' audited financial statement for the period ended on December 31, 1993.
Section 2.06. ACCOUNTS RECEIVABLE AND PROMISSORY NOTES. Sellers'
accounts receivable, as shown on the Financial Statements and on their books and
records as of the date of this Agreement and as of the Closing Date, arose out
of transactions in the ordinary course of business and represent valid rights to
receive payments for bona fide services rendered or goods sold, and are not
subject to discounts, rebates or off-sets of any kind. The accounts receivable
and promissory notes (the "Accounts Receivable") shown on Sellers' Financial
Statements and books and records are, to the best of Sellers' knowledge,
information and belief, fully collectible and not subject to claims or offsets
of any kind except with respect to those matters identified on Schedule 2.06 as
currently subject to litigation claims.
Section 2.07. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth
on Schedule 2.07, Sellers have, as of the respective dates thereof, no
obligation or liability (whether accrued, absolute, contingent, unliquidated or
otherwise, whether due or to become due and whether or not insured), except
liabilities reflected on Sellers' balance sheets as of the respective dates
thereof. Without limiting the generality of the foregoing, except as set forth
on Schedule 2.07, Seller has no liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, or under any other federal or
state environmental legislation, rule or regulation.
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Section 2.08. NO MATERIAL ADVERSE CHANGE. Except as set forth in
Schedule 2.08, since December 31, 1993, there has been no material adverse
change in the financial condition, properties, operating results, employee
relations, customer relations, vendor relations, or business prospects of
Sellers.
Section 2.09. INVENTORIES. The inventories of Courtney reflected on the
Financial Statements, and the inventories thereafter produced or acquired, (a)
consist of items of a quality and quantity usable or salable as first quality
goods in the ordinary course of its business, at prevailing market prices not
less than the book values thereof, (b) none of such items is damaged or
generally unsalable in the ordinary course of business, or below standard
quality, and (c) the values at which such inventories are carried reflect an
inventory valuation policy stating inventory based on actual physical count. The
Purchased Assets will include a sufficient (but not excessive) quantity and mix
of inventory necessary to meet the normal requirements of the operations of
Courtney as of the Closing. The value ascribed to the inventory stored in
Building D on Courtney's unaudited balance sheet as of February 28, 1994 was not
greater than $5,000.00.
Section 2.10. ABSENCE OF CERTAIN DEVELOPMENTS. Except as disclosed on
Schedule 2.10, since December 31, 1993:
(a) Courtney has not redeemed or repurchased, or committed to
redeem or repurchase directly or indirectly, any shares of its capital
stock or declared or paid any dividends or distribution with respect to
any shares of its capital stock;
(b) Courtney has not issued, or committed to issue, any
equity securities, securities convertible into equity securities, or
warrants, options or other rights to acquire equity securities, or
bonds or other securities;
(c) neither of the Sellers has borrowed, or committed to
borrow, any amount or incurred or become subject to any material
liabilities, except current liabilities incurred in the ordinary course
of business and liabilities under contracts entered into in the
ordinary course of business;
(d) neither of the Sellers has discharged or satisfied any
material lien or encumbrance or paid any material obligation or
liability other than current liabilities paid in the ordinary course of
business;
(e) neither of the Sellers has mortgaged, pledged or
subjected to any lien, charge or any other encumbrance, any of its
properties or assets, except liens for current property taxes not yet
due and payable;
(f) neither of the Sellers has sold, assigned, transferred or
otherwise disposed of or committed to sell, assign, transfer or
otherwise dispose of any of its tangible or
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intangible assets (including books and records), except in the
ordinary course of business, or canceled any material debts or
claims;
(g) neither of the Sellers has waived any rights of material
value, whether or not in the ordinary course of business or consistent
with past practice;
(h) neither of the Sellers has made capital expenditures
except as planned or committed to prior to the date of the execution
hereof, and in any event only in reasonable amounts required for the
efficient operations of its business in the future;
(i) neither of the Sellers has paid or committed to pay any
bonuses or similar payments, except in the ordinary course of business;
(j) neither of the Sellers has made, or committed to make,
any loans or advances to, guarantees for the benefit of, or any
investments in, any person or entity;
(k) neither of the Sellers has made or committed to any
charitable or political contributions or pledges in excess of an
aggregate of One Thousand Dollars ($1,000.00);
(l) neither of the Sellers has suffered any material damage,
destruction or casualty loss, whether or not covered by insurance; or,
(m) neither of the Sellers has made any amendment to any
collective bargaining agreement or pension benefit plan to which it is
a party.
Section 2.11. TITLE TO PURCHASED ASSETS. (a) Except as disclosed in
Schedule 2.11.(a) or as disclosed or which would with the exercise of reasonable
diligence have been disclosed by a title examination of the premises being
purchased from C Associates, Sellers own good and marketable title to the
Purchased Assets, free and clear of all liens security interests, easements,
rights of way or other encumbrances (collectively, "Liens") and upon
consummation of the transactions contemplated by this Agreement, Purchaser will
acquire title to the Purchased Assets free and clear of any liens created by or
permitted by Sellers except those disclosed or which would with the exercise of
reasonable diligence have been disclosed by a title examination of the C
Associates premises and further excepting liens for real estate taxes not yet
due and payable and except for such imperfections of title and encumbrances, if
any, which, in the reasonable opinion of Purchaser, are not substantial in
character, amount or extent and do not detract from the value, or interfere with
the present use, of the property subject thereto, or otherwise impair its
business operations.
(b) Except as disclosed in Schedule 2.11(b), (i) Sellers are
not in violation of any applicable zoning ordinance or other law, regulation or
requirement relating to the operation of owned or leased properties, including
those promulgated by the Environmental Protection Agency and the Occupational
Safety and Health Administration, conformance to which would require a material
expenditure or would materially interfere with its operations, and (ii) except
as
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noted on Schedule 2.11(b) Sellers have not received any notice of any such
violations within the three years prior to the date hereof. Sellers have not
received written notice of a pending or threatened expropriation, condemnation,
or similar proceeding affecting all or any portion of the Purchased Assets and
Sellers have not received any written notice of any pending or proposed land use
or zoning changes or restrictions applicable to or affecting the Business of the
Sellers, or either of them or all or any portion of the Purchased Assets.
(c) Sellers lease, license or own all of the properties and assets
used in the Business.
(d) The Purchased Assets constitute all of the assets, tangible and
intangible, that are used or held for use by Sellers in connection with the
Business and include all assets the use of which is reasonably necessary for the
continued conduct of the Business in substantially the same manner as presently
conducted by Sellers.
(e) Sellers own and have a valid, binding and enforceable right to
use all of the intellectual property included in the Purchased Assets and have
received no written notice from any third party alleging the Sellers' use of
said intellectual property is infringing on the property rights of such third
party. Sellers have made no claim of any violation or infringement by others of
their infringement by others of their rights to said intellectual property and
Sellers know of no basis for the making of any such claim.
Section 2.12. TAX MATTERS. Except as disclosed on Section 2.12, all tax
returns and related information required to be filed by or on behalf of the
Sellers prior to the date hereof have been prepared and filed in accordance with
applicable law, and all taxes, interest, penalties, assessments or deficiencies
that have become due pursuant to such returns or any assessments or otherwise
have been paid in full. Except as disclosed on Schedule 2.12, all such returns
are true and correct in all material respects. Except as disclosed on Schedule
2.12, there is no unresolved claim concerning Sellers' federal, state and local
tax liabilities. There are no pending or, to the best of Sellers' knowledge,
threatened actions or proceedings, assessments or collections of taxes of any
kind with respect to the Business that would subject Purchaser to any liability
for such taxes for the period prior to the Closing Date or which would impair
any of the Purchased Assets.
Section 2.13. CONTRACTS AND COMMITMENTS. (a) Except as disclosed on
Schedule 2.13, neither of the Sellers is a party to any of the following
(collectively, the "Material Contracts"):
(i) contract, agreement, purchase order or other commitment for the
purchase, sale or provision to or by Seller of goods, property or
services in any one instance for an amount in excess of Twenty-Five
Thousand Dollars $25,000.00;
(ii) pension, profit sharing, stock option, employee stock purchase
or other plan providing for deferred compensation or other employee
benefit plan, or any contract with any labor union (collectively, the
"Benefit Plans");
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(iii) oral or written contract for the employment of any
officer, individual employee, or other person or entity on a full-time,
part-time, consulting or other basis, or agreement relating to loans to
officers, directors or affiliates, other than advances in the ordinary
course of business;
(iv) agreement or indenture relating to the borrowing of
money or to the mortgaging, pledging or otherwise placing a lien on any
material asset or material group of assets of Sellers, or either of
them;
(v) oral or written direct or indirect guarantee of any
obligation;
(vi) lease, license or agreement under which it is lessee
of, licensee of or holds or operates any property, real or personal,
tangible or intangible, owned by any other party, except for any lease
of personal property the existence of which was disclosed on December
31, 1993 Financial Statements;
(vii) lease, license or agreement under which it is lessor
of, licensor of or permits any third party to hold or operate any
property, real or personal, tangible or intangible, owned or controlled
by it (except as disclosed in the land records pertaining to C
Associates' ownership of the business premises);
(viii) contract or agreement restricting the ability of the
Sellers to conduct any type of lawful business or activity anywhere in
the world.
(b) Except as set forth on Schedule 2.13(b), (i) Sellers have
performed in all material respects all obligations required to be performed by
them and are not in default under or in breach of nor in receipt of any claim
of default or breach under any agreement referred to in Section 2.13(a), (ii)
no event has occurred which with the passage of time or the giving of notice or
both would result in a default, breach or event of noncompliance under any such
agreement, (iii) the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby will not, with the passage
of time or the giving of notice, or both, result in a default, breach, or event
of noncompliance under any such agreement, (iv) Sellers do not have any
knowledge of any breach or anticipated breach by any other party to such
agreements, and (v) Sellers are not a party to any material contract or
commitment for the purchase of goods or services at a rate currently above
market prices.
(c) Purchaser shall, prior to the Closing Date, be provided with an
opportunity to review a true and correct copy of each of the written contracts
which are referred to in Section 2.13(a), together with all amendments, waivers
or other changes thereto.
(d) Schedule 2.13(d) contains a true and complete list of the five (5)
largest suppliers to Courtney and a list of the fifteen (15) largest customers
of Courtney, each during calendar year 1993. Courtney shall also set out on such
schedule (i) the names of customers and/or suppliers included on such list who,
or which, in the reasonable opinion of Courtney, have
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determined to discontinue all future business relationships with Courtney or
(ii) the occurrence of any other event which would have a material adverse
effect on its business relationship with the Sellers.
Section 2.14. LITIGATION, ETC. Except as set forth on Schedule 2.14,
there are no actions, suits, proceedings, orders, investigations or claims
pending or threatened against the Sellers, or to which Sellers, or either of
them, is a party, at law or in equity, or before or by any court, tribunal,
governmental department, commission, board, bureau, agency or instrumentality,
or any arbitration proceedings pending under collective bargaining agreements or
otherwise.
Section 2.15. BROKERAGE. Except with respect to commissions due at
closing upon the transactions contemplated hereby to Peers & Co. to be paid by
Sellers, there are no claims for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement (oral or written) binding upon Seller.
Section 2.16. INSURANCE. Schedule 2.16 contains an abstract or summary
of each outstanding insurance policy maintained by Sellers. Sellers have given
to Purchaser a copy of each such insurance policy maintained with respect to
Sellers' properties, assets and the Business, and each such policy is in full
force and effect. Heretofore Courtney has maintained a term life insurance
policy on the life of James M. Courtney, which policy shall be an Excluded Asset
and shall be transferred to James M. Courtney within sixty (60) days following
the Closing Date.
Section 2.17. COMPLIANCE WITH LAWS. Except as set forth on Schedule
2.17, Sellers are in compliance with all laws, rules, regulations, ordinances,
orders, judgments, and decrees applicable to the Business or the Purchased
Assets, and are not in violation of any law or any regulation or requirement
which might have a material adverse effect upon the Sellers' financial condition
or operating results of, or the prospects of the Business, and Sellers have not
received notice of any such violation.
Section 2.18. EMPLOYEES. Courtney shall advise each of its current
employees of the date on which each employee will be terminated from employment
with Courtney and of the intention of the Purchaser to interview and employ
those from among the employees as are, in Purchaser's sole discretion, suitable
as future employees of the Purchaser. Purchaser covenants and agrees to use its
best efforts to engage all of Courtney's current employees with the exception of
those employees Purchaser has identified to Sellers prior to the Closing Date.
While it is the intention of the Purchaser to engage substantially all such
employees of Courtney, it is understood and agreed that Purchaser can not assure
that all will be hired and that Courtney can not provide assurances that all
offered positions will accept employment. Sellers are not aware of any
circumstances which would lead them to the conclusion that all, or substantially
all of those offered employment by the Purchaser would not accept a position
providing wages and benefits equal to those offered by Courtney to its current
employees. To the best knowledge, information and belief of the Sellers,
Courtney has complied with all laws relating to the employment of labor,
including provisions thereof relating to wages, hours, equal opportunity,
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collective bargaining and the payment of social security and other employment
tax obligations and the Sellers are not aware of any material labor relations
problems of Courtney. Courtney is a party to a collective bargaining agreement,
a copy of which has heretofore been made available to the Purchaser and is
included in Schedule 2.18.
Section 2.19. LICENSES AND PERMITS. Schedule 2.19 lists all of Sellers'
licenses, franchises and permits material to the operation of the Business.
Sellers have all licenses, franchises and permits, the absence of which would
have a material adverse effect on the Business. Sellers shall cooperate in
assisting Purchaser in securing the assignment of all assignable permits,
licenses and franchises held by Sellers, or by their officers, employees or
agents, with respect to the Business or the Business premises.
Section 2.20. BUSINESS RECORDS. Sellers' personnel files, accounting
records, and customer correspondence files are complete and correct in all
material respects, and accurately reflect Sellers' business operations for a
period of not less than five (5) years prior to closing.
Section 2.21. TRANSACTIONS WITH CERTAIN PERSONS. Except as set forth on
Schedule 2.21, (a) during the past three (3) years, Sellers have not, directly
or indirectly, purchased, leased or otherwise acquired any goods, services or
property from any stockholder or general partner of the Sellers or from any
person, firm, corporation or other entity directly or indirectly controlled by
(or under common control with) any stockholder or general partner of the
Sellers, and (b) Sellers do not owe any amount to, nor is any amount owed to
Sellers by, any stockholder or general partner of the Sellers or any person,
firm, corporation or other entity directly or indirectly controlled by (or under
common control with) the Sellers.
Section 2.22. ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Sellers
nor any officer, employee or agent acting on their behalf, has within the past
five (5) years given (or agreed to give) any gift, or similar benefit to any
customer, supplier, governmental employee or other person in a position to help
or hinder Sellers' Business except in the ordinary course of business and as
permitted by applicable law and regulations.
Section 2.23. ENVIRONMENTAL MATTERS. (a) Sellers have previously
provided to Purchaser (i) copies of all environmental reports, surveys and test
results (collectively, "Environmental Reports") performed by or on behalf of
Sellers or otherwise in Sellers' possession relating to the Business, all or any
of the Purchased Assets, or any real estate previously used in connection with
the Business or previously owned by Sellers, (ii) a summary of all corrective or
remedial actions taken by Sellers with respect to any of the findings or
recommendations contained in any Environmental Report, (iii) a list of all
on-site and off-site locations where the business has stored, disposed of
(including spilled or abandoned) or arranged for the disposal of any materials
or substances that are listed either in the United States Department of
Transportation Hazardous Materials Table (49 C.F.R. 172.01), any "hazardous
waste" as defined by the Resource Conservation and Recovery Act of 1976, as
amended, and regulations promulgated thereunder,
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any "hazardous substance" as defined by the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, and regulations
promulgated thereunder, any "hazardous substance" as defined by Maryland
Environmental Code Ann., Title 7, Subtitle 2, as amended, and regulations
promulgated thereunder any other materials described in the "Toxic Substances
Control Act", Title 15, Chapter 53 of the United States Code (collectively,
"Hazardous Materials"), (iv) copies of all reports, applications, registrations
or other filings made by Sellers with any federal, state, county, municipality
or other governmental unit or regulatory body responsible for the administration
or enforcement of any environmental laws or regulations (collectively, the
"Environmental Regulations"), and (v) copies of all notices, demands, pleadings
or other correspondence received by Sellers from any Environmental Regulator or
its legal counsel.
(b) There is no condition, circumstance, or set of facts
(including without limitation the presence, either past or present, of any
underground storage tanks) that constitutes a significant hazard to health,
safety, property, or the environment relating to the Business or any real
property owned or leased by Sellers for which the Business, Sellers or the owner
or operator of such real property would be responsible except as may be
disclosed on Schedule 2.23(b) hereof. Without limiting the foregoing, and except
as disclosed in Schedule 2.23(b), to the best of Sellers' knowledge, the
Purchased Assets contain no quantities of asbestos, PCB's, lead, or other
Hazardous Materials which, absent remediation, would render the premises unsafe
for use in the Business.
Section 2.24. MATERIAL MISSTATEMENTS OR OMISSIONS. Sellers have not
made any material misstatements of fact or omitted to state any material fact
necessary or desirable to make complete, accurate, and not misleading every
representation, warranty, schedule, and agreement set forth, described or
referred to herein. Sellers have disclosed to Purchaser all material adverse
facts relating to the condition or operation, whether past, present or future,
financial or otherwise, of the Purchased Assets and of the Business.
Section 2.25. EFFECTIVE DATE OF WARRANTIES, REPRESENTATIONS AND
COVENANTS. Each warranty, representation, and covenant set forth in this Article
2 shall be deemed to be made on and as of and speak on and as of the date hereof
and as of the Closing (except as otherwise specifically provided herein). Prior
to the Closing, Sellers will notify Purchaser of any change since the date
hereof in any fact, condition or circumstance which would require a modification
of the foregoing representations and warranties (including any schedule thereto)
to make such representation or warranty (or schedule thereto) complete, accurate
and not misleading in all respects.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
As a material inducement to Sellers to enter into and perform its
obligations under this Agreement, Purchaser represents and warrants to Seller as
follows:
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Section 3.01. ORGANIZATION, ETC. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Ohio.
Section 3.02. AUTHORITY RELATIVE TO AGREEMENT. Purchaser has the
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated on its part hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of Purchaser. No
other corporate proceedings on its part or the part of the stockholders of
Purchaser are necessary to authorize the execution and delivery of this
Agreement by it or the consummation by it of the transactions contemplated on
its part hereby. This Agreement has been duly executed and delivered by
Purchaser and is the valid and binding agreement of Purchaser.
Section 3.03. NO BREACH; CONSENTS. Except as disclosed on Schedule
3.03, the execution, delivery and performance of this Agreement by Purchaser and
the consummation of the transactions contemplated hereby (a) do not and will not
conflict with or result in any breach of any of the provisions of, constitute a
default under, result in a violation of, result in the creation of any lien,
security interest, charge or encumbrance upon the assets of the Purchaser under,
or require any authorization, consent, approval, exemption or other action by or
notice to any third party under the provisions of the Charter or By-Laws of
Purchaser or any license, indenture, mortgage, lease, loan agreement or other
agreement (oral or written) or instrument to which Purchaser is a party, and (b)
do not require any authorization consent, approval, exemption or other action by
or notice to any court or governmental body under any law, statute, rule,
regulation or decree to which Purchaser is subject.
Section 3.04. LITIGATION. There is no claim, action, suit or proceeding
pending or, to the knowledge of Purchaser, threatened against Purchaser or any
of its properties which seeks to prohibit, restrict or delay consummation of the
transactions contemplated hereby or to limit in any manner the right of
Purchaser to acquire Sellers' assets or control any material aspect of the
Business of Sellers after the Closing Date, and there is no judgment, decree,
injunction, ruling or order of any court, governmental department, commission,
agency or instrumentality or arbitrator outstanding against Purchaser having, or
which Purchaser believes may in the future have, any such effect.
Section 3.05. BROKERAGE. Except with respect to a finder's fee to be
paid by Purchaser to Kline & Co., there are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Purchaser.
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ARTICLE 4
CLOSING CONDITIONS
------------------
Section 4.01. CLOSING CONDITIONS RELATING TO PURCHASER. The obligation
of Purchaser to consummate the purchase of the Purchased Assets will be subject
to the satisfaction of the following conditions:
(a) DELIVERIES. At or prior to the Closing, Sellers shall
deliver, or cause to be delivered to Purchaser, the following items:
(i) BILL OF SALE/DEED. Sellers shall execute and deliver to
Purchaser a Bill of Sale, a FIRPTA Affidavit and a special warranty
deed, each in form reasonably satisfactory to Purchaser.
(ii) ASSIGNMENT AND ASSUMPTION AGREEMENT. Sellers shall
execute and deliver to Purchaser an Assignment and Assumption Agreement
in the form of Schedule 1.06 attached hereto pursuant to which Sellers
will assign to Purchaser certain contracts and rights of Sellers, and
Purchaser will accept and assume certain liabilities and obligations of
the Sellers.
(iii) CONSULTING AND EMPLOYMENT AGREEMENTS. James M. Courtney
shall execute and deliver to Purchaser a Consulting Agreement providing
for a term of at least six (6) months, and with an option on the part
of Purchaser to extend the term for a period of up to eighteen (18)
months and giving James M. Courtney the right to retain for his use the
leased Lincoln automobile currently used by him. During the term of the
Consulting Agreement James M. Courtney shall be paid for his services
at the rate of Six Hundred Dollars ($600.00) per day, shall be
available for as many as five (5) days per week, shall provide services
on those days reasonably requested by the Purchaser and will,
regardless of actual days worked, be paid for a minimum of three (3)
days per week. During each six month period James M. Courtney shall be
permitted three (3) weeks of vacation, which shall include the first
two (2) weeks of July, during which he shall not be required to provide
consulting services but shall nevertheless be paid. Vacations shall be
scheduled in advance with the consent of Purchaser, which consent shall
not be unreasonably withheld.
(iv) CERTIFICATES. Sellers shall execute and deliver to
Purchaser a Certificate, in the form of Exhibit 4.01(a) (iv) attached
hereto, certifying that all the representations and warranties of
Sellers contained in this Agreement are true and correct in all
material respects as of the Closing Date.
(v) CORPORATE RESOLUTIONS. Sellers shall deliver to
Purchaser certified copies of the resolutions of its Board of Directors
and certified copies of the resolutions of its stockholders, or as to C
Associates, of its general partners, authorizing the transactions
contemplated herein.
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(vi) CONSENTS. Sellers shall deliver to Purchaser copies of
all necessary third party and governmental consents, in a form
satisfactory to Purchaser, that Sellers are required to obtain in order
to consummate the transactions contemplated by this Agreement.
(vii) NON-COMPETE. Sellers, James M. Courtney and George C.
Stradley shall execute and deliver to the Purchaser a Non-Compete
Agreement in the form attached hereto as Schedule 4.01(a)(vii).
(viii) LIEN RELEASES. Sellers shall cause all parties holding
a security interest, lien or deed of trust on any of the Purchased
Assets to execute and deliver to Purchaser releases in form and
substance satisfactory to the Purchaser.
(b) DUE DILIGENCE RESULTS. Nothing shall have come to the
attention of Purchaser, in the course of its due diligence investigation
pursuant to Section 5.02 or otherwise, which demonstrates that (i) any of the
representations or warranties of Sellers, when first made were, or have become
materially inaccurate or incomplete, or (ii) the Financial statements of Sellers
do not accurately reflect its financial condition as at the dates indicated and
the results of operations for the periods covered thereby.
(c) FINANCING. Purchaser, using its best efforts so to do,
shall have obtained, at commercially reasonable rates and terms acceptable to
Purchaser and Sellers, financing adequate to close the transaction, and shall
have provided Sellers with a copy of its commitment letter evidencing the
availability of such financing.
(d) NO INJUNCTION. The consummation of the transactions
contemplated hereby shall not have been enjoined by any court of competent
jurisdiction and no proceeding seeking such an injunction shall be pending.
(e) MAINTENANCE OF RELATIONSHIPS. Sellers, from the date
of this Agreement to the date of Closing, shall have operated the Business in
the ordinary course and except as disclosed herein or in Schedules attached
hereto have continued to maintain its existing relationships with significant
suppliers and wholesale customers, and with key employees identified by
Purchaser.
(f) OPINION OF COUNSEL. Purchaser shall have been provided
with an opinion of counsel to Seller, dated as of the Closing Date, in the form
of Schedule 4.01(f) attached hereto.
Section 4.02. CLOSING CONDITIONS RELATING TO SELLERS. The obligation of
Sellers to consummate the sale of the Purchased Assets will be subject to the
satisfaction of the following conditions:
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(a) DELIVERIES. At or prior to the Closing, Purchaser shall
deliver, or cause to be delivered to Sellers, the following items:
(i) PURCHASER'S CHECK. Purchaser shall deliver to Sellers a
check in full payment of the portion of the Purchase Price described in
Section 1.05(a)(i).
(ii) ASSIGNMENT AND ASSUMPTION AGREEMENT. Purchaser shall
execute and deliver to Seller an Assignment and Assumption Agreement in
the form of Schedule 1.06 attached hereto pursuant to which Purchaser
will accept and assume certain liabilities and obligations of Sellers,
and Sellers will assign to Purchaser certain contracts and rights of
Sellers.
(iii) CORPORATE RESOLUTIONS. Purchaser shall deliver to
Sellers certified copies of the Resolutions of Purchaser's Board of
Directors authorizing the transactions contemplated herein.
(iv) THE NOTE. Purchaser shall execute and deliver to Seller
the Note.
(b) NO INJUNCTION. The consummation of the transactions
contemplated hereby shall not be enjoined by any court of competent jurisdiction
and no proceeding seeking such an injunction shall be pending.
(c) OPINION OF COUNSEL. Sellers shall have been provided
with an opinion of counsel to Purchaser, dated as of the Closing Date, in the
form attached hereto as Schedule 4.02.
ARTICLE 5
PRE-CLOSING AGREEMENTS
----------------------
Section 5.01. EMPLOYEES. Sellers will use best efforts to preserve the
management team and work force of Seller and to preserve employee morale
generally.
Section 5.02. DUE DILIGENCE. Sellers shall grant to Purchaser, and its
employees, counsel, accountants and other representatives, full and complete
access to Sellers' facilities, management, employees and records and its outside
accountants and counsel for purposes of a due diligence investigation in
connection with the transactions contemplated hereby.
Section 5.03. OPERATION OF BUSINESS. Sellers shall continue to operate
the Business in the ordinary course, without substantial change, and Sellers
shall take no action of a nature contemplated by Section 2.10 (except for those
actions specifically noted on Schedule 2.10), without the prior written consent
of Purchaser. Sellers shall promptly notify Purchaser in writing of the
occurrence of any event which may result in a material adverse change to the
business, financial condition, operation or prospects of Sellers. Without
limiting the foregoing, Sellers' shall maintain in full force and effect through
the Closing Date all policies of insurance
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<PAGE> 18
consistent with past practices, which policies shall include a workers'
compensation insurance policy that shall insure against all workers'
compensation claims that relate to events that occurred prior to the Closing
regardless of when said claims are asserted.
Section 5.04. BEST EFFORTS. The parties hereto agree to use their best
efforts to cause all conditions to Closing to be satisfied and to cause the
transactions contemplated hereby to be consummated.
Section 5.05. CONFIDENTIALITY. Purchaser and Sellers agree that they,
and their respective officers, directors and other representatives, will hold in
strict confidence the negotiations relating to the transactions contemplated by
this Agreement, and all information exchanged pursuant thereto. If, for any
reason, Closing does not occur, all information exchanged by Purchaser and
Sellers shall promptly be returned to the other party.
Section 5.06 EXCLUSIVITY. Sellers shall comply with the provisions
contained in the Letter of Intent dated April 6, 1994 (the "Letter of Intent")
and the Escrow Agreement, dated June 3, 1994 (the "Escrow Agreement"), regarding
exclusivity.
ARTICLE 6
POST-CLOSING AGREEMENTS
-----------------------
Section 6.01. INDEMNIFICATION BY SELLER. To the extent of the Purchase
Price actually received by the Sellers, and except as otherwise limited by this
Article 6, Purchaser and its officers, directors, employees, agents, successors
and assigns shall be indemnified and held harmless by Sellers for any and all
liabilities, losses, damages, claims, costs and expenses, interest, awards,
judgments and penalties (including, without limitation, reasonable legal costs
and expenses) actually suffered or incurred by it (hereinafter a "Purchaser
Loss"), and actually arising out of or resulting from:
(a) the breach of any representation or warranty by Sellers
contained herein or in any document delivered hereunder at the Closing;
or
(b) the breach of any covenant or agreement by Sellers
contained herein; or
(c) the Excluded Assets or Excluded Liabilities.
Section 6.02. INDEMNIFICATION BY PURCHASER. To the extent of the
Purchase Price actually received by the Sellers, and except as otherwise limited
by this Article 6, Sellers, and their officers, directors, partners, employees,
agents, successors and assigns shall be indemnified and held harmless by
Purchaser from any and all liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgment and penalties (including, without
limitation, reasonable legal costs and expenses) actually suffered or incurred
by Sellers (hereinafter a "Seller Loss") actually arising out of or resulting
from:
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<PAGE> 19
(a) the breach of any representation or warranty by
Purchaser contained herein or in any document delivered hereunder; or
(b) the breach of any covenant or agreement by Purchaser
contained herein or in any document delivered hereunder; or
(c) the Assumed Liabilities.
Section 6.03. COBRA COVERAGE. Any present or former employee of Sellers
(an "Electing Employee") who properly elects to receive continuation coverage
("COBRA") shall be permitted to receive COBRA under Purchaser's medical/dental
plan provided that the Electing Employee pays to Purchaser 102% of Purchaser's
cost of providing such medical/dental coverage.
Section 6.04. GENERAL INDEMNIFICATION PROVISIONS. (a) For the purposes
of this Section 6.03, the term "Indemnitee" shall refer to the person or persons
indemnified, or entitled, or claiming to be entitled to be indemnified, pursuant
to the provisions of Section 6.01 or 6.02, as the case may be; the term
"Indemnitor" shall refer to the person having the obligation to indemnify
pursuant to such provisions; and "Losses" shall refer to the "Seller Losses" or
the "Purchaser Losses", as the case may be.
(b) An Indemnitee shall promptly give the Indemnitor notice
of any matter which an Indemnitee has determined has given or could give rise to
a right of indemnification under this Agreement, stating the amount of the Loss,
if known, and method of computation thereof, all with reasonable particularity
and containing a reference to the provisions of this Agreement in respect of
which such right to indemnification is claimed or arises. The obligations and
liabilities of an Indemnitor under this Article 6, with respect to Losses
arising from claims of any third party that are subject to the indemnification
provided for in this Article 6 ("Third Party Claims"), shall be governed by and
contingent upon the following additional terms and conditions: if an indemnitee
shall receive notice of any Third Party claim, the Indemnitee shall give the
Indemnitor prompt notice of such Third Party Claim and shall permit the
Indemnitor, at its option, to assume and control the defense of such Third Party
Claim at its expense and through counsel of its choice if it gives prompt notice
of intention to do so to the Indemnitee. In the event the Indemnitor exercises
its right to undertake the defense against any such Third Party claim as
provided above, the Indemnitee shall cooperate with the Indemnitor in such
defense and make available to the Indemnitor all witnesses, pertinent records,
materials and information in its possession or under its control relating
thereto as is reasonably required by the Indemnitor. Similarly, in the event the
Indemnitee is, directly or indirectly, conducting the defense against any such
Third Party Claim, the Indemnitor shall cooperate with the Indemnitee in such
defense and make available to it all such witnesses, records, materials and
information in its possession or under its control relating thereto as is
reasonably required by the Indemnitee. Except the settlement of a Third Party
Claim which involves the payment of money only and for which the Indemnitee is
totally indemnified by the Indemnitor, no Third Party Claim may be settled by
the Indemnitor without the written consent of the Indemnitee.
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<PAGE> 20
Similarly, no Third Party Claim may be settled by the Indemnitee without the
written consent of the Indemnitor.
Section 6.05. LIMITS ON INDEMNIFICATION. (a) No claim may be made
against Sellers for indemnification pursuant to Section 6.01 unless and only to
the extent the aggregate of all Purchaser Losses exceed $25,000.
(b) No claim may be made against Purchaser for indemnification
pursuant to Section 6.02 unless and only to the extent the aggregate of all
Seller Losses exceed $25,000.
Section 6.06. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Sellers in Article 2 and Purchaser in Article
3 shall survive the Closing until the second anniversary thereof, and thereafter
no claim may be brought in respect of any misrepresentation or breach of
warranty; provided, however, that the indemnity obligations of Sellers with
respect to the representations and warranties contained in Section 2.12 shall
survive until expiration of the applicable statute of limitations and the
representations and warranties contained in Section 2.11 shall survive
indefinitely. If written notice of a claim has been given prior to the
expiration of the applicable representations and warranties have been made to
the party that made such representations and warranties, then the relevant
representations and warranties shall survive as to such claim until the claim
has been finally resolved.
Section 6.07. ADJUSTMENT OF LIABILITY. The amount which an Indemnitee
shall be entitled to receive from an Indemnitor with respect to any
indemnifiable loss hereunder shall be net of any insurance recovery and tax
benefit (if realizable prior to the end of the first full tax year following the
date of indemnification) accruing to the Indemnitee on account of such loss.
Section 6.08. FURTHER ASSURANCES. Sellers shall, at any time and from
time to time on and after the Closing Date, upon request by Purchaser and
without further consideration, take such actions or cause others to do so, and
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, all transfers, conveyances, powers of attorney and assurances, as may
be required or desirable for the better conveying, transferring, assigning,
delivering, assuring and confirming to Purchaser, or its respective successors
and assigns, or for aiding and assisting in collecting or reducing to
possession, the Purchased Assets.
ARTICLE 7
MISCELLANEOUS
-------------
Section 7.01. TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and abandoned at any time
prior to consummation of the transactions contemplated hereby:
(a) By the mutual consent of Purchaser and Sellers;
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<PAGE> 21
(b) By Purchaser if all of the conditions to Closing
described in Section 4.01 have not been satisfied by July 15, 1994;
(c) By Purchaser if the transactions shall not, despite the
exercise of its best efforts, been consummated by July 15, 1994 or such
later date as may be agreed upon by the parties;
(d) By Purchaser if Sellers have materially breached any
representation or warranty herein or failed to perform any material
obligation or condition hereof and such breach or failure shall not
have been cured in manner, form and substance reasonably satisfactory
to Purchaser; and
(e) By Sellers if Purchaser has materially breached any
representation or warranty herein or failed to perform any material
obligation or condition hereof and such breach or failure has not been
cured in manner, form and substance reasonably satisfactory to Sellers.
Section 7.02. EXPENSES. Each party will pay all of its expenses in
connection with the negotiation of this Agreement, the performance of its
obligations hereunder, and the consummation of the transactions contemplated by
this Agreement. Without limiting the foregoing, Sellers shall pay one-half (1/2)
of the real estate transfer taxes payable in connection with the transfer of the
Purchased Assets, which payment shall not exceed Twelve Thousand Five Hundred
Dollars ($12,500.00).
Section 7.03. AMENDMENTS AND WAIVERS. The parties hereto, by mutual
agreement in writing, may amend, modify and supplement this Agreement. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
Section 7.04. NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be given by hand or by
registered mail, return receipt requested, addressed as follows:
If to Purchaser:
George P. Ahearn, President
GEO Specialty Chemicals, Inc.
28601 Chagrin Blvd. Suite 450
Cleveland, Ohio 44122
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<PAGE> 22
with a copy to:
Craig R. Martahus, Esq.
Thompson Hine and Flory
3900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1216
If to Sellers:
James M. Courtney, President
Courtney Industries, Inc.
1920 Benhill Avenue
Baltimore, MD 21226
with a copy to:
John A. Hayden, III, Esq.
Whiteford, Taylor & Preston
210 West Pennsylvania Avenue
Towson, MD 21204
Any party hereto may specify in writing a different address for such purpose by
notice to the other parties.
Section 7.05. ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, except that neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any party without the prior written consent of the other parties
hereto, which consent shall not be unreasonably withheld.
Section 7.06. SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provision of this Agreement unless the
consummation of the transaction contemplated hereby is adversely affected
thereby.
Section 7.07. COMPLETE AGREEMENT. This document and the documents
referred to herein contain, save and except consistent provisions of the Letter
of Intent and the Escrow Agreement, copies of which are attached hereto as
Schedule 7.07 and provisions of which, to the extent they are not inconsistent
herewith, survive, the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
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<PAGE> 23
Section 7.08. NO THIRD-PARTY BENEFICIARIES. This Agreement shall be for
the benefit only of the parties hereto, and their respective successors and
assigns.
Section 7.09. WAIVER OF BULK SALES ACT. In consideration of, and in
reliance upon, the representations and warranties made by Sellers in Article 2,
and Purchaser's assumption of Sellers' obligations, the parties hereto waive
compliance with the provisions of any applicable bulk transfer laws.
Section 7.10. SINGULAR AND PLURAL; GENDER. The singular shall include
the plural and vice versa, and the use of one gender shall be deemed to include
all other genders whenever appropriate. The meaning of the term "Sellers" shall
include the Sellers, or either of them.
Section 7.11. GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement will be governed by the laws of the State
of Maryland without reference to any conflict of laws rules.
Section 7.12. ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof. Any arbitration shall
be conducted in Washington, D.C.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
under seal, on the day and year first above written, intending to be legally
bound hereby.
WITNESS: C ASSOCIATES
/s/ Jane N. Courtney By: /s/ James M. Courtney
- ---------------------------- ------------------------------------
General Partner
ATTEST: COURTNEY INDUSTRIES, INC.
/s/ Jacqueline Lanks By: /s/ James M. Courtney
- ---------------------------- ------------------------------------
Asst. Secretary James M. Courtney, President
ATTEST: GEO SPECIALTY CHEMICALS, INC.
/s/ William P. Eckman By: /s/ George P. Ahearn
- ---------------------------- ------------------------------------------
Secretary George P. Ahearn, President
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<PAGE> 1
Exhibit 2.5
ASSET PURCHASE AGREEMENT
Between
RHONE-POULENC BASIC CHEMICALS CO.
and
GEO SPECIALTY CHEMICALS, INC.
RELATING TO THE GULF COAST ALUM BUSINESS
-----------------------
Dated June 5, 1992
-----------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE PAGE
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<S> <C>
I SALE AND PURCHASE...................................................................1
Section 1.1 Assets to be Sold and Purchased.................................1
Section 1.2 Assumption of Liabilities.......................................4
Section 1.3 Purchase Price..................................................7
Section 1.4 Allocation of Purchase Price....................................8
Section 1.5 Closing.........................................................8
Section 1.6 Non-Assignable Licenses, Leases and Contracts..................10
Section 1.7 Receivables/Payables...........................................10
Section 1.8 Shared Assets..................................................11
Section 1.9 "AS IS" Sale...................................................11
II REPRESENTATIONS AND WARRANTIES OF SELLER...........................................12
Section 2.1 Corporate Existence, etc. of Seller............................12
Section 2.2 Authority......................................................12
Section 2.3 No Violations..................................................12
Section 2.4 Title to Properties, Absence of Liens and Encumbrances, etc. ..13
Section 2.5 Inventory......................................................13
Section 2.6 Real Property..................................................13
Section 2.7 Intellectual Property..........................................14
Section 2.8 Contracts of Seller............................................14
Section 2.9 Employee Benefit Plans.........................................15
Section 2.10 Compliance with Laws...........................................15
Section 2.11 Litigation.....................................................15
Section 2.12 Environmental Matters..........................................16
Section 2.13 Labor Matters..................................................16
Section 2.14 Financial Warranties...........................................17
Section 2.15 Brokers and Finders............................................17
Section 2.16 Changes........................................................17
Section 2.17 Machinery and Equipment........................................17
Section 2.18 Acquired Assets................................................18
Section 2.19 Insurance......................................................18
Section 2.20 Permits........................................................18
Section 2.21 Consents.......................................................18
Section 2.22 Customers and Suppliers........................................18
Section 2.23 Taxes..........................................................19
Section 2.24 Receivables....................................................19
Section 2.25 Full Disclosure................................................19
</TABLE>
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TABLE OF CONTENTS
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<TABLE>
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<S> <C>
III REPRESENTATIONS AND WARRANTIES OF PURCHASER........................................19
Section 3.1 Corporate Existence, etc. of Purchaser.........................19
Section 3.2 Authority......................................................19
Section 3.3 No Violations..................................................19
Section 3.4 Litigation.....................................................20
Section 3.5 Brokers and Finders............................................20
Section 3.6 Financing Plan.................................................20
IV COVENANTS..........................................................................20
Section 4.1 Conduct of Business............................................20
Section 4.2 Access to Properties...........................................21
Section 4.3 Confidentiality................................................21
Section 4.4 Third Party Consents; Cooperation with Respect to Filings......21
Section 4.5 Certain Notifications..........................................22
Section 4.6 Employee Matters...............................................22
Section 4.7 No Negotiations................................................26
Section 4.8 Right of First Offer...........................................26
Section 4.9 Noncompetition.................................................26
Section 4.10 Environmental Audit............................................26
Section 4.11 Financing Obligations..........................................27
Section 4.12 Financial Assurances...........................................27
Section 4.13 Sale of Mud Raw Material.......................................27
Section 4.14 Cat Litter.....................................................28
V CONDITIONS TO PURCHASER'S OBLIGATIONS..............................................29
Section 5.1 Representations and Warranties of Seller to be True;
Performance by Seller; Certificate.............................29
Section 5.2 No Material Adverse Change.....................................29
Section 5.3 Consents.......................................................29
Section 5.4 No Proceeding or Litigation....................................29
Section 5.5 Opinion of Counsel.............................................30
Section 5.6 Financing......................................................30
VI CONDITIONS TO SELLER'S OBLIGATIONS.................................................30
Section 6.1 Representations and Warranties of Purchaser to be True;
Performance by Purchaser; Certificate..........................30
Section 6.2 Consents.......................................................31
</TABLE>
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
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<S> <C>
Section 6.3 No Proceeding or Litigation.............................31
Section 6.4 Opinion of Counsel......................................31
Section 6.5 Financing...............................................31
Section 6.6 Supply Agreement........................................32
Section 6.7 Mud Purchase Order......................................32
Section 6.8 Letters of Credit.......................................32
VII INDEMNIFICATION.............................................................32
Section 7.1 Indemnification by Seller...............................32
Section 7.2 Indemnification by Purchaser............................32
Section 7.3 General Indemnification Provisions......................33
Section 7.4 Limits on Indemnification of Purchaser..................34
Section 7.5 Survival of Representations and Warranties..............34
Section 7.6 Adjustment of Liability.................................35
VIII TERMINATION, AMENDMENT AND WAIVER...........................................35
Section 8.1 Termination of Agreement................................35
Section 8.2 Procedure and Effect of Termination.....................36
Section 8.3 Amendment...............................................36
Section 8.4 Waiver..................................................36
IX MISCELLANEOUS...............................................................36
Section 9.1 Expenses................................................36
Section 9.2 Further Assurances......................................36
Section 9.3 Transfer Taxes..........................................37
Section 9.4 Notices.................................................37
Section 9.5 Amendments and Entire Agreement.........................38
Section 9.6 Successors and Assigns..................................38
Section 9.7 Governing Law...........................................38
Section 9.8 Section and Other Headings..............................38
Section 9.9 Counterparts............................................38
Section 9.10 Bulk Sales Law..........................................38
Section 9.11 Definition of Seller's Knowledge........................38
Section 9.12 Transition Services.....................................39
Section 9.13 Packaging Supplies......................................39
Section 9.14 Anhydrous Alum..........................................39
</TABLE>
(iii)
<PAGE> 5
EXHIBITS
Exhibit A Bill of Sale and Assignment
Exhibit B Assignment and Assumption Agreement
Exhibit C Seller's Counsel Opinion Letter
Exhibit D Noncompetition Agreement
Exhibit E Supply Agreement
Exhibit F Mud Purchase Order
Exhibit G Assumption Agreement
Exhibit H Purchaser's Counsel Opinion Letter
Exhibit I Financial Statements
Exhibit J Inventory Analyses
SCHEDULES
Schedule 1.1(a)(i) Real Property
Schedule 1/1(a)(ii) Machinery and Equipment
Schedule 1.1(a)(iv) Office Equipment
Schedule 1.1(a)(xi) Intellectual Property
Schedule 1.1(b)(v) Letters of Credit
Schedule 1.4 Allocation of Purchase Price
Schedule 1.6(b) Material Consents
Schedule 1.8(a) Shared Assets
Schedule 1.8(c) Shared Contracts
Schedule 2.4 Liens and Encumbrances
Schedule 2.5 Inventory
Schedule 2.6(a) Real Property Owned
Schedule 2.6(b) Leased Property
Schedule 2.7 No Conflict or Infringement
Schedule 2.8(a) Material Contracts
Schedule 2.9 Employee Benefit Plans
Schedule 2.11 Litigation
Schedule 2.12 Environmental Matters
Schedule 2.16 Adverse Changes
Schedule 2.20 Permits
Schedule 2.22 Customers and Suppliers
Schedule 4.6(a) Employees
Schedule 9.11 Executive Employees
(iv)
<PAGE> 6
ASSET PURCHASE AGREEMENT dated June 5, 1992 between Rhone-Poulenc Basic
Chemicals Co., a Delaware corporation ("Seller"), and GEO Speciality Chemicals,
Inc., an Ohio corporation ("Purchaser").
Seller is engaged, among other things, in the business of clay mining
and processing for use in production of alum and/or sale to third parties from
Seller's plant in Little Rock, Arkansas and manufacturing and selling alum
products of several types from Seller's plants in Bastrop, Louisiana;
Springhill, Louisiana; Naheola, Alabama; and Counce, Tennessee (the "Gulf Coast
Alum Business"). Seller wishes to sell and assign to Purchaser, and Purchaser
desires to purchase and assume, substantially all of the assets and liabilities
relating to the Gulf Coast Alum Business upon terms and conditions hereinafter
set forth.
The parties agree as follows:
ARTICLE I
SALE AND PURCHASE
-----------------
Section 1.1 ASSETS TO BE SOLD AND PURCHASED. (a) Subject to the terms
and conditions hereof, on the Closing Date (as hereinafter defined), Seller
agrees to sell, assign, convey, transfer and deliver to Purchaser and Purchaser
shall purchase, all Seller's right, title and interest in and to the following
assets, privileges, rights, interests, claims and property (the "Acquired
Assets");
(i) the real property and interests in real property described
in Schedule 1.1(a)(i) (the "Real Property"), together with the plants,
buildings, structures, erections, improvements and fixtures located on
or forming part of the real property described in Section 1.1(a)(i)
which are owned by Seller;
(ii) all machinery, equipment, tools, and accessories
described in Schedule 1.1(a)(ii) (the "Machinery and Equipment") and
any other machinery and equipment located on the Real Property;
(iii) all laboratory equipment located on the Real Property;
(iv) all office equipment, including furniture and furnishings
described in Schedule 1.1(a)(iv) and any other office equipment,
located on the Real Property;
(v) all spare parts used in the Gulf Coast Alum Business
located on the Real Property;
(vi) subject to Section 1.6, the Seller's rights under all
leases, purchase and supply agreements and other contracts, agreements,
arrangements or understandings (including all Material Contracts set
forth on Schedule 2.8(a), all unfulfilled orders
<PAGE> 7
received by Seller and all forward commitments for supplies or
materials for the plants included in the Acquired Assets) which relate
solely to the Gulf Coast Alum Business, whether or not there are any
written contracts with respect thereto (such leases, contracts,
agreements, arrangements and understandings hereinafter referred to as,
the "Assumed Contracts");
(vii) all licenses, registrations and permits pertaining
solely to the Gulf Coast Alum Business to the extent transferable
without consent (the "Permits");
(viii) originals of all general, financial, sales, marketing,
production, purchasing and personnel records, catalogues,
correspondence, mailing lists, customer and supplier lists, and other
documents, records and files relating solely to the Gulf Coast Alum
Business (subject to Seller's right to retain copies thereof) and
copies of all relevant data, materials, records or other information
relating to the Gulf Coast Alum Business which is contained in books
and records which also relate to any of Seller's operations other than
the Gulf Coast Alum Business or which is contained in Seller's computer
records;
(ix) the goodwill of the Gulf Coast Alum Business;
(x) all inventories relating to the Gulf Coast Alum Business
including, without limitation, all finished goods, work in progress,
raw materials, stores and inventories in-transit and all production,
shipping and packaging supplies (to the extent provided for in Section
9.13 hereof), but excluding spare parts (for the purpose of the
definition of "Inventories") and any cat litter inventory which are
located on the Real Property on the Closing Date (the "Inventories");
(xi) all Seller's rights in, to and under domestic and foreign
patents, patent applications, patent licenses, trade names, trademarks,
copyrights, unpatented inventions, servicemarks, trademark and
servicemark registrations and applications which relate solely to the
Gulf Coast Alum Business, if any, all of which are listed on Schedule
1.1(a)(xi) (the "Intellectual Property");
(xii) to the extent that they relate solely to the Gulf Coast
Alum Business, all manufacturing, engineering and other drawings,
technology, technical information, engineering data, design and
engineering specifications and similar data in writing (the
"Engineering Data");
(xiii) the account balances (whether vested or nonvested) of
the Hired Employee's in Seller's 401(k) Plan; and
(xiv) all claims, rights, setoffs and credits of Seller
against third parties to the extent relating to (1) the Assumed
Contracts; (2) condemnation or eminent domain
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<PAGE> 8
proceedings and awards involving the Real Property; (3) rights under
manufacturers' and vendors' warranties to the extent such rights relate
to the Acquired Assets.
(b) The Acquired Assets shall exclude all assets, privileges,
rights, interests, claims and property not specifically included in the
definition of Acquired Assets set forth in Section 1.1(a) and, notwithstanding
Section 1.1(a), shall specifically exclude the following (the "Excluded
Assets"):
(i) accounts receivable of the Gulf Coast Alum Business as of
the Closing Date;
(ii) cash on hand, cash equivalents, investments (including,
without limitation, stock, debt instruments, options and other
securities and instruments) and bank deposits as of the Closing Date;
(iii) income tax refunds, recoveries, loss carry forwards and
similar benefits and attributes relating to or arising out of any
period prior to the Closing Date;
(iv) all stock ledgers, minute books and other corporate
records of the Seller;
(v) any letters of credit or surety bonds securing obligations
of Seller as set forth on Schedule 1.1(b)(v) (the "Letters of Credit");
(vi) except as set forth in Section 1.1(a)(viii), any assets
of the Seller located at any location other than the locations listed
in Schedule 1.1(a)(i), including, without limitation, any assets
relating to Seller's operations other than the Gulf Coast Alum Business
whether or not such assets are Shared Assets (as defined in Section 1.8
hereof);
(vii) the names "Rhone-Poulenc," "Rhone-Poulenc Basic
Chemicals," "Stauffer" and "Stauffer Chemical" and all derivatives
thereof and tradenames, trademarks and registrations relating to such
names (the "Excluded Intangible Property"), all of which shall be
excluded from the definition of the term "Intellectual Property";
(viii) all policies of insurance of Seller;
(ix) all stationery, forms, stocks, and other written
materials that contain or otherwise use the Excluded Intangible
Property (other than packaging supplies);
(x) Seller's rights under and any assets related to any
Benefit Plans relating to Seller's employees except to the extent set
forth in Section 4.6(h);
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<PAGE> 9
(xi) any assets relating to the Seller's manufacture and sale
of cat litter (other than any machinery or equipment located on the
Real Property which is listed on Schedule 1.1(a)(ii);
(xii) any assets relating to the Seller's manufacture and sale
of any alum products or mining of clay at any locations other than the
locations listed in Schedule 1.1(a)(i) and any employees employed at
such other locations; and
(xiii) all Shared Assets, Excluded Engineering Data and Shared
Contracts as defined in Section 1.8 hereof.
(c) Notwithstanding anything to the contrary set forth in
Sections 1.1(a) and 1.1(b) above, all tangible assets located on the Real
Property other than cat litter inventory shall be included in the Acquired
Assets.
Section 1.2 ASSUMPTION OF LIABILITIES. (a) Subject only to the
provisions of Section 1.2(b), Purchaser shall assume, pay, perform or otherwise
discharge when due in accordance with their respective terms the following
liabilities and obligations of Seller, whether actual or contingent, liquidated
or unliquidated, known or unknown, relating to the Gulf Coast Alum Business as
of the Closing Date (the "Assumed Liabilities"):
(i) subject to Section 1.6 hereof, all liabilities and
obligations under the Assumed Contracts other than liabilities relating
to services performed for, or materials or benefits received by, Seller
prior to the Closing date;
(ii) subject to Section 7.4(b) hereof, all liabilities arising
out of or relating to the release, discharge or disposal (including the
movement of material through or in air, soil, surface or groundwater)
of any solid wastes, pollutants or hazardous substances or the
handling, storage, use, transportation or disposal of any of the
foregoing, as these terms are defined by current federal, state or
local law, in, on or from the Real Property whether before or after the
Closing Date except for Excluded Liabilities pursuant to Section
1.2(b)(ii);
(iii) all liabilities arising out of or relating to the period
on or after the Closing Date with respect to Purchaser's obligations
under Section 4.6 hereof relating to Hired Employees;
(iv) all liabilities arising out of or relating to product
liability claims by third parties seeking compensation for bodily
injury or property damage if such injury or damage occurs on or after
the Closing Date (or occurred prior to the Closing Date for which a
claim is asserted more than six (6) months after the Closing Date);
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(v) all liabilities and obligations of Seller arising out of,
resulting from, or relating to product warranty claims which are
asserted on or after the Closing Date;
(vi) all liabilities arising out of or relating to claims by
third parties, whether founded upon negligence, breach of warrant,
strict liability in tort, and/or similar legal theory (other than
product liability claims) seeking compensation for bodily injury or
property damage if such injury or damage occurs on or after the Closing
Date or which, subject to Section 1.2(c) below, has no identifiable
date of occurrence;
(vii) all liabilities and obligations arising out of or
relating to the condition, quality, maintenance, suitability or
compliance with law (including, without limitation, building, zoning,
health, safety, fire code and other laws, regulations or ordinances) of
any of the Machinery and Equipment, Real Property or other tangible
assets included in the Acquired Assets (other than liability for
personal injury or property damage to an employee or other third party
which occurs prior to the Closing Date); provided, however, that
nothing provided herein shall relieve Seller of its obligation for
breach of any of Seller's representations or warranties contained
herein; and
(viii) all liabilities and obligations arising out of,
resulting from, or relating to the operation of the Gulf Coast Alum
Business or ownership of the Acquired Assets by Purchaser after the
Closing.
(b) Notwithstanding anything to the contrary contained in
Section 1.2(a), Purchaser shall not assume any of the following liabilities of
Seller ("Excluded Liabilities"):
(i) all accounts payable of the Gulf Coast Alum Business as of
the Closing Date;
(ii) liabilities which are the result of the disposal of a
Hazardous Substance (as defined in the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended and
applicable state and local environmental laws) prior to the Closing
Date at a site or sites other than the Real Property or liabilities
which are the result of a spill, release or discharge of a Hazardous
Substance at any site or sites other than the Real Property which
occurs during the transportation of Hazardous Substances prior to the
Closing Date;
(iii) all liabilities relating to Hired Employees with respect
to any claims, whether contingent or otherwise, relating to labor
relations and compliance with fair employment practices arising prior
to the Closing Date or any salary, bonuses, commissions, or
contributions to Benefit Plans payable for or with respect to the
period prior to the Closing Date;
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(iv) all liabilities to the extent they are associated with or
relate to any of the Excluded Assets whether arising from events
occurring prior to or after the Closing Date;
(v) all liabilities for taxes of any kind accrued (or which,
pursuant to GAAP, should have been accrued) prior to the Closing Date;
(vi) all liabilities for expenses incurred by Seller in
connection with the transactions contemplated hereby;
(vii) all liabilities arising out of litigation pending prior
to the Closing Date;
(viii) all liabilities or obligations to any affiliates of
Seller arising prior to the Closing Date;
(ix) all liabilities arising out of product liability claims
by third parties seeking compensation for bodily injury or property
damage if such injury or damage occurred prior to the Closing Date and
arises out of an alleged act or omission of Seller prior to the Closing
Date and are caused by a specific lot of product proven to have been
sold by Seller prior to the Closing Date if such claims are asserted
within six (6) months after the Closing Date (other than liabilities or
obligations relating to honoring outstanding warranties in the ordinary
course of business or arising out of environmental matters at the Real
Property);
(x) all liabilities for severance obligations, if any, to any
employee of the Gulf Coast Alum Business who does not become a Hired
Employee so long as Purchaser has fulfilled its obligations pursuant to
Section 4.6 hereof; and
(xi) all other liabilities relating to the operation of the
Gulf Coast Alum Business which are not disclosed in any Schedule
hereto, which are not specifically assumed by Purchaser pursuant to
Section 1.2(a) hereof or which are not otherwise specifically provided
for in this Agreement.
(c) Notwithstanding anything set forth in Section 1.2(a)(vi)
above, if after reasonable investigation, the injury or damage giving rise to
any liability being assumed thereunder has no identifiable date of occurrence,
the parties shall submit the determination of the issue as to whether the date
of occurrence was prior to or on or after the Closing Date to arbitration under
the Commercial Arbitration Rules of the American Arbitration Association. The
arbitration shall be conducted by one or more arbitrators appointed in
accordance with such Rules and the decision of such arbitrators shall be
conclusive and binding on the parties hereto. The cost of any such arbitration
shall be borne equally by the parties.
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Section 1.3 PURCHASE PRICE. (a) The purchase price (the "Purchase
Price") for the Acquired Assets shall be an amount equal to (i) $4,550,000 (the
"Base Purchase Price") plus or minus (ii) an adjustment for the amount by which
the Inventory Price determined in accordance with Section 1.3(c) below exceeds
or is less than $1,500,000. In addition, the Purchaser shall pay Seller $250,000
(the "Noncompetition Payment") as provided in the Noncompetition Agreement (as
defined below). For purposes of payment at the Closing only, the Base Purchase
Price shall be adjusted by the Estimated Inventory Adjustment as provided in
Section 1.3(b) below, and the parties shall make such further adjustment after
the Closing as may be necessary after the final determination of the Inventory
Price as provided in Section 1.3(c) below.
(b) Three (3) days prior to the Closing, Seller shall advise
Purchaser of the Estimated Inventory Price, which shall be the book value of the
Seller's Inventories as of the last day of the last full month preceding the
Closing Date as reflected on Seller's books and records. To the extent that the
Estimated Inventory Price exceeds $1,500,000, Purchaser shall pay Seller the
difference at the Closing, and to the extent the Estimated Inventory Price is
less than $1,500,000, the amount payable by Purchaser at the Closing shall be
reduced by such difference (in each such case, the difference is referred to
herein as the "Estimated Inventory Adjustment").
(c) Immediately prior to the Closing, the parties shall take a
physical inventory count as of the Closing Date at each of the plants included
in the Acquired Assets and at each warehouse or other location where Inventories
included in the Acquired Assets are located. Inventory Price shall be the
aggregate book value of the Inventories on the Closing Date and shall be
calculated based on the physical inventory and the per unit standard cost of
such Inventory as of the Closing Date, as reflected in Seller's books and
records and determined in accordance with Seller's standard accounting practices
("SSAP") consistently applied with prior periods and a revaluation by Seller in
accordance with its past practices to incorporate variances from standard cost
incurred between December 31, 1991 and the Closing Date (the "Inventory Price").
It is understood by the parties that SSAP includes the practices of maintaining
inventories at full budgeted standard cost set on an annual basis and writing
down or writing off finished goods which are non-saleable or raw materials or
work in process which is nonusable and performing certain routine analyses as
set forth on Exhibit J hereto. In addition, it is understood by the parties that
SSAP values raw material inventory (other than sulfuric acid) at the lower of
cost or market and values work in process, finished goods and sulfuric acid
inventory at cost, in each case determined as provided above. The parties shall
determine the Inventory Price as promptly as possible after the Closing Date. In
the event that the parties cannot agree as to the Inventory Price within thirty
(30) days after the taking of the physical inventory count, then such dispute
shall be submitted to Deloitte & Touche or, if Deloitte & Touche is not
independent of all of the parties hereto and each of the financial institutions
or other individuals or entities providing financing to the Purchaser for the
transactions contemplated hereby, to another nationally recognized independent
certified public accounting firm selected by Seller and reasonably acceptable to
Purchaser (the "Accounting Firm"). The parties will use reasonable efforts to
cause the Accounting Firm to make its determination within ten (10) days after
the dispute has been submitted or as soon thereafter as practicable. The
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determination of the Inventory Price by the Accounting Firm shall be final,
conclusive and binding upon the parties hereto. The cost of the Accounting Firm
shall be borne equally by the parties. To the extent the actual Inventory is
greater than or less than the Estimated Inventory Price, Purchaser shall pay
Seller or Seller shall pay Purchaser the difference, as appropriate, within
three (3) business days after the determination of the Inventory Price either by
agreement by the parties or as determined by the Accounting Firm.
(d) Payments will be made to reflect proration of real and
personal property ad valorem taxes or assessments against the Acquired Assets,
any utility or other similar charges payable in arrears as of the Closing Date
and for reimbursement by Purchaser of any utility deposits or deposits under
leases or otherwise made by Seller prior to the Closing.
Section 1.4 ALLOCATION OF PURCHASE PRICE. The consideration paid or
payable by Purchaser pursuant to this Agreement shall be allocated among the
Acquired Assets as set forth in Schedule 1.4 hereto. Seller and Purchaser shall
file all tax returns and, if required, all information returns in a manner
consistent with such allocation.
Section 1.5 CLOSING. (a) The sale and purchase of the Acquired Assets
contemplated hereby (the "Closing") shall take place at 10:00 a.m., local time,
on August 4, 1992, subject to reasonable extensions by either party (but in no
event later than September 3, 1992) (the "Closing Date"), at the offices of
Rhone-Poulenc Inc., 125 Black Horse Lane, Monmouth Junction, New Jersey 08852 or
at such other date or place as Seller and Purchaser may mutually agree upon in
writing.
(b) At the Closing, the Seller shall deliver to the
Purchaser:
(i) a Bill of Sale and Assignment substantially in the form
attached hereto as Exhibit A;
(ii) a general warranty deed or deeds in a form reasonably
acceptable to the Seller and the Purchaser sufficient to convey to the
Purchaser, or its designee, fee simple unencumbered title to the Real
Property owned by the Seller, subject to the Permitted Liens (as
defined herein), an affidavit or certificate in accordance with Section
1445 of the United States Internal Revenue Code of 1986 as amended (the
"Code"), to the effect that Seller is a "non-foreign person," and such
other reasonable and customary affidavits, instruments and agreements
as may be required by Purchaser's title insurer(s) in connection with
the issuance of title insurance policies covering the Real Property;
(iii) an assignment and assumption agreement conveying the
Seller's right, title and interest in the Assumed Contracts in the form
attached hereto as Exhibit B;
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(iv) an assignment of Seller's right, title and interest in
the Intellectual Property, if any;
(v) all Material Consents as defined in Section 1.6 and any
other consents obtained by Seller prior to the Closing, if any;
(vi) an opinion of Proskauer Rose Goetz & Mendelsohn, counsel
to Seller, addressed to Purchaser and dated the Closing Date in the
form attached hereto as Exhibit C;
(vii) possession of the Acquired Assets; and
(viii) the results of UCC searches in each jurisdiction in
which any of the Acquired Assets are located;
(ix) all Permits;
(x) a Noncompetition Agreement in the form of Exhibit D (the
"Noncompetition Agreement"); and
(xi) the Supply Agreement in the form attached hereto as
Exhibit E;
(xii) the purchase order in the form attached hereto as
Exhibit F with respect to the sale of mud by Purchaser to Seller (the
"Mud Purchase Order"); and
(xiii) such other instruments of assignment or conveyance as
Purchaser may reasonably request as necessary or appropriate to vest in
Purchaser good and marketable title to the Acquired Assets.
(c) At the Closing, Purchaser shall deliver to Seller:
(i) the Base Purchase Price (plus or minus the Estimated
Inventory Adjustment, as appropriate) and the Noncompetition Payment by
wire transfer of immediately available funds on the Closing Date to the
account designated by the Seller in a written notice to the Purchaser
delivered at least five (5) business days prior to the Closing Date;
(ii) an assignment and assumption agreement relating to the
Assumed Liabilities in the form attached hereto as Exhibit G;
(iii) certified copies of resolutions, duly adopted by
Purchaser, that shall be in full force and effect at the time of the
Closing, authorizing the execution and
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delivery of this Agreement and the other instruments, agreements and
documents to be executed by it hereunder and the performance of its
obligations hereunder and thereunder;
(iv) an opinion of Hahn Loeser & Parks, counsel to Purchaser,
addressed to the Seller and dated the Closing Date, in the form
attached as Exhibit H;
(v) the Supply Agreement;
(vi) the Noncompetition Agreement;
(vii) the Mud Purchase Order; and
(viii) such other instruments and documents as Seller may
reasonably request with respect to the consummation of the transactions
contemplated by this Agreement.
Section 1.6 NON-ASSIGNABLE LICENSES, LEASES AND CONTRACTS. (a) To the
extent that any Assumed Contract is not capable of being assigned, transferred,
subleased or sublicensed without the consent or waiver of the other party
thereto or any third party (including a government or governmental unit), or if
such assignment, transfer, sublease or sublicense or attempted assignment,
transfer, sublease or sublicense would constitute a breach thereof or a
violation of any law, decree, order, regulation or other governmental edict,
this Agreement shall not constitute an assignment, transfer, sublease or
sublicense thereof, or an attempted assignment, transfer, sublease or sublicense
of any such Assumed Contract.
(b) Anything in this Agreement to the contrary
notwithstanding, Seller is not obligated to transfer to Purchaser any of its
rights and obligations in and to any of the Assumed Contracts without first
having obtained all necessary consents and waivers. Prior to the Closing Date,
Seller shall use its best efforts (which shall not require Seller to incur any
financial obligation) to obtain consent to those Assumed Contracts listed on
Schedule 1.6(b) (the "Material Consents"). Prior to and for a reasonable period
of time after the Closing Date not to exceed thirty (30) days, the Seller shall
cooperate with Purchaser to assist Purchaser in obtaining any other consents and
waivers referred to in Section 1.6(a) which are reasonably requested by
Purchaser.
(c) To the extent that the consents and waivers are not
obtained by Seller, Seller and Purchaser shall cooperate with each other to
establish arrangements that are reasonable and lawful as to both Seller and
Purchaser, and which result in the benefits and obligations under such Assumed
Contracts being apportioned in a manner that is in accordance with the purpose
and intention of this Agreement.
Section 1.7 RECEIVABLES/PAYABLES. All accounts, notes and miscellaneous
receivables as of the Closing Date (whether or not invoices have yet been
rendered as of the Closing Date,
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but in all cases after the product has been shipped) of the Gulf Coast Alum
Business and all accounts payable accrued prior to the Closing Date (whether or
not invoices have yet been rendered or received as of the Closing Date) of the
Gulf Coast Alum Business shall be retained by Seller and shall not be
transferred to Purchaser. Purchaser agrees that it will promptly transfer and
deliver to Seller any cash or other property which it may receive in respect of
Seller's receivables related to the Gulf Coast Alum Business existing as of the
Closing Date. Seller agrees that it will promptly transfer and deliver to
Purchaser any cash or other property which it may receive in respect of accounts
receivable which come into existence after the Closing Date. All payments
received by either party from an account debtor shall be applied by each party
as designated by the account debtor and in the absence of such designation shall
be applied first to the oldest amount due and payable (whether owed to Purchaser
or Seller); provided, however, that in the event that any account debtor files a
petition in bankruptcy or has an involuntary petition in bankruptcy filed
against it, then, each of Purchaser and Seller shall be entitled to file its own
proof of claim and to receive any payments to which it is thereby entitled in
accordance with the terms of such debtor's plan of liquidation or plan or
reorganization.
Section 1.8 SHARED ASSETS. (a) Schedule 1.8(a) sets forth a list of all
tangible assets with a book value as of December 31, 1991 in excess of $5,000
individually or $10,000 in aggregate, which are used by Seller both in the
operation of the Gulf Coast Alum Business and in any of Seller's operations
other than the Gulf Coast Alum Business and which are not located on the Real
Property (the "Shared Assets").
(b) Seller hereby grants to Purchaser, as of the Closing Date,
a perpetual, nonexclusive, royalty-free license to use the Excluded Engineering
Data (as hereinafter defined) for the purpose of manufacturing and selling alum
in a manner consistent with the present operation of the Gulf Coast Alum
Business at the Real Property by Seller. Such license shall not include the
right to sublicense or assign any of Purchaser's rights to such Excluded
Engineering Data except to a purchaser of one or more of the plants in the Gulf
Coast Alum Business. As used herein, Excluded Engineering Data shall mean all
manufacturing, engineering and other drawings, technology, technical
information, engineering data, design and engineering specifications and similar
data which is presently used by the Gulf Coast Alum Business but is excluded
from the Acquired Assets because it does not relate solely to the Gulf Coast
Alum Business.
(c) Schedule 1.8(c) hereof sets forth a list of all contracts,
agreements, leases, commitments or other arrangements providing for payments or
obligations in excess of $25,000 relating to the Gulf Coast Alum Business to
which Seller is a party and which also relate to any of Seller's operations
other than the Gulf Coast Alum Business (the "Shared Contracts").
Section 1.9 "AS IS" SALE. Purchaser understands and agrees that except
for the express warranties specifically made by Seller under Article II of this
Agreement, all tangible Acquired Assets shall be sold, conveyed and delivered by
Seller and shall be purchased, received and accepted by Purchaser on an "AS IS,
WHERE IS" basis and SELLER MAKES NO
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REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, BY DESCRIPTION OR OTHERWISE,
AS TO THE CONDITION, QUALITY OR SUITABILITY OF ANY OF THE TANGIBLE ACQUIRED
ASSETS, AND ALL IMPLIED WARRANTIES, WHETHER ARISING BY LAW OR BY IMPLICATION
FROM THE PROVISIONS OF THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, WARRANTIES
OF MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY EXPRESSLY
DISCLAIMED.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
The Seller represents and warrants to the Purchaser as follows:
Section 2.1 CORPORATE EXISTENCE, ETC. OF SELLER. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to carry on
its business as it is now being conducted. Seller is qualified as a foreign
corporation and is in good standing under the laws of each jurisdiction in which
the conduct of the Gulf Coast Alum Business or the ownership of the property
related to the Gulf Coast Alum Business requires such qualification except where
the failure to be so qualified would not have a material adverse effect on the
Gulf Coast Alum Business.
Section 2.2 AUTHORITY. The execution, delivery and performance of this
Agreement by Seller and the consummation by Seller of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
action. This Agreement has been duly executed and delivered by Seller and
constitutes a legal, valid and binding obligation by Seller, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws affecting the rights of creditors
generally and to the exercise of judicial discretion in accordance with general
principles of equity (whether applied by a court of law or of equity).
Section 2.3 NO VIOLATIONS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
conflict with, violate or result in any breach of the terms of the charter or
by-laws of Seller, or (b) conflict with, violate or result in any breach of, or
constitute a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, franchise, permit, agreement, lease or other
instrument or obligation relating to the Gulf Coast Alum Business to which
Seller is a party or by which Seller or any of the Acquired Assets may be bound,
(c) violate any statute, ordinance or law or any rule, regulation, order, writ,
injunction or decree of any court or of any public, governmental or regulatory
body, agency or authority applicable to Seller or by which the Acquired Assets
may be bound, or, (d) require any filing, declaration or registration with or
permit, consent or approval of, or the giving of any notice to, any public,
governmental or regulatory body, agency or authority, excluding
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from all of the foregoing clauses (i) such conflicts, violations, breaches and
defaults which, and filings, declarations, registrations, permits, consents,
approvals and notices, the absence of which, either singly or in the aggregate,
would not have a material adverse effect on the Gulf Coast Alum Business, (ii)
any consents, approvals, filings or notices required in connection with
substitution of Letters of Credit and (iii) any consents required in connection
with Assumed Contracts.
Section 2.4 TITLE TO PROPERTIES, ABSENCE OF LIENS AND ENCUMBRANCES,
ETC. Seller is the owner of the Acquired Assets and has the power and right to
transfer, sell, assign and deliver the Acquired Assets to Purchaser except as
disclosed in any Schedule to this Agreement, and upon consummation of the
transactions contemplated by this Agreement, Purchaser will acquire title to the
Acquired Assets as provided in this Agreement free and clear of any mortgages,
pledges, liens, security interests, easements, rights of way, restriction of
record or other encumbrances, charges, rights or other claims of third parties
of any kind created or permitted by Seller (collectively, "Liens"), other than
(a) Liens securing or relating to liabilities or obligations which are to be
assumed by Purchaser pursuant to this Agreement, (b) Liens for current taxes and
assessments not yet due, (c) inchoate mechanic and materialmen Liens for
construction in progress, (d) workmen, repairmen, warehousemen, customer,
employee and carriers and similar Liens arising in the ordinary course of
business, (e) Liens created by Purchaser, and (f) those Liens which are
described in Schedule 2.4 (the Liens referred to in clauses (a) through (f)
collectively being referred to as "Permitted Liens"). The Permitted Liens
(individually or in the aggregate) do not materially interfere with the conduct
of the Gulf Coast Alum Business in the ordinary course of business as presently
conducted by Seller.
Section 2.5 INVENTORY. The Inventory consists of material, products and
supplies of a quality and quantity usable or saleable in the normal and ordinary
course of the Gulf Coast Alum Business as presently conducted. Except as set
forth on Schedule 2.5, the Inventory on the date hereof does not include any
material amount of items that is obsolete, damaged or slow moving. The Inventory
is valued on the books and records of the Seller in accordance with Seller's
standard accounting practices consistently applied with prior periods.
Section 2.6 REAL PROPERTY. Schedule 2.6(a) sets forth an accurate
description of all Real Property which Seller owns in fee simple with respect to
the Gulf Coast Alum Business. Schedule 2.6(b) sets forth an accurate list of all
leases pursuant to which Seller leases Real Property with respect to the Gulf
Coast Alum Business. Except (a) as set forth in Schedule 2.6(a), (b) for
Permitted Liens and (c) for immaterial imperfections of title, Seller has title
to all Real Property listed on Schedule 2.6(a) and, except as described in
Schedule 2.6(a) or 2.6(b), to the best of Seller's knowledge, there is no
violation of any law, regulation or ordinance (including, without limitation,
laws, regulations or ordinances relating to zoning, environmental, city planning
or similar matters) relating to the Real Property or any present use thereof
that would result in a material adverse effect on the Gulf Coast Alum Business
and cannot be cured in the ordinary course of business. Except as described in
Schedule 2.6(a) or 2.6(b): (i) Seller has not received any written notice from
any governmental authority asserting any violation of any
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applicable law or the requirements of any federal, state or municipal agency
having jurisdiction over the Real Property, (ii) Seller has not received written
notice of a pending or threatened expropriation or similar proceeding affecting
the Real Property and Seller has not received any written notice of any pending
or proposed land use or zoning changes or restrictions applicable to or
affecting the Real Property, and (iii) such Real Property has access to all
public roads and all utilities and other services reasonably necessary to the
conduct of the Gulf Coast Alum Business as presently conducted at such Real
Property.
Section 2.7 INTELLECTUAL PROPERTY. Schedule 1.1(a)(xi) sets forth a
true and complete list of all Intellectual Property being transferred to
Purchaser pursuant to this Agreement, if any. To the best of Seller's knowledge,
except as set forth on Schedule 2.7, the Intellectual Property does not conflict
with or infringe on the rights of others except where such conflict or
infringement would not have a material adverse effect on the Gulf Coast Alum
Business. Seller owns and has valid, binding and enforceable rights to use all
Intellectual Property included in the Acquired Assets and has received no
written notice from any third party alleging that Seller's use of the
Intellectual Property included in the Acquired Assets is infringing on the
property rights of such third party. Seller has not granted any licenses or
other rights and has no obligations to grant licenses or other rights to any of
the Intellectual Property. Seller has made no claim of any violation or
infringement by others of its rights to the Intellectual Property and Seller
knows of no basis for the making of any such claim.
Section 2.8 CONTRACTS OF SELLER. (a) Schedule 2.8(a) sets forth a list
of all contracts, agreements, leases, commitments or other arrangements
providing for payments or obligations in excess of $25,000 relating solely to
the Gulf Coast Alum Business to which Seller is a party and which are included
in the Assumed Contracts ("Material Contracts"). The Material Contracts
constitute all of the contracts which relate to the continued conduct of the
Gulf Coast Alum Business in substantially the same manner as presently conducted
by Seller, other than (i) contracts not included in Material Contracts because
they involve less than $25,000, (ii) contracts relating to administrative and
back office matters and employment of the sales force, (iii) contracts for
computer and information systems, (iv) contracts for telephone and
communications systems, (v) the Shared Contracts, (vi) contracts relating to any
Benefit Plans not to be transferred to Purchaser in accordance with Section 4.6
hereof, and (vii) any other contracts relating to the Excluded Assets which do
not relate to the Acquired Assets.
(b) Except as set forth in Schedule 2.8(a), the enforceability
of the Material Contracts (except for the obtaining of consents, if required)
will not be affected in any manner by the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(c) Except as set forth in Schedule 2.8(a), Seller is not in
default, nor does there exist any event that, with notice or lapse of time or
both, would constitute an event of default by the Seller, under any Material
Contract, except where all such events in the aggregate would not result in a
material adverse effect to the Gulf Coast Alum Business. Except as set
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forth in Schedule 2.8(a), Seller has no knowledge of any material breach or
default by any other party to any Material Contract. A true and complete copy of
each written Material Contract (except with respect to information on customer
names and addresses and pricing terms) has been made available to Purchaser for
its review. Seller has not entered into any purchase orders or sales orders
other than in the ordinary course of business, consistent with past practices.
The forward purchase commitments of Seller under any Material Contracts have
been incurred in the ordinary course of Seller's business consistent with past
practices and are not in excess of the reasonably anticipated supply
requirements of the Gulf Coast Alum Business as presently conducted by Seller.
Section 2.9 EMPLOYEE BENEFIT PLANS. Except as set forth on Schedule 2.9
hereto, Seller neither maintains, sponsors nor is required to make contributions
to any pension, profit- sharing, thrift or other retirement plan, employee stock
ownership plan, deferred compensation, stock ownership, stock purchase,
performance share, bonus or other incentive plan, severance plan, health or
welfare plan, or any other plan, agreement, arrangement or understanding,
written or oral, providing for employee benefits for any of its current or
former employees of the Gulf Coast Alum Business (the "Benefit Plans"). Each
Benefit Plan listed in Schedule 2.9 is, to the best of Seller's knowledge, in
compliance in all material respects with the applicable provisions of the
Internal Revenue Code of 1986, as amended, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and all other applicable law. Seller
has made all contributions required of it under each Benefit Plan with respect
to all employees of the Gulf Coast Alum Business who may become Hired Employees.
Seller has provided Purchaser with an accurate vesting schedule and an accurate
list of account balances for all employees of the Gulf Coast Alum Business who
are or may become Hired Employees covered by Seller's 401(k) Plan; the account
balance schedule shall be updated by Seller as of the date such account balances
are transferred to Purchaser's 401(k) Plan pursuant to Section 4.6(h). Seller
has made available to Purchaser a copy of a current, favorable determination
letter regarding its 401(k) plan. To the best of Seller's knowledge, neither
Seller nor any party administering a Benefit Plan on behalf of Seller has
engaged in any prohibited transaction with respect to any Benefit Plan. If
requested by Purchaser, Seller will provide to Purchaser a schedule containing,
with respect to each employee of the Gulf Coast Alum Business, who may become a
Hired Employee, his or her (i) date of hire, (ii) base compensation as of the
day preceding the Closing Date and (iii) upon reasonable request, all other
information reasonably necessary (as determined by the Seller) for Purchaser to
meet its obligation under Section 4.6 of this Agreement.
Section 2.10 COMPLIANCE WITH LAWS. Other than with respect to
environmental, health and safety matters, which are covered by Section 2.12, to
the best of Seller's knowledge, Seller is in compliance in all material respects
with all laws, ordinances, regulations and orders applicable to the ownership of
the Acquired Assets and operation of the Gulf Coast Alum Business.
Section 2.11 LITIGATION. Except as disclosed on Schedule 2.11, there is
no litigation or proceeding or governmental investigation pending, or, to the
best of Seller's knowledge, threatened against or relating to the Gulf Coast
Alum Business, which if resolved against Seller
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reasonably could be expected to have a material adverse effect on the Gulf Coast
Alum Business, or which would materially impair the ability of Seller to
consummate the transactions contemplated by this Agreement or to perform its
obligations hereunder; and, without limiting the foregoing, Schedule 2.11 lists
each pending proceeding in which the amount of damages claimed exceeds $25,000
or in which injunctive or equitable relief is requested. There is no outstanding
judgment, order, injunction or decree of any court, government or governmental
agency affecting the Gulf Coast Alum Business or the Acquired Assets.
Section 2.12 ENVIRONMENTAL MATTERS. This section pertains exclusively
to environmental, health and safety matters.
To the best of Seller's knowledge, except as set forth in Schedule
2.12, (a) since Seller acquired the Gulf Coast Alum Business, Seller has
operated the Gulf Coast Alum Business in compliance in all material respects
with all applicable environmental, health and safety statutes, regulations,
ordinances and decrees binding on the Seller with respect to the Gulf Coast Alum
Business, (b) there is no violation of any such statute, regulation, ordinance
or decree arising out of any environmental condition on the Real Property that
could result in a material adverse effect on the Gulf Coast Alum Business, (c)
Seller has disclosed to Purchaser the existence of any written notices from any
governmental agency received by Seller since January 1, 1988 claiming that
Seller has violated or failed to comply with any statute, regulation, ordinance
or decree with respect to environmental conditions on the Real Property, (d)
nothing has been manufactured on the Real Property by Seller or Stauffer
Chemicals Company (or successors in interest operating on the Real Property)
other than the products of the type presently being manufactured by Seller, and
(e) Seller has disclosed to Purchaser any materially adverse environmental
condition on the Real Property. Except as set forth in Schedule 2.12, Seller
currently holds all permits, licenses and approvals of governmental authorities
and agencies necessary for the current use, occupancy or operation of the
Acquired Assets, except where the failure to hold any such permits, licenses or
registrations would not have a material adverse effect on the Gulf Coast Alum
Business.
Section 2.13 LABOR MATTERS. To the best of Seller's knowledge, Seller
has complied with all applicable federal and state laws relating to the
employment of labor including the provisions thereof relating to wages, hours,
collective bargaining and the payment of social security and taxes and is not
liable for any arrears of wages or any tax or any penalty for failure to comply
with any of the foregoing. There are no material controversies pending or, to
the best of Seller's knowledge, threatened between Seller and its employees or
other parties which could reasonably have a material adverse effect on the
Acquired Assets or the continued operation of the Gulf Coast Alum Business in
substantially the same manner as presently conducted. There are no collective
bargaining agreements currently binding on or being negotiated with respect to
the Gulf Coast Alum Business other than the Collective Bargaining Agreement with
the International Chemical Workers with respect to certain employees at the
Bastrop, Louisiana plant, a copy of which has previously been provided to
Purchaser. To the best of Seller's knowledge, there are no pending petitions by
labor unions to the National Labor Relations Board for certification as
representative of any employees of the Gulf Coast Alum Business.
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Section 2.14 FINANCIAL WARRANTIES. Prior to the date hereof, Seller has
delivered to Purchaser unaudited Income Statements of the Gulf Coast Alum
Business for the calendar years 1989, 1990 and 1991 (including all intercompany
sales), an unaudited Asset Statement for the Gulf Coast Alum Business as at
December 31, 1991 and a statement of Sales Results for the calendar years 1988
through 1991, all as attached hereto as Exhibit I. To the best of Seller's
knowledge, the foregoing statements are complete and correct in all material
respects and fairly present the information set forth therein as of the date and
for the periods then ended in conformity with Seller's accounting standards
applied on a consistent basis.
Section 2.15 BROKERS AND FINDERS. Neither Seller nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders fees in connection
with the transactions contemplated by this Agreement.
Section 2.16 CHANGES. Except as disclosed on Schedule 2.16, since
December 31, 1991:
(a) There has been no material adverse change in the
Acquired Assets, the Assumed Liabilities or the operating results or
financial condition of the Gulf Coast Alum Business;
(b) There have been no employment contracts or
compensation arrangements entered into by Seller with, and no increase
in the compensation, bonus or benefits (of any type or description,
including without limitation non-binding arrangements, policies or
understandings) payable or to become payable by Seller to, any
officers, directors, employees or agents of Seller except in the
ordinary course of business consistent with past practices; and Seller
has not made or agreed to, and there has not become effective, any
approval, adoption, modification or amendment of any pension or
retirement or other benefit plan or arrangement (including insurance
policies or other insured benefits), relating solely to the employees
listed on Schedule 4.6, except as required by law or necessary to
implement this Agreement;
(c) There have been no commitments for capital
expenditures relating to the Gulf Coast Alum Business, other than
commitments incurred in the ordinary course of business which,
individually or, in the case of a series of related commitments, in the
aggregate, did not exceed $100,000; and
(d) The Gulf Coast Alum Business has been conducted
in all material respects only in the ordinary course of business.
Section 2.17 MACHINERY AND EQUIPMENT. Schedule 1.1(a)(i) contains a
true and complete list of all Machinery and Equipment located on the Real
Property with a book value as of December 31, 1991 in excess of $50,000. The
inclusion of any item on Schedule 1.1(a)(i)
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does not constitute a representation or warranty that any item on such Schedule
has a book value in excess of $50,000.
Section 2.18 ACQUIRED ASSETS. The Acquired Assets constitute all the
assets that are used or held for use by Seller in connection with the Gulf Coast
Alum Business and, include all assets the use of which is reasonably necessary
for the performance of any Assumed Contract by Purchaser and the continued
conduct of the Gulf Coast Alum Business in substantially the same manner as
presently conducted by Seller except for (i) the Shared Assets, if any, (ii) the
Excluded Engineering Data, (iii) the Shared Contracts, (iv) assets relating to
back office and administrative matters and the employment of the sales force
and, (v) contemplated additions and dispositions in the ordinary course of
business that are not material in the aggregate.
Section 2.19 INSURANCE. Seller has maintained a reasonable and
customary program of insurance (which may include self-insurance) with respect
to the Acquired Assets and the Gulf Coast Alum Business and has insured the
Acquired Assets and the Gulf Coast Alum Business in such manner as may be
required pursuant to any franchises, agreements, licenses or permits applicable
to the Acquired Assets or the Gulf Coast Alum Business. Seller has provided
Purchaser with a list of all property damage and personal injury claims asserted
against Seller with respect to the Gulf Coast Alum Business during the past
three years involving in excess of $25,000.
Section 2.20 PERMITS. To the best of Seller's knowledge, Schedule 2.20
hereto sets forth a true and complete list of all material permits used or held
for use in connection with the conduct of the Gulf Coast Alum Business. Except
as set forth on Schedule 2.12, Seller has all permits the absence of which would
have a material adverse effect on the Gulf Coast Alum Business whether or not
such permits are listed on Schedule 2.20.
Section 2.21 CONSENTS. No consent, approval, authorization or order of,
or registration, qualification or filing with, any court, regulatory authority
or other governmental body is required for the execution, delivery and
performance by Seller of this Agreement and the other instruments, agreements
and documents required or contemplated hereby or the consummation by Seller of
the transactions contemplated hereby and thereby except with respect to local
transfer and recording matters, transfer of Permits and substitution of the
Letters of Credit.
Section 2.22 CUSTOMERS AND SUPPLIERS. Schedule 2.22 hereto contains a
true and complete list of the dollar volume of purchases from each of the five
(5) largest suppliers and sales to each of the fifteen (15) largest customers,
respectively, of the products and services of Seller during the twelve (12)
months ending December 31, 1991. Except as set forth on Schedule 2.22, the best
of Seller's knowledge, Seller has not received written notice from any customer
or supplier as to (i) its intent to discontinue its relationship with Seller or
(ii) the occurrence of any event which would have a material adverse effect on
its relationship with Seller.
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Section 2.23 TAXES. There are no pending or to the best of Seller's
knowledge, threatened actions or proceedings, assessments or collections of
taxes of any kind with respect to the Gulf Coast Alum Business that could
subject Purchaser to any liability for such taxes for the period prior to the
Closing Date or could impair any of the Acquired Assets.
Section 2.24 RECEIVABLES. All of the accounts receivable reflected in
the Asset Statement for the Gulf Coast Alum Business as at December 31, 1991 as
previously provided to Purchaser or arising since the date thereof (except for a
reserve for doubtful accounts in accordance with Seller's past practices) have
been collected or, to the best of Seller's knowledge, are collectable in the
ordinary course of business and, to the best of Seller's knowledge, Seller has
not received any written notice of any account debtor's assertion of any defense
to payment or right of setoff with respect to such receivables.
Section 2.25 FULL DISCLOSURE. This Agreement, including any schedules
or exhibits hereto or any certificate required to be delivered to Purchaser in
connection herewith does not contain any untrue statement of any material fact
or omit to state a material fact relating the Acquired Assets or the Gulf Coast
Alum Business necessary to make the statements made, in the context in which
made, not materially false or misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser represents and warrants to Seller as follows:
Section 3.1 CORPORATE EXISTENCE, ETC. OF PURCHASER. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio and has the corporate power to carry on its business as it
is now being conducted.
Section 3.2 AUTHORITY. The execution, delivery and performance of this
Agreement by Purchaser and the consummation by Purchaser of the transactions
contemplated hereby have been duly authorized by all necessary corporate action.
This Agreement has been duly executed and delivered by Purchaser and constitutes
a legal, valid and binding obligation by Purchaser, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws affecting the rights of creditors generally and to
the exercise of judicial discretion in accordance with general principles of
equity (whether applied by a court of law or of equity).
Section 3.3 NO VIOLATIONS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
conflict with, violate or result in any breach of the terms of the Articles of
Incorporation or Code of Regulations of Purchaser; (b) conflict with, violate or
result in any breach of , or constitute a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or
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provisions of any note, bond, mortgage, indenture, license, franchise,
permit, agreement, lease or other instrument or obligation to which Purchaser is
a party or by which Purchaser or any of its respective properties or assets may
be bound; (c) violate any statute, ordinance or law or any rule, regulation,
order, writ, injunction or decree of any court or of any public, governmental or
regulatory body, agency or authority applicable to Purchaser or by which any of
its properties or assets may be bound; or (d) require any filing, declaration or
registration with, or permit, consent or approval of, or the giving of any
notice to, any public governmental or regulatory body, agency or authority,
excluding from the foregoing clauses (a), (b), (c) and (d) such conflicts,
violations, breaches and defaults which, and filings, declarations,
registrations, permits, consents, approvals and notices, the absence of which,
either singly or in the aggregate, would not have a material adverse effect on
the ability of Purchaser to perform its obligations under this Agreement.
Section 3.4 LITIGATION. There is no litigation or proceeding or
governmental investigation pending, or, to the best of Purchaser's knowledge,
threatened against Purchaser or relating to the transactions contemplated
hereby, which if resolved against Purchaser reasonably could be expected to have
a material adverse effect on the ability to perform its obligations under this
Agreement.
Section 3.5 BROKERS AND FINDERS. Neither Purchaser nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders fees in connection
with the transactions contemplated by this Agreement.
Section 3.6 FINANCING PLAN. Simultaneously with the execution and
delivery of this Agreement, Purchaser has delivered to Seller a true and
complete copy of the plan (including a timetable) by which Purchaser intends to
obtain sufficient funds to enable Purchaser to pay the Purchase Price (the
"Financing Plan"). Purchaser reasonably believes that its Financing Plan will be
implemented and that Purchaser will have sufficient funds to pay the Purchase
Price.
ARTICLE IV
COVENANTS
---------
Section 4.1 CONDUCT OF BUSINESS. (a) Between the date hereof and the
Closing Date, without the written consent of Purchaser, Seller shall not:
(i) conduct the Gulf Coast Alum Business out of the ordinary
course;
(ii) make any sale, transfer, lease or other
disposition of any assets that would otherwise be included in the
Acquired Assets with a book value in excess of $5,000 or mortgage,
pledge or otherwise create a security interest in any of the Acquired
Assets other than Permitted Liens and other than in the ordinary course
of business;
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(iii) enter into, amend or modify any contract,
commitment or lease in relation to the Gulf Coast Alum Business that
would, if entered into on the date hereof, be required to be disclosed
on a Schedule to this Agreement, other than in the ordinary course of
business;
(iv) grant any increase in compensation to any
employees of the Gulf Coast Alum Business which increases singly or in
the aggregate are material, other than in the ordinary course of
business;
(v) transfer or otherwise change the terms or
conditions of employment of any employees of the Gulf Coast Alum
Business other than in the ordinary course of business; or
(vi) consent to the termination of any Assumed
Contract or waive any of Seller's material rights with respect thereto.
Section 4.2 ACCESS TO PROPERTIES. Seller shall furnish to Purchaser and
its counsel, accountants, investment advisors and other representatives all
information reasonably requested by Purchaser and provide access (during regular
business hours and on reasonable prior notice) to facilities and personnel of
Seller that Purchaser may reasonably request, all solely for purposes of
performing the Phase I Audit or an asset appraisal or to the extent that
Purchaser demonstrates that such information or access has been requested by
Purchaser's prospective lending institutions or insurance companies; provided,
however, that all such requests for information and access must be made and
coordinated through the Manager of Business Development. Any additional requests
for information or access shall be made to, and subject to the approval of, the
Manager of Business Development.
Section 4.3 CONFIDENTIALITY. Neither Purchaser nor Seller shall divulge
any information (except to their respective employees, financing sources, or
legal or financial representatives or advisors) or make any public announcement
regarding the transactions contemplated hereby without the prior written consent
of the other party except to the extent required by law. In the event that this
Agreement terminates without the purchase and sale of the Acquired Assets having
taken place, the parties and their respective affiliates and agents (i) shall
hold in confidence and refrain from using all non-public information received in
connection with the transactions contemplated in this Agreement and (ii) shall
return promptly all such non- public information to the party to which such
information relates.
Section 4.4 THIRD PARTY CONSENTS; COOPERATION WITH RESPECT TO FILINGS.
(a) Seller shall use its best efforts (which shall not require Seller to incur
any financial obligation) to obtain prior to the Closing Date, all Material
Consents required by this Agreement and shall cooperate with Purchaser to assist
Purchaser in obtaining any other consents to transfer of the Assumed Contracts
reasonably requested by Purchaser.
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(b) Each of the parties shall use its best efforts (which
shall not require such party to incur any financial obligation) to obtain all
waivers, permits, consents and approvals and to effect all registrations,
filings and notices with or to third parties or governmental or public bodies or
authorities that are in the reasonable opinion of Seller or Purchaser necessary
or reasonably desirable in connection with the transactions contemplated by this
Agreement.
Section 4.5 CERTAIN NOTIFICATIONS. At all times prior to the Closing,
each party hereto shall, as promptly as reasonably practicable, notify the other
in writing of the occurrence of any event as to which it obtains knowledge that
is reasonably likely to result in the failure of a condition specified in
Article V or Article VI hereof.
Section 4.6 EMPLOYEE MATTERS. (a) Except as to provided to the contrary
in this Section 4.6, Purchaser shall offer employment to all employees of the
Gulf Coast Alum Business identified on Schedule 4.6(a) on terms substantially
equivalent to their current employment including, without limitation, job
responsibilities, wages and compensation. Purchaser's offer of employment shall
include employee benefits no less favorable in the aggregate than that
applicable to each such employee immediately before the Closing Date based on
those Benefit Plans described on Schedule 2.9 hereto. Effective as of the
Closing Date, all such employees who accept or do not affirmatively decline
Purchaser's offer of employment within two (2) business days after the Closing
Date will become employees of Purchaser ("Hired Employees") and Purchaser shall
continue the employment of such Hired Employees for at least nine (9) months
following the Closing Date, except for any Hired Employee who voluntarily leaves
or is dismissed for "cause". Any employee who receives an offer of employment in
accordance with the provisions of this Section 4.6 which such employee does not
affirmatively accept and who does not report to work or provide notification to
his or her supervisor of a reasonably acceptable reason for such absence
(including, without limitation, vacation, illness, short-term disability, jury
duty or funeral or bereavement leave) within two business days following the
Closing Date shall be deemed to have rejected Purchaser's offer of employment.
Except as provided to the contrary in this Section 4.6, Purchaser shall maintain
in effect for a period of at least one (1) year following the Closing Date,
employee benefit plans (including, without limitation, benefits under Section
4.6(j) that are no less favorable in the aggregate than those applicable to a
Hired Employee immediately before the Closing Date. Any employee identified on
Schedule 4.6(a) who is on short-term disability as of the Closing Date shall be
offered employment by Purchaser in accordance with this Section 4.6 upon the
cessation of such short-term disability. Purchaser shall have no obligation to
offer employment to any employee identified on Schedule 4.6(a) who is receiving
(i) long-term disability on the Closing Date, or (ii) short-term disability on
the Closing Date, which is followed by long-term disability.
(b) In any termination or layoff by Purchaser of any Hired
Employee after the Closing, Purchaser will comply fully, if applicable, with the
Worker Adjustment and Retraining Notification Act of 1988 ("WARN") and all other
applicable Federal, state and local laws, including those prohibiting
discrimination and requiring notice. Purchaser will bear the cost of compliance
with (or failure to comply with) any such laws.
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(c) Except as specifically set forth in this Agreement, (i)
Purchaser is not assuming and (ii) will not have any responsibility for the
continuation of, any Benefit Plan, and Purchaser will not be deemed a successor
employer to Seller with respect to any Benefit Plan. Except as set forth in this
Section 4.6, no Benefit Plan adopted or maintained by Purchaser with respect to
the Gulf Coast Alum Business will be deemed a successor plan of Seller. Except
as specifically set forth in this Agreement, no assets held in trust for any
Benefit Plan shall be transferred to Purchaser or to any plan adopted or
maintained by Purchaser.
(d) As of the Closing Date, and without any waiting period,
Purchaser will provide all Hired Employees (and their dependents) with medical
benefit coverage under plans maintained or established by Purchaser, consistent
with Purchaser's obligations under Section 4.6(a). As to any Hired Employee (or
a dependent thereof) who was covered by Seller's medical plans as of the
Closing, Purchaser will use its best efforts (not involving any financial
obligation or any increased rates payable by Purchaser) to waive any
pre-existing condition exclusions contained in the applicable medical plans or
have such pre-existing condition exclusions eliminated or waived as
expeditiously as possible and consider any monies paid (or accrued) under
Seller's medical and dental plans by Hired Employees (or their dependents) prior
to the Closing Date toward any deductibles, co-pays or other maximums under
Purchaser's medical and dental plan for the first plan year after the Closing
Date. Purchaser will be responsible for satisfying its obligations under Section
601 ET SEQ. of ERISA and Section 4980B of the Internal Revenue Code of 1986, as
amended (the "Code"), to provide continuation coverage ("COBRA") to any Hired
Employee in accordance with law. Purchaser shall pay to Seller the premiums
payable on behalf of a Hired Employee (and/or his or her dependents) who elect
to receive COBRA under Seller's medical plans due to a pre-existing condition
which is excluded under Purchaser's medical plans (until the earlier of (i) the
elimination of the condition or the exclusion or (ii) the termination of the
COBRA period).
(e) As of the Closing Date and for one (1) year thereafter,
Purchaser will provide all Hired Employees with coverage under severance pay
plans maintained by Purchaser, which coverage shall be no less favorable than
that provided under Seller's severance pay plans or obligations as of the
Closing Date, all of which are identified on Schedule 2.9. Such plans shall be
established in accordance with Section 4.6(g) hereof.
(f) As of the Closing Date, Purchaser will assume all
obligations of Seller to Hired Employees for any vacation entitlement and
vacation pay entitlement, regardless of whether such obligations have been
accrued on the books of the Gulf Coast Alum Business. Seller will have no
obligation to make any payment to Hired Employees after the Closing with respect
to any vacation entitlement and vacation pay entitlement. Purchaser shall
provide vacation benefits to Hired Employees in accordance with Section 4.6(g)
hereof.
(g) Purchaser will provide each Hired Employee with full
credit for such Hired Employee's service with Seller prior to the Closing for
purposes of any participation or eligibility requirement and for purposes of
vesting under Purchaser's 401(k) Plan, Purchaser's
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<PAGE> 29
Defined Benefit Plans, if any (including, without limitation, eligibility for
early retirement and other subsidies), and for purposes of any eligibility,
participation, vesting or similar requirement for retiree medical (including,
without limitation, dental), life insurance, medical, severance pay and vacation
benefits.
(h) As soon as practicable after the Closing, Purchaser shall
establish one or more Section 401(k) Plans or designate one or more existing
Section 401(k) Plans (the "Purchaser's 401(k) Plan"). Upon receipt by counsel
for Seller of evidence satisfactory to Seller that Purchaser's 401(k) Plan is a
tax-qualified plan under Section 401(a) of the Code and any related trust is
exempt from tax under Section 501(a) of the Code, as soon as practicable in
accordance with the terms of the Purchaser's 401(k) Plan and applicable law and
regulations, the Trustees of the Savings Investment Plan for Hourly Employees of
Rhone-Poulenc Basic Chemicals Co. and the Rhone-Poulenc Inc. Savings Plus Plan
(the "Seller's 401(k) Plans") shall transfer in cash, in accordance with Section
414(1) of the Code, to the Trustee of the Purchaser's 401(k) Plan, the balance
(whether or not vested) standing in the account of each Hired Employee as of the
most recent valuation date (on or immediately preceding the date of
distribution). The account balances so transferred under this Section 4.6(h)
shall be fully vested and nonforfeitable under the Purchaser's 401(k) Plan, and
the provisions of Section 4.6(g) hereof shall be fully applicable to the Hired
Employees. Upon such transfer, the Trustee of the Purchaser's 401(k) Plan shall
assume liability for the account balances transferred on behalf of the Hired
Employees and shall agree to indemnify and hold Seller, the Trustees of the
Seller's 401(k) Plans and the Seller's 401(k) Plans harmless for the account
balances transferred to the Purchaser's 401(k) Plan. Seller and Purchaser agree
to take such actions as may be necessary to transfer to Purchaser and/or
Purchaser's 401(k) Plans any loans or related obligations of Hired Employees
under Seller's 401(k) Plans as of the date account balances are transferred.
The Seller and Purchaser agree to use their best efforts to
execute all necessary documents, to file all required forms with any
governmental agencies and to undertake all actions that may be necessary or
desirable to implement expeditiously the transfer of assets contemplated herein.
(i) As of, or as soon as practicable after and effective as
of, the Closing Date, the Purchaser may (but shall not be required to) establish
or designate one or more existing defined benefit pension plans (the
"Purchaser's Defined Benefit Plans"). If such Defined Benefit Plans are
established by Purchaser, the Hired Employees shall be entitled to participate
in the Purchaser's Defined Benefit Plans, which shall be tax-qualified plans
under Section 401(a) of the Code (and any related trust shall be exempt from tax
under Section 501(a) of the Code), it being understood that the adoption of a
Defined Benefit Plan for employees covered by a collective bargaining agreement
shall not entitle the non-collectively bargained employees to be covered by the
same or any other Defined Benefit Plan. The Purchaser's Defined Benefit Plans,
if established, shall provide coverage (including, without limitation,
participation, eligibility for benefits and subsidies, vesting and accruals) to
Hired Employees that is substantially equivalent (as reasonably determined by
Purchaser) to that provided to the Hired Employees under the
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Retirement Plan for Hourly Employees of Rhone-Poulenc Basic Chemicals Co. and
the Rhone Poulenc Inc. Retirement Plan (whichever is applicable to a particular
Hired Employee) as of the Closing Date. The provisions of Section 4.6(g) hereof
shall be fully applicable to the Purchaser's Defined Benefit Plans.
(j) As of the Closing Date and for a period of at least one
year following the Closing Date, Purchaser will provide all Hired Employees (and
their dependents) with retiree medical (including, without limitation, dental)
coverage and life insurance coverage, which is not less favorable (in terms of
eligibility, benefits and cost to participants) than the retiree coverage
provided to them or for which they could have become eligible under Seller's
Benefit Plans providing such coverage, based on provisions of such Plans as in
effect as of the Closing Date ("Purchaser's Retiree Medical Plans"). Purchaser
shall assume and become liable with respect to all obligations and
responsibilities of the Seller to provide retiree medical (including, without
limitation, dental) and life insurance benefits to the Hired Employees (and
their dependents). The provisions of Section 4.6(g) hereof shall be fully
applicable to the Purchaser's Retiree Medical Plans.
(k) Seller will bear the entire cost and expense of all
workers' compensation claims arising out of injuries identifiably sustained by
Hired Employees on or before the Closing. Purchaser will bear the entire cost
and expense of all workers' compensation claims arising out of injuries
identifiably sustained by Hired Employees after the Closing. Purchaser will bear
the entire cost and expense of all workers' compensation claims arising out of
injuries without an identifiable date of occurrence and which are filed after
the Closing Date.
(l) Any liabilities, costs or expenses incurred by Seller or
Purchaser associated with the termination of any Hired Employees, shall be the
responsibility of the Purchaser, including, without limitation, any
responsibility for Seller to pay severance to any Hired Employee as a result of
the transactions contemplated by this Agreement.
(m) Neither Purchaser nor Seller intend this Section 4.6 to
create any rights or interest, except as between Purchaser and Seller and no
present or future employees of either party (or any dependents of such
employees) will be treated as third party beneficiaries in or under this
Agreement.
(n) Purchaser will indemnify and hold harmless Seller and
Seller's Benefit Plans (and their trustees, fiduciaries and administrators)
against (i) any claim (including, without limitation, any such claim for
severance, employee benefits or for benefits under WARN) arising out of
Purchaser's failure to extend any employee listed on Schedule 4.6(a) an offer of
employment in accordance with Section 4.6; (ii) any claim alleging that any
termination or layoff of any Hired Employee failed to comply with applicable
law; (iii) any claim by a Hired Employee (or dependent) arising out of
Purchaser's failure to comply with Section 4.6(j); (iv) any claim by a Hired
Employee in connection with the account balances transferred from Seller's
401(k) Plans to Purchaser's 401(k) Plans as described in Section 4.6(h) hereof;
(v) any claim
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related to the rights of a Hired Employee (or dependent) to continuation
coverage under Section 4980B of the Code or Section 601 ET SEQ of ERISA, which
arises due to or in connection with a qualifying event that occurs after the
Closing Date; and (vi) all liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgments and penalties (including, without
limitation, reasonable legal costs and expenses) actually suffered or incurred,
arising out of or resulting from Purchaser's breach of any covenant set forth in
this Section 4.6.
(o) Seller shall not offer employment to or hire any of the
persons listed on Schedule 4.6(a) hereto for a period of two (2) years after the
Closing Date without the prior written consent of Purchaser.
Section 4.7 NO NEGOTIATIONS. Between the date hereof and the Closing
Date, Seller will not in any way contact, initiate, enter into or conduct any
discussions or negotiations or enter into any agreements with any person or
entity with respect to the sale of all or part of the Gulf Coast Alum Business.
Section 4.8 RIGHT OF FIRST OFFER. Within six (6) months after the
Closing Date, Seller shall give Purchaser notice in writing of its intent to
offer for sale all or substantially all of the intangible assets related to
Seller's dry alum business conducted at Seller's Houston, Texas plant (the
"Houston Dry Alum Business"). For a period of thirty (30) days after receipt of
such notice, Purchaser shall have the exclusive right to make an offer to
purchase the Houston Dry Alum Business ("Purchase Offer") by giving Seller
written notice in reasonable detail of the terms of such Purchase Offer
including, without limitation, the purchase price and method of payment
therefor. During such thirty (30) day period, Seller shall not offer to sell the
Houston Dry Alum Business to any third party. If Purchaser declines to make a
Purchase Offer or makes an offer which Seller does not accept, Seller shall
thereinafter have the right to sell the Houston Dry Alum Business to a third
party; provided, however, that if Purchaser has made a Purchase Offer, Seller
cannot sell to a third party on terms less favorable to Seller than those set
forth in Purchaser's Purchase Offer within six (6) months after such Purchase
Offer.
Section 4.9 NONCOMPETITION. At the Closing, Seller and Purchaser shall
enter into the Noncompetition Agreement.
Section 4.10 ENVIRONMENTAL AUDIT. Immediately after the execution
hereof and for a period not to exceed forty-five (45) days, Purchaser shall have
the right to conduct a Phase I Audit (as defined below) of the Real Property.
The term "Phase I Audit" shall mean (i) the review of records and documents
relating to the Real Property's environmental conditions and compliance matters,
(ii) visual site inspections, and (iii) interviews of present and former
employees and/or managers with responsibility for environmental compliance
matters. A copy of the Phase I Audit Report shall be delivered by Purchaser to
Seller promptly upon Purchaser's receipt thereof. Seller shall cooperate with
Purchaser and its environmental consultants to provide reasonable access to the
Real Property and to all relevant data and records relating to environmental
conditions on the Real Property; provided, however, that Seller shall not be
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required to disclose any information regarding analyses or conclusions reached
by Seller or its agents or consultants or provide copies of any reports or other
documents containing such analyses or conclusions, if Seller, in its sole
discretion, deems such reports or other documents, analyses or conclusions to be
privileged and/or confidential. Notwithstanding the foregoing, in the event
Seller declines to provide copies of such reports or documents, Seller shall
provide Purchaser with any factual data (without disclosing such analyses or
conclusions) contained in such reports or documents.
Section 4.11 FINANCING OBLIGATIONS. Purchaser shall use its best
efforts to obtain financing pursuant to the Financing Plan and shall provide
Seller with status reports every fifteen (15) days after the execution of this
Agreement until the earlier of the Closing or termination of this Agreement. If
Purchaser has not received a firm written commitment from a reputable lending
institution within sixty (60) days from the date hereof which commitment is
irrevocable except for customary conditions, Seller shall have the right to
terminate this Agreement for failure to satisfy the condition set forth in
Section 6.5 hereof.
Section 4.12 FINANCIAL ASSURANCES. On the Closing Date, Purchaser shall
issue or cause to be issued on its behalf such financial assurance documents as
are acceptable to and accepted by the applicable governmental entities in
substitution for the Letters of Credit. In the event that despite using its best
efforts, Purchaser fails to fulfill its obligation under the preceding sentence,
Purchaser shall on the Closing Date cause back to back unconditional irrevocable
letters of credit to be issued for the benefit of Seller with respect to each
Letter of Credit in a form reasonably satisfactory to Seller. Such back to back
letters of credit shall continue until Purchaser fulfills its obligation
pursuant to this Section.
Section 4.13 SALE OF MUD RAW MATERIAL. (a) On the Closing Date,
Purchaser shall enter into the Mud Purchase Order pursuant to which, Purchaser
agrees to sell to Seller at a price equal to the Purchaser's direct cost of
removal and delivery of mud to Seller plus 5% ("Base Price"), F.O.B. Purchaser's
plant, all of Seller's requirements for mud (subject to availability of supply)
in order to permit Seller to continue the manufacture and sale of cat litter
after the Closing Date; provided, however, if Purchaser has received orders from
another customer for mud for a price greater than the Base Price and has
insufficient supplies of mud to fill both Seller's requirements and those of
such customer, Purchaser may give priority in supplying mud to such customer
unless Seller agrees to pay the greater price for the mud in which event Seller
shall be given priority in the supply of mud. The Mud Purchase Order shall be
effective for a term of five years and shall renew automatically thereafter
annually, for successive one year terms, unless either party shall have
terminated such purchase order effective at the end of the initial term or any
renewal term, upon at least one year's prior written notice to the other party.
(b) Such Mud Purchase Order shall contain an agreement (the
"Litter Noncompete") by Purchaser not to directly or indirectly compete with
Seller in the United States with respect to the development, manufacture, sale
or offering or promoting for sale of any product which is the same or
substantially similar to or which competes with any cat or other
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animal litter product now or hereafter developed, manufactured or sold by Seller
("Competition") or to sell mud to any other party engaged in Competition with
Seller from the date of Closing until the earlier of (i) the third anniversary
of the Closing, (ii) the date on which Purchaser and Seller execute either the
license agreement or the manufacturing agreement referred to in Section 4.14
hereof, or (iii) the date on which Purchaser and Seller close the sale of
Seller's cat litter business to Purchaser, all of the agreements referred to in
(ii) and (iii) hereinafter referred to as the "Litter Operations Transactions"
(the "Litter Noncompete Terms"). As consideration for such Litter Noncompete,
Seller shall make annual payments to Purchaser during the Litter Noncompete Term
of $50,000 payable at the Closing, $100,000 payable on the first anniversary of
the Closing and $150,000 payable on the second anniversary of the Closing
(collectively, the "Litter Noncompete Payments"). To the extent that Seller
purchases mud from Purchaser pursuant to the Mud Purchase Order during the
Litter Noncompete Term, Seller shall receive a credit to be applied against the
purchase price of the mud equal to the full amount of such purchase price up to
a maximum annual credit equal to the annual portion of the Litter Noncompete
Payments paid for the year in which such purchase of mud is made.
(c) Notwithstanding anything to contrary set forth above, if
either party terminates negotiations with respect to the Litter Operations
Transactions prior to execution of any definitive agreement with respect thereto
or the closing of any sale of the cat litter business to Purchaser, Seller, at
its option, may at any time thereafter terminate the Litter Noncompete in which
event the Seller's obligation to pay any future Litter Noncompete Payments shall
cease. To the extent such termination occurs prior to the end of any full year
of the Litter Noncompete Term for which an annual installment of the Litter
Noncompete Payments has already been made, then Seller shall be entitled to a
pro-rata rebate of such annual installment of the Litter Noncompete Payments for
such year based on the number of days remaining in such year divided by 365. In
the event that Seller exercises such option to terminate the Litter Noncompete
or the Litter Noncompete expires by its terms, such termination shall have no
effect on any of the other provisions of the Mud Purchase Order, all of which
shall remain in full force and effect as written.
Section 4.14 CAT LITTER. Promptly after the execution hereof, Seller
and Purchaser shall negotiate in good faith, and use their reasonable efforts to
enter into, a license agreement pursuant to which Seller shall grant to
Purchaser the right to use the technology and know-how presently used by Seller
in Seller's cat litter business. Such license agreement shall provide for
payment of commercially reasonable royalties by Purchaser based upon a
percentage of gross sales (F.O.B. Purchaser's plant and net of returns, sales
taxes, cash discounts and allowances) and shall be exclusive for so long as
certain mutually agreed upon performance levels are achieved by Purchaser. In
the event that Seller and Purchaser are unable to agree on the terms of such
license agreement prior to the Closing Date, Purchaser and Seller shall
promptly, and in no event later than thirty days after the Closing Date,
negotiate in good faith and use their reasonable efforts to enter into a toll
manufacturing agreement pursuant to which Purchaser shall manufacture cat litter
for Seller for a price equal to Purchaser's manufacturing cost plus 5%
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which agreement will contain certain mutually agreed upon terms in accordance
with reasonable commercial practices.
ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS
-------------------------------------
The obligations of Purchaser are subject to the fulfillment, prior to
or on the Closing Date, of each of the following conditions, any of which may be
waived in whole or in part by Purchaser as provided herein except as otherwise
provided by law:
Section 5.1 REPRESENTATIONS AND WARRANTIES OF SELLER TO BE TRUE;
PERFORMANCE BY SELLER; Certificate. (a) The representations and warranties of
Seller contained in this Agreement shall be true and correct in all material
respects on the date hereof and as of the Closing Date with the same effect as
though such representations and warranties had been made or given again at and
as of the Closing Date, except for any representation or warranty expressly
stated to have been made or give as of a specified date, which, at the Closing
Date, shall be true and correct in all material respects as of the date
expressly stated.
(b) Seller shall have performed and complied in all material
respects with all of its agreements, covenants and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing
Date.
(c) Seller shall have delivered to Purchaser a certificate of
its president or any vice president certifying the fulfillment of the conditions
set forth in this Section 5.1.
Section 5.2 NO MATERIAL ADVERSE CHANGE. Since the date of the execution
of this Agreement, there has been no material adverse change in the Acquired
Assets, the Assumed Liabilities, operating results or the financial condition of
the Gulf Coast Alum Business taken as a whole.
Section 5.3 CONSENTS. All notices to, and declarations, filings and
registrations with, and consents, approvals and waivers from, and waiting
periods required by, governmental and regulatory agencies required to consummate
the transactions contemplated hereby and all Material Consents shall have been
obtained.
Section 5.4 NO PROCEEDING OR LITIGATION. (a) No preliminary or
permanent injunction or other order shall have been issued by any court of
competent jurisdiction, whether federal, state or foreign, or by any
governmental or regulatory body, whether federal, state or foreign, nor shall
any statute, rule, regulation or executive order be promulgated or enacted by
any governmental authority, whether federal, state or foreign, which prevents
the consummation of the transactions contemplated in this Agreement.
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(b) No suit, action, claim, proceeding or investigation before
any court, arbitrator or administrative, governmental or regulatory body,
whether federal, state or foreign, shall have been commenced and be pending
against Seller or Purchaser or any of their respective affiliates, associates,
officers or directors seeking to prevent the sale of the Acquired Assets or the
Gulf Coast Alum Business or asserting that the sale of the Acquired Assets or
the Gulf Coast Alum Business would be illegal.
Section 5.5 OPINION OF COUNSEL. Seller shall have delivered an opinion
of counsel pursuant to Section 1.5(b).
Section 5.6 FINANCING. Purchaser shall have obtained a firm written
commitment from a reputable lending institution within sixty (60) days from the
date hereof to provide financing for the payment of the Purchase Price, in an
amount of no less than the minimum amount required to consummate the
transactions contemplated hereby (other than those referred to in Sections 4.8
and 4.14 above) as set forth in the Financing Plan on terms and conditions that
are reasonable in light of generally acceptable commercial standards for similar
transactions involving parties similarly situated which commitment is
irrevocable except for customary conditions.
ARTICLE VI
CONDITIONS TO SELLER'S OBLIGATIONS
----------------------------------
The obligations of Seller under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, all or any of which may be waived in whole or in part by Seller as
provided herein except as otherwise provided by law.
Section 6.1 REPRESENTATIONS AND WARRANTIES OF PURCHASER TO BE TRUE;
PERFORMANCE BY PURCHASER; CERTIFICATE. (a) The representations and warranties of
Purchaser contained in this Agreement shall be true and correct in all material
respects on the date hereof and as of the Closing Date with the same effect as
though such representations and warranties had been made or given again at and
as of the Closing Date, except for any representation or warranty expressly
stated to have been made or given as of a specified date, which, at the Closing
Date, shall be true and correct in all material respects as of the date
expressly stated.
(b) Purchaser shall have performed and complied in all
material respects with all of its agreements, covenants and conditions required
by this Agreement to be performed or complied with by it prior to or at the
Closing Date.
(c) Purchaser shall have delivered to Seller a certificate of
its president or any vice president dated the Closing Date and certifying the
fulfillment of the conditions set forth in this Section 6.1.
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Section 6.2 CONSENTS. All notices to, and declarations, filings and
registrations with and consents, approvals and waivers from and waiting periods
required by, governmental and regulatory agencies required to consummate the
transactions contemplated hereby shall have been obtained.
Section 6.3 NO PROCEEDING OR LITIGATION. (a) No preliminary or
permanent injunction or other order shall have been issued by any court of
competent jurisdiction, whether federal, state or foreign, or by any
governmental or regulatory body, whether federal, state or foreign, nor shall
any statute, rule, regulation or executive order be promulgated or enacted by
any governmental authority, whether federal, state or foreign, which prevents
the consummation of the transactions contemplated in this Agreement.
(b) No suit, action, claim, proceeding or investigation before
any court, arbitrator or administrative, governmental or regulatory body,
whether federal, state or foreign, shall have been commenced and be pending
against Seller or Purchaser or any of their respective affiliates, associates,
officers or directors seeking to prevent the sale of the Assets or the Business
or asserting that the sale of the Assets or the Business would be illegal.
Section 6.4 OPINION OF COUNSEL. Purchaser shall have delivered an
opinion of counsel pursuant to Section 1.5(c).
Section 6.5 FINANCING. Purchaser shall have obtained, and provided to
Seller, a firm written commitment from a reputable lending institution within
sixty (60) days from the date hereof to provide financing for the payment of the
Purchase Price, in an amount no less than the minimum amount required to
consummate the transactions contemplated hereby (other than those set forth in
Sections 4.8 and 4.14 above) as set forth in the Financing Plan on terms and
conditions that are reasonable in light of generally acceptable commercial
standards for similar transactions involving parties similarly situated which
commitment is irrevocable except for customary conditions. If such condition is
not satisfied by the sixtieth day, notwithstanding Section 1.5(a) hereof, Seller
may thereafter terminate this Agreement upon notice to Purchaser; provided,
however, that seller shall not have the right to terminate this Agreement for
failure by Purchaser to satisfy this condition until ninety (90) days after the
date hereof, if Purchaser deposits in escrow with a financial institution
mutually acceptable to Purchaser and Seller and pursuant to a mutually
acceptable escrow agreement a nonrefundable deposit of $200,000 prior to the
expiration of such sixty (60) day period in an interest bearing account. In the
event Purchaser makes such a deposit of earnest money and the transactions
contemplated hereby (other than those referred to in Sections 4.8 and 4.14
above) close within such additional thirty (30) day period then the deposit and
any interest thereon shall be applied against the Purchase Price upon the
closing of the transactions contemplated hereby. In the event Purchaser fails to
obtain such financing commitment and to close the transactions contemplated
hereby (other than those referred to in Sections 4.8 and 4.14 above), prior to
the expiration of such additional thirty (30) day period for any reason (other
than due to the failure of any of the
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conditions set forth in Sections 5.1 through 5.5 hereof to be satisfied within
such period), Seller may terminate this Agreement effective upon written notice
of such termination. In such event, the deposit and all interest thereon shall
be retained by Seller and shall be deemed a payment for the extension of
Purchaser's exclusive right to purchase the Acquired Assets and not liquidated
damages with respect to any losses suffered by Seller as a result of any failure
by Purchaser to close the transactions contemplated hereby in accordance with
this Agreement. If this Agreement is terminated due to the failure of any of the
conditions set forth in Sections 5.1 through 5.5 hereof to be satisfied then
such deposit and interest thereon shall be returned to Purchaser.
Section 6.6 SUPPLY AGREEMENT. Purchaser shall have executed and
delivered to Seller the Supply Agreement.
Section 6.7 MUD PURCHASE ORDER. Purchaser shall have executed and
delivered to Seller the Mud Purchase Order.
