<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1993
Commission file number 0-685
PETROLITE CORPORATION
Incorporated in the State of Delaware
Employer Identification No. 43-0617572
369 Marshall Avenue, St. Louis, MO 63119
Telephone 314/961-3500
Securities registered pursuant to Section 12(b) of the Act
Title of each class Name of each Exchange on
which registered
NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of Class: Capital Stock without par value
Exhibits Index is on page 16
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Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90
days.
Yes X No
---------- ----------
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy of information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K []
As of January 7, 1994, 11,294,271 shares of Common Stock were
outstanding. The aggregate market value of the voting shares held
by non-affiliates of the registrant (based upon the closing bid
price of the Registrant's Common Stock on January 7, 1994 of $33.25
per share) was approximately $192 million.
Documents Incorporated by Reference
1. Portions of Petrolite Corporation 1993 Annual Report
(Part I, II, III and IV of Form 10-K)
2. Portions of Petrolite Corporation Notice of Annual
Meeting and Proxy Statement dated January 20, 1994 , (Part
III of Form 10-K)
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PART I
ITEM 1. BUSINESS
(a) General Development of Business. The general development
--------------------------------
of the registrant's business for the fiscal year ended October 31,
1993, is set out in the registrant's 1993 Annual Report to
Stockholders on pages 10 through 13 and is incorporated by reference
herein. No material changes in the registrant's mode of doing
business occurred during the five years ended October 31, 1993.
(b) Financial information about Industry Segments. Industry
----------------------------------------------
segment data is set out in the registrant's 1993 Annual Report to
Stockholders on pages 14-17 under the caption "1993 Operating
Results", page 18 under the caption "Industry Segment Data", page 19
under the caption "Worldwide Operations" and page 28 under the
caption "Segment Information", and is incorporated by reference
herein.
(c) Narrative Description of Business.
----------------------------------
1) Specialty Chemical Segment. Specialty chemicals are
---------------------------
produced primarily from petrochemicals and petroleum derived raw
materials, and include demulsifiers, corrosion inhibitors, drilling
fluids, polymers and waxes, water treating chemicals, and fuel and
other additives. Sales for the three major product groupings within
the specialty chemical segment (oil field chemicals, industrial
chemicals, and industrial polymers and waxes) for each of the three
years in the period ended October 31, 1993, are provided in the 1993
Annual Report to Stockholders on page 18 under the caption "Industry
Segment Data" which is incorporated by reference herein.
Registrant markets its products and services primarily
to producers and transporters of crude oil and natural gas, related
service companies and petroleum refineries throughout the world
through the registrant's own field staff and a limited number of
agents and distributors. The registrant also serves other major
markets, such as adhesives, agribusiness, coatings, packaging,
petrochemicals, plastics fabrication, power utilities, and printing
inks.
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During the fiscal year ended October 31, 1993, there have been
no significant changes in the kinds of products or services
rendered, or in the markets or methods of distribution by
registrant. It is the continuing nature of the business for a
number of new or improved products to be introduced annually;
typically, no individual new product or service by itself is
expected to be significant immediately in sales or earnings.
Registrant's joint business alliance with Energy BioSystems
Corporation continues to make steady progress in its efforts to
commercialize a breakthrough biocatalytic desulfurization (BDS)
process for hydrocarbons. Registrant's participation has expanded
to worldwide coverage at 22% of gross profits from
biodesulfurization unit sales and fees. In return, registrant will
provide development resources, separation technology, engineering
know-how and ongoing customer service for all BDS units, worldwide.
Registrant is dependent on the availability of petrochemicals
and petroleum-derived raw materials and supplies, which have been
available in the past in adequate quantities. In the past year,
registrant's operations were not affected materially by any raw
material shortages. Registrant presently does not foresee any
shortage of materials in the near future.
Registrant has numerous patents, patent applications, and
licenses under patents, of various durations which, in the
aggregate, are material to the operation of the registrant. The
registrant, however, does not believe that expiration of any
particular patent or group thereof would have a material adverse
effect upon its business as a whole.
The specialty chemical business is not considered to be
seasonal.
The registrant traditionally has carried sufficient inventory
at various stages of production in order to respond quickly to the
needs of its customers. Accounts receivable generally are due
within thirty days of invoicing, and letters of credit are employed
when deemed appropriate. The registrant believes that its practices
are consistent with industry standards.
Registrant's customers are located throughout the world and no
one customer
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constitutes more than 10% of the registrant's business.
Foreign operations account for a significant portion of the
registrant's specialty chemical business. Non-U.S. revenues were
approximately 32% of total specialty chemical revenues during each
of the last three years.
Orders from customers for specialty chemical products
generally are filled from stock or manufactured within a few days or
weeks after receipt of the order and, as a result, backlog of orders
is not significant in relation to total annual dollar volume of
sales.
The registrant's specialty chemical product lines, oil field
chemicals, industrial chemicals, and industrial polymers and waxes
are in competition with a number of manufacturers. Competitive
companies vary in size from large international companies to small
companies which may compete with the registrant in the sale of one
product or a line of products. All aspects of this business are
considered to be very competitive. Registrant is recognized as a
leader in providing services and products to the oil field chemical
market. In the registrant's opinion, registrant's overall
competitive position in the market has not changed materially in the
past fiscal year, although registrant is unable to predict the
extent to which its business may be affected by future competition
or by consolidations within the industry. Information on
acquisitions made by the registrant in fiscal 1993 is set out in the
registrant's 1993 annual report on page 25 under the caption
"Acquisitions" and is incorporated by reference herein.
2. Equipment Segment - The equipment segment designs,
-----------------
installs and services processing equipment for petroleum,
petrochemical and electrical power generating industries. Products
and services are marketed both domestically and in foreign countries
through the registrant's own field staff and a limited number of
agents and distributors.
During the past year the registrant has not had, and in the
foreseeable future does not anticipate, any shortage of raw
materials.
Certain products of the equipment segment are covered under
patents, patent
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applications, and licenses under patents. Registrant does not believe that
expiration of any particular patent or group thereof would have a material
adverse effect upon its business as a whole.
The equipment segment business is not seasonal, but is subject
to the business cycles of the industries which it serves.
This segment primarily produces processing equipment upon
order from customers. Accounts receivable generally are due within
thirty days of invoicing, and letters of credit are employed when
deemed appropriate. The registrant believes that its practices are
consistent with industry standards.
Registrant's customers are located throughout the world and no
one customer constitutes a significant portion of the registrant's
business on a continuing basis. However, one or several equipment
contracts may represent a significant portion of the equipment
segment revenues in a particular year.
Foreign operations account for a significant portion of the
registrant's equipment business. Non-U.S. revenues ranged from 40%
to 67% of total equipment revenues during the last three years.
The amount of backlog orders for the equipment segment at
October 31, 1993, approximates $11.5 million. Substantially all of
these orders are expected to be completed in fiscal 1994. Backlog
orders as of October 31, 1992 were $8.7 million.
The equipment segment is in competition with similar equipment
and services offered by other competitors. Although, in registrant's
opinion, registrant's competitive position in its equipment business
has not changed materially in the past year, the registrant is
unable to predict the extent to which its business may be affected
by future competition.
3. Registrant's Business in General - The registrant expended
--------------------------------
$13,587,000, $12,224,000, and $11,431,000, in fiscal years 1993,
1992 and 1991, respectively, on
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research activities relating to development of new products and services,
and on improvement of existing products and services. Approximately 95%
was applicable to the registrant's specialty chemical products segment. The
registrant also continued its strong commitment to technology by
continuing to increase its emphasis on field applications support
which, when combined with the research and development amounts,
resulted in total technology expenditures of $24,444,000,
$21,764,000, and $20,474,000 in fiscal years 1993, 1992 and 1991,
respectively. The registrant directly sponsors substantially all of
its research activities.
The registrant is subject to various federal, state and local
laws and regulations concerning environmental matters. The
registrant maintains a separate Safety, Health and Environmental
Affairs Department charged with the responsibility of monitoring
compliance with these various laws and regulations. For fiscal year
1993, these efforts did not result in any material capital
expenditure or material charges to income, and it is not likely that
these efforts will result in any material capital expenditure or
material charges to income during fiscal year 1994.
Approximately 2,012 persons are employed worldwide by
registrant and its subsidiaries.
(d) Financial Information About Foreign and Domestic
------------------------------------------------
Operations and Export Sales. Information under this caption is
- ----------------------------
included in the registrant's 1993 Annual Report to Stockholders for
each of the three years ended October 31, 1993, 1992, and 1991,
respectively, on page 19 under the caption "Worldwide Operations"
and is incorporated by reference herein.
Substantially all of the registrant's non-U.S. sales are made
to major international companies, national oil companies and
utilities, and contractors and distributors of long standing.
Letters of credit are required when and where appropriate. The risk
attendant to the foreign business conducted by registrant and its
subsidiaries is believed to be slightly greater than the risk
involved in doing business within the United States. The
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registrant protects itself from potential losses due to foreign currency
fluctuations through pricing adjustments, maintenance of offsetting
asset and liability balances, and utilization of foreign currency
futures contracts when deemed appropriate.
ITEM 2. PROPERTIES
<TABLE>
Principal properties of the registrant and its subsidiaries
are set forth in the following table:
<CAPTION>
Type of Industry Segment
Facility User
-------- ----------------
<S> <C> <C>
Petrolite Corporation -
Barnsdall, Oklahoma Manufacturing Specialty Chemical
La Porte, Texas Manufacturing Specialty Chemical
Brea, California Real Estate Corporate
Houston, Texas Sales Office Specialty Chemical
Kilgore, Texas Manufacturing Specialty Chemical
Rancho Dominguez, California Sales Office Specialty Chemical
Midland, Texas Blending Specialty Chemical
Tulsa, Oklahoma Administrative Specialty Chemical
Webster Groves, Missouri Manufacturing, Specialty Chemical
Research and
Administrative
Houston, Texas Manufacturing, Equipment
Engineering and
Administrative
Pasadena, Texas Manufacturing Specialty Chemical
Consolidated Subsidiaries -
Luzzato & Figlio (France) S.A. Sales Office Specialty Chemical
(Paris, France)
Petrolite Canada Inc. Blending Specialty Chemical
(Nisku, Alberta Canada)
Petrolite Limited Manufacturing and
(Kirkby, England) Administrative Specialty Chemical
Petrolite Pacific Pte. Ltd.
(Singapore) Blending Specialty Chemical
Petrolite Saudi Arabia Ltd. Blending Specialty Chemical
(Dammam, Saudi Arabia)
P.T. Petrolite Indonesia
Patrama (Batam, Indonesia) Manufacturing Specialty Chemical
</TABLE>
All properties are owned by the registrant, except for the following:
Sales office facilities located at 16010 Barker's Point Lane, Houston,
Texas, are leased under an agreement which expires April 14, 1997.
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Petrolite Saudi Arabia Ltd. blending facilities are located on leased
properties with the lease expiring 2002.
Petrolite Pacific Pte. Ltd. blending facilities are located on leased
properties with the lease expiring 2009.
P.T. Petrolite Indonesia Patrama manufacturing facilities are located
on leased property with the lease expiring in October, 2015.
In addition to the foregoing properties, the registrant and its
subsidiaries occupy a number of small general and sales offices under short-
term leases and its subsidiaries occupy a number of distribution warehouses
located on small sites owned in fee.
Although facilities are of varying ages, the registrant considers them
generally to be well maintained, equipped with modern and efficient
equipment, and in good operating condition. Current productive capacity is
adequate to meet demands for the immediate future.
ITEM 3. LEGAL PROCEEDINGS
Neither the registrant nor any of its subsidiaries is a party to, nor
is any of their property subject to, any material pending legal proceedings,
other than routine litigation incidental to the business.
The registrant is subject to various laws and governmental regulations
concerning employee safety and environmental matters. The registrant
maintains a separate Safety, Health and Environmental Affairs Department
charged with the responsibility of monitoring compliance with these various
laws and regulations. The registrant currently participates, as a
potentially responsible party and otherwise, with various governmental
agencies concerning certain environmental cleanup sites. After consultation
with environmental and engineering advisors, and legal counsel, the
registrant does not believe that the registrant's participation at these
sites, individually and collectively, is likely to result in the payment of
any material sanctions, capital expenditures or charges to income.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through
the
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solicitation of proxies or otherwise, during the fourth quarter of fiscal 1993.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information regarding registrant's common stock appears on page 17 of
the registrant's 1993 Annual Report to Stockholders under the caption
"Stockholders' Equity/Capital Stock" and is incorporated by reference herein.
As of January 7, 1994 the registrant has 2,093 stockholders of record.
ITEM 6. SELECTED FINANCIAL DATA
A summary of selected financial data for the five years ended 10/31/93
appears on pages 30 and 31 of the registrant's 1993 Annual Report to
Stockholders under the caption "11-Year Summary", and is incorporated by
reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information under this caption is in the registrant's 1993 Annual
Report to Stockholders on pages 14 through 19, under the caption "Financial
Review", and on pages 25 and 26 under the captions "Acquisitions, Short-Term
Borrowings and Lines of Credit, and Long-Term Debt" and is incorporated by
reference herein.
The registrant continued its program to cease manufacturing operations
at its Webster Groves, Missouri facility to coincide with an expansion of its
La Porte, Texas facility. As and when such operations cease, the registrant
expects that appropriate reserves will be established. This program will
increase manufacturing capacity, efficiency and flexibility, and ultimately
will allow for any necessary additions to sales, administrative and research
facilities at Webster Groves.
On January 27, 1993, the registrant announced that it adopted Statement
of Financial Accounting Standard No. 106 related to medical and other
postretirement benefits. The adoption of this rule resulted in a one-time,
non-cash charge of $6.5 million, or $0.58 per share, to net income in fiscal
1993's first quarter ending January 31.
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During the first quarter of fiscal 1994, the registrant will adopt
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes." Statement 109 will change the company's method of accounting for
income taxes from the deferred method (APB 11) to an asset and liability
approach. The estimated cumulative effect of implementing the new standard,
using current tax rates, will be a one-time, non-cash credit of $2.0 million,
or $0.18 per share, to net income in fiscal 1994's first quarter ending
January 31.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements of the registrant and its
subsidiaries, and the Notes to Consolidated Financial Statements, together
with the report thereon of Price Waterhouse dated November 30, 1993,
appearing on pages 20 through 29, the Quarterly Results on pages 15 and 16,
Industry Segment Information on page 18, and Worldwide Operations Information
on page 19 in the registrant's 1993 Annual Report to Stockholders, are
incorporated by reference in this Form 10-K Annual Report.
Marketable securities are stated at their approximate market value at
October 31, 1993. The registrant's provision for bad debts was $395,000,
$338,000, and $281,000, for fiscal years 1993, 1992, and 1991, respectively.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the registrants three most recent fiscal years, there were no
changes in or disagreements with the registrants independent accountants on
accounting or financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
a) Identification of directors - Information regarding identification
---------------------------
of directors, on pages 3 through 7 of the registrant's Notice of Annual
Meeting and Proxy Statement dated January 20, 1994, hereby is incorporated
by reference. Also see information on page 32 of the registrant's Annual
Report to Stockholders under the caption "Corporate Organization" which is
incorporated by reference herein.
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<TABLE>
b) Identification of executive officers - Executive officers of the
------------------------------------
registrant, their ages and positions held are as follows:
<CAPTION>
Date elected to Age at
Name Title present office Oct. 31, 1993
---- ----- ---------------- -------------
<C> <S> <C> <C>
William E. Nasser Chairman, President and 05/19/88 54
Chief Executive Officer
Herbert F. Eggerding, Jr. Executive Vice President and 06/01/89 56
Chief Financial Officer
Ralph J. Churchill Vice President, 08/09/89 49
Special Projects
Toby R. Graves Vice President; 06/08/88 47
General Manager,
Polymers Division
John F. McCartney Vice President, General Counsel 08/09/90 57
Derek Redmore Vice President, 12/08/93 55
Technology
E. E. Schooling Vice President 07/01/91 49
Manufacturing and Distribution
Richard J. Seidel Vice President; 04/08/85 52
General Manager,
Petreco Division
J.S. Titone Group Vice President, 09/15/82 52
Chemicals
Ralph E. Werley Vice President, Purchasing 06/01/82 68
James M. Zemenick Vice President, 06/01/82 46
Administration and Corporate
Development
William F. Haberberger Controller 03/04/91 43
Charles R. Miller Corporate Secretary, 08/12/92 38
Associate General Counsel
Steven F. Schaab Treasurer 01/01/93 41
</TABLE>
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c) Identification of certain significant employees - S. Monro joined
------------------------------------------------
the registrant in January 1978. After having served in various sales and
managerial positions within International operations, in March of 1989 he was
appointed Managing Director of Petrolite Ltd. In June 1991, he was also
appointed to the position of General Manager of the newly created EuroChem
Division. He holds various diplomas and degrees including a Licentiate in
Chemistry, a chartered engineer and an M.B.A. degree in Management from the
City University in London.
David Winslett joined Petrolite in December of 1982 with 15 years of
Refinery and Speciality Chemical experience. From 1982 to 1989 Winslett was
Operations Manager for the European Industrial Chemicals business based in
Kirkby, England. Since 1989, he has served in various capacities in
Petrolite's St. Louis office as Vice President in the Industrial Chemicals
Division until June 16, 1993 when he was promoted to General Manager of the
Industrial Chemicals Division. Winslett is a graduate of the University of
Wales with a B.Sc. (Honors) in Chemistry.
d) Business experience - Information regarding business experience of
-------------------
directors, on pages 5 and 6 of the registrant's Notice of Annual Meeting and
Proxy Statement dated January 20, 1994, hereby is incorporated by reference.
Officers are elected to serve until removed or until a successor has
been elected or appointed. Except as noted below, each of the officers in
Item 10 (b) has served in his present office for at least five years. The
following is a brief description of past positions of those officers who were
elected to their present position within the last five years.
Mr. W.E. Nasser has been an employee of the registrant since 1962. He
served as Vice President and General Manager of Petrolite's Specialty
Polymers from March 1980 until May 1988, when he was elected President and
Chief Operating Officer. In February 1992, he also was elected Chairman of
the Board and Chief Executive Officer.
Dr. R.J. Churchill returned to the registrant July 1, 1989 as Vice
President-Corporate Development. In June 1990, he became Vice President of
Technology and in January 1993, he also was named to the position of Vice
President, Marketing. In
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December, 1993, he was appointed Vice President-Special Projects. He served
the registrant in various research and management positions before leaving in
1981 to head his own management consulting firm. He holds a Ph.D. in sanitary
engineering.
Dr. T.R. Graves has been an employee of the registrant since 1972, and
served as technical director of the registrant's Specialty Polymers Group
from 1980 until June 1988,when he was elected Vice President and General
Manager of such Group (now the Polymers Division). He holds a Ph.D in
chemical engineering.
Mr. J.F. McCartney has served as Assistant General Counsel since
joining the registrant in 1973, managing legal aspects of the registrants
international operations, primarily working to establish subsidiaries,
affiliates and joint venture companies worldwide. He was named Vice
President in August 1989. During July 1992, he also assumed responsibility
for the administration of the Law Department and now is Vice President,
General Counsel.
Mr. E.E. Schooling joined the Registrant in February 1968, and has
served in various plant manager positions. Most recently he was
manufacturing manager before his July 1, 1991 promotion to the position of
Vice President - Manufacturing/Distribution.
Mr. W.F. Haberberger joined the Registrant in October 1977, as an
internal auditor. Since 1980, he has served in various financial managerial
positions of the registrant's international operations until his election to
Controller on March 4, 1991. He holds a B.S. degree in Business from the
University of Missouri - St. Louis and is a certified public accountant.
Mr. S.F. Schaab joined the registrant in November 1992, and was elected
Treasurer effective January 1, 1993. He has 19 years of experience in
financial and treasury management, most recently with Peabody Holding
Company, Inc. A certified public accountant, he holds a B.S.B.A. degree in
accounting from the University of Missouri-Columbia.
Mr. C.R. Miller joined the registrant in May 1990, as an attorney, and
was elected Secretary on August 12, 1992. His title now is Corporate
Secretary, Associate General
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Counsel. He has twelve years experience in the public and private practice
of law, most recently as an attorney in the executive branch of Missouri
state government.
Derek Redmore joined Petrolite as a research chemist in 1965 and was
promoted to group Leader in 1966. From 1972 to 1993, he held various
managerial positions with increasing responsibility in Research and
Development, most recently Director of Technology Support. In December 1993,
he was elected Vice President, Technology. Redmore earned his B.Sc. and
Ph.D. degrees in Organic Chemistry at the University of Nottingham.
e) Compliance with Section 16(a) of the Exchange Act. Information
--------------------------------------------------
regarding compliance with Section 16(a) of the Exchange Act, on page 14 of
the registrant's Notice of Annual Meeting and Proxy Statement dated January
20, 1994, hereby is incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information appearing under Compensation of Executive Officers,
Retirement Benefits, and Compensation of Directors' on pages 10 through 14
of the registrant's Notice of Annual Meeting and Proxy statement dated
January 20, 1994 is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership is set out on pages 3 and 4
of the registrant's Notice of Annual Meeting and Proxy Statement dated
January 20, 1994, under the heading "Security Ownership of Certain Beneficial
Owners and Management", is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information appearing under Certain Transactions on page 7 of the
registrant's Notice of Annual Meeting and Proxy Statement dated January 20,
1994 is incorporated by reference herein.
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PART IV
<TABLE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The consolidated financial statements and supplementary information of
the registrant have been incorporated by reference under Item 8. With the
exception of the aforementioned information, and the information incorporated
specifically in Items 1, 5, 6, 7, 8, 10, and 14, the Petrolite Corporation
1993 Annual Report is not to be deemed filed as part of this report.
Financial statement schedules listed below should be read in conjunction with
financial statements in the 1993 Annual Report to Stockholders. Financial
statement schedules not included in this Form 10-K Annual Report have been
omitted because they are not applicable, or because the required information
is shown in the financial statements or notes thereto.
a) Documents filed with this report:
<CAPTION>
Page
Reference
---------
<S> <C>
Financial Statements previously incorporated by reference
under Items 1, 5, 6, 7, 8, 10 and 14 above.
Report of Independent Accountants on Financial
Statement Schedules 19
Consent of Independent Accountants 19
Schedule V. Property, Plant and Equipment 20
Schedule VI. Accumulated Depreciation of Property,
Plant and Equipment 21
Schedule IX. Short-Term Borrowings 22
Schedule X. Supplementary Income Statement Information 23
Exhibit Index
Exhibit No.
3 i) Restated Certificate of Incorporation
(Incorporated from the definitive Proxy
Statement dated January 21, 1987, Exhibit B
and the definitive Proxy Statement dated
February 3, 1984, Exhibit A)
*ii) By Laws 24-51
4 Note Purchase Agreement 52-117
13 Annual Report to Stockholders 118-153
21 Subsidiaries of the Registrant 154-155
24 Power of Attorney 156-157
99 Proxy Statement (Incorporated from the definitive
Proxy Statement dated January 20, 1994 and filed
pursuant to Regulation 14A)
</TABLE>
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b) No form 8-K's were filed with SEC during the fourth quarter of fiscal 1993.
Individual financial statements of the registrant's subsidiaries have
been omitted since the registrant is primarily an operating registrant and
the operating subsidiaries included in the consolidated financial statements,
in the aggregate, do not have minority equity interest and/or indebtedness
to any person other than the registrant or its consolidated subsidiaries in
amounts which together exceed 5 percent of total consolidated assets at
October 31, 1993. Separate financial statements of subsidiaries not
consolidated, and 50% or less owned entities (accounted for by the equity
method) have been omitted because, if considered in the aggregate, they would
not constitute a significant subsidiary.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PETROLITE CORPORATION
---------------------
(Registrant)
By s/ Herbert F. Eggerding, Jr.
------------------------------
Herbert F. Eggerding, Jr.
Executive Vice President and
Chief Financial Officer
Dated: January 26, 1994
----------------------------------
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Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By s/ William E. Nasser By s/ Herbert F. Eggerding, Jr.
-------------------------------------- -------------------------------
William E. Nasser Herbert F. Eggerding, Jr.
Principal Executive Officer Principal Financial Officer
and Director
Dated: January 26 , 1994 Dated: January 26 , 1994
--------------------- ---------------------
By s/ Andrew B. Craig * By s/ William F. Haberberger
--------------------------------------- -------------------------------
Andrew B. Craig, Director William F. Haberberger
Principal Accounting Officer
Dated: January 26 , 1994 Dated: January 26 , 1994
--------------------- ---------------------
By s/ Paul F. Cornelsen* By s/ Louis Fernandez*
-------------------------------------- -------------------------------
Paul F. Cornelsen, Director Louis Fernandez, Director
Dated: January 26 , 1994 Dated: January 26 , 1994
--------------------- ---------------------
By s/ Michael V. Janes* By s/ James E. McCormick*
-------------------------------------- ------------------------------
Michael V. Janes, Director James E. McCormick, Director
Dated: January 26 , 1994 Dated: January 26 , 1994
--------------------- ---------------------
By s/ William E. Maritz* By s/ Thomas P. Reidy*
--------------------------------------- -----------------------------
William E. Maritz, Director Thomas P. Reidy, Director
Dated: January 26 , 1994 Dated: January 26 , 1994
--------------------- ---------------------
*By: s/ Charles R. Miller
-------------------------------------
Charles R. Miller
Attorney-In-Fact
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REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
ON FINANCIAL STATEMENTS SCHEDULES
---------------------------------
To the Directors of
Petrolite Corporation
Our audits of the consolidated financial statements referred to in our
report dated November 30, 1993 appearing on page 29 of the Petrolite
Corporation 1993 Annual Report to Stockholders (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the Financial Statement Schedules listed
in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement
Schedules present fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
s/ Price Waterhouse
PRICE WATERHOUSE
St. Louis, Missouri
November 30, 1993
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the registration statements on Form S-8 (Nos. 2-80631, 33-
20553, 33-21962, 33-24261, 33-63108, 33-47814, 33-47815, and 33-63108) of
Petrolite Corporation of our report dated November 30, 1993 appearing on page
29 of the Petrolite Corporation 1993 Annual Report to Stockholders which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement
Schedules, which appears on page 19 of this Form 10-K.
s/ Price Waterhouse
PRICE WATERHOUSE
St. Louis, Missouri
January 26, 1994
-19-
<PAGE> 20
<TABLE>
PETROLITE CORPORATION
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(Thousands of $)
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Balance
beginning Additions Other at end
of period at cost Retirements Changes* of period
---------- --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Classification
- --------------
Year ended October 31, 1993 -
Buildings $ 65,727 $ 3,196 $ 2,125 $ (44) $ 66,754
Machinery & equipment 188,639 30,879 11,753 (2,062) 205,703
Construction in progress 4,890 8,706 5,071 (27) 8,498
-------- ------- ------- ------- --------
259,256 42,781 18,949 (2,133) 280,955
Land 5,811 1,720 0 (119) 7,412
-------- ------- ------- ------- --------
$265,067 $44,501 $18,949 $(2,252) $288,367
======== ======= ======= ======= ========
Year ended October 31, 1992 -
Buildings $ 61,690 $ 3,521 $ 1,108 $ 1,624 $ 65,727
Machinery & equipment 191,345 14,771 11,321 (6,156) 188,639
Construction in progress 3,915 7,007 6,038 6 4,890
-------- ------- ------- ------- --------
256,950 25,299 18,467 (4,526) 259,256
Land 5,040 1,152 482 101 5,811
-------- ------- ------- ------- --------
$261,990 $26,451 $18,949 $(4,425) $265,067
======== ======= ======= ======= ========
Year ended October 31, 1991 -
Buildings $ 52,609 $11,793 $ 121 $(2,591) $ 61,690
Machinery & equipment 187,076 12,499 6,864 (1,366) 191,345
Construction in progress 5,051 15,319 16,456 1 3,915
-------- ------- ------- ------- --------
244,736 39,611 23,441 (3,956) 256,950
Land 5,227 9 100 (96) 5,040
-------- ------- ------- ------- --------
$249,963 $39,620 $23,541 $(4,052) $261,990
======== ======= ======= ======= ========
<FN>
* Fixed assets of operations outside the United States are translated into U.S. dollars at current
exchange rates rather than historical rates in effect at time of acquisition, in accordance with
Financial Accounting Standard No. 52 "Foreign Currency Translation". The net change resulting from
fluctuating exchange rates and asset classification adjustments have been reflected in Column E.
</TABLE>
*****************
Major capital expenditures in fiscal 1993, 1992, and 1991 included property,
plant and equipment from the Welchem acquisition, a new information system
principally to serve the Tretolite and Industrial Chemicals Divisions,
continuing expansion and upgrading of the Bayport Chemical manufacturing
plant, investments in bulk containers and related distribution facilities,
and a new EuroChem Division office building in Kirkby, England.
Depreciation is generally provided on a straight-line basis at rates based
on estimated useful lives of
properties.
-20-
<PAGE> 21
<TABLE>
SCHEDULE VI - ACCUMULATED DEPRECIATION OF
PROPERTY, PLANT AND EQUIPMENT
(Thousands of $)
<CAPTION>
Column A Column B Column C Column D Column E Column F
Additions
Balance at charged to Balance
beginning cost and Other at end
of period expenses Retirements Changes* of period
---------- ---------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Classification
- --------------
Year ended October 31, 1993-
Buildings $ 22,379 $ 3,393 $ 1,200 $ 76 $ 24,648
Machinery & equipment 135,666 13,372 7,245 (2,175) 139,618
-------- ------- ------- ------- --------
$158,045 $16,765 $ 8,445 $(2,099) $164,266
======== ======= ======= ======= ========
Year ended October 31, 1992-
Buildings $ 21,690 $ 2,110 $ 1,272 $ (149) $ 22,379
Machinery & equipment 132,319 13,847 10,178 (322) 135,666
-------- ------- ------- ------- --------
$154,009 $15,957 $11,450 $ (471) $158,045
======== ======= ======= ======= ========
Year ended October 31, 1991-
Buildings $ 19,973 $ 1,769 $ 2 $ (50) $ 21,690
Machinery & equipment 125,382 13,834 6,083 (814) 132,319
-------- ------- ------- ------- --------
$145,355 $15,603 $ 6,085 $ (864) $154,009
======== ======= ======= ======= ========
<FN>
* Fixed assets of operations outside the United States are translated into U.S. dollars at current
exchange rates rather than historical rates in effect at time of acquisition, in accordance with
Financial Accounting Standard No. 52 "Foreign Currency Translation". The net change resulting from
fluctuating exchange rates and asset classification adjustments have been reflected in Column E.
</TABLE>
-21-
<PAGE> 22
<TABLE>
SCHEDULE IX - SHORT - TERM BORROWINGS
(Thousands of $)
<CAPTION>
Column A Column B Column C Column D Column E Column F
Maximum Average Weighted
Category of Weighted amount amount average
aggregate Balance average outstanding outstanding interest rate
short-term at end of interest during during during
borrowings period rate period period** period**
- ----------- --------- -------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Year ended October 31, 1993-
- ----------------------------
Amounts payable
to banks $ 9,920 3.78% $51,684 $28,461 3.74%
======= ======= =======
Year ended October 31, 1992 -
- -----------------------------
Amounts payable
to banks $13,582 3.70% $16,113 $11,733 5.40%
======= ======= =======
Year ended October 31, 1991-
- ----------------------------
Amounts payable
to banks $12,478 6.36% $20,258 $13,092 7.22%
======= ======= =======
<FN>
** Average of month-end balances
*** Computed based on month end balances and interest rates
</TABLE>
-22-
<PAGE> 23
<TABLE>
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
- -------------------------------------------------------
<CAPTION>
(Thousands of $)
Column A Column B
Charged to cost and expenses
---------------------------------------------
Item 1993 1992 1991
- ---- ---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs $7,546 $6,875 $6,608
====== ====== ======
</TABLE>
-23-
<PAGE> 1
1/25/94
BY-LAWS
OF
PETROLITE CORPORATION
---------------------
ARTICLE I
OFFICES
-------
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware, and the name of the resident agent
in charge thereof is The Corporation Trust Company.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may
from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. All meetings of the stockholders shall be held at such
place either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting.
