SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 0-15899
WELLMAN, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-1671740
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1040 Broad Street, Suite 302
Shrewsbury, New Jersey 07702
--------------------------------- -------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (908) 542-7300
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, New York Stock
$.001 par value Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Rule
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. []
Aggregate market value of the voting stock held by nonaffiliates of the
registrant, computed on the basis of $26.875 per share (the closing price of
such stock on March 1, 1995 on the New York Stock Exchange): $881,097,063.
The number of shares of the registrant's Common Stock, $.001 par value,
and Class B Common Stock, $.001 par value, outstanding as of March 10, 1995 was
33,256,361 and -0-, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
1. Proxy Statement for the 1995 Annual Meeting of Stockholders (to be
filed with the Securities and Exchange Commission on or before April 30, 1995)
is incorporated by reference in Part III hereof.
2
PART I
Item 1. BUSINESS
------- --------
Wellman, Inc. (which, together with its subsidiaries, is herein referred
to as the "Company") was founded in 1927 and incorporated in Delaware in 1985.
The principal business of the Company is the manufacture and sale of PET
(polyethylene terephthalate) products, including Fortrel(R) brand polyester
textile fibers, recycled polyester fibers and PET resins.
PRODUCTS and MARKETS
--------------------
The Company is organized into three groups: the Fibers Group, which is
comprised of the Company's domestic and European fiber manufacturing operations;
the Manufactured Products Group (MPG), consisting of businesses which procure
and process recycled raw materials and produce PET and nylon engineering resins,
wool top and anhydrous lanolin, polyester batting and needle-punched fabrics and
PET sheet and thermoformed packaging products; and New England CRInc. (CRInc),
which designs, equips and operates materials recovery facilities (MRFs).
The following table presents the combined net sales (in millions) and
percentage of net sales by group of the Company for the periods indicated. For
purposes of this data, intercompany transactions have been eliminated and with
respect to the European fiber operations, historical exchange rates have been
applied to the data for the periods indicated.
<TABLE>
<CAPTION>
1994 1993 1992
-------------- -------------- --------------
Net % of Net % of Net % of
Sales Total Sales Total Sales Total
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Fibers Grp $728.8 77.9% $655.2 77.8% $674.5 81.5%
MPG(1) 180.1 19.2 163.1 19.4 134.3 16.2
CRInc 27.2 2.9 23.8 2.8 19.4 2.3
------ ------ ------ ------ ------ ------
TOTAL $936.1 100.0% $842.1 100.0% $828.2 100.0%
====== ====== ====== ====== ====== ======
</TABLE>
--------------
(1) Includes sales of thermoformed products
business from November 18, 1992, the date of
its acquisition by the Company.
FIBERS GROUP
------------
Fibers Division.
----------------
The Fibers Division is the Company's domestic fiber operation which
produces polyester and nylon staple fibers and polyester
partially-oriented yarn (POY). Staple, the primary product
produced, is multi-strand fiber cut into short lengths to simulate
certain properties found in natural fibers, such as cotton and wool,
and/or to meet the end product needs of the Company's customers.
Approximately two-thirds of the Company's domestic polyester staple
production is for the textile industry. Customers include
integrated textile mills and yarn spinners which process polyester
staple into fabric and yarn for a variety of applications,
including apparel, home furnishings and industrial uses. Polyester
textile staple is sold under the Fortrel(R) brand. The Company
manufactures polyester textile staple from two petrochemicals,
3
purified terephthalic acid (PTA) and monoethylene glycol (MEG), at
its Palmetto Plant in Darlington, SC. The stated annual fiber
production capacity of the Palmetto Plant is approximately 465
million pounds.
The Company purchases PTA under an exclusive supply contract which
expires December 31, 1996 with Amoco Chemical Corporation. MEG is
purchased under an exclusive supply contract with Oxy Chem Inc.
which expires December 31, 1997. The prices of PTA and MEG, which
are typically set on a quarterly basis, have fluctuated in the past
and may continue to do so in the future.
The balance of the Company's domestic polyester staple production is
fiberfill (for pillows, comforters and furniture), carpet fiber and
industrial fibers. These products are made from recycled raw
materials at facilities in Johnsonville and Marion, SC. The stated
annual staple fiber production capacity of the Johnsonville Plant is
approximately 250 million pounds. The stated annual staple fiber
production capacity of the Marion Plant, site of Fortrel(R)
EcoSpun(TM) production, is approximately 30 million pounds.
The Company utilizes two categories of recycled raw materials:
producer plant wastes and postconsumer PET soft drink bottles.
Producer wastes include off-quality or off-spec production, trim
and other wastes generated from fiber, resin or film manufacturing
processes. A material portion of producer plant waste is purchased
from manufacturers that compete with the Company in the sale of
fiber and resin. The Company obtains postconsumer PET bottles
primarily from deposit return and curbside recycling programs. The
Company's Recycling Division is responsible for the procurement and
processing of waste raw materials.
POY is a continuous polyester filament produced at the Company's
Fayetteville, NC plant from fiber-grade PET resin manufactured from
PTA and MEG at the Company's Palmetto Plant. POY is sold under the
Fortrel(R) brand to integrated textile mills and texturizers, which
further process it before making it into fabric for use in apparel,
home furnishings and industrial applications. The Fayetteville
Plant increased its stated annual POY production capacity by 30%, to
130 million pounds, in the first quarter of 1994.
Wellman International Limited (WIL).
------------------------------------
WIL is a wholly-owned subsidiary based in Mullagh, Republic of
Ireland. WIL's fiber production process, which is similar to that
of the Company's Johnsonville Plant, uses recycled raw materials to
produce polyester and, to a lesser extent, nylon staple fibers. The
majority of WIL's raw materials are producer wastes, some of which
are obtained from suppliers who compete with it in the fibers
business in Europe. Postconsumer PET bottles procured by WIL are
processed at the Company's 35 million pounds per year PET bottle
recycling facility, located in Spijk, the Netherlands.
The stated annual fiber production capacity of WIL is approximately
154 million pounds. WIL's polyester fibers are used primarily in
fiberfill, nonwovens and industrial applications. WIL exports,
primarily to the United Kingdom and Europe, virtually all of its
fiber production.
4
Including domestic and European production, the Company believes it is
the world's largest producer of polyester staple fiber made from recycled
feedstocks.
MANUFACTURED PRODUCTS GROUP
---------------------------
Polymer Products Division.
--------------------------
Located at the Palmetto Plant, this business primarily manufactures
amorphous and solid-stated PET resins. Amorphous resins, which are
produced from PTA and MEG, are sold to external customers and used
internally for solid-stating (a drying process which upgrades and
adds value to the resin). Solid-stated PET resin is primarily used
in the manufacture of soft drink bottles and other PET packaging.
The Company began production of solid-stated PET resin at the rate
of 80 million pounds per year in the first quarter of 1994.
Through expansion and process improvements, production of amorphous
resin is expected to reach 220 million pounds per year in mid-1995,
160 million pounds of which will be solid-stated. The Company plans
to approximately double solid-stated production in 1997.
Recycling Division.
-------------------
The Recycling Division procures postconsumer PET soft drink bottles
and producer wastes and processes them into usable raw materials for
the fibers, engineering resins, PET sheet and thermoformed product
operations. As a result, it operates primarily as an internal
supplier.
The Division consists of PET bottle and producer waste recycling
operations in Johnsonville, SC and a PET bottle recycling operation
in Bridgeport, NJ. Stated annual capacity to recycle PET bottles at
the Johnsonville location is approximately 190 million pounds.
Stated annual PET bottle recycling capacity in Bridgeport is
approximately 50 million pounds.
Including the Netherlands and domestic facilities, the Company believes
it is the largest postconsumer PET bottle recycler in the world.
Other.
------
The MPG also produces nylon engineering resins, wool top and
anhydrous lanolin in Johnsonville, SC, polyester batting and
needle-punched fabrics in Commerce, CA, polyester batting in
Charlotte, NC and PET sheet and thermoformed products in Ripon, WI.
NEW ENGLAND CRINC.
------------------
CRInc designs, builds and operates advanced MRFs. CRInc sells the
recyclables from its MRFs (14 in operation at year-end 1994) and brokers
recyclables for other parties. CRInc operates glass beneficiation
facilities, owned through a joint venture, and polystyrene recycling
facilities.
CAPITAL INVESTMENT PROGRAM
--------------------------
The Company is currently engaged in a long-term capital investment program,
which began in 1993. The Company's 1993 and 1994 capital expenditures totaled
approximately $106 million and $74 million, respectively. Capital projects
included in the 1993 and 1994 expenditures were the installation of the new
solid-stating unit, expansions of monomer, PET resin, PET bottle recycling and
POY capacity and equipment modernization at the Company's fiber operations.
5
Future capital expenditures are expected to total approximately $400
million. Significant projects include expansions of polyester fiber and PET
resin capacity and continued equipment upgrades and process improvements at
substantially all operations. See "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources."
SALES and MARKETING
-------------------
Approximately 50 direct sales people market the majority of the Company's
products. For sales outside the United States, the Company primarily utilizes
representatives or agents.
The Company's polyester fibers are also marketed through various activities,
such as advertising, sales promotion, market analysis, product development and
fashion forecasting, directed to its customers and to organizations downstream
from its customers. As part of this effort, the Company's marketing personnel
encourage downstream purchasers of apparel, home furnishings and other products
to specify to their suppliers the use of Fortrel(R) brand polyester in their
products.
The Company's sales are neither materially dependent upon a single customer
nor seasonal in nature. Sales in the second half of the year can be affected by
changes in the traditional vacation periods of its customers.
The polyester staple fiber and POY markets have historically displayed price
and volume cyclicality. The prices of PTA and MEG are a primary determinant of
polyester fiber prices. The polyester fiber markets are subject to changes in,
among other factors, polyester fiber and/or textile product imports, consumer
preferences and spending and retail sales patterns, all of which are driven by
general economic conditions. Consequently, a downturn in either the U.S. or
global economy or an increase in imports of textile or polyester fiber products
could adversely affect the Company's business. Polyester textile fiber demand
also may be influenced by the relative price of substitute fibers, most notably
cotton.