Section 6.8 LETTERS OF CREDIT. Purchaser shall have issued or caused to
be issued the necessary financial assurances or back to back letters of credit
pursuant to Section 4.12 hereof.
ARTICLE VII
INDEMNIFICATION
---------------
Section 7.1 INDEMNIFICATION BY SELLER. Except as otherwise limited by
this Article VII, Purchaser and its officers, directors, employees, agents,
successors and assigns shall be indemnified and held harmless by Seller for any
and all liabilities, losses, damages, claims, costs and expenses, interest,
awards, judgments and penalties (including, without limitation, reasonable legal
costs and expenses) actually suffered or incurred by it (hereinafter a
"Purchaser Loss"), and actually arising out of or resulting from:
(a) the breach of any representation or warranty by Seller
contained herein or in any document delivered hereunder at the Closing;
or
(b) the breach of any covenant or agreement by Seller
contained herein; or
(c) the Excluded Assets or Excluded Liabilities.
Section 7.2 INDEMNIFICATION BY PURCHASER. Except as otherwise limited
by this Article VII, Seller and its officers, directors, Benefit Plans (and
trustees, fiduciaries or administrators), employees, agents, successors and
assigns shall be indemnified and held harmless by Purchaser from any and all
liabilities, losses, damages, claims, costs and expenses, interest, awards,
judgments and penalties (including, without limitation, reasonable legal costs
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and expenses) actually suffered or incurred by it (hereinafter a "Seller Loss")
actually arising out of or resulting from:
(a) the breach of any representation or warranty by Purchaser
contained herein or in any document delivered hereunder; or
(b) the breach of any covenant or agreement by Purchaser
contained herein or in any document delivered hereunder; or
(c) the Assumed Liabilities.
Section 7.3 GENERAL INDEMNIFICATION PROVISIONS. (a) For the purposes of
this Section 7.3, the term "Indemnitee" shall refer to the person or persons
indemnified, or entitled, or claiming to be entitled to be indemnified, pursuant
to the provisions of Section 7.1 or 7.2, as the case may be; the term
"Indemnitor" shall refer to the person having the obligation to indemnify
pursuant to such provisions; and "Losses" shall refer to the "Seller Losses" or
the "Purchaser Losses", as the case may be.
(b) An Indemnitee shall promptly give the Indemnitor notice of
any matter which an Indemnitee has determined has given or could give rise to a
right of indemnification under this Agreement, stating the amount of the Loss,
if known, and method of computation thereof, all with reasonable particularity
and containing a reference to the provisions of this Agreement in respect of
which such right to indemnification is claimed or arises. The obligations and
liabilities of an Indemnitor under this Article VII, with respect to Losses
arising from claims of any third party that are subject to the indemnification
provided for in this Article VII ("Third Party Claims"), shall be governed by
and contingent upon the following additional terms and conditions: if an
Indemnitee shall receive notice of any Third Party Claim, the Indemnitee shall
give the Indemnitor prompt notice of such Third Party Claim and shall permit the
Indemnitor, at its option, to assume and control the defense of such Third Party
Claim at its expense and through counsel of its choice if it gives prompt notice
of intention to do so to the Indemnitee. In the event the Indemnitor exercises
its right to undertake the defense against any such Third Party Claim as
provided above, the Indemnitee shall cooperate with the Indemnitor in such
defense and make available to the Indemnitor all witnesses, pertinent records,
materials and information in its possession or under its control relating
thereto as is reasonably required by the Indemnitor. Similarly, in the event the
Indemnitee is, directly or indirectly, conducting the defense against any such
Third Party Claim, the Indemnitor shall cooperate with the Indemnitee in such
defense and make available to it all such witnesses, records, materials and
information in its possession or under its control relating thereto as is
reasonably required by the Indemnitee. Except the settlement of a Third Party
Claim which involves the payment of money only and for which the Indemnitee is
totally indemnified by the Indemnitor, no Third Party Claim may be settled by
the Indemnitor without the written consent of the Indemnitee. Similarly, no
Third party Claim may be settled by the Indemnitee without the written consent
of the Indemnitor.
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Section 7.4 LIMITS ON INDEMNIFICATION OF PURCHASER. (a) No claim may be
made against Seller for indemnification pursuant to Section 7.1 unless and only
to the extent the aggregate of all Purchaser Losses exceed $100,000 and Seller
shall not be required to indemnify Purchaser for any Purchaser Losses which in
the aggregate exceed the Base Purchase Price less $1,500,000; provided, however,
that such restrictions shall not apply to (i) breaches of Sections 2.4 and 2.6
to the extent relating to title to the Acquired Assets and (ii) the Excluded
Liabilities.
(b) (i) Subject to Section 7.4(a) hereof, with respect to
Government Mandated Clean-up or Third Party Environmental Claims (as defined
below), Seller shall pay 60% of the aggregate amount of all such claims up to a
total of $1,000,000 in claims (i.e. Seller shall be responsible for a maximum of
$600,000) provided that (A) Purchaser provides Seller with written notice of
such claims within three years from the Closing Date, (B) the liability is
solely the result of storage, release or disposal of Hazardous Substances (as
heretofore defined) prior to the closing Date, (C) such liability shall not have
been materially increased by actions or inaction of the Purchaser after the
Closing Date, and (D) such liability does not relate to manufacture of alum,
closure of any ponds, storage or handling of sulfuric acid or to any other
matters disclosed to Purchaser on any Schedule to this Agreement.
(ii) As used herein:
(A) "Government Mandated Clean-Up" means any judicial
or administrative order, decree or judgment of a governmental
or regulatory body, agency or authority ("Order") which is not
initiated by Purchaser and which requires Purchaser to
analyze, monitor, remove, treat, clean-up, prevent the escape
of, store or otherwise dispose of any Hazardous Substances
existing on the Real Property as of the Closing Date or
existing on any adjacent property as of the Closing Date as a
result of the release or discharge of Hazardous Substances
from the Real Property prior to the Closing Date, as and to
the extent the Government Mandated Clean-up is required
(whether or not so stated in the Order) for the Purchaser's
continued use of the Real Property as a site for the
manufacture of alum. An Order shall not be deemed initiated by
Purchaser if it is initiated solely pursuant to any notice or
report made by Purchaser which is required by law.
(B) "Third Party Environmental Claims" means any
claims, suits or legal or administrative proceedings
(including for violation of law or regulations) made or
instituted by any federal, state or local government,
governmental agency or political subdivision, or any other
person or entity based on or relating to injury to persons or
property caused by the presence or release of any Hazardous
Substances on or from the Real Property prior to the Closing
Date.
Section 7.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller in Article II and Purchaser in Article
III shall survive the Closing until the
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second anniversary thereof, and thereafter no claim may be brought in respect of
any misrepresentation or breach of warranty; provided, however, that the
indemnity obligations of Seller with respect to the representations and
warranties contained in Section 2.23 shall survive until expiration of the
applicable statute of limitations and the representations and warranties
contained in Sections 2.4 and 2.6 to the extent relating to title to the
Acquired Assets shall survive indefinitely. If written notice of a claim has
been given prior to the expiration of the applicable representations and
warranties by a party in whose favor such representations and warranties have
been made to the party that made such representations and warranties, then the
relevant representations and warranties shall survive as to such claim until the
claim has been finally resolved. At the Closing Seller shall have the right to
update or amend any of the Schedules hereto to furnish Purchaser with
supplemental information with respect to any matters or events which were not
known to Seller at the time the Schedules were prepared and which arise or which
become known by Seller subsequent to the date hereof which, if existing or known
on the date hereof would have rendered any statement, representation or warranty
made by Sellers or any information in any Schedule hereto then inaccurate or
incomplete. If Purchaser receives any updates or amendments to any schedules
pursuant to this Section, Purchaser shall have the right to delay the Closing
for not more than five (5) days to review such amended schedules and to object
to any item on such Schedules which was not contained in the original schedules
within five (5) days after receipt by Purchaser of the relevant amended Schedule
if such item materially and adversely affects the value of the Gulf Coast Alum
Business taken as a whole. In the event that Purchaser objects to any item on
the Amended Schedules because such item materially and adversely affects the
value of the Gulf Coast Alum Business taken as a whole or if Purchaser
independently becomes aware that any representation or warranty made by Seller
herein is incorrect in any material respect as of the date hereof or will be
incorrect in any material respect as of the Closing Date, the Purchaser shall
have as its sole remedy hereunder the option (i) to terminate this Agreement (on
five (5) business days' notice) or (ii) to proceed with the Closing and, upon
the Closing, Purchaser shall be conclusively deemed to have waived all claims
hereunder relating to such misrepresentation or breach of warranty or such items
set forth on updated or amended schedules.
Section 7.6 ADJUSTMENT OF LIABILITY. The amount which an
Indemnitee shall be entitled to receive from an Indemnitor with respect to any
indemnifiable loss hereunder shall be net of any insurance recovery and tax
benefit (if realizable prior to the end of the first full tax year following the
date of indemnification) accruing to the Indemnitee on account of such loss.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 8.1 TERMINATION OF AGREEMENT. This Agreement may be terminated
at any time prior to the Closing:
(a) by mutual written consent of Purchaser and Seller; or
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(b) by either Purchaser or Seller, if the Closing
shall not have occurred on or before September 3, 1992; or
(c) by either Purchaser or Seller, as provided in
Section 7.5. with respect to knowledge of incorrect representations and
warranties prior to the Closing; or
(d) by Purchaser pursuant to Section 5.6 or by
Seller, pursuant to Section 6.5 for failure of Purchaser to satisfy the
financing condition set forth therein.
Section 8.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of
termination of this Agreement by either or both of the parties pursuant to
Section 8.1 hereof, written notice thereof shall forthwith be given to the other
party specifying the provision hereof pursuant to which such termination is
made, and this Agreement shall forthwith become void and there shall be no
liability on the part of the parties hereto (or their respective officers,
director of affiliates) except (a) as set forth in Sections 4.3 and 9.1 hereof
and (b) nothing herein shall relieve either party from liability for any willful
breach hereof.
Section 8.3 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by Purchaser and Seller.
Section 8.4 WAIVER. Except as otherwise provided in this Agreement, any
failure of either of the parties to comply with any provision hereof may be
waived by the party entitled to the benefit thereof only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such provision shall not operate as a waiver of or
estoppel with respect to, any subsequent or other failure.
ARTICLE IX
MISCELLANEOUS
-------------
Section 9.1 EXPENSES. Purchaser and Seller will each pay its own
expenses resulting or arising from or incurred in connection with this Agreement
and the transactions contemplated hereby, including without limitation, expenses
for professional services; provided, however, that Seller shall pay the cost of
providing UCC searches to Purchaser hereunder and Purchaser shall pay the cost
of obtaining all surveys required by its lenders, its title searches and title
insurance policies, the Phase I Audit and the asset appraisal.
Section 9.2 FURTHER ASSURANCES. Each party agrees, at any time and from
time to time on or after the date hereof, upon the reasonable request of the
other party and without further consideration, to execute and deliver such other
documents and instruments and to take such other action as the other party may
reasonably request in order to carry out the purposes and intent of this
Agreement, provided, however, that any party required to take any actions
pursuant
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to this Section shall be reimbursed for all out-of-pocket expenses incurred by
such party in connection therewith.
Section 9.3 TRANSFER TAXES. All excise, sales, value added, use,
registration, stamp, transfer and similar taxes, levies, charges and fees
(including all real estate transfer taxes) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by Purchaser.
Purchaser and Seller shall cooperate in providing each other appropriate resale
exemption certificates and other appropriate tax documentation.
Section 9.4 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if hand delivered or mailed by registered or certified mail to the
addresses herein designated, or at such other address as may be designated in
writing by notice pursuant hereto:
If to Seller:
Rhone-Poulenc Basic Chemicals Co.
c/o Rhone-Poulenc Inc.
CN 5266
Princeton, NJ 08543-5266
Attn: James Spooner
with a copy to:
Proskauer Rose Goetz & Mendelsohn
1585 Broadway
New York, NY 10036
Attn: Steven L. Kirshenbaum, Esq.
If to Purchaser:
Geo Specialty Chemicals, Inc.
Cambridge Court, Suite 450
28601 Chagrin Blvd.
Cleveland, Ohio 44122
Attn: George P. Ahearn, President
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with a copy to:
Hahn Loeser & Parks
3300 BP America Building
200 Public Square
Cleveland, Ohio 44114-2301
Attn: Richard A. Zellner, Esq.
Section 9.5 AMENDMENTS AND ENTIRE AGREEMENT. This instrument contains
the entire agreement between the parties hereto with respect to the purchase and
sale of assets and other transactions contemplated hereby and supersedes and
nullifies all prior understandings, representations, warranties, promises and
undertakings made orally or in writing by or on behalf of the parties hereto.
This Agreement may be changed, modified or terminated only by an instrument
executed by Seller and Purchaser.
Section 9.6 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties named herein and their respective
heirs, successors and permitted assigns. Neither this Agreement nor any of the
rights or obligations herein shall be assigned by either party without the prior
written consent of the other party.
Section 9.7 GOVERNING LAW. This Agreement shall be construed and
governed in accordance with the laws of the State of New York without regard to
its provisions concerning conflicts or choice of law.
Section 9.8 SECTION AND OTHER HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the interpretation or meaning of this Agreement.
Section 9.9 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
Section 9.10 BULK SALES LAW. Purchaser waives compliance by Seller with
the provisions of any applicable bulk sales laws to the extent that such laws
may be deemed applicable to the transactions contemplated hereby. Seller hereby
indemnifies and agrees to hold Purchaser harmless from and against any and all
liabilities, losses, damages, costs and expenses, including reasonable
attorneys' fees, other than the Assumed Liabilities, which are incurred or
sustained by Purchaser as a result of such noncompliance. Notwithstanding
Article II hereof, any lien on the Acquired Assets resulting from such
non-compliance shall not be deemed to result in breach of any representation or
warranty made pursuant to Article II hereof.
Section 9.11 DEFINITION OF SELLER'S KNOWLEDGE. As used in this
Agreement, the phrase "to Seller's knowledge" and any similar phrase shall mean
the actual knowledge of those
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employees of Seller listed in Schedule 9.11 after reasonable inquiry of plant
managers and in reliance upon representations from such managers as to the
accuracy and completeness of the information contained in the Schedules hereto.
Section 9.12 TRANSITION SERVICES. Seller shall provide Purchaser with
reasonable sales and marketing assistance in introducing Purchaser to the top
ten paper industry customers of the Gulf Coast Alum Business for a period not to
exceed thirty (30) days following the Closing Date, and in this regard shall
provide Purchaser with the services of members of its sales force, at mutually
agreed upon times, to accompany Purchaser's salesmen on initial visits to the
top ten paper industry customers. In addition, prior to the Closing Date, the
parties shall negotiate in good faith, and shall use their reasonable efforts to
enter into an agreement with respect to the provision by Seller to Purchaser of
certain mutually agreed upon transition services for a period not to exceed one
hundred and twenty (120) days following the Closing Date with compensation for
such services payable by Purchaser in an amount equal to Seller's cost of
providing such services.
Section 9.13 PACKAGING SUPPLIES. Purchaser shall have the right to use
all packaging supplies and materials in Seller's Inventory as of the Closing
Date until such packaging supplies are exhausted; provided, however, that (a)
Purchaser shall not use any packaging supplies and materials which are marked
with the Excluded Intangible Property at any time after three (3)months from the
Closing Date and (b) Purchaser shall also stamp all packaged products with
Purchaser's name or mark to identify that Purchaser is the seller of such
products.
Section 9.14 ANHYDROUS ALUM. Simultaneously with the Closing, Purchaser
and Seller shall enter into the Supply Agreement for the sale of all of Seller's
requirements of anhydrous alum by Purchaser to Seller in the form attached
hereto as Exhibit F.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
RHONE-POULENC BASIC CHEMICALS CO.
By: /s/ David D. Eckert
-------------------------------------
GEO SPECIALTY CHEMICALS, INC.
By: /s/ George P. Ahearn
-------------------------------------
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<PAGE> 1
Exhibit 3.1
AMENDED
ARTICLES OF INCORPORATION
OF
GEO SPECIALTY CHEMICALS, INC.
-----------------------------
FIRST: The name of the Corporation shall be GEO SPECIALTY CHEMICALS,
INC.
SECOND: The place in Ohio where the principal office of the
Corporation is to be located is the City of Cleveland, County
of Cuyahoga.
THIRD: The purpose for which the Corporation is formed is to engage
in any lawful act or activity for which corporations may be
formed under Chapter 1701 of the Ohio Revised Code.
FOURTH: The total number of shares which the Corporation is authorized
to have outstanding is Twelve Hundred Fifty (1250) common
shares, $1.00 par value ("Common Stock"), classified as
follows:
(a) One Thousand Thirty-Five (1035) shares of
Class A Voting Common Stock, $1.00 par value
("Class A Common"); and
(b) Two Hundred Fifteen (215) shares of Class B
Non-voting Common Stock, $1.00 par value
("Class B Common").
Except as set forth in this Fourth Article, all shares of
Common Stock will be identical and will entitle the holders
thereof to the same rights and privileges.
A. EXPRESS TERMS OF COMMON STOCK.
1. VOTING RIGHTS. Except as otherwise required by law,
the holders of Class A Common will be entitled to one
(1) vote per share on all matters to be voted on by
the Corporation's shareholders, and the holders of
Class B Common will have no right to vote on any
matters to be voted on by the Corporation's
shareholders.
2. DIVIDENDS. When and as dividends are declared
thereon, whether payable in cash, property or
securities of the Corporation, the holders of Class A
Common and the holders of Class B Common will be
entitled to share equally, share-for-share, in such
dividends; PROVIDED, HOWEVER, that if dividends are
declared which are payable in shares of Class A
Common or in Class B Common, dividends will be
declared which are payable at the same rate on both
classes of stock, and the dividends payable in shares
of
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<PAGE> 2
Class A Common will be payable to the holders of
Class A Common, and the dividends payable in shares
of Class B Common will be payable to holders of Class
B Common.
3. CONVERSION OF COMMON SHARES.
(a) Each record holder of Class B Common is
entitled at any time to convert any or all
of the shares of such holder's Class B
Common into the same number of shares of
Class A Common. At such record holder's
written request, the Corporation will
exchange with such record holder for such
number of shares of Class B Common then held
by such record holder as it designates a
like number of shares of Class A Common, and
the Corporation will at all times reserve
and keep available out of its authorized but
unissued shares of Class A Common, solely
for issuance upon such exchanges, the number
of such shares deemed sufficient by the
Corporation for such purposes.
(b) In addition, if a holder of Class B Common
acquires shares of Class A Common, then such
holder shall have the right to convert any
or all of such shares of Class A Common into
Class B Common in the same manner as is set
forth below in Paragraph A.4. of this Fourth
Article, and the holder of such converted
shares shall thereafter have the same
conversion privileges set forth above in
Paragraph A.3.a.
4. PROCEDURE FOR CONVERSION OF CLASS B COMMON.
(a) Each conversion of shares of Class B Common
into shares of Class A Common will be
effected by the surrender of the certificate
or certificates representing the shares to
be converted at the principal office of the
Corporation at any time during normal
business hours, together with a written
notice by the holder of such Class B Common
stating that such holder desires to convert
the shares, or a stated number of the
shares, of Class B Common represented by
such certificate or certificates into Class
A Common. Such conversion will be deemed to
have been effected as of the close of
business on the date on which such
certificate or certificates have been
surrendered and such notice has been
received by the Corporation, and at such
time the rights of the holder of the
converted Class B Common will cease and the
person or persons in whose name or names the
certificate or certificates for shares of
Class A Common are to be issued upon such
conversion will be deemed to have become the
holder or holders of record of the shares of
Class A Common represented thereby.
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<PAGE> 3
(b) Promptly after such surrender and the
receipt of such written notice by the
Corporation, the Corporation will issue and
deliver in accordance with the surrendering
holder's instructions (i) the certificate or
certificates for the Class A Common issuable
upon such conversion and (ii) a certificate
representing any Class B Common which was
represented by the certificate or
certificates delivered to the Corporation in
connection with such conversion but which
was not converted.
(c) If the Corporation in any manner subdivides
or combines the outstanding shares of one
class of Common Stock to the outstanding
shares of the other class of Common Stock,
such shares will be proportionately
subdivided or combined.
(d) The issuance of certificates of Class A
Common upon conversion of Class B Common
will be made without charge to the holders
of such shares for any issuance tax in
respect thereof or other costs incurred by
the Corporation in connection with such
conversion and the related issuance of Class
A Cannon.
(e) The Corporation will not close its books
against the transfer of Class B Common or of
Class A Common issued or issuable upon
conversion of Class B Common in any manner
which would interfere with the timely
conversion of Class B Common.
FIFTH: All shares outstanding on the date of these Amended Articles
of Incorporation shall be, and hereby are, converted into the
same number of Class A Common Shares.
SIXTH: No holder of any class of shares of the Corporation shall have
any preemptive or preferential right to subscribe to or
purchase any shares of any class of stock of the Corporation,
whether now or hereafter authorized and whether unissued or in
the treasury, or any obligations convertible into shares of
any class of stock of the Corporation, at any time issued or
sold, or any right to subscribe to or purchase any thereof.
SEVENTH: These Amended Articles of Incorporation supersede the existing
Articles of Incorporation of the Corporation.
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<PAGE> 1
Exhibit 3.2
GEO SPECIALTY CHEMICALS, INC.
AMENDED REGULATIONS
Adopted February 9, 1993
ARTICLE I
---------
SHAREHOLDERS
------------
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of
the Corporation for the election of directors, the consideration of reports to
be laid before the meeting, and the transaction of such other business as may
properly be brought before the meeting shall be held in the place described in
the Articles of Incorporation as the place where the principal office of the
Corporation is or is to be located, or at such other place either within or
without the State of Ohio as may be designated by the Board of Directors, the
Chairman of the Board, or the President and specified in the notice of the
meeting, at 10:00 o'clock a.m. on the first Tuesday in the fourth month
following the end of each fiscal year, if not a legal holiday, or, if a legal
holiday, on the next succeeding business day, or at such other date or time as
may be designated by the Board of Directors, the Chairman of the Board, or the
President and specified in the notice of the meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders of
the Corporation may be held on any business day when called by the Chairman of
the Board, the President, the Board of Directors acting at a meeting, a majority
of the directors acting without a meeting, or the persons who hold
fifteen-percent of all the shares outstanding and entitled to vote at the
meeting. Upon request in writing delivered either in person or by registered
mail to the President or the Secretary by any persons entitled to call a meeting
of the shareholders, such officer shall forthwith cause to be given to the
shareholders entitled thereto written notice of a meeting to be held on a date
not less than seven or more than sixty days after receipt of the request, as
that officer may fix; if the notice is not given within seven (7) days after the
receipt of the request, the persons calling the meeting may fix the time of the
meeting and give notice thereof in the manner provided by law or as provided in
these Regulations or cause the notice to be given by any designated
representative. Each special meeting shall be called to convene between nine
o'clock a.m. and four o'clock p.m., and shall be held at any place within
twenty-five miles of Cleveland, Ohio designated in the written notice of the
meeting.
SECTION 3. NOTICE OF MEETINGS. Not less than seven or more than sixty
days before the date fixed for a meeting of the shareholders, written notice
stating the time, place, and purposes of the meeting shall be given by or at the
direction of the Secretary, an Assistant Secretary, or any other person or
persons required or permitted by these Regulations to give the notice. The
notice shall be given by personal delivery or by mail to each shareholder
entitled to notice of the meeting who is of record as of the day next preceding
the date on which notice is given or, if a record date therefor is duly fixed,
of record as of that date; if mailed, the notice shall be addressed to the
shareholders at their respective addresses as they appear on the records of the
Corporation. Notice of the time, place, and purposes of any meeting of the
shareholders
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<PAGE> 2
may be waived in writing, either before or after the holding of the meeting, by
any shareholder, which writing shall be filed with or entered upon the records
of the Corporation. Attendance of any shareholder at any meeting without
protesting, prior to or at the commencement of the meeting, the lack of proper
notice shall be deemed to be a waiver by him of notice of the meeting.
SECTION 4. QUORUM; ADJOURNMENT. Except as may be otherwise provided by
law or by the Articles of Incorporation, at any meeting of the shareholders the
holders of shares entitling them to exercise sixty-six percent (66%) of the
voting power of the Corporation present in person or by proxy shall constitute a
quorum for the meeting, except that no action required by law, the Articles, or
these Regulations to be authorized or taken by a designated proportion of the
shares of any particular class or of each class of the Corporation may be
authorized or taken by a lesser proportion and except that the holders of
sixty-six percent (66%) of the voting shares represented at the meeting, whether
or not a quorum is present, may adjourn the meeting from time to time; if any
meeting is adjourned, notice of adjournment need not be given if the time and
place to which the meeting is adjourned are fixed and announced at the meeting.
SECTION 5. ACTION WITHOUT A MEETING. In addition to the provisions of
Article IX for the amendment of these Regulations, or the adoption of new
Regulations, by written consent, any action that may be authorized or taken at a
meeting of the shareholders may be authorized or taken without a meeting with
the affirmative vote or approval of, and in a writing or writings signed by or
on behalf of, all of the shareholders who would be entitled to notice of a
meeting of the shareholders held for the purpose, which writing or writings
shall be filed with or entered upon the records of the Corporation.
SECTION 6. PROXIES. Persons entitled to vote shares or to act with
respect to shares may vote or act in person or by proxy. The person appointed as
proxy need not be a shareholder. Unless the writing appointing a proxy otherwise
provides, the presence at a meeting of the person who appointed a proxy shall
not operate to revoke the appointment. Notice to the Corporation, in writing or
in open meeting, of the revocation of the appointment of a proxy shall not
affect any vote or act previously taken or authorized.
SECTION 7. APPROVAL AND RATIFICATION OF ACTS OF OFFICERS AND DIRECTORS.
Except as otherwise provided by the Articles or by law, any contract, action, or
transaction, prospective or past, of the Corporation or of the Board of
Directors or of any director or officer may be approved or ratified by the
affirmative vote in person or by proxy of the holders of record of sixty-six
percent (66%) of the shares held by persons not interested in the contract,
action, or transaction and entitled to vote in the election of directors
(without regard to voting powers that may thereafter exist upon a default,
failure, or other contingency), which approval or ratification shall be as valid
and binding as though affirmatively voted for or consented to by every
shareholder of the Corporation.
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<PAGE> 3
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
SECTION 1. NUMBER. The Board of Directors shall consist of such number
of members (not less, however, than three or, when all of the shares of the
Corporation are owned of record by one or two shareholders, not less than the
number of shareholders) as the shareholders, at any annual or special meeting
called for the purpose of electing directors at which a quorum is present, by
the affirmative vote of the holders of sixty-six percent (66%) of the shares
that are represented at the meeting and entitled to vote on the proposal, may
determine. Whenever the shareholders shall have so determined the number, that
number shall be deemed the authorized number of members of the Board of
Directors until the number shall again be changed in the manner set forth
herein.
SECTION 2. ELECTION OF DIRECTORS; VACANCIES. The directors shall be
elected at each annual meeting of shareholders or at a special meeting called
for the purpose of electing directors. At a meeting of shareholders at which
directors are to be elected, only persons nominated as candidates shall be
eligible for election as directors and the candidates receiving the greatest
number of votes shall be elected. In the event of the occurrence of any vacancy
in the Board of Directors, however caused, the remaining directors, though less
than a majority of the whole authorized number of directors, may, by the vote of
a majority of their number, fill the vacancy for the unexpired term.
SECTION 3. TERM OF OFFICE; RESIGNATIONS. Each director shall hold
office until the next annual meeting of the shareholders and until his successor
is elected or until his earlier resignation, removal from office, or death. Any
director may resign at any time by oral statement to that effect made at a
meeting of the Board of Directors or in a writing to that effect delivered to
the Secretary, such resignation to take effect immediately or at such other time
as the director may specify.
SECTION 4. ORGANIZATION OF MEETING. Immediately after each annual
meeting of the shareholders, the newly elected directors shall hold an
organization meeting for the purpose of electing officers and transacting any
other business. Notice of the organization meeting need not be given.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held at such times and places within or without the State of Ohio as may
be provided for in bylaws or resolutions adopted by the Board of Directors and
upon such notice, if any, as shall be so provided. Unless otherwise indicated in
the notice of a regular meeting, any business may be transacted at that regular
meeting.
SECTION 6. SPECIAL MEETINGS. Special meetings (including "telephone"
meetings) of the Board of Directors may be held at any time within or without
the State of Ohio (or through use of telephone or other communications equipment
if all persons participating can hear each other) upon call by the Chairman of
the Board, the President, a Vice President, or any two directors. Written notice
of the time and place of each special meeting shall be given to each
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<PAGE> 4
director either by personal delivery or by mail, telegram, or cablegram at least
two days before the meeting, which notice shall specify the purposes of the
meeting, except that attendance of any director at any special meeting (and
participation in a meeting employing telephone or other communications
equipment) without protesting, prior to or at the commencement of the meeting,
the lack of proper notice shall be deemed to be a waiver by him of notice of the
meeting and except that the notice of a special meeting may be waived in
writing, either before or after the holding of the meeting, by any director,
which writing shall be filed with or entered upon the records of the
Corporation. Unless otherwise indicated in the notice of a special meeting, any
business may be transacted at that special meeting.
SECTION 7. QUORUM; ADJOURNMENT. A quorum of the Board of Directors at
an organization, regular, or special meeting shall consist of sixty-six (66%) of
the directors then in office, except that a majority of the directors present at
a meeting duly held, whether or not a quorum is present, may adjourn the meeting
from time to time; if any meeting is adjourned, notice of adjournment shall be
given. At each meeting of the Board of Directors at which a quorum is present,
all questions and business shall be determined by a majority vote of those
present except as otherwise expressly provided in these Regulations.
SECTION 8. ACTION WITHOUT A MEETING. Any action that may be authorized
or taken at a meeting of the Board of Directors may be authorized or taken
without a meeting with the affirmative vote or approval of, and in a writing or
writings signed by, all of the directors, which writing or writings shall be
filed with or entered upon the records of the Corporation.
ARTICLE III
-----------
OFFICERS
--------
SECTION 1. ELECTION AND DESIGNATION OF OFFICERS. The Board of Directors
shall elect a President, a Secretary, and a Treasurer and, in its discretion,
may elect a Chairman of the Board, one or more Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
as the Board of Directors may deem necessary. The Chairman of the Board and the
President shall be directors, but no one of the other officers need be a
director. Any two or more offices may be held by the same person, but no officer
shall execute, acknowledge, or verify any instrument in more than one capacity
if the instrument is required to be executed, acknowledged, or verified by two
or more officers.
SECTION 2. TERM OF OFFICE; VACANCIES. Each officer of the Corporation
shall hold office until the next organization meeting of the Board of Directors
and until his successor is elected or until his earlier resignation, removal
from office, or death. The Board of Directors may remove any officer at any time
with or without cause by a majority vote of the directors then in office. Any
vacancy in any office may be filled by the Board of Directors.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any,
shall preside at all meetings of the Board of Directors, shall, unless that duty
has been delegated by the Board of Directors to the President or another
officer, preside at all meetings of the shareholders, and
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<PAGE> 5
shall have such authority and shall perform such other duties as may be
determined by the Board of Directors.
SECTION 4. PRESIDENT. The President shall preside at all meetings of
the shareholders and at all meetings of the Board of Directors, other than
meetings at which the Chairman of the Board, if any, presides in accordance with
the provisions of the preceding Section. Subject to directions of the Board of
Directors and to the delegation by the Board of Directors to the Chairman of the
Board of specific or general executive supervision, the President shall have
general executive supervision over the property, business, and affairs of the
Corporation. He may execute all authorized deeds, mortgages, bonds, contracts,
and other obligations in the name of the Corporation and shall have such other
authority and shall perform such other duties as may be determined by the Board
of Directors.
SECTION 5. VICE PRESIDENTS. The Vice Presidents, if any, shall,
respectively, have such authority and perform such duties as may be determined
by the Board of Directors.
SECTION 6. SECRETARY. The Secretary shall keep the minutes of meetings
of the shareholders and of the Board of Directors. He shall keep such books as
may be required by the Board of Directors, shall give notices of meetings of the
shareholders and of meetings of the Board of Directors required by law or by
these Regulations or otherwise, and shall have such authority and shall perform
such other duties as may be determined by the Board of Directors.
SECTION 7. TREASURER. The Treasurer shall receive and have in charge
all money, bills, notes, bonds, securities of other corporations, and similar
property belonging to the Corporation, and shall do with this property as may be
ordered by the Board of Directors. He shall keep accurate financial accounts and
hold them open for the inspection and examination of the directors and shall
have such authority and shall perform such other duties as may be determined by
the Board of Directors.
SECTION 8. OTHER OFFICERS. The Assistant Secretaries and Assistant
Treasurers, if any, and any other officers whom the Board of Directors may elect
shall, respectively, have such authority and perform such duties as may be
determined by the Board of Directors.
SECTION 9. DELEGATION OF AUTHORITY AND DUTIES. The Board of Directors
is authorized to delegate the authority and duties of any officer to any other
officer and generally to control the action of the officers and to require the
performance of duties in addition to those mentioned herein.
ARTICLE IV
----------
COMPENSATION OF AND TRANSACTIONS WITH
-------------------------------------
DIRECTORS, OFFICERS, AND EMPLOYEES
----------------------------------
SECTION 1. DIRECTORS. Members of the Board of Directors shall, as such,
receive such compensation, which may be either a fixed sum for attendance at
each meeting of the Board of Directors or stated compensated payable at
intervals, or shall otherwise be compensated as may
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<PAGE> 6
be determined by or pursuant to authority conferred by the Board of Directors
which compensation may be in different amounts for various members of the Board
of Directors. No member of the Board of Directors shall be disqualified from
being counted in the determination of the presence of a quorum or from acting at
any meeting of the Board of Directors by reason of the fact that matters
affecting his own compensation as a director, officer, or employee are to be
determined.
SECTION 2. OFFICERS AND EMPLOYEES. The compensation of officers and
employees of the Corporation, or the method of fixing their compensation, shall
be determined by or pursuant to authority conferred by the Board of Directors.
Compensation may include pension, disability, and death benefits, and may be by
way of fixed salary, on the basis of earnings of the Corporation, any
combination thereof, or otherwise, as may be determined or authorized from time
to time by the Board of Directors.
SECTION 3. TRANSACTIONS WITH DIRECTORS, OFFICERS, AND EMPLOYEES. No
contract, act, or transaction shall be void, or be voidable by the Corporation,
for the reason that it is between the Corporation and one or more of the
directors, officers, or employees of the Corporation or between the Corporation
and another corporation, partnership, joint venture, trust, or other enterprise
in which one or more of the directors, officers, or employees of the Corporation
are directors, trustees, or officers or have a financial or personal interest or
for the reason that one or more interested directors, officers, or employees of
the Corporation participate in a vote at the meeting of the Board of Directors
that authorizes the contract, act, or transaction if, in any such case, the
contract, act, or transaction is approved, ratified, or authorized in the manner
prescribed in these Regulations or by law.
ARTICLE V
---------
INDEMNIFICATION
---------------
SECTION 1. THIRD PARTY ACTIONS. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (other than an action, suit, or
proceeding by or in the right of the Corporation), by reason of the fact that he
is or was a director, officer, employee, or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, trustee, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise, against expenses (including attorney's fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit, or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation or that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
-6-
<PAGE> 7
SECTION 2. DERIVATIVE ACTIONS. Other than in connection with an action
or suit in which the liability of a director under Section 1701.95 of the Ohio
Revised Code is the only liability asserted, the Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee, or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, trustee, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise, against expenses (including attorney's fees) actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, except that:
(a) no indemnification of a director shall be made if it is
proved by clear and convincing evidence in a court of competent
jurisdiction that his action or failure to act involved an act or
omission undertaken with deliberate intent to cause injury to the
Corporation or undertaken with reckless disregard for the best
interests of the Corporation; and
(b) no indemnification of an officer, employee, or agent,
regardless of his status as a director, shall be made in respect of any
claim, issue, or matter as to which he is adjudged to be liable for
negligence or misconduct in the performance of his duty to the
Corporation;
unless and only to the extent that the Court of Common Pleas or the court in
which the action or suit was brought determines upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
he is fairly and reasonably entitled to indemnity for such expenses as the Court
of Common Pleas or the other court shall deem proper.
SECTION 3. RIGHTS AFTER SUCCESSFUL DEFENSE. To the extent a director,
officer, employee, or agent has been successful on the merits or otherwise in
defense of any action, suit, or proceeding referred to in Section 1 or Section 2
of this Article V, or in defense of any claim, issue, or matter therein, he
shall be indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection with the action, suit, or proceeding.
SECTION 4. OTHER DETERMINATIONS OF RIGHTS. Other than in a situation
governed by Section 3 of this Article V, any indemnification under Section 1 or
Section 2 of this Article V (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee, or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 1 or Section 2. The determination shall be made in a written opinion (a)
by independent legal counsel (compensated by the Corporation) or (b) by the
Court of Common Pleas or the court in which the action, suit, or proceeding was
brought.
-7-
<PAGE> 8
SECTION 5. ADVANCES OF EXPENSES. Unless the action or suit is one in
which the liability of a director under Section 1701.95 of the Ohio Revised Code
is the only liability asserted:
(a) expenses (including attorney's fees) incurred by a
director in defending any action, suit, or proceeding referred to in
Section 1 or Section 2 of this Article V shall be paid by the
Corporation, as they are incurred, in advance of final disposition of
the action, suit, or proceeding upon receipt of an undertaking by or on
behalf of the director in which he agrees both (i) to repay the amount
if it is proved by clear and convincing evidence in a court of
competent jurisdiction that his action or failure to act involved an
act or omission undertaken with deliberate intent to cause injury to
the Corporation or undertaken with reckless disregard for the best
interests of the Corporation and (ii) to cooperate with the Corporation
concerning the action, suit, or proceeding; and
(b) expenses (including attorney's fees) incurred by a
director, officer, employee, or agent in defending any action, suit, or
proceeding referred to in Section 1 or Section 2 of this Article V may
be paid by the Corporation, as they are incurred, in advance of final
disposition of the action, suit, or proceeding, as authorized by the
Board of Directors in the specific case, upon receipt of an undertaking
by or on behalf of the director, officer, employee, or agent to repay
the amount if it is ultimately determined that he is not entitled to be
indemnified by the Corporation.
SECTION 6. PURCHASE OF INSURANCE. The Corporation may purchase and
maintain insurance or furnish similar protection, including trust funds, letters
of credit, and self-insurance, on behalf of or for any person who is or was a
director, officer, employee, or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, trustee, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, against any liability asserted against him and incurred by him in
any capacity directly on behalf of the Corporation, or arising out of his status
as such, whether or not the Corporation would have the power to indemnify him
against liability under the provisions of this Article or of the Ohio General
Corporation Law.
SECTION 7. MERGERS. Unless otherwise provided in the agreement of
merger pursuant to which there is a merger into this Corporation of a
constituent corporation that, if its separate existence had continued, would
have been required to indemnify directors, officers, employees, or agents in
specified situations, any person who served as a director, officer, employee, or
agent of the constituent corporation, or served at the request of the
constituent corporation as a director, trustee, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
shall be entitled to indemnification by this Corporation (as the surviving
corporation) to the same extent he would have been entitled to indemnification
by the constituent corporation if its separate existence had continued.
SECTION 8. HEIRS; NON-EXCLUSIVITY. The indemnification provided by this
Article shall continue as to a person who has ceased to be a director, officer,
employee, or agent of the Corporation and shall inure to the benefit of the
heirs, executors, and administrators of such a
-8-
<PAGE> 9
person and shall not be deemed exclusive of, and shall be in addition to, any
other rights granted to a person seeking indemnification as a matter of law or
under the Articles, these Regulations, any agreement, a vote of shareholders or
disinterested directors, any insurance purchased by the Corporation, any action
by the directors to take into account amendments to the Ohio General Corporation
Law that expand the authority of the Corporation to indemnify a director,
officer, employee, or agent of the Corporation, or otherwise, both as to action
in his official capacity and as to action in another capacity while holding an
office.
ARTICLE VI
----------
CERTIFICATES FOR SHARES
-----------------------
SECTION 1. FORM OF CERTIFICATES AND SIGNATURES. Each holder of shares
shall be entitled to one or more certificates, signed by the Chairman of the
Board, the President, or a Vice President and by the Secretary, an Assistant
Secretary, the Treasurer, or an Assistant Treasurer of the Corporation, which
shall certify the number and class of shares held by him in the Corporation, but
no certificate for shares shall be executed or delivered until the shares are
fully paid. When a certificate is countersigned by an incorporated transfer
agent or registrar, the signature of any officer of the Corporation may be
facsimile, engraved, stamped, or printed. Although an officer of the Corporation
whose manual or facsimile signature is affixed to a certificate ceases to hold
that office before the certificate is delivered, the certificate nevertheless
shall be effective in all respects when delivered.
SECTION 2. TRANSFER OF SHARES. Shares of the Corporation shall be
transferable upon the books of the Corporation by the holders thereof, in
person, or by a duly authorized attorney, upon surrender and cancellation of
certificates for a like number of shares of the same class or series, with duly
executed assignment and power of transfer endorsed on or attached to the
certificates, and with such proof of the authenticity of the signatures to the
assignment and power of transfer as the Corporation or its agents may reasonably
require.
SECTION 3. LOST, STOLEN, OR DESTROYED CERTIFICATES. The Corporation may
issue a new certificate for shares in place of any certificate theretofore
issued by it and alleged to have been lost, stolen, or destroyed; the Board of
Directors may, however, in its discretion, require the owner, or his legal
representatives, to give the Corporation a bond containing such terms as the
Board of Directors may require to protect the Corporation or any person injured
by the execution and delivery of a new certificate.
SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
appoint, or revoke the appointment of, transfer agents and registrars and may
require all certificates for shares to bear the signatures of the transfer
agents and registrars, or any of them.
-9-
<PAGE> 10
ARTICLE VII
-----------
AUTHORITY TO TRANSFER AND VOTE SECURITIES
-----------------------------------------
The Chairman of the Board, the President, any Vice President, the
Secretary, the Treasurer of the Corporation, and each such officer are
authorized to sign the name of the Corporation and to perform all acts necessary
to effect a sale, transfer, assignment, or other disposition of any shares,
bonds, other evidences of indebtedness or obligations, subscription rights,
warrants, or other securities of another corporation owned by the Corporation
and to issue the necessary powers of attorney; and each such officer is
authorized, on behalf of the Corporation, to vote the securities, to appoint
proxies with respect thereto, to execute consents, waivers, and releases with
respect thereto, or to cause any such action to be taken.
ARTICLE XIII
------------
CORPORATE SEAL
--------------
The Ohio General Corporation Law provides in effect that the absence of
a corporate seal from any instrument executed on behalf of the Corporation does
not affect the validity of the instrument; if in spite of that provision a seal
is imprinted on or attached, applied, or affixed to an instrument by embossment,
engraving, stamping, printing, typing, adhesion, or other means, the impression
of the seal on the instrument shall be circular in form and shall contain the
words "corporate seal."
ARTICLE IX
----------
AMENDMENTS
----------
These Regulations may be amended, or new Regulations may be adopted, by
the shareholders at a meeting held for that purpose, by the affirmative vote of
the holders of shares entitling them to exercise sixty-six percent (66%) of the
voting power on that proposal or without a meeting by the written consent of the
holders of shares entitling them to exercise sixty-six percent (66%) of the
voting power on that proposal. If the Regulations are amended, or new
Regulations are adopted, without a meeting of the shareholders, the Secretary of
the Corporation shall mail a copy of the amendment or the new Regulations to
each shareholder who would have been entitled to vote thereon but did not
participate in the adoption thereof.
ARTICLE X
---------
SHAREHOLDERS' AGREEMENT
-----------------------
If there are any inconsistencies between these Regulations and the
Shareholders' Agreement, dated as of February 5, 1993, between the Corporation
and its shareholders (including any amendments thereto, the "Agreement"), then
the Agreement shall be controlling.
-10-
<PAGE> 1
Exhibit 4.1
================================================================================
GEO SPECIALTY CHEMICALS, INC.
as Issuer
and
Chase Manhattan Trust Company, National Association
as Trustee
-----------------
INDENTURE
Dated as of July 31, 1998
-----------------
up to $200,000,000
10 1/8% Senior Subordinated Notes due 2008, Series A
10 1/8% Senior Subordinated Notes due 2008, Series B
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section_
- ------- --------
<S> <C>
310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.08; 7.10
(b) 7.08; 7.10;
11.02
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.05
(b) 11.03
(c) 11.03
313(a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c) 7.06; 11.02
(d) 7.06
314(a) 4.07; 4.08;
11.02
(b) N.A.
(c)(1) 11.04
(c)(2) 11.04
(c)(3) N.A.
(d) N.A.
(e) 11.05
(f) N.A.
315(a) 7.01(b)
(b) 7.05; 11.02
(c) 7.01(a)
(d) 7.01(c)
(e) 6.11
316(a)(last
sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
(c) 9.05
317(a)(1) 6.08
</TABLE>
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
<TABLE>
<S> <C>
(a)(2) 6.09
(b) 2.04
318(a) 11.01
(c) 11.01
</TABLE>
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
PAGE
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions...................................................1
SECTION 1.02. Incorporation by Reference of TIA............................26
SECTION 1.03. Rules of Construction........................................27
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating..............................................27
SECTION 2.02. Execution and Authentication; Aggregate
Principal Amount............................................28
SECTION 2.03. Registrar and Paying Agent...................................30
SECTION 2.04. Paying Agent To Hold Assets in Trust.........................31
SECTION 2.05. Noteholder Lists.............................................31
SECTION 2.06. Transfer and Exchange........................................32
SECTION 2.07. Replacement Notes............................................32
SECTION 2.08. Outstanding Notes............................................33
SECTION 2.09. Treasury Notes...............................................33
SECTION 2.10. Temporary Notes..............................................34
SECTION 2.11. Cancellation.................................................34
SECTION 2.12. Defaulted Interest...........................................34
SECTION 2.13. CUSIP Numbers................................................35
SECTION 2.14. Deposit of Moneys............................................35
SECTION 2.15. Restrictive Legends..........................................35
SECTION 2.16. Book-Entry Provisions for Global
Security...................................................................37
SECTION 2.17. Special Transfer Provisions..................................39
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee...........................................41
SECTION 3.02. Selection of Notes To Be Redeemed............................42
SECTION 3.03. Notice of Redemption.........................................43
SECTION 3.04. Effect of Notice of Redemption...............................44
SECTION 3.05. Deposit of Redemption Price..................................44
SECTION 3.06. Notes Redeemed in Part.......................................44
-i-
<PAGE> 5
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.............................................45
SECTION 4.02. Maintenance of Office or Agency..............................45
SECTION 4.03. Corporate Existence..........................................45
SECTION 4.04. Payment of Taxes and Other Claims............................46
SECTION 4.05. Maintenance of Properties and
Insurance...................................................46
SECTION 4.06. Compliance Certificate; Notice of
Default.....................................................47
SECTION 4.07. Compliance with Laws.........................................48
SECTION 4.08. Reports to Holders...........................................48
SECTION 4.09. Waiver of Stay, Extension or Usury
Laws........................................................49
SECTION 4.10. Limitation on Restricted Payments............................49
SECTION 4.11. Limitation on Transactions with
Affiliates..................................................51
SECTION 4.12. Limitation on Incurrence of Additional
Indebtedness................................................52
SECTION 4.13. Limitation on Dividend and Other
Payment Restrictions Affecting
Subsidiaries................................................53
SECTION 4.14. Prohibition on Incurrence of Senior
Subordinated Debt...........................................53
SECTION 4.15. Change of Control............................................54
SECTION 4.16. Limitation on Asset Sales....................................56
SECTION 4.17. Limitation on Preferred Stock of
Restricted Subsidiaries.....................................60
SECTION 4.18. Limitation on Liens..........................................60
SECTION 4.19. Limitation of Guarantees by Restricted
Subsidiaries................................................61
SECTION 4.20. Conduct of Business..........................................62
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of
Assets.....................................................62
SECTION 5.02. Successor Corporation Substituted............................63
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default............................................64
SECTION 6.02. Acceleration.................................................65
SECTION 6.03. Other Remedies...............................................67
SECTION 6.04. Waiver of Past Defaults......................................67
-ii-
<PAGE> 6
SECTION 6.05. Control by Majority..........................................67
SECTION 6.06. Limitation on Suits..........................................68
SECTION 6.07. Rights of Holders To Receive Payment.........................68
SECTION 6.08. Collection Suit by Trustee...................................68
SECTION 6.09. Trustee May File Proofs of Claim.............................69
SECTION 6.10. Priorities...................................................69
SECTION 6.11. Undertaking for Costs........................................70
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee............................................70
SECTION 7.02. Rights of Trustee............................................72
SECTION 7.03. Individual Rights of Trustee.................................73
SECTION 7.04. Trustee's Disclaimer.........................................73
SECTION 7.05. Notice of Default............................................74
SECTION 7.06. Reports by Trustee to Holders................................74
SECTION 7.07. Compensation and Indemnity...................................74
SECTION 7.08. Replacement of Trustee.......................................76
SECTION 7.09. Successor Trustee by Merger, Etc.............................77
SECTION 7.10. Eligibility; Disqualification................................77
SECTION 7.11. Preferential Collection of Claims
Against Company.............................................77
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's
Obligations................................................78
SECTION 8.02. Legal Defeasance and Covenant
Defeasance.................................................80
SECTION 8.03. Conditions to Legal Defeasance or
Covenant Defeasance........................................81
SECTION 8.04. Application of Trust Money..................................83
SECTION 8.05. Repayment to the Company....................................84
SECTION 8.06. Reinstatement...............................................84
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders..................................85
SECTION 9.02. With Consent of Holders.....................................86
SECTION 9.03. Effect on Senior Debt.......................................87
SECTION 9.04. Compliance with TIA.........................................87
SECTION 9.05. Revocation and Effect of Consents...........................87
SECTION 9.06. Notation on or Exchange of Notes............................88
SECTION 9.07. Trustee To Sign Amendments, Etc.............................88
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<PAGE> 7
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Debt............................89
SECTION 10.02. No Payment on Notes in Certain
Circumstances...............................................89
SECTION 10.03. Payment Over of Proceeds upon
Dissolution, Etc............................................91
SECTION 10.04. Payments May Be Paid Prior to
Dissolution.................................................93
SECTION 10.05. Subrogation..................................................93
SECTION 10.06. Obligations of the Company
Unconditional...............................................93
SECTION 10.07. Notice to Trustee............................................94
SECTION 10.08. Reliance on Judicial Order or
Certificate of Liquidating Agent............................95
SECTION 10.09. Trustee's Relation to Senior Debt............................95
SECTION 10.10. Subordination Rights Not Impaired by
Acts or Omissions of the Company or
Holders of Senior Debt......................................96
SECTION 10.11. Noteholders Authorize Trustee To
Effectuate Subordination of Notes...........................96
SECTION 10.12. This Article Ten Not To Prevent Events
of Default..................................................97
SECTION 10.13. Trustee's Compensation Not Prejudiced........................97
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.................................................97
SECTION 11.02. Notices......................................................98
SECTION 11.03. Communications by Holders with Other
Holders.....................................................99
SECTION 11.04. Certificate and Opinion as to
Conditions Precedent........................................99
SECTION 11.05. Statements Required in Certificate or
Opinion.....................................................99
SECTION 11.06. Rules by Trustee, Paying Agent,
Registrar..................................................100
SECTION 11.07. Legal Holidays..............................................100
SECTION 11.08. Governing Law...............................................100
SECTION 11.09. No Adverse Interpretation of Other
Agreements.................................................100
SECTION 11.10. No Recourse Against Others..................................101
SECTION 11.11. Successors..................................................101
SECTION 11.12. Duplicate Originals.........................................101
SECTION 11.13. Severability................................................101
-iv-
<PAGE> 8
SIGNATURES.................................................................102
Exhibit A - Form of Initial Note...........................................A-1
Exhibit B - Form of Exchange Note..........................................B-1
Exhibit C - Form of Certificate To Be Delivered in
Connection with Transfers to Non-QIB
Accredited Investors..........................................C-1
Exhibit D- Form of Certificate To Be Delivered in
Connection with Transfers Pursuant to
Regulations S.................................................D-1
Note: This Table of Contents shall not, for any purpose,
be deemed to be part of the Indenture.
-1-
<PAGE> 9
-1-
INDENTURE, dated as of July 31, 1998, between GEO Specialty
Chemicals, Inc., an Ohio corporation (the "Company"), and Chase Manhattan Trust
Company, National Association, as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 10
1/8% Senior Subordinated Notes due 2008, Series A, to be issued initially in the
principal amount of $120,000,000 and thereafter in an additional principal
amount, if any, up to $80,000,000 subject to the terms and conditions contained
herein, and 10 1/8% Senior Subordinated Notes due 2008, Series B, to be issued
in exchange for the 10 1/8% Senior Subordinated Notes due 2008, Series B, to be
issued in exchange for the 10 1/8% Senior Subordinated Notes due 2008, Series A,
pursuant to a Registration Rights Agreement (as defined) and, to provide
therefor, the Company has duly authorized the execution and delivery of this
Indenture. All things necessary to make the Notes, when duly issued and executed
by the Company, and authenticated and delivered hereunder, the valid obligations
of the Company, and to make this Indenture a valid and binding agreement of the
Company, have been done.
Each party hereto agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders of the Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACCELERATION NOTICE" has the meaning provided in Section
6.02(a).
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of the Company or at the time it merges or consolidates with the
Company or any of its Subsidiaries or assumed in connection with the acquisition
of assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
"AFFILIATE" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, directly or indirectly, of the
<PAGE> 10
-2-
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative of the foregoing.
"AFFILIATE TRANSACTION" has the meaning provided in
Section 4.11.
"AGENT" means any Registrar, Paying Agent or
co-Registrar.
"AGENT MEMBERS" has the meaning provided in
Section 2.16.
"AMENDED CREDIT FACILITY" means the Amended and Restated
Credit Agreement dated as of July 31, 1998, between the Company, the lenders
party thereto in their capacities as lenders thereunder and Bankers Trust
Company, as administrative agent, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder or adding Restricted Subsidiaries of the Company
as additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"ASSET ACQUISITION" means (a) an Investment by the Company or
any Restricted Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of the Company or any
Restricted Subsidiary of the Company, or shall be merged with or into the
Company or any Restricted Subsidiary of the Company, or (b) the acquisition by
the Company or any Restricted Subsidiary of the Company of the assets of any
Person (other than a Restricted Subsidiary of the Company) which constitute all
or substantially all of the assets of such Person or comprise any division or
line of business of such Person or any other properties or assets of such Person
other than in the ordinary course of business.
"ASSET SALE" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or
<PAGE> 11
-3-
a Wholly Owned Restricted Subsidiary of the Company of (a) any Capital Stock of
any Restricted Subsidiary of the Company; or (b) any other property or assets of
the Company or any Restricted Subsidiary of the Company other than in the
ordinary course of business; PROVIDED, HOWEVER, that asset sales or other
dispositions shall not include (i) a transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $500,000 and (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under Section 5.01.
"AUTHENTICATING AGENT" has the meaning provided in
Section 2.02.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any
similar Federal, state or foreign law for the relief of
debtors.
"BLOCKAGE PERIOD" has the meaning provided in
Section 10.02.
"BOARD OF DIRECTORS" means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy
of a resolution certified by the Secretary or an Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person and to
be in full force and effect on the date of such certification, and delivered to
the Trustee.
"BORROWING BASE" means, as of any date, an amount equal to the
sum of (a) 80% of the face amount of all accounts receivable owned by the
Company and its Restricted Subsidiaries as of such date that are not more than
90 days past due, and (b) 50% of the book value of all inventory owned by the
Company and its Restricted Subsidiaries as of such date, all calculated on a
consolidated basis and in accordance with GAAP. To the extent that information
is not available as to the amount of accounts receivable or inventory as of a
specific date, the Company may utilize the most recent available information for
the purpose of calculating the Borrowing Base.
"BUSINESS DAY" means any day that is not a Legal
Holiday.
"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person, and (ii)
<PAGE> 12
-4-
with respect to any Person that is not a corporation, any and all partnership,
membership or other equity interests of such Person.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"CASH EQUIVALENTS" means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Ratings Group ("S&P")
or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing
no more than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $250.0 million; (v)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (iv) above; and (vi) investments
in money market funds which invest substantially all their assets in securities
of the types described in clauses (i) through (v) above.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of this
Indenture), other than to the Permitted Holders; (ii) the approval by the
holders of Capital Stock of the Company of any plan or proposal for the
liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of this Indenture);
<PAGE> 13
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(iii) any Person or Group (other than the Permitted Holders) shall become the
owner, directly or indirectly, beneficially or of record, of shares representing
more than 50% of the aggregate ordinary voting power represented by the issued
and outstanding Capital Stock of the Company; or (iv) the replacement of a
majority of the Board of Directors of the Company over a two-year period from
the directors who constituted the Board of Directors of the Company at the
beginning of such period, and such replacement shall not have been approved by a
vote of at least a majority of the members of the Board of Directors of the
Company then still in office who either were members of such Board of Directors
at the beginning of such period or whose election as a member of such Board of
Directors was previously so approved.
"CHANGE OF CONTROL DATE" has the meaning provided in
Section 4.15.
"CHANGE OF CONTROL OFFER" has the meaning provided in
Section 4.15.
"CHANGE OF CONTROL PAYMENT DATE" has the meaning
provided in Section 4.15.
"COMMON STOCK" of any Person means any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of, such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"COMPANY" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
such successor.
"CONSOLIDATED EBITDA" means, with respect to any Person, for
any period, the sum (without duplication) of (i) Consolidated Net Income and
(ii) to the extent Consolidated Net Income has been reduced thereby, (A) all
income taxes of such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable to
sales or dispositions outside the ordinary course of business), (B) Consolidated
Interest Expense and (C) Consolidated Non-cash Charges LESS any non-cash items
increasing Consolidated Net Income for such period, all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in accordance
with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect
to any Person, the ratio of Consolidated EBITDA of such Person during the four
full fiscal quarters (the "Four
<PAGE> 14
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Quarter Period"), for which financial statements are available, ending on or
prior to the date of the transaction giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to
Consolidated Fixed Charges of such Person for the Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a PRO FORMA basis for the period of such
calculation to (i) the incurrence or repayment of any Indebtedness of such
Person or any of its Restricted Subsidiaries (and the application of the
proceeds thereof) giving rise to the need to make such calculation and any
incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (ii) any asset sales or other dispositions or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise
to the need to make such calculation as a result of such Person or one of its
Restricted Subsidiaries (including any Person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (including any PRO FORMA expense and cost reductions
calculated on a basis consistent with Regulation S-X under the Exchange Act)
attributable to the assets which are the subject of the Asset Acquisition or
asset sale or other disposition during the Four Quarter Period) occurring during
the Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such asset sale or
other disposition or Asset Acquisition (including the incurrence, assumption or
liability for any such Acquired Indebtedness) occurred on the first day of the
Four Quarter Period. If such Person or any of its Restricted Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the incurrence of such guaranteed Indebtedness as
if such Person or any Restricted Subsidiary of such Person had directly incurred
or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date; and (2) notwithstanding
clause (1) above, interest on Indebtedness
<PAGE> 15
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determined on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Swap Obligations, shall be deemed to accrue at
the rate per annum resulting after giving effect to the operation of such
agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person
for any period, the sum, without duplication, of (i) Consolidated Interest
Expense, plus (ii) the product of (x) the amount of all dividend payments on any
series of Preferred Stock of such Person (other than dividends paid in Qualified
Capital Stock) paid, accrued or scheduled to be paid or accrued during such
period times (y) a fraction, the numerator of which is one and the denominator
of which is one minus the then current effective consolidated federal, state and
local tax rate of such Person, expressed as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any
Person for any period, the sum of, without duplication: (i) the aggregate of the
interest expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount and amortization or write-off
of deferred financing costs, (b) the net costs under Interest Swap Obligations,
(c) all capitalized interest and (d) the interest portion of any deferred
payment obligation; and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person,
for any period, the aggregate net income (or loss) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; PROVIDED that there shall be excluded therefrom (a)
after-tax gains from Asset Sales or abandonments or reserves relating thereto,
(b) after-tax items classified as extraordinary or nonrecurring gains, (c) the
net income of any Person acquired in a "pooling of interests" transaction
accrued prior to the date it becomes a Restricted Subsidiary of the referent
Person or is merged or consolidated with the referent Person or any Restricted
Subsidiary of the referent Person, (d) the net income (but not loss) of any
Restricted Subsidiary of the referent Person to the extent that the declaration
of dividends or similar distributions by that Restricted Subsidiary of that
income is restricted by a contract, operation of law or otherwise, (e) the net
income of any Person, other than a Restricted Subsidiary of the referent Person,
except to the extent of cash dividends or distributions paid to the referent
Person or to a Wholly Owned Restricted Subsidiary of the referent Person by such
Person, (f) any restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of Consolidated Net Income
<PAGE> 16
-8-
accrued at any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), and (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets.
"CONSOLIDATED NET WORTH" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any
Person, for any period, the aggregate depreciation, amortization and other
non-cash expenses of such Person and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP (excluding
any such charges constituting an extraordinary item or loss or any such charge
which requires an accrual of or a reserve for cash charges for any future
period).
"COVENANT DEFEASANCE" has the meaning provided in
Section 8.02.
"CURRENCY AGREEMENT" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any Restricted Subsidiary of the Company against
fluctuations in currency values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means an event or condition the occurrence of which
is, or with the lapse of time or the giving of notice or both would be, an Event
of Default.
"DEFAULT NOTICE" has the meaning provided in
Section 10.02.
"DEPOSITORY" means The Depository Trust Company, its
nominees and successors.
"DESIGNATED SENIOR DEBT" means (i) Indebtedness under or in
respect of the Amended Credit Facility and (ii) any other Indebtedness
constituting Senior Debt which, at the time of determination, has an aggregate
principal amount of at least
<PAGE> 17
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$25.0 million and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by the Company.
"DISQUALIFIED CAPITAL STOCK" means that portion of
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 is redeemable at the sole option of the
holder thereof, on or prior to the final maturity date of the Notes.
"EVENT OF DEFAULT" has the meaning provided in
Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"EXCHANGE NOTES" means the 10 1/8% Senior Subordinated Notes
due 2008, Series B (the terms of which are identical to the Initial Notes except
that, unless any Exchange Notes shall be issued as Private Exchange Notes (as
defined in the Registration Rights Agreement), the Exchange Notes shall be
registered under the Securities Act, and shall not contain the restrictive
legend on the face of the form of the Initial Notes), to be issued in exchange
for the Initial Notes pursuant to the registered Exchange Offer and a Private
Exchange (as defined in the Registration Rights Agreement).
"EXCHANGE OFFER" means the registration by the Company under
the Securities Act pursuant to a registration statement of the offer by the
Company to each Holder of the Initial Notes to exchange all the Initial Notes
held by such Holder for the Exchange Notes in an aggregate principal amount
equal to the aggregate principal amount of the Initial Notes held by such
Holder, all in accordance with the terms and conditions of the Registration
Rights Agreement.
"FAIR MARKET VALUE" means, with respect to any asset or
property, the price which could be negotiated in an arm's- length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
Board Resolution of the Board of Directors of the Company delivered to the
Trustee.
"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
<PAGE> 18
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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, which are in effect as of the Issue Date.
"GLOBAL NOTE" has the meaning provided in
Section 2.01.
"GUARANTEE" has the meaning provided in Section 4.19.
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note
is registered on the Registrar's books.
"INCUR" has the meaning provided in Section 4.12.
"INDEBTEDNESS" means with respect to any Person, without
duplication, (i) all Obligations of such Person for borrowed money, (ii) all
Obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all Capitalized Lease Obligations of such Person,
(iv) all Obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all Obligations under
any title retention agreement (but excluding trade accounts payable and other
accrued liabilities arising in the ordinary course of business that are not
overdue by 90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted), (v) all Obligations
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (vi) guarantees and other contingent
obligations in respect of Indebtedness referred to in clauses (i) through (v)
above and clause (viii) below, (vii) all Obligations of any other Person of the
type referred to in clauses (i) through (vi) which are secured by any lien on
any property or asset of such Person, the amount of such Obligation being deemed
to be the lesser of the fair market value of such property or asset or the
amount of the Obligation so secured, (viii) all Obligations under currency
agreements and interest swap agreements of such Person and (ix) all Disqualified
Capital Stock issued by such Person with the amount of Indebtedness represented
by such Disqualified Capital Stock being equal to the greater of its voluntary
or involuntary liquidation preference and its maximum fixed repurchase price,
but excluding accrued dividends, if any. For purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
this Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in
<PAGE> 19
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good faith by the Board of Directors of the issuer of such Disqualified Capital
Stock.
"INDENTURE" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (i)
which does not, and whose directors, officers and employees or
Affiliates do not, have a direct or indirect financial interest in the Company
and (ii) which, in the judgment of the Board of Directors of the Company, is
otherwise independent and qualified to perform the task for which it is to be
engaged.
"INITIAL NOTES" means the 10 1/8% Senior Subordinated Notes
due 2008, Series A of the Company issued on the Issue Date and authenticated and
delivered under this Indenture pursuant to Section 2.02 of this Indenture.
"INITIAL PURCHASER" means BT Alex. Brown
Incorporated.
"INTEREST PAYMENT DATE" means the stated maturity of
an installment of interest on the Notes.
"INTEREST SWAP OBLIGATIONS" means the obligations of any
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended to the date hereof and from time to time hereafter.
"INVESTMENT" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit by
the Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of Section 4.10, (i)
"Investment" shall
<PAGE> 20
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include and be valued at the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary and shall exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by the Company or any of its Restricted Subsidiaries,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment, reduced by the
payment of dividends or distributions in connection with such Investment or any
other amounts received in respect of such Investment; PROVIDED that no such
payment of dividends or distributions or receipt of any such other amounts shall
reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Common Stock of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, it ceases to be a Subsidiary of the Company, the Company 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 Common Stock of such Restricted Subsidiary
not sold or disposed of.
"ISSUE DATE" means the date of original issuance of
the Notes.
"LEGAL DEFEASANCE" has the meaning provided in
Section 8.02.
"LEGAL HOLIDAY" has the meaning provided in
Section 11.07.
"LIEN" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"MATURITY DATE" means August 1, 2008.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment
<PAGE> 21
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banking fees and sales commissions), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to available
tax credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employ-
ment benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale.
"NET PROCEEDS OFFER" has the meaning provided in
Section 4.16.
"NET PROCEEDS OFFER PAYMENT DATE" has the meaning
provided in Section 4.16.
"NET PROCEEDS OFFER TRIGGER DATE" has the meaning
provided in Section 4.16.
"NON-U.S. PERSON" means a Person who is not a U.S.
person, as defined in Regulation S.
"NOTES" means the Initial Notes and the Exchange Notes and any
other notes issued after the Issue Date in accordance with clause (iii) of the
fourth paragraph of Section 2.02 treated as a single class of securities, as
amended or supplemented from time to time in accordance with the terms hereof,
that are issued pursuant to this Indenture.
"OBLIGATIONS" means all obligations for principal, premium,
interest, penalties, fees, indemnification, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"OFFERING MEMORANDUM" means the Offering Memorandum dated July
28, 1998, pursuant to which the Initial Notes were offered, and any supplement
thereto.
"OFFICER" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Controller or the Secretary of such
Person, or any other officer designated by the Board of Directors serving in a
similar capacity.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of
<PAGE> 22
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such Person and otherwise complying with the requirements of Sections 11.04 and
11.05, as they relate to the making of an Officers' Certificate.
"OPINION OF COUNSEL" means a written opinion from legal
counsel, who may be counsel for the Company, and who is reasonably acceptable to
the Trustee and not rendered by any employee of the Company or any of its
Affiliates or Subsidiaries complying with the requirements of Sections 11.04 and
11.05, as they relate to the giving of an Opinion of Counsel.
"PAYING AGENT" has the meaning provided in
Section 2.03.
"PERMITTED HOLDERS" means (A) George P. Ahearn, William P.
Eckman and each of their respective spouses, members of their immediate families
and/or any of the lineal descendants of any thereof and/or (B) any trust or
similar entity all of the beneficiaries of which are any of the Persons
identified in the foregoing clause (A) and (C) Charter Oak Partners or any of
its Affiliates.
"PERMITTED INDEBTEDNESS" means, without duplication,
each of the following:
(i) the Exchange Notes and the Private Exchange Notes (as
defined in the Registration Rights Agreement) issued in exchange for
the $120,000,000 of Initial Notes issued on the first Issue Date
(ii) Indebtedness of the Company and its Restricted
Subsidiaries incurred pursuant to the Amended Credit Facility in an
aggregate principal amount at any time outstanding not to exceed the
greater of (A) $25.0 million less any required permanent repayments
(which are accompanied by a corresponding permanent commitment
reduction) thereunder and (B) the amount of the Borrowing Base;
(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually
paid or permanent reductions therein;
(iv) Interest Swap Obligations of the Company covering
Indebtedness of the Company or any of its Restricted Subsidiaries and
Interest Swap Obligations of any Restricted Subsidiary of the Company
covering Indebtedness of such Restricted Subsidiary; PROVIDED, HOWEVER,
that such Interest Swap Obligations are entered into to protect the
Company and its Restricted
<PAGE> 23
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Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with this Indenture to the extent the notional
principal amount of such Interest Swap Obligation does not exceed the
principal amount of the Indebtedness to which such Interest Swap
Obligation relates;
(v) Indebtedness under Currency Agreements; PROVIDED that in
the case of Currency Agreements which relate to Indebtedness, such
Currency Agreements do not increase the Indebtedness of the Company and
its Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary of
the Company to the Company or to a Wholly Owned Restricted Subsidiary
of the Company for so long as such Indebtedness is held by the Company
or a Wholly Owned Restricted Subsidiary of the Company, in each case
subject to no Lien held by a Person other than the Company or a Wholly
Owned Restricted Subsidiary of the Company; PROVIDED that if as of any
date any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company owns or holds any such Indebtedness or holds
a Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by
the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary of the Company for so long as such Indebtedness is held by a
Wholly Owned Restricted Subsidiary of the Company, in each case subject
to no Lien; PROVIDED that (a) any Indebtedness of the Company to any
Wholly Owned Restricted Subsidiary of the Company is unsecured and
subordinated, pursuant to a written agreement, to the Company's
obligations under this Indenture and the Notes and (b) if as of any
date any Person other than a Wholly Owned Restricted Subsidiary of the
Company owns or holds any such Indebtedness or any Person holds a Lien
in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by
the Company;
(viii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; PROVIDED,
HOWEVER, that such Indebtedness is extinguished within two business
days of incurrence;
<PAGE> 24
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(ix) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations
in connection with self-insurance or similar requirements in the
ordinary course of business;
(x) Indebtedness represented by Capitalized Lease Obligations
and Purchase Money Indebtedness of the Company and its Restricted
Subsidiaries incurred in the ordinary course of business not to exceed
$5.0 million at any one time outstanding;
(xi) Refinancing Indebtedness; and
(xii) additional Indebtedness of the Company and its
Restricted Subsidiaries in an aggregate principal amount not to exceed
$10.0 million at any one time outstanding (which may, but need not be,
incurred under the New Credit Facility).
"PERMITTED INVESTMENTS" means (i) Investments by the Company
or any Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company; (ii) Investments in the Company by any
Restricted Subsidiary of the Company; PROVIDED that any Indebtedness evidencing
such Investment is unsecured and subordinated, pursuant to a written agreement,
to the Company's obligations under the Notes and this Indenture; (iii)
investments in cash and Cash Equivalents; (iv) loans and advances to employees
and officers of the Company and its Restricted Subsidiaries in the ordinary
course of business for bona fide business purposes not in excess of $1.0 million
at any one time outstanding; (v) Currency Agreements and Interest Swap
Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with this
Indenture; (vi) additional Investments not to exceed $5.0 million at any one
time outstanding; (vii) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers; and
(viii) Investments made by the Company or its Restricted Subsidiaries as a
result of consideration received in connection with an Asset Sale made in
compliance with Section 4.16.
"PERMITTED LIENS" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b)
<PAGE> 25
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contested in good faith by appropriate proceedings and as to which the
Company or any of its Restricted Subsidiaries shall have set aside on
its books such reserves as may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security, including any Lien
securing letters of credit issued in the ordinary course of business
consistent with past practice in connection therewith, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so
long as such Lien is adequately bonded and any appropriate legal
proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of the
business of the Company or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized
Lease Obligation; PROVIDED that such Liens do not extend to any
property or asset which is not leased property subject to such
Capitalized Lease Obligation;
(vii) purchase money Liens to finance property or assets of
the Company or any Restricted Subsidiary of the Company acquired in the
ordinary course of business; PROVIDED, HOWEVER, that (A) the related
purchase money Indebtedness shall not exceed the cost of such property
or assets and shall not be secured by any property or assets of the
Company or any Restricted Subsidiary of the Company other than the
property and assets so acquired and (B) the Lien securing such
Indebtedness shall be created within 90 days of such acquisition;
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(viii) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Person's obligations in
respect of bankers' acceptances issued or created for the account of
such Person to facilitate the purchase, shipment or storage of such
inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and proceeds
thereof;
(x) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Restricted Subsidiaries,
including rights of offset and set-off;
(xi) Liens securing Interest Swap Obligations which Interest
Swap Obligations relate to Indebtedness that is otherwise permitted
under this Indenture;
(xii) Liens securing Capitalized Lease Obligations and
Purchase Money Indebtedness permitted pursuant to clause (x) of the
definition of "Permitted Indebtedness"; PROVIDED, HOWEVER, that in the
case of Purchase Money Indebtedness (A) the Indebtedness shall not
exceed the cost of such property or assets and shall not be secured by
any property or assets of the Company or any Restricted Subsidiary of
the Company other than the property and assets so acquired or
constructed and (B) the Lien securing such Indebtedness shall be
created within 180 days of such acquisition or construction or, in the
case of a refinancing of any Purchase Money Indebtedness, within 180
days of such refinancing;
(xiii) Liens securing Indebtedness under Currency Agreements;
and
(xiv) Liens securing Acquired Indebtedness incurred in
accordance with Section 4.12; PROVIDED that (A) such Liens secured such
Acquired Indebtedness at the time of and prior to the incurrence of
such Acquired Indebtedness by the Company or a Restricted Subsidiary of
the Company and were not granted in connection with, or in anticipation
of, the incurrence of such Acquired Indebtedness by the Company or a
Restricted Subsidiary of the Company and (B) such Liens do not extend
to or cover any property or assets of the Company or of any of its
Restricted Subsidiaries other than the property or assets that secured
the Acquired Indebtedness prior to the time such Indebtedness became
Acquired Indebtedness of the Company or a Restricted Subsidiary of the
Company and are no more
<PAGE> 27
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favorable to the lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired Indebtedness by
the Company or a Restricted Subsidiary of the Company.
"PERSON" means an individual, partnership, corporation,
unincorporated organization, trust or joint venture, or a governmental agency or
political subdivision thereof.
"PHYSICAL NOTES" has the meaning provided in
Section 2.01.
"PREFERRED STOCK" of any Person means any Capital
Stock of such Person that has preferential rights to any other
Capital Stock of such Person with respect to dividends or redemptions or upon
liquidation.
"PRINCIPAL" of any Indebtedness (including the Notes) means
the principal amount of such Indebtedness plus the premium when due, if any, on
such Indebtedness.
"PRIVATE EXCHANGE NOTES" has the meaning set forth in
the Registration Rights Agreement.
"PRIVATE PLACEMENT LEGEND" means the legend initially set
forth on the Notes in the form set forth in the first paragraph of Section 2.15.
"PROCEEDS PURCHASE DATE" has the meaning provided in
Section 4.16.
"PRO FORMA" means, with respect to any calculation made or
required to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Exchange Act, as
determined by the Board of Directors of the Company.
"PUBLIC EQUITY OFFERING" means an underwritten public offering
of Qualified Capital Stock of the Company pursuant to a registration statement
filed with the SEC in accordance with the Securities Act.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the
Company and its Restricted Subsidiaries incurred in the normal course of
business for the purpose of financing all or any part of the purchase price, or
the cost of installation, construction or improvement, of property or equipment.
"QUALIFIED CAPITAL STOCK" means any Capital Stock
that is not Disqualified Capital Stock.
<PAGE> 28
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"QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the
meaning specified in Rule 144A under the Securities Act.
"RECORD DATE" means the Record Dates specified in the Notes,
whether or not a Legal Holiday.
"REDEMPTION DATE," when used with respect to any Note to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Notes.
"REDEMPTION PRICE," when used with respect to any Note to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Notes.
"REFERENCE DATE" has the meaning provided in
Section 4.10.
"REFINANCE" means, in respect of any security or Indebtedness,
to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the
Company or any Restricted Subsidiary of the Company of Indebtedness incurred in
accordance with Section 4.12 (other than pursuant to clause (ii), (iv), (v),
(vi), (vii), (viii), (ix), (x) or (xii) of the definition of "Permitted
Indebtedness"), in each case that does not (1) result in an increase in the
aggregate principal amount of Indebtedness of such Person as of the date of such
proposed Refinancing (plus the amount of any premium required to be paid under
the terms of the instrument governing such Indebtedness and plus the amount of
reasonable expenses incurred by the Company in connection with such Refinancing)
or (2) create Indebtedness with (A) a Weighted Average Life to Maturity that is
less than the Weighted Average Life to Maturity of the Indebtedness being
Refinanced or (B) a final maturity earlier than the final maturity of the
Indebtedness being Refinanced; PROVIDED that (x) if such Indebtedness being
Refinanced is Indebtedness of the Company, then such Refinancing Indebtedness
shall be Indebtedness solely of the Company and (y) if such Indebtedness being
Refinanced is subordinate or junior to the Notes, then such Refinancing
Indebtedness shall be subordinate to the Notes at least to the same extent and
in the same manner as the Indebtedness being Refinanced.
"REGISTRAR" has the meaning provided in Section 2.03.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated July 31, 1998 between the Company and the Initial Purchaser, as
the same may be amended
<PAGE> 29
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or modified from time to time in accordance with the terms thereof.
"REGULATION S" means Regulation S under the
Securities Act.
"REPLACEMENT ASSETS" has the meaning provided in
Section 4.16.
"REPRESENTATIVE" means the indenture trustee or other trustee,
agent or representative in respect of any Designated Senior Debt; PROVIDED that
if, and for so long as, any Designated Senior Debt lacks such a representative,
then the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt in respect of any Designated Senior Debt.
"RESTRICTED PAYMENT" has the meaning provided in
Section 4.10.
"RESTRICTED SECURITY" has the meaning assigned to such term in
Rule 144(a)(3) under the Securities Act; PROVIDED that the Trustee shall be
entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Note constitutes a Restricted Security.
"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of
such Person which at the time of determination is not an Unrestricted
Subsidiary.
"RULE 144A" means Rule 144A under the Securities Act.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such Property.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means, the Securities Act of 1933, as
amended, or any successor statute or statutes thereto.
"SENIOR DEBT" means the principal of, premium, if any, and
interest (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable law)
on any
<PAGE> 30
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Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Debt" shall also include the principal of, premium, if
any, interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of, (x) all monetary
obligations (whether direct or through a guarantee)of every nature of the
Company under the Amended Credit Facility, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses and indemnities, (y) all Interest Swap
Obligations (whether direct or through a guarantee) and (z) all obligations
(whether direct or through a guarantee) under Currency Agreements, in each case
whether outstanding on the Issue Date or thereafter incurred. Notwithstanding
the foregoing, "Senior Debt" shall not include (i) any Indebtedness of the
Company to a Subsidiary of the Company or any Affiliate of the Company or any of
such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of,
any shareholder, director, officer or employee of the Company or any Subsidiary
of the Company (including, without limitation, amounts owed for compensation),
(iii) Indebtedness to trade creditors and other amounts incurred in connection
with obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Capital Stock, (v) any liability for federal, state, local or other
taxes owed or owing by the Company, (vi) that portion of any Indebtedness
incurred in violation of Section 4.12 (but, as to any such obligation, no such
violation shall be deemed to exist for purposes of this clause (vi) if the
holder(s) of such obligation or their representative and the Trustee shall have
received an officers' certificate of the Company to the effect that the
incurrence of such Indebtedness does not (or, in the case of revolving credit
indebtedness, that the incurrence of the entire committed amount thereof at the
date on which the initial borrowing thereunder is made would not) violate such
provisions of this Indenture), (vii) Indebtedness which, when incurred and
without respect to any election under Section 1111(b) of Title 11, United States
Code, is without recourse to the Company and (viii) any Indebtedness which is,
by its express terms, subordinated in right of payment to any other Indebtedness
of the Company.
"SIGNIFICANT SUBSIDIARY," with respect to any Person, means
any Restricted Subsidiary of such Person that satisfies the criteria for a
"significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the
Exchange Act.
<PAGE> 31
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"SUBSIDIARY," with respect to any Person, means (i) any
corporation of which the outstanding Capital Stock having at least a majority of
the votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such Person
or (ii) any other Person of which at least a majority of the voting interest
under ordinary circumstances is at the time, directly or indirectly, owned by
such Person.
"SURVIVING ENTITY" has the meaning provided in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb), as amended, as in effect on the date of this Indenture,
except as otherwise provided in Section 9.04.
"TRUST OFFICER" means any officer of the Trustee assigned by
the Trustee to administer this Indenture, or in the case of a successor trustee,
an officer assigned to the department, division or group performing the
corporation trust work of such successor and assigned to administer this
Indenture.
"TRUSTEE" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"UNRESTRICTED SUBSIDIARY" of any Person means (i) any
Subsidiary of such Person that at the time of determination shall be or continue
to be designated an Unrestricted Subsidiary by the Board of Directors of such
Person in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; PROVIDED that (x) the
Company certifies to the Trustee that such designation complies with Section
4.10 and (y) each Subsidiary to be so designated and each of its Subsidiaries
has not at the time of designation, and does not thereafter, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable with
respect to any Indebtedness pursuant to which the lender has recourse to any of
the assets of the Company or any of its Restricted Subsidiaries. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if (x) immediately after giving effect to such designation, the
Company is able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance
<PAGE> 32
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with Section 4.10 and (y) immediately before and immediately after giving effect
to such designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing provisions.
"U.S. GOVERNMENT OBLIGATIONS" means direct
obligations of, and obligations guaranteed by, the United
States of America for the payment of which the full faith and
credit of the United States of America is pledged.
"U.S. LEGAL TENDER" means such coin or currency of
the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person or
any Wholly Owned Restricted Subsidiary of such Person.
SECTION 1.02. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a
Noteholder.
"indenture to be qualified" means this Indenture.
<PAGE> 33
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"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the Notes means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP as in effect on the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular; and
(5) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING.
The Initial Notes and the Trustee's certificate of
authentication relating thereto shall be substantially in the form of EXHIBIT A.
The Exchange Notes and the Trustee's certificate of authentication relating
thereto shall be substantially in the form of EXHIBIT B. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
depository rule or usage. The Company and the Trustee shall approve the form of
the Notes and any notation, legend or endorsement on them. Each Note shall be
dated the date of its issuance and shall show the date of its authentication.
The terms and provisions contained in the Notes, annexed
hereto as Exhibits A and B, shall constitute, and are hereby expressly made, a
part of this Indenture and, to
<PAGE> 34
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the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global Notes in registered
form, substantially in the form set forth in Exhibit A (the "Global Note"),
deposited with the Trustee, as custodian for the Depository, duly executed by
the Company and authenticated by the Trustee as hereinafter provided and shall
bear the legends set forth in Section 2.15. The aggregate principal amount of
the Global Note may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depository, as
hereinafter provided.
Notes issued in exchange for interests in a Global Note
pursuant to Section 2.16 may be issued in the form of permanent certificated
Notes in registered form (the "Physical Notes") and shall bear the first legend
set forth in Section 2.15. All Notes offered and sold in reliance on Regulation
S shall remain in the form of a Global Note until
the consummation of the Exchange Offer pursuant to the
Registration Rights Agreement.
SECTION 2.02. EXECUTION AND AUTHENTICATION; AGGREGATE
PRINCIPAL AMOUNT.
Two Officers, or an Officer and an Assistant Secretary, shall
sign, or one Officer shall sign and one Officer or an Assistant Secretary (each
of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Notes for the Company by manual or
facsimile signature. The Company's seal shall also be reproduced on the Notes.
If an Officer or Assistant Secretary whose signature is on a
Note was an Officer or Assistant Secretary at the time of such execution but no
longer holds that office or position at the time the Trustee authenticates the
Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original
issue in the aggregate principal amount not to exceed $200,000,000 in one or
more series, PROVIDED that the aggregate principal amount of Initial Notes on
the first Issue Date is $120,000,000, (ii) Private Exchange Notes from time to
time
<PAGE> 35
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only in exchange for a like principal amount of Initial Notes and (iii)
Exchange Notes from time to time only in exchange for (A) a like principal
amount of Initial Notes or (B) a like principal amount of Private Exchange
Notes, in each case upon a written order of the Company in the form of an
Officers' Certificate of the Company. Each such written order shall specify the
amount of Notes to be authenticated and the date on which the Notes are to be
authenticated, whether the Notes are to be Initial Notes, Private Exchange Notes
or Exchange Notes and whether (subject to Section 2.01) the Notes are to be
issued as Physical Notes or Global Notes or such other information as the
Trustee may reasonably request. In addition, with respect to authentication
pursuant to clause (iii) of the first sentence of this paragraph, the first such
written order from the Company shall be accompanied by an Opinion of Counsel of
the Company in a form reasonably satisfactory to the Trustee stating that the
issuance of the Exchange Notes does not give rise to an Event of Default,
complies with this Indenture and has been duly authorized by the Company. The
aggregate principal amount of Notes outstanding at any time may not exceed
$200,000,000, except as provided in Sections 2.07 and 2.08.
In the event that the Company shall issue and the Trustee
shall authenticate any Notes issued under this Indenture subsequent to the Issue
Date pursuant to clause (ii) or (iii) of the first sentence of the immediately
preceding paragraph, the Company shall use its reasonable efforts to obtain the
same "CUSIP" number for such Notes as is printed on the Notes outstanding at
such time; PROVIDED, HOWEVER, that if any series of Notes issued under this
Indenture subsequent to the Issue Date is either determined, pursuant to an
Opinion of Counsel of the Company in a form reasonably satisfactory to the
Trustee or deemed under standard practices to be a different class of security
than the Notes outstanding at such time for federal income tax purposes, the
Company shall obtain a "CUSIP" number for such Notes that is different than the
"CUSIP" number printed on the Notes then outstanding.
Notwithstanding the foregoing, all Notes issued under this
Indenture shall vote and consent together on all matters (as to which any of
such Notes may vote or consent) as one class and no series of Notes will have
the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent (the
"Authenticating Agent") reasonably acceptable to the Company to authenticate
Notes. Unless otherwise provided in the appointment, an Authenticating Agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
Authenticating Agent. An Authenticating Agent has the same rights as an Agent to
deal with the Company or with any Affiliate of the Company.
<PAGE> 36
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The Notes shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New York)
where (a) Notes may be presented or surrendered for registration of transfer or
for exchange ("Registrar"), (b) Notes may be presented or surrendered for
payment ("Paying Agent") and (c) notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Registrar shall keep
a register of the Notes and of their transfer and exchange. The Company, upon
prior written notice to the Trustee, may have one or more co-Registrars and one
or more additional paying agents reasonably acceptable to the Trustee. The term
"Paying Agent" includes any additional Paying Agent. Neither the Company nor any
Affiliate of the Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which agreement shall incorporate
the provisions of the TIA and implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee, in advance, of the
name and address of any such Agent. If the Company fails to maintain a Registrar
or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such.
The Company initially appoints the Trustee as Registrar,
Paying Agent and agent for service of demands and notices in connection with the
Notes, until such time as the Trustee has resigned or a successor has been
appointed. The Paying Agent or Registrar may resign upon 30 days notice to the
Company.
SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of the Holders or the Trustee all assets held by the Paying Agent for
the payment of principal of, or interest on, the Notes (whether such assets have
been distributed to it by the Company or any other obligor on the Notes), and
the Company and the Paying Agent shall notify the Trustee of any Default by the
Company (or any other obligor on the Notes) in making any such payment. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any
<PAGE> 37
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payment Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to account for any
assets distributed. Upon distribution to the Trustee of all assets that shall
have been delivered by the Company to the Paying Agent, the Paying Agent shall
have no further liability for such assets.
SECTION 2.05. NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of the Holders. If the Trustee is not the Registrar, the Company shall
furnish or cause the Registrar to furnish to the Trustee five (5) Business Days
before each Record Date and at such other times as the Trustee may request in
writing a list as of such date and in such form as the Trustee may reasonably
require of the names and addresses of the Holders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. TRANSFER AND EXCHANGE.
Subject to the provisions of Sections 2.15 and 2.16, when
Notes are presented to the Registrar or a co-Registrar with a request to
register the transfer of such Notes or to exchange such Notes for an equal
principal amount of Notes of other authorized denominations, the Registrar or
co-Registrar shall register the transfer or make the exchange as requested if
its requirements for such transaction are met; PROVIDED, HOWEVER, that the Notes
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in form satisfactory
to the Company and the Registrar or co-Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. To permit registrations of
transfer and exchanges, the Company shall execute and the Trustee shall
authenticate Notes at the Registrar's or co-Registrar's request. No service
charge shall be made for any registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Sections 2.10, 3.06, 4.15, 4.16 or 9.06, in which event
the Company shall be responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to
register the transfer of or exchange of any Note (i) during a period beginning
at the opening of business 15 days before the mailing of a notice of redemption
of Notes and ending at the close of business on the day of such mailing and (ii)
selected for redemption in whole or in part pursuant to
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Article Three, except the unredeemed portion of any Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such
Global Note, agree that transfers of beneficial interests in such Global Note
may be effected only through a book entry system maintained by the Holder of
such Global Note (or its agent), and that ownership of a beneficial interest in
the Note shall be required to be reflected in a book entry.
SECTION 2.07. REPLACEMENT NOTES.
If a mutilated Note is surrendered to the Trustee or if the
Holder of a Note claims that the Note has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Note if the Trustee's requirements are met. If required by the Trustee or the
Company, such Holder must provide an affidavit of lost certificate and an
indemnity bond or other indemnity, sufficient in the judgment of both the
Company and the Trustee, to protect the Company, the Trustee or any Agent from
any loss which any of them may suffer if a Note is replaced. The Company may
charge such Holder for its reasonable, out-of-pocket expenses in replacing a
Note, including reasonable fees and expenses of counsel. Every replacement Note
shall constitute an additional obligation of the Company.
SECTION 2.08. OUTSTANDING NOTES.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. Subject
to the provisions of Section 2.09, a Note does not cease to be outstanding
because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives an Opinion of Counsel that the replaced Note is held by a
BONA FIDE purchaser. A mutilated Note ceases to be outstanding upon surrender of
such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent
holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of
the principal and interest due on the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.09. TREASURY NOTES.
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In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver, consent or notice,
Notes owned by the Company or any of its Affiliates shall be considered as
though they are not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Notes which a Trust Officer of the Trustee actually knows are
so owned shall be so considered. The Company shall notify the Trustee, in
writing, when it or any of its Affiliates repurchases or otherwise acquires
Notes, of the aggregate principal amount of such Notes so repurchased or
otherwise acquired.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon receipt of a
written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Notes to be
authenticated and the date on which the temporary Notes are to be authenticated.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company considers appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate upon receipt of a written order of the Company pursuant to Section
2.02 definitive Notes in exchange for temporary Notes.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and, at the written direction of the Company, shall dispose
of all Notes surrendered for transfer, exchange, payment or cancellation.
Subject to Section 2.07, the Company may not issue new Notes to replace Notes
that it has paid or delivered to the Trustee for cancellation. If the Company
shall acquire any of the Notes, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Notes unless
and until the same are surrendered to the Trustee for cancellation pursuant to
this Section 2.11.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record
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date, which date shall be the fifteenth day next preceding the date fixed by the
Company for the payment of defaulted interest or the next succeeding Business
Day if such date is not a Business Day. At least 15 days before the subsequent
special record date, the Company shall mail to each Holder, as of a recent date
selected by the Company, with a copy to the Trustee, a notice that states the
subsequent special record date, the payment date and the amount of defaulted
interest, and interest payable on such defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP NUMBERS.
The Company in issuing the Notes may use one or more "CUSIP"
numbers, and if so, the Trustee shall use the CUSIP numbers in notices of
redemption or exchange as a convenience to Holders; PROVIDED that no
representation is hereby deemed to be made by the Trustee as to the correctness
or accuracy of the CUSIP number printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers printed on the
Notes. The Company shall promptly notify the Trustee of any change in the CUSIP
numbers.
SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 10:00 a.m. New York City time on each Interest
Payment Date and on the Maturity Date, the Company shall have deposited with the
Paying Agent in immediately available funds money sufficient to make cash
payments, if any, due on such Interest Payment Date or Maturity Date, as the
case may be, in a timely manner which permits the Paying Agent to remit payment
to the Holders on such Interest Payment Date or Maturity Date, as the case may
be.
SECTION 2.15. RESTRICTIVE LEGENDS.
Each Global Note and Physical Note that constitutes a
Restricted Security or is sold in compliance with Regulation S shall bear the
following legend (the "Private Placement Legend") on the face thereof until
after the second anniversary of the later of the Issue Date and the last date on
which the Company or any Affiliate of the Company was the owner of such Note (or
any predecessor security) (or such shorter period of time as permitted by Rule
144(k) under the Securities Act or any successor provision thereunder) (or such
longer period of time as may be required under the Securities Act or applicable
state securities laws in the opinion of counsel for the Company, unless
otherwise agreed by the Company and the Holder thereof):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE
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OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) or (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE THAT IS TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE
THE UNITED STATES TO AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON
ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN
BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN
TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear the following legend on the
face thereof:
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UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR
BY ANY SUCH NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE
OF SUCH SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE
INDENTURE GOVERNING THIS NOTE.
SECTION 2.16. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITY.
(a) The Global Note initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in Section 2.15.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depository, or the Trustee as its custodian, or
under the Global Note, and the Depository may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of the
Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.
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(b) Transfers of the Global Note shall be limited to transfers
in whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Note may be transferred
or, subject to Section 2.01, exchanged for Physical Notes in accordance with the
rules and procedures of the Depository and the provisions of Section 2.17. In
addition, Physical Notes shall be transferred to all beneficial owners in
exchange for their beneficial interests in the Global Note if (i) the Depository
notifies the Company that it is unwilling or unable to continue as Depository
for the Global Note and a successor depositary is not appointed by the Company
within 90 days of such notice or (ii) an Event of Default has occurred and is
continuing and the Registrar has received a written request from the Depository
to issue Physical Notes.
(c) In connection with any transfer or exchange of a portion
of the beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Physical Notes of like tenor and amount.
(d) In connection with the transfer of the entire Global Note
to beneficial owners pursuant to paragraph (b), the Global Note shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depository in exchange for its beneficial interest in
the Global Note, an equal aggregate principal amount of Physical Notes of
authorized denominations.
(e) Any Physical Note constituting a Restricted Security
delivered in exchange for an interest in the Global Note pursuant to paragraph
(b) or (c) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c)
of Section 2.17, bear the legend regarding transfer restrictions applicable to
the Physical Notes set forth in Section 2.15.
(f) The Holder of the Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
SECTION 2.17. SPECIAL TRANSFER PROVISIONS.
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
AND NON-U.S. PERSONS. The following provisions shall
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apply with respect to the registration of any proposed transfer of a Note
constituting a Restricted Security to any Institutional Accredited Investor
which is not a QIB or to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the transferee is not an Affiliate of
the Company and the requested transfer is after the second anniversary
of the later of the (a) Issue Date and (b) the last date on which the
Company or an Affiliate of the Company was the owner of such Note (or
any predecessor security) or such shorter period of time as permitted
by Rule 144(k) under the Securities Act or any successor provision
thereunder or (y) (1) in the case of a transfer to an Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons),
the proposed transferee has delivered to the Registrar a certificate
substantially in the form of EXHIBIT C hereto or (2) in the case of a
transfer to a Non-U.S. Person, the proposed transferor has delivered to
the Registrar a certificate substantially in the form of EXHIBIT D
hereto and such other information that the Trustee may reasonably
request in order to confirm that such transaction is being made
pursuant to an exemption from or in a transaction not subject to the
registration requirements of the Securities Act; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, the Registrar shall register
the transfer of any Note constituting a Restricted Security, whether or
not such Note bears a Private Placement Legend upon receipt by the
Registrar of (x) the certificate, if any, required by paragraph (i)
above and (y) instructions given in accordance with the Depository's
and the Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply
with respect to the registration of any proposed transfer of a Note constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
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(i) the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box provided
for on the form of Note stating, or has otherwise advised the Company
and the Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or has
otherwise advised the Company and the Registrar in writing, that it is
purchasing the Note for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Notes to be transferred consist of Physical Notes which after transfer
are to be evidenced by an interest in the Global Note, upon receipt by
the Registrar of instructions given in accordance with the Depository's
and the Registrar's procedures, the Registrar shall reflect on its
books and records the date and an increase in the principal amount of
the Global Note in an amount equal to the principal amount of the
Physical Notes to be transferred, and the Trustee shall cancel the
Physical Notes so transferred.
(c) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the circumstance contemplated by paragraph (a)(i)(x) of this Section
2.17 exist or (ii) there is delivered to the Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.
(d) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
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The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.16 or this Section
2.17. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to Paragraph 6
of the Notes, it shall notify the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice provided for in this
Section 3.01 at least 30 days, but not more than 60 days, before the Redemption
Date (unless a shorter notice period shall be satisfactory to the Trustee, as
evidenced in a writing signed on behalf of the Trustee), together with an
Officers' Certificate stating that such redemption shall comply with the
conditions contained herein and in the Notes.
If the Company is required to make an offer to redeem Notes
pursuant to the provisions of Section 4.15 or 4.16 hereof, it shall furnish to
the Trustee at least 30 days but not more than 60 days before a Redemption Date
(or such shorter period as may be agreed to by the Trustee in writing), an
Officers' Certificate setting forth (i) the Section of this Indenture pursuant
to which the redemption shall occur, (ii) the Redemption Date, (iii) the
principal amount of Notes to be redeemed, (iv) the redemption price and (v) a
statement to the effect that (a) the Company or one of its Subsidiaries has
effected an Asset Sale and the conditions set forth in Section 4.16 have been
satisfied or (b) a Change of Control has occurred and the conditions set forth
in Section 4.15 have been satisfied, as applicable.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
In the event that less than all of the Notes are to be
redeemed at any time, selection of such Notes 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 then listed on a
national securities exchange, on a PRO RATA basis, by lot or in such other fair
and reasonable manner chosen at the discretion
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of the Trustee; PROVIDED, HOWEVER, that if a partial redemption is made with the
proceeds of a Public Equity Offering, selection of the Notes or portion thereof
for redemption shall be made by the Trustee only on a PRO RATA basis or as
nearly on a PRO RATA basis as is practicable (subject to the Depository's
procedures), unless such method is otherwise prohibited. The Company shall
promptly notify the Trustee and the Paying Agent in writing of the date of
listing and the name of the securities exchange if and when the Notes are listed
on a principal national securities exchange. The Trustee shall make the
selection from the Notes outstanding and not previously called for redemption
and shall promptly notify the Company in writing of the Notes selected for
redemption and, in the case of any Notes selected for partial redemption, the
principal amount thereof to be redeemed. Notes in denominations of $1,000 or
less may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Notes that have denominations larger than $1,000. Provisions of this Indenture
that apply to Notes called for redemption also apply to portions of Notes called
for redemption. On and after the date of redemption, interest will cease to
accrue on the Notes or portions thereof called for redemption as long as the
Company has deposited with the Paying Agent funds in satisfaction of the
applicable redemption price pursuant to this Indenture.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail or cause to be mailed a notice of redemption by
first class mail, postage prepaid, to each Holder whose Notes are to be
redeemed, with a copy to the Trustee and any Paying Agent. At the Company's
written request, the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense.
Each notice for redemption shall identify the Notes to be
redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest,
if any, to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such
redemption is being made;
(5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price plus accrued interest,
if any;
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(6) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on
and after the Redemption Date, and the only remaining right of the
Holders of such Notes is to receive payment of the Redemption Price
plus accrued interest, if any, upon surrender to the Paying Agent of
the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, and upon surrender of such Note, a new Note or Notes
in the aggregate principal amount equal to the unredeemed portion
thereof will be issued; and
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.03, Notes called for redemption become due and payable on the Redemption Date
and at the Redemption Price plus accrued interest, if any. Upon surrender to the
Trustee or Paying Agent, such Notes called for redemption shall be paid at the
Redemption Price (which shall include accrued interest thereon to the Redemption
Date, except that installments of interest, the maturity of which is on or prior
to the Redemption Date, shall be payable to Holders of record at the close of
business on the relevant record dates referred to in the Notes).
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before 10:00 a.m. New York City time on the Redemption
Date, the Company shall deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the Redemption Price plus accrued interest, if any, of all
Notes to be redeemed on that date. The Paying Agent shall promptly return to the
Company any U.S. Legal Tender so deposited which is not required for that
purpose, except with respect to monies owed as obligations to the Trustee
pursuant to Article Seven.
If the Company complies with the preceding paragraph, then,
unless the Company defaults in the payment of such Redemption Price plus accrued
interest, if any, interest on the Notes to be redeemed will cease to accrue on
and after the
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applicable Redemption Date, whether or not such Notes are presented for payment.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is to be redeemed in part, the
Company shall execute and the Trustee shall authenticate for the Holder a new
Note or Notes equal in principal amount to the unredeemed portion of the Note
surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay the principal of and interest on the
Notes on the dates and in the manner provided in the Notes and in this
Indenture. An installment of principal of or interest on the Notes shall be
considered paid on the date it is due if the Trustee or Paying Agent (other than
the Company or an Affiliate of the Company) holds on that date U.S. Legal Tender
designated for and sufficient to pay the installment in full and is not
prohibited from paying such money to the Holders pursuant to the terms of this
Indenture.
The Company shall pay, to the extent such payments are lawful,
interest on overdue principal and on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
borne by the Notes. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law, deduct
or withhold income or other similar taxes imposed by the United States of
America from principal, premium, if any, or interest payments hereunder.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain the office or agency required under
Section 2.03. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands
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may be made or served at the address of the Trustee set forth in Section 11.02.
SECTION 4.03. CORPORATE EXISTENCE.
Except as otherwise permitted by Article Five and Section
4.16, the Company shall do or cause to be done, at its own cost and expense, all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate existence of each of its Restricted Subsidiaries in
accordance with the respective organizational documents of each such Restricted
Subsidiary and the material rights (charter and statutory) and franchises of the
Company and each such Restricted Subsidiary.
SECTION 4.04. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon it or any of
its Subsidiaries or properties of it or any of its Subsidiaries and (ii) all
lawful claims for labor, materials and supplies that, if unpaid, might by law
become a Lien upon the property of it or any of its Subsidiaries; PROVIDED,
HOWEVER, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings properly instituted and diligently conducted for which adequate
reserves, to the extent required under GAAP, have been taken.
SECTION 4.05. MAINTENANCE OF PROPERTIES AND INSURANCE.
(a) The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain its material properties in good working order and
condition (subject to ordinary wear and tear) and make all necessary repairs,
renewals, replacements, additions, betterments and improvements thereto, all as
in the judgment of the Company or such Restricted Subsidiary may be appropriate
in order to conduct and carry on its business; PROVIDED, HOWEVER, that nothing
in this Section 4.05 shall prevent the Company or any of its Restricted
Subsidiaries from discontinuing the operation and maintenance of any of its
properties, if such discontinuance is, in the good faith judgment of the Board
of Directors of the Company or the Restricted Subsidiary, as the case may be,
desirable in the conduct of their respective businesses.
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(b) The Company shall provide or cause to be provided, for
itself and each of its Restricted Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the good faith
judgment of the Board of Directors of the Company, are adequate and appropriate
for the conduct of the business of the Company and such Restricted Subsidiaries,
with reputable insurers or with the government of the United States of America
or an agency or instrumentality thereof, in such amounts, with such deductibles,
and by such methods as shall be customary, in the good faith judgment of the
Board of Directors of the Company, for companies similarly situated in the
industry.
SECTION 4.06. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee, (i) within 90
days after the end of the Company's fiscal year and (ii) within 15 days after
the Trustee's written request stating that the Trustee has a reasonable basis to
believe an Event of Default has occurred, an Officers' Certificate stating that
a review of its activities and the activities of its Subsidiaries during the
preceding fiscal year, in the case of Section 4.06(a)(i), or the preceding four
fiscal quarters in the case of Section 4.06(a)(ii), has been made under the
supervision of the signing Officers with a view to determining whether the
Company has complied with its obligations under this Indenture and further
stating, as to each such Officer signing such certificate, that to the best of
such Officer's knowledge the Company during such preceding fiscal year has
complied with each and every such covenant and no Default or Event of Default
occurred during such year and at the date of such certificate there is no
Default or Event of Default that has occurred and is continuing or, if such
signers do know of such Default or Event of Default, the certificate shall
describe the Default or Event of Default and its status with particularity. The
Officers' Certificate shall also notify the Trustee should the Company elect to
change the manner in which it fixes its fiscal year end.
(b) The annual financial statements delivered pursuant to
Section 4.08 shall be accompanied by a written report of the Company's
independent accountants (who shall be a firm of established national reputation)
that in conducting their audit of such financial statements nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article Four, Five or Six of this Indenture insofar as they
relate to accounting matters or, if any such violation has occurred, specifying
the nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
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(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee, at its address set forth in Section 11.02 hereof,
by registered or certified mail or by telegram, telex or facsimile transmission
followed by hard copy by registered or certified mail an Officers' Certificate
specifying such event, notice or other action within five Business Days of its
becoming aware of such occurrence.
SECTION 4.07. COMPLIANCE WITH LAWS.
The Company shall comply, and shall cause each of its
Restricted Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders and restrictions of the United States of America, all states
and municipalities thereof, and of any governmental department, commission,
board, regulatory authority, bureau, agency and instrumentality of the
foregoing, in respect of the conduct of their respective businesses and the
ownership of their respective properties, except for such noncompliances as are
not in the aggregate reasonably likely to have a material adverse effect on the
financial condition or results of operations of the Company and its Restricted
Subsidiaries, taken as a whole.
SECTION 4.08. REPORTS TO HOLDERS.
The Company will deliver to the Trustee and transmit (or cause
to be transmitted) by mail to all Holders, as their names and addresses appear
in the register, without cost, within 15 days after the filing of the same with
the Commission, copies of the quarterly and annual reports and of the
information, documents and other reports, if any, which the Company is required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act (and within 15 days of
the date that is or would be prescribed thereby), the Company will file with the
Commission, to the extent permitted, and provide the Trustee and Holders with
such annual reports and such information, documents and other reports specified
in Sections 13 and 15(d) of the Exchange Act, except that the Company will not
be required to file a current report on Form 8-K with respect to the Acquisition
or the Offering. The Company will also comply with the other provisions of TIA
Section 314(a).
SECTION 4.09. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon,
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plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law or any usury law or other law that would prohibit or
forgive the Company from paying all or any portion of the principal of or
interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Indenture; and (to the extent that it may lawfully do so) the Company
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 4.10. LIMITATION ON RESTRICTED PAYMENTS.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other than dividends or distributions payable
in Qualified Capital Stock of the Company) on or in respect of shares of the
Company's Capital Stock to holders of such Capital Stock, (b) purchase, redeem
or otherwise acquire or retire for value any Capital Stock of the Company or any
warrants, rights or options to purchase or acquire shares of any class of such
Capital Stock, (c) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any Indebtedness of the Company that is subordinate or junior in right of
payment to the Notes (other than payments in respect of that certain
subordinated note dated July 15, 1994 in the current principal amount of
$765,000 payable to Courtney Industries, Inc.) or (d) make any Investment (other
than Permitted Investments) (each of the foregoing actions set forth in clauses
(a), (b), (c) and (d) being referred to as a "Restricted Payment"), if at the
time of such Restricted Payment or immediately after giving effect thereto, (i)
a Default or an Event of Default shall have occurred and be continuing or (ii)
the Company is not able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with Section 4.12 or (iii) the
aggregate amount of Restricted Payments (including such proposed Restricted
Payment) made subsequent to the Issue Date (the amount expended for such
purposes, if other than in cash, being the fair market value of such property as
determined in good faith by the Board of Directors of the Company) shall exceed
the sum of: (w) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company
earned subsequent to the Issue Date and on or prior to the date the Restricted
Payment occurs (the "Reference Date") (treating such period as a single
accounting period); plus (x) 100% of the aggregate net
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cash proceeds received by the Company from any Person (other than a Subsidiary
of the Company) from the issuance and sale subsequent to the Issue Date and on
or prior to the Reference Date of Qualified Capital Stock of the Company; plus
(y) without duplication of any amounts included in clause (iii)(x) above, 100%
of the aggregate net cash proceeds of any equity contribution received by the
Company from a holder of the Company's Capital Stock (excluding, in the case of
clauses (iii)(x) and (y), any net cash proceeds from a Public Equity Offering to
the extent used to redeem the Notes in compliance with the provisions set forth
under paragraph (6)(b) of the Notes; plus (z) without duplication, the sum of
(1) the aggregate amount returned in cash on or with respect to Investments
(other than Permitted Investments) made subsequent to the Issue Date whether
through interest payments, principal payments, dividends or other distributions
or payments, (2) the net cash proceeds received by the Company or any of its
Restricted Subsidiaries from the disposition of all or any portion of such
Investments (other than to a Subsidiary of the Company) and (3) upon
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the fair
market value of such Subsidiary; PROVIDED, HOWEVER, that the sum of clauses (1),
(2) and (3) above shall not exceed the aggregate amount of all such Investments
made subsequent to the Issue Date.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any dividend
within 60 days after the date of declaration of such dividend if the dividend
would have been permitted on the date of declaration; (2) if no Default or Event
of Default shall have occurred and be continuing, the acquisition of any shares
of Capital Stock of the Company, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of, or a contribution of capital in respect of, shares of
Qualified Capital Stock of the Company; (3) if no Default or Event of Default
shall have occurred and be continuing, the acquisition of any Indebtedness of
the Company that is subordinate or junior in right of payment to the Notes
either (i) solely in exchange for shares of Qualified Capital Stock of the
Company, or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of (A)
shares of Qualified Capital Stock of the Company or (B) Refinancing
Indebtedness; (4) so long as no Default or Event of Default shall have occurred
and be continuing, repurchases by the Company of Common Stock of the Company
from employees of the Company or any of its Subsidiaries or their authorized
representatives, whether such Common Stock is owned directly or indirectly by
such employees or their authorized representatives, upon the death, disability
or termination of employment of such employees, in an aggregate amount not to
exceed $750,000 in any calendar year plus the aggregate cash
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proceeds from any payments on life insurance policies for which the Company or
its Subsidiaries is the beneficiary with respect to any employees, officers or
directors of the Company and its Subsidiaries which proceeds are used to
purchase the Common Stock of the Company held by any such employees, officers or
directors; and (5) if no Default or Event of Default shall have occurred and be
continuing, Investments made with the net proceeds of a substantially concurrent
sale for cash (other than to a Subsidiary of the Company) of shares of Qualified
Capital Stock of the Company. In determining the aggregate amount of Restricted
Payments made subsequent to the Issue Date in accordance with clause (iii) of
the immediately preceding paragraph, amounts expended pursuant to clauses (1),
(2)(ii), (4) and (5) shall be included in such calculation.
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its Affiliates
(each an "Affiliate Transaction"), other than (x) Affiliate Transactions
permitted under paragraph (b) below and (y) Affiliate Transactions on terms that
are no less favorable than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a Person that
is not an Affiliate of the Company or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other property
with a fair market value in excess of $250,000 shall be approved by the Board of
Directors of the Company or such Restricted Subsidiary, as the case may be, such
approval to be evidenced by a Board Resolution stating that such Board of
Directors has determined that such transaction complies with the foregoing
provisions. If the Company or any Restricted Subsidiary of the Company enters
into an Affiliate Transaction (or a series of related Affiliate Transactions
related to a common plan) that involves an aggregate fair market value of more
than $2,500,000, the Company or such Restricted Subsidiary, as the case may be,
shall, prior to the consummation thereof, obtain a favorable opinion as to the
fairness of such transaction or series of related transactions to the Company or
the relevant Restricted Subsidiary, as the case may be, from a financial point
of view, from an Independent Financial Advisor and file the same with the
Trustee.
(b) The restrictions set forth in clause (a) shall not apply
to (i) reasonable fees and compensation paid to and indemnity provided on behalf
of, officers, directors, employees
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or consultants of the Company or any Restricted Subsidiary of the Company as
determined in good faith by the Company's Board of Directors or senior
management; (ii) transactions exclusively between or among the Company and any
of its Wholly Owned Restricted Subsidiaries or exclusively between or among such
Wholly Owned Restricted Subsidiaries, provided such transactions are not
otherwise prohibited by this Indenture; (iii) any agreement as in effect as of
the Issue Date or any amendment thereto or any transaction contemplated thereby
(including pursuant to any amendment thereto) in any replacement agreement
thereto so long as any such amendment or replacement agreement is not more
disadvantageous to the Holders in any material respect than the original
agreement as in effect on the Issue Date; and (iv) Restricted Payments permitted
by this Indenture.
SECTION 4.12. LIMITATION ON INCURRENCE OF ADDITIONAL
INDEBTEDNESS.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee, acquire, become liable, contingently or otherwise, with respect to,
or otherwise become responsible for payment of (collectively, "incur") any
Indebtedness (other than Permitted Indebtedness); PROVIDED, HOWEVER, that if no
Default or Event of Default shall have occurred and be continuing at the time of
or as a consequence of the incurrence of any such Indebtedness, the Company and
Restrictrd Subsidiaries which have provided a Guarantee may incur Indebtedness
(including, without limitation, Acquired Indebtedness) and Restricted
Subsidiaries of the Company may incur Acquired Indebtedness, in each case if on
the date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company
is greater than 2.0 to 1.0.
SECTION 4.13. LIMITATION ON DIVIDEND AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Indenture; (3) customary non-assignment
provisions of any contract or any lease governing a leasehold interest of any
<PAGE> 57
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Restricted Subsidiary of the Company; (4) any instrument governing Acquired
Indebtedness, which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person or the
properties or assets of the Person so acquired; (5) agreements existing on the
Issue Date to the extent and in the manner such agreements are in effect on the
Issue Date; (6) the Amended Credit Facility; or (7) an agreement governing
Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred
pursuant to an agreement referred to in clause (2), (4), (5) or (6) above;
PROVIDED, HOWEVER, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness are no less favorable to the
Company in any material respect as determined by the Board of Directors of the
Company in their reasonable and good faith judgment than the provisions relating
to such encumbrance or restriction contained in agreements referred to in such
clause (2), (4), (5) or (6).
SECTION 4.14. PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED
DEBT.
The Company shall not incur or suffer to exist Indebtedness
that is senior in right of payment to the Notes and subordinate in right of
payment to any other Indebtedness of the Company.
SECTION 4.15. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Company
shall make an offer to purchase all outstanding Notes pursuant to the offer
described in paragraph (b) below (the "Change of Control Offer") at a purchase
price equal to 101% of the principal amount thereof plus accrued interest, if
any, to the date of purchase. Prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, the
Company shall (i) repay in full and terminate all commitments under Indebtedness
under the Amended Credit Facility and all other Senior Debt and to repay the
Indebtedness owed to each lender which has accepted such offer or (ii) obtain
the requisite consents under the Amended Credit Facility and all other Senior
Debt to permit the repurchase of the Notes as provided below. The Company shall
first comply with the covenant in the immediately preceding sentence before it
shall be required to repurchase Notes pursuant to the provisions described in
this Section 4.15. The Company's failure to comply with the immediately
preceding two sentences shall constitute an Event of Default under Section
6.01(3) and not under Section 6.01(2).
(b) Within 30 days following the date upon which the Change of
Control occurred (the "Change of Control Date"), the Company shall send, by
first class mail, a notice to each
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Holder, with a copy to the Trustee, which notice shall govern the terms of the
Change of Control Offer. The notice to the Holders shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to
this Section 4.15 and that all Notes tendered and not withdrawn will be
accepted for payment;
(2) the purchase price (including the amount of accrued
interest) and the purchase date (which shall be no earlier than 30 days
nor later than 45 days from the date such notice is mailed, other than
as may be required by law) (the "Change of Control Payment Date");
(3) that any Note not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that Holders electing to have a Note purchased pursuant to
a Change of Control Offer will be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the third Business Day
prior to the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than five Business Days prior
to the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Notes the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such
Notes purchased;
(7) that Holders whose Notes are purchased only in part will
be issued new Notes in a principal amount equal to the unpurchased
portion of the Notes surrendered; PROVIDED that each Note purchased and
each new Note issued shall be in an original principal amount of $1,000
or integral multiples thereof; and
(8) the circumstances and relevant facts regarding such Change
of Control.
On or before the Change of Control Payment Date, the Company
shall (i) accept for payment Notes or portions thereof
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validly tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Notes so tendered and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company. The Paying Agent shall promptly
mail to the Holders of Notes so accepted payment in an amount equal to the
purchase price plus accrued interest, if any, and the Trustee shall promptly
authenticate and mail to such Holders new Notes equal in principal amount to any
unpurchased portion of the Notes surrendered. Any Notes not so accepted shall be
promptly mailed by the Company to the Holder thereof. For purposes of this
Section 4.15, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Notes pursuant to
a Change of Control Offer shall be returned by the Trustee to the Company.
The Company shall 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 Notes pursuant to a Change of Control Offer. To the extent the
provisions of any securities laws or regulations conflict with this Section
4.15, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.15 by virtue thereof.
SECTION 4.16. LIMITATION ON ASSET SALES.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or
the applicable Restricted Subsidiary, as the case may be, receives consideration
at the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors), (ii) at least 80% of the consideration received
by the Company or the Restricted Subsidiary, as the case may be, from such Asset
Sale shall be in the form of cash, Cash Equivalents or Replacement Assets (as
defined below) and is received at the time of such disposition; and (iii) upon
the consummation of an Asset Sale, the Company shall apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 180 days of receipt thereof either (A) to prepay any Senior Debt
and, in the case of any Senior Debt under any revolving credit facility, effect
a permanent reduction in the availability under such revolving credit facility,
(B) to make an investment in properties and/or assets that replace the
properties and/or assets that were the subject of such Asset Sale or in
properties and/or assets that will be used in the business of the Company and
its Restricted Subsidiaries as existing on the
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Issue Date or in businesses reasonably related thereto ("Replacement Assets"),
or (C) a combination of prepayment and investment permitted by the foregoing
clauses (iii)(A) and (iii)(B). On the 181st day after an Asset Sale or such
earlier date, if any, as the Board of Directors of the Company or of such
Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to
such Asset Sale as set forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the
next preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such
aggregate amount of Net Cash Proceeds which have not been applied on or before
such Net Proceeds Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B)
and (iii)(C) of the next preceding sentence (each a "Net Proceeds Offer Amount")
shall be applied by the Company or such Restricted Subsidiary to make an offer
to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer
Payment Date") not less than 30 nor more than 45 days following the applicable
Net Proceeds Offer Trigger Date, from all Holders on a PRO RATA basis, that
amount of Notes equal to the Net Proceeds Offer Amount at a price equal to 100%
of the principal amount of the Notes to be purchased, plus accrued and unpaid
interest thereon, if any, to the date of purchase; PROVIDED, HOWEVER, that if at
any time any non-cash consideration received by the Company or any Restricted
Subsidiary of the Company, as the case may be, in connection with any Asset Sale
is converted into or sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration), then such conversion
or disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Cash Proceeds thereof shall be applied in accordance with this Section 4.16. The
Company may defer the Net Proceeds Offer until there is an aggregate unutilized
Net Proceeds Offer Amount equal to or in excess of $5.0 million resulting from
one or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer
Amount, and not just the amount in excess of $5.0 million, shall be applied as
required pursuant to this paragraph).
In the event of the transfer of substantially all (but not
all) of the property and assets of the Company and its Restricted Subsidiaries
as an entirety to a Person in a transaction permitted under Section 5.01, the
successor corporation shall be deemed to have sold the properties and assets of
the Company and its Restricted Subsidiaries not so transferred for purposes of
this Section 4.16, and shall comply with the provisions of this covenant with
respect to such deemed sale as if it were an Asset Sale. In addition, the fair
market value of such properties and assets of the Company or its Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this Section 4.16.
Notwithstanding the two immediately preceding paragraphs, the
Company and its Restricted Subsidiaries will be permitted to consummate an Asset
Sale without complying with such paragraphs to the extent (i) at least 80% of
the
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consideration for such Asset Sale constitutes Replacement Assets and (ii)
such Asset Sale is for fair market value; PROVIDED that any consideration not
constituting Replacement Assets received by the Company or any of its Restricted
Subsidiaries in connection with any Asset Sale permitted to be consummated under
this paragraph shall constitute Net Cash Proceeds subject to the provisions of
the two preceding paragraphs.
Each Net Proceeds Offer will be mailed to the record Holders
as shown on the register of Holders within 25 days following the Net Proceeds
Offer Trigger Date, with a copy to the Trustee, and shall comply with the
procedures set forth in this Indenture. Upon receiving notice of the Net
Proceeds Offer, Holders may elect to tender their Notes in whole or in part in
integral multiples of $1,000 in exchange for cash. To the extent Holders
properly tender Notes in an amount exceeding the Net Proceeds Offer Amount,
Notes of tendering Holders will be purchased on a PRO RATA basis (based on
amounts tendered). A Net Proceeds Offer shall remain open for a period of 20
business days or such longer period as may be required by law.
