<PAGE> 1
________________________________________________________________________________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the quarter ended September 30, 1995 Commission file number 1-11013
SPECIALTY CHEMICAL RESOURCES, INC.
----------------------------------------------------
Exact name of registrant as specified in its charter
Delaware 34-1366838
---------------------- -----------------------
State of incorporation I.R.S. Employer I.D. No.
9100 Valley View Road; Macedonia, Ohio 44056
---------------------------------------------------
Address of principal executive offices and zip code
(216) 468-1380
---------------------------------------------------
Registrant's telephone number, including area code
Indicate by a 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 twelve (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 ninety
(90) days. Yes__X__ No_____.
The number of outstanding shares of the registrant's common stock as
of October 31, 1995 was 3,932,770.
_________________________________________________________________________
______________________________Page 1 of 15_______________________________
<PAGE> 2
Specialty Chemical Resources, Inc.
Form 10-Q
For the quarter ended September 30, 1995
<TABLE>
<CAPTION>
Index
<S> <C>
Part I Financial Information Page
Item 1. Financial Statements..........................................3
Condensed Balance Sheets......................................3
Condensed Statements of Operations, 3 Months..................5
Condensed Statements of Operations, 9 Months..................6
Condensed Statements of Cash Flows, 3 Months..................7
Condensed Statements of Cash Flows, 9 Months..................8
Notes to Financial Statements.................................9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................10
Part II Other Information
Item 1. Legal Proceedings............................................13
Item 2. Changes in Securities........................................13
Item 6. Exhibits & Reports on Form 8-K...............................14
</TABLE>
2 of 15
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Specialty Chemical Resources, Inc.
Condensed Balance Sheets
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
(Unaudited) (Audited)
------------- -----------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 3,346 $ 15,025
Accounts Receivables 8,129,326 6,873,256
Inventories (Note B) 9,082,943 6,832,213
Prepaid expenses 205,848 383,084
Refundable Income Taxes 51,898 51,898
------------ ------------
Total current assets 17,473,361 14,155,476
Property, plant and equipment
At cost 12,905,053 10,813,702
Less accumulated depreciation
and amortization (3,174,267) (2,739,671)
------------ ------------
9,730,786 8,074,031
Other assets
Goodwill 20,508,423 20,970,474
Other 1,176,451 1,358,471
------------ -------------
21,684,874 22,328,945
------------ -------------
Total assets $ 48,889,021 $ 44,558,452
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
3 of 15
<PAGE> 4
Specialty Chemical Resources, Inc.
Condensed Balance Sheets
(continued)
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
(Unaudited) (Audited)
---------------- -----------------
<S> <C> <C>
Current liabilities
Accounts payable $ 7,725,162 $ 5,764,259
Deferred Income Taxes 203,505 242,219
Accrued expenses 966,501 787,333
Accrued cost related &
Restructuring Plan (Note C) 77,488 941,460
----------- -----------
Total current liabilities 8,972,656 7,735,271
Long-term obligations
less current maturities 9,230,497 4,512,247
Deferred Income Taxes 1,678,589 1,871,586
---------- ----------
Total non-current liabilities 10,909,086 6,383,833
Stockholders' equity
Preferred stock - $.01 par value;
authorized 2,000,000 shares - -
Common Stock - $.10 par value;
authorized 13,000,000 shares;
issued and outstanding 3,932,771
and 3,932,776 393,277 393,277
Additional paid in capital 41,878,575 41,878,575
Accumulated deficit (13,264,573) (11,832,504)
----------- -----------
29,007,279 30,439,348
----------- -----------
$48,889,021 $44,558,452
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
4 of 15
<PAGE> 5
Specialty Chemical Resources, Inc.
Condensed Statements of Operations
(Unaudited)
For the 3 month periods ended:
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1994
------------------ ------------------
<S> <C> <C>
Net Sales $10,521,005 $11,942,573
Cost of Goods Sold 8,689,452 9,966,231
----------- -----------
Gross profit 1,831,553 1,976,342
Selling, general and administrative
expenses 1,600,400 1,698,557
Amortization of intangibles 217,173 218,448
----------- -----------
Operating profit (loss) 13,980 59,337
Other (income) expense
Interest expense 214,465 134,648
Other 13,836 (15,084)
----------- -----------
228,301 119,564
----------- -----------
Earnings (loss) before income
taxes and extraordinary items (214,321) ( 60,227)
Income taxes (benefit) ( 80,000) (211,000)
----------- -----------
Net Earnings (loss) before extra-
ordinary items (134,321) 150,773
Extraordinary gain (loss)(Note A) -0- (831,000)
----------- -----------
Net earnings (loss) $ (134,321) $ (680,227)
=========== ===========
Earnings (loss) per common share:
Earnings (loss) before extra-
ordinary item $ (.03) $ .04
Extraordinary item $ (.00) $ (.21)
---------- -----------
Net Earnings $ (.03) $ (.17)
========== ===========
Weighted average shares outstanding 3,962,252 3,932,777
</TABLE>
See accompanying Notes to Financial Statements.
5 of 15
<PAGE> 6
Specialty Chemical Resources, Inc.
Condensed Statements of Operations
(Unaudited)
For the 9 month periods ended:
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1994
------------------ ------------------
<S> <C> <C>
Net Sales $31,989,959 $32,437,452
Cost of Goods Sold 26,785,649 27,147,678
----------- -----------
Gross profit 5,204,310 5,289,774
Selling, general and administrative
expenses 4,891,179 5,007,951
Amortization of intangibles 651,519 655,344
Proxy Contest 650,000 -0-
----------- -----------
Operating Profit (loss) (988,388) (373,521)
Other (income) expense
Interest expense 535,910 455,295
Other (12,229) (18,173)
----------- -----------
523,681 437,122
----------- -----------
Earnings (loss) before income
taxes and extraordinary items (1,512,069) (810,643)
Income taxes (benefit) (80,000) (274,000)
----------- -----------
Net earnings (loss) before extra-
ordinary items (1,432,069) (536,643)
Extraordinary gain from insurance
settlement (net of income taxes) -0- 2,163,797
----------- -----------
Net earnings $(1,432,069) $ 1,627,154
=========== ===========
Earnings (loss) per common share:
Earnings (loss) before extra-
ordinary item $ (.36) $ (.14)
Extraordinary item $ -0- $ .55
---------- ----------
Net earnings $ (.36) $ .41
========== ==========
Weighted average shares outstanding 3,962,252 3,932,777
</TABLE>
See accompanying Notes to Financial Statements.
6 of 15
<PAGE> 7
Specialty Chemical Resources, Inc.
Condensed Statements of Cash Flows
(Unaudited)
For the 3 month periods ended:
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1994
------------------ ------------------
<S> <C> <C>
Net cash provided (used) by operating
activities $ 93,290 $ (399,461)
Cash flows from investing activities:
Expenditures for property, plant and
equipment - net (441,277) (259,278)
----------- -----------
Net cash provided (used) by
investing activities (441,277) (259,278)
Cash flows from financing activities:
Increase (decrease) in capital lease
obligations 1,050 10,171
Payments on revolver (1,920,000) (1,870,000)
Proceeds on revolver 2,265,000 2,514,000
----------- -----------
Net cash provided (used) by
financing activities 346,050 654,171
----------- -----------
Net increase (decrease) in cash
and cash equivalents (1,937) ( 4,568)
Cash and cash equivalents at beginning
of period 5,283 22,892
----------- -----------
Cash and cash equivalents at end
of period $ 3,346 $ 18,324
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
7 of 15
<PAGE> 8
Specialty Chemical Resources, Inc.
Condensed Statements of Cash Flows
(Unaudited)
For the 9 month periods ended:
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1994
------------------ ------------------
<S> <C> <C>
Net cash provided (used) by operating
activities $(2,272,567) $ 5,477,895
Cash flows from investing activities:
Expenditures for property, plant and
equipment - net (2,460,162) (354,433)
----------- ----------
Net cash provided (used) by
investing activities (2,460,162) (354,433)
Cash flows from financing activities:
Payments on revolver (4,455,000) (15,165,000)
Increase (decrease) in capital lease
obligations 1,050 10,171
Proceeds on revolver 9,175,000 10,017,000
----------- -----------
Net cash provided (used) by
financing activities 4,721,050 (5,137,829)
----------- -----------
Net increase (decrease) in cash
and cash equivalents (11,679) (14,367)
Cash and cash equivalents at beginning
of period 15,025 32,691
----------- -----------
Cash and cash equivalents at end
of period $ 3,346 $ 18,324
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
8 of 15
<PAGE> 9
Specialty Chemical Resources, Inc.
Notes to Financial Statements
Note A - Summary of Significant Accounting Policies
The accompanying audited and unaudited financial statements have been
prepared in conformity with generally accepted accounting principles and all
adjustments are of a normal recurring nature and are, in the opinion of
management, necessary to present fairly the financial position of Specialty
Chemical Resources, Inc. (The "Company") at December 31, 1994 and September 30,
1995 and the results of operations and cash flows for the interim periods ended
September 30, 1995.
