UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1997
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to
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Commission file number 0-2085
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BetzDearborn Inc.
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(Exact name of Registrant as specified in its charter)
PENNSYLVANIA 23-1503731
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4636 Somerton Road, Trevose, Pa 19053
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(Address of principal executive offices) (Zip code)
Registrant's area code and telephone number (215) 355-3300
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which
registered:
Common Stock New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of Registrant's voting common stock (Par value
$.10) held by non-affiliates of Registrant as of February 20, 1998:
$1,858,553,462
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The number of shares outstanding of each of the Registrant's classes of
common stock as of February 20, 1998: 29,582,425
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Common Shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive proxy statement for use in
conjunction with Registrant's 1998 Annual Meeting of Shareholders are
incorporated into Part III hereof.
<PAGE>
PART 1
Item 1 - BUSINESS
General
BetzDearborn Inc. and its subsidiaries ("Registrant") are engaged in the
engineered specialty chemical treatment of water and industrial process systems
operating in a wide variety of industrial and commercial applications with
particular emphasis on the chemical, petroleum refining, paper, food processing,
automotive, steel and power industries. Registrant develops, produces and
markets a wide range of specialty chemical products, and provides the technical
expertise necessary to utilize these products effectively. Chemical treatment
programs are developed for use in boilers, cooling systems, heat exchangers,
paper and petroleum process streams and both influent and effluent systems.
Registrant monitors changing water, process and plant operating conditions so as
to prescribe the appropriate treatment programs to solve problems such as
corrosion, scale, deposit formation and a variety of process problems.
Registrant's worldwide sales of specialty chemicals and the
above-related products during 1997 amounted to $1,294.8 million, as compared to
$1,037.0 million in 1996 and $752.5 million in 1995. Estimated sales by industry
served for the years 1997, 1996 and 1995 are (dollars in millions):
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------ -------------
$ % $ % $ %
------ -- ------ -- ------ --
<S> <C> <C> <C> <C> <C> <C>
Hydrocarbon Processing $362.5 28% $300.7 29% $267.9 36%
Pulp and Paper 453.3 35 300.7 29 240.8 32
Middle Market 362.5 28 290.4 28 137.0 18
Other 116.5 9 145.2 14 106.8 14
</TABLE>
Consolidated net earnings for 1997 were $86.2 million, as compared to $64.3
million in 1996 and $68.3 million in 1995.
Registrant has twelve (12) production plants in the United States and
nineteen (19) in countries outside the United States. Operations are conducted
primarily in the United States, Canada and Europe, and also in Asia-Pacific and
Latin America. Registrant employs approximately 6,405 people worldwide.
Acquisitions
On June 28, 1996, pursuant to the Grace Dearborn Worldwide
Purchase and Sale Agreement, Registrant acquired the Dearborn business unit
("Dearborn") of W. R. Grace & Co. - Conn. ("Grace") for $632 million, subject to
certain adjustments. Dearborn was a global supplier of industrial water and
process treatment specialty chemicals with 1995 annual net revenues of $399.1
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million, approximately 75% of which were recorded by operations outside the
United States. This acquisition was financed by a $750 million Credit Agreement
("Credit Agreement") among the Registrant and a syndicate of banks. Immediately
following the acquisition, the Registrant changed its name from Betz
Laboratories, Inc. to BetzDearborn Inc.
The Dearborn acquisition combined the second and third largest global
suppliers of engineered programs and advanced specialty chemical treatments for
water, wastewater and process systems operating in a wide variety of industrial,
commercial, and institutional applications. It was accounted for using the
purchase method of accounting and is included in the consolidated statements of
operations since the date of acquisition. The Registrant adopted a November 30
fiscal year end for non-U.S. Dearborn units, except Canada, to align the fiscal
year end with the remainder of the Registrant's operations. Consequently,
Dearborn units, except the U.S. and Canada, reported five months of results of
operations in 1996. The Registrant has completely integrated the former Betz
Laboratories, Inc. ("Betz") and Dearborn, which makes it impractical to
separately report the results of Betz and Dearborn.
In November, 1997, the Registrant acquired all the outstanding common stock
of D. W. Walker & Associates, Inc., d.b.a. Argo Scientific, in exchange for
252,600 of the Registrant's Common Shares. Argo Scientific is a leading supplier
of highly specialized chemical treatments, services and technology for membrane
separation systems, which are used in the production of "pure" water from fresh
water and sea water. It has six locations in the United States and a wholly
owned limited company in the United Kingdom with sales representatives in Europe
and the Middle East. See Note 2 to Consolidated Financial Statements for
additional information.
During December, 1997, the Registrant announced that it signed a letter of
intent to acquire for cash certain assets of Index Industries, a privately held
performance additives company headquartered in Grand Rapids, Michigan. With 1997
estimated annual sales of over $7 million, Index Industries is a producer and
marketer of performance additives for a variety of fuel types serving mid-range
to very small applications throughout the U.S. and is expected to become part of
the Hydrocarbon Process Group. The transaction is anticipated to close in the
first quarter of 1998, subject to due diligence review and other approvals. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations for additional information.
Business Units
BetzDearborn Water Management Group brings to market all of the
Registrant's water and wastewater technology worldwide. This unit provides
specialty water treatment programs for boiler, cooling, influent and effluent
applications to its principal markets such as refining, chemical, paper,
electric utility, food, light industrial, commercial and institutional
establishments. BetzDearborn Water Management Group accounts for approximately
$806.3 million (62%) of Registrant's 1997 worldwide sales as compared to $661.7
million (65%) in 1996 and $466.6 million (62%) in 1995.
The Paper, Hydrocarbon and Metals Process Groups are collectively referred
to as the global business units providing process treatment programs, and
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accounted for approximately $488.5 million (38%) of Registrant's 1997 worldwide
sales compared to $375.3 million (35%) in 1996 and $285.9 million (38%) in 1995.
These global business units are responsible for program development, technology
commercialization, sales and marketing worldwide. They are supported by regional
centers in Asia-Pacific, Europe, Latin America and North America.
BetzDearborn Paper Process Group serves the global pulp and paper industry.
This unit brings to market custom engineered programs for the process-related
problems associated with paper production. Deposition, corrosion,
microbiological fouling, foam control, de-inking and felt conditioning are other
problems associated with pulp and paper production that are treated by the
BetzDearborn Paper Process Group.
BetzDearborn Hydrocarbon Process Group delivers specific programs for
process streams in the worldwide refining, petrochemical and gas production
industries. These programs are "process-side" treatments as compared to
"water-side" treatments and effectively reduce production inefficiencies in
large industrial plants. The programs are applied in many ways, including
controlling corrosion with effective inhibitors and controlling fouling in heat
exchangers through trace metal deactivation, polymer retardants, foam control,
and oxidation control.
BetzDearborn Metals Process Group serves steel, aluminum and
plastic producers, and the related transportation, machinery, appliances,
fabricated parts and coil industries. Its process-related treatment programs are
designed for cleaning, passivation, conversion coating, paint detackification
and storage of metals and metal parts. The Metals Process Group recently began
to serve European processors and fabricators in the United Kingdom, Italy,
France and Belgium as part of a global expansion that will eventually include
all of Europe.
Technical sales representatives working in each of the Registrant's global
business units assist in the development of engineered programs to meet
customers' needs. Such programs are custom designed to conserve energy, minimize
corrosion and deposits, control microbiological fouling, reduce waste
generation, improve process efficiency or any combination of the above,
depending on the customer's requirements. Technical sales representatives also
train customer operating personnel in the controlling, testing and chemical
feeding required in applying Registrant's treatment programs. Since plant
operating conditions and intake water characteristics do not remain static, the
technical sales representatives make regularly scheduled plant follow-up visits
to monitor the treatment program results and help customer operating personnel.
To ensure treatment effectiveness, Registrant's sales representatives may
draw upon technical support and application management tools such as
computerized condensate modeling programs, Action Alert(R) statistical process
control software or laptop-based Application Atlas(R) account management tools.
Worldwide, Registrant has approximately 2,550 Regional Managers, District
Managers and Technical Sales Representatives selling and servicing its chemical
technologies.
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Non-U.S. Operations
Registrant has significantly expanded its international operations as a
result of the acquisition of Dearborn. Registrant now conducts its non-U.S.
activities through subsidiaries and divisions in thirty-five (35) non-U.S.
locations including North American subsidiaries in Canada and Mexico. In Europe,
Registrant operates subsidiaries and divisions located in Austria, Belgium,
Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Poland,
Portugal, Spain, Sweden and the United Kingdom. In Latin America, Registrant has
subsidiaries and divisions located in Argentina, Brazil, Chile, Colombia,
Ecuador, Peru, Uruguay and Venezuela. In the Asia-Pacific region, Registrant
conducts activities through subsidiaries and divisions located in Australia,
Hong Kong, India, Indonesia, Korea, Malaysia, Singapore, South Africa, Taiwan
and Thailand.
As a result of the acquisition of Dearborn, the Registrant's exposure to
risk relating to impacts of foreign economies and currency fluctuations has
increased. The Registrant acknowledges the present economic uncertainty in the
Asia-Pacific region of the world and is taking a number of steps to manage the
risks present in this region. The Registrant's operations in that region
presently account for approximately six percent of consolidated net sales and
consolidated total assets. See "Management's Discussion and Analysis of Results
of Operations - 1997 vs. 1996" for a more complete discussion of this issue. The
Registrant conducts business in Latin America which is also subject to certain
levels of economic uncertainty. The Registrant's operations in Latin America
presently account for approximately eight percent of consolidated net sales and
consolidated total assets. In addition to Management's Discussion and Analysis,
see Notes 1, 2, 3 and 4 to the Consolidated Financial Statements for additional
information.
The range of products sold by Registrant to customers located outside of
the United States is substantially similar to those sold in the United States.
Products and services sold to non-U.S. markets during 1997 accounted for $583.6
million or 45.1% of Registrant's consolidated net sales, as compared to $395.9
million (38.2%) in 1996 and $196.6 million (26.1%) in 1995. Direct export sales
of $14.2 million (1.1%), $11.2 million (1.1%) and $10.8 million (1.4%) for 1997,
1996 and 1995, respectively, are not included in non-U.S. net sales. The
operating earnings of Registrant's non-U.S. subsidiaries in 1997 were $69.6
million or 5.4% of Registrant's consolidated net sales as compared to $35.3
million (3.4%) in 1996 and $31.4 million (4.2%) in 1995.
Approximately $706.9 million or 49.3% of Registrant's identifiable assets
are attributable to its U.S. operations, and $726.7 million or 50.7% are
attributable to its non-U.S. operations.
Production and Distribution
The Registrant's self-manufactured products are produced in common
production plants referred to under Item 2 ("Properties"). The particular plant
from which a customer's needs are filled is generally determined on the basis of
economy of freight. Most shipments to customers are made by common carriers and
Registrant-owned vehicles.
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The Registrant integrated the Dearborn delivery services into its own as a
result of the Dearborn acquisition. Registrant now delivers its products to its
customers worldwide under the ChemSure(TM) Drumless Delivery Services. Under the
ChemSure Drumless Delivery Services, formulated products are delivered directly
to the customer by one of four systems.
The ChemSure(TM) Bulk Delivery Service delivers Registrant's products to
customers who require delivery of products in bulk shipment.
The ChemSure(TM) Custom-Bulk Delivery Service delivers Registrant's
products to customers in custom-built vehicles owned by Registrant to tanks
owned by Registrant or the customer at the customer's site. This delivery
service reduces the storage and handling costs of Registrant's customers.
Registrant's ChemSure(TM) Semi-Bulk Delivery Service involves the delivery
of Registrant's products to customer locations in stackable, returnable,
reusable 300 and 400 gallon containers. The ChemSure(TM) Semi-Bulk Delivery
Service offers greater convenience to those of Registrant's customers whose
volume demand or other considerations make unavailable the ChemSure(TM)
Custom-Bulk Delivery Service, but who desire delivery in other than drums.
Lastly, Registrant operates the ChemSure(TM) Mini-Bulk Delivery Service to
some of its customers with smaller quantity requirements. All four of the above
distribution systems eliminate the need for the handling, storage and cleaning
of chemical drums.
As most of Registrant's chemical products are shipped to customers within
one week of the receipt of specific purchase orders, Registrant has no
significant backlog of orders.
Raw Materials
Most of the chemicals used by the Registrant as raw materials are standard
commercial products available from two or more sources. Some of these chemicals
are produced by Registrant. Registrant's inventories of raw materials vary
according to the availability of and need for such raw materials. Management
believes that the loss of any single source of supply would not have a
materially adverse effect on its business.
The Registrant cannot presently estimate the effect which energy problems,
inflation or recession and resulting economic uncertainties may have upon its
customers, upon such customers' possible future purchases of Registrant's
products, upon future prices of raw materials purchased by Registrant or upon
future selling prices of Registrant's products and services.
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Research and Development - Patents, Trademarks and Licenses
For many years the Registrant has pursued a research and development
program which has resulted in the improvement of existing products and the
development of new products. Although Registrant does not segregate such
research and development expenditures from total laboratory and engineering
costs, it estimates that expenditures for research and development during 1997
amounted to approximately $38.8 million as compared with approximately $35.7
million during 1996 and $32.2 million during 1995. All of these activities were
sponsored and paid for by the Registrant. Such activities were carried out in
1997 and 1996 by approximately 650 professional and technical employees as
compared with approximately 496 professional and technical employees in 1995.
As a result of its research efforts, Registrant has produced numerous
chemicals, chemical formulations and equipment for which it has secured letters
patent and others for which Registrant is presently seeking letters patent.
Registrant also has registered various of its trademarks. As a result of the
Dearborn Acquisition, Registrant acquired additional patents, trademarks, and
trade names having an appraised value of $82.6 million. Patents are amortized on
a straight-line basis over 13 to 15 years, and unlimited-life trademarks and
trade names are amortized over 40 years. Registrant also has certain licensing
agreements with third parties whereby Registrant has authorized others to make
use of and/or sell Registrant's products or whereby Registrant has obtained such
authorization with respect to the products of others. Revenues derived from such
licensing agreements are not material.
Under United States law each letter patent is effective for 17 years from
the date of grant. Generally, trademark registrations are valid so long as the
trademarks registered are used and renewal of the registration is timely made.
Registrant's rights under its licensing agreements expire at various times in
accordance with the respective terms of such agreements. Because of the highly
competitive nature of the specialty chemical industry and the uniqueness of
Registrant's technology in the industry, Registrant considers its rights under
its patents, trademarks, and licensing agreements to be valuable assets.
However, there is no single patent, trademark or trade name that is material to
the Company's current or future operating results.
Competition
Although the acquisition of Dearborn and other acquisitions in the industry
have reduced the number of competitors, Registrant's business remains highly
competitive. Competition is provided by companies ranging in size from large
multinational companies to small local manufacturers. Although direct
comparisons to competitors' sales and earnings in the Registrant's business are
not always possible, Registrant believes it is one of the largest worldwide
suppliers of specialty water treatment and industrial process system programs.
Registrant believes that it competes effectively with its principal
competitors both as to services and price. From time to time, Registrant
institutes price increases to cover increased costs; however, such increases do
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not affect its ability to compete effectively. Registrant believes that its 1997
experience with respect to increased costs were similar to that of its
competitors.
Environmental Legislation
Registrant believes that it is in compliance in all material respects with
all applicable Federal, state, local and foreign environmental laws and
regulations. In those instances where the Registrant has taken affirmative
action to ensure compliance with applicable laws or regulations, such actions
have had no material effect on the earnings or competitive position of
Registrant.
Federal, state, local and foreign pollution and waste control legislation
governing the disposal of industrial and hazardous wastes confer broad powers on
the administrative personnel charged with their enforcement. The interpretation
and enforcement of such laws govern the amount and manner of disposal of many of
the chemicals used by industry, including some chemical products presently sold
by Registrant and its competitors. It is possible that some of such products
will no longer be able to be used unless the industrial users install their own
waste treatment plants or otherwise provide for disposition of their wastes.
These laws also impose heavy fines against manufacturers of chemicals or
carriers of chemicals or both if, as a result of an accident, even if beyond the
control of the manufacturer or carrier, those chemicals spill into a river, lake
or other water. Such manufacturers may also be ultimately responsible for the
cost of cleaning up any such spill.
While Registrant does not anticipate that it will incur substantial costs
in complying with existing environmental legislation, Registrant is unable to
predict the effect of existing or future Federal, state or local environmental
legislation or regulation on the Registrant's U.S. or non-U.S. business. (See
Item 3 - Pending Legal Proceedings.)
Item 2 - PROPERTIES
The Registrant's principal facilities are at the following locations:
U.S. Facilities
<TABLE>
<CAPTION>
Square
Owned or Footage
Location Leased of Facility General Character
-------- -------- ----------- -----------------
<S> <C> <C> <C>
Bakersfield, California Owned 55,000 Office, Plant and Warehouse
Long Beach, California Owned 13,000 Office
Jacksonville, Florida Owned 117,000 Office and Laboratory
</TABLE>
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<TABLE>
<CAPTION>
Square
Owned or Footage
Location Leased of Facility General Character
-------- -------- ----------- -----------------
<S> <C> <C> <C>
Macon, Georgia Owned 71,000 Plant and Warehouse
Addison, Illinois Owned 118,800 Plant and Warehouse
Lake Zurich, Illinois Owned 141,000 Plant and Warehouse
Reserve, Louisiana Owned 24,000 Plant and Warehouse
New Philadelphia, Ohio Owned 108,000 Plant and Warehouse
Langhorne, Pennsylvania Owned 212,000 Plant and Warehouse
Horsham, Pennsylvania Owned 126,000 Office and Limited Production
Horsham, Pennsylvania Owned 100,000 Office
Trevose, Pennsylvania Owned 198,000 Headquarters
Owned 46,500 W.H. and L.D. Betz
Research Center
Owned 50,000 Training Center, Warehouse and
Maintenance Bldg.
Owned 81,000 J.D. Betz Engineering Laboratory and
BetzDearborn Water Management Group
Laboratory
Puerto Rico Leased 12,000 Office and Warehouse
Beaumont, Texas Owned 101,000 Plant, Warehouse and Office
Fort Worth, Texas(1) Owned 34,500 Plant and Warehouse
Garland, Texas Owned 45,000 Plant and Warehouse
Orange, Texas Owned 53,000 Plant and Warehouse
South Houston, Texas Owned 25,000 Plant and Warehouse
South Houston, Texas Owned 10,000 Sales Office
</TABLE>
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<TABLE>
<CAPTION>
Square
Owned or Footage
Location Leased of Facility General Character
-------- -------- ----------- -----------------
<S> <C> <C> <C>
The Woodlands, Texas Owned 120,000 Laboratory and Office
Washougal, Washington Owned 46,000 Plant and Warehouse
Non-U.S. Facilities
Ingleburn, New South Wales, Owned 31,900 Office, Plant, Warehouse and
Australia Laboratory
Haasrode, Belgium Owned 38,500 Office and Laboratory
Herentals, Belgium Owned 101,000 Office, Plant and Laboratory
Herentals, Belgium Owned 11,500 Office
Hoboken, Antwerp, Belgium(1) Owned 46,000 Office and Laboratory
Cotia, Brazil Owned 32,000 Office and Laboratory
Sorocaba, Brazil Owned 87,200 Plant and Warehouse
Edmonton, Alberta, Canada Owned 61,000 Plant, Warehouse and Laboratory
Mississauga, Ontario, Canada Owned 77,500 Plant, Warehouse and Laboratory
Pointe Claire, Quebec, Canada Owned 90,000 Office and Plant
Bogota, Colombia Leased 12,000 Plant, Warehouse, Office and
Laboratory
Pudahuel, Santiago, Chile Owned 25,800 Plant and Warehouse
Helsinki, Finland(1) Owned 20,000 Office and Warehouse
Crissey, France Owned 48,000 Office and Plant
Marne la Vallee, France Owned 26,000 Office and Laboratory
Heidelberg, Germany(1) Owned 69,000 Plant and Warehouse
</TABLE>
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<TABLE>
<CAPTION>
Square
Owned or Footage
Location Leased of Facility General Character
-------- -------- ----------- -----------------
<S> <C> <C> <C>
Willich, Germany Owned 15,000 Office and Laboratory
Ferentino, Italy Owned 35,700 Office, Plant and Laboratory
Qualiano, Italy Owned 25,300 Office, Plant and Laboratory
Rome, Italy Owned 18,200 Office
Iri, Korea Owned 22,700 Office, Plant and Laboratory
Singapore(2) Owned/ 26,300 Office, Plant, Warehouse and
Leased Laboratory
Wynberg, South Africa Leased 9,700 Plant and Warehouse
Castellbisbal, Spain Owned 12,600 Office and Warehouse
Helsingborg, Sweden Owned 261,000 Plant and Warehouse
Kilafors, Sweden Owned 8,600 Plant and Warehouse
Taipei, Taiwan Owned 33,200 Office, Plant, Warehouse and
Laboratory
Widnes, United Kingdom Owned 105,000 Plant and Warehouse
Valencia, Venezuela Owned 8,600 Plant and Warehouse
</TABLE>
The Registrant believes that the present production capacity of its plants
is adequate to meet its present and reasonably anticipated worldwide needs.
In addition to owned facilities, the Registrant leases numerous office
facilities throughout the world from which its local sales efforts are
conducted.
1. Location is closed and scheduled for sale in 1998. See Note
12--Integration/Restructuring in Notes to Consolidated Financial
Statements.
2. In accordance with local law and custom, Registrant owns the Singapore
facility but presently holds the land upon which the facility is situated
under a 30-year lease which expires in August, 2009. At such time as the
lease lapses without being renewed, the office, plant and warehouse would
become the property of the Singapore government. Registrant would receive
no compensation therefor.
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Item 3 - PENDING LEGAL PROCEEDINGS
There are no material pending legal proceedings other than ordinary routine
litigation incidental to the business of the Registrant to which the Registrant
or any of its subsidiaries is a party or of which any of their property is the
subject.
A. Environmental
The Registrant is a "Potentially Responsible Party" ("PRP") under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
as amended by the Superfund Amendments and Reauthorization Act ("SARA") with
respect to seven (7) sites at which alleged releases or threatened releases of
hazardous substances into the environment may have occurred. In response, the
Registrant has been voluntarily participating with other PRPs at each of these
sites to familiarize itself with site conditions, determine the nature and
extent of contamination, analyze alternatives for remediation and develop a plan
for clean-up. In each instance, the Registrant has participated in discussions
with representatives of the EPA and other PRPs to determine its potential
liability for financing necessary response actions. Although it is impossible to
determine the exact cost of response activities, present information and the
likelihood of contributions from other PRPs at each site indicates that the
Registrant's ultimate share of remediation costs at four (4) of the seven (7)
sites will be less than $100,000 of the total anticipated response cost. A
description of the other three (3) sites and the Registrant's share of
remediation costs is set forth below.
At the Operating Industries, Inc. site, Monterey Park, California (the
"Site"), the Registrant is a signatory to two Partial Consent Decrees among the
United States of America, the State of California, the California Hazardous
Substance Account and approximately four hundred (400) other parties entered in
the United States District Court for the Central District of California in 1989
and 1992, respectively. Pursuant to such Partial Consent Decrees, the parties
are performing remedial activities at the Site in response to alleged releases
and threatened releases of hazardous substances into the environment. The
Registrant, without admitting liability, agreed to an allocation of costs of
approximately $400,000 to be paid over a period of seven (7) years pursuant to
the 1989 Partial Consent Decree. Pursuant to the 1992 Partial Consent Decree,
the Registrant agreed to pay a portion of state and Federal past costs and
perform necessary remedial work, and pay for oversight of such work.
The Registrant is a third party defendant in two actions commenced in the
Federal District Court for the District of New Jersey in 1989 involving the
Helen Kramer Landfill site in Mantua Township, New Jersey. It is alleged that
the Registrant's wastes were shipped to the site from 1968 to 1971 and that two
loads of municipal solid waste were sent to the site in 1981. The EPA and New
Jersey Department of Environmental Protection claims for past and future costs
total approximately $160 million. The Registrant has tentatively agreed to a
settlement in this litigation whereby it has agreed to pay approximately
$900,000 in exchange for a release from liability at the site. The settlement is
subject to the negotiation of a mutually acceptable release.
The Registrant executed a Consent Decree in April, 1996, in a lawsuit
commenced in the Federal District Court of the Southern District of West
Virginia in April, 1994, by EPA seeking recovery of response costs incurred at
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the Artel Chemical Corporation Site in Kanawha and Putnam Counties, West
Virginia. It was alleged that the Registrant used this site for the blending of
certain anti-freeze chemicals used in the coal mining business. By signing the
Consent Decree, Registrant resolved its alleged liability by agreeing to pay a
percentage of costs associated with remediating the site. Pursuant to present
estimates, the Registrant's share will be approximately $440,000 payable over a
period of two (2) to five (5) years.
B. Product Liability
The Registrant, along with Pacific Gas and Electric ("PG&E"), is a
defendant in five lawsuits involving in the aggregate approximately four
thousand plaintiffs brought in the Superior Courts of various counties in
California (the "Lawsuits"). Plaintiffs are comprised primarily of both present
and former PG&E employees and residents living in the vicinity of the three PG&E
facilities which are the subject of the Lawsuits. In each of the Lawsuits,
plaintiffs seek unspecified money damages (including, in three of the Lawsuits,
punitive damages) for personal injuries arising from alleged exposures to
chromate-based products sold or allegedly sold by Registrant to PG&E for use in
cooling towers located at these three PG&E facilities. The sales in question
occurred or allegedly occurred at various times between 1952 and the mid-1980s,
depending upon the PG&E facility. The Lawsuits are all in various stages of
discovery. Registrant denies any legal liability to plaintiffs, believes it has
substantial defenses, and intends to contest the claims vigorously. Registrant
further believes that any claim for punitive damages is without any legitimate
basis in fact or law. The Lawsuits are captioned as follows: Acosta, et al, v.
Betz Laboratories, et al. (Los Angeles County, November, 1996); Adams, et al, v.
Betz Laboratories, et al. (Los Angeles County, October, 1994); Aguilar, et al.
v. Betz Laboratories, et al. (San Francisco County, October, 1996); Aguayo, et
al. v. Betz Laboratories et al. (Los Angeles County, March, 1995); and Riep, et
al. v. Betz Laboratories, et al. (San Francisco County, February, 1997).
The Registrant maintained insurance coverage throughout the period in
question for the purpose of securing protection against alleged product and
other liabilities, and certain of the insurance carriers have undertaken to pay
the costs of the defense of the Lawsuits subject to various reservations of
rights. The Registrant will pursue all available insurance coverage to fund any
amounts payable to plaintiffs in connection with the Lawsuits, excluding any
punitive damages to the extent not recoverable under Registrant's insurance
policies. Because the Lawsuits are in the early stages and because the outcomes
of court proceedings in litigation of this type are inherently uncertain, the
Registrant cannot reasonably predict what liabilities, if any, it may have in
connection with the Lawsuits. Although the Registrant believes that it has
substantial defenses to liability in connection with the Lawsuits, it can
provide no assurance that an unanticipated adverse final determination of the
Lawsuits would not materially affect the Registrant's results of operations or
financial condition.
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Registrant's security holders
through the solicitation of proxies or otherwise during the fourth quarter of
the fiscal year to which this report relates.
13
<PAGE>
PART II
Item 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
See Item 8 - Note 13 to the Consolidated Financial Statements.
Item 6 - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(In millions, except per share amounts) 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales $1,294.8 $1,037.0 $752.5 $708.3 $684.9
Net Earnings Before Cumulative Effect of
Accounting Change 92.2 64.3 68.3 73.2 63.4
Net Earnings 86.2 64.3 68.3 73.2 65.5
Earnings per Common Share:
Basic
Before Cumulative Effect of Accounting
Change 3.02 2.13 2.30 2.47 2.08
Net Earnings 2.81 2.13 2.30 2.47 2.15
Diluted
Before Cumulative Effect of Accounting
Change 2.80 2.01 2.16 2.30 1.94
Net Earnings 2.61 2.01 2.16 2.30 2.01
Cash Dividends Declared per Common Share 1.51 1.49 1.47 1.43 1.39
Total Assets 1,433.6 1,418.3 630.5 555.5 521.1
Long-term Debt 679.5 745.5 96.5 97.5 98.0
</TABLE>
Notes: On June 28, 1996 the Company acquired Dearborn -- see Note 2 to
Consolidated Financial Statements.
1997 includes the cumulative effect of accounting change relating to
business process reengineering amounting to basic and diluted earnings
per share of ($.21) and ($.19), respectively. All earnings per share
and average number of Common Shares figures prior to 1997 have been
restated to comply with Statement of Financial Accounting Standards
No. 128, "Earnings per Share." 1993 includes the cumulative effect of
accounting changes relating to income taxes, retiree health benefits
and pensions amounting to basic and diluted earnings per share of
$.07.
14
<PAGE>
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ACQUISITION OF DEARBORN
On June 28, 1996, pursuant to the Grace Dearborn Worldwide Purchase and
Sale Agreement, the Company acquired the Dearborn business unit ("Dearborn") of
W.R. Grace & Co. - Conn. ("Grace") for $632 million, subject to certain
adjustments. Dearborn was a global supplier of industrial water and process
treatment specialty chemicals with 1995 annual net revenues of $399.1 million,
approximately 75% of which were recorded by operations outside the United
States. This acquisition was financed by a $750 million Credit Agreement
("Credit Agreement") among the Company and a syndicate of banks. Immediately
following the acquisition, the Company changed its name from Betz Laboratories,
Inc. to BetzDearborn Inc.
The Dearborn acquisition combined the second and third largest global
suppliers of engineered programs and advanced specialty chemical treatments for
water, wastewater and process systems operating in a wide variety of industrial,
commercial, and institutional applications. It was accounted for using the
purchase method of accounting and is included in the consolidated statements of
operations since the date of acquisition. The Company adopted a November 30
fiscal year end for non-U.S. Dearborn units, except Canada, to align the fiscal
year end with the remainder of the Company's operations. Consequently, Dearborn
units, except the U.S. and Canada, reported five months of results of operations
in 1996. The Company has completely integrated the former Betz Laboratories,
Inc. ("Betz") and Dearborn, which makes it impractical to separately report the
results of Betz and Dearborn.
To achieve reductions in operating costs and to integrate the
operations of Betz and Dearborn, the Company has incurred incremental and
non-recurring expenses that are reported as Integration/Restructuring operating
expenses. Integration expenses are incremental and non-recurring costs necessary
to integrate the two businesses. Integration expenses in 1997 were $16.6
million, compared to $20.4 million in 1996, and are associated with the
activities of integration teams responsible for merging the two companies for
the benefit of future operations and include items such as consulting and legal
fees, integration incentive bonuses, training, travel and Betz employee
relocation expenses. These costs are expensed as incurred and all integration
activities were completed in 1997.
A $13.1 million pretax provision for restructuring is also included in this
caption for 1996 relating to expected exit costs associated with the decisions
to close Betz facilities and the severance of Betz employees. The Company also
recorded a $26.0 million pretax restructuring provision in 1996 and an
additional $12.8 million in 1997 for the closure of Dearborn facilities and
severance costs for Dearborn employees located throughout the world. The
Dearborn restructuring provisions increase the purchase price of the acquisition
and, as such, are not included in results of operations.
15
<PAGE>
These restructuring actions were substantially completed during 1997,
except for the closure of the Lake Zurich plant, and include personnel
reductions, office consolidations and asset dispositions, including the shutdown
of blending plants in Winsford, United Kingdom; Lake Zurich, Illinois; Fort
Worth, Texas; Fort Saskatchewan, Canada; and Heidelberg, Germany, and the
shutdown of administrative and research facilities in Lake Zurich, Illinois;
Kanata, Canada; and Hoboken, Belgium, along with approximately 15 laboratories
and 58 sales offices located throughout the world. The combined provision
included $34 million for employee termination benefits covering approximately
550 technical, production, administrative and support employees worldwide. The
remainder of the provision was primarily related to facility closures and
relocation of Dearborn employees. The actions, when combined with other
purchasing and production synergies, are expected to yield in excess of $55
million in annual savings, which are expected to be fully realized in 1998. The
restructuring liabilities are primarily cash obligations which will be funded
principally by operating cash flows. No significant components of these
provisions would have been recognized in the absence of these actions.
In accordance with the purchase method of accounting, the adjusted purchase
price was allocated to the estimated fair value of net assets acquired, with the
excess recorded as goodwill. Of the purchase price, $82.6 million was allocated
to identifiable intangibles representing the independently appraised value of
the trademarks, trade names and patents of Dearborn. The Company completed the
Dearborn acquisition purchase price allocation during 1997 and made final
adjustments to goodwill recorded as a result of the acquisition. Such
adjustments amounted to $20.4 million and were principally related to final
adjustments to restructuring liabilities, fixed asset writedowns and deferred
tax adjustments. Goodwill of $440.7 million was recorded, which is amortized on
a straight-line basis over 40 years. Intangible amortization expense of $14.6
million and $6.7 million is included in the 1997 and 1996 results of operations,
respectively.
The Company estimates that it will incur annual interest expense of $40
million to $45 million as a result of the Dearborn acquisition financing. In
1997 and 1996, approximately $41 million and $24 million, respectively, of
Dearborn acquisition-related interest expense is included in the results of
operations.
The Dearborn acquisition has increased the Company's exposure to foreign
currency fluctuations. With the increase in significance of foreign operations,
reported U.S. dollar sales and income will be subjected to more unpredictable
fluctuation from exchange rate movements. The following discussion and Note 1 to
the consolidated financial statements disclose the impact of translation on the
consolidated financial statements. Note 4 to the consolidated financial
statements sets forth the Company's geographic information.
RESULTS OF OPERATIONS -- 1997 vs. 1996
The acquisition of Dearborn significantly impacts the comparability of
results for 1997 to 1996 since only six months of Dearborn North America
16
<PAGE>
operations and five months of Dearborn non-North America operations were
included in 1996. The subsequent integration of this business makes it
impracticable to segregate the 1997 Dearborn results from the remainder of the
Company's operations. Consequently, only pro forma sales comparisons, adding the
first six months of 1996 Dearborn North America sales and the first seven months
of their non-North America sales (as provided by Grace) to the sales reported
for 1996 can be discussed. The Company's presentation and discussion of local
currency growth rates is meant to augment this discussion by providing the
economic implications of currency rate changes and to compare results with those
of prior periods. The remainder of the discussion will primarily focus on
results of operations as a percentage of sales.
Net earnings and diluted earnings per share before the cumulative effect of
accounting change, excluding integration/restructuring expenses, for 1997 were
$102.2 million and $3.11, respectively, compared to $84.4 million and $2.66 in
1996. Including integration/restructuring costs and the cumulative effect of an
accounting change, net earnings and diluted earnings per share were $86.2
million and $2.61, respectively, compared to $64.3 million and $2.01 in 1996.
Net sales increased 25% from $1,037.0 million in 1996 to a record $1,294.8
million in 1997. Sales in the U.S. increased 11% accompanied by a 47% increase
in non-U.S. sales over the prior year. On a pro forma basis, consolidated annual
sales increased approximately 3% in U.S. dollars and 6% in local currencies.
Current year U.S. sales increased approximately 2% over the prior year's pro
forma level, while pro forma sales outside the U.S. increased 4% in U.S.
dollars, but approximately 10% in local currencies. The relative strength of the
U.S. dollar in 1997 versus 1996 caused an estimated $38 million reduction of
sales recorded outside the U.S.
Worldwide sales recorded by the Water Management Group, the largest global
business unit, comprising 62% of consolidated sales, increased 2% on a pro forma
basis in local currencies and remained flat when translated into U.S. dollars.
In the U.S., 1997 sales declined in the low single-digit percentage range when
compared to last year on a pro forma basis. The U.S. heavy industrial sector,
including water treatment for the refining and petrochemical industries,
comprises a large portion of the U.S. Water Management Group sales and is
considered to be a mature market. Local currency percentage increases outside
the U.S., however, are in the middle single-digit range with highest growth in
the Asia-Pacific and Latin America regions.
The combined process chemical global business units, which comprise the
remaining 38% of consolidated sales, increased local currency 1997 sales by
approximately 13% and approximately 9% in U.S. dollars, on a pro forma basis.
The U.S. reported a percentage increase in the low double-digit percentage range
and non-U.S. units rose in the middle teen range. All global process chemical
units reported increased local currency sales on a pro forma basis.
The Paper Process Group, the largest of the three process chemical
groups, increased its local currency global sales in the middle teen percentage
range, on a pro forma basis. The U.S., Asia-Pacific and European regions all
reported strong double-digit growth on a local currency pro forma basis. The
17
<PAGE>
U.S. Paper Process Group entered into several large contracts early in 1997
which contributed to its sales growth. The European region sales growth is
mainly attributable to improved growth rates in the European paper industry.
Despite having a large percentage of its sales in the mature U.S. refining
industry, the global Hydrocarbon Process Group posted an upper single-digit
local currency sales increase for the year. This group recorded double-digit
local currency percentage sales growth in all regions outside of the U.S. The
Metals Process Group recorded a local currency percentage increase in the low
double-digit range. Almost all of the 1997 metal process sales are in the U.S.,
but the Company also began marketing of the Metals Process Group treatment
programs in selected geographic regions outside the U.S.
The percentage of sales recorded outside the U.S. increased from 39.3% in
1996 to 46.2% in 1997. This increase in the proportion of business outside the
U.S. increases the Company's exposure to currency fluctuations in the process of
translating local currency results of operations to U.S. dollars. As previously
mentioned, the strengthening of the U.S. dollar versus foreign currencies in
1997 caused a reduction of reported sales. The estimated reduction was
approximately $38 million, with the European region accounting for approximately
$27.5 million and Asia-Pacific causing approximately $4.4 million.
The Company's operations in the Asia-Pacific region account for
approximately six percent of 1997 consolidated net sales and consolidated total
assets. Over the past two years, this region has been one of the fastest growing
areas within the Company. It is possible that economic conditions in
Asia-Pacific could adversely affect the Company's regional sales. Also,
profitability in the region could be adversely affected by a number of factors,
including an increase in raw material costs for those materials imported into
the region unaccompanied by a corresponding increase in selling prices. The
Company is taking a number of steps to try to manage the risks present in this
region which include reducing working capital levels and intercompany balances,
pursuing selling price increases and sourcing more raw materials from within the
region. The outcome of these efforts is uncertain at the present time and the
Company will continue to monitor this situation. While the economic uncertainty
in the region poses risks, the Company does not anticipate a material impact on
its consolidated results of operations or financial condition as a result of
this uncertainty. Asia-Pacific has been a profitable region for the Company and,
despite the current turmoil, the Company believes this region continues to offer
strategic long-term growth opportunities.
The Company recognizes that the Asia-Pacific economic turmoil has the
potential to negatively impact other regions of the world economy. The Company
is unable to predict the potential impact of this on the Company's consolidated
results of operations or financial condition.
The Company's gross profit margin decreased from 60.5% of net sales in 1996
to 59.9% in 1997. This deterioration is primarily due to the increased
proportion of sales from former Dearborn accounts included in the current year.
Dearborn historically generated gross profit margins at a rate lower than the
18
<PAGE>
Betz historical margin. The Company's post-acquisition gross margin percentage,
however, has been stable in the 60% range, with 5 consecutive quarters within
this range (starting in the fourth quarter of 1996).
Selling, research and administrative expenses, as a percent of net sales,
decreased from 45.5% in 1996 to the current year's level of 44.0%. These
percentages, excluding intangible amortization, were 44.8% in 1996 and 42.9% in
1997. The decline was primarily due to savings achieved from the Company's 1995
and 1996 restructuring and integration activities targeted at reducing operating
expenses as a percentage of sales and integrating the Dearborn operations.
Investment and other income declined $1.2 million from 1996 primarily due
to foreign exchange losses. In addition, a full year of interest expense on the
Dearborn acquisition financing was the primary cause of the $19.8 million
increase in interest expense from 1996.
The Company is engaged in a major project that combines business process
reengineering activities and information technology transformation. The Emerging
Issues Task Force of the Financial Accounting Standards Board ("EITF") reached a
consensus on November 20, 1997 that the cost of business process reengineering
activities is to be expensed as incurred. In accordance with the EITF consensus,
the Company recorded, as a cumulative effect type adjustment, a pretax charge of
$9.3 million representing the capitalized business process reengineering costs
at September 30, 1997, of which approximately $4.1 million was capitalized prior
to 1997. Prospectively, all costs associated with business process reengineering
activities will be expensed as incurred.
The systems implemented as a result of the information technology
transformation represent the Company's core business systems and are expected to
be year 2000 capable. The Year 2000 issue is the result of many computer
programs using only two digits to identify a year in the date field. These
programs were designed and developed without making provision for the impact of
the upcoming change in the century. If not corrected, many computer applications
could fail or create erroneous results by or at the year 2000.
The Company has initiated a global, enterprise-wide Year 2000 program to
identify and address the Year 2000 issue throughout its businesses. A Year 2000
program function has been created by the Company to coordinate and provide
policies, guidance and support on its Year 2000 initiatives. As part of its Year
2000 program, the Company is instituting procedures intended to reasonably
ensure that new systems implemented by the Company and current systems material
to the Company will be year 2000 capable. In addition to evaluating the
Company's computer-related systems, the Company will be assessing how it could
be affected by the impact of the Year 2000 issue on its major customers, product
suppliers and other vendors and on its chemical feeding equipment installed at
customer locations. The anticipated timetables for addressing various aspects of
the Year 2000 initiative are being developed.
19
<PAGE>
Until the internal assessment is completed, the Company will not be able to
estimate the impact of the Year 2000 issue on future operating results or
financial condition. Even without regard to the Company's state of preparedness,
additional uncertainty will undoubtedly remain relative to the status of
preparedness of those with whom the Company interacts and the external
environment in general, due to the complexity of various systems and the lack of
predictability of their respective interactions and capabilities.
Costs incurred to address the Year 2000 issue are charged to operating
expenses as incurred and are expected to be funded by available cash balances
and cash provided by operations. Expenses amounting to approximately $0.5
million are included in the 1997 results of operations.
In November 1997, the Company acquired all the outstanding common stock
of D.W. Walker & Associates, Inc., d.b.a. Argo Scientific ("Argo"), in exchange
for 252,600 of the Company's common shares. Argo is a leading supplier of highly
specialized chemical treatments, services and technology for membrane separation
systems, which are being used increasingly in the production of "pure" water
from fresh water and sea water. Argo has six locations in the United States and
a wholly owned limited company in the United Kingdom with sales representatives
in Europe and the Middle East. The Argo acquisition is being accounted for using
the purchase method of accounting. Goodwill of $15.7 million will be amortized
on a straight-line basis over 40 years. The Argo results of operations are
included with the Company's Water Management Group effective November 1997. This
acquisition did not have a material impact on the Company's 1997 results of
operations nor its capital resources and liquidity.
During December 1997, the Company announced that it signed a letter of
intent to acquire for cash certain assets of Index Industries, a privately held
performance additives company. Index Industries is a producer and marketer of
performance additives for a variety of fuel types serving mid-range to very
small applications throughout the U.S. and is expected to become part of the
Hydrocarbon Process Group. The acquisition is anticipated to close in the first
quarter of 1998, subject to due diligence review. This acquisition is not
expected to have a material impact on the Company's 1998 results of operations
nor its capital resources and liquidity.
RESULTS OF OPERATIONS -- 1996 vs. 1995
Net sales increased 38% from $752.5 million in 1995 to $1,037.0 million in
1996. Sales in the U.S. increased 16% accompanied by a 96% increase in non-U.S.
sales over the prior year. Net earnings and diluted earnings per share,
excluding integration/restructuring expenses, for 1996 were $84.4 million and
$2.66, respectively, compared to $77.9 million and $2.48 in 1995. Including
integration/restructuring costs, net earnings and diluted earnings per share
were $64.3 million and $2.01, respectively, compared to $68.3 million and $2.16
in 1995.
The 38% increase in sales over the 1995 level was mainly due to an
estimated 29% growth as a result of acquisitions. It also included an estimated
7% increase in volume-mix, a 1% rise in selling prices and a 1% increase due to
20
<PAGE>
the inclusion of certain freight revenues in 1996. Beginning in 1996, the
Company revised its practice of accounting for freight to standardize its
practices worldwide. The result increases both net sales and cost of products
sold, with no effect on operating earnings. The year-over-year increase,
excluding the Dearborn acquisition, for the total U.S. operations was
approximately 6%, and for total non-U.S. operations was approximately 29% in
U.S. dollars and 32% in local currencies.
Net sales recorded by the Water Management Group global business unit,
exclusive of the approximate impact of the Misan and Dearborn acquisitions,
increased 7% over the prior year. In the U.S., this group increased sales over
1995 in the middle single-digit percentage range, with increased sales in all
key customer industries. Outside the U.S., the Water Management Group recorded a
middle teens percentage improvement over 1995 sales with the Asia-Pacific and
Latin American regions recording the largest increases.
The combined process chemical global business units, exclusive of
acquisitions, increased net sales by approximately 13%, with the U.S. reporting
a percentage increase in the upper single-digit range and non-U.S. units rising
over 20%. All global process chemical units reported increased sales. The Paper
Process Group increased its sales of Novus(R) polymers by 43% and has
experienced a successful new product introduction of its low toxicity
Slime-Trol(R) RX-10R biocide. The Hydrocarbon Process Group sales growth was
primarily due to new technology developments and rapid capacity expansion in the
petroleum refining industry outside North America, while U.S. capacity
reductions stabilized during the year. The Metals Process Group, the smallest of
the process chemical groups, achieved its third consecutive year of double-digit
percentage growth.
The Company's gross profit margin decreased from 63.6% of net sales in 1995
to 60.5% in 1996. This deterioration in the gross profit margin was primarily
due to changes in product mix (mostly those related to acquisitions),
standardization of the method of accounting for freight revenue and increases in
raw material and delivery costs, without comparable increases in selling prices.
Sales included in the 1996 Statement of Operations that are attributable to the
Misan and Dearborn acquisitions generate gross profit margins at rates lower
than the Company's historical margin.
Selling, research and administrative expenses, as a percent of net sales,
decreased from 46.9% in 1995 to the 1996 level of 45.5%. During the second
quarter of 1996, in preparation for the integration of Dearborn, the Company
revised the vesting policy for certain employee benefits to align Betz and
Dearborn policies, resulting in a reduction of operating expenses. Without this,
1996 selling, research and administrative expenses would have been 46.0% of net
sales. The remainder of the decline was primarily due to savings achieved from
the Company's 1995 and 1996 restructuring actions, as well as ongoing cost
controls.
The $15.6 million provision for restructuring recorded in 1995 was for a
series of actions to reduce operating costs. The provision included $7.8 million
for the writedown associated with the closure of two blending plants and other
asset dispositions. The $7.8 million remaining provision was primarily for
21
<PAGE>
employee termination benefits covering approximately 150 technical, production,
administrative and support employees located primarily in the U.S. As a result
of the completion of these restructuring actions, $3.5 million of the 1995
provision was reversed in 1996. The lower than anticipated costs resulted from
fewer terminations and higher attrition than planned, along with lower than
planned losses on the closure of the Compton, California plant. The completion
of the 1995 plan resulted in revised estimated annualized savings of
approximately $8 million.
Investment and other income declined $3.0 million from 1995 primarily due
to foreign exchange losses, principally in Venezuela. In addition, the Dearborn
acquisition financing caused the significant increase in interest expense during
1996.
The effective income tax rate decreased from 38.8% in 1995 to 35.5% in
1996, reflecting the benefits from tax planning initiatives.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's 1997 funds provided by operations declined from the 1996
amount by $28.8 million mainly due to a $59.8 million increase in accounts
receivable. Accounts receivable, exclusive of acquisitions, have increased in
each year for the past three years to support the increases in sales, especially
in the non-U.S. business, and due to the conversion of a larger proportion of
customer accounts to a contract basis, which increases the accounts receivable
days sales outstanding. The increase in 1997 was also impacted by non-recurring
systems conversion issues which caused a backlog in the collection process. The
conversion issues have been rectified and the Company is taking actions to
reduce its accounts receivable days outstanding and overall levels of working
capital. The Company believes that its allowance for doubtful accounts at year
end is sufficient to cover any potential losses on trade receivables. Cash
payments in 1997 of $23.5 million on restructuring liabilities also contributed
to the reduction in funds provided by operations.
Cash proceeds amounting to $42.3 million from the issuance of common shares
under the employee stock plans combined with $9.6 million from asset sales,
mainly resulting from assets sold as a result of restructuring actions, helped
to offset the reductions in funds from operations.
Capital expenditures for the year 1997 were $78.0 million, which is a $13.1
million increase over 1996. Major projects in 1997 included expenditures for the
installation of SAP financial systems and the expansion of the Company's
production facility in Beaumont, Texas to increase the manufacturing capacity
for the Novus(R) polymer line and expansions at other plants outside the U.S.
The Company anticipates that capital expenditures for 1998 will approximate $110
million to $120 million.
The Dearborn acquisition and related financing also increased the Company's
exposure to interest rate fluctuations and to foreign currency movements.
Approximately one-half of the Company's assets are outside the U.S. The stronger
U.S. dollar relative to most currencies is the primary cause for declines in
22
<PAGE>
non-U.S. assets such as property, plant and equipment and goodwill, with the
offsetting impact included in the foreign currency translation adjustments
section of shareholders' equity.
The Company executes, as it considers necessary and feasible, financial
instruments to reduce these risks, including foreign exchange forward contracts
and interest rate swaps. Forward contracts are primarily accounted for on a
mark-to-market basis. Gains or losses which, in the aggregate, are not material
are included with investment and other income on the Consolidated Statements of
Operations. Since the Credit Agreement bears interest at short-term variable
rates, the Company executed a series of variable to fixed interest rate swaps,
with staggered maturities, at a maximum notional amount of $400 million for any
future period. The Company is also considering refinancing a portion of its
variable-rate debt to fixed-rate debt, at which time it may terminate a
proportionate amount of swap agreements.
The Company is a "Potentially Responsible Party" to seven waste disposal
sites under the Comprehensive Environmental Response, Compensation and Liability
Act as amended by the Superfund Amendments and Reauthorization Act of 1986.
Adequate provision has been made in the financial statements for the Company's
portion of the anticipated remediation costs of these sites. While it is not
possible to precisely predict future costs in these matters, the Company does
not believe that any further assessments for these sites would have a materially
adverse impact upon its financial condition or results of operations.
The Company refinanced its Revolving Credit Agreement on October 20,
1997 by executing a new $750 million Credit Agreement with a syndicate of banks.
This agreement expires in 5 years and contains fewer restrictive covenants than
the previous agreement. The new agreement is at variable interest rates, but
with a 30 basis points lower margin over LIBOR than the old agreement. This
agreement requires the Company to meet certain net worth and indebtedness tests.
The Company anticipates that present cash and cash equivalents, cash
provided from operating activities and the $168.1 million of borrowings
available under the Credit Agreement will be sufficient to fund its 1998
operating, capital expenditure, dividend and debt service cash requirements.
IMPACT OF PENDING ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income," and Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information," both of which are required
to be adopted for fiscal years beginning after December 15, 1997. Statement 130
will require the Company to report in its financial statements all non-owner
related changes in equity for the periods being reported. Statement 131 will
require the Company to disclose revenues and other financial information
pertaining to the business segments by which the Company is managed, as well as
the factors management used to determine these segments. The Company is
currently evaluating the requirements of Statements 130 and 131 to determine how
to present the required information in its financial statements.
23
<PAGE>
IMPACT OF INFLATION AND CHANGING PRICES
The Company attempts to counter the impact of rising costs through timely
adjustments of product pricing whenever possible. The Company believes that its
use of the LIFO cost method and higher depreciation charges associated with its
newer, more costly and improved facilities mitigates the impact of inflation on
its reported earnings.
FORWARD-LOOKING INFORMATION
Statements contained in this report, including statements relating to the
Company's expectations for anticipated growth in the future, are
"forward-looking statements," as such term is defined in the Private Securities
Litigation Act of 1995. Actual results could differ materially from the
Company's statements in this report regarding its anticipated performance due to
various factors such as foreign currency fluctuations and the impact on
profitability from economic and market conditions, especially as it exists in
the Asia-Pacific region, costs of disruptions associated with the implementation
of business process reengineering and information technology transformation
projects, and Year 2000 issues. In addition to the forward-looking statements,
the reader is cautioned that pro forma sales comparisons and estimated savings
from restructuring actions are based on the Company's best estimates.
24
<PAGE>
Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
BetzDearborn Inc.
We have audited the accompanying consolidated balance sheets of BetzDearborn
Inc. as of December 31, 1997 and 1996, and the related consolidated statements
of operations, common shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1997. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of BetzDearborn Inc.
at December 31, 1997 and 1996, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, at October 1,
1997 the Company changed its method of accounting for certain business process
reengineering costs.
Philadelphia, Pennsylvania
February 2, 1998
25
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
BetzDearborn Inc.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Year Ended December 31
---------------------------------------
(in millions, except per share amounts) 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $1,294.8 $1,037.0 $ 752.5
Operating Costs and Expenses:
Cost of products sold 518.7 409.3 273.7
Selling, research and administration 570.6 472.0 353.2
Integration/restructuring 15.6 30.0 15.6
-------- -------- -------
1,104.9 911.3 642.5
-------- -------- -------
OPERATING EARNINGS 189.9 125.7 110.0
Other Income (Expense):
Interest (45.5) (25.7) (1.1)
Investment and other income, net (1.5) (0.3) 2.7
-------- -------- -------
(47.0) (26.0) 1.6
-------- -------- -------
EARNINGS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 142.9 99.7 111.6
Income Taxes 50.7 35.4 43.3
-------- -------- -------
EARNINGS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 92.2 64.3 68.3
Cumulative effect of change in accounting for
business process reengineering, net of
$3.3 income taxes (6.0) -- --
-------- -------- -------
NET EARNINGS $ 86.2 $ 64.3 $ 68.3
======== ======== =======
Basic Earnings per Common Share:
Before cumulative effect of accounting change $ 3.02 $ 2.13 $ 2.30
Accounting change (.21) -- --
-------- -------- -------
Basic earnings per Common Share $ 2.81 $ 2.13 $ 2.30
======== ======== =======
Diluted Earnings per Common Share:
Before cumulative effect of accounting change $ 2.80 $ 2.01 $ 2.16
Accounting change (.19) -- --
-------- -------- -------
Diluted earnings per Common Share $ 2.61 $ 2.01 $ 2.16
======== ======== =======
Average Number of Common Shares:
(in thousands)
Basic 28,734 27,651 27,574
======== ======== =======
Diluted 31,992 30,736 30,592
======== ======== =======
</TABLE>
1996 and 1995 earnings per share and average number of common shares have been
restated to comply with Statement of Financial Accounting Standards No. 128,
"Earnings per Share."
See notes to consolidated financial statements.
26
<PAGE>
CONSOLIDATED BALANCE SHEETS
BetzDearborn Inc.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
December 31
------------------------
(in millions, except share amounts) 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 36.9 $ 38.2
Trade accounts receivable, less allowances:
1997 - $7.2; 1996 - $7.6 293.0 243.2
Inventories:
Finished products and goods purchased for resale 49.2 54.5
Raw materials 45.1 42.2
-------- --------
94.3 96.7
Income taxes 19.6 31.1
Prepaid expenses and other 36.2 29.5
-------- --------
TOTAL CURRENT ASSETS 480.0 438.7
PROPERTY, PLANT AND EQUIPMENT --- at cost
Land 33.6 38.9
Buildings 214.3 221.9
Machinery and equipment 562.4 531.0
Construction in progress
(estimated cost to complete - $48.4) 15.8 11.9
-------- --------
826.1 803.7
Less allowance for depreciation (424.3) (374.7)
-------- --------
401.8 429.0
OTHER ASSETS
Investments and other 22.8 16.6
Goodwill - net of accumulated amortization:
1997 - $17.8; 1996 - $7.1 447.7 449.9
Other intangibles - net of accumulated amortization:
1997 - $8.8; 1996 - $4.3 81.3 84.1
-------- --------
551.8 550.6
-------- --------
$1,433.6 $1,418.3
======== ========
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
December 31
----------------------------
1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 77.7 $ 68.9
Payroll and related taxes 47.7 47.8
Notes payable 26.6 0.8
Accrued restructuring costs 15.9 30.9
Other accrued liabilities 43.7 67.5
Income taxes 7.4 -
Dividends payable 11.2 10.6
Current portion of long-term debt 1.3 1.0
--------- --------
TOTAL CURRENT LIABILITIES 231.5 227.5
LONG-TERM DEBT - less portion classified as current 678.2 744.5
OTHER LONG-TERM LIABILITIES
Income taxes 14.3 12.4
Employee benefit plans 54.5 44.3
Other 2.7 4.1
--------- --------
71.5 60.8
SHAREHOLDERS' EQUITY
Preferred shares, $.10 par value: authorized 1,000,000 shares;
issued 1997 - 475,371 shares; 1996 - 481,780 shares 95.0 96.4
Guarantee of related ESOP debt (88.6) (90.0)
Common shares, $.10 par value: authorized - 90,000,000 shares;
issued 1997 - 33,631,330 shares; 1996 - 33,637,359 shares 3.4 3.4
Capital in excess of par value of shares 131.6 93.8
Retained earnings 501.1 463.9
Cost of common shares in treasury: 1997 - 4,181,807 shares;
1996 - 5,509,124 shares (155.0) (188.0)
Unearned compensation (3.9) (4.2)
Foreign currency translation adjustments (31.2) 10.2
--------- --------
TOTAL SHAREHOLDERS' EQUITY 452.4 385.5
--------- --------
$ 1,433.6 $1,418.3
========= ========
</TABLE>
See notes to consolidated financial statements.