(b) Each notice of a Net Proceeds Offer pursuant to this
Section 4.16 shall be mailed or caused to be mailed, by first class mail, by the
Company not more than 25 days after the Net Proceeds Offer Trigger Date to all
Holders at their last registered addresses as of a date within 15 days of the
mailing of such notice, with a copy to the Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Net Proceeds Offer and shall state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to
Section 4.16 and that all Notes tendered will be accepted for payment;
PROVIDED, HOWEVER, that if the aggregate principal amount of Notes
tendered in a Net Proceeds Offer exceeds the aggregate amount of the
Net Proceeds Offer, the Company shall select the Notes to be purchased
on a PRO RATA basis based on the amounts tendered (with such
adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000 or multiples thereof shall be
purchased);
(2) the purchase price (including the amount of accrued
interest) and the purchase date (which shall be at least 20 and not
more than 30 Business Days from the date of mailing of notice of such
Net Proceeds Offer, or such longer period as required by law) (the
"Proceeds Purchase Date");
(3) that any Note not tendered will continue to accrue
interest;
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(4) that, unless the Company defaults in making payment
therefor, any Note accepted for payment pursuant to the Net Proceeds
Offer shall cease to accrue interest after the Proceeds Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to
a Net Proceeds Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day prior
to the Proceeds Purchase Date;
(6) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than five Business Days prior
to the Proceeds Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Notes the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such
Note purchased; and
(7) that Holders whose Notes are purchased only in part will
be issued new Notes in a principal amount equal to the unpurchased
portion of the Notes surrendered; PROVIDED that each Note purchased and
each new Note issued shall be in an original principal amount of $1,000
or integral multiples thereof;
On or before the Proceeds Purchase Date, the Company shall (i)
accept for payment Notes or portions thereof validly tendered pursuant to the
Net Proceeds Offer which are to be purchased in accordance with item (b)(1)
above, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the purchase price plus accrued interest, if any, of all Notes to be purchased
and (iii) deliver to the Trustee Notes so accepted together with an Officers'
Certificate stating the Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price plus accrued interest,
if any. For purposes of this Section 4.16, the Trustee shall act as the Paying
Agent.
Any amounts remaining after the purchase of Notes pursuant to
a Net Proceeds Offer shall be returned by the Trustee to the Company.
The Company shall 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 Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with
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this Section 4.16, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Section 4.16 by virtue thereof.
SECTION 4.17. LIMITATION ON PREFERRED STOCK OF RESTRICTED
SUBSIDIARIES.
The Company shall not permit any of its Restricted
Subsidiaries to issue any Preferred Stock (other than to the Company or to a
Wholly Owned Restricted Subsidiary of the Company) or permit any Person (other
than the Company or a Wholly Owned Restricted Subsidiary of the Company) to own
any Preferred Stock of any Restricted Subsidiary of the Company.
SECTION 4.18. LIMITATION ON LIENS.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of the Company or any of its Restricted Subsidiaries whether owned on the
Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes, the Notes are secured by
a Lien on such property, assets or proceeds that is senior in priority to such
Liens and (ii) in all other cases, the Notes are equally and ratably secured,
except for (A) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date; (B) Liens securing the
Amended Credit Facility and other Senior Debt; (C) Liens securing the Notes; (D)
Liens of the Company or a Wholly Owned Restricted Subsidiary of the Company on
assets of any Restricted Subsidiary of the Company; (E) Liens securing
Refinancing Indebtedness which is incurred to Refinance any Indebtedness which
has been secured by a Lien permitted under this Indenture and which has been
incurred in accordance with the provisions of this Indenture; PROVIDED, HOWEVER,
that such Liens (i) are no less favorable to the Holders and are not more
favorable to the lienholders with respect to such Liens than the Liens in
respect of the Indebtedness being Refinanced and (ii) do not extend to or cover
any property or assets of the Company or any of its Restricted Subsidiaries not
securing the Indebtedness so Refinanced; and (F) Permitted Liens.
SECTION 4.19. LIMITATION OF GUARANTEES BY RESTRICTED
SUBSIDIARIES.
The Company will not permit any of its Restricted
Subsidiaries, directly or indirectly, by way of the pledge of
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any intercompany note or otherwise, to assume, guarantee or in any other manner
become liable with respect to any Indebtedness of the Company or any other
Restricted Subsidiary of the Company (other than (A) Indebtedness and other
obligations under the Amended Credit Facility, (B) Permitted Indebtedness of a
Restricted Subsidiary of the Company, (c) Indebtedness under Currency Agreements
in reliance on clause (v) of the definition of Permitted Indebtedness, or (D)
Interest Swap Obligations incurred in reliance on clause (iv) of the definition
of Permitted Indebtedness), or to incur any Indebtedness in an aggregate
principal amount equal to or greater than $1.0 million unless, in any such case
(a) such Restricted Subsidiary executes and delivers a supplemental indenture to
this Indenture, providing a guarantee of payment of the Notes by such Restricted
Subsidiary (the "Guarantee") and (b) (x) if any such assumption, guarantee,
incurrence or other liability of such Restricted Subsidiary is provided in
respect of Senior Debt, the guarantee or other instrument provided by such
Restricted Subsidiary in respect of such Senior Debt may be superior to the
Guarantee pursuant to subordination provisions no less favorable to the Holders
of the Notes than those contained in this Indenture and (y) if such assumption,
guarantee, incurrence or other liability of such Restricted Subsidiary is
provided in respect of Indebtedness that is expressly subordinated to the Notes,
the guarantee or other instrument provided by such Restricted Subsidiary in
respect of such subordinated Indebtedness shall be subordinated to the Guarantee
pursuant to subordination provisions no less favorable to the Holders of the
Notes than those contained in this Indenture.
Notwithstanding the foregoing, any such Guarantee by a
Restricted Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged, without any further
action required on the part of the Trustee or any Holder, upon: (i) the
unconditional release of such Restricted Subsidiary from its liability in
respect of the Indebtedness in connection with which such Guarantee was executed
and delivered pursuant to the preceding paragraph; or (ii) any sale or other
disposition (by merger or otherwise) to any Person which is not a Restricted
Subsidiary of the Company of all of the Company's Capital Stock in, or all or
substantially all of the assets of, such Restricted Subsidiary; PROVIDED that
(a) such sale or disposition of such Capital Stock or assets is otherwise in
compliance with the terms of this Indenture and (b) such assumption, guarantee
or other liability of such Restricted Subsidiary has been released by the
holders of the other Indebtedness so guaranteed.
SECTION 4.20. CONDUCT OF BUSINESS.
The Company and its Restricted Subsidiaries will not engage in
any businesses which are not the same, similar,
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reasonably related to the businesses in which the Company and its Restricted
Subsidiaries are engaged on the Issue Date.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. MERGER, CONSOLIDATION AND SALE OF ASSETS.
The Company will not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Company's Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless: (i) either (1) the Company shall be the surviving or continuing
corporation or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of the Company and of the Company's Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be
a corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly assume,
by supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Notes and the
performance of every covenant of the Notes, this Indenture and the Registration
Rights Agreement on the part of the Company to be performed or observed; (ii)
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction), the Company or such
Surviving Entity, as the case may be, (1) shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Company immediately
prior to such transaction and (2) shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.12; (iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default
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shall have occurred or be continuing; and (iv) the Company or the Surviving
Entity shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of this Indenture
and that all conditions precedent in this Indenture relating to such transaction
have been satisfied.
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries of the Company the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation, combination or merger or any transfer
of all or substantially all of the assets of the Company in accordance with the
foregoing, in which the Company is not the continuing corporation, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Notes with the same effect as if such surviving entity
had been named as such.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(1) the Company fails to pay interest on any Notes when the
same becomes due and payable and the Default continues for a period of
30 days (whether or not such payment shall be prohibited by Article Ten
of this Indenture); or
(2) the Company fails to pay the principal on any Notes when
such principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered
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pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether
or not such payment shall be prohibited by Article Ten); or
(3) the Company defaults in the observance or performance of
any other covenant or agreement contained in this Indenture and which
default continues for a period of 30 days after the Company receives
written notice specifying the default (and demanding that such default
be remedied) from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the Notes (except in the case of a
default with respect to Section 5.01, which will constitute an Event of
Default with such notice requirement but without such passage of time
requirement); or
(4) the Company fails to pay at final maturity (giving effect
to any applicable grace periods and any extensions thereof) the
principal amount of any Indebtedness of the Company or any Restricted
Subsidiary of the Company, or the acceleration of the final stated
maturity of any such Indebtedness (which acceleration is not rescinded,
annulled or otherwise cured within 20 days of receipt by the Company or
such Restricted Subsidiary of notice of any such acceleration) if the
aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure
to pay principal at final maturity or which has been accelerated,
aggregates $2.5 million or more at any time; or
(5) one or more judgments in an aggregate amount in excess of
$2.5 million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid
or unstayed for a period of 60 days after such judgment or judgments
become final and non-appealable; or
(6) the Company or any Significant Subsidiary of the Company
(A) commences a voluntary case or proceeding under any Bankruptcy Law
with respect to itself, (B) consents to the entry of a judgment, decree
or order for relief against it in an involuntary case or proceeding
under any Bankruptcy Law, (C) consents to the appointment of a
Custodian of it or for substantially all of its property, (D) consents
to or acquiesces in the institution of a bankruptcy or an insolvency
proceeding against it, (E) makes a general assignment for the benefit
of its creditors, or (F) takes any corporate action to authorize or
effect any of the foregoing; or
(7) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the
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Company or any Significant Subsidiary of the Company in an involuntary
case or proceeding under any Bankruptcy Law, which shall (A) approve as
properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect of the Company or any such
Significant Subsidiary, (B) appoint a Custodian of the Company or any
such Significant Subsidiary or for substantially all of its property or
(C) order the winding-up or liquidation of its affairs; and such
judgment, decree or order shall remain unstayed and in effect for a
period of 60 consecutive days.
SECTION 6.02. ACCELERATION.
(a) If an Event of Default (other than an Event of Default
specified in Section 6.01(6) or (7) with respect to the Company) occurs and is
continuing and has not been waived pursuant to Section 6.04, then the Trustee or
the Holders of at least 25% in principal amount of outstanding Notes may declare
the principal of and accrued interest on all the Notes to be due and payable by
notice in writing to the Company and the Trustee specifying the respective Event
of Default and that it is a "notice of acceleration" (the "Acceleration
Notice"), and the same (i) shall become immediately due and payable or (ii) if
there are any amounts outstanding under the Amended Credit Facility, shall
become immediately due and payable upon the first to occur of an acceleration
under the Amended Credit Facility or 5 business days after receipt by the
Company and the Representative under the Amended Credit Facility of such
Acceleration Notice but only if such Event of Default is then continuing. Upon
any such declaration, but subject to the immediately preceding sentence, such
amount shall be immediately due and payable.
(b) If an Event of Default specified in Section 6.01(6) or (7)
occurs and is continuing with respect to the Company, all unpaid principal of
and accrued and unpaid interest on all of the outstanding Notes shall IPSO FACTO
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder.
(c) At any time after a declaration of acceleration with
respect to the Notes in accordance with Section 6.02(a), the Holders of a
majority in principal amount of the outstanding Notes may, on behalf of the
Holders of all of the Notes, rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any judgment or
decree, (ii) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) if the Company has paid the
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Trustee its reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in Section 6.01(6) or (7), the Trustee
shall have received an Officers' Certificate and an Opinion of Counsel that such
Event of Default has been cured or waived. No such rescission shall affect any
subsequent Default or impair any right consequent thereto. The Holders of a
majority in principal amount of the outstanding Notes may waive any existing
Default or Event of Default under this Indenture, and its consequences, except a
default in the payment of the principal of or interest on any Notes.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 2.09, 6.07 and 9.02, the Holders of a
majority in principal amount of the outstanding Notes by notice to the Trustee
may waive an existing Default or Event of Default and its consequences, except a
Default in the payment of principal of or interest on any Note as specified in
clauses (1) and (2) of Section 6.01. When a Default or Event of Default is
waived, it is cured and ceases.
SECTION 6.05. CONTROL BY MAJORITY.
Subject to Section 2.09, the Holders of a majority in
principal amount of the outstanding Notes may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it, including, without limitation,
any remedies provided for in Section 6.03. Subject to Section 7.01, however, the
Trustee may refuse to follow any direction that the Trustee reasonably believes
conflicts with any law or this Indenture, that the Trustee determines may be
unduly prejudicial to the rights of another Holder, or that may involve the
Trustee in personal liability; PROVIDED that the Trustee
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may take any other action deemed proper by the Trustee which is not inconsistent
with such direction; and PROVIDED FURTHER that this provision shall not affect
the rights of the Trustee set forth in Section 7.01(d).
SECTION 6.06. LIMITATION ON SUITS.
A Holder may not pursue any remedy with respect to this
Indenture or the Notes unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) Holders of at least 25% in principal amount of the
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holders offer to the Trustee indemnity in its sole
discretion satisfactory to the Trustee against any loss, liability,
claim or expense (including without limitation attorney's fees) to be
incurred in compliance with such request;
(4) the Trustee does not comply with the request within 45
days after receipt of the request and the offer of satisfactory
indemnity; and
(5) during such 45-day period the Holders of a majority in
principal amount of the outstanding Notes do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with
the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of and interest on a Note,
on or after the respective due dates expressed in such Note, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal or interest
specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or
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any other obligor on the Notes for the whole amount of principal and accrued
interest remaining unpaid, together with interest on overdue principal and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest at the rate set forth in Section 4.01 and such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents, consultants and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any other
obligor upon the Notes, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other securities or property payable or deliverable upon
conversion or exchange of the Notes or upon any such claims and to distribute
the same, and any Custodian in any such judicial proceedings is hereby
authorized by each Holder to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, taxes, disbursements and advances of the Trustee, its
agents, consultants and counsel, and any other amounts due the Trustee under
Section 7.07. The Company's payment obligations under this Section 6.09 shall be
secured in accordance with the provisions of Section 7.07 hereunder. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Sections 6.09 and
7.07;
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Second: if the Holders are forced to proceed against the
Company directly without the Trustee, to Holders for their collection
costs;
Third: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for
principal and interest, respectively; and
Fourth: to the Company or any other obligor on the Notes, as
their interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee, upon prior notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this Section
6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than
10% in principal amount of the outstanding Notes.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in its exercise
thereof as a prudent person would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
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(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
(including Officers' Certificates) or opinions (including Opinions of
Counsel) furnished to the Trustee and conforming to the requirements of
this Indenture. However, as to any certificates or opinions which are
required to be delivered or provided to the Trustee, the Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts
stated therein).
(c) Notwithstanding anything to the contrary herein contained,
the Trustee may not be relieved from liability for its own negligent action, its
own negligent failure to act, or its own bad faith or willful misconduct, except
that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not herein expressly provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money
or assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the
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Trustee need not be segregated from other assets except to the extent required
by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other paper or document reasonably
believed by it to be genuine and to have been signed or presented by
the proper Person. The Trustee need not investigate any fact or matter
stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate, an
Opinion of Counsel or both, which shall conform to Sections 11.04 and
11.05. The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on such Officers' Certificate or
Opinion of Counsel.
(c) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or indirectly
or by or through agents or attorneys and the Trustee shall not be
responsible for the misconduct or negligence of any agent or attorney
appointed with due care.
(d) The Trustee shall not be liable for any action that it
takes or omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers conferred upon it by this
Indenture.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, notice, request, direction, consent,
order, bond, debenture, or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled, upon reasonable notice to the Company, to examine the books,
records, and premises of the Company, personally or by agent or
attorney and to consult with the officers and representatives of the
Company, including the Company's accountants and attorneys, at the sole
cost of the Company and shall incur no liability or additional
liability of any kind by reason of such inquiry or investigation.
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(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Holders pursuant to the provisions of
this Indenture, unless such Holders shall have offered to the Trustee
security or indemnity satisfactory to the Trustee in its sole
discretion against the costs, expenses and liabilities which may be
incurred by it in compliance with such request, order or direction.
(g) The Trustee shall not be required to give any bond or
surety in respect of the performance of its powers and duties
hereunder.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary of the Company, or their respective Affiliates with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The recitals contained herein and in the Notes shall be taken
as statements of the Company and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Notes, and it shall not be accountable for the
Company's use of the proceeds from the Notes, and it shall not be responsible
for any statement of the Company in this Indenture or the Notes other than the
Trustee's certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to each Holder notice
of the uncured Default or Event of Default within 60 days after such Default or
Event of Default occurs. Except in the case of a Default or an Event of Default
in payment of principal of, or interest on, any Note, including an accelerated
payment and the failure to make payment on the Change of Control Payment Date
pursuant to a Change of Control Offer or on the Proceeds Purchase Date pursuant
to a Net Proceeds Offer and, except in the case of a failure to comply with
Article Five hereof, the Trustee may withhold the notice if and so long as its
Board of Directors, the executive committee of its Board of Directors or a
committee of its directors and/or Trust Officers in good faith determines that
withholding the notice is in the interest of the Holders.
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SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15, the Trustee shall, to the
extent that any of the events described in TIA Section 313(a) occurred within
the previous twelve months, but not otherwise, mail to each Holder a brief
report dated as of such date that complies with TIA Section 313(a). The Trustee
also shall comply with TIA Sections 313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes
become listed on any stock exchange and the Trustee shall comply with TIA
Section 313(d).
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time
reasonable compensation for its services (including without limitation in its
capacity as Registrar, Paying Agent and agent for service of demands and
notices). The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable fees and expenses, including
out-of-pocket expenses incurred or made by it in connection with the performance
of its duties under this Indenture. Such expenses shall include the reasonable
fees and expenses of the Trustee's agents, consultants and counsel.
The Company shall indemnify the Trustee and its agents,
employees, stockholders and directors and officers for, and hold them harmless
against, any loss, liability or expense incurred by them except for such actions
to the extent caused by any negligence, bad faith or willful misconduct on their
part, arising out of or in connection with the administration of this trust
(including without limitation in its capacity as Registrar, Paying Agent and
agent for service of demands and notices) including the reasonable costs and
expenses of enforcing this Indenture against the Company (including without
limitation pursuant to this Section 7.07) and of defending themselves against
any claim (whether asserted by a Noteholder or the Company) or liability in
connection with the exercise or performance of any of their rights, powers or
duties hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. At the Trustee's
reasonable discretion, the Company shall defend the claim and the Trustee shall
cooperate and may participate in the defense; PROVIDED that any settlement of a
claim shall be approved in writing by the Trustee if such settlement would
result in an admission of liability by the Trustee or if such settlement would
not be accompanied by a
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full release of the Trustee for all liabilities arising out of the events giving
rise to such claim. Alternatively, the Trustee may at its option have separate
counsel of its own choosing and the Company shall pay the reasonable fees and
expenses of such counsel; PROVIDED that the Company will not be required to pay
such fees and expenses if it assumes the Trustee's defense and there is no
conflict of interest between the Company and the Trustee in connection with such
defense as reasonably determined by the Trustee. The Company need not pay for
any settlement made without its written consent. The Company need not reimburse
any expense or indemnify against any loss or liability to the extent incurred by
the Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a lien prior to the Notes on all assets or money
held or collected by the Trustee, in its capacity as Trustee, except assets or
money held in trust to pay principal of or interest on particular Notes. The
Trustee's right to receive payment of any amounts due under this Section 7.07
shall not be subordinate to any other liability or indebtedness of the Company
(even though the Notes may be subordinate to such other liability or
indebtedness).
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(6) or (7) occurs, such expenses and
the compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law; PROVIDED, HOWEVER, that this shall not
affect the Trustee's rights as set forth in the preceding paragraph or Section
6.10.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company.
The Holders of a majority in principal amount of the outstand-
ing Notes may remove the Trustee by so notifying the Company
and the Trustee and may appoint a successor Trustee. The
Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each Holder of
such event and shall promptly appoint a successor Trustee. Within one year after
the
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successor Trustee takes office, the Holders of a majority in principal amount of
the Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; PROVIDED that such
corporation shall be otherwise qualified and eligible under this Article Seven.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss.ss. 310(a)(1), (2) and (5). The Trustee (or, in the case
of a corporation included in a bank holding company system, the related bank
holding company) shall have a combined capital and surplus of at least $100
million as set forth in its most recent publicly available annual report of
condition. In addition, if the Trustee is a corporation included in a bank
holding company system, the
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Trustee, independently of such bank holding company, shall meet the capital
requirements of TIA Section 310(a)(2). The Trustee shall comply with TIA Section
310(b); PROVIDED, HOWEVER, that there shall be excluded from the operation of
TIA Section 310(b)(1) any indenture or indentures under which other securities,
or certificates of interest or participation in other securities, of the Company
are outstanding, if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met. The provisions of TIA Section 310 shall apply to the Company,
as obligor on the Notes, and any other obligor on the Notes.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein. The provisions of TIA Section 311 shall apply to the Company,
as obligor on the Notes, and any other obligor on the Notes.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. TERMINATION OF THE COMPANY'S OBLIGATIONS.
The Company may terminate its obligations under the Notes and
this Indenture, except those obligations referred to in the penultimate
paragraph of this Section 8.01, if all Notes previously authenticated and
delivered (other than destroyed, lost or stolen Notes which have been replaced
or paid or Notes for whose payment U.S. Legal Tender or non-callable U.S.
Government Obligations, or a combination thereof, has theretofore been deposited
with the Trustee or the Paying Agent in trust or segregated and held in trust by
the Company and thereafter repaid to the Company, as provided in Section 8.05)
have been delivered to the Trustee for cancellation and the Company has paid all
sums payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, the Company shall
have given notice to the Trustee and mailed a notice of redemption to
each Holder of the redemption of all of the Notes under arrangements
satisfactory to the Trustee for the giving of such notice or (ii) all
Notes have otherwise become due and payable hereunder;
(b) the Company shall have irrevocably deposited or caused to
be deposited with the Trustee or a trustee satisfactory to the Trustee,
under the terms of an
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irrevocable trust agreement in form and substance satisfactory to the
Trustee, as trust funds in trust solely for the benefit of the Holders
for that purpose, U.S. Legal Tender or non-callable U.S. Government
Obligations, or a combination thereof, in such amount as is sufficient
without consideration of reinvestment of such interest, to pay
principal and interest on the outstanding Notes to maturity or
redemption, as well as the Trustee's fees and expenses; PROVIDED that
the Trustee shall have been irrevocably instructed to apply such U.S.
Legal Tender to the payment of said principal and interest with respect
to the Notes; PROVIDED, FURTHER, that no deposits made pursuant to this
Section 8.01(b) shall cause the Trustee to have a conflicting interest
as defined in and for the purposes of the TIA; PROVIDED, FURTHER, that
from and after the time of deposit, the money deposited shall not be
subject to the rights of holders of Senior Debt pursuant to the
provisions of Article Ten and PROVIDED, FURTHER, that, as confirmed by
an Opinion of Counsel, no such deposit shall result in the Company, the
Trustee or the trust becoming or being deemed to be an "investment
company" under the Investment Company Act of 1940;
(c) no Default or Event of Default with respect to this
Indenture or the Notes shall have occurred and be continuing on the
date of such deposit or shall occur as a result of such deposit and
such deposit will not result in a breach or violation of, or constitute
a default under, any other material instrument to which the Company is
a party or by which it is bound (other than a Default or Event of
Default resulting from the incurrence of Indebtedness, all or a portion
of which will be used to defease the Notes concurrently with such
incurrence);
(d) the Company shall have paid all other sums payable by it
hereunder; and
(e) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent providing for or relating to the termination of
the Company's obligations under the Notes and this Indenture have been
complied with. Such Opinion of Counsel shall also state that such
satisfaction and discharge does not result in a default under the New
Revolving Credit Facility (if then in effect) or any other agreement or
instrument then known to such counsel that binds or affects the
Company.
Notwithstanding the foregoing paragraph, the Company's
obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06
shall survive until the Notes are no longer outstanding pursuant to the last
paragraph of Section
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2.08. After the Notes are no longer outstanding, the Company's obligations in
Sections 7.07, 8.05 and 8.06 shall survive.
After such delivery or irrevocable deposit, the Trustee upon
request shall acknowledge in writing the discharge of the Company's obligations
under the Notes and this Indenture except for those surviving obligations
specified above.
SECTION 8.02. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
(a) The Company may, at its option by Board Resolution of the
Board of Directors of the Company, at any time, elect to have either paragraph
(b) or (c) below be applied to all outstanding Notes upon compliance with the
conditions set forth in Section 8.03.
(b) Upon the Company's exercise under paragraph (a) hereof of
the option applicable to this paragraph (b), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.04 hereof and the other Sections of this Indenture
referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), and Holders of the Notes and any amounts deposited
under Section 8.03 hereof shall cease to be subject to any obligations to, or
the rights of, any holder of Senior Debt under Article Ten or otherwise, except
for the following provisions, which shall survive until otherwise terminated or
discharged hereunder: (i) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.04 hereof, and as more fully
set forth in such Section, payments in respect of the principal of and interest
on such Notes when such payments are due, (ii) the Company's obligations with
respect to such Notes under Article Two and Section 4.02 hereof, (iii) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (iv) this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise its
option under this paragraph (b) notwithstanding the prior exercise of its option
under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of
the option applicable to this paragraph (c), the
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Company shall, subject to the satisfaction of the conditions set forth in
Section 8.03 hereof, be released from its obligations under the covenants
contained in Sections 4.10 through 4.20 and Article Five hereof with respect to
the outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes) and Holders of the Notes and any
amounts deposited under Section 8.03 hereof shall cease to be subject to any
obligations to, or the rights of, any holder of Senior Debt under Article Ten or
otherwise. For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event or Default under Section
6.01(3) hereof, but, except as specified above, the remainder of this Indenture
and such Notes shall be unaffected thereby. In addition, upon the Company's
exercise under paragraph (a) hereof of the option applicable to this paragraph
(c), subject to the satisfaction of the conditions set forth in Section 8.03
hereof, Sections 6.01(3), 6.01(4) and 6.01(5) shall not constitute Events of
Default.
SECTION 8.03. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT
DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02(b) or 8.02(c) hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in U.S. dollars,
non-callable U.S. Government Obligations, 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, premium, if any, and interest on the Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may
be;
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(b) in the case of an election under Section 8.02(b) hereof,
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 date of this
Indenture, 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 Holders 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; PROVIDED, HOWEVER,
that notwithstanding the foregoing, the Opinion of Counsel required by
this Section 8.03(b) with respect to Legal Defeasance need not be
delivered if all of the Notes not theretofore delivered to the Trustee
for cancellation (x) have become due and payable, (y) will become due
and payable on the maturity date within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by
the Trustee in the name, and at the expense, of the Company;
(c) in the case of an election under Section 8.02(c) hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel
in the United States reasonably acceptable to the Trustee confirming
that the Holders of the 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;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Sections 6.01(6)
and 6.01(7) hereof are concerned, at any time in the period ending on
the 91st day after the date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under this
Indenture or any other material agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others;
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(g) the Company shall have delivered 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 complied with; and
(h) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that (i) the trust funds will not be subject
to any rights of any holders of Senior Debt, including, without
limitation, those arising under this Indenture, and (ii) after the 91st
day following the date of deposit, the trust funds will not be subject
to the effect of any applicable Bankruptcy Law.
SECTION 8.04. APPLICATION OF TRUST MONEY.
The Trustee or Paying Agent shall hold in trust U.S. Legal
Tender or U.S. Government Obligations deposited with it pursuant to Article
Eight, and shall apply the deposited U.S. Legal Tender and the money from U.S.
Government Obligations in accordance with this Indenture to the payment of
principal of and interest on the Notes. The Trustee shall be under no obligation
to invest said U.S. Legal Tender or U.S. Government Obligations except as it may
agree with the Company.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Legal Tender or
U.S. Government Obligations deposited pursuant to Section 8.03 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the Company's request any U.S. Legal Tender or U.S. Government
Obligations held by it as provided in Section 8.03 hereof which, in the opinion
of a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof that would then be required to be deposited to effect an
equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.05. REPAYMENT TO THE COMPANY.
Subject to Article Eight, the Trustee and the Paying Agent
shall promptly pay to the Company upon request any excess U.S. Legal Tender or
U.S. Government Obligations held by them at any time and thereupon shall be
relieved from all liability with respect to such money. The Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal or interest that remains unclaimed
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for two years; PROVIDED that the Trustee or such Paying Agent, before being
required to make any payment, may at the expense of the Company cause to be
published once in a newspaper of general circulation in the City of New York or
mail to each Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein which shall be at least 30
days from the date of such publication or mailing any unclaimed balance of such
money then remaining will be repaid to the Company. After payment to the
Company, Holders entitled to such money must look to the Company for payment as
general creditors unless an applicable law designates another Person.
SECTION 8.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S.
Legal Tender or U.S. Government Obligations in accordance with Article Eight by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Article Eight until such time as the Trustee or Paying Agent is permitted to
apply all such U.S. Legal Tender or U.S. Government Obligations in accordance
with Article Eight; PROVIDED that if the Company has made any payment of
interest on or principal of any Notes because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the U.S. Legal Tender or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company, when authorized by a Board Resolution, and the
Trustee, together, may amend or supplement this Indenture or the Notes without
notice to or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency; PROVIDED
that such amendment or supplement does not, in the opinion of the
Trustee, adversely affect the rights of any Holder in any material
respect;
(2) to comply with Article Five;
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(3) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(4) to comply with any requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA;
(5) to make any change that would provide any additional
benefit or rights to the Holders or that does not adversely affect in
any material respect the rights of any Holder; or
(6) to provide for issuance of the Exchange Notes, which will
have terms substantially identical in all material respects to the
Initial Notes (except that the transfer restrictions contained in the
Initial Notes will be modified or eliminated, as appropriate), and
which will be treated together with any outstanding Initial Notes, as a
single issue of securities, provided that for purposes of this clause
(6), the terms Initial Notes and Exchange Notes, shall include any
other Notes issued in accordance with clause (iii) of the fourth
paragraph of Section 2.02 or Notes issued in exchange therefor which
are identical in all material respects to such Notes (except that the
transfer restrictions on the Notes issued in exchange for Notes issued
in accordance with clause (iii) of the fourth paragraph of Section 2.02
shall be modified or eliminated, as appropriate);
PROVIDED that the Company has delivered to the Trustee an Opinion of Counsel and
an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Subject to Section 6.07, the Company, when authorized by a
Board Resolution, and the Trustee, together, with the written consent of the
Holder or Holders of at least a majority in aggregate principal amount of the
outstanding Notes, may amend or supplement this Indenture or the Notes, without
notice to any other Holders. Subject to Sections 6.04 and 6.07, the Holder or
Holders of a majority in aggregate principal amount of the outstanding Notes may
waive compliance by the Company with any provision of this Indenture or the
Notes without notice to any other Holder. No amendment, supplement or waiver,
including a waiver pursuant to Section 6.04, shall, without the consent of each
Holder of each Note affected thereby:
(1) reduce the amount of Notes whose Holders must consent to
an amendment;
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(2) reduce the rate of or change or have the effect of
changing the time for payment of interest, including defaulted
interest, on any Notes;
(3) reduce the principal of or change or have the effect of
changing the fixed maturity of any Notes, or change the date on which
any Notes may be subject to redemption, or reduce the redemption price
therefor;
(4) make any Notes payable in money other than that stated in
the Notes;
(5) make any change in provisions of this Indenture protecting
the right of each Holder to receive payment of principal of and
interest on such Note on or after the due date thereof or to bring suit
to enforce such payment, or permitting Holders of a majority in
principal amount of Notes to waive Defaults or Events of Default;
(6) amend, modify, change or waive any provision of this
Section 9.02;
(7) amend, modify or change in any material respect the
obligation of the Company to make or consummate a Change of Control
Offer in the event of a Change of Control or make and consummate a Net
Proceeds Offer in respect of any Asset Sale that has been consummated
or modify any of the provisions or definitions with respect thereto
after a Change of Control has occurred or the subject Asset Sale has
been consummated; or
(8) modify Article Ten or the definitions used in Article Ten
to adversely affect the Holders of the Notes in any material respect.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. EFFECT ON SENIOR DEBT.
No amendment of this Indenture shall adversely affect the
rights of any holder of Senior Debt under Article Ten of this Indenture, without
the consent of such holder.
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SECTION 9.04. COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect.
SECTION 9.05. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of outstanding Notes have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver (at
which time such amendment, supplement or waiver shall become effective).
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver, which record date shall be at least 30 days
prior to the first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder, unless it makes a change described in any of clauses
(1) through (8) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note; PROVIDED that any such waiver shall not impair or
affect the right of any Holder to receive payment of principal of and interest
on a Note, on or after the respective due dates expressed in such Note, or to
bring suit for the enforcement of any such payment on or after such respective
dates without the consent of such Holder.
SECTION 9.06. NOTATION ON OR EXCHANGE OF NOTES.
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If an amendment, supplement or waiver changes the terms of a
Note, the Trustee may require the Holder of such Note to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Note about the
changed terms and return it to the Holder. Alternatively, if the Company or the
Trustee so determines, the Company in exchange for the Note shall issue and the
Trustee shall authenticate a new Note that reflects the changed terms. Any such
notation or exchange shall be made at the sole cost and expense of the Company.
SECTION 9.07. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; PROVIDED that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture. Such Opinion of Counsel shall not be an expense of the Trustee.
ARTICLE TEN
SUBORDINATION
SECTION 10.01. NOTES SUBORDINATED TO SENIOR DEBT.
The Company covenants and agrees, and each Holder of the
Notes, by its acceptance thereof, likewise covenants and agrees, that all Notes
shall be issued subject to the provisions of this Article Ten; and the Trustee
and each Person holding any Note, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that the payment of all
Obligations on the Notes by the Company shall, to the extent and in the manner
herein set forth, be subordinated and junior in right of payment to the prior
payment in full in cash or Cash Equivalents of all Obligations on the Senior
Debt; that the subordination is for the benefit of, and shall be enforceable
directly by, the holders of Senior Debt, and that each holder of Senior Debt
whether now outstanding or hereafter created, incurred, assumed or guaranteed
shall be deemed to have acquired Senior Debt in reliance upon the covenants and
provisions contained in this Indenture and the Notes.
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SECTION 10.02. NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES.
(a) If any default occurs and is continuing in the payment
when due, whether at maturity, upon redemption, by declaration or otherwise, of
any principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt, no
payment of any kind or character shall be made by, or on behalf of, the Company
or any other Person on its or their behalf with respect to any Obligations on
the Notes, or to acquire any of the Notes for cash or property or otherwise. In
addition, if any other event of default occurs and is continuing with respect to
any Designated Senior Debt, as such event of default is defined in the
instrument creating or evidencing such Designated Senior Debt, permitting the
holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives notice of the event of default to the Trustee (a
"Default Notice"), then, unless and until all events of default have been cured
or waived or have ceased to exist or the Trustee receives notice thereof from
the Representative for the respective issue of Designated Senior Debt
terminating the Blockage Period (as defined below), during the 180 days after
the delivery of such Default Notice (the "Blockage Period"), neither the Company
nor any other Person on its behalf shall (x) make any payment of any kind or
character with respect to any Obligations on the Notes or (y) acquire any of the
Notes for cash or property or otherwise. Notwithstanding anything herein to the
contrary, in no event will a Blockage Period extend beyond 180 days from the
date the payment on the Notes was due and only one such Blockage Period may be
commenced within any 360 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any Blockage Period with
respect to the Designated Senior Debt shall be, or be made, the basis for the
commencement of a second Blockage Period by the Representative of such
Designated Senior Debt whether or not within a period of 360 consecutive days,
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days (it being acknowledged that any subsequent action,
or any breach of any financial covenants for a period commencing after the date
of commencement of such Blockage Period that, in either case, would give rise to
an event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 10.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior Debt
(pro rata to such holders on the basis of the respective amount
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of Senior Debt held by such holders) or their respective Representatives, as
their respective interests may appear. The Trustee shall be entitled to rely on
information regarding amounts then due and owing on the Senior Debt, if any,
received from the holders of Senior Debt (or their Representatives) or, if such
information is not received from such holders or their Representatives, from the
Company and only amounts included in the information provided to the Trustee
shall be paid to the holders of Senior Debt.
Nothing contained in this Article Ten shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; PROVIDED that all Senior Debt thereafter due or declared to
be due shall first be paid in full in cash or Cash Equivalents before the
Holders are entitled to receive any payment of any kind or character with
respect to Obligations on the Notes.
SECTION 10.03. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
(a) Upon any payment or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any total or partial liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt shall
first be paid in full in cash or Cash Equivalents, or such payment duly provided
for to the satisfaction of the holders of Senior Debt, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Notes, or for the acquisition of any of the Notes for cash or property or
otherwise. Upon any such dissolution, winding-up, liquidation, reorganization,
receivership or similar proceeding, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Holders of the Notes or the Trustee under this Indenture would be
entitled, except for the provisions hereof, shall be paid by the Company or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the Holders or by the Trustee under
this Indenture if received by them, directly to the holders of Senior Debt (PRO
RATA to such holders on the basis of the respective amounts of Senior Debt held
by such holders) or their respective Representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of Senior Debt remaining unpaid until all such Senior Debt has been paid
in full in cash or Cash Equivalents after giving
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effect to any concurrent payment, distribution or provision therefor to or for
the holders of Senior Debt.
(b) To the extent any payment of Senior Debt (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then, if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Debt or part thereof originally intended to
be satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, shall be received by any Holder when
such payment or distribution is prohibited by Section 10.03(a), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Debt (PRO RATA to such holders on the
basis of the respective amount of Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining unpaid until all such Senior Debt has been paid in full in cash or
Cash Equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt.
(d) The consolidation of the Company with, or the merger of
the Company with or into, another corporation or the liquidation or dissolution
of the Company following the conveyance or transfer of all or substantially all
of its assets, to another corporation upon the terms and conditions provided in
Article Five hereof and as long as permitted under the terms of the Senior Debt
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, assume the Company's obligations
hereunder in accordance with Article Five hereof.
SECTION 10.04. PAYMENTS MAY BE PAID PRIOR TO DISSOLUTION.
Nothing contained in this Article Ten or elsewhere in this
Indenture shall prevent (i) the Company, except under the
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conditions described in Sections 10.02 and 10.03, from making payments at any
time for the purpose of making payments of principal of and interest on the
Notes, or from depositing with the Trustee any moneys for such payments, or (ii)
in the absence of actual knowledge by the Trustee that a given payment would be
prohibited by Section 10.02 or 10.03, the application by the Trustee of any
moneys deposited with it for the purpose of making such payments of principal
of, and interest on, the Notes to the Holders entitled thereto unless at least
two Business Days prior to the date upon which such payment would otherwise
become due and payable a Trust Officer shall have actually received the written
notice provided for in the second sentence of Section 10.02(a) or in Section
10.07 (PROVIDED that, notwithstanding the foregoing, such application shall
otherwise be subject to the provisions of the first sentence of Section 10.02(a)
and Section 10.03). The Company shall give prompt written notice to the Trustee
of any dissolution, winding-up, liquidation or reorganization of the Company.
SECTION 10.05. SUBROGATION.
Subject to the payment in full in cash or Cash Equivalents of
all Senior Debt, the Holders of the Notes shall be subrogated to the rights of
the holders of Senior Debt to receive payments or distributions of cash,
property or securities of the Company applicable to the Senior Debt until the
Notes shall be paid in full; and, for the purposes of such subrogation, no such
payments or distributions to the holders of the Senior Debt by or on behalf of
the Company or by or on behalf of the Holders by virtue of this Article Ten
which otherwise would have been made to the Holders shall, as between the
Company and the Holders of the Notes, be deemed to be a payment by the Company
to or on account of the Senior Debt, it being understood that the provisions of
this Article Ten are and are intended solely for the purpose of defining the
relative rights of the Holders of the Notes, on the one hand, and the holders of
the Senior Debt, on the other hand.
SECTION 10.06. OBLIGATIONS OF THE COMPANY UNCONDITIONAL.
Nothing contained in this Article Ten or elsewhere in this
Indenture or in the Notes is intended to or shall impair, as among the Company,
its creditors other than the holders of Senior Debt, and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of and any interest on the Notes as and when the same
shall become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of the Holders and creditors of the Company
other than the holders of the Senior Debt, nor shall anything herein or therein
prevent the Holder of any Note or the Trustee on its behalf from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if
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any, in respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
SECTION 10.07. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Notes pursuant to the provisions of this
Article Ten. Regardless of anything to the contrary contained in this Article
Ten or elsewhere in this Indenture, the Trustee shall not be charged with
knowledge of the existence of any default or event of default with respect to
any Senior Debt or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing from the Company, or from a holder of Senior Debt or a
Representative therefor, together with proof satisfactory to the Trustee of such
holding of Senior Debt or of the authority of such Representative, and, prior to
the receipt of any such written notice, the Trustee shall be entitled to assume
(in the absence of actual knowledge to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Ten, and if such evidence is not furnished the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
SECTION 10.08. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company
referred to in this Article Ten, the Trustee, subject to the provisions of
Article Seven hereof, and the Holders of the Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation,
reorganization or similar case or proceeding is pending, or upon a certificate
of the receiver, trustee in bankruptcy, liquidating trustee, receiver, assignee
for the benefit of creditors, agent or other person making such payment or
distribution, delivered to the Trustee or the Holders of the Notes, for the
purpose of ascertaining the persons entitled to
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participate in such payment or distribution, the holders of the Senior Debt and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Ten.
SECTION 10.09. TRUSTEE'S RELATION TO SENIOR DEBT.
The Trustee and any agent of the Company or the Trustee shall
be entitled to all the rights set forth in this Article Ten with respect to any
Senior Debt which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Debt and nothing in
this Indenture shall deprive the Trustee or any such agent of any of its rights
as such holder.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt.
Whenever a distribution is to be made or a notice given to
holders or owners of Senior Debt, the distribution may be made and the notice
may be given to their Representative, if any.
SECTION 10.10. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR
OMISSIONS OF THE COMPANY OR HOLDERS OF
SENIOR DEBT.
No right of any present or future holders of any Senior Debt
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article Ten or the obligations
hereunder of the Holders of the Notes to the holders of the Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of
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payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in
any manner Senior Debt, or any instrument evidencing the same or any agreement
under which Senior Debt is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Debt; (iii) release any Person liable in any manner for the payment or
collection of Senior Debt; and (iv) exercise or refrain from exercising any
rights against the Company and any other Person.
SECTION 10.11. NOTEHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF NOTES.
Each Holder of Notes by its acceptance of them authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Senior Debt
and the Holders of Notes, the subordination provided in this Article Ten, and
appoints the Trustee its attorney-in-fact for such purposes, including, in the
event of any dissolution, winding-up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business and assets of the
Company, the filing of a claim for the unpaid balance of its Notes and accrued
interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt
in the form required in such proceeding prior to 30 days before the expiration
of the time to file such claim or claims, then the holders of the Senior Debt or
their Representative are or is hereby authorized to have the right to file and
are or is hereby authorized to file an appropriate claim for and on behalf of
the Holders of said Notes. Nothing herein contained shall be deemed to authorize
the Trustee or the holders of Senior Debt or their Representative to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee or the holders of
Senior Debt or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 10.12. THIS ARTICLE TEN NOT TO PREVENT EVENTS OF
DEFAULT.
The failure to make a payment on account of principal of or
interest on the Notes by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of an Event of Default.
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SECTION 10.13. TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article Ten will apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required TIA provision shall control.
SECTION 11.02. NOTICES.
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by commercial courier service, by telex, by telecopier or registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows:
if to the Company:
GEO Specialty Chemicals, Inc.
28601 Chagrin Boulevard
Suite 210
Cleveland, Ohio 44122
Facsimile No.: (216) 765-1307
Attn: Mr. George P. Ahearn
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if to the Trustee:
Chase Manhattan Trust Company, National Association
Chase Financial Tower, Suite 220
250 West Huron Road
Cleveland, Ohio 44113
Facsimile No.: (216) 274-1633
Attention: Mr. David Kovach
Each of the Company and the Trustee by written notice to each
other such Person may designate additional or different addresses for notices to
such Person. Any notice or communication to the Company or the Trustee shall be
deemed to have been given or made as of the date so delivered if personally
delivered; when receipt is confirmed if delivered by commercial courier service;
when answered back, if telexed; when receipt is acknowledged, if faxed; and five
(5) calendar days after mailing if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed
to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 11.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and any other Person shall have the
protection of TIA ss. 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent to be performed
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by the Company, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company,
if any, provided for in this Indenture relating to the proposed action
have been complied with.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition and the definitions
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is reasonably necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been complied with.
SECTION 11.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.07. LEGAL HOLIDAYS.
A "Legal Holiday" used with respect to a particular place of
payment is a Saturday, a Sunday or a day on which banking institutions in New
York, New York or at such place of payment are not required to be open. If a
payment date is a Legal Holiday at such place, payment may be made at such place
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on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 11.08. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or incorporator, as
such, of the Company or of the Trustee shall not have any liability for any
obligations of the Company under the Notes or this Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
Holder by accepting a Note waives and releases all such liability. Such waiver
and release are part of the consideration for the issuance of the Notes.
SECTION 11.11. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 11.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together shall represent
the same agreement.
SECTION 11.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture or
in the Notes shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all
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of the provisions hereof shall be enforceable to the full
extent permitted by law.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
Issuer:
GEO SPECIALTY CHEMICALS, INC.
By: /s/ William P. Eckman
-----------------------------------------
Name: William P. Eckman
Title: Senior Vice President & C.F.O.
Trustee:
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION, as
Trustee
By: /s/ David Kovach
-----------------------------------------
Name: David Kovach
Title: Assistant Vice President
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EXHIBIT A
CUSIP No.:
GEO SPECIALTY CHEMICALS, INC.
10 1/8% Senior Subordinated Notes due 2008, Series A
No. $
GEO SPECIALTY CHEMICALS, INC., an Ohio corporation
(the "Company"), for value received, promises to pay to
or registered assigns, the principal sum of
Dollars, on August 1, 2008.
Interest Payment Dates: February 1 and August 1,
commencing February 1, 1999.
Record Dates: January 15 and July 15.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Dated:
GEO SPECIALTY CHEMICALS, INC.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
Trustee's Certificate of Authentication
<PAGE> 104
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This is one of the 10 1/8% Senior Subordinated Notes due 2008, Series A referred
to in the within-mentioned Indenture.
Dated:
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION, as
Trustee
By:
-----------------------------------
Authorized Signatory
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(REVERSE OF SECURITY)
10 1/8% SENIOR SUBORDINATED NOTE DUE 2008, SERIES A
1. INTEREST. GEO SPECIALTY CHEMICALS, INC., an Ohio
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above. Interest on the Notes will accrue
from the most recent date on which interest has been paid or, if no interest has
been paid, from the date of the original issuance of the Notes. The Company will
pay interest semi-annually in arrears on each Interest Payment Date, commencing
February 1, 1999 for the period commencing on and including the immediately
preceding Interest Payment Date and ending on and including the date next
preceding the Interest Payment Date, with the exception that the first Interest
Period shall commence on and include July 31, 1998 and end on and include
January 31, 1999. Interest will be computed on the basis of a 360-day year of
twelve 30- day months.
The Company shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at the rate borne
by the Notes and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful.
2. METHOD OF PAYMENT. The Company shall pay interest on the
Notes (except defaulted interest) to the Persons who are the registered Holders
at the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are canceled on registration of transfer or
registration of exchange (including pursuant to an Exchange Offer (as defined in
the Registration Rights Agreement)) after such Record Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in money of the United States that at the time
of payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Company may pay principal and interest by its check
payable in such U.S. Legal Tender. The Company may deliver any such interest
payment to the Paying Agent or to a Holder at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, Chase Manhattan
Trust Company, National Association (the "Trustee"), will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders.
4. INDENTURE. The Company issued the Notes under an Indenture,
dated as of July 31, 1998 (the "Indenture"), between the Company and the
Trustee. This Note is one of a duly authorized issue of Initial Notes of the
Company
<PAGE> 106
-4-
designated as its 10 1/8% Senior Subordinated Notes due 2008, Series A (the
"Initial Notes"). The Notes include the Initial Notes, the Private Exchange
Notes and the Exchange Notes (as defined in the Indenture) issued in exchange
for the Initial Notes pursuant to the Registration Rights Agreement. The Initial
Notes and the Exchange Notes are treated as a single class of securities under
the Indenture. Except as set forth in the Indenture, the Notes are limited in
aggregate principal amount outstanding at any time to $200,000,000, which may be
issued under the Indenture, PROVIDED the principal amount of Initial Notes
issued on the Issue Date is $120,000,000. Capitalized terms herein are used as
defined in the Indenture unless otherwise defined herein. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb)
(the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything
to the contrary herein, the Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and the TIA for a statement of them. The
Notes are general unsecured obligations of the Company.
5. SUBORDINATION. The Notes are subordinated in right of
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash or Cash Equivalents of all Senior Debt of the
Company, whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. Each Holder by its acceptance hereof agrees to
be bound by such provisions and authorizes and expressly directs the Trustee, on
its behalf, to take such action as may be necessary or appropriate to effectuate
the subordination provided for in the Indenture and appoints the Trustee its
attorney-in-fact for such purposes.
6. REDEMPTION.
(a) OPTIONAL REDEMPTION. The Notes will be redeemable, at the
Company's option, in whole at any time or in part from time to time, on and
after August 1, 2003, upon not less than 30 nor more than 60 days' notice, at
the following redemption prices (expressed as percentages of the principal
amount thereof) if redeemed during the twelve-month period commencing on August
1 of the year set forth below, plus, in each case, accrued and unpaid interest
thereon, if any, to the date of redemption:
<PAGE> 107
-5-
YEAR PERCENTAGE
- ---- ----------
2003.......................................................... 105.063%
2004.......................................................... 103.375%
2005.......................................................... 101.688%
2006 and thereafter 100.000%
(b) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any
time, or from time to time, on or prior to August 1, 2001, the Company may, at
its option, use the net cash proceeds of one or more Public Equity Offerings (as
defined below) to redeem up to 35% of the Notes at a redemption price equal to
110.125% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of redemption; PROVIDED that at least 65% of the
principal amount of Notes originally issued on the Issue Date remains
outstanding immediately after any such redemption.
In order to effect the foregoing redemption with the proceeds
of any Public Equity Offering, the Company shall make such redemption not more
than 90 days after the consummation of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering"
means an underwritten public offering of Qualified Capital Stock of the Company
pursuant to a registration statement filed with the Commission in accordance
with the Securities Act.
7. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price plus accrued and unpaid
interest, if any, the Notes called for redemption will cease to bear interest
from and after such Redemption Date and the only right of the Holders of such
Notes will be to receive payment of the Redemption Price plus accrued and unpaid
interest, if any.
8. OFFERS TO PURCHASE. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales and upon the occurrence of a Change of
Control, and subject to further limitations contained therein, the Company will
make an offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
<PAGE> 108
-6-
9. REGISTRATION RIGHTS. Pursuant to the Registration Rights
Agreement, the Company will be obligated to consummate an exchange offer
pursuant to which the Holder of this Note shall have the right to exchange this
Note for the Company's 10 1/8% Senior Subordinated Notes due 2008, Series B (the
"Exchange Notes"), which have been registered under the Securities Act, in like
principal amount and having terms identical in all material respects to the
Initial Notes. The Holders of the Initial Notes shall be entitled to receive
certain additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in accordance
with the terms of the Registration Rights Agreement.
10. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.
11. PERSONS DEEMED OWNERS. The registered Holder of
a Note shall be treated as the owner of it for all purposes.
12. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
13. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest on the Notes).
14. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
written consent of the Holders of at least a majority in aggregate principal
amount of the Notes then outstanding, and any existing Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the Notes
then outstanding. Without notice
<PAGE> 109
-7-
to or consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, or comply with Article Five of the Indenture or make any
other change that does not adversely affect in any material respect the rights
of any Holder of a Note.
15. RESTRICTIVE COVENANTS. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
its Capital Stock or certain Indebtedness, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, merge or consolidate with any other Person, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation. Such limitations are subject to a number
of important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
16. SUCCESSORS. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
17. DEFAULTS AND REMEDIES. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest) if it determines that withholding
notice is in their interest.
18. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
19. NO RECOURSE AGAINST OTHERS. No stockholder, director,
officer, employee or incorporator, as such, of the Company shall have any
liability for any obligation of the
<PAGE> 110
-8-
Company under the Notes or the Indenture or for any claim based on, in respect
of or by reason of, such obligations or their creation. Each Holder of a Note by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issuance of the Notes.
20. AUTHENTICATION. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
21. GOVERNING LAW. The laws of the State of New York shall
govern this Note and the Indenture, without regard to principles of conflict of
laws.
22. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
23. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience to the Holders
of the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
24. INDENTURE. Each Holder, by accepting a Note, agrees to be
bound by all of the terms and provisions of the Indenture, as the same may be
amended from time to time.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture which has the text of this
Note in larger type. Requests may be made to: GEO Specialty Chemicals, Inc.,
28601 Chagrin Boulevard, Suite 210, Cleveland, Ohio 44122, Attn: George P.
Ahearn.
<PAGE> 111
-9-
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to:
================================================================================
================================================================================
================================================================================
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint __________________________________________________,
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date: Signed:
------------------- ------------------------
(Sign exactly as your
name appears on the
other side of this Note)
Signature Guarantee:
============================
In connection with any transfer of this Note occurring prior
to the date which is the earlier of (i) the date of the declaration by the SEC
of the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii)July 31, 2000, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:
<PAGE> 112
-10-
[CHECK ONE]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under
the Securities Act; or
(3) __ to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act) that has furnished to the
Trustee a signed letter containing certain
representations and agreements (the form of which
letter can be obtained from the Trustee); or
(4) __ outside the United states to a "foreign person" in
compliance with Rule 904 of Regulation S under the
Securities Act; or
(5) __ pursuant to the exemption from registration
provided by Rule 144 under the Securities Act; or
(6) __ pursuant to an effective registration statement
under the Securities Act; or
(7) __ pursuant to another available exemption from the
registration requirements of the Securities Act;
and unless the box below is checked, the undersigned confirms
that such Note is not being transferred to an "affiliate" of
the Company as defined in Rule 144 under the Securities Act of
1933, as amended (an "Affiliate"):
"The transferee is an Affiliate of the Company.
Unless one of the items is checked, the Trustee will refuse to
register any of the Notes evidenced by this certificate in the name of
any person other than the registered Holder thereof; PROVIDED that if
box (3), (4), (5) or (7) is checked, the Company or the Trustee may
require, prior to registering any such transfer of the Notes, in its
sole discretion, such legal opinions, certifications (including an
investment letter in the case of box (3) or (4)) and other information
as the Trustee or the Company has reasonably requested to confirm that
such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act.
<PAGE> 113
-11-
If none of the foregoing boxes is checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person
other than the Holder hereof unless and until the conditions to any
such transfer of registration set forth herein and in Section 2.17 of
the Indenture shall have been satisfied.
Dated: Signed:
===================================== ==========================
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee: _________________________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
=============================== =============================
NOTICE: To be executed by
an executive officer
<PAGE> 114
-12-
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state
the amount you elect to have purchased:
$
- --------------------------
Dated: __________________ ___________________________
NOTICE: The signature on
this assignment must
correspond with the name
as it appears upon the
face of the within Note in
every particular without
alteration or enlargement
or any change whatsoever
and be guaranteed by the
endorser's bank or broker.
Signature Guarantee:
==========================================================
<PAGE> 115
-1-
EXHIBIT B
CUSIP No.:
GEO SPECIALTY CHEMICALS, INC.
10 1/8% Senior Subordinated Notes due 2008, Series B
No. $
GEO SPECIALTY CHEMICALS, INC., an Ohio corporation
(the "Company"), for value received, promises to pay to
or registered assigns, the principal sum of
Dollars, on August 1, 2008.
Interest Payment Dates: February 1 and August 1,
commencing February 1, 1999.
Record Dates: January 15 and July 15.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Dated:
GEO SPECIALTY CHEMICALS, INC.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
Trustee's Certificate of Authentication
<PAGE> 116
-2-
This is one of the 10 1/8% Senior Subordinated Notes due 2008, Series B referred
to in the within-mentioned Indenture.
Dated:
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION, as
Trustee
By:
--------------------------------
Authorized Signatory
<PAGE> 117
-3-
(REVERSE OF SECURITY)
10 1/8% SENIOR SUBORDINATED NOTE DUE 2008, SERIES B
1. INTEREST. GEO SPECIALTY CHEMICALS, INC., an Ohio
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above. Interest on the Notes will accrue
from the most recent date on which interest has been paid or, if no interest has
been paid, from the date of the original issuance of the Notes. The Company will
pay interest semi-annually in arrears on each Interest Payment Date, commencing
February 1, 1999, for the period commencing on and including the immediately
preceding Interest Payment Date and ending on and including the date next
preceding the Interest Payment Date, with the exception that the first Interest
Period shall commence on and include July 31, 1998 and end on and include
January 31, 1999. Interest will be computed on the basis of a 360-day year of
twelve 30- day months.
The Company shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at the rate borne
by the Notes and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful.
2. METHOD OF PAYMENT. The Company shall pay interest on the
Notes (except defaulted interest) to the Persons who are the registered Holders
at the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are canceled on registration of transfer or
registration of exchange (including pursuant to an Exchange Offer (as defined in
the Registration Rights Agreement)) after such Record Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in money of the United States that at the time
of payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Company may pay principal and interest by its check
payable in such U.S. Legal Tender. The Company may deliver any such interest
payment to the Paying Agent or to a Holder at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, Chase Manhattan
Trust Company, National Assocition (the "Trustee"), will act as Paying Agent and
Registrar. The Company may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders.
4. INDENTURE. The Company issued the Notes under an Indenture,
dated as of July 31, 1998 (the "Indenture"), between the Company and the
Trustee. This Note is one of a duly authorized issue of Exchange Notes of the
Company
<PAGE> 118
-4-
designated as its 10 1/8% Senior Subordinated Notes due 2008, Series B (the
"Exchange Notes"). The Notes include the 10 1/8% Senior Subordinated Notes due
2008, Series A (the "Initial Notes"), the Private Exchange Notes and the
Exchange Notes issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement. The Initial Notes and the Exchange Notes are
treated as a single class of securities under the Indenture. Except as set forth
in the Indenture, the Notes are limited in aggregate principal amount
outstanding at any time to $200,000,000, which may be issued under the
Indenture, PROVIDED the principal amount of Initial Notes issued on the Issue
Date is $120,000,000. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the TIA for a statement of them. The Notes are
general unsecured obligations of the Company.
5. SUBORDINATION. The Notes are subordinated in right of
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash or Cash Equivalents of all Senior Debt of the
Company, whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. Each Holder by its acceptance hereof agrees to
be bound by such provisions and authorizes and expressly directs the Trustee, on
its behalf, to take such action as may be necessary or appropriate to effectuate
the subordination provided for in the Indenture and appoints the Trustee its
attorney-in-fact for such purposes.
6. REDEMPTION.
(a) OPTIONAL REDEMPTION. The Notes will be redeemable, at the
Company's option, in whole at any time or in part from time to time, on and
after August 1, 2003, upon not less than 30 nor more than 60 days' notice, at
the following redemption prices (expressed as percentages of the principal
amount thereof) if redeemed during the twelve-month period commencing on August
1 of the year set forth below, plus, in each case, accrued and unpaid interest
thereon, if any, to the date of redemption:
<PAGE> 119
-5-
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003.................................................. 105.063%
2004.................................................. 103.375%
2005.................................................. 101.688%
2006 and thereafter ................ 100.000%
</TABLE>
(b) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any
time, or from time to time, on or prior to August 1, 2001, the Company may, at
its option, use the net cash proceeds of one or more Public Equity Offerings (as
defined below) to redeem up to 35% of the Notes at a redemption price equal to
110.125% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of redemption; PROVIDED that at least 65% of the
principal amount of Notes originally issued on the Issue Date remains
outstanding immediately after any such redemption.
In order to effect the foregoing redemption with the proceeds
of any Public Equity Offering, the Company shall make such redemption not more
than 90 days after the consummation of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering"
means an underwritten public offering of Qualified Capital Stock of the Company
pursuant to a registration statement filed with the Commission in accordance
with the Securities Act.
7. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price plus accrued and unpaid
interest, if any, the Notes called for redemption will cease to bear interest
from and after such Redemption Date and the only right of the Holders of such
Notes will be to receive payment of the Redemption Price plus accrued and unpaid
interest, if any.
8. OFFERS TO PURCHASE. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales and upon the occurrence of a Change of
Control, and subject to further limitations contained therein, the Company will
make an offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
<PAGE> 120
-6-
9. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.
10. PERSONS DEEMED OWNERS. The registered Holder of
a Note shall be treated as the owner of it for all purposes.
11. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest on the Notes).
13. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
written consent of the Holders of at least a majority in aggregate principal
amount of the Notes then outstanding, and any existing Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the Notes
then outstanding. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency, provide for uncertificated
Notes in addition to or in place of certificated Notes, or comply with Article
Five of the Indenture or make any other change that does not adversely affect in
any material respect the rights of any Holder of a Note.
14. RESTRICTIVE COVENANTS. The Indenture imposes certain
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
its Capital Stock or certain Indebtedness, enter into transactions with
Affiliates, create dividend or other payment restrictions
<PAGE> 121
-7-
affecting Subsidiaries, merge or consolidate with any other Person, sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its assets or adopt a plan of liquidation. Such limitations are subject to a
number of important qualifications and exceptions. The Company must annually
report to the Trustee on compliance with such limitations.
15. SUCCESSORS. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. DEFAULTS AND REMEDIES. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest) if it determines that withholding
notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS. No stockholder, director,
officer, employee or incorporator, as such, of the Company shall have any
liability for any obligation of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
19. AUTHENTICATION. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
20. GOVERNING LAW. The laws of the State of New York shall
govern this Note and the Indenture, without regard to principles of conflict of
laws.
<PAGE> 122
-8-
21. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience to the Holders
of the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
23. INDENTURE. Each Holder, by accepting a Note, agrees to be
bound by all of the terms and provisions of the Indenture, as the same may be
amended from time to time.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture which has the text of this
Note in larger type. Requests may be made to: GEO Specialty Chemicals, Inc.,
28601 Chagrin Boulevard, Suite 210, Cleveland, Ohio 44122, Attn: George P.
Ahearn.
<PAGE> 123
-9-
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to:
z==============================================================================
==============================================================================
==============================================================================
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ______________________________________,
agent to transfer this Note on the books of the Company. The
agent may substitute another to act for him.
Dated: Signed:
=============================== ==========================
(Sign exactly as name
appears on the other
side of this Note)
Signature Guarantee: _________________________________________________________
<PAGE> 124
-10-
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by
the Company pursuant to Section 4.15 or Section 4.16 of the
Indenture, check the appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state
the amount you elect to have purchased:
$______________________
Dated: _________________ __________________________
NOTICE: The signature on
this assignment must
correspond with the name
as it appears upon the
face of the within Note in
every particular without
alteration or enlargement
or any change whatsoever
and be guaranteed by the
endorser's bank or broker.
Signature Guarantee: ________________________________________________________
<PAGE> 125
-1-
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
TRANSFERS TO NON-QIB ACCREDITED INVESTORS
[ ], [ ]
Attention: Securities Processing
Window Level SC1
Re: GEO Specialty Chemicals, Inc. 10 1/8% Senior
Subordinated Notes due 2008 (THE "NOTES")
Ladies and Gentlemen:
In connection with our proposed purchase of 10 1/8% Senior
Subordinated Notes of GEO Specialty Chemicals, Inc. (the "Company"), we confirm
that:
1. We have received a copy of the Offering Memorandum (the
"Offering Memorandum"), dated July 28, 1998 relating to the Notes and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages (i)-(iv)
of the Offering Memorandum and in the section entitled "Transfer Restrictions"
of the Offering Memorandum, including the restrictions on duplication and
circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Notes (as described in the Offering Memorandum) and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with, such restrictions and conditions
and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Notes prior to the date
which is two years after the original issuance of the Notes, we will do so only
(i) to the Company or any of its subsidiaries, (ii) inside the United States in
<PAGE> 126
-2-
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act), (iii) inside the
United States to an institutional "accredited investor" (as defined below) that,
prior to such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to the Trustee (as defined in the Indenture relating to the
Notes), a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Notes, (iv) outside the United
States in accordance with Rule 904 of Regulation S under the Securities Act, (v)
pursuant to the exemption from registration provided by Rule 144 under the
Securities Act (if available), or (vi) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.
4. We are not acquiring the Notes for or on behalf of, and
will not transfer the Notes to, any pension or welfare plan (as defined in
Section 3 of the Employee Retirement Income Security Act of 1974), except as
permitted in the section entitled "Transfer Restrictions" of the Offering
Memorandum.
5. We understand that, on any proposed resale of any Notes, we
will be required to furnish to the Trustee and the Company such certification,
legal opinions and other information as the Trustee and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or their investment, as the case may be.
7. We are acquiring the Notes purchased by us for our account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
<PAGE> 127
-3-
By:
---------------------
Name:
Title:
<PAGE> 128
-1-
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant To Regulation S
[ ], [ ]
[ ]
Attention: Securities Processing
Window Level SC1
Re: GEO Specialty Chemicals, Inc. (the
"Company") 10 1/8% Senior Subordinated Notes
due 2008 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $ aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to and
in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and neither
we nor any person acting on our behalf knows that the transaction has
been pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Notes.
<PAGE> 129
-2-
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:______________________________
Authorized Signature
<PAGE> 1
[Thompson Hine & Flory LLP Letterhead]
Exhibit 5.1
December 22, 1998
GEO Specialty Chemicals, Inc.
28601 Chagrin Boulevard, Suite 210
Cleveland, Ohio 44122
Dear Sirs:
We have acted as counsel to GEO Specialty Chemicals, Inc., an Ohio
corporation ("GEO"), in connection with the preparation by GEO of a Registration
Statement on Form S-1, to be filed with the Securities and Exchange Commission
under the Securities Act of 1933, relating to $120 million aggregate principal
amount of its 10 1/8% Senior Subordinated Notes due 2008 (the "Offered Notes")
to be offered in exchange for a like principal amount of its outstanding 10 1/8%
Senior Subordinated Notes due 2008 (as the same may be amended, the
"Registration Statement"). The Offered Notes will be issued pursuant to an
Indenture, dated as of July 31, 1998 (the "Indenture"), by and between GEO and
Chase Manhattan Trust Company, National Association, as the trustee (the
"Trustee").
In rendering this opinion, we have examined copies of the Indenture,
the form of the Offered Notes set forth in the Indenture and such other
documents as we have deemed necessary or appropriate to render this opinion. In
our examination we have assumed the genuineness of all signatures; the
authenticity of all documents submitted to us as originals; the conformity to
original documents of all documents submitted to us as certified, conformed or
photostatic copies; the authenticity of the originals of such copies; the due
authorization, execution, acknowledgment and delivery by all parties thereto of
all documents examined by us; and the power and authority of the parties to the
documents examined by us to enter into and perform the obligations of such party
thereunder. As to questions of fact not independently verified by us we have
relied, to the extent we have deemed appropriate, upon representations and
certificates of officers of GEO, public officials and other appropriate persons.
We have investigated such questions of law for the purpose of rendering this
opinion as we have deemed necessary. We express no opinion with respect to
compliance with state securities laws or with respect to any state or federal
law relating to fraudulent conveyance.
Based upon the foregoing and subject to the qualifications, exceptions
and limitations set forth herein, we are of the opinion that, when (i) the
agreements, documents and certificates that are required to be executed and
delivered pursuant to, or are contemplated by, the Indenture upon the issuance
of the Offered Notes have been executed and delivered by the
<PAGE> 2
applicable parties, (ii) the Offered Notes have been duly executed,
authenticated and delivered in accordance with the Indenture, and (iii) one or
more global certificates in definitive, fully registered form has been delivered
by GEO to the Trustee and deposited by the Trustee with, and accepted by, The
Depository Trust Company, the Offered Notes will be legally issued, fully paid
and non-assessable and will constitute the legally valid and binding obligations
of GEO, except as may be limited by (a) bankruptcy, reorganization, insolvency
or other similar laws of general application affecting the rights and remedies
of creditors and secured parties and (b) the discretion of the courts in
applying equitable principles.
To the extent that the obligations of GEO under the Indenture may be
dependent upon such matters, we assume for purposes of this opinion that the
Trustee is duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization; that the Trustee is duly qualified to
engage in the activities contemplated by the Indenture; that the Indenture has
been duly authorized, executed and delivered by the Trustee and constitutes the
valid, binding and enforceable obligation of the Trustee; that the Trustee is in
compliance, generally and with respect to acting as a trustee under the
Indenture, with all applicable laws and regulations; and that the Trustee has
the requisite corporate and legal power and authority to perform its obligations
under the Indenture.
The opinions expressed in this letter are limited to the matters set
forth herein and no other opinions should be inferred beyond the matters
expressly stated. We assume no obligation to revise or supplement this opinion
in the event of any amendment, supplement or other modification of the Indenture
or any other agreement, document or certificate executed and delivered in
connection with the issuance of the Offered Notes, or upon a change in any of
the laws of the United States or any jurisdiction thereof by legislative action,
judicial decision or otherwise.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to this firm under the caption "Legal
Matters" in the prospectus forming a part of the Registration Statement.
Sincerely,
/s/ THOMPSON HINE & FLORY LLP
Thompson Hine & Flory LLP
<PAGE> 1
Exhibit 10.1
SHARE PURCHASE AGREEMENT
BETWEEN
GEO SPECIALTY CHEMICALS, INC.
and
CHARTER OAK PARTNERS
Dated as of March 25, 1997
<PAGE> 2
SHARE PURCHASE AGREEMENT
------------------------
THIS SHARE PURCHASE AGREEMENT (this "Agreement"), dated as of March 25,
1997, is made by and among Charter Oak Partners, a Connecticut partnership
("Charter Oak"), and GEO Specialty Chemicals, Inc., an Ohio corporation (the
"Company").
RECITALS
--------
A. Charter Oak desires to acquire from the Company, and the Company
desires to issue and sell to Charter Oak, in the manner and on the terms and
conditions hereinafter set forth, Common Shares, $1.00 par value, of the
Company.
B. In connection with Charter Oak's purchase of the Company's Common
Shares, the Company and Charter Oak desire to establish certain rights and
obligations among themselves.
AGREEMENTS
----------
NOW, THEREFORE, the Company and Charter Oak agree as follows:
SECTION 1. DEFINITIONS
-----------
The following terms when used in this Agreement shall have the
following respective meanings:
"AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by, or is under common control
with such Person. A Person shall be deemed to control another Person if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of the "controlled" Person, whether
through ownership of voting securities, by contract, or otherwise.
"AHEARN EMPLOYMENT AGREEMENT" means that certain employment agreement
entered into by the Company and George P. Ahearn on even date herewith in the
form attached as EXHIBIT A hereto.
"BUSINESSES" or the "Business" means the business of clay mining and
processing for use in the production of alum and/or the sale to third parties,
the manufacturing and marketing of alum and aluminum based coagulants and
floculants for use in water treatment and the paper industry and the production
of clay for the oil and agchemicals industries, but excluding the United States
and Canadian paper chemicals and construction and process chemicals businesses
to be acquired by the Company pursuant to the Henkel Agreement (defined below).
-1-
<PAGE> 3
"ARTICLES OF INCORPORATION" means the Articles of Incorporation of the
Company on file with the Secretary of State of the State of Ohio immediately
prior to the March 25, 1997 approval, by the Company's Shareholders and Board of
Directors of an amendment to the Articles of Incorporation.
"CHARTER OAK WARRANT AGREEMENT" means that certain warrant agreement
entered into by the Company and Charter Oak on even date herewith.
"CLOSING" shall have the meaning set forth in Section 3.1 hereof.
"CLOSING DATE" shall have the meaning set forth in Section 3.1 hereof.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CODE OF REGULATIONS" means the Code of Regulations of the Company.
"COMMON SHARES" means the Company's Class A Voting Common Stock, par
value $1.00 per share.
"COMMON SHAREHOLDERS" means each of Chemical Specialities Enterprises,
L.P. and any Permitted Transferee of Common Shares after the date of this
Agreement.
"COMPANY FINANCIAL STATEMENTS" means the balance sheets of the Company
as of December 31, 1996, and the related statements of operations, shareholders
equity and cash flows for the twelve-month period then ended.
"CONTRACT" means any contract, agreement, undertaking or commitment
(written or oral) to which the Company or any of its Subsidiaries is a party or
by which the Company, any of its Subsidiaries or any of their respective assets
are bound.
"CREDIT AGREEMENT" means the Credit Agreement, dated as of March 25,
1997, among the Company, the financial institutions party thereto and Bankers
Trust Company, as Administrative Agent.
"CROWE CHIZEK DILIGENCE DOCUMENTS" means any written material prepared
by Crowe, Chizek & Company, delivered to Charter Oak and/or Bankers Trust
Company and summarizing in whole or in part, the results of any due diligence
investigation performed by Crowe, Chizek & Company for Charter Oak.
"ECKMAN EMPLOYMENT AGREEMENT" means that certain employment agreement
entered into by the Company and William P. Eckman on even date herewith.
-2-
<PAGE> 4
"EMPLOYEE BENEFIT PLAN(S)" means any employee benefit plan as defined
in Section 3(3) of ERISA and any other plan, policy, program, practice or
arrangement providing compensation or other benefits to any current or former
officer or employee of the Company or its Subsidiaries or any beneficiary or
dependent thereof that is or was maintained by the Company or its Subsidiaries.
"ENCUMBRANCES" means any mortgage, chattel mortgage, conditional sales
contract, pledge, lien, charge, security interest, encumbrance, option, lease,
license or easement.
"ENTERPRISES" means Chemical Specialities Enterprises, L.P., a Delaware
limited partnership.
"ENTERPRISES WARRANT AGREEMENT" means that certain warrant agreement
entered into by the Company and Enterprises on even date herewith.
"ENVIRONMENTAL LAW(S)" means all federal, state, and local laws,
statutes, common law duties, rules, regulations ordinances and codes, together
with all administrative orders, directives, requests, licenses, authorizations,
permits and agreements issued or signed by any federal, state or local
government authority, relating to environmental, health or safety matters,
including but not limited to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980; Clean Water Act of 1977; Clean Air Act;
Resource Conservation and Recovery Act of 1976; Federal Insecticide, Fungicide,
and Rodenticide Act; Toxic Substances Control Act; Emergency Planning and
Community Right-to-Know Act of 1986; Occupational Safety and Health Act of 1970;
and Safe Drinking Water Act, and state and local counterparts to these acts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" shall mean generally accepted accounting principles as in effect
on the date hereof. Whenever any accounting term is used herein which is not
otherwise defined, it shall have the meaning ascribed thereto under GAAP.
"GOVERNMENTAL AUTHORITY" means the United States, any state or
municipality, the government of any foreign country, any subdivision of any of
the foregoing, or any authority, department, commission, board, bureau, agency,
court, or instrumentality of any of the foregoing.
"HAZARDOUS SUBSTANCE(S)" means (a) any substance, the presence of which
requires investigation or remediation under any Environmental Law or under
common law; (b) any dangerous, toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous
substance which is regulated by any Environmental Law; (c) any substance, the
presence of which causes or threatens to cause a nuisance upon property
presently and/or previously owned, leased or otherwise used by the Company or
its Subsidiaries (or poses or threatens to pose a hazard to the health or safety
of persons on or about the property
-3-
<PAGE> 5
or adjacent properties); and (d) radon, ureaformaldehyde, polychlorinated
biphenyls, asbestos or asbestos-containing materials, petroleum and petroleum
products.
"HENKEL" means Henkel Corporation, a Delaware corporation, and Henkel
Canada Limited, a corporation organized under the laws of Ontario, Canada.
"HENKEL AGREEMENT" means that certain asset purchase agreement, dated
February 10, 1977, entered into between the Company and Henkel.
"HENKEL ASSETS" means the assets purchased pursuant to the Henkel
Agreement.
"INDEBTEDNESS" of any Person means (i) indebtedness for borrowed money;
(ii) indebtedness for the deferred purchase price of property or services; (iii)
obligations under a lease which is capitalized on the balance sheet of such
Person; (iv) obligations under direct or indirect guaranties of indebtedness or
obligations of others of the type referred to in clause (i), (ii) or (iii)
above; and (v) nonrecourse indebtedness secured by a lien on the property of
such person.
"INTELLECTUAL PROPERTY" means all of the following which is owned by,
issued to or licensed to Company or any Subsidiary, and any and all
corresponding rights that, now or hereafter, may be secured throughout the
world: patents, patent applications, patent disclosures and inventions (whether
or not patentable and whether or not reduced to practice) and any reissue,
continuation, continuation-in-part, revision, extension or reexamination
thereof; trademarks, service marks, trade dress, logos, trade names and
corporate names together with all goodwill associated therewith and all
translations, adaptations, derivations and combinations of the foregoing;
copyrights and copyrightable works; mask works; and all registrations,
applications and renewals for any of the foregoing; trade secrets as defined
under the Uniform Trade Secrets Act and confidential information (including,
without limitation, ideas, formulae, compositions, know-how, manufacturing and
production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data, financial,
business and marketing plans, sales and promotional literature, and customer and
supplier lists and related information); computer software (including, without
limitation, data and related documentation); other intellectual property rights;
and all copies and tangible embodiments of the foregoing (in whatever form or
medium), in each case including, without limitation, the items set forth on
SCHEDULE 4.13 attached hereto (collectively, the "Intellectual Property").
"KEY EQUITY REDEMPTION AGREEMENT" means that certain redemption
agreement between the Company, Key Equity Capital Corporation and Key Equity
Partners I concerning the redemption of all of the Common Shares and all of the
Class B Non-Voting Common Stock held by Key Equity Capital Corporation and Key
Equity Partners I.
"LICENSES" means all governmental licenses, permits, approvals and
registrations.
-4-
<PAGE> 6
"MATERIAL ADVERSE EFFECT" means any material adverse effect on the
business, financial condition, results of operations, assets or prospects of the
Company or any of its Subsidiaries.
"1933 ACT" means the Securities Act of 1933, as amended.
"NOTE PURCHASE AGREEMENT" means that certain note purchase agreement
concerning the purchase of certain notes of Enterprises by Charter Oak from Key
Capital Corporation, entered into on even date herewith.
"PERSON" means an individual, corporation, partnership, joint venture,
trust, unincorporated organization, or Governmental Authority.
"RELATION" shall mean with respect to any Person, such Person's spouse
and the parents, grandparents, brothers and sisters, children, and grandchildren
of such Person or of such Person's spouse.
"SEC" means the Securities and Exchange Commission.
"SHAREHOLDERS" shall have the meaning given to it in Section 4.5(b)
hereof.
"SHAREHOLDERS AGREEMENT" means the Shareholders Agreement, of even date
herewith, among the Company, Charter Oak, Enterprises, George P. Ahearn and
William P. Eckman.
"SUBSIDIARY" means any Person or business in which the Company owns,
directly or indirectly, an equity interest representing at least twenty-five
percent of the voting stock or voting interests or such Person or business.
"TAX RETURN(S)" means all federal, state, foreign, local and other tax
returns, reports and statements heretofore required to be filed by the Company
to which reference is being made or by any consolidated, combined or unitary
group of which the Company is or was a member.
"TAX(ES)" means all taxes, charges, fees, levies or other assessments
of a Governmental Authority of any nature whatsoever, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, estimated, severance, stamp, occupation, property or other
taxes, customs, duties, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any taxing authority (domestic or foreign) upon the company
to which reference is being made or any affiliate thereof or upon any
consolidated, combined or unitary group of which any such entity is or was a
member.
"TO THE BEST KNOWLEDGE OF THE COMPANY" means the actual knowledge after
reasonable investigation of any of the Company's officers, directors, general
managers or plant managers.
-5-
<PAGE> 7
SECTION 2. PURCHASE AND SALE OF SHARES
2.1 ISSUANCE AND PURCHASE OF SHARES AT CLOSING. At the Closing, the
Company shall issue and sell to Charter Oak, and Charter Oak shall purchase from
the Company, 82.31 Common Shares. Charter Oak shall pay to the Company a
purchase price of $179,252.24 per share for each Common Share purchased by it
and shall make such payment by wire transfer of immediately available funds to
an account designated in writing by the Company.
SECTION 3. THE CLOSING
3.1 CLOSING. The closing of the issuance and sale of the Common Shares
pursuant to Section 2.1 hereof and the other transactions contemplated hereby
shall take place at the offices of White & Case, 1155 Avenue of the Americas,
New York, New York 10036-2787 at 10:00 a.m. on March 25, 1997 (the "Closing
Date"), or at such other time or place as the parties shall mutually agree.
3.2 DELIVERIES BY THE COMPANY. (a) At the Closing, the Company shall
deliver or cause to be delivered to Charter Oak the following items (in addition
to any other items required to be delivered to Charter Oak pursuant to any other
provision of this Agreement):
(i) certificates representing the Common Shares being issued
and sold by the Company to Charter Oak pursuant to Section 2.1 hereof,
duly recorded on the books of the Company in the name of Charter Oak,
together with such other supporting documents as may in the opinion of
Charter Oak's counsel be reasonably necessary to permit Charter Oak to
acquire title to such Common Shares free of any Encumbrance or adverse
claim;
(ii) receipts for the payment delivered to the Company by
Charter Oak pursuant to Section 3.3(a)(i) hereof;
(iii) the Articles of Incorporation, certified by the
Secretary of State of the State of Ohio;
(iv) a certificate of the Secretary of State of the State of
Ohio as to the good standing of the Company, dated within eight days
prior to the Closing Date;
(v) certificates of existence in good standing and
qualification to transact business as a foreign corporation (or similar
documents) of the Company and each of its Subsidiaries from each state
in which the failure to so qualify could have a Material Adverse
Effect;
(vi) a certificate of the Secretary of the Company, in form
and substance satisfactory to counsel for Charter Oak, certifying that
attached thereto are true and correct copies of (A) the Code of
Regulations of the Company and (B) resolutions duly
-6-
<PAGE> 8
and validly adopted by the Board of Directors of the Company authorizing the
execution and delivery of this Agreement, the Shareholders Agreement, the
Enterprises Warrant Agreement, the Charter Oak Warrant Agreement, the Ahearn
Employment Agreement, the Eckman Employment Agreement and the Key Equity
Redemption Agreement and the consummation of the transactions contemplated
hereby and thereby.
(vii) a certificate of the President of the Company certifying
that (A) each of the representations and warranties of the Company
contained in Section 4 of this Agreement are true and correct in all
material respects as of the Closing Date and (B) all agreements,
undertakings and obligations to be performed or complied with by the
Company as of or prior to the Closing, unless waived in writing, have
been duly performed or complied with by the Company in accordance with
the terms of this Agreement;
(viii) the legal opinion of Thompson, Hine & Flory LLP,
counsel to the Company;
(ix) a counterpart of the Shareholders Agreement, duly
executed by the Company, each of the Shareholders, George P. Ahearn and
William P. Eckman;
(x) an executed copy of the Ahearn Employment Agreement, duly
executed by the Company and George P. Ahearn;
(xi) an executed copy of the Eckman Employment Agreement, duly
executed by the Company and William P. Eckman;
(xii) a counterpart of the Charter Oak Warrant Agreement, duly
executed by the Company;
(xiii) an executed copy of the Enterprises Warrant Agreement,
duly executed by the Company and Enterprises;
(xiv) an executed copy of the Key Equity Redemption Agreement
and all exhibits thereto;
(xv) an executed copy of the Henkel Agreement; and
(xvi) a copy of the executed Credit Agreement.
3.3 DELIVERIES BY CHARTER OAK. (a) At the Closing, Charter Oak shall
deliver or cause to be delivered to the Company the following items (in addition
to any other items required to be delivered to the Company pursuant to any other
provision of this Agreement):
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(i) payment by wire transfer of immediately available funds
necessary to satisfy Charter Oak's obligations to the Company under
Section 2.1 hereof;
(ii) receipts for each of the Common Shares being purchased by
Charter Oak pursuant to Section 2.1 hereof; and
(iii) a counterpart of the Shareholders Agreement, duly
executed by Charter Oak.
(iv) a copy of the Note Purchase Agreement, duly executed by
Charter Oak;
(v) the legal opinion of Calfee, Halter & Griswold LLP,
counsel to Charter Oak.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
In order to induce Charter Oak to purchase the Common Shares that it is
purchasing hereunder, the Company represents and warrants to Charter Oak that:
4.1 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio and has full
corporate power and authority to own its properties and carry on its business
and to enter into and perform its obligations under this Agreement.
4.2 CERTIFICATE OF INCORPORATION AND BYLAWS. The Company has delivered
to Charter Oak true, correct and complete copies of its Articles of
Incorporation and Code of Regulations, together with all amendments to each
through, and including, the date hereof. Such Articles of Incorporation and Code
of Regulations are in full force and effect, and no amendments to the Articles
of Incorporation or Code of Regulations are contemplated, other than the
amendment to the Articles of Incorporation listed on Schedule 4.2.
4.3 CORPORATE MINUTES. The Company has made available to Charter Oak
true, correct and complete copies of its minute books, stock certificate books
and corporate records; such books and records reflect all issuances of equity
and debt securities of the Company or rights to acquire any such securities, and
contain true and complete records of all meetings and consents in lieu of
meetings of the Company's Board of Directors (and any committees thereof) and
shareholders.
4.4 QUALIFICATION. The Company is qualified to do business and is in
good standing in each jurisdiction (listed on SCHEDULE 4.4 to this Agreement)
where the character or location of property owned and leased, the employment of
personnel or the nature of the business and activities conducted by the Company
requires such qualification, licensing or domestication, except in such
jurisdictions where the failure to be so qualified, licensed or domesticated and
to
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be in good standing, individually or in the aggregate, would not have a Material
Adverse Effect. Except as set forth on SCHEDULE 4.4, the Company does not file
franchise, income or other tax returns in any jurisdiction based upon the
ownership or use of property therein or the derivation of income therefrom.
4.5 CAPITALIZATION OF THE COMPANY; SHAREHOLDERS. (a) Immediately prior
to the issuance of the Common Shares as contemplated by this Agreement, but
giving effect to the transactions contemplated by the Key Equity Redemption
Agreement, the authorized capital stock of the Company consists of: (i) 1025
Common Shares, 21.88 of which are issued and outstanding, and 215 Class B
Non-Voting Common Stock, par value $1.00, none of which are issued and
outstanding. All issued and outstanding Common Shares have been duly authorized
and are validly issued, fully paid and nonassessable and are not subject to, nor
were any issued in violation of, any previously existing preemptive rights.
Except as described above in this Section 4.5(a) or as set forth on SCHEDULE
4.5(a), there are not any outstanding shares of capital stock or other equity
securities of the Company or options, warrants, subscriptions, convertible
debentures or other rights, commitments or any other similar agreements for the
purchase of any shares of capital stock or other equity securities of the
Company. Each of the Common Shares outstanding were issued in full compliance
with all federal and state securities or "blue sky" laws. Except as provided to
the Shareholders under the terms of the Shareholders Agreement, there are no
preemptive or similar rights with respect to the Company's capital stock. Except
as provided in the Shareholders Agreement and as set forth on SCHEDULE 4.5(a),
the Company is not a party to any voting trust agreements or other contracts,
agreements or arrangements restricting voting rights or transferability with
respect to any shares of the capital stock of the Company.
(b) The persons set forth on SCHEDULE 4.5(b) own of record on
the date hereof the number of Common Shares set forth opposite their names, and
collectively constitute all the shareholders of record of the capital stock of
the Company.
4.6 OWNERSHIP OF HENKEL ASSETS. The Company has agreed to acquire the
United States and Canadian paper chemicals and construction and process
chemicals businesses of Henkel, pursuant to the terms of the Henkel Agreement,
which acquisition shall, subject to the satisfaction of the conditions to
closing contained therein, close as of the date of this Agreement.
4.7 SUBSIDIARIES AND OTHER AFFILIATES. Except as set forth on SCHEDULE
4.7, the Company does not own, either directly or indirectly, any interest or
investment, whether debt or equity (other than an interest as a creditor holding
a trade account receivable), or any obligation, option or right to acquire any
interest, direct or indirect, in any other corporation or other entity.
4.8 AUTHORITY. (a) The Company has the necessary corporate power and
authority to enter into and deliver this Agreement, the Shareholders Agreement,
the Enterprises Warrant Agreement, the Charter Oak Warrant Agreement, the Ahearn
Employment Agreement, the Eckman Employment Agreement and the Key Equity
Redemption Agreement to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby
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and thereby. The execution and delivery of this Agreement, the Shareholders
Agreement, the Enterprises Warrant Agreement, the Charter Oak Warrant Agreement,
the Ahearn Employment Agreement, the Eckman Employment Agreement and the Key
Equity Redemption Agreement and the consummation of the transactions
contemplated hereby and thereby by the Company have been duly authorized by the
Board of Directors and the Shareholders of the Company in accordance with the
Company's governing corporate documents and applicable laws. This Agreement, the
Shareholders Agreement, the Enterprises Warrant Agreement, the Charter Oak
Warrant Agreement, the Ahearn Employment Agreement, the Eckman Employment
Agreement and the Key Equity Redemption Agreement have each been duly and
validly authorized, executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company, enforceable in accordance
with their respective terms (except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting the
rights of creditors generally or by the general principles of equity). Except as
set forth on SCHEDULE 4.8, neither the execution, delivery or performance of
this Agreement, the Shareholders Agreement, the Enterprises Warrant Agreement,
the Charter Oak Warrant Agreement, the Ahearn Employment Agreement, the Eckman
Employment Agreement or the Key Equity Redemption Agreement by the Company, nor
the consummation of the transactions contemplated hereby or thereby, nor
compliance by the Company with the terms and provisions of this Agreement, the
Shareholders Agreement, the Enterprises Warrant Agreement, the Charter Oak
Warrant Agreement, the Ahearn Employment Agreement, the Eckman Employment
Agreement or the Key Equity Redemption Agreement will result in a violation or
breach of any term or provision of the Company's Articles of Incorporation or
Code of Regulations, or of any statute, rule or regulation applicable to the
Company or its businesses, properties, assets or personnel, nor conflict with or
constitute a violation or breach of, or a default under (or an event which, with
the passage of time or the giving of notice, or both, would constitute a default
under), or give any party a right to accelerate the due date of any indebtedness
or obligation under, any indenture, mortgage, deed of trust, or Contract to
which the Company is a party or to which its properties or assets are subject,
or any instrument, judgment, decree, writ, or other restriction to which the
Company is a party or by which the Company or its businesses, properties, assets
or personnel are bound, nor require any consent or approval of any Person.
(b) The Company is not required to submit any notice, report
or other filing with any federal, state or local Governmental Authority in
connection with the execution or delivery or performance by the Company of this
Agreement or the consummation of the transactions contemplated thereby.
4.9 COMPANY FINANCIAL STATEMENTS. The Company has delivered to Charter
Oak true, complete and correct copies of the Company Financial Statements.
Except as set forth on SCHEDULE 4.9 and any Crowe Chizek Diligence Documents,
the Company Financial Statements (a) present fairly the financial condition of
the Company at said dates and the results of operations, changes in
shareholders' equity and cash flows for the periods therein specified and (b)
have been prepared from the books and records of the Company in accordance with
GAAP,
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consistently applied and maintained throughout the periods indicated, except as
otherwise stated or referred to in such Company Financial Statements.
4.10 NO UNDISCLOSED LIABILITIES. Except for (a) liabilities disclosed
or provided for on the Company Financial Statements or on SCHEDULE 4.10 hereto
and any Crowe Chizek Diligence Documents and (b) liabilities incurred in the
ordinary course of business consistent with past practice since December 31,
1996 not exceeding in the aggregate $25,000, the Company has no direct or
indirect indebtedness, liability, loss or obligation, accrued, absolute or
contingent (whether or not of a kind required by GAAP to be set forth on a
balance sheet).
4.11 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 4.11,
since December 31, 1996, the Company has conducted its business only in the
ordinary course and consistent with prior practice, and the Company has not:
(a) discharged or satisfied any lien, charge or encumbrance
other than those then required to be discharged or satisfied, or paid
any obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, other than current liabilities
shown on the Company Financial Statements and current liabilities
incurred since December 31, 1996, in the ordinary course of business
and consistent with prior practice;
(b) declared or made any payment of any dividend, or made any
other distribution upon or in respect of any of its shares of capital
stock or any other securities, or purchased, retired or redeemed any of
the shares of its capital stock or any other securities, including any
warrants or options to purchase any capital stock, or obligated itself
to do any of the foregoing, other than pursuant to the Key Equity
Redemption Agreement;
(c) mortgaged, pledged or subjected (or permitted to be
subjected) to lien, charge, security interest or any other encumbrance
or restriction any of its property, business or assets, tangible or
intangible;
(d) sold, transferred, leased to others or otherwise disposed
of any of its property or assets, tangible or intangible (other than
inventory and other products sold and/or licensed in the ordinary
course of business and consistent with prior practice), or canceled or
compromised any debt or claim, or waived or released any claim or right
of substantial value;
(e) terminated or received any notice of termination of any
contract, lease or other agreement or suffered any damage, destruction
or loss (whether or not covered by insurance) which, individually or in
the aggregate, has had or might have a Material Adverse Effect;
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(f) encountered any labor union organizing activity, had any
actual or threatened employee strikes, work stoppages, slowdowns or
lockouts, or had any material change in its relations with its
employees, consultants, agents, distributors, formulators, customers or
suppliers;
(g) transferred or granted any rights under, or entered into
any settlement regarding the breach or infringement of, or entered into
any agreement or commitment relating to, any license, patent,
copyright, trademark, trade name, or any application for any of the
foregoing, or any permit, consent, approval, invention, product
registration or similar rights, domestic or foreign, or modified any
existing rights with respect thereto;
(h) adopted, entered into or amended any employee benefit plan
or made any change in the actuarial methods or assumptions used in
funding or determining benefit equivalencies thereunder, made any
material change in the rate of compensation, commission, bonus,
deferred compensation arrangement or other direct or indirect
remuneration payable, or paid or agreed or orally promised to pay,
conditionally or otherwise, any bonus (cash or non-cash), extra
compensation, deferred compensation arrangement or severance or
vacation pay, to any stockholder, director, officer, or senior employee
of the Company or hired or entered into any written or verbal
employment agreement or arrangement (other than at-will employment
agreements or arrangements in the ordinary course of business which do
not provide for severance and/or termination benefits) with any person
other than as set forth in the Ahearn Employment Agreement and the
Eckman Employment Agreement;
(i) issued or sold any shares of its capital stock or other
securities, or issued, granted or sold any options, rights or warrants
with respect thereto, or acquired any capital stock or other securities
of any corporation, business or entity, or any interest in any business
enterprise or otherwise made any loan or advance to or investment in
any person, entity, firm or corporation, except for short-term
investments in cash and cash equivalents made in the ordinary course of
business and consistent with prior practice;
(j) made any capital expenditures or capital additions or
betterments or commitments therefor in excess of $10,000 individually
or $50,000 in the aggregate;
(k) instituted, settled or agreed to settle, or suffered any
adverse determination in, any litigation, action or proceeding before
any court or governmental body (domestic or foreign) relating to the
Company or its businesses, assets or properties;
(l) revalued any of its assets or written off as uncollectible
any notes or accounts receivable, except writedowns and write-offs in
the ordinary course of business, none of which, individually or in the
aggregate, is material to the Company or its businesses;
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(m) entered into any agreement or made any commitment to take
any of the actions described in paragraphs (a) through (l) above; or
(n) experienced any Material Adverse Effect, or any events or
circumstances that are likely to result in a Material Adverse Effect.
4.12 ASSETS. Except as set forth on SCHEDULE 4.12, the Company has good
and marketable title to, or a valid leasehold interest in, all of the properties
and assets it owns or uses in its business or purports to own. Except as set
forth on SCHEDULE 4.12, none of such assets or properties are subject to any
Encumbrances, except (i) Encumbrances incurred or made in the ordinary course of
business which are not substantial in character, amount or extent and do not
materially impair the usefulness of such properties and assets in the conduct of
the business of the Company or its Subsidiaries; (ii) liens for taxes,
assessments or other governmental charges or levies which are either not yet
delinquent or are being contested in good faith and by appropriate proceedings,
can be paid without penalty and which do not materially impair the usefulness of
such properties and assets in the conduct of the business of the Company or its
Subsidiaries; and (iii) as reflected on the Company Financial Statements.
4.13 INTELLECTUAL PROPERTY. SCHEDULE 4.13 sets forth all patents,
trademarks, service marks, trade names, copyrights and franchises, all
applications for any of the foregoing and all permits, grants and licenses or
other rights running to or from the Company relating to any of the foregoing
that are necessary to the Business of the Company as currently conducted or as
contemplated to be conducted. Except as set forth on SCHEDULE 4.13, to the best
knowledge of the Company, the Company is not in violation of, or infringing upon
or misappropriating, any patent, trademark, service mark, trade name, copyright,
franchise or other proprietary right of any third party, and no claims have been
asserted, nor is there any litigation pending or threatened claiming such
infringement or misappropriation. Except as set forth on SCHEDULE 4.13, the
Company has not licensed or encumbered any of its Intellectual Property to any
third party, nor have any other distribution rights been granted by the Company
to a third party. Except as set forth on SCHEDULE 4.13, the Company has not
entered into any other agreements whereby the Company has been appointed as a
distributor or licensee of any products, patents, trademarks or other
intellectual property owned by a third party. Except as set forth on SCHEDULE
4.13, the Company has not entered into any agreement which restricts or affects
the use of any Intellectual Property. The Company is not a breach of any
agreement set forth in SCHEDULE 4.13, nor have any claims with respect to any
agreement been asserted nor is there any litigation pending or threatened
claiming any such breach, nor have any claims been asserted that any of the
terms and conditions of such agreements violate the laws of any jurisdiction or
treaty. Except as provided in SCHEDULE 4.13, the Company owns all right, title
and interest in and to the Intellectual Property, or has a valid and enforceable
license from third parties, and has the unfettered right to use, all
Intellectual Property in order to conduct its business in all material respects
as currently conducted and has used reasonable efforts to protect its rights in
the Intellectual Property and to protect and maintain the secrecy of its trade
secrets and other proprietary rights and confidential information. Except as set
forth in SCHEDULE 4.13, the transactions contemplated by this
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Agreement will have no material adverse effect on the right, title and interest
in and to the Intellectual Property. To the best knowledge of the Company, the
owners of any Intellectual Property licensed to the Company have taken all
necessary action to maintain and protect such Intellectual Property subject to
such licenses.
4.14 TAX MATTERS. The Company and each other corporation (or
predecessor) that has at any time been a member of a consolidated, combined or
unitary group of which the Company is or was a member (the "Tax Affiliates")
have timely and correctly filed or caused to be filed all Tax Returns. Except as
set forth on SCHEDULE 4.14 and any Crowe Chizek Diligence Documents, all Taxes
due and payable in respect of such Tax Returns have been or will be by Closing
paid in full. Except as set forth on SCHEDULE 4.14 and any Crowe Chizek
Diligence Documents, the Company and the Tax Affiliates have no current
extensions for the filing of any Tax Returns. Except as set forth on SCHEDULE
4.14 and any Crowe Chizek Diligence Documents, adequate provisions have been
made for the payment of all accrued and unpaid Taxes as of the date thereof,
whether or not then due and payable and whether or not disputed, except as may
be set forth in explanatory notes thereto. Except as set forth on SCHEDULE 4.14
and any Crowe Chizek Diligence Documents, the Tax Returns of or relating to the
Company, and the Affiliates have not been examined (nor are they currently in
the process of being examined) by the Internal Revenue Service or any other tax
authority for any of the past six (6) years, and such Tax Returns constitute a
complete and accurate representation of the Tax liabilities of the Company, the
Tax Affiliates and any combined, consolidated or unitary group of which the
company is or was a member.
4.15 LEGAL AND REGULATORY MATTERS. Except as set forth on SCHEDULE
4.15: (a) there is no claim, suit, action, arbitration, governmental
investigation or other proceeding, nor any order, decree or judgment pending or
in effect, or threatened by, against or relating to the Company or any of its
assets or properties, or the transactions contemplated hereby; (b) there are no
judgments, decrees or orders enjoining the Company in respect of, or the effect
of which is to prohibit any business practice or the acquisition of any property
or the conduct of any aspect of the business of the Company; (c) the Company has
complied and is complying with all laws, ordinances, treaties and governmental
rules, orders and regulations applicable to it or its properties, assets,
personnel or business, non-compliance with which could have a Material Adverse
Effect; and (d) the Company has obtained all Licenses necessary for the
ownership of its properties and the conduct of its business as currently
conducted, and all such Licenses are currently in full force and effect.
4.16 EMPLOYEES. Except as set forth on SCHEDULE 4.16, the Company has
not been and is not a party to any collective bargaining agreements with respect
to any of its employees or with respect to any contract or agreement with a
labor union or any local or subdivision thereof, nor has it been charged with
any unresolved unfair labor practices, nor is there any present union organizing
activity among any of its employees. There are no material controversies,
claims, suits, actions or proceedings pending or threatened between the Company
and any of its employees. The Company has complied in all material respects with
all laws and regulations
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relating to the employment of labor, including, without limitation, any
provisions thereof relating to wages, hours, employment practices, terms and
conditions of employment, collective bargaining, equal opportunity or similar
laws and the payment of social security and similar taxes, and is not liable for
any arrears of wages or any taxes or penalties for failure to comply with any of
the foregoing.
4.17 INSURANCE COVERAGE. SCHEDULE 4.17 to this Agreement lists all
insurance policies of the Company indicating the risks insured against, carrier,
policy number, amount of coverage (including deductible), premiums and
expiration dates. Except as set forth on SCHEDULE 4.17, such policies are in
full force and effect and all premiums now due and owing with respect to such
policies have been paid in full, and the Company has not made any borrowings or
incurred any indebtedness, the collateral for which was any of such policies.
4.18 PERSONNEL. (a) SCHEDULE 4.18 to this Agreement lists the names and
addresses of all directors, officers and employees of the Company, indicating
(i) the positions within the Company held by each such person and (ii) the
current annual salary rates for each such person and the amounts payable as
bonus or other compensation for each such person.
(b) SCHEDULE 4.18 to this Agreement provides a description of
all severance plans or agreements that would cause payments of a material nature
to be made to any employee of the Company if his or her employment were
terminated.
4.19 EMPLOYEE BENEFIT PLAN(S). (a) SCHEDULE 4.19 lists each Employee
Benefit Plan. The Company has no affiliates for purposes of ERISA.
(b) Each Employee Benefit Plan is in substantial compliance
with applicable law and has been administered and operated in all material
respects in accordance with its terms. Each Employee Benefit Plan which is
intended to be "qualified" within the meaning of Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service and
no event has occurred and no condition exists which could reasonably be expected
to result in the revocation of any such determination. No event which
constitutes a "reportable event" (as defined in Section 4043(b) of ERISA) for
which the 30-day notice requirement has not been waived by the Pension Benefit
Guaranty Corporation (the "PBGC") has occurred with respect to any Employee
Benefit Plan. Except as set forth on SCHEDULE 4.19, no Employee Benefit Plan
subject to Title IV of ERISA has been terminated or is or has been the subject
of termination proceedings pursuant to Title IV of ERISA. Full payment has been
made of all amounts which the Company was required under the terms of the
Employee Benefit Plan(s) to have paid as contributions to such Employee Benefit
Plan(s) on or prior to the date hereof (excluding any amounts not yet due) and
no Employee Benefit Plan which is subject to Part 3 of Subtitle B of Title 1 of
ERISA has incurred any "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived. Neither
the Company nor any Subsidiary nor any other "disqualified person" or "party in
interest" (as defined in Section 4975(e)(2) of the Code and Section 3(14) of
ERISA, respectively) has
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engaged in any transactions in connection with any Employee Benefit Plan(s) that
could reasonably be expected to result in the imposition of a material penalty
pursuant to Section 502(i) of ERISA, damages pursuant to Section 409 of ERISA or
a tax pursuant to Section 4975(a) of the Code. No material liability, claim,
action or litigation, has been made, commenced or, to the best of Company's
knowledge, threatened with respect to any Employee Benefit Plan(s) (other than
for benefits payable in the ordinary course and PBGC insurance premiums). No
Employee Benefit Plan or related trust owns any securities in violation of
Section 407 of ERISA. With respect to all Employee Benefit Plan(s) which are
subject to Title IV of ERISA, as of the most recent actuarial valuation prepared
for each such Employee Benefit Plan, the aggregate present value of the accrued
liabilities thereof did not exceed the aggregate fair market value of the assets
allocable thereto. The Company does not presently maintain or has not at any
time in the past maintained a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA). There are no actions, suits, or claims (other than routine
claims for benefits) pending or threatened against any Employee Benefit Plan of
the Company or its assets, or arising out of such Employee Benefit Plan(s) and
no facts exist which could give rise to any such actions, suits or claims or
that might have a material adverse effect on such Employee Benefit Plan(s).
There has been no act or omission by the Company that has given rise or may give
rise to any fines, penalties, taxes or late charges under Section 502(c), (i) or
(1), Section 407(1) of ERISA or Chapter 43 of the Code.
4.20 NOTES AND ACCOUNTS RECEIVABLE: INVENTORIES. Except as set forth on
SCHEDULE 4.20, all notes and accounts receivable of the Company are reflected on
the Company Financial Statements as of December 31, 1996, net of any reserves
therefor reflected thereon and all such accounts receivable shall have arisen
only from bona fide transactions in the ordinary course of business. The notes
and accounts receivable of the Company which have arisen since December 31,
1996, have arisen only from bona fide transactions in the ordinary course of
business.
4.21 COMPLIANCE WITH ENVIRONMENTAL LAW. (a) Except as set forth in
SCHEDULE 4.21 or except where the failure to be in compliance would not have a
Material Adverse Effect, (i) the Company is and has been in compliance with all
Environmental Laws as currently in effect; (ii) neither the Company nor any of
its predecessors used, released or disposed of any Hazardous Substance in any
manner that could reasonably be expected to result in material liability; (iii)
none of the property owned, leased or operated by the Company is contaminated by
any Hazardous Substance; and (iv) none of the property owned, leased or operated
by the Company is affected by any condition that could reasonably be expected to
result in liability under any Environmental Law as currently in effect; and (v)
there is and has been no condition, activity or event respecting the Company or
any of the properties owned, leased or operated by it that could reasonably be
expected to subject the Company to any material liability under any
Environmental Law as currently in effect.
4.22 BANK AND BROKERAGE ACCOUNTS. SCHEDULE 4.22 lists (i) the names and
addresses of all banks and brokerage firms in which the Company has accounts or
safe deposit boxes, lock boxes, vaults and the account numbers relating thereto,
(ii) the name of each person authorized to
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draw on any such account or have access to any such boxes or vaults and (iii)
the names of all persons, if any, holding tax or other powers of attorney from
the Company and a summary of the terms thereof.
4.23 CONTRACTS. (a) Except as set forth on SCHEDULE 4.23, the Company
is not a party to any:
(i) Contract for the employment or retention of, or collective
bargaining, severance or termination agreement with, any of its
directors, officers, employees, consultants or agents or groups of
employees;
(ii) Profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension,
retirement, hospitalization, insurance or other employee benefit plan,
agreement or arrangement;
(iii) Contract for the sale of any of its assets, property or
rights outside the ordinary course of business consistent with prior
practice (other than the Henkel Agreement);
(iv) Contract that contains any provisions requiring the
Company to indemnify or act as a indemnitor, guarantor, surety,
co-signer, co-maker or endorser for any other person or entity;
(v) Contract restricting the Company from conducting business
anywhere in the world (other than the Henkel Agreement);
(vi) Contract or other obligation for or relating to borrowed
money or commitments for obtaining borrowed money involving in excess
of $10,000;
(vii) Contract which involves the future payment by or to it
of more than $10,000 in any one installment or $25,000 in the
aggregate;
(viii) Letter of credit or power of attorney;
(ix) Joint venture Contract or similar arrangement or
agreement which is likely to involve future payments by it in excess of
$10,000 in the aggregate;
(x) Personal service, licensing, distributor, supplier,
dealer, franchise, advertising, sales or manufacturer's representative,
agency or other similar Contract;
(xi) Contract to which any shareholder, officer or director of
the Company or any "affiliate" or "associate" of such persons (as such
terms are defined in the rules and regulations promulgated under the
Securities Act), is presently a party, including, without
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limitation, any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, any such person or entity; or
(xii) Any Contract that might have a Material Adverse Effect.
(b) Except as specified on SCHEDULE 4.23, all Contracts,
plans, instruments, arrangements required to be listed on SCHEDULE 4.23 are
valid and binding, enforceable in accordance with their respective terms and in
full force and effect, and the continuation, validity and effectiveness of such
items will in no way be affected by the consummation of the transactions
contemplated by this Agreement. Neither the Company, nor, to the best knowledge
of the Company, any other party thereto, is in breach of any provision of or in
default under any term of any such agreement, and, to the best knowledge of the
Company, there exists no condition or event which after lapse of time or notice
(or both) would constitute any such breach or default or result in any right to
accelerate or loss of rights. True and complete copies of all such agreements,
contracts, plans, instruments, arrangements and commitments have been delivered
or made available to Charter Oak.
4.24 MATERIAL MISSTATEMENTS OR OMISSIONS. The statements,
representations and warranties of the Company contained in this Agreement
(including the schedules hereto but excluding the contents of the documents
referred to therein) and in each document, statement, certificate or exhibit
furnished or to be furnished by or on behalf of the Company pursuant hereto, or
in connection with the transactions contemplated hereby, taken together, do not
contain and will not contain any untrue statements of a material fact and do not
or will not omit to state a material fact necessary to make the statements or
facts contained herein or therein, in light of the circumstances made, not
misleading. There is no fact known to the Company which has not been disclosed
to Charter Oak which materially and adversely affects, or is likely to
materially and adversely affect, the business, financial condition, results of
operations or assets of the Company.
4.25 BROKER'S FEES. Except as set forth on SCHEDULE 4.25, there are no
broker's or finder's fees or obligations due to persons engaged by the Company,
or any of its employees, officers, or directors in connection with the
transactions contemplated by this Agreement, except for the fees and expenses of
counsel and accountants.
4.26 EMPLOYMENT: NO CONFLICTING AGREEMENTS. None of the officers of the
Company is obligated under any contract (including licenses, covenants or
commitments of any nature) or other oral or written agreement, or subject to any
judgment, decree or order of any court, administrative or governmental agency,
that would conflict with his or her obligation to use his or her best efforts to
promote the Company's business as currently conducted and proposed to be
conducted. Neither the execution and delivery of this Agreement, the
Shareholders Agreement, the Enterprises Warrant Agreement, the Charter Oak
Warrant Agreement, the Ahearn Employment Agreement, the Eckman Employment
Agreement nor the Key Equity Redemption Agreement nor the carrying on of the
Company's business as employees by such persons as such
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<PAGE> 20
business is currently conducted and proposed to be conducted, will conflict with
or result in the breach of the terms, conditions or provisions of, or constitute
a default under, any contract, covenant, agreement or instrument under which any
of the officers or directors of the Company will, immediately following the
closing of the Henkel Agreement, be obligated.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF CHARTER OAK
---------------------------------------------
Charter Oak hereby represents and warrants to the company that:
5.1 INVESTMENT INTENT. The Common Shares to be purchased by Charter Oak
hereunder are being purchased for its own account and not with the view to, or
for resale in connection with, any distribution or public offering thereof
within the meaning of the 1933 Act. It understands that the Common Shares have
not been registered under the 1933 Act by reason of their issuance in
transactions exempt from the registration and prospectus delivery requirements
of the 1933 Act pursuant to Section 4(2) thereof and agrees to deliver to the
Company, if requested by the Company, an investment letter in customary form.
Charter Oak understands that the Shares, may not be sold, transferred or
otherwise disposed of without registration under the 1933 Act or an exemption
therefrom, and that in the absence of an effective registration statement
covering the Common Shares or an available exemption from registration under the
1933 Act, the Common Shares must be held indefinitely. In particular, Charter
Oak is aware that the Common Shares may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of that Rule
are met. Among the conditions for use of Rule 144 is the availability of current
information to the public about the Company. Such information is not now
available and the Company has no present plans to make such information
available. It further understands that the certificates representing the Common
Shares will bear the following legend and agrees that it will hold such shares
subject thereto:
THE SHARES REPRESENTED BY THIS CERTIFICATE AND ANY SHARES THAT MAY BE
ISSUED UPON THE CONVERSION OF SUCH SHARES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY PORTION HEREOF OR
INTEREST HEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT THE
EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION REASONABLY
SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY).
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<PAGE> 21
5.2 CAPACITY OF CHARTER OAK: EXECUTION OF AGREEMENT. Charter Oak has
all requisite power, authority, and capacity to enter into this Agreement, the
Shareholders Agreement, the Charter Oak Warrant Agreement and the Note Purchase
Agreement and to perform the transactions and obligations to be performed by it
hereunder. This Agreement, the Shareholders Agreement, the Charter Oak Warrant
Agreement and the Note Purchase Agreement have each been duly authorized,
executed and delivered by it and constitutes its valid and legally binding
obligation, enforceable in accordance with their respective terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws, both state and federal, affecting the
enforcement of creditors' rights or remedies in general from time to time in
effect and the exercise by courts of equity powers or their application of
principles of public policy.
5.3 ACCREDITED INVESTOR. Charter Oak is an "accredited investor" as
defined in Rule 501(a) of Regulation D promulgated under the 1933 Act.
5.4 SUITABILITY AND SOPHISTICATION. (i) Charter Oak has such knowledge
and experience in financial and business matters that it is capable of
independently evaluating the risks and merits of purchasing the Common Shares;
(ii) it has independently evaluated the risks and merits of purchasing the
Common Shares and has independently determined that the Common Shares are a
suitable investment for it; and (iii) it has sufficient financial resources to
bear the loss of its entire investment in the Common Shares.
5.5 RECEIPT OF INFORMATION. Charter Oak further represents that it
and/or its Affiliates has had an opportunity to ask questions and receive
answers from the Company regarding the business, properties, prospects and
financial condition of the Company and to obtain additional information (to the
extent the Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify the accuracy of any
information furnished to it and/or its Affiliates or to which it and/or its
Affiliates had access. The foregoing, does not however limit or modify the
representations and warranties of the Company in Section 4 of this Agreement or
the right of Charter Oak to rely thereon.
SECTION 6. INDEMNIFICATION
---------------
6.1 INDEMNIFICATION BY THE COMPANY. Notwithstanding anything in this
Agreement to the contrary, but subject to the other provisions of this Section
6, the Company shall indemnify, defend, and hold Charter Oak, each of Charter
Oak's directors, officers, and Affiliates (other than the Company), and each of
such Affiliates' officers, directors, partners, employees, representatives and
Affiliates, (collectively, the "Investor Indemnitees") harmless from and
against, and shall reimburse them for, any and all demands, claims, losses,
liabilities, damages, costs, and expenses whatsoever (including, without
limitation, any fines, penalties, reasonable fees and disbursements of counsel
incurred by the Investor Indemnitees in investigating or defending any of the
foregoing, and other reasonable expenses incurred investigating or defending any
of the foregoing or enforcing this Agreement) (individually a "Loss" and
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collectively "Losses") sustained or incurred by an Investor Indemnitee resulting
from or arising in connection with any inaccuracy in or breach of any
representation or warranty of the Company set forth in this Agreement, but only
if the business, financial condition, capitalization, results of operations,
assets or prospects of the Company, as the case may be, are materially and
adversely different than the business, financial condition, capitalization,
results of operations, assets or prospects of the Company as represented and
warranted in such representation and warranty. Charter Oak acknowledges and
agrees that no individual director, shareholder or officer of the Company shall
have personal liability for any indemnity obligation of the Company under this
Section 6.1.
6.2 INDEMNIFICATION BY CHARTER OAK. Notwithstanding anything in this
Agreement to the contrary, but subject to the other provisions of this Section
6, Charter Oak shall indemnify, defend, and hold the Company and its officers,
directors, employees, representatives and Affiliates, and each of the Company's
Affiliates' officers, directors, employees, partners, representatives and
Affiliates (collectively, the "Company Indemnitees") harmless from and against,
and shall reimburse them for, any and all Losses sustained or incurred by a
Company Indemnitee resulting or arising from (a) any material inaccuracy in or
breach of any of Charter Oak's representations or warranties set forth in this
Agreement or (b) any breach of any covenant, obligation or agreement of Charter
Oak contained in this Agreement and the Shareholders Agreement, in each case
whether or not such Loss results from a third party claim.
6.3 INDEMNIFICATION NOTICE. In the event that any third party claim is
asserted against a Person with respect to which such Person is entitled to
indemnification hereunder, such Person (the "Indemnified Party") shall, within
60 days of the later of the occurrence of the event giving rise to the claim or
the date that the Indemnified Party learned of such claim (provided, however,
that if a claim arises by virtue of litigation, then in no event less than 10
days prior to the date in which an appearance or answer is due, whichever is
earlier), notify the Person obligated to indemnify it (the "Indemnifying Party")
of such claim by delivery of a written notice describing the claim and
indicating the basis for indemnification hereunder; provided that the failure to
so notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligations hereunder except to the extent such failure shall have harmed the
Indemnifying Party. The Indemnifying Party shall have the right, upon written
notice to the Indemnified Party within 10 days after receipt from the
Indemnified Party of notice of such claim, to conduct at its expense the defense
against such claim in its own name, or if necessary in the name of the
Indemnified Party. In the event that the Indemnifying Party fails to give such
notice, it shall be deemed to have elected not to conduct the defense of the
subject claim, and in such event the Indemnified Party shall have the right to
conduct such defense and, only with the prior consent of the Indemnifying Party
which shall not be unreasonably withheld, to compromise and settle the claim. In
the event that the Indemnifying Party does elect to conduct the defense of the
subject claim, the indemnified party shall cooperate with and make available to
the Indemnifying Party such assistance and materials as may be reasonably
requested by it, all at the expense of the Indemnifying Party and the
Indemnified Party shall have the right at its expense to participate in the
defense, provided that the Indemnified Party will have the right to compromise
and settle the
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<PAGE> 23
claim only with the prior written consent of the Indemnifying Party. Any
settlement to which the Indemnifying Party shall have consented in writing shall
conclusively be deemed to be an obligation with respect to which the Indemnified
Party is entitled to indemnification hereunder.
6.4 LIMITATIONS ON INDEMNIFICATION. The representations and warranties
contained in this Agreement shall survive the Closing Date and continue to be
binding, regardless of any investigation made at any time by any party.
Indemnification pursuant to this Article 6 shall be limited as follows:
(a) Claims for indemnification relating to the representations
and warranties contained in Sections 4.14 and 4.21 may be made until
the date determined by statutes of limitations with respect to
liability regarding such representations and warranties;
(b) Claims for indemnification relating to the representations
and warranties contained in Sections 4.12, 4.13 and 4.20 may be made
until the first anniversary of the Closing Date;
(c) Claims for indemnification relating to all other
representations and warranties contained in this Agreement may be made
until the first anniversary of the Closing Date;
(d) Notwithstanding the limitations set forth in this Section
6.4, claims for indemnification relating to the representations and
warranties contained in Section 4.3 and 4.5 may be made any time after
the Closing Date;
(e) The Company shall not be liable to the Investor
Indemnitees for any indemnification pursuant to this Article 6 to the
extent such indemnification, when aggregated with all other
indemnification payments made by the Company pursuant to the provisions
of this Article 6 shall exceed $7,500,000; and
(f) The Company shall not be liable to the Investor
Indemnitees for indemnification claims pursuant to this Article 6 until
the aggregate amount of the net liability of such indemnification
claims exceeds $100,000, but upon reaching such amount the Company
shall be liable to Charter Oak from the first dollar of net liability
for such indemnification claims up to a maximum amount of $7,500,000.
6.5 NET LIABILITY. For the purpose of this Article 6, in computing any
individual or aggregate amounts of liabilities for indemnification, the amount
of each liability shall be deemed to be an amount (i) net of any reasonably
anticipated tax benefit to the Indemnified Party; (ii) net of any insurance
proceeds which the Indemnified Party, or in the case of a liability of the
Company to Charter Oak, the Indemnifying Party, has received and any indemnity,
contribution or other similar payment payable by any third party to the
Indemnified Party, or in the case of a liability of the Company to Charter Oak,
the Indemnifying Party, with respect thereto; and
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<PAGE> 24
(iii) net of any adjustments to the aggregate price paid by Charter Oak for the
Common Shares pursuant to Section 2.1 of this Agreement; provided, however, that
the tax benefit shall be determined in good faith by the independent public
accounts of the Indemnified Party and shall apply to the earliest year
reasonable permitted; and provided, further, that in all cases, the timing,
receipt or realization of tax benefits, insurance proceeds or recoveries from
third parties, the amount of increased costs of insurance arising from the
receipt of collection of such insurance proceeds, and the costs of collection
shall be taken into account in determining any reduction in the indemnification
claim.
SECTION 7. COVENANTS
---------
The Company covenants and agrees with Charter Oak that for so long as
Charter Oak remains a shareholder in the Company:
7.1 FURNISHING OF FINANCIAL STATEMENTS AND INFORMATION. The Company
shall deliver to Charter Oak:
(a) according to the time schedule set forth in the Credit
Agreement, unaudited consolidated balance sheets of the Company as of
the end of such month, together with the related unaudited consolidated
statements of income and retained earnings for such month and for the
period from the beginning of the fiscal year to the end of such month
(which shall also set forth any budgeted figures) and cash flows, all
in reasonable detail and the statements as of the end of each fiscal
quarter shall be certified by the President or chief financial officer
of the Company to be accurate to the best of his knowledge and placing
due reliance on the Company's accounting staff, subject to year-end
adjustments;
(b) according to the time schedule set forth in the Credit
Agreement, the audited consolidated balance sheets of the Company, as
of the end of such fiscal year, together with the related consolidated
statements of income and retained earnings and cash flows for such
fiscal year, setting forth in comparative form figures for the previous
fiscal year, all in reasonable detail and duly certified by Crowe,
Chizek & Company, or another firm of independent public accountants of
national or regional standing reasonably acceptable to Charter Oak,
which accountants shall have given the Company an opinion, unqualified
as to the scope of the audit, regarding such statements;
(c) within ten days after the Company learns of the
commencement or threatened commencement of any material claim or suit,
legal or equitable, or of any material administrative, arbitration, or
other similar proceeding against the Company, or its business, assets,
or properties, written notice of the nature and extent of such suit or
proceeding;
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<PAGE> 25
(d) within ten days after the Company learns of any
circumstance or event which reasonably can be expected to have a
Material Adverse Effect on the assets, properties, financial condition,
results of operations, business, or prospects of the Company, written
notice of the nature and extent of such circumstance or event;
(e) not less than 30 days prior to the end of each fiscal
year, commencing with the fiscal year beginning January 1, 1998, an
annual budget for the Company for the next succeeding fiscal year,
prepared in good faith and submitted to the Board of Directors of the
Company (an "Annual Budget"), which Annual Budget shall include monthly
capital and operating expense budgets, cash flow statements, capital
expenditure budgets, profit and loss projections, and employee hiring
projections;
(f) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general
written communications which the Company sends to its shareholders and
copies of all registration statements and all regular, special or
periodic reports which it files with the SEC or with any securities
exchange on which any of its securities are then listed, and copies of
all press releases and other statements made available generally by the
Company to the public concerning material developments in the Company's
business;
(g) within 10 business days after Charter Oak makes a
reasonable request therefor, such other data relating to the business,
affairs and financial condition of the Company; and
(h) Notwithstanding any provision to the contrary herein, in
the Shareholder Agreement and/or in the Amended Articles, the Company
and Charter Oak acknowledge and agree that all financial reporting
deliverable and notices required by this Section 7.1 shall concurrently
be sent to each of the Company's shareholders.