The effective tax rate for the nine-months ended September 30, 1994 was
revised to 33.8% upon electing gain recognition on the replacement of the fire
damaged assets with the filing of the tax return in the third quarter then
ended. The tax affect based on this revised rate for the nine-months ended
September 30, 1994 and the quarter was a benefit of $211,000. The
extraordinary gain booked in the second quarter had a tax impact of $831,000 of
tax, which arose on the replacement of the fire damaged assets with the filing
of the tax return.
Any other significant accounting policies employed in the preparation of
the financial statements are included in the Company's most recent Form 10-K.
Note B - Inventories
Inventories are stated at the lower of cost or market determined by the
last-in, first-out (LIFO) method for raw materials and the first-in, first-out
(FIFO) method for finished goods.
The Company's inventories consisted of the following at:
<TABLE>
<CAPTION>
September 30, December 3l,
1995 1994
------------ -----------
<S> <C> <C>
Raw materials $5,784,486 $4,368,396
Finished goods 3,908,627 3,049,421
---------- ----------
Total FIFO cost 9,693,113 7,417,817
Less: Excess of FIFO cost over
LIFO 610,170 585,604
---------- ----------
Total LIFO cost $9,082,943 $6,832,213
---------- ----------
</TABLE>
9 of 15
<PAGE> 10
Note C - Restructuring Plan
In the fourth quarter of 1994, the Company's Board of Directors approved a
plan to reduce the Company's cost structure and to improve operations through
the consolidation of facilities and reductions in the number of employees.
During the nine months ended September 30, 1995 the Company charged $864,000
against the Restructuring Plan accrual. These charges were composed of
$260,000 for the discontinuation of a product line, $9,000 for employee
termination benefits, $502,000 for the abandonment of certain equipment, and
$93,000 for the abandonment of leasehold improvements. The manufacturing
facilities consolidation is substantially completed; only $77,000 remains
accrued of an original accrual of $941,000. The Company anticipates the
remainder of the Restructuring Plan will be completed by December 31, 1995.
Note D - Legal Proceedings
There have been no material changes in the status of legal proceedings
pending against the Company other than that which was reported on the Company's
most recent Form 10-K.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain items included in the Company's Statement
of Operations.
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------- -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales......................................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................................ 83.7% 83.7% 82.6% 83.5%
------ ------ ------ ------
Gross profit.................................... 16.3% 16.3% 17.4% 16.5%
Selling, general and administrative expenses...... 15.3% 15.4% 15.2% 14.2%
Operating profit.(loss)......................... (3.1%) (1.2%) 0.1% 0.5%
Interest expense.................................. 1.7% 1.4% 2.0% 1.1%
</TABLE>
Net sales of $31,990,000 for the nine-month period ended September 30,
1995, were $447,000, or 1.4%, below the comparable period in the prior year.
This decrease occurred as a result of production shortfalls during the third
quarter.
10 of 15
<PAGE> 11
For the third quarter ended September 30, 1995, net sales of $10,521,000
were $1,422,000, or 11.9%, below the comparable period, in the prior year.
This decrease was mainly attributable to production shortfalls during the third
quarter.
Cost of goods sold for the nine-month period ended September 30, 1995,
decreased by $362,000 as compared to the same period in the prior year. This
decrease was due principally to decreased sales with respect to the nine month
period ended September 30, 1995.
Cost of goods sold as a percentage of net sales was 83.7% for both the
nine-month periods ended September 30, 1994 and 1995, respectively.
Cost of goods sold decreased by $1,277,000 for the three-months ended
September 30, 1995. This decrease was due principally to decreased sales with
respect to the three months ended September 30, 1995 as compared to the same
period in the prior year. Cost of goods sold decreased as a percentage of net
sales from 83.5% to 82.6% for the three-months ended September 30, 1995 as
compared to the same period in the prior year.
Selling, general and administrative expenses were $4,891,000 for the
nine-month period September 30, 1995, or 15.3% of net sales. Selling, general
and administrative expenses were $5,008,000 or 15.4% of net sales for the same
period in 1994. The decrease of $117,000 was due to decreases in commission
and other related expenses incurred from the sales of branded products and
reduced staffing levels.
Selling, general, and administrative expenses were $1,600,000 for the
quarter end September 30, 1995, or 15.2% of net sales. Selling, general, and
administrative expenses were $1,699,000, or 14.2% of net sales for the same
period in 1994. The decrease of $99,000 was due to the same factors discussed
above with respect to the three months ended September 31, 1995 and 1994. The
increase in percent of sales was due to reduced sales during the 1995 period.
During the second quarter of 1995, a group of stockholders (the
"Committee") solicited proxies in opposition to the Company's nominees for its
Board of Directors (the "Proxy Contest"). The purpose of the Proxy Contest was
to attempt to remove, by stockholder vote, the then-current Board of Directors
and to replace them with a slate of new directors nominated by the Committee.
The Proxy Contest was unsuccessful and the Company's incumbent Board nominees
were reelected. The Company incurred charges of $650,000 in responding to the
Proxy Contest.
Interest expense for the nine-months ended September 30, 1995, was 1.7% of
net sales versus 1.4% for the comparable period in the prior year. Interest
expense was $536,000 for the nine-months ended September 30, 1995, an increase
of $81,000 from the nine-months ended September 30, 1994. This increase was
due to increased borrowing under the "Credit Agreement". See "Liquidity and
Capital Resources".
11 of 15
<PAGE> 12
Interest expense for the quarter ended, September 30, 1995, was 2.0% of
net sales versus 1.1% for the comparable period in the prior year. Interest
expense was $214,000 for the quarter ended September 30, 1995, an increase of
$79,000 from the quarter ended September 30, 1994 this increase is due to
increased borrowings under the increased Credit Agreement. See "Liquidity and
Capital Resources".
The Company recorded a net loss for the nine months ended September 30,
1995, of $1,432,069, or $.36 per share on weighted average shares outstanding
of 3,962,252. This compared to a net earnings of $1,627,154, or $.41 per share
on weighted average shares outstanding of 3,932,727 for the same period in the
prior year. The loss for nine months ended September 30, 1995 was partially
the result of expenses totaling $650,000 related to the proxy contest discussed
above. Had the Proxy Contest not occurred the net loss would have been
$782,069 or $.20 per share on weighted average shares outstanding of 3,962,252.
The earnings for the nine month period ended September 30, 1994 were the result
of an extraordinary gain of $2,163,797 (net of taxes). The extraordinary gain
resulted from the insurance settlement on the property and business
interruption claims related to the December, 1992 fire at the Macedonia, Ohio
plant. Had the Company not recognized the extraordinary gain a net loss would
have been reported of $536,643, or $.14 per share on 3,932,777 weighted average
shares outstanding.
For the quarter ended September 30, 1995, the Company lost $.03 per share
on weighted average shares outstanding of 3,962,252 as compared to a loss of
$.17 per share on weighted average shares outstanding of 3,932,777 for the same
period in the prior year. The earnings for the quarter ended September 30,
1994, were affected by an $831,000 tax adjustment of $.21 per share on the
extraordinary gain realized in the second quarter. The tax adjustment arose
upon electing gain recognition on the replacement of the fire damaged assets
with the filing of the tax return in the third quarter. Had the Company not
recognized the extraordinary loss, net earnings would have been reported of
$150,773, or $.04 per share on 3,932,777 weighted average shares outstanding.
Liquidity and Capital Resources
As of September 30, 1995, the Company's ratio of current assets to current
liabilities was 1.95 to 1 and the quick ratio (cash, cash equivalents, and
accounts receivable, divided by current liabilities) was .91 to 1.
During the nine-months ended September 30, 1995, the Company incurred
$535,910 in interest expense and made interest payments totaling $523,448.
Accrued interest at September 30, 1995 was $73,451. Substantially all of the
Company's interest expense was related to the "Credit Agreement" discussed
below.
12 of 15
<PAGE> 13
The Company, as borrower, is a party to a credit agreement (the "Credit
Agreement") that provides for a $10,000,000 revolving line of credit at an
interest rate equal to the prime rate or the London Inter-Bank Offered Rate
(LIBOR), at the Company's election. The Credit Agreement, entered into on
March 30, 1992 and expiring on May 31, 1997, is a facility that allows for
borrowings based upon a formula comprised of inventory, accounts receivable and
fixed assets, less environmental compliance reserve, if any. No compliance
reserve has been required
Under the terms of the Credit Agreement, the Company is required to comply
with various covenants, the most restrictive of which relate to restrictions on
distributions from the Company to its stockholders, maintenance of certain
financial ratios and levels of tangible net worth and limits on capital
expenditures. As of September 30, 1995, approximately $780,000 was unused and
available under the Credit Agreement.
The Company spent $2,460,000 on capital improvements during the nine-month
period ended September 30, 1995 principally as a result of the consolidation of
its manufacturing facilities in Macedonia, Ohio. The final phase of the
Company's facilities consolidation plan entails the purchase of its leased
distribution center in Macedonia, Ohio (consumated October 6, 1995). This
acquisition, valued at $1,080,000, was financed approximately 85% with a real
estate mortgage. Additionally, the Company expects to spend approximately
$250,000 on capital improvements during the balance of the current fiscal
year. Such expenditures are expected to be funded from cash generated by
operations and borrowings under the Credit Agreement.
Part II - Other Information
Item 1. Legal Proceedings
There have been no material changes in the status of legal proceedings
pending against the Company.