28
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BetzDearborn Inc.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Year Ended December 31
-------------------------------
(in millions) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 86.2 $ 64.3 $ 68.3
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 67.8 61.0 48.5
Amortization 15.7 7.8 0.7
Compensation and employee benefit plans 10.6 12.6 10.5
Income taxes 6.4 7.4 (0.2)
Provision for restructuring -- 9.6 15.6
Changes in operating assets and liabilities,
net of business acquisitions:
Accounts receivable (59.8) (24.2) (13.0)
Inventories (2.2) (2.7) (8.0)
Prepaid expenses and other (7.1) (1.0) (10.0)
Accounts payable and accrued expenses (4.1) 7.5 (2.7)
------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 113.5 142.3 109.7
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (78.0) (64.9) (64.1)
Proceeds from sales of long-term assets 9.6 3.5 2.0
Purchases of businesses and long-term investments -- (6.6) (34.6)
Purchase of Dearborn, net of cash equivalents acquired -- (549.4) --
Other, net (0.5) 1.0 (0.6)
------ ------ ------
NET CASH USED IN INVESTING ACTIVITIES (68.9) (616.4) (97.3)
FINANCING ACTIVITIES
Repayments of long-term debt (462.5) (17.0) (1.0)
Borrowings classified as long-term debt 401.1 566.0 --
Net short-term borrowings (repayments) 24.0 (17.7) 17.4
Dividends paid (50.9) (48.9) (48.4)
Proceeds from issuance of common shares, including treasury shares 42.3 14.8 1.0
Purchase of treasury shares -- -- (12.6)
------ ------ ------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (46.0) 497.2 (43.6)
Effect of exchange rate changes on cash 0.1 1.2 1.2
------ ------ ------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1.3) 24.3 (30.0)
Cash and Cash Equivalents at Beginning of Year 38.2 13.9 43.9
------ ------ ------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 36.9 $ 38.2 $ 13.9
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
BetzDearborn Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Capital in
Number of Shares Excess of
------------------------ Common Par Value Retained
(dollars in millions, except per share amounts) Common Treasury Stock of Stock Earnings
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 33,649,527 5,784,899 $ 3.4 $ 81.8 $ 423.5
Net earnings 68.3
Dividends on preferred shares ($16.00 per share) (7.8)
Tax benefit on preferred shares dividend 2.9
Dividends on common shares ($1.47 per share) (40.7)
Reacquired common shares 300,000
Impact of shares issued under employee stock plans,
net of tax of $.3 million (5,546) (94,074) 0.8
Currency translation adjustments (0.1)
---------- ---------- ----- ------- -------
Balance at December 31, 1995 33,643,981 5,990,825 3.4 82.6 446.1
Net earnings 64.3
Dividends on preferred shares ($16.00 per share) (7.7)
Tax benefit on preferred shares dividend 2.7
Dividends on common shares ($1.49 per share) (41.5)
Impact of shares issued under employee stock plans,
net of tax of $2.1 million (6,622) (481,701) 11.2
Currency translation adjustments
---------- ---------- ----- ------- -------
Balance at December 31, 1996 33,637,359 5,509,124 3.4 93.8 463.9
Net earnings 86.2
Dividends on preferred shares ($16.00 per share) (7.7)
Tax benefit on preferred shares dividend 2.6
Dividends on common shares ($1.51 per share) (43.9)
Impact of shares issued under employee stock plans,
net of tax of $6.6 million (6,029) (1,074,717) 28.9
Stock issued for acquisition (252,600) 8.9
Currency translation adjustments
---------- ---------- ----- ------- -------
Balance at December 31, 1997 33,631,330 4,181,807 $ 3.4 $ 131.6 $ 501.1
========== ========== ===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Foreign
Unearned Currency
Treasury Compen- Translation
(dollars in millions, except per share amounts) Stock sation Adjustments
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1995 $(187.5) $ (5.5) $ 2.7
Net earnings
Dividends on preferred shares ($16.00 per share)
Tax benefit on preferred shares dividend
Dividends on common shares ($1.47 per share)
Reacquired common shares (12.6)
Impact of shares issued under employee stock plans,
net of tax of $.3 million 1.9 2.2
Currency translation adjustments 3.5
------- ------ -------
Balance at December 31, 1995 (198.2) (3.3) 6.2
Net earnings
Dividends on preferred shares ($16.00 per share)
Tax benefit on preferred shares dividend
Dividends on common shares ($1.49 per share)
Impact of shares issued under employee stock plans,
net of tax of $2.1 million 10.2 (0.9)
Currency translation adjustments 4.0
------- ------ -------
Balance at December 31, 1996 (188.0) (4.2) 10.2
Net earnings
Dividends on preferred shares ($16.00 per share)
Tax benefit on preferred shares dividend
Dividends on common shares ($1.51 per share)
Impact of shares issued under employee stock plans,
net of tax of $6.6 million 25.9 0.3
Stock issued for acquisition 7.1
Currency translation adjustments (41.4)
------- ------ -------
Balance at December 31, 1997 $(155.0) $ (3.9) $ (31.2)
======= ====== =======
</TABLE>
See notes to consolidated financial statements.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BetzDearborn Inc.
- --------------------------------------------------------------------------------
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - The Company is engaged in the engineered specialty chemical
treatment of water and industrial process systems operating in a wide variety of
industrial and commercial applications with particular emphasis on the chemical,
petroleum refining, paper, food processing, automotive, steel and power
industries. The Company develops, produces and markets a wide range of specialty
chemical products for use in boilers, cooling systems, heat exchangers, paper
and petroleum process streams and both influent and effluent systems. The
Company monitors changing water, process and plant operating conditions so as to
prescribe the appropriate treatment programs to solve problems such as
corrosion, scale, deposit formation and a variety of process problems.
Operations are conducted primarily in the United States, Canada and Europe, and
also in Asia-Pacific and Latin America.
Concentration of Credit Risk - Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
accounts receivable and interest rate swap agreements. Concentrations of credit
risk with respect to accounts receivable are limited because of the large number
of customers comprising the Company's customer base and their dispersion across
many different industries and geographies. The Company generally does not
require collateral or other security to support customer receivables. The
counterparties to the interest rate swaps are major international financial
institutions. The Company continually monitors the credit ratings of its
counterparties, has established policies for counterparty credit rating
requirements and has limited the amount of agreements with any one party. The
Company believes these procedures minimize the risk of credit losses in the
event of nonperformance by these counterparties.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and all subsidiaries. All significant intercompany
items and transactions are eliminated from the consolidated statements. The
Company follows the practice of using a November 30 fiscal year for all non-U.S.
subsidiaries, excluding Canada, in order to expedite the year-end closing.
Revenue Recognition - Primarily, the Company recognizes revenue upon
shipment and passage of title without right of return. For consignment sales,
revenue is recognized when material is used.
31
<PAGE>
Cash Equivalents - The Company considers all highly liquid investments with
an original maturity of three months or less to be cash equivalents. The
carrying value of these investments approximates their fair value at December
31, 1997.
Inventories - Inventories are stated at the lower of cost or market. Cost
of approximately 41 percent of the inventory is determined by the last-in,
first-out (LIFO) method, the balance by the first-in, first-out (FIFO) method.
If the FIFO method of inventory accounting had been used for all inventory,
amounts would have been approximately $10.6 million and $10.9 million higher
than reported at December 31, 1997 and December 31, 1996, respectively.
Property, Plant and Equipment - Property, plant and equipment is recorded
at cost. Depreciation is computed principally by the straight-line method over
the estimated useful lives of the related assets. The estimated useful lives of
depreciable assets are as follows: buildings - 20 to 40 years; computer
equipment and software - 3 to 8 years; other machinery and equipment - 5 to 15
years.
Accounting Change - On November 20, 1997, the FASB Emerging Issues Task
Force ("EITF") announced a consensus on Issue No. 97-13, "Accounting for Costs
Incurred in Connection with a Consulting Contract or an Internal Project That
Combines Business Process Reengineering and Information Technology
Transformation." This issue addressed how an entity should account for third-
party or internally generated costs associated with projects that combine
business process reengineering activities and information technology
transformation and how the total costs of a business process reengineering
consulting contract performed by a third party should be allocated to the
project's various individual activities. The EITF reached a consensus that the
cost of business process reengineering activities, whether done internally or by
third parties, is to be expensed as incurred. Also, the EITF reached a consensus
that any unamortized portion of those identifiable costs should be written off
as a cumulative effect type adjustment in the quarter that contains November 20,
1997.
The Company is engaged in a major project that combines business process
reengineering activities and information technology transformation. The business
process reengineering activities are being performed by both internal staff and
by third parties. The amount of business process reengineering activities
capitalized as of September 30, 1997 was $9.3 million, of which approximately
$4.1 million was capitalized prior to 1997. Consequently, the Company recorded a
write-off in the fourth quarter of 1997 for the cumulative effect of this change
in accounting and will prospectively include the continuing costs of business
process reengineering activities as operating expenses.
Investments - Marketable equity securities are recorded at fair value. All
other investments are generally carried at cost, which does not exceed estimated
fair value.
Goodwill and Other Intangible Assets - Goodwill amortization is computed by
the straight-line method mainly over 40 years. Other intangible assets are
32
<PAGE>
amortized on a straight-line basis ranging between 3 and 40 years in accordance
with the nature of the asset. Goodwill and other intangible assets relate
primarily to the Dearborn acquisition (see Note 2). For all such assets, the
Company evaluates carrying values for impairment by considering the operating
performance and expected future undiscounted cash flows of the underlying
businesses.
Foreign Currency - The Company is exposed to the effect of foreign exchange
rate fluctuations on the U.S. dollar value of the income of its non-U.S.
subsidiaries (see Note 4). Occasionally, the Company enters into foreign
currency forward contracts to minimize the effect of fluctuating foreign
currencies on its cash flow and current unremitted income from certain non-U.S.
subsidiaries. The forward contracts generally are marked to market and resulting
adjustments are recorded directly in income. These adjustments had no material
impact on the results of operations for 1997, 1996 and 1995. There were no open
contracts at the end of 1997. Assets and liabilities of non-U.S. operations
where the functional currency is the local currency are translated into U.S.
dollars at the fiscal year-end exchange rates. The related translation
adjustments are recorded as cumulative translation adjustments, a separate
component of shareholders' equity. Revenues and expenses are translated using
average exchange rates prevailing during the year. Foreign currency transaction
gains and losses, as well as translation adjustments for assets and liabilities
of non-U.S. operations where the functional currency is the U.S. dollar, are
included in the results of operations. A foreign currency transaction loss of
$5.6 million was incurred in 1997 and is included in other income, net in the
Consolidated Statements of Operations; such adjustments were not material in
1996 and 1995.
Research and Development - Research and development costs ($38.8 million in
1997, $35.7 million in 1996 and $32.2 million in 1995) are charged to expense as
incurred.
Earnings Per Share - In 1997, the Financial Accounting Standards Board
issued Statement No. 128, "Earnings Per Share." Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Basic earnings per Common Share is computed by
dividing net income available to common shareholders by the weighted average
number of shares outstanding. In computing basic earnings per Common Share,
preferred stock dividends, net of related income tax benefits, reduce income
available to common shareholders. In computing diluted earnings per Common
Share, conversion of the Series A ESOP Convertible Preferred Shares is assumed
and the dilutive effect of stock options during the periods presented as well as
the effect of contingently issuable shares also increase the weighted average
number of shares (see Note 5). All earnings per share amounts for all periods
have been presented and, where appropriate, restated to conform to the Statement
128 requirement.
Stock-Based Compensation - The Company follows Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its employee stock-based compensation (see
Note 9).
33
<PAGE>
Impact of Pending Accounting Pronouncements - In June 1997, the
Financial Accounting Standards Board issued Statement No. 130, "Reporting
Comprehensive Income," and Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information," both of which are required to be adopted
for fiscal years beginning after December 15, 1997. Statement 130 will require
the Company to report in its financial statements all non-owner related changes
in equity for the periods being reported. Statement 131 will require the Company
to disclose revenues, earnings, and other financial information pertaining to
the business segments by which the Company is managed, as well as what factors
management used to determine these segments. The Company is currently evaluating
the requirements of Statements 130 and 131 to determine how to present the
required information in its financial statements and related disclosures.
34
<PAGE>
2: ACQUISITIONS
Dearborn - On June 28, 1996, pursuant to the Grace Dearborn Worldwide
Purchase and Sale Agreement (the "Agreement"), the Company acquired the Dearborn
business unit ("Dearborn") of W.R. Grace & Co. - Conn. ("Grace") for $632
million, subject to certain adjustments. Dearborn was a global supplier of
industrial water and process treatment chemicals with 1995 annual net revenues
of $399.1 million. This acquisition was financed by a $750 million Credit
Agreement among the Company and a syndicate of banks (see Note 6).
The Dearborn acquisition is accounted for using the purchase method of
accounting and is included in the Consolidated Statements of Operations since
the date of acquisition. The Company adopted a November 30 fiscal year-end for
non-U.S. Dearborn units except Canada to align the fiscal year-end with the
remainder of the Company's operations. Consequently, Dearborn units except
Canada and the U.S. reported five months of results of operations in 1996. The
Company subsequently integrated Betz and Dearborn, which makes it impractical to
report the results of Dearborn separately from the remainder of the Company's
results of operations.
The Company finalized its Dearborn purchase price allocation during 1997
and increased goodwill by $20.4 million to $440.7 million. Goodwill is
determined as follows (in millions):
<TABLE>
<S> <C>
Cash paid to Grace $ 640.9
Adjustments:
Restructuring provision (see Note 12) 38.8
Transition services cancellation fees 10.0
Professional fees and transaction costs 13.4
Tax effects, net (23.7)
----------
679.4
Less: Fair value of net tangible assets acquired 156.1
Fair value of identifiable intangible assets acquired 82.6
----------
Dearborn goodwill as of the acquisition date $ 440.7
==========
</TABLE>
The $38.8 million restructuring provision (see Note 12) is primarily for
closure of Dearborn facilities and severance costs for Dearborn employees.
During the second quarter of 1997, the Company announced the planned closure of
the Lake Zurich, Illinois plant. The increase in restructuring liabilities and
fixed asset writedowns, as a result of this announcement, are the principal
reasons for the 1997 increase in goodwill. The Company incurred costs of
approximately $10.0 million in accordance with the Agreement relating to the
cancellation of transition services previously provided to the Company,
principally in its Latin American and European regions. Professional fees and
transaction costs amounting to $13.4 million are primarily for acquisition
35
<PAGE>
consulting, legal and accounting fees. The tax effects, which reduce the
adjusted purchase price, are comprised of the estimated tax effects resulting
from the purchase price adjustments and for the net deferred tax effects of
differences in the allocation of purchase price for financial reporting and tax
purposes.
In accordance with the purchase method of accounting, the adjusted purchase
price was allocated to the estimated fair value of net assets acquired, with the
excess recorded as goodwill, which is amortized on a straight-line basis over 40
years. The $82.6 million allocated to identifiable intangibles is the
independently appraised value of the trademarks, trade names and patents of
Dearborn. Patents are amortized on a straight-line basis over 13 to 15 years and
unlimited-life trademarks and trade names are amortized over 40 years. Total
Dearborn intangible amortization expense of $14.6 million and $6.7 million is
included in the 1997 and 1996 results of operations, respectively.
Had the Acquisition occurred as of January 1, 1995, unaudited pro forma
results would have been (in millions, except per share amounts):
Year Ended December 31,
-------------------------
1996 1995
-------- --------
Net Sales $1,261.6 $1,151.6
Net Earnings 50.0 25.5
Net Earnings per Common Share:
Basic 1.61 .75
Diluted 1.54 --
The pro forma results reflect adjustments primarily for the increased
amortization and interest expense attributable to the Dearborn acquisition and
the related tax effects. Potential cost savings, however, from combining
Dearborn with the Company's operations are not reflected. Therefore, the pro
forma results are not indicative of the results that would have occurred had the
acquisition actually been consummated on January 1, 1995, and are not intended
to be a projection of future results or trends. The historical financial results
of operations of Dearborn reflect the "carve out" of Dearborn from Grace.
Certain selling, research and administrative expenses of Grace have been
allocated to Dearborn on various bases which, in the opinion of Grace's
management, are reasonable. However, such expenses are not necessarily
indicative of, and it is not practicable for management to estimate, the nature
and level of expenses which might have been incurred if Dearborn had been
operating as a separate independent company.
Argo Scientific - In November 1997, the Company acquired all the
outstanding common stock of D.W. Walker & Associates, Inc., d.b.a. Argo
Scientific, in exchange for 252,600 of the Company's Common Shares. Argo
Scientific is a leading supplier of highly specialized chemical treatments,
services and technology for membrane separation systems, which are used in the
production of "pure" water from fresh water and sea water.
36
<PAGE>
The Argo Scientific acquisition is accounted for using the purchase method
of accounting. The goodwill recorded as a result of this acquisition amounted to
$15.7 million, which is amortized on a straight-line basis over 40 years. The
Argo Scientific results of operations are included with the Company's effective
November 1997. This acquisition did not have a material impact on the Company's
1997 results of operations nor its capital resources and liquidity. The pro
forma consolidated results of operations, as if the acquisition had taken place
at the beginning of fiscal 1996, would not have been materially different from
the reported amounts for fiscal 1996 and 1997.
Misan Group and Taiwan Peitz - On May 1, 1995, the Company acquired
Taiwan Peitz Company, Ltd., a water, paper process and refinery process
treatment business, which had been a licensee of the Company's products since
1974. On November 7, 1995, the Company acquired the Misan Group, an industrial
water, paper process and fuel oil treatment company with headquarters in Naples,
Italy and subsidiaries in Spain and Portugal.
The Taiwan Peitz and Misan acquisitions have also been accounted for using
the purchase method of accounting. The combined purchase price for these
acquisitions was $43.4 million consisting of $32.5 million in cash paid in 1995,
$7.3 million paid in 1996 and $3.6 million paid in 1997. The goodwill resulting
from both acquisitions totaled approximately $25 million, which is amortized on
a straight-line basis over 40 years.
The operating results of these acquired businesses have been included in
the Consolidated Statements of Operations since the dates of acquisition. The
pro forma consolidated results of operations, as if the acquisitions had taken
place at the beginning of fiscal 1995, would not have been materially different
from the reported amounts.
37
<PAGE>
3: INCOME TAXES
The components of earnings before income taxes and cumulative effect of
accounting change are (in millions):
1997 1996 1995
---- ---- ----
U.S. $106.2 $85.1 $ 75.6
Non-U.S 36.7 14.6 36.0
------ ---- ------
$142.9 $99.7 $111.6
====== ===== ======
The provision for income taxes consists of the following (in millions):
1997 1996 1995
---- ---- ----
Current:
Federal $34.6 $22.4 $31.8
State 2.9 4.3 4.4
Foreign 14.5 5.1 10.4
----- ----- -----
Total Current 52.0 31.8 46.6
Deferred:
Federal 0.5 2.9 (4.7)
State 0.1 0.5 (1.0)
Foreign (1.9) 0.2 2.4
----- ----- -----
Total Deferred (1.3) 3.6 (3.3)
----- ----- -----
Total Taxes $50.7 $35.4 $43.3
===== ===== =====
A reconciliation of the effective income tax rate with the statutory
federal income tax rate is as follows:
1997 1996 1995
---- ---- ----
Federal tax rate 35.0% 35.0% 35.0%
State and local taxes, net of
federal income taxes 1.4 3.1 2.0
Foreign tax credits (4.0) (4.8) --
Other items 3.1 2.2 1.8
---- ---- ----
Effective income tax rate 35.5% 35.5% 38.8%
==== ==== ====
38
<PAGE>
Deferred income taxes reflect the estimated future tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts for income tax purposes. Significant
components of the Company's deferred tax assets and liabilities as of December
31 are as follows (in millions):
1997 1996
---- ----
Deferred Tax Assets:
Stock and benefit plans $ 20.0 $ 15.3
Operating loss carryforwards 9.1 4.2
Accrued liabilities not deducted until paid 17.1 19.3
------ ------
Total Deferred Tax Assets 46.2 38.8
Deferred Tax Liabilities:
Tax over book depreciation, net (24.7) (21.7)
Other (11.6) (6.8)
------ ------
Total Deferred Tax Liabilities (36.3) (28.5)
------ ------
Net Deferred Tax Assets $ 9.9 $ 10.3
====== ======
In 1997, income taxes classified as current and non-current liabilities
include deferred tax liabilities of $0.6 million and $14.3 million,
respectively. In addition, income taxes classified as current assets include
deferred tax assets of $19.6 million and income taxes classified as non-current
assets, which are included within investments and other on the Consolidated
Balance Sheets, include deferred tax assets of $5.1 million. In 1996, income
taxes classified as current assets include deferred tax assets of $22.7 million,
with the remaining deferred tax balance of $12.4 million classified as
non-current liabilities. Included in deferred tax assets are foreign operating
loss carryforwards, which mainly have an unlimited life.
The Company made income tax payments of $36.2 million, $45.8 million and
$46.0 million during the years 1997, 1996 and 1995, respectively.
The Company has not provided United States income taxes on $52.7 million of
unremitted earnings of foreign subsidiaries because management views such
earnings as being indefinitely invested.
39
<PAGE>
4: GEOGRAPHIC INFORMATION
The Company operates principally in one industry segment which includes the
development, manufacture and sale of specialty chemical products.
The Company's areas of operation outside of the United States and Europe
principally include Canada, Latin America and Asia-Pacific. No single non-U.S.
country in which the Company produces or markets its products comprises more
than 10 percent of the Company's net sales, operating earnings or identifiable
assets. No single customer accounts for more than 10 percent of the Company's
revenues.
Information about the Company's operations in different geographic
locations is (in millions):
<TABLE>
<CAPTION>
United Other
1997 States Europe Foreign Consolidated
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 711.2 $ 319.6 $ 264.0 $ 1,294.8
Operating earnings 120.3 39.4 30.2 189.9
Identifiable assets 706.9 417.9 308.8 1,433.6
- ------------------------------------------------------------------------------
1996
- ------------------------------------------------------------------------------
Net sales $ 641.1 $ 218.9 $ 177.0 $ 1,037.0
Operating earnings 90.4 12.2 23.1 125.7
Identifiable assets 702.0 412.8 303.5 1,418.3
- ------------------------------------------------------------------------------
1995
- ------------------------------------------------------------------------------
Net sales $ 555.9 $ 111.6 $ 85.0 $ 752.5
Operating earnings 78.6 15.2 16.2 110.0
Identifiable assets 395.7 142.7 92.1 630.5
- ------------------------------------------------------------------------------
</TABLE>
At December 31, 1997, the local currency is the functional currency of
non-U.S. operations representing 45% of consolidated identifiable assets. For
operations in highly inflationary economies, the U.S. dollar is the functional
currency. Identifiable assets of such operations were 6% of consolidated
identifiable assets at December 31, 1997.
United States identifiable assets include $0.3 million, $2.6 million and
$0.8 million of cash and cash equivalents and other investments at December 31,
1997, 1996 and 1995, respectively, that are available for general corporate
purposes.
Direct export sales of $14.2 million, $11.2 million and $10.8 million for
the years 1997, 1996 and 1995, respectively, are included in United States net
sales.
40
<PAGE>
5: EARNINGS PER SHARE
In compliance with Financial Accounting Standards Board Statement No. 128,
"Earnings per Share," issued in February 1997, the Company has changed its
method of computing earnings per share effective with the fourth quarter 1997.
All prior periods presented have been restated to conform to the new
requirements which exclude contingently issuable shares and the dilutive effect
of stock options from the number of weighted average shares used in the
computation of basic earnings per share. The effect of Statement 128 on diluted
earnings per share is immaterial compared to previously disclosed fully diluted
earnings per share. Basic and diluted earnings per share are calculated as
follows (in millions, except per share amounts):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Basic Earnings per Share:
Net earnings before cumulative effect
of accounting change $ 92.2 $ 64.3 $ 68.3
Effect of preferred stock dividends, net of taxes (5.6) (5.3) (4.9)
-------- -------- --------
86.6 59.0 63.4
Cumulative effect of accounting change, net of taxes (6.0) -- --
-------- -------- --------
Net earnings available to common shareholders $ 80.6 $ 59.0 $ 63.4
======== ======== ========
Average Common Shares outstanding - basic 28.7 27.7 27.6
======== ======== ========
Basic Earnings per Common Share:
Before cumulative effect of accounting change $ 3.02 $ 2.13 $ 2.30
Cumulative effect of accounting change (0.21) -- --
-------- -------- --------
Basic earnings per Common Share $ 2.81 $ 2.13 $ 2.30
======== ======== ========
Diluted Earnings per Share:
Net earnings before cumulative effect
of accounting change $ 92.2 $ 64.3 $ 68.3
Effect of ESOP charge to operations assuming
conversion of Series A ESOP Convertible
Preferred Shares, net of taxes (2.7) (2.6) (2.1)
-------- -------- --------
89.5 61.7 66.2
Cumulative effect of accounting change, net of taxes (6.0) -- --
-------- -------- --------
Net earnings available to common shareholders $ 83.5 $ 61.7 $ 66.2
======== ======== ========
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average Common Shares outstanding - basic 28.7 27.7 27.6
Effect of dilutive securities:
Contingently issuable shares 0.2 0.1 0.1
Employee stock options 0.4 0.2 0.1
Assumed conversion of Series A ESOP
Convertible Preferred Shares 2.7 2.7 2.8
-------- -------- --------
Average Common Shares outstanding - diluted 32.0 30.7 30.6
======== ======== ========
Diluted Earnings per Common Share:
Before cumulative effect of accounting change $ 2.80 $ 2.01 $ 2.16
Cumulative effect of accounting change (0.19) -- --
-------- -------- --------
Diluted earnings per Common Share $ 2.61 $ 2.01 $ 2.16
======== ======== ========
</TABLE>
Note 9 contains further disclosures regarding the Company's oustanding
stock options and contingently issuable shares (Incentive Plan). Note 8
describes the conversion provision of the Company's preferred stock in the ESOP.
42
<PAGE>
6: LONG-TERM DEBT
Long-term debt at December 31 consisted of (in millions):
<TABLE>
<CAPTION>
1997 1996
--------------------- ---------------------
Rate(1) Amount Rate(1) Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revolving credit agreement 5.83% $ 581.9 5.98% $ 548.0
Promissory note to Grace -- -- 5.87 100.0
ESOP debt 8.56 94.5 8.56 95.5
Other indebtedness 6.30 3.1 6.36 2.0
-------- --------
Total debt 679.5 745.5
Less current maturities 1.3 1.0
-------- --------
Long-term debt $ 678.2 $ 744.5
======== ========
</TABLE>
(1) Weighted average interest rate for the year ended December 31.
On October 20, 1997, the Company entered into a Credit Agreement with a
syndicate of banks which provides for a five-year unsecured revolving credit
agreement in an amount of $750 million. The commitments made under the Credit
Agreement expire in October 2002. The Credit Agreement requires the Company,
among other things, to meet certain net worth and indebtedness tests.
Approximately $168.1 million of the Credit Agreement was unused at December 31,
1997.
Borrowings under the Credit Agreement bear interest at various rates based
on the types of borrowings used by the Company. Each type of borrowing bears
interest at a variable rate based on an index plus a margin. The borrowings
outstanding at year end for U.S. dollar loans bear interest at LIBOR plus a
margin and for Canadian dollar loans at market rates for Canadian bankers'
acceptances plus a margin. Margin pricing is dependent on the Company's selected
pricing option of either a specific financial ratio test or the Company's public
debt rating. The Company pays a facility fee based upon the selected pricing
option. At December 31, 1997, the Company is paying a facility fee of .08% of
the total commitment of funds provided by the banks. Commitment fees to maintain
the Credit Agreement totaled $1.3 million and $0.7 million during fiscal years
1997 and 1996, respectively, and are included in interest expense.
In 1989, the Company guaranteed a loan of $100 million to the ESOP Trust,
the proceeds of which were used by the trust for the purchase of the Company's
preferred stock (see Note 8). The loan and guarantee, which mature on June 19,
2009, are recorded in the Company's Consolidated Balance Sheets as long-term
debt and a reduction of shareholders' equity. With respect to the ESOP loan, the
Company is obligated, among other things, to maintain certain financial ratios
and meet certain net worth and indebtedness tests.
43
<PAGE>
Scheduled maturities of long-term debt are as follows (in millions): 1998 -
$1.3; 1999 - $3.2; 2000 - $1.7; 2001 - $2.8; 2002 - $586.0; and 2003 through
2009 - $84.5.
Interest Rate Swaps - During the second quarter of 1996, the Company
entered into interest rate swap agreements, with maturities ranging from 1.5 to
5.5 years, to effectively convert $400 million of the Company's variable-rate
long-term debt to fixed interest rate obligations, thereby reducing the
Company's exposure to rising interest rates. Over the term of each swap
agreement, the Company exchanges interest payments with the swap counterparty
without exchanging the notional amount upon which the payments are based. The
differential to be paid or received is accrued and recognized as an adjustment
to interest expense. The related amount payable to such counterparties is
included in accrued liabilities.
The Company has designated the series of swaps as hedges against future
interest rate exposure on its variable-rate debt outstanding. The series of
swaps will hedge no more than the aggregate amount of variable-rate debt
outstanding. The Company may also designate individual swaps included in this
series as both a hedge against interest rate exposure and a hedge of the fair
value of future fixed-rate term debt replacing outstanding variable-rate debt.
In the event future fixed-rate term debt is issued, the Company intends to
terminate the designated swaps and amortize the gain or loss on such termination
over the remainder of the hedged period. In the event fixed-rate debt is not
issued for the entire remaining hedged period, a portion of the termination gain
or loss will be included in net earnings.
Fair Value of Debt and Interest Rate Swaps - The fair value of the
Company's short-term notes payable, long-term debt and interest rate swaps, all
of which are held for purposes other than trading, at December 31 is summarized
below (in millions):
<TABLE>
<CAPTION>
1997 1996
-------------------------- -------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Notes payable $ 26.6 $ 26.6 $ 0.8 $ 0.8
Long-term debt 679.5 692.7 745.5 753.3
Interest rate swap payable 0.5 7.2 0.7 5.6
</TABLE>
The estimated fair values of these financial instruments are generally
based on quoted market prices or on current rates available to the Company for
financial instruments of similar remaining maturities and do not include
potential tax effects or possible expenses incurred in settling the transactions
to terminate the related agreements.
Notes payable are borrowings under uncommitted lines of credit with an
average interest rate of 5.76% at December 31, 1997.
44
<PAGE>
Interest Expense - Net ESOP expense (see Note 8) is characterized as
interest expense in the accompanying financial statements. The effect of the
interest rate swap agreements referred to above was to increase interest expense
by $3.3 million and $2.0 million in 1997 and 1996, respectively. Cash payments
for interest amounted to $50.4 million, $17.8 million and $1.6 million for the
years 1997, 1996 and 1995, respectively. Interest expense is capitalized on
major construction projects. Interest expense components for the years ending
December 31 are as follows (in millions):
1997 1996 1995
---- ---- ----
Gross interest expense $45.9 $26.1 $ 1.6
Capitalized interest (0.4) (0.4) (0.5)
----- ----- -----
Interest expense $45.5 $25.7 $ 1.1
===== ===== =====
45
<PAGE>
7: LONG-TERM LEASES
Total rental expense for all leases amounted to $23.2 million, $18.8
million and $14.9 million in 1997, 1996 and 1995, respectively. The future
rental commitments, primarily for automobiles, as of December 31, 1997 for all
noncancelable long-term leases are (in millions): 1998 - $12.1; 1999 - $7.0;
2000 - $3.7; 2001 - $1.4; 2002 - $1.1; and $0.2 thereafter.
46
<PAGE>
8: EMPLOYEE STOCK OWNERSHIP (ESOP) AND 401(k) PLAN
In 1989, the Company established an ESOP and a related trust as a long-term
benefit for substantially all of its U.S. employees. This plan supplements the
Company's employee retirement plan. Under this plan, the Company sold 500,000
shares of a new Series A ESOP Convertible Preferred Stock to the trust for $100
million. This series of preferred stock has one vote per share with cumulative
dividends at a rate of 8% and is stated at the aggregate liquidation preference
on the Consolidated Balance Sheets. The Company arranged for and guaranteed a
loan of $100 million (see Note 6) to the trust for the purchase of the preferred
stock. Proceeds of the loan were primarily used for the purchase of common
treasury stock to be used for future conversion and redemption of the preferred
stock, which is presently convertible into 2,648,671 shares of common stock. The
loan and guarantee are recorded in the Company's Consolidated Balance Sheets as
long-term debt and a reduction in shareholders' equity.
Effective January 1, 1990, the Company's 401(k) program was integrated into
the Employee Stock Ownership Plan. Employees may invest 2 to 15 percent of
eligible compensation. Company matches, equal to 25 percent of the first 4
percent of employees' investments, fully vest to employees upon the completion
of 5 years of service. The Company's matching contributions, which are included
in ESOP expense, are made in the form of the ESOP Convertible Preferred Stock.
The value of such matching contributions amounted to $1.7 million in 1997, $1.5
million in 1996 and $1.4 million in 1995.
After satisfying the 401(k) matching contributions, the remaining shares of
ESOP stock are allocated to each participant based on the ratio of the
participant's compensation to total compensation of all participants. During
1997, 6,409 shares of the Preferred Stock were converted to Common Shares by
plan participants and permanently retired. The number of shares allocated and
unallocated at December 31 are as follows:
1997 1996
---- ----
Allocated 134,355 121,911
Unallocated 341,016 359,869
------- -------
Total shares held by ESOP 475,371 481,780
======= =======
The Company is required to make quarterly contributions to the Plan which
enable the trust to service its indebtedness. Net ESOP cost for the Company is
comprised of the following elements (in millions):
47
<PAGE>
1997 1996 1995
---- ---- ----
ESOP expense $ 9.5 $ 9.3 $ 9.2
Preferred dividends
(charged to retained earnings) (7.7) (7.7) (7.8)
----- ----- -----
ESOP expense charged to earnings $ 1.8 $ 1.6 $ 1.4
===== ===== =====
ESOP contributions $ 9.1 $ 9.0 $ 8.8
===== ===== =====
The ESOP expense is calculated using the 80-percent-of-shares-allocated
method. To the extent that this expense exceeds the ESOP's annual debt service
requirements, an adjustment is made to the shareholders' equity reduction to
reflect the cumulative effect of the excess charges.
48
<PAGE>
9: STOCK-BASED COMPENSATION AND SHAREHOLDER RIGHTS PLANS
The Company accounts for its stock-based compensation plans in accordance
with Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," which results in no compensation expense being recognized
for its stock option plans or its stock purchase plan.
As required by Statement 123, pro forma information regarding net income
and earnings per share has been determined as if the Company had accounted for
its stock options under the fair value method. A weighted average fair value of
$16.96 for options granted in 1997, $9.63 for those granted in 1996 and $9.78
for those granted in 1995 was estimated as of the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for option grants in 1997, 1996 and 1995, respectively:
1997 1996 1995
---- ---- ----
Dividend yield 2.36% 3.4% 3.4%
Volatility .226 .203 .203
Risk-free interest rate 5.77% 6.22% 6.22%
Weighted average expected life, in years 6.65 6.75 6.75
Option valuation models use highly subjective assumptions to determine the
fair value of traded options with no vesting or trading restrictions. Because
options granted under the Company's Stock Option Plans have vesting requirements
and cannot be traded, and because changes in the assumptions can materially
affect the fair value estimate, in management's opinion, the existing valuation
models do not necessarily provide a reliable measure of the fair value of its
employee stock options.
For purposes of the pro forma disclosures required by Statement 123, the
estimated fair value of the options is amortized to expense over the options'
vesting period. Statement 123 requires only that the income effects of options
granted subsequent to December 31, 1994 be included in the pro forma
disclosures. Since a portion of the Company's stock options vest over one- and
two-year periods, and additional options are granted each year, the pro forma
effect on 1995 and 1996 net income reported below is not representative of the
effect of fair value stock option expense on future years' pro forma net income.
For purposes of the pro forma disclosures, compensation expense is recognized
under the stock purchase plan for the difference in price paid by employees and
the fair value of the Company's stock at the date of purchase. The Company's pro
forma information follows (in millions, except for per share information):
49
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Pro forma net income $78.9 $60.5 $64.2
Pro forma earnings per share:
Basic
Before cumulative effect of accounting change 2.76 2.00 2.15
Net earnings 2.55 2.00 2.15
Diluted
Before cumulative effect of accounting change 2.59 1.89 2.03
Net earnings 2.40 1.89 2.03
</TABLE>
Option Plans - Options granted under the Company's Stock Option Plans are
at the fair value at the date of grant. The period during which these options
become exercisable ranges from date of grant to two years after date of grant.
Unexercised options expire ten years after date of grant. No individual may
receive an option if that individual owns (or would own if options were
exercised) stock possessing five percent of the voting power or value of all
classes of stock of the Company.
Option activity is summarized as follows:
Number of Weighted Average
Shares Price per Share
---------- ----------------
Outstanding at January 1, 1995 2,564,269 $48.126
Granted 967,688 43.749
Canceled (40,998) 52.916
Forfeited (5,006) 44.875
Exercised (47,730) 21.606
----------
Outstanding at December 31, 1995 3,438,223 47.210
Granted 493,841 43.493
Canceled (44,715) 51.838
Forfeited (12,727) 44.450
Exercised (378,120) 39.501
---------
Outstanding at December 31, 1996 3,496,502 47.470
Granted 687,425 62.676
Canceled (8,191) 57.238
Forfeited (15,773) 50.083
Exercised (965,542) 44.404
---------
Outstanding at December 31, 1997 3,194,421 51.631
========= ======
Exercisable at December 31, 1997 2,659,399 50.442
========= ======
50
<PAGE>
The exercise prices for options outstanding as of December 31, 1997 ranged
from $23.375 to $62.75. The options outstanding and exercisable at December 31,
1997 are segregated into groups based on ranges of exercise price below:
<TABLE>
<CAPTION>
Wtd. Avg. Wtd. Avg.
Exercise Remaining
Shares Outstanding at 12/31/97: Range of Prices Price Life
------------------- -------- ---------
<S> <C> <C> <C>
31,214 $23.375 - $29.125 $23.688 .47 yrs
134,494 33.500 - 39.250 38.517 6.94 yrs
1,467,208 40.500 - 49.625 45.065 6.90 yrs
789,042 50.250 - 59.813 56.668 4.62 yrs
772,463 60.000 - 62.750 62.363 6.56 yrs
----------
3,194,421 $23.375 - $62.750 $51.631 6.68 yrs
=========
</TABLE>
Wtd. Avg.
Exercise
Shares Exercisable at 12/31/97: Range of Prices Price
------------------ ---------
31,214 $23.375 - $29.125 $23.688
134,494 33.500 - 39.250 38.517
1,325,518 40.500 - 49.625 45.255
781,506 50.250 - 59.813 56.638
386,667 60.000 - 62.750 62.007
---------
2,659,399 $23.375 - $62.750 $50.442
=========
At December 31, 1997, the Company had remaining an aggregate of 5,067,205
Common Shares reserved for issuance under its Stock Option Plans.
Employee Stock Purchase Plan - Effective July 1, 1997, the Company
established an Employee Stock Purchase Plan for all employees meeting certain
eligibility criteria. Under the Plan, eligible employees may purchase through a
series of semiannual offerings, each July and January, shares of the Company's
Common Stock, subject to certain limitations. The purchase price of each share
is 85 percent of the lesser of its fair market value on the grant date or on the
exercise date. The aggregate number of whole shares of Common Stock purchasable
under the option shall not exceed 10 percent of the employee's base
compensation. At December 31, 1997, 400,000 shares were available for purchase
under the plan. Based on the market price of common stock on the exercise date,
the Company issued approximately 47,215 shares in January 1998.
51
<PAGE>
Incentive Plan - The Employee Stock Incentive Plan provides that up to
2,500,000 shares of common stock may be granted through April 13, 2005, at the
discretion of the Board of Directors, to key employees and non-employee
Directors at no cost to the employees or Directors. The Company granted 81,326
shares and 72,407 shares during 1997 and 1996, respectively, at a weighted
average value of $62.64 in 1997 and $43.58 in 1996. Key employees receiving
grants are entitled to receive dividends, but assumption of full beneficial
ownership is contingent at the time of grant. In the event the employee does not
remain in continuous employment for the periods stipulated, the shares are
canceled and revert to the Company for reissuance under the Plan.
The aggregate fair market value of the shares granted under this Plan is
considered unearned compensation at the time of grant and compensation is earned
ratably over the stipulated period. Compensation cost included in net income is
$1.8 million in 1997, $1.9 million in 1996, and $2.5 million in 1995.
At December 31, 1997, the Company had remaining an aggregate of 488,070
Common Shares available for issuance under its Employee Stock Incentive Plan.
Common Stock Shareholder Rights Plan - On September 8, 1988, the Board
of Directors declared a distribution of one Stock Purchase Right for each Common
Share outstanding. Each right will entitle the holder to buy from the Company a
unit consisting of one Common Share at an exercise price of $75 per unit. The
rights become exercisable ten days after a public announcement that a person or
group has acquired 20 percent or more of the Company's Common Shares or has
commenced a tender offer for 20 percent or more of the Common Shares. The rights
may be redeemed prior to becoming exercisable by action of the Board of
Directors at a redemption price of $.01 per right. If more than 20 percent of
the Company's Common Shares become held by a beneficial owner, other than
pursuant to an offer deemed in the best interests of the shareholders by the
Company's independent directors, each right may be exercised for Common Shares,
or other property, of the Company having a value of twice the exercise price of
each right. If the Company is acquired by any person after the rights become
exercisable, each right will entitle its holder to receive common shares of the
acquiring company having a market value of twice the exercise price of each
right. The rights expire on September 19, 1998.
In February 1998, the Board of Directors approved a new Shareholder Rights
Plan having a 10-year term which expires on September 19, 2008 which provides
for the declaration of a distribution of one Share Purchase Right for each
Common Share outstanding effective September 19, 1998. The exercise price of
each new right will be $250.00. This new plan is substantially the same as the
1988 plan.
52
<PAGE>
10: EMPLOYEE RETIREMENT PLANS
The Company has defined benefit plans to provide pension benefits to
substantially all of its U.S. employees and for employees of several non-U.S.
operations. The benefits are primarily based on years of service and the
employee's final average compensation. The Company's funding policy is to
contribute an amount annually based upon actuarial and economic assumptions
designed to achieve adequate funding of projected benefit obligations. Plan
assets are principally invested in listed common stocks, bonds and common trust
funds.
U.S. Plans
The salary scale assumption is graded by age with an underlying inflation
assumption of 4% for U.S. plans. Other primary assumptions used to develop the
Company's U.S. net periodic pension expense and the actuarial present value of
the benefit obligations are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate 7.25% 7.5% 7.0%
Long-term rate of return on plan assets 9.5% 9.25% 9.25%
</TABLE>
Net periodic pension expense for the Company's U.S. defined benefit plans
consists of the following (in millions):
1997 1996 1995
------------ ------------ -------
Service cost $ 7.3 $ 7.6 $ 5.5
Interest cost 14.0 12.8 11.4
Return on plan assets (37.0) (27.1) (31.2)
Net amortization and deferral 22.8 14.8 20.1
------------ ------------ -------
Net periodic pension expense $ 7.1 $ 8.1 $ 5.8
============ ============ =======
53
<PAGE>
The following table sets forth the actuarial present value of benefit
obligations and funded status at December 31 for the Company's U.S. plans (in
millions):
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $(168.6) $(148.4)
Nonvested benefits (9.0) (8.5)
------- --------
Accumulated benefit obligation (177.6) (156.9)
Effect of projected future salary increases (27.9) (25.1)
------- --------
Projected benefit obligation (205.5) (182.0)
Plan assets at fair value 205.3 176.4
------- --------
Projected benefit obligation in excess of plan assets (0.2) (5.6)
Unrecognized net gain (36.7) (25.6)
Unrecognized prior service cost 5.2 6.0
Other (2.8) (2.3)
------- --------
Net pension liability included in the Consolidated Balance Sheets $ (34.5) $ (27.5)
======== ========
</TABLE>
Non-U.S. Plans
Primary assumptions used to develop the Company's non-U.S. net periodic
pension expense and the actuarial present value of the benefit obligations are
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Salary increase 3.0-6.5% 3.0-7.0% 4.0-6.5%
Discount rate 6.0-8.5% 6.0-9.0% 6.5-8.5%
Long-term rate of return on plan assets 6.0-9.0% 6.0-9.0% 7.0-9.0%
</TABLE>
Net periodic pension expense for the Company's non-U.S. defined benefit
plans consists of the following (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost $ 3.2 $ 2.2 $ 1.3
Interest cost 4.5 2.8 1.6
Return on plan assets (4.6) (2.8) (2.1)
Net amortization and deferral -- -- 0.5
------- ------- -------
Net periodic pension expense $ 3.1 $ 2.2 $ 1.3
======= ======= =======
</TABLE>
54
<PAGE>
The following table sets forth the actuarial present value of benefit
obligations and funded status at December 31 for the Company's non-U.S. plans
(in millions):
<TABLE>
<CAPTION>
Assets Exceed Accumulated
Accumulated Benefits Ex-
Benefits ceed Assets
--------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $ (40.7) $ (32.4) $ (4.5) $ (8.3)
Nonvested benefits (4.5) (3.6) (3.3) --
-------- -------- -------- ---------
Accumulated benefit obligation (45.2) (36.0) (7.8) (8.3)
Effect of projected future salary increases (13.8) (14.7) (4.2) (2.6)
-------- -------- -------- ---------
Projected benefit obligation (59.0) (50.7) (12.0) (10.9)
Plan assets at fair value 62.6 55.9 1.7 1.7
-------- -------- -------- ---------
Projected benefit obligation in excess of plan assets 3.6 5.2 (10.3) (9.2)
Unrecognized net gain (1.3) (2.6) 0.8 (0.1)
Unrecognized prior service cost -- -- 0.3 0.4
Other 1.3 1.5 -- 0.1
-------- -------- -------- ---------
Net pension asset (liability) included in the
Consolidated Balance Sheets $ 3.6 $ 4.1 $ (9.2) $ (8.8)
======== ======== ======== =========
</TABLE>
55
<PAGE>
11: POSTRETIREMENT BENEFITS
The Company pays limited medical and dental insurance premiums on behalf of
certain early retirees as well as providing a small life insurance benefit for
certain retirees.
Employee benefit plans at December 31, 1997 and 1996 include $8.5 million
and $7.8 million, respectively, representing the actuarially determined
liability for these benefits. The actuarially determined expense was $1.7
million, $1.5 million and $1.1 million in 1997, 1996 and 1995, respectively.
56
<PAGE>
12: INTEGRATION/RESTRUCTURING
To achieve reductions in operating costs and to integrate the operations of
the former Betz Laboratories, Inc. (Betz) and the former Dearborn business
(Dearborn), the Company has incurred incremental and non-recurring expenses that
are reported as Integration/Restructuring operating expenses.
Integration expenses are incremental and non-recurring costs necessary to
integrate Dearborn and Betz. Integration expenses amounted to $16.6 million and
$20.4 million for 1997 and 1996, respectively. These expenses are associated
with the activities of integration teams responsible for merging the two
companies for the benefit of future operations and include items such as
consulting and legal fees, integration bonuses, training, travel and Betz
employee relocation expenses. These costs are expensed as incurred. Such
integration activities were completed in 1997.
The provision for restructuring is for estimated exit costs associated with
the decisions to close Betz facilities and severance costs for Betz employees.
These costs are accrued when the decisions are made and announced and exit costs
can be reasonably estimated. A $9.6 million provision for restructuring, net of
the 1995 provision reversal noted below, was recorded in 1996 for the closure of
Betz facilities and the severance of Betz employees located throughout the
world. Additionally, $26.0 million and $12.8 million restructuring provisions
for the closure of Dearborn facilities and severance and relocation costs for
worldwide Dearborn employees were also recorded in 1996 and 1997, respectively,
which are part of the overall purchase price allocation. These combined actions
include employee termination benefits for approximately 550 technical,
production, administrative and support employees, as well as office
consolidations and asset dispositions. All restructuring plans were completed in
1997.
In connection with the Dearborn acquisition and restructuring decisions, at
December 31, 1997, approximately $11.9 million of assets are held for sale.
These assets, included in property, plant and equipment, are primarily
production facilities of Dearborn. The Company estimates it will complete the
sale of such facilities by 1999.
The $15.6 million provision for restructuring recorded in 1995 was for a
series of actions to reduce operating costs. The provision included the
writedown associated with the closure of two blending plants and other asset
dispositions, and employee termination benefits covering approximately 150
technical, production, administrative and support employees located primarily in
the United States. As a result of the completion of these restructuring actions,
$3.5 million of the 1995 restructuring provision was reversed in 1996. The lower
than anticipated cost resulted from fewer than planned terminations and higher
than planned attrition, along with lower than estimated losses on the closure of
a blending plant.
57
<PAGE>
A reconciliation of activity with respect to the restructuring accruals is
as follows (in millions):
1997 1996
------ ------
Balance at beginning of year $ 30.9 $ 7.5
Provision:
Included in Goodwill (see Note 2) 12.8 26.0
Charged to Consolidated Statements of
Operations - net (1.0) 9.6
Cash Payments (23.5) (11.4)
Noncash - Fixed asset writedowns and
foreign exchange translation (3.3) (0.8)
------ ------
Balance at end of year $ 15.9 $ 30.9
====== ======
The remaining reserve at December 31, 1997 is expected to be sufficient to
complete these actions. Cash flows from operations and available financing
sources are expected to be sufficient to meet restructuring liabilities.
58
<PAGE>
13: QUARTERLY FINANCIAL INFORMATION (unaudited)
The following is a summary of quarterly financial information for the years
ended December 31, 1997 and 1996 (in millions, except for per share data):
<TABLE>
<CAPTION>
1997 Quarter Ended
-----------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Net Sales $ 306.4 $ 322.4 $ 331.8 $ 334.2
Gross Profit 184.2 193.5 199.0 199.4
Earnings Before Income Taxes
and Cumulative Effect of
Accounting Change (Note 1) 28.8 32.8 41.4 39.9
Earnings Before
Cumulative Effect of
Accounting Change 18.6 21.1 26.7 25.8
Net Earnings 18.6 21.1 26.7 19.8
Net Earnings Per Common Share:
Basic
Before Cumulative Effect
of Accounting Change .61 .69 .88 .84
Net Earnings .61 .69 .88 .63
Diluted
Before Cumulative Effect
of Accounting Change .57 .64 .81 .78
Net Earnings .57 .64 .81 .59
Cash Dividends Declared
Per Common Share .375 .375 .38 .38
Common Share Market
Prices:
High Price 67-1/4 67-3/8 71 70-1/8
Low Price 55-1/4 61-1/4 59-11/16 57-11/16
<CAPTION>
1996 Quarter Ended
-------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Net Sales $ 199.5 $ 210.1 $ 304.2 $ 323.2
Gross Profit 122.6 129.3 183.8 192.0
Earnings Before Income Taxes
and Cumulative Effect of
Accounting Change (Note 1) 31.5 34.9 16.3 17.0
Earnings Before
Cumulative Effect of
Accounting Change 19.7 22.3 10.9 11.4
Net Earnings 19.7 22.3 10.9 11.4
Net Earnings Per Common Share:
Basic
Before Cumulative Effect
of Accounting Change .67 .76 .34 .36
Net Earnings .67 .76 .34 .36
Diluted
Before Cumulative Effect
of Accounting Change .62 .71 .34 .34
Net Earnings .62 .71 .34 .34
Cash Dividends Declared
Per Common Share .37 .37 .375 .375
Common Share Market
Prices:
High Price 47-1/4 48 53-1/2 60-1/8
Low Price 40-1/8 41-3/4 43-1/8 50
</TABLE>
The 1996 and first three quarters of 1997 earnings per share amounts have
been restated to comply with Statement of Financial Accounting Standards No.
128, "Earnings per Share." The common stock of the Company is traded on the New
York Stock Exchange under the symbol BTL. The approximate number of record
holders of Common Shares as of January 30, 1998, was 3,466.
59
<PAGE>
Item 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Pursuant to General Instruction G(3) to Form 10-K, in response to Item 10,
Registrant hereby incorporates by reference the information contained under the
headings "Proposal No. 1: Election of Directors" on pages 5 through 7,
inclusive, and "Executive Officers" on page 9 of Registrant's definitive proxy
statement to be filed with the Securities and Exchange Commission on or about
March 9, 1998, in connection with Registrant's 1998 Annual Meeting of
Shareholders.
Item 11 - EXECUTIVE COMPENSATION AND TRANSACTIONS
Pursuant to General Instruction G(3) to Form 10-K, in response to Item 11,
Registrant hereby incorporates by reference the information contained under the
headings "Remuneration of Directors" on page 11, "Compensation Committee Report
on Executive Compensation" on pages 12 through 14, inclusive, "Executive
Compensation" on pages 15 through 18, inclusive, "Pension Plan Table" on page
20, and "Employment Agreements" on pages 20 and 21 of Registrant's definitive
proxy statement to be filed with the Securities and Exchange Commission on or
about March 9, 1998, in connection with Registrant's 1998 Annual Meeting of
Shareholders.
Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G(3) to Form 10-K, in response to Item 12,
Registrant hereby incorporates by reference the information contained under the
heading "Ownership of Company Shares" on pages 10 and 11 of Registrant's
definitive proxy statement to be filed with the Securities and Exchange
Commission on or about March 9, 1998, in connection with Registrant's 1998
Annual Meeting of Shareholders.
Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
John Quarles, a Director of the Registrant, is a partner in the law firm of
Morgan, Lewis and Bockius which provided legal services to the Registrant in
1997.
60
<PAGE>
PART IV
Item 14 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. In response to Item 14, Registrant hereby sets forth the following
included in Item 8:
Consolidated Statements of Operations--Years ended December 31, 1997, 1996 and
1995
Consolidated Balance Sheets--December 31, 1997 and 1996
Consolidated Statements of Cash Flows--Years ended December 31, 1997, 1996 and
1995
Consolidated Statements of Common Shareholders' Equity--Years ended December 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
(a) 2. The following consolidated financial statement schedule of BetzDearborn
Inc. and subsidiaries is included in Item 14(a):
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
(a) 3. Listing of Exhibits
Form 10-K
Exhibit No. Description Page
- ----------- ----------- ----
3 Articles of Incorporation and Bylaws
* The item designated Exhibit 3 to Registrant's Annual Report
on Form 10-K for fiscal year 1988 (Restated Articles of
Incorporation) as heretofore filed with the Securities and
Exchange Commission is hereby incorporated by reference as
Exhibit 3.
3.1 The Bylaws of BetzDearborn Inc.
4 Instruments defining the rights of Security Holders
4.1 Rights Agreement, dated as of February 12, 1998, by and between
BetzDearborn Inc. and American Stock Transfer & Trust Company, as
Rights Agent.
61
<PAGE>
Exhibit No. Description Page
- ----------- ----------- ----
10 Material Contracts
10.1 Credit Agreement, dated as of October 20, 1997 by and among the
Registrant, BetzDearborn Canada, the banks parties thereto, and
The Chase Manhattan Bank of Canada, as Agent
10.2 Executive Employment Agreement
10.3 Guidelines for Performance Incentive Compensation Plan
10.4 Acquisition Incentive Compensation Plan
* The item designated as Exhibit A to Registrant's definitive
Proxy Statement dated March 8, 1995 ("Stock Incentive Plan");
the item designated Exhibit A to Registrant's definitive Proxy
Statement dated March 10, 1997 ("Stock Option Plan of 1987");
and the item designated as Exhibit 2.1 to Registrant's Current
Report on Form 8-K/A filed on March 29, 1996 (Grace Dearborn
Worldwide Purchase and Sale Agreement, dated as of March 11,
1996 by and between W. R. Grace and Co.-Conn. and the
Registrant); all as heretofore filed with the Securities and
Exchange Commission are hereby incorporated by reference as
Exhibit 10 hereto.
11 Statement regarding computation of per share earnings:
See Item 8 - Note 5.
21 Subsidiaries of Registrant
23 Consent of Independent Auditors
27 Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K was filed with the Securities and Exchange Commission on
December 11, 1997 reporting that the Registrant anticipated taking a write-off
in the fourth quarter of 1997 for the cumulative effect of a change in
accounting for certain business process reengineering costs.
See Item 8 - Note 1.
62
<PAGE>
BETZDEARBORN INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D Col. E
- -------------------------------------------------------------------------------------------------------------------------------
Additions
------------------------------------------
Balance at (1) (2)
Beginning Charged to Costs Charged to Other Deductions - Balance at End
Description of Period and Expenses Accounts - Describe Describe of Period
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
Acconts Receivable
deducted from Trade
Accounts Receivable:
Year Ended
December 31, 1997 $7,572 $2,040 ($ 637)(B) $1,733(A) $7,242
====== ====== ======= ====== ======
Year Ended
December 31, 1996 $2,886 $1,319 $4,366 (B) $ 999(A) $7,572
====== ====== ======= ====== ======
Year Ended
December 31, 1995 $2,693 $ 434 $ 122 $ 363(A) $2,886
====== ====== ======= ====== ======
</TABLE>
(A) Principally accounts written off/Foreign Currency Translation.
(B) Acquisition of Dearborn and the Misan Group.
63
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BETZDEARBORN INC.
By: /s/ William R. Cook Date: March __, 1998
----------------------------------- -------------------
William R. Cook,
Chairman, President and
Chief Executive Officer
By: /s/ George L. James III Date: March __, 1998
----------------------------------- -------------------
George L. James III
Senior Vice President and
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints William R. Cook and George L. James III, and each
of them, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead in any and all capacities, to sign any or all amendments and
supplements to this Annual Report on Form 10-K, with all exhibits thereto, and
other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully and to all intents and purposes
as he or she might or could do in person, hereby ratifying and confirming all
that each said attorney-in-fact and agent, or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ John W. Boyer, Jr. Date: March __, 1998
----------------------------------- -------------------
John W. Boyer, Jr.,
Director
By: /s/ Patrick F. Brennan Date: March __, 1998
----------------------------------- -------------------
Patrick F. Brennan,
Director
64
<PAGE>
By: Date:
----------------------------------- -------------------
Carolyn S. Burger,
Director
By: /s/ William R. Cook Date: March __, 1998
----------------------------------- -------------------
William R. Cook,
Director
By: /s/ John G. Drosdick Date: March __, 1998
----------------------------------- -------------------
John G. Drosdick
Director
By: /s/ Alan R. Hirsig Date: March __, 1998
----------------------------------- -------------------
Alan R. Hirsig,
Director
By: /s/ John F. McCaughan Date: March __, 1998
----------------------------------- -------------------
John F. McCaughan,
Director
By: /s/ John Quarles Date: March __, 1998
----------------------------------- -------------------
John Quarles,
Director
By: /s/ John A. H. Shober Date: March __, 1998
----------------------------------- -------------------
John A. H. Shober,
Director
By: Date:
----------------------------------- -------------------
Geoffrey Stengel, Jr.,
Director
By: /s/ Robert L. Yohe Date: March __, 1998
----------------------------------- -------------------
Robert L. Yohe,
Director
65
B Y L A W S
OF
BETZDEARBORN INC.