COMPETITORS
-----------
Each of the Company's major fiber markets is highly competitive. The
Company competes primarily on the basis of quality, service, brand identity and
price. Several competitors are substantially larger than the Company and have
substantially greater economic resources. The Company's primary competitors are
E.I. DuPont de Nemours & Co. and the Hoechst Celanese Corp. (HCC) subsidiary of
Hoechst A.G. The Company believes it is currently the second-largest producer
of polyester staple and POY in the United States, representing approximately 28%
and 12%, respectively, of U.S. production capacity for these products.
Primary competitors in the PET bottle resin business, which the Company
entered in 1994, are Eastman Chemical Co., Shell Chemical Co. and HCC.
RESEARCH and DEVELOPMENT
------------------------
The Company has approximately 75 U.S. employees devoted to research and
development activities in its fibers, recycling and resins businesses. The
Company has entered into technology sharing arrangements from time to time with
various parties.
FOREIGN ACTIVITIES
------------------
The Company operates in international markets, primarily the United Kingdom
and Western Europe, primarily through WIL, its Irish fiber subsidiary. Since
6
substantially all of WIL's sales are for export, changes in exchange rates may
affect WIL's profit margins and sales levels. In addition, fluctuations between
the United States dollar and Irish pound may also affect the Company's reported
financial results.
The Company's foreign business is subject to certain risks customarily
attendant to foreign operations and investments in foreign countries, including
restrictive action by local governments, limitations on repatriating funds and
changes in currency exchange rates. See note 11 to the consolidated financial
statements for additional information relating to the Company's foreign
activities.
EMPLOYEES
---------
As of December 31, 1994, the Company employed a total of approximately 3,600
persons in the United States and Europe. At December 31, 1994, the Amalgamated
Clothing and Textile Workers Union (ACTWU) represented approximately 1,300
employees at the Company's Johnsonville, SC operations. Approximately 770 of
these employees were members of ACTWU, whose contract with the Company expires
in July 1996. At the Company's Irish fiber operation, approximately 350 out of
480 total employees were represented by four unions at year-end 1994. The wage
agreements with these unions each expire on April 30, 1997. The Company
believes relations with its employees are satisfactory.
ENVIRONMENTAL MATTERS
---------------------
The Company's plants are subject to numerous existing and proposed laws and
regulations designed to protect the environment from wastes, emissions and
hazardous substances. Except as discussed in "Management's Discussion and
Analysis of Financial Position and Results of Operations" below, the Company
believes it is either in material compliance with all currently applicable
regulations or is operating in accordance with the appropriate variances and
compliance schedules or similar arrangements. For additional information
relating to environmental matters, see "Management's Discussion and Analysis of
Financial Position and Results of Operations" and note 6 to the consolidated
financial statements.
EXECUTIVE OFFICERS of the REGISTRANT
------------------------------------
The current executive officers of the Company are as follows:
Name and Age Position
------------
Thomas M. Duff, 47 President, Chief Executive Officer
and Director
Clifford J. Christenson, 45 Executive Vice President
Keith R. Phillips, 40 Vice President, Chief Financial
Officer and Treasurer
C.W. Beckwith, 63 Vice President and Director;
Chief Executive Officer of WIL
James P. Casey, 54 Vice President; President, Fibers
Division
Paul D. Apostol, 49 Vice President, Manufactured
Products Group, Strategic Planning
and Business Development
7
Mark J. Rosenblum, 41 Vice President, Controller
Ernest G. Taylor, 44 Vice President, Administration
Officers are elected annually by the Board of Directors. Set forth below is
certain information with respect to the Company's executive officers.
Thomas M. Duff. Mr. Duff has been President and CEO of the Company since
its inception in 1985.
Clifford J. Christenson. Mr. Christenson has been Executive Vice President
since October 1993. Prior to that time he was Chief Financial Officer and
Treasurer since he joined the Company in 1985 and Vice President since 1986.
Keith R. Phillips. Mr. Phillips has been Vice President, Chief Financial
Officer and Treasurer since October 1993. Prior to joining the Company in
October 1993 he was a partner in Ernst & Young LLP. Mr. Phillips is a certified
public accountant.
C.W. Beckwith. Mr. Beckwith has been Vice President of Wellman and Chief
Executive Officer of WIL since 1987. Prior to such time, he was managing
director of WIL since 1972.
James P. Casey. Mr. Casey has been President of the Fibers Division since
October 1993; prior to such time he was Vice President, Marketing since March
1991. Prior to that time, he was Vice President of Marketing for polyester
staple at Fiber Industries, Inc. (FI).
Paul D. Apostol. Mr. Apostol has been Vice President, Manufactured Products
Group and Strategic Planning and Business Development since March 1991. Prior
to such time, he was Vice President of Marketing for POY and PET resin at FI.
Mark J. Rosenblum. Mr. Rosenblum has been Vice President, Controller since
September 1989 and Controller since he joined the Company in 1985. Mr.
Rosenblum is a certified public accountant.
Ernest G. Taylor. Mr. Taylor has been Vice President in charge of
Administration since January 1991. From November 1989 until 1991 he was Manager
of Administration. Prior to such time, he was a manager of information systems
for FI.
Section 16 Compliance.
----------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities ("insiders"), to file reports of ownership
and changes in ownership with the Securities and Exchange Commission ("SEC").
Insiders are required by SEC regulation to furnish the Company with copies of
all Section 16(a) forms they file. Based solely on review of the copies of such
forms furnished to the Company, the Company believes that during 1994 all
Section 16(a) filing requirements applicable to its insiders were complied with,
except that Mr. Richard J. Kattar inadvertently failed to timely file one report
related to one transaction as required by Section 16.
8
Item 2. PROPERTIES
------- ----------
The location and general description of the principal manufacturing
properties owned by the Company are set forth in the table below:
Principal Square
Location Functions Footage
-------- --------- -------
Johnsonville, SC Fiber, Engineering Resins 2,190,000
and Wool Manufacturing,
Recycling Operations
and Warehouse
Darlington, SC Fiber and Resin 1,018,000
(Palmetto) Manufacturing
and Warehouse
Mullagh, Ireland (1) Fiber Manufacturing 341,830
and Warehouse
Fayetteville, NC Fiber Manufacturing 331,913
and Warehouse
Marion, SC Fiber Manufacturing 258,500
and Warehouse
--------------------
(1) WIL's credit facilities are secured by the assets of WIL.
The Company also has manufacturing, marketing and administrative
facilities in Charlotte, NC, New York, NY, Commerce, CA, Chelmsford, MA, Ripon,
WI and Bridgeport, NJ. The corporate office is located in Shrewsbury, NJ.
Item 3. LEGAL PROCEEDINGS
------- -----------------
Not applicable.
Item 4. SUBMISSION of MATTERS to a VOTE of SECURITY HOLDERS
------- ---------------------------------------------------
Not applicable.
9
PART II
Item 5. MARKET for REGISTRANT'S COMMON EQUITY and RELATED STOCKHOLDER MATTERS
------- ---------------------------------------------------------------------
The Company's common stock is listed on the New York Stock Exchange under
the symbol WLM. The following table shows the high, low and closing sales
prices and cash dividends paid per share of common stock for the last two fiscal
years.
Year High Low Close Dividend
---- ---- --- ----- --------
1994
----
Fourth Quarter $34-3/8 $23-3/8 $28-1/4 $0.06
Third Quarter $34-5/8 $27-3/8 $34-1/8 $0.06
Second Quarter $29-1/8 $20 $27-7/8 $0.06
First Quarter $22-3/8 $17-1/8 $20-5/8 $0.05
1993
----
Fourth Quarter $19-3/8 $16-1/4 $18-3/4 $0.05
Third Quarter $22 $17-3/8 $17-3/4 $0.05
Second Quarter $24-7/8 $18-1/8 $21-7/8 $0.05
First Quarter $23-3/4 $19-3/4 $19-7/8 $0.03
The Company had 1,230 holders of record and, to its knowledge, approximately
40,000 beneficial owners of its common stock as of March 17, 1995.
10
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
------- ------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------
(In thousands, except per share data) 1994 1993(2) 1992 1991 1990
------------------------------------- ---------- ---------- ---------- ---------- ----------
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . $936,133 $842,064 $828,200 $805,664 $827,764
Cost of sales . . . . . . . . . . . . 724,874 679,182 639,664 623,546 618,519
---------- ---------- ---------- ---------- ----------
Gross profit. . . . . . . . . . . . . 211,259 162,882 188,536 182,118 209,245
Selling, general and administrative
expenses . . . . . . . . . . . . . . 89,518 86,511 77,439 73,194 65,268
Interest expense, net . . . . . . . . 13,741 15,736 23,012 29,387 42,712
Gain on sale of Wellstar. . . . . . . -- 12,386 -- -- --
---------- ---------- ---------- ---------- ----------
Earnings before income taxes and
cumulative effect of changes in
accounting principles. . . . . . . . 108,000 73,021 88,085 79,537 101,265
Income taxes. . . . . . . . . . . . . 43,200 32,567 35,801 32,954 39,141
---------- ---------- ---------- ---------- ----------
Earnings before cumulative effect of
changes in accounting principles . . 64,800 40,454 52,284 46,583 62,124
Cumulative effect of changes in
accounting principles, net of
income taxes . . . . . . . . . . . . -- (9,010) -- -- --
---------- ---------- ---------- ---------- ----------
Net earnings. . . . . . . . . . . . . $ 64,800 $ 31,444 $ 52,284 $ 46,583 $ 62,124
========== ========== ========== ========== ==========
Earnings per common share:
Before cumulative effect of changes
in accounting principles . . . . . $ 1.94 $ 1.23 $ 1.60 $ 1.43 $ 1.92
Cumulative effect of changes in
accounting principles, net of
income taxes . . . . . . . -- (0.27) -- -- --
---------- ---------- ---------- ---------- ----------
Net earnings. . . . . . . . . . . . $ 1.94 $ 0.96 $ 1.60 $ 1.43 $ 1.92
========== ========== ========== ========== ==========
Average common shares . . . . . . . . 33,417 32,857 32,728 32,632 32,358
Dividends (1) . . . . . . . . . . . . $ 7,593 $ 5,885 $ 3,895 $ 3,887 $ 3,849
Pro forma amounts assuming the
effects of the changes in accounting
principles are applied retroactively:
Net earnings. . . . . . . . . . . NA $ 40,454 $ 43,759 $ 46,583 $ 62,124
Net earnings per share. . . . . . NA $ 1.23 $ 1.34 $ 1.43 $ 1.92
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Total assets. . . . . . . . . . . . $1,040,640 $1,015,247 $996,583 $925,289 $944,974
Current portion of long-term
debt . . . . . . . . . . . . . . . $ 200 $ 18,594 $ 24,688 $ 34,291 $ 33,375
Long-term debt less current
portion. . . . . . . . . . . . . . $ 256,331 $ 294,173 $299,860 $269,590 $342,066
Stockholders' equity. . . . . . . . $ 577,573 $ 506,506 $483,268 $438,440 $393,609
</TABLE>
(1) Dividends paid were $0.23 per share in 1994, $0.18 per share in 1993 and
$0.12 per share in 1992, 1991 and 1990.