7.2 INSPECTION. The Company shall, upon receipt of reasonable notice,
permit Charter Oak and any of its representatives to visit and inspect any of
the properties of the Company during normal business hours, including, without
limitation, their respective books and records (and to make extracts therefrom
and copies thereof).
7.3 DIVIDENDS ON OR REDEMPTION OF SHARES. Except with respect to the
Key Equity Redemption Agreement and as otherwise provided in the Shareholders
Agreement, the Company shall not, directly or indirectly, declare or pay any
dividend or make any other distribution with respect to any of its capital stock
or any securities, or directly or indirectly purchase, redeem, or otherwise
acquire for any consideration any shares of its capital stock or other equity
securities (including without limitation any warrants or options) without the
prior written consent of Charter Oak.
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<PAGE> 26
7.4 INDEBTEDNESS. Except as set forth in the Annual Budget approved by
the Company's Board, and as otherwise provided in the Shareholders Agreement,
the Company shall not, without the prior written consent of Charter Oak, incur,
assume or suffer to exist any Indebtedness except (i) the Credit Agreement, (ii)
Indebtedness to banks or other financial institutions of up to $500,000 in the
aggregate, (iii) purchase money Indebtedness representing or evidencing the
principal amount of the deferred purchase price of equipment or other personal
property used in the Company's business and (iv) Indebtedness arising from
capitalized lease obligations of up to $250,000 in the aggregate.
7.5 USE OF PROCEEDS. The Company shall use all proceeds received from
Charter Oak in connection with the issuance and sale of the Common Shares
hereunder towards consummation of the transactions contemplated by the Key
Equity Redemption Agreement and the Henkel Agreement.
7.6 MANAGEMENT COMPENSATION. The Company shall not amend the terms or
provisions of the Ahearn Employment Agreement and/or the Eckman Employment
Agreement or create, implement or otherwise put into effect any stock option
plan, stock rights plan, stock appreciation rights plan or similar benefit plan,
without the prior written consent of Charter Oak.
7.7 FURTHER ASSURANCES. The Company shall cure promptly any defects in
the creation and issuance of the Common Shares, and in the execution and
delivery of this Agreement and the Shareholder Agreement. The Company, at its
expense, shall promptly execute and deliver to Charter Oak upon reasonable
request all such other and further documents, agreements and instruments in
compliance with or pursuant to its covenants and agreements herein, and shall
make any recordings, file any notices, and obtain any consents as may be
reasonably necessary or appropriate in connection therewith.
7.8 TAXES AND ASSESSMENTS. The Company shall pay and discharge, before
the same become delinquent and before penalties accrue thereon, all taxes,
assessments and governmental charges upon or against the Company or any of its
properties, and all other material liabilities at any time existing, except to
the extent and so long as (a) the same are being contested in good faith and by
appropriate proceedings in such manner as not to cause any material adverse
effect upon the Company, or the loss of any right of redemption from any sale
thereunder, and (b) the Company shall have set aside on its books adequate
reserves with respect thereto.
7.9 BUSINESS LINES. Except as set forth in the Shareholders Agreement,
the Company shall not, enter into the ownership, management or operation of any
business other than the Businesses without the prior written consent of Charter
Oak.
7.10 CONFLICTING AGREEMENTS. The Company shall not enter into or become
subject to any Contract or instrument which by its terms would (under any
circumstances) restrict the Company's right to perform any of the provisions of
this Agreement, the Shareholders Agreement, the Enterprises Warrant Agreement,
the Charter Oak Warrant Agreement, the
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<PAGE> 27
Ahearn Employment Agreement, the Eckman Employment Agreement, the Key Equity
Redemption Agreement or the Articles of Incorporation.
7.11 INSURANCE. The Company shall:
(a) keep or cause all of its insurable property or properties
to be kept insured against loss or damage against fire and other
material risks;
(b) maintain public liability insurance against claims for
personal injury, death, or property damage suffered by others upon or
in or about any premises occupied by it or occurring as a result of its
maintenance or operation of any automobiles, trucks, or other vehicles
or other facilities; and
(c) maintain all such workers' compensation or similar
insurance as may be required under the laws of any state or
jurisdiction in which it may be engaged in business.
All insurance for which provision has been made in this Section 7.13 shall be
maintained with such insurers, in such amounts and to such extent as is
reasonable for businesses such as or similar to the Businesses.
SECTION 8. CONDITIONS TO CLOSING
---------------------
8.1 CONDITIONS TO CLOSING BY CHARTER OAK. The obligations of Charter
Oak to consummate the purchase of the Common Shares pursuant to Section 2.1
hereof and certain of the transactions contemplated by this Agreement are
subject to the satisfaction on or prior to the Closing Date of the following
conditions, any of which may be waived in whole or in part in writing by Charter
Oak:
(a) The conditions for the closing of the Henkel Agreement
have been either satisfied or waived;
(b) The Company shall have consummated simultaneously with the
Closing of this Agreement, the Key Equity Redemption Agreement and the
transactions contemplated thereunder;
(c) All representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as
though made anew as of such date;
(d) The Company shall have delivered to Charter Oak the items
required by Section 3.2 of this Agreement;
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<PAGE> 28
(e) The Company shall have performed and complied with all
agreements and conditions required by this Agreement to be performed
and complied with by it prior to or as of the Closing Date;
(f) All pre-issuance registrations, qualifications, permits,
and approvals required, if any, under applicable state securities laws
for the lawful execution and delivery of this Agreement and the offer,
sale, issuance, and delivery of the Common Shares shall have been
obtained;
(g) The Company and each of the named parties thereto (other
than any exceptions approved by Charter Oak) shall have executed and
delivered to Charter Oak the Shareholders Agreement;
(h) George P. Ahearn shall have entered into the Ahearn
Employment Agreement with the Company;
(i) William P. Eckman shall have entered into the Eckman
Employment Agreement with the Company; and
(j) The Company shall have issued the Enterprises Warrant
Agreement and Charter Oak Warrant Agreement.
8.2 CONDITIONS TO CLOSING BY THE COMPANY. The obligations of the
Company to consummate the issuance and sale of the Common Shares pursuant to
Section 2.1 hereof and certain of the transactions contemplated by this
Agreement are subject to the satisfaction on or prior to the Closing Date of the
following conditions, any of which may be waived in whole or in part in writing
by the Company:
(a) All representations and warranties of Charter Oak
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as
though made anew as of such date;
(b) Charter Oak shall have delivered to the Company the items
required by Section 3.3 of this Agreement;
(c) All pre-issuance registrations, qualifications, permits,
and approvals required, if any, under applicable state securities laws
for the lawful execution and delivery of this Agreement and the offer,
sale, issuance, and delivery of the Preferred Shares shall have been
obtained;
(d) Charter Oak shall have executed and delivered the
Shareholders Agreement; and
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<PAGE> 29
(e) Charter Oak shall have executed and delivered the Note
Purchase Agreement to Key Capital Corporation.
SECTION 9. MISCELLANEOUS
-------------
9.1 WAIVERS AND AMENDMENTS. This Agreement may be amended or modified
in whole or in part only by a writing which makes reference to this Agreement
executed by Charter Oak and the Company. The obligations of any party hereunder
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the party
claimed to have given the waiver; PROVIDED, HOWEVER, that any waiver by any
party of any violation of, breach of, or default under any provision of this
Agreement or any other agreement provided for herein shall not be construed as,
or constitute, a continuing waiver of such provision, or waiver of any other
violation of, breach of or default under any other provision of this Agreement
or any other agreement provided for herein. Any amendment, modification or
waiver of this Agreement that would have a material adverse impact on the rights
of the Company must be approved by the Company's Board of Directors with the
directors nominated by Charter Oak abstaining from the vote thereon.
9.2 EXPENSES. Each party hereto shall pay its own costs and expenses
that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement, the Shareholders Agreement, the Enterprises
Warrant Agreement, the Charter Oak Warrant Agreement, the Ahearn Employment
Agreement, the Eckman Employment Agreement, the Key Equity Redemption Agreement
and the Note Purchase Agreement.
9.3 ENTIRE AGREEMENT. This Agreement and the other agreements and
instruments expressly provided for herein, together set forth the entire
understanding of the parties hereto and supersede in their entirety all prior
contracts, agreements, arrangements, communications, discussions,
representations, and warranties, whether oral or written, among the parties.
9.4 GOVERNING LAW. This Agreement shall in all respects be governed by
and construed in accordance with the internal substantive laws of the State of
Ohio without giving effect to the principles of conflicts of law thereof.
9.5 NOTICES. Any notice, request or other communication required or
permitted hereunder shall be in writing and be deemed to have been duly given
(a) when personally delivered or sent by facsimile transmission (the receipt of
which is confirming in writing), (b) one business day after being sent by a
nationally recognized overnight courier service or (c) five business days after
being sent by registered or certified mail, return receipt requested, postage
prepaid, to the parties at their respective addresses set forth below.
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<PAGE> 30
If to the Company: George P. Ahearn
President
GEO Specialty Chemicals, Inc.
28601 Chagrin Boulevard
Suite 450
Cleveland, Ohio 44122
with a copy to: Thompson Hine & Flory LLP
3900 Key Tower
127 Public Square
Cleveland, Ohio 44114
Attention: Craig R. Martahus, Esq.
If to Charter Oak: Mr. Anthony J. Dowd
Charter Oak Partners
10 Wright Street
Building B
P.O. Box 5147
Westport, CT 06880
with a copy to: Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attention: Edward W. Moore, Esq.
Any party may change the address of the persons to whom notices or copies
thereof shall be directed by written notice to the other party.
9.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together will constitute one and the same instrument.
9.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns, except that the Company may not assign or transfer its rights
hereunder without the prior written consent of Charter Oak. Charter Oak shall be
entitled to assign all of its rights, benefits, and obligations hereunder
without the prior consent of any party only to any Person that acquires Common
Shares from Charter Oak and such Person shall become entitled to all rights and
benefits, and be bound by the obligations, of Charter Oak hereunder.
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<PAGE> 31
9.8 THIRD PARTIES. Nothing expressed or implied in this Agreement is
intended, or shall be construed, to confer upon or give any person or entity
other than the parties hereto any rights or remedies under or by reason of this
Agreement.
9.9 SCHEDULES AND EXHIBITS. The schedules and exhibits attached to this
Agreement are incorporated herein and shall be part of this Agreement for all
purposes. Charter Oak acknowledges and agrees that disclosures set forth in one
schedule shall automatically be deemed to have been made with respect to any
other schedule, representation and/or warranty to which they may be applicable,
provided that the reason for such disclosure is readily apparent.
9.10 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have duly executed, or have caused
their duly authorized officer or representative to executive, this Share
Purchase Agreement as of the date first above written.
GEO SPECIALTY CHEMICALS, INC.
By: /s/ George P. Ahearn
-----------------------------------------
Name: George P. Ahearn
Title: President
CHARTER OAK PARTNERS
By: /s/ Anthony J. Dowd
-----------------------------------------
Name: Anthony J. Dowd
Title: Director of Private Investments
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<PAGE> 1
Exhibit 10.2
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
-------------------------------------------
THIS AMENDED AND RESTATED SHAREHOLDERS AGREEMENT (the "Agreement") is
entered into as of July 31, 1998, by and between GEO Specialty Chemicals Inc.
(the "Company"), an Ohio corporation, Charter Oak Partners and Charter Oak
Capital Partners, Connecticut partnerships (together, "Charter Oak"), GEO
Chemicals, Ltd. ("GEO Chemicals"), an Ohio limited liability company and
successor-in-interest by merger to Chemical Specialties Enterprises, L.P.
("CSE"), George P. Ahearn ("Ahearn"), William P. Eckman ("Eckman"), George W.
Rapp, Jr. ("Rapp") and A. Elliott Archer ("Archer"). Charter Oak, GEO Chemicals,
Ahearn, Rapp and Archer as of the date of this Agreement are all of the
shareholders of the Company and are hereinafter sometimes referred to as the
"Shareholders." Ahearn and Eckman are hereinafter sometimes referred to as the
"Managers." This Agreement amends and restates the Shareholders Agreement, dated
March 25, 1997 (the "1997 Shareholders Agreement"), entered into by and among
the Company, Charter Oak, CSE, Ahearn and Eckman.
RECITALS
WHEREAS, at the time of the 1997 Shareholders Agreement, the shares of
the Company's Class A Common Stock, $1.00 par value per share (the "Common
Shares") were held by the following shareholders in the following percentages:
<TABLE>
<CAPTION>
Shareholder No. of Common Shares Percentage
----------- -------------------- ----------
<S> <C> <C>
Charter Oak Partners 82.31 79.00%
Chemical Specialty Enterprises, L.P. 21.88 21.00%
</TABLE>
WHEREAS, subsequent to the execution and delivery of the 1997
Shareholders Agreement, Charter Oak transferred (i) 0.466 and 0.137 Common
Shares to Rapp and Archer, respectively, each of whom is a Charter Oak designee
serving on the Board of Directors of the Company (hereinafter sometimes referred
to together as the "Charter Oak Designees"); and (ii) 1.646 Common Shares to
Ahearn, as a result of the exercise by Ahearn of an option held by him from
Charter Oak (the "Charter Oak Transfers");
WHEREAS, in connection with the acquisition by the Company of the
TRIMET Technical Products Division of Mallinckrodt, Inc., the shareholders of
the Company and Charter Oak Capital Partners made an aggregate equity
contribution of $6,000,000 (the "Equity Contribution"), on a pro rata basis
assuming that an 8% equity interest had been granted to Charter Oak pursuant to
its warrant agreement with the Company, and received in exchange therefor an
aggregate of 31.646 Common Shares;
WHEREAS, as a consequence of the Charter Oak Transfers and the Equity
Contribution, the Common Shares are now held by the following shareholders in
the following percentages:
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<PAGE> 2
<TABLE>
<CAPTION>
Shareholder No. of Common Shares Percentage
----------- -------------------- ----------
<S> <C> <C>
Charter Oak Partners 85.431 62.89%
Charter Oak Capital Partners 21.478 15.81%
GEO Chemicals, Ltd. 25.994 19.14%
George P. Ahearn 2.146 1.58%
George W. Rapp, Jr. 0.608 0.45%
A. Elliott Archer 0.178 0.13%
</TABLE>
WHEREAS, the Company, Charter Oak, CSE, Ahearn and Eckman, along with
Charter Oak Capital Partners, Rapp and Archer, desire to amend and restate the
1997 Shareholders Agreement to include Rapp and Archer within its provisions and
to reflect the changes in the ownership of the Common Shares of the Company
effected since March 25, 1997.
In consideration of the premises and mutual covenants contained herein,
the parties hereby agree as follows:
ARTICLE 1 DEFINITIONS
When used in this Agreement, the following terms in all of their tenses
and cases have the meanings assigned to them below or elsewhere in this
Agreement as indicated below:
"Adjusted Book Value" shall mean the book value per share of Common
Shares, calculated by dividing (A) the shareholders' equity reflected
in the Company's most recent quarterly or year-end consolidated
financial statements by (B) the Shares of the Company outstanding plus
the Shares subject to options of the Company (provided that such
options shall only be considered outstanding if the fair market value
of the Shares subject thereto exceeds the exercise price thereof), plus
total outstanding dilutive stock options. For purposes of this
calculation: (i) Shares underlying the warrants of the Company granted
in favor of Charter Oak Partners and GEO Chemicals, Ltd., pursuant to
separate Amended and Restated Warrant Agreements entered into as of the
date hereof, shall not be deemed to be outstanding; and (ii) stock
options shall be considered dilutive if the exercise price per share is
less than per share Adjusted Book Value calculated without regard to
outstanding stock options.
"Affiliate" means with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common
control with such Person. A Person shall be deemed to control another
Person if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the
"controlled" Person, whether through ownership of voting securities, by
contract, or otherwise.
"Cause" shall mean that any one of the following events has occurred:
(i) The relevant party has been convicted of committing a
felony;
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<PAGE> 3
(ii) The relevant party has committed a theft or
embezzlement from the Company, or any other crime
against the Company, or dishonesty in connection with
Company matters;
(iii) The relevant party for himself or any other person,
firm, corporation or other entity, (A) solicits
business from customers of the Company, (B) diverts
or attempts to divert any business from the Company,
or otherwise interferes with the business or
employment relationship between the Company and any
customers, employee or sales representative thereof,
or (C) discloses or furnishes to any competitor or
any person, firm, corporation or other entity, or
uses on his own behalf, any confidential or secret
information or data of or relating to the Company; or
(iv) The Company provides notice of (A) any act of gross
negligence or corporate waste to the Company which
adversely affects the business of the Company and
which is not cured by the relevant party within 30
days of receipt of such notice, or is repeated by the
relevant party after the receipt of such notice, (B)
any material breach of this Agreement not cured
within 30 days after receipt of notice, or (C) any
other intentional act or course of conduct which may
have an adverse affect on the business of the Company
such as, by way of example only, intentionally
causing the Company to violate federal, state or
local environmental, labor, antitrust, or other
similar laws, or sexual or other illegal harassment
of employees.
"Charter Oak Sale Amount" is defined in Section 6.1.
"Charter Oak Thirty Day Period" is defined in Section 4.4(d).
"Company" is defined in the Recitals.
"Common Shares" is defined in the recitals.
"Company Option" is defined in Subsection 3.2.1.
"Company Thirty Day Period" is defined in Section 4.4(d).
"Complete Disability" means, at the election of the Company, any
disability of a Manager or Charter Oak Designee, which, for purposes
hereof, shall mean the inability of such person for a continuous period
of six (6) months to, in the case of a Manager, perform the essential
functions of his position hereunder on an active full time basis and,
in the case of a Charter Oak Designee, to perform the essential
functions of a director of the Company, in each case with or without
reasonable accommodations and by reason of disability or impairment of
health. A certificate from a physician acceptable to both the Company
and the Manager or the Charter Oak Designee, as applicable, to the
effect that the Manager or the Charter Oak Designee is or has been
disabled and incapable of performing the essential functions of his
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<PAGE> 4
position with or without reasonable accommodations for the Company as
previously performed shall be conclusive of the fact that the Manager
or the Charter Oak Designee is incapable of performing such reasonable
services and is or has been disabled for the purposes of this
Agreement.
"Drag-Along Closing" is defined in Section 6.1.
"Drag-Along Notice" is defined in Section 6.1.
"Drag-Along Pro-Rata Amount" is defined in Section 6.1.
"Excess Portion" is defined in Section 4.4(d).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holders" is defined in Section 4.1.
"Loan Agreements" is defined in Section 4.1.
"Notes" is defined in Section 4.4(d).
"Offer Price" is defined in Section 3.1.
"Offered Shares" is defined in Section 3.1.
"Offer Terms" is defined in Section 3.1.
"Other Shareholders" is defined in Subsection 3.3.1.
"Per Share Appraised Value" is defined in Section 4.4(a).
"Permitted Transferee" is defined in Section 2.6.
"Person" means an individual, trust, corporation, partnership, joint
venture or other entity.
"Public Offering" means the sale of securities of the Company pursuant
to a Registration Statement under the Securities Act (other than on
Form S-8 or S-4 or any successor thereto) made pursuant to a firm
commitment underwriting.
"Purchase Offer" is defined in Section 6.1.
"Purchase Price" is defined in Section 6.1.
"Purchase Terms" is defined in Section 6.1.
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<PAGE> 5
"Securities Act" means the Securities Act of 1933, as amended.
"Secondary Option" is defined in Subsection 3.3.1.
"Selling Shareholder" is defined in Section 3.1.
"Shares" means the Common Shares (whether presently or hereafter
issued) now or hereafter owned, legally or beneficially, by any
Shareholder, and any securities issued in connection therewith or as a
result of the conversion or exchange or such Shares (i.e., via merger,
share split, share dividend, recapitalization or similar event) except
as may be released from the restrictions contained in this Agreement
pursuant to the provisions hereof.
"Shareholder" means Charter Oak, GEO Chemicals, Ahearn, Rapp and Archer
and each Person who becomes bound by this Agreement as of and after the
date hereof and any executor, administrator, guardian, custodian, or
other legal representative of a Person who obtains legal or beneficial
ownership of any Shares and the ability to transfer the same in the
event of another's death, Complete Disability or other incapacity;
provided, in any event, that a Person who no longer owns any Shares
shall be deemed not to be a "Shareholder."
"Tag-Along Notice" is defined in Section 6.2.
"Tag-Along Pro Rata Amount" is defined in Section 6.2.
"Termination" shall mean, when used to refer to the employment of
either of the Managers, or either of the Managers' ceasing to be
regularly employed by the Company.
"Transfer" means sell, give, assign, pledge, bequeath, exchange,
dispose of, hypothecate, or otherwise transfer whether by testamentary
disposition, survivorship arrangement or otherwise, encumber in any
respect, or grant any interest in (whether voluntarily or involuntarily
or by operation of law and whether with or without consideration), and
specifically includes all transfers upon divorce, in bankruptcy or by
way of execution, seizure, or sale by legal process.
"Transfer Notice" is defined in Section 3.1.
ARTICLE 2 RESTRICTIONS ON TRANSFER
2.1 IN GENERAL. Each Shareholder agrees not to Transfer any Shares
except in compliance with the provisions of this Agreement. Any attempt to
Transfer any Shares other than in accordance with this Agreement shall be void.
The Company shall not make any transfer of record of any Shares other than in
accordance with the provisions of this Agreement.
2.2 PROHIBITION ON TRANSFER TO COMPETITORS. To protect the competitive
advantage of the Company, under no circumstances may Shares be transferred to
any Person who is, or is employed
5
<PAGE> 6
by or affiliated in any way with a Person who is, engaged in business or other
activities directly or indirectly in competition with the Company; except and
unless in connection with a sale of a majority of the outstanding shares of
capital stock of the Company to any such Person.
2.3 AGREEMENT LEGENDS. Each Shareholder shall promptly deliver to the
Company any certificates representing Shares for placement thereon of the
legends set forth as follows:
THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON
COMPLIANCE WITH, THE PROVISIONS OF AN AMENDED AND RESTATED SHAREHOLDERS
AGREEMENT DATED AS OF JULY 31, 1998 BY AND BETWEEN GEO SPECIALITY
CHEMICALS, INC. (THE "COMPANY"), CHARTER OAK PARTNERS, CHARTER OAK
CAPITAL PARTNERS, GEO CHEMICALS, LTD., GEORGE P. AHEARN, GEORGE W.
RAPP, JR. AND A. ELLIOTT ARCHER. A COPY OF THE ABOVE REFERENCED
SHAREHOLDERS AGREEMENT IS ON FILE AT THE OFFICE OF THE COMPANY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
THE HOLDER HEREOF, BY PURCHASING THESE SECURITIES, AGREES FOR THE
BENEFIT OF THE COMPANY THAT THESE SECURITIES ONLY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO ANY OTHER EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT, PROVIDED AN OPINION OF
COUNSEL IS FURNISHED REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO
THE COMPANY, STATING THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT IS AVAILABLE, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES.
2.4 PLACEMENT OF RESTRICTIVE LEGENDS. All certificates representing
Shares hereafter issued to any Shareholder during the term of this Agreement
shall bear the legends set forth in Section 2.3, except for any certificates
representing Shares which are released from the restrictions hereof pursuant to
the provisions of this Agreement.
2.5. REMOVAL OF RESTRICTIVE LEGENDS. If, for any reason, any of the
Shares are no longer subject to the provisions hereof, the Company shall
promptly issue a new certificate for such Shares without the applicable legends
set forth in Section 2.3 upon the request of the record owner thereof and the
surrender to the Company of the certificate containing such legends.
2.6. PERMITTED TRANSFERS. The Shareholders shall be permitted to
Transfer Shares as follows, which is illustrated in the table set forth in
Exhibit B hereto: (a) with respect to Charter Oak,
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<PAGE> 7
GEO Chemicals, Ahearn and Eckman, to the Company or its Affiliates, (b) with
respect to Charter Oak, to any of its Affiliates (excluding any of its operating
companies) and, in an aggregate amount of up to twenty percent (20%) of the
fully-diluted outstanding equity of the Company, to any outside director(s) of
the Company designated by Charter Oak, (c) with respect to GEO Chemicals, to
Ahearn or Eckman and as otherwise permitted by the GEO Chemicals Operating
Agreement, entered into as of the date hereof, which shall not be amended, (d)
with respect to Ahearn and Eckman, to the respective Manager's parents,
siblings, spouse or issue (including, without limitation, adopted issue), or to
a trust or partnership for the exclusive benefit of any one or more of the
respective Manager, his parents, siblings, spouse or issue, and as otherwise
permitted by the GEO Chemicals Operating Agreement, which shall not be amended
without the consent of Charter Oak, and (e) with respect to the Charter Oak
Designees, to Charter Oak or to each other. Each of the persons referenced in
clauses (b), (c) or (d) of the preceding sentence is sometimes hereinafter
referred to as a "Permitted Transferee." Each Permitted Transferee shall be (a)
bound by this Agreement with the same effect as if the Permitted Transferee were
a Shareholder hereunder and (b) obligated to Transfer all Shares owned by the
Permitted Transferee to the Company when the Shareholder who transferred the
Shares to the Permitted Transferee becomes obligated to Transfer all Shares
owned by that Shareholder pursuant to the provisions of this Agreement. To
memorialize the provisions of the foregoing sentence, each Permitted Transferee
shall sign either a duplicate counterpart of this Agreement or, if requested by
the Company, a modified version reflecting only the particular rights and
obligations applicable to the Permitted Transferee.
ARTICLE 3 RIGHTS OF FIRST REFUSAL
3.1 IN GENERAL. If a Shareholder desires to Transfer any Shares other
than as provided in Section 2.6 or in Article 6, then such Shareholder (the
"Selling Shareholder") shall notify the Company and all other Shareholders of
the Company (whether or not parties to this Agreement) in writing (the "Transfer
Notice") of (a) the number of Shares to be Transferred (the "Offered Shares"),
(b) the identity of the proposed transferee, (c) the price per Share to be paid
by the proposed transferee (the "Offer Price"), and (d) the terms of the
proposed Transfer, including the payment terms (the "Offer Terms"), which
Transfer Notice may not be withdrawn during any of the time periods set forth in
Sections 3.2 and 3.3.
3.2 OPTION OF COMPANY.
3.2.1. CONDITIONS GIVING RISE TO OPTION. When the Transfer
Notice is given to the Company, the Company shall have the option (the "Company
Option") to purchase all, but not less than all, of the Offered Shares.
3.2.2. EXERCISE OF OPTION. If the Company desires to exercise
the Company Option, it shall give written notice to that effect to the Selling
Shareholder within fifteen (15) days after the Transfer Notice is given to the
Company. The Company Option shall be exercisable at the Offer Price per Share
and on the payment and other Offer Terms set forth in the Transfer Notice.
7
<PAGE> 8
3.2.3. CONSUMMATION OF PURCHASE. Upon the giving of notice of
exercise of the Company Option pursuant to Subsection 3.2.2, a purchase and sale
agreement shall be deemed to have been created between the Company, as
purchaser, and the Selling Shareholder, as seller, providing for the purchase
and sale of the Offered Shares consistent with the provisions of Subsection
3.2.2. Such purchase and sale shall be consummated not later than thirty (30)
days after the giving of notice of exercise of the Company Option pursuant to
Subsection 3.2.2.
3.3 OPTION TO SHAREHOLDERS.
3.3.1 CONDITIONS GIVING RISE TO OPTION. The occurrence of the
earlier to occur of (a) the refusal of the Company to exercise the Company
Option (by written notice to the Selling Shareholder with copies to all of the
Shareholders (whether or not parties to this Agreement)) or, (b) the failure of
the Company to give notice of exercise of the Company Option within the 15-day
period after the Transfer Notice is given to the Company, shall give to the
Shareholders (other than the Selling Shareholder) (the "Other Shareholders") the
option (the "Secondary Option") to purchase the Offered Shares.
3.3.2 EXERCISE OF OPTION. Within fifteen (15) days after the
Secondary Option arises, any Other Shareholder desiring to purchase any of the
Offered Shares shall give written notice to the Selling Shareholder (with a copy
to the Company) indicating the number of Offered Shares which the Other
Shareholder desires to purchase.
3.3.3 CONSUMMATION OF PURCHASE. If, within thirty (30) days
after the Secondary Option arises, the Other Shareholders collectively have
given written notice of a desire to purchase ALL, but not less than all, of the
Offered Shares, then a purchase and sale agreement shall be deemed to have been
created among the Other Shareholders giving written notice of a desire to
purchase the Offered Shares, as purchasers (each such Other Shareholder
individually purchasing the number of Shares indicated in such Other
Shareholder's written notice of exercise), and the Selling Shareholder, as
seller, providing for the purchase and sale of the Offered Shares, at the Offer
Price per Share and on the Offer Terms. Notwithstanding the provisions of the
preceding sentence, if the notices from the Other Shareholders indicate a desire
to purchase, in the aggregate, more than the number of the Offered Shares, then,
unless the Other Shareholders who gave notice of a desire to purchase any of the
Offered Shares unanimously agree among themselves as to a different allocation,
each such Other Shareholder shall purchase that number of the Offered Shares (up
to the number indicated in such Other Shareholder's written notice of exercise)
which bears the same ratio to the total number of Offered Shares as the number
of Shares owned by such Other Shareholder bears to the total number of Shares
owned by all Other Shareholders who gave written notice of exercise. The
provisions of the preceding sentence will be reapplied as necessary (excluding
Other Shareholders who have been allocated the number of Shares they indicated
their desire to purchase in their written notice) until all of the Offered
Shares have been allocated (with the Company having the right in such allocation
to eliminate fractional shares) among the Other Shareholders who gave notice of
a desire to purchase any of the Offered Shares. Such purchase and sale shall be
consummated not later than forty-five (45) days after the Secondary Option
arises.
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<PAGE> 9
3.3.4 COMPANY PURCHASE OF BALANCE OF SHARES. Notwithstanding
the requirement of Subsection 3.3.3 that the Other Shareholders must agree to
purchase all of the Offered Shares, if at least one Other Shareholder agreed to
purchase at least one Offered Share, then the Company, by written notice to the
Selling Shareholder, within fifteen (15) days after the Secondary Option arises
may instead agree to purchase the balance of the Offered Shares which the Other
Shareholders declined to purchase, in which case a purchase and sale agreement
shall be deemed to have been created in accordance with the provisions of
Subsection 3.3.3, except that the Company shall be the purchaser of the balance
of the Offered Shares which the Other Shareholders declined to purchase, and the
purchase and sale shall be consummated not later than forty-five (45) days after
the Secondary Option arises.
3.4 SELLING SHAREHOLDER DELIVERIES UPON A PURCHASE AND SALE. If a
purchase and sale obligation arises under the provision of Section 3.1, then
upon the consummation of such purchase and sale, the Selling Shareholder shall
be required to make the deliveries specified under Section 5.1 hereof, and the
purchaser(s) shall be required to make the deliveries specified under Section
5.2 hereof.
3.5 TRANSFER UPON LAPSE OF OPTIONS. If the parties granted the options
to purchase pursuant to this Article 3 do not elect to exercise such options
within the time periods provided herein, then at the expiration of all of the
respective option periods pursuant to this Article 3 (or, if earlier, at such
time as all the parties entitled to exercise such options have given written
notice to the Selling Shareholder that they do not intend, in the aggregate, to
purchase all of the Offered Shares), the Selling Shareholder shall be entitled
for a period of ninety (90) days (but not thereafter without first again having
complied with the provisions of this Article 4) to Transfer all but not less
than all the Offered Shares to the proposed transferee identified in the
Transfer Notice at the same price and on the same terms as set forth in the
Transfer Notice.
3.6 CONSEQUENCE OF TRANSFER. Upon a Transfer of any Shares pursuant to
the provisions of Section 3.5, the Shares so Transferred shall continue to be
subject to the rights and restrictions set forth in this Agreement and upon
receipt of the certificates for such Shares for transfer, the Company shall
issue a new certificate bearing the restrictive legends provided for in Section
2.3. To memorialize the provisions of this Section 3.6., the transferee shall
sign either a duplicate counterpart of this Agreement or, if requested by the
Company, a modified version reflecting only the particular rights and
obligations applicable to the transferee.
3.7 OTHER TRANSFERS. In the event that the Selling Shareholder proposes
or is required to sell or Transfer all or any portion of the Shares other than
pursuant to a Permitted Transfer or Transfer subject to Article 4, the
notification, rights of first refusal and all other provisions of this Article 3
shall apply to such proposed sale or transfer including, without limitation, any
gift, transfer by operation of law, transfer by way of bankruptcy, hypothecation
or seizure and sale by legal process; provided that the purchase price per Share
under this Section 3.7 shall be as determined pursuant to Subsection 4.4(a).
9
<PAGE> 10
ARTICLE 4 TRANSFER OF SHARES UPON DEATH, DISABILITY
OR OTHER TERMINATION OF EMPLOYMENT
4.1 PUT OPTION OF GEO CHEMICALS AND THE MANAGERS IN EVENT OF DEATH OR
DISABILITY. Subject to (i) any financing agreements or any other instruments,
agreements or indentures of the Company from time to time in effect restricting
(including indirectly through restrictions of dividend payments by the Company)
or otherwise governing the purchase or retirement of shares of the Company's
capital stock (the "Financing Arrangements") or (ii) applicable law, at any time
during the term of this Agreement upon the death or Complete Disability of
either or both Ahearn and Eckman, the following options shall be exercisable for
a period of up to ninety (90) days at a purchase price determined in accordance
with Section 4.4: (a) GEO Chemicals shall have the option, or in the event of a
permitted transfer under Section 2.6(c) to the respective Manager or his
Permitted Transferees, the Holders of Ahearn's or Eckman's Shares (as
hereinafter defined), as applicable, shall have the option, to put to the
Company sixty-two percent (62%) of the Shares held by GEO Chemicals or the
Holders of Ahearn's Shares, as applicable, in the case of the death or Complete
Disability of Ahearn, or thirty-eight percent (38%) of the Shares held by GEO
Chemicals or the Holders of Eckman's Shares, as applicable, in the case of the
death or Complete Disability of Eckman; and (b) Ahearn and Eckman, as
applicable, shall have the option to put to the Company the respective Shares
held by them.
4.2 CALL OPTION OF THE COMPANY IN EVENT OF DEATH OR DISABILITY. Unless
the put option in Section 4.1 shall have been exercised, subject to (i) any
Financing Arrangements or (ii) applicable law, at any time during the term of
this Agreement upon the death or Complete Disability of either or both Ahearn or
Eckman, the Company shall have the option, exercisable for a period of ninety
(90) days following the expiration of the put option set forth in Section 4.1
above to purchase at the purchase price determined in accordance with Section
4.4 from Ahearn and Eckman, as applicable, the respective Shares held by them
and from GEO Chemicals sixty-two percent (62%) of the Shares held by GEO
Chemicals in the case of the death or Complete Disability of Ahearn or
thirty-eight percent (38%) of the Shares held by GEO Chemicals in the event of
the death or Complete Disability of Eckman, or, if there previously has been a
permitted transfer under Section 2.6(c), from either Ahearn or Eckman, as
applicable, or their respective estates, heirs or personal representatives (in
the case of death), and/or Ahearn's or Eckman's Permitted Transferees
(collectively, the "Holders" of Ahearn's or Eckman's Shares), all the Shares
held by such Holders. The Shares available for purchase pursuant to the options
granted to the Company pursuant to this Section 4.2 and Section 4.5 from Ahearn,
Eckman and either GEO Chemicals or the Holders of Ahearn's or Eckman's Shares,
shall collectively be referred to as the "Ahearn Redemption Shares" or "Eckman
Redemption Shares," as applicable. If the Company exercises its call option
under this Section 4.2, it shall be obligated to purchase all of the Ahearn
Redemption Shares or Eckman Redemption Shares, as applicable.
4.3 CALL OPTION OF SHAREHOLDERS IN EVENT OF DEATH OR DISABILITY. Unless
the put option in Section 4.1 or the call option in Section 4.2 shall have been
exercised with respect to all of the Ahearn Redemption Shares or the Eckman
Redemption Shares, as applicable, the Shareholders shall have the option on a
pari passu basis, for a period of ninety (90) days following the expiration of
the Company's option granted in Section 4.2 above, to purchase all of the Ahearn
Redemption Shares
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<PAGE> 11
or Eckman Redemption Shares, as applicable, at the price determined in
accordance with Section 4.4.
4.4 PURCHASE PRICE. (a) The purchase price per Share for the Shares
purchased pursuant to Sections 4.1, 4.2, 4.3 and 4.7 shall be the appraised
value of one Share (the "Per Share Appraised Value"), as valued by a nationally
known appraisal firm chosen by the Company. Such appraiser shall value the
Company based on the total fair market value of the Company (free of all
liabilities for borrowed money) divided by the number of Shares outstanding, and
no minority discount shall be used in such calculation. If any Shareholder
objects to the valuation of the Company's Per Share Appraised Value as
calculated by the first appraiser, the objecting Shareholder shall select and
the Company shall appoint a second appraiser, which shall be a nationally known
appraisal firm, which shall determine the Per Share Appraised Value in
accordance with the provisions of this Agreement. If any Shareholder objects to
the valuation of the Per Share Appraised Value as calculated by the second
appraiser, the first appraiser and the second appraiser shall together select
and the Company shall appoint a third appraiser, which shall be an nationally
known appraisal firm, which shall determine the Per Share Appraised Value in
accordance with the provisions of this Agreement. The determination of the third
appraiser as to the Per Share Appraised Value shall be binding on the applicable
parties for purposes of this Section 4.4. The fees and other costs of the second
and third appraiser shall be borne by the objecting Shareholder, as applicable.
All purchases under Sections 4.3 and 4.6 shall be made in cash, and all
purchases under Sections 4.1, 4.2, 4.5 and 4.7 shall be made in cash except as
set forth in Section 4.4(c) and 4.4(d).
(b) The purchase price per Share for the Shares purchased
pursuant to Sections 4.5. and 4.6 shall be determined based on the Company's
Adjusted Book Value, which shall be determined by the Company's independent
auditors using accounting principles then in effect and as applied by the
Company's independent auditors and shall be accompanied by a letter from the
Company's independent auditors stating that the calculations made by them have
been made in accordance with the applicable provisions of this Agreement. If any
Shareholder objects to the valuation of the Company's Adjusted Book Value as
calculated by the Company's independent auditors, the objecting Shareholder
shall select and the Company shall appoint a second appraiser, which shall be an
independent, nationally recognized, valuation firm, which shall determine the
Company's Adjusted Book Value in accordance with the applicable provisions of
this Agreement, using accounting principles then in effect, and shall render a
written report of their opinion thereon. If any Shareholder objects to the
valuation of the Company's Adjusted Book Value as calculated by the second
appraiser, the second appraiser and the Company's independent auditors shall
together select and the Company shall appoint a third appraiser, which shall be
an independent, nationally recognized, valuation firm, which shall determine the
Company's Adjusted Book Value in accordance with the applicable provisions of
this Agreement, using accounting principles then in effect, and shall render a
written report of their opinion thereon. The determination of the third
appraiser as to the Company's Adjusted Book Value shall be binding on the
applicable parties for purposes of Section 4.5 and 4.6. The fees and other costs
of the second and third appraiser shall be borne by the objecting Shareholder,
as applicable.
(c) If any portion of the cash purchase price payable for any
shares purchased pursuant to Sections 4.2 and 4.5 above may not be paid as a
result of direct or indirect restrictions
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imposed by the Financing Arrangements or by applicable law, such portion shall,
subject to the Financing Arrangements and to applicable law, be payable by the
delivery of notes in the principal amount of such portion (at an interest rate
of eight percent (8%) per annum); PROVIDED, FURTHER, that, notwithstanding any
direct or indirect restrictions imposed by the Financing Arrangements or by
applicable law, the Company and the other parties to this Agreement shall use
their respective best efforts to enable the Company to pay the full amount of
the cash purchase price payable for any shares purchased pursuant to Section 4.2
and 4.5 above, including, without limitation, taking necessary measures to
create sufficient surplus and/or to obtain the consent of any parties to the
Financing Arrangements, and through the use of then existing life insurance
policies, and, in any event, the Company shall pay that portion of the cash
purchase price payable for any shares purchased pursuant to Section 4.2 and 4.5
above which was not paid as a result of direct or indirect restrictions imposed
by the Financing Arrangements or by applicable law as soon as the Company may
pay such amount in cash without violating the terms of any Financing
Arrangements or applicable law.
(d) With respect to any Shares put to the Company pursuant to
Sections 4.1 and 4.7, the following terms shall apply. The Company shall be
obligated, for purposes of purchasing the Shares put to it pursuant to Section
4.1, to utilize the proceeds received by the Company from any life insurance
policies maintained by the Company insuring the lives of Ahearn or Eckman, as
applicable, net of: (i) fifteen percent (15%) of any such proceeds to be used by
the Company for expenses incurred in connection with the death of Ahearn or
Eckman, as applicable, and (ii) the use of any such proceeds to retire
indebtedness of the deceased employee owing to the Company. The Company shall be
obligated to purchase in cash the Shares put to it pursuant to Sections 4.1 or
4.7 within thirty (30) days (the "Company Thirty Day Period") from the exercise
of such put option to the fullest extent permitted by any Financing Arrangements
and applicable law. The Company and the other parties to this Agreement shall
use their respective best efforts to enable the Company to pay the full amount
of the cash purchase price payable for any Shares put to the Company pursuant to
Sections 4.1 and 4.7, including, without limitation, taking necessary measures
to create sufficient surplus and/or to obtain the consent of the parties to any
Financing Arrangements. Any portion of such Shares that the Company is unable,
by reason of any Financing Arrangements or applicable law, to purchase within
the Company Thirty Day Period (the "Excess Portion") shall be purchased by the
Company, subject to any Financing Arrangements and applicable law, through the
delivery of notes (the "Notes"), in form and substance reasonably satisfactory
to the lender(s) and/or the trustee under any Financing Arrangements, in the
principal amount of the purchase price of the Excess Portion (at an interest
rate of eight percent (8%) per annum), which Notes shall be accompanied by the
grant by the Company of a first priority purchase money security interest on the
Excess Portion; PROVIDED, HOWEVER, that with respect to the Excess Portion, the
following rights shall apply after the expiration of the Company Thirty Day
Period and, if exercised, shall supersede the Company's obligation to purchase
the Excess Portion through the issuance of the Notes: (i) Charter Oak shall have
the option, exercisable for a period of thirty (30) days (the "Charter Oak
Thirty Day Period"), to purchase from GEO Chemicals, Ahearn, Eckman and/or the
Holders of Ahearn's or Eckman's Shares, as applicable, all, but not less than
all, of the Excess Portion at a per Share purchase price equal to the Per Share
Appraised Value; and (ii) GEO Chemicals, Ahearn, Eckman and the Holders of
Ahearn's and Eckman's Shares, as applicable, if the applicable party or parties
choose to not accept the Notes from the Company for the Excess Portion, shall
have the option,
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exercisable at any time after the expiration of the Charter Oak Thirty Day
Period, to sell any of the Excess Portion to any third party, subject to Section
2.2 and Article 3 of this Agreement.
4.5 CALL OPTION OF THE COMPANY IN EVENT OF TERMINATION FOR CAUSE.
Subject to (i) any Financing Arrangements or (ii) applicable law, at any time
during the term of this Agreement upon Termination of either Ahearn's or
Eckman's employment by the Company for Cause (a "Termination With Cause"), the
Company shall have the option, exercisable for a period of ninety (90) days to
purchase from Ahearn, Eckman, GEO Chemicals and/or, if there previously has been
a permitted transfer under Section 2.6(c), to the respective Manager and/or his
Permitted Transferees, from the Holders of Ahearn's or Eckman's Shares, as
applicable, all the Ahearn Redemption Shares or Eckman Redemption Shares, as
applicable, at a purchase price per Share equal to the Adjusted Book Value of a
Share. The Company shall be under no obligation to purchase such Shares;
however, if the Company exercises its call option under this Section 4.5, it
shall be obligated to purchase all of the Ahearn Redemption Shares or Eckman
Redemption Shares, as applicable.
4.6 CALL OPTION OF SHAREHOLDERS IN EVENT OF TERMINATION FOR CAUSE.
Unless the call option in Section 4.5 shall have been exercised with respect to
all of the Ahearn Redemption Shares or Eckman Redemption Shares, as applicable,
the Shareholders shall have the option on a pari passu basis, for a period
ninety (90) days following the expiration of the Company's option granted in
Section 4.5 above, to purchase all of the Ahearn Redemption Shares or Eckman
Redemption Shares, as applicable, at a purchase price per Share equal to the
Adjusted Book Value of a Share.
4.7 PUT OPTION OF GEO CHEMICALS IN EVENT OF TERMINATION WITHOUT CAUSE.
Subject to (i) any Financing Arrangements or (ii) applicable law, at any time
during the term of this Agreement upon Termination of either or both Ahearn's or
Eckman's employment by the Company without Cause (a "Termination Without
Cause"), the following options shall be exercisable for a period of up to ninety
(90) days at a purchase price determined in accordance with Section 4.4: (a) GEO
Chemicals shall have the option to put to the Company sixty-two percent (62%) of
the Shares held by GEO Chemicals in the case of a Termination Without Cause of
Ahearn or thirty-eight percent (38%) of the Shares held by GEO Chemicals in the
case of a Termination Without Cause of Eckman, or, if there previously has been
a Permitted Transfer under Section 2.6(c) to the respective Manager and/or his
Permitted Transferees, the Holders of Ahearn's or Eckman's Shares, as
applicable, have the option to put the Company all of the Ahearn Redemption
Shares or Eckman Redemption Shares, as applicable; and (b) Ahearn and Eckman, as
applicable, shall have the option to put to the Company the respective Shares
held by them.
4.8 PURCHASE OF THE SHARES OF THE CHARTER OAK DESIGNEES BY CHARTER OAK.
At any time during the term of this Agreement, upon the death or Complete
Disability of Rapp or Archer or at such time as Rapp or Archer shall cease to be
directors of the Company, Charter Oak shall be obligated within ninety (90) days
to purchase from Rapp or Archer, as applicable, all, but not less than all, of
the Shares held at such time by Rapp or Archer, as applicable. The purchase
price for such Shares shall be determined as follows. Upon the death or Complete
Disability of either Rapp or Archer, or the termination of either Rapp or Archer
as a director voluntarily or by the Shareholders of the Company without Cause,
the purchase price per Share for the Shares purchased pursuant to this Section
4.8 shall be the Per Share Appraised Value. Upon the termination of Rapp
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<PAGE> 14
or Archer as a director by the Shareholders of the Company with Cause, the
purchase price per Share shall be equal to the lesser of: (i) the cost per Share
paid by Rapp or Archer, as applicable; and (ii) a per Share amount based on the
Company's Adjusted Book Value, which shall be determined by the Company's
independent auditors using accounting principles then in effect and as applied
by the Company's independent auditors and shall be accompanied by a letter from
the Company's independent auditors stating that the calculations made by them
have been made in accordance with the applicable provisions of this Agreement.
Upon the failure of Charter Oak to purchase all of the Shares of Rapp or Archer,
as applicable, in accordance with the terms of this Section 4.8, the Company
shall have the option for a period of ninety (90) days after such failure to
purchase all, but not less than all, of the Shares held by Rapp or Archer, as
applicable, at the same purchase price that applied to the purchase of such
Shares by Charter Oak under this Section 4.8.
ARTICLE 5 DELIVERIES UPON A PURCHASE AND SALE
If a purchase and sale obligation arises under the provisions of this
Agreement, then upon consummation of such purchase and sale, the Selling
Shareholder or Holder, as applicable, and the Company, at a Closing to be held
at the Company's offices, shall be required to make the deliveries herein below
specified:
5.1 BY THE SELLING SHAREHOLDER OR HOLDER:
(a) Certificates representing the Shares which are being
sold and purchased, which certificates shall be duly
endorsed in blank and accompanied by stock powers
endorsed in blank with signatures guaranteed and
otherwise in proper form for transfer; and
(b) Representations and warranties of such Selling
Shareholder or Holder, as applicable, and Permitted
Transferees to the effect that (i) such Person is the
record and beneficial owner of the Shares being sold
and purchased, has good and marketable title thereto
and the absolute right to transfer same, and upon
transfer, the Shares will be free and clear of all
claims, liens, pledges, restrictions (other than any
restrictions imposed by this Agreement) or
encumbrances of any nature whatsoever, and (ii) such
Person has full power and capacity to perform the
terms of this Agreement relating to such sale and
purchase.
5.2 BY THE COMPANY.
(a) The purchase price for the Shares, by bank, cashier,
or certified check, unless a different form of
consideration is set forth in the Transfer Notice or
agreed to by the Selling Shareholder or Holder, as
applicable, and/or his or her Permitted Transferees,
as applicable.
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ARTICLE 6 DRAG-ALONG/TAG-ALONG RIGHTS
Notwithstanding anything contained in this Article 6 to the contrary,
Charter Oak's rights to transfer for value any Shares representing more than
fifty percent (50%) of the capital stock or voting power of the Company are
subject (i) until March 25, 1999, to the unanimous approval of the Company's
Board of Directors of such contemplated sale or (ii) after March 25, 1999 and
thereafter, the approval of at least four (4) of the five (5) Directors of the
Company of such contemplated sale.
6.1 DRAG-ALONG RIGHTS.
(a) Notwithstanding the provisions contained in Article 3
of this Agreement, at any time that Charter Oak shall
have received a bona fide offer and Charter Oak
intends to transfer for value any Shares representing
more than fifty percent (50%) of the capital stock or
voting power of the Company, in any one transaction
or series of related transactions entered into at
arm's length, to any Person that is not (i) an
Affiliate of Charter Oak or any of the Charter Oak
Designees (unless waived in writing by each of GEO
Chemicals, Ahearn and Eckman), or (ii) if Charter Oak
is a Shareholder hereunder, a Permitted Transferee of
Charter Oak, then, if Charter Oak desires to require
the other Shareholders to sell certain of their
Shares to such offeror, Charter Oak shall give to the
Company and the other Shareholders at least twenty
(20) days advance written notice (hereinafter called
a "Drag-Along Notice"):
(i) Attaching a copy of such offer (hereinafter
called the "Purchase Offer"), identifying
the offeror thereof, and the aggregate
number of Shares to be sold by Charter Oak
(the "Charter Oak Sale Amount"), and stating
Charter Oak's desire to sell such Shares and
to require all of the other Shareholders to
sell the Drag-Along Pro Rata Amount (as
hereinafter defined) of Shares owned of
record by such other Shareholders to such
offeror at the price per Share (hereinafter
called the "Purchase Price") and on the
terms (hereinafter called the "Purchase
Terms") set forth in the Purchase Offer
including the time and place for the
consummation ("Drag-Along Closing") of the
Transfer of the Charter Oak Sale Amount; and
(ii) Stating that the other Shareholders shall be
required to participate in such sale by
selling their Drag-Along Pro Rata Amount, at
the Purchase Price and on the Purchase Terms
at the Drag-Along Closing.
(b) In connection with and upon the delivery by Charter
Oak of any Drag-Along Notice, the Shareholders shall
have the right to be represented by a nationally
recognized investment banking firm, at the sole
expense of the Company, to assist such Shareholders
in assessing the transaction contemplated by such
Drag-Along Notice.
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(c) At the Drag-Along Closing, each of the other
Shareholders shall be obligated to deliver and sell
the Drag-Along Pro Rata Amount of the Shares owned of
record by such Shareholder and in connection
therewith, each Shareholder shall be required to make
the deliveries otherwise provided for in Article 5
hereof.
(d) For purposes of this Agreement, a Shareholder's
Drag-Along Pro Rata Amount shall mean the aggregate
number of Shares owned of record by such Shareholder
multiplied by a fraction, the numerator of which is
the Charter Oak Sale Amount and the denominator of
which is the aggregate number of Shares owned of
record by Charter Oak.
6.2 TAG-ALONG RIGHTS.
(a) Notwithstanding the provisions contained in Article 3
of this Agreement, at any time that Charter Oak shall
have received a bona fide offer and Charter Oak
intends to transfer for value any Shares representing
more than fifty percent (50%) of the capital stock or
voting power of the Company in any one transaction or
series of related transactions, to any Person that is
not (i) then a Shareholder of the Company or any
Affiliate of a Shareholder, unless as a result of any
such transfer, the transferee thereof (together with
the transferee's Affiliates) would be a holder of
record or beneficial owner of a greater number of
Shares of the Company than Charter Oak, or (ii) if
Charter Oak is a Shareholder hereunder, a Permitted
Transferee of Charter Oak, but does not desire to
issue a Drag-Along Notice, then Charter Oak shall
give to the Company and the other Shareholders at
least twenty (20) days advance written notice
(hereinafter called a "Tag-Along Notice"):
(i) Attaching a copy of the Purchase Offer,
identifying the offeror thereof, the Charter
Oak Sale Amount, the Purchase Price, the
Purchase Terms set forth in the Purchase
Offer and stating that Charter Oak desires
to sell such Shares; and
(ii) Stating that the other Shareholders shall
have the right to participate in such sale
by selling their Tag-Along Pro Rata Amount
(as hereinafter defined) at the Purchase
Price and on the Purchase Terms including
the time and place for the consummation (the
"Tag-Along Closing") of the Transfer of that
Charter Oak Sale Amount.
(b) For a period of ten (10) days after the giving of the
Tag-Along Notice each of the other Shareholders shall
have the right exercisable by written notice to
Charter Oak and the Company, to sell at the Tag-Along
Closing up to the Tag-Along Pro Rata Amount to the
Person making the Purchase Offer (at the Purchase
Price and on the Purchase Terms).
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(c) For purposes of this Agreement, a Shareholder's
Tag-Along Pro Rata Amount shall be equal to (i) the
total number of Shares proposed to be sold to the
Person making the Purchase Offer, multiplied by (ii)
a fraction, the numerator or which is the aggregate
number of Common Shares owned of record by such
Shareholder, and the denominator of which is the
aggregate total of (x) all of the Shares owned of
record by Charter Oak, plus (y) all of the Shares
owned of record by all of the other Shareholders
desiring to exercise their Tag-Along rights. At the
Tag-Along Closing, the Shareholders desiring to
exercise their Tag-Along rights hereunder and who
have properly given notice thereof under Section
6.2(b) shall be required to make the deliveries in
connection with the sale of their Shares hereunder
that are otherwise provided for in Article 6 hereof.
6.3 EXCEPTIONS TO DRAG-ALONG AND TAG-ALONG RIGHTS. Notwithstanding the
foregoing, Sections 6.1 and 6.2 shall not apply to any merger or consolidation
of the Company with or into another Person or sale of all or substantially all
of the assets or stock of the Company followed by a dissolution, provided that
all the Shares and all Shareholders (regardless of percentages) are treated the
same in such transaction.
ARTICLE 7 REGISTRATION RIGHTS
7.1 "PIGGYBACK" REGISTRATION. Each time the Company shall determine to
proceed with the actual preparation and filing of a registration statement under
the Securities Act in connection with the proposed offer and sale for money of
any of it securities by it or any of its security holders (other than on Form
S-4 or Form S-8 promulgated under the Securities Act or any successor or similar
form), the Company will give written notice of its determination to the
Shareholders or any Holder of Shares subject to this Agreement, if applicable.
Upon the written request of such a Holder given to the Company within thirty
(30) days after the mailing of any such notice by the Company, the Company will
cause all Shares of the same class of securities which the Company has
determined to register, which such holder has requested to have registered, to
be included in such registration statement; PROVIDED, HOWEVER, that if the
managing underwriter, in the case of an underwritten public offering, determines
and advises in writing that in its opinion the inclusion in the registration
statement of all Shares proposed to be included by such holders would interfere
with the successful marketing of the securities proposed to be registered by the
Company, then the number of such Shares to be included in the registration
statement shall be reduced pro rata among all of such holders requesting
registration hereunder.
7.2 EXPENSES. With respect to each inclusion of Shares in a
registration statement pursuant to Section 7.1, the Company shall bear the
following fees, costs and expenses; all printing expenses, fees and
disbursements of counsel, accountants, underwriters (excluding discounts or
commissions) and other persons retained by the Company, all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered or qualified, and the expenses and fees for any listing of the
securities to be registered on such securities exchange (or the Nasdaq National
Market) on which
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similar securities issued by the Company are then listed. Fees and disbursements
not expressly included above shall be borne by the holders participating in such
registration.
ARTICLE 8 PREEMPTIVE RIGHTS
8.1 LIMITED PREEMPTIVE RIGHTS.
(a) If the Company authorizes the issuance or sale of any
of its securities to any person not a party to this
Agreement, the Company shall offer to sell each
Shareholder a portion of such shares or securities
equal to the quotient determined by dividing (A) the
number of Shares of held by such Shareholder by (B)
the total number of Shares (including in each case
any fully-diluted Common Shares). Each Shareholder
shall be entitled to purchase such shares or
securities at the most favorable price and on the
most favorable terms as such shares or securities are
to be offered to such person.
(b) In order to exercise its purchase rights hereunder,
each Shareholder must within thirty (30) days after
receipt of written notice from the Company describing
in reasonable detail the share or securities being
offered, the purchase price thereof, the payment
terms and such Shareholder's percentage allotment,
deliver a written notice to the Company describing
its election hereunder.
(c) Upon the expiration of the offering period described
above, the Company shall be entitled to sell such
shares or securities which the Shareholders have not
elected to purchase during the ninety (90) days
following such expiration on terms and conditions no
more favorable to the purchasers thereof than those
offered to Shareholders. Any shares or securities
offered or sold by the Company after such 90-day
period must be reoffered to each Shareholder pursuant
to the terms of this paragraph.
(d) In the event of an acquisition requiring an
additional equity investment by the Shareholders,
Charter Oak hereby agrees to use its best efforts to
loan sufficient funds to GEO Chemicals or the
Managers (if they have become Permitted Transferees
under Section 2.6), as applicable, to enable GEO
Chemicals or the Managers, as applicable, to maintain
their percentage ownership of the Company in
accordance with the pre-emptive rights provisions
contained in this Section 8.1. Notwithstanding the
foregoing, Charter Oak shall have no obligation to
fund the purchase of GEO Chemicals or the Managers,
as applicable, described above, if any of the
Managers has sufficient liquidity (as agreed upon in
good faith by Charter Oak and such Manager) to fund
such purchase of Common Shares.
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ARTICLE 9 GOVERNANCE
9.1 COMPOSITION OF THE BOARD OF DIRECTORS. The Shareholders each hereby
agree to take any and all action necessary (including, without limitation,
voting their Shares, executing and delivering written actions of shareholders in
lieu of a meeting, and calling special shareholders' meetings) to cause the
Board of Directors of the Company to be comprised as follows:
(a) The number of Directors on the Board of Directors
shall initially be five. The Directors shall include:
(i) three individuals designated in writing by
Charter Oak, which shall initially be
Anthony J. Dowd, George W. Rapp, Jr. and A.
Elliott Archer;
(ii) Ahearn, so long as Ahearn is President and
Chief Executive Officer of the Company or,
in the event Ahearn is terminated by the
Company without Cause, so long as GEO
Chemicals remains a Shareholder and Ahearn
retains an ownership interest in GEO
Chemicals; and
(iii) Eckman, so long as Eckman is Executive Vice
President and Chief Financial Officer of the
Company.
(b) In the event any Director who is elected to the Board
of Directors pursuant to clause (i) or (iii) of
Section 9.1(a) resigns or otherwise ceases to serve
on the Board of Directors for whatever reason, the
vacancy shall be filled, in the case of clause (i),
with an individual designated by Charter Oak, and in
the case of clause (iii), for so long as Ahearn is
President and Chief Executive Officer of the Company,
with an individual designated by Ahearn, and the
Shareholders hereby agree to call a special
shareholders' meeting and to vote all of their Shares
at such meeting or to execute a written action of
shareholders in lieu of a meeting in order to effect
such election.
ARTICLE 10 ACQUIRING COMPETING COMPANIES
Each of the Shareholders agrees, for so long as the Shareholder is a
party to this Agreement, that the Shareholder will not acquire a majority
ownership interest in any corporation, partnership or other business entity that
is a direct competitor of the Company in paper chemicals, water treatment and
construction and process chemicals business, inorganic chemicals or fine
chemicals for the bulk active medicinal market, without the prior approval of
the other Shareholders, which approval shall not be unreasonably withheld.
Charter Oak shall have no further obligations under this Article 11 upon the
death or Complete Disability of Ahearn or Eckman or Termination of either
Ahearn's or Eckman's employment by the Company, with Cause.
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ARTICLE 11 TERM OF AGREEMENT
11.1 TERMINATION OF THIS AGREEMENT. This Agreement shall
remain in effect until terminated by (i) written agreement of the Company's
Board of Directors, Charter Oak, the Managers and the Charter Oak Designees,
(ii) cessation of the Company's business and winding up of its affairs, (iii)
any merger or consolidation of the Company in which the Company is not the
surviving corporation, unless such merger or consolidation is with another
entity that is controlled by, under the control of or in common control with,
the Company, or (iv) the later of (A) a closing of a Public Offering, or (B) 10
years from the date of this Agreement.
11.2 REMOVAL OF RESTRICTIVE LEGENDS. Upon termination of this
Agreement, each Shareholder shall surrender to the Company any certificates
representing Shares bearing the restrictive legends referenced in Section 2.3,
and the Company shall issue a new certificate in lieu thereof for an equal
number of Shares without such restrictive legend.
ARTICLE 12 MISCELLANEOUS
12.1 NOTICES. All notices pursuant to this Agreement shall be
in writing, delivered as follows:
(a) If to the Company, to:
Mr. George P. Ahearn
President
GEO Specialty Chemicals, Inc.
28601 Chagrin Boulevard
Suite 210
Cleveland, OH 44122
(b) If to Charter Oak Partners or Charter Oak
Capital Partners, to:
Mr. Anthony J. Dowd
Charter Oak Partners
10 Wright Street
Building B
P. O. Box 5147
Westport, CT 06880
(c) If to George P. Ahearn, to:
Mr. George P. Ahearn
28601 Chagrin Boulevard
Suite 210
Cleveland, OH 44122
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(d) If to William P. Eckman, to:
Mr. William P. Eckman
Executive Vice President
GEO Chemicals, Inc.
401 South Avenue
Suite 3A
Lafayette, IN 47904
(e) If to GEO Chemicals, Ltd.:
Mr. George P. Ahearn
28601 Chagrin Boulevard
Suite 210
Cleveland, OH 44122
(f) If to George W. Rapp, Jr.:
Mr. George W. Rapp, Jr.
97 Warrior Road
Louisville, Kentucky 40207
(g) If to A. Elliott Archer:
Mr. A. Elliott Archer
14947 Mercury Court
Carmel, Indiana 46032
(h) In each case with a copy to:
Craig R. Martahus, Esq.
Thompson Hine & Flory LLP
3900 Key Center
127 Public Square
Cleveland, Ohio 44114
If to any other Shareholder, to the address for such Shareholder listed in the
shareholder records of the Company or to such address as may have been
designated by such Shareholder in a prior notice to the Company.
Notices delivered by registered mail or a national overnight air
courier service shall be deemed to have been given three business days and one
business day, respectively, after the day of registration or documented
acceptance by the national overnight air courier service, as the case may be,
and otherwise notices shall be deemed to have been given when received.
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12.2 FURTHER ASSURANCES. From time to time after the date
hereof, upon reasonable notice and without further consideration, each
Shareholder shall execute and deliver any other document or instrument and shall
take any other action as may be advisable and reasonable to give effect to the
provisions of this Agreement.
12.3 INSURANCE. The Company shall have the right to obtain
insurance on the life of any Shareholder, whenever, in the opinion of the
Company, insurance may be required for the benefit of the Company or to enable
it to carry out its obligations hereunder. Each Shareholder shall submit to any
medical examination requested by the Company for the purpose of obtaining or
maintaining any such policy. No Shareholder shall have any rights in or to any
such policy, and the Company shall be free at any time to dispose of or retain
any such policy in any manner it desires.
12.4 ASSIGNMENT. No Shareholder may assign rights or delegate
duties or obligations hereunder without the prior written consent of all other
parties, and any assignment or delegation of any right, duty, or claim arising
hereunder without such consent shall be void.
12.5 INJUNCTIVE RELIEF. Each Shareholder acknowledges that it
will be impossible to measure in money the damage to the Company and to the
other Shareholders if there is a failure to comply with this Agreement. It is
therefore agreed that the Company or any other Shareholder, in addition to any
other rights or remedies which they may have, shall be entitled to immediate
injunctive relief and to specific performance to enforce this Agreement and that
if any action or proceeding is brought in equity to enforce it, no party will
urge, as a defense, that there is an adequate remedy at law.
12.6 EQUITY CONTRIBUTION VALUATION. The price of the Common
Shares issued in connection with the Equity Contribution shall not constitute a
binding valuation of the Common Shares of the Company for any other purpose
under this Agreement.
ARTICLES 13 REPRESENTATIONS AND WARRANTIES
13.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio. This
Agreement has been duly authorized, executed and delivered by the
Company, and is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
(b) The execution, delivery and performance of this Agreement
by the Company will not result in any violation of, or be in conflict
with or constitute a default under, its Articles of Incorporation or
Code of Regulations, or any agreement, instrument, judgment, decree or
order to which the Company is subject, or result in the creation of any
mortgage, lien, charge or encumbrance upon any of the properties or
assets of the Company.
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(c) The Company, Key Equity Capital Corporation and Key Equity
Partners I have executed a Sale and Purchase Agreement for the
redemption by the Company of all the capital stock of the Company held
by Key Equity Capital Corporation and Key Equity Partners I.
13.2 REPRESENTATIONS AND WARRANTIES OF CHARTER OAK AND CHARTER
OAK CAPITAL PARTNERS. Charter Oak and Charter Oak Capital Partners represent and
warrant that:
(a) Charter Oak and Charter Oak Capital Partners are each duly
organized, validly existing and in good standing under the laws of the
State of Connecticut. This Agreement has been duly authorized, executed
and delivered by Charter Oak and Charter Oak Capital Partners, and is a
valid and binding obligation of Charter Oak and Charter Oak Capital
Partners, enforceable against them in accordance with its terms.
(b) The execution, delivery and performance of this Agreement
by Charter Oak and Charter Oak Capital Partners will not result in any
violation of, or be in conflict with or constitute a default under,
their respective partnership agreements, or any agreement, instrument,
judgment, decree or order to which Charter Oak or Charter Oak Capital
Partners, as applicable, is subject, or result in the creation of any
mortgage, lien, charge or encumbrance upon any of the properties or
assets of either of them.
13.3 REPRESENTATIONS AND WARRANTIES OF THE MANAGERS. Each of
the Managers represents and warrants:
(a) This Agreement has been duly authorized, executed and
delivered by the Managers, and is a valid and binding obligation of
each of the Managers, enforceable against each of the Managers in
accordance with its terms.
(b) Each of the Managers is aware of and familiar with the
restrictions imposed on the transfer by each of the Managers of any of
the Shares, including, without limitation, the restrictions contained
in this Agreement. Each of the Managers is aware that, except as
expressly provided in this Agreement, they will have no right to
require registration of their Shares and must bear the economic risk of
their investment therein.
(c) Each of the Managers separately acknowledge that the
Company and Charter Oak are entering into this Agreement in reliance
upon the representations and warranties of each of the Managers
contained in this Agreement, including, without limitation, those set
forth in this Section 13.3(c).
13.4 REPRESENTATIONS AND WARRANTIES OF GEO CHEMICALS. GEO
Chemicals represents and warrants that:
(a) GEO Chemicals is a limited liability company duly
organized, validly existing and in good standing under the laws of the
state of Ohio. This Agreement has been duly authorized, executed and
delivered by GEO Chemicals, and is a valid and binding
23
<PAGE> 24
obligation of GEO Chemicals, enforceable against GEO Chemicals in
accordance with its terms.
(b) The execution, delivery and performance of this Agreement
by GEO Chemicals will not result in any violations of, or be in
conflict with or constitute a default under its Articles of
Organization or Operating Agreement, or any agreement, instrument,
judgment, decree or order to which GEO Chemicals is subject, or result
in the creation of any mortgage, lien, charge or encumbrance upon any
of the properties or assets of GEO Chemicals.
ARTICLE 14 CONSTRUCTION
14.1 ENTIRE AGREEMENT. This Agreement constitutes the
exclusive statement in the agreement of the Company and the Shareholders
concerning rights and restrictions on matters contained herein this Agreement
and supersedes all other agreements, oral or written, among or between any of
them concerning rights and restrictions contained herein this Agreement. All
negotiations among or between any of the Company and the Shareholders with
respect to the subject matter hereof are superseded by this Agreement, and there
are no representations, promises, understandings, or agreements, or written, in
relation thereto among or between any of them other than those incorporated
herein.
14.2 MODIFICATION AND WAIVER. No amendment, modification, or
waiver of this Agreement shall be effective unless made in a written instrument
which specifically references this Agreement and which is signed by the Company
and the holders of a ninety percent (90%) majority of the outstanding Shares.
Except as expressly provided herein, the failure of the Company or any
Shareholder to enforce at any time, or for any period of time, any provision of
this Agreement shall not be construed as a waiver of any provision or the right
of any such Person to enforce each and every provision of this Agreement.
14.3 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the Shareholders, their Permitted Transferees,
successors-in-interest, legal representatives and permitted assigns and shall be
binding upon and inure to the benefit of the Company, its successors and
assigns.
14.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio without giving effect
to the conflict of law provisions thereof.
14.5 SEVERABILITY AND REFORMATION. If any provision of this
Agreement, or the application thereof to any Person or circumstance should, for
any reason and to any extent, be invalid or unenforceable, the remainder of this
Agreement and the application of such provision to other Persons or
circumstances shall not be affected thereby, but rather shall be enforced to the
greatest extent permitted by law. In addition, if any of the Share Transfer
restrictions contained herein should ever be found by a court of competent
jurisdiction to be invalid or unenforceable, such court is hereby authorized by
the Company and the Shareholders to reform such provision for the purpose
24
<PAGE> 25
of imposing reasonable and enforceable restrictions on the Transfer of Shares so
as to carry out the intentions of the Company and the Shareholders in imposing
Transfer restrictions designed to ensure unity and continuity in the ownership
of the Company and to afford the remaining Shareholders a reasonable degree of
discretion and control over the admission of Persons substituted as Shareholders
of the Company.
14.6 HEADINGS. The Article and Section headings contained
herein are intended solely for convenience of reference and shall not be
considered in interpreting this Agreement.
14.7 GENDER AND NUMBER. Whenever the context requires herein,
the masculine gender includes the feminine or neuter, and the singular number
includes the plural.
14.8 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same document.
14.9 THIRD PARTIES. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer on any Person, other than
the Company and the Shareholders, any rights hereunder.
14.10 EXHIBITS. The Exhibits referenced in this Agreement
constitute an integral part of this Agreement as if fully rewritten herein.
14.11 TIME PERIODS. Any action required hereunder to be taken
within a certain number of days shall be taken within that number of calendar
days; provided, however, that if the last day for taking such action falls on a
Saturday, Sunday, or a holiday observed by the Company, the period during which
such action may be taken shall be automatically extended to the next business
day.
[signature page to follow]
25
<PAGE> 26
INTENDING TO BE LEGALLY BOUND, the parties hereto have executed this
Agreement or have caused this Agreement to be executed by their duly authorized
representatives as of the day first above written.
GEO SPECIALTY CHEMICALS, INC. GEORGE P. AHEARN
/s/ George P. Ahearn /s/ George P. Ahearn
- --------------------------------------------------- -------------------------
By: George P. Ahearn
------------------------------------------------
Title: President and Chief Executive Officer
--------------------------------------------- WILLIAM P. ECKMAN
/s/ William P. Eckman
------------------------
CHARTER OAK PARTNERS
/s/ Jerrold N. Fine
- ---------------------------------------------------
By: Jerrold N. Fine GEORGE W. RAPP, JR.
------------------------------------------------
Title: Managing Partner of Fine Partners, L.P.,
--------------------------------------------- /s/ George W. Rapp, Jr.
the Managing Partner of Charter Oak Partners -------------------------
---------------------------------------------
GEO CHEMICALS, LTD.
/s/ George P. Ahearn A. ELLIOTT ARCHER
- ---------------------------------------------------
By: George P. Ahearn
------------------------------------------------
Title: Member /s/ A. Elliott Archer
--------------------------------------------- -------------------------
CHARTER OAK CAPITAL PARTNERS
/s/ Anthony J. Dowd
- ---------------------------------------------------
By: Anthony J. Dowd
------------------------------------------------
Title: General Partner
---------------------------------------------
26
<PAGE> 1
Exhibit 10.3
THE WARRANT REPRESENTED BY THIS AMENDED AND RESTATED WARRANT AGREEMENT, AND THE
SHARES OF COMMON STOCK TO BE ISSUED UPON EXERCISE THEREOF, HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY
NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OR ANY
APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO SUCH WARRANT OR THE SHARES OF
COMMON STOCK TO BE ISSUED UPON EXERCISE THEREOF, OR UNLESS THE HOLDER HEREOF
ESTABLISHES TO THE REASONABLE SATISFACTION OF GEO SPECIALTY CHEMICALS, INC. THAT
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
GEO SPECIALTY CHEMICALS, INC.
AMENDED AND RESTATED WARRANT AGREEMENT
WITH CHARTER OAK PARTNERS
-------------------------
This AMENDED AND RESTATED WARRANT AGREEMENT (the "Agreement") is
entered into as of July 31, 1998, by and between GEO Specialty Chemicals, Inc.,
an Ohio corporation (the "Company"), and Charter Oak Partners, a
Connecticut partnership ("Holder"). This Agreement amends and restates the
Warrant Agreement (the "1997 Warrant Agreement"), dated March 25, 1997,
entered into by and between the Company and Holder.
WITNESSETH:
-----------
WHEREAS, in connection with, and as a condition to the execution of,
the Share Purchase Agreement, dated March 25, 1997, by and between the Company
and Holder, the Company, desiring to provide Holder with the potential for an
increased percentage ownership of the Company, agreed to issue warrants to
Holder to purchase shares of the Company's Class A Common Stock, $1.00 par
value per share (the "Common Shares");
WHEREAS, at the time of the 1997 Warrant Agreement, the Common Shares
were held by the following shareholders in the following percentages:
<TABLE>
<CAPTION>
Shareholder No. of Common Shares Percentage
----------- -------------------- ----------
<S> <C> <C>
Charter Oak Partners 82.31 79.00%
Chemical Specialty Enterprises, L.P. 21.88 21.00%
</TABLE>
WHEREAS, subsequent to the execution and delivery of the 1997 Warrant
Agreement, Holder transferred (i) 0.466 and 0.137 Common Shares to George W.
Rapp, Jr. and A. Elliott Archer, respectively, each of whom is a designee of
Holder serving on the Board of Directors of the Company; and (ii) 1.646 Common
Shares to George P. Ahearn as a result of the exercise by Ahearn of an option
held by him from Holder (the "Charter Oak Transfers");
<PAGE> 2
WHEREAS, in connection with the acquisition by the Company of the
TRIMET Technical Products Division of Mallinckrodt, Inc. ("TRIMET"), the
shareholders of the Company and Charter Oak Capital Partners made an aggregate
equity contribution of $6,000,000 (the "Equity Contribution"), on a pro
rata basis assuming that an 8% equity interest had been granted to Charter Oak
pursuant to this Agreement, and received in exchange therefor an aggregate of
31.646 Common Shares;
WHEREAS, as a consequence of the Charter Oak Transfers and the Equity
Contribution, the Common Shares are now held by the following shareholders in
the following percentages:
<TABLE>
<CAPTION>
Shareholder No. of Common Shares Percentage
----------- -------------------- ----------
<S> <C> <C>
Charter Oak Partners 85.431 62.89%
Charter Oak Capital Partners 21.478 15.81%
GEO Chemicals, Ltd. 25.994 19.14%
George P. Ahearn 2.146 1.58%
George W. Rapp, Jr. 0.608 0.45%
A. Elliott Archer 0.178 0.13%
</TABLE>
WHEREAS, the Company and Holder desire to amend and restate the 1997
Warrant Agreement to reflect the changes in the ownership of the Common Shares
effected since March 25, 1997.
NOW, THEREFORE, in consideration of the premises herein contained the
parties agree as follows:
AGREEMENT
---------
1. GRANT OF WARRANT. The Company hereby acknowledges and confirms that
on March 25, 1997 it issued a warrant to Holder, which as of the date of this
Agreement is to be subject to the terms and conditions hereof and shall entitle
Holder to purchase that number of Common Shares of the Company as calculated
pursuant to Section 3 below (the "Warrant") at a purchase price per share
(the "Warrant Price") equal to $.01, payable as set forth in Section 2
below. The Company shall at all times maintain and reserve a sufficient number
of authorized but unissued Common Shares, so that the Warrant may be exercised
without additional authorization of Common Shares after giving effect to all
other options, warrants, convertible securities and other rights to purchase
Common Shares; and the Common Shares issued upon exercise of the Warrant in
accordance with its terms shall be duly authorized, fully paid and
nonassessable. The Company will not take any action which would have the effect
of preventing or disabling the Company from delivering to Holder, upon exercise
of the Warrant pursuant to the terms hereof, the Common Shares then deliverable
or otherwise performing its obligations under this Warrant Agreement.
2
<PAGE> 3
2. EXERCISE OF WARRANT.
(a) Subject to the provisions of Sections 4 and 6 hereof, the Warrant
may be exercised, in whole or in part, upon the following Triggering Events:
(i) Upon each of the years ending December 31, 1998, 1999,
2000 and 2001, if the Company's earnings before interest, taxes,
depreciation and amortization, as measured pursuant to generally
accepted accounting principles ("EBITDA"), does not then equal or
exceed $24,500,000, $26,000,000, $27,500,000 and $29,000,000,
respectively; and
(ii) Upon the death, disability or termination from employment
by the Company, with Cause, as defined in that certain Amended and
Restated Shareholders Agreement, dated as of the date hereof and
entered into by and among the Company, Holder, GEO Chemicals, Ltd.,
George P. Ahearn ("Ahearn"), William P. Eckman ("Eckman"), George W.
Rapp, Jr. and A. Elliott Archer, of Ahearn or Eckman on or before 4:00
p.m. March 31, 2002 (the "Expiration Time").
(b) Holder may exercise all or a portion of the Warrant by delivering
to the Company at the principal office of the Company (i) a written notice of
exercise specifying the number of Common Shares that Holder wishes to purchase,
(ii) the aggregate purchase price for the Common Shares as to which the Warrant
is then being exercised, payable in cash or by bank cashier's check to the
Company, and (iii) a copy of this Warrant Agreement.
(c) As soon as practicable thereafter, the Company shall deliver to
Holder (i) a certificate or certificates representing the number of Common
Shares purchased by Holder and (ii) if the Warrant is being exercised in part, a
new Warrant Agreement, substantially in the form hereof, for any remaining
Common Shares available for purchase through this Warrant, but as to which this
Warrant is not being exercised.
(d) Upon the occurrence of a Liquidity Event, to the extent the Warrant
has not previously been exercised, the Warrant shall expire and become void. For
purposes of this Warrant, a "Liquidity Event" shall mean (i) a sale,
reorganization, consolidation or merger of the Company with another corporation
after which the Company is not the surviving entity, (ii) a sale or other
transfer of all or substantially all of the assets or equity securities of the
Company or (iii) the consummation of an underwritten public offering of the
Company's equity securities pursuant to a registration statement filed
under the Securities Act of 1933, with net proceeds therefrom in excess of
$10,000,000.
3. NUMBER OF COMMON SHARES SUBJECT TO WARRANT.
(a) For purposes of this Warrant, the number of fully diluted Common
Shares issuable to Holder under Section 2(a)(i) hereof shall be equal to the
following:
(i) If, for the year ending December 31, 1998, the Company's
EBITDA does not equal or exceed $24,500,000 (which calculation shall
include the EBITDA of TRIMET for
3
<PAGE> 4
the seven months ended July 31, 1998, subject to a pro forma adjustment
of $525,000), then the number of Common Shares issuable to the Holder
upon exercise of this Warrant shall be such number of Common Shares
that will increase the Holder's ownership of the Outstanding Equity in
the Company by 2.0% of such Outstanding Equity (an "Additional Two
Percent"); provided that, along with the issuance of an Additional Two
Percent upon exercise of the Warrant by Holder, the Company shall issue
to the other shareholders of the Company, excluding GEO Chemicals, Ltd.
(the "Other Shareholders"), Common Shares in such amounts that the
percentage ownership of Common Shares of the Other Shareholders is not
affected by the issuance of an Additional Two Percent ("Offsetting
Common Shares");
(ii) If, for the year ending December 31, 1999, the Company's
EBITDA does not equal or exceed $26,000,000, then the number of Common
Shares issuable to the Holder upon exercise of this Warrant shall be
equal to an Additional Two Percent; provided that, along with the
issuance of an Additional Two Percent upon exercise of the Warrant by
Holder, the Company shall issue Offsetting Common Shares to the Other
Shareholders;
(iii) If, for the year ending December 31, 2000, the Company's
EBITDA does not equal or exceed $27,500,000, then the number of Common
Shares issuable to the Holder upon exercise of this Warrant shall be
equal to an Additional Two Percent; provided that, along with the
issuance of an Additional Two Percent upon exercise of the Warrant by
Holder, the Company shall issue Offsetting Common Shares to the Other
Shareholders;
(iv) If, for the year ending December 31, 2001, the Company's
EBITDA does not equal or exceed $29,000,000, then the number of Common
Shares issuable to the Holder upon exercise of this Warrant shall be
equal to an Additional Two Percent; provided that, along with the
issuance of an Additional Two Percent upon exercise of the Warrant by
Holder, the Company shall issue Offsetting Common Shares to the Other
Shareholders;
(v) Notwithstanding Sections 3(a)(i)-(iv) above, in the event
this Warrant is exercised pursuant to Section 3(b), the percentage
amounts contained in this Section 3(a) shall be reduced for each of the
fiscal periods in which Charter Oak exercised its Warrant pursuant to
Section 3(b) upon the death, disability or termination from employment
by the Company, with Cause, of Ahearn and/or Eckman by 1.24%, in the
case of Ahearn's death, disability or termination by the Company,
and/or by 0.76%, in the case of Eckman's death, disability or
termination by the Company;
(b) For purposes of this Warrant, the number of Common Shares issuable
to Holder under Section 2(a)(ii) hereof shall be equal to the following:
(i) In the event of Ahearn's death, disability or termination
from employment by the Company, with Cause, the number of Common Shares
issuable to Holder under Section 2(a)(ii) hereof shall be such number
of Common Shares that will increase Holder's percentage of the
Outstanding Equity in the Company by 1.24% multiplied by the number of
fiscal periods described in Section 2(a)(i) ending subsequent to such
death, disability or termination (the "Ahearn Warrant Shares");
provided that, along with the issuance of the
4
<PAGE> 5
Ahearn Warrant Shares upon exercise of the Warrant by Holder, the
Company shall issue Offsetting Common Shares to the Other Shareholders;
provided further that, for the year in which the death, disability or
termination occurs, Charter Oak will not be entitled to an additional
1.24% of the Outstanding Equity for that fiscal year if (a) the event
occurs after July 1 of such year and (b) the Company's annualized
EBITDA results for the partial year exceed the EBITDA targets indicated
for the specified period in Section 3(a); and
(ii) In the event of Eckman's death, disability or termination
from employment by the Company, with Cause, the number of Common Shares
issuable to Holder under Section 2(a)(ii) hereof shall be such number
of Common Shares that will increase Holder's percentage of the
Outstanding Equity in the Company by 0.76% multiplied by the number of
fiscal periods described in Section 2(a)(i) ending subsequent to such
death, disability or termination (the "Eckma Warrant Shares"); provided
that, along with the issuance of the Eckman Warrant Shares upon
exercise of the Warrant by Holder, the Company shall issue Offsetting
Common Shares to the Other Shareholders; provided further that, for the
year in which the death, disability or termination occurs, Charter Oak
will not be entitled to an additional 0.76% of the Outstanding Equity
for that fiscal year if (a) the event occurs after July 1 of such year
and (b) the Company's annualized EBITDA results for the partial year
exceed the EBITDA targets indicated for the specified period in Section
3(a); and
(c) For purposes of this Section 3, the term "Outstanding Equity" shall
mean, for each of the Common Share issuances under Section 2(a) and 2(b), that
number of Common Shares equal to the currently outstanding Common Shares plus
(i) any Common Shares issued pursuant to Section 2(a) prior to the applicable
Triggering Event and (ii) any Common Shares issued pursuant to Section 2(a) upon
the occurrence of the applicable Triggering Event.
4. ASSIGNMENT. Subject to the provisions of Section 9 below, Holder may
sell, transfer or assign all or a portion of this Warrant.
5. RECOGNITION. Notwithstanding the rights of Holder pursuant to the
provisions of Section 4 above, the Company shall only be required to recognize
the holder of the Warrant as identified upon the Warrant registration books and
records as maintained by the Company.
6. CONTRAVENTION OF LAWS. If at any time while all or any portion of
this Warrant is outstanding, the exercise of the Warrant and the issuance of
Common Shares pursuant thereto is deemed to be illegal or in contravention of
then applicable state or federal laws, the Company shall be excused from
performing any of its obligations or complying with the terms and conditions of
this Warrant Agreement until the date that the exercise of this Warrant or the
issuance of Common Shares pursuant thereto is not in contravention of then
applicable state or federal law. In connection with the foregoing, the Company
shall use its reasonable best efforts to maintain the effectiveness of this
Warrant under then applicable state or federal law.
7. FRACTIONAL SHARE. The Company may issue fractional Common Shares
upon the exercise of the Warrant.
5
<PAGE> 6
8. TERMINATION. The Warrant granted hereby, to the extent not
previously exercised or voided pursuant to the terms of this Warrant Agreement,
shall terminate on March 31, 2002 or at such later time as the EBITDA results
for the fiscal year ended December 31, 2001 are available.
9. INVESTMENT REPRESENTATION. Holder hereby represents and warrants to
the Company that the Warrant is, and any Common Shares issued upon its exercise
will be, purchased by Holder for his own account and not with a view to the
public distribution thereof and will not be transferred except in a transaction
registered or exempt from registration under the Securities Act, and a legend to
such effect shall be noted on such shares.
10. MISCELLANEOUS.
(a) VALIDITY. The invalidity or unenforceability of any provision of
this Warrant Agreement shall not affect the validity or enforceability of any
other provision of this Warrant Agreement, which shall remain in full force and
effect; and, except as otherwise provided herein to the contrary, the failure or
invalidity of any portion of the consideration for which the Warrant is being
granted shall not reduce the amount of, or render invalid or unenforceable, all
or any portion of the Warrant
(b) ENTIRE AGREEMENT. Except as otherwise provided herein, this Warrant
Agreement contains the entire agreement between the parties with respect to the
transactions provided for herein and supersedes all prior arrangements or
understandings with respect thereto, written or oral. The terms of this Warrant
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. Nothing in this Warrant Agreement,
expressed or implied, is intended to confer upon any other person (other than an
assignee or transferee of Holder pursuant to the provisions hereof) any rights
or remedies of any nature whatsoever under or by reason of this Warrant
Agreement.
(c) NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given when actually delivered in person by cable or telecopy, or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
parties as follows:
(i) If to Holder, to:
Charter Oak Partners
Attn: Mr. Anthony J. Dowd
10 Wright Street
Building B
P.O. Box 5147
Westport, CT 06880
6
<PAGE> 7
(ii) If to the Company, to:
GEO Specialty Chemicals, Inc.
Attn: Mr. George P. Ahearn, President
28601 Chagrin Boulevard
Suite 210
Cleveland, OH 44122
(iii) In each case with a copy to:
Craig R. Martahus, Esq.
Thompson Hine & Flory LLP
3900 Key Tower
127 Public Square
Cleveland, Ohio 44114
A party may change its address for notice purposes by written notice to
the other party hereto.
(d) GOVERNING LAW. This Warrant Agreement and the Warrant granted
hereby shall be governed by and construed in accordance with the laws of the
State of Ohio, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
(e) COUNTERPARTS. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
(f) DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Warrant Agreement.
[signature page to follow]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereunto have caused this instrument to
be executed, all as of the day and year first above written.
GEO SPECIALTY CHEMICALS, INC.
By: /s/ George P. Ahearn
------------------------------------------
Name: George P. Ahearn
----------------------------------------
Title: President and Chief Executive Officer
---------------------------------------
CHARTER OAK PARTNERS
By: /s/ Anthony J. Dowd
------------------------------------------
Name: Anthony J. Dowd
----------------------------------------
Title: Director of Private Investments
---------------------------------------
8
<PAGE> 1
Exhibit 10.4
THE WARRANT REPRESENTED BY THIS AMENDED AND RESTATED WARRANT AGREEMENT, AND THE
SHARES OF COMMON STOCK TO BE ISSUED UPON EXERCISE THEREOF, HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY
NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OR ANY
APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO SUCH WARRANT OR THE SHARES OF
COMMON STOCK TO BE ISSUED UPON EXERCISE THEREOF, OR UNLESS THE HOLDER HEREOF
ESTABLISHES TO THE REASONABLE SATISFACTION OF GEO SPECIALTY CHEMICALS, INC. THAT
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
GEO SPECIALTY CHEMICALS, INC.
AMENDED AND RESTATED WARRANT AGREEMENT
WITH GEO CHEMICALS, LTD.
------------------------
This AMENDED AND RESTATED WARRANT AGREEMENT (the "Agreement") is
entered into as of July 31, 1998, by and between GEO Specialty Chemicals, Inc.,
an Ohio corporation (the "Company"), and GEO Chemicals, Ltd.
("Holder"), an Ohio limited liability company and
successor-in-interest by merger to Chemicals Specialties Enterprises, L.P.
("CSE"). This Agreement amends and restates the Warrant Agreement
(the "1997 Warrant Agreement"), dated March 25, 1997, entered into
by and between the Company and CSE.
WITNESSETH:
-----------
WHEREAS, in connection with, and as a condition to the execution of,
the Share Purchase Agreement, dated March 25, 1997, by and between the Company
and Charter Oak Partners ("Charter Oak"), a Connecticut partnership,
the Company, desiring to provide Holder with the potential for an increased
percentage ownership of the Company upon the occurrence of certain liquidity
events and based upon the return achieved by Charter Oak in its investment in
the Company, agreed to issue warrants to Holder to purchase shares of the
Company's Class A Common Stock, $1.00 par value per share (the
"Common Shares");
WHEREAS, at the time of the 1997 Warrant Agreement, the Common Shares
were held by the following shareholders in the following percentages:
Shareholder No. of Common Shares Percentage
----------- -------------------- ----------
Charter Oak Partners 82.31 79.00%
Chemical Specialty Enterprises, L.P. 21.88 21.00%
WHEREAS, subsequent to the execution and delivery of the 1997 Warrant
Agreement, Charter Oak transferred (i) 0.466 and 0.137 Common Shares to George
W. Rapp, Jr. and A. Elliott Archer, respectively, each of whom is a Charter Oak
designee serving on the Board of Directors of the Company; and (ii) 1.646 Common
Shares to George P. Ahearn as a result of the exercise by Ahearn of an option
held by him from Charter Oak (the "Charter Oak Transfers");
<PAGE> 2
WHEREAS, in connection with the acquisition by the Company of the
TRIMET Technical Products Division of Mallinckrodt, Inc., the shareholders of
the Company and Charter Oak Capital Partners made an aggregate equity
contribution of $6,000,000 (the "Equity Contribution"), on a pro
rata basis assuming that an 8% equity interest had been granted to Charter Oak
pursuant to its warrant agreement with the Company, and received in exchange
therefor an aggregate of 31.646 Common Shares;
WHEREAS, as a consequence of the Charter Oak Transfers and the Equity
Contribution, the Common Shares are now held by the following shareholders in
the following percentages:
Shareholder No. of Common Shares Percentage
----------- -------------------- ----------
Charter Oak Partners 85.431 62.89%
Charter Oak Capital Partners 21.478 15.81%
GEO Chemicals, Ltd. 25.994 19.14%
George P. Ahearn 2.146 1.58%
George W. Rapp, Jr. 0.608 0.45%
A. Elliott Archer 0.178 0.13%
WHEREAS, the Company and Holder desire to amend and restate the 1997
Warrant Agreement to reflect the changes in the ownership of the Common Shares
effected since March 25, 1997.
NOW, THEREFORE, in consideration of the premises herein contained the
parties agree as follows:
AGREEMENT
---------
1. GRANT OF WARRANT. The Company hereby acknowledges and confirms that
on March 25, 1997 it issued a warrant to Holder, which as of the date of this
Agreement is to be subject to the terms and conditions hereof and shall entitle
Holder to purchase that number of Common Shares of the Company as calculated
pursuant to Section 3 below (the "Warrant") at a purchase price per share (the
"Warrant Price") equal to $.01, payable as set forth in Section 2 below. The
Company shall at all times maintain and reserve a sufficient number of
authorized but unissued Common Shares, so that the Warrant may be exercised
without additional authorization of Common Shares after giving effect to all
other options, warrants, convertible securities and other rights to purchase
Common Shares; and the Common Shares issued upon exercise of the Warrant in
accordance with its terms shall be duly authorized, fully paid and
nonassessable. The Company will not take any action which would have the effect
of preventing or disabling the Company from delivering to Holder, upon exercise
of the Warrant pursuant to the terms hereof, the Common Shares then deliverable
or otherwise performing its obligations under this Warrant Agreement.
2
<PAGE> 3
2. EXERCISE OF WARRANT.
(a) Subject to the provisions of Sections 4 and 6 hereof, the Warrant
may be exercised, in whole or in part, upon the occurrence of a Liquidity Event
(as hereinafter defined) on or before 4:00 p.m. March 31, 2007 (the
"Expiration Time") if, at the time of the Liquidity Event, Charter
Oak's Internal Rate of Return (as hereinafter defined) for its investment
in the Company's Common Shares exceeds 30 percent.
(b) Holder may exercise all or a portion of the Warrant by delivering
to the Company at the principal office of the Company (i) a written notice of
exercise specifying the number of Common Shares Holder wishes to purchase, (ii)
the aggregate purchase price for the Common Shares as to which the Warrant is
then being exercised, payable in cash or by bank cashier's check to the
Company, and (iii) this Warrant Agreement.
(c) As soon as practicable thereafter, the Company shall deliver to
Holder (i) a certificate or certificates representing the number of Common
Shares purchased by Holder, and (ii) if the Warrant is being exercised in part,
a new Warrant Agreement substantially in the form hereof for any remaining
Common Shares available for purchase through this Warrant, but as to which this
Warrant is not being exercised. The Common Shares shall be deemed issued
immediately prior to the occurrence of the Liquidity Event.
(d) For purposes of this Warrant, a "Liquidity Event" shall mean one or
any combination of related or unrelated transactions of the following types that
return to Charter Oak an amount equivalent to their total equity investment in
the Company ($20,220,000) plus an amount to provide Charter Oak with an Internal
Rate of Return in excess of thirty percent (30%), after taking account of the
Charter Oak Transfers and all other transfers of Common Shares by Charter Oak to
its permitted transferees under Section 2.6 of the Shareholders Agreement of the
Company dated as of the date hereof (the "Shareholders Agreement"); (i) a sale,
reorganization, consolidation or merger of the Company with another corporation,
(ii) a sale or other transfer of some or all of the assets (other than in the
ordinary course of business) of the Company or (iii) a sale of some or all of
Charter Oak's equity securities of the Company (other than the sale or
distribution by Charter Oak to a director pursuant to Section 8.1(d) of the
Shareholders Agreement) or (iv) the consummation of a public offering of the
Company's equity securities pursuant to a registration statement filed under the
Securities Act of 1933.
(e) For the purposes of this Warrant, Charter Oak's "Internal Rate of
Return" shall mean the net compound annual internal rate of return on Common
Shares invested by Charter Oak in the Company. For the purpose of calculating
the Internal Rate of Return, partial years will be utilized to measure the time
between the date(s) of investment and date(s) of Liquidity Event(s), and any
such investment shall be given effect only for the partial year for which it has
been in place. In addition, included in the calculation of the Internal Rate of
Return will be (i) to the extent Common Share dividends are received by Charter
Oak, all of such dividends, (ii) any fees and interest that are paid to Charter
Oak, and (iii) any net proceeds received by Charter Oak as a result of the sale
or refinancing of assets of the Company other than in the ordinary course of
business of the Company.
3
<PAGE> 4
(f) To the extent the Warrant is not exercised or otherwise expires or
becomes void prior to the Expiration Time, it shall expire and become void, and
all rights thereunder and all rights under this Warrant Agreement shall cease at
the Expiration Time.
3. NUMBER OF COMMON SHARES SUBJECT TO WARRANT. The Warrant shall
entitle Holder to purchase that number of Common Shares (the "Warrant Shares")
representing the percentage of the outstanding equity of the Company, including
the Warrant Shares and the Offsetting Common Shares (as defined below),
equivalent to the percentage by which Charter Oak's Internal Rate of Return
exceeds 30 percent after giving effect to the issuance of the Warrant Shares and
the Offsetting Common Shares, up to a maximum of five percent. Concurrently with
the issuance by the Company of the Warrant Shares upon exercise of the Warrant
by Holder, the Company shall issue to the other shareholders of the Company,
excluding Charter Oak and Rapp and Archer (the "Other Shareholders"), Common
Shares in such amounts that the percentage ownership of Common Shares of the
Other Shareholders is not affected by the issuance of the Warrant Shares (the
"Offsetting Common Shares").
4. ASSIGNMENT. Subject to the provisions of Section 9 below, Holder may
sell, transfer or assign all or a portion of this Warrant.
5. RECOGNITION. Notwithstanding the rights of Holder pursuant to the
provisions of Section 4 above, the Company shall only be required to recognize
the holder of the Warrant as identified upon the Warrant registration books and
records as maintained by the Company.
6. CONTRAVENTION OF LAWS. If at any time while all or any portion of
this Warrant is outstanding, the exercise of the Warrant and the issuance of
Common Shares pursuant thereto is deemed to be illegal or in contravention of
then applicable state or federal laws, the Company shall be excused from
performing any of its obligations or complying with the terms and conditions of
this Warrant Agreement until the date that the exercise of this Warrant or the
issuance of Common Shares pursuant thereto is not in contravention of then
applicable state or federal law. In connection with the foregoing, the Company
shall use its reasonable best efforts to maintain the effectiveness of this
Warrant under then applicable state or federal law.
7. FRACTIONAL SHARES. The Company may issue fractional Common Shares
upon exercise of the Warrant.
8. TERMINATION. The Warrant granted hereby, to the extent not
previously exercised or voided pursuant to the terms of this Warrant Agreement,
shall terminate on March 31, 2007.
9. INVESTMENT REPRESENTATION. Holder hereby represents and warrants to
the Company that the Warrant is, and any Common Shares issued upon its exercise
will be, purchased by Holder for his own account and not with a view to the
public distribution thereof and will not be transferred except in a transaction
registered or exempt from registration under the Securities Act, and a legend to
such effect shall be noted on such shares.
4
<PAGE> 5
10. MISCELLANEOUS.
(a) VALIDITY. The invalidity or unenforceability of any provision of
this Warrant Agreement shall not affect the validity or enforceability of any
other provision of this Warrant Agreement, which shall remain in full force and
effect; and, except as otherwise provided herein to the contrary, the failure or
invalidity of any portion of the consideration for which the Warrant is being
granted shall not reduce the amount of, or render invalid or unenforceable, all
or any portion of the Warrant.
(b) ENTIRE AGREEMENT. Except as otherwise provided herein, this Warrant
Agreement contains the entire agreement between the parties with respect to the
transactions provided for herein and supersedes all prior arrangements or
understandings with respect thereto, written or oral. The terms of this Warrant
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. Nothing in this Warrant Agreement,
expressed or implied, is intended to confer upon any other person (other than an
assignee or transferee of Holder pursuant to the provisions hereof) any rights
or remedies of any nature whatsoever under or by reason of this Warrant
Agreement.
(c) NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given when actually delivered in person, by cable or telecopy, or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
parties as follows:
(i) If to Holder, to:
GEO Chemicals, Ltd.
Attn: Mr. George P. Ahearn
28601 Chagrin Boulevard
Suite 210
Cleveland, Ohio 44122
(ii) If to the Company, to:
GEO Specialty Chemicals, Inc.
Attn: Mr. George P. Ahearn, President
28601 Chagrin Boulevard
Suite 210
Cleveland, Ohio 44122
5
<PAGE> 6
(iii) In each case with a copy to:
Craig R. Martahus, Esq.
Thompson Hine & Flory LLP
3900 Key Tower
127 Public Square
Cleveland, Ohio 44114
A party may change its address for notice purposes by written notice to
the other party hereto.
(d) GOVERNING LAW. This Warrant Agreement and the Warrant granted
hereby shall be governed by and construed in accordance with the laws of the
State of Delaware, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
(e) COUNTERPARTS. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall together constitute one and the same agreement.
(f) DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Warrant Agreement.
[signature page to follow]
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereunto have caused this instrument to
be executed, all as of the day and year first above written.
GEO SPECIALTY CHEMICALS, INC.
By: /s/ George P. Ahearn
------------------------------------------------
Name: George P. Ahearn
----------------------------------------------
Title: President and Chief Executive Officer
---------------------------------------------
GEO CHEMICALS, LTD.
By: /s/ William P. Eckman
------------------------------------------------
Name: William P. Eckman
----------------------------------------------
Title: Member
---------------------------------------------
7
<PAGE> 1
Exhibit 10.5
EMPLOYMENT AND NONCOMPETITION AGREEMENT
---------------------------------------
THIS AGREEMENT is made as of March 25, 1997 by and between GEO
SPECIALTY CHEMICALS, INC., an Ohio corporation ("Company"), and GEORGE P. AHEARN
("Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to employ Executive, and Executive desires
to be employed by the Company to undertake such responsibilities as are
necessary to assist in running the businesses of the Company, all in accordance
with the provision of this Agreement; and
WHEREAS, Executive has been an Officer of the Company and a shareholder
of GEO Chemicals, Inc., the General Partner of Chemical Specialties Enterprises,
L.P. which is a shareholder of the Company and has valuable knowledge and
experience pertaining to the business of the Company, and the parties desire to
arrange for the continuation of his services to the Company; and
WHEREAS, as a condition to the performance of the obligations of
Charter Oak Partners, a Connecticut partnership, contemplated by that Share
Purchase Agreement between GEO Specialty Chemicals, Inc. and Charter Oak
Partners, dated March 25, 1997, and as a condition to the Closing referred to
therein; and
WHEREAS, as an inducement to the Company extending its employment
arrangement with Executive, the parties also desire to arrange for Executive's
undertaking not to compete with the Company;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is hereby agreed as follows:
1. EMPLOYMENT. Commencing as of the date hereof and continuing through
five (5) years following the date hereof (the "Initial Term"), the Company
hereby employs Executive as President and Chief Executive Officer of the Company
with responsibility for the performance of such executive services and duties as
shall be reasonably assigned to and requested of him by, and subject to the
direction and supervision of, the Board of Directors of the Company. In
addition, Executive shall be the Chairman of the Board of Directors during the
Employment Period (as hereinafter defined). Subject to the provisions of Section
11 hereof, commencing on March 25, 2002 and the 25th day of each March
thereafter, the term of this Agreement shall be automatically extended for
additional one (1) year period(s), on the same terms and conditions as contained
herein, unless either party gives written notice to the other party of his or
its intention not to extend the employment hereunder at least ninety (90) days
prior to March 25 of any year following the Initial Term of this Agreement (the
"Additional Term(s)") (the Initial Term and the Additional Term(s), if any, are
hereinafter referred to as the "Employment Period"). Executive hereby accepts
such employment and agrees that he will devote his full time and undivided
-1-
<PAGE> 2
efforts to the business and affairs of the Company and serve the Company in its
business and perform his duties to the best of his ability. Notwithstanding the
above, it is understood that Executive is a party to a certain consulting
agreement with a European affiliate of the Company and holds certain outside
directorships with non-competing businesses.
2. SALARY AND BONUS. (a) As a compensation for his services during the
Employment Period, Executive shall receive a base salary at the rate of Two
Hundred Fifty Thousand Dollars ($250,000) per year. The Company shall undertake
a salary survey on the first anniversary of Executive's employment and will make
a good faith effort to adjust Executive's salary to be consistent with the top
quartile of similarly situated executives. Such salary shall be subject to being
increased, but not decreased, based upon an annual review, although any increase
shall be at the sole discretion of the Board of Directors of the Company. Such
salary shall be payable no less frequently than in equal monthly installments.
In the event Executive's employment with the Company is terminated for any
reason prior to the expiration of the Employment Period, other than a discharge
without Cause, as defined in that certain Shareholders Agreement, dated March
25, 1997, entered into by and between the Company, Charter Oak Partners, a
Connecticut partnership, Chemical Specialties Enterprises, L.P., an Ohio limited
partnership, Executive and William P. Eckman, Executive's receipt of such salary
shall terminate immediately. In the event Executive is discharged without Cause,
such salary shall be payable for either the remainder of the Employment Period
or for one (1) year after the date of Executive's termination, whichever is
greater.
(b) In addition to the base salary referred to in Section 2(a) hereof,
and subject to the discretion of the Company's Board of Directors, Executive
will be eligible to receive bonus compensation as follows:
(i) Annual bonus compensation payable for 1997 shall be equal
to a fixed percentage of Executive's base salary determined on the
basis of the Company's annualized EBITDA according to the following
table:
<TABLE>
<CAPTION>
Bonus of Dollar Amount Equal to
Annualized Ebitda Percentage of Base Salary
----------------- -------------------------
<S> <C>
$0 - $15 million 0%
over $15 million - $17.5 million 15%
over $17.5 million - $20 million 33%
over $20 million or more 50%
</TABLE>
(ii) Annual bonus compensation payable for the years 1998 and
thereafter and performance targets established in connection therewith
shall be determined by the Company's Board of Directors based upon the
recommendation of Executive.
3. EXPENSES. The Company shall reimburse Executive for reasonable
expenses incurred by him on behalf of the Company in the performance of his
duties during the
-2-
<PAGE> 3
Employment Period. Executive shall furnish the Company with such documentation
as is requested by the Company in order for it to comply with the Internal
Revenue Code and regulations thereunder in connection with the proper deduction
of such expenses.
4. BENEFITS. During the Employment Period, Executive shall be entitled
to participate in any employee benefit plans which are maintained or established
by the Company for its senior executives generally, subject, however, to all of
the terms and conditions thereof, including any eligibility requirements
therefor. In any event, the Company agrees to provide (i) medical insurance
coverage equal to that provided for other senior executives of the Company; (ii)
life insurance coverage equal to 1.6 times Executive's base salary; and (iii)
participation in the Company's 401(k) plan or other standard retirement plan
maintained by the Company. In the event Executive's employment with the Company
is terminated for any reason prior to the expiration of the Employment Period,
other than a discharge without Cause, Executive's receipt of such benefits shall
immediately cease. In the event Executive is discharged without Cause, such
Executive shall receive such benefits for either the remainder of the Employment
Period or for one (1) year after the date of Executive's termination, whichever
is greater.
5. VACATIONS. During the Employment Period, Executive shall be entitled
to four (4) weeks of paid vacation.
6. NONDISCLOSURE. Except for information which is already in the public
domain, which is publicly disclosed by persons other than Executive, or which is
required by law to be disclosed, Executive shall at all times during and after
his employment with the Company hold in strictest confidence any and all
confidential information within his knowledge (whether acquired prior to or
during his employment with the Company) concerning the products, processes,
services, business, suppliers and customers of the Company. Such confidential
information includes, without limitation, financial information, sales and
distribution information, price lists, the identity and lists of actual and
potential customers and technical information, all to the extent that such
information is not intended by the Company for public dissemination.
7. NONCOMPETITION. Commencing as of the date hereof and continuing
through the date of the expiration of the Employment Period, or, one (1) year
after the termination of his employment with the Company, whichever is later,
Executive shall not, without the prior written consent of the Company, (a)
solicit business from or compete with the Company for the business of any
customer of the Company as reflected on the books of the Company either as of
the date hereof or as of the date of Executive's termination of employment with
the Company or (b) either directly or indirectly operate or perform any advisory
or consulting services for, invest in (other than stock in a publicly-held
corporation which is traded on a recognized securities exchange or in an
established over-the-counter market, provided that the ownership of such equity
interest does not give Executive the right to control or substantially influence
the policy or operational decisions of such corporation), or otherwise become
associated with in any capacity, any company, partnership, organization,
proprietorship or other entity which develops, manufactures, prepares, sells or
distributes products or performs services then in competition with the products
-3-
<PAGE> 4
developed, manufactured, prepared, sold or distributed or services rendered by
the Company anywhere in the markets in which the Company competes at any time
during such period.
8. NONINTERFERENCE. Executive shall not, at any time during the
Employment Period, or, within one (1) year after the termination of his
employment with the Company, whichever is later, without the prior written
consent of the Company, directly or indirectly, induce or attempt to induce any
employee, agent or other representative or associate of the Company to terminate
its relationship with the Company, or in any way directly or indirectly
interfere with such a relationship or any relationship between the Company and
any of its suppliers or customers.
9. DISCLOSURE OF PROPRIETARY INFORMATION. Executive will promptly
disclose in writing to the Board each improvement, discovery, idea and invention
relating to the business of the Company made or conceived by Executive, either
alone or in conjunction with others, while employed by the Company or during the
Employment Period, or, one (1) year after the termination of his employment with
the Company, whichever is later, if such improvement, discovery, idea or
invention results from or was suggested by such employment. Executive will not
disclose any such improvement, discovery, idea or invention to any person,
except the Company. Each such improvement, discovery, idea or invention shall be
the sole and exclusive property of, and is hereby assigned to, the Company and
at the request of the Company, Executive will assist and cooperate with the
Company and any person or persons from time to time designated by the Company to
obtain for the Company the grant of any letters patent in the United States
and/or any foreign country, covering any such improvement, discovery, idea or
invention, and will in conjunction therewith execute such applications,
statements, assignments or other documents, furnish such information and data
and take all such other action (including without limitation the giving of
testimony) as the Company may from time to time reasonably request. Should
Executive not be an employee of the Company at the time such cooperation and
assistance is rendered, he shall be reimbursed for all reasonable and related
out-of-pocket expenses incurred by him.
10. REMEDIES. Executive acknowledges that Sections 6, 7, 8 and 9 hereof
were negotiated at arms' length, with the advice of counsel and are required for
the fair and reasonable protection of the Company. In the event of an alleged
breach by Executive of his obligations under Sections 6, 7, 8 and 9, the Company
shall give Executive written notice thereof, and Executive shall have thirty
(30) days to cease such activities to the satisfaction of the Company before the
Company may file any legal action pursuant to this Section 10. Executive and the
Company further acknowledge and agree that a continued breach of any of those
obligations and agreements will result in irreparable and continuing damage to
the Company for which there will be no adequate remedy at law, and therefore,
Executive and the Company agree that, in the event of any breach of said
obligations and agreements, the Company and its successors and assigns shall be
entitled to injunctive relief and such other and further relief, including
monetary damages, as is proper in the circumstances. It is further agreed that
the running of the periods provided above in Sections 7, 8 and 9, respectively,
shall be tolled during any period during which Executive shall be adjudged to
been in violation of any of his obligations under such Sections.
-4-
<PAGE> 5
11. TERMINATION. This Agreement shall terminate and, except for the
obligations of the Company set forth in Sections 2 and 4 hereof and the
obligations of Executive set forth in Sections 6, 7, 8 and 9, which shall
survive such termination, all rights and obligations of the Company and
Executive hereunder shall be completely void upon the earliest to occur of the
following:
(a) expiration of the Employment Period;
(b) voluntary termination by Executive of his employment with
the Company, a right reserved to Executive hereunder;
(c) discharge of Executive with or without good cause;
(d) the death of Executive; and
(e) at the election of the Company, the disability of
Executive, which, for purposes hereof, shall mean the inability of
Executive for a continuous period of six (6) months to perform the
essential functions of his position hereunder on an active full time
basis, with or without reasonable accommodations, by reason of
disability or impairment of health. A certificate from a physician
acceptable to both the Company and Executive to the effect that
Executive is or has been disabled and incapable of performing the
essential functions of his position with or without reasonable
accommodations for the Company as previously performed shall be
conclusive of the fact that Executive is incapable of performing such
reasonable services and is or has been disabled for the purposes of
this Agreement.
12. REFORMATION OF AGREEMENT; SEVERABILITY. In the event that any of
Sections 6, 7, 8 or 9 shall be found by a court of competent jurisdiction to be
invalid or unenforceable as against public policy, such court shall exercise its
discretion in reforming such provision to the end that Executive shall be
subject to such restrictions and obligations as are reasonable under the
circumstances and enforceable by the Company. In the event that any other
provision or term of this Agreement is found to be void or unenforceable to any
extent for any reason, it is the agreed upon intent of the parties hereto that
all remaining provisions or terms of the Agreement shall remain in full force
and effect to the maximum extent permitted and that the Agreement shall be
enforceable as if such void or unenforceable provision or term had never been a
part hereof.
13. ASSIGNMENT. This Agreement shall inure to the benefit of, and shall
be binding upon, the Company, its successors and assigns. Executive shall not
assign this Agreement without the written consent of the Company, but this
Agreement shall be binding upon Executive and his heirs, estate and personal
representatives.
14. ARBITRATION. In the event a dispute concerning the terms and
operation of this Agreement arises, and if the Company and Executive do not come
to an agreement with respect to such dispute within thirty (30) days after the
notice of said dispute is provided by either party under Section 15 hereof, the
Company and Executive shall submit the dispute to arbitration in
-5-
<PAGE> 6
Cleveland, Ohio, under the commercial rules of the American Arbitration
Association then in effect. Such arbitration shall be final and binding upon the
parties and enforceable in a court of competent jurisdiction. Judgment on such
arbitration award, from which no appeal or review may be taken, may be entered
in any court having jurisdiction and enforced accordingly.
15. NOTICE. Any notice required to be given under the terms of this
Agreement shall be in writing, and mailed to the recipient's last known address
or delivered in person. If sent by registered or certified mail, such notice
shall be effective when mailed; otherwise, it shall be effective upon delivery.
(i) If to the Company, to:
GEO Specialty Chemicals, Inc.
c/o Charter Oak Partners
10 Wright Street
Building B
Westport, Connecticut 06880
Attn: Anthony J. Dowd
Telecopier: (203) 222-2720
With a copy to:
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attn: Thomas E. Wagner
(ii) If to Executive, to:
George P. Ahearn
8387 Whispering Pines Drive
Novelty, Ohio 44072
With a copy to:
Thompson, Hine & Flory LLP
3900 Society Center
127 Public Square
Cleveland, Ohio 44114
Attn: Craig R. Martahus
16. ENTIRE AGREEMENT; AMENDMENTS; WAIVERS. This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof.
It may not be changed orally but only by a written agreement signed by Executive
and an officer of the Company
-6-
<PAGE> 7
specifically designated by the Board of Directors of the Company to execute such
amendment. The terms or covenants of this Agreement may be waived only by a
written instrument specifically referring to this Agreement and executed by the
party waiving compliance. The failure of the Company at any time or from time to
time to require performance of any of Executive's obligations under this
Agreement shall in no manner affect the Company's right to enforce any
provisions of this Agreement at a subsequent time; and the waiver by the Company
of any right arising out of any breach shall not be construed as a waiver of any
right arising out of any subsequent breach.
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
GEO SPECIALTY CHEMICALS, INC.
(the "Company")
/s/ George P. Ahearn By: /s/ William P. Eckman
- ----------------------------- ------------------------------------
GEORGE P. AHEARN Its: Executive Vice President
("Executive")
-7-
<PAGE> 1
Exhibit 10.6
EMPLOYMENT AND NONCOMPETITION AGREEMENT
---------------------------------------
THIS AGREEMENT is made as of March 25, 1997 by and between GEO
SPECIALTY CHEMICALS, INC., an Ohio corporation ("Company"), and WILLIAM P.
ECKMAN ("Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to employ Executive, and Executive desires
to be employed by the Company to undertake such responsibilities as are
necessary to assist in running the businesses of the Company, all in accordance
with the provision of this Agreement; and
WHEREAS, Executive has been an Officer of the Company and a controlling
shareholder of GEO Chemicals, Inc., the General Partner of Chemical Specialties
Enterprises, L.P. which is a principal shareholder of the Company and has
valuable knowledge and experience pertaining to the business of the Company, and
the parties desire to arrange for the continuation of his services to the
Company; and
WHEREAS, as a condition to performance of the obligations of Charter
Oak Partners, a Connecticut partnership, contemplated by that Share Purchase
Agreement between GEO Specialty Chemicals, Inc. and Charter Oak Partners, dated
March 25, 1997 and as a condition to the Closing referred to therein; and
WHEREAS, as an inducement to the Company extending its employment
arrangement with Executive, the parties also desire to arrange for Executive's
undertaking not to compete with the Company;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is hereby agreed as follows:
1. EMPLOYMENT. Commencing as of the date hereof and continuing through
five (5) years following the date hereof (the "Employment Period"), the Company
hereby employs Executive as Executive Vice President and Chief Financial Officer
of the Company with responsibility for the performance of such executive
services and duties as shall be reasonably assigned to and requested of him by,
and subject to the direction and supervision of, the Board of Directors of the
Company. In addition, Executive shall be a member of the Board of Directors
during the Employment Period (as hereinafter defined). Subject to the provisions
of Section 11 hereof, commencing on March 25, 2002 and the 25th day of each
March thereafter, the term of this Agreement shall be automatically extended for
additional one (1) year period(s), on the same terms and conditions as contained
herein, unless either party gives written notice to the other party of his or
its intention not to extend the employment hereunder at least ninety (90) days
prior to March 25 of any year following the Initial Term of this Agreement (the
"Additional Term(s)") (the Initial Term and the Additional Term(s), if any, are
hereinafter referred to as the
-1-
<PAGE> 2
"Employment Period"). Executive hereby accepts such employment and agrees that
he will devote his full time and undivided efforts to the business and affairs
of the Company and serve the Company in its business and perform his duties to
the best of his ability. Notwithstanding the above, it is understood that
Executive is a party to a certain consulting agreement with a European affiliate
of the Company and holds certain outside directorships with non-competing
businesses.
2. SALARY AND BONUS. (a) As compensation for his services during the
Employment Period, Executive shall receive a base salary at the rate of One
Hundred Ninety Thousand Dollars ($190,000) per year. The Company shall undertake
a salary survey on the first anniversary of Executive's employment and will make
a good faith effort to adjust Executive's salary to be consistent with the top
quartile of similarly situated executives. Such salary shall be subject to being
increased, but not decreased, based upon an annual review, although any increase
shall be at the sole discretion of the Board of Directors of the Company. Such
salary shall be payable no less frequently than in equal monthly installments.
In the event Executive's employment with the Company is terminated for any
reason prior to the expiration of the Employment Period, other than a discharge
without Cause, as defined in that certain Shareholders Agreement, dated March
25, 1997, entered into by and between the Company, Charter Oak Partners, a
Connecticut partnership, Chemical Specialties Enterprises, L.P., an Ohio limited
partnership, Executive and George P. Ahearn, Executive's receipt of such salary
shall terminate immediately. In the event Executive is discharged without Cause,
such salary shall be payable for either the remainder of the Employment Period
or for one (1) year after the date of Executive's termination, whichever is
greater.
(b) In addition to the base salary referred to in Section 2(a) hereof,
and subject to the discretion of the Company's Board of Directors, Executive
will be eligible to receive bonus compensation as follows:
(i) Annual bonus compensation payable for 1997 shall be equal
to a fixed percentage of Executive's base salary determined on the
basis of the Company's annualized EBITDA according to the following
table:
<TABLE>
Bonus of Dollar Amount Equal to
Annualized Ebitda Percentage of Base Salary
----------------- -------------------------
<S> <C>
$0 - $15 million 0%
over $15 million - $17.5 million 15%
over $17.5 million - $20 million 33%
over $20 million or more 50%
</TABLE>
(ii) Annual bonus compensation payable for the years 1998 and
thereafter and performance targets established in connection therewith
shall be determined by the Company's Board of Directors based upon the
recommendation of the Company's Chief Executive Officer.
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<PAGE> 3
3. EXPENSES. The Company shall reimburse Executive for reasonable
expenses incurred by him on behalf of the Company in the performance of his
duties during the Employment Period. Executive shall furnish the Company with
such documentation as is requested by the Company in order for it to comply with
the Internal Revenue Code and regulations thereunder in connection with the
proper deduction of such expenses.
4. BENEFITS. During the Employment Period, Executive shall be entitled
to participate in any employee benefit plans which are maintained or established
by the Company for its senior executives generally, subject, however, to all of
the terms and conditions thereof, including any eligibility requirements
therefor. In any event, the Company agrees to provide (i) medical insurance
coverage equal to that provided for other senior executive of the Company; (ii)
life insurance coverage equal to 1.6 times Executive's base salary; and (iii)
participation in the Company's 401(k) plan or other standard retirement plan
maintained by the Company. In the event Executive's employment with the Company
is terminated for any reason prior to the expiration of the Employment Period,
other than a discharge without Cause, Executive's receipt of such benefits shall
immediately cease. In the event Executive is discharged without Cause, such
Executive shall receive such benefits for either the remainder of the Employment
Period or for one (1) year after the date of Executive's termination, whichever
is greater.
5. VACATIONS. During the Employment Period, Executive shall be entitled
to four (4) weeks of paid vacation.
6. NONDISCLOSURE. Except for information which is already in the public
domain, which is publicly disclosed by persons other than Executive, or which is
required by law to be disclosed, Executive shall at all times during and after
his employment with the Company hold in strictest confidence any and all
confidential information within his knowledge (whether acquired prior to or
during his employment with the Company) concerning the products, processes,
services, business, suppliers and customers of the Company. Such confidential
information includes, without limitation, financial information, sales and
distribution information, price lists, the identity and lists of actual and
potential customers and technical information, all to the extent that such
information is not intended by the Company for public dissemination.
7. NONCOMPETITION. Commencing as of the date hereof and continuing
through the date of the expiration of the Employment Period or one (1) year
after the date of termination of his employment with the Company, whichever is
later, Executive shall not, without the prior written consent of the Company,
(a) solicit business from or compete with the Company for the business of any
customer of the Company as reflected on the books of the Company either as of
the date hereof or as of the date of Executive's termination of employment with
the Company, or (b) either directly or indirectly operate or perform any
advisory or consulting services for, invest in (other than stock in a
publicly-held corporation which is traded on a recognized securities exchange or
in an established over-the-counter market, provided that the ownership of such
equity interest does not give Executive the right to control or substantially
influence the policy or operational decisions of such corporation), or otherwise
become associated with in any capacity, any company, partnership, organization,
proprietorship or other entity which develops,
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<PAGE> 4
manufactures, prepares, sells or distributes products or performs services then
in competition with the products developed, manufactured, prepared, sold or
distributed or services rendered by the Company anywhere in the markets in which
the Company competes at any time during such period.