(a Pennsylvania Registered Corporation)
(As adopted on December 11, 1997)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Offices and Fiscal Year 1
Section 1.01. Registered Office 1
Section 1.02. Other Offices 1
Section 1.03. Fiscal Year 1
ARTICLE II Notice -- Waivers -- Meetings Generally 1
Section 2.01. Manner of Giving Notice 1
(a) General Rule 1
(b) Bulk Mail 1
(c) Adjourned Shareholder Meetings 2
Section 2.02. Notice of Meetings of Board of Directors 2
Section 2.03. Notice of Meetings of Shareholders 2
(a) General Rule 2
(b) Notice of Action by Shareholders on Bylaws 2
(c) Notice of Action by Shareholders on Fundamental Change 2
(d) Notice of Action by Shareholders Giving Rise to
Dissenters Rights 3
Section 2.04. Waiver of Notice 3
(a) Written Waiver 3
(b) Waiver by Attendance 3
Section 2.05. Modification of Proposal Contained in Notice 3
Section 2.06. Exception to Requirement of Notice 3
(a) General Rule 3
(b) Shareholders Without Forwarding Addresses 3
Section 2.07. Use of Conference Telephone and Similar Equipment 4
Section 2.08. Notice to Corporation of Shareholder Business and
Nominations 4
(a) Annual Meeting of Shareholders 4
(b) Special Meeting of Shareholders 5
(c) General 5
ARTICLE III Shareholders 6
Section 3.01. Place of Meeting 6
Section 3.02. Annual Meeting 6
Section 3.03. Special Meetings 7
Section 3.04. Quorum and Adjournment 7
(a) General Rule 7
(b) Withdrawal of a Quorum 7
(c) Adjournments Generally 7
(d) Electing Directors at Adjourned Meeting 7
(e) Other Action in Absence of Quorum 7
<PAGE>
Section 3.05. Action by Shareholders 8
Section 3.06. Organization 8
Section 3.07. Voting Rights of Shareholders 8
Section 3.08. Voting and Other Action by Proxy 8
(a) General Rule 8
(b) Execution and Filing 9
(c) Revocation 9
(d) Expenses 9
Section 3.09. Voting by Fiduciaries and Pledgees 9
Section 3.10. Voting by Joint Holders of Shares 9
(a) General Rule 9
(b) Exception 9
Section 3.11. Voting by Corporations 10
(a) Voting by Corporate Shareholders 10
(b) Controlled Shares 10
Section 3.12. Determination of Shareholders of Record 10
(a) Fixing Record Date 10
(b) Determination When a Record Date is Not Fixed 10
(c) Certification by Nominee. 10
Section 3.13. Voting Lists 11
(a) General Rule 11
(b) Effect of List 11
Section 3.14. Judges of Election 11
(a) Appointment 11
(b) Vacancies 11
(c) Duties 11
(d) Report 12
Section 3.15. Minors as Security Holders 12
Section 3.16. Consent of Shareholders in Lieu of Meeting 12
ARTICLE IV Board of Directors 12
Section 4.01. Powers; Liability 12
(a) General Rule 12
(b) Liability of Directors 12
(c) Notation of Dissent 13
Section 4.02. Qualifications and Selection of Directors 13
(a) Qualifications 13
(b) Election of Directors 14
Section 4.03. Number, Classification and Term of Office 14
Section 4.04. Vacancies 14
(a) General Rule 14
(b) Resignation; Action by Resigned Directors 14
Section 4.05. Removal of Directors 14
(a) Removal by the Shareholders 14
(b) Removal by the Board 15
<PAGE>
Section 4.06. Place of Meetings 15
Section 4.07. Organization of Meetings 15
Section 4.08. Regular Meetings 15
Section 4.09. Special Meetings 15
Section 4.10. Quorum of and Action by Directors 15
(a) General Rule 15
(b) Action by Written Consent 15
Section 4.11. Committees 16
(a) Establishment and Powers 16
(b) Alternate Committee Members 16
(c) Term 16
(d) Committee Procedures 16
Section 4.12. Compensation 16
ARTICLE V Officers 17
Section 5.01. Officers Generally 17
(a) Number, Qualifications and Designation 17
(b) Bonding 17
(c) Standard of Care 17
Section 5.02. Election, Term of Office and Resignations 17
(a) Election and Term of Office 17
(b) Resignations 17
Section 5.03. Subordinate Officers, Committees and Agents 18
Section 5.04. Removal of Officers and Agents 18
Section 5.05. Vacancies 18
Section 5.06. Authority 18
(a) General Rule 18
(b) Chief Executive Officer 18
Section 5.07. The Chairman of the Board 18
Section 5.08. The President 18
Section 5.09. Executive Vice President 19
Section 5.10. Senior Vice President 19
Section 5.11. Vice President 19
Section 5.12. Assistant Vice Presidents 19
Section 5.13. Secretary 19
Section 5.14. Assistant Secretaries 19
Section 5.15. Treasurer 20
Section 5.16. Assistant Treasurers 20
Section 5.17. Subordinate Officers, Committees and Agents 20
Section 5.18. Salaries 20
ARTICLE VI Certificates of Stock, Transfer, Etc. 21
Section 6.01. Share Certificates 21
(a) Form of Certificates 21
(b) Share Register 21
<PAGE>
Section 6.02. Issuance 21
Section 6.03. Transfer 21
Section 6.04. Record Holder of Shares 21
Section 6.05. Lost, Destroyed or Mutilated Certificates 22
ARTICLE VII Indemnification of Directors, Officers and Other
Authorized Representatives 22
Section 7.01. Directors and Officers; Third Party Action 22
Section 7.02. Directors and Officers; Derivative Actions 22
Section 7.03. Employees and Agents 23
Section 7.04. Bylaw Provisions Not Exclusive 23
Section 7.05. Expense of Litigation 23
Section 7.06. Indemnification After Leaving Office 23
Section 7.07. Creation of Indemnification Fund 23
ARTICLE VIII Miscellaneous 24
Section 8.01. Corporate Seal 24
Section 8.02. Checks 24
Section 8.03. Contracts 24
Section 8.04. Interested Directors or Officers; Quorum 24
(a) General Rule 24
(b) Quorum 24
Section 8.05. Deposits 25
Section 8.06. Corporate Records 25
(a) Required Records 25
(b) Right of Inspection 25
Section 8.07. Amendment of Bylaws 25
</TABLE>
<PAGE>
B Y L A W S
OF
BETZDEARBORN INC.
(a Pennsylvania Registered Corporation)
...oo0oo...
ARTICLE I
Offices and Fiscal Year
Section 1.01. Registered Office. The registered office of the
Corporation in the Commonwealth of Pennsylvania shall be at 4636 Somerton Road,
Trevose, Pennsylvania 19053-6783, until otherwise established by an amendment
of the articles of incorporation (the "articles") or by the Board of Directors
and a record of such change is filed with the Pennsylvania Department of State
in the manner provided by law.
Section 1.02. Other Offices. The Corporation may also have offices at
such other places within or without the Commonwealth of Pennsylvania as the
Board of Directors may from time to time appoint or the business of the
Corporation may require.
Section 1.03. Fiscal Year. The fiscal year of the Corporation shall
begin on the first day of January in each year.
ARTICLE II
Notice -- Waivers -- Meetings Generally
Section 2.01. Manner of Giving Notice.
(a) General Rule. Whenever written notice is required to be given to
any person under the provisions of the Pennsylvania Business Corporation Law of
1988 (the "Business Corporation Law") or by the articles or these bylaws, it may
be given to the person either personally or by sending a copy thereof by first
class or express mail, postage prepaid, or by courier service, charges prepaid,
or by facsimile transmission to the address (or to the facsimile or telephone
number) of the person appearing on the books of the Corporation or, in the case
of directors, supplied by the director to the Corporation for the purpose of
notice. If the notice is sent by mail or courier service, it shall be deemed to
have been given to the person entitled thereto when deposited in the United
States mail or with a courier service for delivery to that person or, in the
case of facsimile transmission, when received. A notice of meeting shall specify
the place, day and hour of the meeting and any other information required by any
other provision of the Business Corporation Law, the articles or these bylaws.
(b) Bulk Mail. If the Corporation has more than 30 shareholders,
notice of any regular or special meeting of the shareholders, or any other
notice required by the Business Corporation Law or by the articles or these
bylaws to be given to all shareholders or to all holders
<PAGE>
of a class or series of shares, may be given by any class of postpaid mail if
the notice is deposited in the United States mail at least 20 days prior to the
day named for the meeting or any corporate or shareholder action specified in
the notice.
(c) Adjourned Shareholder Meetings. When a meeting of shareholders is
adjourned, it shall not be necessary to give any notice of the adjourned meeting
or of the business to be transacted at an adjourned meeting, other than by
announcement at the meeting at which the adjournment is taken, unless the Board
fixes a new record date for the adjourned meeting in which event notice shall be
given in accordance with Section 2.03.
Section 2.02. Notice of Meetings of Board of Directors. Notice of a
regular meeting of the Board of Directors need not be given. Notice of every
special meeting of the Board of Directors shall be given to each director by
telephone or in writing at least one hour (in the case of notice by telephone),
24 hours (in the case of notice by facsimile transmission) or 48 hours (in the
case of notice by courier service or express mail) or five days (in the case of
notice by first class mail) before the time at which the meeting is to be held.
Every such notice shall state the time and place of the meeting. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board need be specified in a notice of the meeting.
Section 2.03. Notice of Meetings of Shareholders.
(a) General Rule. Except as otherwise provided in Section 2.01(b),
written notice of every meeting of the shareholders shall be given by, or at the
direction of, the Secretary or other authorized person to each shareholder of
record entitled to vote at the meeting at least (1) 10 days prior to the day
named for a meeting (and, in case of a meeting called to consider a merger,
consolidation, asset transfer, share exchange or division, to each shareholder
of record not entitled to vote at the meeting) called to consider a fundamental
change under 15 Pa.C.S. Chapter 19 or (2) five days prior to the day named for
the meeting in any other case. If the Secretary neglects or refuses to give
notice of a meeting, the person or persons calling the meeting may do so. In the
case of a special meeting of shareholders, the notice shall specify the general
nature of the business to be transacted.
(b) Notice of Action by Shareholders on Bylaws. In the case of a
meeting of shareholders that has as one of its purposes action on the bylaws,
written notice shall be given to each shareholder that the purpose, or one of
the purposes, of the meeting is to consider the adoption, amendment or repeal of
the bylaws. There shall be included in, or enclosed with, the notice a copy of
the proposed amendment or a summary of the changes to be effected thereby.
(c) Notice of Action by Shareholders on Fundamental Change. In the
case of a meeting of the shareholders that has as one of its purposes action
with respect to any fundamental change under 15 Pa.C.S. Chapter 19, each
shareholder shall be given, together with written notice of the meeting, a copy
or summary of the amendment or plan to be considered at the meeting in
compliance with the provisions of Chapter 19.
2
<PAGE>
(d) Notice of Action by Shareholders Giving Rise to Dissenters Rights.
In the case of a meeting of the shareholders that has as one of its purposes
action that would give rise to dissenters rights under the provisions of 15
Pa.C.S. Subchapter 15D, each shareholder shall be given, together with written
notice of the meeting:
(1) a statement that the shareholders have a right to dissent and
obtain payment of the fair value of their shares by complying with the
provisions of Subchapter 15D (relating to dissenters rights); and
(2) a copy of Subchapter 15D.
Section 2.04. Waiver of Notice.
(a) Written Waiver. Whenever any written notice is required to be
given under the provisions of the Business Corporation Law, the articles or
these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of the notice. Neither the business to be
transacted at, nor the purpose of, a meeting need be specified in the waiver of
notice of the meeting.
(b) Waiver by Attendance. Attendance of a person at any meeting shall
constitute a waiver of notice of the meeting except where a person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting was not lawfully called
or convened.
Section 2.05. Modification of Proposal Contained in Notice. Whenever
the language of a proposed resolution is included in a written notice of a
meeting required to be given under the provisions of the Business Corporation
Law or the articles or these bylaws, the meeting considering the resolution may
without further notice adopt it with such clarifying or other amendments as do
not enlarge its original purpose.
Section 2.06. Exception to Requirement of Notice.
(a) General Rule. Whenever any notice or communication is required to
be given to any person under the provisions of the Business Corporation Law or
by the articles or these bylaws or by the terms of any agreement or other
instrument or as a condition precedent to taking any corporate action and
communication with that person is then unlawful, the giving of the notice or
communication to that person shall not be required.
(b) Shareholders Without Forwarding Addresses. Notice or other
communications need not be sent to any shareholder with whom the Corporation has
been unable to communicate for more than 24 consecutive months because
communications to the shareholder are returned unclaimed or the shareholder has
otherwise failed to provide the Corporation with a current address. Whenever the
shareholder provides the Corporation with a current address, the
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Corporation shall commence sending notices and other communications to the
shareholder in the same manner as to other shareholders.
Section 2.07. Use of Conference Telephone and Similar Equipment. Any
director may participate in any meeting of the Board of Directors, and the Board
of Directors may provide by resolution with respect to a specific meeting or
with respect to a class of meetings that one or more persons may participate in
a meeting of the shareholders of the Corporation, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this section shall constitute presence in person at the meeting.
Section 2.08. Notice to Corporation of Shareholder Business and
Nominations.
(a) Annual Meeting of Shareholders.
(1) Nominations of persons for election to the Board of Directors
of the Corporation and the proposal of business to be considered by
the shareholders may be made at an annual meeting of shareholders (i)
by or at the direction of the Chairman of the Board or the Board of
Directors or (ii) by any shareholder of the Corporation who is
entitled to vote at the meeting with respect to the election of
directors or the business to be proposed by such shareholder, as the
case may be, who complies with the notice procedures set forth in
clauses (2) and (3) of paragraph (a) of this Section 2.08 and who is
a shareholder of record at the time such notice is delivered to the
Secretary of the Corporation as provided below.
(2) For nominations or other business to be properly brought
before an annual meeting by a shareholder pursuant to clause (ii) of
paragraph (a)(1) of this Section 2.08, the shareholder must have
given timely notice thereof in writing to the Secretary of the
Corporation and such business must be a proper subject for
shareholder action under the Business Corporation Law. To be timely,
a shareholder's notice shall be delivered to or mailed to and
received by the Secretary of the Corporation at the office specified
in Section 1.01 hereof not less than 120 days nor more than 150 days
prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the
annual meeting is advanced or delayed by more than 30 days from such
anniversary date, notice by the shareholder to be timely must be so
delivered or mailed and received not later than the later of 120 days
prior to such annual meeting or the tenth day following the day on
which public announcement of the date of such meeting is first made.
Such shareholder's notice shall set forth (i) as to each person whom
the shareholder proposes to nominate for election or reelection as a
director all information relating to such person that would be
required to be disclosed in a proxy statement filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") if proxies were solicited with respect to such
nominee by the Board of Directors and shall include such person's
written consent to serving as a director if elected; (ii) as to any
other business that
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the shareholder proposes to bring before the meeting, a description
of the business desired to be brought before the meeting, the reasons
for conducting such business at the meeting and any material interest
in such business of such shareholder; and (iii) as to the shareholder
giving the notice (x) the name and address of such shareholder, as
they appear on the Corporation's books, (y) the class and number of
shares of the Corporation which are owned beneficially and of record
by such shareholder and (z) a description of all arrangements or
understandings among such shareholder and any other person or
persons, including any nominee (giving the name and address of such
person or persons), with respect to the matters set forth in such
shareholder's notice.
(3) Notwithstanding anything in the second sentence of paragraph
(a) (2) of this Section 2.08 to the contrary, in the event that the
number of directors to be elected to the Board of Directors is
increased from the number of directors then serving in the class to
be elected and there is no public announcement naming all of the
nominees for director or specifying the size of the increased Board
of Directors or class made by the Corporation at least 130 days prior
to the first anniversary of the preceding year's annual meeting, a
shareholder's notice required by paragraph (a)(2) of this Section
2.08 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall
be delivered to the Secretary of the Corporation at the principal
executive offices of the Corporation not later than the close of
business on the tenth day following the day on which such public
announcement is first made by the Corporation.
(b) Special Meeting of Shareholders. At a special meeting of
shareholders, only such business shall be conducted as shall have been set forth
in the notice of meeting. Nominations of persons for election to the Board of
Directors may be made at a special meeting of shareholders at which directors
are to be elected (i) by or at the direction of the Chairman of the Board or the
Board of Directors pursuant to a resolution or (ii) by any shareholder of the
Corporation who is entitled to vote at the meeting with respect to the election
of directors, who complies with the notice procedures set forth in this
paragraph (b) and who is a shareholder of record at the time such notice is
delivered to the Secretary of the Corporation as provided below. Nominations by
shareholders of persons for election to the Board of Directors may be made at a
special meeting of shareholders if the shareholder's notice as required by
paragraph (a)(2) of this Section 2.08 shall be delivered to the Secretary of the
Corporation at the principal executive offices of the Corporation not earlier
than the ninetieth day prior to such special meeting and not later than the
close of business on the later of the sixtieth day prior to such special meeting
or the tenth day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
(c) General.
(1) Only persons who are nominated in accordance with the
procedures set forth in this Section 2.08 shall be eligible to serve
as directors and only such
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business shall be conducted at a meeting of shareholders as shall
have been brought before the meeting in accordance with the
procedures set forth in this Section 2.08.
(2) Except as otherwise provided by law, the articles or
this Section 2.08, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to
be brought before the meeting was made in accordance with the
procedures set forth in this Section 2.08 and, if any proposed
nomination or business is not in compliance with this Section 2.08, to
declare that such defective nomination or proposal shall be
disregarded.
(3) For purposes of this Section 2.08, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
(4) Notwithstanding the foregoing provisions of this Section
2.08, a shareholder shall also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 2.08. Nothing in this
Section 2.08 shall be deemed to enlarge or impair any rights (i) of
shareholders to request inclusion of proposals in the Corporation's
proxy materials with respect to a meeting of shareholders pursuant to
and upon meeting the requirements of Rule 14a-8 under Exchange Act or
(ii) of the holders of any class or series of preferred stock or any
other class or series of stock as set forth in the articles to elect
directors under specified circumstances or to consent to specific
actions taken by the Corporation.
ARTICLE III
Shareholders
Section 3.01. Place of Meeting. Meetings of shareholders of the
Corporation shall be held at such place, within the Commonwealth of Pennsylvania
or elsewhere, as may be fixed by the Board of Directors. If the Board shall not
fix a place for such meetings, they shall be held at the office of the
Corporation set forth in Section 1.01 of these Bylaws.
Section 3.02. Annual Meeting. The Board of Directors may fix and
designate the date and time of the annual meeting of the shareholders, but if no
such date and time is fixed and designated by the Board, the meeting for any
calendar year shall be held on the second Thursday in April in such year, if not
a legal holiday under the laws of Pennsylvania, and, if a legal holiday, then on
the next succeeding business day, not a Saturday, at 11:00 o'clock A.M., and at
said meeting the shareholders then entitled to vote shall elect directors and
shall transact such other business as may properly be brought before the
meeting. If the annual meeting shall not have been called and held within six
months after the designated time, any shareholder may call the meeting at any
time thereafter.
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Section 3.03. Special Meetings. Special meetings of the shareholders
may be called at any time by the Chairman of the Board or by resolution of the
Board of Directors, who may fix the date, time and place of the meeting. If the
Board does not fix the date, time or place of the meeting, it shall be the duty
of the Secretary to do so. A date fixed by the Secretary shall not be more than
60 days after the date of the adoption of the resolution of the Board calling
the special meeting.
Section 3.04. Quorum and Adjournment.
(a) General Rule. A meeting of shareholders of the Corporation duly
called shall not be organized for the transaction of business unless a quorum is
present. The presence of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast on a particular matter to
be acted upon at the meeting shall constitute a quorum for the purposes of
consideration and action on the matter. Shares of the Corporation owned,
directly or indirectly, by it and controlled, directly or indirectly, by the
Board of Directors of the Corporation, as such, shall not be counted in
determining the total number of outstanding shares for quorum purposes at any
given time.
(b) Withdrawal of a Quorum. The shareholders present at a duly
organized meeting can continue to do business until adjournment notwithstanding
the withdrawal of enough shareholders to leave less than a quorum.
(c) Adjournments Generally. Any regular or special meeting of the
shareholders, including one at which directors are to be elected and one which
cannot be organized because a quorum has not attended, may be adjourned for such
period and to such place as the shareholders present and entitled to vote shall
direct.
(d) Electing Directors at Adjourned Meeting. Those shareholders
entitled to vote who attend a meeting called for the election of directors that
has been previously adjourned for lack of a quorum, although less than a quorum
as fixed in this section, shall nevertheless constitute a quorum for the purpose
of electing directors.
(e) Other Action in Absence of Quorum. Those shareholders entitled to
vote who attend a meeting of shareholders that has been previously adjourned for
one or more periods aggregating at least 15 days because of an absence of a
quorum, although less than a quorum as fixed in this section, shall nevertheless
constitute a quorum for the purpose of acting upon any matter set forth in the
notice of the meeting if the notice states that those shareholders who attend
the adjourned meeting shall nevertheless constitute a quorum for the purpose of
acting upon the matter.
Section 3.05. Action by Shareholders. Except as otherwise provided in
the Business Corporation Law or the articles or these bylaws, whenever any
corporate action is to be taken by vote of the shareholders of the Corporation,
it shall be authorized upon receiving the affirmative vote of a majority of the
votes cast by all shareholders entitled to vote thereon and, if
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any shareholders are entitled to vote thereon as a class, upon receiving the
affirmative vote of a majority of the votes cast by the shareholders entitled to
vote as a class.
Section 3.06. Organization. At every meeting of the shareholders, the
Chairman of the Board, or, in the case of vacancy in office or absence of the
Chairman of the Board, one of the following persons present in the order stated:
the President, an Executive Vice President, a Senior Vice President or a Vice
President in their order of rank or seniority in office, or a person chosen by
vote of the shareholders present, shall act as chairman of the meeting. The
Secretary or, in the absence of the Secretary, an assistant secretary, or, in
the absence of both the Secretary and assistant secretaries, a person appointed
by the chairman of the meeting, shall act as secretary of the meeting.
Section 3.07. Voting Rights of Shareholders. Unless otherwise provided
in the articles, every shareholder of the Corporation shall be entitled to one
vote for every share standing in the name of the shareholder on the books of the
Corporation.
Section 3.08. Voting and Other Action by Proxy.
(a) General Rule.
(1) Every shareholder entitled to vote at a meeting of
shareholders may authorize another person to act for the shareholder
by proxy.
(2) The presence of, or vote or other action at a meeting of
shareholders by, a proxy of a shareholder shall constitute the
presence of, or vote or action by the shareholder.
(3) Where two or more proxies of a shareholder are present, the
Corporation shall, unless otherwise expressly provided in the proxy,
accept as the vote of all shares represented thereby the vote cast by
a majority of them and, if a majority of the proxies cannot agree
whether the shares represented shall be voted or upon the manner of
voting the shares, the voting of the shares shall be divided equally
among those persons.
(b) Execution and Filing. Every proxy shall be executed in
writing by the shareholder or by the duly authorized attorney-in-fact of the
shareholder and filed with the Secretary of the Corporation. A telegram, telex,
cablegram, datagram or similar transmission from a shareholder or
attorney-in-fact, or a photographic, facsimile or similar reproduction of a
writing executed by a shareholder or attorney-in-fact:
(1) may be treated as properly executed for purposes of this
subsection; and
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(2) shall be so treated if it sets forth a confidential and unique
identification number or other mark furnished by the Corporation to
the shareholder for the purposes of a particular meeting or
transaction.
(c) Revocation. A proxy, unless coupled with an interest, shall be
revocable at will, notwithstanding any other agreement or any provision in the
proxy to the contrary, but the revocation of a proxy shall not be effective
until written notice thereof has been given to the Secretary of the Corporation.
An unrevoked proxy shall not be valid after three years from the date of its
execution unless a longer time is expressly provided therein. A proxy shall not
be revoked by the death or incapacity of the maker unless, before the vote is
counted or the authority is exercised, written notice of the death or incapacity
is given to the Secretary of the Corporation.
(d) Expenses. The Corporation shall pay the reasonable expenses of
solicitation of votes, proxies or consents of shareholders by or on behalf of
the Board of Directors or its nominees for election to the Board, including
solicitation by professional proxy solicitors and otherwise.
Section 3.09. Voting by Fiduciaries and Pledgees. Shares of the
Corporation standing in the name of a trustee or other fiduciary and shares held
by an assignee for the benefit of creditors or by a receiver may be voted by the
trustee, fiduciary, assignee or receiver. A shareholder whose shares are pledged
shall be entitled to vote the shares until the shares have been transferred into
the name of the pledgee, or a nominee of the pledgee, but nothing in this
section shall affect the validity of a proxy given to a pledgee or nominee.
Section 3.10. Voting by Joint Holders of Shares.
(a) General Rule. Where shares of the Corporation are held jointly or
as tenants in common by two or more persons, as fiduciaries or otherwise:
(1) if only one or more of such persons is present in person or by
proxy, all of the shares standing in the names of such persons shall
be deemed to be represented for the purpose of determining a quorum
and the Corporation shall accept as the vote of all the shares the
vote cast by a joint owner or a majority of them; and
(2) if the persons are equally divided upon whether the shares
held by them shall be voted or upon the manner of voting the shares,
the voting of the shares shall be divided equally among the persons
without prejudice to the rights of the joint owners or the beneficial
owners thereof among themselves.
(b) Exception. If there has been filed with the Secretary of the
Corporation a copy, certified by an attorney at law to be correct, of the
relevant portions of the agreement under which the shares are held or the
instrument by which the trust or estate was created or the order of court
appointing them or of an order of court directing the voting of the shares, the
persons
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specified as having such voting power in the document latest in date of
operative effect so filed, and only those persons, shall be entitled to vote the
shares but only in accordance therewith.
Section 3.11. Voting by Corporations.
(a) Voting by Corporate Shareholders. Any Corporation that is a
shareholder of this Corporation may vote at meetings of shareholders of this
Corporation by any of its officers or agents, or by proxy appointed by any
officer or agent, unless some other person, by resolution of the Board of
Directors of the other Corporation or a provision of its articles or bylaws, a
copy of which resolution or provision certified to be correct by one of its
officers has been filed with the Secretary of this Corporation, is appointed its
general or special proxy in which case that person shall be entitled to vote the
shares.
(b) Controlled Shares. Shares of this Corporation owned, directly or
indirectly, by it and controlled, directly or indirectly, by the Board of
Directors of this Corporation, as such, shall not be voted at any meeting and
shall not be counted in determining the total number of outstanding shares for
voting purposes at any given time.
Section 3.12. Determination of Shareholders of Record.
(a) Fixing Record Date. The Board of Directors may fix a time prior to
the date of any meeting of shareholders as a record date for the determination
of the shareholders entitled to notice of, or to vote at, the meeting, which
time, except in the case of an adjourned meeting, shall be not more than 90 days
prior to the date of the meeting of shareholders. Only shareholders of record on
the date fixed shall be so entitled notwithstanding any transfer of shares on
the books of the Corporation after any record date fixed as provided in this
subsection. The Board of Directors may similarly fix a record date for the
determination of shareholders of record for any other purpose. When a
determination of shareholders of record has been made as provided in this
section for purposes of a meeting, the determination shall apply to any
adjournment thereof unless the Board fixes a new record date for the adjourned
meeting.
(b) Determination When a Record Date is Not Fixed. If a record date is
not fixed:
(1) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the
close of business on the day next preceding the day on which notice
is given.
(2) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
(c) Certification by Nominee. The Board of Directors may adopt a
procedure whereby a shareholder of the Corporation may certify in writing to the
Corporation that all or a portion of the shares registered in the name of the
shareholder are held for the account of a
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specified person or persons. Upon receipt by the Corporation of a certification
complying with the procedure, the persons specified in the certification shall
be deemed, for the purposes set forth in the certification, to be the holders of
record of the number of shares specified in place of the shareholder making the
certification.
Section 3.13. Voting Lists.
(a) General Rule. The officer or agent having charge of the transfer
books for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by each.
The list shall be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting for the purposes thereof except that, if the Corporation has
5,000 or more shareholders, in lieu of the making of the list, the Corporation
may make the information therein available at the meeting by any other means.
(b) Effect of List. Failure to comply with the requirements of this
section shall not affect the validity of any action taken at a meeting prior to
a demand at the meeting by any shareholder entitled to vote thereat to examine
the list. The original share register or transfer book, or a duplicate thereof
kept in the Commonwealth of Pennsylvania, shall be prima facie evidence as to
who are the shareholders entitled to examine the list or share register or
transfer book or to vote at any meeting of shareholders.
Section 3.14. Judges of Election.
(a) Appointment. In advance of any meeting of shareholders of the
Corporation, the Board of Directors may appoint judges of election, who need not
be shareholders, to act at the meeting or any adjournment thereof. If judges of
election are not so appointed, the presiding officer of the meeting may, and on
the request of any shareholder shall, appoint judges of election at the meeting.
The number of judges shall be one or three. A person who is a candidate for an
office to be filled at the meeting shall not act as a judge.
(b) Vacancies. In case any person appointed as a judge fails to appear
or fails or refuses to act, the vacancy may be filled by appointment made by the
Board of Directors in advance of the convening of the meeting or at the meeting
by the presiding officer thereof.
(c) Duties. The judges of election shall determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, and the authenticity, validity and effect of
proxies, receive votes or ballots, hear and determine all challenges and
questions in any way arising in connection with nominations by shareholders or
the right to vote, count and tabulate all votes, determine the result and do
such acts as may be proper to conduct the election or vote with fairness to all
shareholders. The judges of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as is practical.
If there are three judges of election, the decision, act or certificate of a
majority shall be effective in all respects as the decision, act or certificate
of all.
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(d) Report. On request of the presiding officer of the meeting or of
any shareholder, the judges shall make a report in writing of any challenge or
question or matter determined by them, and execute a certificate of any fact
found by them. Any report or certificate made by them shall be prima facie
evidence of the facts stated therein.
Section 3.15. Minors as Security Holders. The Corporation may treat a
minor who holds shares or obligations of the Corporation as having capacity to
receive and to empower others to receive dividends, interest, principal and
other payments or distributions, to vote or express consent or dissent and to
make elections and exercise rights relating to such shares or obligations
unless, in the case of payments or distributions on shares, the corporate
officer responsible for maintaining the list of shareholders or the transfer
agent of the Corporation or, in the case of payments or distributions on
obligations, the Treasurer or paying officer or agent has received written
notice that the holder is a minor.
Section 3.16. Consent of Shareholders in Lieu of Meeting. Any action
which may be taken at a meeting of the shareholders or of a class of
shareholders of the Corporation may be taken without a meeting only if a consent
or consents in writing, setting forth the action so taken, shall be signed by
all the shareholders who would be entitled to vote at a meeting of the
shareholders or of a class of shareholders called for such purpose and shall be
filed with the Secretary of the Corporation.
ARTICLE IV
Board of Directors
Section 4.01. Powers; Liability.
(a) General Rule. Unless otherwise provided by statute, all powers
vested by law in the Corporation shall be exercised by or under the authority
of, and the business and affairs of the Corporation shall be managed under the
direction of, the Board of Directors.
(b) Liability of Directors.
(1) No director, including a director who is also an officer, of
the Corporation shall be personally liable for monetary damages as
such for any action taken, or any failure to take any action in his
capacity as a director, including his duties as a member of any
committee of the Board of Directors upon which he may serve unless:
(A) The director has breached or failed to perform his duties
as a director in good faith, in a manner he reasonably believed to
be in the best interest of the Corporation and with such care,
including reasonable inquiry, skill and diligence, as a person of
ordinary prudence would use under similar circumstances; and
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(B) Such breach or failure to perform his duties constitutes
self-dealing, willful misconduct or recklessness.
(2) Absent a breach by a director of his duty as a fiduciary to
the Corporation, lack of good faith, or self dealing, the acts of or
failure to act by a director in his capacity as a director shall be
presumed to be in the best interest of the Corporation.
(3) In performing his duties, a director shall be entitled
to rely in good faith on information, opinions, reports or statements,
including financial statements and other financial data, in each case
prepared or presented by:
(A) One or more officers or employees of the Corporation whom
the director reasonably believes to be reliable and competent in
the matter presented; or
(B) Counsel, public accountants or other persons as to matters
which the director reasonably believes to be within the
professional or expert competence of such persons; or
(C) A committee of the Board of Directors upon which he does
not serve, duly designated in accordance with law, as to matters
within its designated authority, which committee the director
reasonably believes to merit confidence.
(Section 4.01(b) was approved by the shareholders of the Corporation on April 9,
1987)
(c) Notation of Dissent. A director of the Corporation who is present
at a meeting of the Board of Directors, or of a committee of the Board, at which
action on any corporate matter is taken on which the director is generally
competent to act, shall be presumed to have assented to the action taken unless
his or her dissent is entered in the minutes of the meeting or unless the
director files his or her written dissent to the action with the secretary of
the meeting before the adjournment thereof or transmits the dissent in writing
to the Secretary of the Corporation immediately after the adjournment of the
meeting. The right to dissent shall not apply to a director who voted in favor
of the action. Nothing in this section shall bar a director from asserting that
minutes of the meeting incorrectly omitted his or her dissent if, promptly upon
receipt of a copy of such minutes, the director notifies the Secretary of the
Corporation, in writing, of the asserted omission or inaccuracy.
Section 4.02. Qualifications and Selection of Directors.
(a) Qualifications. Each director of the Corporation shall be a
natural person of full age who need not be a resident of the Commonwealth of
Pennsylvania or a shareholder of the Corporation.
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(b) Election of Directors. In elections for directors, voting need not
be by ballot, unless required by vote of the shareholders before the voting for
the election of directors begins. The candidates receiving the highest number of
votes from each class or group of classes, if any, entitled to elect directors
separately shall be elected. If at any meeting of shareholders, directors of
more than one class are to be elected, each class of directors shall be elected
in a separate election.
Section 4.03. Number, Classification and Term of Office. The number of
directors of the Corporation shall be not less than five, nor more than
thirteen, as determined from time to time by resolutions of the Board of
Directors. The directors shall be classified with respect to the time for which
they shall severally hold office. The Board of Directors shall divide the number
of directors as evenly as practicable into three classes.
At each annual election, the successors to the class of directors
whose terms shall expire in that year shall be elected to hold office for the
term of three years, so that the term of office of one class of directors shall
expire each year.
Each director shall hold office for the term for which he or she is
elected and until his or her successor shall have been elected and qualified.
(Section 4.03 was adopted by the shareholders of the Corporation on April 13,
1978 and amended by vote of the shareholders of the Corporation on April 9,
1981.)
Section 4.04. Vacancies.
(a) General Rule. Vacancies on the Board of Directors, including
vacancies resulting from an increase in the number of directors, may be filled
by a majority vote of the remaining members of the Board though less than a
quorum, or by a sole remaining director, and each person so selected shall be a
director to serve until the next selection of the class for which such director
has been chosen, and until a successor has been selected and qualified or until
his or her earlier death, resignation or removal.
(b) Resignation; Action by Resigned Directors. Any director may resign
at any time by giving written notice to the Chairman of the Board or the
Secretary. Such resignation shall take effect upon the receipt of such notice or
at any later time specified therein. Unless otherwise specified in the notice,
acceptance of the resignation shall not be necessary to make it effective. When
one or more directors resign from the Board effective at a future date, the
directors then in office, including those who have so resigned, shall have power
by the applicable vote to fill the vacancies, the vote thereon to take effect
when the resignations become effective.
Section 4.05. Removal of Directors.
(a) Removal by the Shareholders. The entire Board of Directors, or any
class of the Board, or any individual director may be removed from office by
vote of the
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shareholders entitled to vote thereon only for cause. In case the Board or a
class of the Board or any one or more directors are so removed, new directors
may be elected at the same meeting.
(b) Removal by the Board. The Board of Directors may declare vacant
the office of a director who has been judicially declared of unsound mind or who
has been convicted of an offense punishable by imprisonment for a term of more
than one year or if, within 60 days after notice of his or her selection, the
director does not accept the office either in writing or by attending a meeting
of the Board of Directors.
Section 4.06. Place of Meetings. Meetings of the Board of Directors
may be held at such place within or without the Commonwealth of Pennsylvania as
the Board of Directors may from time to time appoint or as may be designated in
the notice of the meeting.
Section 4.07. Organization of Meetings. At every meeting of the Board
of Directors, the Chairman of the Board or, in the case of a vacancy in the
office or absence of the Chairman of the Board, one of the following directors
present in the order stated: the Vice Chairman of the Board, if there be one,
the President or a person chosen by a majority of the directors present shall
act as chairman of the meeting. The Secretary or, in the absence of the
Secretary, an assistant secretary, or, in the absence of the Secretary and the
assistant secretaries, any person appointed by the chairman of the meeting,
shall act as secretary of the meeting.
Section 4.08. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such time and place as shall be designated from time
to time by resolution of the Board of Directors.
Section 4.09. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board or, in the
case of a vacancy in the office or absence of the Chairman of the Board, the
President, or by two or more of the directors.
Section 4.10. Quorum of and Action by Directors.
(a) General Rule. A majority of the directors in office of the
Corporation shall be necessary to constitute a quorum for the transaction of
business and the acts of a majority of the directors present and voting at a
meeting at which a quorum is present shall be the acts of the Board of
Directors.
(b) Action by Written Consent. Any action required or permitted to be
taken at a meeting of the directors may be taken without a meeting if, prior or
subsequent to the action, a consent or consents thereto by all of the directors
in office is filed with the Secretary of the Corporation.
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Section 4.11. Committees.
(a) Establishment and Powers. The Board of Directors may, by
resolution adopted by a majority of the directors in office, establish one or
more committees to consist of one or more directors of the Corporation. Any
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all of the powers and authority of the Board of
Directors except that a committee shall not have any power or authority as to
the following:
(1) The submission to shareholders of any action requiring
approval of shareholders under the Business Corporation Law.
(2) The creation or filling of vacancies in the Board of
Directors.
(3) The adoption, amendment or repeal of these bylaws.
(4) The amendment or repeal of any resolution of the Board that
by its terms is amendable or repealable only by the Board.
(5) Action on matters committed by a resolution of the Board of
Directors to another committee of the Board.
(b) Alternate Committee Members. The Board may designate one or more
directors as alternate members of any committee who may replace any absent or
disqualified member at any meeting of the committee or for the purposes of any
written action by the committee. In the absence or disqualification of a member
and alternate member or members of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another director to act at the
meeting in the place of the absent or disqualified member.
(c) Term. Each committee of the Board shall serve at the pleasure of
the Board.
(d) Committee Procedures. The term "Board of Directors" or "Board,"
when used in any provision of these bylaws relating to the organization or
procedures of or the manner of taking action by the Board of Directors, shall be
construed to include and refer to any committee of the Board.
Section 4.12. Compensation. The Board of Directors shall have the
authority to fix the compensation of directors for their services as directors.
A director may be a salaried officer of the Corporation, but a director who is a
salaried officer of the Corporation shall not be entitled to receive any
additional compensation for service as a director.
16
<PAGE>
ARTICLE V
Officers
Section 5.01. Officers Generally.
(a) Number, Qualifications and Designation. The officers of the
Corporation shall be a Chairman of the Board, a President, a Secretary and a
Treasurer. The Board of Directors may also choose one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, one
or more Assistant Secretaries and Assistant Treasurers and such other officers
as may be elected in accordance with the provisions of Section 5.03. Except as
otherwise provided by any policy of the Corporation adopted by the Board of
Directors, officers may but need not be directors or shareholders of the
Corporation. The Chairman of the Board, the President and Secretary shall be
natural persons of full age. The Treasurer may be a corporation, but if a
natural person shall be of full age. Any number of offices may be held by the
same person.
(b) Bonding. The Corporation may secure the fidelity of any or all of
its officers by bond or otherwise.
(c) Standard of Care. In lieu of the standards of conduct otherwise
provided by law, officers of the Corporation shall be subject to the same
standards of conduct, including standards of care and loyalty and rights of
justifiable reliance, as shall at the time be applicable to directors of the
Corporation. An officer of the Corporation shall not be personally liable, as
such, to the Corporation or its shareholders for monetary damages for any action
taken, or any failure to take any action, unless the officer has breached or
failed to perform the duties of his or her office under the articles, these
bylaws or the applicable provisions of law and the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness. The provisions of
this subsection shall not apply to the responsibility or liability of an officer
pursuant to any criminal statute or for the payment of taxes pursuant to local,
state or federal law.
Section 5.02. Election, Term of Office and Resignations.
(a) Election and Term of Office. Officers of the Corporation, except
those elected by delegated authority pursuant to Section 5.03, shall be elected
annually by the Board of Directors at the first meeting of the Board of
Directors held after the annual meeting of shareholders and at such other
meetings as the Board of Directors may determine. Each such officer shall hold
office for a term of one year, or until the next annual election, and until a
successor has been selected and qualified or until his or her earlier death,
resignation or removal.
(b) Resignations. Any officer may resign at any time upon written
notice to the Corporation. The resignation shall be effective upon receipt
thereof by the Corporation or at such subsequent time as may be specified in the
notice of resignation. Acceptance of the resignation shall not be necessary to
make it effective, except as may be specified in such notice.
17
<PAGE>
Section 5.03. Subordinate Officers, Committees and Agents. The Board
of Directors may from time to time elect such other officers and appoint such
committees, employees or other agents as the business of the Corporation may
require, including one or more Assistant Secretaries, and one or more Assistant
Treasurers, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these bylaws, or as the Board of
Directors may from time to time determine. The Board of Directors may delegate
to any officer or committee the power to elect subordinate officers and to
retain or appoint employees or other agents, or committees thereof, and to
prescribe the authority and duties of such subordinate officers, committees,
employees or other agents.
Section 5.04. Removal of Officers and Agents. Any officer or agent of
the Corporation may be removed by the Board of Directors with or without cause.
The removal shall be without prejudice to the contract rights, if any, of any
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
Section 5.05. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause, may be filled by the
Board of Directors or by the officer or committee to which the power to fill
such office has been delegated pursuant to Section 5.03, as the case may be, and
if the office is one for which these bylaws prescribe a term, shall be filled
for the unexpired portion of the term.
Section 5.06. Authority.
(a) General Rule. All officers of the Corporation, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of the Corporation as may be provided by or pursuant to
resolutions or orders of the Board of Directors or, in the absence of
controlling provisions in the resolutions or orders of the Board of Directors,
as may be determined by or pursuant to these bylaws.
(b) Chief Executive Officer. The Chairman of the Board shall be the
chief executive officer of the Corporation.
Section 5.07. The Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the shareholders and of the Board of Directors
and shall perform such other duties as may from time to time be requested by the
Board of Directors. The Chairman of the Board shall have authority to sign,
execute and acknowledge, in the name of the Corporation, deeds, mortgages,
bonds, contracts and other instruments. The Chairman of the Board shall be
deemed to be and exercise the authority of the office of president as to all
matters as to which the Business Corporation Law, reposes authority in the
president of a corporation, and as to such matters the President shall be deemed
not to act as such.
Section 5.08. The President. The President shall be the chief
operating officer of the Corporation and shall have general supervision over the
business and operations of the Corporation, subject, however, to the direction
and control of the Chairman of the Board. He or she shall have the authority to
sign, execute and acknowledge, in the name of the Corporation,
18
<PAGE>
deeds, mortgages, bonds, contracts and other instruments authorized by the
Board, except in cases where the signing and execution thereof shall be
expressly delegated by the Board or the Chairman to some other officer or agent
of the Corporation; and, in general, he or she shall perform all duties incident
to the office of President and such other duties as from time to time may be
assigned by the Chairman.
Section 5.09. Executive Vice President. The Board may establish one
or more Executive Vice Presidents. The Executive Vice President, or if there
shall be more than one, the Executive Vice Presidents, shall direct and
coordinate broad Corporation activities, including departments in his or her
charge, in accordance with policies established by the Chairman and the Board of
Directors. When so directed by the President, an Executive Vice President may
perform all of the duties of the President, and, when so acting, shall have all
of the powers of, and be subject to all of the restrictions upon the President.
Section 5.10. Senior Vice President. The Board may establish one or
more Senior Vice Presidents. The Senior Vice President, or if there shall be
more than one, the Senior Vice Presidents, shall have such responsibilities and
shall perform such duties as may be prescribed by the Chairman and/or the
officer to whom they report.
Section 5.11. Vice President. The Board may establish one or more
Vice Presidents. The Vice President, or if there shall be more than one, the
Vice Presidents, shall have such responsibilities and shall perform such duties
as may be prescribed by the Chairman and/or the officer to whom they report.
Section 5.12. Assistant Vice Presidents. The Board may establish one
or more Assistant Vice Presidents. The Assistant Vice President, or if there
shall be more than one, the Assistant Vice Presidents, shall have such
responsibilities and shall perform such duties as may be prescribed by the
Chairman and/or the officer to whom they report
Section 5.13. Secretary. The Secretary shall record all of the votes
of the shareholders and of the directors and the minutes of the meetings of the
shareholders and of the Board of Directors in a book or books to be kept for
that purpose; he or she shall see that notices of meetings of the Board and
shareholders are given and that all records and reports are properly kept and
filed by the Corporation as required by law; he or she shall be the custodian of
the seal of the Corporation and shall see that it is affixed to all documents to
be executed on behalf of the Corporation under its seal; and, in general, he or
she shall perform all duties incident to the office of Secretary, and such other
duties as may, from time to time, be assigned by the Board or the Chairman.
Section 5.14. Assistant Secretaries. In the absence or disability of
the Secretary or when so directed by the Secretary, any Assistant Secretary
elected by the Board of Directors, or temporarily appointed by the Chairman, may
perform all the duties of the Secretary, and, when so acting, shall have all the
powers of and be subject to all the restrictions upon the Secretary. The
Assistant Secretary shall perform such other duties as from time to time may be
assigned respectively by the Board of Directors, the Chairman or the Secretary.
19
<PAGE>
Section 5.15. Treasurer. The Treasurer shall have charge of all
receipts and disbursements of the Corporation and shall have or provide for the
custody of its funds and securities; he or she shall have full authority to
receive and give receipts for all money due and payable to the Corporation, and
to endorse checks, drafts, and warrants in its name and on its behalf and to
give full discharge for the same; he or she shall deposit all funds of the
Corporation except such as may be required for current use, in such banks or
other places of deposit as the Board of Directors may from time to time
designate; and, in general, he or she shall perform all duties incident to the
office of Treasurer and such other duties as may, from time to time, be assigned
by the Board or the Chairman.
Section 5.16. Assistant Treasurers. In the absence or disability of
the Treasurer or when so directed by the Treasurer, any Assistant Treasurer may
perform all the duties of the Treasurer, and, when so acting, shall have all the
powers of and be subject to all the restrictions upon the Treasurer. The
Assistant Treasurers shall perform all such other duties as, from time to time,
may be assigned respectively, by the Board of Directors, the Chairman or the
Treasurer.
Section 5.17. Subordinate Officers, Committees and Agents. The Board
of Directors may, from time to time, elect such other officers and appoint such
committees, employees or other agents as the business of the Corporation may
require, each of which shall hold office for such period, have such authority,
and perform such duties as are provided in these bylaws, or as the Board of
Directors may, from time to time, determine. The Board of Directors may delegate
to any officer or committee the power to elect subordinate officers and to
retain or appoint employees or other agents, or committees thereof, and to
prescribe the authority and duties of such subordinate officers, committees,
employees or other agents.
Section 5.18. Salaries. The salaries of the officers elected by the
Board of Directors shall be fixed from time to time by the Board of Directors or
by such officer as may be designated by resolution of the Board. The salaries or
other compensation of any other officers, employees and other agents shall be
fixed from time to time by the officer or committee to which the power to elect
such officers or to retain or appoint such employees or other agents has been
delegated pursuant to Section 5.03. No officer shall be prevented from receiving
such salary or other compensation by reason of the fact that the officer is also
a director of the Corporation.
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ARTICLE VI
Certificates of Stock, Transfer, Etc.
Section 6.01. Share Certificates.
(a) Form of Certificates. Certificates for shares of the Corporation
shall be in such form as approved by the Board of Directors, and shall state
that the Corporation is incorporated under the laws of the Commonwealth of
Pennsylvania, the name of the person to whom issued, and the number and class of
shares and the designation of the series (if any) that the certificate
represents. If the Corporation is authorized to issue shares of more than one
class or series, certificates for shares of the Corporation shall set forth upon
the face or back of the certificate (or shall state on the face or back of the
certificate that the Corporation will furnish to any shareholder upon request
and without charge), a full or summary statement of the designations, voting
rights, preferences, limitations and special rights of the shares of each class
or series authorized to be issued so far as they have been fixed and determined
and the authority of the Board of Directors to fix and determine the
designations, voting rights, preferences, limitations and special rights of the
classes and series of shares of the Corporation.
(b) Share Register. The share register or transfer books and blank
share certificates shall be kept by the Secretary or by any transfer agent or
registrar designated by the Board of Directors for that purpose.
Section 6.02. Issuance. The share certificates of the Corporation
shall be numbered and registered in the share register or transfer books of the
Corporation as they are issued. They shall be executed in such manner as the
Board of Directors shall determine. In case any officer, transfer agent or
registrar who has signed or authenticated, or whose facsimile signature or
authentication has been placed upon, any share certificate shall have ceased to
be such officer, transfer agent or registrar because of death, resignation or
otherwise, before the certificate is issued, the certificate may be issued with
the same effect as if the officer, transfer agent or registrar had not ceased to
be such at the date of its issue. The provisions of this Section 6.02 shall be
subject to any inconsistent or contrary agreement in effect at the time between
the Corporation and any transfer agent or registrar.
Section 6.03. Transfer. Transfers of shares shall be made on the
share register or transfer books of the Corporation upon surrender of the
certificate therefor, endorsed by the person named in the certificate or by an
attorney lawfully constituted in writing. No transfer shall be made inconsistent
with the provisions of the Uniform Commercial Code, 13 Pa.C.S.
(section marks) 8101 et seq., and its amendments and supplements.
Section 6.04. Record Holder of Shares. The Corporation shall be
entitled to treat the person in whose name any share or shares of the
Corporation stand on the books of the Corporation as the absolute owner thereof,
and shall not be bound to recognize any equitable or other claim to, or interest
in, such share or shares on the part of any other person.
21
<PAGE>
Section 6.05. Lost, Destroyed or Mutilated Certificates. The holder
of any shares of the Corporation shall immediately notify the Corporation of any
loss, destruction or mutilation of the certificate therefor, and the Board of
Directors may, in its discretion, cause a new certificate or certificates to be
issued to such holder, in case of mutilation of the certificate, upon the
surrender of the mutilated certificate or, in case of loss or destruction of the
certificate, upon satisfactory proof of such loss or destruction and, if the
Board of Directors shall so determine, the deposit of a bond in such form and in
such sum, and with such surety or sureties, as it may direct.
ARTICLE VII
Indemnification of Directors, Officers and
Other Authorized Representatives
Section 7.01. Directors and Officers; Third Party Action. The
Corporation shall indemnify any director or officer of the Corporation 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 by or in the right of the Corporation) by
reason of the fact that he or she is or was an authorized representative of the
Corporation which, for the purposes of this Article, shall mean a director,
officer, employee or agent of the Corporation, or a person who is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a matter
he or she 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 or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, 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 which he
or she 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
reasonable cause to believe that his or her conduct was unlawful.
Section 7.02. Directors and Officers; Derivative Actions. The
Corporation shall indemnify any director or officer of the Corporation 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 or she is or was an
authorized representative of the Corporation, against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if he or she acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed to,
the best interests of the Corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his or her duty to the Corporation unless and only to the extent that the
court of common pleas of the county in which the registered office of the
Corporation is located or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the
22
<PAGE>
circumstances of the case, such person is fairly and reasonably entitled to such
expenses which the court of common pleas or such other court shall deem proper.
Section 7.03. Employees and Agents. To the extent that an authorized
representative of the Corporation who neither was nor is a director or officer
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Section 4.01(b), 7.01 and 7.02 of
this Article or in defense of any claim, issue or matter therein, he or she
shall be indemnified by the Corporation against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection therewith.
Such an authorized representative may, at the discretion of the Corporation, be
indemnified by the Corporation in any other circumstances to any extent if the
Corporation would be required by Section 7.01 or 7.02 of this Article to
indemnify such person in such circumstances to such extent if he or she were or
had been a director or officer of the Corporation.
Section 7.04. Bylaw Provisions Not Exclusive. The provisions of
Section 4.01(b), 7.01, 7.02 and 7.03 of these bylaws shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under any other provision of these
bylaws, or any agreement, vote of shareholders, vote of directors or otherwise
both as to acts or failure to act of such person in his or her official capacity
and as to acts or failure to act in another capacity while holding office. The
Corporation shall have the fullest authority to indemnify any such director,
officer, employee or agent permitted under the laws of the Commonwealth of
Pennsylvania; provided, however, no indemnification shall be made in any case
where the act or failure to act giving rise to the claim for indemnification is
finally determined by a court to have constituted willful misconduct or
recklessness.
Section 7.05. Expense of Litigation. Expense incurred by any such
director, officer, employee or agent in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such person to repay such amount if it shall ultimately be
determined such person is not entitled to be indemnified by the Corporation.
Section 7.06. Indemnification After Leaving Office. The
indemnification and payment of expenses permitted under these bylaws, unless
otherwise provided when authorized or ratified, shall continue as to such person
who has ceased to be such a director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such person.
Section 7.07. Creation of Indemnification Fund. The Corporation may
create a fund of any nature which may, but need not, be under the control of a
trustee, or otherwise may secure or insure in any manner its indemnification
obligations, whether arising under or pursuant to these bylaws or otherwise.
23
<PAGE>
ARTICLE VIII
Miscellaneous
Section 8.01. Corporate Seal. The Corporation shall have a corporate
seal in the form of a circle containing the name of the Corporation, the year of
incorporation and such other details, if any, as may be approved by the Board of
Directors. The affixation of the corporate seal shall not be necessary to the
valid execution, assignment or endorsement by the Corporation of any instrument
or other document.
Section 8.02. Checks. All checks, notes, bills of exchange or other
similar orders in writing shall be signed by such person or persons as the Board
of Directors may from time to time designate.
Section 8.03. Contracts. Except as otherwise provided in the Business
Corporation Law in the case of transactions that require action by the
shareholders, the Board of Directors may authorize any officer or agent to enter
into any contract or to execute or deliver any instrument on behalf of the
Corporation, and such authority may be general or confined to specific
instances.
Section 8.04. Interested Directors or Officers; Quorum.
(a) General Rule. A contract or transaction between the Corporation
and one or more of its directors or officers or between the Corporation and
another Corporation, partnership, joint venture, trust or other enterprise in
which one or more of its directors or officers are directors or officers or have
a financial or other interest, shall not be void or voidable solely for that
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of Directors that authorizes the contract or
transaction, or solely because his, her or their votes are counted for that
purpose, if:
(1) the material facts as to the relationship or interest and as
to the contract or transaction are disclosed or are known to the
Board of Directors and the Board authorizes the contract or
transaction by the affirmative votes of a majority of the
disinterested directors even though the disinterested directors are
less than a quorum;
(2) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to
the shareholders entitled to vote thereon and the contract or
transaction is specifically approved in good faith by vote of those
shareholders; or
(3) the contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified by the Board of
Directors or the shareholders.
(b) Quorum. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board which authorizes
a contract or transaction specified in subsection (a).
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Section 8.05. Deposits. All funds of the Corporation shall be
deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositaries as the Board of Directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by such
one or more persons as the Board of Directors shall from time to time designate.
Section 8.06. Corporate Records.
(a) Required Records. The Corporation shall keep complete and
accurate books and records of account, minutes of the proceedings of the
incorporators, shareholders and directors and a share register giving the names
and addresses of all shareholders and the number and class of shares held by
each. The share register shall be kept at either the registered office of the
Corporation in the Commonwealth of Pennsylvania or at its principal place of
business wherever situated or at the office of its registrar or transfer agent.
Any books, minutes or other records may be in written form or any other form
capable of being converted into written form within a reasonable time.
(b) Right of Inspection. Every shareholder shall, upon written
verified demand stating the purpose thereof, have a right to examine, in person
or by agent or attorney, during the usual hours for business for any proper
purpose, the share register, books and records of account, and records of the
proceedings of the incorporators, shareholders and directors and to make copies
or extracts therefrom. A proper purpose shall mean a purpose reasonably related
to the interest of the person as a shareholder. In every instance where an
attorney or other agent is the person who seeks the right of inspection, the
demand shall be accompanied by a verified power of attorney or other writing
that authorizes the attorney or other agent to so act on behalf of the
shareholder. The demand shall be directed to the Corporation at its registered
office in the Commonwealth of Pennsylvania or at its principal place of business
wherever situated.
Section 8.07. Amendment of Bylaws. These bylaws may be amended or
repealed, or new bylaws may be adopted, either (i) by vote of the shareholders
at any duly organized annual or special meeting of shareholders, or (ii) with
respect to those matters that are not by statute committed expressly to the
shareholders and regardless of whether the shareholders have previously adopted
or approved the bylaw being amended or repealed, by vote of a majority of the
Board of Directors of the Corporation in office at any regular or special
meeting of directors; provided that any proposal relating to Section 4.03 of
these bylaws to change the number, classification or term of office of directors
must receive the affirmative vote of at least seventy-five percent of all shares
outstanding as of the record date for any annual or special meeting of
shareholders, and any proposal relating to the seventy-five percent shareholder
approval required by this Section must also receive the affirmative vote of at
least seventy-five percent of all shares outstanding. Any change in these bylaws
shall take effect when adopted unless otherwise provided in the resolution
effecting the change. See Section 2.03(b) (relating to notice of action by
shareholders on bylaws).
25
================================================================================
BETZDEARBORN INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Rights Agent
Rights Agreement
Dated as of February 12, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. Certain Definitions.................................................................1
2. Appointment of Rights Agent.........................................................5
3. Issue of Rights Certificates........................................................5
4. Form of Rights Certificates.........................................................7
5. Countersignature and Registration...................................................8
6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates...................8
7. Exercise of Rights; Purchase Price; Expiration Date of Rights.......................9
8. Cancellation and Destruction of Rights Certificates................................11
9. Reservation and Availability of Capital Stock; Registration of Securities..........12
10. Capital Stock Record Date..........................................................13
11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights.......................................................13
12. Certificate of Adjusted Purchase Price or Number of Shares.........................21
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power...............21
14. Fractional Rights and Fractional Shares............................................24
15. Rights of Action...................................................................25
16. Agreement of Rights Holders........................................................25
<PAGE>
17. Rights Certificate Holder Not Deemed a Shareholder.................................26
18. Concerning the Rights Agent........................................................26
19. Merger or Consolidation or Change of Name of Rights Agent.........................27
20. Duties of Rights Agent.............................................................27
21. Change of Rights Agent.............................................................29
22. Issuance of New Rights Certificates................................................30
23. Redemption and Termination.........................................................31
24. Notice of Certain Events...........................................................32
25. Notices............................................................................33
26. Supplements and Amendments.........................................................33
27. Successors.........................................................................34
28. Determinations and Actions by the Board of Directors, etc..........................34
29. Benefits of this Agreement.........................................................35
30. Severability.......................................................................35
31. Governing Law......................................................................35
32. Counterparts.......................................................................35
33. Descriptive Headings...............................................................36
</TABLE>
Exhibit A -- Form of Rights Certificate
Exhibit B -- Form of Summary of Rights
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of February 12, 1998 (the "Agreement"),
between BetzDearborn Inc., a Pennsylvania corporation (the "Company"), and
American Stock Transfer & Trust Company, a New York corporation (the "Rights
Agent").
W I T N E S S E T H
WHEREAS, on February 12, 1998 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each Common Share of the Company (as hereinafter
defined) outstanding at the close of business on September 19, 1998 (the "Record
Date") (subject to the right to cancel such dividend in certain events) and has
authorized the issuance of one Right for each Common Share of the Company issued
between the Record Date (whether originally issued or delivered from the
Company's treasury) and the earlier of the Distribution Date or the Expiration
Date (as such terms are hereinafter defined), each Right initially representing
the right to purchase one of the Company's Common Shares upon the terms and
subject to the conditions hereinafter set forth (the "Rights"); and
WHEREAS, the Board of Directors of the Company has considered whether
approval of this Agreement and the distribution of the Rights is in the best
interests of the Company and has also considered the effects upon employees,
suppliers and customers of the Company and upon communities in which offices or
other establishments of the Company are located and all other pertinent factors;
and
WHEREAS, the Board of Directors of the Company has concluded that
approval of this Agreement and the distribution of the Rights is in the best
interests of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and intending to be legally bound hereby, the
parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
"Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
20% or more of the Common Shares then outstanding, but shall not include the
Company, any Subsidiary of the Company, any employee benefit plan (including any
stock incentive plan) of the Company or of any Subsidiary of the Company, or any
Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan. Notwithstanding the foregoing, no Person
shall become an "Acquiring Person" as the result of an acquisition of Common
Shares by the Company, which by reducing the number of shares outstanding,
increases the proportional number of shares beneficially owned by such Person to
20% or more of the Common Shares of
<PAGE>
the Company then outstanding; provided, however, that if a Person shall become
the Beneficial Owner of 20% or more of the Common Shares of the Company then
outstanding by reason of share purchases by the Company and shall, after such
share purchase by the Company, become the Beneficial Owner of any additional
Common Shares of the Company, then such Person shall be deemed to be an
"Acquiring Person." Notwithstanding the foregoing, if the Board of Directors of
the Company determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph, has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an "Acquiring Person," as defined pursuant to the foregoing provisions
of this paragraph (a), then such Person shall not be deemed to be an "Acquiring
Person" for any purposes of this Agreement.
"Act" shall mean the Securities Act of 1933, as amended.
"Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii) of this Agreement.
"Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act.