(2) 1993 net earnings reflect $15.9 million ($0.48 per share) of accounting
changes and unusual and nonrecurring items. See also "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and notes 1, 5 and 9 to the consolidated financial
statements.
11
Item 7. MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS
------- -----------------------------------------------------------------------
of OPERATIONS
-------------
RESULTS OF OPERATIONS - 1994 COMPARED TO 1993
Net sales for 1994 increased 11.2% to $936.1 million from $842.1 million in
1993. Sales increased during 1994 for each of the Company's three groups:
Fibers Group sales increased to $728.8 million from $655.2 million, Manufactured
Products Group (MPG) sales increased to $180.1 million from $163.1 million and
New England CRInc. (CRInc) sales increased to $27.2 million from $23.8 million.
Substantially all of the increase in sales of the Company's domestic fibers
business was due to higher polyester sales volumes. Higher selling prices in
certain markets also increased sales. Higher volumes were primarily the result
of polyester staple production improvements, the expansion of polyester yarn
capacity during the first quarter of 1994 and strong product demand. At Wellman
International Limited (WIL), the Company's Irish fiber subsidiary, sales
increased due to higher volumes, resulting from strong product demand, and
higher selling prices. Sales for the MPG increased during 1994 primarily as a
result of sales of higher-priced PET resin and higher selling prices for wool
top products. At CRInc, sales increased due to significantly higher commodity
prices, increased volumes and the addition of a new materials recovery facility
(MRF).
Gross profit totalled $211.3 million in 1994 versus $162.9 million in 1993. The
gross profit margin for 1994 was 22.6% compared to 19.3% for 1993. Gross profit
in 1993 was adversely impacted by the unusual and nonrecurring items discussed
in "Results of Operations - 1993 Compared to 1992." Gross profit for the
Company's fibers businesses increased primarily due to higher sales volumes,
higher selling prices during the latter part of the year and lower unit costs.
Lower unit costs primarily resulted from lower costs for certain raw materials
at the Company's waste-based fibers businesses, higher volumes and reduced
spending. Gross profit for the MPG increased mainly due to increased sales of
value-added PET resin and increased gross profit at the wool business, which was
partially offset by decreased gross profit at the thermoformed products
operation.
Selling, general and administrative expenses were $89.5 million in 1994, or 9.6%
of sales, compared to $86.5 million in 1993, or 10.3% of sales. Excluding
certain unusual and nonrecurring items discussed in "Results of Operations -
1993 Compared to 1992", 1993 expenses were 9.9% of sales.
As a result of the foregoing, operating income increased to $121.7 million in
1994 versus $76.4 million in 1993. Excluding the unusual and nonrecurring items
noted above, 1993 operating income was $94.9 million.
Net interest expense in 1994 decreased to $13.7 million from $15.7 million in
1993. Interest expense was favorably impacted by a decrease in outstanding
borrowings, partially offset by higher interest rates.
Results for 1993 reflect the gain from the sale of the Company's ownership
interest in Wellstar Holding, B.V. (Wellstar) discussed in "Results of
Operations - 1993 Compared to 1992."
The effective tax rate of 40% in 1994 reflects the positive impact of strong
domestic and Irish earnings. The Irish tax rate for manufacturing operations is
significantly lower than the U.S. statutory rate. Income tax expense for 1993
was negatively affected by the maximum federal corporate income tax rate
increasing from 34% to 35%.
As a result of the foregoing, net earnings for 1994 were $64.8 million, or $1.94
per share, compared to $31.4 million, or $0.96 per share, in 1993. Excluding
12
the unusual and nonrecurring items noted above and the cumulative effect of
changes in accounting principles discussed in note 1 to the consolidated
financial statements, net earnings for 1993 were $47.0 million, or $1.44 per
share.
OUTLOOK
Due in part to improved worldwide economic conditions and continued high
cotton prices, demand for the Company's polyester fibers strengthened
significantly in 1994 and is expected to remain healthy in 1995. Together with
increasing chemical and recycled raw material costs, upward pressure on
polyester fiber selling prices may continue in 1995. The ability to increase
fiber selling prices commensurate with increased costs will affect future
profitability. Ongoing expansions and other capital improvement projects should
result in increased polyester fiber production capacity in 1995 and beyond.
The Company expects to complete a significant expansion of PET resin
production capacity in mid-1995 (see "Item 1. Business - Capital Investment
Program"). Continued strong worldwide demand for PET resin has enabled the
Company to enter into long-term contracts with certain customers which generally
permit the Company to increase selling prices in order to offset increasing
chemical raw material costs.
RESULTS OF OPERATIONS -- 1993 COMPARED TO 1992
Net sales increased from $828.2 million in 1992 to $842.1 million in 1993.
Increased sales for the MPG more than offset lower Fibers Group sales. The
increase in sales for the MPG was primarily due to added sales from the
thermoformed products business, acquired in November 1992, and, to a lesser
extent, higher wool and engineering resins sales. Domestic fiber sales
decreased due to lower polyester selling prices, which more than offset higher
domestic sales volumes. At WIL, sales in U.S. dollars decreased due to the
unfavorable impact of the decrease in value of the Irish punt against the U.S.
dollar, which more than offset modest improvements in selling prices expressed
in terms of local currency and sales volumes. At CRInc, revenues increased
primarily due to an increase in the number of operating MRFs.
Gross profit amounted to $162.9 million in 1993 compared to $188.5 million in
1992. The gross profit margin was 19.3% in 1993 compared to 22.8% in 1992.
Gross profit for the Fibers Group decreased primarily due to lower domestic
polyester selling prices and, to a lesser extent, higher costs for the Company's
waste-based fibers operations. For the MPG, gross profit increased primarily
due to the contribution of the new thermoformed products business and an
increase in gross profit at the PET resin operation.
In addition to the effect on 1993 earnings of the change in accounting for
certain slow-moving and discontinued inventory discussed in note 1 to the
consolidated financial statements, gross profit was also adversely affected by
unusual and nonrecurring items, primarily related to inventory, development of a
prototype MRF and expenses associated with the Company's ongoing capital
investment program, aggregating $11.6 million.
Selling, general and administrative expenses were $86.5 million, or
approximately 10.3% of sales, in 1993 compared to $77.4 million, or
approximately 9.4% of sales in 1992. The increase was primarily due to the
inclusion of the thermoformed products business, including the amortization of
intangible assets arising from the acquisition, and a decline in earnings from
unconsolidated subsidiaries due to the sale of the Company's equity interest in
Wellstar. In addition, certain unusual and nonrecurring charges aggregating
$2.9 million were included in selling, general and administrative expenses in
1993.
13
As a result of the foregoing, operating income was $76.4 million in 1993
compared to $111.1 million in 1992.
Net interest expense for 1993 was $15.7 million compared to $23.0 million in
1992. This decrease was primarily the result of the decline in the Company's
average interest rates on outstanding borrowings and, to a lesser extent, an
increase in the amount of interest capitalized to property, plant and equipment
commensurate with the Company's ongoing capital investment program.
During the third quarter of 1993, the maximum corporate income tax rate
increased from 34% to 35% resulting in an increase in income taxes of $2.7
million, which had a negative impact on net earnings of approximately $0.08 per
share.
The impact of the cumulative effect of changes in accounting principles and
the gain on sale of Wellstar are discussed in notes 1 and 9, respectively, to
the consolidated financial statements.
As discussed above, 1993 net earnings were adversely effected by $15.9
million, or $0.48 per share, due to the net effect of changes in accounting
principles and unusual and nonrecurring events. As a result of the foregoing,
net earnings in 1993 were $31.4 million, or $0.96 per share, compared to $52.3
million, or $1.60 per share in 1992.
ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive laws and regulations governing
air emissions, waste water discharges and solid and hazardous waste management
activities. The Company takes a proactive approach in addressing the
applicability of these laws and regulations as they relate to its manufacturing
operations and in proposing and implementing any remedial plans that may be
necessary. The Company has identified certain situations that will require
future capital and non-capital expenditures to maintain or improve compliance
with current environmental laws and regulations as well as to support planned
future expansion. The majority of the identified situations are found at the
Company's largest manufacturing facilities and primarily deal with groundwater
remediation, quality of air emissions and wastewater treatment processes.
The Company's policy is to accrue environmental remediation costs when it is
both probable that a liability has been incurred and the amount can be
reasonably estimated. While it is often difficult to reasonably quantify future
environmental-related expenditures, the Company currently estimates its future
non-capital expenditures related to environmental matters to range between $13.0
million and $30.0 million. In connection with these expenditures, the Company
has accrued an amount at December 31, 1994 within such range representing
management's best estimate of probable non-capital environmental expenditures.
In addition, future capital expenditures aggregating approximately $12.0 million
to $25.0 million may be required related to environmental matters. These non-
capital and capital expenditures are estimated to be incurred over the next 10
to 20 years. The Company believes that it is entitled to recover a portion of
these expenditures under indemnification and escrow agreements. During 1994,
costs associated with environmental remediation and ongoing assessment were not
significant. See notes 1 and 6 to the consolidated financial statements.
The measurement of liability is based on an evaluation of currently available
facts with respect to each individual situation and takes into consideration
factors such as existing technology, presently enacted laws and regulations and
prior experience in remediation of contaminated sites. As assessments and
remediation progress at individual sites, these liabilities are reviewed
periodically and adjusted to reflect additional technical and legal information
which becomes available.
14
The Company believes it is either in material compliance with all currently
applicable regulations or is operating in accordance with the appropriate
variances and compliance schedules or similar arrangements.