8. NONINTERFERENCE. Executive shall not, at any time during the
Employment Period or within one (1) year after the termination of his employment
with the Company, whichever is later, without the prior written consent of the
Company, directly or indirectly, induce or attempt to induce any employee, agent
or other representative or associate of the Company to terminate its
relationship with the Company, or in any way directly or indirectly interfere
with such a relationship or any relationship between the Company and any of its
suppliers or customers.
9. DISCLOSURE OF PROPRIETARY INFORMATION. Executive will promptly
disclose in writing to the Board each improvement, discovery, idea and invention
relating to the business of the Company made or conceived by Executive, either
alone or in conjunction with others, while employed by the Company or during the
Employment Period, or, one (1) year after the termination of his employment with
the Company, whichever is later, if such improvement, discovery, idea or
invention results from or was suggested by such employment. Executive will not
disclose any such improvement, discovery, idea or invention to any person,
except the Company. Each such improvement, discovery, idea or invention shall be
the sole and exclusive property of, and is hereby assigned to, the Company and
at the request of the Company, Executive will assist and cooperate with the
Company and any person or persons from time to time designated by the Company to
obtain for the Company the grant of any letters patent in the United States
and/or any foreign country, covering any such improvement, discovery, idea or
invention, and will in conjunction therewith execute such applications,
statements, assignments or other documents, furnish such information and data
and take all such other action (including without limitation the giving of
testimony) as the Company may from time to time reasonably request. Should
Executive not be an employee of the Company at the time such cooperation and
assistance is rendered, he shall be reimbursed for all reasonable and related
out-of-pocket expenses incurred by him.
10. REMEDIES. Executive acknowledges that Sections 6, 7, 8 and 9 hereof
were negotiated at arms' length, with the advice of counsel and are required for
the fair and reasonable protection of the Company. In the event of an alleged
breach by Executive of his obligations under Sections 6, 7, 8 and 9, the Company
shall give Executive written notice thereof, and Executive shall have thirty
(30) days to cease such activities to the satisfaction of the Company before the
Company may file any legal action pursuant to this Section 10. Executive and the
Company further acknowledge and agree that a continued breach of any of those
obligations and agreements will result in irreparable and continuing damage to
the Company for which there will be no adequate remedy at law, and therefore,
Executive and the Company agree that, in the event of any breach of said
obligations and agreements, the Company and its successors and assigns shall be
entitled to injunctive relief and such other and further relief, including
monetary damages, as is proper in the circumstances. It is further agreed that
the running of the periods provided above in Sections 7, 8 and 9, respectively,
shall be tolled during any period during
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<PAGE> 5
which Executive shall be adjudged to been in violation of any of his obligations
under such Sections.
11. TERMINATION. This Agreement shall terminate and, except for the
obligations of the Company set forth in Sections 2 and 4 hereof and the
obligations of Executive set forth in Sections 6, 7, 8 and 9, which shall
survive such termination, all rights and obligations of the Company and
Executive hereunder shall be completely void upon the earliest to occur of the
following:
(a) expiration of the Employment Period;
(b) voluntary termination by Executive of his employment with
the Company, a right reserved to Executive hereunder;
(c) discharge of Executive with or without good cause;
(d) the death of Executive; and
(e) at the election of the Company, the disability of
Executive, which, for purposes hereof, shall mean the inability of
Executive for a continuous period of six (6) months to perform the
essential functions of his position hereunder on an active full time
basis, with or without reasonable accommodations, by reason of
disability or impairment of health. A certificate from a physician
acceptable to both the Company and Executive to the effect that
Executive is or has been disabled and incapable of performing the
essential functions of his position with or without reasonable
accommodations for the Company as previously performed shall be
conclusive of the fact that Executive is incapable of performing such
reasonable services and is or has been disabled for the purposes of
this Agreement.
12. REFORMATION OF AGREEMENT; SEVERABILITY. In the event that any of
Sections 6, 7, 8 or 9 shall be found by a court of competent jurisdiction to be
invalid or unenforceable as against public policy, such court shall exercise its
discretion in reforming such provision to the end that Executive shall be
subject to such restrictions and obligations as are reasonable under the
circumstances and enforceable by the Company. In the event that any other
provision or term of this Agreement is found to be void or unenforceable to any
extent for any reason, it is the agreed upon intent of the parties hereto that
all remaining provisions or terms of the Agreement shall remain in full force
and effect to the maximum extent permitted and that the Agreement shall be
enforceable as if such void or unenforceable provision or term had never been a
part hereof.
13. ASSIGNMENT. This Agreement shall inure to the benefit of, and shall
be binding upon, the Company, its successors and assigns. Executive shall not
assign this Agreement without the written consent of the Company, but this
Agreement shall be binding upon Executive and his heirs, estate and personal
representatives.
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<PAGE> 6
14. ARBITRATION. In the event a dispute concerning the terms and
operation of this Agreement arises, and if the Company and Executive do not come
to an agreement with respect to such dispute within thirty (30) days after the
notice of said dispute is provided by either party under Section 15 hereof, the
Company and Executive shall submit the dispute to arbitration in Cleveland,
Ohio, under the commercial rules of the American Arbitration Association then in
effect. Such arbitration shall be final and binding upon the parties and
enforceable in a court of competent jurisdiction. Judgment on such arbitration
award, from which no appeal or review may be taken, may be entered in any court
having jurisdiction and enforced accordingly.
15. NOTICE. Any notice required to be given under the terms of this
Agreement shall be in writing, and mailed to the recipient's last known address
or delivered in person. If sent by registered or certified mail, such notice
shall be effective when mailed; otherwise, it shall be effective upon delivery.
(i) If to the Company, to:
GEO Specialty Chemicals, Inc.
c/o Charter Oak Partners
10 Wright Street
Building B
Westport, Connecticut 06880
Attn: Anthony J. Dowd
Telecopier: (203) 222-2720
With a copy to:
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attn: Thomas E. Wagner, Esq.
(ii) If to Executive, to:
William Eckman
GEO Chemicals, Inc.
401 South Avenue
Suite 3A
Lafayette, IN 47904
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<PAGE> 7
With a copy to:
Thompson Hine & Flory LLP
3900 Key Center
127 Public Square
Cleveland, Ohio 44114
Attn: Craig R. Martahus, Esq.
16. ENTIRE AGREEMENT; AMENDMENTS; WAIVERS. This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof.
It may not be changed orally but only by a written agreement signed by Executive
and an officer of the Company specifically designated by the Board of Directors
of the Company to execute such amendment. The terms or covenants of this
Agreement may be waived only by a written instrument specifically referring to
this Agreement and executed by the party waiving compliance. The failure of the
Company at any time or from time to time to require performance of any of
Executive's obligations under this Agreement shall in no manner affect the
Company's right to enforce any provisions of this Agreement at a subsequent
time; and the waiver by the Company of any right arising out of any breach shall
not be construed as a waiver of any right arising out of any subsequent breach.
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
GEO SPECIALTY CHEMICALS, INC.
(the "Company")
/s/ William P. Eckman By: /s/ George P. Ahearn
- ------------------------------- ------------------------------------------
WILLIAM ECKMAN Its: President and Chief Executive Officer
("Executive")
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<PAGE> 1
Exhibit 10.7
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement ("Agreement") is effective as of the 20th day
of May, 1996, between GEO Specialty Chemicals, an Ohio corporation ("GEO" or the
"Company"), and Dennis S. Grandle (the "Employee").
W I T N E S S E T H:
--------------------
WHEREAS, the Company desires to employ the Employee and the Employee
desires to be employed by the Company upon the terms provided in this Agreement;
WHEREAS, in reliance on this employment offer, the Employee will move
from Houston, Texas to Little Rock, Arkansas to accept this position.
NOW, THEREFORE, in consideration of the mutual promises set forth in
this Agreement and intending to be legally bound, the parties agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth herein,
the Company agrees to employ the Employee, and the Employee agrees to be
employed by the Company, as Vice President/General Manager. In such positions,
the Employee agrees to devote his full time and efforts to the business and
affairs of the Company and any company to which Employee is transferred
hereunder, and to perform and discharge such service and duties of equivalent
responsibility and authority of such positions as the Company may from time to
time designate.
2. COMPENSATION. In consideration of the full, prompt and faithful
performance of the services and duties to be rendered by the Employee under this
Agreement, including the attached and related to agreements, the Company shall
pay the Employee as follows:
(a) BASE SALARY. The Company shall pay the Employee an annual
base salary of $115,000 ("Base Salary") in installments of at least
twice a month (the 15th and the last day of the month, "Payday"). After
the first calendar year, starting with the date of execution of this
Agreement, and after each subsequent calendar year ("Anniversary
Date"), the Company agrees to consider Employee for raises to the Base
Salary.
(b) BONUS. In consideration of the full, prompt and faithful
performance of the Position in conformance with the goals for the
Position as defined by the Company in its Management Incentive Program
("MIP"), or any other incentive program established by the Company for
subsequent years, the Company will pay the Employee a bonus in the
amount and under the conditions delineated in the MIP, a copy of which
is attached hereto as Exhibit "A," and incorporated herein by
reference.
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<PAGE> 2
(c) BENEFITS. Employee shall be eligible to participate in the
benefit programs outlined in Exhibit B which is attached hereto and
incorporated herein by reference. The Employee will be eligible for
four (4) weeks paid vacation.
(d) SEVERANCE. If the Employee's employment is terminated for
any reason, the Company agrees to pay the Employee's moving expenses to
any where in the continental United States, under the provisions of the
Company's Moving Policy, as specified in Exhibit B. The Severance
Moving Allowance shall be paid to the Employee within thirty days of
submission of an invoice by the Employee. If the Employee's employment
is terminated for cause as defined under this Agreement, he shall be
entitled to his accrued Base Salary to the date he receives notice of
the termination or the effective date of the termination, whichever is
later, and no other payment under the MIP, except as otherwise provided
by law or under this Agreement. If the Employee's employment is
terminated without cause or in breach, during its initial two year term
of this Agreement, the Company agrees to pay the Employee, on his final
day of employment, his accrued Base Salary and Bonus to the date he
receives notice of the termination or the effective date of the
termination whichever is later, and in consideration for the
Noncompetition Agreement attached hereto as Exhibit C, and incorporated
herein by reference, the Company shall pay the Employee on his final
day of employment, one year of his Base Salary, except as otherwise
provided by law or under this Agreement. Following the initial two year
term, if the Employee continues employment with the Company, and is
terminated without cause or breach of this agreement, he will be
provided with three months severance pay and moving benefits.
3. PARTICIPATION THE MANAGEMENT INCENTIVE PROGRAM. The Employee shall
be guaranteed participation in the Company's Management Incentive Program unless
this Agreement is terminated according to its provisions prior to that time. If
the Company terminates the Management Incentive Program, the Company will
establish another incentive compensation program for the Employee, unless
establishing such an incentive compensation program will cause the Company to
default on any of its loan covenants or other financial obligations.
In addition, in the event that the Employee's employment hereunder is
terminated before the end of any fiscal year of the Company, the bonus for that
fiscal year, if any, shall be reduced pro rata in the same proportion that the
number of days remaining in such fiscal year bears to the total number of days
in such fiscal year. Notwithstanding any provision of this Agreement to the
contrary, the Employee shall not be entitled to receive a bonus for any fiscal
year in which the Employee's employment hereunder terminates and the Employee
has been employed by the Company for less than three months during such fiscal
year. In addition, the Employee shall not be entitled to a bonus if he is
terminated for cause under this Agreement. The terms of the MIP are incorporated
into this Agreement. As used herein, the term "bonus" means a bonus under the
Management Incentive Program or any other incentive compensation program
established by the Company.
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<PAGE> 3
4. REASSIGNMENT. The Company may, at any time, reassign the Employee to
another position of equivalent responsibility and authority with the Company or
any of its subsidiaries. In connection therewith, the Company may change the
position title or job responsibilities of the Employee. Refusal by the Employee
to accept such a reassignment can be grounds for termination for cause under
this Agreement, except in cases of undue hardship to the Employee or other
personal reasons acceptable to the Company.
5. NONCOMPETITION AND PROPRIETARY INFORMATION AGREEMENT. As a condition
of the Employee's employment hereunder, the Employee hereby agrees to the terms
of the Noncompetition and Proprietary Information Agreement attached as Exhibit
C (the "Noncompetition Agreement"), which Agreement is incorporated herein by
reference in its entirety.
6. EMPLOYEE OBLIGATIONS. The Employee agrees that he will manage the
Company's business from Little Rock, Arkansas. The Employee also agrees that he
will devote his full time and efforts to the business and affairs of GEO and any
company to which the Employee is transferred under this Agreement, and to
perform and discharge such services and duties of equivalent responsibility and
authority as the Company may from time to time designate. The Employee agrees
that he will fulfill any duty or task as directed by George P. Ahearn, the
President of GEO Specialty Chemicals, William P. Eckman, the Senior Vice
President of GEO Specialty Chemicals, or any other person designated by Mr.
Ahearn or Mr. Eckman. The Employee agrees that he will provide Mr. Ahearn and
Mr. Eckman with a written monthly business report. The form, contents, and time
for delivery of this monthly business report shall be determined by Mr. Ahearn
and Mr. Eckman. The Employee also agrees that he will inform either Mr. Ahearn
or Mr. Eckman and obtain concurrence prior to implementing any strategic
decision. For purposes of this Agreement, "strategic decision" means any
decision or action likely to have a material impact upon the profitability or
strategic goals of the Company. The Employee agrees that the term "strategic
decision" is to be construed broadly under this Agreement and that he should
contact either Mr. Ahearn or Mr. Eckman if he has any doubts, questions, or
concerns about whether a contemplated course of action constitutes a strategic
decision. The Employee also agrees that he will make measurable and significant
progress in moving the Company toward any strategic goals established by the
Company. These strategic goals include:
(a) Increasing the Company's market share in the aluminum-
based water treatment business in a profitable manner;
(b) Gaining additional municipal accounts in order to optimize
the throughput of the Company's plants;
(c) Fully utilizing clay processing capacity to cover overhead
and increase profit at the Little Rock facility;
(d) Finding additional markets for calcined clay products;
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<PAGE> 4
(e) Achieving safe and environmentally sound operations at all
manufacturing sites;
(f) Broadening the product line to include specialty
formulations of polymer blends of aluminum-based chemicals; and
(g) Broadening sales of anhydrous alum and increasing the dry
alum distribution network and sales volume.
The Employee agrees that the Company may add to, modify, or delete the foregoing
list of strategic goals at any time.
7. TERM. Unless sooner terminated as provided herein, the Employee
shall be employed with the Company for an initial term of two (2) years,
commencing on the date of this Agreement. Thereafter, the Employee's employment
hereunder shall continue for an indefinite period until terminated by either
party upon at least thirty (30) days advanced written notice or as otherwise
provided herein, which notice may be given at any time prior to the end of the
initial two year term, provided that such termination is not effective prior to
the end of such term.
8. TERMINATION. Notwithstanding anything to contrary in the Agreement,
the Employee's employment with the Company hereunder shall terminate under the
following circumstances, provided that the Management Incentive Compensation
provisions shall survive the Employee's death and are payable to his estate as
long as the conditions set forth in Paragraph 4 of the Agreement are met:
(a) DEATH. In the event the Employee dies, the Employee's
employment shall terminate effective as of the end of the month during
which his death occurs. Payment of the Employee's salary will cease at
the end of that month.
(b) DISABILITY. If the Employee, due to physical or mental
illness, shall be disabled so as to be unable to perform substantially
all of his services for a continuous period of three (3) months, either
the Employee or the Company may by notice terminate this Agreement
effective as of the last day of the calendar month during which such
notice is given, provided such termination shall not be effective until
after Employee is certified as disabled in accordance with the
certification procedure described below, if requested by either party.
Payment of the Employee's salary shall cease as of the date his
employment terminates under this provision. If any question shall arise
as to whether during any period the Employee was disabled so as to be
unable to perform the services required hereunder due to physical or
mental illness, the Employee may, and at the request of the Company
will, submit to the Company a certification in reasonable detail of a
physician selected by the Company as to whether the Employee was so
disabled. Nothing herein shall relieve the Company of its obligation to
pay the Employee disability benefits in accordance with the Company's
disability policy, if any.
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<PAGE> 5
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Employee's
employment hereunder may be terminated effective immediately by the
Company at any time for cause by written notice to the Employee. The
following acts or omissions by the Employee shall constitute "cause"
for such termination: (i) dishonesty or misconduct by the Employee,
whether or not in relation to the business of the Company, which is
detrimental to the interests of the Company; (ii) insubordination or
disloyalty to the Company or any of its officers; (iii) gross
negligence or breach of fiduciary duty to the Company; (iv) criticism
of the Company or its officers to other employees of the Company or to
outsiders, provided that the Employee is entitled to privately express
disagreements or reservations to George P. Ahearn and William Eckman;
(v) failure to timely submit the reports required under Paragraph 6 of
the Agreement; and (vi) failure by the Employee to fulfill his
obligations under this Agreement, including, but not limited to, the
obligations set forth in Paragraph 6 of this Agreement. In the event of
termination of the Employee's employment for cause hereunder, the
Employee agrees that he shall thereby forfeit: (A) all rights granted
to him under any bonus or deferred compensation arrangement of the
Company then existing in which he participates, if any, to the extent
permitted by law, and (B) his Annual Compensation, including Base
Salary and fringe benefits for the effective date of such termination,
to the extent permitted by law, and all Incentive Compensation,
including any Management Incentive Compensation bonus, regardless of
when accrued or payable.
9. CONFLICTING AGREEMENTS. The Employee represents, warrants and agrees
that (a) the execution of this Agreement and the performance of his duties and
obligations hereunder will not breach or be in conflict with any other agreement
to which he is a party and by which he is bound; (b) except as set forth on
Exhibit D, he has not heretofore entered into any written employment,
noncompetition, confidentiality or similar agreement; (c) except as set forth on
Exhibit C, he is not now subject to any covenants against competition or similar
covenants which would affect the performance of his duties hereunder; (d) he has
not made and will not make any agreements in conflict with this Agreement; and
(e) he will not disclose to the Company, or use for the Company's benefit, any
trade secrets or confidential information that is the property of any other
party now or hereafter in his possession. Employee further represents and
warrants that the Agreements listed on Exhibit D will not materially interfere
with the Employee's performance of his duties hereunder.
10. SEVERABILITY. The parties agree that each provision contained in
this Agreement shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses herein. Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to scope, activity or subject so as to be unenforceable at all, such
provision or provisions shall be construed by the appropriate judicial body by
limiting and reducing it or them, so as to be enforceable to the extent
compatible with the applicable law.
11. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the heirs, executors, and administrators of the Employee, and to the
successors and assigns of the
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<PAGE> 6
Company. Neither the Company nor the Employees may assign this Agreement or any
interest therein by operation of law or otherwise, without the prior written
consent of the other party; provided, however, that the Company may, at its sole
election, assign its rights under the Agreement, in the event of a
reorganization, consolidation with or merger with or into any other business
entity, or a transfer of all or substantially all of its properties or assets to
another business entity, provided such other business entity agrees to accept
all of the rights and all of the obligations of the Company under this
Agreement.
12. CONSTRUCTION OF TERMS. The term "Agreement" when used in this
Agreement means this Agreement and all Schedules and Exhibits hereto, including
without limitation the Noncompetition and Proprietary Information Agreement
attached as Exhibit C.
13. NOTICES. All notices to be sent pursuant to this Agreement shall be
in writing and shall have been deemed to have been adequately given if delivered
in person, by telex or telecopy, or mailed by registered or certified mail,
postage prepaid.
If to the Company:
George P. Ahearn
GEO Specialty Chemicals
28601 Chagrin Blvd., #450
Cleveland, Ohio 44122
With a copy to:
Thompson Hine & Flory LLP
3900 Society Center
127 Public Square
Cleveland, Ohio 44114
Attn: Michael J. Frantz, Esq.
If to the Employee:
Dennis S. Grandle
12107 Maple Rock
Houston, TX 77077
or to such other address as any party may from time to time designate for itself
by notice in writing given to the other party hereto.
14. WAIVERS. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed to be a
continuing waiver unless specifically stated therein.
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<PAGE> 7
15. ENTIRE AGREEMENT. This Agreement, together with all Schedules and
Exhibits hereto, constitutes the entire understanding of the parties hereto with
respect to the Employee's employment with the Company. This Agreement supersedes
any prior agreement or arrangement concerning the Employer's employment with the
Company. No modifications of any provisions of this Agreement shall be made
unless made in writing and signed by the parties hereto.
16. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Ohio.
17. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18. CONFIDENTIALITY. The terms of this Agreement are confidential and
shall not be disclosed by the Employee to any third party except for his wife,
his accountant, and his attorney. Each of such persons to whom the Employee
discloses the terms of this Agreement shall be advised by the Employee to
maintain the confidentiality of same.
19. HEADINGS. The headings of sections and paragraphs herein are
included solely for convenience of reference and shall not effect the meaning or
construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto, or their duly authorized
representatives, have signed, sealed and delivered this Agreement effective as
of the day and year first above written.
GEO SPECIALTY CHEMICALS
By: /s/ George P. Ahearn
------------------------------
DENNIS S. GRANDLE
/s/ Dennis S. Grandle
---------------------------------
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<PAGE> 1
Exhibit 10.8
SUPPLY AGREEMENT
(SUPPLY TO BUYER)
This AGREEMENT, made and entered into this 25th day of March, 1997, by
and between HENKEL CORPORATION, a Delaware corporation ("HENKEL") and Geo
Specialty Chemicals, Inc., an Ohio corporation ("COMPANY");
W I T N E S S E T H :
WHEREAS, HENKEL and COMPANY have executed and delivered an Asset Sale
and Purchase Agreement dated February 10, 1997 (the "Asset Sale and Purchase
Agreement") pursuant to which COMPANY is acquiring certain of the assets of the
Business (as such term is defined in the Asset Sale and Purchase Agreement); and
WHEREAS, prior to the Closing Date (as defined in the Asset Sale and
Purchase Agreement), the Business obtained certain products for use in
connection with the Business from other HENKEL plants and businesses which are
not part of the Business; and
WHEREAS, COMPANY desires to continue to obtain the Business'
requirements of such products from HENKEL and HENKEL desires to provide the
Business' requirements for such products on the terms set forth herein.
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants, agreements and conditions contained herein and in the
Asset Sale and Purchase Agreement, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used herein without definition have
the meanings assigned to them in the Asset Sale and Purchase Agreement.
"Products" means those products supplied to the Business by other
HENKEL businesses prior to the Closing Date, namely:
(i) products for use as raw materials or intermediates in the
manufacture of products by the Business, which products will be sold by HENKEL
to COMPANY at market prices ("Henkel Products"). A complete listing of Henkel
Products is attached as Schedule I to this Agreement; and
(ii)products made for the Business at HENKEL's Charlotte,
North Carolina, Mauldin, South Carolina and Lock Haven, Pennsylvania and other
facilities, which products will be sold by HENKEL at prices set forth on
Schedule II on a cost basis ("Toll Products"). A complete listing of Toll
Products is attached as Schedule II to this Agreement.
<PAGE> 2
2. SUPPLY OF PRODUCTS.
(a) During the term of this Agreement, COMPANY shall purchase from
HENKEL and HENKEL shall supply to COMPANY the Business' requirements for Henkel
Products.
(b) During the term of this Agreement, COMPANY shall take and
HENKEL shall manufacture and package the Business' requirements for Toll
Products listed on Schedule II. COMPANY shall pay HENKEL a manufacturing fee as
set forth in Schedule II for Toll Products produced and delivered to COMPANY
pursuant to this Agreement.
(c) (i) From time to time during the term of this Agreement,
COMPANY will issue orders for Products setting forth specific Products and
quantities of each and indicating the shipping designations and desired delivery
dates. COMPANY shall issue orders in advance of desired delivery dates
consistent with the past practice of the Business.
(ii) HENKEL shall provide certificates of analysis for all
manufactured Toll Products.
(iii) The manufacture and transfer of Products to COMPANY
shall be subject to the terms and conditions of sale attached hereto as Schedule
III (which terms and conditions have been modified to delete Article 2, Article
3, Article 13, Article 14, Article 15 and Article 16 and to change the time
period in Article 7 by which claims may be made to thirty (30) days). In the
event that there are any inconsistencies between the terms of this Agreement and
the terms on Schedule III, the terms of this Agreement shall govern.
(d) Products shall be manufactured and packaged in accordance with
the specification for Products used by HENKEL immediately prior to the Closing
Date.
(e) During the first year of this Agreement, HENKEL shall have no
obligation to sell or manufacture more than One Hundred Ten Percent (110%) of
the annual volume of each class of Product set forth on Schedule IV. Thereafter,
HENKEL shall have no obligation to sell or manufacture more than One Hundred Ten
Percent (110%) of the amount of each class of Product that was sold or
manufactured during the previous year. In the event that HENKEL agrees to sell
or manufacture quantities of Product in excess of the aforesaid quantities, the
purchase price or manufacturing fee for such Product shall be as mutually agreed
in writing.
(f) For purposes of calculating volumes, to the extent that any
Toll Product or Henkel Product is modified slightly to create a new, but closely
related product, it shall be considered to be the Product that was modified. It
shall also be considered to be the Product that was modified for purposes of
pricing unless HENKEL can document that the cost of manufacturing the new
Product is greater than the cost of manufacturing the original Product.
2
<PAGE> 3
(g) The manufacturing fee for Toll Products may be adjusted on the
first day of each calendar quarter but only upon thirty (30) days prior written
notice to COMPANY and only to the extent of an actual, documented change in the
purchase price of raw materials used to produce the Product. The overhead cost
of producing Toll Products may be increased on the first day of each calendar
year upon thirty (30) days advance written notice but only to reflect an
increase in labor costs and energy costs, which increase shall be determined as
follows: The overhead shall be increased by ten percent (10%) of the annual
increase in the energy component of the Producer Price Index for Finished Goods,
as reported for the month of October by the Department of Labor and by ninety
percent (90%) of the annual increase in the Employment Cost Index (Total
Compensation) as reported for the third quarter by the Department of Labor. For
example, if the overhead cost for a product is Ten Cents ($.10) and the energy
component of the Producer Price Index for Finished Goods increases by three
percent (3%) as compared to the previous October and the Employment Cost Index
(Total Compensation) increases by four percent (4%) as compared to the previous
third quarter, the increase in the overhead cost will be calculated as follows:
10% x 3% x $.10 + 90% x 4% x $.10 = $.0003 + $.0036 = an increase of $.0039.
Therefore, the new overhead cost would be $.1039.
(h) The price of Henkel Products may be adjusted on the first day
of each calendar quarter upon twenty (20) days written notice to COMPANY.
(i) Payment for Product shall be made within thirty (30) days of
the date of shipment.
(j) Each Monday during the term of this Agreement, COMPANY shall
provide a forecast of its requirement for Products for the following four (4)
weeks.
3. ASSIGNMENT.
This Agreement may not be assigned by either party without the
prior written consent of the other party; PROVIDED, HOWEVER, that this Agreement
shall be assignable by either party without prior written consent to an
Affiliate or to a purchaser of substantially all of the assets of the business
or manufacturing plant to which this Agreement relates.
4. INTELLECTUAL PROPERTY.
Nothing contained herein shall grant, or be construed to grant,
COMPANY any rights or licenses in the technology or patents relating to Henkel
Products supplied hereunder or in the trademarks under which such Products are
supplied.
5. TERM AND TERMINATION; DEFAULT.
This Agreement shall remain in effect for an initial term of five
(5) years with respect to Henkel Products and three (3) years with respect to
Toll Products beginning on the Closing Date. Thereafter, this Agreement shall be
automatically renewed for successive one-year periods, unless
3
<PAGE> 4
either party provides prior written notice, at least one-year in advance, of its
intent to terminate this Agreement at the end of the initial term or at any time
thereafter.
Any such termination of this Agreement shall be without prejudice
to any other remedies which either party may have against the other arising out
of such breach or default and shall not affect any rights or obligations of
either party arising under this Agreement prior to such termination. In the
event of termination by COMPANY, COMPANY shall pay the manufacturing fee for all
Toll Products ordered, processed, packaged and available for shipment prior to
the effective date of termination and shall reimburse HENKEL for all unused raw
materials for Toll Products.
This Agreement and any rights granted hereunder may be terminated as
follows:
(i) in whole or in part by the mutual written consent of the
parties hereto;
(ii) By either party by written notice to the other party upon any
material breach or default of any provision or obligation of this Agreement,
including without limitation a material breach of the representations,
warranties or covenants set forth herein, and failure to cure such breach or
default within sixty (60) days after notice thereof; or
(iii) upon termination of the Supply Agreement of even date
between the parties, relating to the supply of products by COMPANY to HENKEL, at
the election of the non-terminating party.
6. CONFIDENTIALITY AND VERIFICATION. The parties shall use reasonable
efforts to maintain the confidentiality of any proprietary or confidential
information provided by either party in connection with this Agreement. Each
party hereto shall provide the other party with reasonable access to its books
and records to permit verification of each party's compliance with the terms of
this Agreement
7. MISCELLANEOUS. This Agreement is a complete and exclusive statement
of the terms of this Agreement between the parties with respect to the subject
matter hereof and may not be changed, terminated, modified or waived except by
an instrument in writing executed by both parties hereto. This Agreement may be
executed in counterparts, each of which shall be considered an original, but all
of which together shall constitute the same instrument. No waiver by COMPANY or
HENKEL of any breach of or default under this Agreement shall constitute a
wavier of any subsequent breach or default. The parties hereby acknowledge that
HENKEL is acting solely in the capacity as an independent contractor and nothing
in this Agreement shall be construed to constitute HENKEL as an agent of
COMPANY. This Agreement shall be binding and inure to the benefit of the parties
hereto and their respective successors and assigns.
8. NOTICES. Any notice or other communication given under this
Agreement shall be in writing and shall be (i) delivered personally; (ii) sent
by documented overnight delivery service; (iii) sent by facsimile transmission,
provided that a confirmation copy thereof is sent no later than the business day
following the day of such transmission by documented overnight delivery service
or
4
<PAGE> 5
first class mail, postage prepaid; or (iv) sent by first class mail, postage
prepaid. Such notice shall be deemed to have been duly given (i) on the date of
delivery, if delivered personally; (ii) on the business day after dispatch by
documented overnight delivery service, if sent in such manner; (iii) on the date
of facsimile transmission, if so transmitted; or (iv) on the fifth business day
after sent by first-class mail, postage prepaid, if sent in such manner. Notices
or other communications shall be directed to the following addresses:
Notices to Seller:
Henkel Corporation
2200 Renaissance Boulevard
Suite 200, The Triad
Gulph Mills, Pennsylvania 19406
Attention: Monika Krug, Vice President
with a copy to:
Henkel Corporation
2200 Renaissance Boulevard
Suite 200, The Triad
Gulph Mills, Pennsylvania 19406
Attention: Ernest G. Szoke, Vice President
Notices to Buyer:
Geo Specialty Chemicals, Inc.
28601 Chagrin Boulevard
Suite 450
Cleveland, Ohio 44122
Attention: George P. Ahearn
5
<PAGE> 6
with a copy to:
Thompson Hine & Flory L.L.P.
3900 Key Tower
129 Public Square
Cleveland, Ohio 44114
Attention: Craig R. Martahus
Either party may, by notice given in accordance with this Section 8, specify a
new address for notices under this Agreement.
9. GOVERNING LAW. The parties hereto agree that all of the provisions
of this Agreement and any questions concerning its interpretation and
enforcement shall be governed by the laws of the State of Delaware.
10. FORCE MAJEURE. Neither party shall be responsible for suspension of
its performance under this Agreement if such suspension is caused by shortage of
raw materials, fire, flood, labor trouble, strikes, riots, acts of God or
compliance with rules or regulations or any governmental authority, or by
compliance with any order or decision of any court, board or other governmental
authority or by any cause beyond the reasonable control of such party. The party
claiming the benefit of this Section shall promptly give verbal notification,
promptly confirmed in writing, to the other party of the nature and extent of
the matter causing the delay and estimated duration of the suspension period.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, thereunto duly authorized, as of the
date and year first above written.
HENKEL CORPORATION GEO SPECIALTY CHEMICALS, INC.
By: /s/ Monika Krug By: /s/ George P. Ahearn
--------------------------------- --------------------------------
Monika Krug, Vice President George P. Ahearn, President
6
<PAGE> 1
Exhibit 10.9
SUPPLY AGREEMENT
(SUPPLY TO HENKEL )
This AGREEMENT, made and entered into this 25th day of March,
1997, by and between HENKEL CORPORATION, a Delaware corporation ("HENKEL") and
GEO SPECIALTY CHEMICALS, INC., an Ohio corporation ("COMPANY");
W I T N E S S E T H :
WHEREAS, HENKEL and COMPANY have executed and delivered an Asset Sale
and Purchase Agreement dated February 10, 1997 (the "Asset Sale and Purchase
Agreement") pursuant to which COMPANY is acquiring certain of the assets of the
Business (as such term is defined in the Asset Sale and Purchase Agreement); and
WHEREAS, prior to the Closing Date (as defined in the Asset Sale and
Purchase Agreement), plants acquired by COMPANY with the Business manufactured
certain products for other HENKEL businesses; and
WHEREAS, HENKEL desires to continue to obtain HENKEL's requirements of
such products from COMPANY and COMPANY desires to provide HENKEL's requirements
for such products on the terms set forth herein.
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants, agreements and conditions contained herein and in the
Asset Sale and Purchase Agreement, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used herein without definition have
the meanings assigned to them in the Asset Sale and Purchase Agreement.
"Products" means those products supplied by the Business to other
HENKEL businesses prior to the Closing Date, a complete listing of which is
attached as Schedule I to this Agreement.
2. SUPPLY OF PRODUCTS.
(a) During the term of this Agreement, HENKEL shall purchase from
COMPANY and COMPANY shall supply to HENKEL HENKEL's requirements for Products on
a cost basis at prices set forth in Schedule I, subject to the terms and
conditions of sale, attached hereto as Schedule II (which terms and conditions
have been modified to delete Article 2, Article 3, Article 13, Article 14,
Article 15 and Article 16 and to change the time period in Article 7 by which
claims may be made to thirty (30) days). In the event that there are any
inconsistencies between the terms of this Agreement and the terms of Schedule
II, the terms of this Agreement shall govern.
<PAGE> 2
(b) (i) from time to time during the term of this Agreement,
HENKEL will issue orders for Products setting forth specific Products and
quantities of each and indicating the shipping designations and desired delivery
dates. HENKEL shall issue orders in advance of desired delivery dates consistent
with the past practice of the Business.
(ii) COMPANY shall provide certificates of analysis
for all manufactured Products.
(c) All Products shall be manufactured and packaged in
accordance with the specifications for such Products used by HENKEL immediately
prior to the Closing Date.
(d) During the first year of this Agreement, COMPANY shall
have no obligation to sell or manufacture more than One Hundred Ten Percent
(110%) of the annual volume of each class of Product set forth on Schedule III.
Thereafter, COMPANY shall have no obligation to sell or manufacture more than
One Hundred Ten Percent (110%) of the amount of each class of Product that was
sold or manufactured during the previous year. In the event that COMPANY agrees
to a request to sell or manufacture quantities of Product in excess of the
aforesaid quantities, the sales price for such Product shall be as mutually
agreed in writing.
(e) For purposes of calculating volumes, to the extent that
any Product is modified slightly to create a new, but closely related product,
it shall be considered to be the Product that was modified. It shall also be
considered to be the Product that was modified for purposes of pricing unless
COMPANY can document that the cost of manufacturing the new Product is greater
than the cost of the manufacturing the original Product.
(f) The price of Products may be adjusted on the first day of
each calendar quarter upon thirty (30) days prior written notice to HENKEL, but
only to the extent of an actual, documented change in the purchase price of raw
materials used to produce the Product. The overhead cost of producing Products
may be increased on the first day of each calendar year upon thirty (30) days
advance written notice but only to reflect an increase in labor costs and energy
costs, which increase shall be determined as follows: The overhead shall be
increased by ten percent (10%) of the annual increase in the energy component of
the Producer Price Index for Finished Goods, as reported for the month of
October by the Department of Labor and by ninety percent (90%) of the annual
increase in the Employment Cost Index (Total Compensation) as reported for the
third quarter by the Department of Labor. For example, if the overhead cost for
a product is Ten Cents ($.10) and the energy component of the Producer Price
Index for Finished Goods increases by three percent (3%) as compared to the
previous October and the Employment Cost Index (Total Compensation) increases by
four percent (4%) as compared to the previous third quarter, the increase in the
overhead cost will be calculated as follows: 10% x 3% x $.10 + 90% x 4% x $.10 =
$.0003 + $.0036 = an increase of $.0039. Therefore, the new overhead cost would
be $.1039.
(g) Payment for Product shall be made within thirty (30) days
of the date of shipment.
(h) Each Monday during the term of this Agreement, HENKEL
shall provide a forecast of its requirement for Products for the following four
(4) weeks.
2
<PAGE> 3
3. ASSIGNMENT.
This Agreement may not be assigned by either party without the
prior written consent of the other party; PROVIDED, HOWEVER, that this Agreement
shall be assignable by either party without prior written consent to an
Affiliate or to a purchaser of substantially all of the assets of the business
or manufacturing plant to which this Agreement relates and PROVIDED, FURTHER,
that COMPANY may grant a security interest in its rights hereunder to one or
more of its lenders.
4. TERM AND TERMINATION; DEFAULT.
This Agreement shall remain in effect for an initial term of
five (5) years with respect to Naphthalene-based Products (i.e. Lomar and Spray
Drys ) and Calcium Stearate products and three (3) years with respect to all
other Products beginning on the Closing Date. Thereafter, this Agreement shall
be automatically renewed for successive one-year periods, unless either party
provides prior written notice, at least one-year in advance, of its intent to
terminate this Agreement at the end of the initial term or at any time
thereafter.
Any such termination of this Agreement shall be without
prejudice to any other remedies which either party may have against the other
arising out of such breach or default and shall not affect any rights or
obligations of either party arising under this Agreement prior to such
termination. In the event of termination by HENKEL, HENKEL shall pay for all
Products ordered, processed, packaged and available for shipment prior to the
effective date of termination.
This Agreement and any rights granted hereunder may be terminated as
follows:
(i) in whole or in part by the mutual written consent of
the parties hereto;
(ii) By either party by written notice to the other party upon
any material breach or default of any provision or obligation of this Agreement,
including without limitation a material breach of the representations,
warranties or covenants set forth herein, and failure to cure such breach or
default within sixty (60) days after notice thereof; or
(iii) upon termination of the Supply Agreement of even date
between the parties, relating to the supply of products by HENKEL to COMPANY, at
the election of the non-terminating party.
5. CONFIDENTIALITY AND VERIFICATION. The parties shall use reasonable
efforts to maintain the confidentiality of any proprietary or confidential
information provided by either party in connection with this Agreement. Each
party hereto shall provide the other party with reasonable access to its books
and records to permit verification of each party's compliance with the terms of
this Agreement.
6. MISCELLANEOUS. This Agreement is a complete and exclusive statement
of the terms of this Agreement between the parties with respect to the subject
matter hereof and may not be changed, terminated, modified or waived except by
an instrument in writing executed by both parties hereto.
3
<PAGE> 4
This Agreement may be executed in counterparts, each of which shall be
considered an original, but all of which together shall constitute the same
instrument. No waiver by COMPANY or HENKEL of any breach of or default under
this Agreement shall constitute a wavier of any subsequent breach or default.
The parties hereby acknowledge that COMPANY is acting solely in the capacity as
an independent contractor and nothing in this Agreement shall be construed to
constitute COMPANY as an agent of HENKEL. This Agreement shall be binding and
inure to the benefit of the parties hereto and their respective successors and
assigns.
7. NOTICES. Any notice or other communication given under this
Agreement shall be in writing and shall be (i) delivered personally; (ii) sent
by documented overnight delivery service; (iii) sent by facsimile transmission,
provided that a confirmation copy thereof is sent no later than the business day
following the day of such transmission by documented overnight delivery service
or first class mail, postage prepaid; or (iv) sent by first class mail, postage
prepaid. Such notice shall be deemed to have been duly given (i) on the date of
delivery, if delivered personally; (ii) on the business day after dispatch by
documented overnight delivery service, if sent in such manner; (iii) on the date
of facsimile transmission, if so transmitted; or (iv) on the fifth business day
after sent by first-class mail, postage prepaid, if sent in such manner. Notices
or other communications shall be directed to the following addresses:
Notices to Seller:
Henkel Corporation
2200 Renaissance Boulevard
Suite 200, The Triad
Gulph Mills, Pennsylvania 19406
Attention: Monika Krug, Vice President
with a copy to:
Henkel Corporation
2200 Renaissance Boulevard
Suite 200, The Triad
Gulph Mills, Pennsylvania 19406
Attention: Ernest G. Szoke, Vice President
Notices to Buyer:
Geo Specialty Chemicals, Inc.
28601 Chagrin Boulevard
Suite 450
Cleveland, Ohio 44122
Attention: George P. Ahearn
with a copy to:
4
<PAGE> 5
Thompson Hine & Flory L.L.P.
3900 Key Tower
129 Public Square
Cleveland, Ohio 44114
Attention: Craig R. Martahus
Either party may, by notice given in accordance with this Section 7, specify a
new address for notices under this Agreement.
8. GOVERNING LAW. The parties hereto agree that all of the provisions
of this Agreement and any questions concerning its interpretation and
enforcement shall be governed by the laws of the State of Delaware.
9. FORCE MAJEURE. Neither party shall be responsible for suspension of
its performance under this Agreement if such suspension is caused by shortage of
raw materials, fire, flood, labor trouble, strikes, riots, acts of God or
compliance with rules or regulations or any governmental authority, or by
compliance with any order or decision of any court, board or other governmental
authority or by any cause beyond the reasonable control of such party. The party
claiming the benefit of this Section shall promptly give verbal notification,
promptly confirmed in writing, to the other party of the nature and extent of
the matter causing the delay and estimated duration of the suspension period.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, thereunto duly authorized, as of the
date and year first above written.
HENKEL CORPORATION GEO SPECIALTY CHEMICALS, INC.
By: /s/ Monika Krug By: /s/ George P. Ahearn
------------------------------- --------------------------------
Monika Krug, Vice President George P. Ahearn, President
5
<PAGE> 1
EXHIBIT 10.10
GEO SPECIALTY CHEMICALS, INC.
$120,000,000
10 1/8% SENIOR SUBORDINATED NOTES DUE 2008
PURCHASE AGREEMENT
------------------
July 31, 1998
BT ALEX. BROWN INCORPORATED
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
GEO Specialty Chemicals, Inc., an Ohio corporation (the
"COMPANY"), hereby confirms its agreement with you (the "INITIAL PURCHASER"), as
set forth below.
1. THE SECURITIES. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchaser
$120,000,000 aggregate principal amount of its 10 1/8% Senior Subordinated Notes
due 2008, Series A (the "NOTES"). The Notes are to be issued under an indenture
(the "INDENTURE") to be dated as of July 31, 1998 by and between the Company and
Chase Manhattan Trust Company, National Association as Trustee (the "TRUSTEE").
The Notes are being offered in connection with the Company's
(i) repayment of indebtedness outstanding under its existing revolving bank loan
facility (the "EXISTING CREDIT FACILITY"), (ii) entering into a new credit
facility with the lenders party thereto in their capacities as lenders
thereunder and Bankers Trust Company, as administrative agent (the "NEW CREDIT
AGREEMENT") and (iii) acquisition (the "ACQUISITION") pursuant to the Asset
Purchase Agreement dated as of June 29, 1998 among the Company, Mallinckrodt
Inc., a Delaware corporation, and Mallinckrodt Inc., a Delaware Corporation (the
"ASSET PURCHASE AGREEMENT") of the Trimet Technical Products Division
("TRIMET").
The Notes will be offered and sold to the Initial Purchaser
without being registered under the Securities Act of 1933, as amended (the
"ACT"), in reliance on exemptions therefrom.
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<PAGE> 2
In connection with the sale of the Notes, the Company has
prepared a preliminary offering memorandum dated July 7, 1998 (the "PRELIMINARY
MEMORANDUM"), and a final offering memorandum dated July 28, 1998 (the "FINAL
MEMORANDUM"; the Preliminary Memorandum and the Final Memorandum each herein
being referred to as a "MEMORANDUM") setting forth or including a description of
the terms of the Notes, the terms of the offering of the Notes, a description of
the Company and any material developments relating to the Company occurring
after the date of the most recent historical financial statements included
therein.
The Initial Purchaser and its direct and indirect transferees
of the Notes will be entitled to the benefits of the Registration Rights
Agreement, substantially in the form attached hereto as EXHIBIT A (the
"REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company has agreed,
among other things, to file a registration statement (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "COMMISSION")
registering the Notes or the Exchange Notes (as defined in the Registration
Rights Agreement) under the Act.
2. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to and agrees with the Initial Purchaser that:
(a) Neither the Preliminary Memorandum as of the date thereof
nor the Final Memorandum nor any amendment or supplement thereto as of the date
thereof and at all times subsequent thereto up to the Closing Date (as defined
in Section 3 below) contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this Section 2(a) do not apply to statements or omissions made in reliance
upon and in conformity with information relating to the Initial Purchaser
furnished to the Company in writing by the Initial Purchaser expressly for use
in the Preliminary Memorandum, the Final Memorandum or any amendment or
supplement thereto.
(b) As of the Closing Date, the Company will have the
authorized, issued and outstanding capitalization set forth in the Final
Memorandum; all of the outstanding shares of capital stock of the Company have
been, and as of the Closing Date will be, duly authorized and validly issued,
are fully paid and nonassessable and were not issued in violation of any
preemptive or similar rights; all of the outstanding shares of capital stock of
the Company will be free and clear of all liens, encumbrances, equities and
claims or restrictions on transferability (other than those imposed by the Act
and the securities or "Blue Sky" laws of certain jurisdictions) or voting;
except as set forth in
-2-
<PAGE> 3
the Final Memorandum, there are no (i) options, warrants or other rights to
purchase, (ii) agreements or other obligations to issue or (iii) other rights to
convert any obligation into, or exchange any securities for, shares of capital
stock of or ownership interests in the Company outstanding, other than pursuant
to certain amended and restated warrant agreements entered into by and between
the Company and Charter Oak Partners and GEO Chemicals, Ltd., respectively, and
an amended and restated shareholders agreement entered into by and between the
Company and each of the Company's shareholders (the "EQUITY AGREEMENTS"). The
Company does not own, directly or indirectly, any shares of capital stock or any
other equity or long-term debt securities or have any equity interest in any
firm, partnership, joint venture or other entity.
(c) The Company is duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own its properties and conduct its
business as now conducted and as described in the Final Memorandum; the Company
is duly qualified to do business as a foreign corporation in good standing in
all other jurisdictions where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the failure to
be so qualified would not, individually or in the aggregate, have a material
adverse effect on the general affairs, management, business, condition
(financial or otherwise), prospects or results of operations of the Company
(both before and after giving effect to the transactions contemplated hereby)
(any such event, a "MATERIAL ADVERSE EFFECT").
(d) The Company has all requisite corporate power and
authority to execute, deliver and perform each of its obligations under the
Notes, the Exchange Notes and the Private Exchange Notes (as defined in the
Registration Rights Agreement). The Notes, when issued, will be in the form
contemplated by the Indenture. The Notes, the Exchange Notes and the Private
Exchange Notes have each been duly and validly authorized by the Company and,
when executed by the Company and authenticated by the Trustee in accordance with
the provisions of the Indenture and, in the case of the Notes, when delivered to
and paid for by the Initial Purchaser in accordance with the terms of this
Agreement, will constitute valid and legally binding obligations of the Company,
entitled to the benefits of the Indenture, and enforceable against the Company
in accordance with their terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally,
and (ii) general principles of equity and the discretion of the court before
which any proceeding therefor may be brought.
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<PAGE> 4
(e) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Indenture.
The Indenture meets the requirements for qualification under the Trust Indenture
Act of 1939, as amended (the "TIA"). The Indenture has been duly and validly
authorized by the Company and, when executed and delivered by the Company
(assuming the due authorization, execution and delivery by the Trustee), will
constitute a valid and legally binding agreement of the Company, enforceable
against the Company in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought.
(f) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Registration
Rights Agreement. The Registration Rights Agreement has been duly and validly
authorized by the Company and, when executed and delivered by the Company
(assuming the due authorization and execution by the Initial Purchaser), will
constitute a valid and legally binding agreement of the Company enforceable
against the Company in accordance with its terms, except that (A) the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought and (B) any rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public policy considerations.
(g) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the Asset Purchase Agreement and to consummate the transactions contemplated
hereby and thereby. This Agreement and the Asset Purchase Agreement and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and validly authorized by the Company. This Agreement and the
Asset Purchase Agreement have been duly executed and delivered by the Company.
(h) No consent, approval, authorization or order of any court
or governmental agency or body, or third party is required for the issuance and
sale by the Company of the Notes to the Initial Purchaser or the consummation by
the Company of the other transactions contemplated hereby, except such as have
been obtained and such as may be required under state securities or "Blue Sky"
laws in connection with the purchase and resale of the Notes by the Initial
Purchaser. The Company is not (i) in
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<PAGE> 5
violation of its certificate of incorporation or bylaws, (ii) in breach or
violation of any statute, judgment, decree, order, rule or regulation applicable
to it or any of its properties or assets, except for any such breach or
violation which would not, individually or in the aggregate, have a Material
Adverse Effect, or (iii) in breach of or default under (nor has any event
occurred which, with notice or passage of time or both, would constitute a
default under) or in violation of any of the terms or provisions of any
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other agreement or
instrument to which it is a party or to which any of its properties or assets is
subject (collectively, "CONTRACTS"), except for any such breach, default,
violation or event which would not, individually or in the aggregate, have a
Material Adverse Effect.
(i) The execution, delivery and performance by the Company of
this Agreement, the Asset Purchase Agreement, the Indenture and the Registration
Rights Agreement and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
sale of the Notes to the Initial Purchaser) will not conflict with or constitute
or result in a breach of or a default under (or an event which with notice or
passage of time or both would constitute a default under) or violation of any of
(i) the terms or provisions of any Contract, except for any such conflict,
breach, violation, default or event which would not, individually or in the
aggregate, have a Material Adverse Effect, (ii) the certificate of incorporation
or bylaws (or similar organizational document) of the Company, or (iii)
(assuming compliance with all applicable state securities or "Blue Sky" laws and
assuming the accuracy of the representations and warranties of the Initial
Purchaser in Section 8 hereof) any statute, judgment, decree, order, rule or
regulation applicable to the Company or any of its properties or assets, except
for any such conflict, breach or violation which would not, individually or in
the aggregate, have a Material Adverse Effect.
(j) The audited financial statements of the Company and Trimet
included in the Final Memorandum present fairly in all material respects the
financial position, results of operations and cash flows of the Company and
Trimet, respectively, at the dates and for the periods to which they relate and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, except as otherwise stated therein. The summary
and selected financial and statistical data in the Final Memorandum present
fairly in all material respects the information shown therein and have been
prepared and compiled on a basis consistent with the audited financial
statements included therein, except as otherwise stated therein. Crowe Chizek
and Company LLP (the "INDEPENDENT
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<PAGE> 6
ACCOUNTANTS") is an independent public accounting firm within the meaning of the
Act and the rules and regulations promulgated thereunder.
(k) The pro forma financial statements (including the notes
thereto) and the other pro forma financial information included in the Final
Memorandum (i) comply as to form in all material respects with the applicable
requirements of Regulation S-X promulgated under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), (ii) have been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma financial
statements, and (iii) have been properly computed on the bases described
therein; the assumptions used in the preparation of the pro forma financial data
and other pro forma financial information included in the Final Memorandum are
reasonable and the adjustments used therein are appropriate to give effect to
the transactions or circumstances referred to therein.
(l) There is not pending or, to the knowledge of the Company,
threatened any action, suit, proceeding, inquiry or investigation to which the
Company or Trimet is a party, or to which any of their respective property or
assets are subject, before or brought by any court, arbitrator or governmental
agency or body which, if determined adversely to the Company or Trimet, would,
individually or in the aggregate, have a Material Adverse Effect or which seeks
to restrain, enjoin, prevent the consummation of or otherwise challenge the
issuance or sale of the Notes to be sold hereunder or the consummation of the
other transactions described in the Final Memorandum.
(m) Each of the Company and Trimet possesses all licenses,
permits, certificates, consents, orders, approvals and other authorizations
from, and has made all declarations and filings with, all federal, state, local
and other governmental authorities, all self-regulatory organizations and all
courts and other tribunals, presently required or necessary to own or lease, as
the case may be, and to operate its respective properties and to carry on its
respective business as now or proposed to be conducted as set forth in the Final
Memorandum ("PERMITS"), except where the failure to obtain such Permits would
not, individually or in the aggregate, have a Material Adverse Effect; each of
the Company and Trimet has fulfilled and performed all of its obligations with
respect to such Permits and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or results in
any other material impairment of the rights of the holder of any such Permit;
and none of the Company or Trimet has received any notice of any proceeding
relating to revocation or modification of any such Permit, except as described
in the Final Memorandum and
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<PAGE> 7
except where such revocation or modification would not, individually or in the
aggregate, have a Material Adverse Effect.
(n) Since the date of the most recent financial statements
appearing in the Final Memorandum, except as described therein, (i) none of the
Company or Trimet has incurred any liabilities or obligations, direct or
contingent, or entered into or agreed to enter into any transactions or
contracts (written or oral) not in the ordinary course of business which
liabilities, obligations, transactions or contracts would, individually or in
the aggregate, be material to the general affairs, management, business,
condition (financial or otherwise), prospects or results of operations of the
Company or Trimet, as the case may be, other than the execution of the Equity
Agreements, (ii) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock and (iii) there has not been any change in the capital
stock or long-term indebtedness of the Company.
(o) Each of the Company and Trimet has filed all necessary
federal, state and foreign income and franchise tax returns, except where the
failure to so file such returns would not, individually or in the aggregate,
have a Material Adverse Effect, and has paid all taxes shown as due thereon; and
other than tax deficiencies which the Company is contesting in good faith and
for which the Company has provided adequate reserves, there is no tax deficiency
that has been asserted against the Company that would have, individually or in
the aggregate, a Material Adverse Effect.
(p) The statistical and market-related data included in the
Final Memorandum are based on or derived from sources which the Company believes
to be reliable and accurate.
(q) None of the Company or any agent acting on its behalf has
taken or will take any action that might cause this Agreement or the sale of the
Notes to violate Regulation T, U or X of the Board of Governors of the Federal
Reserve System, in each case as in effect, or as the same may hereafter be in
effect, on the Closing Date.
(r) Each of the Company and Trimet has good and marketable
title to all real property and good title to all personal property described in
the Final Memorandum as being owned by it and good and marketable title to a
leasehold estate in the real and personal property described in the Final
Memorandum as being leased by it free and clear of all liens, charges,
encumbrances or restrictions, except as described in the Final Memorandum or to
the extent the failure to have such title or the existence of such liens,
charges, encumbrances or
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<PAGE> 8
restrictions would not, individually or in the aggregate, have a Material
Adverse Effect. All leases, contracts and agreements to which the Company or
Trimet is a party or by which it is bound are valid and enforceable against the
Company or Trimet, as the case may be, and, to the knowledge of the Company, are
valid and enforceable against the other party or parties thereto and are in full
force and effect with only such exceptions as would not, individually or in the
aggregate, have a Material Adverse Effect. Each of the Company and Trimet owns
or possesses adequate licenses or other rights to use all patents, trademarks,
service marks, trade names, copyrights and know-how necessary to conduct the
businesses now or proposed to be operated by it as described in the Final
Memorandum, and neither the Company nor Trimet has received any notice of
infringement of or conflict with (or knows of any such infringement of or
conflict with) asserted rights of others with respect to any patents,
trademarks, service marks, trade names, copyrights or know-how which, if such
assertion of infringement or conflict were sustained, would have a Material
Adverse Effect.
(s) There are no legal or governmental proceedings involving
or affecting the Company or Trimet or any of their respective properties or
assets which would be required to be described in a prospectus pursuant to the
Act that are not described in the Final Memorandum, nor are there any material
contracts or other documents which would be required to be described in a
prospectus pursuant to the Act that are not described in the Final Memorandum.
(t) Except as described in the Final Memorandum or as would
not, individually or in the aggregate, have a Material Adverse Effect (A) each
of the Company and Trimet is in compliance with and not subject to liability
under applicable Environmental Laws (as defined below), (B) each of the Company
and Trimet has made all filings and provided all notices required under any
applicable Environmental Law, and has and is in compliance with all Permits
required under any applicable Environmental Laws and each of them is in full
force and effect, (C) there is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter or request for information pending or, to the knowledge
of the Company, threatened against the Company or Trimet under any Environmental
Law, (D) no lien, charge, encumbrance or restriction has been recorded under any
Environmental Law with respect to any assets, facility or property owned,
operated, leased or controlled by the Company or Trimet, (E) neither the Company
nor Trimet has received notice that it has been identified as a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA") or any comparable state law,
(F) no property or facility of the Company or Trimet
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<PAGE> 9
is (i) listed or proposed for listing on the National Priorities List under
CERCLA or is (ii) listed in the Comprehensive Environmental Response,
Compensation, Liability Information System List promulgated pursuant to CERCLA,
or on any comparable list maintained by any state or local governmental
authority.
For purposes of this Agreement, "Environmental Laws" means the
common law and all applicable federal, state and local laws or regulations,
codes, orders, decrees, judgments or injunctions issued, promulgated, approved
or entered thereunder, relating to pollution or protection of public or employee
health and safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened releases of
hazardous materials into the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transport or handling of hazardous materials, and (iii) underground
and above ground storage tanks and related piping, and emissions, discharges,
releases or threatened releases therefrom.
(u) There is no strike, labor dispute, slowdown or work
stoppage with the employees of the Company or Trimet which is pending or, to the
knowledge of the Company, threatened.
(v) Each of the Company and Trimet carries insurance in such
amounts and covering such risks as is adequate for the conduct of its business
and the value of its properties.
(w) Neither the Company nor Trimet has any liability for any
prohibited transaction or funding deficiency or any complete or partial
withdrawal liability with respect to any pension, profit sharing or other plan
which is subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), to which the Company or Trimet makes or ever has made a
contribution and in which any employee of the Company or Trimet is or has ever
been a participant. With respect to such plans, each of the Company and Trimet
is in compliance in all material respects with all applicable provisions of
ERISA.
(x) The Company (i) makes and keeps accurate books and records
and (ii) maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with management's
authorization, (B) transactions are recorded as necessary to permit preparation
of its financial statements and to maintain accountability for its assets, (C)
access to its assets is permitted only in accordance with management's
authorization and (D) the reported accountability for its assets is compared
with existing assets at reasonable intervals.
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<PAGE> 10
(y) The Company will not be an "investment company" or
"promoter" or "principal underwriter" for an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
(z) The Notes, the Indenture and the Registration Rights
Agreement will conform in all material respects to the descriptions thereof in
the Final Memorandum.
(aa) No holder of securities of the Company will be entitled
to have such securities registered under the registration statements required to
be filed by the Company pursuant to the Registration Rights Agreement other than
as expressly permitted thereby.
(bb) Immediately after the consummation of the transactions
contemplated by this Agreement, the fair value and present fair saleable value
of the assets of the Company will exceed the sum of its stated liabilities and
identified contingent liabilities; the Company is not, or will not be,
immediately after giving effect to the execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated hereby or
referred to herein, (a) left with unreasonably small capital with which to carry
on its business as it is proposed to be conducted, (b) unable to pay its debts
(contingent or otherwise) as they mature or (c) otherwise insolvent.
(cc) None of the Company or any of its Affiliates (as defined
in Rule 501(b) of Regulation D under the Act) has directly, or through any
agent, (i) sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any "security" (as defined in the Act) which is or
could be integrated with the sale of the Notes in a manner that would require
the registration under the Act of the Notes or (ii) engaged in any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Act) in connection with the offering of the Notes or in
any manner involving a public offering within the meaning of Section 4(2) of the
Act. Assuming the accuracy of the representations and warranties of the Initial
Purchaser in Section 8 hereof, it is not necessary in connection with the offer,
sale and delivery of the Notes to the Initial Purchaser in the manner
contemplated by this Agreement to register any of the Notes under the Act or to
qualify the Indenture under the TIA.
(dd) No securities of the Company are of the same class
(within the meaning of Rule 144A under the Act) as the Notes and listed on a
national securities exchange registered under Section 6 of the Exchange Act, or
quoted in a U.S. automated inter-dealer quotation system.
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<PAGE> 11
(ee) The Company has not taken, nor will it take, directly or
indirectly, any action designed to, or that might be reasonably expected to,
cause or result in stabilization or manipulation of the price of the Notes
(other than any stabilization transactions conducted by the Initial Purchaser as
disclosed in the Final Memorandum).
(ff) None of the Company, any of its Affiliates or any person
acting on its behalf (other than the Initial Purchaser) has engaged in any
directed selling efforts (as that term is defined in Regulation S under the Act
("Regulation S")) with respect to the Notes; the Company and its Affiliates and
any person acting on its behalf (other than the Initial Purchaser) have complied
with the offering restrictions requirement of Regulation S.
3. PURCHASE, SALE AND DELIVERY OF THE NOTES. On the basis of
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company at 97% of their principal amount, the Notes. One or
more certificates in definitive form for the Notes that the Initial Purchaser
has agreed to purchase hereunder, and in such denomination or denominations and
registered in such name or names as the Initial Purchaser requests upon written
notice to the Company at least 36 hours prior to the Closing Date, shall be
delivered by or on behalf of the Company to the Initial Purchaser, against
payment by or on behalf of the Initial Purchaser of the purchase price therefor
by wire transfer (same day funds), to such account or accounts as the Company
shall specify prior to the Closing Date, or by such means as the parties hereto
shall agree prior to the Closing Date. Such delivery of and payment for the
Notes shall be made at the offices of Cahill Gordon & Reindel, 80 Pine Street,
New York, New York at 10:00 A.M., New York time, on July 31, 1998, or at such
other place, time or date as the Initial Purchaser, on the one hand, and the
Company, on the other hand, may agree upon, such time and date of delivery
against payment being herein referred to as the "CLOSING DATE." The Company will
make such certificate or certificates for the Notes available for checking and
packaging by the Initial Purchaser at the offices of BT Alex. Brown Incorporated
in New York, New York, or at such other place as BT Alex. Brown Incorporated may
designate, at least 24 hours prior to the Closing Date.
4. OFFERING BY THE INITIAL PURCHASER. The Initial Purchaser
proposes to make an offering of the Notes at the price and upon the terms set
forth in the Final Memorandum, as soon as practicable after this Agreement is
entered into and as in the judgment of the Initial Purchaser is advisable.
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<PAGE> 12
5. COVENANTS OF THE COMPANY. The Company covenants and agrees
with the Initial Purchaser that:
(a) The Company will not amend or supplement the Final
Memorandum or any amendment or supplement thereto of which the Initial Purchaser
shall not previously have been advised and furnished a copy for a reasonable
period of time prior to the proposed amendment or supplement and as to which the
Initial Purchaser shall not have given its consent. The Company will promptly,
upon the reasonable request of the Initial Purchaser or counsel for the Initial
Purchaser, make any amendments or supplements to the Preliminary Memorandum or
the Final Memorandum that may be necessary or advisable in connection with the
resale of the Notes by the Initial Purchaser.
(b) The Company will cooperate with the Initial Purchaser in
arranging for the qualification of the Notes for offering and sale under the
securities or "Blue Sky" laws of which jurisdictions as the Initial Purchaser
may designate and will continue such qualifications in effect for as long as may
be necessary to complete the resale of the Notes; PROVIDED, HOWEVER, that in
connection therewith, the Company shall not be required to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction or subject itself to taxation in excess of a nominal dollar amount
in any such jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the
distribution by the Initial Purchaser of the Notes or the Private Exchange
Notes, any event occurs or information becomes known as a result of which the
Final Memorandum as then amended or supplemented would include any untrue
statement of a material fact, or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or if for any other reason it is necessary at any time to
amend or supplement the Final Memorandum to comply with applicable law, the
Company will promptly notify the Initial Purchaser thereof and will prepare, at
the expense of the Company, an amendment or supplement to the Final Memorandum
that corrects such statement or omission or effects such compliance.
(d) The Company will, without charge, provide to the Initial
Purchaser and to counsel for the Initial Purchaser as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or supplement
thereto as the Initial Purchaser may reasonably request.
(e) The Company will apply the net proceeds from the sale of
the Notes substantially as set forth under "Use of Proceeds" in the Final
Memorandum.
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<PAGE> 13
(f) For so long as any of the Notes remain outstanding, the
Company will furnish to the Initial Purchaser copies of all reports and other
communications (financial or otherwise) furnished by the Company to the Trustee
or to the holders of the Notes and, as soon as available, copies of any reports
or financial statements furnished to or filed by the Company with the Commission
or any national securities exchange on which any class of securities of the
Company may be listed.
(g) Prior to the Closing Date, the Company will furnish to the
Initial Purchaser, as soon as they have been prepared, a copy of any unaudited
interim financial statements of the Company or Trimet for any period subsequent
to the period covered by the most recent financial statements appearing in the
Final Memorandum.
(h) None of the Company or any of its Affiliates will sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale of
the Notes in a manner which would require the registration under the Act of the
Notes.
(i) The Company will not engage in any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) in connection with the offering of the Notes or in any manner
involving a public offering within the meaning of Section 4(2) of the Act.
(j) For so long as any of the Notes remain outstanding, the
Company will make available at its expense, upon request, to any holder of such
Notes and any prospective purchasers thereof the information specified in Rule
144A(d)(4) under the Act, unless the Company is then subject to Section 13 or
15(d) of the Exchange Act.
(k) The Company will use its best efforts to (i) permit the
Notes to be designated PORTAL securities in accordance with the rules and
regulations adopted by the NASD relating to trading in the Private Offerings,
Resales and Trading through Automated Linkages market (the "PORTAL MARKET") and
(ii) permit the Notes to be eligible for clearance and settlement through The
Depository Trust Company.
(l) In connection with Notes offered and sold in an offshore
transaction (as defined in Regulation S) the Company will not register any
transfer of such Notes not made in accordance with the provisions of Regulation
S and will not, except in accordance with the provisions of Regulation S, if
applicable, issue any such Notes in the form of definitive securities.
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<PAGE> 14
6. EXPENSES. The Company agrees to pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing, word processing or other production of documents
with respect to the transactions contemplated hereby, including any costs of
printing the Preliminary Memorandum and the Final Memorandum and any amendment
or supplement thereto, (ii) all arrangements relating to the delivery to the
Initial Purchaser of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Company, (iv) preparation (including printing), issuance and
delivery to the Initial Purchaser of the Notes, (v) the qualification of the
Notes under state securities and "Blue Sky" laws, and the preparation of a "Blue
Sky" memoranda, including filing fees and fees and disbursements of counsel for
the Initial Purchaser relating thereto, (vi) expenses in connection with any
meetings with prospective investors in the Notes, (vii) fees and expenses of the
Trustee, including fees and expenses of counsel, (viii) all expenses and listing
fees incurred in connection with the application for quotation of the Notes on
the PORTAL Market and (ix) any fees charged by investment rating agencies for
the rating of the Notes. If the sale of the Notes provided for herein is not
consummated because any condition to the obligations of the Initial Purchaser
set forth in Section 7 hereof is not satisfied, because this Agreement is
terminated or because of any failure, refusal or inability on the part of the
Company to perform all obligations and satisfy all conditions on their part to
be performed or satisfied hereunder (other than by reason of a default by the
Initial Purchaser of its obligations hereunder), the Company agrees to promptly
reimburse the Initial Purchaser for all reasonable out-of-pocket expenses
(including reasonable fees, disbursements and charges of Cahill Gordon &
Reindel, counsel for the Initial Purchaser), which shall be accompanied by such
supporting documentation as the Company may reasonably request, that shall have
been incurred by the Initial Purchaser in connection with the proposed purchase
and sale of the Notes.
7. CONDITIONS OF THE INITIAL PURCHASER'S OBLIGATIONS. The
obligation of the Initial Purchaser to purchase and pay for the Notes shall, in
its reasonable sole discretion, be subject to the satisfaction or waiver of the
following conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchaser shall have
received the opinion, dated as of the Closing Date and addressed to the Initial
Purchaser, subject to customary exceptions and qualifications, of Thompson Hine
& Flory, counsel
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<PAGE> 15
for the Company, in form and substance satisfactory to counsel for the Initial
Purchaser, to the effect that:
(i) The Company is duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has
all requisite corporate power and authority to own its properties and
to conduct its business as described in the Final Memorandum. The
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions where the ownership or leasing
of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect.
(ii) The Company has the authorized, issued and outstanding
capitalization set forth in the Final Memorandum; all of the
outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights.
(iii) Except as set forth in the Final Memorandum (A) no options,
warrants or other rights to purchase from the Company shares of capital
stock or ownership interests in the Company are outstanding, (B) no
agreements or other obligations to issue, or other rights to convert,
any obligation into, or exchange any securities for, shares of capital
stock or ownership interests in the Company are outstanding and (C) no
holder of securities of the Company is entitled to have such securities
registered under a registration statement filed by the Company pursuant
to the Registration Rights Agreement, other than pursuant to the Equity
Agreements.
(iv) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the
Indenture, the Notes, the Exchange Notes and the Private Exchange
Notes; the Indenture meets the requirements for qualification under the
TIA; the Indenture has been duly and validly authorized by the Company
and, when duly executed and delivered by the Company (assuming the due
authorization, execution and delivery thereof by the Trustee), will
constitute the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except
that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of
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<PAGE> 16
equity and the discretion of the court before which any proceeding
therefor may be brought.
(v) The Notes are in the form contemplated by the Indenture. The
Notes have each been duly and validly authorized by the Company and,
when duly executed and delivered by the Company and paid for by the
Initial Purchaser in accordance with the terms of this Agreement
(assuming the due authorization, execution and delivery of the
Indenture by the Trustee and due authentication and delivery of the
Notes by the Trustee in accordance with the Indenture), will constitute
the valid and legally binding obligations of the Company, entitled to
the benefits of the Indenture, and enforceable against the Company in
accordance with their terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought.
(vi) The Exchange Notes and the Private Exchange Notes have been
duly and validly authorized by the Company, and when the Exchange Notes
and the Private Exchange Notes have been duly executed and delivered by
the Company in accordance with the terms of the Registration Rights
Agreement and the Indenture (assuming the due authorization, execution
and delivery of the Indenture by the Trustee and due authentication and
delivery of the Exchange Notes and the Private Exchange Notes by the
Trustee in accordance with the Indenture), will constitute the valid
and legally binding obligations of the Company, entitled to the
benefits of the Indenture, and enforceable against the Company in
accordance with their terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought.
(vii) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Registration
Rights Agreement; the Registration Rights Agreement has been duly and
validly authorized by the Company and, when duly executed and delivered
by the Company (assuming due authorization, execution and delivery
thereof by the Initial Purchaser), will constitute the valid and
legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, except that (A) the enforcement
thereof may be subject to
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<PAGE> 17
(i) bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought and (B) any rights
to indemnity or contribution thereunder may be limited by federal and
state securities laws and public policy considerations.
(viii) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby; this Agreement
and the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by the Company. This
Agreement has been duly executed and delivered by the Company.
(ix) The Indenture, the Notes and the Registration Rights Agreement
conform in all material respects to the descriptions thereof contained
in the Final Memorandum.
(x) No legal or governmental proceedings are pending or, to the
knowledge of such counsel, threatened to which any of the Company is a
party or to which the property or assets of the Company is subject
which, if determined adversely to the Company, would result,
individually or in the aggregate, in a Material Adverse Effect, or
which seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Notes to be sold
hereunder or the consummation of the other transactions described in
the Final Memorandum under the caption "Use of Proceeds."
(xi) The Company is not (i) in violation of its certificate of
incorporation or bylaws (or similar organizational document), (ii) to
the knowledge such counsel, in breach or violation of any statute,
judgment, decree, order, rule or regulation applicable to it or any of
its properties or assets, except for any such breach or violation which
would not, individually or in the aggregate, have a Material Adverse
Effect, or (iii) in breach or default under (nor has any event occurred
which, with notice or passage of time or both, would constitute a
default under) or in violation of any of the terms or provisions of any
Contract known to such counsel, except for any such breach, default,
violation or event which would not, individually or in the aggregate,
have a Material Adverse Effect.
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(xii) The execution, delivery and performance of this Agreement, the
Asset Purchase Agreement, the Indenture, the Registration Rights
Agreement and the consummation of the transactions contemplated hereby
and thereby (including, without limitation, the issuance and sale of
the Notes to the Initial Purchaser) will not conflict with or
constitute or result in a breach or a default under (or an event which
with notice or passage of time or both would constitute a default
under) or violation of any of (i) to the knowledge of such counsel, the
terms or provisions of any Contract, except for any such conflict,
breach, violation, default or event which would not, individually or in
the aggregate, have a Material Adverse Effect, (ii) the certificate of
incorporation or bylaws (or similar organizational document) of the
Company, or (iii) (assuming compliance with all applicable state
securities or "Blue Sky" laws and assuming the accuracy of the
representations and warranties of the Initial Purchaser in Section 8
hereof) to the knowledge of such counsel, any statute, judgment,
decree, order, rule or regulation known to such counsel to be
applicable to the Company or any of its properties or assets, except
for any such conflict, breach or violation which would not,
individually or in the aggregate, have a Material Adverse Effect.
(xiii) No consent, approval, authorization or order of any
governmental authority is required for the issuance and sale by the
Company of the Notes to the Initial Purchaser or the consummation by
the Company of the other transactions contemplated hereby, except such
as may be required under Blue Sky laws, as to which such counsel need
express no opinion, and those which have previously been obtained.
(xiv) The Company has obtained all Permits necessary to conduct the
businesses now or proposed to be conducted by them as described in the
Final Memorandum, the lack of which would, individually or in the
aggregate, have a Material Adverse Effect; to the knowledge of such
counsel, the Company has fulfilled and performed all of its obligations
with respect to such Permits and no event has occurred which allows, or
after notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights of
the holder of any such Permit.
(xv) To such counsel's knowledge, the Company (a) owns or possesses
adequate licenses or other rights to use all patents, trademarks,
service marks, trade names, copyrights and know-how necessary to
conduct the businesses now or proposed to be operated by them as
described in the Final Memorandum, and (b) has not received any notice
of
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<PAGE> 19
infringement of or conflict with asserted rights of others with respect
to any patents, trademarks, service marks, trade names, copyrights or
know-how which, if such assertion of infringement or conflict were
sustained, would have a Material Adverse Effect.
(xvi) To the knowledge of such counsel, there are no legal or
governmental proceedings involving or affecting the Company or any of
its properties or assets which would be required to be described in a
prospectus pursuant to the Act that are not described in the Final
Memorandum, nor are there any material contracts or other documents
which would be required to be described in a prospectus pursuant to the
Act that are not described in the Final Memorandum.
(xvii) The Company is not, or immediately after the sale of the
Notes to be sold hereunder and the application of the proceeds from
such sale (as described in the Final Memorandum under the caption "Use
of Proceeds") will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(xviii) No registration under the Act of the Notes is required in
connection with the sale of the Notes to the Initial Purchaser as
contemplated by this Agreement and the Final Memorandum or in
connection with the initial resale of the Notes by the Initial
Purchaser in accordance with Section 8 of this Agreement, and prior to
the commencement of the Exchange Offer (as defined in the Registration
Rights Agreement) or the effectiveness of the Shelf Registration
Statement (as defined in the Registration Rights Agreement), the
Indenture is not required to be qualified under the TIA, in each case
assuming (i) (A) that the purchasers who buy such Notes in the initial
resale thereof are qualified institutional buyers as defined in Rule
144A promulgated under the Act ("QIBs") or accredited investors as
defined in Rule 501(a) (1), (2), (3) or (7) promulgated under the Act
("Accredited Investors") or (B) that the offer or sale of the Notes is
made in an offshore transaction as defined in Regulation S, (ii) the
accuracy of the Initial Purchaser's representations in Section 8 and
those of the Company contained in this Agreement regarding the absence
of a general solicitation in connection with the sale of such Notes to
the Initial Purchaser and the initial resale thereof and (iii) the due
performance by the Initial Purchaser of the agreements set forth in
Section 8 hereof.
(xix) Neither the consummation of the transactions contemplated by
this Agreement nor the sale, issuance, execution or delivery of the
Notes will violate
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Regulation T, U or X of the Board of Governors of the Federal Reserve
System.
At the time the foregoing opinion is delivered, Thompson Hine
& Flory shall additionally state that it has participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company, representatives of the Initial
Purchaser and counsel for the Initial Purchaser, at which conferences the
contents of the Final Memorandum and related matters were discussed, and,
although it has not independently verified and is not passing upon and assumes
no responsibility for the accuracy, completeness or fairness of the statements
contained in the Final Memorandum (except to the extent specified in subsection
7(a)(ix)), no facts have come to its attention which lead it to believe that the
Final Memorandum, on the date thereof or at the Closing Date, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading (it being
understood that such firm need express no opinion with respect to the financial
statements and related notes thereto and the other financial, statistical and
accounting data included in the Final Memorandum). The opinion of Thompson, Hine
& Flory described in this Section shall be rendered to the Initial Purchaser at
the request of the Company and shall so state therein.
References to the Final Memorandum in this subsection (a)
shall include any amendment or supplement thereto prepared in accordance with
the provisions of this Agreement at the Closing Date.
(b) On the Closing Date, the Initial Purchaser shall have
received the opinion, in form and substance satisfactory to the Initial
Purchaser, dated as of the Closing Date and addressed to the Initial Purchaser,
of Cahill Gordon & Reindel, counsel for the Initial Purchaser, with respect to
certain legal matters relating to this Agreement and such other related matters
as the Initial Purchaser may reasonably require. In rendering such opinion,
Cahill Gordon & Reindel shall have received and may rely upon such certificates
and other documents and information as it may reasonably request to pass upon
such matters.
(c) The Initial Purchaser shall have received from the
Independent Accountants a comfort letter or letters dated the date hereof and
the Closing Date, in form and substance reasonably satisfactory to counsel for
the Initial Purchaser.
(d) The representations and warranties of the Company
contained in this Agreement shall be true and correct in all
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material respects on and as of the date hereof and on and as of the Closing Date
as if made on and as of the Closing Date; the statements of the Company's
officers made pursuant to any certificate delivered in accordance with the
provisions hereof shall be true and correct in all material respects on and as
of the date made and on and as of the Closing Date; the Company shall have
performed all covenants and agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to the Closing Date; and,
except as described in the Final Memorandum (exclusive of any amendment or
supplement thereto after the date hereof), subsequent to the date of the most
recent financial statements in such Final Memorandum, there shall have been no
event or development, and no information shall have become known, that,
individually or in the aggregate, has or would be reasonably likely to have a
Material Adverse Effect.
(e) The sale of the Notes hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(f) Subsequent to the date of the most recent financial
statements in the Final Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), the Company shall not have sustained any loss or
interference with respect to its business or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by insurance, or
from any strike, labor dispute, slow down or work stoppage or from any legal or
governmental proceeding, order or decree, which loss or interference,
individually or in the aggregate, has or would be reasonably likely to have a
Material Adverse Effect.
(g) The Initial Purchaser shall have received a certificate of
the Company, dated the Closing Date, signed on behalf of the Company by its
Chairman of the Board, President or any Senior Vice President and the Chief
Financial Officer, to the effect that:
(i) The representations and warranties of the Company contained in
this Agreement are true and correct in all material respects on and as
of the date hereof and on and as of the Closing Date, and the Company
has performed all covenants and agreements and satisfied all conditions
on its part to be performed or satisfied hereunder at or prior to the
Closing Date;
(ii) At the Closing Date, since the date hereof or since the date of
the most recent financial statements in the Final Memorandum (exclusive
of any amendment or supplement thereto after the date hereof), no event
or development has occurred, and no information has become
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known, that, individually or in the aggregate, has or would be
reasonably likely to have a Material Adverse Effect; and
(iii) The sale of the Notes hereunder has not been enjoined
(temporarily or permanently).
(h) On or before the Closing Date, (i) the Acquisition shall
have been consummated, (ii) the Company shall have received an equity
contribution in the aggregate amount of $6.0 million from Charter Oak Partners,
its affiliates and management, and (iii) the New Credit Agreement shall have
been executed and delivered by the parties thereto, shall be in full force and
effect and in form and substance satisfactory to the Initial Purchaser.
(i) On the Closing Date, the Initial Purchaser shall have
received the Registration Rights Agreement executed by the Company and such
agreement shall be in full force and effect at all times from and after the
Closing Date.
On or before the Closing Date, the Initial Purchaser and
counsel for the Initial Purchaser shall have received such further documents,
opinions, certificates, letters and schedules or instruments relating to the
business, corporate, legal and financial affairs of the Company as they shall
have heretofore reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules
or instruments delivered pursuant to this Agreement will comply with the
provisions hereof only if they are reasonably satisfactory in all material
respects to the Initial Purchaser and counsel for the Initial Purchaser. The
Company shall furnish to the Initial Purchaser such conformed copies of such
documents, opinions, certificates, letters, schedules and instruments in such
quantities as the Initial Purchaser shall reasonably request.
8. OFFERING OF NOTES; RESTRICTIONS ON TRANSFER. (a) The
Initial Purchaser represents and warrants that it is a QIB. The Initial
Purchaser agrees with the Company that (i) it has not and will not solicit
offers for, or offer or sell, the Notes by any form of general solicitation or
general advertising (as those terms are used in Regulation D under the Act) or
in any manner involving a public offering within the meaning of Section 4(2) of
the Act; and (ii) it has and will solicit offers for the Notes only from, and
will offer the Notes only to (A) in the case of offers inside the United States,
persons whom the Initial Purchaser reasonably believes to be QIBs or, if any
such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
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the Initial Purchaser that each such account is a QIB, to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A, and, in
each case, in transactions under Rule 144A and (B) in the case of offers outside
the United States, to persons other than U.S. persons ("foreign purchasers,"
which term shall include dealers or other professional fiduciaries in the United
States acting on a discretionary basis for foreign beneficial owners (other than
an estate or trust)); PROVIDED, HOWEVER, that, in the case of this clause (B),
in purchasing such Notes such persons are deemed to have represented and agreed
as provided under the caption "Transfer Restrictions" contained in the Final
Memorandum (or, if the Final Memorandum is not in existence, in the most recent
Memorandum).
(b) The Initial Purchaser represents and warrants with respect
to offers and sales outside the United States that (i) it has and will comply
with all applicable laws and regulations in each jurisdiction in which it
acquires, offers, sells or delivers Notes or has in its possession or
distributes any Memorandum or any such other material, in all cases at its own
expense; (ii) the Notes have not been and will not be offered or sold within the
United States or to, or for the account or benefit of, U.S. persons except in
accordance with Regulation S under the Act or pursuant to an exemption from the
registration requirements of the Act; (iii) it has offered the Notes and will
offer and sell the Notes (A) as part of its distribution at any time and (B)
otherwise until 40 days after the later of the commencement of the offering and
the Closing Date, only in accordance with Rule 903 of Regulation S and,
accordingly, neither it nor any persons acting on its behalf have engaged or
will engage in any directed selling efforts (within the meaning of Regulation S)
with respect to the Notes, and any such persons have complied and will comply
with the offering restrictions requirement of Regulation S; and (iv) it agrees
that, at or prior to confirmation of sales of the Notes, it will have sent to
each distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Notes from it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under
the United States Securities Act of 1933 (the "Securities
Act") and may not be offered and sold within the United States
or to, or for the account or benefit of, U.S. persons (i) as
part of the distribution of the Securities at any time or (ii)
otherwise until 40 days after the later of the commencement of
the offering and the closing date of the
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offering, except in either case in accordance with Regulation
S (or Rule 144A if available) under the Securities Act. Terms
used above have the meaning given to them in Regulation S."
Terms used in this Section 8 and not defined in this Agreement
have the meanings given to them in Regulation S.
9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless the Initial Purchaser, and each person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which the Initial Purchaser or such controlling person may become
subject under the Act, the Exchange Act or otherwise, insofar as any such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon:
(i) any untrue statement or alleged untrue statement of any material
fact contained in any Memorandum or any amendment or supplement thereto
or any application or other document, or any amendment or supplement
thereto, executed by the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in
order to qualify the Notes under the securities or "Blue Sky" laws
thereof or filed with any securities association or securities exchange
(each an "Application"); or
(ii) the omission or alleged omission to state, in any Memorandum or
any amendment or supplement thereto or any Application, a material fact
required to be stated therein or necessary to make the statements
therein not misleading,
and will reimburse, as incurred, the Initial Purchaser and each such controlling
person for any reasonable legal or other expenses incurred by the Initial
Purchaser or such controlling person in connection with investigating, defending
against or appearing as a third-party witness in connection with any such loss,
claim, damage, liability or action; PROVIDED, HOWEVER, the Company will not be
liable in any such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in any Memorandum or any
amendment or supplement thereto or any Application in reliance upon and in
conformity with written information concerning the Initial Purchaser furnished
to the Company by the Initial Purchaser specifically for use therein.
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<PAGE> 25
This indemnity agreement will be in addition to any liability that the Company
may otherwise have to the indemnified parties. The Company shall not be liable
under this Section 9 for any settlement of any claim or action effected without
its prior written consent, which shall not be unreasonably withheld. The Initial
Purchaser shall not, without the prior written consent of the Company, effect
any settlement or compromise of any pending or threatened proceeding in respect
of which the Company is or could have been a party, or indemnity could have been
sought hereunder by the Company, unless such settlement (A) includes an
unconditional written release of the Company, in form and substance reasonably
satisfactory to the Company, from all liability on claims that are the subject
matter of such proceeding and (B) does not include any statement as to an
admission of fault, culpability or failure to act by or on behalf of the
Company.
(b) The Initial Purchaser agrees to indemnify and hold
harmless the Company, its directors, its officers and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act against any losses, claims, damages or liabilities to which
the Company or any such director, officer or controlling person may become
subject under the Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendment or supplement thereto
or any Application, or (ii) the omission or the alleged omission to state
therein a material fact required to be stated in any Memorandum or any amendment
or supplement thereto or any Application, or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
concerning the Initial Purchaser, furnished to the Company by the Initial
Purchaser specifically for use therein; and subject to the limitation set forth
immediately preceding this clause, will reimburse, as incurred, any legal or
other expenses incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity agreement will be
in addition to any liability that the Initial Purchaser may otherwise have to
the indemnified parties. The Initial Purchaser shall not be liable under this
Section 9 for any settlement of any claim or action effected without their
consent, which shall not be unreasonably withheld. The Company shall not,
without the prior written consent of the Initial Purchaser, effect any
settlement or
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compromise of any pending or threatened proceeding in respect of which the
Initial Purchaser is or could have been a party, or indemnity could have been
sought hereunder by the Initial Purchaser, unless such settlement (A) includes
an unconditional written release of the Initial Purchaser, in form and substance
reasonably satisfactory to the Initial Purchaser, from all liability on claims
that are the subject matter of such proceeding and (B) does not include any
statement as to an admission of fault, culpability or failure to act by or on
behalf of the Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action for which such indemnified
party is entitled to indemnification under this Section 9, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 9, notify the indemnifying party of the commencement
thereof in writing; but the omission to so notify the indemnifying party (i)
will not relieve it from any liability under paragraph (a) or (b) above unless
and to the extent such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraphs (a) and (b)
above. In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; PROVIDED, HOWEVER, that if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after receipt by the indemnifying party of notice of the institution of
such action, then, in each such case, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such
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indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the Initial Purchaser
in the case of paragraph (a) of this Section 9 or the Company in the case of
paragraph (b) of this Section 9, representing the indemnified parties under such
paragraph (a) or paragraph (b), as the case may be, who are parties to such
action or actions) or (ii) the indemnifying party has authorized in writing the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the prior written consent of the indemnifying party (which consent shall
not be unreasonably withheld), unless such indemnified party waived in writing
its rights under this Section 9, in which case the indemnified party may effect
such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided
for in the preceding paragraphs of this Section 9 is unavailable to, or
insufficient to hold harmless, an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Notes or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, not only such relative benefits but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
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actions in respect thereof). The relative benefits received by the Company on
the one hand and the Initial Purchaser on the other shall be deemed to be in the
same proportion as the total proceeds from the offering (before deducting
expenses) received by the Company bear to the total discounts and commissions
received by the Initial Purchaser. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand,
or the Initial Purchaser on the other, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission or alleged statement or omission, and any other equitable
considerations appropriate in the circumstances. The Company and the Initial
Purchaser agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), the Initial Purchaser
shall not be obligated to make contributions hereunder that in the aggregate
exceed the total discounts, commissions and other compensation received by the
Initial Purchaser under this Agreement, less the aggregate amount of any damages
that the Initial Purchaser has otherwise been required to pay by reason of the
untrue or alleged untrue statements or the omissions or alleged omissions to
state a material fact, and no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as the
Initial Purchaser, and each director of the Company, each officer of the Company
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Company.
10. SURVIVAL CLAUSE. The respective representations,
warranties, agreements, covenants, indemnities and other statements of the
Company, its officers and the Initial Purchaser set forth in this Agreement or
made by or on behalf of them pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Company, any of its officers or directors, the Initial Purchaser or any
controlling person referred to in Section 9 hereof and (ii) delivery of and
payment for the Notes. The respective agreements, covenants, indemnities and
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other statements set forth in Sections 6, 9 and 15 hereof shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement.
11. TERMINATION. (a) This Agreement may be terminated in the
reasonable sole discretion of the Initial Purchaser by written notice to the
Company, which notice shall specify the basis for termination, given prior to
the Closing Date in the event that the Company shall have failed, refused or
been unable to perform all obligations and satisfy all conditions on its part to
be performed or satisfied hereunder at or prior thereto or, if at or prior to
the Closing Date:
(i) the Company shall have sustained any loss or interference with
respect to its businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or
from any strike, labor dispute, slow down or work stoppage or any legal
or governmental proceeding, which loss or interference, in the sole
judgment of the Initial Purchaser, has had or has a Material Adverse
Effect, or there shall have been, in the sole judgment of the Initial
Purchaser, any event or development that, individually or in the
aggregate, has or could be reasonably likely to have a Material Adverse
Effect (including without limitation a change in control of the
Company), except in each case as described in the Final Memorandum
(exclusive of any amendment or supplement thereto);
(ii) trading in securities generally on the New York Stock Exchange,
American Stock Exchange or the NASDAQ National Market shall have been
suspended or minimum or maximum prices shall have been established on
any such exchange or market;
(iii) a banking moratorium shall have been declared by New York or
United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial
markets of the United States which, in the case of (A), (B) or (C)
above and in the reasonable sole judgment of the Initial Purchasers,
makes it impracticable or inadvisable to proceed with the offering or
the delivery of the Notes as contemplated by the Final Memorandum; or
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(v) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11
shall be without liability of any party to any other party except as provided in
Section 10 hereof.
12. INFORMATION SUPPLIED BY THE INITIAL PURCHASER. The
statements set forth in the last paragraph on the front cover page and in the
second and third sentences of the third paragraph under the heading "Private
Placement" in the Final Memorandum (to the extent such statements relate to the
Initial Purchaser) constitute the only information furnished by the Initial
Purchaser to the Company for the purposes of Sections 2(a) and 9 hereof.
13. NOTICES. All communications hereunder shall be in writing
and, if sent to the Initial Purchasers, shall be mailed or delivered to BT Alex.
Brown Incorporated, 130 Liberty Street, New York, New York 10006, Attention:
Corporate Finance Department; if sent to the Company, shall be mailed or
delivered to the Company at GEO Specialty Chemicals, Inc., 28601 Chagrin
Boulevard, Suite 210, Cleveland, Ohio 44122, Attention: Mr. George P. Ahearn;
with a copy to Thompson Hine & Flory LLP, 3900 Society Center, 127 Public
Square, Cleveland, Ohio 44114, Attention: Craig R. Martahus.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; and one
business day after being timely delivered to a next-day air courier.
14. SUCCESSORS. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchaser, the Company and their respective
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained; this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Company contained in Section 9 of this Agreement
-30-
<PAGE> 31
shall also be for the benefit of any person or persons who control the Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Initial Purchaser contained in
Section 9 of this Agreement shall also be for the benefit of the directors of
the Company, its officers and any person or persons who control the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act.
No purchaser of Notes from the Initial Purchaser will be deemed a successor
because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-31-
<PAGE> 32
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between the
Company and the Initial Purchaser.
Very truly yours,
GEO SPECIALTY CHEMICALS, INC.
By: /s/ William P. Eckman
--------------------------
Name: William P. Eckman
Title: Senior Vice President & C.F.O.
The foregoing Agreement is
hereby confirmed and accepted as of
the date first above written.
BT ALEX. BROWN INCORPORATED
By: /s/ Michael Apfel
--------------------------
Name: Michael Apfel
Title: Vice President
-32-
<PAGE> 1
Exhibit 10.11
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of July 31, 1998
Between
GEO SPECIALTY CHEMICALS, INC. as Issuer
and
BT ALEX. BROWN INCORPORATED as Initial Purchaser
================================================================================
$120,000,000
10 1/8% SENIOR SUBORDINATED NOTES DUE 2008
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
1. Definitions.....................................................................1
2. Exchange Offer..................................................................5
3. Shelf Registration..............................................................9
4. Additional Interest............................................................10
5. Registration Procedures........................................................12
6. Registration Expenses..........................................................23
7. Indemnification................................................................24
8. Rule 144 and 144A..............................................................28
9. Underwritten Registrations.....................................................29
10. Miscellaneous.................................................................29
(a) No Inconsistent Agreements .............................29
(b) Adjustments Affecting Registrable
Notes.................................................29
(c) Amendments and Waivers .................................29
(d) Notices ................................................30
(e) Successors and Assigns .................................31
(f) Counterparts ...........................................31
(g) Headings ...............................................31
(h) Governing Law ..........................................32
(i) Severability ...........................................32
(j) Notes Held by the Issuer or its
Affiliates.............................................32
(k) Third Party Beneficiaries ..............................32
(l) Entire Agreement .......................................32
</TABLE>
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is dated
as of July 31, 1998 by and among GEO Specialty Chemicals, Inc., an Ohio
corporation (the "COMPANY"), and BT Alex. Brown Incorporated (the "INITIAL
PURCHASER").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of July 28, 1998, between the Company and the Initial
Purchaser (the "PURCHASE AGREEMENT") that provides for the sale by the Company
to the Initial Purchaser of $120,000,000 aggregate principal amount of the
Company's 10 1/8% Senior Subordinated Notes due 2008 (the "NOTES"). In order to
induce the Initial Purchaser to enter into the Purchase Agreement, the Company
has agreed to provide the registration rights set forth in this Agreement for
the benefit of the Initial Purchaser and its direct and indirect transferees and
assigns. The execution and delivery of this Agreement is a condition to the
Initial Purchaser's obligation to purchase the Notes under the Purchase
Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
ADDITIONAL INTEREST: See Section 4(a) hereof.
ADVICE: See the last paragraph of Section 5 hereof.
AGREEMENT: See the first introductory paragraph
hereto.
APPLICABLE PERIOD: See Section 2(b) hereof.
CLOSING DATE: The Closing Date as defined in the
Purchase Agreement.
COMPANY: See the first introductory paragraph
hereto.
EFFECTIVENESS DATE: The date that is 270 days after
the Issue Date.
EFFECTIVENESS PERIOD: See Section 3(a) hereof.
<PAGE> 4
-2-
EVENT DATE: See Section 4(b) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934,
as amended, and the rules and regulations of the SEC
promulgated thereunder.
EXCHANGE OFFER: See Section 2(a) hereof.
EXCHANGE REGISTRATION STATEMENT: See Section 2(a)
hereof.
EXCHANGE NOTES: See Section 2(a) hereof.
FILING DATE: On or prior to 225 days after the Issue
Date.
HOLDER: Any holder of a Registrable Note or
Registrable Notes.
INDEMNIFIED PERSON: See Section 7(c) hereof.
INDEMNIFYING PERSON: See Section 7(c) hereof.
INDENTURE: The Indenture, dated as of July 31, 1998 by and
among the Company, and Chase Manhattan Trust Company, National Association, as
trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time in accordance with the terms thereof.
INITIAL PURCHASER: See the first introductory
paragraph hereto.
INSPECTORS: See Section 5(o) hereof.
ISSUE DATE: The date on which the original Notes
were sold to the Initial Purchaser pursuant to the Purchase
Agreement.
NASD: See Section 5(s) hereof.
NOTES: See the second introductory paragraph hereto.
PARTICIPANT: See Section 7(a) hereof.
PARTICIPATING BROKER-DEALER: See Section 2(b) hereof.
<PAGE> 5
-3-
PERSON: An individual, trustee, corporation, partnership,
limited liability company, joint stock company, trust, unincorporated
association, union, business association, firm or other legal entity.
PRIVATE EXCHANGE: See Section 2(b) hereof.
PRIVATE EXCHANGE NOTES: See Section 2(b) hereof.
PROSPECTUS: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, and all other amendments and supplements to the
Prospectus, with respect to the terms of the offering of any portion of the
Registrable Notes covered by such Registration Statement including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the second introductory
paragraph hereto.
RECORDS: See Section 5(o) hereof.
REGISTRABLE NOTES: Each Note upon original issuance of the
Notes and at all times subsequent thereto, each Exchange Note as to which
Section 2(c)(v) hereof is applicable upon original issuance and at all times
subsequent thereto and each Private Exchange Note upon original issuance thereof
and at all times subsequent thereto, until in the case of any such Note,
Exchange Note or Private Exchange Note, as the case may be, the earliest to
occur of (i) a Registration Statement (other than, with respect to any Exchange
Note as to which Section 2(c)(v) hereof is applicable, the Exchange Registration
Statement) covering such Note, Exchange Note or Private Exchange Note, as the
case may be, has been declared effective by the SEC and such Note, Exchange Note
or Private Exchange Note, as the case may be, has been disposed of in accordance
with such effective Registration Statement, (ii) such Note, Exchange Note or
Private Exchange Note, as the case may be, is sold in compliance with Rule 144,
(iii) such Note has been exchanged for an Exchange Note or Exchange Notes
pursuant to an Exchange Offer and is entitled to be resold without complying
with the prospectus delivery requirements of the Securities Act or (iv) such
Note, Exchange Note or Private Exchange Note, as the
<PAGE> 6
-4-
case may be, ceases to be outstanding for purposes of the Indenture.
REGISTRATION STATEMENT: Any registration statement of the
Company, including, but not limited to, the Exchange Registration Statement and
any registration statement filed in connection with a Shelf Registration, filed
with the SEC pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration statement, including
post-effective amendments, all exhibits and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
RULE 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
NOTES: See the second introductory paragraph hereto.
SECURITIES ACT: The Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
SHELF NOTICE: See Section 2(c) hereof.
SHELF REGISTRATION: See Section 3(a) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE: The trustee under the Indenture and, if
existent, the trustee under any indenture governing the
Exchange Notes and Private Exchange Notes (if any).
<PAGE> 7
-5-
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
2. EXCHANGE OFFER
(a) The Company shall file with the SEC no later than the Filing
Date an offer to exchange (the "EXCHANGE OFFER") any and all
of the Registrable Notes (other than the Private Exchange
Notes, if any) for a like aggregate principal amount of debt
securities of the Company that are identical in all material
respects to the Notes (the "EXCHANGE NOTES") (and that are
entitled to the benefits of the Indenture or a trust indenture
that is identical in all material respects to the Indenture
(other than such changes to the Indenture or any such
identical trust indenture as are necessary to comply with any
requirements of the SEC to effect or maintain the
qualification thereof under the TIA) and that, in either case,
has been qualified under the TIA), except that the Exchange
Notes (other than Private Exchange Notes, if any) shall have
been registered pursuant to an effective Registration
Statement under the Securities Act and shall contain no
restrictive legend thereon. The Exchange Offer shall be
registered under the Securities Act on the appropriate form
(the "EXCHANGE REGISTRATION STATEMENT") and shall comply with
all applicable tender offer rules and regulations under the
Exchange Act. The Company agrees to use its reasonable best
efforts to (x) cause the Exchange Registration Statement to be
declared effective under the Securities Act on or before the
Effectiveness Date; (y) keep the Exchange Offer open for at
least 20 business days (or longer if required by applicable
law) after the date that notice of the Exchange Offer is
mailed to Holders; and (z) consummate the Exchange Offer on or
prior to the 300th day following the Issue Date. If after such
Exchange Registration Statement is declared effective by the
SEC, the Exchange Offer or the issuance of the Exchange Notes
thereunder is interfered with by any stop order, injunction or
other order or requirement of the SEC or any other
governmental agency or court, such Exchange Registration
Statement shall be deemed not to have become effective for
purposes of this Agreement. Each Holder who participates in
the Exchange Offer will be required to represent in writing
(i) that any Exchange Notes received by it will be acquired in
the ordinary course of its business, (ii) that at the time of
the consummation of the Exchange Offer such Holder will have
no arrangement or understanding with any Person to participate
in the
<PAGE> 8
-6-
distribution of the Exchange Notes in violation of the provisions of
the Securities Act, (iii) that such Holder is not an affiliate of the
Company within the meaning of the Securities Act, (iv) if such Holder
is not a broker-dealer, that it is not engaged in, and does not intend
to engage in, the distribution of Exchange Notes, (v) if such Holder is
a Participating Broker-Dealer (as defined below) that will receive
Exchange Notes for its own account in exchange for Notes that were
acquired as a result of market-making or other trading activities, that
it will deliver a prospectus in connection with and resale of such
Exchange Notes, and (vi) that such Holder is not acting on behalf of
any persons or entities who could not truthfully make the foregoing
representations. Upon consummation of the Exchange Offer in accordance
with this Section 2, the provisions of this Agreement shall continue to
apply, MUTATIS MUTANDIS, solely with respect to Registrable Notes that
are Private Exchange Notes and Exchange Notes held by Participating
Broker-Dealers, and the Company shall have no further obligation to
register Registrable Notes (other than Private Exchange Notes and other
than in respect of any Exchange Notes as to which clause 2(c)(v) hereof
applies) pursuant to Section 3 hereof. No securities other than the
Exchange Notes shall be included in the Exchange Registration
Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchaser, that
shall contain a summary statement of the positions taken or policies
made by the Staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes
received by such broker-dealer in the Exchange Offer (a "PARTICIPATING
BROKER-DEALER"), whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies, in
the judgment of the Initial Purchaser, represent the prevailing views
of the Staff of the SEC. Such "Plan of Distribution" section shall also
expressly permit the use of the Prospectus by all Persons subject to
the prospectus delivery requirements of the Securities Act, including
all Participating Broker-Dealers, and include a statement describing
the means by which Participating Broker-Dealers may resell the Exchange
Notes.
The Company shall use its reasonable best efforts to keep the
Exchange Registration Statement effective and to amend
<PAGE> 9
-7-
and supplement the Prospectus contained therein in order to permit such
Prospectus to be lawfully delivered by all Persons subject to the prospectus
delivery requirements of the Securities Act for such period of time as is
necessary to comply with applicable law in connection with any resale of the
Exchange Notes; PROVIDED, HOWEVER, that such period shall not exceed 60 days
after the consummation of the Exchange Offer.
If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by them and having, or that are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, the Company, upon the request of the Initial Purchaser
simultaneously with the delivery of the Exchange Notes in the Exchange Offer,
shall issue and deliver to the Initial Purchaser in exchange (the "PRIVATE
EXCHANGE") for such Notes held by the Initial Purchaser a like principal amount
of debt securities of the Company that are identical in all material respects to
the Exchange Notes (the "PRIVATE EXCHANGE NOTES") (and that are issued pursuant
to the same indenture as the Exchange Notes), except for the placement of a
restrictive legend on such Private Exchange Notes. The Private Exchange Notes
shall bear the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes
will accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the Issue Date.
In connection with the Exchange Offer, the Company shall:
(1) mail to each Holder a copy of the Prospectus forming part
of the Exchange Registration Statement, together with an appropriate
letter of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York;
(3) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last business day
on which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all
applicable laws, rules and regulations.
<PAGE> 10
-8-
As soon as practicable after the close of the Exchange Offer
or the Private Exchange, as the case may be, the Company shall:
(1) accept for exchange all Notes properly tendered and not
validly withdrawn pursuant to the Exchange Offer or the Private
Exchange;
(2) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to
each Holder of Notes, Exchange Notes or Private Exchange Notes, as the
case may be, equal in principal amount to the Notes of such Holder so
accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture, which in either event shall provide that (1) the
Exchange Notes shall not be subject to the transfer restrictions set forth in
the Indenture and (2) the Private Exchange Notes shall be subject to the
transfer restrictions set forth in the Indenture. The Indenture or such
indenture shall provide that the Exchange Notes, the Private Exchange Notes and
the Notes shall vote and consent together on all matters as one class and that
none of the Exchange Notes, the Private Exchange Notes or the Notes will have
the right to vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the SEC, the Company is not permitted
to effect an Exchange Offer, (ii) the Exchange Offer is not consummated
on or prior to 300 days after the Issue Date, (iii) the holder of
Private Exchange Notes so requests at any time after the consummation
of the Private Exchange, (iv) the Holders of not less than a majority
in aggregate principal amount of the Registrable Notes determine not
later than 180 days after the Issue Date that the interests of the
Holders would be materially adversely affected by consummation of the
Exchange Offer or (v) in the case of any Holder holding at least $5.0
million in aggregate principal amount of Exchange Notes that
participates in the Exchange Offer, such Holder does not receive
Exchange Notes on the date of the exchange that may be sold without
restriction under state and federal securities laws (other than due
solely to the status of such Holder as an affiliate of the
<PAGE> 11
-9-
Company within the meaning of the Securities Act), then the Company
shall promptly deliver written notice thereof (the "SHELF NOTICE") to
the Trustee and in the case of clauses (i), (ii) and (iv), all Holders,
in the case of clause (iii), the Holders of the Private Exchange Notes
and in the case of clause (v), the affected Holder, and shall file a
Shelf Registration pursuant to Section 3 hereof.
3. SHELF REGISTRATION
If a Shelf Notice is delivered as contemplated by Section 2(c)
hereof, then:
(a) SHELF REGISTRATION. The Company shall as promptly as practicable after
delivery of a Shelf Notice file with the SEC a Registration Statement
for an offering to be made on a continuous basis pursuant to Rule 415
covering all of the Registrable Notes (the "SHELF REGISTRATION"). If
the Company shall not have yet filed an Exchange Registration
Statement, the Company shall use its reasonable best efforts to file
with the SEC the Shelf Registration on or prior to the Filing Date. The
Shelf Registration shall be on Form S-1 or another appropriate form
permitting registration of such Registrable Notes for resale by Holders
in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Company shall not
permit any securities other than the Registrable Notes to be included
in the Shelf Registration.
The Company shall use its reasonable best efforts to cause the
Shelf Registration to be declared effective under the Securities Act on or prior
to the Effectiveness Date or 60 days after the date a Shelf Notice is required
to be delivered, whichever is later, and to keep the Shelf Registration
continuously effective under the Securities Act until the date that is two years
from the Issue Date (the "EFFECTIVENESS PERIOD"), or such shorter period ending
when all Registrable Notes covered by the Shelf Registration have been sold in
the manner set forth and as contemplated in the Shelf Registration.
(b) WITHDRAWAL OF STOP ORDERS. If the Shelf Registration ceases to be
effective for any reason at any time during the Effectiveness Period
(other than because of the sale of all of the securities registered
thereunder), the Company shall use its reasonable best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness
thereof.
<PAGE> 12
-10-
(c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly supplement and
amend the Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of
the Registrable Notes covered by such Registration Statement or by any
underwriter of such Registrable Notes.
4. ADDITIONAL INTEREST
(a) The Company and the Initial Purchaser agree that the Holders of
Registrable Notes will suffer damages if the Company fails to fulfill
its obligations under Section 2 or Section 3 hereof and that it would
not be feasible to ascertain the extent of such damages with precision.
Accordingly, the Company agrees to pay, as liquidated damages,
additional interest on the Notes ("ADDITIONAL INTEREST") under the
circumstances and to the extent set forth below (without duplication):
(i) if (A) neither the Exchange Offer Registration Statement nor the
Shelf Registration has been filed on or prior to the Filing Date or (B)
notwithstanding that the Company has consummated or will consummate the
Exchange Offer, the Company is required to file a Shelf Registration
and such Shelf Registration is not filed on or prior to the date
required to be filed, then commencing on the day after such required
filing date, Additional Interest shall accrue on the principal amount
of the Notes so affected at a rate of 0.25% per annum for the first 90
days immediately following such required filing date, such Additional
Interest rate increasing by an additional 0.25% per annum at the
beginning of each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor the
Shelf Registration is declared effective by the SEC on or prior to the
Effectiveness Date or (B) notwithstanding that the Company has
consummated or will consummate the Exchange Offer, the Company is
required to file a Shelf Registration and such Shelf Registration is
not declared effective by the SEC on or prior to the 60th day following
the date such Shelf Registration was filed, then, commencing on the
Effectiveness Date, in the case of (A) above, or the 61st day after the
filing of the Shelf Registration, the case of (B), Additional Interest
shall accrue on the principal amount of the Notes so affected at a rate
of 0.25% per annum for the first 90 days
<PAGE> 13
-11-
immediately following such date, such Additional Interest rate
increasing by an additional 0.25% per annum at the beginning of each
subsequent 90-day period; or
(iii) if (A) the Company has not exchanged Exchange Notes for all Notes
validly tendered in accordance with the terms of the Exchange Offer on
or prior to 300 days after the Issue Date or (B) if applicable, a Shelf
Registration has been declared effective and such Shelf Registration
ceases to be effective at any time prior to the second anniversary of
the Issue Date (other than after such time as all Notes have been
disposed of thereunder), then Additional Interest shall accrue on the
principal amount of the Notes so affected at a rate of 0.25% per annum
for the first 90 days commencing on (x) the 301st day after the Issue
Date, in the case of (A) above, or (y) the day such Shelf Registration
ceases to be effective, in the case of (B) above, such Additional
Interest rate increasing by an additional 0.25% per annum at the
beginning of each subsequent 90-day period;
provided, however, that the Additional Interest rate on the
Notes may not exceed in the aggregate 2.0% per annum; provided, further,
however, that (1) upon the filing of the Exchange Offer Registration Statement
or a Shelf Registration (in the case of clause (i) of this Section 4(a)), (2)
upon the effectiveness of the Exchange Offer Registration Statement or the Shelf
Registration (in the case of clause (ii) of this Section 4(a)), or (3) upon the
exchange of Exchange Note for all Notes tendered (in the case of clause (iii)(A)
of this Section 4(a)), or upon the effectiveness of the Shelf Registration which
had ceased to remain effective (in the case of clause (iii)(B) of this Section
4(a)), Additional Interest on the Notes as a result of such clause (or the
relevant subclause thereof), as the case may be, shall cease to accrue.
(b) The Company shall notify the Trustee within one business day after each
and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "EVENT DATE"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this
Section 4 will be payable in cash semi-annually on each February 1 and
August 1 (to the holders of record on the January 15 and July 15
immediately preceding such dates), commencing with the first such date
occurring after any such Additional Interest commences to accrue. The
amount of Additional Interest will be determined by multiplying the
applicable Additional Interest rate by the principal amount of the
Registrable Notes, multiplied by a
<PAGE> 14
-12-
fraction, the numerator of which is the number of days such Additional
Interest rate was applicable during such period (determined on the
basis of a 360-day year consisting of twelve 30-day months and, in the
case of a partial month, the actual number of days elapsed) and the
denominator of which is 360.
5. REGISTRATION PROCEDURES
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Company shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Company hereunder, the
Company shall:
(a) Prepare and file with the SEC on or prior to the Filing
Date, a Registration Statement or Registration Statements as prescribed
by Sections 2 or 3 hereof, and use its reasonable best efforts to cause
each such Registration Statement to become effective and remain
effective as provided herein; PROVIDED, HOWEVER, that, if (1) such
filing is pursuant to Section 3 hereof or (2) a Prospectus contained in
an Exchange Registration Statement filed pursuant to Section 2 hereof
is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, before filing any Registration Statement or
Prospectus or any amendments or supplements thereto, the Company shall
furnish to and afford the Holders of the Registrable Notes covered by
such Registration Statement or each such Participating Broker-Dealer,
as the case may be, their counsel and the managing underwriters, if
any, a reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed (in each case at
least three business days prior to such filing). The Company shall not
file any Registration Statement or Prospectus or any amendments or
supplements thereto if the Holders of a majority in aggregate principal
amount of the Registrable Notes covered by such Registration Statement,
or any such Participating Broker-Dealer, as the case may be, or their
counsel, or the managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration
<PAGE> 15
-13-
or Exchange Registration Statement, as the case may be, as may be
necessary to keep such Registration Statement continuously effective
for the Effectiveness Period or the Applicable Period, as the case may
be; cause the related Prospectus to be supplemented by any prospectus
supplement required by applicable law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of
the Securities Act and the Exchange Act applicable to it with respect
to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and
with respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus; the Company
shall be deemed not to have used its reasonable best efforts to keep a
Registration Statement effective during the Applicable Period if the
Company voluntarily takes any action that would result in selling
Holders of the Registrable Notes covered thereby or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell
such Registrable Notes or such Exchange Notes during that period,
unless such action is required by applicable law or unless the Company
complies with this Agreement, including without limitation, the
provisions of paragraph 5(k) hereof and the last paragraph of this
Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period, notify
the selling Holders of Registrable Notes, or each such Participating
Broker-Dealer, as the case may be, their counsel and the managing
underwriters, if any, promptly (but in any event within two business
days) and confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may, upon
request, obtain, at the sole expense of the Company, one conformed copy
of such Registration Statement or post-effective amendment including
financial statements and schedules, documents incorporated or deemed to
be incorporated by reference and exhibits), (ii) of the issuance by the
SEC of any stop order suspending the
<PAGE> 16
-14-
effectiveness of a Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the initiation of
any proceedings for that purpose, (iii) if at any time when a
prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Notes or resales of Exchange
Notes by Participating Broker-Dealers the representations and
warranties of the Company contained in any agreement (including any
underwriting agreement), contemplated by Section 5(n) hereof cease to
be true and correct in any material respect, (iv) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration
Statement or any of the Registrable Notes or the Exchange Notes to be
sold by any Participating Broker-Dealer for offer or sale in any
jurisdiction, or the initiation or written threat of any proceeding for
such purpose, (v) of the happening of any event, the existence of any
condition or any information becoming known that makes any statement
made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respects or that requires the making of any
changes in or amendments or supplements to such Registration Statement,
Prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in
the case of the Prospectus, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading
and (vi) of the Company's determination that a post-effective amendment
to a Registration Statement would be appropriate.
(d) Use its reasonable best efforts to prevent the issuance of
any order suspending the effectiveness of a Registration Statement or
of any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any
of the Registrable Notes or the Exchange Notes for sale in any
jurisdiction and, if any such order is issued, to use its reasonable
best efforts to obtain the withdrawal of any such order at the earliest
possible moment.
<PAGE> 17
-15-
(e) If a Shelf Registration is filed pursuant to Section 3 and
if requested by the managing underwriter or underwriters, if any, or
the Holders of a majority in aggregate principal amount of the
Registrable Notes being sold in connection with an underwritten
offering, (i) promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter
or underwriters, if any, such Holders or counsel for any of them
determine is reasonably necessary to be included therein, (ii) make all
required filings of such prospectus supplement or such post-effective
amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment and (iii) supplement or make
amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period, furnish
to each selling Holder of Registrable Notes and to each such
Participating Broker-Dealer who so requests and to their respective
counsel and each managing underwriter, if any, at the sole expense of
the Company, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto,
including financial statements and schedules and, if requested, all
documents incorporated or deemed to be incorporated therein by
reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period, deliver
to each selling Holder of Registrable Notes, or each such Participating
Broker-Dealer, as the case may be, their respective counsel and the
underwriters, if any, at the sole expense of the Company, as many
copies of the Prospectus or Prospectuses (including each form of
preliminary prospectus) and each amendment or supplement thereto and
any documents incorporated by reference therein as such Persons may
reasonably request; and, subject to the last paragraph of this Section
5, the Company hereby consents to the use of such Prospectus and
<PAGE> 18
-16-
each amendment or supplement thereto by each of the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case
may be, and the underwriters or agents, if any, and dealers, if any, in
connection with the offering and sale of the Registrable Notes covered
by, or the sale by Participating Broker-Dealers of the Exchange Notes
pursuant to, such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or
Exchange Notes or any delivery of a Prospectus contained in the
Exchange Registration Statement by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period, use its
reasonable best efforts to register or qualify and cooperate with the
selling Holders of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration
or qualification) of such Registrable Notes for offer and sale under
the securities or Blue Sky laws of such jurisdictions within the United
States as any selling Holder, Participating Broker-Dealer or the
managing underwriter or underwriters reasonably request in writing;
PROVIDED, HOWEVER, that where Exchange Notes held by Participating
Broker-Dealers or Registrable Notes are offered other than through an
underwritten offering, the Company agrees to cause its counsel to
perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h); use
its reasonable best efforts to keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and
all other acts or things reasonably necessary or advisable to enable
the disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; PROVIDED, HOWEVER, that the Company
shall not be required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) take any action
that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) subject itself to
taxation in any such jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3
hereof, cooperate with the selling Holders of
<PAGE> 19
-17-
Registrable Notes and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates
representing Registrable Notes to be sold, which certificates shall not
bear any restrictive legends and shall be in a form eligible for
deposit with The Depository Trust Company; and enable such Registrable
Notes to be in such denominations and registered in such names as the
managing underwriter or underwriters, if any, or Holders may reasonably
request.
(j) Use its reasonable best efforts to cause the Registrable
Notes covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the Holders thereof or the underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Notes, except as may be required solely as a consequence of the nature
of such selling Holder's business, in which case the Company will
cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period, upon the
occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi),
hereof, as promptly as practicable prepare and (subject to Section 5(a)
hereof) file with the SEC, at the Company's sole expense, a supplement
or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, or file any other
required document so that, as thereafter delivered to the purchasers of
the Registrable Notes being sold thereunder or to the purchasers of the
Exchange Notes to whom such Prospectus will be delivered by a
Participating Broker-Dealer, any such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(l) Use its reasonable best efforts to cause the Registrable
Notes covered by a Registration Statement or the Exchange Notes, as the
case may be, to be rated with
<PAGE> 20
-18-
the appropriate rating agencies, if so requested by the Holders of a
majority in aggregate principal amount of Registrable Notes covered by
such Registration Statement or the Exchange Notes, as the case may be,
or the managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee
with certificates for the Registrable Notes or Exchange Notes, as the
case may be, in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes or
Exchange Notes, as the case may be.
(n) In connection with any underwritten offering of
Registrable Notes pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings of
debt securities similar to the Notes and take all such other actions as
are reasonably requested by the managing underwriter or underwriters in
order to expedite or facilitate the registration or the disposition of
such Registrable Notes and, in such connection, (i) make such
representations and warranties to, and covenants with, the underwriters
with respect to the business of the Company (including any acquired
business, properties or entity, if applicable) and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to
be incorporated by reference therein, in each case, as are customarily
made by issuers to underwriters in underwritten offerings of debt
securities similar to the Notes, and confirm the same in writing if and
when requested; (ii) obtain the written opinion of counsel to the
Company and written updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters,
addressed to the underwriters covering the matters customarily covered
in opinions requested in underwritten offerings of debt similar to the
Notes and such other matters as may be reasonably requested by the
managing underwriter or underwriters; (iii) obtain "cold comfort"
letters and updates thereof in form, scope and substance reasonably
satisfactory to the managing underwriter or underwriters from the
independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are required
to be, included or incorporated by reference in the Registration
Statement), addressed to each of the
<PAGE> 21
-19-
underwriters, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings of debt securities similar to the Notes and
such other matters as reasonably requested by the managing underwriter
or underwriters; and (iv) if an underwriting agreement is entered into,
the same shall contain indemnification provisions and procedures no
less favorable than those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to Holders of a majority in
aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said
Section. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3
hereof or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period, upon
reasonable advance notice make available for inspection by any selling
Holder of such Registrable Notes being sold, or each such Participating
Broker-Dealer, as the case may be, any underwriter participating in any
such disposition of Registrable Notes, if any, and any attorney,
accountant or other agent retained by any such selling Holder or each
such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "INSPECTORS"), at the offices where normally kept,
during reasonable business hours without interfering in the orderly
business of the Company, all financial and other records, pertinent
corporate documents and instruments of the Company (collectively, the
"RECORDS") as shall be reasonably necessary to enable them to exercise
any applicable due diligence responsibilities, and cause the respective
officers, directors and employees of the Company to supply all
information reasonably requested by any such Inspector in connection
with such Registration Statement. Records that the Company determines,
in good faith, to be confidential and any Records that the Company
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is necessary to
avoid or correct a material misstatement or omission in such
Registration Statement, (ii) the release of such Records is ordered
pursuant to a subpoena or other
<PAGE> 22
-20-
order from a court of competent jurisdiction, (iii) after giving
reasonable prior notice to the Company, disclosure of such information
is, in the written opinion of counsel for any Inspector, necessary or
advisable in connection with any action, claim, suit or proceeding,
directly or indirectly, involving or potentially involving such
Inspector and arising out of, based upon, relating to or involving this
Agreement or any transactions contemplated hereby or arising hereunder
or (iv) the information in such Records has been made generally
available to the public. Each selling Holder of such Registrable Notes
and each such Participating Broker-Dealer will be required to agree
that information obtained by it as a result of such inspections shall
be deemed confidential and shall not be used by it as the basis for any
market transactions in the securities of the Company unless and until
such information is generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating
Broker-Dealer will be required to further agree that it will, upon
learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the
Company to undertake appropriate action to prevent disclosure of the
Records deemed confidential at the Company's sole expense.
(p) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a) hereof, as the case may
be, to be qualified under the TIA not later than the effective date of
the Exchange Offer or the first Registration Statement relating to the
Registrable Notes; and in connection therewith, cooperate with the
trustee under any such indenture and the Holders of the Registrable
Notes, to effect such changes to such indenture as may be required for
such indenture to be so qualified in accordance with the terms of the
TIA; and execute, and use its reasonable best efforts to cause such
trustee to execute, all documents as may be required to effect such
changes and all other forms and documents required to be filed with the
SEC to enable such indenture to be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the
SEC and make generally available to its securityholders earning
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any
<PAGE> 23
-21-
12-month period (or 90 days after the end of any 12-month period if
such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm
commitment or reasonable best efforts underwritten offering and (ii) if
not sold to underwriters in such an offering, commencing on the first
day of the first fiscal quarter of the Company after the effective date
of a Registration Statement, which statements shall cover said 12-month
periods.