A Person shall be deemed the "Beneficial Owner" of, and shall be deemed
to "beneficially own," any securities:
(i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether
or not in writing) or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own" (A) securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted for purchase
or exchange, or (B) securities issuable upon exercise of Rights at any
time prior to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any of
such Person's Affiliates or Associates prior to the Distribution Date
or pursuant to Section 3(a) or Section 22 hereof (the "Original
Rights") or pursuant to Section 11(i) hereof in connection with an
adjustment made with respect to any Original Rights;
(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of
or has "beneficial
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ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), including without
limitation pursuant to any agreement, arrangement or understanding,
whether or not in writing; provided, however, that a Person shall not
be deemed the "Beneficial Owner" of, or to "beneficially own," any
security under this subparagraph (ii) as a result of an oral or written
agreement, arrangement or understanding to vote such security if such
agreement, arrangement or understanding: (A) arises solely from a
revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with., the applicable
provisions of the General Rules and Regulations under the Exchange Act,
and (B) is not also then reportable by such Person on Schedule 13D
under the Exchange Act (or any comparable or successor report); or
(iii) that are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing),
for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (ii) of
this paragraph (c)) or disposing of any voting securities of the
Company.
provided, however, that nothing in this paragraph shall cause a Person engaged
in business as an underwriter of securities to be the "Beneficial Owner" of, or
to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the Commonwealth of Pennsylvania are
authorized or obligated by law or executive order to close.
"Close of business" on any given date shall mean 5:00 P.M.,
Philadelphia time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Philadelphia time, on the next succeeding
Business Day.
"Common Share" shall mean the shares of Common Stock, par value $.10
per share, of the Company and, to the extent that there are not a sufficient
number of Common Shares authorized to permit the full exercise of the Rights,
shares of any other class or series of the Company designated for such purpose
containing terms substantially similar to the terms of the Common Shares, except
that "Common Share" when used with reference to any Person other than the
Company shall mean the shares of capital stock of such Person with the greatest
voting power, or the equity securities or other equity interest having power to
control or direct the management, of such Person.
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<PAGE>
"Continuing Director" shall mean (i) any member of the Board of
Directors of the Company, while such Person is a member of the Board, who is not
an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, and
was a member of the Board prior to the date of this Agreement, or (ii) any
Person who subsequently becomes a member of the Board, while such Person is a
member of the Board, who is not an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, or a representative of an Acquiring Person or
of any such Affiliate or Associate, if such Person's nomination for election or
election to the Board is recommended or approved by a majority of the Continuing
Directors.
"Distribution Date" shall have the meaning set forth in Section 3(a) of
this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended and in effect on the date hereof.
"Expiration Date" shall have the meaning set forth in Section 7(a) of
this Agreement.
"Final Expiration Date" shall have the meaning set forth in Section
7(a) of this Agreement.
"Person" shall mean any individual, firm, corporation, partnership or
other entity.
"Purchase Price" shall have the meaning set forth in Section
4(a) of this Agreement.
"Record Date" shall mean September 19, 1998.
"Redemption Price" shall have the meaning set forth in Section 23(a) of
this Agreement.
"Rights Certificate" shall have the meaning set forth in
Section 3(a) of this Agreement.
"Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii) hereof.
"Section 13 Event" shall mean any event described in clauses (x), (y)
or (z) of Section 13(a) hereof, subject to Section 13(d).
"Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
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<PAGE>
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
"Subsidiary" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
"Trading Day" shall have the meaning set forth in Section 11(d) of this
Agreement.
"Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
Unless otherwise specified, where reference is made in this Agreement
to sections of, and the General Rules and Regulations under, the Exchange Act,
such reference shall mean such sections and rules as amended from time to time
and any successor provisions thereto.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issue of Rights Certificates.
(a) Until the earlier of (i) the close of business on the tenth day
after the Stock Acquisition Date or (ii) the close of business on the tenth
Business Day (or such later date as may be fixed by the Board of Directors of
the Company prior to the time any Person becomes an Acquiring Person) after the
date that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan) is
first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would be the Beneficial Owner of 20% or more of the Common
Shares then outstanding (the earlier of (i) and (ii) being herein referred to as
the "Distribution Date"), (x) beneficial interests in the Rights will be
evidenced (subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Shares registered in the names of the holders of the
Common Shares (which certificates for Common Shares shall be deemed also to be
certificates for beneficial interests in the Rights) and not by separate
certificates and (y) the Rights and beneficial interests therein will be
transferable only in connection with the transfer of the underlying Common
Shares (including a transfer to the Company). As soon as practicable after the
Distribution Date, the Rights Agent will send to each record holder of the
Common Shares as of the close of business on the Distribution Date, at the
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<PAGE>
address of such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of Exhibit A hereto (the "Rights
Certificates"), evidencing one Right for each Common Share so held, subject to
adjustment as provided herein. As of and after the Distribution Date, the Rights
will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the Company
will send a copy of a Summary of Rights, in substantially the form attached
hereto as Exhibit B, by first-class, postage prepaid mail, to each record holder
of the Common Shares as of the close of business on the Record Date, at the
address of such holder shown on the records of the Company. With respect to
certificates for the Common Shares outstanding as of the Record Date, until the
Distribution Date the Rights will be evidenced by such certificates for the
Common Shares and the registered holders of the Common Shares shall also be the
registered holders of the Rights. Until the earlier of the Distribution Date or
the Expiration Date, the transfer of any certificates representing Common Shares
in respect of which Rights have been issued shall also constitute the transfer
of the Rights associated with such Common Shares.
(c) Rights shall be issued in respect of all Common Shares that are
issued (whether originally issued or delivered from the Company's treasury)
after the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date. Certificates representing such Common Shares and certificates
issued after the Record Date upon transfer of Common Shares outstanding shall
bear the following legend:
"This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between
BetzDearborn Inc. (the "Company") and American Stock Transfer & Trust
Company, a New York corporation (the "Rights Agent"), dated as of
February 12, 1998 (the "Rights Agreement"), and as the same may be
amended from time to time, the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal
offices of the Company. Under certain circumstances, as set forth in
the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy of the
Rights Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or
held by, any Person who is, was or becomes an Acquiring Person or any
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement), whether currently held by or on behalf of such Person or by
any subsequent holder, may become null and void."
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<PAGE>
Until the earlier of the Distribution Date or the Expiration Date, the Rights
associated with the Common Shares shall be evidenced by certificates for the
Common Shares alone, and registered holders of Common Shares shall also be the
registered holders of the associated Rights, and the transfer of any
certificates for Common Shares shall also constitute the transfer of the Rights
associated with the Common Shares represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase and
of assignment to be printed on the reverse thereof) shall each be substantially
in the form set forth in Exhibit A hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or securities quotation system on which
the Rights may from time to time be listed, or to conform to usage. Subject to
the provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall entitle the holders thereof to purchase such number
of Common Shares as shall be set forth therein at the price set forth therein
(such exercise price per share, the "Purchase Price"), but the amount and type
of securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights that the Company knows are beneficially owned
by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing oral or written plan, agreement, arrangement
or understanding regarding the transferred Rights or (B) a transfer that the
Board of Directors of the Company has determined is part of an oral or written
plan, agreement, arrangement or understanding that has as a primary purpose or
effect avoidance of Section 7(e) hereof, and any Rights Certificate issued
pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement
or adjustment of any other Rights Certificate referred to in this sentence,
shall contain (to the extent feasible) the following legend:
"The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the
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<PAGE>
Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement."
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its President or any Vice President, either
manually or by facsimile signature, and shall have affixed thereto the Company's
seal or a facsimile thereof which shall be attested by the Secretary or an
Assistant Secretary of the Company, either manually or by facsimile signature.
The Rights Certificates shall be manually countersigned by the Rights Agent and
shall not be valid for any purpose unless so countersigned. In case any officer
of the Company who shall have signed any of the Rights Certificates shall cease
to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the Company; and
any Rights Certificates may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates, the Certificate number and the date of each
of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e) and Section
14 hereof, at any time after the close of business on the Distribution Date, and
at or prior to the close of business on the Expiration Date, any Rights
Certificate or Certificates may be transferred, split up, combined or exchanged
for another Rights Certificate or Certificates, entitling the registered holder
to purchase a like number of Common Shares or other securities, cash or other
assets, as the case may be, as the Rights Certificate or Certificates
surrendered then entitled such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the principal office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
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<PAGE>
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or
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<PAGE>
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Section
4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the Person
entitled thereto a Rights Certificate or Rights Certificates, as the case may
be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to subsection (e), the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price (except as
provided in Section 11(p) hereof) with respect to the total number of shares (or
other securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable (except as provided in Section 11(p)
hereof), at or prior to the earliest of (i) the close of business on September
19, 2008 (the "Final Expiration Date"), (ii) the consummation of a transaction
contemplated by Section 13(d) hereof, or (iii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the earlier of (i), (ii) and (iii)
being herein referred to as the "Expiration Date").
(b) The Purchase Price for each Common Share (or fraction thereof and
other securities or property, as provided in subsection (g)) pursuant to the
exercise of a Right shall as of the date of this Agreement be $250 and shall be
subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with subsection (c).
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per Common Share (or other shares, securities, cash or other assets, as
the case may be) to be purchased as set forth
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<PAGE>
below and an amount equal to any applicable transfer tax, the Rights Agent
shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition
from any transfer agent of the Common Shares (or make available, if the Rights
Agent is the transfer agent for such Shares) certificates for the total number
of Common Shares to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) if the Company shall
have elected to deposit some or all of the total number of Common Shares
issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of Common Shares as are to be purchased (in which case certificates for
the Common Shares represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iv) after receipt thereof, deliver
such cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price per Common Share (as such amount
may be reduced pursuant to Section 11(a)(iii) hereof) may be made (x) in cash or
by certified bank check or money order payable to the order of the Company, or
(y) if the Company, by action of a majority of the Continuing Directors in
office at the time, so permits, by delivery of a certificate or certificates
(with appropriate stock powers executed in blank attached thereto) evidencing a
number of Common Shares equal to the then Purchase Price divided by the closing
price (as determined pursuant to Section 11(d) hereof) per Common Share on the
Trading Day immediately preceding the date of such exercise. In the event that
the Company is obligated to issue other securities of the Company, pay cash
and/or distribute other property pursuant to Section 11(a) hereof, the Company
will make all arrangements necessary so that such other securities, cash and/or
other property are available for distribution by the Rights Agent, if and when
appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing oral or written plan,
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<PAGE>
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which the Board of Directors of the Company has determined is part of
an oral or written plan, agreement, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise; provided, however, that the Rights held by an
Acquiring Person, an Affiliate or Associate of an Acquiring Person or the
transferees of such persons referred to above shall not be voided unless the
Acquiring Person in question or an Affiliate or Associate of such Acquiring
Person shall be involved in the transaction giving rise to the Section 11(a)(ii)
Event. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
(g) In the event that, prior to a Triggering Event, the number of
Common Shares that are authorized by the Company's Articles but not outstanding
or reserved for issuance for purposes other than upon exercise of the Rights are
not sufficient to permit the exercise in full of the Rights for Common Shares
only, the Company shall substitute for the Common Shares otherwise purchasable,
upon payment of the Purchase Price, a combination of some or all of the
following that has an aggregate value equal to the Purchase Price (where such
aggregate value has been determined by the Board of Directors of the Company):
(i) fractions of a Common Share (to the extent permitted by law and the Articles
of the Company), (ii) other equity securities of the Company, (iii) debt
securities of the Company, or (iv) other assets.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the
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written request of the Company, destroy such canceled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock; Registration
of Securities.
(a) The Company covenants and agrees that it will cause to be reserved
and kept available for issuance upon the exercise of outstanding Rights as many
as reasonably possible of its authorized and unissued Common Shares and other
securities or authorized and issued shares held in its treasury, to permit
exercise of outstanding Rights.
(b) So long as the Common Shares and other securities issuable and
deliverable upon the exercise of the Rights may be listed on any national
securities exchange or securities quotation system, the Company shall use its
best efforts to cause, from and after such time as the Rights become
exercisable, all shares and other securities reserved for such issuance to be
listed on such exchange or quotation system upon official notice of issuance
upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement or statements under the Act, with respect
to the securities purchasable upon exercise of the Rights on an appropriate form
or forms, (ii) cause such registration statement or statements to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement or statements to remain effective (with a prospectus at
all times meeting the requirements of the Act) until the earlier of (A) the date
as of which the Rights are no longer exercisable for such securities, and (B)
the date of the expiration of the Rights. The Company will also take such action
as may be appropriate under, or to ensure compliance with, the securities or
"blue sky" laws of the various states in connection with the exercisability of
the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date set forth in clause (i) of the first
sentence of this subsection (c), the exercisability of the Rights in order to
prepare and file such registration statement and permit it to become effective.
Upon any such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as well as
a public announcement at such time as the suspension is no longer in effect. In
addition, if the Company shall determine that a registration statement is
required following the Distribution Date, the Company may temporarily suspend
the exercisability of the Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have
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been obtained, the exercise thereof shall not be permitted under applicable law
or a registration statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Common Shares and other securities
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares or other securities (subject to payment of the
Purchase Price), be duly and validly authorized and issued and, with respect to
Common Shares or other shares of capital stock, fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges that may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for a number of Common Shares (or other securities, as the case
may be) upon the exercise of Rights. The Company shall not, however, be required
to pay any transfer tax that may be payable in respect of any transfer or
delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of Common Shares (or other securities, as the case may be)
in respect of a name other than that of the registered holder of the Rights
Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for a number of Common Shares (or other securities, as the case
may be) in a name other than that of the registered holder upon the exercise of
any Rights until such tax shall have been paid (any such tax being payable by
the holder of such Rights Certificate at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
Section 10. Capital Stock Record Date. Each person in whose name any
certificate for a number of Common Shares (or other securities, as the case may
be) is issued upon the exercise of Rights shall for all purposes be deemed to
have become the holder of record of such Common Shares (or other securities, as
the case may be) represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Common Share (or other securities, as the case
may be) transfer books of the Company are closed, such Person shall be deemed to
have become the record holder of such shares (fractional or otherwise) on, and
such certificate shall be dated, the next succeeding Business Day on which the
Common Share (or other securities, as the case may be) transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a
shareholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares and other
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securities covered by each Right and the number of Rights issued (or to be
issued) and outstanding are subject to adjustment from time to time as provided
in this Section 11.
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Common Shares payable in
Common Shares, (B) subdivide the outstanding Common Shares, (C) combine
the outstanding Common Shares into a smaller number of shares, or (D)
issue any shares of its capital stock in a reclassification of the
Common Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section
11(a) and Section 7(e) hereof, the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind
of Common Shares or capital stock, as the case may be, issuable on such
date, shall be adjusted to the extent appropriate so that the holder of
any Right exercised after such time shall be entitled to receive, upon
exercise of such Right and any Rights received as a consequence of
issuance of Common Shares in connection with such dividend or
subdivisions and payment of the Purchase Price then in effect, the
aggregate number and kind of Common Shares or capital stock, as the
case may be, that, if such Right had been exercised immediately prior
to such date and at a time when the Common Share transfer books were
open, such holder would have owned upon such exercise and been entitled
to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment
under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in addition
to, and shall be made prior to, any adjustment required pursuant to
Section 11 (a)(ii) hereof.
(ii) In the event any Person becomes an Acquiring Person, then each
holder of a Right (except as provided below and in Section 7(e) hereof)
shall thereafter have the right to receive, upon exercise thereof at
the then current Purchase Price in accordance with the terms of this
Agreement, such number of Common Shares of the Company as shall equal
the result obtained by (x) multiplying the current Purchase Price by
the number of Common Shares for which a Right was exercisable
immediately prior to such Person becoming an Acquiring Person and (y)
dividing that product by 50% of the current market price (determined
pursuant to Section 11(d) hereof) per Common Share on the date of such
occurrence (such number of shares, the "Adjustment Shares").
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(iii) In the event that the number of Common Shares that are
authorized by the Company's Articles but not outstanding or reserved
for issuance for purposes other than upon exercise of the Rights are
not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a),
the Company shall: (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a Right (the "Current
Value") over (2) the Purchase Price (such excess, the "Spread"), and
(B) with respect to each Right, make adequate provision to substitute
for the Adjustment Shares, upon payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common
Shares or other equity securities of the Company (including, without
limitation, preferred shares or units of preferred shares that a
majority of the Continuing Directors in office at the time has deemed
(based, among other things, on the dividend and liquidation rights of
such preferred shares) to have substantially the same economic value as
Common Shares (such preferred shares, hereinafter referred to as
"common share equivalents")), (4) debt securities of the Company, (5)
other assets, or (6) any combination of the foregoing, having an
aggregate value equal to the Current Value, where such aggregate value
has been determined by a majority of the Continuing Directors in office
at the time after considering the advice of a nationally recognized
investment banking firm selected by the Board of Directors of the
Company; provided, however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty
(30) days following the later of (x) the occurrence of a Section
11(a)(ii) Event and (y) the date on which the Company's right of
redemption pursuant to Section 23(a) expires (the later of (x) and (y)
being referred to herein as the "Section 11(a)(ii) Trigger Date"), then
the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase
Price, Common Shares (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the
Spread. If the Board of Directors of the Company shall determine in
good faith that it is likely that sufficient additional Common Shares
could be authorized for issuance upon exercise in full of the Rights,
the thirty (30) day period set forth above may be extended to the
extent necessary, but not more than ninety (90) days after the Section
11(a)(ii) Trigger Date, in order that the Company may seek shareholder
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approval for the authorization of such additional shares (such period,
as it may be extended, the "Substitution Period"). To the extent that
the Company determines that some action need be taken pursuant to the
first and/or second sentences of this Section 11(a)(iii), the Company
(x) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and (y) may suspend
the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional
shares and/or to decide the appropriate form of distribution to be made
pursuant to such first sentence and to determine the value thereof. In
the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the Common Shares shall be the current market
price (as determined pursuant to Section 11(d) hereof) per Common Share
on the Section 11(a)(ii) Trigger Date and the value of any "common
share equivalent" shall be deemed to have the same value as the Common
Shares on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Common Shares entitling them to
subscribe for or purchase (for a period expiring within forty-five (45) calendar
days after such record date) Common Shares of the Company (or shares having the
same rights, privileges and preferences as the Common Shares ("equivalent common
shares")) or securities convertible into Common Shares or equivalent common
shares at a price per Common Share or per equivalent common share (or having a
conversion price per share, if a security convertible into Common Shares or
equivalent common shares) less than the current market price (as determined
pursuant to Section 11(d) hereof) per Common Share on such record date, the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Common Shares
outstanding on such record date, plus the number of Common Shares that the
aggregate offering price of the total number of Common Shares and/or equivalent
common shares so to be offered (and/or the aggregate initial conversion price of
the convertible securities so to be offered) would purchase at such current
market price, and the denominator of which shall be the number of Common Shares
outstanding on such record date, plus the number of additional Common Shares
and/or equivalent common shares to be offered for subscription or purchase (or
into which the convertible securities so to be offered are initially
convertible). In case such subscription price may be paid by delivery of
consideration part or all of which may be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. Common Shares owned by or held for the account of the
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Company shall not be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record date is fixed,
and in the event that such rights or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price that would then be in effect if
such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of Common Shares (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular quarterly
dividend out of the earnings or retained earnings of the Company), assets (other
than a regular quarterly dividend referred to above or dividend payable in
Common Shares of the Company, but including any dividend payable in stock other
than Common Shares of the Company) or subscription rights or warrants (excluding
those referred to in Section 11(b) hereof), the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the current market price (as determined pursuant to Section 11(d)
hereof) per Common Share on such record date, less the fair market value (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a Common
Share and the denominator of which shall be such current market price (as
determined pursuant to Section 11(d) hereof) per Common Share. Such adjustments
shall be made successively whenever such a record date is fixed, and in the
event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.
(d) The "current market price" per Common Share on any date shall be
deemed to be the average of the daily closing prices per Common Share for the
thirty (30) consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date, except that for purposes of computations made
pursuant to Section 11(a)(iii) hereof, the "current market price" per Common
Share on any date shall be deemed to be the average of the daily closing prices
per Common Share for the ten (10) consecutive Trading Days immediately following
such date; provided, however, that in the event that the current market price
per Common Share is determined during a period following the announcement by the
issuer of such Common Share of (A) a dividend or distribution on such Common
Share payable in Common Shares or securities convertible into Common Shares
(other than the Rights), or (B) any subdivision, combination or reclassification
of such Common Shares, and prior to the expiration of the requisite thirty (30)
Trading Day or ten (10) Trading Day period, as set forth above, after the
exdividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
"current market price" shall be properly adjusted to take into account
ex-dividend trading. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Shares are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
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with respect to securities listed on the principal national securities exchange
on which the Common Shares are listed or admitted to trading or, if the Common
Shares are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use, or, if on any such date the Common
Shares are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Common Shares selected by the Board of Directors of the Company. If on any
such date no market maker is making a market in the Common Shares, the fair
value of such shares on such date as determined in good faith by the Board of
Directors of the Company shall be used. The term "Trading Day" shall mean a day
on which the principal national securities exchange on which the Common Shares
are listed or admitted to trading is open for the transaction of business or, if
the Common Shares are not listed or admitted to trading on any national
securities exchange, a Business Day. If the Common Shares are not publicly held
or not so listed or traded, "current market price" per share shall mean the fair
value per share as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a Common Share.
Notwithstanding the first sentence of this subsection (e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction that mandates such adjustment, and
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Common Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Shares contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k), (m) and (q), and the provisions of Sections
7, 9, 10, 13 and 14 hereof with respect to the Common Shares shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
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purchase, at the adjusted Purchase Price, the number of Common Shares
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
subsection (i), upon each adjustment of the Purchase Price as a result of the
calculations made in subsections (b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of Common Shares
(calculated to the nearest ten-thousandth) obtained by (i) multiplying (x) the
number of shares covered by a Right immediately prior to this adjustment, by (y)
the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price, and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of Common Shares purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of Common Shares for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. The record date for the
adjustment may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Rights Certificates have been issued, shall be at least
ten (10) days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights Certificates on such
record date Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so distributed shall be issued, executed and
countersigned in the manner provided for herein (and may bear, at the option of
the Company, the adjusted Purchase Price) and shall be registered in the names
of the holders of record of Rights Certificates on the record date specified in
the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of Common Shares issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per Common Share and the number of shares that were expressed in
the initial Rights Certificates issued hereunder.
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(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the par value of the number of Common Shares issuable
upon exercise of the Rights, the Company shall take any corporate action that
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue such number of fully paid and nonassessable Common
Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of Common Shares and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the number of Common
Shares and other capital stock or securities of the Company, if any, issuable
upon such exercise on the basis of the Purchase Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right to
receive such additional shares (fractional or otherwise) or securities upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Common Shares, (ii) issuance wholly for cash of any Common
Shares at less than the current market price, (iii) issuance wholly for cash of
Common Shares or securities which by their terms are convertible into or
exchangeable for Common Shares, (iv) stock dividends or (v) issuance of rights,
options or warrants referred to in this Section 11, hereafter made by the
Company to holders of its Common Shares shall not be taxable to such
shareholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other person or persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect that would
Substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
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13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution Date,
it will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) In the event that the Rights become exercisable following a Section
11(a)(ii) Event, the Company, by action of a majority of the Continuing
Directors in office at the time, may permit the Rights, subject to Section 7(e)
hereof, to be exercised for 50% of the Common Shares (or cash, other securities
or assets to be substituted for the Adjustment Shares pursuant to subsection
(a)(iii)) that would otherwise be purchasable under subsection (a), in
consideration of the surrender to the Company of the Rights so exercised and
without other payment of the Purchase Price. Rights exercised under this
subsection (p) shall be deemed to have been exercised in full and shall be
canceled.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Common Shares, a copy of such certificate, and (c) mail a brief summary thereof
to each holder of a Rights Certificate (or, if prior to the Distribution Date,
to each holder of a certificate representing Common Shares) in accordance with
Section 25 hereof. The Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger or sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding Common Shares shall be changed into or exchanged
for stock or other securities of any other Person or cash or any other property,
or (z) the Company shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one transaction or a series
of related transactions, assets or earning power aggregating more than 50% of
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the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any Person or Persons (other than the Company or any Subsidiary of the
Company in one or more transactions each of which complies with Section 11(o)
hereof), then, and in each such case and except as contemplated by subsection
(d), proper provision shall be made so that: (i) each holder of a Right, except
as provided in Section 7(e) or subsection (e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, non-assessable and freely tradeable Common
Shares of the Principal Party (as such term is hereinafter defined), not subject
to any liens, encumbrances, rights of first refusal or other adverse claims, as
shall be equal to the. result obtained by (1) multiplying the then current
Purchase Price by the number of Common Shares for which a Right is exercisable
immediately prior to the first occurrence of a Section 13 Event (or, if a
Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section
13 Event, multiplying the number of such shares for which a Right was
exercisable immediately prior to the occurrence of a Section 11(a)(ii) Event by
the Purchase Price in effect immediately prior to such occurrence), and dividing
that product (which, following the first occurrence of a Section 13 Event, shall
be referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by (2) 50% of the current market price (determined pursuant to
Section 11(d) hereof) per Common Share of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement; (iii)
the term Company shall thereafter be deemed to refer to such Principal Party, it
being specifically intended that the provisions of Section 11 hereof shall apply
only to such Principal Party following the first occurrence of a Section 13
Event; (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of its Common Shares) in
connection with the consummation of any such transaction as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common Shares thereafter deliverable upon
the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of subsection (a), the Person that is the issuer of
any securities into which Common Shares of the Company are converted in
such merger or consolidation, and if no securities are so issued, the
Person that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of the
first sentence of subsection (a), the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
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provided, however, that in any such case, (1) if the Common Shares of such
Person are not at such time and have not been continuously over the preceding
twelve (12) month period registered under Section 12 of the Exchange Act, and
such Person is a direct or indirect Subsidiary of another Person the Common
Shares of which are and have been so registered, "Principal Party" shall refer
to such other Person, and (2) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Shares of two or more of which
are and have been so registered, "Principal Party" shall refer to whichever of
such Persons is the issuer of the Common Shares having the greatest aggregate
market value.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Shares that have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to
cause such registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and
(ii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights that have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13 (a).
(d) Notwithstanding anything in this Agreement to the contrary, Section
13 (other than this subsection (d)) shall not be applicable to a transaction
described in subparagraphs (x) and (y) of Section 13(a) if (i) such transaction
is consummated with a Person or Persons who acquired Common Shares pursuant to a
tender offer or exchange offer for all outstanding Common Shares that complies
with the provisions of Section 11(a)(ii) hereof (or a wholly owned Subsidiary of
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any such Person or Persons), (ii) the price per Common Share offered in such
transaction is not less than the price per Common Share paid to all holders of
Common Shares whose shares were purchased pursuant to such tender offer or
exchange offer and (iii) the form of consideration being offered to the
remaining holders of Common Shares pursuant to such transaction is the same as
the form of consideration paid pursuant to such tender or exchange offer. Upon
consummation of any such transaction contemplated by this subsection (d), all
Rights hereunder shall expire.
(e) In the event that the Rights become exercisable under subsection
(a) (except as provided in subsection (d)), the Company, by action of a majority
of the Continuing Directors in office at the time, may agree with the Principal
Party that the Principal Party shall permit the Rights to be exercised for 50%
of the Common Shares of the Principal Party that would otherwise be purchasable
under subsection (a), in consideration of the surrender to the Principal Party,
as the successor to the Company under subsection (a) (ii), of the Rights so
exercised and without other payment of the Purchase Price. Rights exercised
under this subsection (e) shall be deemed to have been exercised in full and
shall be canceled.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or
to distribute Rights Certificates that evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this subsection (a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Common
Shares upon exercise of the Rights or to distribute certificates which evidence
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fractional Common Shares. In lieu of fractional Common Shares, the Company may
pay to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of a Common Share. For purposes of this subsection (b), the
current market value of one Common Share shall be the closing price of a Common
Share (as determined pursuant to Section 11(d) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of Common Shares upon exercise of the Rights
or to distribute certificates that evidence fractional Common Shares. In lieu of
fractional Common Shares, the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one
Common Share. For purposes of this subsection (c), the current market value of
one Common Share shall be the closing price of one Common Share (as determined
pursuant to Section 11(d) hereof) for the Trading Day immediately prior to the
date of such exercise.
(d) The holder of a Right or a beneficial interest in a Right by the
acceptance thereof expressly waives his right to receive any fractional Rights
or any fractional shares upon exercise of a Right, except as permitted by this
Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent. or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights or beneficial interests
therein, it is specifically acknowledged that the holders of Rights or
beneficial interests therein would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right or a
beneficial interest in a Right by accepting the same consents and agrees with
the Company and the Rights Agent and with every other such holder that:
(a) prior to the Distribution Date, beneficial interests in the Rights
will be transferable only in connection with the transfer of Common Shares;
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(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Share
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Share certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary.; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or a beneficial interest in a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by reason of
any preliminary or permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation; provided,
however, the Company must use its best efforts to have any such order, decree or
ruling lifted or otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of Common Shares
or any other securities of the Company that may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a shareholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent, for and to
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hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Shares or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency and trust created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
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conditions, by all of which the Company and the holders of Rights Certificates
or beneficial interests in the Rights, by their acceptance thereof, shall be
bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11 or
Section 13 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after actual notice of any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Common Shares to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any Common Shares or
Preferred Shares will, when so issued, be validly authorized and issued, fully
paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
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further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement and none of such actions shall constitute a breach of
trust. Nothing herein shall preclude the Rights Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent 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 its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause (1) and/or clause
(2) thereof, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' prior written notice mailed to the Company and to each
transfer agent of the Common Shares, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. The Company may remove
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the Rights Agent or any successor Rights Agent upon thirty (30) days' prior
written notice mailed to the Rights Agent or successor Rights Agent, as the case
may be, and to each transfer agent of the Common Shares, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of thirty
(30) days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Rights Certificate (who shall, with such
notice, submit his Rights Certificate for inspection by the Company), then any
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be (a) a
corporation organized, doing business and in good standing under the laws of the
United States or of any state, having a principal office in the State of New
York or the Commonwealth of Pennsylvania, that is authorized by law to exercise
corporate trust and stock transfer powers and is subject to supervision or
examination by federal or state authority and that has at the time of its
appointment as Rights Agent a combined capital and surplus adequate in the
judgment of a majority of Continuing Directors in office at the time to assure
the performance of its duties hereunder and the protection of the interests of
the Company and the holders of Rights or beneficial interests therein, or (b) an
Affiliate of a corporation described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares, and mail
a notice thereof in writing to the registered holders of the Rights Certificates
or, prior to the Distribution Date, to the registered holders of the Common
Shares. Failure to give any notice provided for in this Section 21, however, or
any defect therein, shall not affect the legality or validity of the resignation
or removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance, sale or delivery of Common. Shares following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to Common Shares so issued, sold or delivered pursuant to
the exercise of stock options, stock appreciation rights, grants or awards
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outstanding on the Distribution Date under any benefit plan or arrangement for
employees or directors, or upon the exercise, conversion or exchange of
securities outstanding on the Record Date or hereinafter issued by the Company,
and (b) may, in any other case, if deemed necessary or appropriate by the Board
of Directors of the Company, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that (i) no such Rights Certificate shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the Person to whom such Rights Certificate would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the close of business on the tenth day
following a Stock Acquisition Date (or, if the Stock Acquisition Date shall have
occurred prior to the Record Date, the close of business on the tenth day
following the Record Date) or (ii) the Final Expiration Date, redeem all but not
less than all the then outstanding Rights at a redemption price of $.01 per
Right, as such amount may be appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price"), and
the Company may, at its option, pay the Redemption Price either in Common Shares
(based on the "current market price", as defined in Section 11(d) hereof, of the
Common Shares at the time of redemption) or cash; provided, however, if the
Board of Directors of the Company authorizes redemption of the Rights in either
of the circumstances set forth in clauses (i) and (ii) of this proviso, then
there must be Continuing Directors then in office and such authorization shall
require the concurrence of a majority of such Continuing Directors: (i) such
authorization occurs on or after the time a Person becomes an Acquiring Person,
or (ii) such authorization occurs on or after the date of a change (resulting
from a proxy or consent solicitation) in a majority of the directors in office
at the commencement of such solicitation if any Person who is a participant in
such solicitation has stated (or, if upon the commencement of such solicitation,
a majority of the Board of Directors of the Company has determined in good
faith) that such Person (or any of its Affiliates or Associates) intends to
take, or may consider taking, any action that would result in such Person
becoming an Acquiring Person or that would cause the occurrence of a Triggering
Event unless, concurrently with such solicitation, such Person (or one or more
of its Affiliates or Associates) is making a cash tender offer pursuant to a
Schedule 14D-1 (or any successor form) filed with the Securities and Exchange
Commission for all outstanding Common Shares not beneficially owned by such
Person (or by its Affiliates or Associates). Notwithstanding anything contained
in this Agreement to the contrary, the Rights shall not be exercisable after the
occurrence of a Section 11(a)(ii) Event until such time as the Company's right
of redemption hereunder has expired.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
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thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at each holder's last address as it appears upon
the registry books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the Transfer Agent for the Common Shares. Any notice that
is mailed in the manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made.
(c) In the event of any dividend payable on the Common Shares payable
in Common Shares, subdivision of outstanding Common Shares or combination of the
Common Shares into a smaller number of shares, the Redemption Price then in
effect shall be adjusted by multiplying such Redemption Price by a fraction, the
numerator of which is the number of Common Shares outstanding immediately prior
to the occurrence of the event, and the denominator of which shall be the total
number of Common Shares outstanding immediately following the occurrence of the
event.
Section 24. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Common Shares or to make any other distribution to the holders of
Common Shares (other than a regular quarterly dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Common
Shares rights or warrants to subscribe for or to purchase any additional Common
Shares or shares of stock of any class or any other securities, rights or
options, or (iii) to effect any reclassification of its Common Shares (other
than a reclassification involving only the subdivision of outstanding Common
Shares), or (iv) to effect any consolidation or merger into or with any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), or to effect any sale or other transfer (or to
permit one or more Of its Subsidiaries to effect any sale or other transfer), in
one transaction or a series of related transactions, of more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of
the Company, then, in each such case, the Company shall give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 25
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of Common Shares, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of Common Shares for purposes of such action, and in the
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case of any such other action, at least twenty (20) days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of Common Shares whichever shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii) hereof
shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Right, to the extent feasible
and in accordance with Section 25 hereof, a notice of the occurrence of such
event, which shall specify the event and the consequences of the event to
holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the
preceding paragraph to Common Shares shall be deemed thereafter to refer to
Common Shares and/or, if appropriate, other securities.
Section 25. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
BetzDearborn Inc.
4636 Somerton Road
Trevose, Pennsylvania 19053-6783
Attention: General Counsel
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Attention: Corporate Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date to the holder of certificates representing Common
Shares) shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as shown on the
registry books of the Company.
Section 26. Supplements and Amendments.
(a) Prior to the Distribution Date, the Company and the Rights Agent
shall, if the Company so directs, supplement or amend any provision of this
Agreement without the approval of any holders of Common Shares. From and after
the Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
-34-
<PAGE>
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder (which lengthening or shortening, following the first occurrence of an
event set forth in clauses (i) and (ii) of the proviso to Section 23(a) hereof,
shall be effective only if there are Continuing Directors and shall require the
concurrence of a majority of such Continuing Directors), or to change or
supplement the provisions hereunder in any manner that the Company may deem
necessary or desirable and that shall not adversely affect the interests of the
holders of Rights Certificates; provided, this Agreement may not be supplemented
or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed at such time as the Rights
are not then redeemable, or (B) any other time period unless such lengthening is
for the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Company that states that the proposed supplement or
amendment is in compliance with the terms of this Section 26, the Rights Agent
shall execute such supplement or amendment. Prior to the Distribution Date, the
interests of the beneficial owners of Rights shall be deemed coincident with the
interests of the holders of Common Shares.
(b) In deciding whether or not to supplement or amend this Agreement,
the directors of the Company shall act in good faith, in a manner they
reasonably believe to be in the best interests of the Company and with such
care, including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances, and they may consider the
effects of any action upon employees, suppliers and customers and creditors of
the Company and upon communities in which offices or other establishments of the
Company are located and all other pertinent factors.
Section 27. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 28. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of Common Shares outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding Common
Shares of which any Person is the Beneficial Owner, shall be made in accordance
with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act as in effect on the date hereof. The Board of
Directors of the Company (with, where specifically provided for herein, the
concurrence of the Continuing Directors) shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board (with, where specifically provided for herein,
the concurrence of the Continuing Directors) or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend or supplement the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
-35-
<PAGE>
clause (y) below, all omissions with respect to the foregoing) that are done or
made by the Board (with, where specifically provided for herein, the concurrence
of the Continuing Directors) in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject the Board or the Continuing Directors to any
liability to the holders of the Rights.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Shares) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Shares).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable for any purpose or under
any set of circumstances or as applied to any Person, such invalid, void or
unenforceable term, provision, covenant or restriction shall continue in effect
to the maximum extent possible for all other purposes, under all other
circumstances and as applied to all other Persons; and the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
Without limiting the foregoing, if any provisions requiring that a determination
be made by less than the entire Board (or at a time or with the concurrence of a
group of directors consisting of less than the entire Board) is held by a court
of competent jurisdiction or other authority to be invalid, void or
unenforceable, such determination shall then be made by the Board in accordance
with applicable law and the Company's Articles and by-laws.
Section 31. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the Commonwealth of Pennsylvania and for all purposes shall be governed
by and construed in accordance with the laws of such jurisdiction applicable to
contracts made and to be performed entirely within such jurisdiction.
-36-
<PAGE>
Section 32. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BETZDEARBORN INC.
By:
---------------------------------------
William R. Cook
Chairman of the Board and
Chief Executive Officer
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:
---------------------------------------
Name:
Title:
-37-
<PAGE>
Exhibit A
(Form of Rights Certificate)
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER SEPTEMBER 19, 2008 OR AFTER EARLIER
REDEMPTION BY THE COMPANY. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, INITIALLY AT $.01
PER RIGHT, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS
AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME
NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS
OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF
AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]*
- --------------------
* The bracketed portion of the legend shall be inserted only if applicable and
shall replace the preceding sentence.
<PAGE>
Rights Certificate
BETZDEARBORN INC.
This certifies that , or
registered assigns, is the registered owner of the number of Rights set forth
above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement, dated as of February 12, 1998
(the "Rights Agreement"), between BetzDearborn, Inc., a Pennsylvania corporation
(the "Company"), and American Stock Transfer & Trust Company, a New York
corporation (the "Rights Agent"), to purchase from the Company at any time prior
to 5:00 P.M. (Philadelphia time) on September 19, 2008 at the office or offices
of the Rights Agent designated for such purpose, or its successors as Rights
Agent, one fully paid, non-assessable Common Share (the "Common Share") of the
Company, at a purchase price of $250 per share (the "Purchase Price"), or such
fraction of a Common Share and other debt or equity securities of the Company
and other assets as provided in Section 7(g) of the Rights Agreement, upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. Except as provided in
Sections 11(p) and 13(e) of the Rights Agreement, the Purchase Price shall be
paid in cash or, if the Company permits, by the delivery of Common Shares of the
Company having an equivalent value. The number of Rights evidenced by this
Rights Certificate (and the number of shares that may be purchased upon exercise
thereof) set forth above, and the Purchase Price per share set forth above, are
the number and Purchase Price as of February 12, 1998, based on the Common
Shares as constituted at such date.
Except as otherwise provided in the Rights Agreement, upon the
occurrence of any Section 11(a)(ii) Event (as such term is defined in the Rights
Agreement), if the Rights evidenced by this Rights Certificate are beneficially
owned by (i) an Acquiring Person or an Affiliate or Associate of any such
Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of any such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of Common Shares or other securities that may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events, including
Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
<PAGE>
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the office of the Rights Agent and
are also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Common Shares as the Rights evidenced by the
Rights Certificate or Rights Certificates surrendered shall have entitled such
holder to purchase. If this Rights Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Rights
Certificate or Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a redemption
price of $.01 per Right (subject to adjustment as provided in the Rights
Agreement) at any time prior to the earlier of the close of business on (i) the
tenth day following the Stock Acquisition Date (as such time period may be
extended pursuant to the Rights Agreement), and (ii) the Final Expiration Date.
Under certain circumstances set forth in the Rights Agreement, the decision to
redeem shall require the concurrence of a majority of the Continuing Directors.
No fractional Common Shares will be issued upon the exercise of any
Right or Rights evidenced hereby but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of Common Shares or
of any other securities of the Company that may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or, to receive notice of meetings or
other actions affecting shareholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
-2-
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of , .
---------- ----
ATTEST BETZDEARBORN INC.
By:
----------------------------
Secretary Chairman of the Board and
Chief Executive Officer
Countersigned
American Stock Transfer & Trust Company
By:
---------------------------------
Title:
-3-
<PAGE>
(Form of Reverse Side of Rights Certificate)
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Rights Certificate.)
FOR VALUE RECEIVED
--------------------------------------------------------------
hereby sells, assigns and transfers unto
---------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: ,
------------ ------ ----------------------------------
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ,
------------ ---- ------------------------------------
Signature
Signature Guaranteed:
<PAGE>
NOTICE
The signatures to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Rights Certificate.)
To: BETZDEARBORN INC.
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the Common Shares issuable
upon the exercise of the Rights (or such other securities of the Company or of
any other person that may be issuable upon the exercise of the Rights) and
requests that certificates for such shares be issued in the name of and
delivered to:
Please insert social security or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: ,
----------- ------
------------------------------------
Signature
Signature Guaranteed:
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes that
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: ,
---------- ------
-------------------------------------
Signature
Signature Guaranteed:
NOTICE
The signatures to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
EXHIBIT B
SUMMARY OF RIGHTS TO PURCHASE
COMMON SHARES
On February 12, 1998 the Board of Directors of BetzDearborn Inc. (the
"Company") declared a dividend distribution of one Right for each outstanding
share of Common Stock, $.10 par value, of the Company (the "Common Shares"), to
shareholders of record at the close of business on September 19, 1998. Each
Right entitles the registered holder to purchase from the Company one Common
Share, or, under certain circumstances, a combination of securities and assets
of equivalent value, at a Purchase Price of $250 per Common Share, subject to
adjustment. The Purchase Price may be paid in cash or, if the Company permits,
by the delivery of Common Shares having a value at the time of exercise equal to
the Purchase Price. The description and terms of the Rights are set forth in a
Rights Agreement (the "Rights Agreement") between the Company and American Stock
Transfer & Trust Company, as Rights Agent.
Initially, ownership of the Rights will be evidenced by the Common
Share certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. The Rights will separate from the Common
Shares and a Distribution Date will occur upon the earlier of (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 20% or more of the outstanding Common Shares
(the "Stock Acquisition Date") or (ii) the close of business on the tenth
business day (or such later date as may be fixed by the Board of Directors of
the Company) before a Person becomes an Acquiring Person after the commencement
of a tender offer or exchange offer that would result in a person or group
beneficially owning 20% or more of the outstanding Common Shares. Until the
Distribution Date, (i) the Rights will be evidenced by the Common Share
certificates and will be transferred with and only with such Common Share
certificates, (ii) new Common Share certificates issued after September 19, 1998
will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificates for Common Shares
outstanding will also constitute the transfer of the Rights associated with the
common Shares represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on September 19, 2008, unless earlier redeemed
by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Shares as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, and except in connection with the exercise of employee
stock options or stock appreciation rights or under any other benefit plan for
employees or
<PAGE>
directors or in connection with the exercise of warrants or the conversion of
convertible securities, only Common Shares issued after September 19, 1998 and
prior to the Distribution Date will be issued with Rights.
In the event that at any time following the Distribution Date a Person
becomes an Acquiring Person, each holder of a Right will thereafter have the
right to receive, upon exercise, Common Shares (or, in certain circumstances,
cash, property or other securities of the Company) having a value equal to two
times the exercise price of the Right. In lieu of requiring payment of the
Purchase Price upon exercise of the Rights following any such event, the Company
may permit the holders simply to surrender the Rights in which event they will
be entitled to receive Common Shares (and other property, as the case may be)
with a value of 50% of what could be purchased by payment of the full Purchase
Price. Notwithstanding any of the foregoing, all Rights that are, or (under
certain circumstances specified in the Rights Agreement) were, beneficially
owned by the Acquiring Person will be null and void. However, Rights are not
exercisable until such time as the Rights are no longer redeemable by the
Company as set forth below.
For example, at an exercise price of $250 per Right, each Right not
otherwise voided following an event set forth in the preceding paragraph would
entitle its holder to purchase $500 worth of Common Shares (or other
consideration, as noted above) for $250. Assuming that the Common Shares had a
per share value of $100 at such time, the holder of each valid Right would be
entitled to purchase five Common Shares with a value of $500 for $250.
Alternatively, the Company could permit the holder to surrender each Right in
exchange for one-half of the number of Common Shares (or other consideration, as
noted above) otherwise deliverable upon exercise without the payment of any
consideration other than the surrender of the Right.
In the event that, at any time following the Stock Acquisition Date,
(i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than a
merger that is described in, or that follows a tender offer or exchange offer
described in, the second preceding paragraph), or (ii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a Right
(except Rights that previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common shares of the
acquiring company having a value equal to two times the exercise price of the
Right. Again, provision is made to permit surrender of the Rights in exchange
for one-half of the value otherwise purchasable. The events set forth in this
paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."
The Purchase Price payable, and the number of Common Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Common
Shares, (ii) if holders of the Common Shares are granted certain rights or
warrants to subscribe for Common Shares or convertible securities at less than
the current market price of the Common Shares, or (iii) upon the distribution to
-2-
<PAGE>
holders of the Common Shares of evidences of indebtedness or assets (excluding
regular quarterly dividends) or of certain subscription rights or warrants
(other than those referred to above and rights or warrants to acquire securities
of any person, including any subsidiary of the Company).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Common Shares will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Common Shares
on the last trading date prior to the date of exercise.
At any time until ten days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a redemption price
of $.01 per Right, subject to adjustment. The ten day period may be extended by
the Board of Directors so long as the Rights are still redeemable. Under certain
circumstances set forth in the Rights Agreement, the decision to redeem will
require the concurrence of a majority of the Continuing Directors. Immediately
upon the action of the Board of Directors ordering redemption of the Rights,
with, where required, the concurrence of the Continuing Directors, the Rights
will terminate and the only right of the holders of Rights will be to receive
the redemption price.
The term "Continuing Directors" means any member of the Board of
Directors of the Company who was a member of the Board prior to the date of the
Rights Agreement, and any person who is subsequently elected to the Board if
such person is recommended or approved by a majority of the Continuing
Directors, but shall not include an Acquiring Person, or an affiliate or
associate of an Acquiring Person, or any representative of the foregoing
entities.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Shares (or other consideration) of the Company or for
common shares of the acquiring company as set forth above.
Any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board (in certain circumstances, with the concurrence of the Continuing
Directors) in order to cure any ambiguity, to make changes that do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person), or to shorten or lengthen certain time periods under the
Rights Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
-3-
<PAGE>
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission. A copy of the Rights Agreement is available from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
-4-
[CONFORMED COPY]
$750,000,000
CREDIT AGREEMENT
dated as of
October 20, 1997
among
BetzDearborn Inc.,
BetzDearborn Canada Inc.,
The Banks Parties Hereto,
and
The Chase Manhattan Bank
and
The Chase Manhattan Bank of Canada,
as Administrative Agents
- -------------------------------------------------------------------------------
J.P. Morgan Securities Inc.,
Syndication Agent
Bank of America National Trust and Savings Association,
Documentation Agent
<PAGE>
TABLE OF CONTENTS
----------------------
PAGE
----
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions....................................................1
SECTION 1.02. Accounting Terms and Determinations...........................22
SECTION 1.03. Classes and Types of Loans....................................22
SECTION 1.04. Related Banks.................................................22
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend...........................................23
SECTION 2.02. Notice of Committed Borrowing.................................23
SECTION 2.03. Bankers' Acceptances..........................................24
SECTION 2.04. Money Market Borrowings.......................................28
SECTION 2.05. Notice to Banks; Funding of Loans.............................33
SECTION 2.06. Registry......................................................34
SECTION 2.07. Maturity of Loans.............................................34
SECTION 2.08. Interest Rates................................................35
SECTION 2.09. Fees..........................................................38
SECTION 2.10. Optional Termination, Reduction or Reallocation of
Commitments...................................................40
SECTION 2.11. Method of Electing Interest Rates.............................40
SECTION 2.12. Scheduled Termination of Commitments..........................42
SECTION 2.13. Optional Prepayments; Collateralization of Bankers'
Acceptances...................................................42
SECTION 2.14. General Provisions as to Payments.............................43
SECTION 2.15. Funding Losses................................................44
SECTION 2.16. Computation of Interest and Fees..............................44
SECTION 2.17. Regulation D Compensation.....................................45
SECTION 2.18. Judgment Currency.............................................45
SECTION 2.19. Foreign Costs.................................................46
SECTION 2.20. Currency Equivalents..........................................46
ARTICLE 3
CONDITIONS
SECTION 3.01. Closing.......................................................47
SECTION 3.02. Borrowings and Acceptances of Bankers' Acceptances............48
<PAGE>
PAGE
----
SECTION 3.03. First Borrowing by Each Eligible Subsidiary...................49
SECTION 3.04. Termination of Existing Credit Agreement......................50
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power.................................50
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention.................................................50
SECTION 4.03. Binding Effect................................................50
SECTION 4.04. Financial Information.........................................51
SECTION 4.05. Litigation....................................................51
SECTION 4.06. Compliance with ERISA.........................................51
SECTION 4.07. Environmental Matters.........................................52
SECTION 4.08. Taxes.........................................................52
SECTION 4.09. Subsidiaries..................................................52
SECTION 4.10. Regulatory Restrictions on Borrowing..........................53
SECTION 4.11. Full Disclosure...............................................53
ARTICLE 5
COVENANTS
SECTION 5.01. Company Information...........................................53
SECTION 5.02. Other Borrower Information....................................55
SECTION 5.03. Payment of Obligations........................................56
SECTION 5.04. Maintenance of Property; Insurance............................56
SECTION 5.05. Conduct of Business and Maintenance of Existence..............56
SECTION 5.06. Compliance with Laws..........................................57
SECTION 5.07. Inspection of Property, Books and Records.....................57
SECTION 5.08. Mergers and Sales of Assets...................................57
SECTION 5.09. Use of Proceeds...............................................57
SECTION 5.10. Negative Pledge...............................................58
SECTION 5.11. Debt to Total Capital.........................................59
SECTION 5.12. Debt of Subsidiaries..........................................59
SECTION 5.13. Minimum Consolidated Net Worth................................60
SECTION 5.14. Sale-leaseback Transactions...................................60
SECTION 5.15. Transactions with Affiliates..................................61
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ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default.............................................61
SECTION 6.02. Notice of Default.............................................63
SECTION 6.03. Action by Administrative Agents...............................64
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization.................................64
SECTION 7.02. Administrative Agents and Affiliates..........................64
SECTION 7.03. Action by Administrative Agents...............................64
SECTION 7.04. Consultation with Experts.....................................64
SECTION 7.05. Liability of Administrative Agent.............................65
SECTION 7.06. Indemnification...............................................65
SECTION 7.07. Credit Decision...............................................65
SECTION 7.08. Successor Administrative Agent................................65
SECTION 7.09. Agents' Fees..................................................66
SECTION 7.10. Other Agents..................................................66
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair......66
SECTION 8.02. Illegality....................................................67
SECTION 8.03. Increased Cost and Reduced Return.............................68
SECTION 8.04. Taxes.........................................................69
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans.....73
SECTION 8.06. Substitution of Bank..........................................73
SECTION 8.07. Allocations...................................................74
ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF ELIGIBLE SUBSIDIARIES
SECTION 9.01. Corporate Existence and Power.................................74
SECTION 9.02. Corporate and Governmental Authorization;
Contravention.................................................74
SECTION 9.03. Binding Effect................................................74
SECTION 9.04. Taxes.........................................................75
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ARTICLE 10
GUARANTY
SECTION 10.01. The Guaranty.................................................75
SECTION 10.02. Guaranty Unconditional.......................................75
SECTION 10.03. Discharge Only Upon Payment In Full; Reinstatement In
Certain Circumstances........................................76
SECTION 10.04. Waiver by the Company........................................76
SECTION 10.05. Subrogation..................................................76
SECTION 10.06. Stay of Acceleration.........................................77
SECTION 10.07. Continuing Guaranty..........................................77
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices......................................................77
SECTION 11.02. No Waivers...................................................78
SECTION 11.03. Expenses; Indemnification....................................78
SECTION 11.04. Sharing of Set-offs..........................................78
SECTION 11.05. Amendments and Waivers.......................................79
SECTION 11.06. Successors and Assigns.......................................79
SECTION 11.07. Collateral...................................................81
SECTION 11.08. Governing Law; Submission to Jurisdiction....................81
SECTION 11.09. Counterparts; Integration; Effectiveness.....................82
SECTION 11.10. WAIVER OF JURY TRIAL.........................................82
SECTION 11.11. Confidentiality..............................................82
EXHIBIT A - Pricing Schedule
EXHIBIT B - Note
EXHIBIT C - Money Market Quote Request
EXHIBIT D - Invitation for Money Market Quotes
EXHIBIT E - Money Market Quote
EXHIBIT F-1 - Opinion of Counsel for the Company
and United States Counsel for BetzDearborn Canada
EXHIBIT F-2 - Opinion of Canadian Counsel
for BetzDearborn Canada
EXHIBIT G - Opinion of Special Counsel
for the Agents
EXHIBIT H - Form of Election to Participate
EXHIBIT I - Form of Election to Terminate
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EXHIBIT J - Matters to be covered in the Opinions of Counsel for the
Eligible Subsidiary and the Company
EXHIBIT K - Assignment and Assumption Agreement
EXHIBIT L - Commitment Schedule
EXHIBIT M - Acceptance Note
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CREDIT AGREEMENT dated as of October 20, 1997 among BETZDEARBORN INC.,
BETZDEARBORN CANADA INC., the BANKS parties hereto, and THE CHASE MANHATTAN BANK
and THE CHASE MANHATTAN BANK OF CANADA, as Administrative Agents.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes setting
forth Money Market Absolute Rates pursuant to Section 2.04.
"Acceptance Fee" means the fee payable in Canadian Dollars to each Bank in
respect of Bankers' Acceptances computed in accordance with Section 2.03(d).
"Acceptance Note" has the meaning set forth in Section 2.03(f).
"Acceptance Note Bank" has the meaning set forth in Section 2.03(f).
"Adjusted CD Rate" has the meaning set forth in Section 2.08(b).
"Administrative Agent" means the General Administrative Agent or the
Canadian Administrative Agent, as the context may require, and "Administrative
Agents" means both of them. Any reference to the Administrative Agent in
connection with (i) any notice given by or to the Administrative Agent, (ii) any
fees or other payments paid to the Administrative Agent, (iii) any determination
of any interest rate made by the Administrative Agent or (iv) any other action
taken by the Administrative Agent (x) with respect to the Canadian Subfacility,
shall refer to the Canadian Administrative Agent and (y) with respect to the US
Subfacility, shall refer to the General Administrative Agent.
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative Agent
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and submitted to the Administrative Agent (with a copy to the Company) duly
completed by such Bank.
"Affiliate" means (i) any Person that directly, or indirectly through one
or more intermediaries, controls the Company (a "Controlling Person") or (ii)
any Person (other than the Company or a Subsidiary) which is controlled by or is
under common control with a Controlling Person. As used herein, the term
"control" means possession, directly or indirectly, of the power to vote 10% or
more of any class of voting securities of a Person or to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" means any of the Administrative Agents, the Documentation Agent or
the Syndication Agent, and "Agents" means any two or more of the foregoing.
"Alternate Interest Period" has the meaning set forth in Section 2.02(b).
"Alternate Term" has the meaning set forth in Section 2.03(b).
"Alternative Currency" means the respective lawful currencies of the United
Kingdom, Belgium, France, Germany, Canada, Italy and Japan; provided that any
other currency (except Dollars) shall also be an Alternative Currency if (i) the
Company requests, by notice to the Administrative Agent, that such currency be
included as an additional Alternative Currency for purposes of this Agreement,
(ii) such currency is freely transferable and is freely convertible into Dollars
in the London foreign exchange market, (iii) deposits in such currency are
customarily offered to banks in the London interbank market and (iv) the
Administrative Agent, by notice to the Borrowers and the Banks, approves (which
approval shall not be unreasonably withheld) the inclusion of such currency as
an additional Alternative Currency for purposes hereof. The Administrative
Agent's approval of any such additional Alternative Currency may be limited to a
specified maximum Dollar Amount or a specified period of time or both.
"Alternative Currency Loan" means a Money Market Loan that is made in an
Alternative Currency in accordance with the applicable Notice of Borrowing.
"Applicable BA Discount Rate" means (i) with respect to any Schedule I
Bank, as applicable to a Bankers' Acceptance being purchased by such Schedule I
Bank on any day, the average (as determined by the Administrative Agent) of the
respective percentage discount rates (expressed to two decimal places and
rounded upward, if necessary, to the nearest 1/100th of 1%) quoted to the
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Administrative Agent by each Schedule I Reference Bank as the percentage
discount rate at which such Schedule I Reference Bank would, in accordance with
its normal practices, at or about 10:00 A.M. (Toronto time) on such day, be
prepared to purchase bankers' acceptances accepted by such Schedule I Reference
Bank having a term and face amount comparable to the term and face amount of
such Bankers' Acceptance and (ii) with respect to any Schedule II Bank, as
applicable to a Bankers' Acceptance being purchased by such Schedule II Bank on
any day, the lesser of (x) the average (as determined by the Administrative
Agent) of the respective percentage discount rates (expressed to two decimal
places and rounded upward, if necessary, to the nearest 1/100th of 1%) quoted to
the Administrative Agent by each Schedule II Reference Bank as the percentage
discount rate at which such Schedule II Reference Bank would, in accordance with
its normal practices, at or about 10:00 A.M. (Toronto time) on such day, be
prepared to purchase bankers' acceptances accepted by such Schedule II Reference
Bank having a term and a face amount comparable to the term and face amount of
such Bankers' Acceptance and (y) the rate that is 0.10% per annum in excess of
the rate determined pursuant to clause (i) of this definition in connection with
the relevant issuance of Bankers' Acceptances.
"Applicable Lending Office" means (i) with respect to any US Bank, its US
Lending Office and (ii) with respect to any Canadian Bank, its Canadian Lending
Office.
"Approved Amount" means (i) with respect to Dollars, $10,000,000 or any
larger multiple of $1,000,000, (ii) with respect to Canadian Dollars,
C$10,000,000 or any larger multiple of C$1,000,000 and (iii) with respect to any
other currency, a comparable amount of such currency as determined by the
Administrative Agent and the Company.
"Assessment Rate" has the meaning set forth in Section 2.08(b).
"Assignee" has the meaning set forth in Section 11.06(c).
"BA Discount Proceeds" means proceeds in respect of any Bankers' Acceptance
to be purchased by a Bank on any day under Section 2.03, in an amount (rounded
to the nearest whole Canadian cent, and with one-half of one Canadian cent being
rounded up) calculated on such day by dividing:
(a) the face amount of such Bankers' Acceptance; by
(b) the sum of one plus the product of:
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(i) the Applicable BA Discount Rate (expressed as a decimal)
applicable to such Bankers' Acceptance; and
(ii) a fraction, the numerator of which is the number of days
remaining in the term of such Bankers' Acceptance and the
denominator of which is 365;
with such product being rounded up or down to the fifth
decimal place and .000005 being rounded up.
"BA Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
"Bank" means a Canadian Bank or a US Bank.
"Bankers' Acceptance" means a bill of exchange denominated in Canadian
Dollars drawn by a Borrower and accepted by a Canadian Bank pursuant to Section
2.03; provided that, to the extent the context shall require, each Acceptance
Note shall be deemed to be a Bankers' Acceptance.
"Bankruptcy Remote Subsidiary" means any Subsidiary of the Company created
in connection with a Permitted Securitization Transaction which has no material
creditors other than the purchaser or lender related to such Permitted
Securitization Transaction and the Company or any Subsidiary of the Company that
is the originator and seller or contributor of accounts receivable to such
Subsidiary in connection with a Permitted Securitization Transaction.