Actual costs to be incurred for identified situations in future periods may vary
from the estimates, given inherent uncertainties in evaluating environmental
exposures due to unknown conditions, changing government regulations and legal
standards regarding liability and evolving related technologies. Subject to the
imprecision in estimating future environmental costs, the Company believes that
compliance with current laws and regulations will not require significant
capital expenditures or have a material adverse effect on its consolidated
financial position or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash from operations of $132.4 million in 1994 compared
to $94.6 million in 1993.
Net cash used in investing activities amounted to $69.5 million in 1994
compared to $62.2 million in 1993. Capital spending amounted to $74.3 million
in 1994 and $105.7 million in 1993, reflecting the Company's ongoing capital
investment program. In 1993, investing activities included proceeds of $33.0
million from the sale of Wellstar.
Net cash used in financing activities amounted to $60.3 million for 1994 and
$15.1 million for 1993. Net repayments of long-term debt amounted to $56.8
million in 1994 compared to $9.9 million in 1993.
The Company's long-term capital investment program includes approximately
$115.0 million in planned expenditures in 1995. The exact amount and timing of
the capital spending is difficult to predict, however, since certain projects
may extend into 1996 or beyond depending upon equipment delivery and
construction schedules. The 1995 capital plan includes expansion of PET resin
production capacity at the Palmetto Plant and expansions and continued equipment
upgrades at the Company's domestic fiber operations. See "Item 1. Business -
Products and Markets" and "- Capital Investment Program".
The Company's financing agreements contain normal financial and restrictive
covenants. The Company believes that the financial resources available to it,
including the various credit facilities discussed in note 4 to the consolidated
financial statements and internally generated funds, will be sufficient to meet
its foreseeable working capital, capital expenditure and dividend payment
requirements. Note 4 to the consolidated financial statements discusses a
$330.0 million revolving credit facility entered into by the Company on February
8, 1995, which matures in February 2000.
15
Item 8. FINANCIAL STATEMENTS and SUPPLEMENTARY DATA
------- -------------------------------------------
WELLMAN, INC.
Index to Consolidated Financial Statements
and Consolidated Financial Statement Schedules
Consolidated Statements of Income for the years ended
December 31, 1994, 1993 and 1992 17
Consolidated Balance Sheets at December 31, 1994 and 1993 18
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1994, 1993 and 1992 19
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 20
Notes to Consolidated Financial Statements 21
Report of Independent Auditors 31
Consolidated financial statement schedules for the years ended
December 31, 1994, 1993 and 1992:
II -- Valuation and qualifying accounts 32
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedules, or
because the information required is included in the consolidated financial
statements and notes thereto.
16
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
------------------------
(In thousands, except per share data) 1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . $936,133 $842,064 $828,200
Cost of sales. . . . . . . . . . . . . . . . 724,874 679,182 639,664
-------- -------- --------
Gross profit . . . . . . . . . . . . . . . . 211,259 162,882 188,536
Selling, general and administrative expenses 89,518 86,511 77,439
-------- -------- --------
Operating income . . . . . . . . . . . . . . 121,741 76,371 111,097
Interest expense, net. . . . . . . . . . . . 13,741 15,736 23,012
Gain on sale of Wellstar . . . . . . . . . . -- 12,386 --
-------- -------- --------
Earnings before income taxes and cumulative
effect of changes in accounting principles 108,000 73,021 88,085
Income taxes . . . . . . . . . . . . . . . . 43,200 32,567 35,801
Earnings before cumulative effect of changes
in accounting principles . . . . . . . . . 64,800 40,454 52,284
Cumulative effect of changes in accounting
principles, net of income taxes. . . . . . -- (9,010) --
-------- -------- --------
Net earnings . . . . . . . . . . . . . . . . $ 64,800 $ 31,444 $ 52,284
======== ======== ========
Earnings per common share:
Before cumulative effect of changes
in accounting principles . . . . . . . . $ 1.94 $ 1.23 $ 1.60
Cumulative effect of changes
in accounting principles, net of income
taxes. . . . . . . . . . . . . . . . . . -- (0.27) --
-------- -------- --------
Net earnings . . . . . . . . . . . . . . . $ 1.94 $ 0.96 $ 1.60
======== ======== ========
Average common shares. . . . . . . . . . . . 33,417 32,857 32,728
======== ======== ========
Pro forma amounts assuming the effect of the
changes in accounting principles are applied
retroactively:
Net earnings . . . . . . . . . . . . . . NA $ 40,454 $ 43,759
======== ======== ========
Net earnings per share . . . . . . . . . NA $ 1.23 $ 1.34
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
17
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 31,
------------------------
(In thousands, except share data) 1994 1993
--------------------------------------------------------------------------------
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents. . . . . . . . . . . . . . $ 21,556 $ 18,751
Accounts receivable, less allowance of $4,733
in 1994 and $4,232 in 1993. . . . . . . . . . . . . 119,278 96,599
Inventories. . . . . . . . . . . . . . . . . . . . . 122,914 133,391
Prepaid expenses and other current assets. . . . . . 8,479 4,995
---------- ----------
Total current assets. . . . . . . . . . . . . . . 272,227 253,736
Property, plant and equipment, at cost:
Land, buildings and improvements . . . . . . . . . . 100,172 94,652
Machinery and equipment. . . . . . . . . . . . . . . 553,834 489,516
---------- ----------
654,006 584,168
Less accumulated depreciation. . . . . . . . . . . . 206,130 163,627
---------- ----------
Property, plant and equipment, net. . . . . . . . 447,876 420,541
Cost in excess of net assets acquired, net . . . . . . 301,030 309,395
Other assets, net. . . . . . . . . . . . . . . . . . . 19,507 31,575
---------- ----------
$1,040,640 $1,015,247
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . $ 53,647 $ 51,882
Accrued liabilities. . . . . . . . . . . . . . . . . 30,472 27,501
Current portion of long-term debt. . . . . . . . . . 200 18,594
---------- ----------
Total current liabilities . . . . . . . . . . . . 84,319 97,977
Long-term debt . . . . . . . . . . . . . . . . . . . . 256,331 294,173
Deferred income taxes and other liabilities. . . . . . 122,417 116,591
---------- ----------
Total liabilities . . . . . . . . . . . . . . . . 463,067 508,741
Stockholders' equity:
Common stock, $0.001 par value; 55,000,000 shares
authorized, 33,191,987 shares issued and outstanding
in 1994, 32,780,018 in 1993. . . . . . . . . . . . . 33 33
Class B common stock, $0.001 par value; 5,500,000
shares authorized; no shares issued . . . . . . . . -- --
Paid-in capital. . . . . . . . . . . . . . . . . . . 224,352 215,179
Foreign currency translation adjustments . . . . . . 4,783 96
Retained earnings. . . . . . . . . . . . . . . . . . 348,405 291,198
---------- ----------
Total stockholders' equity. . . . . . . . . . . . 577,573 506,506
---------- ----------
$1,040,640 $1,015,247
========== ==========
</TABLE>
See notes to consolidated financial statements.
18
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
Common Stock Currency
----------------- Paid-in Translation Retained
Shares Amount Capital Adjustments Earnings Total
---------- ------ -------- ----------- -------- ---------
Balance at December 31, 1991 . . . . . . 32,393,183 $ 32 $207,561 $13,597 $217,250 $438,440
Net earnings . . . . . . . . . . . . . . 52,284 52,284
Cash dividends ($0.12 per share) . . . . (3,895) (3,895)
Exercise of stock options . . . . . . . 54,138 665 665
Issuance of common stock to employee
benefit plans . . . . . . . . . . . . . 74,995 1 1,646 1,647
Issuance of restricted stock . . . . . . 1,334 30 30
Tax effect of exercise of stock options. 278 278
Currency translation adjustments . . . . (6,181) (6,181)
---------- ----- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 . . . . . 32,523,650 33 210,180 7,416 265,639 483,268
Net earnings . . . . . . . . . . . . . . 31,444 31,444
Cash dividends ($0.18 per share) . . . . (5,885) (5,885)
Exercise of stock options . . . . . . . 54,748 674 674
Issuance of common stock to employee
benefit plans . . . . . . . . . . . . . 200,286 4,065 4,065
Issuance of restricted stock . . . . . . 1,334 26 26
Tax effect of exercise of stock options. 234 234
Currency translation adjustments . . . . (7,320) (7,320)
---------- ----- -------- ----------- -------- ---------
Balance at December 31, 1993 . . . . . . 32,780,018 33 215,179 96 291,198 506,506
Net earnings . . . . . . . . . . . . . . 64,800 64,800
Cash dividends ($0.23 per share) . . . . (7,593) (7,593)
Exercise of stock options . . . . . . . 235,116 4,047 4,047
Issuance of common stock to employee
benefit plans . . . . . . . . . . . . . 176,186 3,936 3,936
Issuance of restricted stock . . . . . . 667 23 23
Tax effect of exercise of stock options. 1,167 1,167
Currency translation adjustments . . . . 4,687 4,687
---------- ----- -------- ----------- -------- ---------
Balance at December 31, 1994 . . . . . . 33,191,987 $ 33 $224,352 $ 4,783 $348,405 $577,573
========== ===== ======== =========== ======== =========
</TABLE>
See notes to consolidated financial statements.