Section 2. An annual meeting of stockholders shall be held on the
first Monday in March in each year, if not a legal holiday, and if a legal
holiday, then on the next business day following, at 9:00 a.m. or at such
other date and time and at such place as may
<PAGE> 2
be determined from time to time by resolution adopted by the Board of
Directors, when they shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Section 3. A majority of the stock issued and outstanding and entitled
to vote at any meeting of stockholders, the holders of which are present in
person or represented by proxy, shall constitute a quorum for the transaction
of business except as otherwise provided by law, by the Certificate of
Incorporation, or by these By-Laws. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, a majority of the
voting stock represented in person or by proxy may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which
a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally noticed. If
the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled
to vote thereat.
Section 4. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power
-2-
<PAGE> 3
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of the statutes, or the Certificate of Incorporation, or these By-Laws, a
different vote is required in which case such express provision shall govern
and control the decision of such question.
Section 5. At each meeting of the stockholders, each stockholder
having the right to vote may vote in person or may authorize another person
or persons to act for him by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three (3)
years prior to said meeting, unless said instrument provides for a longer
period. All proxies must be filed with the Secretary of the Corporation at
the beginning of each meeting in order to be counted in any vote at the
meeting. A proxy shall be deemed signed if the stockholder's name is placed
on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the stockholder or the stockholder's attorney
in fact. Each stockholder shall have one vote for each share of stock having
voting power, registered in his name on the books of the Corporation on the
record date set by the Board of Directors as provided in Article V, Section 6
hereof. All elections shall be had and all questions decided by a plurality
vote.
-3-
<PAGE> 4
Section 6. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called at any time by the Board of Directors, or by a
majority of the members of the Board of Directors, or by a committee of the
Board of Directors which has been duly designated by the Board of Directors
and whose power and authority, as provided in a resolution of the Board of
Directors or in the By-Laws, includes the power to call such meetings.
Special meetings of stockholders of the Corporation may not be called by any
other person or persons. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 7. Notice of any meeting of stockholders shall be given either
personally or by first-class mail or telegraphic or other written
communications, charges prepaid, addressed to the stockholder at the address
of such stockholder appearing on the books of the Corporation or given by the
stockholder to the Corporation for the purpose of notice. If no such address
appears on the Corporation's books or has been so given, notice shall be
deemed to have been given if sent by first-class mail or telegraphic or other
written communication to the Corporation's principal executive office, or if
published at least once in a newspaper of general circulation in the county
where such office is located. Notice shall be deemed to have been given at
the time
-4-
<PAGE> 5
when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
If any notice addressed to a stockholder at the address of such
stockholder appearing on the books of the Corporation is returned to the
Corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the
stockholder at such address, all future notices shall be deemed to have been
duly given without further mailing if the same shall be available to the
stockholder upon written demand of the stockholder at the principal executive
office of the Corporation for a period of one (1) year from the date of the
giving of such notice.
Section 8. Attendance of a person at a meeting shall constitute a
waiver of notice to such person of such meeting, except when the person
objects at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened, or objects to the
consideration of matters not included in the notice of the meeting.
Section 9. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and
-5-
<PAGE> 6
the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for
a period of at least ten (10) days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 10. Action may be taken by stockholders either at an annual or
special meeting of stockholders, or stockholders may act by written consent.
Section 11. Before any meeting of stockholders, the Board of Directors
may appoint any persons other than nominees for office to act as inspectors
of election at the meeting or its adjournment. If no inspectors of election
are so appointed, the chairman of the meeting may appoint inspectors of
election at the meeting. The number of inspectors shall be either one (1) or
two (2). If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting may appoint a person to fill such
vacancy.
The duties of these inspectors shall be as follows:
-6-
<PAGE> 7
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of
a quorum, and the authenticity, validity and effect of proxies;
(b) Receive votes or ballots;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes;
(e) Determine the result; and
(f) Do any other acts that may be proper to conduct the
election or vote with fairness to all stockholders.
ARTICLE III
DIRECTORS
---------
Section 1. The business and property of this Corporation shall be
managed and controlled by its Board of Directors, ten (10) in number. Unless
the Board of Directors shall otherwise determine, no Director shall stand for
re-election after he has attained the age of seventy-two (72) years.
Directors need not be stockholders.
Section 2. The Board of Directors, by majority vote of its members,
may at any time and from time to time, appoint one or more Advisory Directors
who shall advise and counsel the Board of Directors. Advisory Directors may
attend meetings of said Board
-7-
<PAGE> 8
but without the right to vote on any matter that may come before the Board
for consideration. Advisory Directors shall hold office at the pleasure of
the Board of Directors; provided, however, that the term of office of any
Advisory Director shall expire in any event at the Annual Stockholders'
Meeting next following his appointment as an Advisory Director. No Advisory
Director shall be appointed or reappointed after he has attained the age of
seventy-five (75) years; except that any current Advisory Director may be
reappointed until he has attained the age of eighty (80) years.
Section 3. The Directors shall be elected at the Annual Meeting of the
Stockholders, except as provided in Section 4 of this Article, and each
Director elected shall hold office until his successor is elected and
qualified.
Section 4. Vacancies on the Board of Directors by reason of death,
resignation, retirement, disqualification, removal from office, or otherwise,
and newly created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in
office, although less than a quorum, or by a sole remaining director. The
directors so chosen shall hold office until the next annual election of
directors and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner
-8-
<PAGE> 9
provided by statute.
Section 5. The property and business of the Corporation shall be
managed by or under the direction of its Board of Directors. In addition to
the powers and authorities by these By-Laws expressly conferred upon them,
the Board may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-Laws directed or required to be exercised or
done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
----------------------------------
Section 6. The directors may hold their meetings and have one or more
offices, and keep the books of the Corporation outside of the State of
Delaware.
Section 7. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be
determined by the Board.
Section 8. Special meetings of the Board of Directors may be called by
the Chairman of the Board, the President, any Vice President or the Secretary
on forty-eight (48) hours' notice to each director, either personally or by
mail, telephone, telegram or facsimile. Special meetings shall be called by
the Chairman of the
-9-
<PAGE> 10
Board, the President or the Secretary in like manner and
on like notice on the written request of two directors unless the Board
consists of only one director, in which case special meetings shall be called
by the Chairman of the Board, the President or Secretary in like manner or on
like notice on the written request of the sole director.
Section 9. At all meetings of the Board of Directors a majority of the
authorized number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the vote of a
majority of the directors present at any meeting at which there is a quorum,
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these By-Laws. If a quorum shall not be present at any meeting of the Board
of Directors, the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a
quorum shall be present. If only one director is authorized, such sole
director shall constitute a quorum. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action is approved by at least a majority of
the required quorum for such meeting.
-10-
<PAGE> 11
Section 10. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board or committee.
Section 11. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting
of the Board of Directors, or any committee, by means of conference telephone
or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in
a meeting shall constitute presence in person at such meeting.
COMMITTEES OF DIRECTORS
-----------------------
Section 12. The Board of Directors may at any time and from time to
time, create from its membership such committees as the Board may desire.
Any such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise such powers and authority of the Board
of Directors in the management of the business and affairs of the
Corporation, as the
-11-
<PAGE> 12
Board of Directors at any time and from time to time may delegate.
COMPENSATION OF DIRECTORS
-------------------------
Section 13. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, the Board of Directors shall have the
authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of
Directors or any committee thereof and may be paid a fixed sum for attendance
at each meeting of the Board of Directors or any Committee thereof, and a
stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
INDEMNIFICATION
---------------
Section 14. (a) The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and
-12-
<PAGE> 13
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best
-13-
<PAGE> 14
interests of the Corporation and except that no such
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only
to the extent that the Court of Chancery of Delaware or the court in which
such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation shall be successful on the merits or otherwise in defense, of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in
defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered
by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in paragraphs (a) and (b). Such
determination shall be made (1) by the Board of Directors by a
-14-
<PAGE> 15
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or,
even if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board of
Directors in the manner provided in paragraph (d) upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to
repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation as authorized in this
Section 14.
(f) The indemnification provided by this Section 14 shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under any statute, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such
a person.
(g) The Board of Directors may authorize, by a vote of a majority of
a quorum of the Board of Directors, the Corporation to purchase and maintain
insurance on behalf of any person who is or
-15-
<PAGE> 16
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Section 14.
(h) For the purposes of this Section 14, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Section with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence
had continued.
-16-
<PAGE> 17
ARTICLE IV
OFFICERS
--------
Section 1. The officers of the Corporation shall be a Chairman of the
Board, a President, a Vice President (any one or more of whom may be
designated as Executive or Senior Vice Presidents), a Secretary, a Treasurer
and a Controller, all of whom shall be appointed by the Board of Directors.
The same person may hold more than one office. The Board of Directors may
also designate a chief executive officer and a chief operating officer of the
Corporation.
Section 2. The officers of the Corporation, except such officers as
may be appointed in accordance with the provisions of Section 3 or Section 5
of this Article, shall be chosen by the Board of Directors, and each shall
serve at the pleasure of the Board, subject to the rights, if any, of any
officer under any contract of employment.
Section 3. The Board of Directors may appoint, and may empower the
Chairman of the Board to appoint, such other officers as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in the By-Laws or as
the Board of Directors may from time to time determine.
-17-
<PAGE> 18
Section 4. Any officer may be removed, either with or without cause,
by the Board of Directors, at any regular or special meeting thereof, or,
except in case of an officer chosen by the Board of Directors, by any officer
upon whom such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Corporation. Any such resignation shall take effect on receipt or at any
later time specified therein. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Any such resignation is without prejudice to the rights, if any, of the
Corporation under any contract to which the officer is a party.
Section 5. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in these By-Laws for regular appointments to such office.
Section 6. The Chairman of the Board shall, if present, preside at all
meetings of the Board of Directors and of the stockholders, and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and affairs of the Corporation and
shall exercise and perform such other powers and duties as may be from time
to time assigned to him by the Board of Directors or prescribed by the
-18-
<PAGE> 19
By-Laws.
Section 7. The President shall exercise and perform such powers and
duties as may be from time to time assigned to him by the Board of Directors
or the Chairman of the Board.
Section 8. In the absence or disability of the Chairman of the Board,
the President shall perform all of the duties of the Chairman of the Board,
and when so acting, shall have all of the powers of, and be subject to all of
the restrictions upon, the Chairman of the Board. In the absence or
disability both of the Chairman of the Board and of the President, and until
the Board of Directors designates otherwise, the Vice Presidents, if any,
shall perform all of the duties of the President, and when so acting shall
have all of the powers of, and be subject to all of the restrictions upon,
the President. The Vice Presidents shall have such other powers and perform
such other duties as from time to time may be prescribed for them
respectively by the Board of Directors, the Chairman of the Board, the
President or the By-Laws.
Section 9. The Secretary shall keep or cause to be kept, at the
principal office or such other place as the Board of Directors may order, a
book of minutes of all meetings and actions of directors, committees of
directors and stockholders, with the time and place of holding, whether
regular or special, and, if special,
-19-
<PAGE> 20
how authorized, the notice thereof given, the names of those present at
directors and committee meetings, the number of shares present or represented
at stockholders meetings, and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the Corporation's transfer agent or registrar, a share
register, or a duplicate share register, showing the names of all
stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same, and the number
and date of cancellation of every certificate surrendered for cancellations.
The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required by the By-Laws or
by law to be given, and he shall keep the seal of the Corporation, if one be
adopted, in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the By-
Laws.
Section 10. The Treasurer and the Controller shall each have such
powers and perform such duties as from time to time may be prescribed for him
by the Board of Directors, the Chairman of the Board, the President or by the
By-Laws.
-20-
<PAGE> 21
ARTICLE V
CERTIFICATES OF STOCK
---------------------
Section 1. Every holder of stock of the Corporation shall be entitled
to have a certificate signed by, or in the name of the Corporation by, the
Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice President, and by the Secretary or an Assistant Secretary, or the
Treasurer or an Assistant Treasurer of the Corporation, certifying the number
of shares represented by the certificate owned by such stockholder in the
Corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer, transfer agent, or registrar at the date
of issue.
LOST, STOLEN OR DESTROYED CERTIFICATES
--------------------------------------
Section 3. The Board of Directors, the Secretary and the Treasurer
each may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged
to have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the
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<PAGE> 22
person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may require the owner of such lost,
stolen or destroyed certificate or certificates or his legal representative
to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to
the certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
------------------
Section 4. Upon surrender to the Corporation or the transfer agent of
the Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall
be the duty of the Corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon
its books.
FIXING RECORD DATE
------------------
Section 5. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the
stockholders, or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix
a record date
-22-
<PAGE> 23
which shall not be more than sixty (60) nor less than ten (10)
days before the date of such meeting, nor more than sixty (60) days prior to
any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
-----------------------
Section 6. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim or
interest in such share on the part of any other person, whether or not it
shall have express or other notice thereof, save as expressly provided by the
laws of the State of Delaware.
ARTICLE VI
GENERAL PROVISIONS
------------------
DIVIDENDS
---------
Section 1. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting pursuant
to law. Dividends may be paid in cash, in property, or in shares of capital
stock, subject
-23-
<PAGE> 24
to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as
the directors from time to time, in their absolute discretion, think proper
as a reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interests of the
Corporation, and the directors may abolish any such reserve.
CHECKS
------
Section 3. All checks, drafts or other orders for payment of money,
notes or other evidences of indebtedness, issued in the name of or payable to
the Corporation shall be signed by such officer or officers as the Board of
Directors, the Chairman of the Board, the President or any Vice President may
from time to time designate.
Section 4. To the extent authorized by the Board of Directors or
otherwise provided in these By-Laws:
(a) The President, any Vice President, the Secretary or the
Treasurer may enter into contracts and execute instruments on behalf of
the Corporation;
(b) The Board of Directors, the Chairman of the Board, the
President or any Vice President may authorize any officer
-24-
<PAGE> 25
or officers, and any employee or employees or agent or agents of the
Corporation or any of its subsidiaries, to enter into any contract or
execute any instrument in the name of and on behalf of the Corporation,
and such authority may be general or confined to specific instances.
FISCAL YEAR
-----------
Section 5. The fiscal year of the Corporation shall be November 1
through October 31, unless otherwise fixed by resolution of the Board of
Directors.
SEAL
----
Section 6. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Seal, Delaware".
Said seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
NOTICES
-------
Section 7. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be
given to any director or stockholder, it shall not be construed to require
personal notice, but such notice may be given in writing, by mail, addressed
to such director or stockholder, at his address as it appears on the records
of the
-25-
<PAGE> 26
Corporation, with postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by telegram or facsimile.
Section 8. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein,
shall be deemed equivalent thereto.
ANNUAL STATEMENT
----------------
Section 9. The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by
vote of the stockholders, a full and clear statement of the business and
condition of the Corporation.
DELEGATION OF AUTHORITY
-----------------------
Section 10. Pursuant to Section 141 of the General Corporation Law of
the State of Delaware, the Board of Directors hereby delegates, subject to
such limitations as the Chairman of the Board or the President may impose, to
the officers of the Corporation the management of the day-to-day business and
affairs of the Corporation, including authority, provided the transaction
-26-
<PAGE> 27
is in the ordinary course of the Company's business:
(1) To sell or otherwise dispose of real or personal property
for such consideration as deemed proper;
(2) To purchase or otherwise acquire real or personal property
for such consideration as deemed proper;
(3) To enter into leases of real and personal property as
lessor or lessee, subject to the limitation below regarding financing
arrangements, and to enter into contracts, obligations and other
agreements;
(4) To enter into any instrument in the name and on behalf of
the Corporation;
(5) To open, maintain, and close checking, savings and other
banking accounts, brokerage and other investment accounts, and to
deposit, transfer, invest and withdraw funds to, in and from said
accounts, which accounts shall be maintained in the name and on behalf
of the Corporation; and
(6) To do all other such acts and things as are necessary to
effectuate the foregoing and to exercise all powers which are necessary
or useful to carry on the business of the Company.
The officers shall not, without approval of the Board of Directors of
this Corporation:
(a) Incur indebtedness for borrowed money or otherwise enter
into financing arrangements;
(b) Dispose of any of the Corporation's divisions,
-27-
<PAGE> 28
subsidiaries or principal product lines, or in any one transaction
assets having a value in excess of two percent (2%) of the disposing
Corporation's total assets;
(c) Acquire any corporation, partnership or other entity if the
fair value of the consideration paid is in excess of two percent (2%)
of the acquiring corporation's total assets; or
(d) Take any action which would cause this Corporation to be in
default of its debt obligations.
ARTICLE VII
AMENDMENTS
----------
Section 1. These By-Laws may be altered, amended or rescinded or new
By-Laws may be adopted by the Board of Directors.
Section 2. These By-Laws may not be altered, amended or rescinded and
new By-Laws may not be adopted by the stockholders of the Corporation except
by the vote of the holders of not less than seventy-five percent (75%) of the
total shares of stock of the Corporation entitled to vote in the election of
directors.
- ----------
-28-
<PAGE> 1
- --------------------------------------------------------------------------------
PETROLITE CORPORATION
-------------------------------------------
NOTE PURCHASE AGREEMENT
--------------------------------------------
$10,000,000 5.90% SERIES A SENIOR NOTES, TRANCHE I, DUE 2000
$30,000,000 6.39% SERIES A SENIOR NOTES, TRANCHE II, DUE 2003
Dated as of September 3, 1993
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
PAGE
----
<C> <S> <C>
Section 1. Authorization and Issue of Notes; Additional
Senior Notes...................................... 1
Section 2. Purchase and Sales of Notes....................... 2
Section 3. Prepayments Of Notes.............................. 2
3.1. Mandatory Prepayments of the Series A-I Senior
Notes............................................. 2
3.2. Mandatory Prepayment of the Series A-II Senior
Notes............................................. 2
3.3. Optional Prepayment of the Notes.................. 3
3.4. Notice of Optional Prepayments.................... 3
3.5. Optional Redemption of Notes in Case of Change
of Control........................................ 4
3.6. Cancellation of Notes; Notation Thereon........... 6
3.7. Purchase of Notes................................. 6
Section 4. Representations and Warranties of the
Borrower.......................................... 6
4.1. Corporate Existence and Power..................... 7
4.2. Corporate Authority............................... 7
4.3. Binding Effect.................................... 7
4.4. Capital Stock..................................... 7
4.5. Financial Statements and Reports.................. 7
4.6. Litigation; Governmental Orders................... 9
4.7. Outstanding Debt; Investments..................... 9
4.8. Subsidiaries...................................... 9
4.9. Consents, Etc. ................................... 10
4.10. Title to Properties............................... 10
4.11. Taxes............................................. 11
4.12. No Conflicts with Agreements, Etc. ............... 11
4.13. Disclosure........................................ 12
4.14. Offering of Notes................................. 12
4.15. Broker's or Finder's Commissions.................. 12
4.16. Pollution and Other Regulations................... 13
4.17. Possession of Franchises, Licenses, Etc. ......... 14
4.18. Trademarks, Etc. ................................. 15
4.19. Margin Regulations; Use of Proceeds............... 15
4.20. Compliance with ERISA............................. 16
4.21. Status under Certain Laws......................... 18
4.22. Legality.......................................... 18
4.23. Foreign Assets Control Regulations................ 18
4.24. Other Agreements.................................. 18
4.25. Labor Matters..................................... 18
-i-
<PAGE> 3
<CAPTION>
TABLE OF CONTENTS
-----------------
(CONTINUED)
PAGE
----
4.26. Material Contracts................................ 19
4.27. Insurance......................................... 19
4.28. Ranking of Notes.................................. 20
Section 5. Representations of Purchasers..................... 20
Section 6. Closing Conditions................................ 20
6.1. Proceedings Satisfactory.......................... 20
6.2. Opinion of Purchaser's Special Counsel............ 21
6.3. Opinion of Counsel to the Borrower................ 21
6.4. Representations and Warranties True, Etc.;
Certificates...................................... 21
6.5. Absence of Material Adverse Change................ 21
6.6. Absence of Litigation, Orders, Etc. .............. 22
6.7. Your Purchase Permitted by Applicable Laws;
Legal Investment.................................. 22
6.8. Other Purchasers.................................. 22
6.9. Consents and Approvals............................ 22
6.10. Fees.............................................. 22
6.11. PPN Number........................................ 22
Section 6A. Closing Conditions of the Borrower................ 22
6A.1. Right of Refusal.................................. 23
Section 7. Financial Statements and Information.............. 24
Section 8. Inspection of Properties and Books................ 27
Section 9. Affirmative Covenants............................. 27
9.1. Payment of Principal, Prepayment Charge and
Interest; to Keep Books; Reserves; Etc. .......... 28
9.2. Payment of Taxes and Claims....................... 28
9.3. Maintenance of Properties and Corporate
Existence......................................... 28
9.4. Insurance......................................... 30
9.5. Further Assurances................................ 30
9.6. Maintenance of Consolidated Adjusted Net
Worth............................................. 30
9.7. ERISA Covenant.................................... 30
Section 10. Negative Covenants................................ 30
-ii-
<PAGE> 4
<CAPTION>
TABLE OF CONTENTS
-----------------
(CONTINUED)
PAGE
----
10.1. Restrictions on Debt.............................. 30
10.2. Restrictions on Liens............................. 31
10.3. Conduct of Business............................... 34
10.4. Transactions with Affiliates...................... 34
10.5. Mergers, Consolidations and Sales of Assets....... 34
10.6. Restricted Payments............................... 36
10.7. Limitation on Dividend Restrictions Affecting
Subsidiaries...................................... 37
Section 11. Definitions....................................... 37
Section 12. Events of Default................................. 49
12.1. Events of Default; Remedies....................... 49
12.2. Suits for Enforcement............................. 53
12.3. Remedies Cumulative............................... 53
12.4. Remedies Not Waived............................... 54
Section 13. Registration, Exchange, and Transfer of Notes..... 54
Section 14. Lost, Stolen, Damaged and Destroyed Notes......... 54
Section 15. Miscellaneous..................................... 55
15.1. Home Office Payment............................... 55
15.2. Amendment and Waiver.............................. 55
15.3. Expenses.......................................... 57
15.4. Survival of Representations and Warranties........ 57
15.5. Successors and Assigns............................ 57
15.6. Notices........................................... 58
15.7. Governing Law..................................... 59
15.8. Indemnification................................... 59
15.9. Integration and Severability...................... 59
15.10. Counterparts...................................... 59
15.11. Submission to Jurisdiction; Waiver of Service
and Venue......................................... 60
15.12 Waiver of Right to Trial by Jury.................. 60
-iii-
<PAGE> 5
<CAPTION>
TABLE OF CONTENTS
-----------------
(CONTINUED)
SCHEDULES AND EXHIBITS
----------------------
Schedule I Manner of Payment and
Communications to Purchasers
Schedule 3.5B Members of the Janes Family
Schedule 4.5 Interim Transactions
Schedule 4.7A Debt
Schedule 4.7B Investments
Schedule 4.8 Significant Subsidiaries
Schedule 4.10 Real Property
Schedule 4.16 Environmental Matters
Schedule 4.20 ERISA
Schedule 4.25 Labor Matters
Schedule 10.4 Transactions with Affiliates
Exhibit A-1 Form of Series A-I Senior Note
Exhibit A-2 Form of Series A-II Senior Note
Exhibit B Opinion of Counsel to Purchasers
Exhibit C Opinion of Counsel to the Borrower
(/TABLE)
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<PAGE> 6
PETROLITE CORPORATION
NOTE PURCHASE AGREEMENT
September 3, 1993
To the Several Purchasers Whose
Names Appear in the Acceptance
Form at the End Hereof
Ladies and Gentlemen:
The undersigned, Petrolite Corporation, a Delaware corporation
(the "Borrower"), hereby agrees with each of you (each of you being
referred to herein individually as a "Purchaser" and collectively as
the "Purchasers") as follows:
Section 1. Authorization and Issue of Notes; Additional Senior Notes.
---------------------------------------------------------
(a) The Borrower has duly authorized the issue, sale and delivery of
(i) its 5.90% Series A Senior Notes, Tranche I, in the aggregate
principal amount of $10,000,000 (all such Notes originally issued
pursuant to this Agreement and the Other Agreements, or delivered in
substitution or exchange for any thereof, being collectively called
the "Series A-I Senior Notes" and individually a "Series A-I Senior Note")
and (ii) its 6.39% Series A Senior Notes, Tranche II, in the aggregate
principal amount of $30,000,000 (all such Notes originally issued
pursuant to this Agreement and the Other Agreements, or delivered in
substitution or exchange for any thereof, being collectively called the
"Series A-II Senior Notes" and individually a "Series A-II Senior Note",
and the Series A-I Senior Notes and the Series A-II Senior Notes being
collectively called the "Notes" and individually a "Note"), in each case
dated the date of issue thereof, bearing interest (computed on the basis
of a 360-day year of twelve 30-day months) from such date on the unpaid
principal amount thereof, payable semi-annually on the 1st day of May and
November of each year, commencing on May 1, 1994, at the rate specified
above for such notes until said principal shall have become due and
payable, and bearing interest (so computed) at the rate per annum which
is 2.00% higher than the rate specified above for such Notes on any
overdue principal and prepayment charge and, to the extent permitted by
applicable law, on any overdue interest, until the same shall be paid,
to mature (x) in the case of the Series A-I Senior Notes, on November 1,
2000, and (y) in the case of the Series A-II Senior Notes, on November 1,
2003, all of which Series A-I Senior Notes and Series
<PAGE> 7
A-II Senior Notes
shall be substantially in the form of Exhibit A-I and Exhibit A-2,
respectively, hereto attached.
Section 2. Purchase and Sales of Notes. The Borrower hereby
---------------------------
agrees to sell to you and, subject to the terms and conditions herein set
forth, you agree severally to purchase from the Borrower, Notes of the
respective series and in the respective aggregate principal amounts set
forth opposite your name in Schedule I hereto, at a price equal in each
case to 100% of the respective principal amount thereof.
The purchase and delivery of the Notes shall take place at the offices
of Sonnenschein Nath and Rosenthal, 1221 Avenue of the Americas, 24th Floor,
New York, New York 10020-1089 at 10:00 a.m., New York time on November 5,
1993 (or such other time and place as the parties shall agree) (herein
called the "Closing Date"). On the Closing Date, the Borrower will deliver
to you Notes registered in your name or in the name of your nominee, each
such note to be duly executed and dated the applicable Closing Date, in any
denominations (which Note shall be in any multiples of $100,000 but the
principal amount of any such Note shall in no event be less than $500,000)
and of the respective series and in the respective aggregate principal
amounts to be purchased by you on such Closing Date as specified above,
as you may specify by timely notice to the Borrower (or, in the absence
of such notice, one Note registered in your name with respect to each
series of Notes to be purchased by you hereunder on the Closing Date),
against your delivery to the Borrower of immediately available funds in the
amount of the aggregate purchase price of the Notes to be purchased by you
on the Closing Date.
Section 3. Prepayments Of Notes.
--------------------
3.1. Mandatory Prepayments of the Series A-I Senior Notes.
----------------------------------------------------
On November 1, in each year, commencing on November 1, 1996, the Borrower
will prepay and apply and there shall become due and payable the sum of
$2,000,000 on the principal amount of the Series A-I Senior Notes. No
prepayment charge shall be payable in connection with any required
prepayment made pursuant to this Section 3.1. Each such prepayment shall
be allocated (but only in units of $1,000) among the outstanding Series
A-I Senior Notes in proportion, as nearly as may be, to the respective
unpaid principal amounts thereof.
3.2 Mandatory Prepayment of the Series A-II Senior Notes.
----------------------------------------------------
On November 1 in each year, commencing on November 1, 1997, the Borrower
will prepay and apply and there shall become due and payable the sum of
$4,285,714.29 on the principal amount of the Series A-II Senior Notes.
No prepayment charge shall be payable
-2-
<PAGE> 8
in connection with any required prepayment made pursuant to this Section
3.2. Each such prepayment shall be allocated (but only in units of $1,000)
among the outstanding Series A-II Senior Notes in proportion, as nearly
as may be, to the respective unpaid principal amounts thereof.
3.3. Optional Prepayment of the Notes. Upon compliance with
--------------------------------
Section 3.4, the Borrower shall have the privilege, at any time and
from time to time, of prepaying the principal amount of the outstanding
Notes, either in whole or in part (but if in part then in an integral
multiple of $100,000) by payment of the remaining principal balance of
the Notes, or portion thereof to be prepaid, and accrued interest thereon
to the date of such prepayment, together with a prepayment charge equal to
the applicable Make-Whole Premium.
Each prepayment of principal made pursuant to this Section 3.3 shall
be allocated (but only in units of $1,000) among all of the outstanding
Notes in propotion, as nearly as may be, to the respective unpaid
principal amounts thereof. Any partial prepayment of the Notes pursuant to
this Section 3.3 shall be applied to the required payments of principal
of the Notes of such respective series (excluding required prepayments
thereof pursuant to Section 3.1 or 3.2 and payment of the principal balance
thereof on final maturity) in the inverse order of maturity.
3.4. Notice of Optional Prepayments. The Borrower shall call Notes
------------------------------
for prepayment pursuant to Section 3.3 by giving written notice thereof
to each holder of Notes, which notice shall be given not less than 30 nor
more than 60 days prior to the date fixed for such prepayment. Such notice
shall specify (a) the date fixed for such prepayment, (b) the principal
amount so to be prepaid on such date, (c) the amount of accrued interest
to be paid on such date and (d) the estimated amount of the Make-Whole
Premium, if any, to be paid in connection therewith. Concurrently with
any prepayment pursuant to Section 3.3, the Borrower shall furnish to each
holder of Notes an Officer's Certificate setting forth computations in
reasonable detail showing the manner of calculation of the Make-Whole
Premium, if any, paid in connection with such prepayment and attaching
a copy of the source of market data by reference to which the Treasury Yield
for each series of Notes was determined in connection with such
computations. Notice of prepayment having been so given, the aggregate
principal amount of the Notes of each series so to be prepaid as specified
in such notice, together with interest accrued thereon to such date fixed
for prepayment, plus the applicable prepayment charge (if any), shall
become due and payable on the specified prepayment date.
-3-
<PAGE> 9
3.5. Optional Redemption of Notes in Case of Change of Control.
---------------------------------------------------------
(a) Upon the occurrence of a Change of Control (the "Change of
Control Date"), each holder of any Notes shall have the right to require
the Borrower to repurchase such holder's Notes in whole or in part pursuant
to the offer described in paragraph (b) and (d) below (the "Change of
Control Offer") at a purchase price in cash equal to the principal amount
thereof, plus accrued and unpaid interest thereon to the date of repurchase
(the "Change of Control Purchase Price").
(b) Not less than 30 nor more than 60 days prior to any Change
of Control Date, the Borrower shall give written notice (the "Change of
Control Notice") to each holder of any Notes stating:
(i) that a Change of Control is expected to occur (describing
such Change of Control in reasonable detail and identifying the parties
thereto), that a Change of Control Offer is being made pursuant to
this Section 3.5, and that all Notes timely tendered within 20 Business
Days of the date of the Change of Control Notice will be accepted for
payment;
(ii) the purchase date, which shall be the Change of Control
Date (the "Change of Control Payment Date");
(iii) that any Note not timely tendered within the time
specified in clause (i) above, will continue to accrue interest;
(iv) that any Note accepted for payment pursuant to the Change
of Control Offer will cease to accrue interest after the Change of
Control Payment Date;
(v) that holders of Notes electing to have one or more Notes
repurchased pursuant to a Change of Control Offer will be required to
surrender the Notes to be so repurchased within 20 Business Days of
the date of the Change of Control Notice, duly endorsed to the
Borrower or in blank, to the Borrower at its address specified in
Section 15.6 hereof prior to the close of business on the 20th
Business Day following the date of the Change of Control Notice;
(vi) that any holder of Notes will be entitled to withdraw
such holder's election with respect to any or all of the principal
amount of Notes delivered for repurchase if the Borrower receives, not
later than the close of business on the third Business Day preceding
the Change of Control Payment Date, a telegram, telex, facsimile
transmission or
-4-
<PAGE> 10
letter setting forth the name of such holder, the principal amount of
Notes such holder delivered for repurchase, and a statement that
such holder is withdrawing its election to have such Notes
repurchased; and
(vii) any other information necessary to enable holders of
Notes to tender such Notes and have such Notes repurchased pursuant
to this Section 3.5.