"Base Rate Loan" means a Canadian Base Rate Loan or a US Base Rate Loan.
"Benefit Arrangement" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA
Group.
"BetzDearborn Canada" means BetzDearborn Canada Inc., a corporation
amalgamated under the laws of Ontario, and its successors.
"Borrower" means the Company or any Eligible Subsidiary, as the context may
require, and their respective successors, and "Borrowers" means all of the
foregoing. As the context may permit, the terms "Borrower" and
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"Borrowers" include the Company in its capacity as guarantor of the obligations
of the other Borrowers hereunder.
"Borrowing" means the aggregation of Loans of one or more Banks to be made
to a single Borrower pursuant to Article 2 on the same date, all of which Loans
are of the same Class, Type (subject to Article 8) and currency and, in the case
of Fixed Rate Loans, have the same initial Interest Period.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close; provided
that if such term is used with reference to Canadian Loans or Bankers'
Acceptances such day shall also be a day on which commercial banks in Toronto
are open for business; and provided further if such term is used with reference
to a Euro-Dollar Loan or a Money Market Loan, such day shall also be a day on
which commercial banks are open for international business (including dealings
in deposits of the relevant currency) in London and (in the case of a Money
Market Loan denominated in a currency other than Dollars) in the jurisdiction of
the Payment Office.
"Canadian Administrative Agent" means The Chase Manhattan Bank of Canada in
its capacity as administrative agent for the Canadian Banks under the Canadian
Subfacility, and its successors in such capacity.
"Canadian Bank" means each Bank or other financial institution listed on
the signature pages hereof as a Canadian Bank, each Assignee which becomes a
Canadian Bank pursuant to Section 11.06(c), and their respective successors.
"Canadian Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the rate of interest per annum established by The Chase Manhattan
Bank of Canada in Toronto as the reference rate of interest then in effect for
determining interest rates on commercial loans denominated in Dollars made by it
in Canada and (ii) the sum of one-half of one percent plus the Federal Funds
Rate for such day.
"Canadian Base Rate Loan" means (i) a Canadian Loan denominated in Dollars
which bears interest at the Canadian Base Rate pursuant to the applicable Notice
of Committed Borrowing or Notice of Interest Rate Election or the provisions of
Article 8 or (ii) an overdue amount which was a Canadian Base Rate Loan
immediately before it became overdue.
"Canadian Commitment" means (i) with respect to each Canadian Bank listed
on the signature pages hereof, the amount set forth opposite its name on the
Commitment Schedule under the heading "Canadian Commitment" and (ii) with
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respect to each Assignee which becomes a Canadian Bank pursuant to Section 8.06
or 11.06(c), the amount of the Canadian Commitment thereby assumed by it, in
each case as such amount may be reduced from time to time pursuant to Sections
2.10, 2.13, and 11.06(c) or increased from time to time pursuant to Section 2.10
or 11.06(c). All Canadian Commitments are denominated in Dollars.
"Canadian Dollars" and "C$" mean the lawful currency of Canada.
"Canadian Lending Office" means, as to each Canadian Bank, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Canadian Lending Office)
or such other office, branch or affiliate of such Canadian Bank as it may
hereafter designate as its Canadian Lending Office by notice to the Company and
the Administrative Agent; provided that any Canadian Bank may so designate
separate Canadian Lending Offices for its Canadian Loans of different Types and
currencies, in which case all references herein to the Canadian Lending Office
of such Canadian Bank shall be deemed to refer to any or all of such offices, as
the context may require.
"Canadian Loan" means a Committed Loan made pursuant to Section 2.01(b).
Canadian Loans may be denominated in Canadian Dollars (as Canadian Prime Rate
Loans) or in Dollars (as Canadian Base Rate Loans or Euro-Dollar Loans);
provided that the aggregate Canadian Outstandings of all Canadian Banks may not
exceed the aggregate amount of the Canadian Commitments.
"Canadian Outstandings" means, as to any Canadian Bank at any time, an
amount equal to the sum of the aggregate outstanding Dollar Amount of its
Canadian Loans at such time and the aggregate Dollar Amount of Bankers'
Acceptances accepted by it and outstanding at such time.
"Canadian Prime Rate" means, for any day, a rate per annum equal to the
higher of (i) the rate of interest per annum established by The Chase Manhattan
Bank of Canada as the reference rate of interest then in effect for determining
interest rates on commercial loans denominated in Canadian Dollars made by it in
Canada and (ii) the sum of 1/2 of 1% plus the CDOR Rate for such day.
"Canadian Prime Rate Loan" means (i) a Canadian Loan denominated in
Canadian Dollars which bears interest at the Canadian Prime Rate pursuant to the
applicable Notice of Committed Borrowing or Notice of Interest Rate Election or
(ii) an overdue amount which was a Canadian Prime Rate Loan immediately before
it became overdue.
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"Canadian Subfacility" means the credit facility extended to the Borrowers
pursuant to Sections 2.01(b) and 2.03.
"CD Base Rate" has the meaning set forth in Section 2.08(b).
"CD Loan" means (i) a Committed Loan which is a US Loan denominated in
Dollars bearing interest at a CD Rate pursuant to the applicable Notice of
Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue
amount which was a CD Loan immediately before it became overdue.
"CD Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
"CD Rate" means a rate of interest determined pursuant to Section 2.08(b)
on the basis of an Adjusted CD Rate.
"CD Reference Banks" means Bank of America National Trust and Savings
Association, The Chase Manhattan Bank and Morgan Guaranty Trust Company of New
York.
"CDOR Rate" means on any date, the per annum rate of interest which is the
rate based on an average rate applicable to Canadian Dollar bankers' acceptances
for a term of 30 days appearing on the "Reuters Screen CDOR Page" (as defined in
the International Swap Dealer Association, Inc. definitions, as modified or
amended from time to time) as of 10:00 A.M. (Toronto time) on such date, or if
such date is not a Business Day, then on the immediately preceding Business Day;
provided, however, if such rate does not appear on the Reuters Screen CDOR Page
as contemplated, then the CDOR Rate on any date shall be calculated as the
arithmetic mean of the rates for the term referred to above applicable to
Canadian Dollar bankers' acceptances quoted by the Schedule I Reference Banks as
of 10:00 A.M. (Toronto time) on such date, or if such date is not a Business
Day, then on the immediately preceding Business Day.
"Class" has the meaning set forth in Section 1.03.
"Closing Date" means the date on or after the Effective Date on which the
General Administrative Agent shall have received the documents specified in or
pursuant to Section 3.01.
"Commitment" means a Canadian Commitment or a US Commitment, and
"Commitments" means all or any combination of the foregoing, as the context may
require.
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"Commitment Schedule" means the schedule set forth in Exhibit L hereto.
"Committed Loan" means a loan made by a Bank pursuant to Section 2.01;
provided that, if any such loan or loans (or portions thereof) are combined or
subdivided pursuant to a Notice of Interest Rate Election, the term "Committed
Loan" shall refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting from such
subdivision, as the case may be.
"Company" means BetzDearborn Inc., a Pennsylvania corporation, and its
successors.
"Company's 1996 Form 10-K" means the Company's annual report on Form 10-K
for 1996, as filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934.
"Consolidated Assets" means at any date the assets of the Company and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated Debt" means at any date the Debt of the Company and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated EBITDA" means, for any fiscal period, Consolidated Net Income
for such period plus, to the extent deducted in determining Consolidated Net
Income for such period, the aggregate amount of (i) Consolidated Interest
Expense, (ii) income tax expense and (iii) depreciation and amortization
expense.
"Consolidated Interest Expense" means, for any period, the interest expense
of the Company and its Consolidated Subsidiaries determined on a consolidated
basis for such period.
"Consolidated Net Income" means, for any fiscal period, the net income of
the Company and its Consolidated Subsidiaries, determined on a consolidated
basis for such period, exclusive of the effect of any extraordinary or other
non-recurring gain or loss (such as non-recurring restructuring or integration
costs as a result of an acquisition).
"Consolidated Net Worth" means at any date the consolidated shareholders'
equity of the Company and its Consolidated Subsidiaries determined as of such
date (other than any amount attributable to stock which is required to be
redeemed or is redeemable at the option of the holder, if certain
8
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events or conditions occur or exist or otherwise), excluding the effect thereon
of foreign currency translation gains and losses arising after June 30, 1996.
"Consolidated Subsidiary" means at any date any Subsidiary or other entity
the accounts of which would be consolidated with those of the Company in its
consolidated financial statements if such statements were prepared as of such
date.
"Credit Event" means any Borrowing or issuance of Bankers' Acceptances
hereunder.
"Debt" of any Person means at any date, 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 obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable, construction retentions and similar
items arising in the ordinary course of business, (iv) all obligations of such
Person as lessee which are capitalized in accordance with generally accepted
accounting principles, (v) all non-contingent obligations (and, for purposes of
Section 5.10 and the definitions of Material Debt and Material Financial
Obligations, all contingent obligations) of such Person to reimburse any bank or
other Person in respect of amounts paid under a letter of credit or similar
instrument, (vi) all Debt secured by a Lien on any asset of such Person up to
the greater of fair market value or book value of such asset, whether or not
such Debt is otherwise an obligation of such Person and (vii) all Debt of others
Guaranteed by such Person. Notwithstanding the foregoing, "Debt" shall not
include any obligations that have been defeased in accordance with generally
accepted accounting principles.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
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"Documentation Agent" means Bank of America National Trust and Savings
Association in its capacity as documentation agent in respect of this Agreement.
"Dollar Amount" means, at any time:
(i) with respect to any Dollar-Denominated Loan, the principal amount
thereof then outstanding;
(ii) with respect to any Alternative Currency Loan, the principal
amount thereof then outstanding in the relevant Alternative Currency,
converted to Dollars in accordance with Section 2.20; and
(iii) with respect to any Bankers' Acceptance, the face amount
thereof, converted to Dollars in accordance with Section 2.20.
"Dollar-Denominated Loan" means a Loan that is made in Dollars in
accordance with the applicable Notice of Borrowing.
"Dollars" and the sign "$" mean the lawful currency of the United States.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section 2.08(b).
"Drafts" has the meaning set forth in Section 2.03(b)(ii).
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 11.09.
"Eighty Percent-Owned Consolidated Subsidiary" means any Consolidated
Subsidiary of which at least 80% of the shares of capital stock or other
ownership interests are at the time directly or indirectly owned by the Company.
"Election to Participate" means an Election to Participate substantially in
the form of Exhibit H hereto.
"Election to Terminate" means an Election to Terminate substantially in the
form of Exhibit I hereto.
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"Eligible Subsidiary" means (i) BetzDearborn Canada and (ii) any Eighty
Percent-Owned Consolidated Subsidiary of the Company as to which an Election to
Participate shall have been delivered to the General Administrative Agent and as
to which an Election to Terminate shall not have been delivered to the General
Administrative Agent. Each such Election to Participate and Election to
Terminate shall be duly executed on behalf of such Consolidated Subsidiary and
the Company in such number of copies as the General Administrative Agent may
request. The delivery of an Election to Terminate shall not affect any
obligation of an Eligible Subsidiary theretofore incurred. The General
Administrative Agent shall promptly give notice to the Canadian Administrative
Agent and the Banks of the receipt of any Election to Participate or Election to
Terminate.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to the
environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Loan" means (i) a Committed Loan denominated in Dollars which
bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of
Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue
amount which was a Euro-Dollar Loan immediately before it became overdue.
"Euro-Dollar Margin" means a rate per annum determined in accordance with
the Pricing Schedule.
"Euro-Dollar Rate" means a rate of interest determined pursuant to Section
2.08(c) on the basis of a London Interbank Offered Rate.
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"Euro-Dollar Reference Banks" means the principal London offices of Bank of
America National Trust and Savings Association, The Chase Manhattan Bank and
Morgan Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
"Events of Default" has the meaning set forth in Section 6.01.
"Existing Credit Agreement" means the Credit Agreement dated as of June 20,
1996 among the Company, BetzDearborn Canada Inc. (formerly Betz Canada Inc.),
the banks parties thereto and Morgan Guaranty Trust Company of New York, as
agent, as amended to the Closing Date.
"Facility Fee Rate" has the meaning set forth in the Pricing Schedule.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (i) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (ii) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate quoted to The
Chase Manhattan Bank on such day on such transactions as determined by the
Administrative Agent.
"Fixed Rate Loan" means any Loan other than a Base Rate Loan or a Canadian
Prime Rate Loan.
"General Administrative Agent" means The Chase Manhattan Bank in its
capacity as administrative agent for the US Banks under the US Subfacility and
for all Banks under this Agreement generally, and its successors in such
capacity.
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"Group " means at any time:
(a) a group of Loans consisting of (i) all Committed Loans of the same
Class to a single Borrower which are Base Rate Loans at such time, (ii) all
Committed Loans under the Canadian Subfacility which are Canadian Prime Rate
Loans at such time or (iii) all Committed Loans of the same Class to a single
Borrower which are Fixed Rate Loans of the same Type and currency having the
same Interest Period at such time, provided that, if a Committed Loan of any
particular Bank is converted to or made as a Base Rate Loan or a Canadian Prime
Rate Loan pursuant to Article 8, such Loan shall be included in the same Group
or Groups of Loans from time to time as it would have been in if it had not been
so converted or made; or
(b) a group of Bankers' Acceptances issued on a single date and having the
same maturity date.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the holder of such Debt of the payment
thereof or to protect such holder against loss in respect thereof (in whole or
in part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hazardous Substances" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 11.03(b).
"Information Memorandum" means the confidential descriptive memorandum
dated September 19, 1997 furnished to the Banks in connection with the
transactions contemplated hereby.
"Interest Period" means: (1) with respect to each Euro-Dollar Loan, the
period commencing on the date of such borrowing specified in the applicable
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Notice of Borrowing or on the date specified in the applicable Notice of
Interest Rate Election and ending one, two, three or six months (or, with the
prior consent of each Bank making such Euro-Dollar Loan, any shorter period or
longer period of time not exceeding twelve months) thereafter, as the Borrower
may elect in the applicable notice; provided that:
(a) any Interest Period which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Business Day; and
(b) any Interest Period which begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall, subject to the further
proviso below, end on the last Business Day of a calendar month;
(2) with respect to each CD Loan, the period commencing on the date of such
borrowing specified in the applicable Notice of Borrowing or on the date
specified in the applicable Notice of Interest Rate Election and ending 30, 60,
90 or 180 days (or, with the prior consent of each Bank making such CD Loan, any
shorter period or longer period of time not exceeding 360 days) thereafter, as
the Borrower may elect in the applicable notice; provided that any Interest
Period which would otherwise end on a day which is not a Business Day shall be
extended to the next succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall end on the next
preceding Business Day;
(3) with respect to each Money Market LIBOR Loan, the period commencing on
the date of borrowing specified in the applicable Notice of Borrowing and ending
such whole number of months or other period of time thereafter as the Borrower
may elect in accordance with Section 2.04; provided that:
(a) any Interest Period which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Business Day; and
(b) any Interest Period which begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall, subject to the further
proviso below, end on the last Business Day of a calendar month;
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(4) with respect to each Money Market Absolute Rate Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending such number of days thereafter as the Borrower may elect in
accordance with Section 2.04; provided that any Interest Period which would
otherwise end on a day which is not a Business Day shall, subject to the further
proviso below, be extended to the next succeeding Euro-Dollar Business Day;
provided further that any Interest Period for any Loan of any Type which would
otherwise end after the Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"LIBOR Auction" means a solicitation of Money Market Quotes setting forth
Money Market Margins based on the London Interbank Offered Rate pursuant to
Section 2.04.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge
or security interest, or any other type of preferential arrangement that has the
practical effect of creating a security interest, in respect of such asset. For
the purposes of this Agreement, the Company or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Loan" means a Committed Loan or a Money Market Loan and "Loans" means all
or any combination of the foregoing, as the context may require.
"London Interbank Offered Rate" has the meaning set forth in Section
2.08(c).
"Material Debt" means Debt (other than (i) the Notes, (ii) Debt of a
Subsidiary to the Company or (iii) Debt of the Company or a Subsidiary to a
Subsidiary) of the Company and/or one or more of its Subsidiaries, arising in
one or more related or unrelated transactions, in an aggregate principal or face
amount exceeding $25,000,000.
"Material Financial Obligations" means a principal or face amount of Debt
and/or payment or collateralization obligations in respect of Derivatives
Obligations of the Company and/or one or more of its Subsidiaries, arising in
one or more related or unrelated transactions, exceeding in the aggregate
$25,000,000.
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"Material Plan" means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $25,000,000.
"Material Subsidiary" means (i) any Subsidiary which is a "significant
subsidiary" within the meaning of Regulation S-X of the Securities and Exchange
Commission as in effect on the date hereof and (ii) any Eligible Subsidiary.
"Money Market Absolute Rate" has the meaning set forth in Section 2.04(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a
LIBOR Auction.
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.04(d)(ii)(C).
"Money Market Quote" means an offer by a Bank to make a Money Market Loan
in accordance with Section 2.04.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five-year period.
"Notes" means promissory notes of a Borrower, substantially in the form of
Exhibit B hereto, evidencing the obligation of such Borrower to repay the Loans
made to it, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as defined in
Section 2.02) or a Notice of Money Market Borrowing (as defined in Section
2.04(f)).
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"Notice of Interest Rate Election" has the meaning set forth in Section
2.11.
"Notice of Request for Acceptances" has the meaning set forth in Section
2.03.
"Notice of Utilization" means a Notice of Borrowing or a Notice of Request
for Acceptances.
"Parent" means, with respect to any Bank, any Person controlling such Bank.
"Participant" has the meaning set forth in Section 11.06(b).
"Payment Office" means the office or account of the Administrative Agent at
or to which payments hereunder are to be made, which shall be (i) in the case of
payments in Dollars with respect to the US Subfacility, the office of the
Administrative Agent in New York City referred in Section 11.01, (ii) in the
case of payments in Canadian Dollars or in Dollars with respect to the Canadian
Subfacility, the office of the Administrative Agent in Toronto, Ontario referred
to in Section 11.01 and (iii) in the case of any other payments in an
Alternative Currency, such office or account as the Administrative Agent may
specify for such purpose by notice to the affected Borrowers and Banks.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Receivables Disposition" means any transfer (by way of sale,
pledge or otherwise) by the Company or any Subsidiary to any other Person
(including a Bankruptcy Remote Subsidiary) of accounts receivable and other
rights to payment (whether constituting accounts, chattel paper, instruments,
general intangibles or otherwise and including the right to payment of interest
or finance charges) and related contract and other rights and property
(including all general intangibles, collections and other proceeds relating
thereto, all security therefor (and the property subject thereto), all
guarantees and other agreements or arrangements of whatsoever character from
time to time supporting such right to payment, and all other right, title and
interest in goods relating to a sale which gave rise to such right of payment)
in connection with a Permitted Securitization Transaction.
"Permitted Securitization Transaction" means any receivables purchase or
financing transaction pursuant to which the Company or a Subsidiary (including a
Bankruptcy Remote Subsidiary) sells or grants a security interest in
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accounts receivable of the Company or its Subsidiaries (and related rights and
property as described in the definition of Permitted Receivables Disposition) or
an undivided interest therein, provided that (i) the aggregate principal or
invested amount outstanding at any one time under all such facilities shall not
exceed $150,000,000 and (ii) the recourse of the purchaser or lender with
respect to such transaction for losses resulting from an obligor's failure to
pay a receivable due to credit problems is limited to such accounts receivable
or an interest therein, and the collections thereof.
"Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Pricing Schedule" means the schedule set forth in Exhibit A hereto.
"Prime Rate" means the rate of interest publicly announced by The Chase
Manhattan Bank in New York City from time to time as its Prime Rate.
"Quarterly Dates" means each March 31, June 30, September 30 and December
31.
"Reference Banks" means the CD Reference Banks, the Euro-Dollar Reference
Banks, the Schedule I Reference Banks or the Schedule II Reference Banks, as the
context may require, and "Reference Bank" means any one of such Reference Banks.
"Refund" has the meaning set forth in Section 8.04(h).
"Register" has the meaning set forth in Section 2.06(a)
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Related" has the meaning set forth in Section 1.04.
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"Required Banks" means at any time Banks having at least 51% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding (or having accepted) at least 51% of the aggregate unpaid
Dollar Amount of the Loans and Bankers' Acceptances.
"Revolving Credit Period" means the period from and including the Effective
Date to but not including the Termination Date.
"S&P" means Standard & Poor's Ratings Services.
"Sale-Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of any property that,
or of any property similar to and used for substantially the same purposes as
any other property that, has been or is to be sold, assigned, transferred or
otherwise disposed of by the Company or any of its Subsidiaries to such Person
with the intention of entering into such a lease.
"Schedule I Bank" means any Canadian Bank named on Schedule I to the Bank
Act (Canada).
"Schedule I Reference Banks" means Bank of Montreal and Royal Bank of
Canada.
"Schedule II Bank" means any Canadian Bank named on Schedule II to the Bank
Act (Canada).
"Schedule II Reference Banks" means J.P. Morgan Canada, Bank of America
Canada and The Chase Manhattan Bank of Canada.
"Spot Rate" means, on any day, with respect to any Alternate Currency, the
rate at which such Alternate Currency may be exchanged into Dollars, as set
forth at approximately 10:30 A.M. (New York City time), on such date on the
Reuters World Currency Page for such Alternate Currency. In the event that such
rate does not appear on any Reuters World Currency Page, the Spot Rate shall be
determined by reference to the applicable Bloomberg System page, or, in the
event that such rate does not appear on such page, such other publicly available
service for displaying exchange rates as may be agreed upon by the
Administrative Agent and the Company, or, in the absence of such agreement, such
Spot Rate shall instead be the spot rate of exchange of the Administrative Agent
in the market where its foreign currency exchange operations in respect of such
Alternate Currency are then being conducted, at or about 10:30 A.M. (New York
City time), on such date for the purchase of Dollars for delivery two Business
Days later; provided that if at the time of such determination, for any
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reason, no such spot rate is being quoted, the Administrative Agent may use any
reasonable method it deems appropriate to determine such rate, and such
determination shall be conclusive absent manifest error.
"Subsidiary" means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of the Company.
"Syndication Agent" means J.P. Morgan Securities Inc. in its capacity as
arranger and syndication agent in respect of this Agreement.
"Termination Date" means October 20, 2002, or, if such day is not a
Business Day, the next succeeding Business Day unless such Business Day falls in
another calendar month, in which case the Termination Date shall be the next
preceding Business Day.
"Total Capital" means, at any date, the sum of (x) Consolidated Debt plus
(y) consolidated shareholders' equity of the Company and its Consolidated
Subsidiaries (including for this purpose any amount attributable to stock which
is required to be redeemed or is redeemable at the option of the holder, if
certain events or conditions occur or exist or otherwise), excluding the effect
thereon of foreign currency translation gains and losses arising after June 30,
1996, in each case determined at such date.
"Total Commitment" means, at any date, the sum of the aggregate amount of
the US Commitments and the aggregate amount of the Canadian Commitments.
"Total Outstandings" means, at any date, the sum of the aggregate Dollar
Amount of all US Loans outstanding at such date plus the aggregate Canadian
Outstandings of all Canadian Banks at such date.
"Type" has the meaning set forth in Section 1.03.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA (or other applicable standard),
exceeds (ii) the fair market value of all Plan assets allocable to such
liabilities under Title IV of ERISA (excluding any accrued but unpaid
contributions), all determined as of the then most recent valuation date for
such Plan, but only to the
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extent that such excess represents a potential liability of a member of the
ERISA Group to the PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the States
and the District of Columbia, but excluding its territories and possessions.
"US Bank" means each bank or other financial institution listed on the
signature pages hereof as a US Bank, each Assignee which becomes a US Bank
pursuant to Section 11.06(c), and their respective successors.
"US Base Rate" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"US Base Rate Loan" means (i) a US Loan denominated in Dollars which bears
interest at the US Base Rate pursuant to the applicable Notice of Committed
Borrowing or Notice of Interest Rate Election or the provisions of Article 8 or
(ii) an overdue amount which was a Base Rate Loan immediately before it became
overdue.
"US Commitment" means, (i) with respect to each US Bank listed on the
signature pages hereof, the amount set forth opposite its name on the Commitment
Schedule under the heading "US Commitment" and (ii) with respect to each
Assignee which becomes a US Bank pursuant to Section 8.06 or 11.06(c), the
amount of the US Commitment thereby assumed by it, in each case as such amount
may be reduced from time to time pursuant to Section 2.10 or Section 11.06(c) or
increased from time to time pursuant to Section 2.10 or Section 11.06(c).
"US Lending Office" means, as to each Bank, its office located at its
address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its US Lending Office) or such other office as
such Bank may hereafter designate as its US Lending Office by notice to the
Company and the Administrative Agent; provided that any Bank may so designate
separate US Lending Offices for its US Loans of different Types and currencies,
in which case all references herein to the US Lending Office of such Bank shall
be deemed to refer to any or all of such offices, as the context may require.
"US Loan" means (i) a Committed Loan made pursuant to Section 2.01(a) or
(ii) a Money Market Loan. US Loans may be US Base Rate Loans, CD Loans,
Euro-Dollar Loans or Money Market Loans; provided that the aggregate Dollar
Amount of US Loans outstanding may not exceed the aggregate amount of the US
Commitments.
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"US Subfacility" means the credit facility extended to the Borrowers
pursuant to Sections 2.01(a) and 2.04.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary
all of the shares of capital stock or other ownership interests of which (except
directors' qualifying shares) are at the time directly or indirectly owned by
the Company.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent in all material respects (except for changes to which the
Company's independent public accountants do not take exception) with the most
recent audited consolidated financial statements of the Company and its
Consolidated Subsidiaries delivered to the Banks; provided that, if the Company
notifies the Administrative Agent that the Company wishes to amend any covenant
in Article 5 to eliminate the effect of any change in generally accepted
accounting principles on the operation of such covenant (or if the
Administrative Agent notifies the Company that the Required Banks wish to amend
Article 5 for such purpose), then the Company's compliance with such covenant
shall be determined on the basis of generally accepted accounting principles in
effect immediately before the relevant change in generally accepted accounting
principles became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to the Company and the Required
Banks.
SECTION 1.03. Classes and Types of Loans. Loans hereunder are
differentiated by Class and by Type. The "Class" of a Loan or Loans (or of a
Borrowing comprised of such Loans or, in the case of Committed Loans, of a
Commitment to make such Loans) refers to the determination whether such Loans
are Canadian Loans or US Loans. The "Type" of a Loan refers to the basis upon
which interest accrues on such Loan (e.g., Euro-Dollar Loans, Canadian Prime
Rate Loans and Money Market Absolute Loans are each a Type of Loan). Loans
hereunder (and Borrowings comprised of such Loans) may be identified by both
Class and Type (e.g., a Euro-Dollar Canadian Borrowing is a Borrowing comprised
of Canadian Loans denominated in Dollars which bear interest at a Euro-Dollar
Rate).
SECTION 1.04. Related Banks. Each Canadian Bank is, or is an affiliate of,
a US Bank (although not all US Banks are affiliates of Canadian Banks at the
date of this Agreement). The term "Related" when used with respect to a US Bank
or Canadian Bank means the Canadian Bank or US Bank, as the case may
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be, of which such former Bank is an affiliate (or which is the same Person as
such former Bank).
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend.
(a) US Subfacility. During the Revolving Credit Period, each US Bank
severally agrees, on the terms and conditions set forth in this Agreement, to
make loans denominated in Dollars to any Borrower pursuant to this subsection
(a) from time to time in amounts such that the aggregate Dollar Amount of
Committed Loans by such US Bank to all Borrowers at any one time outstanding
which are US Loans shall not exceed the amount of its US Commitment.
(b) Canadian Subfacility. During the Revolving Credit Period, each Canadian
Bank severally agrees, on the terms and conditions set forth in this Agreement,
to make loans denominated in Dollars or in Canadian Dollars to any Borrower
pursuant to this subsection (b) from time to time in amounts such that the
aggregate Canadian Outstandings of such Canadian Bank to all Borrowers at any
one time outstanding shall not exceed the amount of its Canadian Commitment.
(c) Approved Amounts. Each Borrowing under this Section shall be in an
Approved Amount (except that any such Borrowing may be in the aggregate amount
available under the Commitments of the relevant Class in accordance with Section
3.02) and shall be made from the several Banks ratably in proportion to their
respective Commitments of the relevant Class. Within the foregoing limits, a
Borrower may borrow under this Section, repay, or to the extent permitted by
Section 2.13, prepay Loans and reborrow at any time during the Revolving Credit
Period under this Section.
SECTION 2.02. Notice of Committed Borrowing. (a) The Borrower shall give
the Administrative Agent notice (a "Notice of Committed Borrowing") not later
than 10:30 A.M. (Eastern time) on (w) the date of each Base Rate Borrowing or
Canadian Prime Rate Borrowing, (x) the second Business Day (or, if the desired
Interest Period requires the prior consent of each Bank making such Loan, the
fourth Business Day) before each CD Borrowing and (y) the third Business Day
(or, if the desired Interest Period requires the prior consent of each Bank
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making such Loan, the fifth Business Day) before each Euro-Dollar Borrowing,
specifying:
(i) the date of such Borrowing, which shall be a Business Day;
(ii) the aggregate amount of such Borrowing;
(iii) the Class and Type of the Loans comprising such Borrowing; and
(iv) in the case of a Fixed Rate Borrowing, the duration of the
initial Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
(b) If the Borrower specifies an Interest Period that requires the prior
consent of each Bank making such Loan with respect to any Euro-Dollar Borrowing
or any CD Borrowing (in each case, an "Alternate Interest Period") in any Notice
of Committed Borrowing or Notice of Interest Rate Election and the
Administrative Agent shall not have received from any Bank written objection to
such Alternate Interest Period by 9:30 A.M. (Eastern time) on the second
Business Day after receipt by the Administrative Agent of such notice, then each
Bank shall be deemed to have consented to such Alternate Interest Period;
provided that such notice specifies that the consent of each Bank making such
Loan is required and that if such Bank does not timely object as set forth
above, then such Bank shall be deemed to have consented. If any Bank timely
objects as set forth above to any request for an Alternate Interest Period, then
the Administrative Agent shall promptly notify the Borrower and the Borrower
shall deliver a new Notice of Committed Borrowing or Notice of Interest Rate
Election (which may be included as an alternative election in the original
notice) specifying a different election within the applicable time periods
specified in the definition of Interest Period. If the Borrower fails to so
timely deliver such a new notice, then the related Loans shall be made as (or
continued as or converted into) Base Rate Loans (if denominated in Dollars) or
Canadian Prime Rate Loans (if denominated in Canadian Dollars).
SECTION 2.03. Bankers' Acceptances. (a) Acceptance Commitment. Any Borrower
may issue Bankers' Acceptances denominated in Canadian Dollars, for purchase by
the Canadian Banks under the Canadian Subfacility, in each case in accordance
with the provisions of this Section 2.03.
(b) Procedures.
(i) The Borrower shall notify the Administrative Agent not later than
10:00 A.M. (Toronto time) one Business Day prior to the date of any Credit
Event by way of Bankers' Acceptances (a "Notice of Request for
Acceptances"), which notice shall specify (x) the date of such Credit Event
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(which shall be a Business Day), (y) the aggregate face amount of Banker's
Acceptances to be issued (which shall be an Approved Amount) and (z) the
maturity date thereof (which shall be a Business Day 30, 60, 90 or 180 days
(excluding days of grace) after the date of issuance thereof, or such
shorter or longer term as has been consented to by each Canadian Bank, and
which shall in any event not be later than the Termination Date); provided
that if the Borrower wishes to specify a maturity date that requires the
consent of each Canadian Bank (an "Alternate Term") the Borrower shall
deliver a Notice of Request for Acceptances not later than 10:00 AM
(Toronto time) two Business Days prior to the date of such Credit Event. If
the Borrower specifies an Alternate Term in any Notice of Request for
Acceptances and the Administrative Agent shall not have received from any
Canadian Bank written objection to such Alternate Term by 10:00 A.M.
(Toronto time) on the first Business Day after receipt by the
Administrative Agent of such notice, then each Canadian Bank shall be
deemed to have consented to such Alternate Term; provided that such notice
specifies that the consent of each Canadian Bank is required and that if
such Canadian Bank does not timely object as set forth above, then such
Canadian Bank shall be deemed to have consented. If any Canadian Bank
timely objects as set forth above to any request for an Alternate Term,
then the Administrative Agent shall promptly notify the Borrower and the
Borrower shall deliver a new Notice of Request for Acceptances (which may
be included as an alternative election in the original notice) specifying a
different election of a maturity date 30, 60, 90 or 180 days after the date
of issuance of such Bankers' Acceptance.
(ii) To facilitate the acceptance of Bankers' Acceptances under this
Agreement, each Borrower intending to issue Bankers' Acceptances may, as it
considers necessary, provide to the Administrative Agent drafts ("Drafts"),
in form satisfactory to the Administrative Agent, duly executed and
endorsed in blank by such Borrower in quantities sufficient for each
Canadian Bank to fulfill its obligations under this Section 2.03. Each
Canadian Bank is hereby authorized to issue such Bankers' Acceptances
endorsed in blank in such face amounts as may be determined by such
Canadian Bank; provided that (x) the aggregate amount thereof so issued by
any Canadian Bank in connection with any Credit Event is equal to the
aggregate amount of Bankers' Acceptances required to be accepted by such
Canadian Bank in connection with such Credit Event and (y) as provided in
Section 2.03(b)(iv) the face amount of each Bankers' Acceptance shall be
C$100,000 or any multiple thereof. No Canadian Bank shall be responsible or
liable for its failure to accept a Bankers' Acceptance if the cause of such
failure is, in whole or in part, the failure of any Borrower to provide
duly executed and endorsed Drafts to the Administrative Agent on
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a timely basis. Each Canadian Bank will exercise the same degree of care
with respect to such Drafts as it would exercise with respect to the
management of its own property. Each Canadian Bank shall maintain a record
with respect to Bankers' Acceptances (A) received by it from the
Administrative Agent in blank hereunder, (B) voided by it for any reason,
(C) accepted by it hereunder, (D) purchased by it hereunder and (E)
cancelled at their respective maturities. Each Canadian Bank further agrees
to retain such records in the manner and for the statutory periods provided
in the various Canadian provincial or federal statutes and regulations
which apply to such Canadian Bank.
(iii) Drafts of any Borrower to be accepted as Banker's Acceptances
hereunder shall be duly executed on behalf of such Borrower.
Notwithstanding that any person whose signature appears on any Bankers'
Acceptance as a signatory for any Borrower may no longer be an authorized
signatory for such Borrower at the date of issuance of a Bankers'
Acceptance, such signature shall nevertheless be valid and sufficient for
all purposes as if such authority had remained in force at the time of such
issuance, and any such Bankers' Acceptance so signed shall be binding on
such Borrower.
(iv) Promptly following receipt of a Notice of Request for
Acceptances, the Administrative Agent shall so advise the Canadian Banks of
the contents thereof and shall advise each Canadian Bank of the face amount
of Bankers' Acceptances to be accepted by it and the term thereof. The
aggregate face amount of Bankers' Acceptances to be accepted by a Canadian
Bank shall be determined by the Administrative Agent on a pro rata basis by
reference to the respective Canadian Commitments, except that, if the face
amount of a Bankers' Acceptance, which would otherwise be accepted by a
Canadian Bank, would not be C$100,000 or a larger multiple thereof, such
face amount shall be increased or reduced by the Administrative Agent in
its discretion to the nearest multiple of C$100,000.
(v) Each Bankers' Acceptance to be accepted by a Canadian Bank shall
be accepted at its Canadian Lending Office.
(vi) On the date of each issuance of Bankers' Acceptances in
accordance with this Section 2.03, each Canadian Bank shall purchase from
the Borrower each Bankers' Acceptance accepted by it for a purchase price
equal to the applicable BA Discount Proceeds determined on the basis of the
Applicable BA Discount Rate, and shall remit to the Administrative Agent
for the account of the Borrower the BA Discount
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Proceeds so determined less the Acceptance Fee payable by the Borrower to
such Bank under Section 2.03(d) in respect of such Bankers' Acceptances.
(vii) Each Canadian Bank may at any time and from time to time hold,
sell, rediscount or otherwise dispose of any or all Bankers' Acceptances
accepted and purchased by it.
(viii) Each Borrower waives presentment for payment and any other
defense to payment of any amounts then due to a Canadian Bank in respect of
a Bankers' Acceptance accepted by it pursuant to this Agreement which might
exist solely by reason of such Bankers' Acceptance being held, at the
maturity thereof, by such Canadian Bank in its own right, and each Borrower
agrees not to claim any days of grace if such Canadian Bank as holder sues
such Borrower on the Bankers' Acceptances for payment of the amount payable
by such Borrower thereunder.
(c) Each Bankers' Acceptance shall mature, and the face amount thereof
shall be due and payable, on the maturity date specified in such Bankers'
Acceptance. Any overdue amount of any Bankers' Acceptance shall bear interest,
payable on demand, calculated daily until paid at a rate per annum equal to the
sum of 2% plus the Canadian Prime Rate. Any payment of a maturing Bankers'
Acceptance shall be made as provided in Section 2.14 (notwithstanding that any
Canadian Bank or any other Person may be the holder thereof at maturity). Any
such payment shall be made by deposit at the Payment Office and shall satisfy
the applicable Borrower's obligations under the maturing Bankers'Acceptance to
which it relates, and the Canadian Bank issuing the applicable Bankers'
Acceptance shall thereafter be solely responsible for the payment of such
Bankers' Acceptance.
(d) An Acceptance Fee shall be payable by the Borrower to each Canadian
Bank in advance (in the manner specified in Section 2.03(b)(vi)) upon the
issuance of a Bankers' Acceptance to be accepted by such Canadian Bank
calculated at the rate per annum equal to the BA Margin, such Acceptance Fee to
be calculated on the face amount of such Bankers" Acceptance and to be computed
on the basis of the number of days in the term of such Bankers' Acceptance.
(e) Upon the occurrence of any Event of Default, and in addition to any
other rights or remedies of any Canadian Bank and the Administrative Agent
hereunder, any Canadian Bank or the Administrative Agent as and by way of
collateral security (or such alternate arrangement as may be agreed upon by
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the relevant Borrower and such Bank or the Administrative Agent, as applicable)
shall be entitled to deposit and retain in an account to be maintained by the
Administrative Agent (bearing interest at the Administrative Agent's rates as
may be applicable in respect of other deposits of similar amounts for similar
terms) amounts which are received by such Canadian Bank or the Administrative
Agent from such Borrower hereunder or as proceeds of the exercise of any rights
or remedies of any Canadian Bank or the Administrative Agent hereunder against
such Borrower, to the extent such amounts may be required to satisfy any
contingent or unmatured obligations or liabilities of such Borrower to the
Canadian Banks or the Administrative Agent, or any of them hereunder.
(f) (i) It is understood that from time to time certain Schedule II Banks
may not be authorized to or may, as a matter of general corporate policy, elect
not to accept Drafts (each, an "Acceptance Note Bank"); accordingly, any
Acceptance Note Bank may instead purchase Acceptance Notes of a Borrower in
accordance with the provisions of Section 2.03(b) in lieu of creating Bankers'
Acceptances for its account.
(ii) In connection with any request by a Borrower for the creation of
Bankers' Acceptances, such Borrower shall deliver to each Acceptance Note Bank
non-interest bearing promissory notes (each, an "Acceptance Note") of such
Borrower, substantially in the form of Exhibit M, having the same maturity as
the Bankers' Acceptances to be created and in an aggregate principal amount
equal to the aggregate amount of the Bankers' Acceptances that would otherwise
have been required to be accepted by such Acceptance Note Bank. Each Acceptance
Note Bank hereby agrees to purchase Acceptance Notes from any Borrower at the
Applicable BA Discount Rate which would have been applicable if a Draft had been
accepted by it (less any Acceptance Fee which would have been paid pursuant to
Section 2.03(d) if such Acceptance Note Bank had created a Bankers' Acceptance),
and such Acceptance Notes shall be governed by the provisions of this Section
2.03 as if they were Bankers' Acceptances.
SECTION 2.04. Money Market Borrowings. (a) The Money Market Option. In
addition to Committed Borrowings pursuant to Section 2.01(a), any Borrower may,
as set forth in this Section, request the US Banks during the Revolving Credit
Period to make offers to make Money Market Loans to such Borrower denominated in
Dollars or in any Alternative Currency; provided that the aggregate Dollar
Amount of Money Market Loans denominated in Alternative Currencies may not
exceed $75,000,000. The Banks may, but shall have no obligation to, make such
offers and such Borrower may, but shall have no obligation to, accept any such
offers in the manner set forth in this Section, all within the limits of the US
Subfacility.
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(b) Money Market Quote Request. When a Borrower wishes to request offers to
make Money Market Loans under this Section, it shall transmit to the
Administrative Agent by telex or facsimile transmission a Money Market Quote
Request substantially in the form of Exhibit C hereto so as to be received not
later than 10:30 A.M. (Eastern time) on (x) the fifth Business Day prior to the
date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the
Business Day next preceding the date of Borrowing proposed therein, in the case
of an Absolute Rate Auction (or, in either case, such other time or date as the
Company and the Administrative Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for which such change is to
be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Business Day;
(ii) the currency in which such Borrowing is to be denominated, which
shall be Dollars or an Alternative Currency;
(iii) the aggregate amount of such Borrowing, which shall be an
Approved Amount;
(iv) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period, and
(v) whether the Money Market Quotes requested are to set forth a Money
Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Business Days (or such other number of days
as the Company and the Administrative Agent may agree) of any other Money Market
Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a Money
Market Quote Request, the Administrative Agent shall send to the Banks by telex
or facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit D hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance with
this Section.
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(d) Submission and Contents of Money Market Quotes. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money Market
Quote must comply with the requirements of this subsection (d) and must be
submitted to the Administrative Agent by telex or facsimile transmission at its
offices specified in or pursuant to Section 11.01 not later than (x) 2:00 P.M.
(Eastern time) on the fourth Business Day prior to the proposed date of
Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (Eastern time) on the
proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in
either case, such other time or date as the Company and the Administrative Agent
shall have mutually agreed and shall have notified to the Banks not later than
the date of the Money Market Quote Request for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be effective); provided that
Money Market Quotes submitted by the Administrative Agent (or any affiliate of
the Administrative Agent) in the capacity of a Bank may be submitted, and may
only be submitted, if the Administrative Agent or such affiliate notifies the
Borrower of the terms of the offer or offers contained therein not later than
(x) one hour prior to the deadline for the other Banks, in the case of a LIBOR
Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case
of an Absolute Rate Auction. Subject to Articles 3 and 6, any Money Market Quote
so made shall be irrevocable except with the written consent of the
Administrative Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit E hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each
such offer is being made, which principal amount (w) may be greater
than or less than the Commitment of the quoting Bank, (x) must be
$5,000,000 or a larger multiple of $1,000,000 (or a comparable amount
in an Alternative Currency as determined by the Administrative Agent),
(y) may not exceed the principal amount of Money Market Loans for
which offers were requested and (z) may be subject to an aggregate
limitation as to the principal amount of Money Market Loans for which
offers being made by such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan,
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expressed as a percentage (specified to the nearest 1/10,000th of 1%)
to be added to or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest
per annum (specified to the nearest 1/10,000th of 1%) (the "Money
Market Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit E hereto or
does not specify all of the information required by subsection (d)(ii)
above;
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth
in the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i) above.
(e) Notice to Borrower. The Administrative Agent shall promptly notify the
Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is
in accordance with subsection (d) and (y) of any Money Market Quote that amends,
modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request. Any
such subsequent Money Market Quote shall be disregarded by the Administrative
Agent unless such subsequent Money Market Quote is submitted solely to correct a
manifest error in such former Money Market Quote. The Administrative Agent's
notice to the Borrower shall specify (A) the aggregate principal amount of Money
Market Loans for which offers have been received for each Interest Period
specified in the related Money Market Quote Request, (B) the respective
principal amounts and Money Market Margins or Money Market Absolute Rates, as
the case may be, so offered and (C) if applicable, limitations on the aggregate
principal amount of Money Market Loans for which offers in any single Money
Market Quote may be accepted.
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(f) Acceptance and Notice by Borrower. Not later than 10:30 A.M. (Eastern
time) on (x) the third Business Day prior to the proposed date of Borrowing, in
the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case
of an Absolute Rate Auction (or, in either case, such other time or date as the
Company and the Administrative Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for which such change is to
be effective), the Borrower shall notify the Administrative Agent of its
acceptance or non-acceptance of the offers so notified to it pursuant to
subsection (e). In the case of acceptance, such notice (a "Notice of Money
Market Borrowing") shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. The Borrower may accept any Money Market
Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in the related Money Market
Quote Request;
(ii) the principal amount of each Money Market Borrowing must be an
Approved Amount;
(iii) acceptance of offers may only be made on the basis of ascending
Money Market Margins or Money Market Absolute Rates, as the case may be;
and
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the requirements
of this Agreement.
(g) Allocation by Administrative Agent. If offers are made by two or more
Banks with the same Money Market Margins or Money Market Absolute Rates, as the
case may be, for a greater aggregate principal amount than the amount in respect
of which such offers are accepted for the related Interest Period, the principal
amount of Money Market Loans in respect of which such offers are accepted shall
be allocated by the Administrative Agent among such Banks as nearly as possible
(in such multiples as the Administrative Agent may deem appropriate) in
proportion to the aggregate principal amounts of such offers. Determinations by
the Administrative Agent of the amounts of Money Market Loans shall be
conclusive in the absence of manifest error.
SECTION 2.05. Notice to Banks; Funding of Loans. (a) Upon receipt of a
Notice of Borrowing, the Administrative Agent shall promptly notify each Bank
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having a Commitment of the related Class of the contents thereof and of such
Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not
thereafter be revocable by the Borrower.
(b) On the date of each Borrowing, each Bank participating therein shall
(i) if such Borrowing is to be made in Dollars or Canadian Dollars, make
available its share of such Borrowing in such currency not later than 2:00 P.M.
(Eastern time) in immediately available funds to the Administrative Agent at the
Payment Office or (ii) if such Borrowing is to be made in another Alternative
Currency, make available its share of such Borrowing in such Alternative
Currency (in such funds as may then be customary for the settlement of
international transactions in such Alternative Currency) to the account of the
Administrative Agent at such time and Payment Office as shall have been notified
by the Administrative Agent to the Banks by at least two Business Days' notice.
Unless the Administrative Agent determines that any applicable condition
specified in Article 3 has not been satisfied, the Administrative Agent will
make the funds so received from the Banks available to the Borrower at the
Payment Office.
(c) Unless the Administrative Agent shall have received notice from a Bank
prior to the date of any Borrowing that such Bank will not make available to the
Administrative Agent such Bank's share of such Borrowing, the Administrative
Agent may assume that such Bank has made such share available to the
Administrative Agent on the date of such Borrowing in accordance with subsection
(b) of this Section and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such share available
to the Administrative Agent, such Bank and the Borrower severally agree to repay
to the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Administrative Agent, at (i) if such amount is repaid by the relevant Borrower,
a rate per annum equal to the interest rate applicable thereto pursuant to
Section 2.08 (or, if higher, the rate determined by the Administrative Agent to
be its cost of funds (which determination shall be conclusive absent manifest
error)) and (ii) if such amount is repaid by such Bank, the rate determined by
the Administrative Agent to be its cost of funds (which determination shall be
conclusive absent manifest error). If such Bank shall repay to the
Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement.
SECTION 2.06. Registry. (a) Each Administrative Agent shall maintain a
register (a "Register") on which it will record the Commitment (if any) of the
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applicable Class of each Bank, each Loan of such Class made by such Bank and
each repayment of any such Loan made by such Bank. Any such recordation by an
Administrative Agent on a Register shall be conclusive, absent manifest error.
With respect to any Bank, the assignment or other transfer of the Commitment (if
any) of the applicable Class of such Bank and the rights to the principal of,
and interest on, any Loan of such Class made pursuant to this Agreement shall
not be effective until such assignment or other transfer is recorded on the
applicable Register and otherwise complies with Section 11.06(c). The
registration of assignment or other transfer of all or part of any Commitments,
Loans and Notes for a Bank shall be recorded by the applicable Administrative
Agent on the applicable Register only upon the acceptance by such Administrative
Agent of a properly executed and delivered Assignment and Assumption Agreement
referred to in Section 11.06(c). Each Register shall be available at the offices
where kept by the applicable Administrative Agent for inspection by the Company
and any Bank at any reasonable time upon reasonable prior notice to such
Administrative Agent. Each Bank shall record on its internal records (including
computerized systems) the foregoing information as to its own Commitment and
Loans. Failure to make any such recordation, or any error in such recordation,
shall not affect the obligations of any Borrower hereunder.
(b) Each Borrower hereby agrees that, upon the request of any Bank at any
time, any or all of such Bank's Loans shall be evidenced by one or more Notes of
such Borrower payable to the order of such Bank and representing the obligation
of such Borrower to pay the unpaid principal amount of such Loans to such
Borrower made by such Bank, with interest as provided herein on the unpaid
principal amount of such Loans from time to time outstanding.
SECTION 2.07. Maturity of Loans.
(a) Each Committed Loan shall mature, and the principal amount thereof
shall be due and payable, together with accrued interest thereon, on the
Termination Date.
(b) Each Money Market Loan included in any Money Market Borrowing shall
mature, and the principal amount thereof shall be due and payable, together with
accrued interest thereon, on the last day of the Interest Period applicable to
such Borrowing.
SECTION 2.08. Interest Rates. (a) Each Base Rate Loan shall bear interest
on the outstanding principal amount thereof, for each day from the date such
Loan is made until it becomes due, at a rate per annum equal to the Canadian
Base Rate (in the case of Canadian Base Rate Loans) or the US Base Rate (in the
case of US Base Rate Loans) for such day. Such interest shall be payable
quarterly in arrears
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on each Quarterly Date and, with respect to the principal amount of any Base
Rate Loan converted to a CD Loan or a Euro-Dollar Loan, on the date such Base
Rate Loan is so converted. Any overdue principal of or overdue interest on any
Base Rate Loan shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the sum of 2% plus the Canadian Base Rate or US
Base Rate, as applicable, for such day.
(b) Each CD Loan shall bear interest on the outstanding principal amount
thereof, for each day during each Interest Period applicable thereto, at a rate
per annum equal to the sum of the CD Margin for such day plus the Adjusted CD
Rate applicable to such Interest Period; provided that if any CD Loan shall, as
a result of the concluding proviso to the definition of Interest Period, have an
Interest Period of less than 30 days, such CD Loan shall bear interest during
such Interest Period at the rate applicable to Base Rate Loans during such
period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than 90 days, at intervals of 90
days after the first day thereof. Any overdue principal of or overdue interest
on any CD Loan shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the
CD Margin plus the Adjusted CD Rate applicable to such Loan at the date such
payment was due and (ii) the Base Rate for such day.
The "Adjusted CD Rate" applicable to any Interest Period means a rate per
annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [------------] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
- ----------
* The amount in brackets being rounded upward, if necessary, to the next
higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates
per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two or more New York
certificate of deposit dealers of recognized standing for the purchase at face
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value from each CD Reference Bank of its certificates of deposit in an amount
comparable to the principal amount of the CD Loan of such CD Reference Bank to
which such Interest Period applies and having a maturity comparable to such
Interest Period.
"Domestic Reserve Percentage" means for any day that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including without limitation any basic,
supplemental or emergency reserves) for a member bank of the Federal Reserve
System in New York City with deposits exceeding five billion dollars in respect
of new non-personal time deposits in dollars in New York City having a maturity
comparable to the related Interest Period and in an amount of $100,000 or more.
The Adjusted CD Rate shall be adjusted automatically on and as of the effective
date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in effect on
such day which is payable by a member of the Bank Insurance Fund classified as
adequately capitalized and within supervisory subgroup "A" (or a comparable
successor assessment risk classification) within the meaning of 12 C.F.R. ss.
327.4(a) (or any successor provision) to the Federal Deposit Insurance
Corporation (or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the United States. The
Adjusted CD Rate shall be adjusted automatically on and as of the effective date
of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus
the London Interbank Offered Rate for Dollars applicable to such Interest
Period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, at intervals
of three months after the first day thereof.
The "London Interbank Offered Rate" applicable to any Interest Period for
any currency (other than Belgian francs) means the rate appearing on Page 3740
or 3750 of the Telerate Service (or on any successor or substitute page of such
service, or any successor to or substitute for such service, providing rate
quotations comparable to those currently provided on such page of the Telerate
Service, as determined by the Administrative Agent from time to time for
purposes of providing quotations of interest rates applicable to deposits in
such currency in the London interbank market) at approximately 11:00 A.M.
(London time) two Business Days prior to the commencement of such Interest
Period, as
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the rate for deposits in such currency with a maturity comparable to such
Interest Period. In the event that such rate is not so available at such time
for any reason, then the "London Interbank Offered Rate" with respect to such
Euro-Dollar Borrowing for such Interest Period shall be the average (rounded
upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per
annum at which deposits in such currency are offered to each of the Euro-Dollar
Reference Banks in the London interbank market at approximately 11:00 A.M.
(London time) two Business Days before the first day of such Interest Period in
an amount approximately equal to the principal amount of the Euro-Dollar Loan of
such Euro-Dollar Reference Bank to which such Interest Period is to apply and
for a period of time comparable to such Interest Period.
(d) Any overdue principal of or overdue interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for
such day plus the London Interbank Offered Rate applicable to such Loan at the
date such payment was due and (ii) the sum of 2% plus the Euro-Dollar Margin for
such day plus the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which one day (or, if such amount
due remains unpaid more than three Business Days, then for such other period of
time not longer than three months as the Administrative Agent may select)
deposits in Dollars or the relevant Alternative Currency in an amount
approximately equal to such overdue payment due to each of the Euro-Dollar
Reference Banks are offered to such Euro-Dollar Reference Bank in the London
interbank market for the applicable period determined as provided above (or, if
the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at
a rate per annum equal to the sum of 2% plus the Base Rate for such day).
(e) Each Money Market LIBOR Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the sum of the London Interbank Offered Rate for such
Interest Period (determined in accordance with Section 2.08(c) as if the related
Money Market LIBOR Borrowing were a Euro-Dollar Borrowing and (i) in the case of
a Borrowing in an Alternative Currency (other than Belgian francs), based on the
London Interbank Offered Rate for such Alternative Currency rather than for
Dollars and (ii) in the case of a Borrowing in Belgian francs, based on the
comparable quotations for Belgian francs rather than for such other currencies)
plus (or minus) the Money Market Margin quoted by the Bank making such Loan in
accordance with Section 2.04. Each Money Market Absolute Rate Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the Money Market Absolute Rate
quoted by the Bank making such Loan in accordance with Section 2.04. Such
interest shall be payable for each Interest Period on the last day thereof and,
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if such Interest Period is longer than three months, at intervals of three
months after the first day thereof. Any overdue principal of or overdue interest
on any Money Market Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to (i) in the case of Money Market Loans
denominated in Dollars, the sum of 2% plus the Base Rate for such day and (ii)
in the case of Money Market Loans denominated in an Alternative Currency, at a
rate per annum determined in accordance with Section 2.07(d) as if such Money
Market Loans were Euro-Dollar Loans, but based on comparable quotations for such
Alternative Currency rather than for Dollars.
(f) Each Canadian Prime Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made until it
becomes due, at a rate per annum equal to the Canadian Prime Rate for such day.
Such interest shall be payable quarterly in arrears on each Quarterly Date. Any
overdue principal of or overdue interest on any Canadian Prime Rate Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 2% plus the Canadian Prime Rate for such day.
(g) The Administrative Agent shall determine each interest rate applicable
to the Loans hereunder. The Administrative Agent shall give prompt notice to the
Borrower and the participating Banks of each rate of interest so determined, and
its determination thereof shall be conclusive in the absence of manifest error.
(h) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated by this Agreement. If any
Reference Bank does not furnish a timely quotation, the Administrative Agent
shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if none of
such quotations is available on a timely basis, the provisions of Section 8.01
shall apply.
SECTION 2.09. Fees. (a) Facility Fee. The Borrowers shall pay to the
Administrative Agent for the account of the Banks ratably a facility fee at the
Facility Fee Rate (determined daily in accordance with the Pricing Schedule).
Such facility fee shall accrue (i) from and including the Effective Date to but
excluding the date of termination of the Commitments in their entirety, on the
daily aggregate amount of the Commitments (whether used or unused) and (ii) from
and including such date of termination to but excluding the date the Loans and
Bankers' Acceptances shall be repaid in their entirety, on the daily aggregate
Total Outstandings. Fees accrued pursuant to clause (i) of the preceding
sentence shall be allocated among the Banks in accordance with the respective
Dollar Amounts of their Commitments, while fees accrued pursuant to clause (ii)
shall be
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allocated among the Banks ratably in proportion to the respective outstanding
Dollar Amounts of Loans made and Bankers' Acceptances accepted by them. The
portion of the facility fee that shall be the obligation of each Borrower other
than the Company or BetzDearborn Canada for any period shall be based on the
average daily aggregate outstanding Dollar Amount of Loans to and Bankers'
Acceptances issued by such Borrower during such period in relation to the
average daily aggregate amount of the Commitments during such period, all as
determined by the Administrative Agent, which determination shall be conclusive
absent manifest error. Betz Dearborn Canada shall be responsible for any
remaining portion of the facility fee allocated to the Canadian Commitments, and
the Company shall be solely responsible for payment of the balance of the
facility fee.
(b) Utilization Fee. The Borrowers shall pay to the Administrative Agent
for the account of the Banks a utilization fee at the rate of 0.05% per annum.
Such utilization fee shall accrue from and including October 20, 1998 to but
excluding the date of termination of the Commitments in their entirety, on an
amount equal to the lesser of (i) the excess of the daily aggregate Total
Outstandings over $375,000,000 and (ii) the sum of the daily aggregate Dollar
Amount of all Committed Loans outstanding which are US Loans and the daily
aggregate Canadian Outstandings of all Canadian Banks. Such fee shall be
allocated among the Banks ratably on the basis of the respective daily
outstanding aggregate Dollar Amounts of Committed Loans made and Bankers'
Acceptances accepted by them. The portion of the utilization fee that shall be
the obligation of each Borrower for any period shall be based on the average
daily aggregate outstanding Dollar Amount of Committed Loans to and Bankers'
Acceptances issued by such Borrower during such period in relation to the
average daily aggregate outstanding Dollar Amount of all Committed Loans and
Bankers' Acceptances during such period, all as determined by the Administrative
Agent, which determination shall be conclusive absent manifest error.
(c) Payments. Accrued fees under this Section shall be payable in Dollars
quarterly in arrears on each Quarterly Date and on the date of termination of
the Commitments in their entirety (and, if later, the date the Loans shall be
repaid in their entirety).
SECTION 2.10. Optional Termination, Reduction or Reallocation of
Commitments. (a) During the Revolving Credit Period, the Company may, upon at
least three Business Days' notice to the Administrative Agent, (i) terminate the
Commitments of either Class in their entirety at any time, if no Loans of such
Class (and, in the case of the Canadian Subfacility, no Bankers' Acceptances)
are outstanding at such time or (ii) ratably reduce from time to time by an
aggregate amount of $25,000,000 or a larger multiple of $1,000,000, the
aggregate of the
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Commitments of either Class in excess of the aggregate outstanding Dollar Amount
of Loans of such Class (together with, in the case of the Canadian Subfacility,
the aggregate outstanding Dollar Amount of Bankers' Acceptances). Any
termination or reduction of the Commitments of either Class pursuant to this
subsection (a) shall be permanent (subject to subsection (b)).