(r) Upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Company, who may, at the
Company's election, be internal counsel to the Company, in a form
customary for underwritten transactions, addressed to the Trustee for
the benefit of all Holders of Registrable Notes participating in the
Exchange Offer or the Private Exchange, as the case may be, that the
Exchange Notes or Private Exchange Notes, as the case may be, and the
related indenture constitute legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its
respective terms, subject to customary exceptions and qualifications.
(s) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Company (or to such other Person as directed by the Company) in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be, the Company shall mark, or cause to be marked, on such
Registrable Notes that such Registrable Notes are being cancelled in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be; in no event shall such Registrable Notes be marked as paid
or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and each underwriter, if any, participating
in the disposition of such Registrable Notes and their respective
counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD").
(u) Use its reasonable best efforts to take all other steps
necessary or advisable to effect the registration of the Registrable
Notes covered by a Registration Statement contemplated hereby.
<PAGE> 24
-22-
The Company may require each seller of Registrable Notes as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such Registrable Notes
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Notes of any seller who
unreasonably fails to furnish such information within a reasonable time after
receiving such request and in such event shall have no further obligation under
this Agreement (including, without limitation, obligations under Section 4
hereof) with respect to such seller or any subsequent holder of such Registrable
Notes. Each seller as to which any Shelf Registration is being effected agrees
to furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such seller
not materially misleading.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, that, upon
actual receipt of any notice from the Company of the happening of any event of
the kind described in Sections 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi) hereof,
such Holder will forthwith discontinue disposition of such Registrable Notes
covered by such Registration Statement or Prospectus or Exchange Notes to be
sold by such Holder or Participating Broker-Dealer, as the case may be, until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "ADVICE") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event that the Company shall give any such
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration Statement or Exchange Notes to be
sold by such Participating Broker-Dealer, as the case may be, shall have
received (x) the copies of the supplemented or amended Prospectus contemplated
by Section 5(k) hereof or (y) the Advice; PROVIDED, HOWEVER, that the
Effectiveness Period shall not be extended for a period longer than two years
from the Issue Date.
6. REGISTRATION EXPENSES
<PAGE> 25
-23-
(a) All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company whether or
not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, (A) fees with respect to
filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with
state securities or Blue Sky laws (including, without limitation,
reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Notes or Exchange Notes and
determination of the eligibility of the Registrable Notes or Exchange
Notes for investment under the laws of such jurisdictions (x) where the
holders of Registrable Notes are located, in the case of the Exchange
Notes, or (y) as provided in Section 5(h) hereof, in the case of
Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses,
including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with
The Depository Trust Company and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriter or
underwriters, if any, by the Holders of a majority in aggregate
principal amount of the Registrable Notes included in any Registration
Statement or sold by any Participating Broker-Dealer, as the case may
be, (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and reasonable fees and
disbursements of special counsel for the sellers of Registrable Notes
(subject to the provisions of Section 6(b) hereof), (v) fees and
disbursements of all independent certified public accountants referred
to in Section 5(n)(iii) hereof (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or
incident to such performance), (vi) rating agency fees, if any, and any
fees associated with making the Registrable Notes or Exchange Notes
eligible for trading through the Depository Trust Company, (vii)
Securities Act liability insurance, if the Company desires such
insurance, (viii) fees and expenses of all other Persons retained by
the Company, (ix) internal expenses of the Company (including, without
limitation, all salaries and expenses of officers and employees of the
Company performing legal or accounting duties), (x) the expense of any
annual audit, (xi) the fees and expenses incurred in connection with
the listing of the securities to be registered on any
<PAGE> 26
-24-
securities exchange, if applicable, and (xii) the expenses relating to
printing, word processing and distributing of all Registration
Statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary to comply with this
Agreement.
(b) The Company shall (i) reimburse the Holders of the Registrable Notes
being registered in a Shelf Registration for the reasonable fees and
disbursements of not more than one counsel chosen by the Holders of a
majority in aggregate principal amount of the Registrable Notes to be
included in such Registration Statement and (ii) reimburse reasonable
out-of-pocket expenses (other than legal expenses) of Holders of
Registrable Notes incurred in connection with the registration and sale
of the Registrable Notes pursuant to a Shelf Registration or in
connection with the exchange of Registrable Notes pursuant to the
Exchange Offer.
7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Notes offered pursuant to a Shelf Registration Statement
and each Participating Broker-Dealer selling Exchange Notes during the
Applicable Period, the officers and directors of each such Person or
its affiliates, and each other Person, if any, who controls any such
Person or its affiliates within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a
"PARTICIPANT"), from and against any and all losses, claims, damages
and liabilities (including, without limitation, the reasonable legal
fees and other expenses actually incurred in connection with any suit,
action or proceeding or any claim asserted) caused by, arising out of
or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement pursuant to which
the offering of such Registrable Notes or Exchange Notes, as the case
may be, is registered (or any amendment thereto) or related Prospectus
(or any amendments or supplements thereto) or any related preliminary
prospectus, or caused by, arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that the Company will not be required to indemnify a
Participant if (i) such losses, claims, damages or liabilities are
caused by any untrue
<PAGE> 27
-25-
statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information relating to any
Participant furnished to the Company in writing by, on behalf of, or at
the request of, such Participant expressly for use therein or (ii) if
such Participant sold to the person asserting the claim the Registrable
Notes or Exchange Notes that are the subject of such claim and such
untrue statement or omission or alleged untrue statement or omission
was contained or made in any preliminary prospectus and corrected in
the Prospectus or any amendment or supplement thereto and the
Prospectus does not contain any other untrue statement or omission or
alleged untrue statement or omission of a material fact that was the
subject matter of the related proceeding and it is established by the
Company in the related proceeding that such Participant failed to
deliver or provide a copy of the Prospectus (as amended or
supplemented) to such Person with or prior to the confirmation of the
sale of such Registrable Notes or Exchange Notes sold to such Person if
required by applicable law, unless such failure to deliver or provide a
copy of the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify and
hold harmless the Company, the Company's directors and officers, each
Person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to each Participant, but only
(i) with reference to information relating to such Participant
furnished to the Company in writing by or on behalf of such Participant
expressly for use in any Registration Statement or Prospectus, any
amendment or supplement thereto or any preliminary prospectus or (ii)
with respect to any untrue statement or representation made by such
Participant in writing to the Company. The liability of any Participant
under this paragraph shall in no event exceed the proceeds received by
such Participant from sales of Registrable Notes or Exchange Notes
giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted
against any Person in respect of which indemnity may be sought pursuant
to either of the two preceding paragraphs, such Person (the
"INDEMNIFIED PERSON") shall promptly notify the Person against whom
<PAGE> 28
-26-
such indemnity may be sought (the "INDEMNIFYING PERSON") in writing,
and the Indemnifying Person, upon request of the Indemnified Person,
shall retain counsel reasonably satisfactory to the Indemnified Person
to represent the Indemnified Person and any others the Indemnifying
Person may reasonably designate in such proceeding and shall pay the
reasonable fees and expenses actually incurred by such counsel related
to such proceeding; PROVIDED, HOWEVER, that the failure to so notify
the Indemnifying Person shall not relieve it of any obligation or
liability that it may have hereunder or otherwise (unless and only to
the extent that such failure directly results in the loss or compromise
of any material rights or defenses by the Indemnifying Person and the
Indemnifying Person was not otherwise aware of such action or claim).
In any such proceeding, any Indemnified Person shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually
agreed in writing to the contrary, (ii) the Indemnifying Person shall
have failed within a reasonable period of time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the named
parties in any such proceeding (including any impleaded parties)
include both the Indemnifying Person and the Indemnified Person and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. It is understood that, unless there exists a conflict among
Indemnified Persons, the Indemnifying Person shall not, in connection
with any one such proceeding or separate but substantially similar
related proceeding in the same jurisdiction arising out of the same
general allegations, be liable for the fees and expenses of more than
one separate firm (in addition to any local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be
reimbursed promptly as they are incurred. Any such separate firm for
the Participants and such control Persons of Participants shall be
designated in writing by Participants who sold a majority in interest
of Registrable Notes and Exchange Notes sold by all such Participants
and any such separate firm for the Company, its directors, its officers
and such control Persons of the Company shall be designated in writing
by the Company. The Indemnifying Person shall not be liable for any
settlement of any proceeding effected without its prior written
consent, but if settled with such consent or if there be a final
non-appealable judgment for the plaintiff for which the Indemnified
<PAGE> 29
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Person is entitled to indemnification pursuant to this Agreement, the
Indemnifying Person agrees to indemnify and hold harmless each
Indemnified Person from and against any loss or liability by reason of
such settlement or judgment. Notwithstanding the foregoing sentence, if
at any time an Indemnified Person shall have requested an Indemnifying
Person to reimburse the Indemnified Person for reasonable fees and
expenses actually incurred by counsel as contemplated by the third
sentence of this paragraph, the Indemnifying Person agrees that it
shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30
days after receipt by such Indemnifying Person of the aforesaid request
and (ii) such Indemnifying Person shall not have reimbursed the
Indemnified Person in accordance with such request prior to the date of
such settlement; PROVIDED, HOWEVER, that the Indemnifying Person shall
not be liable for any settlement effected without its consent pursuant
to this sentence if the Indemnifying Person is contesting, in good
faith, the request for reimbursement. No Indemnifying Person shall,
without the prior written consent of the Indemnified Person, effect any
settlement or compromise of any pending or threatened proceeding in
respect of which any Indemnified Person is or could have been a party,
and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement (A) includes an unconditional written
release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims
that are the subject matter of such proceeding and (B) does not include
any statement as to an admission of fault, culpability or failure to
act by or on behalf of any Indemnified Person.
(d) If the indemnification provided for in the first and second paragraphs
of this Section 7 is for any reason unavailable to, or insufficient to
hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified
Person thereunder and in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Person or Persons on the one hand
and the Indemnified Person or Persons on the other in connection
<PAGE> 30
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with the statements or omissions or alleged statements or omissions
that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the Company on the one hand or such Participant or such other
Indemnified Person, as the case may be, on the other, the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if the Participants were treated as one entity for
such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified
Person as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the
amount by which proceeds received by such Participant from sales of
Registrable Notes or Exchange Notes, as the case may be, exceeds the
amount of any damages that such Participant has otherwise been required
to pay or has paid by reason of such untrue or alleged untrue statement
or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability that the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. RULE 144 AND 144A
<PAGE> 31
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The Company covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder in a timely manner in accordance
with the requirements of the Securities Act and the Exchange Act and, if at any
time the Company is required to file such reports, they will, upon the request
of any Holder of Registrable Notes, make publicly available annual reports and
such information, documents and other reports of the type specified in Sections
13 and 15(d) of the Exchange Act. The Company further covenants for so long as
any Registrable Notes remain outstanding, to make available to any Holder or
beneficial owner of Registrable Notes in connection with any sale thereof and
any prospective purchaser of such Registrable Notes from such Holder or
beneficial owner the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of such Registrable Notes pursuant to
Rule 144A.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and reasonably acceptable to the
Company.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. MISCELLANEOUS
(a) NO INCONSISTENT AGREEMENTS. The Company has not entered into, as of the
date hereof, and shall not, after the date of this Agreement, enter
into any agreement with respect to any of the Company's securities that
is inconsistent with the rights granted to the Holders of Registrable
Notes in this Agreement or otherwise conflicts with the provisions
hereof.
<PAGE> 32
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(b) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Company shall not,
directly or indirectly, take any action with respect to the Registrable
Notes as a class that would adversely affect the ability of the Holders
of Registrable Notes to include such Registrable Notes in a
registration undertaken pursuant to this Agreement.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, otherwise than
with the prior written consent of the Holders of not less than a
majority in aggregate principal amount of the then outstanding
Registrable Notes. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Notes whose
securities are being sold pursuant to a Registration Statement and that
does not directly or indirectly affect, impair, limit or compromise the
rights of other Holders of Registrable Notes may be given by Holders of
at least a majority in aggregate principal amount of the Registrable
Notes being sold by such Holders pursuant to such Registration
Statement; PROVIDED, HOWEVER, that the provisions of this sentence may
not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(d) NOTICES. All notices and other communications (including without
limitation any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, next-day air courier or facsimile:
1. if to a Holder of the Registrable Notes or any
Participating Broker-Dealer, at the most current address of such Holder
or Participating Broker-Dealer, as the case may be, set forth on the
records of the registrar under the Indenture, with a copy in like
manner to the Initial Purchaser as follows:
<PAGE> 33
-31-
BT ALEX. BROWN INCORPORATED
130 Liberty Street
New York, New York 10006
Facsimile No.: (212) 250-7200
Attention: Corporate Finance Department
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile No.: (212) 269-5420
Attention: William M. Hartnett, Esq.
2. if to the Initial Purchaser, at the address
specified in Section 10(d)(1)
3. if to the Issuer, at the address as follows:
GEO Specialty Chemicals, Inc.
28601 Chagrin Boulevard
Suite 210
Cleveland, Ohio 44122
Facsimile No.: (216) 765-1307
Attention: Mr. George P. Ahearn
with a copy to:
Thompson Hine & Flory LLP
3900 Society Center
127 Public Square
Cleveland, Ohio 44114
Facsimile No.: (216) 566-5800
Attention: Craig R. Martahus, Esq.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address and in the manner specified in such Indenture.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns
-32-
<PAGE> 34
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of each of the parties hereto; PROVIDED, HOWEVER, that this Agreement
shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign
holds Registrable Notes.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning
hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
(i) SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force
and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable best efforts to find
and employ an alternative means to achieve the same or substantially
the same result as that contemplated by such term, provision, covenant
or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
(j) NOTES HELD BY THE ISSUER OR ITS AFFILIATES. Whenever the consent or
approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its
affiliates (as such term is defined in Rule 405 under the Securities
Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
<PAGE> 35
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(k) THIRD PARTY BENEFICIARIES. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of
this Agreement and this Agreement may be enforced by such Persons.
(l) ENTIRE AGREEMENT. This Agreement, together with the Purchase Agreement
and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and
all prior oral or written agreements, representations, or warranties,
contracts, understandings, correspondence, conversations and memoranda
between the Initial Purchaser on the one hand and the Company on the
other, or between or among any agents, representatives, parents,
subsidiaries, affiliates, predecessors in interest or successors in
interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
<PAGE> 36
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
GEO SPECIALTY CHEMICALS, INC.
By: /s/ William P. Eckman
-----------------------------
Name: William P. Eckman
Title: Senior Vice President & C.F.O.
BT ALEX. BROWN INCORPORATED
By: /s/ Michael Apfel
-----------------------------
Name: Michael Apfel
Title: Vice President
<PAGE> 1
Exhibit 10.12
PROVISIONAL LEASE AGREEMENT
This Lease Agreement (the "Lease") is made as of the
29th day of July, 1998 by and between MALLINCKRODT, INC., a Delaware corporation
(the "Landlord"), and GEO SPECIALTY CHEMICALS, INC., an Ohio corporation (the
"Tenant"). Unless otherwise specifically set forth herein, capitalized terms
shall have the meaning ascribed to them in that certain Asset Purchase
Agreement, by and among Tenant, as buyer, Landlord and Mallinckrodt, Inc., a New
York corporation, collectively, as seller, dated June 29, 1998 (the "Asset
Purchase Agreement").
1. LEASED PREMISES. Upon and subject to the terms and
conditions of this Lease, Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, the real property located in South Whitehall Township,
County of Lehigh and State of Pennsylvania, as further described on EXHIBIT A
attached hereto and made a part hereof, together with the buildings and other
improvements and fixtures located thereon (the "Improvements"), and all
easements and licenses appurtenant thereto, in accordance with the terms hereof
(the "Leased Premises"), which Leased Premises are part of the real property
described on EXHIBIT B, attached hereto and made a part hereof.
2. LEASE TERM. (a) This Lease shall commence on the
date first written above (the "Commencement Date") and shall expire on the
earliest to occur of: (a) the date the Deed for the Leased Premises is filed
with the South Whitehall County Recorders Office pursuant to the Asset Purchase
Agreement; (b) the date Tenant is vested in fee simple title to the Leased
Premises and more land pursuant to Tenant's rights under that certain Mortgage
by Landlord, in favor of Tenant, encumbering the Leased Premises and more land,
dated of even date herewith (the "Mortgage"); or (c) the date that is
twenty-nine (29) years and eleven (11) months after the Commencement Date (the
"Term").
3. RENT. (a) During the Term, commencing on the
Commencement Date, Tenant shall pay to Landlord, as base rent (the "Base Rent"),
a sum equal to $10.00 per annum, payable in one installment in advance on the
Commencement Date and on each anniversary of the Commencement Date.
(b) In addition to the Base Rent as provided above,
Tenant shall also pay, when due, all costs, expenses and other sums of money
required to be paid by Tenant under the terms of this Lease, any and all of
which are hereby defined as "Additional Rent." In the event of any non-payment
of Additional Rent, when due, Landlord shall have all of the rights and remedies
provided for hereunder, or by law or in equity, for the non-payment of Base Rent
or for any other breach of this Lease. Base Rent and Additional Rent are
hereinafter sometimes collectively referred to as "Rent."
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(c) All Rent shall be payable without demand,
deduction or set- off. All Rent payments shall be made to Landlord at Landlord's
address set forth in paragraph 22 or at such other address as Landlord may
designate.
4. REAL PROPERTY TAXES AND ASSESSMENTS. Tenant shall
pay all real property taxes and assessments, special or otherwise, affecting the
Leased Premises and covering the period included within the Term.
Notwithstanding the preceding sentence, Tenant shall have the right to institute
and prosecute any lawful contest of real property taxes and assessments, special
or otherwise, affecting the Leased Premises, and Landlord agrees to cooperate
with Tenant in connection therewith at no cost to Landlord.
5. UTILITIES. Tenant shall pay, as and when due, all
water, sewer, power, heat, gas, electricity and all other utility services used
or consumed on the Leased Premises during the Lease Term, such payment to be
made directly to the supplying utility company. Landlord shall not be liable for
any permanent or temporary interruption or termination of utility services nor
shall any of Tenant's obligations under this Lease be affected by any such
interruption or termination of utility services.
6. MAINTENANCE AND REPAIRS. Tenant shall, throughout
the Lease Term, at its sole cost and expense, keep and maintain the Leased
Premises in good working order and condition, including, without limitation, the
structural components, floors, walls, roof, replacement of glass, repair of
doors, truck docks and truck pads, heating units, electrical, plumbing and other
utility systems serving the Leased Premises, and the parking lots serving the
Leased Premises, and the private roadways located on the Leased Premises, except
to the extent improvements are required thereto in connection with the
fulfilment of Landlord's obligations under the Asset Purchase Agreement.
7. FIXTURES AND ALTERATIONS. Tenant shall have the
right to make any alterations, installations, additions or expansions to the
Leased Premises as Tenant may desire, provided that Tenant shall do so in a good
and workmanlike manner, free of any mechanics liens and in accordance with all
governmental laws, ordinances, requirements, orders, directions, rules or
regulations (collectively, "Governmental Requirements"), and provided, further,
that Tenant does so in a manner that is reasonably calculated not to interfere
with Landlord's use of, or activities on, its property adjacent to the Leased
Premises. Upon the expiration or earlier termination of this Lease, Tenant, at
its own cost and expense, shall have the right, but not the obligation, to
remove all trade fixtures and other equipment owned by Tenant and located within
the Leased Premises, and shall repair any damage caused by such removal.
8. USE. Subject in all respects to the terms and
conditions otherwise set forth in this Lease, Tenant may use the Leased Premises
for any lawful purpose; provided that, during the Term, Tenant will not take any
action, or omit to take
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<PAGE> 3
any action, that would give rise to Environmental Claims with respect to the
Leased Premises. Tenant shall not use or occupy the Leased Premises, or permit
or suffer the Leased Premises or any part thereof to be used or occupied, for
any unlawful or illegal business, use or purpose, or in any manner to constitute
a nuisance of any kind, or for any purpose or in any way in violation of any
Governmental Requirements or in any manner that might breach any of its
obligations under the Asset Purchase Agreement. Landlord shall not be liable for
the loss of or any damage to any property of Tenant or of others located or
stored in, upon or about the Leased Premises, whether by theft, vandalism,
malicious mischief, unlawful entry or any other cause or reason.
9. LIENS. (a) Throughout the Term, Tenant shall not
suffer or permit any mechanic's lien or other lien to attach to the Leased
Premises as a result of any work performed by Tenant or its agents, and whenever
and as often as any such lien or liens shall be filed or shall attach, Tenant
shall, within 90 days thereafter, pay or bond off such lien or liens or procure
their cancellation in any manner prescribed or permitted by law.
(b) Tenant acknowledges and agrees that Tenant is
not, and shall not be deemed to be, an agent of Landlord in connection with any
construction, demolition or renovation activities undertaken by Tenant at the
Leased Premises, and nothing contained in this Lease shall be construed as
consent or permission by Landlord to subject Landlord's fee simple estate in the
Land or the Leased Premises to any lien of contractors, suppliers, materialmen
or other persons performing services, or supplying labor or materials, in
connection any construction, demolition or renovation activities undertaken by
Tenant.
10. INSURANCE. (a) Throughout the Term, Tenant shall
obtain and keep in force, at its sole cost and expense, commercial general
liability insurance insuring both the Landlord and Tenant from and against any
and all claims for damages resulting from injury or death to persons or injury
to property occurring in and about the Leased Premises or arising out of the
ownership, maintenance, use or occupancy of the Leased Premises. The amount of
coverage shall be not less than $2,000,000.00 per occurrence and $3,000,000.00
annual aggregate for property damage and injury or death to persons. Tenant
shall also maintain all risk property damage insurance covering all of Tenant's
trade fixtures, equipment, furnishings and other personal property and contents
and all other portions of the Leased Premises.
(b) Tenant shall deliver to Landlord a certificate
evidencing the existence and amount of the insurance required to be carried by
Tenant hereunder. No policy of insurance required to be obtained and maintained
hereunder shall be cancelable or subject to reduction of coverage or other
material modification except after thirty (30) days prior written notice to
Landlord.
(c) Tenant shall keep the Improvements now or
hereafter located on the Leased Premises insured against loss by fire (with
extended coverage) in an
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<PAGE> 4
amount equal to not less than one hundred percent (100%) of the full insurable
value thereof.
11. FIRE OR OTHER CASUALTY. If at any time during the
Lease Term all or any portion of the Improvements now or hereafter erected on
the Leased Premises shall be destroyed or damaged by fire, flood, or any other
casualty, Tenant shall repair, reconstruct and restore such Improvements, and
there shall be no abatement in Base Rent or any other charges hereunder during
the period of such restoration.
12. MUTUAL RELEASE AND WAIVER OF CLAIMS.
Notwithstanding any provision of this instrument to the contrary, Landlord and
Tenant hereby each waive all rights of recovery and causes of action which
either party has or may have, or which may arise hereafter, against the other,
whether caused by negligence or otherwise, for any loss or damage to property or
business arising out of or incident to the perils required to be insured against
under this Lease; provided, however, that the foregoing waivers apply only to
the extent of such insurance coverage and to the extent such waivers do not
invalidate any policy of insurance of the parties hereto, now or hereafter
issued, it being stipulated that the waiver shall not apply if the application
thereof would result in the invalidation of such policy of insurance.
13. CONDEMNATION. (a) If the whole or any substantial
or material part of the Leased Premises shall be taken, appropriated or
condemned for any public or quasi-public use or purpose, then Tenant may elect
to terminate this Lease by delivering written notice to Landlord (the
"Termination Notice"), such Termination Notice to be delivered to Landlord not
more than thirty (30) days after title to the Leased Premises vests in the
taking authority, and all rents and other charges paid under this Lease shall be
apportioned as of the date of Landlord receives the Termination Notice.
(b) Tenant shall be entitled to receive any award in
connection with any taking, appropriation or condemnation of the Leased Premises
referred to in paragraph 13(a). Landlord hereby assigns all of Landlord's right,
title and interest in and to any such award to Tenant, and Landlord hereby
irrevocably appoints Tenant as Landlord's limited power of attorney to prosecute
and collect any such award on behalf of Landlord.
14. MORTGAGES. Landlord shall not permit or cause to
be permitted any liens, restrictions, easements, covenants, encumbrances or
other conditions on the Leased Premises other than the items listed on EXHIBIT
C, attached hereto and made a part hereof (the "Permitted Encumbrances").
15. DEFAULT. (a) Tenant shall be in default hereunder
if any one or more of the following events (hereinafter referred to individually
as an "Event of Default") shall occur: (i) Tenant shall fail to pay any amounts
or charges payable by Tenant under this Lease and such failure shall continue
for more than 30 days after
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<PAGE> 5
receipt of written notice by Tenant of such failure, (ii) Tenant shall neglect
or fail to perform or observe any of the other terms, covenants or conditions
contained in this Lease and such failure shall continue for more than 30 days
after notice to Tenant of such failure, provided, that if such default cannot be
reasonably cured within such 30 day period, such period shall be extended so
long as Tenant commences the cure of such default within such 30 day period and
diligently prosecutes the completion thereof, and in any event is unable to cure
such default within 120 days after notice to Tenant of such failure. Upon the
occurrence of an Event of Default, or at any time thereafter while an Event of
Default continues, Landlord shall have the right, at its option, to terminate
this Lease. If this Lease is terminated in the manner provided above or by legal
proceedings or otherwise, Landlord or its duly authorized agents shall have the
right, immediately or at any time thereafter, and without the necessity of
giving any further notice, to reenter and to resume possession of the Leased
Premises without being deemed guilty of trespass or any other violation of law
and without prejudice to any remedies Landlord may have for unpaid rent or for
damages for breach of this Lease.
(b) All remedies available to Landlord are declared
to be cumulative and concurrent. In the event of a default or threatened default
by Tenant of any of the terms, provisions, covenants, conditions, rules and
regulations of this Lease, Landlord shall have the right to seek and the right
to invoke any remedy permitted to Landlord in law or in equity. No termination
of this Lease nor any taking or recovering of possession of the Leased Premises
shall deprive Landlord of any of its remedies or actions against Tenant for all
damages resulting from Tenant's default.
16. SUBLETTING AND ASSIGNMENT. Tenant shall have the
right to assign, pledge or mortgage this Lease, whether by operation of law or
otherwise, or sublease all or any part of the Leased Premises, without the
consent of the Landlord.
17. SURRENDER OF LEASED PREMISES; HOLDOVER. At the
expiration of the Lease Term, or upon any earlier termination of this Lease for
any reason, Tenant shall surrender the Leased Premises in good condition and
repair, reasonable wear and tear and taking by eminent domain excepted. If
Tenant fails to surrender possession of the Leased Premises at the expiration of
the Lease Term, Tenant shall be a Tenant at sufferance, but shall remain liable
for the performance of all Tenant obligations hereunder.
18. CERTIFICATES. Either party shall, without charge,
at any time and from time to time hereafter, within fifteen (15) days after
written request of the other party, certify by written instrument duly executed
and acknowledged to any mortgagee or purchaser, or proposed mortgagee or
proposed purchaser, or any other person, firm or corporation specified in such
request: (a) as to whether this Lease has been supplemented or amended, and if
so, the substance and manner of such supplement or amendment; (b) as to the
existence of any default hereunder, to such certifying party's best knowledge
and belief; (c) as to the existence of any offsets, counterclaims or defenses
thereto on the part of such other party, to such certifying party's best
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<PAGE> 6
knowledge and belief; and (d) as to any other matters as may reasonably be so
requested. Any such certificate may be relied upon by the party requesting it
and any other person, firm or corporation to whom the same may be exhibited or
delivered, and the contents of such certificate shall be binding on the party
executing the same.
19. QUIET ENJOYMENT. Landlord warrants to Tenant,
that upon Tenant's paying the rent and all other amounts and charges Tenant is
required under this Lease to pay, and upon Tenant's performing and observing all
covenants, agreements and conditions of this Lease that Tenant is required to
perform and observe, Tenant shall quietly have, hold and enjoy the Leased
Premises during the Lease Term without hindrance or interruption by Landlord or
any other person or persons claiming by, through or under the Landlord.
20. FORCE MAJEURE. Except for any obligation to pay
rent or other charges required under this Lease, if either Landlord or Tenant
shall be delayed in or prevented from the performance of any of the terms,
covenants and conditions of this Lease, by reason of restrictive governmental
laws or regulations, riots, insurrections, war, sabotage, act of God, or any
other reason of a similar or dissimilar nature not the fault of the party
delayed in or prevented from performance, then performance shall be excused for
the period of the delay or prevention of performance and the time for
performance shall be extended for an equivalent period.
21. WAIVER. The waiver by Landlord of any breach of
any term, covenant or condition of this Lease shall not be deemed to be a waiver
of such term, covenant or condition or any subsequent breach of the same or any
other term, covenant, or condition of this Lease. Landlord's acceptance of rent
shall not be deemed to be a waiver of any preceding breach by Tenant of any
term, covenant or condition of this Lease. No term, covenant, or condition of
this lease shall be deemed to have been waived by Landlord unless such waiver be
in writing by Landlord.
22. NOTICES. Any notice, demand, or request required
to be given by Landlord or Tenant under this Lease shall be in writing signed by
the party giving such notice. Any notice, request or instruction to be given
hereunder by any party to the other party will be deemed to have been given (i)
when it is delivered, (ii) the Business Day after it is sent by overnight
courier, or (iii) when it is sent by facsimile, with confirmation of receipt,
addressed as follows or to such other address(es) as may be designated by
written notice to the other party from time to time:
If to Tenant: GEO Specialty Chemicals, Inc.
28601 Chagrin Boulevard, Suite 450
Cleveland, Ohio 44122
Attention: George P. Ahearn
Fax No.: (216) 765-1307
with a copy to: Craig R. Martahus, Esq.
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Thompson Hine & Flory LLP
3900 Key Center
127 Public Square
Cleveland, OH 44114
Fax No.: (216) 566-5800
If to Landlord: Mallinckrodt, Inc.
675 McDonnell Blvd.
Hazelwood, Missouri 63134
Attn.: Richard T. Higgons, Vice President, Corporate
Development
Fax No.: (314) 654-3137
with a copy to: Mallinckrodt, Inc.
675 McDonnell Blvd.
Hazelwood, Missouri 63134
Attn: Roger A. Keller, Vice President and General Counsel
Fax No.: (314) 654-5366
23. GOVERNING LAW; SEVERABILITY; SUCCESSORS. This
Lease and its performance shall be governed, interpreted and regulated by and in
accordance with the laws of the State of Pennsylvania. If any portion of this
Lease should be invalid or held invalid, the remainder of it shall be unaffected
and remain in full force and effect. The provisions of this Lease shall apply to
and be binding upon the heirs, successors, assigns and legal representatives of
both Tenant and Landlord.
24. CONFLICT OF TERMS; ENTIRE AGREEMENT; MODIFICATION
OF LEASE This Lease shall at all times be subject to the Asset Purchase
Agreement. The parties agree that no term or provision of this Lease shall limit
or affect any obligation of the parties under the Asset Purchase Agreement. In
the event the terms and conditions contained herein (including, without
limitation, the terms of paragraph 25 below) are inconsistent or conflict with
the terms and conditions set forth in the Asset Purchase Agreement, the terms
and conditions of the Asset Purchase Agreement shall govern and control so long
as such terms remain in effect. There are no oral agreements existing between
the parties hereto with respect to the subject matter hereto. This Lease shall
not be modified except in writing signed by both Landlord and Tenant.
25. INDEMNIFICATION. Tenant shall indemnify, defend
and hold harmless Landlord from and against any and all losses, claims,
liabilities, damages, demands, fines, costs and expenses (including reasonable
legal expenses) of whatever kind and nature (collectively, "Claims") to the
extent resulting from any of the following: (i) Tenant's negligent or wrongful
acts or omissions, (ii) Tenant's breach of the terms and provisions of this
Lease or (iii) any accident, occurrence or condition caused by Tenant from the
release after the Commencement Date of any Hazardous Substances (as defined
below) in, on, under or from the Leased Premises that results in
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any injury or death to any person or damage to any property or that requires any
investigation with respect to, the removal, treatment or other remediation of,
such Hazardous Substances under the terms of any Environmental Laws (as defined
below). As used throughout this Lease, the term "Hazardous Substances" shall
mean any hazardous waste, hazardous or toxic substances, including without
limitation, asbestos, PCBs, lead-based paint, petroleum and petroleum products,
radioactive materials, pesticides, herbicides and any other substance, material
or waste that is now or hereafter regulated by any federal, state or local
governmental authority or that is now or hereafter listed, defined as or
included in the definition of 'hazardous substances', 'hazardous wastes',
'hazardous materials', 'toxic materials' or 'toxic substances' under any
applicable Environmental Laws now or hereafter in effect. As used throughout
this Lease, the term "Environmental Laws" shall mean any law, regulation, rule,
order or directive of any federal, state or local governmental authority now or
hereafter in effect that relates to pollution or protection of public health and
safety or to the environment, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, and
the Resource Conservation and Recovery Act, as amended.
(b) Landlord shall indemnify, defend and hold
harmless Tenant from and against any and all Claims to the extent resulting from
any of the following: (i) Landlord's negligent or wrongful acts or omissions,
(ii) Landlord's breach of the terms and provisions of this Lease or (iii)
subject to the terms of the Asset Purchase Agreement, any accident, occurrence
or condition caused by the release on or before the Commencement Date of any
Hazardous Substances in, on or under the Leased Premises, or any release before
or after the Commencement Date on any adjoining land owned by Landlord, that
results in any injury or death to any person or damage to any property or that
requires any investigation with respect to, the removal, treatment or other
remediation of such Hazardous Substances under the terms of any Environmental
Laws.
26. COUNTERPARTS. Two or more duplicate originals of
this Lease may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument. The Lease
may be executed in one or more counterparts and will be effective when at least
one counterpart has been executed by each party thereto, and each set of
counterparts shall constitute one duplicate original.
[rest of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have executed this
Lease on the day and year first above written.
MALLINCKRODT, INC, GEO SPECIALTY CHEMICALS,
a Delaware corporation. INC., an Ohio corporation.
By: /s/ Richard T. Higgons By: /s/ George P. Ahearn
------------------------------ --------------------------------
Name: Richard T. Higgons Name: George P. Ahearn
Title: Vice President Title: President
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Exhibit 10.13
Leased Real Property
LEASE AGREEMENT
---------------
This Lease Agreement (the "Lease") is made as of the
29th day of July, 1998 by and between MALLINCKRODT, INC., a Delaware corporation
(the "Landlord"), and GEO SPECIALTY CHEMICALS, INC., an Ohio corporation (the
"Tenant"). Unless otherwise specifically set forth herein, capitalized terms
shall have the meaning ascribed to them in that certain Asset Purchase
Agreement, by and among Tenant, as buyer, Landlord and Mallinckrodt, Inc., a New
York corporation, collectively, as seller, dated June 29, 1998 (the "Asset
Purchase Agreement").
1. LEASED PREMISES. Upon and subject to the terms and
conditions of this Lease, Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, the buildings and other improvements (herein, the "Leased
Premises") associated with the warehouse and sludge processing facility
currently operated by Landlord on land owned by Landlord (the "Land") situated
in South Whitehall Township, County of Lehigh and State of Pennsylvania, as
described on Exhibit A attached hereto and made a part hereof, and as more
narrowly described as Lot Nos. 3 and 4 on the proposed Subdivision Plan of
Mallinckrodt Chemical, Inc., prepared by McTish, Kunkel & Associates, Consulting
Engineers, Allentown, Pennsylvania, dated June 19, 1998 (the "Proposed
Subdivision Plan"), which Landlord plans to file of record following the date
hereof. The parties acknowledge that the Leased Premises consists of leased
improvements only, and not the Land; provided, that Landlord hereby grants to
Tenant, throughout the term hereof (i) the right to use existing roadways on the
Land for ingress and egress from the Leased Premises over the Land to Mauch
Chunk Road and to Cedar Crest Road, for persons and vehicles entering and
leaving the Leased Premises and (ii) the right to park vehicles in the parking
areas located near the Leased Premises. The Leased Premises are identified on
the site plan attached hereto and made a part hereof as Exhibit B.
2. LEASE TERM. (a) The initial term of this Lease
shall be twenty (20) years, commencing on the date first written above (the
"Commencement Date") and expiring on July 30, 2018 at 11:59 P.M. (the "Initial
Term").
(b) Tenant shall have fifteen (15) renewal options of
two (2) years each to extend the term of this Lease on the same terms and
conditions as the Initial Term, except that Tenant shall have no further options
to extend (each renewal period is referred to as a "Renewal Term"; the Initial
Term and any Renewal Terms are herein collectively referred to as the "Term").
Such rights to extend shall be exercisable by providing Landlord with written
notice of such election not less than thirty (30) days prior to the expiration
of the Initial Term or then current Renewal Term.
3. RENT. (a) During the Initial Term and each Renewal Term,
Tenant shall pay to Landlord, as base rent (the "Base Rent"), a sum equal to
$1.00 per
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Leased Real Property
annum, payable in one installment in advance on the Commencement Date and on
each anniversary of the Commencement Date.
(b) In addition to the Base Rent as provided above,
Tenant shall also pay, when due, all costs, expenses and other sums of money
required to be paid by Tenant under the terms of this Lease, any and all of
which are hereby defined as "Additional Rent." In the event of any non-payment
of Additional Rent, when due, Landlord shall have all of the rights and remedies
provided for hereunder, or by law or in equity, for the non-payment of Base Rent
or for any other breach of this Lease. Base Rent and Additional Rent are
hereinafter sometimes collectively referred to as "Rent."
(c) All Rent shall be payable without demand,
deduction or set-off. All Rent payments shall be made to Landlord at Landlord's
address set forth in paragraph 22 or at such other address as Landlord may
designate.
4. REAL PROPERTY TAXES AND ASSESSMENTS. Tenant shall
pay all real property taxes and assessments, special or otherwise, affecting and
attributable to the Leased Premises and covering the period included within the
Term. Tenant shall have the right to institute and prosecute any lawful contest
of real property taxes and assessments, special or otherwise, affecting the
Leased Premises (but shall pay all such taxes as and when due, regardless of
whether or not Tenant wishes to institute any contest with respect thereto), and
Landlord agrees to cooperate with Tenant in connection therewith at no cost to
Landlord.
5. UTILITIES. Tenant shall pay, as and when due, all
water, sewer, power, heat, gas, electricity and all other utility services used
or consumed on the Leased Premises during the Lease Term, such payment to be
made directly to the supplying utility company. Landlord shall not be liable for
any permanent or temporary interruption or termination of utility services nor
shall any of Tenant's obligations under this Lease be affected by any such
interruption or termination of utility services.
6. MAINTENANCE AND REPAIRS. Tenant shall, throughout
the Lease Term, at its sole cost and expense, keep and maintain the Leased
Premises in good working order and condition, including, without limitation, the
structural components, floors, walls, roof, replacement of glass, repair of
doors, truck docks and truck pads, heating units, electrical, plumbing and other
utility systems serving the Leased Premises, and the parking lots serving the
Leased Premises.
7. FIXTURES AND ALTERATIONS. Tenant shall have the
right to make any alterations, installations, additions or expansions to the
Leased Premises as Tenant may desire, provided that Tenant shall do so in a good
and workmanlike manner, free of any mechanics liens and in accordance with all
governmental laws, ordinances, requirements, orders, directions, rules or
regulations (collectively, "Governmental Requirements"). Upon the expiration or
earlier termination of this Lease, Tenant, at its
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Leased Real Property
own cost and expense, shall have the right, but not the obligation, to remove
all trade fixtures and other equipment owned by Tenant and located within the
Leased Premises, and shall repair any damage caused by such removal.
8. USE. Subject in all respects to the terms and
conditions otherwise set forth in this Lease, Tenant may use the Leased Premises
for any lawful purpose; provided that, during the Term, Tenant will not take any
action, or omit to take any action, that would give rise to Environmental Claims
with respect to the Leased Premises. Tenant shall not use or occupy the Leased
Premises, or permit or suffer the Leased Premises or any part thereof to be used
or occupied, for any unlawful or illegal business, use or purpose, or in any
manner to constitute a nuisance of any kind, or for any purpose or in any way in
violation of any Governmental Requirements or in any manner that might breach
any of its obligations under the Asset Purchase Agreement. Landlord shall not be
liable for the loss of or any damage to any property of Tenant or of others
located or stored in, upon or about the Leased Premises, whether by theft,
vandalism, malicious mischief, unlawful entry or any other cause or reason.
9. LIENS. (a) Throughout the Term, Tenant shall not
suffer or permit any mechanic's lien or other lien to attach to the Leased
Premises as a result of any work performed by Tenant or its agents, and whenever
and as often as any such lien or liens shall be filed or shall attach, Tenant
shall, within 90 days thereafter, pay or bond off such lien or liens or procure
their cancellation in any manner prescribed or permitted by law.
(b) Tenant acknowledges and agrees that Tenant is
not, and shall not be deemed to be, an agent of Landlord in connection with any
construction, demolition or renovation activities undertaken by Tenant at the
Leased Premises, and nothing contained in this Lease shall be construed as
consent or permission by Landlord to subject Landlord's fee simple estate in the
Land or the Leased Premises to any lien of contractors, suppliers, materialmen
or other persons performing services, or supplying labor or materials, in
connection any construction, demolition or renovation activities undertaken by
Tenant.
10. INSURANCE. (a) Throughout the Term, Tenant shall
obtain and keep in force, at its sole cost and expense, commercial general
liability insurance insuring both the Landlord and Tenant from and against any
and all claims for damages resulting from injury or death to persons or injury
to property occurring in and about the Leased Premises or arising out of the
ownership, maintenance, use or occupancy of the Leased Premises. The amount of
coverage shall be not less than $2,000,000.00 per occurrence and $3,000,000.00
annual aggregate for property damage and injury or death to persons. Tenant
shall also maintain all risk property damage insurance covering all of Tenant's
trade fixtures, equipment, furnishings and other personal property and contents
and all other portions of the Leased Premises.
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Leased Real Property
(b) Tenant shall deliver to Landlord a certificate
evidencing the existence and amount of the insurance required to be carried by
Tenant hereunder. No policy of insurance required to be obtained and maintained
hereunder shall be cancelable or subject to reduction of coverage or other
material modification except after thirty (30) days prior written notice to
Landlord.
(c) Tenant shall keep the Leased Premises insured
against loss by fire (with extended coverage) in an amount equal to not less
than one hundred percent (100%) of the full insurable value thereof.
11. FIRE OR OTHER CASUALTY. If at any time during the
Lease Term all or any portion of the improvements now or hereafter erected on
the Leased Premises shall be destroyed or damaged by fire, flood, or any other
casualty, Tenant shall repair, reconstruct and restore such improvements, and
there shall be no abatement in Base Rent or any other charges hereunder during
the period of such restoration; provided, that if the estimated cost of
restoring such improvements exceeds Six Hundred Thousand Dollars ($600,000.00),
then Tenant shall have the right to terminate this Agreement, in which event
neither party shall have any liability to the other hereunder.
12. MUTUAL RELEASE AND WAIVER OF CLAIMS.
Notwithstanding any provision of this instrument to the contrary, Landlord and
Tenant hereby each waive all rights of recovery and causes of action which
either party has or may have, or which may arise hereafter, against the other,
whether caused by negligence or otherwise, for any loss or damage to property or
business arising out of or incident to the perils required to be insured against
under this Lease; provided, however, that the foregoing waivers apply only to
the extent of such insurance coverage and to the extent such waivers do not
invalidate any policy of insurance of the parties hereto, now or hereafter
issued, it being stipulated that the waiver shall not apply if the application
thereof would result in the invalidation of such policy of insurance.
13. CONDEMNATION. (a) If the whole of the Leased
Premises shall be taken, appropriated or condemned for any public or
quasi-public use or purpose, or if less than all of the Leased Premises is taken
but the remaining portion is not sufficient for the operation of Tenant's
business, then the Initial Term, or then-current Renewal Term, shall
automatically cease and terminate as of the date Tenant is required to
relinquish possession of the Leased Premises or when title to the Leased
Premises vests in the taking authority, whichever first occurs, and all rents
and other charges paid under this Lease shall be apportioned as of the date of
termination. Tenant shall be entitled to receive any award for the value of the
Leased Premises and also the Option Property (defined below) in connection with
any taking and Landlord hereby waives any claim thereto.
(b) If less than all of the Leased Premises shall be
taken, appropriated or condemned for any public or quasi-public use or purpose,
and the
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Leased Real Property
remaining portion not so taken is sufficient for the operation of Tenant's
business, as determined by Tenant in Tenant's sole judgment, then Tenant shall,
to the extent of any award received in connection therewith (which shall be for
the account of Tenant in such circumstances), restore the balance of the Leased
Premises to a complete unit and this Lease shall thereafter remain in full force
and effect.
14. MORTGAGES. Landlord shall not permit or cause to
be permitted any liens, restrictions, easements, covenants, encumbrances or
other conditions on the Leased Premises other than the Permitted Encumbrances
(defined below).
15. DEFAULT. (a) Tenant shall be in default hereunder
if any one or more of the following events (hereinafter referred to individually
as an "Event of Default") shall occur: (i) Tenant shall fail to pay any amounts
or charges payable by Tenant under this Lease and such failure shall continue
for more than 30 days after receipt of written notice by Tenant of such
failure,, (ii) Tenant shall neglect or fail to perform or observe any of the
other terms, covenants or conditions contained in this Lease and such failure
shall continue for more than 30 days after notice to Tenant of such failure,
provided, that if such default cannot be reasonably cured within such 30 day
period, such period shall be extended so long as Tenant commences the cure of
such default within such 30 day period and diligently prosecutes the completion
thereof, and in any event is unable to cure such default within 120 days after
notice to Tenant of such failure. Upon the occurrence of an Event of Default, or
at any time thereafter while an Event of Default continues, Landlord shall have
the right, at its option, to terminate this Lease. If this Lease is terminated
in the manner provided above or by legal proceedings or otherwise, Landlord or
its duly authorized agents shall have the right, immediately or at any time
thereafter, and without the necessity of giving any further notice, to reenter
and to resume possession of the Leased Premises without being deemed guilty of
trespass or any other violation of law and without prejudice to any remedies
Landlord may have for unpaid rent or for damages for breach of this Lease.
(b) All remedies available to Landlord are declared
to be cumulative and concurrent. In the event of a default or threatened default
by Tenant of any of the terms, provisions, covenants, conditions, rules and
regulations of this Lease, Landlord shall have the right to seek and the right
to invoke any remedy permitted to Landlord in law or in equity. No termination
of this Lease nor any taking or recovering of possession of the Leased Premises
shall deprive Landlord of any of its remedies or actions against Tenant for all
damages resulting from Tenant's default.
16. SUBLETTING AND ASSIGNMENT. Tenant shall have the
right to assign, pledge or mortgage this Lease, whether by operation of law or
otherwise, or sublease all or any part of the Leased Premises, without the
consent of the Landlord.
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Leased Real Property
17. SURRENDER OF LEASED PREMISES; HOLDOVER. At the
expiration of the Lease Term, or upon any earlier termination of this Lease for
any reason, Tenant shall surrender the Leased Premises in good condition and
repair, reasonable wear and tear and taking by eminent domain excepted. If
Tenant fails to surrender possession of the Leased Premises at the expiration of
the Lease Term, Tenant shall be a Tenant at sufferance, but shall remain liable
for the performance of all Tenant obligations hereunder.
18. CERTIFICATES. Either party shall, without charge,
at any time and from time to time hereafter, within fifteen (15) days after
written request of the other party, certify by written instrument duly executed
and acknowledged to any mortgagee or purchaser, or proposed mortgagee or
proposed purchaser, or any other person, firm or corporation specified in such
request: (a) as to whether this Lease has been supplemented or amended, and if
so, the substance and manner of such supplement or amendment; (b) as to the
existence of any default hereunder, to such certifying party's best knowledge
and belief; (c) as to the existence of any offsets, counterclaims or defenses
thereto on the part of such other party, to such certifying party's best
knowledge and belief; and (d) as to any other matters as may reasonably be so
requested. Any such certificate may be relied upon by the party requesting it
and any other person, firm or corporation to whom the same may be exhibited or
delivered, and the contents of such certificate shall be binding on the party
executing the same.
19. QUIET ENJOYMENT. Landlord warrants to Tenant,
that upon Tenant's paying the rent and all other amounts and charges Tenant is
required under this Lease to pay, and upon Tenant's performing and observing all
covenants, agreements and conditions of this Lease that Tenant is required to
perform and observe, Tenant shall quietly have, hold and enjoy the Leased
Premises during the Lease Term without hindrance or interruption by Landlord or
any other person or persons claiming by, through or under the Landlord.
20. FORCE MAJEURE. Except for any obligation to pay
rent or other charges required under this Lease, if either Landlord or Tenant
shall be delayed in or prevented from the performance of any of the terms,
covenants and conditions of this Lease, by reason of restrictive governmental
laws or regulations, riots, insurrections, war, sabotage, act of God, or any
other reason of a similar or dissimilar nature not the fault of the party
delayed in or prevented from performance, then performance shall be excused for
the period of the delay or prevention of performance and the time for
performance shall be extended for an equivalent period.
21. WAIVER. The waiver by Landlord of any breach of
any term, covenant or condition of this Lease shall not be deemed to be a waiver
of such term, covenant or condition or any subsequent breach of the same or any
other term, covenant, or condition of this Lease. Landlord's acceptance of rent
shall not be deemed to be a waiver of any preceding breach by Tenant of any
term, covenant or condition of this
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Leased Real Property
Lease. No term, covenant, or condition of this lease shall be deemed to have
been waived by Landlord unless such waiver be in writing by Landlord.
22. NOTICES. Any notice, demand, or request required
to be given by Landlord or Tenant under this Lease shall be in writing signed by
the party giving such notice. Any notice, request or instruction to be given
hereunder by any party to the other party will be deemed to have been given (i)
when it is delivered, (ii) the Business Day after it is sent by overnight
courier, or (iii) when it is sent by facsimile, with confirmation of receipt,
addressed as follows or to such other address(es) as may be designated by
written notice to the other party from time to time:
If to Tenant: GEO Specialty Chemicals, Inc.
28601 Chagrin Boulevard, Suite 450
Cleveland, Ohio 44122
Attention: George P. Ahearn
Fax No.: (216) 765-1307
with a copy to: Craig R. Martahus, Esq.
Thompson Hine & Flory LLP
3900 Key Center
127 Public Square
Cleveland, OH 44114
Fax No.: (216) 566-5800
If to Landlord: Mallinckrodt, Inc.
675 McDonnell Blvd.
Hazelwood, Missouri 63134
Attn.: Richard T. Higgons, Vice President, Corporate
Development
Fax No.: (314) 654-3137
with a copy to: Mallinckrodt, Inc.
675 McDonnell Blvd.
Hazelwood, Missouri 63134
Attn: Roger A. Keller, Vice President and General Counsel
Fax No.: (314) 654-5366
23. GOVERNING LAW; SEVERABILITY; SUCCESSORS. This
Lease and its performance shall be governed, interpreted and regulated by and in
accordance with the laws of the State of Pennsylvania. If any portion of this
Lease should be invalid or held invalid, the remainder of it shall be unaffected
and remain in full force and effect. The provisions of this Lease shall apply to
and be binding upon the heirs, successors, assigns and legal representatives of
both Tenant and Landlord.
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Leased Real Property
24. CONFLICT OF TERMS; ENTIRE AGREEMENT; MODIFICATION
OF LEASE This Lease shall at all times be subject to the Asset Purchase
Agreement. The parties agree that no term or provision of this Lease shall limit
or affect any obligation of the parties under the Asset Purchase Agreement. In
the event the terms and conditions contained herein (including, without
limitation, the terms of paragraph 25 below) are inconsistent or conflict with
the terms and conditions set forth in the Asset Purchase Agreement, the terms
and conditions of the Asset Purchase Agreement shall govern and control so long
as such terms remain in effect. There are no oral agreements existing between
the parties hereto with respect to the subject matter hereof. This Lease shall
not be modified except in writing signed by both Landlord and Tenant.
25. INDEMNIFICATION. (a) Tenant shall indemnify,
defend and hold harmless Landlord from and against any and all losses, claims,
liabilities, damages, demands, fines, costs and expenses (including reasonable
legal expenses) of whatever kind and nature (collectively, "Claims") to the
extent resulting from any of the following: (i) Tenant's negligent or wrongful
acts or omissions, (ii) Tenant's breach of the terms and provisions of this
Lease or (iii) any accident, occurrence or condition caused by Tenant from the
release after the Commencement Date of any Hazardous Substances (as defined
below) in, on, under or from the Leased Premises that results in any injury or
death to any person or damage to any property or that requires any investigation
with respect to, the removal, treatment or other remediation of, such Hazardous
Substances under the terms of any Environmental Laws (as defined below). As used
throughout this Lease, the term "Hazardous Substances" shall mean any hazardous
waste, hazardous or toxic substances, including without limitation, asbestos,
PCBs, lead-based paint, petroleum and petroleum products, radioactive materials,
pesticides, herbicides and any other substance, material or waste that is now or
hereafter regulated by any federal, state or local governmental authority or
that is now or hereafter listed, defined as or included in the definition of
'hazardous substances', 'hazardous wastes', 'hazardous materials', 'toxic
materials' or 'toxic substances' under any applicable Environmental Laws now or
hereafter in effect. As used throughout this Lease, the term "Environmental
Laws" shall mean any law, regulation, rule, order or directive of any federal,
state or local governmental authority now or hereafter in effect that relates to
pollution or protection of public health and safety or to the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the Resource
Conservation and Recovery Act, as amended.
(b) Landlord shall indemnify, defend and hold
harmless Tenant from and against any and all Claims to the extent resulting from
any of the following: (i) Landlord's negligent or wrongful acts or omissions,
(ii) Landlord's breach of the terms and provisions of this Lease or (iii)
subject to the terms of the Asset Purchase Agreement, any accident, occurrence
or condition caused by the release on or before the Commencement Date of any
Hazardous Substances in, on or under the Leased Premises, or any release before
or after the Commencement Date on any adjoining land owned by
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Leased Real Property
Landlord, that results in any injury or death to any person or damage to any
property or that requires any investigation with respect to, the removal,
treatment or other remediation of such Hazardous Substances under the terms of
any Environmental Laws.
26. OPTION TO PURCHASE; RESTRICTIONS ON SALE. (a)
Landlord shall not sell or convey any interest in the Leased Premises and the
land described below as the Land Under Option (collectively, the "Option
Property") unless Landlord provides at least one hundred twenty (120) days
advance written notice to tenant of its willingness to sell such property.
During such 120 day period (the "Option Period"), tenant shall have the option
to purchase the Option Property (the "Option to Purchase"), exercisable at any
time during the Option Period by delivering written notice to Landlord. Upon
Tenant's exercise of its Option to Purchase, Landlord and Tenant shall promptly
enter into a purchase agreement that contains such terms as are customary and
consistent with the following terms:
(i) The purchase price for the Option Property shall
be $1.00.
(ii) The consummation of the transaction contemplated
by the Option to Purchase (the "Closing") shall be completed as soon as
reasonably practicable under the circumstances following exercise of the Option
to Purchase (the "Closing Date"), taking into account any subdivision or similar
requirements. As a condition to Closing, Tenant shall obtain, at its cost, any
necessary subdivision or similar approval to effect the sale of the Option
Property as one or more separate parcels, apart from any continuous land to be
retained by Landlord.
(iii) On the Closing Date, Landlord shall convey
marketable fee simple title to the Option Property by special warranty deed
(the "Deed"), subject only to (i) real estate taxes and assessments, both
general and special, including, without limitation, assessments for water and
sewer, that are a lien but not yet due and payable, (ii) other matters
affecting title that would not, individually or in the aggregate, materially
detract from the value of the real property used in connection with the conduct
of Tenant's then-existing business operations or materially impair the use or
conduct thereof; (iii) any liens and encumbrances with respect to the Leased
Premises that exist solely or principally as a consequence of actions by
Tenant; and (iv) the matters set forth on EXHIBIT C, attached hereto and
made a part hereof ((i), (ii), (iii) and (iv) together, the "Permitted
Encumbrances"). The Deed shall also provide for the grant to Tenant of
perpetual easements, appurtenant to the Option Property, for ingress and egress
to and from the Option Property over existing private roads to Mauch Chunk Road
and Cedar Crest Road, to the extent Landlord, after consummation of the
transactions contemplated under the Asset Purchase Agreement, owns such land on
which such roads are situated.
(iv) On the Closing Date, Landlord shall deliver, at
Landlord's cost, an owner's title insurance policy (ALTA form) issued by
Commonwealth Title
9
<PAGE> 10
Leased Real Property
Company, or such other national title company as Tenant may reasonably elect
(the "Title Company"), insuring fee simple title of Tenant in the Option
Property, subject only to the Permitted Encumbrances, in an amount equal to
$600,000.00, with standard exceptions deleted, together with affirmative
insurance as to the appurtenant easements referred to above, and a "same land as
survey" endorsement, provided that Tenant shall furnish any survey in connection
therewith (the "Title Policy"). Each party shall pay one-half of any escrow
fees, recording fees, and sales or transfer taxes incurred in connection with
the conveyance of the Option Property to Tenant.
(v) On or before the Closing Date, Landlord shall, at
its cost, deliver a survey of each parcel of land comprising the Option
Property, which survey shall be prepared in accordance with the most recent
ALTA/ACSM Minimum Survey Detail Requirements, showing all Table A items thereof
(except items 5 and 12 thereof and such other items as are not reasonably
necessary or feasible), certified to Tenant, Landlord, Tenant's lender and the
title company (the "Survey").
(vi) On the Closing Date, Landlord shall deposit with
the Title Company (i) the Deed; (ii) Landlord's affidavit of non-foreign status
as contemplated by Section 1445 of the Internal Revenue Code of 1986, as
amended; and (iii) a release of any and all documents relating to any mortgage,
lien or encumbrance affecting the Option Property or any portion thereof, other
than the Permitted Encumbrances.
(vii) The purchase agreement for the Option Property
shall include such environmental representations, warranties and
indemnifications in favor of Tenant as are consistent with the terms of Asset
Purchase Agreement.
(b) The land to be included in such sale (the "Land
under Option") will consist, at a minimum, of all land necessary for the
beneficial use and enjoyment of the Leased Premises, together with additional
land for expansion and as a buffer to adjoining property, as shall be mutually
determined by the parties following the receipt of notice from Landlord that the
property is available for sale, subject, however, to the following, each of
which shall be conditions to Tenant's obligations to consummate such purchase:
(i) The parties anticipate that the Land Under Option
shall include no less than 20 acres in the aggregate, including land related to
the warehouse facilities and the sludge facilities;
(ii) The Land Under Option shall be configured to
respect all applicable building and zoning laws, including setback and other
restrictions, minimum lot size and parking requirements, taking into account any
variances that may be issued by applicable governmental authorities.
10
<PAGE> 11
Leased Real Property
(iii) The Land Under Option shall be contiguous to
the Owned Real Property (defined below), and shall have direct vehicular access
to existing and usable public roads or rights of way over the Owned Real
Property and the easements benefitting the Owned Real Property, in addition to
the rights discussed in paragraph 26(a)(iii) above. For the purposes hereof, the
term Owned Real Property means the real property to be conveyed separately by
Landlord to Tenant and further described as Lot Nos. 1 and 2 on the Proposed
Subdivision Plan.
(iv) The Land Under Option shall not rely on other
land for utilities other than with respect to the Owned Real Property and except
to the extent such reliance exists as of the Commencement Date.
(v) The Land Under Option shall constitute one or
more separate tax parcels, or shall be added to the tax parcels comprising the
Owned Real Property, at the time of conveyance to Tenant.
(vi) The Land Under Option shall exclude any land to
which Tenant objects based on environmental considerations.
(c) During the Option Period, Tenant shall have the
right to conduct a so-called Phase I environmental inspection of the Option
Property, and Landlord shall cooperate with Tenant and provide full disclosure
to Tenant of all available environmental reports and data; provided, that Tenant
shall have no right to perform soil or ground water tests on the Option
Property.
(d) In the event Tenant does not elect to exercise
the Option to Purchase, the Option to Purchase shall be of no further force or
effect, but this Lease shall remain in full force and effect notwithstanding any
sale of the Option Property to any third party.
27. COUNTERPARTS. Two or more duplicate originals of
this Lease may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument. The Lease
may be executed in one or more counterparts and will be effective when at least
one counterpart has been executed by each party thereto, and each set of
counterparts shall constitute one duplicate original.
[rest of page intentionally left blank]
11
<PAGE> 12
Leased Real Property
IN WITNESS WHEREOF, the parties have executed this Lease on the day and
year first above written.
MALLINCKRODT, INC, GEO SPECIALTY CHEMICALS,
a Delaware corporation. INC., an Ohio corporation.
By: /s/ Richard T. Higgons By: /s/ George P. Ahearn
------------------------------------ ----------------------------
Name: Richard T. Higgons Name: George P. Ahearn
Title: Vice President Title: President
12
<PAGE> 1
Exhibit 10.14
================================================================================
CREDIT AGREEMENT
among
GEO SPECIALTY CHEMICALS, INC.,
VARIOUS LENDING INSTITUTIONS,
and
BANKERS TRUST COMPANY,
As Administrative Agent
------------------------------------
Dated as of March 25, 1997
and
Amended and Restated as of July 31, 1998
------------------------------------
$25,000,000
================================================================================
<PAGE> 2
CREDIT AGREEMENT, dated as of March 25, 1997 and amended and
restated as of July 31, 1998, among GEO SPECIALTY CHEMICALS, INC., an Ohio
corporation (the "Borrower"), the lending institutions party hereto from time to
time (each a "Bank" and, collectively, the "Banks"), and BANKERS TRUST COMPANY,
as administrative agent (the "Administrative Agent"). Unless otherwise defined
herein, all capitalized terms used herein and defined in Section 10 are used
herein as so defined.
W I T N E S S E T H :
---------------------
WHEREAS, the Borrower, the Existing Banks and Bankers Trust
Company, as administrative agent thereunder, are party to a credit agreement,
dated as of March 25, 1997 (as amended, modified or supplemented to, but not
including, the Restatement Effective Date, the "Existing Credit Agreement"); and
WHEREAS, the Borrower has requested that the Existing Credit
Agreement be amended and restated in its entirety, and the Banks and the
Administrative Agent are willing to amend and restate the same, upon the terms
and conditions set forth herein;
NOW, THEREFORE, the parties hereto agree that, on the
Restatement Effective Date, the Existing Credit Agreement shall be, and hereby
is, amended and restated in its entirety as follows:
SECTION 1. AMOUNT AND TERMS OF CREDIT.
1.01 COMMITMENTS. (a) Subject to and upon the terms and
conditions set forth herein, each Bank severally agrees, at any time and from
time to time on and after the Restatement Effective Date and prior to the
Maturity Date, to make a revolving loan or revolving loans (each, a "Revolving
Loan" and, collectively, the "Revolving Loans") to the Borrower, which Revolving
Loans (i) shall, at the option of the Borrower, be Base Rate Loans or Eurodollar
Loans, PROVIDED that except as otherwise specifically provided in Section
1.10(b), all Revolving Loans comprising the same Borrowing shall at all times be
of the same Type, (ii) may be repaid and reborrowed in accordance with the
provisions hereof, (iii) shall not exceed for any Bank at any time outstanding
that aggregate principal amount which, when added to the product of (x) such
Bank's Adjusted RC Percentage and (y) the sum of (I) the aggregate amount of all
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid
with the proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) at such time and (II) the aggregate principal
amount of all Swingline Loans (exclusive of Swingline Loans which are repaid
with the
<PAGE> 3
proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) then outstanding, equals the Revolving Loan
Commitment of such Bank at such time and (iv) shall not exceed for all Banks at
any time outstanding that aggregate principal amount which, when added to (x)
the amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings
which are repaid with the proceeds of, and simultaneously with the incurrence
of, the respective incurrence of Revolving Loans) at such time and (y) the
aggregate principal amount of all Swingline Loans (exclusive of Swingline Loans
which are repaid with the proceeds of, and simultaneously with the incurrence
of, the respective incurrence of Revolving Loans) then outstanding, equals the
Adjusted Total Revolving Loan Commitment at such time.
(b) Subject to and upon the terms and conditions set forth
herein, the Swingline Bank in its individual capacity agrees to make at any time
and from time to time on and after the Restatement Effective Date and prior to
the Swingline Expiry Date, a revolving loan or revolving loans to the Borrower
(each a "Swingline Loan," and, collectively, the "Swingline Loans"), which
Swingline Loans (i) shall be made and maintained as Base Rate Loans, (ii) may be
repaid and reborrowed in accordance with the provisions hereof, (iii) shall not
exceed in aggregate principal amount at any time outstanding, when combined with
the aggregate principal amount of all Revolving Loans made by Non-Defaulting
Banks then outstanding and the Letter of Credit Outstandings (exclusive of
Unpaid Drawings which are repaid with the proceeds of, and simultaneously with
the incurrence of, the respective incurrence of Swingline Loans) at such time,
an amount equal to the Adjusted Total Revolving Loan Commitment then in effect
(after giving effect to any reductions to the Adjusted Total Revolving Loan
Commitment on such date) and (iv) shall not exceed in aggregate principal amount
at any time outstanding the Maximum Swingline Amount. The Swingline Bank will
not make a Swingline Loan after it has received written notice from the Required
Banks that one or more of the applicable conditions to Credit Events specified
in Section 5 are not then satisfied.
(c) On any Business Day, the Swingline Bank may, in its sole
discretion, give notice to the Banks that its outstanding Swingline Loans shall
be funded with a Borrowing of Revolving Loans (PROVIDED that each such notice
shall be deemed to have been automatically given upon the occurrence of an Event
of Default under Section 9.05 or upon the exercise of any of the remedies
provided in the last paragraph of Section 9), in which case a Borrowing of
Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day by all
Banks PRO RATA based on each Bank's Adjusted RC Percentage, and the proceeds
thereof shall be applied directly to repay the Swingline Bank for such
outstanding Swingline Loans. Each Bank hereby irrevocably agrees to make Base
Rate Loans upon one Business Day's notice pursuant to each Mandatory Borrowing
in the amount and in the manner specified in the preceding sentence and on the
date specified in writing by the Swingline Bank notwithstanding (i) that the
amount of the Mandatory Borrowing may not comply with the Minimum Borrowing
Amount otherwise required hereunder, (ii) whether any conditions specified in
Section 5 are then satisfied, (iii) whether a Default or an Event of Default has
occurred and is continuing, (iv) the date of such Mandatory Borrowing and (v)
any reduction in the Total Revolving Loan Commitment or the Adjusted Total
Revolving Loan Commitment after any such Swingline Loans were made. In the event
that any Mandatory Borrowing cannot for any reason be made on the date otherwise
required above (including, without limitation, as a result of the commencement
of a proceeding under the Bankruptcy Code in respect of the Borrower), each Bank
(other than the Swingline Bank) hereby agrees that it shall forthwith purchase
from the Swingline Bank (without
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<PAGE> 4
recourse or warranty) such assignment of the outstanding Swingline Loans as
shall be necessary to cause the Banks to share in such Swingline Loans ratably
based upon their respective Adjusted RC Percentages, PROVIDED that (x) all
interest payable on the Swingline Loans shall be for the account of the
Swingline Bank until the date the respective assignment is purchased and, to the
extent attributable to the purchased assignment, shall be payable to the Bank
purchasing same from and after such date of purchase and (y) at the time any
purchase of participations pursuant to this sentence is actually made, the
purchasing Bank shall be required to pay the Swingline Bank interest on the
principal amount of participation purchased for each day from and including the
day upon which the Mandatory Borrowing would otherwise have occurred to but
excluding the date of payment for such participation, at the overnight Federal
Funds Effective Rate for the first three days and at the rate otherwise
applicable to Revolving Loans maintained as Base Rate Loans hereunder for each
day thereafter.
1.02 MINIMUM BORROWING AMOUNTS, ETC. The aggregate principal
amount of each Borrowing of Revolving Loans shall not be less than the Minimum
Borrowing Amount and, if greater, shall be in integral multiples of $100,000.
The aggregate principal amount of each Borrowing of Swingline Loans shall not be
less than $100,000 and, if greater, shall be in integral multiples of $100,000.
More than one Borrowing may be incurred on any day, PROVIDED that at no time
shall there be outstanding more than six Borrowings of Eurodollar Loans.
1.03 NOTICE OF BORROWING. (a) Whenever the Borrower desires to
incur Revolving Loans (excluding Borrowings of Revolving Loans incurred pursuant
to a Mandatory Borrowing), the Borrower shall give the Administrative Agent at
its Notice Office, prior to 11:00 A.M. (New York time), at least three Business
Days' prior written notice (or telephonic notice promptly confirmed in writing)
of each Borrowing of Eurodollar Loans to be made hereunder and, except as
provided in Section 1.03(c), at least one Business Day's prior written notice
(or telephonic notice promptly confirmed in writing) of each Borrowing of Base
Rate Loans to be made hereunder. Each such Notice of Borrowing shall be in the
form of Exhibit A and shall be irrevocable and shall specify (i) that such
Borrowing is to consist of Revolving Loans, (ii) the aggregate principal amount
of the Revolving Loans to be made pursuant to such Borrowing, (iii) the date of
Borrowing (which shall be a Business Day) and (iv) whether the respective
Borrowing shall consist of Base Rate Loans or (to the extent permitted)
Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be initially
applicable thereto. The Administrative Agent shall promptly give each Bank
written notice (or telephonic notice on that day promptly confirmed in writing)
of each proposed Borrowing, of such Bank's proportionate share thereof and of
the other matters covered by the Notice of Borrowing.
(b)(i) Whenever the Borrower desires to incur a Borrowing of
Swingline Loans hereunder, the Borrower shall give the Swingline Bank prior to
12:00 Noon (New York time) on the day such Swingline Loan is to be made, written
notice (or telephonic notice promptly confirmed in writing) of each Swingline
Loan to be made hereunder. Each such Notice of Borrowing shall be irrevocable
and shall specify in each case (x) that such Borrowing is to consist of a
Swingline Loan, (y) the date of Borrowing (which shall be a Business Day) and
(z) the aggregate principal amount of the Swingline Loan to be made pursuant to
such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice
specified in Section 1.01(c), with the Borrower irrevocably agreeing, by its
incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set
forth in such Section 1.01(c).
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<PAGE> 5
(c) In the case of a Notice of Borrowing given by the Borrower
with respect to Eurodollar Loans which has been deemed rescinded pursuant to
clause (x) of the last sentence of Section 1.10, the Borrower shall be permitted
to deliver a substitute Notice of Borrowing providing for (x) an equal aggregate
amount of Base Rate Loans and (y) notwithstanding the one Business Day notice
period otherwise required by Section 1.03(a), a Borrowing on the date originally
set forth in the rescinded Notice of Borrowing.
(d) Without in any way limiting the obligation of the Borrower
to confirm in writing any telephonic notice of any Borrowing of Loans, the
Administrative Agent or the Swingline Bank, as the case may be, may act without
liability upon the basis of telephonic notice of such Borrowing, believed by the
Administrative Agent or the Swingline Bank, as the case may be, in good faith to
be from the President or the Chief Financial Officer of the Borrower (or any
other officer of the Borrower designated in writing to the Administrative Agent
and the Swingline Bank by the President or the Chief Financial Officer as being
authorized to give such notices under this Agreement) prior to receipt of
written confirmation. In each such case, the Borrower hereby waives the right to
dispute the Administrative Agent's and the Swingline Bank's record of the terms
of such telephonic notice of such Borrowing of Loans.
1.04 DISBURSEMENT OF FUNDS. (a) No later than 12:00 Noon (New
York time) on the date specified in each Notice of Borrowing, each Bank will
make available its PRO RATA share of each Borrowing requested to be made on such
date in the manner provided below, PROVIDED that all Swingline Loans shall be
made available by the Swingline Bank no later than 3:00 P.M. (New York time) on
the date so requested. All such amounts shall be made available to the
Administrative Agent in U.S. dollars and immediately available funds at the
Payment Office and the Administrative Agent promptly will make available to the
Borrower by depositing to its account at the Payment Office the aggregate of the
amounts so made available in the type of funds received. Unless the
Administrative Agent shall have been notified by any Bank prior to the date of
Borrowing that such Bank does not intend to make available to the Administrative
Agent its portion of the Borrowing or Borrowings to be made on such date, the
Administrative Agent may assume that such Bank has made such amount available to
the Administrative Agent on such date of Borrowing, and the Administrative
Agent, in reliance upon such assumption, may (in its sole discretion and without
any obligation to do so) make available to the Borrower a corresponding amount.
If such corresponding amount is not in fact made available to the Administrative
Agent by such Bank and the Administrative Agent has made available same to the
Borrower, the Administrative Agent shall be entitled to recover such
corresponding amount from such Bank. If such Bank does not pay such
corresponding amount forthwith upon the Administrative Agent's demand therefor,
the Administrative Agent shall promptly notify the Borrower, and the Borrower
shall immediately pay such corresponding amount to the Administrative Agent. The
Administrative Agent shall also be entitled to recover on demand from such Bank
or the Borrower, as the case may be, interest on such corresponding amount in
respect of each day from the date such corresponding amount was made available
by the Administrative Agent to the Borrower to the date such corresponding
amount is recovered by the Administrative Agent, at a rate per annum equal to
(x) if paid by such Bank, the overnight Federal Funds Effective Rate or (y) if
paid by the Borrower, the then applicable rate of interest, calculated in
accordance with Section 1.08, for the respective Revolving Loans.
(b) Nothing herein shall be deemed to relieve any Bank from
its obligation to fulfill its commitments hereunder or to prejudice any rights
which the Borrower may have against any
-4-
<PAGE> 6
Bank as a result of any default by such Bank hereunder.
1.05 NOTES. (a) The Borrower's obligation to pay the principal
of, and interest on, the Loans shall be evidenced (i) if Revolving Loans, by a
promissory note duly executed and delivered by the Borrower substantially in the
form of Exhibit B-1, with blanks appropriately completed in conformity herewith
(each, a "Revolving Note" and, collectively, the "Revolving Notes") and (ii) if
Swingline Loans, by a promissory note duly executed and delivered by the
Borrower substantially in the form of Exhibit B-2, with blanks appropriately
completed in conformity herewith (the "Swingline Note").
(b) The Revolving Note issued to each Bank shall (i) be
executed by the Borrower, (ii) be payable to the order of such Bank and be dated
the Restatement Effective Date (or, in the case of any Revolving Note issued
after the Restatement Effective Date, be dated the date of the issuance
thereof), (iii) be in a stated principal amount equal to the Revolving Loan
Commitment of such Bank and be payable in the principal amount of the Revolving
Loans evidenced thereby from time to time, (iv) mature on the Maturity Date, (v)
bear interest as provided in the appropriate clause of Section 1.08 in respect
of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01 and
mandatory repayment as provided in Section 4.02 and (vii) be entitled to the
benefits of this Agreement and the other Credit Documents.
(c) The Swingline Note issued to the Swingline Bank shall (i)
be executed by the Borrower, (ii) be payable to the order of the Swingline Bank
and be dated the Restatement Effective Date (or, in the case of any Swingline
Note issued after the Restatement Effective Date, be dated the date of the
issuance thereof), (iii) be in a stated principal amount equal to the Maximum
Swingline Amount and be payable in the principal amount of the outstanding
Swingline Loans evidenced thereby from time to time, (iv) mature on the
Swingline Expiry Date, (v) bear interest as provided in the appropriate clause
of Section 1.08 in respect of the Base Rate Loans evidenced thereby and (vi) be
entitled to the benefits of this Agreement and the other Credit Documents.
(d) Each Bank will note on its internal records the amount of
each Revolving Loan made by it and each payment in respect thereof and will,
prior to any transfer of its Revolving Note, endorse on the reverse side thereof
the outstanding principal amount of Revolving Loans evidenced thereby. Such
notation shall be conclusive absent manifest error, although the failure to make
any such notation shall not affect the Borrower's obligations in respect of such
Revolving Loans.
1.06 CONVERSIONS. The Borrower shall have the option to
convert on any Business Day occurring on or after the Restatement Effective
Date, all or a portion at least equal to the applicable Minimum Borrowing Amount
of the outstanding principal amount of Revolving Loans made pursuant to one or
more Borrowings (it being understood that Swingline Loans will at all times be
maintained as Base Rate Loans) of one or more Types of Revolving Loans into a
Borrowing or Borrowings of another Type of Revolving Loan, PROVIDED that (i)
except as otherwise provided in Section 1.10(b), Eurodollar Loans may be
converted into Base Rate Loans only on the last day of an Interest Period
applicable thereto and no partial conversion of a Borrowing of Eurodollar Loans
shall reduce the outstanding principal amount of the Eurodollar Loans made
pursuant to such Borrowing to less than the Minimum Borrowing Amount, (ii) Base
Rate Loans may not be converted into Eurodollar Loans if a violation of Section
9.01 or 9.05 or an Event of Default is in existence on
<PAGE> 7
the date of the conversion and the Administrative Agent or the Required Banks
have determined that such conversion at such time would be disadvantageous to
the Banks and (iii) Borrowings of Eurodollar Loans resulting from this Section
1.06 shall be limited in number as provided in Section 1.02. Each such
conversion shall be effected by the Borrower giving the Administrative Agent at
its Notice Office, prior to 11:00 A.M. (New York time), at least three Business
Days' (or two Business Days', in the case of a conversion into Base Rate Loans)
prior written notice (or telephonic notice promptly confirmed in writing) (each
a "Notice of Conversion") specifying the Revolving Loans to be so converted, the
Type of Loans to be converted into and, if to be converted into a Borrowing of
Eurodollar Loans, the Interest Period to be initially applicable thereto. The
Administrative Agent shall give each Bank prompt notice of any such proposed
conversion affecting any of its Revolving Loans.
1.07 PRO RATA BORROWINGS. All Borrowings of Revolving Loans
under this Agreement shall be incurred from the Banks PRO RATA on the basis of
their Revolving Loan Commitments. It is understood that no Bank shall be
responsible for any default by any other Bank in its obligation to make
Revolving Loans hereunder and that each Bank shall be obligated to make the
Revolving Loans provided to be made by it hereunder, regardless of the failure
of any other Bank to fulfill its commitments hereunder.
1.08 INTEREST. (a) The unpaid principal amount of each Base
Rate Loan shall bear interest from the date of the Borrowing thereof until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such Base
Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan
pursuant to Section 1.06 at a rate per annum which shall at all times be the
Base Rate Margin plus the Base Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall
bear interest from the date of the Borrowing thereof until the earlier of (i)
the maturity (whether by acceleration or otherwise) of such Eurodollar Loan and
(ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to
Section 1.06 or 1.09, as applicable, at a rate per annum which shall at all
times be the Eurodollar Margin plus the relevant Eurodollar Rate.
(c) All overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount payable
hereunder shall bear interest at a rate per annum equal to the greater of (x) 2%
per annum in excess of the rate otherwise applicable to Base Rate Loans from
time to time and (y) the rate which is 2% in excess of the rate borne by such
Loans at the time such payment becomes due, in each case with such interest to
be payable on demand.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, in arrears on each Quarterly
Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of each
Interest Period applicable thereto and, in the case of an Interest Period of
longer than three months, every three months after the first day of such
Interest Period and (iii) in respect of each Loan, on any prepayment or
conversion (other than the prepayment and conversion of Revolving Loans that are
maintained as Base Rate Loans) (on the amount prepaid or converted), at maturity
(whether by acceleration or otherwise) and, after such maturity, on demand.
(e) All computations of interest hereunder shall be made in
accordance with Section
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<PAGE> 8
12.07(b).
(f) The Administrative Agent, upon determining the interest
rate for any Borrowing of Eurodollar Loans for any Interest Period, shall
promptly notify the Borrower and the Banks thereof.
1.09 INTEREST PERIODS. (a) At the time the Borrower gives a
Notice of Borrowing or Notice of Conversion in respect of the making of, or
conversion into, a Borrowing of Eurodollar Loans (in the case of the initial
Interest Period applicable thereto) or prior to 11:00 A.M. (New York time) on
the third Business Day prior to the expiration of an Interest Period applicable
to a Borrowing of Eurodollar Loans, the Borrower shall have the right to elect,
by giving the Administrative Agent written notice (or telephonic notice promptly
confirmed in writing), the Interest Period applicable to such Borrowing, which
Interest Period shall, at the option of the Borrower, be a one, two, three, six
or, if available to all Banks, twelve month period. Notwithstanding anything to
the contrary contained above:
(i) all Eurodollar Loans comprising a single Borrowing shall at
all times have the same Interest Period;
(ii) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date
of any conversion from a Borrowing of Base Rate Loans) and each
Interest Period occurring thereafter in respect of such Borrowing shall
commence on the day on which the next preceding Interest Period
expires;
(iii) if any Interest Period begins on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day, PROVIDED that if any Interest Period
would otherwise expire on a day which is not a Business Day but is a
day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding Business
Day;
(v) no Interest Period shall extend beyond the Maturity Date;
and
(vi) no Interest Period may be elected at any time when a
violation of Section 9.01 or 9.05 or an Event of Default is then in
existence and the Administrative Agent or the Required Banks have
determined that such an election at such time would be disadvan-
tageous to the Banks.
(b) If upon the expiration of any Interest Period, the
Borrower has failed to (or may not) elect a new Interest Period to be applicable
to the respective Borrowing of Eurodollar Loans as provided above, the Borrower
shall be deemed to have elected to convert such Borrowing into a Borrowing of
Base Rate Loans effective as of the expiration date of such current Interest
Period.
1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that
(x) in the case of clause (i) below, the Administrative Agent or (y) in the case
of clauses (ii) and (iii) below, any Bank shall
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<PAGE> 9
have determined (which determination shall, absent manifest error, be final and
conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period that, by reason of any changes arising after the date
of this Agreement affecting the interbank Eurodollar market, adequate
and fair means do not exist for ascertaining the applicable interest
rate on the basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder in an amount
which such Bank deems material with respect to any Eurodollar Loans
(other than any increased cost or reduction in the amount received or
receivable resulting from the imposition of or a change in the rate of
Taxes or other similar charges) because of (x) any change since the
Restatement Effective Date in any applicable law, governmental rule,
regulation, guideline or order (whether or not having the force of law)
or in the interpretation or administration thereof and including the
introduction of any new law or governmental rule, regulation, guideline
or order (such as, for example, but not limited to, a change in
official reserve requirements, but, in all events, excluding reserves
required under Regulation D to the extent included in the computation
of the Eurodollar Rate) and/or (y) other circumstances occurring after
the Restatement Effective Date adversely affecting the interbank
Eurodollar market or the position of such Bank in such market; or
(iii) at any time after the Restatement Effective Date, that the
making or continuance of any Eurodollar Loan has become unlawful by
compliance by such Bank in good faith with any law, governmental rule,
regulation, guideline or order (or would conflict with any such
governmental rule, regulation, guideline or order not having the force
of law but with which such Bank customarily complies even though the
failure to comply therewith would not be unlawful);
then, and in any such event, such Bank (or the Administrative Agent in the case
of clause (i) above) shall (x) on such date and (y) within ten Business Days of
the date on which such event no longer exists give notice (by telephone
confirmed in writing) to the Borrower and to the Administrative Agent of such
determination (which notice the Administrative Agent shall promptly transmit to
each of the other Banks). Thereafter (x) in the case of clause (i) above,
Eurodollar Loans shall no longer be available until such time as the
Administrative Agent notifies the Borrower and the Banks that the circumstances
giving rise to such notice by the Administrative Agent no longer exist, and any
Notice of Borrowing or Notice of Conversion given by the Borrower with respect
to Eurodollar Loans which have not yet been incurred shall be deemed rescinded
by the Borrower, (y) in the case of clause (ii) above, the Borrower shall,
subject to the provisions of Section 12.17 (to the extent applicable), pay to
such Bank, upon written demand therefor, such additional amounts (in the form of
an increased rate of, or a different method of calculating, interest or
otherwise as such Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts receivable hereunder (a written notice as to the additional amounts owed
to such Bank, showing the basis for the calculation thereof, which basis shall
be reasonable, submitted to the Borrower by such Bank shall, absent manifest
error, be final and conclusive and binding upon all parties hereto) and (z) in
the case of clause (iii) above, the Borrower shall take one of the actions
<PAGE> 10
specified in Section 1.10(b) as promptly as possible and, in any event, within
the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii), the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, cancel said Borrowing by giving the Administrative
Agent telephonic notice (confirmed promptly in writing) thereof on the same date
that the Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or
(iii), or (ii) if the affected Eurodollar Loan is then outstanding, upon at
least three Business Days' notice to the Administrative Agent, require the
affected Bank to convert each such Eurodollar Loan into a Base Rate Loan,
PROVIDED that if more than one Bank is so affected at any time, then all
affected Banks must be treated the same pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the
Restatement Effective Date, the adoption or effectiveness of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged by relevant authority with
the interpretation or administration thereof, or compliance by such Bank (or any
corporation controlling such Bank) with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing by
an amount reasonably deemed by such Bank to be material the rate of return on
such Bank's (or such controlling corporation's) capital or assets as a
consequence of its commitments or obligations hereunder to a level below that
which such Bank (or such controlling corporation) could have achieved but for
such adoption, effectiveness, change or compliance (taking into consideration
such Bank's (or such controlling corporation's) policies with respect to capital
adequacy), then from time to time, within 15 days after written demand by such
Bank (with a copy to the Administrative Agent and accompanied by the notice
described in the last sentence of this Section 1.10(c)), the Borrower shall,
subject to the provisions of Section 12.17 (to the extent applicable), pay to
such Bank such additional amount or amounts as will compensate such Bank (or
such controlling corporation) for such reduction. Each Bank, upon determining in
good faith that any additional amounts will be payable pursuant to this Section
1.10(c), will give prompt written notice thereof to the Borrower, which notice
shall set forth in reasonable detail the basis of the calculation of such
additional amounts, which basis shall be reasonable, although the failure to
give any such notice shall not release or diminish any of the Borrower's
obligations to pay additional amounts pursuant to this Section 1.10(c) upon the
subsequent receipt of such notice.
1.11 COMPENSATION; BREAKAGE. The Borrower shall, subject to
the provisions of Section 12.17 (to the extent applicable), compensate each
Bank, upon its written request (which request shall set forth the reasonably
detailed basis for requesting and the method of calculating such compensation),
for all reasonable losses, expenses and liabilities (including, without
limitation, any loss, expense or liability incurred by reason of the liquidation
or reemployment of deposits or other funds required by such Bank to fund its
Eurodollar Loans but excluding in any event the loss of anticipated profits)
which such Bank may sustain: (i) if for any reason (other than a default by such
Bank or the Administrative Agent) a Borrowing of Eurodollar Loans does not occur
on a date specified therefor in a Notice of Borrowing or Notice of Conversion
(whether or not withdrawn by the Borrower or deemed withdrawn pursuant to
Section 1.10(a)); (ii) if any prepayment, repayment
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<PAGE> 11
or conversion of any of its Eurodollar Loans occurs on a date which is not the
last day of an Interest Period applicable thereto (other than any prepayment or
repayment made by the Borrower upon the Administrative Agent's demand therefor
following a Bank's failure to make available its PRO RATA share of a Borrowing
as set forth in the last three sentences of Section 1.04(a)); (iii) if any
prepayment of any of its Eurodollar Loans is not made on any date specified in a
notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any
other default by the Borrower to repay its Eurodollar Loans when required by the
terms of this Agreement or (y) an election made pursuant to Section 1.10(b).
1.12 CHANGE OF LENDING OFFICE. Each Bank agrees that, upon the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), 1.10(c), 2.06 or 4.04 with respect to such Bank, it will, if requested by
the Borrower, use reasonable efforts (subject to overall policy considerations
of such Bank) to designate another lending office for any Loans, its Revolving
Loan Commitment or Letters of Credit, as the case may be, if affected by such
event, PROVIDED that such designation is made on such terms that such Bank and
its lending office suffer no economic, legal or regulatory disadvantage, with
the object of avoiding the consequence of the event giving rise to the operation
of any such Section. Nothing in this Section 1.12 shall affect or postpone any
of the obligations of the Borrower or the right of any Bank provided in Section
1.10, 2.06 or 4.04.
1.13 REPLACEMENT OF BANKS. (x) Upon the occurrence of any
event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section
1.10(c), Section 2.06 or Section 4.04 with respect to any Bank which results in
such Bank charging to the Borrower increased costs in excess of those being
generally charged by the other Banks or becoming incapable of making Eurodollar
Loans, (y) if a Bank becomes a Defaulting Bank and/or (z) in the case of a
refusal by a Bank to consent to a proposed change, waiver, discharge or
termination with respect to this Agreement which has been approved by the
Required Banks as provided in Section 12.12(b), the Borrower shall have the
right, if no Default or Event of Default then exists, to replace such Bank (the
"Replaced Bank") with one or more other Eligible Transferees reasonably
acceptable to the Administrative Agent, none of whom shall constitute a
Defaulting Bank at the time of such replacement (collectively, the "Replacement
Bank"), PROVIDED that (i) at the time of any replacement pursuant to this
Section 1.13, the Replacement Bank shall enter into one or more Assignment
Agreements pursuant to Section 12.04(b) (and with all fees payable pursuant to
said Section 12.04(b) to be paid by the Replacement Bank) pursuant to which the
Replacement Bank shall acquire the entire Revolving Loan Commitment and
outstanding Revolving Loans of, and participations in Letters of Credit by, the
Replaced Bank and, in connection therewith, shall pay to (x) the Replaced Bank
in respect thereof an amount equal to the sum of (I) an amount equal to the
principal of, and all accrued interest on, all outstanding Revolving Loans of
the Replaced Bank, (II) an amount equal to all Unpaid Drawings that have been
funded by (and not reimbursed to) such Replaced Bank, together with all then
unpaid interest with respect thereto at such time and (III) an amount equal to
all accrued, but theretofore unpaid, Fees owing to the Replaced Bank pursuant to
Section 3.01, (y) the respective Letter of Credit Issuer an amount equal to such
Replaced Bank's Adjusted RC Percentage (for this purpose, determined as if the
adjustment described in clause (B) of the succeeding sentence had been made with
respect to such Replaced Bank) of any Unpaid Drawing (which at such time remains
an Unpaid Drawing) to the extent such amount was not theretofore funded by such
Replaced Bank and (z) the Swingline Bank an amount equal to such Replaced Bank's
Adjusted RC Percentage (for this purpose, determined as if the adjustment
described in clause (B) of the succeeding sentence had been made with respect to
such Replaced Bank) of any Mandatory Borrowing to the extent such amount
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<PAGE> 12
was not theretofore funded by such Replaced Bank and (ii) all obligations of the
Borrower owing to the Replaced Bank (other than those specifically described in
clause (i) above in respect of which the assignment purchase price has been, or
is concurrently being, paid) shall be paid in full to such Replaced Bank
concurrently with such replacement. Upon the execution of the respective
Assignment Agreements, the payment of amounts referred to in clauses (i) and
(ii) above and, if so requested by the Replacement Bank, delivery to the
Replacement Bank of the appropriate Revolving Note executed by the Borrower, (A)
the Replacement Bank shall become a Bank hereunder and the Replaced Bank shall
cease to constitute a Bank hereunder, except with respect to indemnification
provisions applicable to the Replaced Bank under this Agreement, which shall
survive as to such Replaced Bank and (B) in the case of a replacement of a
Defaulting Bank, the Adjusted RC Percentage of the Banks shall be automatically
adjusted at such time to give effect to such replacement (and to give effect to
the replacement of a Defaulting Bank with one or more Non- Defaulting Banks).
SECTION 2. LETTERS OF CREDIT.
2.01 LETTERS OF CREDIT. (a) (i) Subject to and upon the terms
and conditions set forth herein, the Borrower may request a Letter of Credit
Issuer at any time and from time to time on or after the Restatement Effective
Date and prior to the thirtieth day prior to the Maturity Date to issue (x) for
the account of the Borrower and for the benefit of any holder (or any trustee,
agent or other similar representative for any such holders) of L/C Supportable
Obligations of the Borrower or any of its Subsidiaries, an irrevocable sight
standby letter of credit, in a form customarily used by such Letter of Credit
Issuer or in such other form as has been approved by such Letter of Credit
Issuer (each such standby letter of credit, a "Standby Letter of Credit") in
support of such L/C Supportable Obligations and (y) for the account of the
Borrower and for the benefit of sellers of goods or materials to the Borrower or
any of its Subsidiaries, an irrevocable sight commercial letter of credit in a
form customarily used by such Letter of Credit Issuer or in such other form as
has been approved by such Letter of Credit Issuer (each such commercial letter
of credit, a "Trade Letter of Credit", and each such Trade Letter of Credit and
each Standby Letter of Credit, a "Letter of Credit") in support of commercial
transactions of the Borrower and its Subsidiaries, and (ii) subject to and upon
the terms and conditions set forth herein such Letter of Credit Issuer agrees to
issue from time to time, irrevocable Letters of Credit in such form as may be
approved by such Letter of Credit Issuer and the Administrative Agent. Annex III
contains a description of all Letters of Credit (as defined in the Existing
Credit Agreement) issued by a Letter of Credit Issuer pursuant to Section 2 of
the Existing Credit Agreement which remain outstanding on the Restatement
Effective Date. Each such letter of credit, including any extension thereof
(each an "Existing Letter of Credit") shall constitute a "Letter of Credit" for
all purposes of this Agreement and shall be deemed issued for purposes of
Sections 2.04(a) and 3.01(b) and (c) on the Restatement Effective Date.
Notwithstanding the foregoing, no Letter of Credit Issuer shall be under any
obligation to issue any Letter of Credit if at the time of such issuance:
(i) any order, judgment or decree of any governmental authority
or arbitrator shall purport by its terms to enjoin or restrain such
Letter of Credit Issuer from issuing such Letter of Credit or any
requirement of law applicable to such Letter of Credit Issuer or any
request or directive (whether or not having the force of law) from any
governmental authority with jurisdiction over such Letter of Credit
Issuer shall prohibit, or request that such Letter of Credit Issuer
refrain from, the issuance of letters of credit generally or such
Letter of Credit
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<PAGE> 13
in particular or shall impose upon such Letter of Credit Issuer with
respect to such Letter of Credit any restriction or reserve or capital
requirement (for which such Letter of Credit Issuer is not otherwise
compensated) not in effect on the date hereof, or any unreimbursed
loss, cost or expense which was not applicable, in effect or known to
such Letter of Credit Issuer as of the date hereof and which such
Letter of Credit Issuer in good faith deems material to it; or
(ii) such Letter of Credit Issuer shall have received notice
from the Borrower or the Required Banks prior to the issuance of such
Letter of Credit of the type described in clause (iv) of Section
2.01(b).
(b) Notwithstanding the foregoing, (i) no Letter of Credit
shall be issued, the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time, would
exceed either (x) $2,500,000 or (y) when added to the aggregate principal amount
of all Revolving Loans made by Non-Defaulting Banks and Swingline Loans then
outstanding, the Adjusted Total Revolving Loan Commitment at such time; (ii) (x)
each Standby Letter of Credit shall have an expiry date occurring not later than
one year after such Letter of Credit's date of issuance (although any Standby
Letter of Credit may be extendable (whether automatically or otherwise) for
successive periods of up to 12 months, but not beyond the tenth Business Day
prior to the Maturity Date), on terms acceptable to the respective Letter of
Credit Issuer and in no event shall any Standby Letter of Credit have an expiry
date occurring later than the tenth Business Day prior to the Maturity Date and
(y) each Trade Letter of Credit shall have an expiry date occurring no later
than the earlier of (a) 180 days after the issuance thereof or (b) 30 days prior
to the Maturity Date; (iii) each Letter of Credit shall be denominated in U.S.
dollars; and (iv) no Letter of Credit Issuer shall issue any Letter of Credit
after it has received written notice from the Borrower that a Default or an
Event of Default exists until such time as the Letter of Credit Issuers shall
have received written notice of (x) rescission of such notice from the party or
parties originally delivering the same or (y) waiver of such Default or Event of
Default by the Required Banks.
2.02 MINIMUM STATED AMOUNT. The initial Stated Amount of each
Letter of Credit shall be not less than $20,000 or such lesser amount acceptable
to the respective Letter of Credit Issuer.
2.03 LETTER OF CREDIT REQUESTS; NOTICES OF ISSUANCE; REPORTS.
(a) Whenever the Borrower desires that a Letter of Credit be issued, the
Borrower shall give the Administrative Agent and the respective Letter of Credit
Issuer a written request (including by way of telecopier) in the form of Exhibit
C prior to 1:00 P.M. (New York time) at least three Business Days (or such
shorter period as may be acceptable to such Letter of Credit Issuer) prior to
the proposed date (which shall be a Business Day) of issuance (each a "Letter of
Credit Request"), which Letter of Credit Request shall include any other
documents that such Letter of Credit Issuer customarily requires in connection
therewith.
(b) The respective Letter of Credit Issuer shall, promptly
after each issuance of or amendment to any Standby Letter of Credit by it, give
the Administrative Agent, each Bank and the Borrower written notice of the
issuance of or amendment to such Standby Letter of Credit, accompanied by a copy
of the issued Standby Letter of Credit or amendment, as the case may be.
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<PAGE> 14
(c) Each Letter of Credit Issuer (other than BTCo) shall, by
11:00 A.M. on the first Business Day of each week, forward to the Administrative
Agent (by way of telecopier) a report listing the aggregate daily outstanding
balances for the previous week of the Trade Letters of Credit issued by such
Letter of Credit Issuer. Each month the Administrative Agent shall forward to
each Bank a report listing the daily aggregate amount available to be drawn
under all Trade Letters of Credit outstanding during the previous month.
2.04 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The
Borrower hereby agrees to reimburse the respective Letter of Credit Issuer, by
making payment to the Administrative Agent at the Payment Office (which funds
the Administrative Agent shall promptly forward to such Letter of Credit
Issuer), for any payment or disbursement made by such Letter of Credit Issuer
under any Letter of Credit issued by it (each such amount so paid or disbursed
until reimbursed, an "Unpaid Drawing") immediately after, and in any event on
the date on which, the Borrower is notified by such Letter of Credit Issuer of
such payment or disbursement with interest on the amount so paid or disbursed by
such Letter of Credit Issuer, to the extent not reimbursed prior to 1:00 P.M.
(New York time) on the date of such payment or disbursement, from and including
the date paid or disbursed to but not including the date such Letter of Credit
Issuer is reimbursed therefor at a rate per annum which shall be the Base Rate
Margin then in effect plus the Base Rate as in effect from time to time (plus an
additional 2% per annum if not reimbursed by the third Business Day after the
date of such notice of payment or disbursement), such interest also to be
payable on demand. Each Letter of Credit Issuer shall provide the Borrower
prompt notice of any payment or disbursement made by it under any Letter of
Credit issued by it, although the failure of, or delay in, giving any such
notice shall not release or diminish the obligations of the Borrower under this
Section 2.04 (a) or under any other Section of this Agreement.
(b) The Borrower's obligation under this Section 2.04 to
reimburse the respective Letter of Credit Issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower may have or have had against such Letter
of Credit Issuer, the Administrative Agent or any Bank, including, without
limitation, any defense based upon the failure of any payment under a Letter of
Credit to conform to the terms of the Letter of Credit or any non-application or
misapplication by the beneficiary of the proceeds of such payment; PROVIDED,
that the Borrower shall not be obligated to reimburse any Letter of Credit
Issuer for any wrongful payment made by such Letter of Credit Issuer under a
Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence (in either case, as determined by a court of
competent jurisdiction) on the part of such Letter of Credit Issuer.
2.05 LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon the
issuance by any Letter of Credit Issuer of a Letter of Credit, such Letter of
Credit Issuer shall be deemed to have sold and transferred to each other Bank,
and each such Bank (each a "Participant") shall be deemed irrevocably and
unconditionally to have purchased and received from such Letter of Credit
Issuer, without recourse or warranty, an undivided interest and participation,
to the extent of such Bank's Adjusted RC Percentage, in such Letter of Credit,
each substitute letter of credit, each payment made thereunder and the
obligations of the Borrower under this Agreement with respect thereto (although
the Letter of Credit Fee shall be payable directly to the Administrative Agent
for the account of the Banks as provided in Section 3.01(b) and the Participants
shall have no right to receive any portion of any Facing Fees) and any security
therefor or guaranty pertaining thereto. Upon any change in
<PAGE> 15
the Revolving Loan Commitments or Adjusted RC Percentages of the Banks pursuant
to Section 12.04(b) or upon a Bank Default, it is hereby agreed that, with
respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be
an automatic adjustment to the participations pursuant to this Section 2.05 to
reflect the new Adjusted RC Percentages of the assigning and assignee Bank or of
all Banks, as the case may be.
(b) In determining whether to pay under any Letter of Credit,
the respective Letter of Credit Issuer shall not have any obligation relative to
the Participants other than to determine that any documents required to be
delivered under such Letter of Credit have been delivered and that they
substantially comply on their face with the requirements of such Letter of
Credit. Any action taken or omitted to be taken by any Letter of Credit Issuer
under or in connection with any Letter of Credit if taken or omitted in the
absence of gross negligence or willful misconduct (in either case, as determined
by a court of competent jurisdiction) shall not create for such Letter of Credit
Issuer any resulting liability.
(c) In the event that the respective Letter of Credit Issuer
makes any payment under any Letter of Credit and the Borrower shall not have
reimbursed such amount in full to such Letter of Credit Issuer pursuant to
Section 2.04(a), such Letter of Credit Issuer shall promptly notify the
Administrative Agent, and the Administrative Agent shall promptly notify each
Participant of such failure, and each Participant shall promptly and
unconditionally pay to the Administrative Agent for the account of such Letter
of Credit Issuer, the amount of such Participant's Adjusted RC Percentage of
such payment in U.S. dollars and in same day funds; PROVIDED, that no
Participant shall be obligated to pay to the Administrative Agent its Adjusted
RC Percentage of such unreimbursed amount for any wrongful payment made by such
Letter of Credit Issuer under a Letter of Credit as a result of acts or
omissions constituting willful misconduct or gross negligence (in either case,
as determined by a court of competent jurisdiction) on the part of such Letter
of Credit Issuer. If the Administrative Agent so notifies any Participant
required to fund an Unpaid Drawing under a Letter of Credit prior to 11:00 A.M.
(New York time) on any Business Day, such Participant shall make available to
the Administrative Agent for the account of the respective Letter of Credit
Issuer (which funds the Administrative Agent shall promptly forward to the
Letter of Credit Issuer) such Participant's Adjusted RC Percentage of the amount
of such payment on such Business Day in same day funds. If and to the extent
such Participant shall not have so made its Adjusted RC Percentage of the amount
of such Unpaid Drawing available to the Administrative Agent for the account of
such Letter of Credit Issuer, such Participant agrees to pay to the
Administrative Agent for the account of such Letter of Credit Issuer, forthwith
on demand such amount, together with interest thereon, for each day from such
date until the date such amount is paid to the Administrative Agent for the
account of such Letter of Credit Issuer at the overnight Federal Funds Effective
Rate. The failure of any Participant to make available to the Administrative
Agent for the account of the respective Letter of Credit Issuer its Adjusted RC
Percentage of any Unpaid Drawing under any Letter of Credit shall not relieve
any other Participant of its obligation hereunder to make available to the
Administrative Agent for the account of the respective Letter of Credit Issuer
its Adjusted RC Percentage of any payment under any Letter of Credit on the date
required, as specified above, but no Participant shall be responsible for the
failure of any other Participant to make available to the Administrative Agent
for the account of such Letter of Credit Issuer such other Participant's
Adjusted RC Percentage of any such payment.
(d) Whenever the respective Letter of Credit Issuer receives a
payment of a
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<PAGE> 16
reimbursement obligation as to which the Administrative Agent has received for
the account of such Letter of Credit Issuer any payments from the Participants
pursuant to clause (c) above, such Letter of Credit Issuer shall pay to the
Administrative Agent and the Administrative Agent shall promptly pay to each
Participant which has paid its Adjusted RC Percentage thereof, in U.S. dollars
and in same day funds, an amount equal to such Participant's Adjusted RC
Percentage of the principal amount thereof and interest thereon accruing at the
overnight Federal Funds Effective Rate after the purchase of the respective
participations.
(e) Upon the request of any Participant, each Issuing Bank
shall furnish to such Participant copies of any Letter of Credit issued by it
and such other documentation as may reasonably be requested by such Participant.
(f) The obligations of the Participants to make payments to
the Administrative Agent for the account of the respective Letter of Credit
Issuer with respect to Letters of Credit shall be irrevocable and not subject to
counterclaim, set-off or other defense or any other qualification or exception
whatsoever (PROVIDED that no Participant shall be required to make payments
resulting from the Letter of Credit Issuer's gross negligence or willful
misconduct (in either case, as determined by a court of competent jurisdiction)
and shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower or any of it Subsidiaries may have at any time
against a beneficiary named in a Letter of Credit, any transferee of
any Letter of Credit (or any Person for whom any such transferee may be
acting), the Administrative Agent, the respective Letter of Credit
Issuer, any Bank or other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated herein
or any unrelated transactions (including any underlying transaction
between the Borrower or any of its Subsidiaries and the beneficiary
named in any such Letter of Credit);
(iii) any draft, certificate or other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
(g) To the extent the respective Letter of Credit Issuer is
not indemnified for same by the Borrower, the Participants will reimburse and
indemnify the Letter of Credit Issuer, in proportion to their respective
Adjusted RC Percentages, for and against any and all liabilities, obligations,
losses, damages, penalties, claims, actions, judgments, costs, expenses or
disbursements of whatsoever kind or nature which may be imposed on, asserted
against or incurred by such Letter of Credit Issuer in performing its respective
duties in any way relating to or arising out of its
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<PAGE> 17
issuance of Letters of Credit; PROVIDED that no Participant shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from such
Letter of Credit Issuer's gross negligence or willful misconduct (in either
case, as determined by a court of competent jurisdiction).
2.06 INCREASED COSTS. If at any time after the Restatement
Effective Date, the adoption or effectiveness of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged by relevant authority with the interpretation or administration
thereof, or compliance by the respective Letter of Credit Issuer or any Bank
with any request or directive (whether or not having the force of law) by any
such authority, central bank or comparable agency shall either (i) impose,
modify or make applicable any reserve, deposit, capital adequacy or similar
requirement against Letters of Credit issued by such Letter of Credit Issuer or
such Bank's participation therein, or (ii) shall impose on such Letter of Credit
Issuer or any Bank any other conditions affecting this Agreement, any Letter of
Credit or such Bank's participation therein; and the result of any of the
foregoing is to increase the cost to such Letter of Credit Issuer or such Bank
of issuing, maintaining or participating in any Letter of Credit, or to reduce
the amount of any sum received or receivable by such Letter of Credit Issuer or
such Bank hereunder (other than any increased cost or reduction in the amount
received or receivable resulting from the imposition of or a change in the rate
of taxes or similar charges), then, upon demand to the Borrower by such Letter
of Credit Issuer or such Bank (a copy of which notice shall be sent by such
Letter of Credit Issuer or such Bank to the Administrative Agent) and subject to
the provisions of Section 12.17 (to the extent applicable), the Borrower shall
pay to such Letter of Credit Issuer or such Bank such additional amount or
amounts as will compensate such Letter of Credit Issuer or such Bank for such
increased cost or reduction. A certificate submitted to the Borrower by the
respective Letter of Credit Issuer or such Bank, as the case may be (a copy of
which certificate shall be sent by such Letter of Credit Issuer or such Bank to
the Administrative Agent), setting forth in reasonable detail the basis for the
determination of such additional amount or amounts necessary to compensate such
Letter of Credit Issuer or such Bank as aforesaid shall be conclusive and
binding on the Borrower absent manifest error, although the failure to deliver
any such certificate shall not release or diminish any of the Borrower's
obligations to pay additional amounts pursuant to this Section 2.06 upon the
subsequent receipt thereof.
SECTION 3. FEES; COMMITMENTS.
3.01 FEES. (a) The Borrower agrees to pay to the
Administrative Agent a commitment commission ("Commitment Commission") for the
account of each Non-Defaulting Bank with a Revolving Loan Commitment for the
period from and including the Restatement Effective Date to, but not including,
the date the Total Revolving Loan Commitment has been terminated, computed at a
rate for each day equal to 1/2 of 1% per annum on the daily average of such
Bank's Unutilized Revolving Loan Commitment. Such Commitment Commission shall be
due and payable in arrears on each Quarterly Payment Date of each year and on
the date upon which the Total Revolving Loan Commitment is terminated.
(b) The Borrower agrees to pay to the Administrative Agent for
the account of each Non-Defaulting Bank PRO RATA on the basis of its Adjusted RC
Percentage, a fee in respect of each Letter of Credit (the "Letter of Credit
Fee") in an amount equal to the Eurodollar Margin then in
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effect on the daily Stated Amount of such Letter of Credit. Accrued Letter of
Credit Fees shall be due and payable quarterly in arrears on each Quarterly
Payment Date of each year and on the date upon which the Total Revolving Loan
Commitment is terminated.
(c) The Borrower agrees to pay to each Letter of Credit Issuer
for its own account a fee in respect of each Letter of Credit (the
"Facing Fee") issued by such Letter of Credit Issuer computed at the
rate equal to (A) in the case of Trade Letters of Credit, 1/4 of 1% per
annum on the daily Stated Amount of such Trade Letter of Credit,
provided, that in any event, the minimum amount of the Facing Fee
payable for each Trade Letter of Credit shall be $100 and (B) in the
case of Standby Letters of Credit, 1/4 of 1% per annum on the daily
Stated Amount of such Standby Letter of Credit, PROVIDED that, in any
event, the minimum amount of the Facing Fee payable in any 12-month
period for each Standby Letter of Credit shall be $500 (it being agreed
that, on each anniversary of the issuance of any Standby Letter of
Credit or upon any earlier termination or expiration of a Standby
Letter of Credit, if $500 exceeds the amount of Facing Fees theretofore
paid or then accrued with respect to such Standby Letter of Credit, in
either case after the date of the issuance thereof, or if later, after
the date of the last anniversary of the issuance thereof (but excluding
any amounts paid after such anniversary with respect to periods ending
on or prior to such anniversary, including, without limitation, as a
result of the operation of this parenthetical), the amount of such
excess shall be payable on the next date upon which accrued Facing Fees
are otherwise payable with respect to Standby Letters of Credit).
Accrued Facing Fees shall be due and payable quarterly in arrears on
each Quarterly Payment Date of each year and on the date upon which the
Total Revolving Loan Commitment has been terminated and such Letter of
Credit has been terminated in accordance with its terms.
(d) The Borrower agrees to pay directly to the respective
Letter of Credit Issuer upon each issuance of, payment under, and/or
amendment of, a Letter of Credit issued by such Letter of Credit such
amount as shall at the time of such issuance, payment or amendment be
the administrative charge and expenses which such Letter of Credit
Issuer is customarily charging for issuances of, payments under or
amendments of, letters of credit issued by it.
(e) The Borrower agrees to pay to the Administrative Agent
such other fees as agreed to between the Borrower and the
Administrative Agent, when and as due.
(f) All computations of Fees shall be made in accordance with
Section 12.07(b).
3.02 VOLUNTARY REDUCTION OF COMMITMENTS. (a) Upon at least
three Business Days' prior written notice (or telephonic notice confirmed in
writing) to the Administrative Agent at its Notice Office (which notice the
Administrative Agent shall promptly transmit to each of the Banks), the Borrower
shall have the right, without premium or penalty, to terminate or partially
reduce the Total Unutilized Revolving Loan Commitment, PROVIDED that (x) any
such termination shall apply to proportionately and permanently reduce the
Revolving Loan Commitment of each Bank, (y) no such reduction shall reduce any
Non-Defaulting Bank's Revolving Loan Commitment to an amount that is less than
the outstanding Revolving Loans of such Bank and (z) any partial reduction
pursuant to this Section 3.02 shall be in the amount of at least $1,000,000.
(b) In the event of certain refusals by a Bank as provided in
Section 12.12(b) to consent to certain proposed changes, waivers, discharges or
terminations with respect to this Agreement which have been approved by the
Required Banks, the Borrower may, subject to the
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<PAGE> 19
requirements of said Section 12.12(b) and upon five Business Days' written
notice to the Administrative Agent at its Notice Office (which notice the
Administrative Agent shall promptly transmit to each of the Banks), terminate
all of the Revolving Loan Commitment of such Bank so long as all Revolving
Loans, together with accrued and unpaid interest, Fees and all other amounts,
owing to such Bank are repaid concurrently with the effectiveness of such
termination (at which time Annex I shall be deemed modified to reflect such
changed amounts), and at such time such Bank shall no longer constitute a "Bank"
for purposes of this Agreement, except with respect to indemnification
provisions under this Agreement (including, without limitation, Sections 1.10,
1.11, 2.06, 4.04, 12.01 and 12.06), which shall survive as to such repaid Bank.
3.03 MANDATORY ADJUSTMENTS OF COMMITMENTS, ETC. (a) The Total
Revolving Loan Commitment (and the Revolving Loan Commitment of each Bank) shall
terminate on August 31, 1998 unless the Restatement Effective Date has occurred
on or before such date, and in the event of such termination, this Agreement
shall be of no force or effect and the Existing Credit Agreement shall continue
to be effective, as the same may have been amended, modified or supplemented
from time to time.
(b) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the
Revolving Loan Commitment of each Bank) shall terminate on the Maturity Date.
(c) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date on or after the Restatement
Effective Date on which the Borrower or any of its Subsidiaries receives Cash
Proceeds from any Asset Sale, the Total Revolving Loan Commitment shall be
permanently reduced on such date by an amount equal to 100% of the Net Cash
Proceeds from such Asset Sale, PROVIDED that up to an aggregate of $15,000,000
of Net Cash Proceeds received by the Borrower from Asset Sales shall not give
rise to a permanent reduction to the Total Revolving Loan Commitment pursuant to
this Section 3.03(c) to the extent the Borrower elects, as hereinafter provided,
to cause such Net Cash Proceeds to be reinvested in Reinvestment Assets (a
"Reinvestment Election"). The Borrower may exercise its Reinvestment Election
(within the parameters specified in the preceding sentence) with respect to an
Asset Sale if (x) no Default or Event of Default exists and (y) the Borrower
delivers a Reinvestment Notice to the Administrative Agent within 3 Business
Days following the date of the consummation of the respective Asset Sale, with
such Reinvestment Election being effective with respect to the Net Cash Proceeds
of such Asset Sale equal to the Anticipated Reinvestment Amount specified in
such Reinvestment Notice; PROVIDED, that on the Reinvestment Commitment
Reduction Date with respect to a Reinvestment Election, an amount equal to the
Reinvestment Commitment Reduction Amount, if any, for such Reinvestment Election
shall be applied to permanently reduce the Total Revolving Loan Commitment.
(d) Each reduction to the Total Revolving Loan Commitment
pursuant to this Section 3.03 shall be applied proportionately to reduce the
Revolving Loan Commitment of each Bank.
SECTION 4. PAYMENTS.
4.01 VOLUNTARY PREPAYMENTS. The Borrower shall have the right
to prepay Loans in whole or in part, without premium or penalty, from time to
time on the following terms and conditions: (i) the Borrower shall give the
Administrative Agent at the Payment Office written
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<PAGE> 20
notice (or telephonic notice promptly confirmed in writing) of its intent to
prepay the Loans, whether such Loans are Revolving Loans or Swingline Loans, the
amount of such prepayment and (in the case of Eurodollar Loans) the specific
Borrowing or Borrowings pursuant to which made, which notice shall be given by
the Borrower at least one Business Day prior to the date of such prepayment with
respect to Base Rate Loans (other than Swingline Loans, with respect to which
notice may be given by the Borrower on the day of prepayment) and three Business
Days prior to the date of such prepayment with respect to Eurodollar Loans,
which notice shall promptly be transmitted by the Administrative Agent to each
of the Banks; (ii) (x) each partial prepayment of any Borrowing (other than a
Borrowing of Swingline Loans) shall be in an aggregate principal amount of at
least $500,000 and (y) each partial prepayment of any Borrowing of Swingline
Loans shall be in an aggregate principal amount of at least $50,000, PROVIDED
that no partial prepayment of Eurodollar Loans made pursuant to a Borrowing
shall reduce the aggregate principal amount of the Loans outstanding pursuant to
such Borrowing to an amount less than the Minimum Borrowing Amount applicable
thereto; (iii) at the time of any prepayment of Eurodollar Loans pursuant to
this Section 4.01 on any date other than the last day of the Interest Period
applicable thereto, the Borrower shall pay the amounts required pursuant to
Section 1.11; (iv) in the event of certain refusals by a Bank as provided in
Section 12.12(b) to consent to certain proposed changes, waivers, discharges or
terminations with respect to this Agreement which have been approved by the
Required Banks, the Borrower may, upon 5 Business Days' written notice to the
Administrative Agent at its Notice Office (which notice the Administrative Agent
shall promptly transmit to each of the Banks) repay all Revolving Loans,
together with accrued and unpaid interest, Fees, and other amounts owing to such
Bank in accordance with said Section 12.12(b) so long as (A) in the case of the
repayment of Revolving Loans of any Bank pursuant to this clause (iv), the
Revolving Loan Commitment of such Bank is terminated concurrently with such
repayment (at which time Annex I shall be deemed modified to reflect the changed
Revolving Loan Commitments) and (B) the consents required by Section 12.12(b) in
connection with the repayment pursuant to this clause (iv) have been obtained;
and (v) each prepayment in respect of any Revolving Loans made pursuant to a
Borrowing shall be applied PRO RATA among such Revolving Loans, PROVIDED that at
the Borrower's election in connection with any prepayment of Revolving Loans
pursuant to this Section 4.01, such prepayment shall not be applied to any
Revolving Loans of a Defaulting Bank.
4.02 MANDATORY PREPAYMENTS.
(a) (i) If on any date the sum of the aggregate outstanding
principal amount of Revolving Loans made by Non-Defaulting Banks, Swingline
Loans and the Letter of Credit Outstandings exceeds the Adjusted Total Revolving
Loan Commitment as then in effect, the Borrower shall repay on such date the
principal of Swingline Loans, and if no Swingline Loans are or remain
outstanding, Revolving Loans of Non-Defaulting Banks, in an aggregate amount
equal to such excess. If, after giving effect to the repayment of all
outstanding Swingline Loans and Revolving Loans of Non-Defaulting Banks, the
aggregate amount of Letter of Credit Outstandings exceeds the Adjusted Total
Revolving Loan Commitment, the Borrower shall pay to the Administrative Agent on
such date an amount in cash and/or Cash Equivalents equal to such excess (up to
the aggregate amount of the Letter of Credit Outstandings at such time) and the
Administrative Agent shall hold such payment as security for the obligations of
the Borrower hereunder pursuant to a cash collateral agreement to be entered
into in form and substance satisfactory to the Administrative Agent (which shall
permit certain investments in Cash Equivalents satisfactory to the
Administrative Agent, until the proceeds are applied to the secured
obligations).
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<PAGE> 21
(ii) If on any date the aggregate outstanding principal amount
of the Revolving Loans made by a Defaulting Bank exceeds the Revolving Loan
Commitment of such Defaulting Bank, the Borrower shall repay on such date
principal of Revolving Loans of such Defaulting Bank in an amount equal to such
excess.
(b) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, (i) all then outstanding Swingline Loans shall be
repaid in full on the Swingline Expiry Date, and (ii) all then outstanding
Revolving Loans shall be repaid in full on the Maturity Date.
(c) With respect to each repayment of Loans required by this
Section 4.02, the Borrower may designate the Types of Loans which are to be
repaid and, in the case of Eurodollar Loans, the specific Borrowing or
Borrowings pursuant to which made, PROVIDED that: (i) repayments of Eurodollar
Loans pursuant to this Section 4.02 may only be made on the last day of an
Interest Period applicable thereto unless all Eurodollar Loans with Interest
Periods ending on such date of required repayment and all Base Rate Loans have
been paid in full; (ii) if any prepayment of Eurodollar Loans made pursuant to a
single Borrowing shall reduce the outstanding Revolving Loans made pursuant to
such Borrowing to an amount less than the Minimum Borrowing Amount for such
Borrowing, such Borrowing shall be immediately converted into Base Rate Loans;
(iii) each prepayment of any Revolving Loans made by Non-Defaulting Banks
pursuant to a Borrowing shall be applied PRO RATA among such Revolving Loans;
and (iv) each prepayment of any Revolving Loans made by Defaulting Banks
pursuant to a Borrowing shall be applied PRO RATA among such Revolving Loans. In
the absence of a designation by the Borrower as described in the preceding
sentence, the Administrative Agent shall, subject to the above, make such
designation in its sole discretion with a view, but not obligation, to minimize
breakage costs owing under Section 1.11. Notwithstanding the foregoing
provisions of this Section 4.02(c), if at any time a mandatory or voluntary
prepayment of Revolving Loans pursuant to Section 4.01 or 4.02 would result,
after giving effect to the procedures set forth above, in the Borrower incurring
breakage costs under Section 1.11 as a result of Eurodollar Loans being prepaid
other than on the last day of an Interest Period applicable thereto (the
"Affected Eurodollar Loans"), then the Borrower may in its sole discretion
initially deposit a portion (up to 100%) of the amounts that otherwise would
have been paid in respect of the Affected Eurodollar Loans with the
Administrative Agent (which deposit must be equal in amount to the amount of the
Affected Eurodollar Loans not immediately prepaid) to be held as security for
the obligations of the Borrower hereunder pursuant to a cash collateral
arrangement satisfactory to the Administrative Agent and the Borrower and shall
provide for investments satisfactory to the Administrative Agent, with such cash
collateral to be directly applied upon the first occurrence (or occurrences)
thereafter of the last day of an Interest Period applicable to the relevant
Eurodollar Loans (or such earlier date or dates as shall be requested by the
Borrower), to repay an aggregate principal amount of such Affected Eurodollar
Loans not initially prepaid pursuant to this sentence. Notwithstanding anything
to the contrary contained in the immediately preceding sentence, all amounts
deposited as cash collateral pursuant to the immediately preceding sentence
shall be held for the sole benefit of the Banks whose Eurodollar Loans would
otherwise have been immediately prepaid with the amounts deposited and upon the
taking of any action by the Administrative Agent or the Banks pursuant to the
remedial provisions of Section 9, any amounts held as cash collateral pursuant
to this Section 4.02(c) shall, subject to the requirements of applicable law, be
immediately applied to repay such Loans.