(c) On the Change of Control Payment Date, the Borrower shall
(i) accept for payment all Notes tendered pursuant to the Change of
Control Offer and not validly withdrawn, and (ii) pay to each holder of
Notes so tendered, in immediately available funds, by wire transfer or
such other means as may be specified by such holder in writing, the
aggregate Change of Control Purchase Price of all Notes so tendered by
such holder. Concurrently with such payment, the Borrower shall furnish to
each holder of Notes so tendered a certificate signed by an authorized
financial officer the Borrower setting forth computations in reasonable
detail showing the manner of calculation of the Change of Control
Purchase Price being paid on such date. If any holder of Notes shall
specify, by written notice to the Borrower as contemplated in clause (vi)
of the foregoing subsection (b), that it desires to withdraw in whole or
in part its election to have one or more of its Notes repurchased then
(A) if such election is withdrawn in whole, the Borrower shall promptly
(but in no event later than the Change of Control Payment Date) return to
such holder the Notes previously tendered for repurchase as contemplated
by the Change of Control Offer and (B) if such election is withdrawn in
part then the Borrower shall repurchase pursuant to this Section 3.5 only
so much of the principal amount of such Notes as shall be specified in such
notice, and on the Change of Control Payment Date shall issue to such
holder new Notes, in such denominations (multiples of $1,000) as may be
specified by such holder, in an aggregate principal amount equal to the
aggregate portion of the principal amount of the Notes so tendered by such
holder (and not validly withdrawn) which is not repurchased by the
Borrower hereunder. All Notes repurchased pursuant to this Section 3.5
shall be cancelled and shall not be reissued. The Borrower shall give notice
to each holder of Notes of the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
(d) Notwithstanding the foregoing, if the Borrower (i) shall
not have obtained knowledge at least 30 days prior to a Change of Control
that such Change of Control will or may occur, or (ii) shall not have
obtained knowledge until after a Change of Control has occurred, then the
Borrower shall give the notice required by Section 3.5(b) not later than
two business Days after
-5-
<PAGE> 11
obtaining such knowledge. In such event, each holder of Notes may deliver
a notice of election to accept the Change of Control Offer and may tender
any or all of its Notes pursuant thereto at any time within 20 Business
Days after receiving such notice (whether or not at such time the Change
of Control Date shall have occurred). With respect to any such notice of
election and tender of Notes received by the Borrower on or prior to the
third Business Day prior to the Change of Control Date, the Borrower
shall comply with the provisions of Section 3.5(c) and make payment of the
Change of Control Purchase Price on the Change of Control Date as provided
therein. With respect to any such notice of election and tender of Notes
received by the Borrower within such 20-Business-Day period but after the
close of business on the third Business Day prior to the change of
Control Date (whether or not at such time the Change of Control Date
shall have occurred), the Borrower shall comply with the provisions of
Section 3.5(c) and make payment of the Change of Control Purchase Price
promptly, but in any event not later than five (5) days, after receipt thereof.
(e) Notwithstanding the foregoing, (i) in the event the
Borrower caused a notice to be delivered pursuant to Section 3.5(b) hereof,
and (ii) at any time prior to the Change of Control Payment Date, the
Borrower reasonably determines that the circumstances which were to give
rise to a Change of Control have changed so that a Change of Control in
connection with or related to such circumstances will not occur, then the
Borrower shall immediately cause written notice to be mailed, by registered
mail, return receipt requested, to each holder of Notes which notice shall
(1) state that a Change of Control will not occur, (2) describe in
reasonable detail the change of circumstances which lead to the determination
that a Change of Control will not occur, and (3) state that the Borrower's
previous notice delivered pursuant to Section 3.5(b) hereof offering to
redeem all of the Notes shall be of no further force and effect. Concurrently
with the delivery of such written notice, the Borrower shall return to
each holder of Notes any of such holder's Notes tendered pursuant to the
Change of Control Offer.
3.6. Cancellation of Notes; Notation Thereon. Subject to the
---------------------------------------
provisions of Section 15.1, the Borrower may, as a condition of payment
of all or any part of the principal of, prepayment charge (if any) and
interest on, any Note, require the holder to present such Note for
notation of such payment and, if such Note be paid in full, require the
surrender thereof.
3.7. Purchase of Notes. The Borrower will not, and will not permit
-----------------
any of its Subsidiaries or Affiliates to, acquire directly or indirectly
by purchase or prepayment or otherwise any of the outstanding Notes
except (i) by way of payment or prepayment in
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<PAGE> 12
accordance with the provisions of the Notes and of this Agreement and the
Other Agreements or (ii) if any offer to so acquire any of the outstanding
Notes is concurrently made on the same terms, ratably, to each holder of Notes.
Section 4. Representations and Warranties of the Borrower.
----------------------------------------------
The Borrower represents and warrants to the Purchasers that:
4.1. Corporate Existence and Power. The Borrower and each Subsidiary
-----------------------------
is a corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation and is duly qualified
to do business in each additional jurisdiction where the failure to so
qualify would have a Material Adverse Effect. The Borrower and each
Subsidiary has all requisite corporate power to own its properties and to
carry on its business as now being conducted and as proposed to be
conducted, and, in the case of the Borrower, to execute and deliver this
Agreement, the Other Agreements and the Notes, and to engage in the
respective transactions contemplated hereby and thereby.
4.2. Corporate Authority. The execution, delivery and performance
-------------------
by the Borrower of this Agreement, the Other Agreements and the Notes are
within the Borrower's corporate powers and have been duly authorized by
all necessary corporate action on the part of the Board of Directors of
the Borrower.
4.3. Binding Effect. This Agreement and the Other Agreements are,
--------------
and the Notes when issued and delivered against payment therefor as
herein provided will be, the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in each case in accordance with
their respective terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws relative to or
affecting the enforcement of creditors' rights generally in effect from
time to time and by general principles of equity.
4.4. Capital Stock. The authorized Capital Stock of the Borrower
-------------
consists of 35,000,000 shares of Common Stock, no par value per share, and
no shares of Preferred Stock, and all of the issued and outstanding shares
of Common Stock of the Borrower are validly issued, fully paid and
non-assessable.
4.5. Financial Statements and Reports. (a) The Borrower has
--------------------------------
delivered to you copies of the Confidential Memorandum of SPP Hambro & Co.,
and The Boatmen's National Bank of St. Louis, dated April, 1993, entitled
"Petrolite Corporation, Confidential Direct Placement Memorandum" and
prepared in connection with the private placement of the Notes. The
Confidential Memorandum correctly describes in all material respects the
businesses, operations and
-7-
<PAGE> 13
principal Properties of the Borrower and its Subsidiaries except as
modified or as otherwise set forth in any of the Borrower's Quarterly Reports
on Form 10-Q or any of the Borrower's Current Reports on Form 8-K filed
with the SEC after the date of such Confidential Memorandum and which have
been delivered to the Purchasers or their designee. The Borrower has also
delivered to you copies of the Borrower's Annual Reports on form 10-K and
Annual Reports to shareholders for the fiscal years ended October 31, 1990,
October 31, 1991, and October 31, 1992, the Borrower's Quarterly Reports on
Form 10-Q for the fiscal quarters ended January 31, 1993 and April 30, 1993,
the Borrower's definitive Proxy Statement distributed to its shareholders in
connection with its 1992 annual meeting of shareholders, and the
Borrower's Current Reports on Form 8-K dated each of January 25, 1993,
April 28, 1993, and June 25,1993, each as filed with the SEC (collectively,
the "Company Reports"). The Company Reports do not contain any misstatement
of a material fact or omit to state any material fact necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Company Reports, taken together, contain
a true and correct description of the businesses, operations and principal
properties of the Borrower and its Subsidiaries. The Company Reports
contain the audited consolidated balance sheets of the Borrower and its
Subsidiaries as at the last day of each of the fiscal years covered thereby
and the related audited consolidated statements of operations, retained
earnings and of cash flow for each such fiscal year, together with the
notes thereto and the reports thereon of Price Waterhouse, the Borrower's
independent public accountants, and the unaudited consolidated balance
sheets of the Borrower and its Subsidiaries as at January 31, 1993 and
April 30, 1993 and the related unaudited consolidated statements of
operations and retained earnings, of common stock and capital in excess
of par value and of changes in financial position for each of the fiscal
quarters then ended, together with the notes thereto (collectively, the
"Consolidated Financial Statements"). The Consolidated Financial Statements
are consistent with the books of account and records of the Borrower and
its Subsidiaries, were prepared in accordance with GAAP consistently
applied throughout the periods covered thereby (except as noted therein),
and fairly present the consolidated financial position, results of operations
and changes in financial position of the Borrower and its Subsidiaries as
at the respective dates thereof and for the respective periods covered
thereby, subject, in the case of the unaudited interim Financial Statements,
to non-material recurring year-end audit adjustments and absence of the
notes required by GAAP.
(b) As of the date of each of the balance sheets included in the
Consolidated Financial Statements, neither the
-8-
<PAGE> 14
Borrower nor any of its Subsidiaries had any Debt or liability, absolute
or contingent, liquidated or unliquidated, except Debt and liabilities
reflected or reserved against on such respective balance sheets or described
in the notes thereto.
(c) Except as may be set forth in Schedule 4.5 and except for
the transactions contemplated by this Agreement and the Other Agreements,
since October 31, 1992, there has been no change which has or is likely to
have a Material Adverse Effect.
4.6. Litigation; Governmental Orders. (a) Except as may be set forth
-------------------------------
in the Disclosure Document, there are no actions, suits or proceedings
pending, or, to the knowledge of the Borrower after due inquiry, threatened
against or affecting the Borrower or any of its Subsidiaries or any
Properties or rights of any of them which, if adversely determined,
individually or in the aggregate would have a Material Adverse Effect.
(b) There are no actions, suits or proceedings pending, or, to
the knowledge of the Borrower after due inquiry, threatened against or
affecting the Borrower or any of its Subsidiaries which seek to enjoin, or
otherwise prevent the consummation of, the transactions contemplated
herein or to recover any damages or obtain any relief as a result of any of
the transactions contemplated herein in any court or before any arbitrator
of any kind or before or by any Governmental Body.
(c) Neither the Borrower nor any of its Subsidiaries is now,
or will be after or as a result of giving effect to the transactions
contemplated herein, in default under or in violation of any Order of any
court, arbitrator or Governmental Body or of any federal, state, local or
foreign statute, ordinance or law or of any rule or regulation of any
Governmental Body, which default or violation has or might have a Material
Adverse Effect; and, except as may be set forth in the Disclosure Document,
none of them is subject to or a party to any Order of any court or
Governmental Body arising out of any action, suit or proceeding under any
statute or other law respecting antitrust, monopoly, restraint of trade,
unfair competition or similar matters.
4.7. Outstanding Debt; Investments.
-----------------------------
(a) Schedule 4.7A sets forth a correct and complete list and
brief description of all Debt, individually the principal amount of which
exceeds $3,000,000, and a brief description of the aggregate of all other
Debt, of the Borrower and its Subsidiaries and all Liens securing such Debt
(excluding any Debt evidenced by the Notes). There exists no breach or
-9-
<PAGE> 15
default or event of default under the terms and provisions of any
instrument, agreement or contract pertaining to any such Debt.
(b) Schedule 4.7B sets forth a correct and complete list and
brief description of all Investments of a material nature to the Borrower
and its Subsidiaries.
4.8. Subsidiaries. Schedule 4.8 contains a true, correct and complete
------------
list of the Borrower's Significant Subsidiaries as of the date hereof
setting forth, for each Significant Subsidiary, its jurisdiction of
incorporation and the number and percentage of shares of its outstanding
capital stock owned, directly or indirectly, by the Borrower. All shares of
capital stock of such Significant Subsidiaries owned directly or indirectly
by the Borrower are validly issued, fully paid and non-assessable and
free and clear of any Liens except Liens permitted by Section 10.2 hereof.
There are no outstanding warrants, options, or other rights to purchase
or otherwise acquire (i) any of the shares of capital stock of such
Significant Subsidiaries directly or indirectly owned by the Borrower or
(ii) any authorized but unissued or treasury shares of such Significant
Subsidiaries.
4.9. Consents, Etc. Except for any required public disclosure under
-------------
the securities laws of the United States which required public disclosure
has been made or will be made, no consent, approval or authorization of or
declaration, registration or filing with any Governmental Body or any
nongovernmental Person, including without limitation any creditor or
shareholder of the Borrower, is required in connection with the execution,
delivery and performance of this Agreement, the Other Agreements or the
Notes or the transactions contemplated hereby or thereby or as a condition
to the legality, validity or enforceability of this Agreement, the Other
Agreements or the Notes, or to the offer, issue, sale or delivery of the
Notes to the Purchasers hereunder or under the Other Agreements or the
fulfillment of or compliance with the terms and provisions of the Notes
being purchased hereunder or thereunder, except for such consents,
approvals, authorizations, declarations, registrations or filings which
have been obtained or made and are in full force and effect.
4.10. Title to Properties. The Disclosure Document sets forth a true
-------------------
and complete list and brief description of all material real Property owned
by the Borrower or any of its Subsidiaries on the date hereof, except for
properties subsequently acquired from Welchem, Inc. There are no material
leases of real Property or personalty to which the Borrower or any of its
Subsidiaries is a party. Each of the Borrower and its Subsidiaries has
(i) good and marketable fee simple title to each
-10-
<PAGE> 16
of their respective real Properties set forth in the Disclosure Document, or
subsequently acquired from Welchem, Inc. subject to no Lien of any kind
except Permitted Liens, and (ii) good title to all of their other
respective material Properties and material assets, subject to no Lien of
any kind except Permitted Liens.
4.11. Taxes. Each of the Borrower and its Subsidiaries has filed, or
-----
on behalf of each of them there have been filed, all federal, state and
local tax returns, informational returns and excise tax returns which are
required to have been filed by or on behalf of such Persons, and there have
been paid all taxes shown to be due and payable on such returns and all
other material taxes and assessments payable by any of them, unless any tax
liability is being diligently contested in good faith and the Borrower or
any of its Subsidiaries, as the case may be, has adequately reserved
against such tax liability on its books and financial statements in
accordance with GAAP. No material tax liens have been filed and no material
claims are being asserted with respect to any such taxes as of the date
hereof. No material tax assessment against the Borrower or any of its
Subsidiaries has been proposed and all of their respective tax liabilities
are adequately provided for on their respective books and financial
statements in accordance with GAAP. The federal income tax returns of the
Borrower and its Subsidiaries have been audited by the Internal Revenue
Service, and such audits have been completed, or the statute of limitations
has run, for all tax years of the Borrower through and including the year
ended October 31, 1989, and all deficiencies, assessments, interest and
penalties proposed as a result of any such audit have been paid in full.
No issue has been raised in any such examination that, by application of
similar principles, may reasonably be expected to result in the assertion
of a material deficiency for any other taxable year not so examined. None
of the Borrower or any of its Subsidiaries has taken any reporting position
for which it does not have a reasonable basis or anticipates any further
material tax liability with respect to its taxable years that have not been
closed.
4.12. No Conflicts with Agreements, Etc. Neither the Borrower nor any
---------------------------------
Subsidiary is, or after giving effect to the transactions contemplated by
this Agreement and the Other Agreements will be, a party to any contract or
agreement or subject to any restriction contained in its charter or by-laws
which has a Material Adverse Effect. Neither the execution and delivery of
this Agreement, the Other Agreements or the Notes nor the fulfillment of or
compliance with the terms and provisions hereof and thereof, nor the offering
and issuance of the Notes, will conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a default under, or result
in the creation of any Lien on any Properties of the
-11-
<PAGE> 17
Borrower or its Subsidiaries, or result in any violation of, or require
for its validity any authorization, consent, approval, exemption or other
action by, or notice to any Governmental Body or any of the shareholders of
the Borrower pursuant to, the charter or by-laws of any of them, or any award
of any arbitrator or any contract, agreement, mortgage, indenture, lease,
instrument, Order, statute, law, rule or regulation to which any of them or
any of their respective Property is subject. Neither the Borrower nor any of
its Subsidiaries is, or after giving effect to the transactions
contemplated by this Agreement and the Other Agreements will be, in
violation of, or in default under, any contract, mortgage, indenture, lease,
instrument or agreement binding upon it or any of its Properties, which
violation or default individually or in the aggregate might result in a
Material Adverse Effect.
4.13. Disclosure. Neither this Agreement nor any other document,
----------
certificate or statement furnished to any Purchaser by or on behalf of the
Borrower in connection herewith, including the Confidential Memorandum (as
modified or as otherwise provided in any of the Borrower's Quarterly Reports
on Form 10-Q or any of the Borrower's Current Reports on Form 8-K filed with
the SEC after the date of such Confidential Memorandum and which have been
delivered to the Purchasers or their designee), contained, as of its
respective date, or now contains, any untrue statement of a material fact or
as of any such date omitted, or now omits, to state a material fact necessary
in order to make the statements contained herein and therein not misleading.
Except as set forth in the Company Reports delivered as of the date of the
execution of this Agreement, there is no fact known to the Borrower which
now has or in the future may have (so far as the Borrower can reasonably
foresee) a Material Adverse Effect.
4.14. Offering of Notes. Neither the Borrower nor its Affiliates nor
-----------------
any of their representatives has, directly or indirectly, offered any of
the Notes or any security similar to any of them for sale to, or solicited
any offers to buy any of the Notes or any security similar to any of them
from, or otherwise approached or negotiated with respect thereto with, more
than 50 Persons including you, and neither the Borrower nor its Affiliates
nor any of their representatives has taken or will take any action which
would subject the issuance or sale of any of the Notes to the provisions
of Section 5 of the Securities Act or which would violate the provisions of
any other securities or Blue Sky law of any jurisdiction.
4.15. Broker's or Finder's Commissions. Except for SPP Hambro & Co.
--------------------------------
and The Boatmen's National Bank of St. Louis, no broker's or finder's fee
or commission will be payable by the Borrower or any of its Subsidiaries
with respect to the issuance
-12-
<PAGE> 18
and sale of the Notes or the transactions contemplated by this Agreement
or the Other Agreements. The Borrower agrees to indemnify you and hold you
harmless against any loss, cost, claim or liability (including, without
limitation, reasonable attorneys' fees and disbursements for the investigation
and defense of claims) arising out of or relating to any such actual or
alleged fee or commission.
4.16. Pollution and Other Regulations. Except as may be set forth in
-------------------------------
the Company Reports or in Schedule 4.16,
(a) there is no pending Environmental Matter relating to the
Borrower or any of its Subsidiaries or any Properties of any of such Persons
that is likely to have a Material Adverse Effect and the Borrower is aware
of no incidents that could result in any such Environmental Matter. Neither
the Borrower nor any of its Subsidiaries has agreed to assume by contract or
otherwise any liability of any other Person for cleanup, compliance,
or required capital expenditures in connection with any
Environmental Matter arising prior to the date hereof that has or is likely
to have a Material Adverse Effect;
(b) the Properties used, owned, leased, operated, managed or
controlled at any time by the Borrower and its Subsidiaries are free, in
any material respect, of contamination from Hazardous Materials, including,
without limitation, any contamination of the associated air, soil, groundwater
or surface waters for which a response is or is likely to be required by
Environmental Law;
(c) the Borrower and its Subsidiaries are currently in compliance
with all applicable Environmental Laws and have cured any past violations or
alleged violations of Environmental Laws to the satisfaction of Governmental
Bodies, except where the failure to comply with such Environmental Laws or
the failure to cure any past violations or alleged violations of such laws
does not have and is not likely to have a Material Adverse Effect. Neither
the Borrower nor any of its Subsidiaries is currently in receipt of any
notice setting forth a violation that has or is likely to have a Material
Adverse Effect. Neither the Borrower nor any of its Subsidiaries is currently
in receipt of any notice setting forth any potential liability for cleanup
of Hazardous Materials that has or is likely to have a Material Adverse
Effect. Neither the Borrower nor any of its Subsidiaries is now subject to
any material investigation or material information request by a Governmental
Body concerning Hazardous Materials or any Environmental Laws. The Borrower
and its Subsidiaries hold and are in compliance with all governmental permits,
licenses, and authorizations necessary to operate their businesses that
relate to siting, wetlands, coastal zone management, air
-13-
<PAGE> 19
emissions, discharges to surface or ground water, discharges to any sewer
or septic system, noise emissions, solid waste disposal or the generation,
use, transportation or other management of Hazardous Materials, except
where the failure to hold or be in compliance with any such permits, licenses
and authorizations does not have and is not likely to have a Material Adverse
Effect. Neither the Borrower nor any of its Subsidiaries ever has generated,
manufactured, refined, recycled, discharged, emitted, released, buried,
processed, produced, reclaimed, stored, treated, transported, or disposed
of any Hazardous Materials except in compliance with all applicable laws
and regulations, including permit requirements, except where the failure to
comply with such laws and regulations does not have and is not likely to
have a Material Adverse Effect;
(d) no Properties of the Borrower or any of its Subsidiaries are
subject to any Lien or claim for Lien in favor of any person as a result of
any Environmental Matter or response thereto;
(e) no Hazardous Materials, including leachate and effluents,
generated, disposed of, transported, managed or released by the Borrower or
any of its Subsidiaries have caused or will cause in whole or in part any
contamination or injury to the environment, any person, any natural resource
or any Property that has or is likely to have a Material Adverse Effect,
including, without limitation, Property through which or to which such
materials were shipped. Neither the Borrower nor any Subsidiary has handled,
transported, disposed of or managed any Hazardous Material in any manner
that forms the basis for any present or future claim, demand or action seeking
cleanup of any site, location, or body of water, surface or subsurface that
has or is likely to have a Material Adverse Effect, and neither the Borrower
nor any Subsidiary has any liabilities, absolute or contingent, on the date
hereof with respect thereto that has or is likely to have a Material Adverse
Effect; and
(f) to the best knowledge of the Borrower, all facilities where
any Person has treated, stored, disposed of, reclaimed, or recycled any
Hazardous Material on behalf of the Borrower or any Subsidiary are in
compliance with all applicable Environmental Laws, except where the failure
to comply with such laws does not have and is not likely to have a Material
Adverse Effect.
4.17. Possession of Franchises, Licenses, Etc. The Borrower and its
---------------------------------------
Subsidiaries possess all franchises, certificates, licenses, permits,
registrations, and other authorizations from Federal, state and local
governmental or regulatory authorities, free from burdensome restrictions that
-14-
<PAGE> 20
are necessary for the ownership, maintenance and operation of their respective
properties and assets, and for the conduct of their respective businesses as
now conducted and as described in the Company Reports, except where the
failure to possess such franchises, certificates, licenses, permits,
registrations or other authorizations does not have and is not likely to have
a Material Adverse Effect, and neither the Borrower nor any Subsidiary is in
violation of any thereof in any material respect.
4.18. Trademarks, Etc. Each of the Borrower and its Subsidiaries owns
---------------
or has the right to use all patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions,
which are necessary for the operation of its business as presently conducted
and as described in the Company Reports except where the failure to own or
have the right to use such patents, trademarks, service marks, trade names,
copyrights, licenses and other rights does not have and is not likely to have
a Material Adverse Effect. Except as may be set forth in the Disclosure
Document, nothing has come to the attention of the Borrower or its
Subsidiaries or of any of their respective directors or officers to the
effect that (i) any of their respective present or contemplated products or
operations infringes or may infringe in any material respect, any patent,
trademark, service mark, trade name, copyright, license or other right owned
by any other Person, or (ii) there is pending or threatened any claim or
litigation against or affecting the Borrower or any of its Subsidiaries
contesting the right of any of them to sell or use any such product or to
engage in any such operation that has or is likely to have a Material Adverse
Effect.
4.19. Margin Regulations; Use of Proceeds. None of the Borrower or any
-----------------------------------
of its Subsidiaries owns or now intends to acquire any "margin stock" as
defined in Regulation G of the Board of Governors of the Federal Reserve
System of the United States (12 CFR 207). No part of the proceeds from the
sale of the Notes will be used, and no part of the proceeds of any loans repaid
with the proceeds from the sale of the Notes was used, directly or indirectly,
for the purpose of buying or carrying any margin stock within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System of the
United States (12 CFR 207), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve any of the
Borrower or any Subsidiary in a violation of Regulation X of said Board
(12 CFR 224) or to involve any broker or dealer in a violation of Regulation T
of said Board (12 CFR 220). Neither the Borrower, any of its Subsidiaries or
any agent acting on behalf of the Borrower or any such Subsidiary has taken
or will take any action which might cause this Agreement or the Notes to
-15-
<PAGE> 21
violate Regulation G, Regulation X, Regulation T or any other
regulation of the Board of Governors of the Federal Reserve System or
to violate the Exchange Act, in each case as in effect now or as the
same may hereafter be in effect. As used in this Section, the term
"purpose of buying or carrying" has the meaning assigned thereto in the
aforesaid Regulation G. The proceeds (net of expenses of the transactions
contemplated hereby and by the Other Agreements) of the sale of the Notes
will be used to retire Debt incurred in connection with the acquisition of
certain assets of Welchem, Inc. and for general corporate purposes of the
Borrower and its Subsidiaries.
4.20. Compliance with ERISA. Except as set forth on Schedule 4.20:
---------------------
(a) no Pension Plan which is subject to Part 3 of Subtitle B
of Title 1 of ERISA or Section 412 of the Code had an accumulated funding
deficiency (as such term is defined in Section 302 of ERISA or Section 412
of the Code), whether or not waived, as of the last day of the most
recent fiscal year of such Pension Plan heretofore ended;
(b) no liability to the PBGC (other than required insurance
premiums, all of which have been paid) has been incurred and is outstanding
with respect to any Pension Plan, and there has not been any Reportable
Event, or any other event or condition, which presents a material risk of
involuntary termination of any Pension Plan by the PBGC;
(c) neither any Plan nor any trust created thereunder, nor any
trustee or administrator thereof, has engaged in a prohibited transaction
(as such term is defined in Section 4975 of the Code or Section 406 of
ERISA) that could subject the Borrower or any of its Subsidiaries or
ERISA Affiliates to any material tax or penalty on prohibited transactions
imposed under said Section 4975; and neither the Borrower nor any of its
Subsidiaries or ERISA Affiliates has received any notice that any
Multiemployer Plan or trust created thereunder, or any trustee or
administrator thereof, has engaged in any such prohibited transaction;
(d) no material liability has been incurred and is outstanding
with respect to any Multiemployer Plan as a result of the complete or
partial withdrawal by the Borrower or any of its Subsidiaries or ERISA
Affiliates from such Multiemployer Plan under Title IV of ERISA, nor
has the Borrower or any of its Subsidiaries or ERISA Affiliates been
notified by any Multiemployer Plan that such Multiemployer Plan is
currently in reorganization or insolvency under and within the meaning of
Section 4241 or 4245 of ERISA or that such Multiemployer Plan
-16-
<PAGE> 22
intends to terminate or has been terminated under Section 4041A of
ERISA;
(e) the Borrower and its Subsidiaries and ERISA Affiliates
are in compliance in all respects with all applicable provisions of
ERISA and the Code and the regulations and published interpretations
thereunder with respect to all Plans and Multiemployer Plans, except where
non-compliance would not have a Material Adverse Effect;
(f) taking all Pension Plans in the aggregate, the actuarial
present value of all benefit liabilities (as defined in Section 4001(a) (16)
of ERISA) under all Pension Plans that are subject to Title IV of ERISA
do not exceed the Fair Market Value of the assets allocable to such
liabilities, determined as if all such Plans were terminated as of the
date hereof, and using the Plan's actuarial assumptions as set forth in
the most recent actuarial report pertaining to each Plan;
(g) neither the Borrower nor any of its Subsidiaries has
received any notice to the effect that any Multiemployer Plan has any
unfunded vested benefits within the meaning of Section 4213(c) of ERISA;
(h) no event has occurred with respect to any Plan or with
respect to any other employee benefit pension plan (as defined in
Section 3(2) of ERISA) established or maintained at any time during the
five-year period immediately preceding the Closing Date for the benefit
of employees of the Borrower or any of its Subsidiaries or ERISA
Affiliates which presents a risk of material liability of the Borrower or
any of its Subsidiaries or ERISA Affiliates under Section 4069 of ERISA;
(i) the most recent consolidated financial statement of the
Borrower recognizes, in accordance with GAAP and the Statement of
Financial Accounting Standards No. 106, material liabilities under the
Plans that are employee welfare benefit plans (as defined in Section 3(1)
of ERISA) providing for medical, health, life or other welfare benefits
that are not insured by fully paid nonassessable insurance policies,
and to the best of the Borrower's knowledge, after due investigation,
there are no other such material liabilities, except for certain
severance liabilities set forth in that certain letter dated the date
hereof from the Borrower to each of the Purchasers; and
(j) none of the Borrower or any of its Subsidiaries or
ERISA Affiliates is a party in interest (as defined in Section 3(4)
of ERISA) with respect to any Plan other than such Plans sponsored by
any of the Borrower or any of its Subsidiaries or ERISA Affiliates.
-17-
<PAGE> 23
4.21. Status under Certain Laws. The Borrower is not an "investment
-------------------------
company" or a "person directly or indirectly controlled by or acting on
behalf of an investment company" within the meaning of the Investment
Corporation Act of 1940, as amended, or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Corporation Act of 1935, as
amended. The Borrower is not subject to regulation under any Federal,
state or local statute, law or regulation which limits its ability to
incur Debt.
4.22. Legality. The Borrower is, and upon giving effect to the
--------
issuance and sale of the Notes will be, a "solvent institution", as said
term is used in Section 1405(c) of the New York Insurance Law, whose
"obligations . . . are not in default as to principal or interest", as
said terms are used in said Section.
4.23. Foreign Assets Control Regulations. Neither the Borrower
----------------------------------
nor any of its Subsidiaries nor, to the best of the Borrower's knowledge
after due inquiry, any Affiliate of the Borrower, is, or will be after
consummation of the transactions contemplated by this Agreement and the
Other Agreements and application of the proceeds hereof, by reason of
being a "national" of a "designated foreign country" or a "specially
designated national" within the meaning of the Regulations of the
Office of Foreign Assets Control, United States Treasury Department
(31 C.F.R., Subtitle B, Chapter V), or for any other reason, in violation
of, any Federal statute or Presidential Executive Order, or any rules or
regulations of any department, agency or administrative body promulgated
under any such statute or order, concerning trade or other relations with
any foreign country or any citizen or national thereof or the ownership
or operation of any Property.
4.24. Other Agreements. Simultaneously with the execution and
----------------
delivery of this Agreement, the Borrower is entering into the Other
Agreements, which are identical in all respects with this Agreement
(except for the respective series and principal amounts of Notes to be
purchased thereunder) with the other Purchasers named in Schedule I
hereto. The purchases by you and said other Purchasers are to be
separate and several transactions.
4.25. Labor Matters. Except as may be set forth in the Disclosure
-------------
Document, there is no strike, work stoppage, slowdown or other labor
dispute or grievance currently pending or threatened against the
Borrower or any of its Subsidiaries, or employees of any of such
Persons, which has or is likely to have a Material Adverse Effect.
Except as set forth in Schedule 4.25,
-18-
<PAGE> 24
none of the Borrower or any of its Subsidiaries is a party to any
collective bargaining agreement and none of them has any knowledge
after due inquiry of any pending or threatened effort to organize any
of their employees. Except as may be set forth in the Disclosure
Document, there are currently no pending retaliatory or wrongful discharge
claims or federal, state or local employment discrimination charges or
complaints or administrative or judicial complaints arising therefrom
pending against the Borrower or any of its Subsidiaries, or any employees
of any of such Persons, which has had or might have a Material Adverse
Effect, nor to the knowledge of the Borrower after due inquiry are any
such charges or complaints threatened against the Borrower or any of its
Subsidiaries. The Borrower and its Subsidiaries are in compliance with all
applicable federal, state and local statutes, laws, rules, ordinances,
regulations, codes, licenses and orders relating to the employment of
labor, including, without limitation, any provisions thereof relating to
wages, bonuses, collective bargaining agreements, equal pay, occupational
safety and health, equal employment opportunity and wrongful or
retaliatory termination of employment, except where non-compliance could
not have a Material Adverse Effect.