(b) During the Revolving Credit Period, the Company may (i) upon at least
three Business Days' notice to the Administrative Agents, ratably reduce from
time to time by an Approved Amount the aggregate amount of the Canadian
Commitments in excess of the aggregate Canadian Outstandings of all Canadian
Banks or (ii) if and to the extent the Canadian Commitments shall have
previously been reduced pursuant to this subsection (b), (x) upon at least three
Business Days' notice to the Administrative Agents prior to the first day of a
calendar quarter or (y) upon at least 10 Business Days' notice to Administrative
Agents at any other time (but subject in the case of this clause (y) to the
written consent of all Canadian Banks), ratably increase the aggregate amount of
the Canadian Commitments by an Approved Amount (such increase to be effective on
the date specified in such notice); provided that after giving effect to such
increase of the Canadian Commitments (and the consequent decrease in the US
Commitments) (A) the aggregate amount of the Canadian Commitments shall not
exceed $250,000,000, (B) the aggregate outstanding Dollar Amount of US Loans
which are Committed Loans made by any Bank shall not exceed the US Commitment of
such Bank and (C) the aggregate outstanding Dollar Amount of the US Loans shall
not exceed the aggregate amount of the US Commitments. An increase or decrease
in the Canadian Commitment of any Canadian Bank pursuant to this subsection (b)
shall result in an automatic and simultaneous decrease or increase,
respectively, in an equal amount in the US Commitment of its Related US Bank.
SECTION 2.11. Method of Electing Interest Rates. (a) The Loans included in
each Committed Borrowing shall bear interest initially at the Type of interest
rate specified by the Borrower in the applicable Notice of Committed Borrowing.
Thereafter, the Borrower may from time to time elect to change or continue the
Type of interest rate borne by each Group of Loans (subject in each case to the
provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to Euro-Dollar Loans of the same Class or, if such Base
Rate Loans are US Loans, to CD Loans;
(ii) if such Loans are CD Loans, the Borrower may elect to convert
such Loans to Base Rate Loans or Euro-Dollar Loans of the same Class or
elect to continue such Loans as CD Loans for an additional Interest Period,
subject to Section 2.15 in the case of any such conversion
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or continuation effective on any day other than the last day of the then
current Interest Period applicable to such Loans; and
(iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans of the same Class or, if such
Euro-Dollar Loans are US Loans, to CD Loans or elect to continue such Loans
as Euro-Dollar Loans of the same Class for an additional Interest Period,
subject to Section 2.15 in the case of any such conversion or continuation
effective on any day other than the last day of the then current Interest
Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Administrative Agent not later than 10:30 A.M. (Eastern
time) on the earlier of (x) the date on which a notice of prepayment would be
required to be given pursuant to Section 2.12 were the Loans to be optionally
prepaid on the effective date of such conversion or continuation and (y) the
date on which a Notice of Committed Borrowing would be required to be given were
the Loans resulting from such conversion or continuation instead to be borrowed
on the effective date thereof. A Notice of Interest Rate Election may, if it so
specifies, apply to only a portion of the aggregate principal amount of the
relevant Group of Loans; provided that (i) such portion is allocated ratably
among the Loans comprising such Group and (ii) the portion to which such Notice
applies, and the remaining portion to which it does not apply, are each an
Approved Amount. If no such notice is timely received prior to the end of an
Interest Period, the Borrower shall be deemed to have elected that all Committed
Loans having such Interest Period be converted to Base Rate Loans (if
denominated in Dollars) or Canadian Prime Rate Loans (if denominated in Canadian
Dollars).
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in such
notice is to be effective, which shall be a Business Day;
(iii) if the Loans comprising such Group are to be converted, the new
Type of Loans and, if the Loans being converted are to be Fixed Rate Loans,
the duration of the next succeeding Interest Period applicable thereto; and
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(iv) if such Loans are to be continued as Loans of the same Type for
an additional Interest Period, the duration of such additional Interest
Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the Borrower
pursuant to subsection (a) above, the Administrative Agent shall promptly notify
each Bank having a related Loan of the contents thereof and such notice shall
not thereafter be revocable by the Borrower.
(d) An election by the Borrower to change or continue the rate of interest
applicable to any Group of Loans pursuant to this Section shall not constitute a
"Borrowing" subject to the provisions of Section 3.02.
SECTION 2.12. Scheduled Termination of Commitments. The Commitments shall
terminate on the Termination Date and any Loans then outstanding (together with
accrued interest thereon) shall be due and payable on such date.
SECTION 2.13. Optional Prepayments; Collateralization of Bankers'
Acceptances. (a) Subject in the case of any Fixed Rate Borrowing to Section
2.15, any Borrower may, upon notice to the Administrative Agent as provided
below, prepay any Group of Loans in whole at any time, or from time to time in
part in an Approved Amount, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment. Notice of
prepayment pursuant to this Section shall be given to the Administrative Agent
not later than 10:30 A.M. (Eastern Time) on (i) the date of prepayment, in the
case of Base Rate Loans or Canadian Prime Rate Loans, (ii) the Business Day
prior to the date of prepayment, in the case of CD Loans and (iii) the third
Business Day prior to the date of prepayment, in the case of Euro-Dollar Loans.
Each such optional prepayment shall be applied to prepay ratably the Loans of
the several Banks included in such Group.
(b) Except as provided in subsection (a) above no Borrower may prepay all
or any portion of the principal amount of any Money Market Loan prior to the
maturity thereof without the consent of the Bank making such Money Market Loan.
(c) Upon receipt of a notice of prepayment pursuant to this Section, the
Administrative Agent shall promptly notify each Bank of the contents thereof and
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of such Bank's ratable share (if any) of such prepayment and such notice shall
not thereafter be revocable by the Borrower.
(d) Bankers' Acceptances may not be prepaid. The Borrower may, however, at
its option, exercisable upon not less than one Business Day's notice to the
Administrative Agent, elect to deposit with the Administrative Agent Canadian
Dollars in immediately available funds (in an Approved Amount) to be held by the
Administrative Agent, pursuant to collateral arrangements satisfactory to it,
for application to the payment of any Group of Bankers' Acceptances designated
by the Borrower in such notice. If such a deposit is made, then such Bankers'
Acceptances shall (to the extent of such deposit) be deemed no longer
outstanding for purposes of this Agreement.
SECTION 2.14. General Provisions as to Payments. (a) Each payment of
principal of and interest on any Loan shall be made in the currency in which
such Loan was made. Each payment of any Bankers' Acceptance shall be made in
Canadian Dollars. Each payment of principal of and interest on Loans denominated
in Dollars or Canadian Dollars, of Bankers' Acceptances and of fees hereunder
shall be made not later than 2:00 P.M. (Eastern Time) on the date when due, in
immediately available funds, to the Administrative Agent at the Payment Office.
Each payment of principal of and interest on any other Alternative Currency
Loans shall be made in the relevant Alternative Currency in such funds as may
then be customary for the settlement of international transactions in such
Alternative Currency, for the account of the Administrative Agent at such time
and Payment Office as shall have been notified by the Administrative Agent to
the relevant Borrower and Banks by at least two Business Days' notice. The
Administrative Agent will promptly distribute to each Bank its ratable share (if
any) of each such payment received by the Administrative Agent for the account
of the Banks. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans or the Money Market LIBOR Loans shall be due on a day which is
not a Business Day, the date for payment thereof shall be extended to the next
succeeding Business Day unless such Business Day falls in another calendar
month, in which case the date for payment thereof shall be the next preceding
Business Day. Whenever any payment of principal of, or interest on, the Loans of
any other Type or on Bankers' Acceptances shall be due on a day which is not a
Business Day, the date for payment thereof shall be extended to the next
succeeding Business Day. If the date for any payment of principal is extended by
operation of law or otherwise, interest thereon shall be payable for such
extended time.
(b) Unless the Administrative Agent shall have received notice from a
Borrower prior to the date on which any payment is due from such Borrower to the
Banks hereunder that such Borrower will not make such payment in full, the
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Administrative Agent may assume that such Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent that
such Borrower shall not have so made such payment, each Bank shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Administrative Agent, at the rate determined by the Administrative Agent to be
its cost of funds (which determination shall be conclusive absent manifest
error).
SECTION 2.15. Funding Losses. If a Borrower makes any payment of principal
with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted or
continued (pursuant to Article 2, 6 or 8 or otherwise, other than due to Section
8.02(b)) on any day other than the last day of an Interest Period applicable
thereto, or the last day of an applicable period fixed pursuant to Section
2.08(d), or if a Borrower fails to borrow, prepay, convert or continue any Fixed
Rate Loans after notice has been given to any Bank in accordance with Section
2.05(a), 2.13(c) or 2.11(c), such Borrower shall reimburse each Bank within 15
days after demand for any resulting loss or expense reasonably incurred by it
(or by an existing or prospective Participant in the related Loan), including
(without limitation) any loss incurred in obtaining, liquidating or employing
deposits from third parties in the principal amount so prepaid or in the
principal amount which the Borrower failed to borrow, prepay, convert or
continue, but excluding loss of margin for the period after any such payment or
conversion or failure to borrow, prepay, convert or continue, provided that such
Bank shall have delivered to such Borrower a certificate as to the amount of
such loss or expense and showing the calculation thereof, which certificate
shall be conclusive in the absence of manifest error.
SECTION 2.16. Computation of Interest and Fees. Interest based on the
Canadian Base Rate, US Base Rate, Prime Rate or the Canadian Prime Rate and all
Acceptance Fees shall be computed on the basis of a year of 365 days (or, other
than with respect to Acceptance Fees, 366 days in a leap year) and paid for the
actual number of days elapsed (including the first day but excluding the last
day). All other interest and fees shall be computed on the basis of a year of
360 days and paid for the actual number of days elapsed (including the first day
but excluding the last day). For the purposes of this Agreement, whenever any
interest is calculated on the basis of a period of time other than a calendar
year, the annual rate of interest to which each rate of interest determined
pursuant to such calculation is equivalent for the purposes of the Interest Act
(Canada) is such rate as so determined multiplied by the actual number of days
in the calendar year in which the same is to be ascertained and divided by the
number of days used in the basis for such determination.
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SECTION 2.17. Regulation D Compensation. Each Bank may, so long as such
Bank shall be required to maintain reserves in respect of "Eurocurrency
liabilities" under Regulation D of the Board of Governors of the Federal Reserve
System (or in respect of any other category of liabilities which includes
deposits by reference to which the interest rate on Euro-Dollar Loans is
determined or any category of extensions of credit or other assets that includes
loans by a non-United States office of such Bank to United States residents),
require any Borrower to pay, contemporaneously with each payment of interest on
the Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of
such Bank at a rate per annum determined by such Bank up to but not exceeding
the excess of (i) (A) the applicable London Interbank Offered Rate divided by
(B) one minus the Euro-Dollar Reserve Percentage over (ii) the applicable London
Interbank Offered Rate. Any Bank wishing to require payment of such additional
interest (x) shall so notify such Borrower and the Administrative Agent, in
which case such additional interest on the Euro-Dollar Loans of such Bank shall
be payable to such Bank at the place indicated in such notice with respect to
each Interest Period commencing at least three Euro-Dollar Business Days after
the giving of such notice and (y) shall notify such Borrower at least five
Euro-Dollar Business Days prior to each date on which interest is payable on the
Euro-Dollar Loans of the amount then due it under this Section.
SECTION 2.18. Judgment Currency. If for the purpose of obtaining judgment
in any court it is necessary to convert a sum due from any Borrower hereunder or
under any of the Notes in the currency expressed to be payable herein or under
the Notes (the "specified currency") into another currency, the parties hereto
agree, to the fullest extent that they may effectively do so, that the rate of
exchange used shall be that at which in accordance with normal banking
procedures the Administrative Agent could purchase the specified currency with
such other currency at the Administrative Agent's New York office at 11:00 A.M.
(New York City time) on the Business Day preceding that on which final judgment
is given. The obligations of each Borrower in respect of any sum due to any Bank
or the Administrative Agent hereunder or under any Note shall, notwithstanding
any judgment in a currency other than the specified currency, be discharged only
to the extent that on the Business Day following receipt by such Bank or the
Administrative Agent (as the case may be) of any sum adjudged to be so due in
such other currency such Bank or the Administrative Agent (as the case may be)
may in accordance with normal banking procedures purchase the specified currency
with such other currency; if the amount of the specified currency so purchased
is less than the sum originally due to such Bank or the Administrative Agent, as
the case may be, in the specified currency, each Borrower agrees, to the fullest
extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Bank or the Administrative
Agent, as the case may be, against such loss, and if the amount of
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the specified currency so purchased exceeds (a) the sum originally due to any
Bank or the Administrative Agent, as the case may be, and (b) any amounts shared
with other Banks as a result of allocations of such excess as a disproportionate
payment to such Bank under Section 11.04, such Bank or the Administrative Agent,
as the case may be, agrees to remit such excess to the appropriate Borrower.
SECTION 2.19. Foreign Costs. (a) If the cost to any Bank of making or
maintaining any Loan or accepting or purchasing any Bankers'Acceptance is
increased, or the amount of any sum received or receivable by any Bank (or its
Applicable Lending Office) is reduced by an amount deemed by such Bank to be
material, by reason of the fact that the Borrower of such Loan or Bankers'
Acceptance is incorporated in, or conducts business in, (i) in the case of US
Loans, a jurisdiction outside the United States of America or (ii) in the case
of Canadian Loans or Bankers' Acceptances, a jurisdiction outside Canada, such
Borrower shall indemnify such Bank for such increased cost or reduction within
15 days after demand by such Bank (with a copy to the Administrative Agent). A
certificate of such Bank claiming compensation under this subsection (a) and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive in the absence of manifest error.
(b) Each Bank will promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge that will entitle such Bank to
additional compensation pursuant to subsection (a) and will designate a
different Applicable Lending Office if, in the judgment of such Bank, such
designation will avoid the need for, or reduce the amount of, such compensation
and will not be otherwise disadvantageous to such Bank.
SECTION 2.20. Currency Equivalents. (a) The Administrative Agent shall
determine the Dollar Amount of each Alternative Currency Loan and Bankers'
Acceptance as of the date of Borrowing or issuance thereof, and the Dollar
Amount so determined shall be the Dollar Amount of such Alternative Currency
Loan or Bankers' Acceptance for so long as such Loan or Bankers' Acceptance
remains outstanding (appropriately adjusted for any partial prepayment or
collateralization thereof); provided that if and for so long as the aggregate
Canadian Outstandings so determined of all Canadian Banks exceed 50% of the
aggregate amount of the Canadian Commitments, then the Dollar Amount of each
outstanding Alternative Currency Loan and Bankers' Acceptance shall be
determined as of the last Business Day of each calendar month. Each such
determination shall be based on the Spot Rate (i) on the date of the related
Notice of Utilization (in the case of Canadian Loans or Bankers' Acceptances) or
Money Market Quote Request (in the case of Money Market Loans) for purposes of
the initial such determination for any Alternative Currency Loan or Bankers'
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Acceptance and (ii) the second Business Day prior to the date as of which such
Dollar Amount is to be determined for purposes of any subsequent determination.
The Administrative Agent shall promptly notify the Borrower and the Banks of
each Dollar Amount so determined by it.
(b) If after giving effect to any such determination of a Dollar Amount,
the aggregate Canadian Outstandings so determined of all Canadian Banks exceed
105% of the aggregate amount of the Canadian Commitments, the Borrowers shall
within 30 days take such action pursuant to Section 2.10 and Section 2.13 as may
be necessary to cause the aggregate Canadian Outstandings of all Canadian Banks
to be equal to or less than the aggregate amount of the Canadian Commitments;
provided that such action shall be taken within 10 days if upon such
determination of a Dollar Amount, the sum of the aggregate Dollar Amount of all
outstanding US Loans and the aggregate Canadian Outstandings of all Canadian
Banks exceed the aggregate amount of the Total Commitments.
ARTICLE 3
CONDITIONS
SECTION 3.01. Closing. The closing hereunder shall occur upon receipt by
the General Administrative Agent of the following documents, each dated the
Closing Date unless otherwise indicated:
(a) a duly executed copy of this Agreement and duly executed Notes of each
of the Company and BetzDearborn Canada for the account of each Bank which shall
have requested the same not less than two Business Days prior to the Closing
Date, each such Note to be dated on or before the Closing Date and to comply
with the provisions of Section 2.06;
(b) an opinion of Morgan, Lewis & Bockius LLP, counsel for the Company and
United States counsel for BetzDearborn Canada, substantially in the form of
Exhibit F-1 hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks may reasonably request;
(c) an opinion of Bennett Jones Verchere, Canadian counsel for BetzDearborn
Canada, substantially in the form of Exhibit F-2 hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(d) an opinion of Davis Polk & Wardwell, special counsel for the Agents,
substantially in the form of Exhibit G hereto and covering such additional
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matters relating to the transactions contemplated hereby as the Required Banks
may reasonably request;
(e) all documents the General Administrative Agent may reasonably request
relating to the existence of the Company and BetzDearborn Canada, the corporate
authority for and the validity of this Agreement and the Notes, and any other
matters relevant hereto, all in form and substance satisfactory to the General
Administrative Agent; and
(f) evidence satisfactory to the General Administrative Agent that the
payments contemplated by Section 3.04 have been made.
The General Administrative Agent shall promptly notify the Company and the
Banks of the Closing Date, and such notice shall be conclusive and binding on
all parties hereto.
SECTION 3.02. Borrowings and Acceptances of Bankers' Acceptances. The
obligation of any Bank to make a Loan on the occasion of any Borrowing, and the
obligation of any Canadian Bank to accept or purchase any Bankers' Acceptance,
is subject to the satisfaction of the following conditions:
(a) the fact that the Closing Date shall have occurred on or prior to
October 31, 1997;
(b) receipt by the Administrative Agent of a Notice of Utilization as
required by Section 2.02, 2.03 or 2.04, as the case may be;
(c) the facts that, immediately after such Credit Event, (i) the aggregate
Dollar Amount of all outstanding Loans of the related Class (together with, in
the case of the Canadian Subfacility, the aggregate outstanding Dollar Amount of
Bankers' Acceptances) will not exceed the aggregate amount of the Commitments of
such Class and (ii) the Total Outstandings will not exceed the aggregate amount
of the Total Commitment;
(d) the fact that, immediately before and after such Credit Event, no
Default shall have occurred and be continuing; provided that this clause shall
not be applicable to a Credit Event under the Canadian Subfacility which results
in no increase in the aggregate Canadian Outstandings of all Canadian Banks; and
(e) the fact that the representations and warranties of the Borrower (and,
if the Borrower is an Eligible Subsidiary, of the Company) contained in this
Agreement (except, in the case of any Borrowing after the Closing Date, the
representations and warranties set forth in Section 4.11) shall be true in all
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material respects on and as of the date of such Credit Event; provided that this
clause shall not be applicable to a Credit Event under the Canadian Subfacility
which results in no increase in the aggregate Canadian Outstandings of all
Canadian Banks.
Each Credit Event hereunder shall be deemed to be a representation and warranty
by the Borrower on the date of such Credit Event as to satisfaction of the
applicable conditions specified in clauses (c), (d) and (e) of this Section.
SECTION 3.03. First Borrowing by Each Eligible Subsidiary. The obligation
of each Bank to make a Loan or to accept or purchase a Bankers' Acceptance on
the occasion of the first Credit Event for each Eligible Subsidiary is subject
to the satisfaction of the following further conditions (except to the extent
previously satisfied pursuant to Section 3.01, in the case of BetzDearborn
Canada):
(a) receipt by the Administrative Agent for the account of each Bank
requesting the same of a duly executed Note of such Eligible Subsidiary, dated
on or before the date of such Borrowing complying with the provisions of Section
2.06;
(b) receipt by the Administrative Agent of an opinion or opinions of
counsel for such Eligible Subsidiary and/or for the Company acceptable to the
Administrative Agent and addressed to the Administrative Agent and the Banks,
substantially to the effect of Exhibit J hereto and covering such additional
matters relating to the transactions contemplated hereby as the Required Banks
may reasonably request; and
(c) receipt by the Administrative Agent of all documents which it may
reasonably request relating to the existence of such Eligible Subsidiary, the
corporate authority for and the validity of the Election to Participate of such
Eligible Subsidiary, this Agreement and the Notes of such Eligible Subsidiary,
and any other matters relevant thereto, all in form and substance satisfactory
to the Administrative Agent.
SECTION 3.04. Termination of Existing Credit Agreement. On the Closing
Date, and subject to the satisfaction of the conditions specified in Section
3.01, (i) the borrowers under the Existing Credit Agreement shall pay all
accrued fees thereunder and all principal of and interest on loans outstanding
thereunder and (ii) the commitments under the Existing Credit Agreement shall
terminate automatically, without further action of any party thereto. The
Company, BetzDearborn Canada and the Banks which are parties to the Existing
Credit Agreement (constituting the "Required Banks" as defined therein) hereby
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agree to waive any requirement of notice or any limitation on prepayments in
connection with implementation of the foregoing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by the Company of this Agreement and its
Notes are within the corporate powers of the Company, have been duly authorized
by all necessary corporate action, require no action by or in respect of, or
filing with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the articles of incorporation or by-laws of the Company or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the Company
or any of its Subsidiaries or result in the creation or imposition of any Lien
on any asset of the Company or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company and each of its Notes, when executed and delivered in accordance with
this Agreement, will constitute a valid and binding obligation of the Company,
in each case enforceable in accordance with its terms.
SECTION 4.04. Financial Information. (a) The consolidated balance sheet of
the Company and its Consolidated Subsidiaries as of December 31, 1996 and the
related consolidated statements of operations, cash flows and common
shareholders' equity for the fiscal year then ended, reported on by Ernst &
Young LLP and set forth in the Company's 1996 Form 10-K, a copy of which has
been delivered to each of the Banks, fairly present, in conformity with
generally accepted accounting principles, the consolidated financial position of
the Company and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal year.
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(b) The unaudited consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of June 30, 1997 and the related unaudited
consolidated statements of operations and cash flows for the six months then
ended, set forth in the Company's quarterly report for the fiscal quarter ended
June 30, 1997 as filed with the Securities and Exchange Commission on Form 10-Q,
a copy of which has been delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting principles applied on a basis
consistent with the financial statements referred to in subsection (a) of this
Section, the consolidated financial position of the Company and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such six month period (subject to normal year-end adjustments).
(c) Since June 30, 1997 there has been no material adverse change in the
business, financial position or results of operations of the Company and its
Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. There is no action, suit or proceeding pending
against or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable possibility
of an adverse decision which would materially adversely affect the business,
consolidated financial position or consolidated results of operations of the
Company and its Consolidated Subsidiaries, considered as a whole, or which in
any manner draws into question the validity or enforceability of this Agreement
or the Notes.
SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. Environmental Matters. In the ordinary course of its
business, the Company conducts an ongoing review of the effect of Environmental
Laws on the business, operations and properties of the Company
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and its Subsidiaries, in the course of which it identifies and evaluates
associated liabilities and costs (including, without limitation, any capital or
operating expenditures required for clean-up or closure of properties presently
or previously owned, any capital or operating expenditures required to achieve
or maintain compliance with environmental protection standards imposed by law or
as a condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off-site disposal
of wastes or Hazardous Substances, and any actual or potential liabilities to
third parties, including employees, and any related costs and expenses). On the
basis of this review, the Company has reasonably concluded that such associated
liabilities and costs, including the costs of compliance with Environmental
Laws, are unlikely to have an effect on the business, financial condition,
results of operations or prospects of the Company and its Consolidated
Subsidiaries, considered as a whole, that would be materially adverse in
relation to the Banks.
SECTION 4.08. Taxes. The Company and its Subsidiaries have filed all United
States Federal income tax returns and all other material tax returns which are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Company or any Subsidiary
except in the case of any assessment, if such assessment is being contested by
the Company or its Subsidiaries by appropriate proceedings. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of taxes or other governmental charges are, in the opinion of the
Company, adequate.
SECTION 4.09. Subsidiaries. Each of the Company's corporate Material
Subsidiaries is a corporation validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
SECTION 4.10. Regulatory Restrictions on Borrowing. The Company is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended, or otherwise subject to any regulatory scheme
which restricts its ability to incur debt.
SECTION 4.11. Full Disclosure. Neither the description of the Company in
the Information Memorandum, as of the date of the Information Memorandum, nor
any statement or certification furnished by the Company to any Agent or Bank
pursuant to this Agreement, as of the date of such statement or certification,
contained any untrue statement of a material fact or omitted to state a material
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fact necessary in order to make any statements contained therein, in the light
of the circumstances under which they were made, not misleading.
ARTICLE 5
COVENANTS
The Company and, where stated, each other Borrower agree that, so long as
any Bank has any Commitment hereunder or any amount payable hereunder or under
any Note remains unpaid:
SECTION 5.01. Company Information. The Company will deliver to the General
Administrative Agent for delivery to each of the Banks:
(a) as soon as available and in any event within 100 days after the end of
each fiscal year of the Company, a consolidated balance sheet of the Company and
its Consolidated Subsidiaries as of the end of such fiscal year and the related
consolidated statements of operations, cash flows and common shareholders'
equity for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on in a manner acceptable to
the Securities and Exchange Commission by Ernst & Young LLP or other independent
public accountants of nationally recognized standing;
(b) as soon as available and in any event within 50 days after the end of
each of the first three quarters of each fiscal year of the Company, a
consolidated balance sheet of the Company and its Consolidated Subsidiaries as
of the end of such quarter and the related consolidated statements of operations
for such quarter and for the portion of the Company's fiscal year ended at the
end of such quarter and the related consolidated statement of cash flows for the
portion of the Company's fiscal year ended at the end of such quarter, setting
forth in the case of such statements of operations and cash flows, in
comparative form, the figures for the corresponding periods of the Company's
previous fiscal year, all certified (subject to normal year-end adjustments) as
to fairness of presentation, generally accepted accounting principles (except as
to the absence of footnotes) and consistency by the chief financial officer or
the chief accounting officer of the Company;
(c) simultaneously with the delivery of each set of financial statements
referred to in clauses (a) and (b) above, a certificate of the chief financial
officer or the chief accounting officer of the Company (i) setting forth in
reasonable detail the calculations required to establish whether the Company was
in compliance with the requirements of Sections 5.08(b) and 5.10(g), (h) and (l)
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and 5.11 to 5.14, inclusive, on the date of such financial statements, (ii) if
the One-Time Pricing Option (as defined in the Pricing Schedule) has not been
exercised, setting forth the calculations required to establish the Applicable
Pricing Ratio (as defined in the Pricing Schedule) and (iii) stating whether any
Default exists on the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which the Company is taking or
proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial statements
referred to in clause (a) above, a statement of the firm of independent public
accountants which reported on such statements (i) as to whether anything has
come to their attention to cause them to believe that any Default existed on the
date of such statements (it being understood that such accountants shall not
thereby be required to perform any procedures not otherwise required under
generally accepted auditing standards) and (ii) confirming the calculations set
forth in the officer's certificate delivered simultaneously therewith pursuant
to clause (c) above;
(e) within five days after the chief financial officer, the treasurer or
chief accounting officer of the Company obtains knowledge of any Default, if
such Default is then continuing, a certificate of the chief financial officer,
the treasurer or the chief accounting officer of the Company setting forth the
details thereof and the action which the Company is taking or proposes to take
with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the Company
generally, copies of all financial statements, reports and proxy statements so
mailed;
(g) promptly upon the filing thereof, copies of all registration statements
(other than the exhibits thereto and any registration statements on Form S-8 or
its equivalent) and reports (other than the exhibits thereto) on Forms 10-K,
10-Q and 8-K (or their equivalents) which the Company shall have filed with the
Securities and Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is required to
give notice to the PBGC of any "reportable event" (as defined in Section 4043 of
ERISA) with respect to any Plan which might constitute grounds for a termination
of such Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such reportable event, a
copy of the notice of such reportable event given or required to be given to the
PBGC; (ii) receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice;
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(iii) receives notice from the PBGC under Title IV of ERISA of an intent to
terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of
such notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security, a
certificate of the chief financial officer or the chief accounting officer of
the Company setting forth details as to such occurrence and action, if any,
which the Company or applicable member of the ERISA Group is required or
proposes to take; and
(i) from time to time such additional information regarding the financial
position or business of the Company and its Subsidiaries as the Administrative
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Other Borrower Information. Each Borrower other than the
Company will deliver to the General Administrative Agent for delivery to each of
the Banks:
(a) as soon as available and in any event within 140 days after the end of
each fiscal year of such Borrower, a consolidated balance sheet of such Borrower
and its Consolidated Subsidiaries as of the end of such fiscal year and the
related consolidated statements of operations, cash flows and common
shareholders' equity for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all certified as to
fairness of presentation and consistency by the chief financial officer or the
chief accounting officer of such Borrower; and
(b) from time to time such additional information regarding the financial
position or business of such Borrower as the Administrative Agent, at the
request of any Bank, may reasonably request.
SECTION 5.03. Payment of Obligations. Each Borrower will pay and discharge,
and will cause each of its Subsidiaries to pay and discharge, at or before
maturity, all their respective material obligations and liabilities (including,
without limitation, material tax liabilities and claims of materialmen,
warehousemen and the like which if unpaid might by law give rise to a Lien),
except where the same may be contested in good faith by appropriate proceedings,
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and will maintain, and will cause each of its Subsidiaries to maintain, in
accordance with generally accepted accounting principles, appropriate reserves
for the accrual of any of the same.
SECTION 5.04. Maintenance of Property; Insurance. (a) Each Borrower will
keep, and will cause each of its Subsidiaries to keep, all material property
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted.
(b) Each Borrower will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Company or in such Borrower's or
Subsidiary's own name) with financially sound and responsible insurance
companies, insurance on all its respective properties in at least such amounts,
against at least such risks and with such risk retention as are usually
maintained, insured against or retained, as the case may be, in the same general
area by companies of established repute engaged in the same or a similar
business; and will furnish to the Banks, upon request from the Administrative
Agent, information presented in reasonable detail as to the insurance so
carried.
SECTION 5.05. Conduct of Business and Maintenance of Existence. Each
Borrower and its Subsidiaries taken as a whole will continue to engage in
business of the same general type as now conducted by such Borrower and its
Subsidiaries, and each Borrower will preserve, renew and keep in full force and
effect, and will cause each of its Subsidiaries to preserve, renew and keep in
full force and effect, its respective corporate existence and its respective
rights, privileges and franchises necessary or desirable in the normal conduct
of business; provided that nothing in this Section shall prohibit (i) the
consolidation or merger of a Subsidiary (other than an Eligible Subsidiary with
obligations with respect to Borrowings or Bankers' Acceptances outstanding
hereunder) with or into another Person, (ii) the consolidation or merger of an
Eligible Subsidiary with or into another Eligible Subsidiary or (iii) the
termination of the corporate existence of any Subsidiary (other than an Eligible
Subsidiary with obligations with respect to Borrowings or Bankers' Acceptances
outstanding hereunder) if, in the case of clauses (i), (ii) and (iii), the
Company in good faith determines that such consolidation, merger or termination
is in the best interest of the Company and is not materially disadvantageous to
the Banks.
SECTION 5.06. Compliance with Laws. Each Borrower will comply, and cause
each of its Subsidiaries to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and the
rules and regulations thereunder) except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
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SECTION 5.07. Inspection of Property, Books and Records. Each Borrower will
keep, and will cause each of its Subsidiaries to keep, proper books of record
and account in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities; and will
permit, and will cause each of its Subsidiaries to permit, representatives of
any Bank at such Bank's expense to visit and inspect any of its respective
properties, to examine and make abstracts from any of its respective books and
records and to discuss its respective affairs, finances and accounts with its
respective officers, employees and independent public accountants, all at such
reasonable times as may be desired.
SECTION 5.08. Mergers and Sales of Assets. (a) The Company will not
consolidate or merge with or into any other Person; provided that the Company
may merge with another Person if (x) the Company is the corporation surviving
such merger and (y) after giving effect to such merger, no Default shall have
occurred and be continuing.
(b) The Company will not sell, lease or otherwise transfer, directly, or
indirectly, assets (exclusive of assets transferred in the ordinary course of
business and any Permitted Receivables Disposition) if after giving effect to
such transfer the aggregate book value of assets so transferred subsequent to
the date of this Agreement would exceed 25% of Consolidated Assets as of the day
preceding the date of such transfer.
SECTION 5.09. Use of Proceeds. The proceeds of the Loans made under this
Agreement and of the Bankers' Acceptances accepted and purchased under this
Agreement will be used by the Borrowers for general corporate purposes. None of
such proceeds will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U.
SECTION 5.10. Negative Pledge. Neither any Borrower nor any Subsidiary of
any Borrower will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt outstanding
on the date of this Agreement in an aggregate principal or face amount not
exceeding $15,000,000;
(b) any Lien existing on any asset of any Person at the time such Person
becomes a Subsidiary of a Borrower and not created in contemplation of such
event;
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(c) any Lien on any asset securing Debt incurred or assumed for the purpose
of financing all or any part of the cost of acquiring or constructing such
asset, provided that such Lien attaches to such asset concurrently with or
within 90 days after the acquisition or completion of construction thereof;
(d) any Lien on any asset of any Person existing at the time such Person is
merged or consolidated with or into a Borrower or a Subsidiary of a Borrower and
not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by a
Borrower or a Subsidiary of a Borrower and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that the proceeds or such Debt are used solely
for the foregoing purpose and to pay financing costs and such Debt is not
secured by any additional assets;
(g) Liens arising in the ordinary course of its business which (i) do not
secure Debt or Derivatives Obligations, (ii) do not secure any obligation in an
amount exceeding $25,000,000 and (iii) do not in the aggregate materially
detract from the value of its assets or materially impair the use thereof in the
operation of its business;
(h) Liens on cash and cash equivalents securing Derivatives Obligations,
provided that the aggregate amount of cash and cash equivalents subject to such
Liens may at no time exceed $25,000,000;
(i) Liens for current taxes, assessments and other governmental charges not
yet due and payable or being contested in good faith and as to which adequate
reserves in accordance with generally accepted accounting principles have been
established;
(j) mechanics, materialmen's, carrier's, warehousemen's or similar liens
for sums not yet due and owing or being contested in good faith and as to which
adequate reserves in accordance with generally accepted accounting principles
have been established;
(k) Liens created in connection with Permitted Securitization Transactions;
provided that, except for the assets transferred pursuant to Permitted
Receivables Dispositions made in connection with such Permitted Securitization
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Transactions, no such Lien may extend to any assets of the Company or any
Subsidiary of the Company that is not a Bankruptcy Remote Subsidiary; and
(l) Liens not otherwise permitted by the foregoing clauses of this Section
securing Debt in an aggregate principal or face amount at any date not to exceed
an amount equal to the excess of 10% of Consolidated Net Worth over the
aggregate Value of Sale-Leaseback Transactions which would not have been
permitted under Section 5.14 but for this clause (l).
SECTION 5.11. Debt to Total Capital. The ratio of Consolidated Debt to
Total Capital shall not exceed during any period set forth below the applicable
ratio set forth below for such period. For purposes of this Section 5.11
Consolidated Debt shall exclude accreted discount on Bankers' Acceptances.
Period Ratio
------ -----
Closing Date to December 30, 1997 70%
December 31, 1997 - December 30, 1998 67%
December 31, 1998 - December 30, 1999 63%
December 31, 1999 - December 30, 2000 59%
December 31, 2000 and thereafter 55%
SECTION 5.12. Debt of Subsidiaries. Total Debt of all Subsidiaries
(excluding Debt (i) of a Subsidiary owing to the Company, (ii) of a Subsidiary
owing to a wholly owned Subsidiary, (iii) of an Eligible Subsidiary under this
Agreement or (iv) incurred in connection with a refinancing of the Canadian
Facility, but only to the extent that the amount of such Debt incurred in
reliance on this clause (iv) does not exceed the amount by which the Commitments
shall have been reduced pursuant to Section 2.09(b) in connection with such
refinancing of the Canadian Facility) will at no time exceed $125,000,000. For
purposes of this Section any preferred stock of a Consolidated Subsidiary held
by a Person other than the Company or a Wholly-Owned Consolidated Subsidiary
shall be included, at the higher of its voluntary or involuntary liquidation
value, in the "Debt" of such Consolidated Subsidiary.
SECTION 5.13. Minimum Consolidated Net Worth. Consolidated Net Worth will
at no time be less than an amount equal to the sum of (i) $295,000,000 plus (ii)
an amount equal to 25% of Consolidated Net Income for each fiscal quarter of the
Company ending after June 30, 1997 and on or prior to the date of determination,
in each case, for which Consolidated Net Income is positive (but with no
deduction on account of negative Consolidated Net Income for any fiscal quarter
of the Company) plus (iii) 50% of the aggregate net proceeds, including the fair
market value of property other than cash (as determined in good faith by
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the Board of Directors of the Company), received by the Company from the
issuance and sale after the date hereof of any capital stock of the Company
(other than the proceeds of any issuance and sale of any capital stock (x) to a
Subsidiary of the Company or (y) which is required to be redeemed, or is
redeemable at the option of the holder, at any time) or in connection with the
conversion or exchange of any Debt of the Company into capital stock of the
Company after June 30, 1997.
SECTION 5.14. Sale-leaseback Transactions. Neither any Borrower nor any of
their respective Subsidiaries will engage in any Sale-Leaseback Transaction
unless such Borrower or such Subsidiary would be entitled, pursuant to the
provisions of Section 5.10, to incur Debt with a principal amount equal to or
exceeding the Value of such Sale-Leaseback Transaction secured by a Lien on the
property to be leased (after giving similar effect to all other Sale-Leaseback
Transactions in effect at such time). For purposes of this Section and Section
5.10(l), "Value" means, with respect to a Sale-Leaseback Transaction, at any
time, the amount equal to the greater of (i) the net proceeds of the sale or
transfer of the property leased pursuant to such Sale-Leaseback Transaction and
(ii) the fair value in the opinion of the Board of Directors of the Company of
such property at the time of entering into such Sale-Leaseback Transaction, in
either case divided first by the number of full years of the term of the lease
and then multiplied by the number of full years of such term remaining at the
time of determination, without regard to any renewal or extension options
contained in the lease.
SECTION 5.15. Transactions with Affiliates. No Borrower will, nor will it
permit any of its Subsidiaries to, directly or indirectly, pay any funds to or
for the account of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect, any transaction with,
any Affiliate except on an arms-length basis on terms at least as favorable to
such Borrower or such Subsidiary as could have been obtained from a third party
who was not an Affiliate; provided that the foregoing provisions of this Section
shall not prohibit any such Person from declaring or paying any lawful dividend
or other payment ratably in respect of all of its capital stock, from paying
reasonable compensation to its directors and officers or from entering into
other transactions that the Company determines are in its best interests and
having a cost to such Person not in excess of $5,000,000.
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ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) (i) any principal of any Loan or any Bankers' Acceptance shall fail to
be paid when due or (ii) any interest, any fees or any other amount payable
hereunder shall fail to be paid within five days after the due date thereof;
(b) any Borrower shall fail to observe or perform any covenant contained in
Article 5, other than those contained in Sections 5.01 through 5.07 and 5.10;
(c) any Borrower shall fail to observe or perform any covenant contained in
Section 5.10 for 30 days after such Borrower shall have obtained knowledge
thereof;
(d) any Borrower shall fail to observe or perform any covenant or agreement
contained in this Agreement (other than those covered by clause (a), (b) or (c)
above) for 30 days after notice thereof has been given to the Company by the
General Administrative Agent at the request of any Bank;
(e) any representation, warranty, certification or statement made by any
Borrower in this Agreement or in any certificate, financial statement or other
document delivered pursuant to this Agreement shall prove to have been incorrect
in any material respect when made (or deemed made);
(f) any Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any applicable
grace period;
(g) any event or condition shall occur which results in the acceleration of
the maturity of any Material Debt or enables (with the giving of notice of
acceleration, if required) the holder of such Debt or any Person acting on such
holder's behalf to accelerate the maturity thereof;
(h) any Borrower or any Material Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding
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commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing;
(i) an involuntary case or other proceeding shall be commenced against any
Borrower or any Material Subsidiary seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against any Borrower or any Material Subsidiary under
the federal bankruptcy laws as now or hereafter in effect;
(j) any member of the ERISA Group shall fail to pay when due an amount or
amounts aggregating in excess of $5,000,000 which it shall have become liable to
pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA Group, any
plan administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer any Material Plan; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
causes one or more members of the ERISA Group to incur a current payment
obligation in excess of $5,000,000 in the aggregate that is not paid when due;
(k) judgments or orders for the payment of money in excess of $5,000,000 in
the aggregate shall be rendered against any Borrower or any Material Subsidiary
and such judgments or orders shall continue unsatisfied and unstayed for a
period of 30 days;
(l) any person or group of persons (within the meaning of Section 13 or 14
of the Securities Exchange Act of 1934, as amended) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act) of 35% or more of the
outstanding shares of common stock of the Company; or, during any period of 12
consecutive calendar months, individuals who were directors of the Company on
the first day of such period shall cease to constitute a majority of the board
of directors of the Company; or
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(m) any of the obligations of the Company under Article 10 of this
Agreement shall for any reason not be enforceable against the Company in
accordance with their terms, or the Company shall so assert in writing;
then, and in every such event, the General Administrative Agent shall (i) if
requested by the Required Banks, by notice to the Borrowers terminate the
Commitments and they shall thereupon terminate, and (ii) if requested by the
Required Banks, by notice to the Borrowers declare the Loans (together with
accrued interest thereon) to be, and the Loans shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by each Borrower; provided that in
the case of any of the Events of Default specified in clause 6.01(h) or 6.01(i)
with respect to any Borrower, without any notice to any Borrower or any other
act by the General Administrative Agent or the Banks, the Commitments shall
thereupon terminate and the Loans (together with accrued interest thereon) shall
become immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by each Borrower.
SECTION 6.02. Notice of Default. The General Administrative Agent shall
give notice to the Company under Section 6.01(d) promptly upon being requested
to do so by any Bank and shall thereupon notify all the Banks thereof.
SECTION 6.03. Action by Administrative Agents. If an Event of Default shall
have occurred and be continuing and the Required Banks instruct the Canadian
Administrative Agent to request cash collateral pursuant to this Section, each
Borrower issuing a Bankers' Acceptance will, promptly after it receives such
request from the Canadian Administrative Agent, pay to the Canadian
Administrative Agent an amount in Canadian Dollars in immediately available
funds equal to the then outstanding Bankers' Acceptances to be held by the
Canadian Administrative Agent, under arrangements satisfactory to it, to secure
the payment of the face amount of such outstanding Bankers' Acceptances upon
maturity; provided that, if any Event of Default specified in clause 6.01(h) or
6.01(i) occurs with respect to any Borrower, such Borrower shall pay such amount
to the Canadian Administrative Agent forthwith without any notice, demand or
other act by the Canadian Administrative Agent or the Banks.
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ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints
and authorizes each Administrative Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement, and the Notes as are
delegated to such Administrative Agent by the terms hereof or thereof, together
with all such powers as are reasonably incidental thereto.
SECTION 7.02. Administrative Agents and Affiliates. The Chase Manhattan
Bank and The Chase Manhattan Bank of Canada shall have the same rights and
powers under this Agreement as any other Bank and may exercise or refrain from
exercising the same as though it were not the Administrative Agent, and The
Chase Manhattan Bank and its affiliates may accept deposits from, lend money to,
and generally engage in any kind of business with any Borrower or any Subsidiary
or Affiliate of any Borrower as if it were not the Administrative Agent.
SECTION 7.03. Action by Administrative Agents. The obligations of the
Administrative Agents hereunder are only those expressly set forth herein.
Without limiting the generality of the foregoing, the Administrative Agents
shall not be required to take any action with respect to any Default, except as
expressly provided in Article 6.
SECTION 7.04. Consultation with Experts. The Administrative Agents may
consult with legal counsel (who may be counsel for any Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Administrative Agent. Neither Administrative
Agent nor any of its affiliates nor any of their respective directors, officers,
agents or employees shall be liable for any action taken or not taken by it in
connection herewith (i) with the consent or at the request of the Required Banks
(or, when expressly required hereby, all the Banks) or (ii) in the absence of
its own gross negligence or willful misconduct. Neither Administrative Agent nor
any of its affiliates nor any of their respective directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty or representation made in connection with
this Agreement or any borrowing hereunder; (ii) the performance or observance of
any of the covenants or agreements of any Borrower; (iii) the satisfaction of
any condition specified in Article 3, except receipt of items required to be
delivered to such Administrative Agent; or (iv) the validity, effectiveness or
genuineness of this Agreement, the Notes or any other instrument or writing
furnished in connection
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herewith. Neither Administrative Agent shall incur any liability by acting in
reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex, facsimile transmission or similar writing)
believed by it to be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with
its Commitment of the applicable Class, indemnify each Administrative Agent, its
affiliates and their respective directors, officers, agents and employees (to
the extent not reimbursed by the Borrowers) against any cost, expense (including
reasonable counsel fees and disbursements), claim, demand, action, loss or
liability (except such as result from such indemnitees' gross negligence or
willful misconduct) that such indemnitees may suffer or incur in connection with
this Agreement or any action taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon any Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon any Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.08. Successor Administrative Agent. Either Administrative Agent
may resign at any time by giving notice thereof to the Banks and the Company.
Upon any such resignation, the Required Banks shall have the right to appoint a
successor Administrative Agent, subject to the approval of the Company. If no
successor Administrative Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent gives notice of resignation, then the retiring
Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent, which shall be, in the case of the General Administrative
Agent, a commercial bank organized or licensed under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $100,000,000 and, in the case of the Canadian Administrative
Agent, a Schedule I Bank or a Schedule II Bank which has, or is a subsidiary of
a bank or a bank holding company which has, a combined capital and surplus of at
least $100,000,000. Upon the acceptance of its appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's resignation hereunder as
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Administrative Agent, the provisions of this Article shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Administrative
Agent.
SECTION 7.09. Agents' Fees. The Company shall pay, or shall cause
BetzDearborn Canada to pay, to each of the Administrative Agents and the
Syndication Agent for its own account fees in the amounts and at the times
previously agreed upon between the Company and such Agent.
SECTION 7.10. Other Agents. Nothing in this Agreement shall impose upon the
Documentation Agent or the Syndication Agent, in such capacity, any duties or
obligations whatsoever.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If
on or prior to the first day of any Interest Period for any CD Loan, Euro-Dollar
Loan or Money Market LIBOR Loan:
(a) the Administrative Agent is advised by the Reference Banks that
deposits in the relevant currency (in the applicable amounts) are not being
offered to the Reference Banks in the relevant market for such Interest Period,
or
(b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50% or more
of the aggregate principal amount of the affected Loans advise the
Administrative Agent that the Adjusted CD Rate or London Interbank Offered Rate,
as the case may be, as determined by the Administrative Agent will not
adequately and fairly reflect the cost to such Banks of funding their Loans for
such Interest Period, the Administrative Agent shall forthwith give notice
thereof to the Borrower and the Banks, whereupon until the Administrative Agent
notifies the Borrower that the circumstances giving rise to such suspension no
longer exist, (i) the obligations of the Banks to make CD Loans or Euro-Dollar
Loans, as the case may be, or to continue or convert outstanding Loans as or
into CD Loans or Euro- Dollar Loans, as the case may be, shall be suspended and
(ii) each outstanding CD Loan or Euro-Dollar Loan, as the case may be, shall be
converted into a Base Rate Loan (in the case of CD Loans or Euro-Dollar Loans)
on the last day of the then current Interest Period applicable thereto. Unless
the Borrower notifies the Administrative Agent at least two Business Days before
the date of any Fixed Rate Borrowing for which a Notice of Borrowing has
previously been given that it
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elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a
Committed Borrowing, such Borrowing shall instead be made as a Base Rate
Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR
Borrowing, such Borrowing shall be cancelled.
SECTION 8.02. Illegality. If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Applicable Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or its
Applicable Lending Office) to make, maintain or fund its Euro-Dollar Loans to
any Borrower and such Bank shall so notify the Administrative Agent, the
Administrative Agent shall forthwith give notice thereof to the other Banks and
the Borrower, whereupon until such Bank notifies the Borrower and the
Administrative Agent that the circumstances giving rise to such suspension no
longer exist, the obligation of such Bank to make Euro-Dollar Loans to such
Borrower, or to convert outstanding Loans into Euro-Dollar Loans, shall be
suspended. Before giving any notice to the Administrative Agent pursuant to this
Section, such Bank shall designate a different Applicable Lending Office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice
is given, each Euro-Dollar Loan of such Bank then outstanding shall be
converted to a Base Rate Loan of the same Class either (a) on the last day of
the then current Interest Period applicable to such Euro-Dollar Loan if such
Bank may lawfully continue to maintain and fund such Loan to such day or (b)
immediately if such Bank shall determine that it may not lawfully continue to
maintain and fund such Loan to such day.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the
date hereof, in the case of any Committed Loan or Bankers' Acceptance or any
obligation to make Committed Loans or accept or purchase Bankers' Acceptances or
(y) the date of the related Money Market Quote, in the case of any Money Market
Loan, the adoption of any applicable law, rule or regulation, or any change in
any applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Applicable Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement imposed by the Board of
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Governors of the Federal Reserve System, but excluding (i) with respect to any
CD Loan any such requirement included in an applicable Domestic Reserve
Percentage and (ii) with respect to any Euro-Dollar Loan any such requirement
with respect to which such Bank is entitled to compensation during the relevant
Interest Period under Section 2.17), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such requirement reflected in an
applicable Assessment Rate) or similar requirement against assets of, deposits
with or for the account of, or credit (including bankers' acceptances) extended
by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or
its Applicable Lending Office) or on the United States market for certificates
of deposit, the London interbank market or the Canadian bankers' acceptance
market any other condition affecting its Fixed Rate Loans, its Notes or its
obligation to make Fixed Rate Loans or its obligations hereunder in respect of
Bankers' Acceptances and the result of any of the foregoing is to increase the
cost to such Bank (or its Applicable Lending Office) of making or maintaining
any Fixed Rate Loan or accepting any Bankers' Acceptance , or to reduce the
amount of any sum received or receivable by such Bank (or its Applicable Lending
Office) under this Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Administrative Agent), each Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank for the
portion of such increased cost or reduction allocable to such Borrower.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or 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 the rate of return on capital
of such Bank (or its Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its Parent) could have
achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an amount deemed
by such Bank to be material, then from time to time, within 15 days after demand
by such Bank (with a copy to the Administrative Agent), each Borrower shall pay
to such Bank the portion allocable to such Borrower of such additional amount or
amounts as will compensate such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrowers and the Administrative
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Bank to compensation pursuant to this Section
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and will designate a different Applicable Lending Office if such designation
will avoid the need for, or reduce the amount of, such compensation and will
not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this Section and setting
forth the additional amount or amounts (and the calculation thereof) to be paid
to it hereunder shall be conclusive in the absence of manifest error. In
determining such amount, such Bank may use any reasonable averaging and
attribution methods.
SECTION 8.04. Taxes. (a) For the purposes of this Section 8.04, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings of any nature with respect to any payment by
any Borrower to or for the account of the Administrative Agent or any Bank
pursuant to this Agreement or under any Note or Bankers' Acceptance, and all
liabilities with respect thereto, excluding (i) in the case of each Bank and the
Administrative Agent, taxes imposed on its income, and franchise or similar
taxes imposed on it, by a jurisdiction under the laws of which such Bank or the
Administrative Agent (as the case may be) is organized or in which its principal
executive office is located or by any other jurisdiction imposing such taxes by
reason of any connection between such jurisdiction and such Bank or the
Administrative Agent (as the case may be) other than a connection arising solely
from this Agreement or, in the case of each Bank, in which its Applicable
Lending Office is located (all such excluded taxes of the Administrative Agent
or any Bank being herein referred to as its "Domestic Taxes") and (ii) in the
case of each Bank, (x) with respect to payments under the US Subfacility by any
Borrower incorporated under the laws of the United States or any state thereof,
any United States withholding tax imposed on such payments but only to the
extent that payments to such Bank by such Borrower hereunder are subject to
United States withholding tax at the time such Bank first becomes a party to
this Agreement and (y) with respect to payments under the Canadian Subfacility
by any Borrower organized under the laws of Canada or any province thereof, any
Canadian withholding tax imposed on such payments but only to the extent that
payments to such Bank by such Borrower hereunder are subject to Canadian
withholding tax at the time such Bank first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary taxes and
any other excise or property taxes, or similar charges or levies, which arise
from any payment made pursuant to this Agreement or under any Note or Bankers'
Acceptance or from the execution or delivery, registration or enforcement of, or
otherwise with respect to, this Agreement or any Note or Bankers' Acceptance.
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(b) Any and all payments by any Borrower to or for the account of any Bank
or the Administrative Agent hereunder or under any Note or Bankers' Acceptance
shall be made without deduction or withholding for any Taxes or Other Taxes;
provided that, if any Borrower shall be required by law to deduct any Taxes or
Other Taxes from any such payments, (i) the sum payable shall be increased as
necessary so that after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums payable
under this Section) such Bank or the Administrative Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions or withholdings been made, (ii) such Borrower shall make such
deductions or withholdings, (iii) such Borrower shall pay the full amount
deducted or withheld to the relevant taxation authority or other authority in
accordance with applicable law and (iv) such Borrower shall promptly furnish to
the Administrative Agent, at its address referred to in Section 11.01, the
original or a certified copy of a receipt evidencing payment thereof.
(c) Each Borrower agrees to indemnify each Bank and the Administrative
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section), whether or not correctly imposed, paid by
such Bank or the Administrative Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto to the extent allocable to such Borrower. In addition, each Borrower
organized under the laws of a jurisdiction outside the United States of America
(with respect to the US Subfacility) or Canada (with respect to the Canadian
Subfacility) agrees to indemnify the Administrative Agent and each Bank for all
Domestic Taxes incurred by it and any liability (including any penalties,
interest and expenses, to the extent not attributable to its gross negligence or
willful misconduct), arising therefrom or with respect thereto, in each case to
the extent that such Domestic Taxes or liabilities result from any payment or
indemnification pursuant to this Section in connection with the US Subfacility
or the Canadian Subfacility, as the case may be. Each Bank will promptly notify
the Borrowers and the Administrative Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle such Bank to
compensation pursuant to this Section. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it and the calculation thereof hereunder shall be
conclusive in the absence of manifest error. Such amount(s) shall be paid within
15 days after such Bank or the Administrative Agent (as the case may be) makes
demand therefor.
(d) Each Bank having a US Commitment organized under the laws of a
jurisdiction outside the United States, on or prior to the date of its execution
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and delivery of this Agreement in the case of each Bank listed on the signature
pages hereof and on or prior to the date on which it becomes a Bank in the case
of each other Bank, and from time to time thereafter if requested in writing by
the Borrowers under the US Subfacility (but only so long as such Bank remains
lawfully able to do so), shall provide the Borrowers and the Administrative
Agent with Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Bank is entitled to benefits under an income tax treaty to which the United
States is a party which exempts the Bank from United States withholding tax or
reduces the rate of withholding tax on payments of interest for the account of
such Bank or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States.
(e) For any period with respect to which a Bank has failed to provide the
Borrowers or the Administrative Agent with the appropriate form pursuant to
Section 8.04(d) (unless such failure is due to a change in treaty, law or
regulation occurring subsequent to the date on which such form originally was
required to be provided), such Bank shall not be entitled to indemnification
under Section 8.04(b) or (c) with respect to Taxes imposed by the United States;
provided that if a Bank, which is otherwise exempt from or subject to a reduced
rate of withholding tax, becomes subject to Taxes because of its failure to
deliver a form required hereunder, the Borrowers shall take such steps as such
Bank shall reasonably request to assist such Bank to recover such Taxes.
(f) If any Borrower is required to pay additional amounts to or for the
account of any Bank pursuant to this Section, then such Bank will change the
jurisdiction of its Applicable Lending Office if, in the judgment of such Bank,
such change (i) will eliminate or reduce any such additional payment which may
thereafter accrue and (ii) is not otherwise disadvantageous to such Bank.
(g) Each Bank and the Administrative Agent shall, at the request of the
Borrower, use reasonable efforts (consistent with applicable legal and
regulatory restrictions) to file any certificate or document requested by the
Borrower if the making of such a filing would avoid the need for or reduce the
amount of any such additional amounts payable to or for the account of such Bank
or the Agent (as the case may be) pursuant to this Section 8.04 which may
thereafter accrue and would not, in the sole judgment of such Bank or the
Administrative Agent, require such Bank or the Administrative Agent to disclose
any confidential or proprietary information or be otherwise disadvantageous to
such Bank or the Administrative Agent.
(h) If a Bank or the Administrative Agent (as the case may be) shall become
aware that it is entitled to claim a refund (a "Refund") from a taxing
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authority of such Taxes or Other Taxes for which it has been indemnified by
any Borrower, or with respect to which any Borrower has paid additional amounts,
pursuant to this Section 8.04, it shall promptly notify such Borrower of the
availability of such Refund and shall, within 30 days after receipt of a written
request by such Borrower, make a claim to such taxing authority for such Refund
at such Borrower's expense if, in the judgment of such Bank or the
Administrative Agent (as the case may be), the making of such claim will not be
otherwise disadvantageous to it; provided that nothing in this subsection (c)
shall be construed to require any Bank or the Administrative Agent to institute
any administrative proceeding (other than the filing of a claim for any such
Refund) or judicial proceeding to obtain any such Refund. If a Bank or the
Administrative Agent (as the case may be) receives a Refund from a taxing
authority (as a result of any error in the amount of Taxes or Other Taxes paid
to such taxing authority) of any such Taxes or Other Taxes for which it has been
indemnified by any Borrower, or with respect to which any Borrower has paid
additional amounts, pursuant to this Section 8.04, it shall promptly pay to such
Borrower the amount so received (but only to the extent of indemnity payments
made, or additional amounts paid, by such Borrower under this Section 8.04 with
respect to the Taxes or Other Taxes giving rise to such Refund), net of all
reasonable out-of-pocket expenses (including the net amount of taxes, if any,
imposed on such Bank or the Administrative Agent with respect to such Refund) of
such Bank or Administrative Agent, and without interest (other than interest
paid by the relevant taxing authority with respect to such Refund); provided,
however, that such Borrower upon the request of such Bank or the Administrative
Agent, agrees to repay the amount paid over to such Borrower (plus penalties,
interest or other charges) to such Bank or the Administrative Agent in the event
such Bank or the Administrative Agent is required to repay such Refund to such
taxing authority. Nothing contained in this Section 8.04 shall require any Bank
or the Administrative Agent to make available any of its tax returns (or any
other information that it deems to be confidential or proprietary).
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. If
(i) the obligation of any Bank to make, or convert outstanding Loans to,
Euro-Dollar Loans to any Borrower has been suspended pursuant to Section 8.02 or
(ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect
to its CD Loans or Euro-Dollar Loans and the Borrower shall, by at least five
Euro-Dollar Business Days' prior notice to such Bank through the Administrative
Agent, have elected that the provisions of this Section shall apply to such
Bank, then, unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for compensation no
longer exist:
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(a) all Loans to such Borrower which would otherwise be made by such Bank
as (or continued as or converted into) CD Loans or Euro-Dollar Loans, as the
case may be, shall instead be Base Rate Loans (on which interest and principal
shall be payable contemporaneously with the related Fixed Rate Loans of the
other Banks); and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, to
such Borrower has been repaid (or converted to a Base Rate Loan), all payments
of principal which would otherwise be applied to repay such Fixed Rate Loans
shall be applied to repay its Base Rate Loans instead.
If such Bank notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on the
first day of the next succeeding Interest Period applicable to the related CD
Loans or Euro-Dollar Loans of the other Banks.
SECTION 8.06. Substitution of Bank. If (i) the obligation of any Bank to
make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any
Bank has demanded compensation under Section 8.03 or 8.04, the Company shall
have the right, with the assistance of the Administrative Agent, to seek a
mutually satisfactory substitute bank or banks (which may be one or more of the
Banks) to purchase the Notes and assume the Commitment(s) of such Bank and its
Related Bank (if any), all in accordance with Section 11.06(c).