4.03 METHOD AND PLACE OF PAYMENT. Except as otherwise
specifically provided
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<PAGE> 22
herein, all payments under this Agreement shall be made to the Administrative
Agent for the ratable (based on their respective PRO RATA shares) account of the
Banks entitled thereto (which funds the Administrative Agent shall promptly
forward to such Banks), not later than 1:00 P.M. (New York time) on the date
when due and shall be made in immediately available funds and in lawful money of
the United States of America at the Payment Office, it being understood that
written notice by the Borrower to the Administrative Agent to make a payment
from the funds in the Borrower's account at the Payment Office shall constitute
the making of such payment to the extent of such funds held in such account. Any
payments under this Agreement which are made later than 1:00 P.M. (New York
time) shall be deemed to have been made on the next succeeding Business Day.
Whenever any payment to be made hereunder shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
shall be payable during such extension at the applicable rate in effect
immediately prior to such extension.
4.04 NET PAYMENTS. (a) All payments made by the Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense. Except as provided in Section 4.04(b), all such payments will be made
free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments
(but excluding, except as provided in the second succeeding sentence, any tax
imposed on or measured by the net income or net profits of a Bank pursuant to
the laws of the jurisdiction in which it is organized or managed and controlled
or the jurisdiction in which the principal office or applicable lending office
of such Bank is located or any subdivision thereof or therein) and all interest,
penalties or similar liabilities with respect to such non-excluded taxes,
levies, imposts, duties, fees, assessments or other charges (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
being referred to collectively as "Taxes"). If any Taxes are so levied or
imposed, the Borrower agrees to pay the full amount of such Taxes, and such
additional amounts, if any, as may be necessary so that every payment of all
amounts due under this Agreement or under any Note, after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein or in such Note. If any amounts are payable in respect of
Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse each
Bank, upon the written request of such Bank, for taxes imposed on or measured by
the net income or net profits of such Bank pursuant to the laws of the
jurisdiction in which such Bank is organized or in which the principal office or
applicable lending office of such Bank is located or under the laws of any
political subdivision or taxing authority of any such jurisdiction in which such
Bank is organized or in which the principal office or applicable lending office
of such Bank is located and for any withholding of income or similar taxes as
such Bank shall determine are payable by, or withheld from, such Bank in respect
of such amounts so paid to or on behalf of such Bank pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Bank
pursuant to this sentence. The Borrower will furnish to the Administrative Agent
within 45 days after the date the payment of any Taxes is due pursuant to
applicable law certified copies of tax receipts, or other evidence satisfactory
to such Bank, in its sole discretion, evidencing such payment by the Borrower.
The Borrower agrees to indemnify and hold harmless each Bank, and reimburse such
Bank upon its written request, for the amount of any Taxes so levied or imposed
and paid by such Bank. All amounts payable pursuant to this Section 4.04(a)
shall be subject to the provisions of Section 12.17 (to the extent applicable).
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<PAGE> 23
(b) Each Bank that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes agrees to deliver to the Borrower and the Administrative Agent on or
prior to the Restatement Effective Date, or in the case of a Bank that is an
assignee or transferee of an interest under this Agreement pursuant to Section
1.13 or 12.04 (unless the respective Bank was already a Bank hereunder
immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Bank, (i) two accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms)
certifying to such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit D (any such certificate, a "Section
4.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments of interest to be made under this Agreement and
under any Note. In addition, each Bank agrees that from time to time after the
Restatement Effective Date, when a lapse in time or change in circumstances
renders the previous certification obsolete or inaccurate in any material
respect, it will deliver to the Borrower and the Administrative Agent two new
accurate and complete original signed copies of Internal Revenue Service Form
4224 or 1001, or Form W-8 and a Section 4.04(b)(ii) Certificate, as the case may
be, and such other forms as may be required in order to confirm or establish the
entitlement of such Bank to a continued exemption from or reduction in United
States withholding tax with respect to payments under this Agreement
and any Note, or it shall immediately notify the Borrower and the Administrative
Agent of its inability to deliver any such Form or Certificate, in which case
such Bank shall not be required to deliver any such Form or Certificate pursuant
to this Section 4.04(b). Notwithstanding anything to the contrary contained in
Section 4.04(a), but subject to Section 12.04(b) and the immediately succeeding
sentence, (x) the Borrower shall be entitled, to the extent it is required to do
so by law, to deduct or withhold income or similar taxes imposed by the United
States (or any political subdivision or taxing authority thereof or therein)
from interest, fees or other amounts payable hereunder for the account of any
Bank which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that
such Bank has not provided to the Borrower U.S. Internal Revenue Service Forms
that establish a complete exemption from such deduction or withholding and (y)
the Borrower shall not be obligated pursuant to Section 4.04(a) to gross-up
payments to be made to a Bank in respect of income or similar taxes imposed by
the United States or any additional amounts with respect thereto if (I) such
Bank is not a U.S. Person (defined as provided above) and has not provided to
the Borrower the Internal Revenue Service Forms required to be provided to the
Borrower pursuant to this Section 4.04(b) or (II) in the case of a payment,
other than interest, to a Bank described in clause (ii) above, to the extent
that such Forms do not establish a complete exemption from withholding of such
taxes. Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this Section 4.04 and except as set forth in Section
12.04(b), the Borrower agrees to pay additional amounts and to indemnify each
Bank in the manner set forth in Section 4.04(a) (without regard to the identity
of the jurisdiction requiring the deduction or withholding) in respect of any
Taxes deducted or withheld by it as described in the immediately preceding
sentence as a result of any changes after the Restatement Effective Date in any
applicable law, treaty, governmental rule, regulation, guideline or order, or in
the interpretation thereof, relating to the deducting or withholding of such
Taxes.
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<PAGE> 24
(c) If any Bank, in its sole opinion, determines that it has
finally and irrevocably received or been granted a refund in respect of any
Taxes paid as to which indemnification has been paid by the Borrower pursuant to
this Section, it shall promptly remit such refund (including any interest
received in respect thereof), net of all out-of-pocket costs and expenses, to
the Borrower; provided that the Borrower agrees to promptly return any such
refund (plus interest) to such Bank upon receipt of written notification from
such Bank in the event such Bank is required to repay such refund to the
relevant taxing authority. Nothing contained herein shall interfere with the
right of a Bank to arrange its tax affairs in whatever manner it thinks fit or
oblige any Bank to apply for any refund or to disclose to any party any
information relating to its tax affairs on any computations in respect thereof
(including, without limitation, its tax returns).
SECTION 5. CONDITIONS PRECEDENT TO THE RESTATEMENT EFFECTIVE
DATE AND TO ALL CREDIT EVENTS. The occurrence of the Restatement Effective Date
pursuant to Section 12.10, the obligation of the Banks to make each Loan
hereunder, and the obligation of the Letter of Credit Issuers to issue Letters
of Credit hereunder, are each subject, at the time thereof (except as otherwise
hereinafter indicated), to the satisfaction of each of the following conditions:
5.01 EXECUTION OF AGREEMENT. On or prior to the Restatement
Effective Date, (i) this Agreement shall have been executed and delivered as
provided in Section 12.10 and (ii) there shall have been delivered to the
Administrative Agent for the account of each Bank the appropriate Revolving Note
and, in the case of the Swingline Bank, the Swingline Note, in each case,
executed by the Borrower, and in the amount, maturity and as otherwise provided
herein.
5.02 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. On the
Restatement Effective Date and at the time of each Credit Event and also after
giving effect thereto, (i) there shall exist no Default or Event of Default and
(ii) all representations and warranties contained herein and in the other Credit
Documents in effect at such time shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of such Credit Event, except to the extent that
such representations and warranties expressly relate to an earlier date, in
which case such representations and warranties will be true and correct in all
material respects as of such earlier date.
5.03 OFFICER'S CERTIFICATE. On or prior to the Restatement
Effective Date, the Administrative Agent shall have received a certificate dated
such date signed by the President or any Vice President of the Borrower stating
that all of the applicable conditions set forth in Sections 5.02, 5.07, 5.08,
5.09, 5.10, 5.11, 5.12 and 5.22 exist or have been satisfied as of such date.
5.04 OPINIONS OF COUNSEL. On or prior to the Restatement
Effective Date, the Administrative Agent shall have received an opinion,
addressed to the Administrative Agent and each of the Banks and dated the
Restatement Effective Date, from Thompson Hine & Flory LLP, special counsel to
the Borrower and each Subsidiary Guarantor, which opinion shall (i) cover the
matters contained in Exhibit E and (ii) be in form, scope and substance
satisfactory to the Administrative Agent and the Required Banks.
5.05 CORPORATE PROCEEDINGS. (a) On or prior to the Restatement
Effective Date, the Administrative Agent shall have received from each Credit
Party a certificate, dated the Restatement Effective Date, signed by the
President or any Vice-President of each such Credit Party in the form of Exhibit
F with appropriate insertions and deletions, together with copies of the
certificate of
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incorporation, the by-laws or other organizational documents of each such Credit
Party and the resolutions of each such Credit Party referred to in such
certificate and all of the foregoing shall be satisfactory to the Administrative
Agent.
(b) On or prior to the Restatement Effective Date, all
corporate and legal proceedings and all instruments and agreements in connection
with the transactions contemplated by this Agreement and the other Documents
shall be satisfactory in form and substance to the Administrative Agent, and the
Administrative Agent shall have received all information and copies of all
certificates, documents and papers, including good standing certificates and any
other records of corporate proceedings and governmental approvals, if any, which
the Administrative Agent may have reasonably requested in connection therewith,
such documents and papers, where appropriate, to be certified by proper
corporate or governmental authorities.
5.06 PLANS; EXISTING INDEBTEDNESS AGREEMENTS; SHAREHOLDERS'
AGREEMENTS; MANAGEMENT AGREEMENTS; EMPLOYMENT AGREEMENTS; COLLECTIVE BARGAINING
AGREEMENTS; TAX SHARING AGREEMENTS. On or prior to the Restatement Effective
Date, there shall have been delivered to the Administrative Agent copies,
certified as true and correct by an appropriate officer of the Borrower of:
(i) all Plans (and for each Plan that is required to file an
annual report on Internal Revenue Service Form 5500-series, a copy of
the most recent such report (including, to the extent required, the
related financial and actuarial statements and opinions and other
supporting statements, certifications, schedules and information), and
for each Plan that is a "single-employer plan," as defined in Section
4001(a)(15) of ERISA, the most recently prepared actuarial valuation
therefor) and any other "employee benefit plans," as defined in Section
3(3) of ERISA, and any other material agreements, plans or
arrangements, with or for the benefit of current or former employees of
the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate
(provided that the foregoing shall apply in the case of any
multiemployer plan, as defined in Section 4001(a)(3) of ERISA, only to
the extent that any document described therein is in the possession of
the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate
or reasonably available thereto from the sponsor or trustee of any such
plan);
(ii) all agreements evidencing or relating to Existing
Indebtedness (the "Existing Indebtedness Agreements");
(iii) all agreements entered into by the Borrower or any of its
Subsidiaries (after giving effect to the Transaction) governing the
terms and relative rights of its capital stock, and any agreements
entered into by members or shareholders relating to any such entity
with respect to their capital stock (including, without limitation, the
GEO Shareholders' Agreement) (collectively, the "Shareholders'
Agreements");
(iv) any material agreement with members of, or with respect to,
the management of the Borrower or any of its Subsidiaries
(collectively, the "Management Agreements");
(v) any material employment agreements entered into by the
Borrower or any of its Subsidiaries (collectively, the "Employment
Agreements");
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(vi) all collective bargaining agreements applying or relating
to any employee of the Borrower or any of its Subsidiaries
(collectively, the "Collective Bargaining Agreements"); and
(vii) all tax sharing, tax allocation and other similar
agreements entered into by the Borrower or any of its Subsidiaries
(collectively, the "Tax Sharing Agreements");
all of which Plans, Existing Indebtedness Agreements, Shareholders'
Agreements, Management Agreements, Employment Agreements, Collective
Bargaining Agreements and Tax Sharing Agreements shall be in form and
substance satisfactory to the Administrative Agent.
5.07 ADVERSE CHANGE, ETC. On the Restatement Effective Date,
nothing shall have occurred (and neither the Banks nor the Administrative Agent
shall have become aware of any facts or conditions not previously known) which
the Administrative Agent or the Required Banks shall determine (i) has, or is
reasonably likely to have, a material adverse effect on the rights or remedies
of the Banks or the Administrative Agent, or on the ability of the Credit
Parties to perform their obligations to them, or (ii) has, or is reasonably
likely to have, a Material Adverse Effect.
5.08 LITIGATION. On the Restatement Effective Date, there
shall be no actions, suits or proceedings pending or threatened, to the
Borrower's knowledge, (a) with respect to this Agreement or any other Document
or the Transaction or any part thereof or any other transaction contemplated
hereby or thereby) or (b) which the Administrative Agent or the Required Banks
shall determine could reasonably be expected to (i) have a Material Adverse
Effect or (ii) have a material adverse effect on the rights or remedies of the
Banks hereunder or under any other Credit Document or on the ability of any
Credit Party to perform its respective obligations to the Banks hereunder or
under any other Credit Document.
5.09 APPROVALS. On or prior to the Restatement Effective Date,
all material and necessary governmental and third party approvals in connection
with the transactions contemplated by the Documents and otherwise referred to
herein or therein shall have been obtained and remain in effect, and all
applicable waiting periods shall have expired without any action being taken by
any competent authority which restrains or prevents such transactions or
imposes, in the reasonable judgment of the Required Banks or the Administrative
Agent, materially adverse conditions upon the consummation of such transactions.
Additionally, there shall not exist any judgment, order, injunction or other
restraint prohibiting or imposing materially adverse conditions upon the
Transaction or any other transactions contemplated by this Agreement or any
other Document.
5.10 CONSUMMATION OF THE ACQUISITION. On or prior to the
Restatement Effective Date, there shall have been delivered to the Banks a true
and correct copy of the Acquisition Agreement and the other Acquisition
Documents, and all terms of the Acquisition Agreement and the other Acquisition
Documents shall be satisfactory in form and substance to the Administrative
Agent and the Required Banks. The Acquisition Agreement (and the transactions
contemplated thereby) shall have been duly approved by the board of directors
and (if required by applicable law) the stockholders of the Borrower, and all
Acquisition Documents shall have been duly executed and delivered by the parties
thereto and shall be in full force and effect. Each of the conditions precedent
to the obligation of the parties to consummate the Acquisition as set forth in
the Acquisition Documents shall have been satisfied, or waived, all to the
satisfaction of the Administrative Agent, and concurrently with the issuance of
the Senior Subordinated Notes and the making of Revolving
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Loans on the Restatement Effective Date, the Acquisition shall have been
consummated in accordance with the Acquisition Documents and all applicable
laws, rules and regulations.
5.11 SENIOR SUBORDINATED NOTES. On or prior to the Restatement
Effective Date, (i) the Borrower shall have issued the Senior Subordinated Notes
and shall have received gross cash proceeds therefrom in an aggregate amount of
at least $120,000,000, (ii) the Administrative Agent and the Banks shall have
received copies of the Senior Subordinated Notes Documents certified as true and
correct by an Authorized Officer of the Borrower and (iii) the Senior
Subordinated Notes Documents shall be in full force and effect and the terms and
conditions thereof (including, without limitation, subordination provisions,
amortization, maturities, interest rates, covenants, defaults, securities,
remedies, mandatory repayments and offers to purchase, sinking fund provisions)
shall be reasonably satisfactory to the Administrative Agent and the Required
Banks. The Borrower shall have utilized the net cash proceeds received from the
issuance of the Senior Subordinated Notes to make the payments described under
the "Use of Proceeds" section of the offering memorandum relating to the Senior
Subordinated Notes, including the repayment of all outstanding Existing Loans
together with all accrued and unpaid interest in respect thereof and all Fees
(as defined in the Existing Credit Agreement) and all other Obligations (as
defined in the Existing Credit Agreement) then due and owing. The issuance of
the Senior Subordinated Notes shall have occurred in accordance with the terms
and conditions of the Senior Subordinated Notes Documents (without giving effect
to any material amendment, modification or waiver with respect thereto unless
consented to by the Administrative Agent and the Required Banks) and all
applicable law.
5.12 EQUITY FINANCING. On or prior to the Restatement
Effective Date (i) the Borrower shall have received at least $6,000,000 of cash
proceeds from new common equity financing provided by Charter Oak, its
affiliates, managers and other investors reasonably satisfactory to the
Administrative Agent (the "Equity Financing"), (ii) the Administrative Agent and
each Bank shall have received copies of, and the Administrative Agent and the
Required Banks shall be reasonably satisfied with, all agreements governing, or
relating to, the Equity Financing (the "Equity Financing Documents") which shall
be certified as true and correct by an Authorized Officer of the Borrower and
such Equity Financing Documents shall be in full force and effect and (iii) all
terms and conditions of the Equity Financing shall be reasonably satisfactory to
the Administrative Agent and the Required Banks. The Equity Financing shall have
occurred in accordance with the terms and conditions of the Equity Financing
Documents (without giving effect to any material amendment, modification or
waiver with respect thereto unless consented to by the Administrative Agent and
the Required Bank) and all applicable law. The Borrower shall have utilized the
cash proceeds of the Equity Financing to finance, in part, the Acquisition as
well as to pay fees and expenses in connection with the Transaction and the
Administrative Agent and the Banks shall have received a certificate of an
Authorized Officer of the Borrower to such effect setting forth in reasonable
detail the use of such proceeds.
5.13 SUBSIDIARY GUARANTY. To the extent any Subsidiary
Guarantors exist on the Restatement Effective Date, each such Subsidiary
Guarantor shall have duly authorized, executed and delivered a Subsidiary
Guaranty on such date.
5.14 SECURITY DOCUMENTS ACKNOWLEDGMENT. (a) On the Restatement
Effective Date, the Borrower shall have duly authorized, executed and delivered
an acknowledgment in the form of Exhibit H (such acknowledgment, as amended,
modified or supplemented from time to time, the
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"Security Documents Acknowledgment") pursuant to which, among other things, (i)
the Borrower shall acknowledge and agree that the "Obligations" (as defined in
each of such Security Documents) or any similar term include all of the
Obligations under this Agreement after giving effect to the Transaction and (ii)
the Borrower shall acknowledge and agree that, after giving effect to the
Transaction, each of the Pledge Agreement and the Security Agreement, shall
remain in full force and effect in accordance with their respective terms and
the Borrower shall have taken all actions reasonably requested by the
Administrative Agent (including, without limitation, the obtaining of UCC-11's
or equivalent reports and the filing of UCC-1's or UCC-3's) in connection with
the perfection and first priority status of the Liens intended to be created
and/or maintained by the Pledge Agreement and the Security Agreement in the
Pledge Agreement Collateral and the Security Agreement Collateral.
(b) On the Restatement Effective Date,
(i) the Banks shall have received evidence that the completion
of all recordings and filings necessary or, in the reasonable opinion
of the Collateral Agent, desirable to perfect and protect the security
interests purported to be created by the Security Agreement have been
taken;
(ii) the Collateral Agent shall have in its possession all of
the Pledged Securities which shall be either endorsed in blank (in the
case of promissory notes constituting Pledged Securities) or
accompanied by executed and undated stock powers (in the case of
capital stock constituting Pledged Securities); and
(iii) the Banks shall have received evidence that all other
actions necessary or, in the reasonable opinion of the Collateral
Agent, desirable to perfect and protect the first priority Lien in the
Pledge Agreement Collateral and the Security Agreement Collateral,
subject only to Permitted Encumbrances, have been taken, or
arrangements therefor have been made on a basis satisfactory to the
Collateral Agent and shall be in place.
5.15 NEW MORTGAGES. On the Restatement Effective Date, the
Borrower will, or will cause its Subsidiaries to, deliver to the Collateral
Agent (i) fully executed counterparts of deeds of trust, mortgages and similar
documents in each case in form and substance satisfactory to the Collateral
Agent (each a "New Mortgage" and, collectively, the "New Mortgages") covering
all of the Mortgaged Properties listed on Part A of Annex VIII and designated as
"New Mortgaged Properties" thereon (each a "New Mortgaged Property" and,
collectively, the "New Mortgaged Properties"), and counterparts of such New
Mortgages shall have been duly recorded or delivered to the Collateral Agent for
recording in all places to the extent necessary or, in the reasonable judgment
of the Collateral Agent, desirable, effectively to create a valid and
enforceable first priority mortgage Lien, subject only to Permitted
Encumbrances, on each such New Mortgaged Property in favor of the Collateral
Agent (or such other trustee as may be required or desirable under local law)
for the benefit of the Administrative Agent and the Banks, (ii) mortgage title
insurance policies issued by title insurers reasonably satisfactory to the
Collateral Agent (the "New Mortgage Policies") in amounts reasonably
satisfactory to the Collateral Agent and assuring the Collateral Agent that the
New Mortgages in respect of the New Mortgaged Properties are valid and
enforceable first priority mortgage Liens on the respective New Mortgaged
Properties free and clear of all defects and encumbrances except Permitted
Encumbrances, and such New Mortgage Policies shall be in form
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and substance reasonably satisfactory to the Collateral Agent and shall include
an endorsement for mechanic liens and for any other matter that the Collateral
Agent in its discretion may reasonably request and (iii) such opinions of
counsel as the Collateral Agent may reasonably request in connection with such
New Mortgages, which opinions of counsel shall be in form and substance
satisfactory to the Collateral Agent.
5.16 MORTGAGE AMENDMENTS; TITLE INSURANCE ENDORSEMENTS. (a) On
the Restatement Effective Date, the Collateral Agent shall have received:
(i) fully executed counterparts of amendments (the "Existing
Mortgage Amendments") to the mortgages delivered pursuant to the
Existing Credit Agreement (the "Existing Mortgages") in form and
substance reasonably satisfactory to the Collateral Agent, which
Existing Mortgages, as amended, shall cover such of the Real Property
owned by the applicable Credit Party as shall be listed in Part B of
Annex VIII and designated thereon as the "Existing Mortgaged
Properties" (each an "Existing Mortgaged Property" and collectively,
the "Existing Mortgaged Properties"), together with evidence that
counterparts of the Existing Mortgage Amendments have been delivered to
the title insurance company insuring the Liens of the Existing
Mortgages for recording in all places to the extent necessary or
desirable, in the reasonable judgment of the Collateral Agent,
effectively to maintain valid and enforceable first priority mortgage
liens on the Existing Mortgaged Properties) for the benefit of the
Secured Creditors (as therein defined); and
(ii) endorsements of the Existing Mortgage Policies (the
"Endorsements") in a form and in amounts reasonably satisfactory to the
Administrative Agent and the Required Banks, assuring the Collateral
Agent that the Existing Mortgages, as amended by the Existing Mortgage
Amendments, are valid and enforceable first priority mortgage liens on
the Existing Mortgaged Properties, free and clear of all defects,
encumbrances and other Liens except Permitted Encumbrances, and such
Endorsements shall be in form and substance reasonably satisfactory to
the Administrative Agent and the Required Banks.
(b) On the Restatement Effective Date, (i) the Existing
Mortgages shall remain in full force and effect, and (ii) no filings,
recordings, registrations or other actions (other than those made, obtained or
taken on or prior to the Restatement Effective Date referred to in the preceding
clause (a)) shall be necessary or, in the opinion of the Collateral Agent,
desirable to maintain the perfection and priority of the mortgage liens on the
Existing Mortgaged Properties granted pursuant to the Existing Mortgages.
5.17 SOLVENCY. On the Restatement Effective Date, the Borrower
shall have delivered to the Administrative Agent a solvency certificate in
respect of the Borrower and its Subsidiaries from the Chief Financial Officer of
the Borrower which shall be addressed to the Administrative Agent and each of
the Banks and dated the Restatement Effective Date, setting forth the conclusion
that, after giving effect to the Transaction, each of the Borrower and the
Borrower and its Subsidiaries taken as a whole, are not insolvent and will not
be rendered insolvent by the indebtedness incurred in connection therewith, and
will not be left with unreasonably small capital with which to engage in their
businesses and will not have incurred debts beyond their ability to pay debts as
they mature.
5.18 INSURANCE POLICIES. On or prior to the Restatement
Effective Date, the Collateral
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Agent shall have received evidence of insurance complying with the requirements
of Section 7.03 for the business and properties of the Borrower and its
Subsidiaries, in form and substance satisfactory to the Administrative Agent
and, naming the Collateral Agent as an additional insured and/or loss payee, as
the case may be, and stating that such insurance shall not be cancelled or
revised without 30 days' prior written notice by the insurer to the Collateral
Agent.
5.19 FEES. On or prior to the Restatement Effective Date, the
Borrower shall have paid to the Administrative Agent and the Banks all Fees and
expenses (including, without limitation, reasonable fees and expenses of
counsel) agreed upon by such parties to be paid on or prior to such date.
5.20 NOTICE OF BORROWING; LETTER OF CREDIT REQUEST. (a) Prior
to the making of each Loan (excluding Swingline Loans), the Administrative Agent
shall have received a Notice of Borrowing meeting the requirements of Section
1.03(a). Prior to the making of any Swingline Loan, the Swingline Bank shall
have received a Notice of Borrowing meeting the requirements of Section
1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the
respective Letter of Credit Issuer shall have received a Letter of Credit
Request meeting the requirements of Section 2.03.
5.21 PROJECTIONS. On or prior to the Restatement Effective
Date, there shall have been delivered to the Administrative Agent detailed
projected consolidated financial statements of the Borrower and its Subsidiaries
certified by the chief financial officer of the Borrower for the period from
January 1, 1998 to December 31, 2004 (the "Projections"), which Projections (x)
shall reflect the forecasted consolidated income statements, balance sheets and
cash flow (including all relevant assumptions in connection therewith) of the
Borrower and its Subsidiaries after giving effect to the Transaction and (y)
shall be satisfactory (including, with respect to the accounting practices and
procedures to be utilized by the Borrower and its Subsidiaries following the
Transaction) in form and substance to the Administrative Agent.
5.22 REPAYMENT OF EXISTING LOANS AND OTHER OBLIGATIONS UNDER
EXISTING CREDIT AGREEMENT; EXISTING INDEBTEDNESS. (a) On or prior to the
Restatement Effective Date, the Borrower shall have repaid in full in cash all
outstanding Existing Loans (together with all interest in respect thereof
accrued through the Restatement Effective Date) and all other outstanding
Obligations (as defined in the Existing Credit Agreement) to the extent then due
in accordance with the terms of the Existing Credit Agreement (the
"Refinancing").
(b) On the Restatement Effective Date and after giving effect
to the Transaction, neither the Borrower nor any of its Subsidiaries shall have
any preferred stock or Indebtedness outstanding except for (i) the Loans, (ii)
the Letters of Credit, (iii) the Senior Subordinated Notes and (iv) the Existing
Indebtedness.
5.23 ENVIRONMENTAL REPORTS. On or prior to the Restatement
Effective Date, there shall have been delivered to the Administrative Agent
environmental and hazardous substance analyses with respect to the properties of
the Borrower acquired (or to be acquired) in connection with Acquisition, the
results of which shall be in scope, and in form and substance satisfactory to
the Administrative Agent.
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The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by the Borrower to the Administrative
Agent and each of the Banks that all of the applicable conditions specified
above exist as of that time. All of the certificates, legal opinions and other
documents and papers referred to in this Section 5, unless otherwise specified,
shall be delivered to the Administrative Agent at its Notice Office for the
account of each of the Banks and, except for the Notes, in sufficient
counterparts or copies for each of the Banks and shall be satisfactory in form
and substance to the Administrative Agent.
SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In
order to induce the Banks to enter into this Agreement and to make the Loans and
issue and/or participate in Letters of Credit provided for herein, the Borrower
makes the following representations and warranties to, and agreements with, the
Banks, in each case after giving effect to the Transaction, all of which shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance and/or participation in Letters of Credit (with the making of
each Credit Event thereafter being deemed to constitute a representation and
warranty that the matters specified in this Section 6 are true and correct in
all material respects on and as of the date of each such Credit Event unless
such representation and warranty expressly indicates that it is being made as of
any specific date, in which case such representation and warranty shall be true
and correct in all material respects as of such specific date):
6.01 CORPORATE STATUS. Each of the Borrower and each of its
Subsidiaries (i) is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its organization and has the
corporate power and authority to own its property and assets and to transact the
business in which it is engaged and (ii) has duly qualified and is authorized to
do business and is in good standing in all jurisdictions where it is required to
be so qualified and where the failure to be so qualified could reasonably be
expected to have a Material Adverse Effect.
6.02 CORPORATE POWER AND AUTHORITY. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Documents to which it is a party. Each Credit Party has duly executed and
delivered each Document to which it is a party and each such Document
constitutes the legal, valid and binding obligation of such Credit Party
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting creditors' rights
and by equitable principles (regardless of whether enforcement is sought in
equity or at law).
6.03 NO VIOLATION. Neither the execution, delivery and/or
performance by any Credit Party of the Documents to which it is a party nor
compliance by it with the terms and provisions thereof, nor the consummation of
the transactions contemplated therein, (i) will contravene any applicable
provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality having jurisdiction over it,
(ii) will conflict or be inconsistent with, or result in any breach of, any of
the terms, covenants, conditions or provisions of, or constitute a default
under, or (other than pursuant to the Security Documents) result in the creation
or imposition of (or the obligation to create or impose) any Lien upon any of
the property or assets of the Borrower or any of its Subsidiaries pursuant to
the terms of, any material indenture, mortgage, deed of trust, agreement or
other instrument to which the Borrower or any of its Subsidiaries is a
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party or by which it or any of its material property or assets are bound or to
which it may be subject or (iii) will violate any provision of the certificate
of incorporation or by-laws (or equivalent organizational documents) of the
Borrower or any of its Subsidiaries.
6.04 LITIGATION. There are no actions, suits or proceedings
pending or, to the Borrower's knowledge, threatened with respect to the Borrower
or any of its Subsidiaries (i) that are likely to have a Material Adverse Effect
or (ii) that could reasonably be expected to have a material adverse effect on
(a) the rights or remedies of the Banks or on the ability of any Credit Party to
perform its obligations to them hereunder or under the other Credit Documents to
which it is a party or (b) the ability to consummate the Transaction.
6.05 USE OF PROCEEDS; MARGIN REGULATIONS. (a) The proceeds of
all Revolving Loans may be used (i) in amounts of up to $5,000,000 on the
Restatement Effective Date to effect the Transaction and to pay fees and
expenses relating to the Transaction and (ii) for the general corporate and
working capital purposes of the Borrower and its Subsidiaries (including,
without limitation, for Permitted Acquisitions).
(b) The proceeds of all Swingline Loans shall be utilized for
the general corporate and working capital purposes of the Borrower and its
Subsidiaries (including, without limitation, for Permitted Acquisitions).
(c) Neither the making of any Loan hereunder, nor the use of
the proceeds thereof, will violate or be inconsistent with the provisions of
Regulation T, U or X of the Board of Governors of the Federal Reserve System and
no part of the proceeds of any Loan will be used to purchase or carry any Margin
Stock or to extend credit for the purpose of purchasing or carrying any Margin
Stock.
6.06 GOVERNMENTAL APPROVALS. Except for filings and recordings
in connection with the Security Documents that have been or will be made, no
material order, consent, approval, license, authorization, or validation of, or
filing, recording or registration with, or exemption by, any foreign or domestic
governmental or public body or authority, or any subdivision thereof, is
required to authorize or is required in connection with (i) the execution,
delivery and performance of any Document or (ii) the legality, validity, binding
effect or enforceability of any Document.
6.07 INVESTMENT COMPANY ACT. Neither the Borrower nor any of
its Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.08 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower
nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
6.09 TRUE AND COMPLETE DISCLOSURE. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
the Borrower or any of its Subsidiaries in writing to the Administrative Agent
or any Bank for purposes of or in connection with this Agreement or any
transaction contemplated herein is true and accurate in all material respects on
the date as of which such information is dated or certified and not incomplete
by omitting to state any
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material fact necessary to make such information (taken as a whole) not
misleading at such time in light of the circumstances under which such
information was provided. There is no fact known to the Borrower which would be
reasonably likely to have a Material Adverse Effect which has not been disclosed
herein or in such other documents, certificates and statements furnished to the
Banks for use in connection with the transactions contemplated hereby.
6.10 FINANCIAL CONDITION; FINANCIAL STATEMENTS. (a) On and as
of the Restatement Effective Date, on a PRO FORMA basis after giving effect to
the Transaction and to all Indebtedness incurred, and to be incurred, and Liens
created, and to be created, by each Credit Party in connection therewith, (x)
the sum of the assets, at a fair valuation, of the Borrower and its Subsidiaries
taken as a whole will exceed its debts, (y) the Borrower and its Subsidiaries
taken as a whole will not have incurred or intended to, or believe that they
will, incur debts beyond their ability to pay such debts as such debts mature
and (z) the Borrower and its Subsidiaries taken as a whole will not have
unreasonably small capital with which to conduct their businesses. For purposes
of this Section 6.10(a), "debt" means any liability on a claim, and "claim"
means (i) 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 or (ii) right to an equitable
remedy for breach of performance if such breach gives rise to a payment, whether
or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured or unsecured.
(b) (i) The consolidated balance sheets of the Borrower as of
December 31, 1996 and December 31, 1997 and the related consolidated statements
of income and cash flows of the Borrower for the fiscal years ended as of said
dates, which have been audited by Crowe, Chizek and Company, LLP, independent
certified public accountants, who delivered unqualified audit opinions in
respect therewith and (ii) the PRO FORMA balance sheet and the related
statements of income and cash flows of the Borrower, combined to take into
account the Acquired Business, as of March 31, 1998 and the related consolidated
statements of income and cash flows of the Borrower for the twelve-month period
ended as of said date, which have been reviewed by Crowe, Chizek and Company LLP
and prepared on a PRO FORMA basis as if the Transaction had occurred on the
first day of such period, present fairly the consolidated financial position of
the Borrower at the dates of said statements and the results for the period
covered thereby (or, in the case of the PRO FORMA balance sheet described in
clause (ii) of this paragraph (b), present a good faith estimate of the PRO
FORMA financial condition of the Borrower (after giving effect to the
Transaction) at the date thereof in accordance with GAAP (except, in the case of
the PRO FORMA balance sheet described in clause (ii) of this paragraph (b), to
the extent provided therein), except to the extent provided in the notes to said
financial statements and, in the case of the PRO FORMA balance sheet as of March
31, 1998, subject to normal year end adjustments. All such financial statements
(other than the PRO FORMA balance sheet described in clause (ii) of this
paragraph (b)) have been prepared in accordance with GAAP consistently applied
except to the extent provided in the notes to said financial statements.
(c) Since December 31, 1997, and after giving effect to the
Transaction, nothing has occurred that has had or could reasonably be expected
to have a Material Adverse Effect.
(d) The Projections and PRO FORMA financial information
contained in such materials are based on good faith estimates and assumptions
believed by such Persons to be reasonable at the time made, it being recognized
by the Banks that such Projections as to future events and PRO FORMA
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adjustments 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 or PRO FORMA adjustments and that such differences may be material. On
the Restatement Effective Date, the Borrower believed that the Projections were
reasonable and attainable.
(e) Except as reflected in the financial statements and the
notes thereto described in Section 6.10(b), as of the Restatement Effective Date
there were no liabilities or obligations with respect to the Borrower or any of
its Subsidiaries of a nature (whether absolute, accrued, contingent or otherwise
and whether or not due) which, either individually or in aggregate, would be
material to the Borrower and its Subsidiaries taken as a whole.
6.11 SECURITY INTERESTS. On and after the Restatement
Effective Date, each of the Security Documents create, as security for the
Obligations purported to be secured thereby, a valid and enforceable perfected
security interest in and Lien on all of the Collateral subject thereto, superior
to and prior to the rights of all third Persons and subject to no other Liens
(except (x) to the extent expressly set forth in the Security Documents, (y)
that the Collateral may be subject to the security interests evidenced by
Permitted Liens relating thereto and (z) that the Mortgaged Properties also may
be subject to Permitted Encumbrances relating thereto), in favor of the
Collateral Agent. No filings or recordings are required in order to perfect the
security interests created under any Security Document except for filings or
recordings required in connection with any such Security Document (other than
the Pledge Agreement) which shall have been made prior to the date hereof (or
are the subject of arrangements, satisfactory to the Administrative Agent, for
filing on or promptly after the date hereof).
6.12 REPRESENTATIONS AND WARRANTIES IN DOCUMENTS. All
representations and warranties of the Credit Parties and, to the best knowledge
of the Borrower, of all other Persons party thereto (except as taken into
account in the financial information described in Section 6.10), set forth in
the Documents were true and correct in all material respects as of the time such
representations and warranties were made and shall be true and correct in all
material respects as of the Restatement Effective Date as if such
representations and warranties were made on and as of such date, unless stated
to relate to a specific earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of such earlier
date.
6.13 CONSUMMATION OF TRANSACTION. As of the Restatement
Effective Date, the Transaction shall have been consummated in accordance with
the terms and conditions of the Transaction Documents and all applicable laws.
All applicable waiting periods with respect thereto have or, prior to the time
when required, will have, expired without, in all such cases, any action being
taken by any competent authority which restrains, prevents, or imposes material
adverse conditions upon the consummation of the Transaction. As of the
Restatement Effective Date, there does not exist any judgment, order, or
injunction prohibiting the consummation of the Transaction, or the making of the
Loans or the performance by any Credit Party of its respective obligations under
the Documents.
6.14 TAX RETURNS AND PAYMENTS. Each of the Borrower and each
of its Subsidiaries has filed all federal income tax returns and all other
material tax returns, domestic and foreign, required to be filed by it and has
paid, all material taxes and assessments payable by it which have become due,
other than those contested in good faith and adequately disclosed and fully
provided
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for on the financial statements of the Borrower and its Subsidiaries in
accordance with GAAP. The Borrower and each of its Subsidiaries have paid, or
have provided adequate reserves (in the good faith judgment of the management of
the Borrower) for the payment of, all federal, state and foreign income taxes
applicable for all prior fiscal years and for the current fiscal year to date.
There is no material action, suit, proceeding, investigation, audit or claim now
pending or, to the knowledge of the Borrower or any of its Subsidiaries,
threatened by any authority regarding any taxes relating to the Borrower or any
of its Subsidiaries. Neither the Borrower nor any of its Subsidiaries has
entered into an agreement or waiver or been requested to enter into an agreement
or waiver extending any statute of limitations relating to the payment or
collection of taxes of the Borrower or any of its Subsidiaries, or is aware of
any circumstances that would cause the taxable years or other taxable periods of
the Borrower or any of its Subsidiaries not to be subject to the normally
applicable statute of limitations.
6.15 COMPLIANCE WITH ERISA. Annex IV sets forth each Plan;
each Plan (and each related trust, insurance contract or fund) is in substantial
compliance with its terms and with all applicable laws, including without
limitation ERISA and the Code; each Plan (and each related trust, if any) which
is intended to be qualified under Section 401(a) of the Code has received a
determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable
Event has occurred; no Plan which is a multiemployer plan (as defined in Section
4001(a)(3) of ERISA) is insolvent or in reorganization; no Plan has an Unfunded
Current Liability; no Plan which is subject to Section 412 of the Code or
Section 302 of ERISA has an accumulated funding deficiency, within the meaning
of such sections of the Code or ERISA, or has applied for or received a waiver
of an accumulated funding deficiency or an extension of any amortization period,
within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA;
all contributions required to be made with respect to a Plan have been timely
made; neither the Borrower nor any Subsidiary of the Borrower nor any ERISA
Affiliate has incurred any material liability (including any indirect,
contingent or secondary liability) to or on account of a Plan pursuant to
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of
ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any
such liability under any of the foregoing sections with respect to any Plan; no
condition exists which presents a material risk to the Borrower or any
Subsidiary of the Borrower or any ERISA Affiliate of incurring a liability to or
on account of a Plan pursuant to the foregoing provisions of ERISA and the Code;
no proceedings have been instituted to terminate or appoint a trustee to
administer any Plan which is subject to Title IV of ERISA; no action, suit,
proceeding, hearing, audit or investigation with respect to the administration,
operation or the investment of assets of any Plan (other than routine claims for
benefits) is pending, expected or threatened; using actuarial assumptions and
computation methods consistent with Part 1 of subtitle E of Title IV of ERISA,
the aggregate liabilities of the Borrower and its Subsidiaries and its ERISA
Affiliates to all Plans which are multiemployer plans (as defined in Section
4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the
close of the most recent fiscal year of each such Plan ended prior to the date
of the most recent Credit Event, would not exceed $50,000; each group health
plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code)
of the Borrower or any Subsidiary or any ERISA Affiliate which covers or has
covered employees or former employees of the Borrower, any Subsidiary of the
Borrower, or any ERISA Affiliate has at all times been operated in compliance
with the provisions of Part 6 of subtitle B of Title I of ERISA and Section
4980B of the Code; no lien imposed under the Code or ERISA on the assets of the
Borrower or any Subsidiary of the Borrower or any ERISA Affiliate exists or is
likely to arise on account of any Plan; and the
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Borrower and its Subsidiaries may cease contributions to or terminate any
employee benefit plan maintained by any of them without incurring any material
liability.
6.16 SUBSIDIARIES; SUBSIDIARY RESTRICTIONS. (a) Annex V lists
each Subsidiary of the Borrower (and the direct and indirect ownership interest
of the Borrower therein), in each case existing on the Restatement Effective
Date.
(b) There are no restrictions on the Borrower or any of its
Subsidiaries which prohibit or otherwise restrict the transfer of cash or other
assets from any Subsidiary of the Borrower to the Borrower, other than
prohibitions or restrictions existing under or by reason of (i) this Agreement
and the other Credit Documents, (ii) applicable law, (iii) customary
non-assignment provisions entered into in the ordinary course of business and
consistent with past practices, (iv) any restriction or encumbrance with respect
to a Subsidiary of the Borrower imposed pursuant to an agreement which has been
entered into for the sale or disposition of all or substantially all of the
capital stock or assets of such Subsidiary, so long as such sale or disposition
is permitted under this Agreement, and (v) any documents or instruments
governing the terms of any Indebtedness or other obligations secured by
Permitted Liens, PROVIDED that such prohibitions or restrictions apply only to
the assets subject to such Permitted Liens.
6.17 PATENTS, ETC. Except as set forth on Annex VI, the
Borrower and each of its Subsidiaries has the right to use all material patents,
trademarks, service marks, trade names, copyrights and licenses, free from
materially burdensome restrictions, that are used for the operation of their
businesses taken as a whole as presently conducted.
6.18 POLLUTION AND OTHER REGULATIONS. (a) The Borrower and
each of its Subsidiaries is in compliance with all applicable Environmental Laws
governing its business for which failure to comply is likely to have a Material
Adverse Effect, and neither the Borrower nor any of its Subsidiaries is liable
for any material penalties, fines or forfeitures for failure to comply with any
of the foregoing in the manner set forth above. Except as set forth on Annex
VII, all licenses, permits, registrations or approvals required for the business
of the Borrower and each of its Subsidiaries, as conducted as of the Restatement
Effective Date, under any Environmental Law have been secured and each of the
Borrower and each of its Subsidiaries is in substantial compliance therewith,
except such licenses, permits, registrations or approvals the failure to secure
or to comply therewith is not likely to have a Material Adverse Effect. Neither
the Borrower nor any of its Subsidiaries is in any respect in noncompliance
with, breach of or default under any applicable writ, order, judgment,
injunction, or decree to which the Borrower or such Subsidiary is a party or
which would affect the ability of the Borrower or such Subsidiary to conduct its
business and no event has occurred and is continuing which, with the passage of
time or the giving of notice or both, would constitute noncompliance, breach of
or default thereunder, except in each such case, such noncompliance, breaches or
defaults as are not likely to, in the aggregate, have a Material Adverse Effect.
Except as set forth in Annex VII, there are as of the Restatement Effective Date
no Environmental Claims pending or, to the best knowledge of the Borrower,
threatened, against the Borrower or any of its Subsidiaries, or which (a)
question the validity, term or entitlement of the Borrower or any of its
Subsidiaries for any permit, license, order or registration required for the
operation of any facility which the Borrower or any of its Subsidiaries
currently operates and (b) wherein an unfavorable decision, ruling or finding
would be reasonably likely to have a Material Adverse Effect. There are no
facts, circumstances, conditions or occurrences on any Real Property at any time
owned
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or operated by the Borrower or any of its Subsidiaries or, to the knowledge of
the Borrower, on any property adjacent to any such Real Property that could
reasonably be expected (i) to form the basis of an Environmental Claim against
the Borrower, any of its Subsidiaries or any currently owned or operated Real
Property of the Borrower or any of its Subsidiaries, or (ii) (a) to cause any
such Real Property currently owned or operated to be subject to any restrictions
on the occupancy or use of such Real Property under any Environmental Law or (b)
to cause any such owned Real Property to be subject to any restrictions on the
ownership or transferability of such owned Real Property under any Environmental
Law, except in each such case, such Environmental Claims or restrictions that
individually or in the aggregate are not reasonably likely to have a Material
Adverse Effect.
(b) Hazardous Materials have not at any time been (i)
generated, used, treated or stored on, or transported to or from, any Real
Property of the Borrower or any of its Subsidiaries or (ii) released on any such
Real Property, in each case under clauses (i) and (ii) where such occurrence or
event individually or in the aggregate is reasonably likely to have a Material
Adverse Effect.
6.19 PROPERTIES. The Borrower and each of its Subsidiaries
have good title to all material properties owned by them, free and clear of all
Liens, other than (i) as referred to in the consolidated balance sheet referred
to in Section 6.10(b) or in the notes thereto or (ii) Permitted Liens. Annex
VIII contains a true and complete list of each Real Property owned or leased by
the Borrower or any of its Subsidiaries on the Restatement Effective Date and
the type of interest therein held by the Borrower or the respective Subsidiary.
6.20 LABOR RELATIONS. Neither the Borrower nor any of its
Subsidiaries is engaged in any unfair labor practice that could reasonably be
expected to have a Material Adverse Effect. There is (i) no unfair labor
practice complaint pending against the Borrower or any Subsidiary of the
Borrower or, to the Borrower's knowledge, threatened against any of them, before
the National Labor Relations Board, and no grievance or arbitration proceeding
arising out of or under any collective bargaining agreement is so pending
against the Borrower or any Subsidiary of the Borrower or, to the Borrower's
knowledge, threatened against any of them, (ii) no strike, labor dispute, work
slowdown or stoppage pending against the Borrower or any Subsidiary of the
Borrower or, to the Borrower's knowledge, threatened against any of them and
(iii) no union representation petition existing with respect to the employees of
the Borrower or any Subsidiary of the Borrower and no union organizing
activities are taking place, except with respect to any matter specified in
clause (i), (ii) or (iii) above, either individually or in the aggregate, such
as is not reasonably likely to have a Material Adverse Effect.
6.21 EXISTING INDEBTEDNESS. Annex IX sets forth a true and
complete list of all Indebtedness of the Borrower and each of its Subsidiaries
as of the Restatement Effective Date and which is to remain outstanding after
giving effect to the Transaction (excluding the Loans, the Letters of Credit and
the Senior Subordinated Notes, collectively the "Existing Indebtedness"), in
each case showing the aggregate principal amount thereof and the name of the
respective borrower (or issuer) and any other entity which directly or
indirectly guaranteed such debt.
6.22 CAPITALIZATION. On the Restatement Effective Date and
after giving effect to the Transaction and the other transactions contemplated
hereby, the authorized capital stock of the Borrower shall consist of (x) 1,035
shares of Class A Common Stock of which 135.835 shares shall be issued and
outstanding, (y) 215 shares of Class B Common Stock of which no shares shall be
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issued and outstanding and (z) no shares of preferred stock. All such
outstanding shares have been duly and validly issued, are fully paid and
nonassessable and are free of preemptive rights. Except as set forth on Annex X,
neither the Borrower nor any of its Subsidiaries has outstanding any securities
convertible into or exchangeable for its capital stock or outstanding any rights
to subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock.
6.23 SENIOR SUBORDINATED NOTES. (a) As of the Restatement
Effective Date, the Senior Subordinated Notes have been duly authorized, issued
and delivered in accordance with applicable law and the offering memorandum
relating thereto, and such offering memorandum, as of the date of its issue,
does not contain any untrue statement of a material fact nor omit to state a
material fact necessary in order to make the statements contained therein, in
the light of the circumstances under which they were made, not misleading.
(b) The subordination provisions contained in the Senior
Subordinated Notes and in the other Senior Subordinated Note Documents are
enforceable against the Borrower and the holders of the Senior Subordinated
Notes, and all Obligations are within the definition of "Senior Debt" and
"Designated Senior Debt" included in such subordination provisions.
6.24 ADDRESSING THE YEAR 2000 PROBLEM. All Information Systems
and Equipment are either Year 2000 Compliant, or any reprogramming, remediation,
or any other corrective action, including the internal testing of all such
Information Systems and Equipment, will be completed by January 1, 1999.
Further, to the extent that such reprogramming/remediation and testing action is
required, the cost thereof, as well as the cost of the reasonably foreseeable
consequences of failure to become Year 2000 Compliant, to the Borrower and its
Subsidiaries (including, without limitation, reprogramming errors and the
failure of other systems or equipment) will not result in a Default or a
Material Adverse Effect.
SECTION 7. AFFIRMATIVE COVENANTS. The Borrower covenants and
agrees that as of the Restatement Effective Date and thereafter for so long as
this Agreement is in effect and until the Total Revolving Loan Commitment has
terminated, no Letters of Credit or Notes are outstanding and the Loans and
Unpaid Drawings, together with interest, Fees and all other Obligations (other
than indemnities described in Section 12.13 hereof which are not then due and
payable) incurred hereunder, are paid in full:
7.01 INFORMATION COVENANTS. The Borrower will furnish to each
Bank:
(a) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the
close of each fiscal year of the Borrower, the consolidated balance sheet of the
Borrower and its Subsidiaries, as at the end of such fiscal year and the related
consolidated statements of income and retained earnings and of cash flows for
such fiscal year, in each case setting forth comparative consolidated figures
for the preceding fiscal year, and in the case of the consolidated financial
statements, examined by Crowe, Chizek and Company LLP, any "big six" independent
certified public accountants or such other independent certified public
accountants of recognized national standing acceptable to the Administrative
Agent whose opinion shall not be qualified as to the scope of audit or as to the
status of the Borrower or any of its Subsidiaries as a going concern, together
with a certificate of such accounting firm stating that in the course of its
regular audit of the business of the Borrower, which
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audit was conducted in accordance with generally accepted auditing standards,
such accounting firm has obtained no knowledge of any Default or Event of
Default which has occurred and is continuing or, if in the opinion of such
accounting firm such a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and
in any event within 45 days after the close of each of the first three quarterly
accounting periods in each fiscal year of the Borrower, the consolidated balance
sheet of the Borrower and its Subsidiaries, as at the end of such quarterly
accounting period and the related consolidated statements of income and retained
earnings and of cash flows for such quarterly accounting period and for the
elapsed portion of the fiscal year ended with the last day of such quarterly
accounting period, and in each case setting forth comparative consolidated
figures for the related periods in the prior fiscal year, all of which shall be
certified by the chief financial officer or controller of the Borrower, subject
to changes resulting from audit and normal year-end audit adjustments.
(c) MONTHLY REPORTS. As soon as practicable, and in any event
within 30 days after the end of each monthly accounting period of each fiscal
year of the Borrower (other than the last monthly accounting period in such
fiscal year), monthly reports in a form reasonably satisfactory to the
Administrative Agent, which shall include the consolidated balance sheet of the
Borrower and its Subsidiaries, as at the end of such monthly accounting period,
and the related consolidated statements of income and cash flow for such monthly
accounting period, setting forth (i) comparative figures to the budget prepared
in accordance with Section 7.01(d) and (ii) in the case of each monthly
accounting period commencing with August 1999, comparative figures to the
figures for the related periods in the prior fiscal year.
(d) BUDGETS; ETC. Not more than 60 days after the commencement
of each fiscal year of the Borrower, a budget of the Borrower and its
Subsidiaries in reasonable detail for each of the twelve months of such fiscal
year. Together with each delivery of consolidated financial statements pursuant
to Sections 7.01(a), (b) and (c), a comparison of the current year to date
financial results against the budgets required to be submitted pursuant to this
clause (d) shall be presented.
(e) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Sections 7.01(a) (b) and (c), a certificate
of the chief financial officer, controller or other Authorized Officer of the
Borrower to the effect that no Default or Event of Default exists or, if any
Default or Event of Default does exist, specifying the nature and extent
thereof, which certificate, in the case of the certificate delivered pursuant to
(x) Sections 7.01(a) and (b), shall set forth the calculations required to
establish whether the Borrower and its Subsidiaries were in compliance with the
provisions of Sections 8.05, 8.08(a) (but only to the extent the Borrower has
made payments of the type described in clause (ii) thereof in such fiscal
quarter or year), 8.10 and 8.11 as at the end of such fiscal quarter or year, as
the case may be and (y) Section 7.01(c), shall set forth the calculation of the
Leverage Ratio, together with the calculations required to establish such ratio;
PROVIDED that nothing contained in this clause (y) shall require any calculation
to be made on a monthly basis if such calculation is not otherwise required to
be made on a monthly basis.
(f) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any
event within three Business Days after the Borrower obtains knowledge thereof,
notice of (x) the occurrence of any event which constitutes a Default or an
Event of Default, which notice shall specify the nature thereof, the period
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of existence thereof and what action the Borrower proposes to take with respect
thereto or (y) the commencement of or any significant development in any
litigation or governmental proceeding pending against the Borrower or any of its
Subsidiaries which is reasonably likely to have a Material Adverse Effect or is
reasonably likely to have a material adverse effect on the ability of the
Borrower or any other Credit Party to perform its obligations hereunder or under
any other Credit Document.
(g) ENVIRONMENTAL MATTERS. Promptly upon, and in any event
within ten Business Days after, an officer of the Borrower or any of its
Subsidiaries obtains knowledge thereof, notice of one or more of the following
environmental matters, unless such environmental matters could not, individually
or when aggregated with all other such environmental matters, be reasonably
expected to have a Material Adverse Effect:
(i) any pending or threatened Environmental Claim against the
Borrower or any of its Subsidiaries or any Real Property owned or
operated by the Borrower or any of its Subsidiaries;
(ii) any condition or occurrence on or arising from any Real
Property owned or operated by the Borrower or any of its Subsidiaries
that (a) results in noncompliance by the Borrower or any of its
Subsidiaries with any applicable Environmental Law or (b) could
reasonably be expected to form the basis of an Environmental Claim
against the Borrower or any of its Subsidiaries or any such Real
Property;
(iii) any condition or occurrence on any Real Property owned or
operated by the Borrower or any of its Subsidiaries that could
reasonably be expected to cause such Real Property to be subject to any
restrictions on the ownership, occupancy, use or transferability by the
Borrower or any of its Subsidiaries of such Real Property under any
Environmental Law; and
(iv) the taking of any removal or remedial action in response to
the actual or alleged presence of any Hazardous Material on any Real
Property owned or operated by the Borrower or any of its Subsidiaries
as required by any Environmental Law or any governmental or other
administrative agency; PROVIDED that in any event the Borrower shall
deliver to each Bank all notices received by it or any of its
Subsidiaries from any government or governmental agency under, or
pursuant to, CERCLA.
All such notices shall describe in reasonable detail the nature of the claim,
investigation, condition, occurrence or removal or remedial action and the
Borrower's or such Subsidiary's response thereto. In addition, the Borrower will
provide the Banks with copies of all material communications with any government
or governmental agency relating to Environmental Laws, all material
communications with any Person (other than its attorneys) relating to any
Environmental Claim of which notice is required to be given pursuant to this
Section 8.01(g), and such detailed reports of any such Environmental Claim as
may reasonably be requested by the Banks.
(h) AUDITORS' REPORTS. Promptly upon receipt thereof, a copy
of each final report or "management letter" submitted to the Borrower by its
independent accountants in connection with any annual, interim or special audit
made by it of the books of the Borrower.
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<PAGE> 41
(i) OTHER INFORMATION. From time to time, such other
information or documents (financial or otherwise) as the Administrative Agent on
its own behalf or on behalf of the Required Banks may reasonably request from
time to time.
7.02 BOOKS, RECORDS AND INSPECTIONS; BANK MEETINGS. (a) The
Borrower will, and will cause each of its Subsidiaries to, permit, upon
reasonable notice to the chief financial officer, controller or any other
Authorized Officer of the Borrower, (x) officers and designated representatives
of the Administrative Agent or the Required Banks to visit and inspect any of
the properties or assets of the Borrower or any of its Subsidiaries in
whomsoever's possession, and to examine the books of account of the Borrower or
any of its Subsidiaries and discuss the affairs, finances and accounts of the
Borrower or of any of its Subsidiaries with, and be advised as to the same by,
its and their officers and independent accountants, all at such reasonable times
and intervals and to such reasonable extent as the Administrative Agent or the
Required Banks may desire and (y) not more than once per year (and at any time
during the occurrence of a Default or an Event of Default) the Administrative
Agent, or a third party designated by the Administrative Agent, to conduct, at
the Borrower's expense, an audit of the accounts receivable and inventories of
the Borrower and its Subsidiaries at such times as the Administrative Agent
shall reasonably require.
(b) At the request of the Administrative Agent, the Borrower
shall within 120 days after the close of each fiscal year of the Borrower hold a
meeting at a time and place selected by the Borrower and acceptable to the
Administrative Agent with all of the Banks at which meeting shall be reviewed
the financial results of the previous fiscal year and the financial condition of
the Borrower and its Subsidiaries and the budgets presented for the current
fiscal year of the Borrower and its Subsidiaries.
7.03 MAINTENANCE OF PROPERTY; INSURANCE. The Borrower will,
and will cause each of its Subsidiaries to, at all times maintain in full force
and effect insurance in such amounts, covering such risks and liabilities and
with such deductibles or self-insured retentions as are in accordance with
normal industry practice. At any time that insurance at the levels described in
Annex XI is not being maintained by the Borrower and its Subsidiaries, the
Borrower will notify the Banks in writing thereof and, if thereafter notified by
the Administrative Agent to do so, the Borrower will, and will cause each of its
Subsidiaries to, obtain insurance at such levels at least equal to those set
forth in Annex XI to the extent then generally available, or otherwise as are
acceptable to the Administrative Agent. The Borrower will, and will cause each
of its Subsidiaries to, furnish on the Restatement Effective Date and annually
thereafter to the Administrative Agent, upon its request, a summary of the
insurance carried together with certificates of insurance and other evidence of
such insurance, if any, naming the Collateral Agent as an additional insured
and/or loss payee.
7.04 PAYMENT OF TAXES. The Borrower will pay and discharge,
and will cause each of its Subsidiaries to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which material penalties attach thereto, and all lawful claims for sums that
have become due and payable which, if unpaid, might become a Lien not otherwise
permitted pursuant to Section 8.03(a) or charge upon any properties of the
Borrower or any of its Subsidiaries, PROVIDED that neither the Borrower nor any
Subsidiary of the Borrower shall be required to pay any such tax,
assessment, charge, levy or claim which is being contested in good faith and by
proper proceedings if it has maintained adequate reserves (in the good faith
judgment of the management of the
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Borrower) with respect thereto in accordance with GAAP.
7.05 CORPORATE FRANCHISES. The Borrower will do, and will
cause each of its Subsidiaries to do, or cause to be done, all things necessary
to preserve and keep in full force and effect its existence, material rights and
authority, PROVIDED that any transaction permitted by Section 8.02 will not
constitute a breach of this Section 7.05.
7.06 COMPLIANCE WITH STATUTES, ETC. The Borrower will, and
will cause each of its Subsidiaries to, comply with all applicable statutes
(including, without limitation, all applicable Environmental Laws), regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property except for such non-compliance which would not have a
Material Adverse Effect or would not have a material adverse effect on the
ability of any Credit Party to perform its obligations under any Credit Document
to which it is party.
7.07 ERISA. As soon as possible and, in any event, within 10
days after the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate
knows or has reason to know of the occurrence of any of the following, the
Borrower will deliver to each of the Banks a certificate of the chief financial
officer of the Borrower setting forth the full details as to such occurrence and
the action, if any, which the Borrower, a Subsidiary or an ERISA Affiliate is
required or proposes to take, together with any notices required or proposed to
be given to or filed with or by the Borrower, the Subsidiary, the ERISA
Affiliate, the PBGC, a Plan participant or the Plan administrator with respect
thereto: that a Reportable Event has occurred; (except to the extent that the
Borrower has previously delivered to the Banks a certificate and notices (if
any) concerning such event pursuant to the next clause hereof); that a
contributing sponsor as defined in Section 4001(a)(13) of ERISA of a Plan
subject to the requirements of PBGC Regulation Section 4043.61 (without regard
to subparagraph (b)(1) thereof) and an event described in subsection .62, .63,
.64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected
to occur with respect to such Plan within the following 30 days; that an
accumulated funding deficiency within the meaning of Section 412 of the Code or
Section 302 of ERISA has been incurred or an application may be or has been made
for a waiver or modification of the minimum funding standard (including any
required installment payments) or an extension of any amortization period under
Section 412 of the Code or Section 303 or 304 of ERISA, with respect to a Plan;
that any contribution required to be made with respect to a Plan has not been
timely made; that a Plan has been or may be terminated, reorganized, partitioned
or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded
Current Liability; that proceedings may be or have been instituted to terminate
a Plan which is subject to Title IV of ERISA; that a proceeding has been
instituted pursuant to Section 515 of ERISA to collect a delinquent contribution
to a Plan; that the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate will or may incur any liability to or on account of the termination of
or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or
4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or
4980 of the Code or Section 409, 502(i) or 502(l) of ERISA or with respect to a
group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2)
of the Code) under Section 4980B of the Code; or that the Borrower or any
Subsidiary of the Borrower may incur any material liability pursuant to any
employee welfare benefit plan (as defined in Section 3(l) of ERISA) that
provides benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or any Plan other than any Plan subject to
Title IV of ERISA and/or Section 412 of the Code. The Borrower will deliver to
the
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Banks (i) a complete copy of the annual report (on Internal Revenue Service Form
5500-series) of each Plan (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information) required to be filed with the
Internal Revenue Service and (ii) copies of any records, documents or other
information that must be furnished to the PBGC with respect to any Plan pursuant
to Section 4010 of ERISA. In addition to any certificates or notices delivered
to the Banks pursuant to the first sentence hereof, copies of annual reports and
any records, documents and other information required to be furnished to the
PBGC, and any material notices received by the Borrower any Subsidiary of the
Borrower or any ERISA Affiliate with respect to a Plan shall be delivered to the
Banks no later than 10 days after the date such report has been filed with the
Internal Revenue Service or such records, documents and/or information has been
furnished to the PBGC or such notice has been received by the Borrower, the
Subsidiary or the ERISA Affiliate, as applicable.
7.08 GOOD REPAIR. The Borrower will, and will cause each of
its Subsidiaries to, ensure that its material properties and equipment used or
useful in its business in whomsoever's possession they may be, are kept, in all
material respects, in good repair, working order and con-
dition, normal wear and tear excepted, and, subject to Section 8.05, that from
time to time there are made in such properties and equipment all needful and
proper repairs, renewals, replacements, extensions, additions, betterments and
improvements thereto, to the extent and in the manner useful or customary for
companies in similar businesses.
7.09 END OF FISCAL YEARS; FISCAL QUARTERS. The Borrower will,
for financial reporting and tax purposes, cause (i) each of its, and each of its
Subsidiaries' fiscal years to end on December 31 of each year and (ii) each of
its, and each of its Subsidiaries' fiscal quarters to end on March 31, June 30,
September 30 and December 31 of each year.
7.10 USE OF PROCEEDS. All proceeds of the Loans shall be used
as provided in Section 6.05.
7.11 ADDITIONAL SECURITY; FURTHER ASSURANCES. (a) The Borrower
will, and will cause each of its Subsidiaries to, grant to the Collateral Agent
security interests and mortgages (each an "Additional Mortgage") in such owned
Real Property of the Borrower and its Subsidiaries acquired after the
Restatement Effective Date as may be requested from time to time by the
Administrative Agent (each such Real Property, an "Additional Mortgaged
Property") it being understood and agreed that at any time after the Real
Property located in Baltimore, Maryland ceases to be encumbered by a mortgage in
favor of JMC Industries, Inc., the Borrower shall, upon the reasonable request
of the Collateral Agent, grant to the Collateral Agent an Additional Mortgage on
such Real Property so long as the requested action does not result in undue
costs in relation to the benefit to be received. Such Additional Mortgages shall
be granted pursuant to documentation reasonably satisfactory in form and
substance to the Administrative Agent and shall constitute valid and enforceable
Liens superior to and prior to the rights of all third Persons and subject to no
other Liens except as are permitted by Section 8.03. The Additional Mortgages or
instruments related thereto shall be duly recorded or filed in such manner and
in such places as are required by law to establish, perfect, preserve and
protect the Liens in favor of the Collateral Agent required to be granted
pursuant to the Additional Mortgages and all taxes, fees and other charges
payable in connection therewith shall have been paid in full by the Borrower.
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(b) The Borrower will, and will cause each of its Subsidiaries
to, at the expense of the Borrower, make, execute, endorse, acknowledge, file
and/or deliver to the Collateral Agent from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, real
property surveys, reports and other assurances or instruments and take such
further steps relating to the Collateral covered by any of the Security
Documents as the Collateral Agent may reasonably require. Furthermore, the
Borrower will cause to be delivered to the Collateral Agent such opinions of
counsel, title insurance and other related documents as may be requested by the
Administrative Agent to assure themselves that this Section 7.11 has been
complied with.
(c) The Borrower agrees that each action required by clauses
(a) and (b) above in this Section 7.11 shall be completed as soon as possible,
but in no event later than 60 days after such action is requested to be taken by
the Administrative Agent or the Required Banks, PROVIDED that in no event shall
the Borrower be required to take any action, other than using its reasonable
commercial efforts without any material expenditure, to obtain consents from
third parties with respect to its compliance with such clauses (a) and (b).
(d) In the event that the Administrative Agent or the Required
Banks at any time after the Restatement Effective Date determine in its or their
good faith discretion that real estate appraisals satisfying the requirements of
FIRREA (any such appraisal a "Required Appraisal") are or were required to be
obtained, or should be obtained, in each case, in accordance with FIRREA, in
connection with the Mortgaged Properties, then, within 120 days after receiving
written notice thereof from the Administrative Agent or the Required Banks, as
the case may be, such Required Appraisal shall be delivered, at the expense of
the Borrower, to the Administrative Agent which Required Appraisal, and the
respective appraiser, shall be satisfactory to the Administrative Agent.
7.12 YEAR 2000 COMPATIBILITY. The Borrower and each of its
Subsidiaries will ensure that its Information Systems and Equipment are at all
times after January 1, 1999 Year 2000 Compliant, except insofar as the failure
to do so will not result in a Material Adverse Effect, and shall notify the
Administrative Agent and any Bank promptly upon detecting any failure of the
Information Systems and Equipment to be Year 2000 Compliant, except insofar as
such failure is not likely to result in a Material Adverse Effect. In addition,
the Borrower shall provide the Administrative Agent with such information about
its year 2000 computer readiness (including, without limitation, information as
to contingency plans, budgets and testing results) as the Administrative Agent
shall reasonably request.
SECTION 8. NEGATIVE COVENANTS. The Borrower covenants and
agrees that as of the Restatement Effective Date and thereafter for so long as
this Agreement is in effect and until the Total Revolving Loan Commitment has
terminated, no Letters of Credit or Notes are outstanding and the Loans and
Unpaid Drawings, together with interest, Fees and all other Obligations (other
than indemnities described in Section 12.13 which are not then due and payable)
incurred hereunder, are paid in full:
8.01 CHANGES IN BUSINESS. The Borrower will not, and will not
permit any of its Subsidiaries to, materially alter the character of the
business of the Borrower and its Subsidiaries from that conducted on the
Restatement Effective Date (after giving effect to the consummation of the
Transaction), provided that this Section 8.01 shall not restrict the making of
any investment
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expressly permitted by Section 8.06 or the consummation of any transaction
expressly permitted by Section 8.02 (except to the extent that 8.02(m)(iii)
requires that Permitted Acquisitions be made in Permitted Businesses).
8.02 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC.
The Borrower will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs, or enter into any transaction of merger or
consolidation, or sell or otherwise dispose of all or any part of its property
or assets (other than inventory or obsolete equipment or excess equipment no
longer needed in the conduct of the business in the ordinary course of business)
or purchase, lease or otherwise acquire all or any part of the property or
assets of any Person (other than leases, purchases or other acquisitions of
inventory, materials and equipment in the ordinary course of business), or agree
to do any of the foregoing at any future time, except that the following shall
be permitted:
(a) any Wholly-Owned Subsidiary of the Borrower may be merged
or consolidated with or into, or be liquidated into, the Borrower or a
Subsidiary Guarantor that is a Wholly- Owned Domestic Subsidiary of the
Borrower (so long as the Borrower or such Subsidiary Guarantor, as the
case may be, is the surviving corporation), or all or any part of the
business, properties or assets of any Wholly-Owned Subsidiary of the
Borrower may be conveyed, leased, sold or transferred to the Borrower
or any Subsidiary Guarantor that is a Wholly- Owned Domestic Subsidiary
of the Borrower;
(b) Consolidated Capital Expenditures to the extent within the
limitations set forth in Section 8.05;
(c) the investments, acquisitions and transfers or
dispositions of properties permitted pursuant to Section 8.06;
(d) the Borrower and its Subsidiaries may lease (as lessee)
real or personal property in the ordinary course of business (so long
as such lease does not create a Capitalized Lease Obligation not
otherwise permitted by Section 8.04(c));
(e) licenses or sublicenses by the Borrower and its
Subsidiaries of software, customer lists, trademarks, service marks,
patents, trade names and copyrights and other intellectual property in
the ordinary course of business, PROVIDED that such licenses or
sublicenses shall not materially interfere with the business of the
Borrower or any such Subsidiary;
(f) other sales or dispositions of assets in the ordinary
course of business (other than assets disposed of in connection with a
Recovery Event) which constitute Asset Sales, PROVIDED that (x) the
aggregate Net Cash Proceeds received from all such sales and
dispositions (when added to the fair market value of all assets
received in connection with such Asset Sales) shall not exceed
$20,000,000, (y) each such sale shall be in an amount at least equal to
the fair market value thereof (as determined in good faith by the
Borrower) and for proceeds consisting solely of (A) not less than 80%
cash and (B) seller indebtedness evidenced by promissory notes, which
promissory notes shall be pledged and delivered to the Collateral Agent
pursuant to the Pledge Agreement and (z) the Net Cash Proceeds of any
such sale are applied to reduce the Total Revolving Loan Commitment to
the extent required by Section 3.03(c) and repay Revolving Loans to the
extent required by Section 4.02(a), and, PROVIDED FURTHER, that the
sale or disposition of the capital stock of (i) any Subsidiary
Guarantor shall be prohibited except as otherwise
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permitted pursuant to Section 8.02(a) and (ii) any other Subsidiary of
the Borrower shall be prohibited unless it is for all of the
outstanding capital stock of such Subsidiary owned by the Borrower and
its Subsidiaries;
(g) other sales or dispositions of assets (or similar
transactions) in each case to the extent the Required Banks have
consented in writing thereto and subject to such conditions as may be
set forth in such consent;
(h) any Subsidiary of the Borrower (including any Subsidiary
Guarantor so long as the assets of such Subsidiary Guarantor are
transferred pursuant to Section 8.02(l)) may be liquidated into the
Borrower or a Subsidiary Guarantor that is a Wholly-Owned Domestic
Subsidiary of the Borrower;
(i) each of the Borrower and its Subsidiaries may make sales
or transfers of inventory in the ordinary course of business and
consistent with past practices (including without limitation sales or
transfers of inventory by the Borrower to its Subsidiaries);
(j) the Acquisition shall be permitted;
(k) the Borrower and its Subsidiaries may, in the ordinary
course of business, sell, transfer or otherwise dispose of patents,
trademarks, service marks, trade names and copyrights which, in the
reasonable judgment of the Borrower or such Subsidiary, are determined
to be uneconomical, negligible or obsolete in the conduct of its
business;
(l) any Subsidiary of the Borrower may transfer assets to the
Borrower or to a Subsidiary Guarantor that is a Wholly-Owned Domestic
Subsidiary of the Borrower so long as the security interests granted to
the Collateral Agent pursuant to the Security Documents in the assets
so transferred shall remain in full force and effect and perfected to
at least the same extent as in effect immediately prior to such
transfer); and
(m) the Borrower and its Wholly-Owned Domestic Subsidiaries
may acquire all or substantially all of the assets of any Person (or
all or substantially all of the assets of a product line or division of
any Person) or 100% of the capital stock of any Person (including by
purchasing the remaining portion of the capital stock of any Person in
which the Borrower or a Wholly-Owned Domestic Subsidiary thereof
already has an ownership interest and as a result of which such Person
shall become a Wholly-Owned Domestic Subsidiary of the Borrower) (any
such acquisition permitted by this clause (m), a "Permitted
Acquisition"), so long as (i) no Default or Event of Default then
exists or would result therefrom, (ii) each of the representations and
warranties contained in Section 6 is true and correct in all material
respects both before and after giving effect to such Permitted
Acquisition, (iii) the assets or product line acquired, or the business
of the Person whose stock is acquired, constitutes a Permitted
Business, (iv) any Liens or Indebtedness assumed or issued in
connection with such acquisition are otherwise permitted under Section
8.03 or 8.04, as the case may be, (v) the consideration paid by the
Borrower and Subsidiaries in connection with any Permitted Acquisition
consists solely of cash and/or common stock of the Borrower, (vi) at
least 10 Business Days prior to the consummation of any Permitted
Acquisition, the Borrower shall have delivered to the Administrative
Agent and each of the Banks a certificate of the Borrower's Chief
Financial Officer (or other Authorized Officer) certifying (and showing
the
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calculations therefor in reasonable detail) that the Borrower would
have been in compliance with the financial covenants set forth in
Sections 8.10 and 8.11 for the applicable testing period then most
recently ended prior to the date of the consummation of such Permitted
Acquisition, in each case with such financial covenants to be
determined on a PRO FORMA basis as if such Permitted Acquisition had
been consummated on the first day of the relevant testing period (and
assuming that any Indebtedness incurred, issued or assumed in
connection therewith had been incurred, issued or assumed on the first
day of, and had remained outstanding throughout, such testing period)
and (vii) the aggregate consideration paid in connection with all
Permitted Acquisitions consummated on or after the Restatement
Effective Date (including, without limitation, any earn-out,
non-compete or deferred compensation arrangements and the aggregate
principal amount of any Indebtedness assumed in connection therewith)
does not exceed $10,000,000;and
(n) any sale, transfer or other disposition of assets or
property which does not constitute an Asset Sale.
To the extent the Required Banks waive the provisions of this Section 8.02 with
respect to the sale or other disposition of any Collateral, or any Collateral is
sold or otherwise disposed of as permitted by this Section 8.02, such Collateral
(unless sold to the Borrower or a Subsidiary of the Borrower) shall be sold or
otherwise disposed of free and clear of the Liens created by the Security
Documents, and the Administrative Agent and Collateral Agent shall be authorized
to take any actions deemed appropriate in order to effect the foregoing.
8.03 LIENS. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or
with respect to any property or assets of any kind (real or personal, tangible
or intangible) of the Borrower or any such Subsidiary whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with recourse to the
Borrower or any of its Subsidiaries) or assign any right to receive income, or
file or permit the filing of any financing statement under the UCC or any other
similar notice of Lien under any similar recording or notice statute; PROVIDED
that the provisions of this Section 8.03 shall not prevent the creation,
incurrence, assumption or existence of the following (with such Liens described
below being herein referred to as "Permitted Liens"):
(a) inchoate Liens for taxes, assessments or governmental
charges or rules not yet due or Liens for taxes, assessments or
governmental charges or rules being contested in good faith and by
appropriate proceedings for which adequate reserves (in the good faith
judgment of the management of the Borrower) have been established;
(b) Liens in respect of property or assets of the Borrower or
any of its Subsidiaries imposed by law which were incurred in the
ordinary course of business, such as carriers', warehousemen's and
mechanics' Liens, statutory landlord's Liens, and other similar Liens
arising in the ordinary course of business, and (x) which do not in the
aggregate materially detract from the value of such property or assets
or materially impair the use thereof in the operation of the business
of the Borrower or any such Subsidiary or (y) which are being contested
in good faith by appropriate proceedings, which proceedings have the
effect of preventing the forfeiture or sale of the property or asset
subject to such Lien;
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(c) Liens created by or pursuant to this Agreement and the
other Credit Documents;
(d) Liens existing on the Restatement Effective Date to the
extent listed on Annex XII, without giving effect to any subsequent
extensions or renewals thereof;
(e) Liens arising from judgments, decrees or attachments (or
securing of appeal bonds with respect thereto) in circumstances not
constituting an Event of Default under Section 9.09, so long as no cash
or property (other than proceeds of insurance payable by reason of such
judgments, decrees or attachments) is deposited or delivered to secure
any respective judgment or award, or any appeal bond in respect
thereof, the fair market value of which exceeds $1,500,000;
(f) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory
obligations, surety bonds (other than appeal bonds), bids, leases,
government contracts, obligations to utilities, performance and
return-of-money bonds and other similar obligations incurred in the
ordinary course of business (exclusive of obligations in respect of the
payment for borrowed money);
(g) leases, subleases or licenses granted to others not
interfering in any material respect with the business of the Borrower
or any of its Subsidiaries;
(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(i) Liens arising from UCC financing statements regarding
leases not in violation of this Agreement;
(j) purchase money Liens securing payables arising from the
purchase by the Borrower or any of its Subsidiaries of any equipment or
goods in the normal course of business, PROVIDED that such payables
shall not constitute Indebtedness;
(k) any interest or title of a lessor under any lease
permitted by this Agreement;
(l) Liens arising pursuant to purchase money mortgages
relating to, or security interests securing Indebtedness representing,
the purchase price or financing thereof of assets acquired by the
Borrower or any of its Subsidiaries after the Restatement Effective
Date and Liens created pursuant to Capital Leases, provided that any
such Liens attach only to the assets so acquired and that all
Indebtedness secured by Liens created pursuant to this clause (l) shall
not exceed the amount permitted pursuant to Section 8.04(c) at any time
outstanding;
(m) Permitted Encumbrances; and
(n) Liens securing Indebtedness not in excess of $100,000 at
any time outstanding.
8.04 INDEBTEDNESS. The Borrower will not, and will not permit
any of its Subsidiaries
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to, contract, create, incur, assume or suffer to exist any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the
other Credit Documents;
(b) Indebtedness owing by (i) any Subsidiary Guarantor to
another Subsidiary Guarantor or to the Borrower, (ii) any Subsidiary of
the Borrower that is not a Subsidiary Guarantor to another Subsidiary
of the Borrower that is not a Subsidiary Guarantor and (iii) the
Borrower to any Subsidiary Guarantor;
(c) Capitalized Lease Obligations of the Borrower and its
Subsidiaries incurred by the Borrower or any of its Subsidiaries after
the Restatement Effective Date and Indebtedness incurred pursuant to
purchase money mortgages permitted by Section 8.03(l), PROVIDED that
the aggregate amount of Indebtedness incurred pursuant to this clause
(c) shall not exceed $5,000,000 at any time outstanding;
(d) Existing Indebtedness, without giving effect to any
subsequent extension, renewal or refinancing thereof;
(e) Indebtedness under Interest Rate Agreements relating to
Indebtedness otherwise permitted under this Section 8.04;
(f) Indebtedness incurred pursuant to purchase money mortgage
permitted by Section 8.03(l);
(g) Contingent Obligations of the Borrower or any Subsidiary
Guarantor with respect to Indebtedness and lease obligations of the
Borrower or any Subsidiary Guarantor otherwise permitted under this
Agreement;
(h) Indebtedness of the Borrower under the Senior Subordinated
Notes in an aggregate principal amount not to exceed $120,000,000 (as
reduced by any repayments of principal thereof);
(i) the Borrower may issue up to $5,000,000 in aggregate
principal amount of subordinated promissory notes pursuant to Section
4.4(c) of the GEO Shareholders' Agreement; and
(j) Additional Indebtedness of the Borrower and its
Subsidiaries not to exceed an aggregate outstanding principal amount of
$10,000,000 at any time.
8.05 CAPITAL EXPENDITURES. (a) The Borrower will not, and will
not permit any of its Subsidiaries to, incur Consolidated Capital Expenditures,
PROVIDED that the Borrower and its Subsidiaries may make up to $10,000,000 in
Consolidated Capital Expenditures during each fiscal year (taken as one
accounting period).
(b) In the event that the maximum amount which is permitted to
be expended in respect of Consolidated Capital Expenditures during any fiscal
year of the Borrower pursuant to Sections 8.05(a), (c) and (d) (without giving
effect to this clause (b)) is not fully expended during
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such fiscal year, the maximum amount which may be expended during the
immediately succeeding fiscal year pursuant to Sections 8.05(a), (c) and (d)
shall be increased by such unutilized amount, PROVIDED that such increase shall
not exceed $1,000,000 in any fiscal year of the Borrower.
(c) In addition to the foregoing, the amount of insurance
proceeds received by the Borrower and its Subsidiaries from any Recovery Event
may be used by the Borrower or such Subsidiary to make Consolidated Capital
Expenditures to replace or restore any properties or assets in respect of which
such proceeds were paid or to otherwise acquire productive assets usable in the
business of the Borrower.
(c) In addition to the foregoing, the Borrower and the
Subsidiary Guarantors may make Consolidated Capital Expenditures to the extent
such Consolidated Capital Expenditures also constitute the reinvestment of Net
Cash Proceeds from Asset Sales not giving rise to a reduction to the Total
Revolving Loan Commitment pursuant to Section 3.03(c).
8.06 ADVANCES, INVESTMENTS AND LOANS. The Borrower will not,
and will not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any Person, except:
(a) the Borrower and its Subsidiaries may acquire and hold
receivables owing to them, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with
customary trade terms;
(b) the intercompany Indebtedness described in Section 8.04(b)
shall be permitted;
(c) investments made by the Borrower in Subsidiary Guarantors
that are Wholly- Owned Subsidiaries shall be permitted;
(d) loans and advances to employees in an aggregate principal
amount not to exceed $100,000 at any time outstanding shall be
permitted;
(e) the Borrower and its Subsidiaries may acquire and own
investments (including debt obligations) received in connection with
the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with,
customers and suppliers arising in the ordinary course of business;
(f) Interest Rate Agreements permitted by Section 8.04(e)
shall be permitted;
(g) the Borrower may hold the promissory notes acquired in
accordance with Section 8.02(f);
(h) the Borrower may repurchase stock to the extent permitted
by Section 8.08(a)(ii);
(i) the Borrower and its Subsidiaries may make Permitted
Acquisitions;
(j) the Borrower and its Subsidiaries may invest in cash and
Cash Equivalents; and
(k) the Borrower may redeem up to 35% of the aggregate
principal amount of the
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Senior Subordinated Notes pursuant to Section 6(b) thereof.
8.07 PREPAYMENTS OF INDEBTEDNESS; MODIFICATIONS OF CERTIFICATE
OF INCORPORATION, BYLAWS AND CERTAIN OTHER AGREEMENTS, ETC. (a) Other than the
redemption permitted by Section 8.06(k) the Borrower will not, and will not
permit any of its Subsidiaries to, (x) make (or give any notice in respect
thereof) any voluntary or optional payment or prepayment or redemption or
acquisition for value of (including, without limitation, by way of depositing
with the trustee with respect thereto money or securities before due for the
purpose of paying when due) or exchange or refinancing of the Senior
Subordinated Notes or any Existing Indebtedness, (y) amend, modify or change in
any manner the Senior Subordinated Notes Documents or any other agreements
(including, without limitation, the Existing Indebtedness Agreements) relating
to the Senior Subordinated Notes or to any Existing Indebtedness or (z) amend,
modify or change in any manner materially adverse to the interests of the Banks,
the Certificate of Incorporation (including, without limitation, by the filing
of any additional certificate of designation) or By-Laws of the Borrower or any
of its Subsidiaries, the terms of any of its capital stock or any agreement
entered into by the Borrower with respect to its capital stock (including,
without limitation, the Warrants and the Warrant Agreements), the "Transaction
Documents" (as defined in the Existing Credit Agreement (including, without
limitation, the GEO Shareholders' Agreement), or enter into any new agreement in
any manner materially adverse to the interests of the Banks with respect to the
capital stock of the Borrower.
(b) Other than the Obligations, the Borrower shall not
designate and shall not permit any Indebtedness to be designated as "Designated
Senior Debt" under and as defined in the Senior Subordinated Notes Documents.
8.08 DIVIDENDS, ETC. (a) The Borrower will not, and will not
permit any of its Subsidiaries to, declare or pay any dividends (other than
dividends payable solely in capital stock of such Person) or return any capital
to its stockholders or authorize or make any other distribution, payment or
delivery of property or cash to its stockholders as such, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for a consideration, any
shares of any class of its capital stock now or hereafter outstanding (or any
warrants for or options or stock appreciation rights in respect of any of such
shares), or set aside any funds for any of the foregoing purposes, or permit any
of its Subsidiaries to purchase or otherwise acquire for consideration any
shares of any class of the capital stock of the Borrower or any other
Subsidiary, as the case may be, now or hereafter outstanding (or any options or
warrants or stock appreciation rights issued by such Person with respect to its
capital stock) (all of the foregoing "Dividends"), except that:
(i) any Subsidiary of the Borrower may pay cash dividends to
the Borrower or to a Wholly-Owned Subsidiary of the Borrower; and
(ii) so long as no Default or Event of Default has occurred and
is continuing or would result therefrom, the Borrower may redeem or
repurchase for cash (or in consideration of the issuance of
subordinated notes permitted to be issued by Section 8.04(i)), at fair
value, the capital stock of the Borrower (or options to purchase
capital stock) from any employee of the Borrower upon the death,
disability, retirement or other termination of such employee, PROVIDED
that all cash repurchases under this clause (ii) shall not exceed, in
the aggregate, when added to all payments made under the subordinated
notes permitted by Section 8.04(i),
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$1,000,000 (increased by the amount of proceeds received by the
Borrower in connection with the issuance of capital stock to directors
or employees of the Borrower and its Subsidiaries after the Restatement
Effective Date); PROVIDED FURTHER, the Borrower may effect such
repurchases without regard to the dollar limitations set forth above
solely with the proceeds of key man life insurance obtained for the
purpose of making such repurchases.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, create or otherwise cause or suffer to exist any encumbrance or
restriction which prohibits or otherwise restricts (A) the ability of any
Subsidiary of the Borrower to (a) pay dividends or make other distributions or
pay any Indebtedness owed to the Borrower or any other Subsidiary of the
Borrower, (b) make loans or advances to the Borrower or any other Subsidiary of
the Borrower, or (c) transfer any of its properties or assets to the Borrower or
any other Subsidiary of the Borrower or (B) the ability of the Borrower or any
other Subsidiary of the Borrower to create, incur, assume or suffer to exist any
Lien upon its property or assets to secure the Obligations, other than
prohibitions or restrictions existing under or by reason of:
(i) this Agreement, the other Credit Documents and the other
Transaction Documents;
(ii) applicable law;
(iii) customary non-assignment provisions entered into in the
ordinary course of business and consistent with past practices;
(iv) any restriction or encumbrance with respect to a Subsidiary
of the Borrower imposed pursuant to an agreement which has been entered
into for the sale or disposition of all or substantially all of the
capital stock or assets of such Subsidiary, so long as such sale or
disposition is permitted under this Agreement; and
(v) Liens permitted under Section 8.03 and any documents or
instruments governing the terms of any Indebtedness or other
obligations secured by any such Liens, PROVIDED that such prohibitions
or restrictions apply only to the assets subject to such Liens.
8.09 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into any transaction or series
of transactions after the Restatement Effective Date whether or not in the
ordinary course of business, with any Affiliate other than on terms and
conditions substantially as favorable to the Borrower or such Subsidiary as
would be obtainable by the Borrower or such Subsidiary at the time in a
comparable arm's length transaction with a Person other than an Affiliate;
PROVIDED that the foregoing restrictions shall not apply to (i) Dividends
permitted under Section 8.08, (ii) transactions between the Borrower and its
Subsidiaries to the extent otherwise expressly permitted under this Agreement,
(iii) employment arrangements (including arrangements made with respect to
bonuses) entered into in the ordinary course of business with members of the
Board of Directors of the Borrower and of its Subsidiaries and (iv) any
Shareholders' Agreements as in effect on the Restatement Effective Date.
8.10 INTEREST COVERAGE RATIO. The Borrower will not permit the
Interest Coverage Ratio for any period of four consecutive fiscal quarters (or,
if shorter, the period beginning on the Restatement Effective Date and ended on
the last day of a fiscal quarter ended after the Restatement
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Effective Date), in each case taken as one accounting period, ended on
the last day of a fiscal quarter described below to be less than the
amount set forth opposite such fiscal quarter below:
FISCAL QUARTER RATIO
-------------- ---------
September 30, 1998 1.50:1.00
December 31, 1998 1.50:1.00
March 31, 1999 1.75:1.00
June 30, 1999 1.75:1.00
September 30, 1999 2.00:1.00
December 31, 1999 2.00:1.00
March 31, 2000 and 2.25:1.00
thereafter
8.11 LEVERAGE RATIO. The Borrower will not permit the Leverage
Ratio of the Borrower at any time during a fiscal quarter of the Borrower set
forth below to be greater than the ratio set forth opposite such fiscal quarter:
FISCAL QUARTER RATIO
-------------- ---------
September 30, 1998 5.75:1.00
December 31, 1998 5.75:1.00
March 31, 1999 5.50:1.00
June 30, 1999 5.50:1.00
September 30, 1999 5.25:1.00
December 31, 1999 5.25:1.00
March 31, 2000 5.00:1.00
June 30, 2000 5.00:1.00
September 30, 2000 4.75:1.00
December 31, 2000 4.50:1.00
and thereafter
8.12 ISSUANCE OF STOCK. The Borrower will not issue any shares
of capital stock (other than (i) in connection with the Equity Financing or (ii)
issuances of common stock of the Borrower not creating a Change of Control), and
will not permit any of its Subsidiaries directly or indirectly to issue, sell,
assign, pledge or otherwise encumber or dispose of any shares of its capital
stock or other securities (or warrants, rights or options to acquire shares or
other equity securities) of such Subsidiary, except to the extent permitted by
Section 8.03, to the Borrower and/or any Subsidiary Guarantor or to qualify
directors if required by applicable law.
8.13 LIMITATION ON CREATION OF SUBSIDIARIES. The Borrower
shall not, and shall not permit any of its Subsidiaries to, establish, create or
acquire any additional Subsidiaries without the prior written consent of the
Required Banks, PROVIDED that the Borrower and its Wholly-Owned Subsidiaries
shall be permitted to establish or create Wholly-Owned Subsidiaries so long as
(i) at least 5 days' prior written notice thereof (or such lesser notice as is
acceptable to the Administrative Agent) is given to the Administrative Agent,
(ii) such new Subsidiaries shall execute and deliver (x) in the case of the
first such Subsidiary so established, created or acquired (unless a Subsidiary
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Guaranty has been executed and delivered prior to such date pursuant to Section
5.13), the Subsidiary Guaranty and (y) otherwise, such guarantees and security
documents as the Required Banks shall request (including documents substantially
similar to or amendments to each of the Pledge Agreement and the Security
Agreement), and in such forms as shall be satisfactory to them, (iii) the
holders of the capital stock of such new Subsidiaries shall execute and deliver
additional pledge agreements, in form and substance satisfactory to the
Administrative Agent and (iv) such new Subsidiaries shall execute and deliver,
or cause to be executed and delivered, all other relevant documentation of the
type described in Section 5 as such new Subsidiaries would have had to deliver
if such new Subsidiaries were Credit Parties on the Restatement Effective Date.
SECTION 9. EVENTS OF DEFAULT. Upon the occurrence of any of
the following specified events (each an "Event of Default"):
9.01 PAYMENTS. The Borrower shall (i) default in the payment
when due of any principal of the Loans or (ii) default, and such default shall
continue for three or more Business Days, in the payment when due of any Unpaid
Drawing, any interest on the Loans or any Fees or any other amounts owing
hereunder or under any other Credit Document; or
9.02 REPRESENTATIONS, ETC. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or in
any statement or certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material respect on the date
as of which made or deemed made; or
9.03 COVENANTS. The Borrower or any of its Subsidiaries shall
(a) default in the due performance or observance by it of any term, covenant or
agreement contained in Sections 7.01(f)(x), 7.09 or 8, or (b) default in the due
performance or observance by it of any term, covenant or agreement (other than
those referred to in Section 9.01, 9.02 or clause (a) of this Section 9.03)
contained in this Agreement and such default shall continue unremedied for a
period of at least 30 days after notice to the defaulting party by the
Administrative Agent or the Required Banks; or
9.04 DEFAULT UNDER OTHER AGREEMENTS. (a) The Borrower or any
of its Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than the Obligations) beyond the period of grace, if any,
applicable thereto or (ii) default in the observance or performance of any
agreement or condition relating to any such Indebtedness 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 a trustee or agent on behalf of such holder or holders) to
cause, any such Indebtedness to become due prior to its stated maturity or (b)
any such Indebtedness of the Borrower or any of its Subsidiaries shall be
declared to be due and payable, or required to be prepaid other than by a
regularly scheduled required prepayment, prior to the stated maturity thereof,
PROVIDED that it shall not constitute an Event of Default pursuant to this
Section 9.04 unless the principal amount of any one issue of such Indebtedness
exceeds $1,500,000 or the aggregate amount of all Indebtedness referred to in
clauses (a) and (b) above exceeds $2,500,000 at any one time; or
9.05 BANKRUPTCY, ETC. The Borrower or any of its Subsidiaries
shall commence a voluntary case concerning itself under Title 11 of the United
States Code entitled "Bankruptcy," as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against the Borrower or any of its Subsidiaries and the petition is not
controverted
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within 10 days, or is not dismissed within 60 days, after commencement of the
case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or substantially all of the property of the Borrower or any
of its Subsidiaries; or the Borrower or any of its Subsidiaries commences any
other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Borrower or any
of its Subsidiaries; or there is commenced against the Borrower or any of its
Subsidiaries any such proceeding which remains undismissed for a period of 60
days; or the Borrower or any of its Subsidiaries is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; the Borrower or any of its Subsidiaries suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; or the
Borrower or any of its Subsidiaries makes a general assignment for the benefit
of creditors; or any corporate action is taken by the Borrower or any of its
Subsidiaries for the purpose of effecting any of the foregoing; or
9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof under Section 412 of
the Code or Section 302 of ERISA or a waiver of such standard or extension of
any amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph
(b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66,
.67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur
with respect to such Plan within the following 30 days, any Plan which is
subject to Title IV of ERISA shall have had or is likely to have a trustee
appointed to administer such Plan, any Plan which is subject to Title IV of
ERISA is, shall have been or is likely to be terminated or to be the subject of
termination proceedings under ERISA, any Plan shall have an Unfunded Current
Liability, a contribution required to be made with respect to a Plan or a
Foreign Pension Plan has not been timely made, the Borrower or any Subsidiary of
the Borrower or any ERISA Affiliate has incurred or is likely to incur any
liability to or on account of a Plan under Section 409, 502(i), 502(l), 515,
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971
or 4975 of the Code or on account of a group health plan (as defined in Section
607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the
Code, or the Borrower or any of its Subsidiaries has incurred or is likely to
incur liabilities pursuant to one or more employee welfare benefit plans (as
defined in Section 3(1) of ERISA) that provide benefits to retired employees or
other former employees (other than as required by Section 601 of ERISA) or Plans
or Foreign Pension Plans; (b) there shall result from any such event or events
the imposition of a lien, the granting of a security interest, or a liability or
a material risk of incurring a liability; and (c) such lien, security interest
or liability, individually, and/or in the aggregate, in the opinion of the
Required Banks, has had, or could reasonably be expected to have, a material
adverse effect upon the business, operations, condition (financial or otherwise)
or prospects of the Borrower or any of its Subsidiaries; or
9.07 SECURITY DOCUMENTS. Any Security Document shall cease to
be in full force and effect or, except as expressly set forth in the Security
Agreement, shall cease to give the Collateral Agent any perfected Lien
encumbering Collateral (other than in respect of a DI MINIMIS portion of
Collateral), or shall cease to give the Collateral Agent any material rights,
powers and privileges
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<PAGE> 56
purported to be created thereby in favor of the Collateral Agent or any Credit
Party shall default in the due performance or observance of any term, covenant
or agreement on its part to be performed or observed pursuant to any such
Security Document and such default shall continue unremedied for a period of 30
days after notice to the Borrower by the Administrative Agent or the Required
Banks; or
9.08 SUBSIDIARY GUARANTY. The Subsidiary Guaranty or any
provision thereof shall cease to be in full force or effect, or any Subsidiary
Guarantor or any Person acting by or on behalf of any Subsidiary Guarantor shall
deny or disaffirm such guarantor's obligations under such Subsidiary Guaranty or
any Subsidiary Guarantor shall default in the due performance or observance of
any term, covenant or agreement on its part to be performed or observed pursuant
to the Subsidiary Guaranty; or
9.09 JUDGMENTS. One or more judgments or decrees shall be
entered against the Borrower or any of its Subsidiaries involving a liability of
$1,500,000 or more in the case of any one such judgment or decree and $2,500,000
or more in the aggregate for all such judgments and decrees for the Borrower and
its Subsidiaries (in each case, not paid or to the extent not covered by
insurance) and any such judgments or decrees shall not have been vacated,
discharged or stayed or bonded pending appeal within 60 days from the entry
thereof; or
9.10 CHANGE OF CONTROL. A Change of Control shall occur; then,
and in any such event, and at any time thereafter, if any Event of Default shall
then be continuing, the Administrative Agent shall, upon the written request of
the Required Banks, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Administrative Agent
or any Bank to enforce its claims against the Borrower, except as otherwise
specifically provided for in this Agreement (PROVIDED that, if an Event of
Default specified in Section 9.05 shall occur with respect to the Borrower, the
result which would occur upon the giving of written notice by the Administrative
Agent as specified in clauses (i) and (ii) below shall occur automatically
without the giving of any such notice): (i) declare the Total Commitment
terminated, whereupon the Commitment of each Bank shall forthwith terminate
immediately and any Commitment Commission shall forthwith become due and payable
without any other notice of any kind; (ii) declare the principal of and any
accrued interest in respect of all Loans and all Obligations owing hereunder
(including Unpaid Drawings) and thereunder to be, whereupon the same shall
become, forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; (iii)
enforce, as Collateral Agent (or direct the Collateral Agent to enforce), any or
all of the Liens and security interests created pursuant to the Security
Documents; (iv) terminate any Letter of Credit which may be terminated in
accordance with its terms; (v) direct the Borrower to pay (and the Borrower
hereby agrees upon receipt of such notice, or upon the occurrence of any Event
of Default specified in Section 9.05 in respect of the Borrower, it will pay) to
the Collateral Agent at the Payment Office such additional amounts of cash, to
be held as security for the Borrower's reimbursement obligations in respect of
Letters of Credit then outstanding equal to the aggregate Stated Amount of all
Letters of Credit then outstanding; and (vi) apply any cash collateral held
pursuant to this Agreement to repay the Obligations.
SECTION 10. DEFINITIONS. As used herein, the following terms
shall have the
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meanings herein specified unless the context otherwise requires (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Acquired Business" shall have the meaning provided in the
definition of Acquisition.
"Acquisition" shall mean the Borrower's acquisition of
substantially all of the assets of Mallinckrodt that are used by Mallinckrodt's
TRIMET Technical Products Division in manufacturing, marketing and supplying
Dimethylolpropionic Acid, Trimethylolethane, Formaldehyde and Calcium Formate
(the "Acquired Business") pursuant to the Asset Purchase Agreement, dated as of
June 29, 1998, between the Borrower and Mallinckrodt (the "Acquisition
Agreement").
"Acquisition Agreement" shall have the meaning provided in the
definition of Acquisition.
"Acquisition Documents" shall mean the Acquisition Agreement
and all other documents entered into or delivered in connection with the
Acquisition Agreement.
"Additional Mortgage" shall have the meaning provided in
Section 7.11(a).
"Additional Mortgaged Property" shall have the meaning
provided in Section 7.11(a).
"Adjusted Certificate of Deposit Rate" shall mean, on any day,
the sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by
dividing (x) the most recent weekly average dealer offering rate for negotiable
certificates of deposit with a three-month maturity in the secondary market as
published in the most recent Federal Reserve System publication entitled "Select
Interest Rates," published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate information shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by the Administrative Agent on the basis of quotations
for such certificates received by it from three certificate of deposit dealers
in New York of recognized standing or, if such quotations are unavailable, then
on the basis of other sources reasonably selected by the Administrative Agent,
by (y) a percentage equal to 100% minus the stated maximum rate of all reserve
requirements as specified in Regulation D applicable on such day to a
three-month certificate of deposit of a member bank of the Federal Reserve
System in excess of $100,000 (including, without limitation, any marginal,
emergency, supplemental, special or other reserves), plus (2) the then daily net
annual assessment rate as estimated by the Administrative Agent for determining
the current annual assessment payable by the Administrative Agent to the Federal
Deposit Insurance Corporation for insuring three-month certificates of deposit.
"Adjusted RC Percentage" shall mean (x) at a time when no Bank
Default exists, for each Bank such Bank's Revolving Percentage and (y) at a time
when a Bank Default exists (i) for each Bank that is a Defaulting Bank, zero and
(ii) for each Bank that is a Non-Defaulting Bank, the percentage determined by
dividing such Bank's Revolving Loan Commitment at such time by the Adjusted
Total Revolving Loan Commitment at such time, it being understood that all
references herein to Revolving Loan Commitments and the Adjusted Total Revolving
Loan Commitment at a time when the Total Revolving Loan Commitment or Adjusted
Total Revolving Loan Commitment, as the case may be, has been terminated shall
be references to the Revolving Loan Commitments or Adjusted Total Revolving Loan
Commitment, as the case may be, in effect
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immediately prior to such termination, PROVIDED that (A) no Bank's Adjusted RC
Percentage shall change upon the occurrence of a Bank Default from that in
effect immediately prior to such Bank Default if, after giving effect to such
Bank Default and any repayment of Revolving Loans and Swingline Loans at such
time pursuant to Section 4.02(A)(a) or otherwise, the sum of (i) the aggregate
outstanding principal amount of Revolving Loans of all Non-Defaulting Banks plus
(ii) the aggregate outstanding principal amount of Swingline Loans plus (iii)
the Letter of Credit Outstandings, exceeds the Adjusted Total Revolving Loan
Commitment, (B) the changes to the Adjusted RC Percentage that would have become
effective upon the occurrence of a Bank Default but that did not become
effective as a result of the preceding clause (A) shall become effective on the
first date after the occurrence of the relevant Bank Default on which the sum of
(i) the aggregate outstanding principal amount of the Revolving Loans of all
Non-Defaulting Banks plus (ii) the aggregate outstanding principal amount of the
Swingline Loans plus (iii) the Letter of Credit Outstandings is equal to or less
than the Adjusted Total Revolving Loan Commitment and (C) if (i) a
Non-Defaulting Bank's Adjusted RC Percentage is changed pursuant to the
preceding clause (B) and (ii) any repayment of such Bank's Revolving Loans, or
of Unpaid Drawings with respect to Letters of Credit or of Swingline Loans, that
were made during the period commencing after the date of the relevant Bank
Default and ending on the date of such change to its Adjusted RC Percentage must
be returned to any Borrower as a preferential or similar payment in any
bankruptcy or similar proceeding of such Borrower, then the change to such
Non-Defaulting Bank's Adjusted RC Percentage effected pursuant to said clause
(B) shall be reduced to that positive change, if any, as would have been made to
its Adjusted RC Percentage if (x) such repayments had not been made and (y) the
maximum change to its Adjusted RC Percentage would have resulted, in the sum of
the outstanding principal of Revolving Loans made by such Bank plus such Bank's
new Adjusted RC Percentage of the outstanding principal amount of Swingline
Loans and of Letter of Credit Outstandings equalling such Bank's Revolving Loan
Commitment at such time.
"Adjusted Total Revolving Loan Commitment" shall mean at any
time the Total Revolving Loan Commitment less the aggregate Revolving Loan
Commitments of all Defaulting Banks.
"Administrative Agent" shall have the meaning provided in the
first paragraph of this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to Section 11.09.
"Affected Eurodollar Loans" shall have the meaning provided in
Section 4.02(c).
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including, but not limited to, all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power (i) to
vote 5% or more of the securities having ordinary voting power for the election
of directors of such corporation or (ii) to direct or cause the direction of the
management and policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise.
"Agreement" shall mean this credit agreement, as the same may
be from time to time modified, amended and/or supplemented.
"Anticipated Reinvestment Amount" shall mean, with respect to
any Reinvestment
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Election, the amount specified in the Reinvestment Notice delivered by the
Borrower in connection therewith as the amount of the Net Cash Proceeds from the
related Asset Sale that the Borrower and/or the Subsidiary Guarantors intend to
use to purchase, construct or otherwise acquire Reinvestment Assets.
"Approved Bank" shall have the meaning provided in the
definition of Cash Equivalents.
"Approved Company" shall have the meaning provided in the
definition of Cash Equivalents.
"Asset Sale" shall mean the sale, transfer or other
disposition by the Borrower or any Subsidiary of the Borrower to any Person
other than the Borrower or any Subsidiary Guarantor of any asset of the Borrower
or such Subsidiary (other than sales, transfers or other dispositions (x) in the
ordinary course of business of inventory and/or obsolete or excess equipment or
intellectual property pursuant to 8.02(e) or (k) or (y) the cash proceeds
(and/or fair market value of assets received in exchange therefor) of which do
not exceed $500,000.
"Assignment Agreement" shall have the meaning provided in
Section 12.04(b).
"Authorized Officer" shall mean any senior officer of the
Borrower designated as such in writing to the Administrative Agent by the
Borrower in each case to the extent acceptable to the Administrative Agent.
"Bank" shall have the meaning provided in the first paragraph
of this Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any incurrence of
Revolving Loans (including pursuant to a Mandatory Borrowing) or to fund its
portion of any unreimbursed payment under Section 2.05(c) or (ii) a Bank having
notified the Administrative Agent and/or the Borrower that it does not intend to
comply with its obligations under Section 1.01 or under Section 2.05(c), in the
case of either (i) or (ii) as a result of the appointment of a receiver or
conservator with respect to such Bank at the direction or request of any
regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section
9.05.
"Base Rate" at any time shall mean the higher of (i) the rate
which is 1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate and
(ii) the Prime Lending Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the
rates provided in Section 1.08(a).
"Base Rate Margin" shall mean 1.25%.
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"Borrowing" shall mean the incurrence of (i) Swingline Loans
by the Borrower from the Swingline Bank on a given date or (ii) one Type of
Revolving Loan by the Borrower from all of the Banks on a PRO RATA basis on a
given date (or resulting from conversions on a given date),
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having in the case of Eurodollar Loans the same Interest Period; PROVIDED that
Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of
any related Borrowing of Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Capital Lease" as applied to any Person shall mean any lease
of any property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of that Person.
"Capitalized Lease Obligations" shall mean all obligations
under Capital Leases of the Borrower or any of its Subsidiaries in each case
taken at the amount thereof accounted for as liabilities in accordance with
GAAP.
"Cash Equivalents" shall mean (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) having maturities of
not more than six months from the date of acquisition, (ii) U.S. dollar
denominated time deposits, certificates of deposit and bankers' acceptances of
(x) any Bank, (y) any domestic commercial bank of recognized standing having
capital and surplus in excess of $500,000,000 or (z) any bank (or the parent
company of such bank) whose short-term commercial paper rating from Standard &
Poor's Ratings Services ("S&P") is at least A-1 or the equivalent thereof or
from Moody's Investors Service, Inc. ("Moody's") is at least P-1 or the
equivalent thereof (any such bank, an "Approved Bank"), in each case with
maturities of not more than six months from 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) above entered into with any bank
meeting the qualifications specified in clause (ii) above, (iv) commercial paper
issued by any Bank or Approved Bank or by the parent company of any Bank or
Approved Bank and commercial paper issued by, or guaranteed by, any industrial
or financial company with a short-term commercial paper rating of at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's (any such company, an "Approved Company"), or guaranteed by any
industrial company with a long term unsecured debt rating of at least A or A2,
or the equivalent of each thereof, from S&P or Moody's, as the case may be, and
in each case maturing within six months after the date of acquisition and (v)
investments in money market funds substantially all of whose assets are
comprised of securities of the type described in clauses (i) through (iv) above.
"Cash Proceeds" shall mean, with respect to any Asset Sale,
the aggregate cash payments (including any cash received by way of deferred
payment pursuant to a note receivable issued in connection with such Asset Sale,
other than the portion of such deferred payment constituting interest, but only
as and when so received) received by the Borrower and/or any
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Subsidiary from such Asset Sale.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 ET
SEQ.
"Change of Control" shall mean (A) (a) prior to the Borrower's
initial public offering of common stock, the Permitted Holders cease to be the
"beneficial owner" (as defined in Rules 13d- 3 and 13d-5 under the Exchange
Act), directly or indirectly, of a majority in the aggregate of the total voting
power of the Voting Stock of the Borrower, whether as a result of the issuance
of securities of the Borrower, any merger, consolidation, liquidation or
dissolution of the Borrower, any direct or indirect transfer of securities or
otherwise (for purposes of this clause (a) and clause (b) below, the Permitted
Holders shall be deemed to beneficially own any Voting Stock of a corporation
(the "specified corporation") held by any other corporation (the "parent
corporation") so long as the Permitted Holders beneficially own (as so defined),
directly or indirectly (through Wholly-Owned Subsidiaries that are not operating
businesses), in the aggregate a majority of the voting power of the Voting Stock
of the parent corporation), (b) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders,
is or becomes the beneficial owner (as defined in clause (a) above, except that
a person shall be deemed to have "beneficial ownership" of all shares that any
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 30% of the total voting power of the Voting Stock of the Borrower;
PROVIDED, that the Permitted Holders "beneficially own" (as defined in clause
(a) above), directly or indirectly, in the aggregate a lesser percentage of the
total voting power of the Voting Stock of the Borrower than such other person
and do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors of the
Borrower (for the purposes of this clause (b) such other person shall be deemed
to beneficially own any Voting Stock of a specified corporation held by a parent
corporation, if such other person "beneficially owns" (as defined in this clause
(b)), directly or indirectly, more than 30% of the voting power of the Voting
Stock of such parent corporation and the Permitted Holders "beneficially own"
(as defined in clause (a) above), directly or indirectly, in the aggregate a
lesser percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors of such parent corporation), or (c) during any period of two
consecutive years individuals who at the beginning of such period constituted
the Board of Directors of the Borrower (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
stockholders of the Borrower was approved by either (i) the Permitted Holders or
(ii) a vote of a majority of the directors of the Borrower then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Borrower then in office;
or (B) the occurrence of a Senior Subordinated Notes Change of Control.
"Charter Oak" shall mean Charter Oak Partners, a Connecticut
limited partnership and Charter Oak Capital Partners, a Connecticut limited
partnership.
"Charter Oak Warrant Agreement" shall mean the Warrant
Agreement, dated as of March 25, 1997, between the Borrower and Charter Oak, as
amended through the date hereof.
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"Charter Oak Warrants" shall mean the Warrants issued to
Charter Oak pursuant to the Charter Oak Warrant Agreement.
"Class A Common Stock" shall mean the Borrower's Class A
voting common stock, par value $1.00 per share.
"Class B Common Stock" shall mean the Borrower's Class B
non-voting common stock, par value $1.00 per share.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
date of this Agreement and any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in
each of the Security Documents.
"Collateral Agent" shall mean the Administrative Agent acting
as collateral agent for the Banks pursuant to the Security Documents.
"Collective Bargaining Agreements" shall have the meaning
provided in Section 5.06(vi).
"Commitment Commission" shall have the meaning provided in
Section 3.01(a).
"Common Management Fund" shall mean with respect to any
Person, a fund under common control with such Person.
"Consolidated 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 all amounts expended or capitalized
under Capital Leases but excluding any amount representing capitalized interest)
by the Borrower and its Subsidiaries during that period that, in conformity with
GAAP, are or are required to be included in the property, plant or equipment
reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries.
"Consolidated EBIT" shall mean, for any period, (A) the sum of
the amounts for such period of (i) Consolidated Net Income, (ii) provisions for
taxes based on income, (iii) Consolidated Net Interest Expense, (iv)
amortization or write-off of deferred financing costs to the extent deducted in
determining Consolidated Net Income and (v) losses on sales of assets (excluding
sales in the ordinary course of business) and other extraordinary or
nonrecurring losses LESS (B) the amount for such period of gains on sales of
assets (excluding sales in the ordinary course of business) and other
extraordinary or nonrecurring gains, all as determined on a consolidated basis
in accordance with GAAP.
"Consolidated EBITDA" shall mean, for any period, the sum of
the amounts for such period of (i) Consolidated EBIT, (ii) depreciation expense
for the Borrower and its Subsidiaries, (iii) amortization expense for the
Borrower and its Subsidiaries and (iv) depletion and all other non-cash charges
included in Consolidated Net Income during such period, all as determined on a
consolidated
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basis in accordance with GAAP.
"Consolidated Indebtedness" shall mean, as at any date of
determination, the aggregate amount of all Indebtedness of the Borrower and its
Subsidiaries on a consolidated basis.
"Consolidated Net Indebtedness" shall mean, at any date of
determination, an amount equal to the amount of Consolidated Indebtedness at
such time less the amount of cash and Cash Equivalents held by the Borrower and
its Subsidiaries at such time.
"Consolidated Net Interest Expense" shall mean, for any
period, (A) total interest expense (including that attributable to Capital
Leases in accordance with GAAP) of the Borrower and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of the Borrower
and its Subsidiaries, including, without limitation, all capitalized interest,
commitment commissions and agency fees, but excluding (x) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and net costs under Interest Rate Agreements and
(y) Transaction Expenses less (B) the total interest income of the Borrower and
its Subsidiaries on a consolidated basis.
"Consolidated Net Income" shall mean, for any period, the net
income (or loss) of the Borrower and its Subsidiaries on a consolidated basis
for such period taken as a single accounting period determined in conformity
with GAAP, PROVIDED that there shall be excluded (i) the income (or loss) of any
Person (other than Subsidiaries of the Borrower) in which any other Person
(other than the Borrower or any of its Subsidiaries) has a joint interest,
except to the extent of the amount of dividends or other distributions actually
paid to the Borrower or any of its Subsidiaries by such Person during such
period, (ii) the income (or loss) of any Person accrued prior to the date it
becomes a Subsidiary of the Borrower or is merged into or consolidated with the
Borrower or any of its Subsidiaries or that Person's assets are acquired by the
Borrower or any of its Subsidiaries, (iii) the income of any Subsidiary of the
Borrower to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary, (iv) Transaction Expenses, (v) compensation expense resulting from
the issuance of capital stock, stock options or stock appreciation rights issued
to former or current employees, including officers, of the Borrower or any
Subsidiary of the Borrower, or the exercise of such options or rights, in each
case to the extent the obligation (if any) associated therewith is not expected
to be settled by the payment of cash by the Borrower or any Affiliate of the
Borrower and (vi) compensation expense resulting from the repurchase of capital
stock, options and rights described in clause (v) of this definition of
Consolidated Net Income.
"Contingent Obligations" shall mean, as to any Person, any
obligation of such Person guaranteeing or intending to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or
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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 (d) otherwise to assure or hold harmless the owner of such primary
obligation against loss in respect thereof; PROVIDED, that the term Contingent
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by such Person in good faith.
"Continuing Bank" shall mean each Existing Bank with a
Revolving Loan Commitment under this Agreement.
"Credit Documents" shall mean this Agreement, each of the
Notes, each of the Security Documents, the Security Documents Acknowledgment,
the Subsidiary Guaranty and any other documents executed in connection with any
of the foregoing.
"Credit Event" shall mean and include the making of a Loan or
the issuance of a Letter of Credit.
"Credit Party" shall mean the Borrower and the Subsidiary
Guarantors.
"CSE Warrant Agreement" shall mean the Warrant Agreement,
dated as of March 25, 1997, between the Borrower and Chemical Specialties
Enterprises, L.P.
"CSE Warrants" shall mean the Warrants issued to Chemical
Specialties Enterprises, L.P. pursuant to the CSE Warrant Agreement.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a
Bank Default is in effect.
"Dividends" shall have the meaning provided in Section 8.08.
"Documents" shall mean, collectively, (a) the Credit Documents
and (b) the Transaction Documents.
"Eligible Transferee" shall mean and include a commercial
bank, financial institution or other "accredited investor" (as defined by
Regulation D of the Securities Act of 1933).
"Employment Agreements" shall have the meaning provided in
Section 5.06(v).
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, administrative investigations or
proceedings relating in any way to any violation of or any liability under any
Environmental Law or any permit issued, or under any approval given, under any
such Environmental Law (hereafter, "Claims"), including, without limitation, (a)
any and all Claims by
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governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials arising from alleged injury
or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any applicable Federal, state,
foreign or local statute, law, rule, regulation, ordinance, code, rule of common
law or written and binding policy or guide, now or hereafter in effect and in
each case as amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, health, safety or Hazardous Materials, including,
without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251 ET SEQ.; the Toxic Substances Control Act, 15
U.S.C. Section 7401 ET SEQ.; the Clean Air Act, 42 U.S.C. Section 7401 ET SEQ.;
the Safe Drinking Water Act, 42 U.S.C. Section 3808 ET SEQ.; the Oil Pollution
Act of 1990, 33 U.S.C. Section 2701 ET SEQ.; and any applicable state and local
or foreign counterparts or equivalents.
"Equity Financing" shall have the meaning provided in Section
5.12.
"Equity Financing Documents" shall have the meaning provided
in Section 5.12.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Borrower or a Subsidiary of the
Borrower would be deemed to be a "single employer" (i) within the meaning of
Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of
the Borrower or a Subsidiary of the Borrower being or having been a general
partner of such person.
"Eurodollar Loans" shall mean each Loan bearing interest at
the rates provided in Section 1.08(b).
"Eurodollar Margin" shall mean 2.25%.
"Eurodollar Rate" shall mean with respect to each Interest
Period for a Eurodollar Loan, (i) the offered quotation to first-class banks in
the New York interbank Eurodollar market by the Administrative Agent for dollar
deposits of amounts in same day funds comparable to the outstanding principal
amount of the Eurodollar Loan for which an interest rate is then being
determined with maturities comparable to the Interest Period to be applicable to
such Eurodollar Loan, determined as of 10:00 A.M. (New York time) on the date
which is two Business Days prior to the commencement of such Interest Period
divided (and rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a
percentage equal to 100% minus the then stated maximum rate of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable to any member bank of the
Federal Reserve System in respect of Eurocurrency liabilities as defined in
Regulation D (or any successor category of liabilities under Regulation D).
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"Event of Default" shall have the meaning provided in Section
9.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Existing Bank" shall mean each Person which was a "Bank"
under, and as defined in, the Existing Credit Agreement immediately prior to the
Restatement Effective Date.
"Existing Credit Agreement" shall have the meaning provided in
the recitals to this Agreement.
"Existing Letter of Credit" shall have the meaning provided in
Section 2.01(a) of this Agreement.
"Existing Loans" shall mean all "Loans" under, and as defined
in the Existing Credit Agreement.
"Existing Mortgage" shall have the meaning provided in Section
5.16.
"Existing Mortgage Amendments" shall have the meaning provided
in Section 5.16.
"Existing Indebtedness" shall have the meaning provided in
Section 6.21.
"Existing Indebtedness Agreements" shall have the meaning
provided in Section 5.06(ii).
"Facing Fee" shall have the meaning provided in Section
3.01(c).
"Federal Funds Effective Rate" shall mean, for any period, a
fluctuating interest rate equal for each day during such period to 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 for such
day (or, if such day is not a Business Day, for the next preceding 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 such day
on such transactions received by the Administrative Agent from three Federal
Funds brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to, or referred
to in, Section 3.01.
"FIRREA" shall mean Financial Institution Reform, Recovery and
Enforcement Act of 1989.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect on the date of this Agreement; it
being understood and agreed that determinations in accordance with GAAP for
purposes of Section 8, including defined terms as used therein, are subject (to
the extent provided therein) to Section 12.07(a).
"GEO Shareholders' Agreement" shall mean the Shareholders
Agreement, dated as of March 25, 1997, among the Borrower, Charter Oak, Chemical
Specialties Enterprises, L.P.,
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George P. Ahearn and William P. Eckman, as amended through the date hereof.
"Hazardous Materials" shall mean (a) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; (b) any chemicals, materials or substances defined as
or included in the definition of "hazardous substances," "hazardous waste,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," "toxic substances," "toxic pollutants," "contaminants," or "pollutants,"
or words of similar meaning and regulatory effect, under any applicable
Environmental Law; and (c) any other chemical, material or substance, exposure
to which is prohibited, limited or regulated by any governmental authority.
"Indebtedness" of any Person shall mean, without duplication,
(i) all indebtedness of such Person for borrowed money, (ii) the deferred
purchase price of assets or services which in accordance with GAAP would be
shown on the liability side of the balance sheet of such Person, (iii) the face
amount of all letters of credit issued for the account of such Person and,
without duplication, all drafts drawn thereunder, (iv) all Indebtedness of a
second Person secured by any Lien on any property owned by such first Person,
whether or not such indebtedness has been assumed, (v) all Capitalized Lease
Obligations of such Person, (vi) all obligations of such Person to pay a
specified purchase price for goods or services whether or not delivered or
accepted, I.E., take-or-pay and similar obligations, (vii) all net obligations
of such Person under Interest Rate Agreements and (viii) all Contingent
Obligations of such Person, (other than Contingent Obligations arising from the
guaranty by such Person of the obligations of the Borrower and/or its
Subsidiaries to the extent such guaranteed obligations do not constitute
Indebtedness), PROVIDED that Indebtedness shall not include trade payables,
deferred revenue, taxes and accrued expenses, in each case arising in the
ordinary course of business.
"Information Systems and Equipment" shall mean all computer
hardware, firmware and software, as well as other information processing
systems, or any equipment containing embedded microchips, whether directly
owned, licensed, leased, operated or otherwise controlled by the Borrower or any
of its Subsidiaries, including through third-party service providers, and which,
in whole or in part, are used, operated, relied upon, or integral to, the
Borrower's or any of its Subsidiaries' conduct of their business.
"Interest Coverage Ratio" shall mean, for any Test Period, the
ratio of (i) Consolidated EBITDA for such Test Period to (ii) Consolidated Net
Interest Expense for such Test Period.
"Interest Period" with respect to any Eurodollar Loan shall
mean the interest period applicable thereto, as determined pursuant to Section
1.09.