Item 2. Changes in Securities
Pursuant to action by the Company's Board of Directors on October 2, 1995,
the Company authorized the issuance of a series of Preferred Stock consisting
of 3,500 shares designated Cumulative Convertible preferred Stock, $.01 par
value (the "Preferred Stock"). On October 6, 1995, a Certificate of Powers,
Designations, Preferences and Rights with respect to the Preferred Stock (the
"Certificate of Designations") was duly filed; and on the same date, Edwin M.
Roth, The Company's President and Chief Executive Officer, purchased 3,500
shares of Preferred Stock for an aggregate purchase price of $350,000.
Pursuant to the terms of the Preferred Stock, the holder is entitled to
dividends at the rate of 7.5% per annum, which are cumulative from the date of
original issuance and payable on January 1, April 1, July 1, and
13 of 15
<PAGE> 14
October 1 of each year commencing January 1, 1996. The shares of Preferred
Stock may not be redeemed prior to October 6, 1998, and are required to be
redeemed November 6, 2000. The redemption price would equal $350,000 plus
accrued and unpaid dividends.
So long as shares of the Preferred Stock are outstanding, no dividends may
be paid on the Company's Common Stock nor may any shares of Common Stock be
redeemed unless all cumulative dividends required to have been paid have been
paid.
The Preferred Stock is convertible into Common Stock at the initial
conversion price of $5 per share of Common Stock (subject to adjustment as
provided in the Certificate of Designations). the Preferred Stock has no
voting rights; however, the Preferred Stock has a preference over the Common
Stock of The Company upon liquidation of the Company. The liquidation
preference would equal $350,000 plus accrued and unpaid dividends.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
3. Certificate of Powers, Designations, Preferences, and Rights
providing for an issue of 3,500 shares of Cumulative Convertible Preferred
Stock, $.01 par value, designated "Cumulative Convertible Preferred Stock" and
dated October 6, 1995.
10. Stock Purchase Agreement between the Company and Edwin M. Roth,
dated October 6, 1995.
27. Financial Data Schedule.
(b) The Company filed no reports on Form 8-K during the quarter ended
September 30, 1995.
14 of 15
<PAGE> 15
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Specialty Chemical Resources, Inc.
By:/s/ COREY ROTH November 13, 1995
--------------------------------
Corey Roth
Vice President, and Treasurer
(Principal Financial Officer)
15 of 15
<PAGE> 1
EXHIBIT 3
SPECIALTY CHEMICAL RESOURCES, INC.
----------------------------------
CERTIFICATE OF POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS, PROVIDING FOR AN
ISSUE OF 3,500 SHARES OF CUMULATIVE CONVERTIBLE PREFERRED STOCK, $.01 PAR
VALUE, DESIGNATED "CUMULATIVE CONVERTIBLE PREFERRED STOCK"
We, Edwin M. Roth, President, and George Aronoff, Secretary, of Specialty
Chemical Resources, Inc., (hereinafter referred as the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 151 thereof, do
hereby certify:
That pursuant to authority conferred upon the Board of Directors by its
Certificate of Incorporation, as amended, said Board of Directors, by unanimous
vote at a meeting of the Board of Directors on October 2, 1995, duly authorized
and adopted the following resolution providing for the issuance of a series of
Preferred Stock, $.01 par value, to be designated "Cumulative Convertible
Preferred Stock":
"RESOLVED, that an issue of a series of Preferred Stock, to consist of 3,500
shares, designated Cumulative Convertible Preferred Stock, $.01 par value, is
hereby provided for and the powers, designations, preferences, and rights, and
the qualifications, limitations and restrictions thereof are hereby fixed as
follows:
1. Dividend Rate.
--------------
(a) Dividends on each share of the Cumulative Convertible Preferred
Stock shall accrue from the date of its original issue at a rate of $7.50
per annum per share (the "Rate"). Such dividends shall be cumulative from
the date of such original issue and shall be payable, when and as declared
by the Board of Directors, out of funds legally available for such purpose,
on January 1, April 1, July 1, and October 1, of
<PAGE> 2
each year, commencing January 1,1996, (each such date being hereinafter
called individually a "Dividend Payment Date" and collectively the "Dividend
Payment Dates"), except that if any such date is a Saturday, Sunday or legal
holiday then such dividend shall be payable on the first immediately
succeeding calendar day which is not a Saturday, Sunday or legal holiday.
Each such dividend shall be paid to the holders of record of shares of the
Cumulative Convertible Preferred Stock as they appear on the books of the
Corporation on such record dates, not exceeding 60 days nor fewer than ten
days preceding the payment dates thereof, as shall be fixed by the Board of
Directors of the Corporation. Dividends in arrears may be declared and paid
at any time, without reference to any regular Dividend Payment Date, to
holders of record on such date, not exceeding 60 days preceding the payment
date thereof, as may be fixed by the Board of Directors of the
Corporation.
(b) So long as any shares of the Cumulative Convertible Preferred Stock
are outstanding, no dividend or distribution (other than a dividend or
distribution paid in Common Stock or in any other stock of the Corporation
ranking junior to the Cumulative Convertible Preferred Stock) shall be
declared or paid or set aside for payment upon the Common Stock or upon any
other stock of the Corporation ranking junior to the Cumulative Convertible
Preferred Stock, nor shall any Common Stock or any other stock of the
Corporation ranking junior to the Cumulative Convertible Preferred Stock be
redeemed, purchased or otherwise acquired for any consideration (or any
monies be paid to or made available for a sinking fund for the redemption of
any shares of any such stock) by the Corporation unless, in each case,
-2-
<PAGE> 3
the full cumulative dividends required to have been paid to date on all
outstanding shares of the Cumulative Convertible Preferred Stock shall have
been paid.
(c) Dividends payable on the Cumulative Convertible Preferred Stock for
any full quarterly period shall be computed by dividing the Rate by four.
Dividends payable on the Cumulative Convertible Preferred Stock for the
initial dividend period or any period less than a full quarterly period
shall be computed on the basis of a 365 day year.
2. Redemption.
-----------
(a) The shares of Cumulative Convertible Preferred Stock will not be
redeemable, either in whole or in part, prior to October 6, 1998. Such
shares may be redeemed thereafter at the redemption price of $100 per share,
plus an amount equal to accrued and unpaid dividends thereon (the total sum
so payable on any such redemption being herein referred to as the "Redemption
Price").
(b) Upon November 6, 2000, (the "Mandatory Redemption Date") the
Corporation shall redeem all outstanding Cumulative Convertible Preferred
Stock by paying in cash therefor an amount per share equal to the Redemption
Price. The Optional Redemption Date and the Mandatory Redemption Date will
collectively be referred to herein as a "redemption date."
(c) The term "Accrued and Unpaid Dividends" shall mean a sum equal to
$7.50 per share per annum from the date from which dividends on the shares of
the Cumulative Convertible Preferred Stock accrued to and including the
redemption date, less the aggregate amount of all dividends theretofore paid
thereon.
-3-
<PAGE> 4
(d) In the event the Corporation shall redeem shares of the Cumulative
Convertible Preferred Stock, notice of such redemption shall be given by
registered mail, not less than ten nor more than sixty days prior to the
redemption date, to each holder of record of the shares to
be redeemed, at such holder's address as the same appears on the books of
the Corporation. Each such notice shall state: (i) the redemption date;
(ii) the number of shares of the Cumulative Convertible Preferred Stock to be
redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii)
the place or places where certificates for such shares are to be surrendered
for payment of the Redemption Price; (iv) that shares of Cumulative
Convertible Preferred Stock called for redemption may be converted at any
time before the close of business on the third day before the redemption
date; (v) the conversion price: and (vi) that dividends on the shares to be
redeemed will cease to accrue on such redemption date. In case of the
redemption of only a part of the Cumulative Convertible Preferred Stock at
the time outstanding, such redemption shall be made pro rata as nearly as
practicable, according to the number of shares then held by the respective
holders, with adjustment to the extent practicable to equalize for any prior
redemptions, provided that only full shares shall be selected for redemption.
(e) Upon notice having been mailed as aforesaid, from and after the
close of business on the redemption date (unless default shall be made by the
Corporation in making payment of the Redemption Price of the shares called
for redemption), dividends on the shares of the Cumulative Convertible
Preferred Stock so called for redemption shall cease to accrue, and said
shares shall no longer be deemed to be
-4-
<PAGE> 5
outstanding, and all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation the Redemption
Price) shall cease. Upon surrender in accordance with said notice of the
certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors of the Corporation shall so require and
the notice shall so state), such shares shall be redeemed by the Corporation
at the Redemption Price aforesaid.
(f) So long as any shares of Cumulative Convertible Preferred Stock
remain outstanding, any shares of the Cumulative Convertible Preferred Stock
which shall at any time have been redeemed by the Corporation shall, upon
such redemption, be retired and thereafter may not be reissued except as
part of a particular series of preferred stock ranking junior to the
Cumulative Convertible Preferred Stock.