SECTION 8.07. Allocations. The respective portions allocable to particular
Borrowers of any amount payable pursuant to Section 8.03 or 8.04 shall be as
determined by the Company and notified by it to the Bank demanding such payment.
The Company shall itself be unconditionally obligated for payment of any such
amount if and to the extent (i) it fails to allocate to particular Borrowers the
full amount payable within 15 days of demand for payment thereof or (ii) any
particular Borrower disputes the amount so allocated to it.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF ELIGIBLE SUBSIDIARIES
On the Closing Date, BetzDearborn Canada represents and warrants that, and
by the execution and delivery by each other Eligible Subsidiary of its Election
to Participate, such Eligible Subsidiary shall be deemed to have represented and
warranted as of the date thereof that:
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SECTION 9.01. Corporate Existence and Power. It is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is an Eighty Percent-Owned Consolidated
Subsidiary of the Company.
SECTION 9.02. Corporate and Governmental Authorization; Contravention. The
execution and delivery by it of this Agreement or its Election to Participate
and its Notes, and the performance by it of this Agreement and its Notes, are
within its corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
governmental body, agency or official and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of its
certificate or incorporation or by-laws or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Company or such
Eligible Subsidiary or result in the creation or imposition of any Lien on any
asset of the Company or any of its Subsidiaries.
SECTION 9.03. Binding Effect. This Agreement or its Election to Participate
has been duly executed by such Eligible Subsidiary and this Agreement
constitutes a valid and binding agreement of such Eligible Subsidiary and each
of its Notes, when executed and delivered in accordance with this Agreement,
will constitute a valid and binding obligation of such Eligible Subsidiary, in
each case enforceable in accordance with its terms.
SECTION 9.04. Taxes. Except as disclosed in the opinion of counsel
delivered pursuant to Section 3.01(c) of this Agreement or in its Election to
Participate, there are no Taxes or Other Taxes of any country, or any taxing
authority thereof or therein, which are imposed on any payment to be made by
such Eligible Subsidiary pursuant hereto or on its Notes, or imposed on or by
virtue of the execution, delivery or enforcement of this Agreement, its Election
to Participate or of its Notes.
ARTICLE 10
GUARANTY
SECTION 10.01. The Guaranty. The Company hereby unconditionally guarantees
the full and punctual payment (whether at stated maturity, upon acceleration or
otherwise) of the principal of and interest on each Loan made to or Bankers'
Acceptance issued by any Eligible Subsidiary pursuant to this Agreement, and the
full and punctual payment of all other amounts payable by any Eligible
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Subsidiary under this Agreement. Upon failure by any Eligible Subsidiary to pay
punctually any such amount, the Company shall forthwith on demand pay the amount
not so paid at the place and in the manner specified in this Agreement.
SECTION 10.02. Guaranty Unconditional. The obligations of the Company
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of any Eligible Subsidiary under this
Agreement or any Note or Bankers' Acceptance, by operation of law or
otherwise;
(b) any modification or amendment of or supplement to this Agreement
or any Note or Bankers' Acceptance;
(c) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of any Eligible Subsidiary
under this Agreement or any Note or Bankers' Acceptance;
(d) any change in the existence, structure or ownership of any
Eligible Subsidiary, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting any Eligible Subsidiary or its assets or any
resulting release or discharge of any obligation of any Eligible Subsidiary
contained in this Agreement or any Note or Bankers' Acceptance;
(e) the existence of any claim, set-off or other rights which the
Company may have at any time against any Eligible Subsidiary, any Agent,
any Bank or any other Person, whether in connection herewith or any
unrelated transactions, provided that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim;
(f) any invalidity or unenforceability relating to or against any
Eligible Subsidiary for any reason of this Agreement or any Note or
Bankers' Acceptance, or any provision of applicable law or regulation
purporting to prohibit the payment by any Eligible Subsidiary of the
principal of or interest on any Loan or any other amount payable by it
under this Agreement or any Note or Bankers' Acceptance; or
(g) any other act or omission to act or delay of any kind by any
Eligible Subsidiary, any Agent or Bank or any other Person or any other
circumstance whatsoever which might, but for the provisions of this
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paragraph, constitute a legal or equitable discharge of or defense to the
Company's obligations hereunder.
SECTION 10.03. Discharge Only Upon Payment In Full; Reinstatement In
Certain Circumstances. The Company's obligations hereunder shall remain in full
force and effect until the Commitments shall have terminated and the principal
of and interest on the Loans and all other amounts payable by the Company and
each Eligible Subsidiary under this Agreement or any Note or Bankers' Acceptance
shall have been paid in full. If at any time any payment of principal of or
interest on any Loan or any other amount payable by any Eligible Subsidiary
under this Agreement or any Note or Bankers' Acceptance is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or reorganization
of any Eligible Subsidiary or otherwise, the Company's obligations hereunder
with respect to such payment shall be reinstated at such time as though such
payment had been due but not made at such time.
SECTION 10.04. Waiver by the Company. The Company irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
Person against any Eligible Subsidiary or any other Person.
SECTION 10.05. Subrogation. The Company irrevocably waives any and all
rights to which it may be entitled, by operation of law or otherwise, upon
making any payment hereunder to be subrogated to the rights of the payee against
an Eligible Subsidiary with respect to such payment or against any direct or
indirect security therefor, or otherwise to be reimbursed, indemnified or
exonerated by or for the account of an Eligible Subsidiary in respect thereof.
SECTION 10.06. Stay of Acceleration. In the event that acceleration of the
time for payment of any amount payable by any Eligible Subsidiary under this
Agreement or any Note or Bankers' Acceptance is stayed upon insolvency,
bankruptcy or reorganization of such Eligible Subsidiary, all such amounts
otherwise subject to acceleration under the terms of this Agreement shall
nonetheless be payable by the Company hereunder forthwith on demand by the
Administrative Agent made at the request of the Required Banks.
SECTION 10.07. Continuing Guaranty. This guaranty is a continuing one and
all liabilities to which it applies or may apply shall be conclusively presumed
to have been created in reliance hereon.
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<PAGE>
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telex, facsimile
transmission or similar writing) and shall be given to such party: (a) in the
case of the Company either Administrative Agent, at its address, facsimile
number or telex number set forth on the signature pages hereof, (b) in the case
of any Bank, at its address, facsimile number or telex number set forth in its
Administrative Questionnaire or (c) in the case of any party, such other
address, facsimile number or telex number as such party may hereafter specify
for the purpose by notice to the Administrative Agents and the Company. Each
such notice, request or other communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified in this
Section and the appropriate answerback is received, (ii) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received, (iii) if given by mail, 72 hours after
such communication is deposited in the mail with first class postage prepaid,
addressed as aforesaid or (iv) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the
Administrative Agent under Article 2 or Article 8 shall not be effective until
received. Any notice required to be given to or by any Eligible Subsidiary shall
be duly given if given to or by the Company, which is hereby appointed the agent
of each Eligible Subsidiary for such purpose.
SECTION 11.02. No Waivers. No failure or delay by any Agent or Bank in
exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 11.03. Expenses; Indemnification. (a) The Company shall pay (i) all
reasonable out-of-pocket expenses of each Agent, including reasonable fees and
disbursements of special counsel for the Agents, in connection with the
preparation and administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses
reasonably incurred by the Administrative Agents and each Bank, including
(without duplication) the reasonable fees and disbursements of outside counsel
and allocated cost of inside counsel, in connection with such Event of Default
and "work-out", collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom.
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<PAGE>
(b) The Company agrees to indemnify each Agent and Bank, their respective
affiliates and the respective directors, officers, agents and employees of the
foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and
against any and all liabilities, losses, damages, costs and expenses of any
kind, including, without limitation, the reasonable fees and disbursements of
counsel, which may be incurred by such Indemnitee in connection with any
investigative, administrative or judicial proceeding (whether or not such
Indemnitee shall be designated a party thereto) brought or threatened relating
to or arising out of this Agreement or any actual or proposed use of proceeds of
Loans or Bankers' Acceptances hereunder; provided that no Indemnitee shall have
the right to be indemnified hereunder for such Indemnitee's own gross negligence
or willful misconduct as determined by a court of competent jurisdiction.
SECTION 11.04. Sharing of Set-offs. Each Bank agrees that if it shall, by
exercising any right of set-off or counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of principal and interest then due and
payable with respect to any Loan or Bankers' Acceptance of any Class held by it
which is greater than the proportion received by any other Bank in respect of
the aggregate amount of principal and interest then due and payable with respect
to any Loan or Bankers' Acceptance of the same Class held by such other Bank,
the Bank receiving such proportionately greater payment shall purchase such
participations in the Loans and Bankers' Acceptances of the same Class held by
the other Banks, and such other adjustments shall be made, as may be required so
that all such payments of principal and interest with respect to the Loans and
Bankers' Acceptances of the same Class held by the Banks shall be shared by the
Banks pro rata; provided that nothing in this Section shall impair the right of
any Bank to exercise any right of set-off or counterclaim it may have and to
apply the amount subject to such exercise to the payment of indebtedness of a
Borrower other than its indebtedness hereunder. Each Borrower agrees, to the
fullest extent it may effectively do so under applicable law, that any holder of
a participation in a Loan or Bankers' Acceptance, whether or not acquired
pursuant to the foregoing arrangements, may exercise rights of set-off or
counterclaim and other rights with respect to such participation as fully as if
such holder of a participation were a direct creditor of such Borrower in the
amount of such participation.
SECTION 11.05. Amendments and Waivers. Any provision of this Agreement or
the Notes or Bankers' Acceptances may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Company and the Required
Banks (and, if the rights or duties of any Agent are affected thereby, by such
Agent); provided that no such amendment or waiver shall, unless signed by all
the Banks, (i) increase or decrease the Commitment of any Bank (except for a
ratable decrease in the Commitments of all Banks) or subject any Bank to any
additional obligation, (ii) reduce the principal of or rate of interest on
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any Loan or Bankers' Acceptance or any fees hereunder, (iii) postpone the date
fixed for any payment of principal of or interest on any Loan or any fees
hereunder or for any scheduled termination of any Commitment or extend the
maturity date of any Bankers' Acceptance, (iv) release or reduce the Guarantee
by the Company in Article 10 hereof or (v) change the percentage of the
Commitments or of the aggregate unpaid Dollar Amount of the Loans and Bankers'
Acceptances, or the number of Banks, which shall be required for the Banks or
any of them to take any action under this Section or any other provision of this
Agreement; provided further that no such amendment, waiver or modification
shall, unless signed by each Eligible Subsidiary, (w) subject such Eligible
Subsidiary to any additional obligation, (x) increase the principal of or rate
of interest on any outstanding Loan or Bankers'Acceptance of such Eligible
Subsidiary, (y) accelerate the stated maturity of any outstanding Loan or
Bankers' Acceptance of such Eligible Subsidiary or (z) change this proviso.
SECTION 11.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that no Borrower may assign
or otherwise transfer any of its rights under this Agreement without the prior
written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans or Bankers'Acceptances. In the event of any such grant
by a Bank of a participating interest to a Participant, whether or not upon
notice to the Borrowers and the Administrative Agent, such Bank shall remain
responsible for the performance of its obligations hereunder, and the Borrowers
and the Administrative Agent shall continue to deal solely and directly with
such Bank in connection with such Bank's rights and obligations under this
Agreement. Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain the sole right
and responsibility to enforce the obligations of the Borrowers hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided that such participation
agreement may provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement described in clause (i), (ii), (iii), or
(iv) of Section 11.05 without the consent of the Participant. The Borrowers
agree that each Participant shall, to the extent provided in its participation
agreement, be entitled to the benefits of Section 2.17 or Article 8 with respect
to its participating interest. An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given effect for purposes of
this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
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<PAGE>
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to an
initial Commitment of not less than $10,000,000) of all, of its rights and
obligations under this Agreement and the Notes and Bankers' Acceptances, in
respect of the US Subfacility or the Canadian Subfacility or both, and such
Assignee shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit K hereto executed by
such Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Company, BetzDearborn Canada and the Administrative Agents, which
shall not be unreasonably withheld; provided that if an Assignee is a
wholly-owned subsidiary of such transferor Bank or of such transferor Bank's
Parent or was a Bank immediately prior to such assignment, no such consent shall
be required; provided further such assignment may, but need not, include rights
of the transferor Bank in respect of outstanding Money Market Loans; and
provided further in order to ensure the continued operation of Section 2.10(b),
no Canadian Bank and no US Bank having a Related Canadian Bank may assign its
Commitment in whole or in part unless either (x) the Assignee has a Related Bank
which simultaneously assumes any obligations of the Related Bank of the
transferor Bank with respect to the assigned Commitment or (y) in the case of an
assignment of a US Commitment, no increase in the aggregate amount of the
Canadian Commitments would be possible under Section 2.10(b) at the time of such
assignment. Upon execution and delivery of such instrument and payment by such
Assignee to such transferor Bank of an amount equal to the purchase price agreed
between such transferor Bank and such Assignee, such Assignee shall be a Bank
party to this Agreement and shall have all the rights and obligations of a Bank
with Commitments as set forth in such instrument of assumption, and the
transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to this subsection
(c), the transferor Bank, the Administrative Agent and the Borrowers shall make
appropriate arrangements so that, if requested, Note(s) are issued to the
Assignee. In connection with any such assignment, the transferor Bank shall pay
to the Administrative Agent an administrative fee for processing such assignment
in the amount of $2,500. With respect to the US Subfacility, if the Assignee is
not incorporated under the laws of the United States of America or a state
thereof, it shall deliver to the Company and the Administrative Agent
certification as to exemption from deduction or withholding of any United States
federal income taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights under
this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall
release the transferor Bank from its obligations hereunder.
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<PAGE>
(e) No Assignee, Participant or other transferee of any Bank's rights shall
be entitled to receive any greater payment under Section 8.03 or 8.04 than such
Bank would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the Company's prior written consent after
disclosure of such Assignee's, Participant's or other transferee's intention to
seek such greater payments or by reason of the provisions of Section 8.02, 8.03
or 8.04 requiring such Bank to designate a different Applicable Lending Office
under certain circumstances or at a time when the circumstances giving rise to
such greater payment did not exist.
SECTION 11.07. Collateral. Each of the Banks represents to each Agent and
each of the other Banks that it in good faith is not relying upon any "margin
stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 11.08. Governing Law; Submission to Jurisdiction. This Agreement
and each Note shall be governed by and construed in accordance with the laws of
the State of New York. Each Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for purposes
of all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
SECTION 11.09. Counterparts; Integration; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersede any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective upon receipt by the Administrative Agent of
counterparts hereof signed by each of the Company, the Banks and the
Administrative Agent (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Administrative Agent in
form satisfactory to it of telegraphic, telex, facsimile or other written
confirmation from such party of execution of a counterpart hereof by such
party).
SECTION 11.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE
ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
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<PAGE>
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 11.11. Confidentiality. The Administrative Agent and each Bank
agree to keep any information delivered or made available by the Borrowers
pursuant to this Agreement confidential from anyone other than persons employed
or retained by such Bank who are engaged in evaluating, approving, structuring
or administering the credit facility contemplated hereby; provided that nothing
herein shall prevent any Bank from disclosing such information (a) to any other
Bank or to the Administrative Agent, (b) to any other Person if reasonably
incidental to the administration of the credit facility contemplated hereby, (c)
upon the order of any court or administrative agency, (d) upon the request or
demand of any regulatory agency or authority, (e) which had been publicly
disclosed other than as a result of a disclosure by the Administrative Agent or
such Bank prohibited by this Agreement, (f) in connection with any litigation to
which the Administrative Agent, any Bank or its subsidiaries or Parent may be a
party, (g) to the extent necessary in connection with the exercise of any remedy
hereunder, (h) to such Bank's or Administrative Agent's legal counsel and
independent auditors and (i) subject to provisions substantially similar to
those contained in this Section, to any actual or proposed Participant or
Assignee.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
BETZDEARBORN INC.
By /s/ George L. James III
-------------------------------------
Title: Vice President and Chief
Financial Officer
Address: 4636 Somerton Road
Trevose, PA 19053-6783
Facsimile: (215) 953-5544
BETZDEARBORN CANADA INC.
By /s/ Larry V. Rankin
-------------------------------------
Title: Vice President
Address: 3451 Erindale Station Road
Mississauga, Ontario
Canada L5C259
Facsimile: (905) 279-0717
US BANKS
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By /s/ Christopher C. Kunhardt
-------------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION
By /s/ Wendy L. Loring
-------------------------------------
Title: Vice President
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<PAGE>
THE CHASE MANHATTAN BANK
By /s/ Robert T. Sacks
-------------------------------------
Title: Managing Director
BANK OF MONTREAL
By /s/ Susan Blackburn
-------------------------------------
Title: Director
COMMERZBANK AG
NEW YORK BRANCH
By /s/ Robert J. Donohue
-------------------------------------
Title: Vice President
By /s/ Peter T. Doyle
-------------------------------------
Title: Assistant Treasurer
CORESTATES BANK, N.A.
By /s/ Robert Cordell
-------------------------------------
Title: Vice President
84
<PAGE>
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS
BRANCHES
By /s/ Susan L. Pearson
-------------------------------------
Title: Vice President
By /s/ Jean M. Hannigan
-------------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF
CHICAGO
By /s/ Tom Dao
-------------------------------------
Title: Corporate Banking Officer
PNC BANK, NATIONAL ASSOCIATION
By /s/ Vicky Ziff
-------------------------------------
Title: Vice President
ROYAL BANK OF CANADA
By /s/ D.S. Bryson
-------------------------------------
Title: Senior Manager
BANCA COMMERICALE ITALIANA
NEW YORK BRANCH
By /s/ Charles Dougherty/Karen Purelis
-------------------------------------
Title: Vice President/Vice President
85
<PAGE>
THE BANK OF NEW YORK
By /s/ Walter C. Parelli
-------------------------------------
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By /s/ Christopher P. Wilkens
-------------------------------------
Title: Vice President
ISTITUTO BANCARIO SAN PAOLO DI
TORINO, SPA
By /s/ Luca Sacchi
-------------------------------------
Title: Assistant Vice President
By /s/ William J. De Angelo
-------------------------------------
Title: First Vice President
KREDIETBANK N.V.
By /s/ Armen Karozichian
-------------------------------------
Title: Vice President
By /s/ Robert Snauffer
-------------------------------------
Title: Vice President
86
<PAGE>
SOCIETE GENERALE
NEW YORK BRANCH
By /s/ Robert Petersen
-------------------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH
By /s/ Kazuyoshi Ogawa
-------------------------------------
Title: Joint General Manager
CANADIAN BANKS
J.P. MORGAN CANADA
By /s/ John Maynard
-------------------------------------
Title: Vice President & Controller
BANK OF AMERICA CANADA
By /s/ David C. Kong
-------------------------------------
Title: Vice President
THE CHASE MANHATTAN BANK OF
CANADA
By /s/ Christine Chan
-------------------------------------
Title: Vice President
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<PAGE>
BANK OF MONTREAL
By /s/ Susan Blackburn
-------------------------------------
Title: Director
DEUTSCHE BANK CANADA
By /s/ Francois A. Wentzel
-------------------------------------
Title: Vice President & Director
By /s/ T.G. Leonard
-------------------------------------
Title: Vice President
FIRST CHICAGO NBD BANK, CANADA
By /s/ Stephen E. McDonald
-------------------------------------
Title: First Vice President
ROYAL BANK OF CANADA
By /s/ D.S. Bryson
-------------------------------------
Title: Senior Manager
BANCA COMMERCIALE ITALIANA
OF CANADA
By /s/ Massimo Osti/Joseph H.K. Li
-------------------------------------
Title: Executive Vice President/
Department Manager - Credit
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<PAGE>
THE CHASE MANHATTAN BANK, as
General Administrative Agent
By /s/ Robert T. Sacks
-------------------------------------
Title: Managing Director
Address: 270 Park Avenue
New York, NY 10017
Facsimile: 212-270-7939
THE CHASE MANHATTAN BANK OF
CANADA, as Canadian Administrative
Agent
By /s/ Christine Chan
-------------------------------------
Title: Vice President
Address: 100 King Street West,
Suite 6900
Toronto, Ontario, M5X 1A4
Facsimile: 416-216-4161
89
<PAGE>
EXHIBIT A - Pricing Schedule
PRICING SCHEDULE
Each of "Euro-Dollar Margin", "CD Margin", "BA Margin" and "Facility Fee
Rate" means, for any date, the rate set forth below in the row opposite such
term and in the column corresponding to the "Pricing Level" that applies at such
date:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Level I Level II Level III Level IV Level V Level VI
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CD Margin 0.260% 0.280% 0.295% 0.325% 0.375% 0.525%
- ----------------------------------------------------------------------------------------------------
Euro-Dollar Margin
or BA Margin 0.135% 0.155% 0.170% 0.200% 0.250% 0.400%
- ----------------------------------------------------------------------------------------------------
Facility Fee Rate 0.065% 0.070% 0.080% 0.100% 0.125% 0.200%
- ----------------------------------------------------------------------------------------------------
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings, subject to the last paragraph of this Schedule:
"Applicable Pricing Ratio" means, for any day, the ratio of Consolidated
Debt to Consolidated EBITDA as at the last day of the fiscal quarter of the
Company most recently ended prior to such date for which the Company has
delivered financial statements pursuant to Section 5.01(a) or 5.01(b), as the
case may be; provided that until the Company shall have delivered financial
statements pursuant to Section 5.01(a) for the fiscal year ended December 31,
1997, the Applicable Pricing Ratio shall be deemed to be a ratio resulting in
Level IV Pricing; and provided further that if at any time the Company shall
fail to timely deliver the financial statements required to be delivered by it
pursuant to Section 5.01(a) or 5.01(b), as the case may be, the Applicable
Pricing Ratio for each date from and including the date on which such statements
are required to be delivered (the "statement due date") shall be the higher
pricing of the Applicable Pricing Ratio in effect prior to the delivery of each
financial statements and the Applicable Pricing Ratio in effect upon delivery of
such financial statements; provided, further that if the Company shall have
failed to deliver such statements by the day that is 30 days after the statement
due date, then the Applicable Price Ratio for each date from the statement due
date until the date on which such statements are delivered shall be deemed to be
greater than 3.0:1.
"Level I Pricing" applies at any date if, at such date, (x) the Company's
Applicable Pricing Ratio is less than or equal to 1.0:1 or (y) if the Company
has exercised and not revoked its One-Time Pricing Option, the Company's
long-term debt is rated A or higher by S&P or A2 or higher by Moody's.
<PAGE>
"Level II Pricing" applies at any date if, at such date, (i) (x) the
Company's Applicable Pricing Ratio is less than or equal to 1.5:1 or (y) if the
Company has exercised and not revoked its One-Time Pricing Option, the Company's
long-term debt is rated A- or higher by S&P or A3 or higher by Moody's and (ii)
Level I Pricing does not apply.
"Level III Pricing" applies at any date if, at such date, (i) (x) the
Company's Applicable Pricing Ratio is less than or equal to 2.0:1 or (y) if the
Company has exercised and not revoked its One-Time Pricing Option, the Company's
long-term debt is rated BBB+ or higher by S&P or Baa1 or higher by Moody's and
(ii) neither Level I Pricing nor Level II Pricing applies.
"Level IV Pricing" applies at any date if, at such date, (i) (x) the
Company's Applicable Pricing Ratio is less than or equal to 2.5:1 or (y) if the
Company has exercised and not revoked its One-Time Pricing Option, the Company's
long-term debt is rated BBB or higher by S&P or Baa2 or higher by Moody's and
(ii) none of Level I Pricing, Level II Pricing and Level III Pricing applies.
"Level V Pricing" applies at any date if, at such date, (i) (x) the
Company's Applicable Pricing Ratio is less than or equal to 3.0:1 or (y) if the
Company has exercised and not revoked its One-Time Pricing Option, the Company's
long-term debt is rated BBB- or higher by S&P or Baa3 or higher by Moody's and
(ii) none of Level I Pricing, Level II Pricing, Level III Pricing and Level IV
Pricing applies.
"Level VI Pricing" applies at any date if, at such date, no other Pricing
Level applies.
"One-Time Pricing Option" means the one-time option of the Company during
the life of this facility to switch to a ratings-based pricing grid. Such option
shall be considered to be exercised, and thereafter in effect subject to clause
(ii) of the proviso to paragraph (b) below, on the day of receipt by the
Administrative Agent of the Company's notification of its exercise of such
option.
"Pricing Level" refers to the determination of which of Level I, Level II,
Level III, Level IV, Level V or Level VI applies at any date.
Upon the One-Time Pricing Option being exercised, the following shall
apply:
(a) The credit ratings to be utilized for purposes of this Schedule are
those assigned to the senior unsecured long-term debt securities of the Company
without third-party credit enhancement, whether or not any such debt securities
2
<PAGE>
are actually outstanding, and any rating assigned to any other debt security of
the Company shall be disregarded. The rating in effect at any date is that in
effect at the close of business on such date.
(b) If the Company is split-rated and the ratings differential is one
notch, the higher of the two ratings will apply (e.g., A-/Baa1 results in Level
II Status and BBB+/Baa2 results in Level III Status). If the Company is
split-rated and the ratings differential is more than one notch, the average of
the two ratings (or the higher of two intermediate ratings) shall be used (e.g.,
A-/Baa3 results in Level III Status and BBB+/Baa3 results in Level IV Status).
If, however, at any date, the Company's long-term debt is not rated by both S&P
and Moody's, then Level VI shall apply; provided that if either Moody's or S&P
shall cease to issue a rating of the Company's long-term debt, then (i) the
Company, together with the Administrative Agent, shall substitute another
mutually satisfactory nationally recognized credit rating agency for either
Moody's or S&P, as the case may be, and this Pricing Schedule shall apply in
respect of the equivalent ratings of such rating agency or (ii) the Company may
revoke its exercise of the One-Time Pricing Option effective on the date of the
Administrative Agent's receipt of notice of revocation.
3
<PAGE>
EXHIBIT B - Note
NOTE
New York, New York
---------- --, ----
For value received, [Name of Borrower], a [jurisdiction of incorporation]
(the "Borrower"), promises to pay to the order of ______________________ (the
"Bank"), for the account of its Applicable Lending Office, the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below on the maturity date provided for in the Credit
Agreement. The Borrower promises to pay interest on the unpaid principal amount
of each such Loan on the dates and at the rate or rates provided for in the
Credit Agreement. All such payments of principal and interest shall be made in
the funds and at the places specified pursuant to the Credit Agreement.
All Loans made by the Bank to the Borrower, the respective Classes, Types,
currencies and maturities thereof and all repayments of the principal thereof
shall be recorded by the Bank and, if the Bank so elects in connection with any
transfer or enforcement hereof, appropriate notations to evidence the foregoing
information with respect to each such Loan then outstanding may be endorsed by
the Bank on the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement dated as
of October 20, 1997 among BetzDearborn Inc., BetzDearborn Canada Inc., the Banks
parties thereto, and The Chase Manhattan Bank and The Chase Manhattan Bank of
Canada, as Administrative Agents (as the same may be amended from time to time,
the "Credit Agreement"). Terms defined in the Credit Agreement are used herein
with the same meanings. Reference is made to the Credit
<PAGE>
Agreement for provisions for the prepayment hereof and the acceleration of the
maturity hereof.
[The payment in full of the principal and interest on this note has,
pursuant to the provisions of the Credit Agreement, been unconditionally
guaranteed by BetzDearborn Inc.](1)
[NAME OF BORROWER]
By
--------------------------------
Name:
Title:
- --------
(1) To be deleted in the case of Notes executed and delivered by the
Company.
2
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount and Class and Amount of
Currency of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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3
<PAGE>
EXHIBIT C - Money Market Quote
Request
Form of Money Market Quote Request
[Date]
To: The Chase Manhattan Bank (the "Administrative Agent")
From: [Name of Borrower]
Re: Credit Agreement (the "Credit Agreement") dated as of October 20, 1997
among BetzDearborn Inc., BetzDearborn Canada Inc., the Banks parties
thereto, and The Chase Manhattan Bank and The Chase Manhattan Bank
of Canada, as Administrative Agents.
We hereby give notice pursuant to Section 2.04 of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
- ---------------- ---------------
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Terms used herein have the meanings assigned to them in the Credit
Agreement.
[NAME OF BORROWER]
By
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT D - Invitation for Money
Market Quotes
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes to [Name of Borrower] (the "Borrower")
Pursuant to Section 2.04 of the Credit Agreement dated as of October 20,
1997 among BetzDearborn Inc., BetzDearborn Canada Inc., the Banks parties
thereto, and the undersigned and The Chase Manhattan Bank of Canada, as
Administrative Agents, we are pleased on behalf of the Borrower to invite you to
submit Money Market Quotes to the Borrower for the following proposed Money
Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
- ---------------- ---------------
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
[Each bid must be for _______________ or a larger multiple of
_________.](1)
Please respond to this invitation by no later than [2:00 P.M.]
[9:30 A.M.] (Eastern time) on [date].
THE CHASE MANHATTAN BANK,
as Administrative Agent
By
--------------------------------
Authorized Officer
- --------
(1) For Alternative Currency only.
<PAGE>
EXHIBIT E - Money Market Quote
Form of Money Market Quote
To: The Chase Manhattan Bank, as Administrative Agent
Re: Money Market Quote to [Name of Borrower] (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, ____, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
-----------------------------
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market [Absolute
Amount** Period*** [Margin****] Rate*****]
- --------- --------- ------------ ----------
[Provided, that the aggregate principal amount of Money Market Loans
for which the above offers may be accepted shall not exceed
____________.]**
- ----------
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the amount the Bank is willing to lend. Each bid must be
made for $5,000,000 or a larger multiple of $1,000,000 (or a comparable
amount in an Alternative Currency as determined by the Administrative Agent
and specified in the related Invitation).
(notes continued on following page)
<PAGE>
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit Agreement
dated as of October 20, 1997 among BetzDearborn Inc., BetzDearborn Canada Inc.,
the Banks parties thereto, and yourselves and The Chase Manhattan Bank of
Canada, as Administrative Agents, irrevocably obligates us to make the Money
Market Loan(s) for which any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated: By:
---------------------- ------------------------------------
Authorized Officer
- ----------
*** No more than five bids are permitted for each Interest Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of
1%) and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE>
EXHIBIT F-1 - Opinion of Counsel for the
Company and United States Counsel
for BetzDearborn Canada
________________, 1997
To the Banks and the Administrative Agents
Referred to Below
c/o The Chase Manhattan Bank,
as General Administrative Agent
270 Park Avenue
New York, New York
Dear Sirs:
We have acted as counsel for BetzDearborn Inc. (the "Company") and as
United States counsel for BetzDearborn Canada Inc. ("BetzDearborn Canada") in
connection with the Credit Agreement (the "Credit Agreement") dated as of
October 20, 1997 among the Company, BetzDearborn Canada, the Banks parties
thereto, and The Chase Manhattan Bank (the "General Administrative Agent") and
The Chase Manhattan Bank of Canada, as Administrative Agents. Terms defined in
the Credit Agreement are used herein as therein defined. This opinion is being
rendered to you at the request of our clients pursuant to Section 3.01(b) of the
Credit Agreement.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as we have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing and subject to the qualifications set forth
below, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of Pennsylvania and has all corporate power
required to carry on its business as described in the Company's 1996 Form 10-K.
2. The execution, delivery and performance by the Company of the Credit
Agreement and its Notes are within the corporate power of the Company, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
<PAGE>
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the articles of incorporation or bylaws of the Company or of
any agreement, judgment, injunction, order, decree or other instrument known to
us to be binding upon the Company or any of its Subsidiaries or result in the
creation or imposition of any Lien on any asset of the Company or any of its
Subsidiaries pursuant to any of the foregoing.
3. The execution, delivery and performance by BetzDearborn Canada of the
Credit Agreement and its Notes require no action by or in respect of, or filing
with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
any agreement, judgment, injunction, order, decree or other instrument known to
us to be binding upon BetzDearborn Canada or any of its Subsidiaries or result
in the creation or imposition of any Lien on any asset of BetzDearborn Canada or
any of its Subsidiaries pursuant to any of the foregoing.
4. The Credit Agreement has been duly executed and delivered by, and
constitutes a valid and binding agreement of, the Company and BetzDearborn
Canada and each of the Notes of the Company and BetzDearborn Canada,
respectively, has been duly executed and delivered by, and constitutes a valid
and binding obligation of, the Company or BetzDearborn Canada, as the case may
be, in each case enforceable in accordance with its terms except as the same may
be limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
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 or photostatic copies and the
authenticity of the originals of such latter documents. We have also assumed
that the Credit Agreement constitutes the legal, valid and binding agreement of
the Administrative Agents and the Banks.
Whenever our opinion herein with respect to the existence or absence of
facts is indicated to be based on our knowledge, it is intended to signify that
no information has come to the attention of the lawyers actually involved in our
representation of the Company in connection with the Credit Agreement and the
lawyer having overall responsibility for our representation of the Company that
would give us actual present knowledge of the existence or absence of facts. We
have not, however, undertaken any independent investigation to determine the
existence or absence of such facts.
In giving the opinion in paragraph 4 as to BetzDearborn Canada we have
relied with your permission on the opinions of Bennett Jones Verchere, Canadian
2
<PAGE>
counsel for BetzDearborn Canada, contained in its opinion letter of even date
herewith delivered to you in connection with the Credit Agreement.
This opinion is limited to the laws of the Commonwealth of Pennsylvania,
the State of New York and the federal laws of the United States of America.
This opinion is being delivered to you solely for your benefit in
connection with the Credit Agreement and may not be relied upon by any other
person or for any other purpose without our prior written consent.
Very truly yours,
3
<PAGE>
EXHIBIT F-2 - Opinion of Canadian
Counsel for BetzDearborn Canada
___________, 1997
The Banks and the Administrative Agents
referred to below
c/o The Chase Manhattan Bank,
as General Administrative Agent
270 Park Avenue
New York, New York
Dear Sirs:
Re: BetzDearborn Canada Inc.
------------------------
We have acted as Canadian counsel to BetzDearborn Canada Inc.
("BetzDearborn Canada") in connection with a Credit Agreement (the "Credit
Agreement") dated as of October 20, 1997 among BetzDearborn Inc. (the
"Company"), BetzDearborn Canada, the Banks parties thereto, and The Chase
Manhattan Bank (the "General Administrative Agent") and The Chase Manhattan Bank
of Canada, as Administrative Agents. Terms defined in the Credit Agreement are
used herein as therein defined.
For the purposes of the opinions expressed below, we have examined
originals or copies of the following documents:
1. a copy, certified by an officer of BetzDearborn Canada, of the
Articles of Amalgamation of BetzDearborn Canada (the "Articles");
2. a copy, certified by an officer of BetzDearborn Canada, of the by-
laws of BetzDearborn Canada (the "By-laws");
3. a copy, certified by an officer of BetzDearborn Canada, of a
resolution of the board of directors of BetzDearborn Canada,
authorizing, among other things, the execution and delivery of the
Credit Agreement;
4. a certificate of status (the "Certificate of Status") for BetzDearborn
Canada issued by the Ministry of Consumer and Commercial
<PAGE>
Relations Ontario in respect of BetzDearborn Canada dated __________,
1997;
5. a certificate of incumbency of BetzDearborn Canada of even date
herewith;
6. the Credit Agreement; and
7. the form of promissory note (the "Note") to be delivered by
BetzDearborn Canada to the Bank(s) in connection with Loans made to
BetzDearborn Canada.
We have also considered such statutes and regulations of the Province of
Ontario and of Canada applicable in Ontario ("Ontario Law") as we have
considered necessary as a basis for the opinions hereinafter expressed.
As to certain matters of fact material to our opinions, we have also
examined and relied exclusively and without independent verification on a
certificate of the President of BetzDearborn Canada (the "Officer's
Certificates"), a copy of which is delivered therewith.
Assumptions
For the purposes of the opinions hereinafter expressed, we have made the
following assumptions:
1. that all signatures are genuine, all documents submitted to us as
originals are authentic, and all documents submitted to us as copies
conform to authentic original documents;
2. that all facts set forth in official public records and certificates
and other documents supplied by public officials or otherwise conveyed
to us by public officials are complete, true and accurate;
3. that the Certificate of Status is conclusive evidence that
BetzDearborn Canada is an amalgamated corporation and a subsisting
corporation under the laws of Ontario and has not been dissolved
thereunder and that a similar certificate bearing a current date could
be obtained.
2
<PAGE>
Applicable Law
We are solicitors qualified to practice law only in the Province of
Ontario. Accordingly, we do not express any opinion with respect to the laws of
any other jurisdiction other than Ontario Law as of the date of this opinion
letter.
Opinions
Based and relying upon the foregoing, and subject to the qualifications
listed below, we are of the opinion that:
1. BetzDearborn Canada is a corporation amalgamated and validly existing
under the laws of Ontario and has not been dissolved;
2. BetzDearborn Canada has the corporate power and authority to execute,
deliver and perform its obligations under the Credit Agreement and the
Notes (the "Documents");
3. the execution, delivery and performance of the Documents has been
authorized by all necessary corporate action of BetzDearborn Canada;
4. BetzDearborn Canada has duly executed and delivered each of the
Documents;
5. the execution, delivery and performance by BetzDearborn Canada of the
Documents does not constitute or result in a violation or a breach of,
or a default under:
(a) its Articles or By-laws;
(b) any Ontario Law to which BetzDearborn Canada is subject; or
(c) any agreement, judgment, injunction, order, decree or other
instrument known to us to be binding upon BetzDearborn Canada;
6. Under the Income Tax Act (Canada), the Regulations thereunder and the
publicly-announced administrative practices of Revenue Canada as of
the date hereof, taxes in the form of Canadian non-resident
withholding tax will be imposed on payments made by BetzDearborn
Canada to any Bank which is not a Schedule I Bank or a Schedule II
Bank and is neither incorporated in Canada (after
3
<PAGE>
26 April, 1965) nor carries on business in Canada through a permanent
establishment to which the payment is attributable.
7. There is no registration tax, stamp duty or any similar tax or duty
imposed by Ontario Law by virtue of the execution and delivery of the
Documents by the parties thereto or the performance of their
obligations thereunder.
The choice of New York law as the governing law of the Credit Agreement and
the Notes will be upheld as a valid choice of law by the courts of the Province
of Ontario provided that such choice of law is bona fide (in the sense that it
was not made with a view to avoiding the consequences of the law of any other
jurisdiction) and provided that such choice of law is not contrary to public
policy, as that term is understood under the laws of the Province of Ontario. We
have no reason to believe that the choice of law in the Credit Agreement and the
Notes would not be upheld.
Qualifications
Our opinions expressed above are subject to the following qualification:
1. The validity, binding effect and enforceability of each of the
Documents or any judgment arising out of or in connection with any
Document may be limited by applicable bankruptcy, insolvency,
winding-up, reorganization, arrangement, moratorium or other similar
laws affecting creditors' rights generally and by general principles
of equity.
Yours truly,
BENNETT JONES VERCHERE
4
<PAGE>
EXHIBIT G - Opinion of Special Counsel
for the Administrative Agents
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENTS
________________, 199_
To the Banks and the Administrative Agents
Referred to Below
c/o The Chase Manhattan Bank,
as General Administrative Agent
270 Park Avenue
New York, New York
Dear Sirs:
We have participated in the preparation of the Credit Agreement (the
"Credit Agreement") dated as of October 20, 1997 among BetzDearborn Inc., a
Pennsylvania corporation, BetzDearborn Canada Inc., a corporation organized and
existing under the laws of Ontario, the Banks parties thereto, and The Chase
Manhattan Bank (the "General Administrative Agent") and The Chase Manhattan Bank
of Canada, as Administrative Agents, and have acted as special counsel for the
Administrative Agents for the purpose of rendering this opinion pursuant to
Section 3.01(d) of the Credit Agreement. Terms defined in the Credit Agreement
are used herein as therein defined.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as we have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, we are of the opinion that the Credit
Agreement constitutes a valid and binding agreement of each of the Company and
BetzDearborn Canada, and each of their respective Notes constitutes a valid and
binding obligation of its maker, in each case enforceable in accordance with its
terms except as the same may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and by general principles of equity.
<PAGE>
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York and the federal laws of
the United States of America. In giving the foregoing opinion, (i) we express no
opinion as to the effect (if any) of any law of any jurisdiction (except the
State of New York) in which any Bank is located which limits the rate of
interest that such Bank may charge or collect and (ii) as to all matters
governed by the laws of the Commonwealth of Pennsylvania or Canada, we have
relied, without independent investigation, on the respective opinions of Morgan,
Lewis & Bockius LLP, counsel for the Company, and Bennett Jones Verchere,
counsel for BetzDearborn Canada, copies of which have been delivered to you.
This opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose or relied upon
by any other person without our prior written consent.
Very truly yours,
2
<PAGE>
EXHIBIT H - Form of Election to
Participate
FORM OF ELECTION TO PARTICIPATE
[Date]
THE CHASE MANHATTAN BANK,
as General Administrative Agent for the Banks parties to the Credit
Agreement dated as of October 20, 1997 among BetzDearborn Inc,
BetzDearborn Canada Inc., such Banks, and such Administrative Agent
and The Chase Manhattan Bank of Canada, as Administrative Agents.
(the "Credit Agreement")
Dear Sirs:
Reference is made to the Credit Agreement described above. Terms not
defined herein which are defined in the Credit Agreement shall have for the
purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a [jurisdiction of
incorporation] corporation, hereby elects to be an Eligible Subsidiary for
purposes of the Credit Agreement, effective from the date hereof until an
Election to Terminate shall have been delivered on behalf of the undersigned in
accordance with the Credit Agreement. The undersigned confirms that the
representations and warranties set forth in Article 9 of the Credit Agreement
are true and correct as to the undersigned as of the date hereof, and the
undersigned hereby agrees to perform all the obligations of an Eligible
Subsidiary under, and to be bound in all respects by the terms of, the Credit
Agreement, including without limitation Sections 11.01 and 11.08 thereof, as if
the undersigned were a signatory party thereto.
[Tax disclosure pursuant to Section 9.04]
<PAGE>
This instrument shall be construed in accordance with and governed by the
laws of the State of New York.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
By
-------------------------------------
Title:
The undersigned hereby confirms that [name of Eligible Subsidiary] is an
Eligible Subsidiary for purposes of the Credit Agreement described above.
BETZDEARBORN INC.
By
-------------------------------------
Title:
Receipt of the above Election to Participate is hereby acknowledged on and
as of the date set forth above.
THE CHASE MANHATTAN BANK,
as General Administrative Agent
By
-------------------------------------
Title:
2
<PAGE>
EXHIBIT I - Form of Election to
Terminate
FORM OF ELECTION TO TERMINATE
[Date]
THE CHASE MANHATTAN BANK,
as General Administrative Agent for the Banks parties to the Credit
Agreement dated as of October 20, 1997 among BetzDearborn Inc.,
BetzDearborn Canada Inc., such Banks, and such Administrative Agent and The
Chase Manhattan Bank of Canada, as Administrative Agents (the "Credit
Agreement")
Dear Sirs:
Reference is made to the Credit Agreement described above. Terms not
defined herein which are defined in the Credit Agreement shall have for the
purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a [jurisdiction of
incorporation] corporation, hereby elects to terminate its status as an Eligible
Subsidiary for purposes of the Credit Agreement, effective as of the date
hereof. The undersigned hereby represents and warrants that all principal and
interest on all Notes of the undersigned and all other amounts payable by the
undersigned pursuant to the Credit Agreement have been paid in full on or prior
to the date hereof. Notwithstanding the foregoing, this Election to Terminate
shall not affect any obligation of the undersigned under the Credit Agreement or
under any Note heretofore incurred.
<PAGE>
This instrument shall be construed in accordance with and governed by the
laws of the State of New York.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
By
-------------------------------------
Title:
The undersigned hereby confirms that the status of [name of Eligible
Subsidiary] as an Eligible Subsidiary for purposes of the Credit Agreement
described above is terminated as of the date hereof.
BETZDEARBORN INC.
By
-------------------------------------
Title:
Receipt of the above Election to Terminate is hereby acknowledged on and as
of the date set forth above.
THE CHASE MANHATTAN BANK,
as General Administrative Agent
By
-------------------------------------
Title:
2
<PAGE>
EXHIBIT J - Matters to be covered in the
Opinions of Counsel for the Eligible
Subsidiary and the Company
1. The Borrower is a corporation validly existing and in good standing
under the laws of [jurisdiction of organization].
2. The execution and delivery by the Borrower of its Election to
Participate and its Notes and the performance by the Borrower of the Credit
Agreement and its Notes are within the Borrower's powers, have been duly
authorized by all necessary action, require no action by or in respect of, or
filing with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the [charter and similar documents] or bylaws of the Borrower or of any
agreement, judgment, injunction, order, decree or other instrument known to such
counsel to be binding upon the Borrower or the Company or any of its
Subsidiaries or result in the creation or imposition of any Lien on any asset of
the Company or any of its Subsidiaries pursuant to any of the foregoing.
3. The Borrower's Election to Participate has been duly executed and
delivered and the Credit Agreement constitutes a valid and binding agreement of
the Borrower and each of its Notes has been duly executed and delivered and
constitutes a valid and binding obligation of the Borrower, in each case
enforceable in accordance with its terms except as the same may be limited by
bankruptcy, insolvency and other similar laws affecting creditors' rights
generally and by general principles of equity.
4. Except as disclosed in the Borrower's Election to Participate, there are
no Taxes or Other Taxes of [jurisdiction of organization and, if different,
principal place of business], or any taxing authority thereof or therein, which
is imposed on any payment to be made by the Borrower pursuant to the Credit
Agreement or its Notes, or imposed on or by virtue of the execution, delivery or
enforcement of its Election to Participate, the Credit Agreement or its Notes.
<PAGE>
EXHIBIT K - Form of Assignment and
Assumption Agreement
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, ____ among (less than)NAME OF
ASSIGNOR(greater than) (the "Assignor"), [(less than)NAME OF ASSIGNOR'S RELATED
BANK(greater than) (the "Assignor's Related Bank")],(1) (less than)NAME OF
ASSIGNEE(greater than) (the "Assignee"), [(less than)NAME OF ASSIGNEE'S RELATED
BANK(greater than) (the "Assignee's Related Bank")](2), BETZDEARBORN INC. (the
"Company"), BETZDEARBORN CANADA INC. ("BetzDearborn Canada") and THE CHASE
MANHATTAN BANK, as General Administrative Agent (the "General Administrative
Agent") and THE CHASE MANHATTAN BANK OF CANADA, as Canadian Administrative Agent
(the "Canadian Administrative Agent").
WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates
to the Credit Agreement dated as of October 20, 1997 among the Company,
BetzDearborn Canada, the Assignor and the other Banks parties thereto, as Banks,
the General Administrative Agent and the Canadian Administrative Agent, as
Administrative Agents (the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
[US][Canadian] Commitment to make [US][Canadian] Loans [or accept Bankers'
Acceptances] in an aggregate Dollar Amount at any time outstanding not to exceed
$__________;
WHEREAS, Committed [US][Canadian] Loans made by the Assignor [and Bankers'
Acceptances accepted by the Assignor] under the Credit Agreement in the
aggregate Dollar Amount of $__________ are outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the rights
of the Assignor under the Credit Agreement in respect of a portion of its
[US][Canadian] Commitment thereunder in an amount equal to $__________ (the
"Assigned Amount"), together with a corresponding portion of its outstanding
Committed Loans [and Bankers' Acceptances], and the Assignee proposes to
- --------
(1) Not necessary if (i) the Assignor is a Canadian Bank and a US Bank or
(ii) in the case of an assignment of a US Commitment, the aggregate amount of
the Canadian Commitments cannot be increased under Section 2.10(b) of the Credit
Agreement on the date hereof.
(2) Not necessary if (i) the Assignee is a Canadian Bank and a US Bank or
(ii) in the case of an assignment of a US Commitment, the aggregate amount of
the Canadian Commitments cannot be increased under Section 2.10(b) of the Credit
Agreement on the date hereof.
<PAGE>
accept assignment of such rights and assume the corresponding obligations from
the Assignor on such terms;
[WHEREAS, pursuant to Section 2.10(b) of the Credit Agreement, all or a
portion of the Assignor's [US][Canadian] Commitment may be reallocated to the
[Canadian][US] Commitment of the Assignor's Related Bank; and
WHEREAS, the Assignee's Related Bank wishes to assume the obligations of
the Assignor's Related Bank, and to accept assignment of the rights of the
Assignor's Related Bank, which may arise with respect to the Assigned Amount
pursuant to Section 2.10(b) of the Credit Agreement;]
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined herein
shall have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Committed Loans made by the Assignor outstanding at the date hereof. [The
[Assignor][Assignor's Related Bank] hereby assigns and sells to the
[Assignee][Assignee's Related Bank] all of the rights of the
[Assignor][Assignor's Related Bank] which may arise under Section 2.10(b) of
Credit Agreement with respect to the Assigned Amount, and the
[Assignee][Assignee's Related Bank] hereby accepts such assignment from the
[Assignor][Assignor's Related Bank] and assumes all of the obligations of the
[Assignor][Assignor's Related Bank] which may arise under Section 2.10(b) of the
Credit Agreement with respect to the Assigned Amount]. Upon the execution and
delivery hereof by the Assignor, [the Assignor's Related Bank,] the Assignee,
[the Assignee's Related Bank,] [the Company, BetzDearborn Canada, the General
Administrative Agent and the Canadian Administrative Agent](3) and the payment
of the amounts specified in Section 3 required to be paid on the date hereof (i)
the Assignee shall, as of the date hereof, succeed to the rights and be
obligated to perform the obligations of a Bank under the Credit Agreement with a
[US][Canadian] Commitment in an amount equal to the Assigned Amount, and (ii)
the [US][Canadian] Commitment of the Assignor shall, as of the date hereof, be
reduced by a like amount and the Assignor [and its Related Bank] released
- --------
(3) Not necessary if the Assignee is a Bank.
2
<PAGE>
from [its][their] obligations under the Credit Agreement to the extent such
obligations have been assumed by the Assignee [and its Related Bank]. The
assignment provided for herein shall be without recourse to the Assignor [and
its Related Bank].
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.(4) It is
understood that facility fees accrued to the date hereof are for the account of
the Assignor and such fees accruing from and including the date hereof with
respect to the Assigned Amount are for the account of the Assignee. Each of the
Assignor and the Assignee hereby agrees that if it receives any amount under the
Credit Agreement which is for the account of the other party hereto, it shall
receive the same for the account of such other party to the extent of such other
party's interest therein and shall promptly pay the same to such other party.
[SECTION 4. Consent of the Company, BetzDearborn Canada and the
Administrative Agents. This Agreement is conditioned upon the consent of the
Company, BetzDearborn Canada, the General Administrative Agent and the Canadian
Administrative Agent pursuant to Section 11.06 of the Credit Agreement. The
execution of this Agreement by the Company, BetzDearborn Canada, the General
Administrative Agent and the Canadian Administrative Agent is evidence of this
consent. Pursuant to Section 11.06(c), each of the Company and BetzDearborn
Canada agrees to execute and deliver a Note and to cause each of the other
Eligible Subsidiaries to execute and deliver a Note payable to the order of the
Assignee to evidence the assignment and assumption provided for herein.](5)
SECTION 5. Non-Reliance on Assignor[s]. [Neither] The Assignor [nor the
Assignor's Related Bank] makes [no][any] representation or warranty in
connection with, and shall have no responsibility with respect to, the solvency,
financial condition, or statements of any Borrower, or the validity and
enforceability of the obligations of any Borrower in respect of the Credit
Agreement or any Note. [Each of] the Assignee [and the Assignee's Related Bank]
acknowledges that it has, independently and without reliance on the Assignor
[or the Assignor's Related Bank], and based on such documents and information as
it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement and will continue to be responsible for
- --------
(4) Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion of
any upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.
(5) Not necessary if the Assignee is a Bank.
3
<PAGE>
making its own independent appraisal of the business, affairs and financial
condition of the Borrowers.
SECTION 6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
4
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
(less than)NAME OF ASSIGNOR(greater than)
By
--------------------------------------
Name:
Title:
(less than)NAME OF ASSIGNEE(greater than)
By
--------------------------------------
Name:
Title:
(less than)[NAME OF ASSIGNOR'S RELATED
BANK](greater than)
By
--------------------------------------
Name:
Title:
(less than)[NAME OF ASSIGNEE'S RELATED
BANK](greater than)
By
--------------------------------------
Name:
Title:
[BETZDEARBORN INC.
By
--------------------------------------
Name:
Title:
5
<PAGE>
BETZDEARBORN CANADA INC.
By
--------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as General Administrative Agent
By
--------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
OF CANADA, as Canadian
Administrative Agent]
By
--------------------------------------
Name:
Title:
6
<PAGE>
EXHIBIT L - Commitment
Schedule
- ---------------------------------------------------------------------
US Bank US Commitment
- ---------------------------------------------------------------------
MORGAN GUARANTY TRUST COMPANY OF NEW YORK $ 31,000,000
- ---------------------------------------------------------------------
BANK OF AMERICA NATIONAL $ 31,000,000
TRUST AND SAVINGS ASSOCIATION
- ---------------------------------------------------------------------
THE CHASE MANHATTAN BANK $ 31,000,000
- ---------------------------------------------------------------------
BANK OF MONTREAL $ 1,000,000
- ---------------------------------------------------------------------
COMMERZBANK AG $ 51,000,000
NEW YORK BRANCH
- ---------------------------------------------------------------------
CORESTATES BANK, N.A. $ 51,000,000
- ---------------------------------------------------------------------
DEUTSCHE BANK AG, NEW YORK $ 31,000,000
AND/OR CAYMAN ISLANDS BRANCHES
- ---------------------------------------------------------------------
THE FIRST NATIONAL BANK OF CHICAGO $ 31,000,000
- ---------------------------------------------------------------------
PNC BANK, NATIONAL ASSOCIATION $ 51,000,000
- ---------------------------------------------------------------------
ROYAL BANK OF CANADA $ 1,000,000
- ---------------------------------------------------------------------
BANCA COMMERCIALE ITALIANA $ 10,000,000
NEW YORK BRANCH
- ---------------------------------------------------------------------
THE BANK OF NEW YORK $ 30,000,000
- ---------------------------------------------------------------------
BANK OF TOKYO-MITSUBISHI TRUST COMPANY $ 30,000,000
- ---------------------------------------------------------------------
ISTITUTO BANCARIO SAN PAOLO DI TORINO, SPA $ 30,000,000
- ---------------------------------------------------------------------
KREDIETBANK, N.V. $ 30,000,000
- ---------------------------------------------------------------------
SOCIETE GENERALE, NEW YORK BRANCH $ 30,000,000
- ---------------------------------------------------------------------
THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH $ 30,000,000
- ---------------------------------------------------------------------
Total......................................... $ 500,000,000
- ---------------------------------------------------------------------
<PAGE>
- ---------------------------------------------------------------------
Canadian
Canadian Bank Commitment
- ---------------------------------------------------------------------
J.P. MORGAN CANADA $ 30,000,000
- ---------------------------------------------------------------------
BANK OF AMERICA CANADA $ 30,000,000
- ---------------------------------------------------------------------
THE CHASE MANHATTAN BANK OF CANADA $ 30,000,000
- ---------------------------------------------------------------------
BANK OF MONTREAL $ 50,000,000
- ---------------------------------------------------------------------
DEUTSCHE BANK CANADA $ 20,000,000
- ---------------------------------------------------------------------
FIRST CHICAGO NBD BANK, CANADA $ 20,000,000
- ---------------------------------------------------------------------
ROYAL BANK OF CANADA $ 50,000,000
- ---------------------------------------------------------------------
BANCA COMMERCIALE ITALIANA OF CANADA $ 20,000,000
- ---------------------------------------------------------------------
Total......................................... $250,000,000
- ---------------------------------------------------------------------
2
<PAGE>
EXHIBIT M - Form of Acceptance
Note
FORM OF ACCEPTANCE NOTE
C$___________
Toronto, Ontario
-------------, -----
FOR VALUE RECEIVED, the undersigned, [insert name of borrower], a
_____________ corporation (the "Borrower"), hereby unconditionally promises to
pay to the order of [insert name of bank] (the "Bank") at the office of THE
CHASE MANHATTAN BANK OF CANADA, located at 1 First Canadian Place, 100 King
Street West, Suite 6900, P.O. Box 106, Toronto, Ontario M5X 1A4, in lawful money
of Canada and in immediately available funds, the principal amount of
[____________] CANADIAN DOLLARS (C$__________). The undiscounted principal
amount hereof shall be repaid on __________, _____(1). The Borrower further
agrees that interest shall be paid hereon, in advance, by the Bank discounting
the face amount of this Acceptance Note in the manner referred to in Sections
2.03(b)(ix) and 2.03(f) of the Credit Agreement described below (capitalized
terms used herein without definition being defined as set forth therein) as BA
Discount Proceeds.
This Acceptance Note (a) is one of the Acceptance Notes referred to in the
Credit Agreement dated as of October 20, 1997, among BetzDearborn Inc.,
BetzDearborn Canada Inc., the Bank parties thereto, The Chase Manhattan Bank and
The Chase Manhattan Bank of Canada, as Administrative Agents (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement")
and (b) is subject to the provisions of the Credit Agreement.
- --------
(1) Insert maturity date for Bankers' Acceptances created simultaneously
herewith.
<PAGE>
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
[NAME OF BORROWER]
By:
-------------------------------
Name:
Title:
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into this ____ day of ________________, 1998, by
and between BETZDEARBORN INC., a Pennsylvania corporation (hereinafter called
the "Company") and ______________________________, an individual residing at
__________________________ (hereinafter called the "Employee").
W I T N E S S E T H:
[WHEREAS, the Company desires to have the benefit of Employee's
knowledge and experience in the affairs of the Company;
WHEREAS, the Employee desires to be employed by the Company upon the
terms and conditions hereinafter set forth
Or
WHEREAS, the Employee is presently employed by the Company in an
executive capacity and the Company desires to encourage such continued
employment by providing certain protections for the Employee and by extending
and entering into this Agreement with the Employee, and by granting the Employee
certain stock options, in return for which the Employee agrees to continue to be
employed by the Company on the terms set forth herein and refrain from certain
competitive activity.]
NOW, THEREFORE, and in consideration of the mutual covenants herein
contained, the Company and the Employee hereby mutually agree as follows:
1. Employment and Duties. The Company hereby employs the Employee and
the Employee hereby accepts employment with the Company upon the terms and
conditions hereinafter set forth. [The Employee represents and warrants that his
acceptance of employment with the Company has not breached, and the performance
of duties hereunder will not breach, any duty owed to any prior employer or
other entity, nor will the Employee's duties be restricted in any manner by any
such duty.] The Employee shall serve the Company in an executive capacity as an
employee of the Company and the Employee shall perform all duties and accept all
responsibilities incidental to such position (or with respect to periods prior
to or more than two years following a Change of Control (as defined in Section
6), such other position as may be assigned to the Employee during the term of
this Agreement by the Board of Directors of the Company (the "Board of
Directors") or its chief executive officer or any other officer as directed by
the Company), and the Employee shall cooperate fully with the
-1-
<PAGE>
Board of Directors, the Company's chief executive officer and the Company's vice
presidents. In such capacity, the Employee shall have all powers, duties, and
obligations as are customarily associated with Employee's position with the
Company. The Employee shall devote his best efforts, all of his skills, business
time, and business attention solely and exclusively to said position and in
furtherance of the business and interests of the Company except for
(a) time spent in managing his personal, financial and legal
affairs and serving on corporate, civic or charitable boards or
committees, in each case only if and to the extent not interfering with
the performance of such responsibilities, and
(b) periods of vacation to which he is entitled and periods of
approved leave of absence.