19
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
------------------------------
(In thousands) 1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings. . . . . . . . . . . . . . . . $ 64,800 $ 31,444 $ 52,284
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Cumulative effect of changes in
accounting principles . . . . . . . . . -- 9,010 --
Depreciation . . . . . . . . . . . . . . 45,201 41,609 38,913
Amortization . . . . . . . . . . . . . . 14,322 16,313 12,764
Deferred income taxes. . . . . . . . . . 5,878 (3,088) 9,996
Common stock issued for stock plans. . . 3,959 4,091 1,676
Gain on sale of Wellstar . . . . . . . . -- (12,386) --
Changes in assets and liabilities, net
of effects from businesses acquired and
cumulative effect of changes in
accounting principles:
Accounts receivable . . . . . . . . . (20,528) (9,815) 5,156
Inventories . . . . . . . . . . . . . 12,439 14,760 (19,764)
Prepaid expenses and other current
assets . . . . . . . . . . . . . . . (3,310) 2,582 (3,250)
Other assets. . . . . . . . . . . . . 1,332 (2,464) (4,889)
Accounts payable and accrued
liabilities. . . . . . . . . . . . . 3,209 (925) 2,747
Other liabilities . . . . . . . . . . (984) 2,046 (3,976)
Other . . . . . . . . . . . . . . . . 6,079 1,441 3,602
--------- --------- ---------
Net cash provided by operating activities 132,397 94,618 95,259
--------- --------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment. (74,310) (105,689) (39,705)
Businesses acquired . . . . . . . . . . . . -- (8,780) (33,686)
Decrease (increase) in restricted cash. . . 4,779 19,242 (29,149)
Proceeds from sale of Wellstar. . . . . . . -- 33,000 --
--------- --------- ---------
Net cash used in investing activities . . (69,531) (62,227) (102,540)
--------- --------- ---------
Cash flows from financing activities:
Borrowings under long-term debt . . . . . . -- 17,454 62,700
Repayments of long-term debt. . . . . . . . (56,791) (27,314) (50,607)
Exercise of stock options . . . . . . . . . 4,047 674 665
Dividends paid on common stock. . . . . . . (7,593) (5,885) (3,895)
--------- --------- ---------
Net cash provided by (used in) financing
activities. . . . . . . . . .. . . . . . (60,337) (15,071) 8,863
--------- --------- ---------
Effect of exchange rate changes on cash and
cash equivalents . . . . . . . . . . . . . . 276 (318) (554)
--------- --------- ---------
Increase in cash and cash equivalents . . . . 2,805 17,002 1,028
Cash and cash equivalents at beginning of year 18,751 1,749 721
--------- --------- ---------
Cash and cash equivalents at end of year. . . $ 21,556 $ 18,751 $ 1,749
========= ========= =========
Supplemental cash flow data:
Cash paid during the year for:
Interest (net of amounts capitalized) . . $ 15,115 $16,728 $23,712
Income taxes. . . . . . . . . . . . . . . $ 37,487 $33,874 $24,144
</TABLE>
See notes to consolidated financial statements.
20
Notes to Consolidated Financial Statements
(In thousands, except share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Wellman, Inc.
and all wholly and majority-owned subsidiaries (the "Company"). All material
intercompany transactions have been eliminated.
Certain 1993 and 1992 amounts have been reclassified to conform to the 1994
presentation.
Revenue Recognition
Sales to customers are recorded when goods are shipped.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the last-in, first-out (LIFO) method for approximately $67,000 and $79,000
of inventory at December 31, 1994 and 1993, respectively, and the first-in,
first-out (FIFO) and average cost methods for the remainder.
Property, Plant and Equipment
Property, plant and equipment is carried at cost. Depreciation is provided
based on the estimated useful lives of the related assets and is computed on the
straight-line method.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired is amortized on the straight-line
method over periods ranging from 20 to 40 years. Accumulated amortization
amounted to approximately $47,369 and $38,505 at December 31, 1994 and 1993,
respectively.
The carrying value of goodwill is reviewed if the facts and circumstances
suggest that it may be impaired. If this review indicates that goodwill will
not be recoverable, as determined based on the undiscounted cash flows of the
entity acquired over the remaining amortization period, the Company's carrying
value of the goodwill will be reduced by the estimated shortfall of cash flows.
Other Assets
Other assets are comprised of deferred charges related to the Company's debt
agreements and other intangible assets that are amortized over periods ranging
from one to 20 years. Additionally, other assets include cash restricted for
use obtained from borrowings under economic development revenue bonds in the
amount of approximately $7,600 and $12,400 at December 31, 1994 and 1993,
respectively (see note 4).
Environmental Expenditures
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs can be reasonably
estimated.
21
Income Taxes
Income taxes have been provided using the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities. Deferred
income taxes resulting from such differences are recorded based on the enacted
tax rates that are currently expected to be in effect when the differences are
expected to reverse.
Cash and Cash Equivalents
The Company considers all short-term investments purchased with a maturity of
three months or less to be cash equivalents for purposes of the consolidated
statements of cash flows. The carrying amounts reported in the consolidated
balance sheets for cash and cash equivalents approximate their fair value.
Foreign Currency Translation
The financial statements of foreign entities have been translated into U.S.
dollar equivalents in accordance with the Financial Accounting Standards Board's
(FASB) Statement No. 52, "Foreign Currency Translation." Adjustments resulting
from the translation of the financial statements of foreign entities are
excluded from the determination of earnings and accumulated in a separate
component of stockholders' equity.
Earnings Per Common Share
Earnings per common share is based on the average number of common and common
equivalent shares outstanding.
Accounting Changes
Environmental Liabilities
During 1993, the FASB's Emerging Issues Task Force (EITF) issued EITF
Abstract No. 93-5, "Accounting For Environmental Liabilities" (EITF 93-5). The
Company adopted the provisions of EITF 93-5 in its 1993 consolidated financial
statements effective January 1, 1993.
EITF 93-5 provides that an environmental liability should be evaluated
independently from any potential claim for recovery (a two-event approach) and
that the loss arising from the recognition of an environmental liability should
be reduced only when a claim for recovery is probable of realization. Current
accounting standards provide a general presumption that disputed claims for
recovery are not probable of realization. Under practice prior to the issuance
of EITF 93-5, some companies, including the Company, offset reasonably possible
recoveries against probable losses. As a result of the issuance of EITF 93-5,
this accounting treatment is no longer permitted.
The cumulative effect as of January 1, 1993 of adopting the provisions of
EITF 93-5 was a charge to net income of $6,820 ($0.20 per share), net of the
income tax effect of $4,180. Excluding the cumulative effect, the impact of
this change on 1993 net earnings and earnings per share was not material. The
pro forma effect of applying this change retroactively to 1992 would be a
decrease in net earnings of approximately $6,300 ($0.19 per share).
22
Inventory Valuation
During 1993, the Company changed its method of applying the lower of cost or
market rule to certain slow-moving and discontinued waste raw material inventory
which is valued using the LIFO dollar value method. In prior years, the Company
used the aggregate method in applying the lower of cost or market rule to such
inventories and in 1993 changed to the item-by-item method.
The Company believes its current method of accounting is preferable because
it provides a better matching of costs and revenue and results in a more
conservative valuation of slow-moving and discontinued waste raw material
inventory.
The cumulative effect as of January 1, 1993 of this change in accounting was
a charge to net earnings of $2,190 ($0.07 per share), net of the income tax
effect of $1,342.
Excluding the cumulative effect, this change decreased net earnings for 1993
by approximately $2,500 ($0.08 per share). The pro forma effect of applying
this change retroactively to 1992 would be a decrease in net earnings of
approximately $2,200 ($0.07 per share).
2. INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of the following:
December 31,
1994 1993
-------- --------
<S> <C> <C>
Raw materials . . . . . . . . . . . $ 61,680 $ 72,723
Finished and semi-finished goods. . 51,362 53,083
Supplies. . . . . . . . . . . . . . 14,672 12,467
-------- --------
127,714 138,273
Less adjustments of certain
inventories to a LIFO basis . . . 4,800 4,882
-------- --------
$122,914 $133,391
======== ========
</TABLE>
3. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
Accrued liabilities consist of the following:
December 31,
1994 1993
-------- --------
<S> <C> <C>
Payroll and other compensation. . . $ 11,242 $ 5,780
Retirement plans. . . . . . . . . . 7,203 7,951
Property and other taxes. . . . . . 2,990 2,733
Interest. . . . . . . . . . . . . . 2,635 2,347
Other . . . . . . . . . . . . . . . 6,402 8,690
-------- --------
$ 30,472 $ 27,501
======== ========
</TABLE>
23
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of the following:
December 31,
1994 1993
-------- --------
<S> <C> <C>
Reducing revolving credit and term loan
facilities and loan note participations . . . . $ 71,317 $118,559
Serialized senior unsecured notes, 9.02% - 9.26%,
due 1997-1999 . . . . . . . . . . . . . . . . . 100,000 100,000
Economic development revenue bonds, at variable
interest rates, due 2010-2022 . . . . . . . . . 54,500 54,500
8.41% senior unsecured note, due 2000. . . . . . 30,000 30,000
14.5% senior promissory notes. . . . . . . . . . -- 2,900
Wellman International Limited (WIL) debt . . . . -- 6,099
Other. . . . . . . . . . . . . . . . . . . . . . 714 709
-------- --------
256,531 312,767
Less current portion . . . . . . . . . . . . . 200 18,594
-------- --------
$256,331 $294,173
======== ========
</TABLE>
The reducing revolving credit and term loan facilities originally consisted
of a $222,000 Reducing Revolving Credit Loan (the Revolving Loan) and a $178,000
Term Loan. The Revolving Loan was scheduled to mature on December 31, 1996 (see
following paragraph) while the term loan facility was paid off during 1994. At
December 31, 1994, the average interest rate on borrowings under the Revolving
Loan was approximately 6.20%.
On February 8, 1995, the Company entered into a $330,000 Revolving Credit
Loan (the Facility) that replaced the Revolving Loan and matures in February
2000. The terms of the Facility provide the Company the ability to borrow under
competitive bid loans which reduce the availability under the Facility and bear
interest at the offering bank's prevailing interest rate. The Facility has no
scheduled principal repayments and any borrowings under non-competitive bid
loans bear interest, at the Company's option, at the higher of the prime rate or
the federal funds rate plus 0.50%, the LIBOR or CD rate plus applicable margins.
The economic development revenue bonds (the Bonds) are tenderable by the
holders and are secured by letters of credit aggregating approximately $55,800
at December 31, 1994. The average interest rate on the Bonds at December 31,
1994 was approximately 4.10%.
The Company also has available, but unused, short-term uncommitted lines of
credit aggregating $120,000 at December 31, 1994.
The Bonds and borrowings under the Revolving Loan are classified as long-term
in accordance with the Company's intention and ability to refinance such
obligations on a long-term basis.
The Company's financing agreements contain normal financial and restrictive
covenants. Under the most restrictive covenant, approximately $216,000 of
retained earnings at December 31, 1994 is not restricted as to the payment of
dividends.
Aggregate maturities of long-term debt for the next five years are as
follows: 1995 -- $200; 1996 -- $147; 1997 -- $20,159; 1998 -- $40,193; and 1999
-- $40,015.