(g) Notwithstanding the foregoing provisions of this paragraph 2,
unless the full cumulative dividends required to have been paid to date on all
outstanding shares of the Cumulative Convertible Preferred Stock shall have
been paid no shares of the Cumulative Convertible Preferred Stock shall be
redeemed unless all outstanding shares of the Cumulative Convertible Preferred
Stock are simultaneously redeemed, and the Corporation shall not purchase or
otherwise acquire any shares of the Cumulative Convertible Preferred Stock.
3. Conversion.
-----------
(a) The holder of any share of the Cumulative Convertible Preferred
Stock at his option may at any time (except that if any such share shall
have been called for redemption, then, as to such share, such right shall
terminate at the close of
-5-
<PAGE> 6
business on the third day before the date fixed for such redemption, unless
default shall be made by the Corporation in the payment of the redemption
price of the shares called for redemption) convert such share into a number
of fully paid and non-assessable shares of Common Stock determined pursuant
to paragraph 3(d). Such right shall be exercised by the surrender of the
share so to be converted to the Corporation at any time during normal
business hours at the office or agency then maintained by it for payment of
dividends on the shares of the Cumulative Convertible Preferred Stock (which
may be the Corporation's principal place of business) (the "Payment Office"),
accompanied by written notice to the Corporation of such holder's election to
convert and (if so required by the Corporation or any conversion agent) by an
instrument of transfer, in form satisfactory to the Corporation and to any
conversion agent, duly executed by the registered holder or by his duly
authorized attorney, and transfer tax stamps or funds therefor, if
required pursuant to paragraph 3(i).
(b) As promptly as practicable after the surrender for conversion of any
share of the Cumulative Convertible Preferred Stock in the manner provided in
paragraph 3(a) and the payment in cash of any amount required by the
provisions of paragraph 3(i), the Corporation will deliver or cause to be
delivered at the Payment Office to or upon the written order of the holder of
such share, certificates representing the number of full shares of Common
Stock issuable upon such conversion, issued in such name or names as such
holder may direct in accordance with and subject to the terms and conditions
of the Stock Purchase Agreement dated as of October 6, 1995, between the
Corporation and the original holders of the
-6-
<PAGE> 7
Cumulative Convertible Preferred Stock. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the share in proper order for conversion, and all rights of the
holder of such share as a holder of such share shall cease at such time and
the person or persons in whose name or names the certificates for such shares
of Common Stock are to be issued shall be treated for all purposes as having
become the record holder or holders thereof at such time and such conversion
shall be at the Conversion Price (as defined in paragraph 3(d)) in effect at
such time; provided, however, that any such surrender and payment on any date
when the stock transfer books of the Corporation shall be closed shall
constitute the person or persons in whose name or names the certificates for
such shares of Common Stock are to be issued as the record holder or holders
thereof for all purposes immediately prior to the close of business on the
next succeeding day on which such stock transfer books are opened and such
conversion shall be at the Conversion Price in effect at such time on such
succeeding day.
If the last day for the exercise of the conversion right shall be other
than a day on which the stock transfer books of the Corporation are open,
then such conversion right may be exercised on the next succeeding day on
which such stock transfer books are opened.
(c) No adjustments in respect of dividends shall be made upon the
conversion of any share of the Cumulative Convertible Preferred Stock;
provided, however, that if a share shall be converted subsequent to the
record date for any Dividend Payment Date but on or prior to such Dividend
Payment Date, the registered holder of such share at the close of business on
such record date shall be entitled to receive the dividend payable on such
share on such Dividend Payment
-7-
<PAGE> 8
Date notwithstanding the conversion thereof or the Corporation's default in
payment of the dividend due on such Dividend Payment Date.
(d) The initial conversion price ("Conversion Price") shall be $5.00
per share of the Common Stock (equivalent to a conversion rate of 20 shares
of Common Stock for each share of the Cumulative Convertible Preferred
Stock). The Conversion Price shall be subject to adjustment as
follows:
(i) In case the Corporation shall (A) pay a dividend or make a
distribution on its Common Stock in shares of its capital stock (whether
in shares of Common Stock or of capital stock of any other class), (B)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (C) combine its outstanding shares of Common Stock into a smaller
number of shares, or (D) issue by reclassification (including any
reclassification in connection' with a merger or consolidation in which
the Corporation is the continuing corporation) of its shares of Common
Stock any shares of capital stock of the Corporation, then the Conversion
Price in effect immediately prior to such action shall be adjusted so
that the holder of any share of the Cumulative Convertible Preferred
Stock thereafter surrendered for conversion shall be entitled to receive
the number and kind of shares of capital stock which such holder would
have owned immediately following such action had such share been
converted immediately prior thereto. An adjustment made pursuant to this
subparagraph (i) shall become effective immediately after the record date
in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a
-8-
<PAGE> 9
subdivision, combination or reclassification. If, as a result of an
adjustment made pursuant to this subparagraph (i), the holder of any
share thereafter surrendered for conversion shall become entitled to
receive shares of two or more classes of capital stock of the
Corporation, the Board of Directors or a duly authorized committee
thereof (whose determination shall be conclusive) shall determine the
allocation of the adjusted Conversion Price between or among shares of
such classes of capital stock. After such allocation, the Conversion
Price of each class of capital stock shall thereafter be subject to
adjustment in a manner and on terms as nearly equivalent as practicable
to those applicable to Common Stock under this paragraph 3.
(ii) In case the Corporation shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock (or securities convertible into Common
Stock) at a price per share less than the current market price per share
(as determined pursuant, to subparagraph (v) below) of the Common Stock
on the record date mentioned below, the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to the date of issuance
of such rights or warrants by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding immediately prior to the
issuance of such rights or warrants plus the number of shares of Common
Stock which the aggregate offering price of the total number of shares of
Common Stock so offered (or the aggregate Conversion Price of the
convertible securities so offered) would
-9-
<PAGE> 10
purchase at such current market price per share of Common Stock, and of
which the denominator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such rights or warrants
plus the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible securities so
offered are convertible). Such adjustment shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights or warrants. In case any rights or
warrants on account of which any adjustment is required to be made
pursuant to this subparagraph (ii) are issued for consideration, the
offering price of the shares to be issued upon exercise of any such right
or warrant shall be deemed to include such consideration as well as the
additional consideration to be received by the Corporation upon the
exercise of such right or warrant (determined as provided in subparagraph
(iv) below). In case any rights or warrrants on account of which any
adjustment has been made pursuant to this paragraph (ii) expire without
having been exercised, the Conversion Price shall be further adjusted
effective immediately after such expiration, so that such Conversion
Price shall equal the same Conversion Price as would have obtained had
the adjustment which was made upon the issuance of such rights or
warrants been made on the basis that the offering of additional shares of
Common Stock (or securities convertible into Common Stock) for
subscription or purchase related solely to those shares of additional
Common Stock (or securities convertible into Common Stock) actually
subscribed for or purchased.
-10-
<PAGE> 11
(iii) In case the Corporation shall distribute to holders of its
Common Stock on account of its Common Stock any evidences of its
indebtedness or assets (excluding any cash dividends or other cash
distributions out of funds legally available therefor, or distributions
referred to in subparagraph (i) above) or rights, options or warrants to
subscribe for securities of the Corporation (excluding those referred to
in subparagraph (ii) above), or any other securities of the Corporation
other than Common Stock, then in each such case the Conversion Price
shall be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the date
of such distribution by a fraction of which the numerator shall be the
current market price per share (determined as provided in subparagraph
(v) below) of the Common Stock on the record date mentioned below less
the then fair market value (as determined by the Board of Directors of
the Corporation or a duly authorized committee thereof, whose
determination shall be conclusive) on such record date of the assets,
evidences of indebtedness, options, rights or warrants or other
securities applicable to one share of Common Stock, and of which the
denominator shall be such current market price per share of Common Stock
on such record date. Such adjustment shall become effective immediately
after the record date for the determination of stockholders entitled
to receive such distribution.
(iv) For purposes of any computation respecting consideration
received pursuant to subparagraph (ii) above, the following shall apply:
-11-
<PAGE> 12
(a) In the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided
that in no case shall any deductions be made for any commissions,
discounts or other expenses incurred by the Corporation for any
underwriting of the issue or otherwise in connection therewith;
(b) In the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined by the Board of Directors (irrespective of the accounting
treatment thereof), whose determination shall be conclusive; and
(c) In the case of the issuance of securities convertible into or
exchangeable for shares of Common Stock, the aggregate consideration
received therefor shall be deemed to be the consideration received by
the Corporation for the issuance of such securities plus the
additional consideration, if any, to be received by the Corporation
upon the conversion or exchange thereof (the consideration in each
case to be determined in the same manner as provided in subparagraphs
(a) and (b) of this subsection (iv)).
(v) For the purpose of any computation under subparagraph (ii)
and (iii) above, the current market price per share of Common Stock on
any date shall be deemed to be the average of the daily closing prices of
the Common Stock for the 30 most recent consecutive trading days
commencing no more than 45 trading days before the day in question. The
closing price for each day shall be the closing price on the American
Stock Exchange, or, in case no such reported sales take place on such
day, the average of the reported closing bid and asked quotations on the
American Stock Exchange, or, if the Common Stock is not listed on such
Exchange or no such quotations are available, the last sales price in the
over-the-counter market reported by the National Association of
Securities Dealers Automated Quotations System, or if not reported by
such System, the average of the high bid and low asked
-12-
<PAGE> 13
quotations in the over-the-counter market as reported by National
Quotation Bureau, incorporated, or any similar organization, or if no
such quotations are available, the fair market price as determined by the
Board of Directors of the Corporation (whose determination shall be
conclusive).