4.26. Material Contracts. Except as may be set forth in the
------------------
Disclosure Document and in any of the Borrower's Quarterly Reports on
Form 10-Q or Current Reports on Form 8-K filed with the SEC on a date
after October 31, 1992, and which have been delivered to the Purchasers
or their designee, neither the Borrower nor any of its Subsidiaries is a
party to any Material Contract. Each of the Material Contracts set forth
in the Disclosure Document, in such Form 10-Qs or in such Form 8-Ks, is
valid, subsisting and in full force and effect, and none of the Borrower
or any of its Subsidiaries is in breach or violation of the terms, conditions
or provisions of any of the Material Contracts which is reasonably likely
to have a Material Adverse Effect. None of the Borrower or any of its
Subsidiaries is a party to any Material Contract or is subject to any
restriction contained in the charter or by-laws of any of them which has or
is reasonably likely to have a Material Adverse Effect.
4.27. Insurance. The Company and its Subsidiaries have, with
---------
respect to their respective properties and businesses, with financially
sound insurers of nationally recognized stature and responsibility,
insurance of such a nature, with such terms and in such amounts as is
customary in the case of corporations of established reputations engaged
in the same or similar businesses and similarly situated. Such policies
are in full force and effect on the date hereof, and neither the Borrower
nor any of its Subsidiaries has received notice of cancellation with
respect to any such policy.
-19-
<PAGE> 25
4.28. Ranking of Notes. The Debt represented by the Notes is equal
----------------
in rank and priority and is pari passu with all other Unsecured Senior
---- -----
Debt.
Section 5. Representations of Purchasers. You represent, and in
-----------------------------
entering into this Agreement the Borrower understands, that you are
acquiring the Notes for the purpose of investment and not with a view
to the distribution thereof within the meaning of the Securities Act,
and that you have no present intention of selling, negotiating or
otherwise disposing of the Notes; it being understood, however, that the
disposition of your property shall at all times be and remain within your
control. You further represent that you are acquiring the Notes for your
own account and with your general account assets and not with the assets
of any separate account in which any employee benefit plan has any
interest. As used in this Section, the terms "employee benefit plan" and
"separate account" shall have the respective meanings assigned to them in
Sections 3(3) and 3(17) of ERISA.
Section 6. Closing Conditions. Your obligation to purchase and pay
------------------
for the Notes to be purchased by you hereunder on the Closing Date shall
be subject to the satisfaction, on or before the Closing Date, of the
following conditions:
6.1. Proceedings Satisfactory. All corporate and other proceedings
------------------------
taken or to be taken in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably satisfactory
in form and substance to you and your special counsel, and you and your
special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request, including, without limitation:
(i) certificates dated as of a recent date as to the good
standing and payment of taxes of the Borrower and each
of its Significant Subsidiaries in each jurisdiction
where any of such Persons is incorporated or is
authorized to do business as a foreign corporation;
(ii) certified copies of the certificate or articles of
incorporation of the Borrower and each of its
Significant Subsidiaries, with all amendments thereto;
(iii) certified copies of the by-laws of the Borrower and
each of its Significant Subsidiaries, with all
amendments thereto;
(iv) certified copies of resolutions of the Board of
Directors of the Borrower authorizing the execution,
-20-
<PAGE> 26
delivery and performance of this Agreement, the Other
Agreements and the Notes; and
(v) certificates as to the incumbency and signatures of
each of the officers of the Borrower who shall execute
this Agreement or any Note or other document executed
and delivered pursuant to or in connection with this
Agreement or any of the Notes.
6.2. Opinion of Purchaser's Special Counsel. You shall have
--------------------------------------
received from Sonnenschein Nath & Rosenthal, who are acting as special
counsel for you in connection with this transaction, a legal opinion
addressed to you and dated the Closing Date, substantially in the form of
Exhibit B. Such opinion shall also cover such other matters incident to
the matters herein contemplated as you may reasonably request.
6.3. Opinion of Counsel to the Borrower. You shall have received
----------------------------------
from Armstrong, Teasdale, Schlafly & Davis, counsel to the Borrower in
connection with this transaction, a legal opinion addressed to you and
dated the Closing Date substantially in the form of Exhibit C. Such
opinion shall also cover such other matters incident to the matters herein
contemplated as you may reasonably request.
6.4. Representations and Warranties True, Etc.; Certificates. The
-------------------------------------------------------
representations and warranties contained in Section 4 of this Agreement
shall be true on and as of the Closing Date with the same effect as if such
representations and warranties had been made on and as of the Closing Date.
The Borrower shall have performed all agreements on its part required
to be performed under this Agreement prior to the Closing Date; there
shall exist on the Closing Date no Default or Event of Default; the
Borrower shall have delivered to you an Officer's Certificate, dated the
Closing Date, with respect to the matters stated in the foregoing clauses
of this Section 6.4 and in Sections 6.5 and 6.6; and you shall have
received such certificates or other evidence as you may request to establish
that the proceeds of the sale of the Notes on the Closing Date will be
applied as contemplated by Section 4.19.
6.5. Absence of Material Adverse Change. Since October 31, 1992,
----------------------------------
no change or changes shall have occurred to the business, operations,
Properties, assets, income, prospects or condition, financial or otherwise,
of the Borrower and its Subsidiaries, taken as a whole, which you
reasonably believe in good faith to constitute a Material Adverse Effect.
6.6 Absence of Litigation, Orders, Etc. Except as may be disclosed
----------------------------------
in the Disclosure Document, there shall not be pending
-21-
<PAGE> 27
or, to the knowledge of the Borrower after due inquiry, threatened, any
action, suit, proceeding, governmental investigation or arbitration against
or affecting any of the Borrower or its Subsidiaries or their respective
assets or Property (and, as to any action, suit, proceeding, governmental
investigation or arbitration so disclosed, there shall not have occurred
since the date of this Agreement any development) which seeks to enjoin
or restrain any of the transactions contemplated herein or which you
reasonably believe in good faith is likely to have a Material Adverse
Effect. No Order of any court, arbitrator or Governmental Body shall be in
effect which purports to enjoin or restrain any of the transactions
contemplated herein or which you reasonably believe in good faith to
constitute a Material Adverse Effect.
6.7. Your Purchase Permitted by Applicable Laws; Legal Investment.
------------------------------------------------------------
Your purchase of and payment for the Notes to be purchased by you
hereunder on the Closing Date shall be permitted by the laws and regulations
of the jurisdictions to which you are subject, without reference to any
"basket" provisions of such laws such as New York Insurance Law Section
1405(a)(8); and you shall have received such certificates or other
evidence as you may request to establish compliance with this condition.
6.8. Other Purchasers. The other Purchasers shall have purchased
----------------
and made payment for the Notes to be purchased by them on the Closing Date
pursuant to the Other Agreements.
6.9. Consents and Approvals. All necessary consents, approvals and
----------------------
authorizations of, and declarations, registrations and filings with,
Governmental Bodies and nongovernmental Persons required in order to
consummate the transactions contemplated herein shall have been obtained
or made and shall be in full force and effect.
6.10. Fees. The fees and out-of-pocket expenses and disbursements
----
incurred by Sonnenschein Nath & Rosenthal in connection with the
preparation of this Agreement and the transactions contemplated hereby
shall be paid in full by the Borrower on the Closing Date.
6.11. PPN Number. You shall have been supplied with a private
----------
placement number for the Notes from Standard and Poor's Corporation.
Section 6A. Closing Conditions of the Borrower. The Borrower's
----------------------------------
obligation to issue and sell the Notes to be purchased by you hereunder
on the Closing Date shall be subject to the satisfaction, on the Closing
Date, of the following condition:
-22-
<PAGE> 28
6A.1. Right of Refusal. The other Purchasers shall have purchased
----------------
and made payment for the Notes to be purchased by them on the Closing Date
pursuant to the Other Agreements. Notwithstanding the foregoing, in the
event any of the other Purchasers shall not purchase and make payment for,
or have notified the Borrower that such Purchaser does not intend to
purchase and make payment for, any of the Notes to be purchased by such
Purchaser on the Closing Date, then the Closing Date shall automatically
be postponed for five (5) Business Days and the Borrower shall give
immediate written notice to each other Purchaser stating: (i) that one or
more of the other Purchasers has elected to withdraw its offer to purchase
the Notes pursuant to such Other Agreement(s); (ii) the aggregate
principal amount of Notes such other Purchaser(s) was to purchase (the
"Uncommitted Notes"); (iii) that unless any other Purchaser or Purchasers
shall agree to purchase and make payment for the Uncommitted Notes on
the Closing Date under the same terms and conditions as set forth in the
Other Agreement or Other Agreements pursuant to which such Uncommitted
Notes were to be purchased, the Borrower, in its sole and absolute
discretion, shall not be obligated to issue and sell any Notes to any of the
Purchasers; and (iv) that any Purchaser electing to purchase any or all
of the Uncommitted Notes shall notify the Borrower at its address specified
in Section 15.6 hereof, not later than the close of business on the
second Business Day following the postponed Closing Date, by facsimile
transmission, or other same day notice of the principal amount of
Uncommitted Notes such Purchaser shall agree to purchase in addition to
the principal amount of Notes set forth opposite its name in Schedule I
hereto or in Schedule I to such Other Agreement, as the case may be. In
the event the Borrower receives from any Purchaser or Purchasers notice
or notices as contemplated in clause (iv) immediately above with respect
to all of the principal amount of the Uncommitted Notes, the Borrower
shall be required to issue, sell and deliver the Notes to the several
Purchasers the respective aggregate principal amounts set forth opposite
their name in Schedule I hereto as deemed modified by the principal amount
of Uncommitted Notes agreed to be purchased as set forth in such notice
or notices. In the event the Purchasers electing to purchase the
Uncommitted Notes in the aggregate oversubscribe for such Uncommitted
Notes, the aggregate principal amount of such Uncommitted Notes shall
be allocated for purchase among the Purchasers electing to purchase such
Uncommitted Notes, pro rata pursuant to a percentage expressed as a
fraction, the numerator of which shall be the principal amount of
Notes set forth opposite such electing Purchaser's name on Schedule I
hereto, and the denominator of which shall be the sum of the principal
amount of Notes set forth opposite each of the electing Purchasers'
names on Schedule I hereto (such percentage shall be hereinafter referred
to as the "Electing Purchaser's Percentage"). In the
-23-
<PAGE> 29
event any of Purchasers electing to purchase any of the Uncommitted Notes
elects to purchase less than its pro rata share of such Uncommitted Notes,
such Purchaser shall be allocated for purchase such principal amount of
Uncommitted Notes it elected to purchase pursuant to the notice described
in clause (iv) above and such excess principal amount of the Uncommitted
Notes shall be allocated for purchase among the other Purchasers electing
to purchase any or all of the Uncommitted Notes, pro rata in accordance
with their respective Electing Purchaser's Percentage, recalculated with
respect to such other Purchasers without regard to the Purchaser electing
to purchase less than its pro rata share of such Uncommitted Notes.
Section 7. Financial Statements and Information. The Borrower will
------------------------------------
furnish to you, so long as you shall be obligated to purchase or shall
hold any Notes, and to each other institutional holder of any Notes
(such a holder in any such case being hereinafter called an "Eligible
Holder"), in duplicate:
(A) as soon as available and in any event within 45 days after the
end of each quarterly accounting period in each fiscal year of the
Borrower,
(1) copies of either (a) the Borrower's quarterly report
for such fiscal period on Form 10-Q as filed with the SEC or
(b) the consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such accounting period, and of the
related consolidated statements of operations, retained earnings
and cash flow for such accounting period and for the portion of the
fiscal year ended with the last day of such accounting period, all in
reasonable detail and stating in comparative form the consolidated
figures as of the end of and for the corresponding date and period
in the previous fiscal year all Certified by the chief financial officer
of the Borrower, and
(2) a written statement of such financial officer setting
forth computations in reasonable detail showing whether or not as at
the end of such accounting period there was compliance with Sections
9.6 and 10, accompanied by calculations setting forth the maximum
amount of Funded Debt that could have been incurred at such date
pursuant to Section 10.1(C) hereof;
(B) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower,
(1) copies of either (a) the Borrower's annual report for such
fiscal year on Form 10-K as filed with the SEC or
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<PAGE> 30
(b) the audited consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such fiscal year, and of the related
audited consolidated statements of operations, retained earnings and cash
flow for such fiscal year, together with the notes thereto, all in
reasonable detail and stating in comparative form the respective audited
consolidated figures as of the end of and for the previous fiscal year
in the case of such audited consolidated financial statements, accompanied
by a report thereon of Price Waterhouse or any of the Big Six Accounting
Firms selected by the Borrower, in its sole and absolute discretion,
or other independent public accountants of recognized national standing
selected by the Borrower and acceptable to the Majority Holders (the
"Accountants"), which report shall be unqualified as to going concern
and scope of audit and shall state that such consolidated financial
statements present fairly the consolidated financial position of the
Borrower and its Subsidiaries as at the end of such fiscal year and
the consolidated results of their operations, retained earnings and
cash flow for such fiscal year in conformity with GAAP applied on a
basis consistent with prior years (except as otherwise stated therein)
and that the examination by the Accountants in connection with such
consolidated financial statements has been made in accordance with
generally accepted auditing standards;
(2) a written statement of the Accountants (i) stating whether
or not as at the end of such fiscal year there was compliance with
Sections 9.6, 10.1(C) and 10.1(D), accompanied by calculations setting
forth the maximum amount of Funded Debt that could have been incurred
at such date pursuant to Section 10.1(C) and 10.1(D) hereof, and
(ii) stating that in making the examination necessary for their
report on such financial statements they obtained no knowledge of
any default by the Borrower in the fulfillment of any of the terms,
covenants, provisions or conditions of this Agreement insofar as they
relate to accounting matters, or if such Accountants shall have
obtained knowledge of any such default, specifying the nature and
status thereof;
(C) concurrently with the reports or the financial statements
furnished pursuant to subsections (A) and (B) of this Section 7, an
Officer's Certificate of the Borrower stating that, based upon such
examination or investigation and review of this Agreement as in the
opinion of the signer is necessary to enable the signer to express an
informed opinion with respect thereto, no default by the Borrower in the
fullfillment of any of the terms, covenants, provisions or conditions of this
Agreement exists or has existed during such period or, if such a default
-25-
<PAGE> 31
shall exist or have existed, the nature and period of existence thereof
and what action the Borrower has taken, is taking or proposes to take
with respect thereto;
(D) concurrently with the reports or the financial statements
furnished pursuant to subsections (A) and (B) of this Section 7, but
only in the event that the Borrower is not a regular reporting company
within the rules and regulations of the SEC, a brief management discussion
and analysis of the financial condition and results of operations of the
Borrower and the Subsidiaries as of the end of and for the period covered
by such financial statements (including a comparison thereof with the
financial condition and results of operations of the Borrower and
the Subsidiaries as of the end of and for the comparable period in the
prior fiscal year), and describing any significant events relating to the
Borrower or the Subsidiaries occurring during such period;
(E) promptly after the same are available and in any event within
15 Business Days thereof, copies of all such proxy statements, financial
statements, notices and reports as the Borrower or any of its Subsidiaries
shall send or make available generally to any of their securityholders
(but only in the event that neither the Borrower nor any of its
Subsidiaries is a regular reporting company within the rules and
regulations of SEC), and copies of all regular and periodic reports and of
all registration statements (other than on Form S-8 or a similar form)
and any Current Reports filed on Form 8-K which the Borrower or any of its
Subsidiaries may file with the SEC or with any securities exchange; and
(F) promptly (and in any event within 5 Business Days) after becoming
aware of (1) the existence of any Default or Event of Default on the part
of the Borrower, an Officer's Certificate of the Borrower specifying
the nature and period of existence thereof and what action the Borrower
is taking or proposes to take with respect thereto; or (2) any Debt of the
Borrower or any Subsidiary being declared due and payable before its
expressed maturity, or any holder of such Debt having the right to
declare such Debt due and payable before its expressed maturity, because
of the occurrence of any default (or any event which, with notice and/or
the lapse of time, shall constitute any such default) under such Debt,
an Officer's Certificate of the Borrower describing the nature and status
of such matters and what action the Borrower or such Subsidiary is taking
or proposes to take with respect thereto.
The Borrower will keep at its principal executive office a true
copy of this Agreement, and cause the same to be available for inspection
at said offices during normal business hours by
-26-
<PAGE> 32
any holder of any of the Notes or any prospective purchaser of any
thereof designated by the holder thereof.
Section 8. Inspection of Properties and Books. The Borrower agrees
----------------------------------
that, so long as you or any other Eligible Holder shall hold any Note,
you or it may visit at your or its own expense the offices and Properties
of the Borrower or any of its Subsidiaries (provided you or it, as the case
may be, shall comply with all safety rules of the Borrower or any of its
Subsidiaries that are applicable generally to all visitors to the offices
and properties of the Borrower or its Subsidiaries), and may examine and
make copies of the relevant books and records, and discuss the affairs,
finances and accounts of such companies with their officers and public
accountants (and by this provision the Borrower and each Subsidiary hereby
authorizes said accountants to discuss with you or such Eligible Holder its
affairs, finances and accounts) at such reasonable times during normal
business hours and in such a manner as not to unreasonably disrupt or
disturb any manufacturing operations of the Borrower or any of its
Subsidiaries. Any fees payable to such public accountants in connection
with and arising out of any discussions with you or such Eligible Holder
as contemplated above, shall be borne, if such discussions occur prior to
any Default or Event of Default hereunder, by you or such Eligible Holder,
as the case may be, or if such discussions occur subsequent to any Default
or Event of Default hereunder, by the Borrower. Prior to the occurrence
of any Default for Event of Default, you or any other Eligible Holder may
only visit the offices and Properties of the Borrower or any of its
Subsidiaries, examine the relevant books and records and meet with officers
of such companies or their public accountants not more than once per annum,
all at your or such other Eligible Holder's expense. In the event of a
Default or Event of Default or in the event that you or any Eligible Holder
reasonably believes, in your or its sole and absolute discretion, that a
Default or an Event of Default is imminent, such visits, examinations and
meetings with officers and/or accountants of the Borrower or any of its
Subsidiaries shall be made or held as often as you or such Eligible Holder
may reasonably desire. Notwithstanding anything herein to the contrary,
in the event an Event of Default shall have occurred and be continuing,
the Borrower shall be required to pay or reimburse you or any such
Eligible Holder for expenses which you or such Eligible Holder may incur
in connection with any such visitation or inspection.
Section 9. Affirmative Covenants. The Borrower covenants and agrees
---------------------
that so long as any of the Notes shall be outstanding:
9.1. Payment of Principal, Prepayment Charge and Interest; to Keep
-------------------------------------------------------------
Books; Reserves; Etc. The Borrower will duly and
- --------------------
-27-
<PAGE> 33
punctually pay the principal of, prepayment charge (if any) and interest
on the Notes in accordance with the terms of such Notes and this Agreement.
The Borrower will comply with all of the covenants, agreements and
conditions contained in this Agreement.
9.2. Payment of Taxes and Claims. The Borrower will, and will cause
---------------------------
each of its Subsidiaries to, pay before they become delinquent:
(A) all taxes (including excise taxes), assessments and
governmental charges or levies imposed upon the Borrower or any of its
Subsidiaries (or any other Subsidiaries of the Borrower which are part of
any consolidated group for tax purposes with the Borrower or any of its
Subsidiaries) or their income or profits or upon their Property, real,
personal or mixed, or upon any part thereof;
(B) all claims for labor, materials and supplies which, if
unpaid, might result in the creation of a Lien upon Property of the
Borrower or any of its Subsidiaries; and
(C) all claims, assessments, or levies required to be paid by
the Borrower or any of its Subsidiaries or ERISA Affiliates pursuant to
any Pension Plan or Multiemployer Plan or any agreement, contract, law,
ordinance or governmental rule or regulation governing or relating to any
such plan;
provided, that the taxes, assessments, claims, charges and levies described
- --------
in Section 9.2(A) and (B) need not be paid while being diligently contested
in good faith and by appropriate proceedings so long as (i) adequate book
reserves have been established with respect thereto in accordance with
GAAP and (ii) neither the Borrower's nor any Subsidiary's title to and right
to use its Property is materially or adversely affected by such non-payment.
The Borrower will timely file, and will cause its Subsidiaries to file, all
tax returns required to be filed in connection with the payment of taxes
required by this Section 9.2.
9.3. Maintenance of Properties and Corporate Existence. The
-------------------------------------------------
Borrower will, and will cause each of its Subsidiaries to:
(A) maintain their respective Properties in good condition,
reasonable wear and tear excepted, and make all necessary renewals, repairs,
replacements, additions, betterments, and improvements thereto;
(B) keep books of records and accounts in which full and
correct entries will be made of all their respective business transactions
and will reflect in their financial statements adequate accruals and
appropriations to reserves, all in
-28-
<PAGE> 34
accordance with GAAP at the time in effect and consistently applied;
(C) do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, rights and
powers and franchises including, without limitation thereof, any
necessary qualification or licensing in any foreign jurisdiction;
(D) comply, in all material respects, with all applicable
statutes, regulations, franchises, and Orders of, and all applicable
restrictions imposed by, any Governmental Body, in respect of the conduct
of its business and the ownership of its Properties (including, without
limitation, applicable statutes, rules, ordinances, regulations and
Orders relating to Environmental Laws); and
(E) keep any Property owned or operated by them free of
contamination from Hazardous Materials and any other potentially harmful
chemical or physical conditions that has or is likely to have a Material
Adverse Effect. So long as any Notes are outstanding, if the Borrower or
any of its Subsidiaries receives notice or becomes aware of any Environmental
Matter or contamination with Hazardous Materials that relates to any of
them or their respective Properties that has or could reasonably be expected
to have a Material Adverse Effect, then the Borrower shall promptly (and in
any event within 5 Business Days of the earlier of their receipt of notice
or their becoming so aware) provide written notice thereof to each holder
of Notes and, upon written request from the Majority Holders, shall provide
all holders of Notes with such reports, certificates, engineering studies
or other written material or data as the Majority Holders may reasonably
require so as to satisfy the Majority Holders that the Borrower and its
Subsidiaries are in compliance with their obligations under this Agreement.
In addition, upon the occurrence of such an event, the Majority Holders shall
have the right to employ, or to require the Borrower or any of its
Subsidiaries at their expense to employ, a qualified environmental
consultant acceptable to such holders to conduct an environmental review,
audit, assessment or report concerning the Borrower's and its Subsidiaries'
affected operations and affected Property. The Borrower agrees to cooperate
fully with such consultant in any such audits, including, without limitation,
by providing such access to the Borrower's and its Subsidiaries' books,
records, Properties, employees and agents and by furnishing such written
and oral information as such consultant may reasonably request in
connection with any such audits.
9.4. Insurance. The Borrower will, and will cause each of its
---------
Subsidiaries, to maintain with financially sound insurers of
-29-
<PAGE> 35
nationally recognized stature and responsibility, insurance of such a
nature, with such terms and amounts as is customary in the case of
corporations of established reputations engaged in the same or similar
businesses and similarly-situated, provided that such insurance coverage
is available at reasonable cost.
9.5. Further Assurances. The Borrower covenants that, so long as
------------------
you shall hold any of the Notes, it shall cooperate with you and execute
such further instruments and documents as you shall reasonably request
to carry out to your satisfaction the transactions contemplated by this
Agreement.
9.6. Maintenance of Consolidated Adjusted Net Worth. The Borrower
----------------------------------------------
covenants that it shall maintain Consolidated Adjusted Net Worth at an
amount equal to or greater than (i) $125,000,000 plus (ii) 25% of
----
cumulative Consolidated Net Earnings for each year from November 1, 1993
through the date of measurement (provided that such amount determined
in accordance with this clause (ii) shall in no event be less than zero)
and for any interim periods Consolidated Net Earnings shall be determined
on the basis of the last available quarterly report.
9.7. ERISA Covenant. During the term of any Note, the Borrower
--------------
and any of its Subsidiaries and ERISA Affiliates shall continue to meet the
representations and warranties of Section 4.20 hereof, provided that any
failure to comply with the provisions of Section 4.20 individually or in
the aggregate shall not be deemed a breach of this Section 9.7 unless such
failure to comply results in a Material Adverse Effect.
Section 10. Negative Covenants. The Borrower covenants and agrees
------------------
that so long as any of the Notes shall be outstanding:
10.1. Restrictions on Debt. The Borrower shall not, and shall not
--------------------
permit any Subsidiary to, incur, create, assume, guarantee or in any way
become liable for, or permit to exist if not permitted to be incurred at
the time of such incurrence, any Funded Debt or Debt secured by Liens not
permitted under Section 10.2 other than:
(A) Funded Debt represented by the Notes;
(B) Funded Debt of the Borrower and its Subsidiaries existing
on the Closing Date, as set forth on Schedule 4.7A attached hereto;
(C) additional Funded Debt of the Borrower, provided that
immediately after giving effect thereto and to the application of
the proceeds thereof, the aggregate outstanding principal amount of all
outstanding secured and
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unsecured Funded Debt of the Borrower and its Subsidiaries is not
greater than 60% of Consolidated Total Capitalization;
(D) Funded Debt of Subsidiaries and additional secured Debt of
the Borrower (collectively, "Priority Debt"), provided that immediately
after giving effect thereto and to the application of the proceeds
thereof, (i) the aggregate outstanding principal amount of all
Priority Debt incurred pursuant to this subsection (D) shall not exceed
20% of Consolidated Adjusted Net Worth and (ii) the Borrower would
be able to incur at least $1 of additional Funded Debt pursuant to
subsection (C) of this Section 10.1;
(E) any extension, renewal, refunding or refinancing of any
Funded Debt incurred pursuant to paragraphs (B) and (C) of this
Section 10.1 if such Funded Debt was permitted at the time of
incurrence, provided that (i) such extension, renewal, refunding or
--------
refinancing shall not result in an increase in the aggregate
outstanding principal amount of all term facilities constituting a
part of such Funded Debt, as in effect on the date of such extension,
renewal, refunding or refinancing, (ii) such extension, renewal,
refunding or refinancing shall not result in an increase in the
aggregate maximum amount borrowed under all revolving credit facilities,
seasonal working capital facilities, letter of credit facilities and
similar credit facilities constituting a part of such Funded Debt,
as in effect on the date of such extension, renewal, refunding or
refinancing (provided, further, that with respect to each drawdown in
-------- -------
connection with any such extended, renewed, refunded or refinanced
facilities, the Borrower, at the request of the Majority Holders, shall
provide each of the Purchasers a certificate of the chief financial
officer of the Borrower setting forth the computations evidencing
compliance with this Section 10.1(E), after giving effect to such
drawdown), and (iii) the terms, provisions and conditions of such
extension, renewal, refunding or refinancing, taken as a whole, are not
materially more burdensome to the Borrower and its Subsidiaries than
those pertaining to the Funded Debt as in effect on the date
hereof;
For purposes of this Section 10.1, any Funded Debt of a corporation
outstanding immediately after it becomes a Subsidiary shall be deemed
to have been incurred at the time it became a Subsidiary.
10.2. Restrictions on Liens. The Borrower covenants that it will not,
---------------------
and will not permit any Subsidiary to, directly or indirectly, create,
assume or suffer to exist any Lien to secure
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<PAGE> 37
Debt upon any of their respective Properties or assets whether now owned
or hereafter acquired, except for:
(A) Liens for taxes, assessments or governmental charges or
claims the payment of which is not at the time required by Section 9.2;
(B) Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law incurred in the ordinary course of
business or incidental to the ownership of Property and not incurred
in connection with the incurrence of Debt, only to the extent all such
Liens do not in the aggregate (i) materially impair the use of any such
Property for the purposes for which such Property is held by the
Borrower or by the Borrower and its Subsidiaries taken as a whole, or
(ii) materially detract from the value of such Property for the
purposes of such business;
(C) Liens (other than any Lien imposed by ERISA, and other
than any Lien securing an obligation for the payment of borrowed
money) incurred or deposits made in the ordinary course of business
in connection with obligations not due or delinquent with respect to
workers' compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations;
(D) any attachment or judgment Lien (including judgment or
appeal bonds) which shall, within 30 days after the entry thereof,
have been discharged or execution thereof stayed pending appeal,
or which shall have been discharged within 30 days after the
expiration of any such stay, or which is being diligently contested
in good faith so long as a reserve or other appropriate provision,
if any, as shall be required by GAAP shall have been made therefor;
(E) zoning restrictions, easements, licenses, reservations,
restrictions on the use of real property or minor irregularities
incident thereto (and, with respect to leasehold interests, Liens
and other encumbrances that are incurred, created, assumed or
permitted to exist on or with respect to the leased property and
arise by, through or under or are asserted by a landlord or owner
of the leased property, with or without consent of the lessee) which
were not incurred in connection with the borrowing of money and which
do not in the aggregate materially detract from the value of the
Property of the Borrower or any of its Subsidiaries, as the case
may be, or impair the use of such
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<PAGE> 38
Property for the purposes for which such Property is held by the
Borrower or any such Subsidiary;
(F) Liens securing Debt of a Subsidiary to the Borrower;
(G) Liens (including Liens created pursuant to Capitalized
Leases) existing on the date hereof and described in Schedule 4.7A
hereto, and any extension, renewal or replacement of any such Lien
provided that the principal amount of the Debt secured by such Lien
is not increased and the Lien is not extended to other Property;
(H) Liens (including Liens created pursuant to Capitalized
Leases) in respect of Property acquired, constructed or improved by
the Borrower or a Subsidiary after the Closing Date, which Liens exist
or are created at the time of acquisition or completion of
construction or improvement of such Property or within 180 days
thereafter, to secure Debt assumed or incurred to finance all or any
part of the purchase price or cost of acquisition or construction or
improvement of such Property, but any such Lien shall cover only the
Property so acquired or constructed and any improvements thereto
(and any real Property on which such Property is located, if such
Property is a building, improvement or fixture), and may not exceed
(i) the purchase price of such acquisition or the cost of such
construction or improvement, or (ii) the Fair Market Value of the
Property acquired, constructed or improved;
(I) any Lien (i) on Property existing at the time of
acquisition of such Property, whether or not the Debt secured thereby
is assumed by the Borrower or any of its Subsidiaries, and (ii) on
Property of a Subsidiary existing at the time it becomes a Subsidiary,
and (iii) on Property of a corporation or other entity existing at the
time it is merged into or consolidated with the Borrower or any of its
Subsidiaries, but any such Lien shall not exceed the Fair Market Value
of any such Property; and
(J) any Lien on Property not otherwise permitted by this
Section 10.2 securing Priority Debt permitted by Section 10.1(D).
In case any asset or property of the Borrower or any Subsidiary is
subjected to a Lien in violation of this Section 10.2, the Borrower will
make or cause to be made provision whereby the Notes will be secured
equally and ratably with all other obligations secured thereby, and in any
event the holders of the Notes shall have the benefit, to the full extent
that, and
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<PAGE> 39
with such priority as, such holders may be entitled thereto under
applicable law, of an equitable Lien on such asset or property securing
the Notes, except where the effect thereof would in any way limit the
rights of the holders of Notes under this Agreement or the Other
Agreements. Such violation of this Section 10.2 shall constitute an Event
of Default whether or not any such provision shall be made as required by
this Section 10.2.
10.3. Conduct of Business. Neither the Borrower nor any Subsidiary
-------------------
will engage in any business if, as a result, the general nature of the
business, taken on a consolidated basis, which would then be engaged in by
the Borrower and its Subsidiaries would be substantially changed from the
general nature of the business engaged in by the Borrower and its
Subsidiaries on the date of this Agreement.
10.4. Transactions with Affiliates. Except as set forth in
----------------------------
Schedule 10.4, the Borrower will not, and will not permit any Subsidiary
to, directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange or
any property or the rendering of any service), with any Affiliate of the
Borrower or such Subsidiary on terms that are less favorable to the Borrower
or such Subsidiary, as the case may be, than those that would be obtainable
at the time in an arm's length transaction from any Person who is not
such an Affiliate.