"Interest Rate Agreement" shall mean any interest rate swap
agreement, any interest rate cap agreement, any interest rate collar agreement
or other similar agreement or arrangement designed to hedge the position of the
Borrower or any Subsidiary with respect to interest rates.
"L/C Supportable Obligations" shall mean (i) obligations of
the Borrower or its Subsidiaries incurred in the ordinary course of business
with respect to insurance obligations and workers' compensation, surety bonds
and other similar statutory obligations (including taxes,
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licenses and other similar requirements) and (ii) such other obligations of the
Borrower or any of its Subsidiaries as are permitted to exist pursuant to the
terms of this Agreement.
"Leasehold" of any Person shall mean all of the right, title
and interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in
Section 3.01(b).
"Letter of Credit Issuer" shall mean BTCo and any other Bank
which at the request of the Borrower and with the consent of the Administrative
Agent agrees, in such Bank's sole discretion, to become a Letter of Credit
Issuer for purposes of issuing Letters of Credit pursuant to Section 2.
"Letter of Credit Outstandings" shall mean, at any time, the
sum of, without duplication, (i) the aggregate Stated Amount of all outstanding
Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in
respect of all Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in
Section 2.03(a).
"Leverage Ratio" shall mean, at any date of determination, the
ratio of (i) Consolidated Net Indebtedness on such date to (ii) Consolidated
EBITDA for the Test Period most recently ended (taken as one accounting period)
provided that in the case of a Test Period ended before the first anniversary of
the Restatement Effective Date, for purposes of the Leverage Ratio only,
Consolidated EBITDA for such Test Period shall be multiplied by a fraction the
numerator of which is 365 and the denominator of which is the number of days
actually elapsed during the respective Test Period.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof).
"Loan" shall mean each Revolving Loan and each Swingline Loan.
"Mallinckrodt" shall mean Mallinckrodt Inc., a New York
corporation and Mallinckrodt Inc., a Delaware corporation.
"Management Agreements" shall have the meaning provided in
Section 5.06(iv).
"Mandatory Borrowing" shall have the meaning provided in
Section 1.01(c).
"Margin Stock" shall have the meaning provided in Regulation
U.
"Material Adverse Effect" shall mean a material adverse effect
on the business, property, assets, liabilities, operations, condition (financial
or otherwise) or prospects of the Borrower or of the Borrower and its
Subsidiaries taken as a whole, after giving effect to the Transaction.
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"Maturity Date" shall mean July 31, 2003.
"Maximum Swingline Amount" shall mean $1,000,000.
"Minimum Borrowing Amount" shall mean (i) for Revolving Loans
maintained as Base Rate Loans, $250,000 and (ii) for Revolving Loans maintained
as Eurodollar Loans, $500,000.
"Moody's" shall have the meaning provided in the definition of
Cash Equivalents.
"Mortgage" shall mean and include each New Mortgage and each
Existing Mortgage, PROVIDED that after the execution and delivery thereof, each
Additional Mortgage shall also constitute a Mortgage.
"Mortgage Policies" shall mean and include each New Mortgage
Policy and each Existing Mortgage Policy.
"Mortgaged Properties" shall mean each of the Real Properties
listed on Annex VIII hereto and designated either as a "New Mortgage Property"
or "Existing Mortgaged Property" thereon and, after the execution and delivery
of any Additional Mortgage, shall include the respective Additional Mortgaged
Property.
"Multiemployer Plan" shall have the meaning provided in
Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" shall mean, with respect to any Asset
Sale, the Cash Proceeds resulting therefrom net of expenses of sale (including
payment of principal, premium and interest of other Indebtedness secured by the
assets that were the subject of the Asset Sale and required to be, and which is,
repaid under the terms thereof as a result of such Asset Sale, commissions,
reasonable costs, attorneys' fees and accountants' fees), and incremental taxes
paid or payable as a result thereof; PROVIDED that Net Cash Proceeds shall not
include cash deposited with the Administrative Agent pursuant to a cash
collateral arrangement pursuant to this Agreement.
"New Bank" shall mean each Bank on the Restatement Effective
Date which is not an Existing Bank.
"New Mortgages" shall have the meaning provided in Section
5.15.
"New Mortgage Policies" shall have the meaning provided in
Section 5.15.
"New Mortgaged Property" shall have the meaning provided in
Section 5.15.
"Non-Continuing Bank" shall mean any Existing Bank which does
not have a Revolving Loan Commitment under this Agreement.
"Non-Defaulting Bank" shall mean each Bank other than a
Defaulting Bank.
"Note" shall mean and include each Revolving Note and the
Swingline Note.
"Notice of Borrowing" shall mean any written notice of
Borrowing delivered pursuant
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to Section 1.03(a) or 1.03(b).
"Notice of Conversion" shall have the meaning provided in
Section 1.06.
"Notice Office" shall mean the office of the Administrative
Agent located at 130 Liberty Street, New York, New York or such other office as
the Administrative Agent may designate to the Borrower from time to time.
"Obligations" shall mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time existing,
owing to the Administrative Agent, the Collateral Agent or any Bank pursuant to
the terms of this Agreement or any other Credit Document.
"Participant" shall have the meaning provided in Section
2.05(a).
"Payment Office" shall mean the office of the Administrative
Agent located at 130 Liberty Street, New York, New York or such other office as
the Administrative Agent may designate to the Borrower from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquisition" shall have the meaning provided in
Section 8.02(m).
"Permitted Business" shall mean any line of business in which
the Borrower and its Subsidiaries are permitted to engage under Section 8.01.
"Permitted Encumbrances" shall mean, with respect to any Real
Property subject to a Mortgage or an Additional Mortgage, such exceptions to
title as are set forth in the title insurance policy or title commitment
delivered with respect thereto, all of which exceptions must be reasonably
acceptable to the Administrative Agent.
"Permitted Holders" shall mean George P. Ahearn, William P.
Eckman and Pietro Stefanutti, and the holders of the capital stock of the
Borrower on the Restatement Effective Date (after giving effect to the
Transaction).
"Permitted Liens" shall have the meaning provided in Section
8.03.
"Person" shall mean any individual, partnership, joint
venture, firm, corporation, limited liability company, association, trust or
other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" shall mean any pension plan as defined in Section 3(2)
of ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Borrower, a Subsidiary of the Borrower or an
ERISA Affiliate, and each such plan for the five-year period immediately
following the latest date on which the Borrower, a Subsidiary of the Borrower,
or an ERISA Affiliate maintained, contributed to or had an obligation to
contribute to such plan.
"Pledge Agreement" shall have the meaning provided in the
Existing Credit Agreement.
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"Pledged Securities" shall mean all the Pledged Securities as
defined in the Pledge Agreement.
"Prime Lending Rate" shall mean the rate which BTCo announces
from time to time as its prime lending rate, the Prime Lending Rate to change
when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. BTCo may make commercial loans or other loans
at rates of interest at, above or below the Prime Lending Rate.
"Projections" shall have the meaning set forth in Section
5.20.
"Quarterly Payment Date" shall mean the last Business Day of
March, June, September and December, occurring after the Restatement Effective
Date.
"RCRA" shall mean the Resource Conservation and Recovery Act,
as amended, 42 U.S.C. Section 6901 ET SEQ.
"Real Property" of any Person shall mean all of the right,
title and interest of such Person in and to land, improvements and fixtures,
including Leaseholds.
"Recovery Event" shall mean the receipt by the Borrower or any
of its Subsidiaries of any cash insurance proceeds or condemnation award payable
(i) by reason of theft, loss, physical destruction or damage or any other
similar event with respect to any property or asset of the Borrower or any of
its Subsidiaries, or (ii) by reason of any condemnation, taking, seizing or
similar event with respect to any property or asset of the Borrower or any of
its Subsidiaries.
"Refinancing" shall have the meaning provided in Section 5.22.
"Register" shall have the meaning provided in Section 12.16.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation T, U and X" shall mean Regulations T, U and X of
the Board of Governors of the Federal Reserve System as from time to time in
effect and any successor to all or a portion thereof establishing margin
requirements.
"Reinvestment Assets" shall mean any assets to be employed in
the business of the Borrower and its Subsidiaries as described in Sections
3.03(c) and 8.02(f).
"Reinvestment Election" shall have the meaning provided in
Section 3.03(c).
"Reinvestment Notice" shall mean a written notice signed by an
Authorized Officer of the Borrower stating that the Borrower, in good faith,
intends and expects to use all or a specified portion of the Net Cash Proceeds
of an Asset Sale to purchase, construct or otherwise acquire Reinvestment
Assets.
"Reinvestment Commitment Reduction Amount" shall mean, with
respect to any
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Reinvestment Election, the amount, if any, on the Reinvestment Commitment
Reduction Date relating thereto by which (a) the Anticipated Reinvestment Amount
in respect of such Reinvestment Election exceeds (b) the aggregate amount
thereof expended by the Borrower and its Subsidiaries to acquire Reinvestment
Assets.
"Reinvestment Commitment Reduction Date" shall mean, with
respect to any Reinvestment Election, the earliest of (i) the date, if any, upon
which the Administrative Agent, on behalf of the Required Banks, shall have
delivered a written termination notice to the Borrower, provided that such
notice may only be given while an Event of Default exists, (ii) the date
occurring one year after such Reinvestment Election and (iii) the date on which
the Borrower shall have determined not to, or shall have otherwise ceased to,
proceed with the purchase, construction or other acquisition of Reinvestment
Assets with the related Anticipated Reinvestment Amount.
"Replaced Bank" shall have the meaning provided in Section
1.13.
"Replacement Bank" shall have the meaning provided in Section
1.13.
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA
other than those events as to which the 30-day notice period is waived under
subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.
"Required Appraisal" shall have the meaning provided in
Section 7.11(d).
"Required Banks" shall mean Non-Defaulting Banks whose
Revolving Loan Commitments (or, if after the termination thereof, outstanding
Revolving Loans and Adjusted RC Percentage of outstanding Swingline Loans and
Letter of Credit Outstandings) constitute greater than 50% of the Adjusted Total
Revolving Loan Commitment (or, if after the termination thereof, the sum of the
then total outstanding Revolving Loans of Non-Defaulting Banks and the aggregate
Adjusted RC Percentages of all Non-Defaulting Banks of the total outstanding
Swingline Loans and Letter of Credit Outstandings at such time).
"Restatement Effective Date" shall have the meaning provided
in Section 12.10.
"Revolving Loan" shall have the meaning provided in Section
1.01(a).
"Revolving Loan Commitment" shall mean, with respect to each
Bank, the amount set forth opposite such Bank's name in Annex I directly below
the column entitled "Revolving Loan Commitment," (x) as the same may be reduced
from time to time pursuant to Sections 3.02, 3.03 and/or 9 or (y) adjusted from
time to time as a result of assignments to or from such Bank pursuant
to Section 12.04.
"Revolving Note" shall have the meaning provided in Section
1.05(a)(i).
"Revolving Percentage" shall mean at any time for each Bank,
the percentage obtained by dividing such Bank's Revolving Loan Commitment by the
Total Revolving Loan Commitment, PROVIDED that if the Total Revolving Loan
Commitment has been terminated, the Revolving Percentage of each Bank shall be
determined by dividing such Bank's Revolving Loan Commitment immediately prior
to such termination by the Total Revolving Loan
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Commitment immediately prior to such termination.
"S&P" shall have the meaning provided in the definition of
Cash Equivalents.
"SEC" shall mean the Securities and Exchange Commission and
any successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning
provided in Section 4.04(b)(ii).
"Security Agreement" shall have the meaning provided in the
Existing Credit Agreement.
"Security Agreement Collateral" shall mean all "Collateral" as
defined in the Security Agreement.
"Security Documents" shall mean the Pledge Agreement, the
Security Agreement, each Mortgage and each Additional Mortgage, if any.
"Security Documents Acknowledgment" shall have the meaning
provided in Section 5.14.
"Senior Subordinated Notes" shall mean the unsecured senior
subordinated notes, issued by the Borrower, as in effect on the Restatement
Effective Date and after giving effect to any changes, amendments or supplements
thereto (and shall include any unsecured senior subordinated notes into which
the Senior Subordinated Notes are exchanged pursuant to the Senior Subordinated
Notes Documents).
"Senior Subordinated Notes Change of Control" shall mean a
"Change of Control" under, and as defined in, the Senior Subordinated Notes
Indenture.
"Senior Subordinated Notes Documents" shall mean and include
each of the Senior Subordinated Notes, the Senior Subordinated Notes Indenture
and all securities purchase agreements and other documents and agreements
related thereto, as in effect on the Restatement Effective Date and after giving
effect to any changes, amendments or supplements thereto.
"Senior Subordinated Notes Indenture" shall mean the indenture
(which indenture shall be satisfactory to the Administrative Agent) dated on or
about the Restatement Effective Date, between the Borrower and a trustee, as in
effect on the Restatement Effective Date and after giving effect to any changes,
amendments or supplements thereto.
"Shareholders' Agreements" shall have the meaning provided in
Section 5.06(iii).
"Standby Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Stated Amount" of each Letter of Credit shall mean the
maximum amount available to be drawn thereunder (regardless of whether any
conditions for drawing could then be met).
"Subsidiary" of any Person shall mean and include (i) any
corporation more than 50%
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of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the time. Unless otherwise
expressly provided, all references herein to "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Subsidiary Guarantors" shall mean each Subsidiary of the
Borrower incorporated in the United States or any State thereof.
"Subsidiary Guaranty" shall mean the Subsidiary Guaranty in
the form of Exhibit G (appropriately completed), and, after the execution and
delivery thereof, as modified, supplemented or amended from time to time.
"Swingline Bank" shall mean BTCo and its successors and
assigns.
"Swingline Expiry Date" shall mean the date which is five
Business Days prior to the Maturity Date.
"Swingline Loan" shall have the meaning provided in Section
1.01(b).
"Swingline Note" shall have the meaning provided in Section
1.05(a)(ii).
"Tax Sharing Agreement" shall have the meaning provided in
Section 5.06(vii).
"Taxes" shall have the meaning provided in Section 4.04(a).
"Test Period" shall mean each period of four consecutive
fiscal quarters of the Borrower (or, if shorter, the period beginning on the
Restatement Effective Date and ending on the last day of a fiscal quarter of the
Borrower ended after the Restatement Effective Date), in each case taken as one
accounting period, ended after the Restatement Effective Date.
"Total Revolving Loan Commitment" shall mean the sum of the
Revolving Loan Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at
any time, (i) the Total Revolving Loan Commitment at such time less (ii) the sum
of the aggregate principal amount of all Revolving Loans and Swingline Loans
outstanding at such time plus the Letter of Credit Outstandings at such time.
"Trade Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Transaction" shall mean, collectively, (i) the Refinancing,
(ii) the amendment and restatement of the Existing Credit Agreement in the form
of this Agreement, (iii) the issuance of the Senior Subordinated Notes and the
use of proceeds therefrom to repay all outstanding Existing Loans (together with
interest and accrued Fees (under and as defined in the Existing Credit
Agreement)), (iv) the consummation of the Acquisition, (v) the consummation of
the Equity Financing, (vi) the
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incurrence of Revolving Loans on the Restatement Effective Date and (vii) the
payment of all fees and expenses to be paid in connection with the foregoing.
"Transaction Documents" shall mean, collectively, (i) the
Acquisition Documents, (ii) the Senior Subordinated Notes Documents, (iii) the
Equity Financing Documents and (iv) all other documents and agreements (other
than the Credit Documents) entered into in connection with the Transaction.
"Transaction Expenses" shall mean all fees and expenses
incurred in connection with, and payable prior to or in connection with the
closing of, the Transaction including all fees paid to any of the Banks and the
Administrative Agent hereunder, attorney's fees, accountants' fees, placement
agents' fees, consultant fees, discounts and commissions and brokerage, and
employee relocation expenses. Transaction Expenses shall include the
amortization of any such fees and expenses that are capitalized and not
classified as an expense on the date incurred.
"Type" shall mean any type of Revolving Loan determined with
respect to the interest option applicable thereto, I.E., a Base Rate Loan or
Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code, as in effect
from time to time in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under the Plan as of the close of its most recent plan year, determined
in accordance with actuarial assumptions at such time consistent with Financial
Accounting Standards No. 87 exceeds the market value of the assets allocable
thereto, each determined in accordance with Statement of Financial Accounting
Standards No. 87.
"Unpaid Drawing" shall have the meaning provided in Section
2.04(a).
"Unutilized Revolving Loan Commitment" for any Bank with a
Revolving Loan Commitment at any time shall mean the excess of (i) the Revolving
Loan Commitment of such Bank over (ii) the sum of (x) the aggregate outstanding
principal amount of Revolving Loans made by such Bank plus (y) an aggregate
amount equal to such Bank's Adjusted RC Percentage of the Letter of Credit
Outstandings at such time.
"Voting Stock" shall mean any class or classes of capital
stock of the Borrower 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 of the Borrower.
"Warrant Agreements" shall mean, collectively, the CSE Warrant
Agreement and the Charter Oak Warrant Agreement.
"Warrants" shall mean, collectively, the CSE Warrants and the
Charter Oak Warrants.
"Wholly-Owned Domestic Subsidiary" shall mean each
Wholly-Owned Subsidiary of the Borrower that is incorporated under the laws of
the United States or any State thereof.
"Wholly-Owned Subsidiary" of any Person shall mean any
Subsidiary of such Person
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to the extent all of the capital stock or other ownership interests in such
Subsidiary, other than directors' qualifying shares, is owned directly or
indirectly by such Person.
"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex, facsimile transmission,
telegraph or cable.
"Year 2000 Compliant" shall mean that all Information Systems
and Equipment accurately process date data (including, but not limited to,
calculating, comparing and sequencing), before, during and after the year 2000,
as well as same and multi-century dates, or between the years 1999 and 2000,
taking into account all leap years, including the fact that the year 2000 is a
leap year, and further, that when used in combination with, or interfacing with
other Information Systems and Equipment, shall accurately accept, release and
exchange date data, and shall in all material respects continue to function in
the same manner as it performs today and shall not otherwise impair the accuracy
or functionality of Information Systems and Equipment.
SECTION 11. THE ADMINISTRATIVE AGENT.
11.01 APPOINTMENT. The Banks hereby designate Bankers Trust
Company as Administrative Agent (for purposes of this Section 11, the term
"Administrative Agent" shall include BTCo in its capacity as Collateral Agent
pursuant to the Security Documents) to act as specified herein and in the other
Credit Documents. Each Bank hereby irrevocably authorizes, and each holder of
any Note by the acceptance of such Note shall be deemed irrevocably to
authorize, the Administrative Agent to take such action on its behalf under the
provisions of this Agreement, the other Credit Documents and any other
instruments and agreements referred to herein or therein and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Administrative Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. The
Administrative Agent may perform any of its duties hereunder or under the other
Credit Documents by or through its respective officers, directors, agents,
employees or affiliates.
11.02 NATURE OF DUTIES. The Administrative Agent shall not
have any duties or responsibilities except those expressly set forth in this
Agreement and the Security Documents. Neither the Administrative Agent nor any
of its respective officers, directors, agents, employees or affiliates shall be
liable for any action taken or omitted by it or them hereunder or under any
other Credit Document or in connection herewith or therewith, unless caused by
its or their gross negligence or willful misconduct (in either case, as
determined by a court of competent jurisdiction). The duties of the
Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have by reason of this Agreement or any other
Credit Document a fiduciary relationship in respect of any Bank or the holder of
any Note; and nothing in this Agreement or any other Credit Document, expressed
or implied, is intended to or shall be so construed as to impose upon the
Administrative Agent any obligations in respect of this Agreement or any other
Credit Document except as expressly set forth herein or therein.
11.03 LACK OF RELIANCE ON THE ADMINISTRATIVE AGENT.
Independently and without reliance upon the Administrative Agent, each Bank and
the holder of each Note, to the extent it deems appropriate, has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of the Borrower and its Subsidiaries in connection with
the making and the continuance of the Loans and the taking or not taking of any
action in connection herewith
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and (ii) its own appraisal of the creditworthiness of the Borrower and its
Subsidiaries and, except as expressly provided in this Agreement, the
Administrative Agent shall not have any duty or responsibility, either initially
or on a continuing basis, to provide any Bank or the holder of any Note with any
credit or other information with respect thereto, whether coming into its
possession before the making of the Loans or at any time or times thereafter.
The Administrative Agent shall not be responsible to any Bank or the holder of
any Note for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectability, priority or sufficiency of this
Agreement or any other Credit Document or the financial condition of the
Borrower and its Subsidiaries or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of this Agreement or any other Credit Document, or the financial
condition of the Borrower and its Subsidiaries or the existence or possible
existence of any Default or Event of Default.
11.04 CERTAIN RIGHTS OF THE ADMINISTRATIVE AGENT. If the
Administrative Agent shall request instructions from the Required Banks with
respect to any act or action (including failure to act) in connection with this
Agreement or any other Credit Document, the Administrative Agent shall be
entitled to refrain from such act or taking such action unless and until the
Administrative Agent shall have received instructions from the Required Banks;
and the Administrative Agent shall not incur liability to any Person by reason
of so refraining. Without limiting the foregoing, neither any Bank nor the
holder of any Note shall have any right of action whatsoever against the
Administrative Agent as a result of the Administrative Agent acting or
refraining from acting hereunder or under any other Credit Document in
accordance with the instructions of the Required Banks.
11.05 RELIANCE. The Administrative Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or telecopier
message, cablegram, radiogram, order or other document or telephone message
signed, sent or made by any Person that the Administrative Agent believed to be
the proper Person, and, with respect to all legal matters pertaining to this
Agreement and any other Credit Document and its duties hereunder and thereunder,
upon advice of counsel selected by the Administrative Agent (which may be
counsel for the Borrower).
11.06 INDEMNIFICATION. To the extent the Administrative Agent
is not reimbursed and indemnified by the Borrower or the Subsidiary Guarantors,
the Banks will reimburse and indemnify the Administrative Agent, in proportion
to their respective "percentages" as used in determining the Required Banks, for
and against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, costs, expenses or disbursements of whatsoever kind
or nature which may be imposed on, asserted against or incurred by the
Administrative Agent in performing its respective duties hereunder or under any
other Credit Document, in any way relating to or arising out of this Agreement
or any other Credit Document; PROVIDED that no Bank shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's gross negligence or willful misconduct (in either case,
as determined by a court of competent jurisdiction).
11.07 THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.
With respect to its obligation to make Loans under this Agreement, the
Administrative Agent shall have the rights and
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powers specified herein for a "Bank" and may exercise the same rights and powers
as though it were not performing the duties specified herein; and the term
"Banks," "Required Banks," "holders of Notes" or any similar terms shall, unless
the context clearly otherwise indicates, include the Administrative Agent in its
individual capacity. The Administrative Agent may accept deposits from, lend
money to, and generally engage in any kind of banking, trust or other business
with any Credit Party or any Affiliate of any Credit Party as if it were not
performing the duties specified herein, and may accept fees and other
consideration from the Borrower or any other Credit Party for services in
connection with this Agreement and otherwise without having to account for the
same to the Banks.
11.08 HOLDERS. The Administrative Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and until
a written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Administrative Agent. Any request,
authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee, assignee or indorsee, as the
case may be, of such Note or of any Note or Notes issued in exchange therefor.
11.09 RESIGNATION BY THE ADMINISTRATIVE AGENT. (a) The
Administrative Agent may resign from the performance of all its functions and
duties hereunder and/or under the other Credit Documents at any time by giving
30 Business Days' prior written notice to the Borrower and the Banks. Such
resignation shall take effect upon the appointment of a successor Administrative
Agent pursuant to clauses (b) and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the Required Banks
shall appoint a successor Administrative Agent hereunder or thereunder who shall
be a commercial bank or trust company reasonably acceptable to the Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 30 Business Day period, the Administrative Agent, with the
consent of the Borrower (which consent shall not be unreasonably withheld),
shall then appoint a successor Administrative Agent who shall serve as
Administrative Agent hereunder or thereunder until such time, if any, as the
Required Banks appoint a successor Administrative Agent as provided above.
(d) If no successor Administrative Agent has been appointed
pursuant to clause (b) or (c) above by the 30th Business Day after the date such
notice of resignation was given by the Administrative Agent, the Administrative
Agent's resignation shall become effective and the Required Banks shall
thereafter perform all the duties of the Administrative Agent hereunder and/or
under any other Credit Document until such time, if any, as the Banks appoint a
successor Administrative Agent as provided above.
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SECTION 12. MISCELLANEOUS.
12.01 PAYMENT OF EXPENSES, ETC. The Borrower agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Administrative Agent in
connection with the negotiation, preparation, execution and delivery of the
Credit Documents and the documents and instruments referred to therein and any
amendment, waiver or consent relating thereto (including, without limitation,
the reasonable fees and disbursements of White & Case LLP) and of the
Administrative Agent and each of the Banks in connection with the enforcement of
the Credit Documents and the documents and instruments referred to therein
(including, without limitation, the reasonable fees and disbursements of counsel
for the Administrative Agent and either one outside counsel or in-house counsel
for each of the Banks); (ii) pay and hold each of the Banks harmless from and
against any and all present and future stamp and other similar taxes with
respect to the foregoing matters and save each of the Banks harmless from and
against any and all liabilities with respect to or resulting from any delay or
omission (other than to the extent attributable to such Bank) to pay such taxes;
and (iii) indemnify each Bank (including in its capacity as the Administrative
Agent or a Letter of Credit Issuer), its officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all losses, liabilities, claims, damages or expenses incurred by any of them
(whether asserted by the Borrower or otherwise) as a result of, or arising out
of, or in any way related to, or by reason of, (a) any investigation, litigation
or other proceeding (whether or not any Bank is a party thereto) related to the
entering into and/or performance of any Credit Document or the use of the
proceeds of any Loans hereunder or the Acquisition or the offering and sale of
the Senior Subordinated Notes or the consummation of any other transaction
contemplated in any Credit Document, including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceeding (but excluding any such
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of the gross negligence or willful misconduct (in either case, as
determined by a court of competent jurisdiction) of the Person to be
indemnified) or (b) the actual or alleged presence of Hazardous Materials in the
air, surface water, groundwater, surface or subsurface of any Real Property
owned or at any time operated by the Borrower or any of its Subsidiaries, the
generation, storage, transportation or disposal of Hazardous Materials at any
location whether or not owned or operated by the Borrower or any of its
Subsidiaries, the non-compliance of any Real Property owned or at any time
operated by the Borrower or any of its Subsidiaries with federal, state and
local laws, regulations, and ordinances (including applicable permits
thereunder) applicable to any such Real Property, or any Environmental Claim
asserted against the Borrower, any of its Subsidiaries, or any such Real
Property, including, in each case, without limitation, the reasonable fees and
disbursements of counsel and other consultants incurred in connection with any
such investigation, litigation or other proceeding (but excluding any losses,
liabilities, claims, damages or expenses to the extent incurred by reason of the
gross negligence or willful misconduct (in either case, as determined by a court
of competent jurisdiction) of the Person to be indemnified). To the extent that
the undertaking to indemnify, pay or hold harmless the Administrative Agent or
any Bank set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, the Borrower shall make the maximum
contribution to the payment and satisfaction of each of the indemnified
liabilities which is permissible under applicable law.
12.02 RIGHT OF SETOFF. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, if an Event of Default
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then exists, each Bank is hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to any Credit
Party or to any other Person, any such notice being hereby expressly waived, to
set off and to appropriate and apply any and all deposits (general or special)
and any other Indebtedness at any time held or owing by such Bank (including
without limitation by branches and agencies of such Bank wherever located) to or
for the credit or the account of any Credit Party against and on account of the
Obligations and liabilities of such Credit Party to such Bank under this
Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations of such Credit Party purchased by such
Bank pursuant to Section 12.06(b), and all other claims of any nature or
description arising out of or connected with this Agreement or any other Credit
Document, irrespective of whether or not such Bank shall have made any demand
hereunder and although said Obligations, liabilities or claims, or any of them,
shall be contingent or unmatured.
12.03 NOTICES. (a) Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, telecopier or cable communication) and
mailed, telegraphed, telexed, telecopied, cabled or delivered, if to a Credit
Party, at the address specified opposite its signature below or in the other
relevant Credit Documents, as the case may be; if to the Administrative Agent,
at its Notice Office; if to any Bank, at its address specified for such Bank on
Annex II; or, at such other address as shall be designated by any party in a
written notice to the other parties hereto. All such notices and communications
shall be mailed, telegraphed, telexed, telecopied, or cabled or sent by
overnight courier, and shall be effective when received.
(b) Without in any way limiting the obligation of the Borrower
to confirm in writing any telephonic notice permitted to be given hereunder, the
Administrative Agent or the Swingline Bank (in the case of a Borrowing of
Swingline Loans) or any Letter of Credit Issuer, as the case may be, may prior
to receipt of written confirmation act without liability upon the basis of such
telephonic notice, believed by the Administrative Agent or the Swingline Bank or
any Letter of Credit Issuer in good faith to be from an Authorized Officer of
the Borrower. In each such case, the Borrower hereby waives the right to dispute
the Administrative Agent's or the Swingline Bank's record of the terms of such
telephonic notice.
12.04 ASSIGNMENTS; PARTICIPATIONS; ETC. (a) This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto, PROVIDED that the
Borrower may not assign or transfer any of its rights or obligations hereunder
without the prior written consent of the Banks. Each Bank may at any time grant
participations in any of its rights hereunder or under any of the Notes to
another financial institution, PROVIDED that in the case of any such
participation, the participant shall not have any rights under this Agreement or
any of the other Credit Documents (the participant's rights against such Bank in
respect of such participation to be those set forth in the agreement executed by
such Bank in favor of the participant relating thereto) and all amounts payable
by the Borrower hereunder shall be determined as if such Bank had not sold such
participation, except that the participant shall be entitled to the benefits of
Sections 1.10, 2.06 and 4.04 to the extent that such Bank would be entitled to
such benefits if the participation had not been entered into or sold, and,
PROVIDED FURTHER, that no Bank shall transfer, grant or assign any participation
under which the participant shall have rights to approve any amendment to or
waiver of this Agreement or any other Credit Document except to the extent such
amendment or waiver would (i) extend the final scheduled maturity of any Loan or
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Note or Letter of Credit (unless such Letter of Credit is not extended beyond
the Maturity Date) in which such participant is participating, or reduce the
rate or extend the time of payment of interest or Fees thereon (except in
connection with a waiver of the applicability of any post-default increase in
interest rates), or reduce the principal amount thereof (it being understood
that any amendment or modification to the financial definitions in this
Agreement shall not constitute a reduction in the rate of interest for purposes
of this clause (i)), or increase such participant's participating interest in
any Revolving Loan Commitment over the amount thereof then in effect (it being
understood that (x) a waiver of any Default or Event of Default or of a
mandatory reduction in the Total Revolving Loan Commitment, or a mandatory
prepayment, shall not constitute a change in the terms of any Revolving Loan
Commitment and (y) an increase in any Revolving Loan Commitment or Loan shall be
permitted without the consent of any participant so long as such participant's
participation is not increased as a result thereof), (ii) release all or
substantially all of the Collateral which support the Loans in which such
participant is participating (except as expressly permitted in any Credit
Document) or (iii) consent to the assignment or transfer by the Borrower of any
of its rights and obligations under this Agreement.
(b) Notwithstanding the foregoing, (x) any Bank may assign all
or a portion of its Revolving Loan Commitment (and related outstanding
Obligations hereunder) to an Affiliate of such Bank or to another Bank, (y) with
the consent of the Administrative Agent (which consent shall not be unreasonably
withheld), any Bank may assign all or a portion of its Revolving Loan Commitment
(and related outstanding Obligations hereunder) to a Common Management Fund and
(z) with the consent of the Administrative Agent (which consent shall not be
unreasonably withheld), any Bank may assign all or a portion of its outstanding
Revolving Loan Commitment (and related outstanding Obligations hereunder) to one
or more Eligible Transferees. No assignment pursuant to the immediately
preceding sentence shall to the extent such assignment represents an assignment
to an institution other than one or more Banks hereunder, be in an aggregate
amount less than $5,000,000 unless the entire Revolving Commitment (and related
outstanding Obligations hereunder) of the assigning Bank is so assigned. If any
Bank so sells or assigns all or a part of its rights hereunder or under the
Notes, any reference in this Agreement or the Notes to such assigning Bank shall
thereafter refer to such Bank and to the respective assignee to the extent of
their respective interests and the respective assignee shall have, to the extent
of such assignment (unless otherwise provided therein), the same rights and
benefits as it would if it were such assigning Bank. Each assignment pursuant to
this Section 12.04(b) shall be effected by the assigning Bank and the assignee
Bank executing an Assignment Agreement (the "Assignment Agreement")
substantially in the form of Exhibit I (appropriately completed). In the event
of (and at the time of) any such assignment, either the assigning or the
assignee Bank shall pay to the Administrative Agent a nonrefundable assignment
fee of $3,500, and at the time of any assignment pursuant to this Section
12.04(b), (i) Annex I shall be deemed to be amended to reflect the Revolving
Loan Commitment of the respective assignee (which shall result in a direct
reduction to the Revolving Loan Commitment of the assigning Bank) and of the
other Banks, and (ii) if any such assignment occurs after the Restatement
Effective Date, the Borrower will issue new Notes to the respective assignee and
to the assigning Bank in conformity with the requirements of Section 1.05. No
transfer or assignment under this Section 12.04(b) will be effective until
recorded by the Administrative Agent on the Register pursuant to Section 12.16.
To the extent of any assignment pursuant to this Section 12.04(b), the assigning
Bank shall be relieved of its obligations hereunder with respect to the assigned
portion of its Revolving Loan Commitment. At the time of each assignment
pursuant to this Section 12.04(b) to a Person which is not already a Bank
hereunder and which is not a United States person (as such term is
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defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the
respective assignee Bank shall provide to the Borrower and the Administrative
Agent the appropriate Internal Revenue Service Forms (and, if applicable, a
Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent
that an assignment of all or any portion of a Bank's Revolving Loan Commitment
and related outstanding Obligations pursuant to Section 1.13 or this Section
12.04(b) would, at the time of such assignment, result in increased costs under
Section 1.10, 1.11, 2.06 or 4.04 which exceed those being charged, if any, by
the respective assigning Bank prior to such assignment, then the Borrower shall
not be obligated to pay such excess increased costs (although the Borrower shall
be obligated to pay any other increased costs of the type described above
resulting from changes giving rise to such increased costs after the date of the
respective assignment). Each Bank and the Borrower agree to execute such
documents (including, without limitation, amendments to this Agreement and the
other Credit Documents) as shall be necessary to effect the foregoing.
(c) Nothing in this Agreement shall prevent or prohibit any
Bank from pledging its Notes or Loans to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank and, with the
consent of the Borrower and the Administrative Agent, any Bank which is a fund
may pledge all or any portion of its Notes or Loans to a trustee for the benefit
of investors and in support of its obligations to such investors.
(d) Notwithstanding any other provisions of this Section
12.04, no transfer or assignment of the interests or obligations of any Bank
hereunder or any grant of participation therein shall be permitted if such
transfer, assignment or grant would require the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any
State.
(e) Each Bank initially party to this Agreement hereby
represents, and each Person that became a Bank pursuant to an assignment
permitted by this Section 12 will, upon its becoming party to this Agreement,
represent that it is an Eligible Transferee which makes loans in the ordinary
course of its business and that it will make or acquire Loans for its own
account in the ordinary course of such business, PROVIDED that subject to the
preceding clauses (a) and (b), the disposition of any promissory notes or other
evidences of or interests in Indebtedness held by such Bank shall at all times
be within its exclusive control.
12.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of the Administrative Agent or any Bank in exercising any right, power
or privilege hereunder or under any other Credit Document and no course of
dealing between any Credit Party and the Administrative Agent or any Bank shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. The rights and remedies herein expressly
provided are cumulative and not exclusive of any rights or remedies which the
Administrative Agent or any Bank would otherwise have. No notice to or demand on
any Credit Party in any case shall entitle any Credit Party to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Administrative Agent or the Banks to any other or
further action in any circumstances without notice or demand.
12.06 PAYMENTS PRO RATA. (a) The Administrative Agent agrees
that promptly after its receipt of each payment from or on behalf of any Credit
Party in respect of any Obligations of such Credit Party hereunder, it shall
distribute such payment to the Banks (other than any Bank that
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has expressly waived its right to receive its PRO RATA share thereof) PRO RATA
based upon their respective shares, if any, of the Obligations with respect to
which such payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans or Fees, of a sum which with respect to the related sum or sums
received by other Banks is in a greater proportion than the total of such
Obligation then owed and due to such Bank bears to the total of such Obligation
then owed and due to all of the Banks immediately prior to such receipt, then
such Bank receiving such excess payment shall purchase for cash without recourse
or warranty from the other Banks an interest in the Obligations of the
respective Credit Party to such Banks in such amount as shall result in a
proportional participation by all of the Banks in such amount, PROVIDED that if
all or any portion of such excess amount is thereafter recovered from such Bank,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.
(c) Notwithstanding anything to the contrary contained herein,
the provisions of the preceding Sections 12.06(a) and (b) shall be subject to
the express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks.
12.07 CALCULATIONS; COMPUTATIONS. (a) The financial statements
to be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Banks), PROVIDED that (x) except as otherwise
specifically provided herein, all computations determining compliance with
Section 8, including definitions used therein shall utilize accounting
principles and policies in effect at the time of the preparation of, and in
conformity with those used to prepare, the December 31, 1997 historical
financial statements of the Borrower delivered to the Banks as described in
Section 6.10(b) and (y) that if at any time the computations determining
compliance with Section 8, including definitions used therein, utilize
accounting principles different from those utilized in the financial statements
furnished to the Banks, such financial statements shall be accompanied by
reconciliation work-sheets.
(b) All computations of interest, Commitment Commission and
Fees hereunder shall be made on the basis of a year of 360 days for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest, Commitment Commission or Fees are payable.
12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER
OF JURY TRIAL. (a) This Agreement and the other Credit Documents and the rights
and obligations of the parties hereunder and thereunder shall be construed in
accordance with and be governed by the law of the state of New York. Any legal
action or proceeding with respect to this Agreement or any other Credit Document
may be brought in the courts of the State of New York or of the United States
for the Southern District of New York, and, by execution and delivery of this
Agreement, each Credit Party hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Each Credit Party to this Agreement hereby
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further irrevocably waives any claim that any such courts lack jurisdiction over
such Credit Party, and agrees not to plead or claim, in any legal action or
proceeding with respect to this Agreement or any other Credit Document brought
in any of the aforesaid courts, that any such court lacks jurisdiction over such
Credit Party. The Borrower hereby irrevocably designates, appoints and empowers
CT Corporation System, with offices on the date hereof at 1633 Broadway, New
York, New York 10019 as its designee, appointee and agent to receive, accept and
acknowledge for and on its behalf, and in respect of its property, service of
any and all legal process, summons, notices and documents which may be served in
any such action or proceeding. If for any reason such designee, appointee and
agent shall cease to be available to act as such, each credit party agrees to
designate a new designee, appointee and agent in New York City on the terms and
for the purposes of this provision satisfactory to the Administrative Agent
under this Agreement. The Borrower further irrevocably consents to the service
of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to any credit party at its address set forth opposite its
signature below, such service to become effective 30 days after such mailing.
Nothing herein shall affect the right of the Administrative Agent or any Bank to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against any Credit Party in any other
jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement or any other Credit Document brought in the courts referred to in
clause (a) above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
(c) Each of the parties to this Agreement hereby irrevocably
waives all right to a trial by jury in any action, proceeding or counterclaim
arising out of or relating to this Agreement, the other Credit Documents or the
transactions contemplated hereby or thereby.
12.09 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Administrative Agent.
12.10 EFFECTIVENESS. This Agreement shall become effective on
the date (the "Restatement Effective Date") on which (i) the Borrower, the
Administrative Agent and each of the Banks shall have signed a counterpart
hereof (whether the same or different counterparts) and shall have delivered the
same to the Administrative Agent at the Notice Office of the Administrative
Agent or, in the case of the Banks, shall have given to the Administrative Agent
telephonic (confirmed in writing), written telex or facsimile transmission
notice (actually received) at such office that the same has been signed and
mailed to it and (ii) the conditions set forth in Section 5 are met to the
satisfaction of, or waived in writing by, the Administrative Agent and the
Required Banks. Unless the Administrative Agent has received actual notice from
any Bank that the conditions contained in Section 5 have not been met to its
satisfaction or waived by it in writing, upon the satisfaction of the condition
described in clause (i) of the immediately preceding sentence and upon the
Administrative Agent's good faith determination that the conditions described in
clause (ii) of
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the immediately preceding sentence have been met or waived in writing, then the
Restatement Effective Date shall be deemed to have occurred on the date
determined by clause (i), regardless of any subsequent determination that one or
more of the conditions thereto had not been met (although the occurrence of the
Restatement Effective Date shall not release the Borrower from any liability for
failure to satisfy one or more of the applicable conditions contained in Section
5).
12.11 HEADINGS DESCRIPTIVE. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
12.12 AMENDMENT OR WAIVER. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the Borrower and the Required Banks, PROVIDED that no such
change, waiver, discharge or termination shall, without the consent of each Bank
(other than a Defaulting Bank) (with Obligations being directly affected thereby
in the case of the following clause (i)), (i) extend the final scheduled
maturity date of any Loan or Note or extend the stated maturity of any Letter of
Credit beyond the Maturity Date, or reduce the rate or extend the time of
payment of interest (other than as a result of waiving the applicability of any
post-default increase in interest rates) or Fees thereon, or reduce the
principal amount thereof (it being understood that any amendment or modification
to the financial definitions in this Agreement shall not constitute a reduction
in the rate of interest for purposes of this clause (i)), (ii) release all or
substantially all of the Collateral (in each case except as expressly provided
in the Credit Documents), (iii) amend, modify or waive any provision of this
Section 12.12(a), (iv) reduce the percentage specified in the definition of
Required Banks (it being understood that, with the consent of the Required
Banks, additional extensions of credit pursuant to this Agreement may be
included in the determination of the Required Banks on substantially the same
basis as Revolving Loan Commitments are included on the Restatement Effective
Date) or (v) consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement; PROVIDED FURTHER, that no such
change, waiver, discharge or termination shall (v) increase the Revolving Loan
Commitment of any Bank over the amount thereof then in effect without the
consent of such Bank (it being understood that waivers or modifications of
conditions precedent, covenants, Defaults or Events of Default or of a mandatory
reduction in the Total Revolving Loan Commitment shall not constitute an
increase of the Revolving Loan Commitment of any Bank, and that an increase in
the available portion of any Revolving Loan Commitment of any Bank shall not
constitute an increase in the Revolving Loan Commitment of such Bank), (w)
without the consent of each Letter of Credit Issuer, amend, modify or waive any
provision of Section 2 or alter its rights or obligations with respect to
Letters of Credit, (x) without the consent of the Administrative Agent, amend,
modify or waive any provision of Section 11 as same applies to the
Administrative Agent or any other provision as same relates to the rights or
obligations of the Administrative Agent, (y) without the consent of the
Collateral Agent, amend, modify or waive any provision relating to the rights or
obligations of the Collateral Agent or (z) without the consent of the Swingline
Bank, alter its rights or obligations with respect to Swingline Loans.
(b) If, in connection with any proposed change, waiver,
discharge or termination to any of the provisions of this Agreement as
contemplated by clauses (a)(i) through (v), inclusive, of the first proviso to
Section 12.12(a), the consent of the Required Banks is obtained but the consent
of one or more of the other Banks whose consent is required is not obtained,
then the Borrower shall
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have the right, so long as all non-consenting Banks whose individual consent is
required are treated as described in either clauses (A) or (B) below, to either
(A) replace each such non-consenting Bank or Banks with one or more Replacement
Banks pursuant to Section 1.13 so long as at the time of such replacement, each
such Replacement Bank consents to the proposed change, waiver, discharge or
termination or (B) terminate such non-consenting Bank's Revolving Loan
Commitment in accordance with Section 3.02(b), PROVIDED that, unless the
Revolving Loan Commitment is terminated pursuant to preceding clause (B) is
immediately replaced in full at such time through the addition of new Banks or
the increase of the Revolving Loan Commitments of existing Banks (who in each
case must specifically consent thereto), then in the case of any action pursuant
to preceding clause (B) the Required Banks (determined before giving effect to
the proposed action) shall specifically consent thereto, PROVIDED further, that
in any event the Borrower shall not have the right to replace a Bank or
terminate its Revolving Loan Commitment solely as a result of the exercise of
such Bank's rights (and the withholding of any required consent by such Bank)
pursuant to the second proviso to Section 12.12(a).
12.13 SURVIVAL. All indemnities set forth herein including,
without limitation, in Section 1.10, 1.11, 2.06, 4.04, 11.06 or 12.01 shall,
subject to the provisions of Section 12.17 (to the extent applicable), survive
the execution and delivery of this Agreement and the making and repayment of the
Loans.
12.14 DOMICILE OF LOANS. Each Bank may transfer and carry its
Loans at, to or for the account of any branch office, subsidiary or affiliate of
such Bank, PROVIDED that the Borrower shall not be responsible for costs arising
under Section 1.10, 2.06 or 4.04 resulting from any such transfer (other than a
transfer pursuant to Section 1.12) to the extent not otherwise applicable to
such Bank prior to such transfer.
12.15 CONFIDENTIALITY. Subject to Section 12.04, the Banks
shall hold all non-public information obtained pursuant to the requirements of
this Agreement which has been identified as such by the Borrower in accordance
with its customary procedure for handling confidential information of this
nature and in accordance with safe and sound banking practices and in any event
may make disclosure reasonably required by any BONA FIDE actual or potential
transferee or participant in connection with the contemplated transfer of any
Loans or participation therein or an Affiliate of such Bank (including
attorneys, legal advisors and consultants of such Bank) (so long as each of such
actual or potential transferee, participant or Affiliate agrees to be bound by
the provisions of this Section 12.15) or as required or requested by any
governmental agency or representative thereof or pursuant to legal process,
PROVIDED that, unless specifically prohibited by applicable law or court order,
each Bank shall notify the Borrower of any request by any governmental agency or
representative thereof (other than any such request in connection with an
examination of the financial condition of such Bank by such governmental agency)
for disclosure of any such non-public information prior to disclosure of such
information, and provided further that in no event shall any Bank be obligated
or required to return any materials furnished by the Borrower or any Subsidiary.
12.16 REGISTER. The Borrower hereby designates the
Administrative Agent to serve as the Borrower's agent, solely for purposes of
this Section 12.16, to maintain a register (the "Register") on which it will
record the Revolving Loan Commitments from time to time of each of the Banks,
the Loans made by each of the Banks and each repayment in respect of the
principal
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amount of the Loans of each Bank. Failure to make any such recordation, or any
error in such recordation shall not affect the Borrower's obligations in respect
of such Loans. With respect to any Bank, the transfer of the Revolving Loan
Commitment of such Bank and the rights to the principal of, and interest on, any
Loan made pursuant to such Revolving Loan Commitment shall not be effective
until such transfer is recorded on the Register maintained by the Administrative
Agent with respect to ownership of such Revolving Loan Commitment and Revolving
Loans and prior to such recordation all amounts owing to the transferor with
respect to such Revolving Loan Commitments and Revolving Loans shall remain
owing to the transferor. The registration of assignment or transfer of all or
part of any Revolving Loan Commitments and Revolving Loans shall be recorded by
the Administrative Agent on the Register only upon the acceptance by the
Administrative Agent of a properly executed and delivered Assignment Agreement
pursuant to Section 12.04(b). Coincident with the delivery of such an Assignment
Agreement to the Administrative Agent for acceptance and registration of
assignment or transfer of all or part of a Revolving Loan, or as soon thereafter
as practicable, the assigning or transferor Bank shall surrender the Revolving
Note evidencing such Revolving Loan, and thereupon one or more new Revolving
Notes in the same aggregate principal amount shall be issued to the assigning or
transferor Bank and/or the new Bank. The Borrower agrees to indemnify the
Administrative Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Administrative Agent in performing its duties under this Section
12.16.
12.17 LIMITATION ON ADDITIONAL AMOUNTS, ETC. Notwithstanding
anything to the contrary contained in Sections 1.10, 1.11, 2.06 or 4.04 of this
Agreement, unless a Bank gives notice to the Borrower that it is obligated to
pay an amount under any such Section within 150 days after the later of (x) the
date the Bank incurs the respective increased costs, Taxes, loss, expense or
liability, reduction in amounts received or receivable or reduction in return on
capital or (y) the date such Bank has actual knowledge of its incurrence of the
respective increased costs, Taxes, loss, expense or liability, reductions in
amounts received or receivable or reduction in return on capital, then such Bank
shall only be entitled to be compensated for such amount by the Borrower
pursuant to said Section 1.10, 1.11, 2.06 or 4.04, as the case may be, to the
extent (I) the costs, Taxes, loss, expense or liability, reduction in amounts
received or receivable or reduction in return on capital are incurred or
suffered on or after the date which occurs 150 days prior to such Bank giving
notice to the Borrower that it is obligated to pay the respective amounts
pursuant to said Section 1.10, 1.11, 2.06 or 4.04, as the case may be, and (II)
the notice of such payment is accompanied by a written statement by the Banks
that such amount is an amount charged by such Banks to similarly situated
borrowers. This Section 12.17 shall have no applicability to any Section of this
Agreement other than said Sections 1.10, 1.11, 2.06 and 4.04.
12.18 ADDITIONS OF NEW BANKS; TERMINATION OF COMMITMENTS OF
NON-CONTINUING BANKS; SURRENDER OF NOTES. (a) On and as of the occurrence of the
Restatement Effective Date in accordance with Section 12.10 hereof, each New
Bank shall become a "Bank" under, and for all purposes of, this Agreement and
the other Credit Documents.
(b) The parties hereto acknowledge that each Existing Bank has
been offered the opportunity to participate in this Agreement, after the
occurrence of the Restatement Effective Date, as a Continuing Bank hereunder,
but that no Existing Bank is obligated to be a Continuing Bank.
(c) Notwithstanding anything to the contrary contained in the
Existing Credit Agreement, this Agreement or any other Credit
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Document, the Borrower agrees and each of the Banks hereby agree that on the
Restatement Effective Date, (i) each Bank with a Revolving Loan Commitment as
set forth on Annex I (after giving effect to the Restatement Effective Date)
shall make that principal amount of Revolving Loans to the Borrower as is
required by Section 1.01 and (ii) in the case of each Non-Continuing Bank, all
of such Non-Continuing Bank's Existing Loans outstanding on the Restatement
Effective Date shall be repaid in full on such date, together with interest
thereon and all accrued Fees (and any other amounts) owing to such
Non-Continuing Bank, and the Revolving Loan Commitment (under, and as defined
in, the Existing Credit Agreement) of such Non-Continuing Bank, if any, shall be
terminated, effective upon the occurrence of the Restatement Effective Date.
Notwithstanding anything to the contrary contained in the Existing Credit
Agreement, this Agreement or any other Credit Document, the parties hereto
hereby agree that in the event that any Existing Bank shall fail to execute a
counterpart of this Agreement prior to the occurrence of the Restatement
Effective Date, such Existing Bank does not consent to the amendment and
restatement of the Existing Credit Agreement provided for herein and shall be
deemed to be a Non-Continuing Bank and, concurrently with the occurrence of the
Restatement Effective Date, the Revolving Loan Commitment (under, and as defined
in, the Existing Credit Agreement) of such Existing Bank, if any, shall be
terminated, all Existing Loans of such Existing Bank outstanding on the
Restatement Effective Date shall be repaid in full, together with interest
thereon and all accrued Fees (and any other amounts) owing to such Existing
Bank, and concurrently with the occurrence of the Restatement Effective Date,
such Existing Bank shall no longer constitute a "Bank" under this Agreement and
the other Credit Documents, provided that all indemnities of the Credit Parties
under the Existing Credit Agreement and the other Credit Documents (as in effect
prior to the Restatement Effective Date) for the benefit of such Existing Bank
shall survive in accordance with the terms thereof.
(d) On the Restatement Effective Date, each Existing Bank
shall have surrendered to the Administrative Agent for cancellation the
promissory notes issued to it pursuant to the Existing Credit Agreement in
respect of its Existing Loans and the Administrative Agent shall promptly
deliver such cancelled promissory notes to the Borrower.
* * *
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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Agreement to be duly executed and delivered as of the date first above
written.
Address: GEO SPECIALTY CHEMICALS, INC.
28601 Chagrin Boulevard
Suite 450
Cleveland, Ohio 44122
Telephone: (216) 464-5564
Facsimile: (216) 765-1307 By: /s/ WILLIAM P. ECKMAN
Attention: George P. Ahearn -------------------------------
Title: Chief Financial Officer
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By: /s/ Mary Kay Coyle
-------------------------------
Title: Managing Director
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Carleton Olmanson
------------------------------
Title: Senior Vice President
<PAGE> 1
EXHIBIT 10.15
GEO SPECIALTY CHEMICALS, INC.
1997 MANAGEMENT INCENTIVE PROGRAM
The Board of Directors ("Board") of GEO Specialty Chemicals, Inc. (GEO) proposes
a 1997 incentive plan for selected employees. The plan, referred to as
"Management Incentive Program" will be supervised by the President and Executive
Vice President ("Officers") for the Board. The principal features of the plan
are as follows:
I. PLAN CONCEPT
The GEO Management Incentive Program has been established to
recognize and reward the professional contribution of
management and selected employees of the company. Since
sustaining and increasing corporate profitability, and its
attendant benefits, is the primary objective of our executive
and management effort, the total bonus opportunity will be
dependent upon corporate profits as well as individuals
performance levels. The Management Incentive Program Matrix
(Appendix A), illustrating the incentive opportunities at
specific corporate and individual performance levels for the
1997 calendar year is attached.
II. FUNDING
The plan shall be funded through an annual appropriation
approved by the Board of Directors. Each year at its 1st
quarter meeting, the Board will approve payment of the bonus
incentive for the previous year, provided year-end financial
results attain the required corporate performance level for
which a bonus is paid.
The Board may also choose at its sole discretion to exclude
any or all extraordinary items (favorable or unfavorable) in
determination of the corporate performance level which will
apply under the plan for a given fiscal year.
Also at the 1st quarter meeting of each year, the officers
will propose the bonus plan applicable for the next fiscal
year the Board will authorize accrual of the appropriate
funds. If business performance dictates, the accrual may be
adjusted during the fiscal year.
III. PARTICIPATION
The employees who are eligible to participate have significant
functional or project responsibilities and who have an
appropriate position grade level. An employee, however, will
participate only upon the recommendation of the officers with
approval of the Board. Participation in the plan during any
year does not guarantee participation in future plan years.
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IV. NOTIFICATION
Each plan year, or upon the offer of employment to a
prospective eligible management level employee, each
individual participant will be advised of his/her
participation in the program and the following:
- The incentive opportunity and extent to which
it will vary based upon alternative business
and individual performance levels.
- Individual job responsibilities and related
objectives upon which the performance and the
performance component of the incentive award
will be based.
V. PLAN YEAR
Actual bonus awards will be based upon corporate and
individual performance during the corporation's fiscal year,
which is the calendar year.
VI. INDIVIDUAL BONUS AWARDS
As noted, actual bonus awards are based on corporate as well
as individual job performance criteria, briefly described
below:
INDIVIDUAL PERFORMANCE
An employee's job performance in meeting pre-established plan
objectives and position requirements during the fiscal year is
rated in any one of the three categories ranging from IV to I
based on his/her accomplishment of the regular duties of the
position as well as established plan objectives for the year.
Performance is rated by the committee with a recommendation
from the individual's immediate supervisor as appropriate.
Appendix B outlines the individual performance measurement
criteria and procedure. Individual bonus awards are made only
if the corporate performance objective exceeds the previous
year.
CORPORATE PERFORMANCE
Corporate performance is established each year by the Board of
Directors upon the recommendation of the officers. Corporate
performance is pretax profit defined as operating income
before taxes, financing expenses and corporate expenses, but
after depreciation for the applicable year ascertained from
its books of account maintained in accordance with generally
accepted accounting principles, after all charges and reserves
deemed necessary or advisable by the Board excluding bonuses
payable under this plan, and any plans covering other
employees.
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In the determination of pretax income, the Board may, in its
sole and complete discretion, adjust earnings by eliminating
from income or expense such items as is determined in good
faith to be unrelated to the ordinary operations of the
company. The maximum bonus payments for the Management
Incentive Program shall not exceed 10% of the pretax income in
any given year.
BUSINESS SEGMENT PERFORMANCE
The GEO Specialty Chemicals CEO, Group President and Vice
President/General Manager Process Chemicals will establish
their respective business segment performance parameters each
year. The CEO Specialty Chemicals will establish business
segment performance each year. The formula used for
determining business segment performance is the same as
outlined for corporate performance. In determination of pretax
income, the CEO and the Group President and Vice
President/General Manager Process Chemicals at their
discretion and Board endorsement may adjust earnings by
eliminating from income or expense such items as is determined
in good faith to be unrelated to the ordinary business
operations.
PROCEDURE
At the fourth quarter meeting of each fiscal year, the
officers shall evaluate the performance of participants as
outlines in Appendix B. All evaluations will be presented to
the Board for final approval. Based upon the approved
evaluations and projected corporate performance, and the
incentive guidelines as outlined in the incentive award matrix
for the plan year, the officers shall make recommendations to
the Board for incentive awards. Actual awards will be
determined when the company completes its financial audit for
the fiscal year.
VII. FISCAL DEFINITION OF "CURRENT YEAR BASE SALARY"
For purposes of the plan, a participant's current year base
salary in the actual salary paid for the fiscal year, while
the individual is a member of the Plan, excluding any overtime
payments and relocation expenses, bonuses, or other
discretionary or extraordinary items.
VIII. PAYMENT DATE
Payment of any bonus under the plan will generally be made
within thirty (30) days after the company has received its
year-end financial statements, certified by the company's
auditors, or as soon thereafter as practicable. Payments may
be made prior to the receipt of said certified financial
statements at the sole discretion of the committee.
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IX. TERMINATION OF EMPLOYMENT
If a participant's employment is terminated during the year
for any reason, he or she will not be eligible for any bonus
for that fiscal year.
X. DISCRETIONARY PLAN
The continuance of the plan is discretionary and subject to
annual review and approval by the Board.
XI. REVOCATION OR AMENDMENTS
The Board reserves the right, at its sole discretion, to amend
or terminate this plan at any time, provided, however, that no
amendment or termination shall be effective as to awards which
have already been paid.
XII. INTERPRETATION
The Board shall at all times retain the power and authority to
interpret all provisions of this plan and to resolve all
questions and disputes. The decision of the Board shall be
final, binding and conclusive upon all employees.
XIII. LEGAL PROHIBITION
Notwithstanding any provisions to the contrary, the Board
reserves the right to amend, suspend or terminate this plan
(1) if the payment of any amount under this plan shall be
contrary to any law, regulation or ruling by any governmental
agency or authority, or (2) if the company is in default of
any of its obligations to its lenders or if the payment of any
amounts under this plan would create such a default.
-4-
<PAGE> 5
1997 INCENTIVE GUIDELINES
1997 MANAGEMENT INCENTIVE PROGRAM
% OF PARTICIPANTS EARNINGS
SEGMENT 1
CORPORATE/BUSINESS SEGMENT PERFORMANCE PRETAX INCOME*
<TABLE>
<CAPTION>
GREATER THAN
PERFORMANCE PREVIOUS YEAR
ELIGIBILITY LESS THAN BUT LESS THAN MEETS INDIVIDUAL TOTAL CORP. &
CATEGORY PREVIOUS YEAR XXX XXX OR GREATER GOALS INDIVIDUAL
-------- ------------- --- -------------- ----- ----------
<S> <C> <C> <C> <C> <C>
TI 0% 10% 15% 15% 25-30%
TII 0% 7% 10% 10% 17-20%
TIII 0% 5% 7% 7% 12-14%
TIV 0% 5% 5% 5% 5-10%
* As defined in Plan Description
** Plan will pay out 75% business segment, 25% corporate performance e.g. the 10% and 15% tier I targets will be comprised of
75% business segment and 25% corporate performance.
</TABLE>
-5-
<PAGE> 6
APPENDIX B
INDIVIDUAL PERFORMANCE EVALUATION
The Vice President/General Manager will provide individual performance
evaluations for the Management Incentive Program for review and approval, with
input from the appropriate supervisor to the President and Executive Vice
President. The performance category (I-IV) will be based on an individual's
achievement of specific position requirements and agreed upon plan operational
goals for the fiscal year.
Position requirement criteria are as follows:
- Job knowledge
- Ability to plan and organize work to achieve job objectives
- Dependability and reliability
- Ability to analyze and solve work related problems
- Ability to work well and relate to subordinates, managers
and outside contacts
- Commitment to quality improvement and a consistent level of
quality work performance
PERFORMANCE AND POSITION ELIGIBILITY CATEGORY I
Employee meets specific plan operational goal and exceeds the position
requirements criteria.
PERFORMANCE AND POSITION ELIGIBILITY CATEGORY II
Employee meets specific plan operational goal and satisfactorily meets
position requirement criteria.
PERFORMANCE AND POSITION ELIGIBILITY CATEGORY III
Employee does not meet specific plan operational goal but exceeds the
position requirement criteria.
PERFORMANCE AND POSITION ELIGIBILITY CATEGORY IV
Employee meets local plan operational goal and exceeds position
requirement criteria.
-6-
<PAGE> 7
1997 GENERAL MANAGEMENT INCENTIVE PROGRAM
The positions eligible for the program are group President and higher or
selected individuals approved by the Board of Directors ("Board") of GEO
Specialty Chemicals, Inc.
<TABLE>
<CAPTION>
GREATER THAN
PERFORMANCE PREVIOUS YEAR TOTAL CORP. 75%
ELIGIBILITY LESS THAN BUT LESS THAN MEETS INDIVIDUAL & BUSINESS
CATEGORY PREVIOUS YEAR XXX XXX OR GREATER GOALS SEGMENT 25%
-------- ------------- --- -------------- ----- -----------
<S> <C> <C> <C> <C> <C>
A 0% 15% 20% 20% 35-40%
B 0% 10% 15% 15% 25-30%
C 0% 7% 10% 10% 17-20%
</TABLE>
-7-
<PAGE> 8
ELIGIBILITY MATRIX
POSITIONS
- --------------------------------------------------------------------------------
Division Plant Managers
General Business Managers
TIER 1 Operations and Planning Managers
Operating Vice President/General Managers
- --------------------------------------------------------------------------------
TIER II Large Plant Managers (Little Rock, Bastrop)
Managers (Production Managers, Technical Managers)
- -------------------------------------------------------------------------------
Small Plant Managers
Plant Superintendents
TIER III Department Heads
Human Resource Plant Manager
- --------------------------------------------------------------------------------
TIER IV Professional Engineers
Selected Supervisors
Selected Exempt Personnel
Selected Non-Exempt Personnel
- --------------------------------------------------------------------------------
-8-
<PAGE> 9
1997 INCENTIVE GUIDE LINES FOR INDIVIDUAL PERFORMANCE CATEGORY
1997 MANAGEMENT INCENTIVE PROGRAM
% OF PARTICIPANTS EARNINGS
CORPORATE PERFORMANCE/PRETAX INCOME*
<TABLE>
<CAPTION>
TIER 1
GREATER THAN
PREVIOUS YEAR
PERFORMANCE LESS THAN BUT LESS THAN MEETS INDIVIDUAL TOTAL PERFORMANCE
CATEGORY PREVIOUS YEAR XXX XXX OR GREATER GOALS & INDIVIDUAL
-------- ------------- --- -------------- ----- ------------
<S> <C> <C> <C> <C> <C>
I 0% 10% 15% 15% 25-30%
II 0% 7% 10% 10% 17-20%
III 0% 5% 7% 7% 12-14%
<CAPTION>
TIER II
GREATER THAN
PREVIOUS YEAR
PERFORMANCE LESS THAN BUT LESS THAN MEETS INDIVIDUAL TOTAL PERFORMANCE
CATEGORY PREVIOUS YEAR XXX XXX OR GREATER GOALS & INDIVIDUAL
-------- ------------- --- -------------- ----- ------------
<S> <C> <C> <C> <C> <C>
I 0% 7% 10% 10% 17-20%
II 0% 5% 7% 7% 12-14%
III 0% 3% 5% 5% 8-10%
</TABLE>
-9-
<PAGE> 1
Exhibit 12.1
<TABLE>
<CAPTION>
Predecessor
and Successor
Predecessor Combined January 1 March 25
Years Ended Year ended through through
December 31, December 31, March 24, September 30,
-------------
1995 1996 1997 1997 1997
---- ---- ------------- ------------- -----------
(Predecessor) (Successor)
<S> <C> <C> <C> <C> <C>
Net income (loss)
before taxes 209 47 2,317 (676) 3,512
Fixed charges 1,164 1,118 5,600 420 3,464
----- ----- ------------- ------------- -----------
Earnings 1,373 1,165 7,917 (256) 6,976
Fixed charges 1,164 1,118 5,600 420 3,464
Fixed charge
coverage 1.2x 1.0x 1.4x -x 2.0x
============= ============= ============= ===========
</TABLE>
<TABLE>
<CAPTION>
Predecessor
and Successor Pro Forma
Combined Historical Combined
March 25 Nine Months Nine Months Nine Months
through Ended Ended Ended
December 31, September 30, September 30, September 30,
1997 1997 1998 1998
------------ ------------- ------------- -------------
(Successor) (Successor)
<S> <C> <C> <C> <C>
Net income (loss)
before taxes 2,993 2,836 1,491 1,731
Fixed charges 5,180 3,884 5,978 9,692
------------ ------------- ------------- -------------
Earnings 8,173 6,720 7,469 11,423
Fixed charges 5,180 3,884 5,978 9,692
Fixed charge
coverage 1.6x 1.7x 1.3x 1.2x
============ ============= ============= =============
</TABLE>
For purposes of calculating the ratio of earnings to fixed shares, earnings
represents income (loss) before income taxes plus fixed charges. Fixed charges
consist of interest expense and the portion of operating rental expense which
management believes is representative of the interest component of rent expense.
<PAGE> 1
Exhibit 21.1
Subsidiaries of GEO Specialty Chemicals, Inc.
---------------------------------------------
None
<PAGE> 1
Exhibit 24.1
POWER OF ATTORNEY
Each person whose name is signed hereto has made, constituted and
appointed, and does hereby make, constitute and appoint, GEORGE P. AHEARN his
true and lawful attorney, for him and in his name, place and stead to affix, as
attorney-in-fact, his signature as a director or officer or both, as the case
may be, of GEO Specialty Chemicals, Inc., an Ohio corporation ("GEO"), to any
and all registration statements and amendments or modifications to such
registration statements to be filed with the Securities and Exchange Commission
with respect to GEO's 10 1/8% Senior Subordinated Notes due 2008 to be issued in
exchange for GEO's outstanding 10 1/8% Senior Subordinated Notes due 2008,
giving and granting unto such attorney-in-fact full power and authority to do
and perform every act and thing whatsoever necessary to be done in connection
with any such filing, as fully as he might or could do if personally present,
hereby ratifying and confirming all that such attorney-in-fact shall lawfully do
or cause to be done by virtue hereof.
In witness whereof, this Power of Attorney, which may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which shall together constitute one and the same instrument, has been signed on
November 23, 1998.
/s/ GEORGE P. AHEARN President and Chief Executive Officer;
- ----------------------
George P. Ahearn Principal Executive Officer; Director
/s/ WILLIAM P. ECKMAN Executive Vice President; Chief Financial Officer;
- ----------------------
William P. Eckman Principal Financial and Accounting Officer; Director
/s/ ANATOLE G. PENCHUK Director
- ----------------------
Anatole G. Penchuk
/s/ GEORGE W. RAPP, JR. Director
- ----------------------
George W. Rapp, Jr.
/s/ A. ELLIOTT ARCHER Director
- ----------------------
A. Elliott Archer
<PAGE> 1
EXHIBIT 25.1
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
29-2933369
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
ONE OXFORD CENTER, SUITE 1100
301 GRANT STREET, PITTSBURGH, PA 15219
(Address of principal executive offices) (Zip Code)
WILLIAM H. MCDAVID
THE CHASE MANHATTAN BANK
GENERAL COUNSEL
270 PARK AVENUE
NEW YORK, NEW YORK 10017
TEL: (212) 270-2611
(Name, address and telephone number of agent for service)
--------------------------------------------
GEO SPECIALTY CHEMICALS, INC.
(Exact name of obligor as specified in its charter)
OHIO 34-1708689
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
28601 CHAGRIN BOULEVARD, SUITE 210
CLEVELAND, OHIO 44122
(Address of principal executive offices) (Zip Code)
-----------------------------------------------------------
10 1/8/% SENIOR SUBORDINATED NOTES DUE 2008
(Title of the indenture securities)
-------------------------------------------------------------------
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION. None.
NO RESPONSES ARE INCLUDED FOR ITEMS 3-15 OF THIS FORM T-1 BECAUSE THE OBLIGOR IS
NOT IN DEFAULT AS PROVIDED UNDER ITEM 13.
ITEM 16. LIST OF EXHIBITS
List below all exhibits filed as a part of this Statement of Eligibility.
1. EXHIBIT T1A(a) A copy of the Articles of Association of the Trustee as now
in effect.
2. EXHIBIT T1A(b) A copy of the Certificate of Authority of the Trustee
(previously known as New Trust Company, National Association,) to commence
business. Also included in Exhibit TIA (b) are letters dated November 24,
1997 from the Comptroller of the Currency authorizing the exercise of
fiduciary powers by the Trustee and acknowledging the name change of the
Trustee.
3. EXHIBIT T1A(c) The Authorization of the Trustee to exercise corporate trust
powers is contained in Exhibit T1A(b).
4. EXHIBIT T1B A copy of the By-Laws of the Trustee as now in effect.
5. EXHIBIT T1C Not applicable
6. EXHIBIT T1D The Trustee's consent required by Section 321(b) of the Act.
7. EXHIBIT T1E A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising or
examining authority.
8. EXHIBIT T1F Not applicable
9. EXHIBIT T1G Not applicable
2
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Chase Manhattan Trust Company, National Association, a national banking
association organized and existing under the laws of the United States of
America , has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Cleveland and Ohio, on the 2nd day of December , 1998.
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
By /s/ Timothy J. Vara
----------------------------
Timothy J. Vara
Vice President
3
<PAGE> 4
EXHIBIT T1A(a)
[CHASE LOGO]
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
CHARTER NO. 23548
ARTICLES OF ASSOCIATION
For the purpose of organizing an Association to perform any lawful activities of
a national bank, the undersigned do enter into the following Articles of
Association:
FIRST. The title of this Association shall be Chase Manhattan Trust Company,
National Association (the "Association").
SECOND. The main office of the Association shall be in the City of Pittsburgh,
County of Allegheny, Commonwealth of Pennsylvania. The business of the
Association shall be limited to the fiduciary powers and the support of
activities incidental to the exercise of those powers. The Association will
obtain the prior written approval of the Office of the Comptroller of the
Currency before amending these Articles of Association to expand the scope of
its activities and services.
THIRD. The board of directors of this Association shall consist of not less than
five nor more than twenty-five persons, the exact number to be fixed and
determined from time to time by resolution of a majority of the full board of
directors or by resolution of a majority of the shareholders at any annual or
special meeting thereof. Each director, during the full term of his
directorship, shall own common or preferred stock of the Association or of a
holding company owning the Association, with an aggregate par, fair market or
equity value of not less than $1,000. Any vacancy in the board of directors may
be filled by action of the shareholders or a majority of the remaining
directors.
Terms of directors, including directors selected to fill vacancies, shall expire
at the next regular meeting of shareholders at which directors are elected,
unless the directors resign or are removed from office.
Despite the expiration of a director's term, the director shall continue to
serve until his or her successor is elected and qualifies or until there is a
decrease in the number of directors and his or her position is eliminated.
<PAGE> 5
FOURTH. There shall be an annual meeting of the shareholders to elect directors
and transact whatever other business may be brought before the meeting. It shall
be held at the main office or any other convenient place the board of directors
may designate, on the day of each year specified therefore in the by-laws, or if
that day falls on a legal holiday in the state in which the Association is
located, on the next following banking day. If no election is held on the day
fixed or in event of a legal holiday, on the following banking day, an election
may be held on any subsequent day within 60 days of the day fixed, to be
designated by the board of directors, or, if the directors fail to fix the day,
by shareholders representing two-thirds of the shares issued and outstanding.
Advance notice of the meeting may be duly waived by the sole shareholder in
accordance with 12 C.F.R. 7.2001.
A director may resign at any time by delivering written notice to the board of
directors, its Chairperson, or to the Association, which resignation shall be
effective when the notice is delivered unless the notice specifies a later
effective date.
A director may be removed by shareholders at a meeting called to remove him or
her, when notice of the meeting stating that the purpose or one of the purposes
is to remove him or her is provided, if there is a failure to fulfill one of the
affirmative requirements for qualification, or for cause.
FIFTH. The authorized amount of capital stock of this Association shall be five
million dollars ($5,000,000), divided into fifty thousand (50,000) shares of
common stock of the par value of one hundred dollars ($ 100) each; but said
capital stock may be increased or decreased from time to time, according to the
provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association shall
have any preemptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued, or sold, nor
any right to subscription to any thereof other than such, if any, as the board
of directors, in its discretion may from time to time determine and at such
price as the board of directors may from time to time fix.
Unless otherwise specified in the Articles of Association or required by law,
(1) all matters requiring shareholder action, including amendments to the
Articles of Association, must be approved by shareholders owning a majority
voting interest in the outstanding voting stock, and (2) each shareholder shall
be entitled to one vote per share.
The Association, at any time and from time to time, may authorize and issue debt
obligations, whether or not subordinated, without the approval of the
shareholders.
<PAGE> 6
SIXTH. The board of directors may appoint one of its members President of this
Association, and one of its members Chairperson of the board or two of its
members as Co-Chairpersons of the board, and shall have the power to appoint one
or more Vice Presidents, a Secretary who shall keep minutes of the directors'
and shareholders' meetings and be responsible for authenticating the records of
the Association, and such other officers and employees as may be required to
transact the business of this Association. A duly appointed officer may appoint
one or more officers or assistant officers if authorized by the board of
directors in accordance with the by-laws.
The board of directors shall have the power to:
(1) Define the duties of the officers, employees, and agents of the
Association.
(2) Delegate the performance of its duties, but not the responsibility for its
duties, to the officers, employees, and agents of the Association.
(3) Fix the compensation and enter into employment contracts with its officers
and employees upon reasonable terms and conditions consistent with applicable
law.
(4) Dismiss officers and employees.
(5) Require bonds from officers and employees and fix the penalty thereof.
(6) Ratify written policies authorized by the Association's management or
committees of the board.
(7) Regulate the manner in which any increase or decrease of the capital of
the Association shall be made, provided that nothing herein shall restrict the
power of shareholders to increase or decrease the capital of the Association in
accordance with law.
(8) Manage and administer the business and affairs of the Association.
(9) Adopt initial by-laws, not inconsistent with law or the Articles of
Association, for managing the business and regulating the affairs of the
Association.
(10) Amend or repeal by-laws, except to the extent that the Articles of
Association reserve this power in whole or in part to shareholders.
(11) Make contracts.
(12) Generally perform all acts that are legal for a board of directors to
perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other location permitted under applicable law, without
the approval of the shareholders, and shall have the power to establish or
change the location of any branch or branches of the Association to any other
location permitted under applicable law, without the approval of the
shareholders subject to approval by the Office of the Comptroller of the
Currency.
EIGHTH. The corporate existence of this Association shall continue until
termination according to the laws of the United States.
NINTH. These Articles of Association may be amended at any regular or special
meeting of the shareholders by the affirmative vote of the holders of a majority
of the stock of this Association, unless the vote of the holders of a greater
amount of stock is required by law, and in that case by the vote of the holders
of such greater amount. The Association's board of directors may propose one or
more amendments to the Articles of Association for submission to the
shareholders.
<PAGE> 7
EXHIBIT T1A(b)
[GRAPHIC]
Whereas, satisfactory evidence has been presented to the Comptroller of the
Currency that New Trust Company National Association located in Pittsburgh State
of Pennsylvania has complied with all provisions of the statues of the United
States required to be complied with before being authorized to commence the
business of banking as a National Banking Association;
Now, therefore, I hereby certify that the above named association is
authorized to commence the business of banking as a National Banking
Association.
In Testimony whereof, witness my signature
[SEAL] Charter No. 23548 and seal of
office this 24th days of November 1997
/s/ Deputy Comptroller of the Currency
<PAGE> 8
- -------------------------------------------------------------------------------
Comptroller of the Currency EXHIBIT T1A (b)
Administrator of National Banks
- --------------------------------------------------------------------------------
November District
11 14 Avenue of the America's Suite 3900
New York, New York 10036
November 24, 1997
Joseph R. Bielawa
Vice President and Assistant General Counsel
The Chase Manhattan Bank
270 Park Avenue, 39th Floor
New York, New York 10017
Re: Change in Corporate Title
New Trust Company, National Association (Bank)
Pittsburgh, Pennsylvania
Dear Mr. Bielawa:
The Office of the Comptroller of the Currency (OCC) has received your
submission, concerning the change and amendment to Article First of the
above-referenced Bank's Articles of Association. The OCC has amended its records
to reflect that effective November 24, 1997, the corporate title of New Trust
Company, National Association, Charter Number 23548, was changed to "Chase
Manhattan Trust Company, National Association."
You are reminded that the OCC does not approve national bank name changes nor
dies it maintain official titles or the retention of alternate titles. The use
of other titles or the retention of the rights o any previously title is the
responsibility of the Bank's board of directors. Legal counsel should be
consulted to determine whether or not the new title, or any previously used
title, could be challenged by competing institutions under the provisions of
federal state law.
A copy of the amended Article as accepted for filing is enclosed for the Bank's
records.
Very truly yours
/s/ Linda Leickel
Linda Leickel
Senior Licensing Analyst
Charter No.:23548
Control No.: 97 NE 04 010 w/97 NE 01 022
<PAGE> 9
- --------------------------------------------------------------------------------
Comptroller of the Currency EXHIBIT T1A (b)
Administrator of National Banks
- --------------------------------------------------------------------------------
November District Licensing
1114 Avenue of the America's Suite 3900 Telephone (212) 790-4055
New York, New York 10036 Fax: (212) 790-4098
November 24, 1997
Mr. Daryl J. Zupan
President and CEO
New Trust Company, National Association
c/o Mellon Bank, N.A., Corporate Trust
Two Mellon Bank Center, Suite 325
Pittsburgh, Pennsylvania 15259
Re: Charter for a National Trust Bank, New Trust Company,
National Association.
Pittsburgh, Pennsylvania
ACN 97 NE 01 0022
Dear Mr. Zupan:
The Comptroller of the Currency (OCC) has found that you have met all conditions
imposed by the OCC and completed all steps necessary to commence the business of
banking. Your charter certificate is enclosed. You are authorized to commence
business on November 24, 1997.
This letter also constitutes OCC authorization to exercise fiduciary powers.
You are reminded that several of the standard conditions contained in the
preliminary approval letter dated October 23, 1997 will continue to apply once
the bank opens and by opening, you agree to subject your association to these
conditions of operations. Some of the conditions bear reiteration here:
1. Regardless of the association's FDIC insurance status, the association is
subject to the Change in Bank Control act (12 U.S.C. 1817(j)) by virtue of
its national bank charter. Please refer to item 4 in the list of standard
conditions sent with the preliminary approval letter.
2. The board of directors is responsible for regular review and update of
policies and procedures and for assuring ongoing compliance with them.
This includes maintaining an internal control system that ensures
compliance with the currency reporting and record keeping requirements of
the Bank Secrecy Act (BSA). The board is expected to train its personnel
in BSA procedures and designate one person or a group to monitor
day-to-day compliance.
<PAGE> 10
Mr. Daryl J. Zupan
Page two
3. The bank will not engage in full commercial powers authorized to national
banks without the OCC's prior approval
Following the commencement of operations, bank management is urged to become
familiar with the requirements of the Securities Exchange Act of 1934 and Part
11 of the Comptroller's regulations relative to the registration of the bank's
equity securities and related periodic reports. These requirements will be
applicable to your bank when the number of shareholders of record is maintained
at 500 or more. Such registration may be subsequently terminated pursuant to the
Act, only when the number of shareholders of record is reduced to fewer than
300.
Should you have any questions regarding the supervision of your bank, please
contact the portfolio manager who will be responsible for OCC's ongoing
supervisory effort at your institution. You will be notified of the name and
number of the appropriate individual in the near future.
Sincerely,
/s/ Micheal G. Tiscia
Micheal G. Tiscia
Licensing Manager
Enclosure
cc: Official File
Field File
<PAGE> 11
EXHIBIT T1B
[CHASE LOGO]
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
BY-LAWS
ARTICLE I. MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the shareholders to
elect directors and transact whatever other business may properly come before
the meeting, shall be held at the main office of the Association, or such other
place as the board may designate, and at such time in each year as may be
designated by the board of directors. Unless otherwise provided by law, notice
of the meeting may be waived by the Association's sole shareholder in accordance
with 12 C.F.R. ss. 7.2001. If, for any cause, an election of directors is not
made on that date, or in the event of a legal holiday, on the next following
banking day, an election may be held on any subsequent day within 60 days of the
date fixed, to be designated by the board, or, if the directors fail to fix the
date, by shareholders representing two thirds of the shares issued and
outstanding.
SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically provided by
statute, special meetings of the shareholders may be called for any purpose at
any time by a majority of the board of directors or by any one or more
shareholders owning, in the aggregate, not less than twenty-five percent of the
stock of the Association or by the Chairperson of the board of directors or the
President. Unless otherwise provided by law, advance notice of a special meeting
may be waived by the Association's Sole Shareholder in accordance with 12 C.F.R.
ss. 7.2001.
SECTION 1.3. NOMINATIONS OF DIRECTORS. Nominations for election to the board of
directors may be made by the board of directors or by any stockholder of any
outstanding class of capital stock of the Association entitled to vote for the
election of directors. Nominations, other than those made by or on behalf of the
existing management of the Association, shall be made in writing and shall be
delivered or mailed to the President of the Association and to the Comptroller
of the Currency, Washington, D.C., not less than 14 days nor more than 50 days
prior to any meeting of shareholders called for the election of directors,
provided, however, that if less than 21 days' notice of the meeting is given to
shareholders, such nomination shall be mailed or delivered to the President of
the Association and to the Comptroller of the Currency not later than the close
of business on the seventh (7th) day following the day on which the notice of
meeting was mailed. Such notification shall contain the following information to
the extent known to the notifying shareholder.
(1) The name and address of each proposed nominee.
(2) The principal occupation of each proposed nominee.
<PAGE> 12
(3) The total number of shares of capital stock of the Association
that will be voted for each proposed nominee.
(4) The name and residence address of the notifying shareholder.
(5) The number of shares of capital stock of the Association owned
by the notifying shareholder.
Nominations not made in accordance herewith may, in his/her discretion, be
disregarded by the Chairperson of the meeting, and upon his/her instructions,
the vote tellers may disregard all votes cast for each such nominee.
SECTION 1.4. PROXIES. Shareholders may vote at any meeting of the shareholders
by proxies duly authorized in writing, but no officer or employee of this
Association shall act as proxy. Proxies shall be valid only for one meeting to
be specified therein, and any adjournments of such meeting. Proxies shall be
dated and filed with the records of the meeting. Proxies with rubber stamped
facsimile signatures may be used and unexecuted proxies may be counted upon
receipt of a confirming telegram from the shareholder. Proxies meeting above
requirements submitted at any time during a meeting shall be accepted.
SECTION 1.5 QUORUM. A majority of the outstanding capital stock, represented in
person or by proxy, shall constitute a quorum at any meeting of shareholders,
unless otherwise provided by law, or by the shareholders or directors pursuant
to Section 10.2, but less than a quorum may adjourn any meeting, from time to
time, and the meeting may be held, as adjourned, without further notice. A
majority of the votes cast shall decide every question or matter submitted to
the shareholders at any meeting, unless otherwise provided by law or by the
Articles of Association, or by the shareholders or directors pursuant to Section
10.2. Any action required or permitted to be taken by the shareholders may be
taken without a meeting by unanimous written consent of the shareholders to a
resolution authorizing the action. The resolution and the written consent shall
be filed with the minutes of the proceedings of the shareholders.
ARTICLE II. DIRECTORS
SECTION 2.1. BOARD OF DIRECTORS. The board of directors ("board") shall have the
power to manage and administer the business and affairs of the Association.
Except as expressly limited by law, all corporate powers of the Association
shall be vested in and may be exercised by the board.
SECTION 2.2. NUMBER. The board shall consist of not less than five nor more than
twenty-five persons, the exact number within such minimum and maximum limits to
be fixed and determined from time to time by resolution of a majority of the
full board or by resolution of a majority of the shareholders at any meeting
thereof; PROVIDED, HOWEVER, that a majority of the full board may not increase
the number of directors to a number which: (1) exceeds by more than two the
number of directors last elected by shareholders where such number was 15 or
less; and (2) exceeds by more than four the number of directors last elected by
shareholders where such number was 16 or more, but in no event shall the number
of directors exceed 25.
<PAGE> 13
SECTION 2.3. ORGANIZATION MEETING. The Secretary shall notify the
directors-elect of their election and of the time at which they are required to
meet at the main office of the Association to organize the new board and elect
and appoint officers of the Association for the succeeding year. Such meeting
shall be held on the day of the election or as soon thereafter as practicable,
and, in any event, within 30 days thereof. If, at the time fixed for such
meeting, there shall not be a quorum, the directors present may adjourn the
meeting, from time to time, until a quorum is obtained.
SECTION 2.4. REGULAR MEETINGS. The time and location of regular meetings of the
board shall be set by the board. Such meetings may be held without notice. Any
business may be transacted at any regular meeting. The board may adopt any
procedures for the notice and conduct of any meetings as are not prohibited by
law.
SECTION 2.5. SPECIAL MEETINGS. Special meetings of the board may be called at
the request of the Chairperson or Co-Chairperson of the board, the President, or
three or more directors. Each member of the board shall be given notice stating
the time and place, by telegram, telephone, letter or in person, of each such
special meeting at least one day prior to such meeting. Any business may be
transacted at any special meeting.
SECTION 2.6. ACTION BY THE BOARD. Except as otherwise provided by law,
corporate action to be taken by the board shall mean such action at a meeting
of the board. Any action required or permitted to be taken by the board or any
committee of the board may be taken without a meeting if all members of the
board or the committee consent in writing to a resolution authorizing the
action. The resolution and the written consents thereto shall be filed with the
minutes of the proceedings of the board or committee. Any one or more members
of the board or any committee may participate in a meeting of the board or
committee by means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at such meeting.
SECTION 2.7. WAIVER OF NOTICE. Notice of a special meeting need not be given to
any director who submits a signed waiver of notice, whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him or her.
SECTION 2.8. QUORUM AND MANNER OF ACTING. Except as otherwise required by law,
the Articles of Association or these by-laws, a majority of the directors shall
constitute a quorum for the transaction of any business at any meeting of the
board and the act of a majority of the directors present and voting at a meeting
at which a quorum is present shall be the act of the board. In the absence of a
quorum, a majority of the directors present may adjourn any meeting, from time
to time, until a quorum is present and no notice of any adjourned meeting need
be given. At any such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called.
<PAGE> 14
SECTION 2.9. VACANCIES. In the event a majority of the full board increases the
number of directors to a number which exceeds the number of directors last
elected by shareholders, as permitted by Section 2.2, directors may be appointed
to fill the resulting vacancies by vote of such majority of the full board. In
the event of a vacancy in the board for any other cause, a director may be
appointed to fill such vacancy by vote of a majority of the remaining directors
then in office.
SECTION 2.10. REMOVAL OF DIRECTORS. The vacancy created by the removal of a
director pursuant to this Section may be filled by the board in accordance with
Section 2.9 of these by-laws or by the shareholders.
ARTICLE III. COMMITTEES
SECTION 3.1. EXECUTIVE COMMITTEE. There may be an executive committee consisting
of the Chairperson or Co-Chairperson of the board and not less than two other
directors appointed by the board annually or more often. Subject to the
limitations in Section 3.4(g) of these by-laws, the executive committee shall
have the maximum authority permitted by law.
SECTION 3.2. AUDIT COMMITTEE. There may be an audit committee composed of not
less than two directors, exclusive of any active officers, appointed by the
board annually or more often, whose duty it shall be to make an examination at
least once during each calendar year and within fifteen months of the last
examination into the affairs of the Association, or cause continuous suitable
examinations to be made, by auditors responsible only to the board, and to
report the results of any such examinations in writing to the board from time to
time. Such examinations shall include audits of the fiduciary business of the
Association as may be required by law or regulation.
SECTION 3.3. OTHER COMMITTEES. The board may appoint, from time to time, other
committees of one or more persons, for such purposes and with such powers as
the board may determine.
SECTION 3.4. GENERAL. (a) Each committee shall elect a Chairperson from among
the members thereof and shall also designate a Secretary of the committee, who
shall keep a record of its proceedings.
(b) Vacancies occurring from time to time in the membership of any
committee shall be filled by the board for the unexpired term of the member
whose departure causes such vacancy. The board may designate one or more
alternate members of any committee, who may replace any absent member or members
at any meeting of such committee.
(c) Each committee shall adopt its own rules of procedure and shall
meet at such stated times as it may, by resolution, appoint. It shall also meet
whenever called together by its Chairperson or the Chairperson of the board.
(d) No notice of regular meetings of any committee need be given.
Notice of every special meeting shall be given either by mailing such notice to
each member of such committee at his or her address, as the same appears in the
records of the Association, at least two days before the day of such meeting, or
by notifying each member on or before the day of such
<PAGE> 15
meeting by telephone or by personal notice, or by leaving a written notice at
his or her residence or place of business on or before the day of such meeting.
Waiver of notice in writing of any meeting, whether prior or subsequent to such
meeting, or attendance at such meeting, shall be equivalent to notice of such
meeting. Unless otherwise indicated in the notice thereof, any and all business
may be transacted at any special meeting.
(e) All committees shall, with respect to all matters, be subject to
the authority and direction of the board and shall report to it when required.
(f) Unless otherwise required by law, the Articles of Association or
these by-laws, a quorum at any meeting of any committee shall be one-third of
the full membership and present shall be the act of the committee.
(g) No committee shall have authority to take any action which is
expressly required by law or regulation to be taken at a meeting of the board
or by a specified proportion of directors.
ARTICLE IV. OFFICERS AND EMPLOYEES
SECTION 4.1. CHAIRPERSON OF THE BOARD. The board shall appoint one of its
members to be the Chairperson of the board, or two persons to serve as
Co-Chairperson of the board to serve at its pleasure. Such person shall preside
at all meetings of the board. The Chairperson or Co-Chairpersons of the board
shall supervise the carrying out of the policies adopted or approved by the
board; shall have general executive powers, as well as the specific powers
conferred by these by-laws; and shall also have and may exercise such further
powers and duties as from time to time may be conferred upon, or assigned by the
board.
SECTION 4.2. PRESIDENT. The board may appoint one of its members to be the
President of the Association. In the absence of the Chairperson or
Co-Chairpersons, the President shall preside at any meeting of the board. The
President shall have general executive powers, and shall have and may exercise
any and all other powers and duties pertaining by law, regulation, or practice
to the office of President, or imposed by these by-laws. The President shall
also have and may exercise such further powers and duties as from time to time
may be conferred, or assigned by the board.
SECTION 4.3. VICE PRESIDENT. The board may appoint one or more Vice Presidents.
Each Vice President shall have such powers and duties as may be assigned by the
board.
SECTION 4.4. SECRETARY. The board shall appoint a Secretary, Cashier, or other
designated officer who shall be Secretary of the board and of the Association,
and shall keep accurate minutes of all meetings. The Secretary shall attend to
the giving of all notices required by these by-laws; shall be custodian of the
corporate seal, records, documents and papers of the Association; shall provide
for the keeping of proper records of all transactions of the Association; shall
have and may exercise any and all other powers and duties pertaining by law,
regulation or practice, to the office of Cashier, or imposed by these by-laws;
and shall also perform such other duties as may be assigned from time to time,
by the board.
SECTION 4.5. OTHER OFFICERS. The board may appoint one or more Assistant Vice
Presidents, one or more Trust Officers, one or more Assistant Secretaries, one
or more Assistant Cashiers, one or
<PAGE> 16
more Managers and Assistant Managers of branches and such other officers and
attorneys in fact as from time to time may appear to the board to be required
or desirable to transact the business of the Association. Such officers shall
respectively exercise such powers and perform such duties as pertain to their
several offices, or as may be conferred upon, or assigned to, them by the
board, the Chairperson or Co-Chairpersons of the board, or the President. The
board may authorize an officer to appoint one or more officers or assistant
officers.
SECTION 4.6. RESIGNATION. An officer may resign at any time by delivering
notice to the Association. A resignation is effective when the notice is given
unless the notice specifies a later effective date.
ARTICLE V. FIDUCIARY ACTIVITIES
SECTION 5.1. TRUST COMMITTEE. There shall be a Trust Committee of this
Association composed of four or more members, who shall be capable and
experienced officers or directors of the Association. The Committee is charged
with the responsibility for the investment, retention, or disposition of assets
held in accounts with respect to which the Association has investment authority;
for the review of the assets of accounts for which the Association has
investment authority promptly after the acceptance of such an account and at
least once during every calendar year thereafter to determine the advisability
of retaining or disposing of such assets; for the determination of the manner in
which proxies received for accounts for which the Association has responsibility
for the voting of proxies shall be voted; for the determination of all
substantial questions involving discretionary authority of the Association of a
non-investment nature, including, but not limited to, distribution of principal
and/or income in respect of any account; for providing advice as to the
investment, retention, or disposition of assets in investment advisory accounts
maintained by the Association; for the making of such reports as this board
shall require; and for such other responsibilities as may be assigned by this
board. The Trust Committee, in discharging its aforementioned responsibilities,
may authorize officers of the Association to exercise such powers and under such
conditions as the Committee may from time to time prescribe.
SECTION 5.2. TRUST INVESTMENTS. Funds held in a fiduciary capacity shall be
invested according to the instrument establishing the fiduciary relationship and
local law. Where such instrument does not specify the character and class of
investments to be made and does not vest in the Association a discretion in the
matter, funds held pursuant to such instrument shall be invested in investments
in which corporate fiduciaries may invest under applicable law.
SECTION 5.3. TRUST AUDIT COMMITTEE. The board shall appoint a committee of at
least two directors, exclusive of any active officer of the association, which
shall, at least once during each calendar year make suitable audits of the
association's fiduciary activities or cause suitable audits to be made by
auditors responsible only to the board, and at such time shall ascertain whether
fiduciary powers have been administered according to law, Part 9 of the
Regulations of the Comptroller of the Currency, and sound fiduciary principles.
<PAGE> 17
SECTION 5.4. FIDUCIARY FILES. There shall be maintained by the association all
fiduciary records necessary to assure that its fiduciary responsibilities have
been properly undertaken and discharged.
ARTICLE VI. STOCK AND STOCK CERTIFICATES
SECTION 6.1. TRANSFERS. Shares of stock shall be transferable on the books of
the Association, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall, in proportion to his or her shares, succeed to all rights of the prior
holder of such shares.The board may impose conditions upon the transfer of the
stock reasonably calculated to simplify the work of the Association with respect
to stock transfers, voting at shareholder meetings, and related matters and to
protect it against fraudulent transfers.
SECTION 6.2. STOCK CERTIFICATES. Certificates of stock shall bear the signature
of the Chairperson or Co-Chairpersons of the board or President (which may be
engraved, printed or impressed), and shall be signed manually or by facsimile
process by the Secretary, Assistant Secretary, Cashier, Assistant Cashier, or
any other officer appointed by the board for that purpose, to be known as an
authorized officer, and the seal of the Association shall be engraved thereon.
Each certificate shall recite on its face that the stock represented thereby is
transferable only upon the books of the Association properly endorsed. In case
any such officer who has signed or whose facsimile signature has been placed
upon such certificate shall have ceased to be such before such certificate is
issued, it may be issued by the Association with the same effect as if such
officer had not ceased to be such at the time of its issue.
The corporate seal may be a facsimile, engraved or printed.
ARTICLE VII. CORPORATE SEAL
SECTION 7.1. CORPORATE SEAL. The Chairperson, the President, the Cashier, the
Secretary or any Assistant Cashier or Assistant Secretary, or other officer
thereunto designated by the board, shall have authority to affix the corporate
seal to any document requiring such seal, and to attest the same. Such seal
shall be substantially in the following form: A circle, with the words "Chase
Manhattan Trust Company, National Association" within such circle.
ARTICLE VIII. MISCELLANEOUS PROVISIONS
SECTION 8.1. FISCAL YEAR. The fiscal year of the Association shall be the
calendar year.
SECTION 8.2. EXECUTION OF INSTRUMENTS. All agreements, indentures, mortgages,
deeds, conveyances, transfers, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, proxies and other instruments or documents may
be signed, executed, acknowledged, verified, delivered or
<PAGE> 18
accepted on behalf of the Association by the Chairperson or Co-Chairpersons of
the board, or the President, or any Vice Chairperson, or any Managing Director,
or any Vice President, or any Assistant Vice President, or the Chief Financial
Officer, or the Controller, or the Secretary, or the Cashier, or, if in
connection with exercise of fiduciary powers of the Association, by any of
those officers or by any Trust Officer. Any such instruments may also be
executed, acknowledged, verified, delivered or accepted on behalf of the
Association in such other manner and by such other officers as the board may
from time to time direct. The provisions of this Section 8.2 are supplementary
to any other provision of these by-laws.
SECTION 8.3. RECORDS. The Articles of Association, the by-laws and the
proceedings of all meetings of the shareholders, the board, and standing
committees of the board, shall be recorded in appropriate minute books provided
for that purpose. The minutes of each meeting shall be signed by the Secretary,
Cashier or other officer appointed to act as Secretary of the meeting.
SECTION 8.4. CORPORATE GOVERNANCE PROCEDURES. To the extent not inconsistent
with applicable Federal banking law, bank safety and soundness or these by-laws,
the corporate governance procedures found in the Delaware General Corporation
Law shall be followed by the Association.
ARTICLE IX. INDEMNIFICATION
SECTION 9.1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or
is threatened to be made a party to or is otherwise involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or an officer of the Association or is or was serving at the request of
the Association as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Association to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Association to provide broader indemnification rights than such law permitted
the Association to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section 9.3 of these by-laws with respect to proceedings
to enforce rights to indemnification, the Association shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the
board.
<PAGE> 19
SECTION 9.2. RIGHT TO ADVANCEMENT OF EXPENSES. The right to indemnification
conferred in Section 9.1 of these by-laws shall include the right to be paid by
the Association the expenses (including attorney's fees) incurred in defending
any such proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Association of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section 9.2 or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Sections 9.1 and 9.2 of these by-laws shall be contract
rights and such rights shall continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
SECTION 9.3. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section 9.1 or
9.2 of these by-laws is not paid in full by the Association within sixty (60)
days after a written claim has been received by the Association except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty (20) days, the indemnitee may at any time thereafter
bring suit against the Association to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
Association to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (1) any suit brought by the indemnitee to
enforce a right to indemnification hereunder (but not in a suit brought by the
indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (2) any suit brought by the Association to recover an
advancement of expenses pursuant to the terms of an undertaking, the Association
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met any applicable standard for indemnification set forth in
the Delaware General Corporation Law. Neither the failure of the Association
(including the board, the Association's independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Association (including the board, the Association's independent legal counsel,
or its shareholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Association to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article IX or otherwise shall be on the Association.
<PAGE> 20
SECTION 9.4. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and to the
advancement of expenses conferred in this Article IX shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, the Association's Articles of Association, by-laws, agreement, vote of
shareholders or disinterested directors or otherwise.
SECTION 9.5. INSURANCE. The Association may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Association or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Association would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 9.6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE ASSOCIATION. The
Association may, to the extent authorized from time to time by the board, grant
rights to indemnification and to the advancement of expenses to any employee or
agent of the Association to the fullest extent of the provisions of this Article
IX with respect to the indemnification and advancement of expenses of directors
and officers of the Association.
ARTICLE X. BY-LAWS
SECTION 10.1. INSPECTION. A copy of the by-laws, with all amendments, shall at
all times be kept in a convenient place at the main office of the Association,
and shall be open for inspection to all shareholders during banking hours.
SECTION 10.2. AMENDMENTS. The by-laws may be amended, altered or repealed, at
any regular meeting of the board by a vote of a majority of the total number of
the directors except as provided below. The Association's shareholders may amend
or repeal the by-laws even though the by-laws may be amended or repealed by its
board.
<PAGE> 21
EXHIBIT T1D
Consent for Records of Governmental Agencies
to be Made Available to the Commision
-------------------------------------
The undersigned, Chase Manhattan Trust Company, National Association,
Pittsburgh, Pennsylvania pursuant to Section 321(b) of The Trust Indenture Act
of 1939, hereby authorizes the Board of Governors of the Federal Reserve
System, the Federal Reserve Banks, the Treasury Department, the Comptroller of
the Currency and the Federal Deposit Insurance Corporation, under such
conditions as they may prescribe, to make available to the Commision such
reports, records or other information as they may have available with respect
to the undersigned as a prospective trustee under an indenture to be qualified
under the aforesaid Trustee Indenture Act of 1939 and to make through their
examiners or other employees for the use of the Commision, examinations of the
undersigned prospective Trustee.
The undersigned also, pursuant to Section 321(b) of said Trust
Indenture Act of 1939, consents that reports of examination by the Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Commission upon request therefor.
Dated this 2nd day of December , 1998.
Chase Manhattan Trust Company,
National Association
By /s/ Timothy J. Vara
-------------------------------
Timothy J. Vara
Vice President
<PAGE> 22
EXHIBIT T1D
Consent for Records of Governmental Agencies
to be Made Available to the Commision
-------------------------------------
The undersigned, Chase Manhattan Trust Company, National Association,
Pittsburgh, Pennsylvania pursuant to Section 321(b) of The Trust Indenture Act
of 1939, hereby authorizes the Board of Governors of the Federal Reserve
System, the Federal Reserve Banks, the Treasury Department, the Comptroller of
the Currency and the Federal Deposit Insurance Corporation, under such
conditions as they may prescribe, to make available to the Commision such
reports, records or other information as they may have available with respect
to the undersigned as a prospective trustee under an indenture to be qualified
under the aforesaid Trustee Indenture Act of 1939 and to make through their
examiners or other employees for the use of the Commision, examinations of the
undersigned prospective Trustee.
The undersigned also, pursuant to Section 321(b) of said Trust
Indenture Act of 1939, consents that reports of examination by the Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Commission upon request therefor.
Dated this 2nd day of December , 1998.
Chase Manhattan Trust Company,
National Association
By /s/ Timothy J. Vara
-------------------------------
Timothy J. Vara
Vice President
<PAGE> 23
EXHIBIT T1E
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
STATEMENT OF CONDITION
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
($000)
------
ASSETS
<S> <C>
Cash and Due From Banks $ 15,946
Securities Available for Sale 3,072
Premises and Fixed Assets
586
Intangible Assets 88,275
-------------
Total Assets $ 107,879
=============
LIABILITIES
Sundry Liabilities and Accrued Expenses $ 3,917
------------
Stockholder's Equity
Common Stock $ 5,000
Surplus 95,000
Retained Earnings 3,962
------------
Total Stockholder's Equity $ 103,962
-------------
Total Liabilities and Stockholder's Equity $ 107,879
============
</TABLE>
<PAGE> 1
Exhibit 99.1
LETTER OF TRANSMITTAL
TO TENDER 10 1/8% SENIOR SUBORDINATED NOTES DUE 2008
OF
GEO SPECIALTY CHEMICALS, INC.
Pursuant to the Exchange Offer and Prospectus
Dated , 1999
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
EASTERN STANDARD TIME, ON , 1999, UNLESS EXTENDED BY GEO.
The exchange agent for the Exchange Offer is:
THE CHASE MANHATTAN BANK
<TABLE>
<S> <C> <C>
By Courier: By Hand: By Registered Mail:
Chase Bank of Texas, N.A. The Chase Manhattan Bank Chase Bank of Texas, N.A.
Corporate Trust Services Corporate Trust-Securities Corporate Trust Services
1201 Main Street, 18th Floor Window P.O. Box 219052
Dallas, TX 75202 55 Water Street Dallas, TX 75221-9053
Room 234, North Building
New York, NY 10041
</TABLE>
By Facsimile: (214) 672-5932
Confirm by Telephone: (214) 672-5678 or (212) 946-3487
Originals of all documents sent by facsimile should be promptly sent to the
exchange agent by registered or certified mail, by hand, or by overnight
delivery service.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
The undersigned acknowledges that it has received the Prospectus,
dated , 1999, of GEO Specialty Chemicals, Inc., an Ohio
corporation, and this Letter of Transmittal, which together constitute GEO's
offer to exchange an aggregate principal amount of up to $120,000,000 of its
10 1/8% Senior Subordinated Notes due 2008, which have been registered under the
Securities Act of 1933, for a like principal amount of its outstanding 10 1/8%
Senior Subordinated Notes due 2008.
IF YOU DESIRE TO EXCHANGE YOUR 10 1/8% SENIOR SUBORDINATED NOTES DUE 2008
FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF 10 1/8% SENIOR SUBORDINATED NOTES DUE
2008, YOU MUST VALIDLY TENDER (AND NOT VALIDLY WITHDRAW) YOUR NOTES TO THE
EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE OF THE EXCHANGE OFFER.
YOU MUST SIGN THIS LETTER OF TRANSMITTAL WHERE INDICATED BELOW. PLEASE READ
THE INSTRUCTIONS SET FORTH BELOW CAREFULLY BEFORE COMPLETING THIS LETTER OF
TRANSMITTAL.
This Letter of Transmittal is to be completed by holders of GEO's
outstanding notes either if such notes are to be forwarded herewith or if
tenders of such notes are to be made by book-entry transfer to an account
maintained by the exchange agent at the Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the heading "The Exchange Offer -- Book-Entry Transfer."
If you are a registered holder of outstanding notes and desire to tender
your notes but (i) your notes are currently unavailable, (ii) insufficient time
exists for your notes or other required documents to reach the exchange agent
before the expiration of the Exchange Offer, or (iii) you cannot complete the
procedure for book-entry transfer on a timely basis, you must tender your notes
in accordance with the guaranteed delivery
<PAGE> 2
procedures set forth in the Prospectus under the heading "The Exchange
Offer -- Guaranteed Delivery Procedures."
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
DESCRIPTION OF NOTES TENDERED
- ------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S) AS THE SAME CERTIFICATE AGGREGATE PRINCIPAL
APPEARS ON THE 10 1/8% SENIOR SUBORDINATED NOTES DUE 2008 NUMBER(S) AMOUNT OF
(PLEASE FILL IN, IF BLANK) OF TENDERED NOTES* TENDERED NOTES**
- ------------------------------------------------------------------------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
TOTAL PRINCIPAL
AMOUNT TENDERED
- ------------------------------------------------------------------------------------------------------
* Need not be completed by noteholders delivering shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that the entire principal amount evidenced
by each note listed above and delivered to the exchange agent is being tendered hereby.
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
BOXES BELOW TO BE CHECKED BY
ELIGIBLE GUARANTOR INSTITUTIONS ONLY
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING.
Name of Tendering Institution:
-------------------------------------------------------------------------------
Account Number:
-----------------------------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------------------------------
[ ] CHECK HERE IF NOTES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING
(PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY).
Name(s) of Registered Holder(s):
---------------------------------------------------------------------------
Window Ticket Number (if any):
----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-------------------------------------------------------
Name of Institution which Guaranteed Delivery:
------------------------------------------------------------
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution:
-------------------------------------------------------------------------------
Account Number:
-----------------------------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------------------------------
[ ] CHECK HERE IF YOU TENDERED BY BOOK-ENTRY TRANSFER AND DESIRE ANY NON-
EXCHANGED NOTES TO BE RETURNED TO YOU BY CREDITING THE BOOK-ENTRY TRANSFER
FACILITY ACCOUNT NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER THAT ACQUIRED YOUR TENDERED NOTES FOR
YOUR OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES
AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
-----------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------------
<PAGE> 4
Ladies and Gentlemen:
The undersigned hereby tenders to GEO Specialty Chemicals, Inc., an Ohio
corporation, the notes listed above pursuant to GEO's offer to exchange its
10 1/8% Senior Subordinated Notes due 2008 for its outstanding 10 1/8% Senior
Subordinated Notes due 2008, in $1,000 increments, upon the terms and subject to
the conditions contained in the Prospectus, dated , 1999,
receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which together with the Prospectus constitutes the Exchange Offer).
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT (A) THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE
NOTES LISTED ABOVE AND TENDERED HEREBY, (B) WHEN THE NOTES LISTED ABOVE AND
TENDERED HEREBY ARE ACCEPTED FOR EXCHANGE, GEO WILL ACQUIRE GOOD, MARKETABLE AND
UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ANY AND ALL LIENS, RESTRICTIONS,
CHARGES AND ENCUMBRANCES, AND (C) THE NOTES LISTED ABOVE AND TENDERED HEREBY ARE
NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES.
The undersigned understands that the tender of the notes listed above
pursuant to any one of the procedures set forth in the Prospectus and in the
instructions to this Letter of Transmittal will, upon GEO's acceptance of notes
for exchange, constitute a binding agreement between the undersigned and GEO as
to the terms and conditions set forth in the Prospectus.
The undersigned hereby represents and warrants that:
X the undersigned (or the person or entity receiving notes pursuant to this
Letter of Transmittal) is acquiring the offered notes in the ordinary
course of business of the undersigned (or such other person);
X neither the undersigned nor any such person or entity is engaging in or
intends to engage in a distribution of the offered notes;
X neither the undersigned nor any such person or entity has an arrangement
or understanding with any person or entity to participate in a
distribution of the offered notes;
X neither the undersigned nor any such person or entity is an "affiliate,"
as such term is defined under Rule 405 promulgated under the Securities
Act of 1933, of GEO; and
X the undersigned is not acting on behalf of any person or entity who could
not truthfully make the foregoing representations.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of the
offered notes. If the undersigned is a broker-dealer that will receive offered
notes for its own account in exchange for outstanding notes that were acquired
as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such offered notes; however, by so acknowledging and delivering a prospectus,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act of 1933.
Unless otherwise indicated in this Letter of Transmittal under "Special
Delivery Instructions," certificates for the offered notes will be issued in the
name of the undersigned.
Holders of outstanding notes whose notes are accepted for exchange will not
receive accrued interest on such outstanding notes for any period from and after
the last date on which interest has been paid or duly provided for on such
outstanding notes to the original issue date of the offered notes or, if no such
interest has been paid or duly provided for, will not receive any accrued
interest on such outstanding notes. The undersigned waives the right to receive
any interest on such outstanding notes accrued from and after such last interest
payment date or, if no such interest has been paid or duly provided for, from
and after the original issue date of the outstanding notes.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the exchange agent or GEO to be necessary or desirable to
complete the exchange, assignment and transfer of the notes listed above and
tendered hereby and will comply with its obligations under the registration
rights agreement described in the Prospectus under the heading "The Exchange
Offer." All authority herein
<PAGE> 5
conferred or agreed to be conferred in this Letter of Transmittal shall survive
the death or incapacity of the undersigned and all obligations of the
undersigned hereunder shall be binding upon the heirs, executors,
administrators, personal representatives, trustees in bankruptcy, legal
representatives, successors and assigns of the undersigned. Except as stated in
the Prospectus, this tender is irrevocable.
THE UNDERSIGNED HAS READ AND UNDERSTANDS ALL OF THE TERMS AND CONDITIONS OF
THE EXCHANGE OFFER. THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION
OF NOTES TENDERED" ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED
TO HAVE TENDERED THE NOTES LISTED IN SUCH BOX ABOVE.
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 1)
To be completed ONLY if the offered notes are to be issued or sent to
someone other than the undersigned or to the undersigned at an address other
than that provided above under "Description of Notes Tendered."
Check appropriate box:
[ ] Mail certificates to:
[ ] Issue certificates to:
Name:
- ---------------------------------------------
(PLEASE PRINT)
Address:
- -------------------------------------------
------------------------------------------------------
------------------------------------------------------
(INCLUDING ZIP CODE)
<PAGE> 6
TENDERING NOTEHOLDERS: SIGN HERE
To be completed by all tendering noteholders. Must be signed by the
registered holder exactly as name appears on the tendered notes. If signature is
by a 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.
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
Signature(s) of Registered Holder(s) or Authorized Signature
Name(s):
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE)
Dated:
- --------------------------------------------------------------------------------
Capacity (full title):
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone No.:
- -------------------------------------------------------------------------------
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 1 BELOW)
- --------------------------------------------------------------------------------
Name of Eligible Institution Guaranteeing Signature
- --------------------------------------------------------------------------------
Address, Including Zip Code, and Telephone Number, Including Area Code, of Firm
PLACE MEDALLION GUARANTEE HERE
- ------------------------------------------------------
Authorized Signature
- ------------------------------------------------------
Printed Name
- ------------------------------------------------------
Date
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal must
be guaranteed by an "eligible guarantor institution" that is a member of or
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program, the Stock Exchange Medallion
Program, or by an "eligible guarantor institution" within the meaning of Rule
17Ad-15 promulgated under the Securities Exchange Act of 1934, unless the box
entitled "Special Delivery Instructions" has not been completed or the notes
described above are tendered for the account of an "eligible guarantor
institution."
2. DELIVERY OF LETTER OF TRANSMITTAL AND TENDERED NOTES; GUARANTEED
DELIVERY PROCEDURES. The tendered notes, together with a properly completed and
duly executed Letter of Transmittal (or a copy thereof), should be mailed or
delivered to the exchange agent at one of the addresses listed above.
Noteholders who wish to tender their notes and (i) whose notes are not
immediately available or (ii) who cannot deliver their notes, this Letter of
Transmittal and all other required documents to the exchange agent on or before
the expiration of the Exchange Offer or (iii) who cannot complete the procedures
for delivery by book-entry transfer on a timely basis, may tender their notes by
properly completing and duly executing a Notice of Guaranteed Delivery pursuant
to the guaranteed delivery procedures set forth in the Prospectus under the
heading "The Exchange Offer -- Guaranteed Delivery Procedures." Pursuant to such
procedures: (i) such tender must be made by or through an "eligible guarantor
Institution" (as defined in Instruction 1 above); (ii) a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form made
available by GEO with the Prospectus, must be received by the exchange agent
before the expiration of the Exchange Offer; and (iii) the certificates (or a
book-entry confirmation) representing all tendered notes, in proper form for
transfer, together with a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees and any
other documents required by this Letter of Transmittal, must be received by the
exchange agent within three New York Stock Exchange trading days after the date
of execution of such Notice of Guaranteed Delivery, all as provided in the
Prospectus under the heading "The Exchange Offer -- Guaranteed Delivery
Procedures."
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the exchange agent, and must include a guarantee by an
"eligible guarantor institution" (see Instruction 1 above) in the form set forth
in such Notice of Guaranteed Delivery. For outstanding notes to be properly
tendered pursuant to the guaranteed delivery procedures, the exchange agent must
receive a Notice of Guaranteed Delivery before the expiration of the Exchange
Offer.
The method of delivery of outstanding notes and the Letter of Transmittal
and all other required documents to the exchange agent is at the election and
risk of the noteholder. Instead of delivery by mail, you should use an overnight
or hand delivery service. In all cases, you should allow for sufficient time to
ensure delivery to the exchange agent before the expiration of the Exchange
Offer. You may request your broker, dealer, commercial bank, trust company or
nominee to effect these transactions for you. YOU SHOULD NOT SEND ANY TENDERED
NOTE, LETTER OF TRANSMITTAL OR OTHER REQUIRED DOCUMENT TO GEO.
3. SIGNATURE ON THE LETTER OF TRANSMITTAL, BOND POWERS AND
ENDORSEMENTS. If this Letter of Transmittal is signed by a person other than
the registered holder of the tendered notes, such notes must be endorsed or
accompanied by appropriate bond powers, signed by the registered holder exactly
as such registered holder's name appears on the tendered notes. Signatures on
such notes and bond powers must be guaranteed by an "eligible guarantor
institution."
If this Letter of Transmittal or any tendered 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 must so indicate when signing and, unless waived by GEO,
submit proper evidence satisfactory to GEO of their authority to so act with
this Letter of Transmittal.
4. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Notes Tendered" is inadequate, the certificate number(s) and/or
the principal amount of tendered notes and any other required information should
be listed on a separate signed schedule which is attached to this Letter of
Transmittal.
<PAGE> 8
5. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the exchange agent at one of its
addresses or telephone numbers listed on the front of this Letter of
Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and the Letter of Transmittal may be obtained from the exchange agent
or from your broker, dealer, commercial bank, trust company or other nominee.
6. MISCELLANEOUS. All questions as to the validity, form, eligibility,
time of receipt, acceptance, and withdrawal of tendered notes will be resolved
by GEO in its sole discretion, which determination will be final and binding on
all parties. GEO reserves the absolute right to reject any or all notes not
properly tendered or any notes the acceptance of which would, in the opinion of
counsel for GEO, be unlawful. GEO also reserves the right to waive any defects,
irregularities or conditions of tender as to particular notes tendered. GEO's
interpretation of the terms and conditions of the Exchange Offer (including the
Instructions in this Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of outstanding notes must be cured within such time as GEO shall determine. None
of GEO, the exchange agent or any other person shall be under any duty to give
notification of defects in such tenders or shall incur any liability for failure
to give such notification. Tenders of outstanding notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any outstanding notes received by the exchange agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the exchange agent to the tendering noteholder
promptly after the expiration of the Exchange Offer.
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF 10 1/8% SENIOR SUBORDINATED NOTES DUE 2008
OF
GEO SPECIALTY CHEMICALS, INC.
Pursuant to the Exchange Offer and Prospectus
Dated , 1999
(Not To Be Used For Signature Guarantees)
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
EASTERN STANDARD TIME, ON , 1999, UNLESS EXTENDED BY GEO.
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer if (i) certificates for the
10 1/8% Senior Subordinated Notes due 2008 of GEO are not immediately available,
(ii) such certificates, the Letter of Transmittal and all other required
documents cannot be delivered to the exchange agent before the expiration of the
Exchange Offer, or (iii) the procedures for delivery by book-entry transfer
cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand, overnight courier or mail, or transmitted by facsimile
transmission, to the exchange agent. In addition, in order to utilize the
guaranteed delivery procedures to tender outstanding notes pursuant to the
Exchange Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) relating to the outstanding notes must also be received by
the exchange agent prior to expiration of the Exchange Offer. See "The Exchange
Offer -- Guaranteed Delivery Procedures" in the Prospectus.
The exchange agent for the Exchange Offer is:
THE CHASE MANHATTAN BANK
<TABLE>
<CAPTION>
By Courier: By Hand: By Registered Mail:
<S> <C> <C>
Chase Bank of Texas, N.A. The Chase Manhattan Bank Chase Bank of Texas, N.A.
Corporate Trust Services Corporate Trust-Securities Window Corporate Trust Services
1201 Main Street, 18th Floor 55 Water Street P.O. Box 219052
Dallas, TX 75202 Room 234, North Building Dallas, TX 75221-9053
New York, NY 10041
</TABLE>
By Facsimile: (214) 672-5932
Confirm by Telephone: (214) 672-5678 or (212) 946-3487
Originals of all documents sent by facsimile should be promptly sent to the
exchange agent by registered or certified mail, by hand, or by overnight
delivery service.
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE 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 GUARANTOR INSTITUTION" UNDER THE INSTRUCTIONS
THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED
IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to GEO Specialty Chemicals, Inc., an Ohio
corporation, upon the terms and subject to the conditions set forth in the
Prospectus, dated , 1999, and the related Letter of
Transmittal (which together constitute the Exchange Offer), receipt of which is
hereby acknowledged, the aggregate principal amount of notes set forth below
pursuant to the guaranteed delivery procedures set forth in the Prospectus. All
authority conferred or agreed to be conferred herein shall survive the death or
incapacity of the undersigned, and every obligation of the undersigned hereunder
shall be binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, legal representatives, successors and
assigns of the undersigned.
Name(s) of Registered Holder(s):
------------------------------------------------
Aggregate Principal Amount Tendered: $
------------------------------------------
Certificate Number(s) (if available):
-------------------------------------------
Total Principal Amount Represented by Certificate(s): $
-------------------------
If notes will be tendered by book-entry transfer, provide the following
information:
DTC Account Number:
-------------------------------------------------------------
Date:
---------------------------------------------------------------------------
PLEASE SIGN HERE
X
-------------------------------------------------------------------------------
Date:
---------------------------------------------------------------------------
X
-------------------------------------------------------------------------------
Signature(s) of Owner(s) or Authorized Signatory
Date:
---------------------------------------------------------------------------
Area Code and Telephone Number:
-------------------------------------------------
Must be signed by the holder(s) of the tendered notes as their name(s)
appear(s) on certificates for such notes or on a security position listing, or
by person(s) authorized to become registered holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
set forth his or her full title below.
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
THE GUARANTEE BELOW MUST BE COMPLETED
<PAGE> 3
GUARANTEE OF DELIVERY
(Not To Be Used For Signature Guarantees)
The undersigned, a member of or participant in the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Signature Program, the
Stock Exchange Medallion Program or a firm or other entity identified in Rule
17Ad-15 under the Securities Exchange Act of 1934 as an "eligible guarantor
institution," including (as such terms are defined in Rule 17Ad-15): (i) a bank;
(ii) a broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker or government securities dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
learning agency; or (v) a savings association that is a participant in a
Securities Transfer Association recognized program, hereby guarantees to deliver
to the exchange agent, at one of the addresses set forth above, either the notes
tendered hereby in proper form for transfer or confirmation of the book-entry
transfer of such notes to the exchange agent's account at The Depositary Trust
Company, pursuant to the procedures for book-entry transfer set forth in the
Prospectus, in either case together with one or more properly completed and duly
executed Letter(s) of Transmittal (or facsimile thereof) and any other required
documents within three New York Stock Exchange trading days after the date of
execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the notes tendered hereby to the exchange agent within the time
period set forth above. Failure to do so could result in a financial loss to the
undersigned.
Name of Firm:
--------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
AUTHORIZED SIGNATURE:
-----------------------------------------------------------
Name:
---------------------------------------------------------------------------
(PLEASE PRINT)
Title:
--------------------------------------------------------------------------
Area Code and Telephone Number:
-------------------------------------------------
Dated:
- -------------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATE(S) WITH THIS NOTICE OF GUARANTEED DELIVERY.
CERTIFICATE(S) SHOULD BE SENT WITH THE LETTER OF TRANSMITTAL.