(vi) In any case in which this paragraph 3(d) shall require that an
adjustment be made immediately, retroactive to a record date, the
Corporation may elect to defer (but only until five business days
following the mailing by the Corporation of the notice described in
paragraph 3(d)(viii) below) issuing to the holder of any share converted
after such record date the excess number of (a) the shares of Common
Stock and other capital stock of the Corporation issuable upon such
conversion (after adjustment) over (b) the shares of Common Stock and
other capital stock of the Corporation issuable upon such conversion only
on the basis of the conversion price prior to adjustment. In any case in
which this paragraph 3(d) shall require that an adjustment be made
immediately following an expiration date for any warrants or rights
issued to all holders of the Corporation's Common Stock, the Corporation
may elect to defer (but only until five business days following the
mailing by the Corporation of the notice described in paragraph
3(d)(viii) below) issuing to the holder of any share converted after such
expiration date all shares of Common Stock and other capital stock of
the Corporation issuable upon such conversion.
(vii) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such
-13-
<PAGE> 14
price; provided, however, that any adjustments which by reason of this
subparagraph (vii) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations
under this paragraph 3 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be.
(viii) Whenever the Conversion Price is adjusted as herein
provided, the Corporation shall promptly (a) file at the Payment Office a
certificate duly signed by an officer of the Corporation setting forth
the Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment, which certificate shall
be conclusive evidence of the correctness of such adjustment, and (b)
mail or cause to be mailed a notice of such adjustment in the Conversion
Price to the holders of shares of the Cumulative Convertible Preferred
Stock at their last addresses as they shall appear upon the books of
the Corporation.
(ix) The term "Common Stock" shall mean the Corporation's Common
Stock, par value $.10, as the same exists at the date of filing of the
Certificate of Powers, Designations, Preferences and Rights with respect
to the Cumulative Convertible Preferred Stock or any other class of stock
resulting from successive changes or reclassifications of such Common
Stock consisting solely of changes in par value, or from par value to no
par value, or from no par value to par value. In the event that at any
time as a result of an adjustment made pursuant to this paragraph 3(d),
the holder of any share thereafter surrendered for conversion shall
become entitled to receive
-14-
<PAGE> 15
any shares of the Corporation other than shares of its Common Stock,
thereafter the Conversion Price of such other shares so receivable upon
conversion of any share 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 Common Stock contained in subparagraphs (i)
through (viii) above, and the provisions of paragraphs 3(a) through (c)
and paragraphs 3(e) through (k) with respect to the Common Stock shall
apply on like or similar terms to any such other shares.
(e) No fractional shares of stock shall be issued upon the conversion of
any share or shares of the Cumulative Convertible Preferred Stock. In lieu
of any fractional share which would otherwise be issuable, the Corporation
shall adjust such fractional interest by payment to the holder of such
surrendered share or shares of an amount in cash equal (computed to the
nearest cent) to the current market value of such fractional interest,
computed on the basis of the closing price of the Common Stock on the
American Stock Exchange on the trading day prior to the date of conversion,
or, in case no such reported sale takes place on such day, the average of the
reported closing bid and asked quotations on the American Stock Exchange, or,
if the Common Stock is not listed on such Exchange or no such quotations are
available, the last sales price in the over-the-counter market reported by
the National Association of Securities Dealers Automated Quotations System,
or if not reported by such System, the average of the high bid and low asked
quotations in the over-the-counter market as reported by National Quotation
Bureau, incorporated, or any similar organization, or if no such quotations
are available, the fair market price
-15-
<PAGE> 16
as determined by the Board of Directors of the Corporation (whose
determination shall be conclusive).
(f) If any of the following shall occur, namely:
(i) any consolidation or merger to which the Corporation is a
party, other than a consolidation or a merger in which the Corporation is
a continuing or surviving Corporation and which does not result in any
reclassification of, or change (other than a change in par value or from
par value to no par value or from no par value to par value, or as a
result of a subdivision or combination) in, outstanding shares of the
Common Stock; or
(ii) any sale or transfer to another corporation of all or
substantially all of the assets of the Corporation;
then the holder of each share then outstanding shall have the right to
convert such share into the kind and amount of shares of stock and/or other
securities and property receivable upon such consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock issuable upon
conversion of such share immediately prior to such consolidation, merger,
sale or conveyance, subject to adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
paragraph. The provisions of this paragraph 3(f) shall similarly apply to
successive consolidations, mergers, sales or conveyances.
(g) The Corporation covenants that it will at all times reserve and keep
available, solely for the purpose of issue upon conversion of the shares of
the Preferred Stock, the full number of shares of Common Stock as shall be
issuable upon the conversion of all such outstanding shares, provided that
nothing contained
-16-
<PAGE> 17
herein shall be construed to preclude the Corporation from satisfying its
obligations in respect of the conversion of any shares of the Cumulative
Convertible Preferred Stock by delivery of repurchased shares of Common
Stock which are held in the treasury of the Corporation.
The Corporation covenants that all shares of Common Stock which
shall be issued upon conversion of the shares will upon issue be fully
paid and nonassessable and not subject to preemptive rights.
(h) Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value of the Common
Stock, the Corporation will take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and nonassessable shares of Common
Stock at the Conversion Price as so adjusted.
(i) The issuance of certificates for shares of Common Stock upon
conversion shall be made without charge for any stamp or other similar
tax in respect of such issuance. However, if any such certificate is to
be issued in a name other than that of the holder of record of the share
or shares converted, the person or persons requesting the issuance
thereof shall pay to the Corporation the amount of any tax which may be
payable in respect of any transfer involved in such issuance or shall
establish to the satisfaction of the Corporation that such tax has been
paid or is not payable.
(j) Notwithstanding anything elsewhere contained herein, any
funds which at any time shall have been deposited by the Corporation or
on its behalf with any paying agent for the purpose of paying dividends
on or the redemption price of any
-17-
<PAGE> 18
of the shares of the Cumulative Convertible Preferred Stock and which
shall not be required for such purposes because of the conversion of such
shares, as provided in this paragraph 3, shall, upon delivery to the
paying agent of evidence satisfactory to it of such conversion, be repaid
to the corporation by the paying agent.
(k) In case there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, then the Corporation shall
cause to be filed with any conversion agent, and shall cause to be given
to the holders of the shares of the Cumulative Convertible Preferred
Stock at least ten days prior to the applicable record date hereinafter
specified, a notice of the date on which such dissolution, liquidation or
winding up is expected to become effective, and the date as of which it
is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such dissolution, liquidation or winding up. Failure to
give such notice or any defect therein shall not affect the legality or
validity of any proceedings described in this paragraph 3(k).
4. Voting.
-------
Holders of the Cumulative Convertible Preferred Stock shall not be entitled
to vote in respect of their Cumulative Convertible Preferred Stock on any
matter submitted to the shareholders of the Corporation.
-18-
<PAGE> 19
5. Liquidation Rights.
-------------------
(a) Upon the dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, the holders of the shares
of the Cumulative Convertible Preferred Stock shall be entitled to
receive out of the assets of the Corporation available for distribution
to stockholders, before any payment or distribution shall be made on the
Common Stock or on any other class of stock ranking junior to the
Cumulative Convertible Preferred Stock in respect of distributions upon
liquidation or winding up, the amount of $100 per share, plus a sum equal
to all dividends (whether or not earned or declared) on such shares
accrued and unpaid thereon to the date payment is made available.
(b) Neither the sale, lease or exchange (for cash, shares of stock,
securities or other consideration) of all or substantially all the
property and assets of the Corporation nor the merger or consolidation of
the Corporation into or with any other corporation or the merger or
consolidation of any other corporation into or with the Corporation,
shall be deemed to be a dissolution, liquidation or winding up, voluntary
or involuntary, for the purposes of this paragraph 5.
(c) After the payment to the holders of the shares of the
Cumulative Convertible Preferred Stock of the full preferential amounts
provided for in this
-19-
<PAGE> 20
paragraph 5, the holders of the Cumulative Convertible Preferred Stock
as such shall have no right or claim to any of the remaining assets of
the Corporation.
6. Ranking
-------
With regard to rights to receive distributions upon the dissolution,
liquidation or winding-up of the Corporation, the Cumulative Convertible
Preferred Stock shall rank prior to the Common Stock or any other class of
capital stock of the Corporation. IN WiTNESS WHEREOF, Specialty Chemical
Resources, inc. has caused this certificate to be made by its President and
Secretary, respectively, this 6th day of October, 1995.
/s/ Edwin M. Roth
------------------------------------
Edwin M. Roth, President
/s/ Ira C. Kaplan
------------------------------------
Ira C. Kaplan, Assistant Secretary
[Seal]
-20-
<PAGE> 1
EXHIBIT 10
SPECIALTY CHEMICAL RESOURCES, INC.