10.5. Mergers, Consolidations and Sales of Assets. The Borrower will
-------------------------------------------
not, and will not permit any Subsidiary to (i) consolidate with or be a
party to a merger with any other corporation or (ii) sell, lease or
otherwise dispose of all or any of the assets of the Borrower and its
Subsidiaries, provided, however, that:
-------- -------
(A) any Subsidiary may merge or consolidate with or into the
Borrower or any Wholly-owned Subsidiary of the Borrower so long as in
any merger or consolidation (i) involving the Borrower, the Borrower
shall be the surviving or continuing corporation, or (ii) involving
any Wholly-owned Subsidiary of the Borrower, such Wholly-owned
Subsidiary shall be the surviving or continuing corporation;
(B) (1) the Borrower may permit any corporation to be
consolidated with or merged into the Borrower or the Borrower may
consolidate with or merge into any corporation organized in the
United States of America if (i) in the event the surviving corporation
is not the Borrower, the surviving corporation expressly assumes in
writing all obligations of the Borrower under this
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<PAGE> 40
Agreement, the Other Agreements and the Notes, (ii) immediately
before and immediately after giving effect to such consolidation
or merger, no Default or Event of Default shall have occurred and be
continuing, and (iii) immediately after giving effect to such
consolidation or merger, the Borrower or the surviving corporation,
as the case may be, would be permitted to incur at least $1 of
additional Funded Debt under the provisions of Section 10.1(C); and
(2) the Borrower may permit any Wholly-owned Subsidiary
of the Borrower or any other Subsidiary of the Borrower to consolidate
with or to merge into any corporation organized in the United States
of America so long as in any consolidation or merger (i) involving
a Wholly-owned Subsidiary of the Borrower, in the event the surviving
corporation is not the Wholly-owned Subsidiary, such surviving
corporation immediately thereafter becomes a Wholly-owned Subsidiary
of the Borrower, and (ii) involving any other Subsidiary of the
Borrower, in the event the surviving corporation is not the Subsidiary,
such surviving corporation immediately thereafter becomes a Subsidiary
of the Borrower in which the Borrower owns or controls, directly
or indirectly, at least that percentage of the outstanding Voting Stock
of such surviving corporation that the Borrower owned or controlled,
directly or indirectly, of the Subsidiary prior to such consolidation
or merger, and in any such case (a) immediately before and immediately
after giving effect to such consolidation or merger, no Default or
Event of Default shall have occurred and be continuing, and (b)
immediately after giving effect to such consolidation or merger,
the Borrower would be permitted to incur at least $1 of additional
Funded Debt under the provisions of Section 10.1(C);
(C) the Borrower and any Subsidiary may in the ordinary course
of its business sell or otherwise dispose of Inventory owned by
the Borrower or such Subsidiary and such other of its assets reasonably
deemed obsolete or surplus;
(D) any Subsidiary may sell, lease or otherwise dispose of all
or any part of its assets to the Borrower or any Wholly-owned Subsidiary;
and
(E) the Borrower and its Subsidiaries may sell, lease, transfer
or otherwise dispose of assets other than in the ordinary course of
business if (i) the book value of such assets when added to the
aggregate book value of all other assets sold, leased, transferred or
otherwise disposed of by the Borrower and its Subsidiaries other
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<PAGE> 41
than in the ordinary course of business during the same fiscal year
does not exceed 10% of the Consolidated Total Assets of the Borrower
and its Subsidiaries determined as of the end of the most recently
ended fiscal quarter, (ii) the cumulative aggregate book value of such
assets and all other assets of the Borrower and its Subsidiaries (on
a consolidated basis) disposed of pursuant to sales, leases, transfers
or other dispositions pursuant to this Section 10.5(E) from the
Closing Date through the date of such sale, lease, transfer or other
disposition would not exceed 25% of Consolidated Total Assets determined
as of the end of the most recently ended fiscal quarter preceding each
such sale, lease, transfer or other disposition, (iii) immediately
before and immediately after giving effect to such sale, lease, transfer
or other disposition, no Default or Event of Default shall have occurred
and be continuing, and (iv) immediately after giving effect to such
sale, lease, transfer or other disposition, the Borrower would be
permitted to incur at least $1 of additional Funded Debt pursuant to
Section 10.1(C);
provided, however, that any such sale, lease, transfer or other
-------- -------
disposition of assets shall be permitted if the Net Proceeds thereof
are used (a) within 360 days thereafter to acquire or commit to
acquire (subject only to customary contractual cancellation and/or
termination provisions and such other contractual contingencies or
conditions precedent ordinarily found in contracts to acquire Property)
Property of a similar nature and of at least equivalent Fair Market
Value, to be used by the Borrower or its Subsidiaries in their
respective businesses, or (b) to repay Senior Debt including, without
limitation, the payment of principal and interest and any applicable
premium (if any) as set forth in this Agreement, on a pro rata basis.
Notwithstanding anything in this Section 10.5(E) to the contrary the
Borrower may sell, lease, transfer or otherwise dispose of any or all
of the Welchem Facility to any Person.
10.6. Restricted Payments. The Borrower will not, directly or
-------------------
indirectly, make any Restricted Payment, unless no Default or Event of
Default shall have occurred and be continuing and unless after giving
effect to any such action, no Default or Event of Default shall have
occurred and be continuing.
The Borrower will not declare any dividend or other distribution on
any shares of its Capital Stock payable more than 90 days after the
date of declaration thereof. The Borrower will not permit any of its
Subsidiaries (other than Wholly-owned
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<PAGE> 42
Subsidiaries) to make any Restricted Payments to any Person other than the
Borrower, unless no Default or Event of Default shall have occurred and
be continuing.
10.7. Limitation on Dividend Restrictions Affecting Subsidiaries.
----------------------------------------------------------
The Borrower covenants that, except pursuant to this Agreement and the
Other Agreements, it will not permit any of its Subsidiaries directly or
indirectly to create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction which by its terms
restricts the ability of any such Subsidiary to (a) pay dividends or make
any other distributions on such Subsidiary's Capital Stock, (b) pay any
Debt owed to the Borrower or any other Subsidiary, (c) make any loans or
advances to the Borrower or any other Subsidiary or (d) transfer any of
its Property or assets to the Borrower or any other Subsidiary.
Section 11. Definitions. For the purpose of this Agreement, the
-----------
following terms shall have the following respective meanings:
"Accountants" has the meaning specified in Section 7.
"Additional Amount" has the meaning specified in Section 12.1.
"Affiliate" means as to any Person any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with such Person. For purposes of this
definition, "control" of a Person shall mean the power, direct or indirect,
(i) to vote or direct the voting of 5% or more of the outstanding shares
of Voting Stock of such Person, or (ii) to direct or cause the direction
of the management and policies of such Person whether by contract or
otherwise.
"Big Six Accounting Firms" means Arthur Andersen & Co., Coopers &
Lybrand, Deloitte & Touche, Ernst & Young, KPMG Peat Marwick and Price
Waterhouse and any of their successors.
"Business Day" means any day except a Saturday, a Sunday or a
legal holiday in New York City.
"Capitalized Lease" means a lease of Property which in accordance
with GAAP should be capitalized on the balance sheet of any Person or
for which the amount of the asset and liability thereunder as if so
capitalized should be disclosed in a note to such balance sheet.
"Capitalized Lease Obligations" shall mean the aggregate rentals
due and to become due under all Capitalized Leases which any Person,
as a lessee, would be required to reflect as a
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<PAGE> 43
liability on the consolidated balance sheet of such Person in accordance
with GAAP.
"Capital Stock" means and includes any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock.
"Certified" when used with respect to any financial information of
any Person to be certified by any of its officers, indicates that such
information is to be accompanied by a certificate to the effect that such
financial information has been prepared in accordance with GAAP
consistently applied, subject in the case of interim financial information
to normal year-end audit adjustments and absence of the footnotes required
by GAAP, and presents fairly the information contained therein as at the
dates and for the periods covered thereby.
"Change of Control" means any transaction, event or occurrence, or
series of transactions, events or occurrences, as a result of which any
person or group of related persons (within the meanings of Sections 13(d)
and 14(d)(2) of the Exchange Act), acquires more than 50% of the outstanding
shares of Voting Stock of the Borrower, provided, that a Change of Control
--------
shall not be deemed to have occurred if 50% or more of the outstanding
shares of Voting Stock of the Borrower are acquired by (i) a majority of
the Persons constituting the officers of the Borrower as set forth in the
Disclosure Document (but in any such case such majority shall include
William E. Nasser), or (ii) members of the Janes family listed on
Schedule 3.5B, their representatives or designees or trusts created for
their benefit.
"Change of Control Date" has the meaning specified in Section 3.5.
"Change of Control Notice" has the meaning specified in Section 3.5.
"Change of Control Offer" has the meaning specified in Section 3.5.
"Change of Control Payment Date" has the meaning specified in
Section 3.5.
"Change of Control Purchase Price" has the meaning specified in
Section 3.5.
"Closing Date" has the meaning specified in Section 2.
"Code" means the Internal Revenue Code of 1986, as amended.
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<PAGE> 44
"Company Reports" has the meaning specified in Section 4.5(a).
"Confidential Memorandum" has the meaning specified in Section 4.5(a).
"Consolidated Net Earnings" means, for any period, the net earnings
of the Borrower and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period, determined in accordance with
GAAP; provided that in determining Consolidated Net Earnings there shall be
--------
excluded (i) any extraordinary or non-recurring gains and losses as determined
in accordance with GAAP of the Borrower or its Subsidiaries, and (ii) the
equity interest of the Borrower or any Subsidiary in the unremitted earnings
of any Person that is not a Subsidiary.
"Consolidated Adjusted Net Worth" shall mean, as of any date of
determination, Consolidated Net Worth plus (a) an amount equal to the sum
----
of (i) $6,500,000 resulting from the application of Statement of Financial
Accounting Standards No. 106 and (ii) the cumulative translation adjustment
as reported in the Borrower's regular financial statements, minus (b) goodwill
-----
and other intangible assets (other than intangible assets in the aggregate
amount not to exceed $8,000,000 created by the purchase of patents and
technology associated with Sulfa Scrub(TM)) which exceed, in the aggregate,
5% of Consolidated Total Assets, as set forth in the Borrower's consolidated
financial statements.
"Consolidated Net Worth" as of any date of determination shall mean
stockholder's equity, including preferred stock and the equity interests
in Persons who are not Subsidiaries owned by the Borrower and its
Subsidiaries, all as determined as of such date for the Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP.
"Consolidated Total Assets" means, at any time, the total assets of
the Borrower and its Subsidiaries, as determined as of such time on a
consolidated basis in accordance with GAAP.
"Consolidated Total Capitalization" as of any date of determination
shall mean the sum of (i) Funded Debt of the Borrower and its Subsidiaries
and (ii) Consolidated Adjusted Net Worth, all as determined as of such
date for the Borrower and its Subsidiaries on a consolidated basis in
accordance with GAAP.
"Current Liabilities" means all liabilities maturing on demand or
within one year from the date as of which such liabilities are to be
determined, and such other liabilities (including, without limitation,
accrued taxes) as may properly be classified as current liabilities in
accordance with GAAP, but
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<PAGE> 45
excluding the currently payable portion of any Debt not maturing on demand
or within one year from the date as of which such liabilities are to be
determined.
"Debt" with respect to any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) any obligation incurred
for all or any part of the purchase price of Property or services, other than
accounts payable and accrued expenses included in current liabilities and
incurred in respect of Property or services purchased in the ordinary course
of business and other than accounts whose terms expressly provide for payment
within 24 months, provided, that such accounts are not outstanding for a period
--------
in excess of 24 months (iii) indebtedness or obligations evidenced by bonds,
notes or similar written instruments, (iv) the amount of all unreimbursed
drafts drawn under letters of credit issued for the account of such Person,
(v) any obligation (whether or not such Person has assumed or become liable
for the payment of such obligation) secured by a Lien on any Property of such
Person, (vii) all Guarantees of the obligations of any other Person of the
type, without duplication, described in clauses (i) through (x) of this
definition (including, without limitation, any contract which, in economic
effect, is substantially equivalent to a Guarantee), (viii) any contract to
purchase materials or supplies or to rent or lease any real or personal
Property to the extent such contract provides that the Person's obligation to
make payments in respect thereof is absolute and unconditional, (ix) any
contract entered into primarily for the purpose of enabling a party (other
than such Person) to such contract to maintain any contractually required
balance sheet conditions or pay any debt and (x) any contract for goods or
services where the payments to such Person by a party (other than such Person)
to such contract would be subordinated to any Debt of such party; provided
--------
that "Debt" shall not include (a) any of the foregoing obligations with
respect to the Borrower or any Subsidiary to the extent that the Borrower or
any Subsidiary is the beneficiary of such obligations or (b) any unfunded
obligations now or hereafter existing under any Pension Plan of the Borrower.
"Default" means any event or condition which, with due notice or lapse of
time or both, would become an Event of Default.
"Disclosure Document" means the annual report of the Borrower filed on
Form 10-K with the SEC, dated October 31, 1992.
"Eligible Holder" has the meaning specified in Section 7.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource
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<PAGE> 46
Conservation and Recovery Act, the Emergency Planning and Community Right to
Know Act, the Safe Drinking Water Act, the Hazardous Materials Transportation
Act, the Clean Air Act, the Clean Water Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Noise Control Act, the Occupational Safety
and Health Act, the Toxic Substances Control Act, any so-called "Superfund"
or "Superlien" law, any regulation promulgated under any of the foregoing or
any other Federal, state, or local statute, law, ordinance, code, rule,
regulation, order, decree, common law or other requirement of any Governmental
Body regulating, relating to or imposing liability or standards of conduct
concerning the environment, health and safety, or any Hazardous Material, all
as now or at any time hereafter may be in effect.
"Environmental Matter" means any claim, investigation, litigation,
administrative proceeding, whether pending or, to the knowledge of the
Borrower, threatened, or judgment or Order, relating to any Hazardous
Materials, the release thereof, or any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
from time to time amended.
"ERISA Affiliate" means any corporation or other Person which is a member
of the same controlled group (within the meaning of Section 414(b) of the
Code) of corporations or other Persons as the Borrower or any of its
Subsidiaries, or which is under common control (within the meaning of Section
414(c) of the Code) with the Borrower or any of its Subsidiaries, or any
corporation or other Person which is a member of an affiliated service group
(within the meaning of Section 414(m) of the Code) with the Borrower or any
of its Subsidiaries, or any corporation or other Person which is required
to be aggregated with the Borrower or any of its Subsidiaries pursuant to
Section 414(o) of the Code or the regulations promulgated thereunder.
"Event of Default" has the meaning specified in Section 12.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar statute then in effect, and a reference to a particular section
thereof shall include a reference to the comparable section, if any, of any
such similar statute.
"Fair Market Value" means what a willing buyer would pay to a willing
seller in an arm's-length transaction.
"Funded Debt" shall mean all Debt which would constitute long term debt
in accordance with GAAP, and shall include, in any event, (i) all Debt of a
Person having a final maturity of more
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<PAGE> 47
than one year from the date of incurrence thereof (or which is renewable or
extendible at the option of the obligor for a period or periods of more than
one year from the date of incurrence), including all payments in respect
thereof that are required to be made within one year from the date of any
determination of Funded Debt, whether or not included in Current Liabilities,
(ii) Capitalized Lease Obligations, and (iii) in the case of Guarantees, all
Guarantees of obligations constituting Debt maturing more than one year after
the date as of which the computation is made; provided that Funded Debt shall
--------
not be deemed to include any Debt incurred and outstanding under a working
capital line of credit or revolving credit agreement or similar agreement
providing for borrowed money (including any renewals and extensions thereof)
which pursuant to its terms constitutes Debt in accordance with GAAP which
outstanding principal amount is reduced to zero for a period of not less than
30 consecutive days during the preceding 12 consecutive calendar months from
the date of determination.
"GAAP" means generally accepted accounting principles in the United
States in effect from time to time.
"Governmental Body" means any federal, state, county, city, town,
village, municipal or other governmental department, commission, board,
bureau, agency, authority or instrumentality, domestic or foreign.
"Guarantee" means any guarantee or other contingent liability (other than
any endorsement for collection or deposit in the ordinary course of business),
direct or indirect, with respect to, without duplication, any Debt of another
Person, through an agreement or otherwise, including, without limitation,
(a) any other endorsement or discount with recourse or undertaking
substantially equivalent to or having economic effect similar to a guarantee
in respect of such Debt and (b) any agreement (i) to purchase, or to advance
or supply funds for the payment or purchase of such Debt, (ii) to purchase,
sell or lease Property, products, materials or supplies, or transportation or
services, to enable such other Person to pay such Debt or to assure the owner
thereof against loss regardless of the delivery or nondelivery of the
Property, products, materials or supplies or transportation or services or
(iii) to make any loan, advance or capital contribution to or other investment
in, or to otherwise provide funds to or for, such other Person to enable
such Person to satisfy any Debt (including any liability for a dividend,
stock liquidation payment or expense) or to assure a minimum equity, working
capital or other balance sheet condition in respect of any such obligation
(provided, however, that for purposes of this Agreement, any agreement or other
-------- -------
obligation to (i) fund, directly or indirectly, activities related to research
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and development or (ii) make an equity investment in another Person in
exchange for an equity interest, including, without limitation, in the case
where the investment is being used by such other Person to retire any
pre-existing debt, shall be excluded from this definition in all respects).
The amount of any Guarantee shall be equal to the outstanding amount of the
obligations directly or indirectly guaranteed.
"Hazardous Material" and "Hazardous Materials" shall mean as follows:
(1) any "hazardous substance" as defined in, or for purposes of,
the Comprehensive Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C.A. Sections 9601 &
9602, as may be amended from time to time, or any other so-called
"superfund" or "superlien" law and any judicial interpretation of
any of the foregoing;
(2) any "regulated substance" as defined pursuant to 40 C.F.R.
Part 280;
(3) any "pollutant or contaminant" as defined in 42 U.S.C.A.
Section 9601(33);
(4) any "hazardous waste" as defined in, or for purposes of, the
Resource Conservation and Recovery Act;
(5) any "hazardous chemical" as defined in 29 C.F.R. Part 1910;
(6) any "hazardous material" as defined in, or for purposes of, the
Hazardous Materials Transportation Act; and
(7) any other substance, regardless of physical form, or form of
energy or pathogenic agent that is subject to any other past,
present or future law or requirement of any Governmental Body
regulating, relating to, or imposing obligations, liability, or
standards of conduct concerning the protection of human health,
plant life, animal life, natural resources, Property or the
reasonable enjoyment of life or Property from the presence in the
environment of any solid, liquid, gas, odor, pathogen or form of
energy, from whatever source.
Without limiting the generality of the foregoing, the term "Hazardous
Material" thus includes, but is not limited to, any material, waste or
substance that contains petroleum or any fraction thereof, asbestos, or
polychlorinated biphenyls, or that is flammable, explosive or radioactive.
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<PAGE> 49
"Internal Revenue Service" means the United States Internal Revenue
Service and any successor or similar agency performing similar functions.
"Inventory" means all goods, merchandise and other personal Property
which are held for sale or lease or consignment or to be furnished under a
contract of service, or are raw materials, work in process or material used
or consumed, or to be used or consumed, in the business of the Borrower and
its Subsidiaries.
"Investment" when used with reference to any investment of the Borrower
or any of its Subsidiaries, means any investment so classified under GAAP,
and, whether or not so classified, includes (a) any loan or advance made by
the Borrower or any of its Subsidiaries to any other Person, (b) any
Guarantee, and (c) any Capital Stock of, partnership interest in, or other
ownership or similar interest in any Person; and the amount of any Investment
shall be the original principal or capital amount thereof less all cash
returns of principal or equity thereof (and without adjustment by reason of
the financial condition of such other Person).
"Lien" means any security interest, mortgage, pledge, lien, claim,
charge, encumbrance, conditional sale or title retention agreement, lessor's
interest under a Capitalized Lease or analogous instrument, in, of or on any
of a Person's Property (whether held on the date hereof or hereafter
acquired), or any signed or filed financing statement which names such Person
as the debtor, or the execution of any security agreement or the like
authorizing any other Person as the secured party thereunder to file such a
financing statement.
"Majority Holders" means the holders of at least a majority in principal
amount of the Notes at the applicable time outstanding.
"Make Whole Premium" means at any time with respect to any Notes being
prepaid in whole or in part pursuant to Section 3.3 or being declared or
becoming due and payable pursuant to Section 12.1, the amount (but not less
than zero) obtained by subtracting (X) the aggregate amount of the
principal of such Notes being prepaid or paid or being declared or becoming
due and payable on such date (as the case may be) together with unpaid
interest accrued thereon to the date of such prepayment or payment, from
(y) the sum of the Present Values of (A) the aggregate amount of such
principal being so prepaid or paid or being declared or becoming due and
payable (assuming such principal were paid as scheduled in Section 3.1) plus
----
(B) each amount of interest which would have been payable on the amount of
such principal being prepaid or paid (assuming all principal were paid as
specified in
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<PAGE> 50
the foregoing clause (A) and all interest thereon were paid when due pursuant
to the terms of such Notes). "Present Value", for any amount of principal or
-------------
interest, shall be computed in accordance with accepted financial practice on
a semiannual basis at a discount rate equal to the sum of 50 basis points
plus the Treasury Yield. The "Treasury Yield" shall be determined by reference
--------------
to the most recent Federal Reserve Statistical Release H.15 (519) which has
become available not more than two days prior to the date of prepayment or
payment or the date as of which such principal becomes or is declared due and
payable, as the case may be (or, if such Statistical Release is no longer
published, any publicly available source of similar market data acceptable
to the Majority Holders), and shall be the most recent yield on actively
traded United States Treasury securities adjusted to a constant maturity equal
to the then remaining Weighted Average Life to Maturity of the principal being
prepaid or paid or becoming or being declared due and payable, as the case
may be. If the Weighted Average Life to Maturity (so computed) is not equal
to the constant maturity of a United States Treasury security for which a
yield is given, the Treasury Yield shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the yields of United
States Treasury securities for which such yields are given, except that if
the Weighted Average Life to Maturity (so computed) is less than one year, the
yield on actively traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
"Material Adverse Effect" means any change or changes or effect or
effects that individually or in the aggregate are or are likely, in the
reasonable opinion of the Borrower, to be materially adverse to (i) the
assets, liabilities, business, operations, income, prospects or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a whole
or, except with respect to Section 9.3(E), any of the Borrower or the
Significant Subsidiaries taken individually, (ii) the transactions
contemplated by this Agreement, or (iii) taken as a whole, the ability of the
borrower to fulfill its obligations under this Agreement and the Notes.
"Material Contracts" means all supply agreements, requirements
contracts, customer agreements, franchise agreements, license agreements,
distribution agreements, joint venture agreements, asset purchase agreements,
stock purchase agreements, merger agreements, agency or advertising agreements
and other contracts, agreements and commitments to which the Borrower or any
of its Subsidiaries are parties, and which are material to the businesses,
assets or operations of the Borrower and its Subsidiaries, taken as a whole.
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<PAGE> 51
"Multiemployer Plan" means a multiemployer plan as defined in
Section 3(37) or Section 4001(a)(3) of ERISA or Section 414(f) of the
Code contributed to by the Borrower or any of its Subsidiaries or ERISA
Affiliates.
"Net Proceeds" shall mean, with respect to any sale or other
disposition of Property of the Borrower or any of its Subsidiaries (including
in connection with any sale-leaseback transaction), the excess, if any,
of (i) the aggregate amount received in cash (including any cash received
or to be received by way of deferred payment pursuant to a note receivable,
other non-cash consideration or otherwise, but only as and when such cash
is so received) in connection with such sale or other disposition, over
(ii) the sum of (A) the principal amount of and premium, if any, on any
Debt which is secured by or which finances the Property so sold or otherwise
disposed of (except for any amount of such Debt assumed by the purchaser or
acquiror of such Property) and which is required to be, and actually is,
repaid in connection with such sale or other disposition, (B) out-of-pocket
expenses of the Borrower or any Subsidiary incurred in connection with
such sale or other disposition and (C) a reasonable reserve for all
additional taxes, including taxes measured by income, arising out of such
sale or other disposition which are estimated to be or become due for the
Borrower and its consolidated Subsidiaries on a consolidated basis which
would not otherwise be payable had such sale or other disposition not
occurred.
"Note" has the meaning specified in Section 1.
"Officer's Certificate" means with respect to any corporation, a
certificate signed by the Chairman of the Board, the President, one of
the Vice Presidents, the Treasurer, or the chief financial officer of the
specified corporation.
"Order" means any order, writ, injunction, decree, judgment, award,
determination or written direction or demand of any court, arbitrator or
Governmental Body.
"Other Agreements" shall mean the agreements which are identical in
all respects with this Agreement (except for the respective principal
amounts of the Notes to be purchased) and executed and delivered to the
other Purchasers named in Schedule I hereto simultaneously with the
execution and delivery of this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor agency or Governmental Body performing similar functions.
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<PAGE> 52
"Pension Plan" means an employee pension benefit plan, as defined
in Section 3(2) of ERISA, excluding any Multiemployer Plans, maintained
by or contributed to by the Borrower or any of its Subsidiaries or
ERISA Affiliates.
"Permitted Lien" means any of the Liens referred to in subsections
(A) through (L), inclusive, of Section 10.2.
"Person" means and includes an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"Plan" and "Plans" means any employee benefit plan as defined in
Section 3(3) of ERISA, excluding a Multiemployer Plan, established or
maintained for the benefit of employees of the Borrower or any of its
Subsidiaries or ERISA Affiliates.
"Priority Debt" has the meaning specified in Section 10.1(D).
"Property" with respect to any Person, means any interest in any
kind of property or asset, whether real, personal or mixed, tangible or
intangible, of such Person.
"Reportable Event" means any of the events set forth in Section 4043(b)
of ERISA or the regulations thereunder for which the 30-day notice
requirement applies.
"Restricted Payment" means, with respect to any Person,
(a) the declaration or payment of any dividend or other
distribution on, or the incurrence of any liability to make any other
payment in respect of, Capital Stock of such Person (other than one
payable solely in Capital Stock of such Person),
(b) any payment or distribution on account of the purchase,
redemption, defeasance (including in-substance or legal defeasance)
or other retirement of any Capital Stock of such Person, or of any
warrant, option or other right to acquire such Capital Stock, or any
other payment or distribution made in respect thereof, except any
payment or distribution on account of the purchase, redemption or other
retirement of Capital Stock of such Person out of the net cash proceeds
received by such Person after the Closing Date from a substantially
concurrent sale of other Capital Stock of such Person or warrants,
options, or other rights to acquire such Capital Stock, and
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<PAGE> 53
(c) any payment or distribution by such Person on account of
the principal of or prepayment charge, if any, or interest or other
amounts, with respect to any Debt of the Borrower or any Subsidiary
which is subordinated in right of payment to the prior payment of the
Notes.
The amount of any Restricted Payment made in the form of Property shall be
deemed to be the greater of the Fair Market Value or the net book value
of such Property.
"SEC" means the Securities and Exchange Commission and any succeeding
agency, authority, commission or Governmental Body.
"Securities Act" means as of any date the Securities Act of 1933, as
amended, or any similar federal statute then in effect, and a reference
to a particular section thereof shall include a reference to the comparable
section, if any, of any such similar Federal statute.
"Senior Debt" means all Debt which is not Subordinated Debt.
"Significant Subsidiary" means Petrolite Limited and Petrolite
International Sales Corp. and any other Subsidiary of the Borrower from
time to time deemed a "Significant Subsidiary" within the meaning of
Rule 1-02 of Regulation S-X of the Securities Act.
"Subordinated Debt" on any date means Debt of the Borrower or its
Subsidiaries, whether outstanding on the Closing Date or thereafter created,
incurred or assumed which is subordinated in right of payment to the
obligations represented by this Agreement, the Other Agreements and the
Notes.
"Subsidiary" shall mean, with respect to any Person, any corporation
or other entity of which at least a majority of the outstanding Voting
Stock is at the time directly or indirectly owned or controlled by such
Person or by one or more of any entities directly or indirectly owned or
controlled by such Person.
"Unsecured Senior Debt" means all Debt of the Borrower, including
trade debt, which is not secured by any Lien and which is not, by its
terms, subordinated in right of payment to any other unsecured Debt
of the Borrower.
"Voting Stock" with respect to any Person shall mean Capital Stock
of such Person of any class or classes, the holders of which are ordinarily,
in the absence of contingencies, entitled to vote for the election of
members of the Board of Directors (or Persons performing similar functions)
of such Person.
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<PAGE> 54
"Weighted Average Life to Maturity" means, with respect to any Debt,
as at any time of determination, the number of years obtained by dividing
the then Remaining Dollar-years of such Debt by the then outstanding
principal balance of such Debt (before giving effect to any prepayment to
be made at the time of such determination). For such purposes, the
"Remaining Dollar-years" of any Debt shall be determined by (1) multiplying
----------------------
(a) the amount of each required payment of principal of such Debt (including
each required installment payment or mandatory prepayment thereof, if any,
and payment of the principal balance thereof at final maturity, but
assuming no optional prepayments thereof are made) by (b) the number of
years (calculated to the nearest one-twelfth) which will elapse between
the time of determination and the date the respective required payment
or mandatory prepayment of principal is due, and (2) adding all of the
products so obtained.
"Welchem Facility" shall mean the Welchem Bayport manufacturing plant
in La Porte, Texas, and all associated real property, machinery and
equipment located at such manufacturing plant.
"Wholly-owned Subsidiary" shall mean, with respect to any Person,
any Subsidiary of such Person all of the shares of Capital Stock or other
ownership interests (and all rights and options to purchase such shares
or other ownership interests) of or in which, other than directors'
qualifying shares, are owned, beneficially and of record, by such Person
or one or more Wholly-owned Subsidiaries of such Person.
(B) Accounting Terms. All accounting terms used in this
----------------
Agreement shall be applied on a consolidated basis for the Borrower and its
Subsidiaries, unless otherwise specifically indicated herein. Any accounting
terms not specifically defined herein shall have the meanings customarily
given them in accordance with GAAP.
Section 12. Events of Default.