It is expressly understood and agreed that the Employee's continuing to serve on
any boards and committees on which he is serving or with which he is otherwise
associated immediately preceding the date hereof, or his service on any other
boards and committees of which the Company has been notified in writing and does
not object, in writing, within thirty (30) days after receipt of such notice,
shall not be deemed to interfere with the performance of the Employee's services
to the Company.
2. Term of Employment. This Agreement shall be effective upon execution
by both parties. The term of this Agreement (the "Term") shall begin, or be
deemed to have begun, on _____________ (the "Effective Date"). It shall continue
through the five-year period ending on the day before the fifth anniversary date
of the Effective Date, subject, however, to prior termination as herein
provided. In the event of a Change of Control (as defined in Section 6), the
Term of this Agreement shall not expire before the second anniversary of the
date of the Change of Control, subject, however, to prior termination as herein
provided.
3. Base Salary. For services hereunder, the Employee shall receive an
initial annual base salary (the "Base Salary") of $_________________, less
withholding required by law or agreed to by the Employee, which Base Salary may
be increased, but not decreased, by the Company during the Term of this
Agreement. In the event that the Company increases the Employee's initial Base
Salary, the amount of the initial Base Salary, together with any increase(s),
shall be his Base Salary. The Base Salary shall be payable in equal
installments, no less frequently than monthly, in accordance with the Company's
regular payroll practices.
4. Bonus. In addition to Base Salary, the Company may during the Term
of this Agreement, pay the Employee incentive bonus payments in the sole
discretion of the Board of Directors or the compensation committee of the Board
of Directors.
5. Fringe Benefits. The Company shall further provide the Employee with
all health and life insurance coverages, sick leave and disability programs,
tax-qualified retirement plans,
-2-
<PAGE>
stock option plans, paid holidays and vacations, expense reimbursement policies,
moving and relocation policies, perquisites, and such other fringe benefits of
employment as the Company may generally provide from time to time to actively
employed senior executives of the Company who are similarly situated.
Notwithstanding the preceding provisions of this Section 5, during the Term of
this Agreement (including extensions thereof) the Company shall provide the
Employee with;
(a) reimbursement for all reasonable expenses incurred by the
Employee in connection with the conduct of the Company's business on
presentation of reasonable and appropriate receipts and in accordance
with the Company's regular reimbursement policy applicable to senior
executives; and
(b) a minimum of four (4) weeks of paid vacation per year.
6. Termination of Employment.
(a) Termination of Employment Other Than by Employee. The
Employee's employment hereunder may be terminated by the Company
without any breach of this Agreement under the following circumstances:
(1) Death or Disability. The Employee's employment
hereunder shall terminate upon his death, and may be
terminated by the Company in the event of his Disability. For
purposes of this Agreement, "Disability" means in the judgment
of the Board of Directors, the inability, after any reasonable
accommodation required by law, of the Employee due to illness,
accident, or otherwise, to perform his duties for a period of
at least one hundred eighty (180) consecutive days, provided
that the Employee does not return to work on a substantially
full-time basis within thirty (30) days after Notice of
Termination is given by the Company pursuant to the provisions
of Sections 6(d) and 6(e)(2). The Employee agrees, in the
event of any dispute under this Section 6(a)(1) and if
requested by the Company, to submit to a physical examination
by a licensed physician selected by the Company, the cost of
such examination to be paid by the Company. This Section will
be interpreted and applied so as to comply with the provisions
of the Americans with Disabilities Act and any applicable
state or local laws.
(2) Cause. The Company may terminate the Employee's
employment hereunder for Cause. For purposes of this
Agreement, the Company shall have "Cause" to terminate the
Employee's employment hereunder only upon:
(A) Commission by the Employee of a felony;
-3-
<PAGE>
(B) Commission by the Employee of any crime
involving moral turpitude;
(C) Commission by the Employee of any
material act of fraud or bad faith toward the
Company;
(D) Misappropriation by the Employee of any
funds, property or rights of the Company;
(E) The Employee's willful or continued
neglect (other than for reason of incapacity during
physical or mental illness) of his material duties
hereunder, provided, however, that during the period
commencing on a Change of Control and for two years
thereafter (the "Change of Control Period"), the
Employee has been provided with written reasonable
notice of such neglect by the Board of Directors or
the Company's chief executive officer and is provided
with a reasonable opportunity of not less than thirty
(30) days to cure such neglect;
(F) The Employee's habitual insobriety or
substance abuse;
(G) The Employee's entering into any
transaction or contractual relationship with, or
diversion of business opportunity from, the Company
(other than on behalf of the Company or with the
prior written consent of the Board of Directors);
(H) Breach by the Employee of the covenants
contained in Sections 10, 11 or 12; or
(I) Prior to a Change of Control, the
Employee materially violates the Company's statement
of Core Values as it currently exists or as it
changes from time to time, a copy of which the
Employee acknowledges having received, read and
understood prior to the execution of this Agreement.
(3) Without Cause. The Board of Directors or the
Company's chief executive officer may terminate the Employee's
employment with the Company at any time without cause.
(b) Voluntary Resignation by Employee. The Employee may
terminate his employment at any time.
-4-
<PAGE>
(c) Termination by Employee for Good Reason. Without limiting
the ability of the Employee to terminate his employment pursuant to
Section 6(b) hereof, within the Change of Control Period, the Employee
may also terminate his employment for Good Reason. However, he shall be
deemed to have terminated his employment for "Good Reason" only if he
terminates his employment within the Change of Control Period by giving
Notice of Termination pursuant to Sections 6(d) and 6(e)(3) within one
hundred eighty (180) days after the Employee has actual notice of the
occurrence of any of the following events (provided the Company does
not cure such event on a retroactive basis to the extent possible
within ten (10) days following its receipt of the Employee's Notice of
Termination):
(1) The Employee's title, position, authority or
responsibilities (including reporting responsibilities and
authority) are changed in a materially adverse manner.
(2) The Employee's Base Salary is reduced for any
reason other than in connection with the termination of his
employment.
(3) For any reason other than in connection with the
termination of the Employee's employment, the Company
materially reduces any fringe benefit provided to the Employee
under Section 5, below the level of such fringe benefit
provided generally other actively employed similarly situated
Employees of the Company, unless the Company agrees to fully
compensate the Employee for any such material reduction.
(4) A transfer of the Employee, without the
Employee's express written consent, to a location which is
outside the general metropolitan area in which the Employee's
principal place of business immediately preceding such
transfer is located, or which has a commuting distance greater
than the greater of thirty (30) miles or the distance of the
Employee's previous commute.
(5) The Company otherwise materially breaches or is
unable to perform its obligations under this Agreement.
(6) In the event of the sale of substantially all the
assets of the Company or the merger, consolidation, or
combination of the Company with another entity, the failure of
the purchaser of such assets or the survivor corporation of
such merger, consolidation or combination to assume the
obligations of the Company hereunder.
(d) Notice of Termination. Any termination of the Employee's
employment by the Company hereunder, or by the Employee other than
termination upon the
-5-
<PAGE>
Employee's death, shall be communicated by written Notice of
Termination to the other party. For purposes of this Agreement, a
"Notice of Termination" means a notice which during the Change of
Control Period shall indicate the specific termination provision in
this Agreement relied upon, and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of the Employee's employment under the provision so indicated. The
failure by the Employee to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of Good Reason
shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his
rights hereunder. During any time not constituting the Change of
Control Period, the failure of the Company to indicate in the Notice of
Termination the specific termination provision in the Agreement relied
upon and to include reasonable detail of the facts and circumstances
claimed to provide the basis for termination shall not waive the right
of the Company to show that the Employee was terminated for Cause or
for Disability.
(e) Date of Termination. "Date of Termination" means:
(1) If the Employee's employment is terminated by his
death, the date of his death.
(2) If the Employee's employment is terminated by the
Company as a result of Disability pursuant to Section 6(a)(1),
the date that is thirty (30) days after Notice of Termination
is given; provided the Employee shall not have returned to the
performance of his duties on a full-time basis during such
thirty (30) day period.
(3) If the Employee terminates his employment for
Good Reason pursuant to Section 6(c) the date that is ten (10)
days after Notice of Termination is given (provided that the
Company does not cure such event during the ten (10) day
period).
(4) If the Employee terminates his employment other
than for Good Reason, the date that is thirty (30) days after
Notice of Termination is given; provided, in the sole
discretion of the Company, such date may be any earlier date
after Notice of Termination is given.
(5) If the Employee's employment is terminated by the
Company either for Cause pursuant to Section 6(a)(2) or other
than for Cause, the date on which the Notice of Termination is
given.
(f) Change of Control. As used in this Agreement, "Change of
Control" means:
-6-
<PAGE>
(1) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
voting securities of the corporation where such acquisition
causes such person to own 20% or more of the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however,
that for purposes of this Subsection (1), the following
acquisitions shall not be deemed to result in a Change of
Control: (i) any acquisition directly from the Company, (ii)
any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition by any corporation pursuant to
a transaction that complies with clauses (i), (ii) and (iii)
of Subsection (3) below; and provided, further, that if any
Person's beneficial ownership of the Outstanding Company
Voting Securities reaches or exceeds twenty percent (20%) as a
result of a transaction described in clause (i) or (ii) above,
and such Person subsequently acquires beneficial ownership of
additional voting securities of the Company, such subsequent
acquisition shall be treated as an acquisition that causes
such Person to own twenty percent (20%) or more of the
Outstanding Company Voting Securities; or
(2) individuals who as of the date hereof, constitute
the Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a
vote of at least two-thirds of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board of Directors; or
(3) the approval by the shareholders of the Company
of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company ("Business Combination") or, if consummation of such
Business Combination is subject, at the time of such approval
by shareholders, to the consent of any government or
governmental agency, the obtaining of such consent (either
explicitly or implicitly by consummation); excluding, however,
such a Business Combination pursuant to
-7-
<PAGE>
which (i) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than sixty percent (60%) of, respectively, the then
outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that
as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Voting
Securities, (ii) no Person (excluding any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, twenty percent (20%) or more of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or
the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii)
at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the
Board of Directors, providing for such Business Combination;
or
(4) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, no Change of Control shall be
deemed to have occurred for purposes of this Agreement by reason of any
actions or events in which the Employee participates in a capacity
other than in his capacity as Employee (or as a director of the Company
or a subsidiary thereof, where applicable).
7. Amounts Payable Upon Termination of Employment or During Disability.
Upon termination of the Employee's employment with the Company during the Term,
the Company shall have the following obligations, provided, however, that any
item paid or payable under this Agreement shall be reduced by any amount paid or
payable to the Employee and the Employee's family with respect to the same type
of payment under the any Company-sponsored severance plan or as unemployment
compensation. For purpose of computing this reduction, if some payments are made
in a lump sum and others are made over time, any payment made over time shall be
discounted to present value using an interest rate of seven and one-quarter
percent (7.25%) per annum, before calculating any reduction under this Agreement
for any amount paid or payable to the Employee and the Employee's family under
any Company-sponsored severance plan or as unemployment compensation.
-8-
<PAGE>
(a) Death. If the Employee's employment is terminated by his
death, the Employee's beneficiary (as designated by the Employee in
writing with the Company prior to his death) shall be entitled to (i)
any Accrued Obligations then owing to the Employee or his beneficiary
(ii) two months Base Salary and (iii) if and when incentive bonuses are
paid for the fiscal year in which the Employee's date of death
occurred, a pro rata incentive bonus payment based on the target
percentage applicable to the Employee's employment grade as of the Date
of Termination. In addition, all Company stock option awards then held
by the Employee which would have become vested within the two year
period following the date of the Employee's death, shall be and become
vested as of the date of his death and shares of restricted stock then
held in the name of the Employee shall remain in the name of the
Employee (or his beneficiary) for a period of two years following the
date of the Employee's death and shall become vested during such period
at such times and in such proportions that such shares would otherwise
have become vested had the Employee remained in the employ of the
Company for such period. After the expiration of such two-year period,
any such shares of restricted stock that are not then vested shall be
forfeited. If the Employee's designated beneficiary does not survive
the Employee, benefits described in this Section 7(a) shall be paid to
the Employee's estate. As used in this Agreement, the term "Accrued
Obligations" means (i) the Employee's accrued and unpaid Base Salary
and accrued and unused vacation pay through the Date of Termination,
(ii) any compensation previously deferred by the Employee (together
with any accrued earnings thereon) and not yet paid by the Company and
any accrued vacation pay for the current year not yet paid by the
Company, (iii) any amounts or benefits owing to the Employee or to the
Employee's beneficiaries under the then applicable employee benefit
plans or policies of the Company and (iv) any amounts owing to the
Employee for reimbursement of expenses properly incurred by the
Employee prior to the Date of Termination and which are reimbursable in
accordance with the reimbursement policy of the Company.
(b) Disability.
(1) During any period that the Employee fails to
perform his duties hereunder as a result of incapacity due to
physical or mental illness ("Disability Period"), the Employee
shall continue to receive his Base Salary at the rate then in
effect for such period until his employment is terminated
pursuant to Section 6(a)(1); provided, however, that payments
of Base Salary shall be reduced by any amount payable to the
Employee under any disability benefit plan or plans of the
Company for the same period of time.
(2) Upon his termination of employment because of
Disability (as described in Section 6(a)(1)), the Employee
shall be entitled to (i) any Accrued Obligations then owing to
the Employee as of the Date of Termination and (ii) if
-9-
<PAGE>
and when incentive bonuses are paid for the fiscal year in
which the Employee's Date of Termination occurred, a pro rata
incentive bonus payment based on the target percentage
applicable to the Employee's employment grade as of the Date
of Termination. In addition, all Company stock option awards
then held by the Employee which would have become vested
within the two year period following the Date of Termination,
shall be and become vested as of the Date of Termination and
shares of restricted stock then held in the name of the
Employee shall remain in the name of the Employee for a period
of two years following the Date of Termination and shall
become vested during such period at such times and in such
proportions that such shares would otherwise have become
vested had the Employee remained in the employ of the Company
for such period. After the expiration of such two-year period,
any such shares of restricted stock that are not then vested
shall be forfeited. In the event of the Employee's death prior
to the time that all payments described in this Section 7(b)
have been completed, such payments and benefits shall be paid
to the Employee's beneficiary (as designated pursuant to
Section 7(a)), or, in the absence of a beneficiary designation
of the designated beneficiary does not survive the Employee,
to the Employee's estate.
(c) Termination by Company without Cause, or Termination by
Employee for Good Reason. In the event that the Company terminates the
Employee's employment without Cause or the Employee terminates his
employment for Good Reason within the Change of Control Period, the
Employee shall be entitled to the following payments and benefits:
(1) All Accrued Obligations.
(2) If the Date of Termination occurs during a period
not constituting a Change of Control Period;
(i) an amount equal to two (2) years of the
Base Salary applicable to the Employee on the Date of
Termination, payable in twenty-four (24) equal,
consecutive monthly payments, commencing no later
than thirty (30) days following the Date of
Termination; and
(ii) in each of the next two (2) fiscal
years ending after the Date of Termination, if an
incentive bonus is paid for such fiscal year, an
incentive bonus for such fiscal year based on the
nondiscretionary component of the target incentive
bonus determined using the Employee's Base Salary and
the target percentage applicable to employees in the
same employment grade as the Employee as of the Date
of Termination.
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(3) If the Date of Termination occurs within the
Change of Control Period, a lump sum cash payment payable no
later than thirty (30) days after the Date of Termination,
equal to three (3) times the sum of
(i) the Base Salary applicable to the
Employee on the Date of Termination (or if greater,
as of the date on which occurred an event giving rise
to a termination for Good Reason), and
(ii) the greater of:
(A) the incentive bonus that would
have been payable for the fiscal year which
includes the Date of Termination under the
incentive bonus program in effect as of the
date of the Change of Control, based on the
target percentage applicable to employees in
the same employment grade as the Employee
and his Base Salary as of the Date of
Termination (or if greater, as of the date
on which occurred an event giving rise to a
termination for Good Reason), and
(B) the average of the incentive
bonuses paid to the Employee by the Company
during the three (3) most recent fiscal
years of the Company ending prior to the
Date or Termination (or such shorter period
during which the Employee was employed by
the Company).
(4) The Employee, his spouse and their eligible
dependents (as defined in the applicable plan), as the case
may be, shall be entitled to participate in all Company
sponsored welfare benefit plans and programs for a period
equal to two (2) years after the Date of Termination (or if
the Date of Termination occurs within the Change of Control
Period, three (3) years after the Date of Termination), at the
same cost to the Employee and his eligible dependents as
charged to similarly situated active employees and their
dependents, provided that the applicable plans provide for
such continued participation. If the Date of Termination is
within the Change of Control Period, the Company shall pay to
the Employee within thirty (30) days following the Date of
Termination, an amount equal to three times the annualized
cost of any such benefits which cannot be provided to the
Employee and/or his eligible dependents pursuant to the terms
of such plans.
(5) if the Date of Termination is within the Change
of Control Period, all Company stock option awards then held
by the Employee shall be and become vested and exercisable for
the post termination exercise period set forth in the
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award and all restrictions on shares of restricted stock then
held in the name of the Employee shall be waived and such
shares shall be and become immediately vested.
(6) if the Date of Termination is not within the
Change of Control Period, all Company stock option awards then
held by the Employee which would have become vested within the
two year period following the Date of Termination, shall be
and become vested as of the Date of Termination and shares of
restricted stock then held in the name of the Employee shall
remain in the name of the Employee for a period of two years
following the Date of Termination and shall become vested
during such period at such times and in such proportions that
such shares would otherwise have become vested had the
Employee remained in the employ of the Company for such
period. After the expiration of such two-year period, any such
shares of restricted stock that are not then vested shall be
forfeited.
(7) a cash amount equal to the present value,
calculated using an interest rate of seven and one-quarter
percent (7.25%) per annum, of the difference between
(I) the lump sum value of the retirement
benefits that would have been payable or available to
the Employee under any defined benefit retirement
plan intended to meet the requirements of Section
401(a) of the Internal Revenue Code (a "Qualified
Plan"), under any nonqualified defined benefit
retirement plan (a "Nonqualified Plan"), maintained
by the Company or an affiliated company based on the
age and service the Employee would have attained or
completed had the Employee continued in the Company's
employ until the expiration of the second anniversary
of the Date of Termination (or if the Date of
Termination occurs within the Change of Control
Period, until the expiration of the third anniversary
of the Date of Termination), determined using, where
compensation is a relevant factor, his pensionable
compensation at the Date of Termination (or, if
greater, at the rate in effect on the date on which
occurred an event giving rise to a termination for
Good Reason), with such lump sum value being
calculated using, where applicable, assumptions
contained in the respective plans or, where such
assumptions are not applicable, an interest rate of
seven and one-quarter percent (7.25%) per annum; and
(II) the present value of the retirement
benefits that are payable or available to the
Employee under all Qualified Plans and Nonqualified
Plans maintained by the Company or an affiliated
company based on the age and service the Employee has
attained or completed as of the
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Employee's Date of Termination determined using,
where compensation is a relevant factor, his
pensionable compensation at the Date of Termination
(or, if greater, at the rate in effect on the date on
which occurred an event giving rise to a termination
for Good Reason), with such present value being
calculated using, where applicable, assumptions
contained in the respective plans or, where such
assumptions are not applicable, an interest rate of
seven and one-quarter percent (7.25%) per annum.
For purposes of calculating the retirement benefits
which would have become payable under such plans, there shall
be taken into consideration both the additional benefits
attributable to the additional service provided for herein and
the benefits which would have vested under such plans as a
result of such service, but which were otherwise forfeited. If
the Date of Termination occurs within the Change of Control
Period, such amount shall be paid in a lump sum within thirty
(30) days following the Date of Termination. If the Date of
Termination occurs within a period not constituting a Change
of Control Period, such amount shall be paid under the same
terms and at the same time as if paid under the Qualified Plan
or Nonqualified Plan to which the additional benefit relates.
Notwithstanding the foregoing, in the event that the Date of
Termination occurs within the Change of Control Period, and the
Employee subsequently violates any of the covenants contained in
Section 12 hereof, the Employee shall return to the Company a pro rata
portion (based on the period of time elapsed from the Date of
Termination as compared to the period during which the Employee was
required to be subject to such covenants following the Date of
Termination) of any payments made under Section 7(c)(3) or (7) which,
together with all other Covered Payments (as defined in Section 8(a)
hereof, exceed 299% of the Employee's "base amount" as defined in
Section 280G(b)(3) of the Internal Revenue Code and which constitute
"parachute payments" within the meaning of Section 280G(b)(2)(A), as
determined by the Accountants (as defined in Section 8 hereof).
(d) Termination by Employee Other Than for Good Reason, or
Termination by Company for Cause. In the event that the Employee
terminates his employment other than for Good Reason or the Company
terminates his employment for Cause, the Employee shall not be entitled
to any compensation except as set forth below:
(1) Any Base Salary that is accrued but unpaid, any
vacation that is accrued but unused, and any business expenses
that are properly reimbursable in accordance with Company
policies then in effect, but which are unreimbursed -- all, as
of the Date of Termination.
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(2) Any other rights and benefits (if any) provided
under plans and programs of the Company (excluding any bonus
program), determined in accordance with the applicable terms
and provisions of such plans and programs.
(e) No Duty to Mitigate Damages. After any Date of
Termination, the Employee shall have no obligation to seek other
employment and shall have the right to be otherwise employed and any
compensation of any type whatsoever earned in connection with such
other employment by the Employee shall not reduce or otherwise by
setoff against any amount due to the Employee hereunder.
(f) Release of Employment Claims. As a condition to the
receipt of payments described Section 7(c) or 7(d), other than Accrued
Obligations, the Employee agrees to execute a general release in favor
of the Company, any and all of its affiliates, its employees, agents
and all others acting on behalf of the Company, and its successors and
assigns of all claims arising out of or in connection with the
Employee's employment with the Company and the termination of such
employment, in such form and containing such provisions as the Company
may reasonably request, provided, however, that such release shall not
include or be construed to include a release of any obligation of the
Company arising under this Agreement or any obligation under the
express terms of any "employee benefit plan" as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended.
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8.8.8. Certain Further Payments by the Company.
(a) Tax Reimbursement Payment. In the event that any amount or
benefit paid or distributed to the Employee by the Company or any
company controlling, controlled by or under common control with the
Company (an "Affiliated Company"), whether pursuant to this Agreement
or otherwise (collectively, the "Covered Payments"), is or becomes
subject to the tax (the "Excise Tax") imposed under Section 4999 of the
Internal Revenue Code or any similar tax that may hereafter be imposed,
the Company shall pay to the Employee at the time specified in Section
8(e) below, the Tax Reimbursement Payment (as defined below). The Tax
Reimbursement Payment is defined as an amount, which when added to the
Covered Payments and reduced by any Excise Tax on the Covered Payments
and any federal, state and local income tax and Excise Tax on the Tax
Reimbursement Payment provided for by this Agreement (but without
reduction for any federal, state or local income or employment tax on
such Covered Payments), shall be equal to the sum of (i) the amount of
the Covered Payments, and (ii) an amount equal to the product of any
deductions disallowed for federal, state or local income tax purposes
because of the inclusion of the Tax Reimbursement Payment in the
Employee's adjusted gross income and the highest applicable marginal
rate of federal, state or local income taxation, respectively, for the
calendar year in which the Tax Reimbursement Payment is to be made. In
lieu of paying the amount of the Tax Reimbursement Payment to the
Employee, the Company may pay such amount to the applicable taxing
authorities on the Employee's behalf and provide evidence of such
payment to the Employee of such payment on or before the time that the
Tax Reimbursement Payment would otherwise be payable to the Employee
pursuant to Section 8(e) hereof.
(b) Determining Excise Tax. For purposes of determining
whether any of the Covered Payments will be subject to the Excise Tax
and the amount of such Excise Tax,
(1) such Covered Payments will be treated as
"parachute payments" within the meaning of Section 280G of the
Code, and all "parachute payments" in excess of the "base
amount" (as defined under Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax, unless, and
except to the extent that, in the opinion of the Company's
independent certified public accountants, which, in the case
of Covered Payments made after the Change of Control, shall be
the Company's independent certified public accountants
appointed prior to the Change of Control, or tax counsel
selected by such accountants (the "Accountants"), such Covered
Payments (in whole or in part) either do not constitute
"parachute payments" or represent reasonable compensation for
services actually rendered (within the meaning of Section
280G(b)(4) of the Internal Revenue Code) in excess of the
"base amount," or such "parachute payments" are otherwise not
subject to such Excise Tax, and
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(2) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G
of the Internal Revenue Code.
(c) Applicable Tax Rates and Deductions. For purposes of
determining the amount of the Tax Reimbursement Payment, the Employee
shall be deemed:
(1) to pay federal income taxes at the highest
applicable marginal rate of federal income taxation for the
calendar year in which the Tax Reimbursement Payment is to be
made,
(2) to pay any applicable state and local income
taxes at the highest applicable marginal rate of taxation for
the calendar year in which the Tax Reimbursement Payment is to
be made, net of the maximum reduction in federal income taxes
which could be obtained from the deduction of such state or
local taxes if paid in such year (determined without regard to
limitations on deductions based upon the amount of the
Employee's adjusted gross income), and
(3) to have otherwise allowable deductions for
federal, state and local income tax purposes at least equal to
those disallowed because of the inclusion of the Tax
Reimbursement Payment in the Employee's adjusted gross income.
(d) Subsequent Events. In the event that the Excise Tax is
subsequently determined by the Accountants to be less than the amount
taken into account hereunder in calculating the Tax Reimbursement
Payment made, the Employee shall repay to the Company, at the time that
the amount of such reduction in the Excise Tax is finally determined,
the portion of such prior Tax Reimbursement Payment that has been paid
to the Employee or to federal, state or local tax authorities on the
Executive's behalf and that would not have been paid if such Excise Tax
had been applied in initially calculating such Tax Reimbursement
Payment, plus interest on the amount of such repayment for the period
from the date the prior Tax Reimbursement Payment was received by the
Employee to the date of such repayment, at the rate provided in Section
1274(b)(2)(B) of the Internal Revenue Code. Notwithstanding the
foregoing, in the event any portion of the Tax Reimbursement Payment to
be refunded to the Company has been paid to any federal, state or local
tax authority, repayment thereof shall not be required until actual
refund or credit of such portion has been made to the Employee, and
interest payable to the Company shall not exceed interest received or
credited to the Employee by such tax authority for the period it held
such portion. The Employee and the Company shall mutually agree upon
the course of action to be pursued (and the method of allocating the
expenses thereof) if the Employee's good faith claim for refund or
credit is denied.
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<PAGE>
In the event that the Excise Tax is later determined by the
Accountants to exceed the amount taken into account hereunder at the
time the Tax Reimbursement Payment is made (including, but not limited
to, by reason of any payment the existence or amount of which cannot be
determined at the time of the Tax Reimbursement Payment), the Company
shall make an additional Tax Reimbursement Payment in respect of such
excess (which Tax Reimbursement Payment shall include any interest or
penalty payable with respect to such excess) at the time that the
amount of such excess is finally determined.
(e) Date of Payment. The portion of the Tax Reimbursement
Payment attributable to a Covered Payment shall be paid to the Employee
within ten (10) business days following the payment of the Covered
Payment. If the amount of such Tax Reimbursement Payment (or portion
thereof) cannot be finally determined on or before the date on which
payment is due, the Company shall either pay to the Employee an amount
estimated in good faith by the Accountants to be the minimum amount of
such Tax Reimbursement Payment and shall pay the remainder of such Tax
Reimbursement Payment (which Tax Reimbursement Payment shall include
interest at the rate provided in Section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined, but in no event later
than forty-five (45) calendar days after payment of the related Covered
Payment. In the event that the amount of the estimated Tax
Reimbursement Payment exceeds the amount subsequently determined to
have been due, such excess shall be repaid or refunded pursuant to the
provisions of Section 8(d) above.
9. Nonexclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Employee's continuing of future participation in any incentive, fringe
benefit, deferred compensation, or other plan or program provided by the Company
and for which the Employee may qualify, nor shall anything herein limit or
otherwise affect such rights as the Employee may have under any other agreements
with the Company; provided, however, that the Employee shall not be eligible for
participation in the Company-sponsored severance plan, hereby waives
participation in such plan and acknowledges that the provisions of this
Agreement regarding severance payments shall exclusively govern the Company's
obligations regarding the payment of severance to the Employee. Amounts that are
vested benefits or that the Employee is otherwise entitled to receive under any
plan or program of the Company at or after the Date of Termination, shall be
payable in accordance with such plan or program.
10. Developments. Employee shall disclose fully, promptly and in
writing to the Company any and all inventions, discoveries, improvements,
modifications and other intellectual property rights, whether patentable or not
which Employee has conceived, made or developed, solely or jointly with others,
while employed by the Company and which (i) relate to the business, work or
activities of the Company or (ii) result from or are suggested by the carrying
out of Employee's duties hereunder or from or by any information that Employee
may receive while employed by the Company. Employee hereby assigns, transfers
and conveys to the
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Company all of Employee's rights, title and interest in and to any and all such
inventions, discoveries, improvements, modifications and other intellectual
property rights and agrees to take all such actions as may be requested by the
Company at any time and, with respect to any such invention, discovery,
improvement, modification or other intellectual property rights, to confirm or
evidence such assignment, transfer and conveyance. Furthermore, at any time and
from time to time, upon the request of the Company, Employee shall execute and
deliver to the Company any and all instruments, documents and papers, give
evidence and do any and all other acts that, in the opinion of counsel for the
Company, are or may be necessary or desirable to document such assignment,
transfer and conveyance or to enable the Company to file and prosecute
applications for and to acquire, maintain and enforce any and all patents,
trademark registrations or copyrights under United States or foreign law with
respect to any such inventions, discoveries, improvements, modifications or
other intellectual property rights or to obtain any extension, validation,
reissue, continuance or renewal of any such patent, trademark or copyright. The
Company shall be responsible for the preparation of any such instruments,
documents and papers and for the prosecution of any such proceedings and shall
reimburse Employee for all reasonable expenses incurred by Employee incurred in
connection with compliance with the provisions of this Section 10.
. Confidential Information.
(a) Employee acknowledges that, by reason of Employee's
employment by the Company, Employee will have access to confidential
information of the Company and its subsidiaries and affiliates,
including, without limitation, information and knowledge pertaining to
products, inventions, discoveries, improvements, innovations, designs,
ideas, trade secrets, proprietary information, manufacturing,
packaging, advertising, distribution and sales methods, sales and
profit figures, customer and client lists and relationships between
such entities and dealers, distributors, sales representatives,
wholesalers, customers, clients, suppliers and others who have business
dealings with them ("Confidential Information"). Employee acknowledges
that such Confidential Information is a valuable and unique asset of
such entities and covenants that both during and after the Term,
Employee will not disclose any Confidential Information to any person
(except as Employee's duties as an executive of the Company may
require) without the prior written authorization of the Board of
Directors or the Company's chief executive officer. The obligation of
confidentiality imposed by this Section 11 shall not apply to
information that becomes generally known to the public through no act
of Employee in breach of this Agreement.
(b) Employee acknowledges that all documents, files and other
materials received from the Company during the Term (with the exception
of documents relating to Employee's compensation or benefits to which
Employee is entitled following the Term) are for use of Employee solely
in discharging Employee's duties and responsibility hereunder and that
Employee has no claim or right to the continued use or possession of
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such documents, files or other materials following termination of
Employee's employment by the Company. Employee agrees that, upon
termination of employment, Employee will not retain any such documents,
files or other materials and will promptly return to the Company any
documents, files, or other materials in Employee's possession or
custody.
12. Non-Competition. During the Term and without regard to its
termination for any reason, whether voluntary or involuntary, and for a period
of two (2) years after termination of employment with Company for any reason,
Employee shall not unless acting pursuant hereto or with the prior written
consent of the Board of Directors:
(a) directly or indirectly own, manage, operate, finance,
join, control or participate in the ownership, management, operation,
financing or control of, or be connected as an officer, director,
employee, partner, principal, agent, representative, consultant or
otherwise with, or use or permit Employee's name to be used in
connection with any Competing Business (defined below) or any entity
which would require by necessity use of Confidential Information;
provided, however, that notwithstanding the foregoing, this provision
shall not be construed to prohibit the passive ownership by Employee of
not more than 1% of the capital stock of any corporation which is
engaged in any of the foregoing businesses having a class of securities
registered pursuant to the Securities Exchange Act of 1934;
(b) solicit or divert to any Competing Business any individual
or entity which is a customer of the Company or its subsidiaries or
affiliates, or was such a customer at any time during the preceding
twelve (12) months from the date of Employee's employment termination;
or
(c) employ, attempt to employ, solicit or assist any Competing
Business in employing any current employee of the Company or its
subsidiaries or affiliates or any individual who was employed by the
Company or its subsidiaries or affiliates within the preceding twelve
(12) month period from Employee's employment termination.
The term "Competing Business" shall mean any business or enterprise
engaged in the business of manufacturing and sale of water treatment and process
chemicals or services or in any other business engaged in by the Company or its
subsidiaries or affiliates within (i) any state of the United States or the
District of Columbia or (ii) any foreign country in which the Company has
engaged in any such business within the prior year or, during the Term, or has
undertaken preparation to engage.
In the event that the provisions of Section 11 or 12 should ever be
adjudicated to exceed the time, geographic, product or other limitations
permitted by applicable law in any jurisdiction,
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then such provisions shall be deemed reformed in such jurisdiction to the
maximum time, geographic, product or other limitations permitted by applicable
law.
13. Equitable and Other Relief. The Employee acknowledges that the
restrictions contained in Sections 10, 11 and 12 hereof are, in view of the
nature of the business of the Company, reasonable and necessary to protect the
legitimate interests of the Company and that any violation of any provision of
those Sections will result in irreparable injury to the Company. The Employee
also acknowledges that in the event of any such violation, the Company shall be
entitled to preliminary and permanent injunctive relief, without the necessity
of proving actual damages, and to an equitable accounting of all earnings,
profits and other benefits arising from any such violation, which rights shall
be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. The Employee agrees that in the event of any such
violation, or any other matter arising out of or relating to this Agreement, an
action may be removed to or commenced by the Company for any such preliminary
and permanent injunctive relief and other equitable relief or any other cause of
action in any federal or state court of competent jurisdiction in the state of
Pennsylvania. The Employee hereby waives, to the fullest extent permitted by
law, any objection that Employee may now or hereafter have to such jurisdiction
or to the laying of the venue of any such suit, action or proceeding brought in
such a court and any claim that such suit, action or proceeding has been brought
in or removed to an inconvenient forum. The Employee agrees that effective
service of process may be made upon Employee by mail under the notice provisions
contained in Section 14 hereof. In the event the Company files suit against
Employee to enforce any provision of Sections 10, 11 or 12, or in the event the
Company files suit against the Employee or is otherwise involved in litigation
or arbitration concerning the Agreement or the employment relationship of the
parties, and a court of competent jurisdiction or the arbitrator, as applicable,
finds in favor of the Company on any such matter, Employee shall reimburse the
Company its reasonable costs and attorneys' fees incurred in connection with
such suit or arbitration.
14. Notices. Any notice given to either party to this Agreement shall
be in writing, and shall be deemed to have been given when delivered personally
or sent by certified mail, postage prepaid, return receipt requested, duly
addressed to the party concerned, at the address indicated below or to such
changed address as such party may subsequently give notice of:
If to the Company:
BetzDearborn Inc.
4636 Somerton Road
Trevose, Pennsylvania 19053
Attn: General Counsel
If to the Employee:
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15. Indemnification. To the extent provided under the Company's
Articles of Incorporation or Bylaws, the Employee shall be indemnified by the
Company to the maximum extent permitted under applicable law. The provisions of
this Section 15 shall survive the Date of Termination with respect to acts or
omissions occurring prior to such date.
16. Taxes. Anything in this Agreement to the contrary notwithstanding,
all payments required to be made hereunder by the Company to the Employee shall
be subject to withholding of such amounts relating to taxes as the Company may
reasonably determine that it should withhold pursuant to any applicable law or
regulations. In lieu of withholding such amounts, in whole or in part, however,
the Company may, in its sole discretion, accept other provision for payment of
taxes, provided that it is satisfied that all requirements of the law affecting
its responsibilities to withhold such taxes have been satisfied.
17. Enforcement of Rights. With respect to any Termination of
Employment of the Employee occurring during the Change of Control Period, all
legal fees and expenses and court and arbitration expenses, incurred by the
Employee in connection with seeking to obtain or enforce any right or benefit
provided for in this Agreement shall be paid by the Company, to the extent
permitted by law, provided that the Employee is successful in whole or in part
as to such claims as the result of litigation, arbitration, or settlement.
18. Further Assistance. For a period of two (2) years following the
Employee's Date of Termination, the Employee shall be available, upon reasonable
notice, to provide assistance and information to the Company on all matters that
relate to work for which the Employee had responsibility or to which the
Employee devoted attention during employment; provided that the such assistance
does not materially interfere with other the Employee's other employment
obligations and duties, and the Company agrees to pay the Employee for any
reasonable out-of-pocket expenses incurred by the Employee in connection with
such assistance.
19. Governing Law/Captions. This Agreement shall be construed in
accordance with, and pursuant to, the laws of the State of Pennsylvania without
giving effect to conflict of law provisions. The captions of this Agreement
shall not be part of the provisions hereof, and shall have no force or effect.
20. Contents of Agreement, Amendment and Assignment. This Agreement
sets forth the entire understanding between the parties hereto with respect to
the subject matter hereof, supersedes any prior employment agreement between the
parties and shall not be changed, modified or terminated except upon written
amendment executed by the Company and the
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Employee. All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of the parties hereto, except that the duties and responsibilities of
the Employee hereunder are of a personal nature and shall not be assignable or
delegable in whole or in part by the Employee. This Agreement is assignable by
the Company, including without limitation to any entity, including a purchaser
of all or part of the Company's or a succeeding employer's business, and shall
apply with equal effect if, during the Term of this Agreement, the Employee
shall become employed by or work for any one or more of the subsidiaries or
affiliates of the Company. In the event that the Company, which term includes
any succeeding employer hereunder, shall sell substantially all of its operating
assets of the division or unit in which the Employee in engaged to a third party
which agrees in writing to assume all of the Company's obligations hereunder,
then the Company shall, upon the closing of any such transaction, have no
further duties or obligations hereunder.
21. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision or application in any
other jurisdiction; PROVIDED, HOWEVER, that with respect to any Termination of
Employment of the Employee during a period not constituting a Change of Control
Period, if the Company, in its reasonable discretion, determines that such
invalid or unenforceable provision goes to the essence of this Agreement so that
its invalidity relieves one party from the obligation of rendering substantial
performance hereunder, then the provisions of this Section 21 shall not be
effective and such invalid or unenforceable provision shall not be severable
from the remainder of this Agreement.
22. Survival. Notwithstanding the termination of the Term by reason of
a Date of Termination, the obligations of the Employee under Sections 10, 11, 12
or 18 hereof shall survive and remain in full force and effect for the periods
therein provided, and the provisions for equitable relief against the Employee
in Section 13 hereof shall continue in force. Additionally, the expiration of
the Term by reason of a Date of Termination shall not relieve the Company of its
obligations under Sections 7, 8, 15 or 17 hereof.
23. Remedies Cumulative; No Waiver. No remedy conferred upon the
Company by this Agreement is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to any
other remedy given hereunder or now or hereafter existing at law or in equity.
No delay or omission by the Company in exercising any right, remedy or power
hereunder or existing at law or in equity shall be construed as a waiver
thereof, and any such right, remedy or power may be exercised by the Company
form time to time and as often as may be deemed expedient or necessary by the
Company in its sole discretion.
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24. Arbitration. In the event of any dispute or claim relating to or
arising out of this Agreement or the employment relationship between the parties
or the termination of such relationship, such dispute shall be fully, finally
and exclusively resolved by a panel of three neutral arbitrators to be mutually
agreed upon by the parties. Such arbitration will be decided under the
employment dispute resolution rules of the American Arbitration Association and
will be held in Philadelphia, Pennsylvania. If the parties cannot agree upon
such arbitrators within twenty (20) days after submission of a party's request
for arbitration in writing, the arbitrators will be selected in accordance with
the procedures of the American Arbitration Association. Any such arbitration
proceedings must be instituted within the first to occur of (a) six months after
knowledge that the claimed wrong or breach occurred, or (b) one year after the
claimed wrong or breach occurred. The parties agree that the existence, content
and result of any arbitration proceeding shall be confidential, except to the
extent that the Company determines it is required to disclose such matters in
accordance with applicable laws. Nothing in this Section precludes the Company
from seeking the relief set forth under Section 13 of the Agreement in any other
forum.
25. Gender. As used herein, masculine pronouns shall include the
feminine, as the context requires.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
BETZDEARBORN INC.
By:_______________________________________
Title:____________________________________
ATTEST:
- -----------------------------
Title: ______________________
[CORPORATE SEAL]
EMPLOYEE:
__________________________________________
-23-
[BetzDearborn Logo] BetzDearborn Inc. and Subsidiaries
Guidelines for Performance Incentive
Compensation Plan
Effective as of January 1, 1997
- -------------------------------------------------------------------------------
General Program Overview
- -------------------------------------------------------------------------------
The Performance Incentive Compensation Plan (PICP) is designed to support the
achievement of annual Profit Plans at both the Consolidated and GBU (Global
Business Unit) level, while rewarding key employees and officers for individual
performance. The intent is to focus participants on achieving results that are
generally under their control and contribute to BetzDearborn's overall success.
Specifically, the PICP is designed to:
Create a strong link between pay and organization performance;
Develop a clear "line of sight" between a key employees' or officers'
pay, management decisions and actions under his or her control; and
Balance the emphasis on team performance and individual performance.
The program is global in scope and is governed by the following guidelines.
- -------------------------------------------------------------------------------
Administration of the Plan
- -------------------------------------------------------------------------------
The Performance Incentive Compensation Plan (PICP) is administered by the Human
Resources Department. Nominations are made by officers and approved by the
appropriate Corporate Services Department Officer or GBU President. The Human
Resources Department will provide listings to Corporate Services Department
Officers and GBU Presidents annually for verification of participation in the
plan.
- -------------------------------------------------------------------------------
<PAGE>
BetzDearborn Inc. and Subsidiaries
Guidelines for Performance Incentive Compensation Plan
Page 2
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Qualifications for Performance Incentive Compensation Plan Participation
- -------------------------------------------------------------------------------
Service Requirement: Generally, an employee has a minimum of one (1) year
of service with BetzDearborn Inc. or a covered
subsidiary. Any exceptions to minimum service must
be approved by the President of the subsidiary or
Senior Department Officer. New hires may be
considered for participation if they are hired no
later than the first day of July of the plan year.
Grade Level: All Officer grades as well as key employees. The
minimum grade to participate as a key employee is
equivalent to 17 in the US grade structure. Minimum
and typical level of participation vary by job
function. All jobs covered by sales incentive plans
do not participate in this plan.
Function/Responsibility: Recommendations are to be limited to employees who
contribute significantly to the success of the
Company or business unit/department, and whose
continued service is an asset to the organization.
- -------------------------------------------------------------------------------
Determining Incentive Funding
- -------------------------------------------------------------------------------
Within the discretion of the Board of Directors, a bonus for the preceding
year's accomplishments may be paid to the Key Employees and Officers of the
Company designated as participants. The bonus shall be paid as soon as year-end
results are compiled and compared to Bonus Goals for determination of overall
performance levels. Generally, the bonus will be paid toward the end of the
first quarter, usually in late February or early March, if prior year results
warrant that a bonus is to be paid.
Generally, GBU performance levels will be communicated as a percentage of goal
attained (e.g., from a minimum of 95% of goal up to a maximum of 106% of goal).
The Bonus Goals, as established annually by the CEO in accordance with economic
conditions and business plans, shall be used for the basis for bonus
calculations. Goals that drive the achievement of results in this plan will be
established for the company as a whole, for Corporate Services employees, and
for the Global Business Units. All of the goals will be global in scope and will
assume that the potential bonuses generated are accounted for and earned on a
self-funded basis.
<PAGE>
BetzDearborn Inc. and Subsidiaries
Guidelines for Performance Incentive Compensation Plan
Page 3
- -------------------------------------------------------------------------------
In the event the percentage outcome falls between the performance levels
outlined in Appendices A and B, the bonus pool will be generated using
interpolated values. For example, a performance level of 98.3% will generate a
bonus pool of 9.9% for key employees and a performance level of 101.6% will
result in a bonus pool of 19.8%.
- -------------------------------------------------------------------------------
Interaction with Other Profit-Related Incentive Plans and Local Laws
- -------------------------------------------------------------------------------
As a global company, BetzDearborn operates in some locations where local laws
require the existence of other profit-related bonus plans. Since the Performance
Incentive Compensation Plan is discretionary, the plan is not extended to
employees in such locations except if, at its own discretion, the Board of
Directors of BetzDearborn makes a decision on the subject. The Board of
Directors reserves the right to implement an alternative plan, in its absolute
discretion, using this plan as a guideline. Decisions on potential payouts
generated by this plan are made by the Board of Directors of BetzDearborn and
not by local management in any of our locations.
- -------------------------------------------------------------------------------
Determining Participation Levels
- -------------------------------------------------------------------------------
Under the PICP, each participant has an annual incentive target opportunity,
calculated as a percent of salary in effect as of December 31 of the applicable
year. The target incentive represents a competitive annual award opportunity for
a comparable position in a company similar to BetzDearborn. Participation levels
have been determined based on this market position. The plan includes the
following participation levels:
------------------------------------------------
Participation Level Organizational Level
------------------------------------------------
Level A Key Employees
------------------------------------------------
Level B Officers
------------------------------------------------
<PAGE>
BetzDearborn Inc. and Subsidiaries
Guidelines for Performance Incentive Compensation Plan
Page 4
- -------------------------------------------------------------------------------
An award earnings schedule is developed each year. This schedule defines the
award opportunities for different levels of performance, measured by the bonus
goal. Three performance levels within this schedule define the target award and
the award limits. These performance levels are:
Threshold -- or minimum performance. No PICP will be earned if bonus
goal performance fails to reach threshold.
Target--of expected performance. A target incentive opportunity will
be earned if bonus goal performance achieves target.
Maximum--the level of performance that results in the highest possible
award.
The Appendix contains the award earnings schedule for the current year.
- -------------------------------------------------------------------------------
Individual Performance Factor
- -------------------------------------------------------------------------------
Potential PICP awards are adjusted for individual performance. Individual
performance is determined by results achieved against individual objectives.
Objectives and measures for evaluating individual performance will be determined
at the beginning of the year as part of the Performance Management Process. The
number of objectives will vary, but typically not more than five critical
objectives will be used for purposes of the PICP. In addition, while the
objectives are tailored to each participant, they have six common
characteristics:
Support the Corporate or GBU Profit Plan;
Focus on achieving specific results;
Can be clearly measured qualitatively or quantitatively;
Have a specific time frame for completion;
Are demanding yet realistic; and
Focus on results the participant can affect.
<PAGE>
BetzDearborn Inc. and Subsidiaries
Guidelines for Performance Incentive Compensation Plan
Page 5
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Application of the Performance Factor
- -------------------------------------------------------------------------------
Once the Company or GBU results, on which the goal is based, meets the threshold
performance level for the plan year, all eligible participants will receive an
earned bonus level. This earned bonus is equal to 75% of the bonus payment
percentage tied to the actual company performance level. For example, if the
Company performs at 100% of goal or target, the bonus plan will fund 75% of the
15% incentive opportunity for each Level A participant, or 11.25%. The
individual performance factor can then be applied. For this example, the total
individual bonus amount, including the performance factor, may range from a
minimum of 11.25% up to a maximum of 18.75%.
At the end of the year, the manager will assess the participant's performance
against the pre-established objectives and recommend an individual bonus award
based on overall performance results. The recommended bonus amount will then be
approved by the next level of management.
Guidelines for determining the funding adjustment level based on performance are
shown below.
------------------------------------------------------
Assessed Performance Individual Adjustment Range*
------------------------------------------------------
Highest Performer Above Target Level to
Maximum Level
------------------------------------------------------
Solid Performer Target Level
------------------------------------------------------
Lower Performer Earned Level to Below
Target Level
------------------------------------------------------
*Intermediate adjustments for intermediate levels of
performance will be frequently used.
------------------------------------------------------
<PAGE>
BetzDearborn Inc. and Subsidiaries
Guidelines for Performance Incentive Compensation Plan
Page 6
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Recommendations for Incentive Payment
- -------------------------------------------------------------------------------
Recommendations for incentive payment will be in writing and provide the
following information for each potential award recipient:
Full Name;
Position Title and Grade Level;
Target Percentage; and
Plan Year Bonus Recommendation.
All recommendations for PICP awards must be submitted to the CEO by a Senior
Officer of BetzDearborn Inc. for approval. Corporate Compensation will prepare
worksheets for use by management in determining award levels. All
recommendations for PICP awards to GBU employees must be submitted to the CEO
for approval by the GBU President.
- -------------------------------------------------------------------------------
Termination
- -------------------------------------------------------------------------------
In the event that the employment of a participant of the Plan is terminated,
whether involuntarily or by reason or resignation, effective prior to the
payment of the bonus for the bonus year, such participant shall not be entitled
to receive a bonus payment for such year under the Plan.
- -------------------------------------------------------------------------------
Retirement
- -------------------------------------------------------------------------------
In the event that a participant of the Plan retires at the normal retirement
date, or retires following service after the normal retirement date, or retires
in advance of the normal retirement date, before the end of the calendar year,
he or she will receive in the following year at bonus distribution time a pro
rata bonus payment for the bonus year determined as of the effective date of
retirement. For the purpose of the Plan, the "normal retirement date" and
service after the "normal retirement date" and in advance of the "normal
retirement date" shall be interpreted in accordance with the official text of
the BetzDearborn Retirement Plan which is in effect as of the effective date of
retirement.
<PAGE>
BetzDearborn Inc. and Subsidiaries
Guidelines for Performance Incentive Compensation Plan
Page 7
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Disability
- -------------------------------------------------------------------------------
In the event a participant of the Plan is placed on short-term disability,
whether paid or unpaid, prior to the end of a bonus year, he or she will receive
a pro rata bonus payment for that bonus year determined by including the period
of the short-term disability but not to exceed six months. Any period of
long-term disability shall not be included.
- -------------------------------------------------------------------------------
Death
- -------------------------------------------------------------------------------
In the event a participant of the Plan dies prior to December 31 of the bonus
year, a pro rata bonus, determined as of the date of death, for the bonus year
will be paid to his or her estate or legal representative.
- -------------------------------------------------------------------------------
Salary Basis for Target Determination
- -------------------------------------------------------------------------------
In determining bonus payments to participants of the Plan, salary as of December
31 of the bonus year, or as of the last date of employment in the case of death,
disability or retirement before the end of the calendar year, will be used to
determine the award amount, which will then be subject to the applicable
individual performance factor.
- -------------------------------------------------------------------------------
Other Information
- -------------------------------------------------------------------------------
All pro rata bonus payment under this Plan shall be based upon a 365 day year.
Although the Company hopes that the Performance Incentive Compensation Plan can
be continued indefinitely as part of the Company's compensation and benefit
programs, payment of the bonus in any bonus year is discretionary with the Board
of Directors, and the Company reserves the right to modify or terminate the Plan
at any time.
[BETZDEARBORN LOGO] Acquisition Incentive Compensation Plan
(AICP)
Objectives and Eligibility Criteria
Plan Objectives
Emphasize the importance of accomplishing certain cost reduction objectives
associated with the merger of Betz with Dearborn.
Underscore the importance of achieving greater than expected earnings per
share as a result of the acquisition.
Achieving these goals as soon as possible within a pre-defined time period.
Providing meaningful rewards to eligible participants for their
contributions to the successful and timely achievement of their assigned
goals.
Eligibility
Limited to executive officers, other officers, and other key employees who
may be nominated for award eligibility.
Employees hired, promoted, or transferred to eligible positions during the
Plan Period may be considered for award eligibility on a pro-rated basis.
Employees moved to ineligible positions during the Plan Period may be
considered for an award on a pro-rated basis.
How the Plan Works
Performance Criteria and Assessment
The Chief Executive Officer shall establish all performance criteria.
Performance criteria shall focus on predetermined cost reductions for each
area impacted by the acquisition and universal accretion goals. Emphasis on
cost reduction goals versus accretion goals will vary based on the
individual responsibilities identified for each eligible participant during
the acquisition integration process.
Cost reduction goals shall reflect the annualized reduction of expenses as
certified by a designated committee of the Senior Management Team.
<PAGE>
Accretion goals will be tied to the Company's primary earnings per share.
Performance for cost reductions and accretion goals will be assessed on a
quarterly basis.
Awards
Awards will be expressed in terms of a contingent grant of restricted
shares. Restricted shares will be granted upon the achievement of
predetermined cost reduction or accretion goals.
Performance will directly affect the value of the restricted stock grant.
Accomplishment of goals before target date will result in a greater number
of restricted shares recommended for grant; delay or non-delivery of goal
will result in a lesser number or cancellation of restricted shares
recommended for grant (see Exhibit I).
Awards may be payable in restricted stock of the Company, as provided for
under the Company's Restricted Stock Plan, or the cash equivalent value, at
senior management's discretion.
Vesting of Restricted Shares
Restricted share grants approved by the Compensation Committee will vest
immediately once goals have been achieved.
Other Information
This document is provided as a summary of plan provisions. More information
is available from your manager or from the Human Resources Department.
Specific plan information is available from: Benito Cachinero, Director,
Compensation, Benefits, HRIS and Administration.
- --------------------------------------------------------------------------------
Note: This plan summary is provided for information purposes only. The
Acquisition Incentive Compensation Plan document contains the complete text
of plan provisions. Plan participation does not constitute any part of an
employment contract. The Company reserves the right to amend, change or
terminate the plan at its sole discretion.
<PAGE>
[BETZDEARBORN LOGO] Acquisition Incentive Compensation Plan
(AICP)
Exhibit I
- --------------------------------------------------------------------------------
Sample Participant Award Schedule
Participant: John Smith Title: VP Finance
------------------------- -----------------------
Date of Initial
Eligibility: July 1, 1996 Organization: Corporate
--------------------- -----------------
Target Restricted Grant:
1,000
-------------------------
<TABLE>
<CAPTION>
- ------------------------------ ------------------------- -------------------------------- ------------------
Cost Reduction Component: Target Restricted Shares to be
50% Awarded: 500
- ------------------------------ ------------------------- -------------------------------- ------------------
<S> <C> <C> <C>
Quarter % of Restricted # of Restricted
Cost Reduction Goal Targets Shares Earned Shares Earned
------------------------- -------------------------------- ------------------
1/1/97 125% 625
------------------------- -------------------------------- ------------------
4/1/97 100% 500
------------------------- -------------------------------- ------------------
7/1/97 75% 375
------------------------- -------------------------------- ------------------
10/1/97 50% 250
------------------------- -------------------------------- ------------------
Later 0% 0
- ------------------------------ ------------------------- -------------------------------- ------------------
Accretion Component: Target Restricted Shares to be
50% Awarded: 500
- ------------------------------ ------------------------- -------------------------------- ------------------
Two Consecutive % of Restricted # of Restricted
Accretion Goal Quarters Shares Earned Shares Earned
------------------------- -------------------------------- ------------------
Q3 1997, Q4 1997 125% 625
------------------------- -------------------------------- ------------------
Q4 1997, Q1 1998 110% 550
------------------------- -------------------------------- ------------------
Q1 1998, Q2 1998 100% 500
------------------------- -------------------------------- ------------------
Q2 1998, Q3 1998 75% 375
------------------------- -------------------------------- ------------------
Q3 1998, Q4 1998 50% 250
------------------------- -------------------------------- ------------------
Later 0% 0
- ------------------------------ ------------------------- -------------------------------- ------------------
</TABLE>
EXHIBIT 21 - SUBSIDIARIES OF REGISTRANT
U.S. Subsidiaries
- -----------------
Argo Scientific, Inc., a California corporation.
BetzDearborn China Ltd., a Delaware corporation.
BetzDearborn Europe Inc., a Delaware corporation.
BetzDearborn Hydrocarbon Process Group Inc., a Texas corporation.
BetzDearborn International Inc., a Pennsylvania corporation.
BetzDearborn Paper Process Group Inc., a Florida corporation.
Non-U.S. Subsidiaries
- ---------------------
BetzDearborn Argentina S.A., an Argentinean corporation.
BetzDearborn Australia Pty Limited, an Australian corporation.
BetzDearborn Ges. mbH, an Austrian corporation.
BetzDearborn Europe N.V., a Belgian corporation.
BetzDearborn N.V., a Belgian corporation.
Dearborn International Ltda., a Brazilian corporation.
BetzDearborn Canada, Inc., a Canadian corporation.
BetzDearborn de Chile Ltda., a Chilean corporation.
BetzDearborn Colombia S.A., a Colombian corporation.
BetzDearborn Denmark A/S, a Danish corporation.
BetzDearborn de Ecuador S.A., an Ecuadorian corporation.
BetzDearborn 0Y, a Finnish corporation.
BetzDearborn S.A., a French corporation.
BetzDearborn GmbH, a German corporation.
<PAGE>
BetzDearborn India Private Limited, an Indian corporation.
PT BetzDearborn Persada, an Indonesian corporation.
BetzDearborn Ireland Limited, an Irish corporation.
BetzDearborn S.p.A., an Italian corporation.
Nippon BetzDearborn K.K., a Japanese corporation.
BetzDearborn Korea Ltd., a Korean corporation.
Argo Scientific and Marketing Ltd., a Korean corporation.
Betz (Malaysia) Sdn. BHD, a Malaysian corporation.
BetzDearborn de Mexico S.A. de C.V., a Mexican corporation.
BetzDearborn B.V., a Dutch corporation.
BetzDearborn Norge A/S, a Norwegian corporation.
BetzDearborn del Peru S.A., a Peruvian corporation.
BetzDearborn Sp. ZO.O., a Polish corporation.
BetzDearborn Portuguesa, Lda., a Portuguese corporation.
BetzDearborn Pte. Ltd., a Singapore corporation.
BetzDearborn South Africa (Pty) Ltd., a South Africa corporation.
BetzDearborn Iberica S.A., a Spanish corporation.
BetzDearborn AB, a Swedish corporation.
BetzDearborn Taiwan Limited, a Taiwanese corporation.
BetzDearborn (Thailand) Co. Ltd., a Thailand corporation.
BetzDearborn de Uruguay S.A., a Uruguayan corporation.
BetzDearborn Limited, a United Kingdom corporation.
Argo Scientific Limited, a United Kingdom corporation.
BetzDearborn Venezuela C. A., a Venezuelan corporation.
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-40175) pertaining to the BetzDearborn Inc. Stock Option Plan of
1987 and (Form S-8 No. 333-27195) pertaining to the BetzDearborn Inc. Employee
Stock Purchase Plan of 1997 of our report dated February 2, 1998, with respect
to the consolidated financial statements and schedule of BetzDearborn Inc.
included in the Annual Report (Form 10-K) of BetzDearborn Inc. for the year
ended December 31, 1997.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
March 9, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<CURRENCY> U.S.$
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1,000
<CASH> 37
<SECURITIES> 0
<RECEIVABLES> 300
<ALLOWANCES> 7
<INVENTORY> 94
<CURRENT-ASSETS> 480
<PP&E> 826
<DEPRECIATION> 424
<TOTAL-ASSETS> 1,434
<CURRENT-LIABILITIES> 232
<BONDS> 678
6
0
<COMMON> 3
<OTHER-SE> 443
<TOTAL-LIABILITY-AND-EQUITY> 1,434
<SALES> 1,295
<TOTAL-REVENUES> 1,295
<CGS> 519
<TOTAL-COSTS> 519
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 143
<INCOME-TAX> 51
<INCOME-CONTINUING> 92
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (6)
<NET-INCOME> 86
<EPS-PRIMARY> 2.81
<EPS-DILUTED> 2.61
</TABLE>