$350,000
7 1/2% CUMULATIVE CONVERTIBLE PREFERRED STOCK
_____________________________________
STOCK PURCHASE AGREEMENT
_____________________________________
DATED AS OF OCTOBER 6, 1995
<PAGE> 2
SPECIALTY CHEMICAL RESOURCES, INC.
9100 VALLEY VIEW ROAD
MACEDONIA, OHIO 44056-2013
Dated as of October 6, 1995
Mr. Edwin M. Roth
c/o Specialty Chemical Resources, Inc.
9100 Valley View Road
Macedonia, OH 44056-2013
Dear Mr. Roth:
The undersigned, Specialty Chemical Resources, Inc., a Delaware corporation
(herein called the "Company"), hereby agrees with you as follows:
1. AUTHORIZATION OF ISSUANCE OF SECURITIES BY THE COMPANY. The Company has
authorized the issuance and sale of 3,500 shares of its Preferred Stock, par
value $.01 per share, to be designated as the "7 1/2% Cumulative Convertible
Preferred Stock" (the "Preferred Stock"). The preferences, voting powers,
qualifications, limitations, restrictions and the special or relative rights
granted to or imposed upon the Preferred Stock are as set forth in the
Certificate of Powers, Designation, Preferences and Rights of the 7 1/2%
Cumulative Convertible Preferred Stock (the "Certificate of Designation"), a
copy of which is attached hereto as Exhibit A.
2. PURCHASE AND SALE OF SECURITIES.
(a) SECURITIES AND PURCHASE PRICE. On the terms and subject to the
conditions set forth below, the Company agrees to issue and sell to you, and
you agree to purchase from the Company, 3,500 shares of Preferred Stock to be
evidenced by one or more certificates registered in your name and in such
denominations as you shall request, at a purchase price of $100 per share.
(b) CLOSING. The purchase and delivery of the Preferred Stock to be
purchased by you shall take place simultaneously with your and the Company's
execution of this Agreement or at such other time and place as the parties
shall agree (the "closing date" or "date of closing"). At the closing, the
Company will deliver certificates representing the Preferred Stock to be
purchased by you, against payment of the aggregate purchase price therefor.
3. CONDITIONS OF CLOSING. Your obligation to purchase and pay for the
Preferred Stock on the date of closing is subject to the satisfaction on or
before the date of closing of the following conditions:
2
<PAGE> 3
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained in Section 5 of this Agreement shall be true on and as of the date of
closing as if made on and as of such date.
(b) COMPLIANCE WITH THIS AGREEMENT. The Company shall have performed and
complied with all agreements and conditions contained herein which are required
to be performed or complied with by the Company before or at the closing.
(c) PURCHASE OF REAL ESTATE. The Company shall have secured the financing
necessary, together with the proceeds from the issuance of the Preferred Stock,
for its purchase of the real estate located at 9055 Freeway Drive, Macedonia,
Ohio and shall have entered into agreements that are satisfactory to you for
the purchase of same.
4. COVENANTS.
(a) FINANCIAL STATEMENTS AND REPORTS. The Company will deliver to you, so
long as you shall hold any Preferred Stock:
(i) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(ii) promptly upon the filing thereof, copies of all registration
statements and annual, quarterly or monthly reports that the Company or any
of its Subsidiaries shall have filed with the Commission;
(iii) promptly upon transmission thereof (but in any event within ten
days after transmission), copies of all press releases and other statements
made available generally by the Company or its Subsidiaries to the public
concerning material developments in the results of operations, financial
condition, business or prospects of the Company and its Subsidiaries; and
(iv) from time to time such additional information regarding the
financial positions, results of operations, business or prospects of the
Company or any of its Subsidiaries as you or any holder of Preferred Stock
may reasonably request.
(b) ACTIONS PENDING CLOSING. From the date hereof until the closing date,
the Company will not take any action the result of which would be to cause any
of the representations and warranties contained in Section 5 hereof to be
untrue, or any of the conditions of closing contained in Section 3 hereof to be
unsatisfied, on the closing date.
5. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to you
as set forth below:
(a) CORPORATE EXISTENCE AND POWER. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers and all material
governmental licenses, authorizations,
3
<PAGE> 4
consents and approvals required to carry on its business as now conducted,
to enter into this Agreement and is duly qualified as a foreign corporation,
licensed and in good standing in each jurisdiction where qualification or
licensing is required by the nature of its businesses, or the character and
location of its property or businesses, except where the failure to be so
qualified would not have a material adverse effect on the Company.
(b) CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION. The
execution and delivery by the Company of this Agreement and the Preferred Stock
and the performance by the Company of its obligations hereunder are within the
corporate powers of the Company, have been duly authorized by all necessary
corporate action and, as of the date of closing, will not contravene or
constitute (with or without the giving of notice or lapse of time or both) a
default under any material provision of applicable law or regulation or of the
certificate of incorporation or bylaws or any material agreement to which the
Company is a party.
(c) VALID AND BINDING OBLIGATIONS. At the date hereof and at the date of
closing, this Agreement constitutes and will constitute a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms.
6. REPRESENTATIONS OF PURCHASER. You represent that you are an "accredited
investor" as such term is defined in 17 C.F.R. Section 230.501 (1986). You
represent, and it is specifically understood and agreed, that you are acquiring
the Preferred Stock for your own account for the purpose of investment and not
with a view to distribution of any thereof. You further represent that by
virtue of your position with the Company you are able to evaluate the risks of
purchasing the Preferred Stock.
7. RESTRICTIONS ON TRANSFER; REGISTRATION.
(a) RESTRICTIVE LEGEND. Except as otherwise permitted by this Section 7,
each certificate representing shares of Preferred Stock, and each certificate
issued upon the registration of transfer of any shares of such Preferred Stock
or the conversion of any shares of Preferred Stock into Restricted Common
Stock, shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 and may not be transferred in the absence of
such registration or an exemption therefrom under such Act, except under
circumstances where neither such registration nor such an exemption is
required by law. Such securities may be transferred only upon the
fulfillment of the conditions specified in a certain Stock Purchase
Agreement, dated as of October 6, 1995, between Specialty Chemical Resources,
Inc., and the purchaser named therein. A complete and correct copy of the
form of such Agreement is available for inspection at the principal office of
such Corporation or at the office or agency maintained by such Corporation as
provided in such Agreement and will be furnished to the holder of such
securities upon written request and without charge."
4
<PAGE> 5
(b) NOTICE OF PROPOSED TRANSFER; OPINIONS OF COUNSEL. Subject to the
exception set forth in the last sentence of this Section 7(b), prior to any
transfer of any Preferred Stock or Restricted Common Stock, the holder thereof
will give written notice to the Company of such holder's intention to effect
such transfer and to comply in all other respects with this Section 7(b). Each
such notice (1) shall describe the manner and circumstances of the proposed
transfer in sufficient detail to enable counsel to render the opinions referred
to below, and (2) shall designate counsel for the holder giving such notice.
The holder giving such notice will submit a copy thereof to the counsel
designated in such notice and the Company will promptly submit a copy thereof
to its counsel. The following provisions shall then apply:
(i) If in the opinion of each such counsel the proposed transfer may be
effected without registration of such Preferred Stock or Restricted Common
Stock under the Securities Act, the Company will promptly notify the holder
thereof and such holder shall thereupon be entitled to transfer such
Preferred Stock or Restricted Common Stock in accordance with the terms of
the notice delivered by such holder to the Company. Each certificate issued
upon or in connection with such transfer shall bear the applicable
restrictive legend set forth in Section 7(a), unless in the opinion of each
such counsel such legend is no longer required to ensure compliance with the
Securities Act. If for any reason counsel for the Company (after having been
furnished with the information required to be furnished by clause (1) of this
Section 7(b)) shall fail to deliver a favorable or unfavorable opinion to the
Company, or the Company shall fail to notify such holder thereof as
aforesaid, within fifteen days after such holder shall have delivered to the
Company a copy of the opinion of counsel for such holder, then for all
purposes of this Agreement the opinion of counsel for such holder shall be
sufficient to authorize the proposed transfer and the opinion of counsel for
the Company shall not be required in connection with such proposed transfer;
and
(ii) If in the opinion of either or both of such counsel the proposed
transfer may not be effected without registration of such Preferred Stock or
Restricted Common Stock under the Securities Act, the Company will promptly
so notify the holder thereof and such holder shall not be entitled to
transfer such Preferred Stock or Restricted Common Stock until receipt of a
favorable opinion or opinions pursuant to the provisions of this Section 7(b)
or until registration of such Preferred Stock or Restricted Common Stock
under the Securities Act has become effective.