-----------------
12.1. Events of Default; Remedies. If any of the following events
---------------------------
(herein called "Events of Default") shall have occurred and be continuing
-----------------
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or by operation of law or otherwise), that is to
say:
(A) the Borrower shall default in the due and punctual payment
or prepayment of all or any part of the principal of, or prepayment charge
(if any) on, any Note when and as the same shall become due and payable,
whether at stated maturity, by acceleration, by notice of prepayment or
otherwise;
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<PAGE> 55
(B) the Borrower shall default in the due and punctual payment
or prepayment of any interest on any Note when and as such interest shall
become due and payable, and such default shall continue for a period
of five Business Days;
(C) the Borrower shall default in the performance or observance
of any of the covenants, agreements or conditions contained in Sections
9.6 or 10 of this Agreement;
(D) the Borrower shall default in the performance or observance
of any other of the covenants, agreements or conditions contained in this
Agreement and such default shall continue for a period of 30 days;
(E) any event shall occur or any condition shall exist in
respect of any Debt of the Borrower or its Subsidiaries in an aggregate
principal amount in excess of $3,000,000, or under any agreement or
document securing or relating to any such Debt, the effect of which is to
cause the acceleration of the maturity of such Debt, or any default shall
occur in the payment when due of all or any portion of such Debt, whether
at the final maturity thereof (as renewed or extended if such Debt shall
have been renewed or extended) or otherwise and any applicable grace period
shall have expired;
(F) the Borrower or any of its Significant Subsidiaries shall
(1) apply for or consent to the appointment of, or the taking of possession
by, a receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its Property, (2) be generally unable to pay its debts
as such debts become due, (3) make a general assignment for the benefit of
its creditors, (4) commence a voluntary case under the Federal Bankruptcy
Code (as now or hereafter in effect), (5) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (6) fail to
controvert in a timely or appropriate manner, or acquiesce in writing
to, any petition filed against it in an involuntary case under such
Bankruptcy Code, (7) admit in writing its inability to pay its debts
generally as such debts become due, (8) take any action under the laws of
its jurisdiction of organization analogous to any of the foregoing, or
(9) take any requisite action for the purpose of effecting any of the
foregoing;
(G) a proceeding or case shall be commenced, without the
application or consent of the Borrower or any of its Significant Subsidiaries
in any court of competent jurisdiction, seeking (1) the liquidation,
reorganization, dissolution, winding up of the Borrower or any of such
Significant Subsidiaries or composition or readjustment of the Debt of any of
them, (2) the appointment of a trustee, receiver, custodian, liquidator or the
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like of the Borrower or any of its Significant Subsidiaries or of
all of any substantial part of assets of any of them, or (3) similar
relief in respect of the Borrower or any of its Significant Subsidiaries
under any law providing for the relief of debtors, and such proceeding
or case shall continue undismissed, or unstayed and in effect, for a period
of 30 days; or an order for relief shall be entered in an involuntary case
under such Bankruptcy Code, against the Borrower or any of its Significant
Subsidiaries; or action under the laws of the jurisdiction of organization
of any of the Borrower or any of its Significant Subsidiaries analogous
to any of the foregoing shall be taken with respect to any of the Borrower
or any such Significant Subsidiaries and shall continue undismissed, or
unstayed and in effect, for a period of 30 days;
(H) final judgment for the payment of money shall be rendered
by a court of competent jurisdiction against the Borrower or any of its
Subsidiaries, and the Borrower or such Subsidiary, as the case may be,
shall not discharge the same or provide for its discharge in accordance with
its terms, or procure a stay of execution thereof, within 45 days from the
date of entry thereof and within said period of 45 days, or such longer
period during which execution of such judgment shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal, and such judgment shall exceed $1,000,000 or such judgment together
with all other such judgments shall exceed in the aggregate $5,000,000;
(I) any representation, warranty or statement made by or on
behalf of the Borrower or any officer of the Borrower in this Agreement
or in any financial statement, certificate or other instrument or document
now or hereafter delivered pursuant to or in connection with any provision
of this Agreement shall prove to be false or incorrect or breached in any
material respect on the date as of which made; or
(J) any Reportable Event shall occur which could constitute
grounds for termination by the PBGC of any Plan or for the appointment by
the appropriate United States District Court of a trustee to administer any
Plan and such Reportable Event is not corrected and such determination is
not revoked within thirty (30) days after the administrator of any Plan
(if the Borrower or any of its Subsidiaries or ERISA Affiliates is the
administrator) or the Borrower or any of its Subsidiaries or ERISA
Affiliates, as the case may be, has knowledge, or has reason to have
knowledge, thereof; or any proceedings shall be instituted by the
PBGC to terminate any Plan or to appoint a trustee to administer any
Plan; or a trustee shall be appointed by the appropriate United States
District Court to administer any Plan; or any Plan shall be terminated
by its sponsor; or there shall occur a
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<PAGE> 57
complete or partial withdrawal from any Multiemployer Plan by the Borrower
or any of its Subsidiaries or ERISA Affiliates (including any transaction
described in, and meeting the requirements of, Section 4204 of ERISA);
where in any such case the aggregate unfunded liability of the Borrower
and its Subsidiaries and ERISA Affiliates for all such terminations or
withdrawals exceeds or is reasonably likely to exceed $3,000,000;
then (i) upon the occurrence of any Event of Default described in Subsection
(F) or (G), the unpaid principal amount of all Notes, together with the
interest accrued thereon, and, to the extent lawful, an amount equal to the
applicable Additional Amount, shall automatically become immediately due
and payable, without presentment, demand, notice, declaration, protest or
other requirements of any kind, all of which are hereby expressly waived,
or (ii) upon the occurrence of any other Event of Default, the holders
of at least 50% of the unpaid principal amount of the Notes at the time
outstanding may, by written notice to the Borrower, declare the unpaid
principal amount of all Notes to be, and the same shall forthwith become,
immediately due and payable, together with the interest accrued thereon and,
to the extent lawful, the applicable Additional Amount, all without
presentment, demand, notice, protest or other requirements of any kind,
all of which are hereby expressly waived, provided that, during the
--------
existence of an Event of Default described in Subsection (A) or (B) with
respect to any Note, the holder of such Note may, by written notice to the
Borrower, declare such Note
to be, and the same shall forthwith become, due and payable,
together with the interest accrued thereon and, to the extent lawful, an
amount equal to the applicable Additional Amount, all without presentment,
demand, notice, protest or other requirements of any kind, all of which
are hereby expressly waived. If any holder of any Note shall exercise the
option specified in the proviso to the preceding sentence, the Borrower
will forthwith give written notice thereof to the holders of all other
outstanding Notes and each such holder may (whether or not such notice
is given or received), by written notice to the Borrower, declare the
principal of all Notes held by it to be, and the same shall forthwith
become, immediately due and payable, together with the interest accrued
thereon and, to the extent lawful, an amount equal to the applicable
Additional Amount.
For purposes of this Section, the term "Additional Amount"
means, with respect to any declaration of acceleration, or other acceleration,
of the maturity of any Note or Notes referred to in the preceding paragraph,
an amount equal to the applicable Make Whole Premium.
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<PAGE> 58
The provisions of this Section 12.1 are subject, however, to
the condition that if, at any time after any Note shall have so become due
and payable, the Borrower shall pay all arrears of interest on the Notes
and all payments on account of the principal of and, to the extent
permitted by law, prepayment charge (if any) on the Notes which shall have
become due otherwise than by acceleration (with interest on all such overdue
principal and prepayment charge, if any, and, to the extent permitted by
law, on overdue payments of interest, at the applicable rate per annum
provided for in the Notes or this Agreement in respect of overdue amounts
of principal, prepayment charge and interest), and all Events of Default
(other than nonpayment of principal of, prepayment charge (if any) and
accrued interest on the Notes, due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to Section 15.2, then,
and in every such case, the Majority Holders, by written notice to the
Borrower, may rescind and annul any such acceleration and its consequences
with respect to the Notes; but no such action shall affect any subsequent
Default or Event of Default or impair any right consequent thereon.
12.2. Suits for Enforcement. If any Event of Default shall have
---------------------
occurred and be continuing, the holder of any Note may proceed to protect
and enforce its rights, either by suit in equity or by action at law, or
both, whether for the specific performance of any covenant or agreement
contained in this Agreement or in aid of the exercise of any power granted
in this Agreement, or the holder of any Note may proceed to enforce the
payment of all sums due upon such Note or to enforce any other legal or
equitable right of the holders of such Note.
The Borrower covenants that, if it shall default in the making of
any payment of principal of, or interest or prepayment charge on, any Note
or in the performance or observance of any agreement contained in this
Agreement, it will pay to the holder thereof such further amounts, to the
extent lawful, as shall be sufficient to pay the costs and expenses of
collection or of otherwise enforcing such holder's rights, including
reasonable counsel fees.
12.3. Remedies Cumulative. No remedy herein conferred upon you or the
-------------------
holder of any Note is intended to be exclusive of any other remedy and each
and every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity
or by statute or otherwise.
12.4. Remedies Not Waived. No course of dealing between the Borrower
-------------------
and you or any other holder of any Note and no delay or failure in exercising
any rights hereunder or under any Note in
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<PAGE> 59
respect thereof shall operate as a waiver of any of your rights or the rights
of any holder of such Note.
Section 13. Registration, Exchange, and Transfer of Notes. The
---------------------------------------------
Borrower will keep at its principal executive office a register, in which,
subject to such reasonable regulations as it may prescribe, but at its
expense (other than transfer taxes, if any), the Borrower will provide for
the registration and transfer of Notes. Whenever any Note or Notes shall be
surrendered either at the principal executive office of the Borrower, or at
the place of payment named in the Note, for transfer or exchange,
accompanied (if so required by the Borrower) by a written instrument of
transfer in form reasonably satisfactory to the Borrower duly executed by the
holder thereof or by such holder's attorney duly authorized in writing,
the Borrower will execute and deliver in exchange therefor a new Note or
Notes in such denominations (any such Note shall be in multiples of
$100,000 but the principal amount of any such Note shall in no event be
less than $500,000) as may be requested by such holder, of like tenor and in
the same aggregate unpaid principal amount as the aggregate unpaid principal
amount of the Note or Notes so surrendered. Any Note issued in exchange for
any other Note or upon transfer thereof shall carry the rights to unpaid
interest and interest to accrue which were carried by the Note so
exchanged or transferred, and neither gain nor loss of interest shall result
from any such transfer or exchange. Any transfer tax or governmental charge
relating to such transaction shall be paid by the holder requesting the
exchange. The Borrower and any of its agents may treat the Person in whose
name any Note is registered as the owner of such Note for the purpose of
receiving payment of the principal of, prepayment charge (if any) and interest
and other amounts on such Note and for all other purposes whatsoever,
whether or not such Note be overdue.
Section 14. Lost, Stolen, Damaged and Destroyed Notes. At the request
-----------------------------------------
of any holder of any Note, the Borrower will issue and deliver at its
expense, in replacement of any Note or Notes lost, stolen, damaged or
destroyed, upon surrender thereof, if mutilated, a new Note or Notes in the
same aggregate unpaid principal amount, and otherwise of the same tenor, as
the Note or Notes so lost, stolen, damaged or destroyed, duly executed by the
Borrower. The Borrower may condition the replacement of a Note or Notes
reported by the holder thereof as lost, stolen, damaged or destroyed, upon
the receipt from such holder of an indemnity or security reasonably
satisfactory to the Borrower; provided, that if such holder shall be you or
--------
your nominee or another Eligible Holder or its nominee, your or such Eligible
Holder's unsecured agreement of indemnity shall be sufficient for purposes
of this Section.
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Section 15. Miscellaneous.
-------------
15.1. Home Office Payment. Notwithstanding anything to the contrary in
-------------------
this Agreement or in the Notes, the Borrower agrees that, so long as you or
any nominee designated by you or any Eligible Holder shall hold any Notes,
the Borrower shall cause all payments of principal, prepayment charge (if any)
and interest on the Notes to be made, without presentment thereof, to you in
the manner and to the address specified in Schedule I hereto, or in such
other manner or to such other address as you or any Eligible Holder may
designate in writing. You agree that prior to the sale, transfer or
disposition of any Note you will make a notation thereon of the portion of
the principal amount paid or prepaid and the date to which interest has been
paid thereon or surrender the same in exchange for a new Note or Notes of the
same series, of the same tenor and of authorized denominations in principal
amount equal to the unpaid principal amount of the Note or Notes so
surrendered, duly executed by the Borrower. Notwithstanding anything herein
to the contrary, the Borrower shall not, as a condition of payment of all of
the principal of, Make-Whole Premium (if any) and interest on any Notes,
require you or any Eligible Holder, upon receipt of such payment in full, to
surrender such Notes, provided, however, that upon receipt of such payment
-----------------
in full by you or any Eligible Holder, such Notes held by you or any Eligible
Holder shall be deemed to be automatically cancelled, without any further
action on the part of the Borrower or you or any Eligible Holder. The Borrower
shall enter into an agreement similar to that contained in this Section with
any other English Holder (or nominee thereof).
15.2. Amendment and Waiver.
--------------------
(A) Any term, covenant agreement or condition of this Agreement or
of the Notes may, with the consent of the Borrower be amended, or compliance
therewith may be waived (either generally or in a particular instance and
either retroactively or prospectively), by one or more substantially
concurrent written instruments signed by the Majority Holders, except that
(1) no such amendment or waiver shall (a) reduce the
principal of, or the rate of interest on, any of the Notes, (b) extend
the time of payment of all or any portion of the principal of or interest
on or any prepayment charge payable with respect to any of the Notes,
(c) modify any of the provisions of this Agreement or of the Notes with
respect to the payment or prepayment of the principal thereof or
prepayment charge or interest thereon, (d) reduce the percentage of Notes
required with respect to any such amendment or to effectuate any such
waiver, or (e) modify any
-55-
<PAGE> 61
provision of this Section, without in each case the specific prior
written consent of the holders of all of the Notes at the time
outstanding; and
(2) no such waiver shall extend to or affect any obligation
not expressly waived or impair any right consequent thereon.
(B) Any amendment or waiver pursuant to Subsection (A) of this
Section 15.2 shall apply equally to all holders of the Notes at the time
outstanding and shall be binding upon them, upon each future holder of any
Note, and upon the Borrower, in each case whether or not a notation thereof
shall have been placed on any Note.
(C) Notwithstanding any other provision contained in this Section
15.2 or elsewhere in this Agreement to the contrary, Notes which at any
time are held by the Borrower or by any Subsidiary or Affiliate of the
Borrower shall not be deemed outstanding for purposes of any vote, consent,
approval, waiver or other action required or permitted to be taken by the
holders of Notes, or by any of them, under the provisions of this Section
15.2 or Section 12 of this Agreement, and neither the Borrower nor any such
Subsidiary or Affiliate shall be entitled to exercise any right as a holder
of Notes with respect to any such vote, consent, approval or waiver or to take
or participate in taking any such action at any time.
(D) So long as any Notes remain outstanding, the Borrower will
not solicit, request or negotiate for or with respect to any proposed consent
with respect to, or waiver or amendment of, any of the provisions of this
Agreement, the Other Agreements or the Notes unless each holder of Notes
(irrespective of the amount of Notes then owned by it) shall be informed
thereof by the Borrower and shall be afforded the opportunity of considering
the same and shall be supplied by the Borrower with sufficient information
to enable it to make an informed decision with respect thereto. The Borrower
will not, directly or indirectly, pay or cause to be paid any remuneration,
whether by way of supplemental or additional interest, fee or otherwise, to
any holder of Notes as consideration for or as an inducement to the entering
into by any holder of Notes of any amendment, waiver or consent with respect
to any of the terms and provisions of this Agreement, the Other Agreements
or the Notes unless such remuneration is currently paid, on the same terms,
ratably to the holders of all Notes then outstanding.
15.3. Expenses. The Borrower agrees, whether or not the transactions
--------
hereby contemplated shall be consummated, to pay and save you harmless
against any and all liability for the payment
-56-
<PAGE> 62
of all reasonable out-of-pocket expenses arising in connection with this
Agreement and the other instruments and the transactions hereby contemplated,
including without limitation all such expenses incurred with respect to the
enforcement of any provision of any such agreement or instrument, any
proposed consents, amendments or waivers (whether or not the same shall be
signed or shall become effective) under or in respect of any such agreement
or instrument, any workout or restructuring of the Debt or capital structure
of the Borrower (whether or not the same shall be consummated or shall become
effective) and the consideration of any legal questions relevant thereto, all
expenses incurred in connection with the reproduction of such agreements and
instruments and all stamp and other similar taxes (together in each case
with interest and penalties, if any) which may be payable in respect of the
execution and delivery of such agreement or instruments, or the issuance,
delivery or acquisition by you of any Note or otherwise pursuant to this
Agreement, and expenses incurred in obtaining a private placement number
from Standard & Poor's Corporation, and the fees and disbursements of
Sonnenschein Nath & Rosenthal and of any special or local counsel in
connection with preparation of such agreements and instruments and the
transactions hereby and thereby contemplated (including, without limitation,
in connection with any such enforcement, consent, amendment, waiver, workout,
restructuring or consideration of legal questions), and the fees and
disbursements of the Accountants. The obligations of the Borrower under this
Section 15.3 shall survive the payment or transfer of any Note, the
enforcement of any provision hereof or thereof, any such amendments or
waivers and any such consideration of legal questions.
15.4. 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 or otherwise in connection herewith, shall (i) survive
the execution and delivery of this Agreement and the delivery of the Notes to
you and shall continue in effect as long as any of the Notes is outstanding
and thereafter as provided in Section 15.3, and (ii) be deemed to be material
and to have been relied upon by you, regardless of any investigation made
by you or on your behalf.
15.5. Successors and Assigns. All representations, warranties,
----------------------
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 you shall not be obligated to purchase any Note from any issuer
other than the Borrower. The provisions of this Agreement are intended to
be for the benefit of all holders, from time to time, of any Notes purchased
pursuant hereto, and shall be enforceable by any
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<PAGE> 63
such holder, whether or not an express assignment to such holder of rights
under this Agreement has been made by you or your successor or assign.
15.6. Notices. All communications provided for hereunder shall be in
-------
writing and delivered by hand, by Federal Express or other overnight courier,
or sent by first class mail or sent by telex or telecopy (with such telex or
telecopy to be confirmed promptly in writing sent by first class mail), sent
(i) if to you, to the address or telex or telecopy number
set forth by you for such communications on Schedule I hereto, or to
such other address or telex or telecopy number as you may have designated
to the Borrower in writing;
(ii) if to any other holder of any Notes, to the address or
telex or telecopy number (if any) of such holder as set forth in the
register maintained pursuant to Section 13; and
(iii) if to the Borrower, to
Petrolite Corporation
369 Marshall Avenue
St. Louis, Missouri 63119
Attention: Chief Financial Officer
Telephone No.: (314) 961-3500
and with copy to:
Petrolite Corporation
369 Marshall Avenue
St. Louis, Missouri 63119;
Attention: Secretary
Telephone No.: (314) 961-3500
or to such other address or addresses or telex or telecopy number or numbers
as the Borrower may most recently have designated in writing to the holders
of Notes by such notice. All such communications shall be deemed to have been
given or made when so delivered by hand or sent by telex (answer back
received) or telecopy, or three Business Days after being so mailed.
15.7. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
15.8. Indemnification. In consideration of the execution and delivery
---------------
of this Agreement by you, the Borrower hereby agrees to indemnify, exonerate
and hold you and each of your officers, directors, employees and agents
(herein called the "Indemnitees")
-----------
-58-
<PAGE> 64
free and harmless from and against any and all actions, causes of action,
suits, losses, liabilities and damages, and expenses in connection therewith,
including, without limitation, reasonable counsel fees and disbursements
(herein collectively called the "Indemnified Liabilities"), incurred by the
Indemnitees or any of them as a result of, or arising out of or relating to:
(A) any transaction financed or to be financed in whole or in
part directly or indirectly with proceeds from the sale of any of the
Notes, or
(B) any Environmental Matter, any Environmental Law or the
actual or alleged existence or release of any Hazardous Material,
except for any such Indemnified Liabilities arising on account of any
Indemnitee's gross negligence or willful misconduct, and if and to the extent
that the foregoing undertaking may be unenforceable for any reason, the
Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. The obligations of the Borrower under this Section 15.8
shall survive the payment or transfer of any Note and the enforcement of any
provision hereof or thereof.
15.9. Integration and Severability. This Agreement embodies the entire
----------------------------
agreement and understanding among you and the Borrower, and supersedes all
prior agreements and understandings relating to the subject matter hereof.
In case any one or more of the provisions contained in this Agreement or in
any instrument contemplated hereby for such date, or any application thereof,
shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and
therein, and any other application thereof, shall not in any way be affected
or impaired thereby.
15.10. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same instrument.
15.11. SUBMISSION TO JURISDICTION; WAIVER OF SERVICE AND VENUE.
-------------------------------------------------------
(A) THE BORROWER CONSENTS AND AGREES TO THE NON-EXCLUSIVE
GENERAL JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF
NEW YORK, STATE OF NEW YORK, AND WAIVES ANY OBJECTION BASED ON VENUE OR
FORUM NON CONVENIENS WITH RESPECT TO ANY ACTON INSTITUTED THEREIN, AND
- --------------------
AGREES THAT ANY DISPUTE
-59-
<PAGE> 65
CONCERNING THE RELATIONSHIP BETWEEN ANY PURCHASER OR ANY HOLDER OF NOTES, ON
THE ONE HAND, AND THE BORROWER, ON THE OTHER HAND, OR THE CONDUCT OF ANY
PARTY IN CONNECTION WITH THIS AGREEMENT, OR OTHERWISE MAY BE HEARD IN THE
COURTS DESCRIBED ABOVE.
(B) THE BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE
BORROWER AT ITS ADDRESS SET FORTH IN SECTION 15.6, AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO
DEPOSITED IN THE U.S. MAILS. THE BORROWER HEREBY CONSENTS TO SERVICE OF
PROCESS AS AFORESAID.
(C) NOTHING IN THIS SECTION 15.11 SHALL AFFECT THE RIGHT OF ANY
PURCHASER OR ANY HOLDER OF NOTES TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY PURCHASER OR ANY HOLDER OF NOTES
TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION.
15.12. WAIVER OF RIGHT TO TRIAL BY JURY. THE BORROWER AND THE
--------------------------------
PURCHASERS HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OF THEM IN RESPECT TO THIS AGREEMENT
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE. THE BORROWER AND THE PURCHASERS HEREBY AGREE AND
CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.
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<PAGE> 66
If you are in agreement with the foregoing, Please sign the form of
acceptance in the space provided below whereupon this letter shall become a
binding agreement between you and the undersigned.
Very truly yours,
PETROLITE CORPORATION
By: /s/ Herbert F. Eggerding, Jr.
---------------------------------
Its Executive Vice President and
---------------------------------
Chief Financial Officer
---------------------------------
Accepted as of the date first
above written:
THE EQUITABLE LIFE ASSURANCE PROVIDENT MUTUAL LIFE AND
SOCIETY OF THE UNITED STATES ANNUITY COMPANY OF AMERICA
By: /s/ Basil P. Livanos By: /s/ G.C. Lang
- --------------------------------- ---------------------------------
Its Investment Officer Its Vice President
- --------------------------------- ---------------------------------
AID ASSOCIATION FOR LUTHERANS PROVIDENT MUTUAL LIFE AND
ANNUITY COMPANY
By: /s/ Alan D. Onstad PHILIDELPHIA-SPDA
- ---------------------------------
Its Director of Securities
- ---------------------------------
By: /s/ G.C. Lang
---------------------------------
THE CANADA LIFE ASSURANCE Its Vice President
COMPANY ---------------------------------
PROVIDENT MUTUAL LIFE
By: /s/ Brian J. Lynch INSURANCE COMPANY-CALIC
- ---------------------------------
Its Associate Treasurer
- ---------------------------------
By: /s/ G.C. Lang
--------------------------------
CANADA LIFE ASSURANCE Its Vice President
COMPANY OF AMERICA (CLICA) --------------------------------
By: /s/ Brian J. Lynch
- ---------------------------------
Its Associate Treasurer
- ---------------------------------
</TABLE>
<PAGE> 1
DELIVERING ON COMMITMENTS FOCUSING ON ENVIRONMENTAL OPPORTUNITIES
While protecting the quality of air, water and soil is of vital importance to
every industry, complying with the growing body of environmental regulation is
both increasingly difficult and costly. The American Petroleum Institute
estimates the cost of environmental compliance efforts to its industry at $8
billion annually.
The federal Clean Air Act, as one example, had significant impact on the
fuels industry in 1993. Many suppliers were forced to reformulate their fuels
to meet new, more stringent vehicle exhaust specifications -- aimed primarily
at reducing
10
<PAGE> 2
sulfur emissions, considered a key component in the formation of
acid rain and other environmental ills.
As a result, incasing numbers of refiners, diesel fuel distributors,
marketers and specialty chemical companies turned to Petrolite to help them
achieve cost-effective compliance through specialized services, treatment
programs and performance additives.
Cleaner Diesel Fuels
Diesel fuels in particular had to be made cleaner-burning. Reducing the
sulfur content of these fuels, however, raised fears among diesel engine
builders and operators that fuel pumps and other vital parts might wear out
prematurely for lack of sulfur as a friction reducer. Petrolite is responding
to their concerns by providing lubricity additives that help protect both the
engines and the environment.
Many fuel formulators have also had to resort to increased use of
detergents and dispersant to bring their fuels into compliance.
According to Michael Thorne, a fuels specialist for Petrolite, that
practice alone could cause these fuels during transportation and storage to
absorb more water, which could later freeze in fuel lines or form viscous
emulsions that could clog fuel filters. Many major fuel blenders ar now
adding those components in combination with special multipurpose additives
carefully prescribed by Thorne and others at Petrolite to improve their
fuels' "water tolerance".
Communications = Results
"Very often we work directly with the customers' technical people to help
solve these problems," observes Thorne. "In one instance, we had an urgent
request from a major fuel supplier to help them solve a serious water
tolerance problem. Working together with them, communicating one-on-one, we
were able to provide a solution that positively delighted them. Since then,
they have been calling us on other fuel related problems, and that positively
delights us -- to be helping them in these new areas."
Providing customers with this sort of personalized, technical expertise
typifies what Petrolite does best. Our people have the special know-how in
the area of fuel components chemistry and the state-of-the-art technical
resources necessary to help them solve their most difficult fuel performance
problems.
Moreover, many of these same, new, air quality specifications -- or more
stringent versions of them -- may eventually be adopted in Europe and
elsewhere as environmental awareness grows. Wherever and whenever that
happens, Petrolite is prepared to provide its customers with the services they
require.
Another Culprit, H2S
Airborne sulfur emissions in the form of poisonous hydrogen sulfide (H2S) gas
is another area of concern for the hydrocarbon process and fuels industries in
the United States, especially where high-sulfur fuel feedstocks are
transported and stored.
Specifically, Petrolite is providing shippers, terminal operators and
others with a unique, rapid-response service that effectively helps neutralize
this deadly contaminant.
At the same time, Petrolite is working on a revolutionary new method of
mitigating sulfur emissions problems. For nearly two years, we have been
involved in a technical alliance with Energy BioSystems Corporation of Houston
in an effort to commercialize a proprietary biocatalytic process to remove
sulfur from hydrocarbon feedstocks at a cost to customers far below that of
current technologies. Progress to date has been encouraging and a pilot plant
is scheduled for construction late in 1994.
11
<PAGE> 3
DELIVERING ON COMMITMENTS FOCUSING ON ACQUISITIONS
Petrolite negotiated three strategic acquisitions in 1993 that strongly
complement our core business and technology. These synergies are most evident
in the Welchem acquisition which is creating added value for customers,
especially our largest, Amoco Corporation.
A subsidiary of Amoco Chemical holding Company since 1982, Welchem was
providing a full range of specialty chemical services to oil and gas producers
and refiners. While a significant portion of its customers were "outside"
accounts, the majority of them -- comprising the bulk of its approximately $52
million in sales in 1992 -- were Amoco units.
Building Bridges to Amoco
Petrolite too has been a longtime Amoco supplier, and our acquisition of
Welchem was intended to build more and stronger bridges to Amoco's worldwide
organization. That is happening now all across the United States and in the
Caribbean, Canada, Africa and Europe. Illustrative is an alliance agreement,
signed October 1, between Petrolite and Amoco-Netherlands to service its oil
production in the North Sea.
"I think this decision to go with Petrolite was most strongly influenced
by our track record in other alliances, especially our work with Chevron in
the North Sea," says Stuart Monro, general
12
<PAGE> 4
manager of Petrolite's EuroChem Division, "but certainly the Welchem
acquisition was a factor in their selection process".
There were other acquisition benefits as well. Welchem's blend plant,
offices and laboratory in Edmonton, Alberta, Canada, precluded our need to
follow through on plans to build there to serve that attractive market. The
successful integration of Welchem into our own organization also added
significantly to the ranks of talented management and field staff serving the
needs of Petrolite customers.
Vendor of the Year
A good example is Don Porterfield, a Petrolite field sales representative in
West Texas. A former Welchem employee, Porterfield was honored in 1993 by
Amoco as "Vendor of the Year" in its Permian Basin North District.
Jerome Powers, a field foreman for Amoco, explains that this award was
a first for its unit and that the choice of Porterfield was unanimous. "He
works very closely with us," Powers says. "Any time of day or night that we
need him, he's out here. His attitude is great, and he's always coming up
with ways to save us money."
Service offerings also have been improved with former Welchem customers
now having access to Petrolite's expansive technical resources. Petrolite,
in turn, acquired new proprietary process and product technologies that are
important to sustaining ongoing treatment programs at Amoco installations and
elsewhere.
A Natural Fit
Jim Zemenick, vice president of corporate development who led Petrolite's
acquisition efforts, points out that "the Welchem purchase was such a natural
fit with our organization, that it would be hard to imagine that it could have
been anything other than a benefit to our customers and a success for us."
The two other acquisitions in fiscal 1993 were also excellent fits:
Chemical Specialties Corporation of Louisiana effectively serves oil and gas
producers, especially those operating off the U.S. Gulf Coast; the purchase of
Sulfa-Scrub(R) product patents from Quaker Chemical Corp. enhances our
hydrogen sulfide removal technology.
13
<PAGE> 5
FINANCIAL REVIEW
- -------------------------------------------------------------------------------
1993 OPERATING RESULTS
<TABLE>
Consolidated Revenues, Net Earnings and Earnings per Share
<CAPTION>
(Dollars in thousands,
except per share data) 1993 1992 1991
.............................................................................
<S> <C> <C> <C>
Revenues $351,779 $317,950 $323,516
Net earnings--
Before effect of change in
accounting principle 20,546 16,479 14,757
After effect of change in
accounting principle 14,046 16,479 14,757
Earnings per share--
Before effect of change in
accounting principle 1.82 1.45 1.30
After effect of change in
accounting principle 1.24 1.45 1.30
.............................................................................
</TABLE>
Petrolite's revenues rose 11% in fiscal 1993 to $351,779,000. All of the
Company's operating divisions participated in the revenue improvement. About
50% of the increase came from the acquisition of Welchem, Inc., a subsidiary
of Amoco Chemical Company, which was completed in April, 1993.
Net earnings in fiscal 1993, before effect of a change in accounting
principle, increased 25% to $20,546,000, or $1.82 per share, compared with
$16,479,000, or $1.45 per share, in the prior period. All operating divisions
also shared in the earnings improvement.
In the fiscal 1993 first quarter, Petrolite adopted Statement of Financial
Accounting Standard 106 related to medical and other post-retirement benefits,
which resulted in a nonrecurring, non-cash, after-tax charge of $6,500,000, or
$.58 per share. This charge reduced reported fiscal 1993 earnings to
$14,046,000, or $1.24 per share.
<TABLE>
Analysis of Earnings per Share
Following is a comparative analysis of change in earnings per share for the
last three fiscal years:
<CAPTION>
1993 1992 1991
VS. 1992 VS. 1991 VS. 1990
..............................................................................
<S> <C> <C> <C>
Earnings per share--
Current year $ 1.24 $ 1.45 $ 1.30
Prior year 1.45 1.30 1.16
..............................................................................
(Decrease) Increase $ (.21) $ .15 $ .14
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Changes in earnings from operations--
Specialty Chemical Products:
Sales volume $ .86 $ (.12) $ .26
..............................................................................
Pricing, product mix, raw material
costs and manufacturing expenses .23 .30 .45
Other operating expenses (.78) (.07) (.45)
..............................................................................
Net effect of changes attributable to
pricing, product mix, productivity
and inflation (.55) .23
..............................................................................
Total Specialty Chemical Products .31 .11 .26
..............................................................................
Equipment:
Gross profit from sales and rentals .06 (.01) .06
Operating expenses (.03) (.02) .01
..............................................................................
Total Equipment .03 (.03) .07
..............................................................................
Loss on disposition of
subsidiary's assets .15 (.15)
Gain on termination of
subsidiary's pension plan (.06) .06
..............................................................................
Increase (decrease) in earnings
from operations .43 (.01) .33
Changes in other income (expense)--
Interest (expense) income, net (.06) .03 (.04)
Equity in earnings of affiliated
companies .04 .03 (.04)
Foreign exchange (.03) .02 (.03)
Other, net .03 .09 (.10)
Change in income tax--
Change in effective income
tax rate (.04) (.01) .02
..............................................................................
Net increase in earnings per share
before effect of change in
accounting principle $ .37 $ .15 $ .14
Effect of change in accounting
principle (.58)
..............................................................................
Net (decrease) increase in earnings
per share $ (.21) $ .15 $ .14
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
14
<PAGE> 6
<TABLE>
Revenues
<CAPTION>
(Dollars in thousands) 1993 1992 1991
..................................................................
<S> <C> <C> <C>
Specialty Chemical Products $332,512 $301,484 $304,550
Equipment 19,267 16,466 18,966
..................................................................
Total $351,779 $317,950 $323,516
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
Revenues from sales of Specialty Chemical Products were $332,512,000 in fiscal
1993, a 10% increase over fiscal 1992. New business gained as a result of the
Welchem acquisition accounted for approximately 60% of the improvement. The
largest revenue increase was realized by the Tretolite Division principally
due to the Welchem acquisition. New revenue sources also included hydrogen
sulfide management programs added to Petrolite's service offerings through
purchase of Sulfa-Scrub(R) patents and technology from Quaker Chemical
Corporation.
The Industrial Chemicals Division also benefited from acquiring the
Welchem customer base. In addition, there was continued strong demand for
fuel additives and its basic refinery product base. Oilfield and industrial
chemicals sales also showed good improvement in Latin American markets and the
Pacific Rim.
Major sales volume gains were realized by the EuroChem Division, although
a general decline in the value of European currencies versus the dollar diluted
the comparative revenue effect. Larger revenue gains were in the Middle East,
Northern Europe and Africa. The Polymers Division also posted higher revenues
in international markets which offset the impact of sluggish demand in
domestic markets.