The carrying amounts of the Company's borrowings under its variable rate
credit agreements approximate their fair value. The fair values of the
24
Company's fixed rate credit agreements are estimated using discounted cash flow
analyses based on the Company's current incremental borrowing rates for similar
types of borrowing arrangements. The fair value of the Company's fixed rate
debt approximates its carrying value at December 31, 1994. Prepayment of the
fixed rate debt could result in significant penalties.
During 1994, 1993 and 1992, the Company capitalized interest of $2,920,
$2,375 and $304, respectively, as part of the cost of capital projects under
construction.
5. INCOME TAXES
For financial reporting purposes, earnings before income taxes and cumulative
effect of changes in accounting principles are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
United States. . . . . . . . . . . . . $ 89,073 $54,535 $82,647
Foreign. . . . . . . . . . . . . . . . 18,927 18,486 5,438
-------- ------- -------
$108,000 $73,021 $88,085
======== ======= =======
</TABLE>
Significant components of income taxes before cumulative effect of changes in
accounting principles are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Current: Federal. . . . . . . . . . . $ 30,208 $30,310 $20,828
State. . . . . . . . . . . . 5,129 4,357 4,057
Foreign. . . . . . . . . . . 1,985 988 920
-------- ------- -------
37,322 35,655 25,805
-------- ------- -------
Deferred: Federal . . . . . . . . . . 5,239 (2,566) 9,700
State . . . . . . . . . . . 680 (522) 296
Foreign . . . . . . . . . . (41) -- --
-------- ------- -------
5,878 (3,088) 9,996
-------- ------- -------
$ 43,200 $32,567 $35,801
======== ======= =======
</TABLE>
As discussed in note 1, deferred income tax benefits relating to the
cumulative effect of changes in accounting principles in 1993 amounted to
$5,522.
The difference between income taxes before cumulative effect of changes in
accounting principles and income taxes computed at the statutory income tax rate
is explained as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Computed at statutory rate. . . . . . . . . 35.0% 35.0% 34.0%
State taxes, net of federal benefit . . . . 3.5 3.4 3.3
Differences in income tax rates between
the United States and foreign countries. . (3.4) (1.8) (0.4)
Amortization of cost in excess of net
assets acquired. . . . . . . . . . . . . . 2.9 4.1 3.2
Effect of tax rate change . . . . . . . . . -- 2.6 --
Other, net. . . . . . . . . . . . . . . . . 2.0 1.3 0.5
-------- ------- -------
Effective tax rate. . . . . . . . . . . . . 40.0% 44.6% 40.6%
======== ======= =======
</TABLE>
25
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The tax effects of these
differences are as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
------- -------
<S> <C> <C>
Inventory . . . . . . . . . . . . . . . $ 3,731 $ 2,618
Depreciation. . . . . . . . . . . . . . 85,923 81,310
Foreign . . . . . . . . . . . . . . . . 4,117 3,248
Other . . . . . . . . . . . . . . . . . 4,445 4,232
------- -------
Total deferred tax liabilities. . . . . 98,216 91,408
------- -------
Pension . . . . . . . . . . . . . . . . 3,934 4,601
State deferred benefits . . . . . . . . 3,969 3,743
Long-term liabilities . . . . . . . . . 7,495 6,771
Other . . . . . . . . . . . . . . . . . 4,786 4,139
------- -------
Total deferred tax assets . . . . . . . 20,184 19,254
------- -------
Net deferred tax liabilities. . . . . . $78,032 $72,154
======= =======
</TABLE>
Deferred income taxes have not been provided for approximately $69,906 of
undistributed earnings of foreign entities which are considered to be
permanently reinvested. Upon repatriation of those earnings in the form of
dividends or otherwise, the Company would be subject to both U.S. income taxes
(subject to an adjustment for foreign tax credits) and withholding taxes.
Determination of the amount of unrecognized deferred U. S. income tax liability
is not practicable because of the complexities associated with its hypothetical
calculation.
6. ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive laws and regulations
governing air emissions, waste water discharges and solid and hazardous waste
management activities. As discussed in note 1, the Company's policy is to
accrue environmental remediation costs when it is both probable that a liability
has been incurred and the amount can be reasonably estimated. While it is often
difficult to reasonably quantify future environmental-related expenditures, the
Company currently estimates its future non-capital expenditures related to
environmental matters to range between $13,000 and $30,000. In connection with
these expenditures, the Company has accrued an amount at December 31, 1994
within such range representing management's best estimate of probable
non-capital environmental expenditures. In addition, future capital
expenditures aggregating approximately $12,000 to $25,000 may be required
related to environmental matters. These non-capital and capital expenditures
are estimated to be incurred over the next 10 to 20 years. The Company believes
that it is entitled to recover a portion of these expenditures under
indemnification and escrow agreements.
7. RETIREMENT PLANS
The Company has defined benefit and defined contribution pension plans that
cover substantially all employees. The Company also has an employee stock
ownership plan (the ESOP) covering substantially all domestic employees.
The defined contribution plan and the ESOP provide for Company contributions
based on the earnings of eligible employees. Expense related to the defined
contribution plan amounted to approximately $7,840, $7,553 and $6,442 for the
years ended December 31, 1994, 1993 and 1992, respectively. Expense related to
the ESOP amounted to approximately $2,354, $2,249 and $1,847 for the years ended
December 31, 1994, 1993 and 1992, respectively.
26
Benefits under the WIL defined benefit plan are based on employees'
compensation and length of service, while benefits under defined benefit plans
covering domestic employees are based on employees' compensation and length of
service or at stated amounts based on length of service. The Company's policy
is to fund amounts which are actuarially determined to provide the plans with
sufficient assets to meet future benefit payment requirements. Assets of the
plans are invested primarily in equity securities and commingled trust funds.
The pension costs of the defined benefit plans consist of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Service cost. . . . . . . . . . . . . $ (479) $ (370) $ (706)
Interest cost on projected benefit
obligations. . . . . . . . . . . . . 3,938 4,336 4,113
Actual return on plan assets. . . . . (621) (7,512) 1,697
Net amortization and deferral . . . . (3,030) 4,621 (5,009)
-------- -------- --------
$ (192) $ 1,075 $ 95
======== ======== ========
</TABLE>
The following table sets forth the funded status and amounts included in the
Company's consolidated balance sheets at December 31, 1994 and 1993 for its
defined benefit pension plans:
<TABLE>
<CAPTION>
December 31,
1994 1993
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligations. . . . . . . . . . $ 36,369 $ 33,502
========= =========
Accumulated benefit obligations . . . . . . . $ 36,571 $ 33,952
========= =========
Projected benefit obligations . . . . . . . . $ 53,622 $ 52,913
Plan assets at fair market value. . . . . . . . 48,867 45,063
--------- ---------
Funded status . . . . . . . . . . . . . . . . . (4,755) (7,850)
Unrecognized net (gain) loss. . . . . . . . . . (2,815) (1,875)
Unrecognized net asset at transition. . . . . . (54) (5)
Unrecognized prior service cost . . . . . . . . (1,282) (1,395)
--------- ---------
Accrued pension costs . . . . . . . . . . . . . $ (8,906) $(11,125)
========= =========
</TABLE>
Assumptions used in determining the projected benefit obligation as of December
31 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Domestic plans
Discount rate 8.25% 7.25% 8.0%
Future compensation increase 4.75% 4.5% 6.0%
Rate of return on plan assets 8.0% 8.0% 8.0%
WIL
Discount rate 9.0% 7.0% 9.0%
Future compensation increase 6.5% 5.0% 6.5%
Rate of return on plan assets 9.0% 7.0% 9.0%
</TABLE>
8. STOCKHOLDERS' EQUITY
The Company has stock option plans (the Plans) which authorize the grant
of non-qualified stock options (NQSOs). The maximum number of common shares
authorized for grant under the Plans is 3,588,000. For substantially all
options granted in connection with the Plans, the option period extends for
either ten years and one day or 11 years from the date of grant with the shares
27
vesting at 20% per year over the first five years. The option price for such
options must be at least equal to the fair market value of the Company's common
stock at the date of grant.
<TABLE>
<CAPTION>
Information regarding the NQSOs is as follows: Avg Price
Shares Per Share
---------- ---------
<S> <C> <C>
Outstanding December 31, 1991. . . . . . . . . . 1,185,073 $19.38
Granted. . . . . . . . . . . . . . . . . . . . 366,300 20.63
Exercised. . . . . . . . . . . . . . . . . . . (54,138) 12.28
Canceled . . . . . . . . . . . . . . . . . . . (15,500) 22.36
---------- ---------
Outstanding December 31, 1992. . . . . . . . . . 1,481,735 19.92
Granted. . . . . . . . . . . . . . . . . . . . 361,000 17.38
Exercised. . . . . . . . . . . . . . . . . . . (54,748) 12.32
Canceled . . . . . . . . . . . . . . . . . . . (5,590) 20.42
---------- ---------
Outstanding December 31, 1993. . . . . . . . . . 1,782,397 19.63
Granted. . . . . . . . . . . . . . . . . . . . 400,900 29.25
Exercised. . . . . . . . . . . . . . . . . . . (235,116) 17.21
Canceled . . . . . . . . . . . . . . . . . . . (80,550) 22.24
---------- ---------
Outstanding December 31, 1994. . . . . . . . . . 1,867,631 $21.89
========== =========
</TABLE>
At December 31, 1994, options for 803,868 shares were exercisable and
1,042,364 shares were available for future option grants.
Approximately 899,000 common shares have been reserved for issuance in
connection with certain of the Company's employee benefit plans (see note 7).
On August 6, 1991, the Board of Directors declared a dividend of one
common stock purchase right (a Right) for each outstanding share of common
stock. Each Right, when exercisable, will entitle the registered holder to
purchase from the Company one share of common stock at an exercise price of $90
per share (the Purchase Price), subject to certain adjustments. The Rights are
not represented by separate certificates and are only exercisable when a person
or group of affiliated or associated persons acquires or obtains the right to
acquire 15% or more of the Company's outstanding common shares (an Acquiring
Person) or announces a tender or exchange offer that would result in any person
or group beneficially owning 15% or more of the Company's outstanding common
shares. In the event any person becomes an Acquiring Person, the Rights would
give holders the right to buy, for the Purchase Price, common stock with a
market value of twice the Purchase Price. The Rights expire on August 5, 2001,
unless extended by the Board of Directors or redeemed earlier by the Company at
a redemption price of $0.01 per Right.