(c) INCIDENTAL REGISTRATION. In case the Company, at any time or from time
to time, proposes to register any of its securities under the Securities Act
(other than (1) a registration of securities solely in connection with any plan
for the acquisition of securities by employees of the Company or its
subsidiaries or any dividend reinvestment plan, (2) a registration of
securities when the registration statement therefor does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Common Stock or (3) a registration
on Form S-4 or S-8), it will at each such time give written notice to all
holders of Restricted Common Stock of its intention to do so and, upon the
written request of any such holder made within thirty days after the receipt
of any
5
<PAGE> 6
such notice (which request shall specify the number of shares of Restricted
Common Stock intended to be disposed of by such holder and the intended method
of disposition thereof), the Company will, as provided in Section 7(d), use its
best efforts to effect, as expeditiously as possible, the registration under
the Securities Act of all Restricted Common Stock which the Company has been so
requested to register by the holders of the Restricted Common Stock, to the
extent requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Restricted Common Stock so to be
registered, PROVIDED that:
(i) if, at any time after giving written notice of its intention to
register any securities and prior to or after the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register or to withdraw or
suspend the registration of such securities, the Company may, at its
election, give written notice of such determination to each holder of
Restricted Common Stock and, thereupon shall be relieved from its obligation
with respect to such registration (but not from its obligation to pay the
Registration Expenses in connection therewith);
(ii) if the Company's securities so registered for sale are to be
distributed in an underwritten offering and the managing underwriter shall
advise the Company in writing that, in its opinion, the amount of securities
to be offered should be limited in order to assure a successful offering, the
amount of securities to be included in such registration shall be so limited
and shall be allocated among the persons selling such securities, in the
following order of priority (with the effect that all securities of a
category below must be included in the registration before any securities of
a subsequent category below are included in the registration): (1) the
securities, if any, the Company proposes to sell and (2) the Restricted
Common Stock and the other securities requested to be included and having
similar rights, pro rata among the holders of such securities in proportion,
as nearly as practicable, to the amount of securities requested to be
registered by each of the holders of the Restricted Common Stock and such
other securities; and
(iii) if the securities or blue sky laws of any jurisdiction in which
the securities so registered are proposed to be offered would prohibit the
Company's payment of Registration Expenses attributable to the Restricted
Common Stock requested to be included in such registration, and if the
Company shall determine, in good faith, that the offering of such securities
in such jurisdiction is necessary for the successful consummation of the
registered offering, then the holders of Restricted Common Stock requested to
be included in such registration shall either agree to pay the portion of the
Registration Expenses attributable thereto, or withdraw their request for
inclusion of Restricted Common Stock in such registration.
Except as provided above, the Company will pay all Registration Expenses in
connection with each registration of Restricted Common Stock under this Section
7(c).
6
<PAGE> 7
(d) REGISTRATION PROCEDURES. If and whenever the Company is required to
use its best efforts to effect the registration of any Restricted Common Stock
under the Securities Act as provided in Section 8(c), the Company will promptly:
(i) prepare and (in any event within ninety days after the end of the
period within which requests for registration may be given to the Company)
file with the Commission a registration statement with respect to such
securities and use its best efforts to cause such registration statement to
become effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement until such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement, but in no event for a
period of more than six months after such registration statement becomes
effective;
(iii) furnish to each seller of such securities such number of conformed
copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits, except that the
Company shall not be obligated to furnish any seller of securities with more
than two copies of such exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the requirements
of the Securities Act, all documents filed and all correspondence dispatched
to or from the Commission in connection with such offering, and such other
documents, as such seller may reasonably request in order to facilitate the
disposition of the securities owned by such seller;
(iv) use its best efforts to register or qualify such securities
covered by such registration statement under such other securities or blue
sky laws of such jurisdictions as each seller shall reasonably request, and
do any and all other acts and things which may be necessary or advisable to
enable such seller to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, or to subject
itself to taxation in any such jurisdiction, or to consent to general service
of process in any such jurisdiction;
(v) notify each seller of any such securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state any material fact required to be stated therein or
necessary to make statements therein not misleading in the light of the
7
<PAGE> 8
circumstances then existing, and prepare and furnish to such seller a
reasonable number of copies of a supplement to, or an amendment of, such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing;
(vi) advise each seller as to the time when such registration statement
becomes effective and as to the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or the
institution of any proceedings for that purpose, and use its best efforts to
prevent the issuance of any such stop order and to obtain as soon as possible
the lifting thereof, if issued;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first month after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act;
(viii) furnish to each seller a signed counterpart of:
(1) an opinion of counsel for the Company addressed to the
sellers or, in the case of an underwritten public offering, to the
underwriter, dated the effective date of such registration statement,
and
(2) a "comfort letter" addressed to the underwriter signed by the
independent public accountants who have certified the Company's financial
statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities, PROVIDED that the Company shall
not be obligated to furnish such accountants' letter except in connection
with an underwritten offering. The Company may require each seller of any
securities as to which any registration is being effected to furnish the
Company such information regarding such seller and the distribution of such
securities as the Company may from time to time request in writing and as
shall be required by law in connection therewith.
(e) TERMINATION OF RESTRICTIONS. The restrictions imposed by this Section 7
upon the transferability of Preferred Stock and Restricted Common Stock shall
cease and terminate as to any particular shares of Preferred Stock or
Restricted Common Stock (1) when such securities shall have been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering such securities, or (2) when, in the
8
<PAGE> 9
opinion of both counsel for the holder thereof and counsel for the Company,
or when, in the opinion of either counsel for the Company or counsel for the
holder reasonably satisfactory to counsel for the Company on the basis of a
pertinent Commission rule or regulation promulgated under the Securities Act,
or a "no-action" letter addressed to either the holder thereof or the Company
from the staff of the Commission, such restrictions are no longer required in
order to ensure compliance with the Securities Act. Whenever such restrictions
shall terminate as to any shares of Preferred Stock or Restricted Common Stock
the holder thereof shall be entitled to receive from the Company, without
expense (other than transfer taxes, if any), new certificates representing such
shares of like tenor not bearing the applicable legend set forth in Section
7(a).
(f) Indemnification.
---------------
(i) In the event of any registration of any Restricted Common Stock
under the Securities Act pursuant to Section 7(c), the Company will indemnify
and hold harmless the seller of such securities, its directors and officers,
each other Person who participates as an underwriter within the meaning of
the Securities Act, in the offering or sale of such securities and each other
Person, if any, who controls such seller or any such participating Person
against any losses, claims, damages or liabilities, joint or several, to
which such seller or any such director or officer or participating Person or
controlling Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (1) any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or (2)
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading;
and the Company will reimburse such seller and each such director, officer,
participating Person and controlling Person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability or action, PROVIDED that the
Company shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
such seller specifically stating that it is for use in the preparation
thereof. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such seller or any such director,
officer, participating Person or controlling Person and shall survive the
transfer of such securities by such seller.
(ii) As a condition to including any Restricted Common Stock in any
registration statement filed pursuant to Section 7(c), the Company shall have
received an undertaking from the prospective seller of such securities to
indemnify and hold harmless the Company, each director of the Company, each
officer of the Company
9
<PAGE> 10
who shall sign such registration statement, each other Person, if any, who
controls the Company within the meaning of the Securities Act and each other
Person who participates as an underwriter within the meaning of the
Securities Act, with respect to any statement in such registration statement,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, if such statement was made in reliance upon
and in conformity with written information furnished to the Company through
an instrument duly executed by such seller specifically stating that it is
for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of such
securities by such seller.
(iii) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in the
preceding paragraphs of this Section 7(f), such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
prompt written notice to the latter of the commencement of such action,
PROVIDED that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding paragraphs of this Section 7(f), except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the
indemnifying party may (and, upon request by the indemnified party, will), at
its expense, participate in and assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and, in the event of any
failure by the indemnifying party diligently to assume and conduct such
defense, the indemnifying party will pay all costs and expenses (including
legal fees and expenses) incurred by such indemnified party in connection
with such claim or litigation. No indemnifying party, in the defense of any
such claim or litigation, shall, except with the consent of each indemnified
party, consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such indemnified party of a release from all liability in
respect of such claim or litigation.
(iv) Indemnification similar to that specified in the preceding
paragraphs of this Section 7(f) (with appropriate modifications) shall be
given by the Company and each seller of Restricted Common Stock with respect
to any required registration or other qualification of such Restricted Common
Stock under any Federal or state law or regulation of governmental authority
other than the Securities Act.
(g) AVAILABILITY OF INFORMATION. If and so long as the Company is a Public
Company, the Company will comply with the reporting requirements of Sections 13
and 15(d) of the Exchange Act and will comply with all other public information
reporting requirements of the Commission (including the requirements of Rule
144 promulgated by the Commission under the Securities Act) from time to time
in effect and relating to the availability of an exemption from the Securities
Act for the sale of any restricted securities or the sale of
10
<PAGE> 11
securities by affiliates and will furnish on request a written statement as to
such compliance. The Company will also cooperate with each holder to complete
and file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of an exemption from the
Securities Act for the sale of any restricted securities or the sale of
securities by affiliates. The Company will deliver to each holder of
Restricted Common Stock, promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent or made
available generally by the Company to its stockholders, and copies of all
regular and periodic reports and all registration statements and prospectuses
filed by the Company with any securities exchange or with the Commission.
8. LISTING ON SECURITIES EXCHANGES. The Company will, at its expense, use its
best efforts to list on each national securities exchange (including NASDAQ) on
which any Common Stock shall at any time be listed, and will use its best
efforts to maintain such listing of, all shares of Restricted Common Stock
registered pursuant to the terms of this Agreement.
9. DAMAGES. The Company recognizes and agrees that the holder of Restricted
Common Stock will not have an adequate remedy at law if the Company fails to
comply with Sections 7(c), 7(d), 7(e), 7(g) and 8 and that a holder of
Restricted Common Stock will be entitled to an appropriate decree of specific
performance or other equitable remedies and that the Company waives the defense
in action or proceeding that there exists an adequate remedy at law.