Equipment revenues were $19,267,000, a 17% increase over fiscal 1992.
Petreco Division equipment contract activity accelerated significantly,
particularly in Europe and the Pacific Rim. The Division also enjoys a
healthy backlog of contracts to be realized in fiscal 1994.
<TABLE>
Earnings from Operations
<CAPTION>
(Dollars in thousands) 1993 1992 1991
......................................................................
<S> <C> <C> <C>
Specialty Chemical Products $29,714 $24,410 $22,244
Equipment 1,851 1,343 2,174
Loss on disposition of subsidiary's
assets (2,618)
Gain on termination of subsidiary's
pension plan 1,262
......................................................................
Total $31,565 $24,397 $24,418
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
Operating earnings of Petrolite's Specialty Chemical Products business segment
improved 22% to $29,714,000 in fiscal 1993. All divisions contributed to the
improvement. Operating margins of the Tretolite and Industrial Chemicals
Divisions were higher due to more favorable product mix, stable raw material
costs, and the beneficial impact of higher sales volumes on fixed operating
costs. There were also improved contributions from Latin America and the Far
East.
The EuroChem Division significantly improved its profitability, despite the
effect of generally weaker currencies on revenues. Operating earnings of the
Polymers Division improved on higher revenues, while margins were tested by
intense competition in several product lines.
The company's Equipment segment generated operating earnings of $1,851,000,
representing a 38% gain over the prior year. Stronger Equipment revenues
produced by the company's European subsidiaries were a major factor in the
improvement.
Operating earnings in 1992 were impacted by the two non-recurring items
indicated.
<TABLE>
Technology Costs
<CAPTION>
(Dollars in thousands) 1993 1992 1991
...........................................................................
<S> <C> <C> <C>
Research $ 13,587 $12,224 $11,431
Field Technical Support and Other 10,857 9,540 9,043
...........................................................................
Total $ 24,444 $21,764 $20,474
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
Petrolite raised its technology commitment in 1993 as expenditures for
research and field technical support increased 12%. Additional technical
personnel were added to Petrolite through the Welchem acquisition to support
their continuing research projects and additional business realized in the
acquisition.
<TABLE>
Interest Income (Expense), Net
<CAPTION>
(Dollars in thousands) 1993 1992 1991
..................................................................
<S> <C> <C> <C>
Interest and dividend income $ 828 $1,324 $ 1,343
Interest expense (1,475) (936) (1,407)
..................................................................
Interest (expense) income, net $ (647) $ 388 $ (64)
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
The decrease in interest and dividend income and increase in interest expense
in 1993 reflect liquidation of certain marketable securities and other
short-term investments and incurrance of additional debt to provide financing
for 1993 business and technology acquisitions. In September, 1993, the
Company entered into a series of private placement financing agreements
aggregating $40 million, with maturities commencing in 1997 and final
maturities in 2003.
QUARTERLY RESULTS
<TABLE>
Condensed quarterly unaudited summaries of financial results during
fiscal 1993 and 1992, which total to the annual results, are as
follows:
(Dollars in thousands, except per share data)
..................................................................
<CAPTION>
Net Earnings
Three Months Gross Earnings (Loss)
Ended Revenues Profit (Loss) Per Share
..................................................................
<S> <C> <C> <C> <C>
1993
..................................................................
January 31
Before effect of
accounting change $80,163 $33,843 $ 4,826 .43
After effect of
accounting change 80,163 33,843 (1,674) (.15)
April 30 85,944 36,864 5,197 .46
July 31 92,597 38,900 5,223 .46
October 31 93,075 40,505 5,300 .47
.................................................................
1992
.................................................................
January 31 $79,910 $32,767 $ 3,320 .29
April 30 79,644 33,491 4,397 .39
July 31 78,503 31,818 4,065 .36
October 31 79,893 32,282 4,697 .41
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
15
<PAGE> 7
In fiscal 1993, Petrolite realized steady, quarterly improvements in its
revenues, net earnings and earnings per share. During the first quarter, the
company made an accounting change related to medical and other post-retirement
benefits which resulted in a one-time charge of $6.5 million, or $.58 per
share. All divisions contributed to the growth in revenues and earnings for
the year.
The Welchem acquisition was the major contributor to the increase in
revenues and gross profit in the last two quarters of fiscal 1993, although
higher operating expenses transitional costs and financing costs offset most
of these gains. With full assimilation of Welchem activities into Petrolite
operations, this acquisition is expected to make a greater contribution to
earnings in fiscal 1994 and future periods.
The first quarter of fiscal 1992 included two non-recurring items which
significantly affected quarterly results. A loss on sale of assets of a
small, non-productive subsidiary reduced earnings by $.15 per share. This
charge was partially offset by a gain of $.06 per share from termination of a
subsidiary's pension plan, which was replaced by an improved benefit plan.
Overall, the fiscal 1992 improvement was achieved through strong
performance in international markets partially offset by slow domestic
oilfield and refinery markets.
<TABLE>
FOREIGN CURRENCY EXCHANGE AND TRANSLATION
<CAPTION>
(Dollars in thousands) 1993 1992 1991
..................................................................
<S> <C> <C> <C>
Recorded gains:
Earnings statement--
Pretax $ 51 $ 514 $ 120
After-tax 33 357 77
Balance sheet--
Net change in cumulative
translation adjustment $ (3,096) $ (3,394) $ (4,836)
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
The company's exchange gains and losses were principally attributable to the
effects of changes in value of the U.S. dollar-denominated asset and liability
accounts of its foreign subsidiaries and closing of foreign currency futures
contracts. The company uses several measures to protect returns on its
foreign subsidiary net assets from significant changes in the value of the
dollar versus foreign currencies. These measures include pricing adjustments,
maintenance of offsetting asset and liability balances, and investment in
foreign currency futures contracts. There were no significant contracts
outstanding at year end. Balance sheet changes in the cumulative translation
adjustment reflect the general overall increase in the value of the
U.S. dollar versus foreign currencies in all three years.
FOREIGN INVESTMENTS
<TABLE>
Petrolite's net investments in its foreign subsidiaries and affiliates as of
October 31 are identified below by geographic area:
<CAPTION>
(Dollars in thousands) 1993 1992 1991
..................................................................
<S> <C> <C> <C>
Europe $38,276 $38,778 $35,906
Far East 13,142 11,457 11,247
Canada 9,367 5,211 5,418
Middle East 6,695 5,991 5,713
Latin America 4,314 3,480 4,761
..................................................................
Total $71,794 $64,917 $63,045
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
The increase in Petrolite's investment in Canada in 1993 was attributable to
assets acquired in the Welchem purchase.
LIQUIDITY/CAPITAL RESOURCES
<TABLE>
The following table discloses Petrolite's sources and applications of funds
and other liquidity data for the last three fiscal years:
<CAPTION>
(Dollars in thousands) 1993 1992 1991
...............................................................................
<S> <C> <C> <C>
Sources:
Net earnings 27% 49% 46%
Depreciation, amortization and
deferred taxes 21 48 49
Additional long-term debt 52
Other 3 5
...............................................................................
Total 100% 100% 100%
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Applications:
Acquisition of businesses and technologies 47% 5% %
Capital expenditures, net 25 55 68
Dividends to stockholders 16 40 40
Working capital and other, net 24 6 (39)
...............................................................................
112 106 69
(Decrease) increase in cash and
marketable securities (12) (6) 31
...............................................................................
Total 100% 100% 100%
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Other liquidity data:
Working capital--
Cash and marketable securities $ 8,799 $17,852 $20,233
Other 49,261 39,122 38,547
Debt--
Short-term 9,920 13,582 12,478
Long-term 40,000
Ratios--
Current 1.79:1 1.98:1 2.00:1
Long-term debt/total capitlization .20:1
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
While the company's total debt increased significantly in 1993 to finance its
business and technology acquisition programs, its ratio of debt to total
capital remained comparatively low. Petrolite's continuing strong financial
position and adequate credit availability provide a high degree of flexibility
in obtaining additional funds on competitive terms. Historically the company
has financed growth in its asset base and dividends to stockholders primarily
from internally generated funds. With its strategic change to a more
aggressive acquisition program, external financing is likely to continue to
increase.
16
<PAGE> 8
<TABLE>
CAPITAL EXPENDITURES AND DEPRECIATION
<CAPTION>
(Dollars in thousands) 1993 1992 1991
............................................................
<S> <C> <C> <C>
Capital expenditures, net $35,088 $17,567 $21,948
Depreciation 16,765 15,957 15,603
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
Capital expenditures in 1993 included $15,060,000 representing property, plant
and equipment from the Welchem acquisition. Other major expenditures in 1993
were for a new information system principally to serve the Tretolite and
Industrial Chemicals Divisions, continuing expansion and upgrading of the
Bayport chemical manufacturing plant, and investments in containers and
related distribution facilities as part of the continuing program to
distribute chemical products in bulk containers and replace the 55 gallon drum
as a medium for distribution.
Larger projects for fiscal 1994 include a new semi-bulk distribution
facility at the Bayport chemical manufacturing plant, and new laboratory and
manufacturing office facilities for EuroChem operations in Kirkby, England.
<TABLE>
STOCKHOLDERS' EQUITY/CAPITAL STOCK
<CAPTION>
(Dollars in thousands, except per share data) 1993 1992
............................................................................
<S> <C> <C>
At October 31--
Stockholders' equity $163,137 $164,586
Number of shares outstanding 11,289 11,281
Stockholders' equity per share $ 14.45 $ 14.59
Return on average stockholders' equity--
Before accounting change 12.5% 10.0%
After accounting change 8.6% 10.0%
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
Petrolite has stock option and incentive plans which are described in detail
in the Notes to Consolidated Financial Statements on pages 27 and 28. The
company also has contributory employees' savings plans, which include an
option for investment in Petrolite Stock which is partially funded by the
company. These plans are administered by an independent trustee that
purchases shares on the open market on a current basis.
Dividends per Share
Petrolite paid quarterly dividends of $.28 per share for a total annual
dividend of $1.12 per share in both fiscal 1993 and 1992. Dividends represent
34% and 40%, respectively, of funds generated, excluding long-term debt, in
these years.
Petrolite has paid dividends every year since its incorporation in 1930
and has maintained or increased its dividends per share every year since 1946.
<TABLE>
Capital Stock Prices
The high and low bid prices for 1993 and 1992 are shown in the following table
compiled from published sources:
<CAPTION>
1993 1992
................. .................
Quarter Ending High Low High Low
...................................................................
<S> <C> <C> <C> <C>
January 31 $34 $24 $28 1/8 $21 3/4
April 30 33 3/4 27 3/4 30 26 3/4
July 31 39 1/4 28 1/4 31 1/2 25 1/8
October 31 40 1/4 32 26 22 3/4
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
Petrolite Corporation is a member of the NASDAQ National Market System of
over-the-counter securities. The company's capital stock is traded under the
symbol PLIT. As of October 29, 1993, Petrolite has 2,288 shareholders of
record.
PRIOR YEAR'S OPERATING RESULTS
1992 vs. 1991
Petrolite's fiscal 1992 revenues were $317,950,000, a 2% decrease from fiscal
1991. EuroChem Division's revenues were higher in the period. Revenues of
the other operating divisions were slightly lower than those established in
fiscal 1991, which was the company's record revenue year.
Net earnings in fiscal 1992 rose 12% to $16,479,000, or $1.45 per share,
an increase of $1,722,000, or $.15 per share, from fiscal 1991. The EuroChem
Division realized the greatest earnings improvement while the Polymers and
Industrial Chemical Divisions also registered higher profits. The Tretolite
and Petreco Divisions' earnings were lower for the period.
The year's results were affected by two non-recurring items occurring in
the first quarter. These included a charge of $2,618,000, $.15 per share, from
the sale of assets of an unprofitable subsidiary, partially offset by a gain
of $1,262,000, $.06 per share, from the termination of a subsidiary's pension
plan that was replaced by an improved benefit plan.
Net revenues from sales of Specialty Chemical Products were $301,484,000,
approximately the same as fiscal 1991. The major revenue gain was recorded by
the EuroChem Division, where sales to the Middle East and Africa were
exceptionally strong. Tretolite Division's revenues were lower, reflecting
softness in domestic Oil Field markets. Oil Field Chemical sales in Pacific
Rim countries showed good improvement. The rate of decline in domestic
revenues of the Tretolite Division was less than the overall decline in the
domestic market for Oil Field chemicals.
Revenues of the Industrial Chemicals and Polymers Divisions were comparable
to fiscal 1991 while realizing some gains in target markets. The Industrial
Chemicals Division was adversely affected by the slowdown in U.S. refinery
activity. Polymers Division's revenues reflected generally slow economic
conditions but showed an encouraging upturn in the latter months of the year.
Equipment revenues were $16,466,000, 13% lower than fiscal 1991. The
year-end backlog of equipment contracts and other accelerated Petreco Division
activities, particularly in Europe and the Pacific Rim, indicate a turnaround
in fiscal 1993.
Operating earnings of Petrolite's Specialty Chemical Products business
segment improved 10% to $24,410,000 in fiscal 1992. EuroChem Division
operating results rose significantly due to a 7% increase in revenues and
continuing effects of significant cost reduction actions taken in fiscal 1991.
The Industrial Chemicals Division and the Polymers Division realized higher
operating earnings with comparable revenues due to improvements in product
mix. Tretolite Division operating earnings were lower due to lower revenues.
All Specialty Chemicals Products operating divisions benefited from
improved stability of raw material costs in fiscal 1992.
The company's Equipment segment generated an operating profit of
$1,343,000 in fiscal 1992 compared with $2,174,000 in the prior year. The
decline was attributed to lower contract revenues which are expected to turn
around in fiscal 1993.
17
<PAGE> 9
1991 vs. 1990
Petrolite's fiscal 1991 revenues improved to $323,516,000, a 9% increase from
fiscal 1990. Each of the company's five operating divisions contributed to
the revenue growth.
Net earnings in fiscal 1991 rose 12% to $14,757,000, or $1.30 per share,
an increase of $1,622,000 or $.14 per share, from fiscal 1990. All five
operating divisions showed higher profits.
Net revenues from Specialty Chemical Products' sales improved 9% in 1991 to
$304,550,000. The largest revenue growth occurred in the Tretolite Division
where recent concentrated efforts to more effectively market our products and
provide a higher level of field technical service began to produce results.
Substantially higher sales of fuel additives and an improved product mix were
major factors in the Industrial Chemicals Division's revenue growth. The
EuroChem Division's Oil Field Chemical sales were particularly strong in
Africa and the Middle East. Polymers Divisions revenues were higher
world-wide despite generally slow economic conditions which typically impact
this business.
Equipment revenues were $18,966,000, 8% higher than fiscal 1990. Petreco
Division's contract revenues were significantly higher both in the United
States and internationally.
At year end major international equipment contracts were in progress in
Saudi Arabia and Venezuela. The revenue improvement would have been greater
except for the abandonment or disposition of several product lines in early
1991 and 1990.
Operating earnings of Petrolite's Specialty Chemical Products business
segment improved 27% to $22,244,000 in fiscal 1991. Tretolite Division
operating results were sharply higher due to a 7% increase in sales volumes
and the leveraging effect of the additional volume on the division's fixed
expenses. The Industrial Chemicals Division realized increased operating
earnings with comparable volumes but an overall improvement in product mix.
Substantially higher operating profits were realized by the EuroChem
Division as a result of a 14% increase in sales volumes. Earnings from
operations increased in the Polymers Division due to higher sales revenues,
effective control of operating expenses, and the comparative effect of costs
incurred in the prior year due to a plant explosion.
All Specialty Chemical Product operating divisions were favorably impacted
by improved stability of raw material costs in fiscal 1991.
The company's Equipment segment produced an operating profit of $2,174,000
in fiscal 1991, which was 80% higher than comparable operating results in the
prior year. The increase was attributable to a significantly greater
contribution from contract revenues and improved control of operating
expenses.
INDUSTRY SEGMENT DATA
Petrolite's business is classified into two industry segments:
Specialty Chemical Products and Equipment. The Specialty Chemical
Products segment includes development, manufacture, distribution
and marketing of oil field and industrial chemicals, and industrial
polymers and waxes. The Equipment segment includes development,
assembly, distribution and marketing of specialized lines of equipment
for a variety of major industries.
Following is a summary of net revenues, earnings from operations
and other financial data by industry segment. Earnings from operations
are defined as earnings before investment income, equity in net
earnings of affiliated companies, foreign exchange gains and losses,
other nonoperating income and expense, and the provision for income
taxes.
<TABLE>
Industry Segment Information*
<CAPTION>
(Dollars in thousands)
For Years Ended October 31 1993 1992 1991
.............................................................................................
<S> <C> <C> <C>
Net revenues:
Specialty Chemical Products $332,512 $301,484 $304,550
Equipment 19,267 16,466 18,966
.............................................................................................
351,779 317,950 323,516
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Earnings (loss) from operations:
Specialty Chemical Products 29,714 24,410 22,244
Equipment 1,851 1,343 2,174
Loss on disposition of subsidiary's
assets (2,618)
Gain on termination of
subsidiary's pension plan 1,262
.............................................................................................
31,565 24,397 24,418
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Identifiable assets:
Specialty Chemical Products 259,108 192,099 198,605
Equipment 10,733 9,516 9,063
Investments in affiliated companies 8,027 7,710 8,847
Corporate 23,277 31,666 27,480
.............................................................................................
301,145 240,991 243,995
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Other related disclosures:
Specialty Chemical Sales
by product group--
Oil Field Chemicals 199,847 180,691 182,494
Industrial Chemicals 63,249 56,028 56,792
Specialty Polymers and Waxes 69,416 64,765 65,264
.............................................................................................
332,512 301,484 304,550
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Depreciation:
Specialty Chemical Products 16,325 15,584 15,019
Equipment 404 348 508
Corporate 36 25 76
.............................................................................................
16,765 15,957 15,603
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Capital expenditures, net:
Specialty Chemical Products 34,404 18,755 22,081
Equipment 635 (899) (228)
Corporate 49 (289) 95
.............................................................................................
$ 35,088 $ 17,567 $ 21,948
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
<FN>
*The financial statements and related notes thereto on pages 20 to 28 should
be read in conjunction with these data.
</TABLE>
18
<PAGE> 10
WORLDWIDE OPERATIONS
Petrolite's worldwide operations are summarized below. Inter-area net revenues
include sales from one Petrolite unit to another located in a different
geographic area.
Earnings from operations include total company earnings on sales to
unaffiliated customers.
<TABLE>
Worldwide Operations Information*
<CAPTION>
Net Revenues
............................... Earnings Capital
Unaffiliated from Identifiable Expenditures
For Years Ended October 31 (Dollars in thousands) Customers Inter-area Operations Assets Net
.............................................................................................................................
1993
.............................................................................................................................
<S> <C> <C> <C> <C> <C>
United States $231,544 $ 30,576 $ 15,947 $196,066 $ 30,149
Europe 83,271 4,692 11,856 45,360 2,259
Canada/Latin America 18,969 444 1,069 17,022 2,245
Middle East/Far East 17,995 2,693 11,393 386
Investments in affiliated companies 8,027
Corporate 23,277 49
Eliminations (35,712)
.............................................................................................................................
$351,779 $ - $ 31,565 $301,145 $ 35,088
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
1992
.............................................................................................................................
United States $213,813 $ 23,652 $ 11,849 $142,856 $ 15,119
Europe 75,574 2,959 8,020 41,766 1,628
Canada/Latin America 14,693 365 2,897 7,726 967
Middle East/Far East 13,870 1,631 9,267 142
Investments in affiliated companies 7,710
Corporate 31,666 (289)
Eliminations (26,976)
.............................................................................................................................
$317,950 $ - $ 24,397 $240,991 $ 17,567
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
1991
.............................................................................................................................
United States $218,420 $ 25,599 $ 14,210 $147,542 $ 18,699
Europe 75,705 2,580 6,354 44,394 2,812
Canada/Latin America 16,410 856 2,219 6,790 327
Middle East/Far East 12,981 1,635 8,942 15
Investments in affiliated companies 8,847
Corporate 27,480 95
Eliminations (29,035)
.............................................................................................................................
$323,516 $ - $ 24,418 $243,995 $ 21,948
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Export revenues included in the United States net revenues to unaffiliated customers were as follows:
<CAPTION>
For Years Ended October 31 (Dollars in thousands) 1993 1992 1991
.............................................................................................................................
Geographic Areas:
Far East $ 10,358 $ 13,334 $ 9,397
Canada/Latin America 12,602 12,040 6,694
Europe 152 76 492
Africa 4,272 4,127 3,554
Middle East 3,415 9,180 1,963
.............................................................................................................................
$ 30,799 $ 38,757 $ 22,100
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
<FN>
*The financial statements and related notes thereto on pages 20 to 28 should
be read in conjunction with this data.
</TABLE>
19
<PAGE> 11
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
...........................................................................................................................
For Years Ended October 31 (Dollars in thousands, except per share data) 1993 1992 1991
...........................................................................................................................
<S> <C> <C> <C>
Net Revenues $351,779 $317,950 $323,516
Cost of Products Sold and Other Direct Costs 201,667 187,592 196,012
...........................................................................................................................
Gross profit 150,112 130,358 127,504
...........................................................................................................................
Expenses:
Selling 80,750 71,385 70,217
Research 13,587 12,224 11,431
General and administrative 24,210 20,996 21,438
Loss on disposition of subsidiary's assets 2,618
Gain on termination of subsidiary's pension plan (1,262)
...........................................................................................................................
118,547 105,961 103,086
...........................................................................................................................
Earnings from operations 31,565 24,397 24,418
Other Income (Expense):
Equity in earnings (loss) of affiliates (127) (625) (1,187)
Other, net (6) 1,077 (872)
...........................................................................................................................
Earnings before income taxes and effect of change in accounting principle 31,432 24,849 22,359
...........................................................................................................................
Provision for U.S. and Foreign Income Taxes:
Current 11,489 8,487 7,397
Deferred, net (603) (117) 205
...........................................................................................................................
10,886 8,370 7,602
...........................................................................................................................
Net Earnings before effect of change in accounting principle 20,546 16,479 14,757
Effect of change in accounting for post-retirement medical benefits (6,500)
...........................................................................................................................
Net Earnings $ 14,046 $ 16,479 $ 14,757
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Earnings per share before effect of change in accounting principle $ 1.82 $ 1.45 $ 1.30
Effect of change in accounting for post-retirement medical benefits (0.58)
...........................................................................................................................
Earnings per share $ 1.24 $ 1.45 $ 1.30
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
<FN>
See accompanying Notes to Consolidated Financial Statements
</TABLE>
20
<PAGE> 12
<TABLE>
CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
...............................................................................................................
October 31 (Dollars in thousands) 1993 1992
...............................................................................................................
ASSETS
...............................................................................................................
<S> <C> <C>
Current Assets:
Cash and equivalents $ 8,036 $ 8,812
Marketable securities 763 9,040
Accounts receivable, less estimated doubtful accounts of $1,285 and $970, respectively 71,978 55,468
Inventories 44,146 34,584
Other current assets 6,492 7,321
...............................................................................................................
Total current assets 131,415 115,225
...............................................................................................................
Investment in Affiliated Companies 9,309 7,710
...............................................................................................................
Other Assets:
Patents and other intangibles 18,755
Other 17,565 11,034
...............................................................................................................
Total other assets 36,320 11,034
...............................................................................................................
Properties:
Buildings 66,754 65,727
Machinery and equipment 205,703 188,639
Construction in progress 8,498 4,890
Accumulated depreciation (164,266) (158,045)
...............................................................................................................
116,689 101,211
Land 7,412 5,811
...............................................................................................................
124,101 107,022
...............................................................................................................
$301,145 $240,991
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
LIABILITIES AND STOCKHOLDERS' EQUITY
...............................................................................................................
Current Liabilities:
Short-term borrowings $ 9,920 $ 13,582
Accounts payable 42,183 31,402
Income taxes payable 9,383 5,397
Accrued vacation pay 4,070 3,710
Other current liabilities 7,799 4,160
...............................................................................................................
Total current liabilities 73,355 58,251
...............................................................................................................
Other Liabilities:
Long-term debt 40,000
Retiree medical benefits 10,750
Other 2,341 2,056
...............................................................................................................
Total other liabilities 53,091 2,056
...............................................................................................................
Deferred Income Taxes, Net 11,562 16,098
...............................................................................................................
Stockholders' Equity:
Capital stock, without par value--
Authorized--35,000,000 shares
Issued--12,196,497 and 12,190,097 shares, respectively 8,694 8,498
Reinvested earnings 181,101 179,693
Cumulative translation adjustment (7,409) (4,313)
...............................................................................................................
182,386 183,878
Less treasury stock, at cost (907,326 and 908,623 shares, respectively) (19,249) (19,292)
...............................................................................................................
163,137 164,586
...............................................................................................................
$301,145 $240,991
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
<FN>
See accompanying Notes to Consolidated Financial Statements
</TABLE>
21
<PAGE> 13
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------------------------------
<CAPTION>
........................................................................................................
For Years Ended October 31 (Dollars in thousands) 1993 1992 1991
........................................................................................................
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings $14,046 $16,479 $14,757
........................................................................................................
Adjustments to reconcile net earnings to net cash provided by operations:
Depreciation and amortization 17,396 15,957 15,603
Effect of change in accounting for post-retirement medical benefits 6,500
Gain on sale of assets (648) (683) (909)
Loss on disposition of subsidiary's assets 2,618
Changes in assets and liabilities:
Accounts receivable (16,510) (5,721) 9,241
Inventories (9,562) 3,207 147
Accounts payable and accrued liabilities 16,276 (3,386) 1,132
Other, net (3,799) 901 3,384
........................................................................................................
9,653 12,893 28,598
........................................................................................................
Net cash provided by operating activities 23,699 29,372 43,355
........................................................................................................
Cash Flows From Investing Activities:
Capital expenditures, net (18,923) (18,295) (21,039)
Welchem assets acquired (25,148)
Other, net (4,422) 382 (2,528)
........................................................................................................
Net cash used in investing activities (48,493) (17,913) (23,567)
........................................................................................................
Cash Flows From Financing Activities:
Long-term borrowings (repayments), net 40,000 (1,528)
Short-term borrowings (repayments), net (3,583) 996 4,296
Dividends paid (12,638) (12,720) (12,712)
Purchases of common stock (1,930)
Other 239 198 122
........................................................................................................
Net cash used in financing activities 24,018 (13,456) (9,822)
........................................................................................................
Net (Decrease) Increase in Cash and Equivalents (776) (1,997) 9,966
Cash and Equivalents at Beginning of Year 8,812 10,809 843
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Cash and Equivalents at End of Year $ 8,036 $ 8,812 $10,809
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
<FN>
See accompanying Notes to Consolidated Financial Statements
</TABLE>
22
<PAGE> 14
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
................................................................................................................................
Capital Stock Cumulative Total
..................... Reinvested Translation Treasury Stockholders'
(Amounts in thousands, except per share data) Shares Amount Earnings Adjustment Stock Equity
................................................................................................................................
<S> <C> <C> <C> <C> <C> <C>
October 31, 1990 12,182 $ 8,314 $173,889 $ 3,917 $(17,498) $168,622
Net earnings 14,757 14,757
Dividends paid $1.12 per share (12,712) (12,712)
Foreign currency translation adjustments (4,836) (4,836)
Issuance of restricted stock awards 122 122
................................................................................................................................
October 31, 1991 12,182 8,314 175,934 (919) (17,376) 165,953
Net earnings 16,479 16,479
Dividends paid $1.12 per share (12,720) (12,720)
Foreign currency translation adjustments (3,394) (3,394)
Issuance of stock under options and
restricted stock awards 8 184 14 198
Purchase of treasury stock (1,930) (1,930)
................................................................................................................................
October 31, 1992 12,190 8,498 179,693 (4,313) (19,292) 164,586
Net earnings 14,046 14,046
Dividends paid $1.12 per share (12,638) (12,638)
Foreign currency translation adjustments (3,096) (3,096)
Issuance of stock under options and
restricted stock awards 6 196 43 239
................................................................................................................................
October 31, 1993 12,196 $ 8,694 $181,101 $ (7,409) $(19,249) $163,137
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
<FN>
See accompanying Notes to Consolidated Financial Statements
</TABLE>
23
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated statements include the accounts of the company,
its subsidiaries and its unconsolidated corporate affiliates,
Toyo-Petrolite Co. Ltd. and Petrolite Suramericana, S.A.,
which are accounted for using the equity method. All significant
intercompany accounts and transactions have been eliminated.
Translation of Foreign Currencies
Foreign currency translations and financial statments are
translated in accordance with Statement of Financial Accounting
Standards No. 52. Under this standard all assets and liabilities
of operations outside the United States, except for
operations in highly inflationary economies, are translated into
U.S. dollars at exchange rates in effect at the end of the period.
Operating results are translated at a weighted average of
exchange rates in effect during the year. Net unrealized gains
and losses on translation of foreign currency financial statements,
other than those in highly inflationary economies, are
recorded in stockholders' equity, as a cumulative translation
adjustment, and will be included in income only upon sale or
liquidation of the underlying asset. Realized gains and losses
resulting from completed transactions are included in net
earnings.
Cash Equivalents
Cash equivalents are comprised of highly liquid debt instruments
with a maturity of three months or less.
Inventories
Inventories are valued at the lower of cost or market. Cost is
determined under the last-in, first-out (LIFO) method for most
domestic inventories of Specialty Chemical Products. The
remainder is stated at standard cost, which approximates
actual cost, or at actual cost. Standard costs are determined on
a fully-absorbed basis.
Intangibles
Patents and other intangibles are amortized on a straight line
basis over periods ranging from 4 to 15 years.
Properties and Depreciation
Properties are carried at cost and include expenditures for
new facilities and those which substantially extend the useful
lives of existing capital assets. Maintenance, repairs and minor
renewals are expensed as incurred. Upon disposal or retire-
ment of properties, the related cost and accumulated depreciation
are removed from the accounts and any profit or loss on
disposition is recorded in income. Depreciation is generally
provided on a straight-line basis at rates based on estimated
useful lives of the properties (buildings 5 to 50 years, machinery
and equipment 3 to 20 years).
Income Taxes
The company follows the practice of providing for income
taxes based on financial statement earnings. Consolidated
income taxes include provisions for additional taxes or tax
refunds on repatriation of income earned abroad and also
reflect the deferred tax effect of accelerated depreciation and
other timing differences in reporting income and deductions
for tax purposes.
Capital Stock
Proceeds from sales of capital stock issued under stock option
and incentive plans and tax benefits to the company resulting
from early disposition of stock acquired by the employees
under options are credited to capital stock. Proceeds in excess
of cost from sales of treasury stock are also credited to capital
stock.
Revenue Recognition
The company follows the practice of reporting income from
equipment contracts on the percentage-of-completion method.
Revenue other than equipment contracts, is recorded based on
shipment date.
Earnings Per Share
Net earnings per share are based on the weighted average
number of shares of capital stock outstanding during the
respective year.
Financial Statement Reclassification
Selected prior year information has been reclassified to
conform with 1993 annual report presentation.
SUMMARY OF OTHER FINANCIAL DATA
Concentration of Credit Risk
The company sells a majority of its products to customers in
the oil and gas industry. While most of the company's business
activity is with customers located within North America, the
company also services customers in Europe, Africa, the
Middle East, Far East, and South America. The company performs
ongoing credit evaluations of its customers and generally does
not require collateral. When appropriate, the company requires
letters of credit or other similar guarantees particularly
in international transactions. The company maintains
reserves for potential credit losses and such losses have been
within management's expectations. As of October 31, 1993,
the company had no significant concentrations of credit risk.
Financial Instruments
The fair value of financial instruments is determined by
reference to various market data and other valuation techniques
as appropriate. Unless otherwise disclosed, the fair values of
financial instruments approximate their recorded values.
Marketable securities are stated at their approximate market value.
24
<PAGE> 16
ACQUISITIONS
On April 14, 1993 the company completed its acquisition of certain
assets and liabilities of Welchem, Inc., a wholly-owned subsidiary of Amoco
Chemical Holding Company. Results of operations for Welchem are included in
the company's Consolidated Statement of Earnings from the date of acquisition.