Although the Rights should not interfere with a business combination
approved by the Board of Directors, they may cause substantial dilution to a
person or group that attempts to acquire the Company on terms not approved by
the Board, except pursuant to an offer conditioned on a substantial number of
Rights being acquired.
9. INVESTMENT IN UNCONSOLIDATED PARTIALLY-OWNED COMPANY
In March 1993, the Company sold its 43.7% ownership interest in Wellstar
Holding, B.V. (Wellstar) for $33,000. The transaction resulted in a gain,
before applicable income taxes, of approximately $12,386. The sale of Wellstar
increased net earnings by approximately $7,300, or $0.22 per share.
10. COMMITMENTS AND CONTINGENCIES
WIL, the Company's Irish subsidiary, utilizes forward foreign currency
contracts to hedge certain of its accounts receivable and accounts payable
28
denominated in other foreign currencies. The notional amount of such contracts
outstanding at December 31, 1994 and the impact on earnings for contracts closed
during 1994, 1993 and 1992 was immaterial.
At December 31, 1994, the Company had approximately $56,000 of outstanding
letters of credit of which approximately $55,800 were outstanding as security
for the Bonds discussed in note 4.
Approximate minimum rental commitments under noncancelable leases
(principally for buildings and equipment) during each of the next five years and
thereafter are as follows: 1995 -- $4,399; 1996 -- $3,978; 1997 -- $3,772;
1998 -- $3,659; 1999 -- $2,123; and thereafter -- $4,381.
Rent expense for cancelable and noncancelable operating leases was $6,548,
$6,295 and $4,797 for the years ended December 31, 1994, 1993 and 1992,
respectively.
See note 6 for information related to environmental matters.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of the matters will not have a material adverse effect, if any, on
the Company's consolidated financial position or results of operations.
11. BUSINESS SEGMENT AND GEOGRAPHIC AREAS
The Company operates in one business segment: principally the manufacture
and sale of PET (polyethylene terephthalate) products, including Fortrel(R)
brand polyester textile fibers, recycled polyester fibers and PET resins.
Net sales and operating income for the years ended December 31, 1994, 1993
and 1992 and identifiable assets at the end of each year, classified by the
major geographic areas in which the Company operates, are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Net sales
U.S. . . . . . . . . . . . . . . . . $ 824,034 $ 754,882 $ 728,733
Western Europe . . . . . . . . . . . 112,099 87,182 99,467
---------- ---------- ----------
$ 936,133 $ 842,064 $ 828,200
========== ========== ==========
Operating income
U.S. . . . . . . . . . . . . . . . . $ 103,909 $ 69,305 $ 105,943
Western Europe . . . . . . . . . . . 17,832 7,066 5,154
---------- ---------- ----------
$ 121,741 $ 76,371 $ 111,097
========== ========== ==========
Identifiable assets
U.S. . . . . . . . . . . . . . . . . $ 937,135 $ 927,330 $ 913,384
Western Europe . . . . . . . . . . . 103,505 87,917 83,199
---------- ---------- ----------
$1,040,640 $1,015,247 $ 996,583
========== ========== ==========
</TABLE>
29
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial information for the years ended December 31, 1994 and
1993 is summarized as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, Total
Quarter ended 1994 1994 1994 1994 1994
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $222,577 $229,805 $232,955 $250,796 $936,133
Gross profit $43,883 $53,190 $52,594 $61,592 $211,259
Net earnings $11,290 $16,092 $17,317 $20,101 $64,800
Net earnings per
common share $0.34 $0.48 $0.52 $0.60 $1.94
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, Total
Quarter ended 1993(1) 1993 1993(1) 1993(1) 1993(1)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $207,968 $214,005 $210,151 $209,940 $842,064
Gross profit $49,583 $46,046 $41,594 $25,659 $162,882
Earnings (loss) before
cumulative effect of
changes in accounting
principles $21,804 $12,783 $7,056 $(1,189) $40,454
Net earnings (loss) $12,794 $12,783 $7,056 $(1,189) $31,444
Earnings (loss) per
common share before
cumulative effect of
changes in accounting
principles $0.66 $0.39 $0.21 ($0.04) $1.23
Net earnings (loss)
per common share $0.39 $0.39 $0.21 ($0.04) $0.96
</TABLE>
(1) 1993 net earnings reflect $15,900 ($0.48 per share) of accounting changes
and unusual and nonrecurring items. In March 1993, the Company sold its
ownership interest in Wellstar for $33,000. The resulting gain, before
applicable income taxes, was approximately $12,386. As a result of the
sale, 1993 net earnings increased by approximately $7,300 ($0.22 per share).
Net earnings for the quarter ended March 31, 1993 reflect the cumulative
effect of changes in accounting principles for environmental liabilities and
certain inventories ($9,010, net of the related income tax effect). In the
third quarter of 1993, the maximum corporate income tax rate increased from
34% to 35%. This resulted in $2,700 ($0.08 per share) in additional income
tax expense. In the fourth quarter of 1993, the Company incurred unusual
charges aggregating $11,500 ($0.35 per share) primarily related to
inventory, development of a prototype materials recovery facility and
expenses associated with the Company's ongoing capital investment program.
See also "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and notes 1, 5 and 9.
30
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Wellman, Inc.
We have audited the accompanying consolidated balance sheets of Wellman,
Inc. as of December 31, 1994 and 1993, and the related consolidated statements
of income, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1994. Our audits also included the financial
statement schedules listed in the Index at Item 8. These consolidated financial
statements and schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and schedules based on our audits. We did not audit the financial
statements and schedules of a wholly-owned subsidiary of the Company, which
statements reflect total assets constituting 8% in 1994 and 6% in 1993 and total
revenues constituting 12% in 1994, 10% in 1993 and 11% in 1992 of the related
consolidated totals. Those financial statements and schedules were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to data included for the Company's wholly-owned subsidiary, is
based solely on the report of other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Wellman, Inc. at
December 31, 1994 and 1993, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting principles. Also, in our
opinion, based on our audits and the report of other auditors, the related
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
As discussed in note 1 to the consolidated financial statements, in 1993 the
Company changed its method of accounting for recoveries related to environmental
liabilities and its method of valuing certain inventories.
ERNST & YOUNG LLP
Charlotte, North Carolina
February 14, 1995
31
<TABLE>
<CAPTION>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1994, 1993 and 1992
(In thousands)
Balance at Charged to Balance
Beginning Costs and at End
Description of Year Expenses Other Deductions of Year
---------------------- --------- --------- ------- ---------- -------
Allowance for doubtful
accounts receivable:
<S> <C> <C> <C> <S> <C> <C>
Year ended
December 31, 1994 $4,232 $1,101 $155 (a) $ 755(b) $ 4,733
====== ====== ======== ========= =======
Year ended
December 31, 1993 $4,443 $ 702 $(60)(a) $ 853(b) $ 4,232
====== ====== ======== ========= =======
Year ended
December 31, 1992 $5,345 $ 646 $(39)(a) $1,509(b) $ 4,443
====== ====== ======== ========= =======
</TABLE>
(a) Primarily foreign currency translation adjustments.
(b) Accounts written off.
32
Item 9. CHANGES IN and DISAGREEMENTS with ACCOUNTANTS on ACCOUNTING and
------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
33
PART III
Item 10. DIRECTORS and EXECUTIVE OFFICERS of the REGISTRANT
------- --------------------------------------------------
"Election of Directors" in the Company's Proxy Statement for the 1995 Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
on or before April 30, 1995 is hereby incorporated by reference herein.
Item 11. EXECUTIVE COMPENSATION
------- ----------------------
"Compensation of Directors and Officers" in the Company's Proxy Statement
for the 1995 Annual Meeting of Stockholders to be filed with the Securities and
Exchange Commission on or before April 30, 1995 is hereby incorporated by
reference herein. Such incorporation by reference shall not be deemed to
specifically incorporate by reference the information referred to in Item
402(a)(8) of Regulation S-K.
Item 12. SECURITY OWNERSHIP of CERTAIN BENEFICIAL OWNERS and MANAGEMENT
------- --------------------------------------------------------------
"Introduction" and "Election of Directors" in the Company's Proxy Statement
for the 1995 Annual Meeting of Stockholders to be filed with the Securities and
Exchange Commission on or before April 30, 1995 is hereby incorporated by
reference herein.
Item 13. CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS
------- ----------------------------------------------
"Compensation of Directors and Officers" in the Company's Proxy Statement
for the 1995 Annual Meeting of Stockholders to be filed with the Securities and
Exchange Commission on or before April 30, 1995 is hereby incorporated by
reference herein.
34
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, and REPORTS on FORM 8-K
------- ----------------------------------------------------------------
(a) 1. Financial Statements
--------------------
The consolidated financial statements included in Item 8 are filed
as part of this annual report.
2. Financial Statement Schedules
-----------------------------
The consolidated financial statement schedules included in Item 8
are filed as part of this annual report.
3. Exhibits
--------
Exhibit Number Description
-------------- -----------
3(a)(1) Restated Certificate of Incorporation (Exhibit 3.1 of the
Company's Registration Statement on Form S-1, File No.
33-13458, refiled as Exhibit 3(a)(1) of the Company's Form
10-K for the year ended December 31, 1993, incorporated by
reference herein)
3(a)(2) Certificate of Amendment to Restated Certificate of
Incorporation (Exhibit 3(a)(2) of the Company's Registration
Statement on Form S-4, File No. 33-31043, refiled as Exhibit
3(a)(2) of the Company's Form 10-K for the year ended
December 31, 1993, incorporated by reference herein)
3(a)(3) Certificate of Amendment to Restated Certificate of
Incorporation (Exhibit 28 of the Company's Registration
Statement on Form S-8, File No. 33-38491, refiled as Exhibit
3(a)(3) of the Company's Form 10-K for the year ended
December 31, 1993, incorporated by reference herein)
3(a)(4) Certificate of Amendment to Restated Certificate of
Incorporation (Exhibit 3(c)(4) of the Company's Form 10-K for
the year ended December 31, 1993 incorporated by reference
herein)
3(b) By-Laws, as amended (Exhibit 3(b) of the Company's Form 10-K
for the year ended December 31, 1993 incorporated by
reference herein)
4(a) Loan Agreement dated February 8, 1995 by and between the
Company and Fleet National Bank, as agent, and certain other
financial institutions
4(b) Credit Facilities dated July 1994 between WIL and Ulster
Investment Bank Limited, Ulster Bank Ltd. and Ulster Bank
Group Treasury Ltd.