10. DEFINITIONS.
(a) DEFINITIONS OF TERMS. For the purpose of this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Certificate of Designation" has the meaning set forth in Section 1 hereof.
The terms "closing date" and "date of closing" have the respective meanings
set forth in Section 2(c) of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commission" mean the Securities and Exchange Commission and any other
similar or successor agency of the Federal Government administering the
Securities Act or the Exchange Act.
"Common Stock" means the common stock of the Company, par value $.10.
"Company" has the meaning set forth in the first paragraph hereof.
11
<PAGE> 12
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any similar or successor Federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"GAAP" means generally accepted accounting principles in the United States
of America in effect from time to time.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Preferred Stock" has the meaning set forth in Section 1 hereof.
"Public Company" means the Company, if and so long as any class of the
Company's securities is registered pursuant to Sections 12(b) or 12(g) of the
Exchange Act.
"Registration Expenses" means all expenses related to the Company's
registration of Restricted Common Stock, including all expenses with respect to
the procedures set forth in Section 7(d) (other than underwriting discounts and
commissions and transfer taxes, if any, applicable to the Restricted Common
Stock and the fees and disbursements of counsel engaged by the holders to
register the Restricted Common Stock in any jurisdiction in which the Company
is not required to register such Common Stock pursuant to Section 7(d) hereof).
"Restricted Common Stock" means Common Stock received upon conversion of
Preferred Stock.
"Securities Act" means the Securities Act of 1933, as amended, and any
similar or successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same may be in effect at the time.
"Subsidiaries" means any corporation or other entity, a majority of the
then outstanding voting securities of which is owned, directly or indirectly,
by the Company or one or more of its Subsidiaries.
(b) 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 GAAP.
11. MISCELLANEOUS.
(a) HOME OFFICE PAYMENT. The Company agrees that, so long as you shall
hold any shares of Preferred Stock or Common Stock, it will make payments of
dividends on such shares not later than 11:00 a.m., your local time, to a place
within the United States, on the date such payment is due, in immediately
available funds, at your option, by credit to your
12
<PAGE> 13
account, as specified by you in writing, or by check mailed or delivered to
you at your address for payments specified by you in writing, or such other
account or address within the United States as you may from time to time
designate in writing. You agree that, before disposing of any Preferred Stock
or any Common Stock, you will notify the Company of the name and address of the
transferee of such Preferred Stock or Common Stock.
(b) Amendment and Waiver.
--------------------
(i) Any term, covenant, agreement or condition of this Agreement may be
amended, or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), by and only
by, one or more substantially concurrent written instrument(s) signed by the
holders of not less than 66 2/3% of the number of shares of Preferred Stock
outstanding or represented by shares of Preferred Stock outstanding or
represented by shares of Restricted Common Stock outstanding, PROVIDED,
HOWEVER, that no such amendment or waiver shall, without the consent in
writing of the holders of all such shares change the percentage of holders
required to approve any such amendment or effectuate any such waiver, and
PROVIDED FURTHER, that any amendment or waiver pursuant to this Section 11(b)
shall apply equally to all holders of shares of Preferred Stock or Restricted
Common Stock and shall be binding upon them and upon the Company.
(ii) The Company will give prompt notice to all holders of shares of
Preferred Stock or Restricted Common Stock of the proposal of any amendment
or waiver of any provision of this Agreement and of the effectiveness of any
amendment or waiver entered into in accordance with the provisions of this
Section 11(b). Such notices shall state the terms of any such amendment or
waiver and, in the case of effective amendments or waivers, shall be
accompanied by at least two conformed copies (which may be composite
conformed copies) of each written instrument which embodies such amendment or
waiver.
(c) EXCHANGE OF STOCK CERTIFICATES. Upon surrender of any certificate
representing shares of Preferred Stock or Restricted Common Stock for exchange
at the principal office of the Company, or at such other location as the
Company may designate to you in writing, the Company, at its expense (exclusive
of applicable transfer taxes), will issue in exchange therefor one or more new
certificates, in such denomination or denominations as may be requested, for
the same aggregate number of shares represented by the certificate so
surrendered, less that number of shares represented by such surrendered
certificate that have theretofore been redeemed, and registered as such holder
may request, each such new certificate to bear the legend set forth in Section
7(a), unless pursuant to the terms of this Agreement, such legend is no longer
required. The Company will also pay the cost of all deliveries of certificates
representing such shares from your office to the office of the Company
(including the cost of insurance against loss or theft in any amount
satisfactory to you) upon any exchange provided for in this Section 11(c).
(d) LOST, ETC, STOCK CERTIFICATES. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of any
certificate representing any
13
<PAGE> 14
of the shares of Preferred Stock or Restricted Common Stock held by you, and
(in case of loss, theft or destruction) of indemnity satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of such certificate, if mutilated,
the Company will make and deliver to you in lieu of such certificate a new
certificate of like tenor and for an equal number of shares, less that number
of shares represented by such lost, stolen, destroyed or mutilated certificate
that have theretofore been redeemed. Your agreement of indemnity in such a
form and of such a scope as are customary for such indemnities shall constitute
indemnity satisfactory to the Company for the purposes of this Section 11(d).
(e) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made in writing by or on behalf of any party to
this Agreement in connection herewith shall survive the execution and delivery
of this Agreement and the issuance and delivery of the Preferred Stock
regardless of any investigation made by you or on your behalf.
(f) SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
all covenants and agreements in this Agreement contained by or on behalf of any
of the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto, whether so expressed or not,
except that the Company may not assign or transfer any of its rights or
obligations under this Agreement. When any reference is made to "you" in
Sections 2, 3, 4, 5, 6, 7 and 11 this Agreement, such reference shall be deemed
to include and inure to the benefit of, any Person who shall become the
registered holder of any shares of Preferred Stock or Restricted Common Stock
upon transfer thereof; provided that (1) such shares were acquired from you by
such Person directly or indirectly in a transaction or chain of transactions
not involving a public offering, and (2) notice in writing of such transfer is
received by the Company.
(g) NOTICES. All communications provided for hereunder shall be sent by
registered mail and, if to you, addressed to you at the address set forth by
you for such communications under your name on the signature page of this
Agreement, or to such other address as you may have designated to the Company
in writing, if to any other holder of Preferred Stock or Restricted Common
Stock, at the registered address of such holder as set forth in the stock
record books of Company, and if to the Company, addressed to it at the address
set forth on the first page hereof or to such other address or addresses as the
Company may have designated in writing to you and each other holder of any of
the Preferred Stock or Restricted Common Stock at the time outstanding. All
communications provided for shall be effective five days after such
communication is deposited in the mail with registered postage prepaid,
addressed as aforesaid.
(h) DESCRIPTIVE HEADINGS. The descriptive headings contained in this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
(i) GOVERNING LAW; NO ORAL MODIFICATION. This Agreement is being delivered
and is intended to be performed in the State of Ohio, and shall be construed
and enforced in accordance with, and the rights of the parties shall be
governed by, the law of such State.
14
<PAGE> 15
This Agreement may not be changed orally, but (subject to the provisions of
Section 11(b) hereof) only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or discharge is
sought.
(j) COUNTERPARTS. This Agreement may be executed simultaneously in two
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
If you are in agreement with the foregoing, please sign the form of
acceptance where provided below and return the same to the undersigned,
whereupon this letter shall become a binding agreement between you and the
undersigned.
Very truly yours,
SPECIALTY CHEMICAL RESOURCES, INC.
By: /s/ Corey B. Roth
-------------------------------------
Its: Vice President, Treasurer and
------------------------------------
Assistant Secretary
The foregoing Agreement is hereby
accepted as of the date first above
written.
Edwin M. Roth
- -----------------------------------
Edwin M. Roth
___________________________________
___________________________________
______________________, Ohio ________
15
<PAGE> 16
SPECIALTY CHEMICAL RESOURCES, INC.
Stock Purchase Agreement
September 28, 1995 - 7:57 pm - KTM
CLE1 - 181863.1A - 15179\87
16
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000703645
<NAME> SPECIALTY CHEMICAL RESOURCES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,346
<SECURITIES> 0
<RECEIVABLES> 8,129,326
<ALLOWANCES> 0
<INVENTORY> 9,082,943
<CURRENT-ASSETS> 17,473,361
<PP&E> 12,905,053
<DEPRECIATION> 3,174,267
<TOTAL-ASSETS> 48,889,021
<CURRENT-LIABILITIES> 8,972,656
<BONDS> 9,230,497
<COMMON> 393,277
0
0
<OTHER-SE> 28,614,002
<TOTAL-LIABILITY-AND-EQUITY> 48,889,021
<SALES> 31,989,959
<TOTAL-REVENUES> 31,989,959
<CGS> 26,785,649
<TOTAL-COSTS> 4,891,179
<OTHER-EXPENSES> (12,229)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 535,910
<INCOME-PRETAX> (1,512,069)
<INCOME-TAX> (80,000)
<INCOME-CONTINUING> (1,432,069)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,432,069)
<EPS-PRIMARY> (.36)
<EPS-DILUTED> (.36)
</TABLE>