The assets acquired by the company include assets owned by Welchem, Inc. and
certain other of Welchem's affiliates which are used in the manufacture and
sale of oil and gas exploration and production chemicals, chemical
manufacturing and petroleum refining chemicals, custom-blended and
toll-manufactured chemicals and the provision of related services. The
consideration paid by the company was $33,140,000, subject to a post-closing
adjustment for variables in inventory and accounts receivable.
The acquisition was recorded using the purchase method of accounting.
Accordingly, the purchase price has been allocated to the assets and
liabilities acquired based on their estimated fair values at the date of
acquisition. The assets included certain property, plant, and equipment
utilized in the business. Certain intangible assets acquired are being
amortized over periods ranging between 5 and 14 years on a straight-line
basis.
The sources of funds utilized by the company for the acquisition were
borrowings under lines of credit from various banks which were refinanced
through a long term debt private placement in November, 1993.
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if Welchem had been acquired prior to
November 1, 1991, after including the impact of certain adjustments such as
projected savings from consolidation of functions and facilities, amortization
of intangibles, increased interest expense on the acquisition of debt, and the
related income tax effects.
<TABLE>
<CAPTION>
(Unaudited)
(Dollars in thousands, except per share amount) 1993 1992
............................................................................
<S> <C> <C>
Net Revenues $373,693 $362,940
Net Earnings 15,329 18,963
Earnings per share $ 1.35 $ 1.67
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisition had been in effect for the entire
periods presented. In addition, they are not intended to be a projection of
future results.
In July, 1993, the company purchased Sulfa-Scrub(R) patents and technology
from Quaker Chemical Corporation. These patents are being amortized over 15
years on a straight-line basis. Pro forma results of this acquisition would
not be materially different from the results included in the Consolidated
Statement of Earnings.
INVENTORIES
<TABLE>
Inventories at October 31 are summarized as follows:
<CAPTION>
(Dollars in thousands) 1993 1992
..........................................................................
<S> <C> <C>
Raw materials, parts and supplies $26,731 $24,162
Finished goods 34,435 27,158
Less reserve for revaluation of inventories
to LIFO cost (17,017) (17,972)
..........................................................................
44,149 33,348
Equipment contracts in progress 575 3,035
Less advance billings (578) (1,799)
..........................................................................
Inventories, net $44,146 $34,584
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
The overall increase in inventories in 1993 principally reflects additional
raw materials and products to support new business gained in 1993 primarily
through acquisitions. Equipment contracts in progress were lower at year-
end 1993 due to a change in mix of jobs in progress at the respective
year-end dates.
Approximately 75% and 70% of total inventories (exclusive of equipment
contracts in progress) were accounted for on a last-in, first-out (LIFO) basis
at October 31, 1993 and 1992, respectively.
SHORT-TERM BORROWINGS AND LINES OF CREDIT
Short-term funds for certain international operations are obtained
through unsecured overdraft facilities and short-term notes payable with local
banks and totaled $2,220,000, at October 31, 1993. Domestic short-term funds
are obtained through unsecured lines of credit with two banks authorizing
borrowings bearing interest at a fluctuating rate below prime determined by
the banks' cost of funds. These lines of credit were increased to a total of
$66 million during fiscal 1993 for acquisition financing and general corporate
purposes, and require a commitment fee on certain unused portions. At October
31, 1993, the amount available and unused under these lines of credit
aggregated $18.3 million. The fair value of the company's short term
borrowings approximate the carrying amount.
The consolidated balance sheet at October 31, 1993 includes a
reclassification of $40.0 million of short-term debt reflecting the company's
refinancing of this debt on a long-term basis on November 5, 1993.
LONG-TERM DEBT
In September, 1993, the company entered into a Note Purchase Agreement
with several institutional investors providing for the private placement of
its 5.90% Series A Senior Notes due 2000 and 6.39% Series A Senior Notes due
2003 in aggregate principal amounts of $10 million and $30 million,
respectively. Proceeds from the sale of these unsecured notes, which were
issued in November, 1993, were used to retire short-term borrowings.
The Note Purchase Agreement contains certain restrictive covenants
including limitations on additional borrowings and disposition of assets, and
the maintenance of minimum net worth. Long-term debt maturities are (in
millions): fiscal 1994
25
<PAGE> 17
through 1996 - $0, 1997 - $2.0, 1998 - $6.3. The fair
value of the company's long-term debt approximates the carrying amount.
INCOME TAXES
<TABLE>
Below is a comparative summary of income taxes for each of the three years in
the period ended October 31:
<CAPTION>
(Dollars in thousands) 1993 1992 1991
......................................................................................
<S> <C> <C> <C>
Current
United States $ 6,898 $4,331 $4,405
Foreign 3,791 3,506 2,442
State 800 650 550
Deferred (603) (117) 205
......................................................................................
Total $10,886 $8,370 $7,602
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
<TABLE>
Pretax earnings related to domestic and foreign operations
are summarized below:
<CAPTION>
(Dollars in thousands) 1993 1992 1991
......................................................................................
<S> <C> <C> <C>
Domestic $21,765 $16,925 $16,465
Foreign 9,667 7,924 5,894
......................................................................................
Total $31,432 $24,849 $22,359
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
<TABLE>
A reconciliation of income taxes at the U.S. statutory rate to the company's
reported effective tax rate follows:
<CAPTION>
1993 1992 1991
......................................................................................
<S> <C> <C> <C>
Income taxes computed at the U.S.
statutory rate 34.8% 34.0% 34.0%
State income taxes 1.7 1.7 1.6
Tax benefit - U.S. export sales (2.7) (3.5) (2.0)
Net loss of foreign affiliates 0.1 0.9 1.8
Other, net 0.7 0.6 (1.4)
.......................................................................................
Effective tax rate 34.6% 33.7% 34.0%
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
<TABLE>
The deferred income tax provision results from timing differences
in the recognition of income and expense for tax and
financial reporting purposes. The tax effects of timing
differences are as follows:
<CAPTION>
(Dollars in thousands) 1993 1992 1991
......................................................................................
<S> <C> <C> <C>
Accelerated depreciation $ (65) $(249) $ 734
Other, net (538) 132 (529)
......................................................................................
Total $(603) $(117) $ 205
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
Income taxes paid during 1993, 1992, and 1991 totaled
$8,123,000, $9,394,000 and $5,988,000, respectively.
In February 1992, the Financial Accounting Standards
Board issued Statement 109, "Accounting for
Income Taxes". Standard 109 will change the company's
method of accounting for income taxes from the deferred
method (APB 11) to an asset and liability approach.
The FASB has deferred mandatory implementation
of this statement until fiscal 1994. The estimated cumulative
effect of implementing the new standard, using current
tax rates, will be to reduce the net deferred tax liability
by approximately $2 million.
U.S. federal income tax returns for all years through 1991
have been settled with the Internal Revenue Service.
CUMULATIVE TRANSLATION ADJUSTMENTS
<TABLE>
Cumulative translation adjustments represent the effect of translating
assets and liabilities of the company's foreign operations.
The following table provides a summary of cumulative translation
adjustment changes for each of the three years in the period
ended October 31.
<CAPTION>
(Dollars in thousands) 1993 1992 1991
......................................................................................
<S> <C> <C> <C>
Balance at beginning of year $(4,313) $ (919) $ 3,917
Translation adjustments (2,982) (3,260) (4,276)
Effects of hedging activities (114) (134) (560)
......................................................................................
Balance at end of year $(7,409) $(4,313) $ (919)
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
POST-EMPLOYMENT BENEFITS
The company has a noncontributory final average pay defined benefit plan
covering all eligible U.S. employees. Certain benefit improvements under the
plan were initiated for current employees as of November 1, 1991, and for most
retirees as of January 1, 1992. The company contributes funds to trustees as
necessary to provide for current service and for any unfunded prior service
costs over a reasonable period. To the extent that these requirements are
fully covered by assets on hand, a contribution may not be made in a particular
year. Plan assets consist principally of common stocks and fixed income
securities. Pension costs for non-U.S. plans are not material in the aggregate
and are not included in these disclosures.
<TABLE>
The funded status of the U.S. plan at October 31 was as follows:
<CAPTION>
(Dollars in thousands) 1993 1992 1991
......................................................................................
<S> <C> <C> <C>
Actuarial present value of:
Vested benefits $(62,338) $(52,446) $(47,000)
Nonvested benefits (4,440) (4,242) (5,083)
......................................................................................
Accumulated benefit obligation (66,778) (56,688) (52,083)
Effect of future salary increases (18,799) (18,269) (17,683)
......................................................................................
Projected benefit obligation (85,577) (74,957) (69,766)
Plan assets at fair value 121,868 104,752 101,105
......................................................................................
Excess of assets over projected
benefit obligation 36,291 29,795 31,339
Unamortized net transition asset (11,203) (12,226) (13,249)
Unrecognized net gain (22,319) (15,298) (16,220)
Unrecognized prior service cost 5,260 5,728 6,713
......................................................................................
Prepaid pension cost at
October 31 $ 8,029 $ 7,999 $ 8,583
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
<TABLE>
The net pension expense (credit) included the following components:
<CAPTION>
(Dollars in thousands) 1993 1992 1991
......................................................................................
<S>
Service cost - <C> <C> <C>
Benefits earned during the period $ 2,881 $ 2,710 $ 2,316
Interest cost on projected
benefit obligation 6,307 5,868 4,746
Return on plan assets (21,240) (7,860) (21,216)
Net amortization and deferral 12,022 (134) 13,610
......................................................................................
Net pension (credit) expense $ (30) $ 584 $ (544)
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
26
<PAGE> 18
The projected benefit obligation was determined using a discount rate of
7.5% for fiscal 1993 and 8.25% for fiscal 1992 and 1991. The assumed
long-term rate of return on plan assets is 8.5% and the assumed long-term rate
of compensation increases is 5.0% for fiscal 1993 and 6.0% for fiscal 1992 and
1991. The net transition asset at November 1, 1985 is being amortized over
19 years.
Consolidated pension expense was $506,000 for 1993, $364,000 for 1992, and
$421,000 for 1991.
POST-RETIREMENT BENEFITS
The company implemented Statement of Financial Accounting Standards No. 106
(SFAS 106), "Employers' Accounting for Post-retirement Benefits Other Than
Pensions", effective for fiscal 1993. The company elected to immediately
recognize its transition obligation of $9,660,000 as the effect of a change in
method of accounting. SFAS 106 requires recognition during employees' active
service periods of the expected cost of providing post-retirement benefits
(primarily health benefits). The company's previous practice was to expense
these costs as they were paid. Post-retirement health benefits are provided to
current and former employees and their spouses who retire at or after age 55
with 10 years of service. The post-retirement health care plans are
contributory, based upon service at retirement and are subject to deductibles
and co-payments. The company reserves the right to change or terminate the
benefits at any time. The plan is funded as claims are paid.
<TABLE>
The current post-retirement medical benefit expense for fiscal 1993 was
as follows:
<CAPTION>
(Dollars in thousands)
..........................................................
<S> <C>
Current costs
Service $ 268
Interest 793
..........................................................
Total 1,061
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
<TABLE>
The status of the plan at October 31, 1993 was as follows:
..........................................................
<S> <C>
Accumulated post-retirement benefit obligation
(APBO)
Retirees $ (5,206)
Fully eligible plan particpants (1,050)
Other plan participants (4,645)
..........................................................
(10,901)
Unrecognized net loss 151
..........................................................
Accrued post-retirement medical benefit cost $(10,750)
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
Under the former practice of expensing post-retirement benefits when paid,
expense would have been $750,000 in 1993, $603,000 in 1992 and $452,000 in
1991.
For measurement purposes, a health care cost trend of 13.0% was assumed for
1993, grading down gradually over the next seven years to 6.0% and remaining
at that level thereafter. The health care cost trend rate has an effect on
the accumulated post-retirement benefit obligation and net periodic cost for
health benefits. A one-percentage-point increase in the assumed health care
cost trend rates would increase the accumulated post-retirement benefit
obligation for health benefits at November 1, 1992 by $169,000 and would
increase the aggregate of the service and interest cost components of net
periodic post-retirement benefit cost for health benefits for 1993 by $17,000.
The discount rate used in determining the accumulated post-retirement benefit
obligation at the November 1, 1992, and in determining fiscal 1993 net periodic
post-retirement medical benefit cost was 8.25%. The discount rate used for the
October 31, 1993 measurement was 7.5%.
STOCK OPTION PLANS
On December 10, 1986, the company's Board of Directors approved the 1987
Incentive Stock Option Plan. Under this plan, 600,000 shares of unissued stock
were reserved for grant to officers and key employees and may be awarded in the
form of stock options or restricted stock units.
Stock options are granted at prices not less than 100% of fair market
value of stock on dates of grant and are issued with a fixed expiration date,
not to exceed 11 years from date of grant. Options are exercisable ratably in
annual installments of 25% commencing one year from date of grant.
A restricted stock unit is the right to receive either cash or shares of
capital stock, upon fulfillment of certain conditions, without payment to the
company. Restricted stock units are contingent upon continued employment or
attainment of predetermined performance targets during a restriction period of
generally three years. Restrictions on exercise of stock options and
contingencies pertaining to restricted stock units will be mitigated if the
majority of the company's capital stock is acquired by another person or group.
<TABLE>
No additional grants will be made under this plan. Transactions under the
1987 Incentive Stock Option Plan are summarized below:
<CAPTION>
Stock Options
.......................
Restricted Number Average
Stock of Option
Units Options Price
.........................................................................................
<S> <C> <C> <C>
Outstanding October 31, 1990 15,536 217,700 $31.22
Exercised (8,625)
Forfeited (3,000) (6,600) 32.50
Expired (1,000) 32.50
.........................................................................................
Outstanding October 31, 1991 3,911 210,100 31.18
Exercised (750) (8,000) 23.00
Forfeited (13,600) 31.10
Expired (13,600) 30.75
.........................................................................................
Outstanding October 31, 1992 3,161 174,900 31.59
Exercised (1,750) (6,400) 30.59
Forfeited (500) 32.50
Expired (28,700) 31.67
.........................................................................................
Outstanding October 31, 1993 1,411 139,300 $31.62
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
Under the 1993 Stock Incentive Plan, which was approved by the
shareholders on March 1, 1993, 800,000 shares of unissued stock were reserved
for grant to executive officers, key managers and non-employee members of the
Board of Directors and may be awarded in the form of stock options or
restricted stock units. The plan provides that stock options are granted at
prices not less than 100% of fair market value
27
<PAGE> 19
of stock on dates of grant and
are issued with a fixed expiration date, not to exceed 10 years from date of
grant.
Annually, each member of the Board of Directors who is not an employee
of the company and who is elected at an annual shareholders meeting, receives
an option to purchase 2,000 shares of the company's capital stock, subject to
the five year term of the plan.
On June 9, 1993, the Board of Directors granted two groups of options
under the 1993 plan with different performance criteria. The first group of
options is keyed to annual increases in the value of the company's shares,
which consists of the market price plus dividends paid. Options to purchase
410,000 shares are exercisable in five years, however, the exercise date may be
accelerated if certain criteria are met. The second group of options is keyed
to the increase in the value of the company's shares over a five year period
commencing on June 9, 1993, the date of the grant. Options to purchase
200,000 shares are exercisable in five years, however, the actual number of
shares which can be purchased under the plan will depend on the annual growth
in the value of the company's stock.
During fiscal 1993, the company granted 610,000 stock options at an
exercise price of $32.875 per share and 28,000 stock options at an exercise
price of $29.00 per share.
ENVIRONMENTAL AND OTHER CONTINGENCIES
Various claims, lawsuits and other legal and administrative
proceedings, arising in the ordinary course of business, are pending against
the company. The amount of the company's liability, if any, from such
proceedings cannot be determined at this time; however, management and legal
counsel are of the opinion that the ultimate disposition of such proceedings
including environmental matters will not have a material adverse effect on
the consolidated financial position or results of operations of the company.
SEGMENT INFORMATION
Statement of Financial Accounting Standards No. 14 requires disclosure of
certain industry and world area "segment data." Accordingly, industry segment
and worldwide operations data appearing on pages 18 and 19 of this annual
report are an integral part of the accompanying financial statements.
Earnings from operations reported under industry segment data have been
charged with corporate expenses of approximately $6.8 million, $6.3 million and
$10.3 million in 1993, 1992 and 1991, respectively, of which approximately 90%
was allocated to the Specialty Chemical Products segment each year. These
corporate expenses consisted primarily of administrative costs which were
allocated to segments based upon services provided.
Profitability of the company's foreign operations by geographic area, as
reported on page 19 of this annual report, was determined based on ultimate
sales to unaffiliated customers. Total company profit was included in the
geographic area of the entity transacting the final sale.
<TABLE>
The following is a reconciliation of foreign earnings from operations,
as presented on page 19, to pretax foreign earnings as presented on page 26:
<CAPTION>
(Dollars in thousands) 1993 1992 1991
......................................................................................
<S>
Earnings from operations: <C> <C> <C>
Europe $11,856 $ 8,020 $ 6,354
Canada/Latin America 1,069 2,897 2,219
Middle East/Far East 2,693 1,631 1,635
......................................................................................
15,618 12,548 10,208
Intercompany charges, net (6,784) (3,394) (3,464)
Nonoperating income, net 833 (1,230) (850)
......................................................................................
Pretax foreign earnings $ 9,667 $ 7,924 $ 5,894
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
</TABLE>
Intercompany charges include intercompany profits realized in the United
States on sales originating domestically and foreign expenses incurred by
the domestic company. Transfers between geographic areas were recorded at
regular selling prices, less an amount intended to compensate the affiliated
purchaser for costs incurred in selling the product, and also to allow a
reasonable profit.
28
<PAGE> 20
RESPONSIBILITY FOR FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The management of Petrolite is responsible for the integrity and objectivity
of the financial statements of the company and its subsidiaries. The
accompanying financial statements, including the notes, were prepared
by the company in conformity with generally accepted accounting
principles, appropriate in the circumstances, and necessarily include
some amounts that are based on our best estimates and judgements.
The financial information in the remainder of this annual report
is consistent with the financial statements.
The company maintains a system of internal accounting control
designed and intended to provide reasonable assurance that assets
are safeguarded and transactions are executed and recorded in
accordance with management's authorization. The system is tested
and evaluated regularly by the company's internal auditors as well
as by its independent accountants, Price Waterhouse, in connection
with their annual audit.
The adequacy of the company's internal financial controls and
the accounting principles employed in financial reporting are
under the general surveillance of the Audit Committee of the
Board of Directors, consisting of three outside directors and
two advisory directors. The independent accountants and internal
auditors have free and direct access to the Audit Committee and
meet with the committee periodically, with and without
management present, to discuss accounting, auditing and financial
reporting matters. The committee also recommends appointment of
the independent accountants to the Board of Directors.
Petrolite Corporation
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of
Petrolite Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of earnings, of changes in
stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Petrolite Corporation
and its subsidiaries at October 31, 1993 and 1992, and the results
of their operations and their cash flows for each of the three
years in the period ended October 31, 1993, in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of Petrolite's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
As discussed in the post-retirement benefits footnote to the
consolidated financial statements, in 1993 the company changed
its method of accounting for post-retirement benefit costs other
than pensions.
St. Louis, Missouri
November 30, 1993
29
<PAGE> 21
<TABLE>
5-YEAR SUMMARY
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
For Years Ended October 31
(Dollars in thousands, except per share data) 1993 1992 1991 1990 1989
.............................................................................................................................
<S> <C> <C> <C> <C> <C>
Summary of Operations -
Net revenues $351,779 $317,950 $323,516 $296,737 $290,849
Gross profit 150,112 130,358 127,504 114,206 111,883
Earnings from operations 31,565 24,397 24,418 18,693 9,164
Interest expense 1,475 936 1,407 950 1,736
Non-recurring (charge) credit (7,700)
Earnings before income taxes and effect
of change in accounting principle 31,432 24,849 22,359 19,868 10,057
Income taxes 10,886 8,370 7,602 6,733 2,930
Net earnings:
Before effect of change in accounting
principle 20,546
Percent of revenues 6.0% 5.2% 4.6% 4.4% 2.5%
Return on average stockholders' equity 12.5% 10.0% 8.8% 8.0% 4.3%
After effect of change in accounting
principle 14,046** 16,479 14,757 13,135 7,127
.............................................................................................................................
Year-end Financial Position -
Working Capital $ 58,060 $ 56,974 $ 58,780 $ 68,544 $ 71,043
Current ratio 1.79:1 1.98:1 2.00:1 2.32:1 2.46:1
Total properties:
Gross $288,367 $265,067 $261,990 $249,963 $233,317
Net 124,101 107,022 107,981 104,608 99,262
Total assets 301,145 240,991 243,995 241,803 231,113
Long-term debt 40,000 1,674 1,800
Stockholders' equity 163,137 164,586 165,953 168,622 160,688
.............................................................................................................................
Per Share Data -
Net earnings*:
Before effect of change in accounting
principle $ 1.82
After effect of change in accounting
principle $ 1.24** $ 1.45 $ 1.30 $ 1.16 $ .63
Dividends 1.12 1.12 1.12 1.12 1.12
Stockholders' equity 14.45 14.59 14.62 14.86 14.18
.............................................................................................................................
General -
For the year -
Dividends $ 12,638 $ 12,720 $ 12,712 $ 12,707 $ 12,695
Capital expenditures, net 35,088 17,567 21,948 14,067 11,737
Depreciation 16,765 15,957 15,603 14,440 14,640
Research 13,587 12,224 11,431 12,242 12,029
Average number of shares outstanding 11,283,283 11,350,962 11,348,931 11,340,539 11,334,873
At year-end:
Number of shares outstanding 11,289,171 11,281,474 11,351,086 11,345,482 11,334,873
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
<FN>
*Earnings per share are based on weighted averge number of shares
outstanding during each year.
**Effect of change in accounting for medical and other post-retirement
benefits was a charge of $6,500 or $.58 per share.
30
<PAGE> 22
</TABLE>
<TABLE>
<CAPTION>
CORPORATE ORGANIZATION
DIRECTORS ADVISORY DIRECTORS
<S> <C> <C> <C>
William E. Nasser Louis Fernandez James E. McCormick William C. Douce
Chairman, President Retired Chairman of the Board, Retired President and Retired Chairman of the Board
and Chief Executive Officer, President and Chief Chief Operating Officer, and Chief Executive Officer,
Petrolite Corporation, Executive Officer Oryx Energy Company, Phillips Petroleum Company,
St. Louis, Missouri Celgene Corporation, Dallas, Texas Bartlesville, Oklahoma
Summit, New Jersey
Paul F. Cornelson Thomas P. Reidy John P. Harbin
Former Chairman of the Board and Michael V. Janes President and Retired Chariman of the Board
Chief Executive Officer, Investments, Chief Executive Officer, and Chief Executive Officer,
MiTek, Inc., St. Louis, Missouri Reidy International, Inc., Halliburton Company,
St. Louis, Missouri Houston, Texas Dallas, Texas
William E. Maritz
Andrew B. Craig, III Chairman of the Board, Max R. Lents
Chairman, President and President and Director,
Chief Executive Officer, Chief Executive Officer, Miller and Lents, Ltd.,
Boatmen's Bancshares, Inc., Maritz, Incoporated, Houston, Texas
St. Louis, Missouri Fenton, Missouri
.............................................................................................................................
<CAPTION>
OFFICERS AND KEY MANAGERS
William E. Nasser Stuart Monro J. S. Titone William F. Haberberger
Chairman, President Managing Director of Group Vice President Controller
and Chief Executive Officer Petrolite Limited and General Chemicals
Manager, EuroChem Division Charles R. Miller
Ralph J. Churchill Ralph E. Werley Corporate Secretary,
Vice President, Derek Redmore Vice President, Associate General Counsel
Special Projects Vice President, Purchasing
Technology Stephen F. Schaab
Herbert F. Eggerding, Jr. David Winslett Treasurer
Executive Vice President and E. E. Schooling General Manager
Chief Financial Officer Vice President, Industrial Chemicals Division
Manufacturing and Distribution
Toby R. Graves James M. Zemenick
Vice President, Richard J. Seidel Vice President,
General Manager, Vice President, Administration and
Polymers Division General Manager, Corporate Development
Petreco Division
John F. McCartney
Vice President,
General Counsel
32
<PAGE> 23
<CAPTION>
CORPORATE DIRECTORY
SUBSIDIARIES
Ecuatoriana de Petrolite GmbH Petrolite Italiana S.p.A. P.T. Petrolite Indonesia
Petroquimicos- P.O. Box 2031 Via Sasari 86 Pratama
Petrolite S.A. Kaiser-Friedrich 95127 Catania, Italy Batu Ampar
Edificio Albatros Promenade 59 Pulau Batam, Indonesia
Av. de los Shyris 6380 Bad Homburg 1 Petrolite Limited
No. 1240 y Portugal Germany Kirkby Bank Road South America Petrolite
P.O. Box 11026 Knowsley Industrial Park Corporation
Quito, Ecuador Petrolite (North) 369 Marshall Avenue
Handelsgesellschaft m.b.H. Liverpool, England L33 7SY St. Louis, Missouri 63119
Luzzato & Figlio A-1210 Wien
(France) S.A. Bruner Strasse 105 Petrolite Norge A/S A.B. Engineering
10 Avenue Percier Austria Harestadvika 5455 Old Spanish Trail
F-75008 Paris, France 4070 Randaberg Houston, Texas 77023
Norway
Petrolite Canada, Inc. Petrolite Iberica, S.A.
369 Marshall Avenue Marques de Urquijo 8 Petrolite Pacific Pte. Ltd.
St. Louis, Missouri 63119 28008 Madrid, Spain 2 Tanjong Penjuru Crescent
Jurong, Singapore 2260
Petrolite France, S.A. Petrolite International
25 Rue Beranger Sales Corporation Petrolite Saudi Arabia Ltd.
F-75003 Paris, France 369 Marshall Avenue P.O. Box 1940
St. Louis, Missouri 63119 Dammam, Saudi Arabia
AFFILIATES
Petrolite Suramericana, S.A.
Edificio Centro Plaza, Torre A
Piso 14, Oficina 14-G
Av. Francisco de Miranda
Los Palos Grandes
Caracas, Venezuela
Petrolite (Malaysia) Sdn. Bhd.
2.12, 2nd Floor, Angkasa
Raya Building
Jalan Ampang
50450 Kuala Lumpur,
Malaysia
Toyo-Petrolite Co. Ltd.
TOIN Bldg. 12-15
2-Chome, Shinkawa
Chuo-Ku, Tokyo 104, Japan
</TABLE>
<PAGE> 24
APPENDIX
1. Throughout the electronic submission of Exhibit 13, register marks
are designated by the letter "R" in parentheses.
2. On page 10 of the printed Annual Report the following type appears on
the left side of the page: TO BE THE BEST PROVIDER OF SERVICES IN OUR
MARKETS VIA PEOPLE, TECHNOLOGIES AND PRODUCTS WHILE GROWING AND OPTIMIZING
PROFITABILITY. Drawing upon a well-established broad base of advanced
technology, Petrolite assists customers in meeting the challenge of
stringent, ever-expanding environmental regulations. As customers
increasingly look to us for help in tackling their toughest technical
questions in this area, we see opportunity for greater customer
satisfaction and a growing market potential.
There is also a photograph of Michael Thorne, Petrolite Fuels Specialist
pictured in a laboratory along with the following quote: "WORKING CLOSELY
WITH OUR CUSTOMERS TO PROVIDE THEM WITH PERSONALIZED, TECHNICAL EXPERTISE
TYPIFIES WHAT WE DO BEST."
3. On page 11 of the printed Annual Report the formula for hydrogen
sulfide appears as H2S with the 2 being inferior.
4. On page 12 of the printed Annual Report the following type appears
on the left side: TO BE THE BEST PROVIDER OF SERVICES IN OUR MARKETS
VIA PEOPLE, TECHNOLOGIES AND PRODUCTS WHILE GROWING AND OPTIMIZING
PROFITABILITY. A disciplined acquisition program enhances our product
lines and contributes to our ability to meet our customers' growing
needs. We target products and services that build upon existing strengths.
5. On page 13 of the printed Annual Report the following type appears
on the right side: "A CLOSER WORKING RELATIONSHIP WITH AMOCO, FACILITATED
BY THE WELCHEM ACQUISITION, IS HELPING THE INTERNATIONAL OIL COMPANY DERIVE
OPTIMAL PERFORMANCE FROM OUR TREATMENT PROGRAMS IN ITS REFINING OPERATIONS."
There is also a photograph of William Fahey, Senior Specialist, Petrolite
Engineering Services Group standing in front of a Petrolite truck.
<PAGE> 1
<TABLE>
EXHIBIT NO. 21
Subsidiaries of Registrant
--------------------------
<CAPTION>
Percent
State of Other Jurisdiction of
Name of Subsidiary of Incorporation Ownership
- ------------------ --------------------------- ---------
<S> <C> <C>
Luzzato & Figlio (France), S.A. Republic of France 100
Petrolite Canada, Inc. Dominion of Canada 100
Petrolite France, S.A. Republic of France 100
Petrolite GmbH Federal Republic of Germany 100
Petrolite Iberica, S.A. Spain 100
Petrolite International Sales Corporation Virgin Islands 100
Petrolite Limited United Kingdom of 100
Great Britain and Northern Ireland
Petrolite Norge A/S Norway 100
Petrolite Pacific Pte. Ltd. Singapore 100
South American Petrolite Corporation Delaware 100
A.B. Engineering Delaware 100
Ecuatoriana de Petroquimicos-Petrolite, S.A. Ecuador 80
P.T. Petrolite Indonesia Pratama Indonesia 80
Petrolite Saudi Arabia Ltd. Saudi Arabia 75
Petrolite (Malaysia) SDN.BHD. Malaysia 49
</TABLE>
Each of these subsidiaries is included in the consolidated financial
statements incorporated by reference into this registration statement.
Petrolite Italiana S.p.A., which is included in the registrant's consolidated
financial statements, is owned 90% by Petrolite Limited and 10% by the
registrant. Petrolite Handelsgesellschaft m.b.H, which is also included in
the registrant's consolidated financial statements, is owned 100% by
Petrolite Limited. In addition, the registrant has a 50% interest in Toyo-
Petrolite Company, Ltd.
<PAGE> 2
in Japan and Petrolite Suramericana, S.A. in
Venezuela. Also see information on page 33 of the registrant's Annual Report
to stockholders under the heading "Subsidiaries" which is incorporated by
reference herein.
<PAGE> 1
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William E. Nasser, Herbert F.
Eggerding, Jr., John F. McCartney and Charles R. Miller, jointly and
severally, each in his own capacity, his true and lawful attorney-in-fact,
with full power of substitution, for him and in his name, place and stead,
in any and all capacities, to sign the 1993 Form 10-K, Annual Report pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorney-in-fact, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
s/ Paul F. Cornelson Director January 26 , 1994
- ---------------------------------- ------
Paul F. Cornelsen
s/ Andrew B. Craig, III Director January 26 , 1994
- ---------------------------------- ------
Andrew B. Craig, III
s/ Louis Fernandez Director January 26 , 1994
- ---------------------------------- ------
Louis Fernandez
s/ Michael V. Janes Director January 26 , 1994
- ---------------------------------- ------
Michael V. Janes
s/ William E. Maritz Director January 26 , 1994
- ---------------------------------- ------
William E. Maritz
s/ James E. McCormick Director January 26 , 1994
- ---------------------------------- ------
James E. McCormick
s/ William E. Nasser Director January 26 , 1994
- ---------------------------------- ------
William E. Nasser
s/ Thomas P. Reidy Director January 26 , 1994
- ---------------------------------- ------
Thomas P. Reidy
</TABLE>
<PAGE> 2
STATE OF MISSOURI )
) SS.
COUNTY OF ST. LOUIS )
On this 26th day of January 1994, before me personally appeared Paul
F. Cornelsen, Andrew B. Craig, III, Louis Fernandez, Michael V. Janes,
William E. Maritz, James E. McCormick, William E. Nasser and Thomas P. Reidy,
to me known to be the persons described in and who executed the foregoing
Power of Attorney, and acknowledged that they executed the same as their free
act and deed.
/s/ Edith I. Rudder
-------------------------------
Edith I. Rudder
Notary Public