4(c) Credit Facilities dated August 1994 between WIL and Bank of
Ireland Corp. Ltd.
4(d) Registration Rights Agreement dated as of August 12, 1985 by
and among the Company, Thomas M. Duff, John L. Dings, Alex
Holder, Calvin Hughes, Frank McGuire and others (Exhibit 4.7
of the Company's Registration Statement on Form S-1, File No.
33-13458, incorporated by reference herein)
35
4(e) Loan Agreement between South Carolina Jobs - Economic
Development Authority (the "Authority") and the Company dated
as of December 1, 1990 (Exhibit 4(n) of the Company's Form
10-K for the year ended December 31, 1990 incorporated by
reference herein)
4(f) First Supplemental Loan Agreement between the Authority and
the Company dated as of April 1, 1991 (Exhibit 4(a) of the
Company's Form 10-Q for the quarter ended June 30, 1991
incorporated by reference herein)
4(g) Note Purchase Agreement dated as of June 14, 1991 between the
Company and the Purchasers named in Schedule I thereto
(Exhibit 4(b) of the Company's Form 10-Q for the quarter
ended June 30, 1991 incorporated by reference herein)
4(h) Rights Agreement dated as of August 6, 1991 between the
Company and First Chicago Trust Company of New York, as
Rights Agent (Exhibit 1 to the Company's Form 8-K dated as of
August 6, 1991 incorporated by reference herein)
4(i) Loan Agreement between the Authority and the Company dated as
of June 1, 1992 (Exhibit 4(u) of the Company's Form 10-Q for
the quarter ended June 30, 1992 incorporated by reference
herein)
4(j) Note Purchase Agreement between the Company and Teachers
Insurance and Annuity Association of America dated July 28,
1992 (Exhibit 4(v) of the Company's Form 10-Q for the quarter
ended June 30, 1992 incorporated by reference herein)
4(k) Loan Agreement between the Authority and the Company, dated
as of December 1, 1992 (Exhibit 4(w) of the Company's Form
10-K for the year ended December 31, 1992 incorporated by
reference herein)
4(l) Promissory Note dated May 15, 1992 of the Company to the City
of Florence, SC (Exhibit 4(x) of the Company's Form 10-K for
the year ended December 31, 1992 incorporated by reference
herein)
4(m)(1) Loan note participations with the Sumitomo Bank, Limited
dated July 27, 1992, Istituto Bancario San Paolo di Torino
S.p.A. dated January 4, 1992 (Exhibit 4(y) of the Company's
Form 10-K for the year ended December 31, 1992 incorporated
by reference herein)
4(m)(2) Loan note participations with the Banco di Napoli dated
February 17, 1994, First Fidelity Bank, N.A. dated June 13,
1994, Chemical Bank New Jersey, National Association dated
June 13, 1994, Midlantic National Bank dated March 15, 1994
(Exhibit 4(y)(2) of the Company's Form 10-Q for the quarter
ended June 30, 1994 incorporated by reference herein)
4(n) Promissory Note dated June 18, 1993 of the Company to Fleet
National Bank (Exhibit 4(z) of the Company's Form 10-K for
the year ended December 31, 1993 incorporated by reference
herein)
4(o) Money Market Note dated December 16, 1994 from Shawmut Bank
N.A.
36
4(p) Money Market Note dated January 17, 1995 from Monte Dei
Paschi Di Siena
Executive Compensation Plans and Arrangements
---------------------------------------------
10(a) Wellman, Inc. 1985 Amended and Restated Incentive Stock
Option Plan (Exhibit 4 of the Company's Registration
Statement on Form S-8/S-3, File No. 33-54077, incorporated by
reference herein)
10(b)(1) Employment Agreement dated as of January 1, 1990 between the
Company and Thomas M. Duff
10(b)(2) Second Amendment to Employment Agreement dated as of January
1, 1995 between the Company and Thomas M. Duff
10(c) Employment Agreement dated as of December 1, 1994 between the
Company and Clifford J. Christenson
10(d) Service Agreement dated as of June 26, 1991 between Wellman
International Investments Limited and Charles William
Beckwith (Exhibit 10(g) of the Company's Form 10-K for the
year ended December 31, 1991 incorporated by reference
herein)
10(e) Employment Agreement dated as of December 1, 1994 between the
Company and Keith R. Phillips
10(f) Employment Agreement dated as of December 1, 1994 between the
Company and James P. Casey
10(g) Employment Agreement dated as of December 1, 1994 between the
Company and Paul D. Apostol
10(h) Directors Stock Option Plan dated as of December 2, 1991
(Exhibit 4(a) of the Company's Registration Statement on Form
S-8, File No. 33-44822, incorporated by reference herein)
10(i) Management Incentive Compensation Plan (Exhibit 10(h) of the
Company's Form 10-K for the year ended December 31, 1993
incorporated by reference herein)
10(j) Summary of Executive Life Insurance Plan (Exhibit 10.22 of
the Company's Registration Statement on Form S-1, File No.
33-13458, incorporated by reference herein)
10(k) Description of Directors' Restricted Stock Plan
10(l) Directors Deferred Compensation Plan
10(m) Amended and Restated Directors' Retirement Plan
10(n) Executive Retirement Restoration Plan
37
Other Material Agreements
-------------------------
10(o) Environmental Agreement dated as of August 8, 1985, by and
among the Company, Arthur O. Wellman, Jr., and Edward R.
Sacks (Exhibit 10.12 of the Company's Registration Statement
on Form S-1, File No. 33-13458, incorporated by reference
herein)
10(p) Post-Closing Escrow Agreement dated August 12, 1985 by and
among the Company, Arthur O. Wellman, Jr., Edward R. Sacks
and certain other parties (Exhibit 10.2 of the Company's
Registration Statement on Form S-1, File No. 33-13458,
incorporated by reference herein)
10(q) Letter Agreement, relating to certain environmental matters,
dated August 17, 1987, by and among Fiber Industries, Inc.
(FI), Hoechst Celanese Corp. (HCC) and Celanese Fibers Inc.
(Celanese) (Exhibit 10.3 of FI's Registration Statement on
Form S-1, File No. 33-20626, incorporated herein by
reference)
10(r) Trademark Assignment and License, dated January 28, 1988, by
and among FI, HCC and Celanese (Exhibit 10.14 of FI's
Registration Statement on Form S-1, File No. 33-20626,
incorporated herein by reference)
23(a) Consent of Ernst & Young LLP
23(b) Consent of KPMG Stokes Kennedy Crowley
28(a) Report of KPMG Stokes Kennedy Crowley
(b) Reports on Form 8-K
-------------------
None.
38
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, on March 27, 1995.
WELLMAN, INC.
By /s/ Thomas M. Duff
-------------------
President
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 in the capacities indicated on March 27, 1995.
Signatures Title
---------- -----
/s/ Thomas M. Duff President, Chief Executive Officer
------------------------- and Director (Principal Executive Officer)
/s/ Keith R. Phillips Vice President, Chief Financial
------------------------- Officer and Treasurer (Principal
Financial Officer)
/s/ Mark J. Rosenblum Vice President, Controller
------------------------- (Principal Accounting Officer)
/s/ James B. Baker Director
-------------------------
/s/ C. William Beckwith Director
-------------------------
/s/ Peter H. Conze Director
-------------------------
Allan R. Dragone Director
/s/ Richard F. Heitmiller Director
-------------------------
/s/ Jonathan M. Nelson Director
-------------------------
/s/ James E. Rogers Director
-------------------------
/s/ Raymond C. Tower Director
-------------------------
/s/ Roger A. Vandenberg Director
-------------------------
EXHIBIT 4(a)
LOAN AGREEMENT
BY AND BETWEEN
WELLMAN, INC.
AND
FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT,
AND
THE OTHER FINANCIAL INSTITUTIONS NOW OR
HEREAFTER PARTIES HERETO
$330,000,000
------------
REVOLVING CREDIT LOAN
---------------------
February 8, 1995
BA Securities, Inc., as Syndication Agent
Wachovia Bank of Georgia, N.A., as Co-Lead
INDEX TO
LOAN AGREEMENT
--------------
Page
ARTICLE I DEFINITIONS AND ACCOUNTING AND OTHER TERMS 1
Section 1.01. Certain Defined Terms. 1
Section 1.02. Accounting Terms. 19
Section 1.03. Other Terms. 19
ARTICLE II AMOUNT AND TERMS OF THE LOANS 19
Section 2.01. The Loans. 19
(A) The Competitive Bid Loans. 19
(B) The Revolving Credit Loans. 26
(C) Funding and Pro Rata Shares. 27
Section 2.02. Interest and Fees on the Loans. 28
(A) Interest. 28
(B) Facility and Other Fees. 29
(C) Increased Costs - Capital. 30
Section 2.03. Notations. 32
Section 2.04. Computation of Interest and Fees. 32
Section 2.05. Time of Payments and Prepayments in
Immediately Available Funds and Setoff. 33
(A) Time. 33
(B) Setoff, etc. 34
(C) Unconditional Obligations and No
Deductions. 34
Section 2.06. Prepayment and Certain Payments. 35
(A) Voluntary Prepayments. 35
(B) Absence of Designation of Payment or
Prepayment. 35
(C) Competitive Bid Loan. 36
Section 2.07. Interest Rate Elections. 37
Section 2.08. Interest in Absence of Interest Rate Election.
39
Section 2.09. Permanent Reduction of Commitment. 39
Section 2.10. Special Libor Loan Provisions. 39
(A) Requests. 40
(B) Libor Loans Unavailable. 40
(C) Libor Lending Unlawful. 41
(D) Additional Costs on Libor Loans. 42
(E) Libor Funding Losses. 44
(F) Banking Practices. 45
(G) Borrower's Option on Unavailability
or Increased Cost of Libor Loans. 45
Section 2.11. Special CD Rate Loan Provisions. 46
(A) CD Rate Loans Unavailable or Unlawful. 46
(B) Additional Costs on CD Rate Loans. 47
i
(C) CD Rate Funding Losses. 49
(D) Banking Practices. 49
(E) Borrower's Option on Unavailability
or Increased Cost of CD Rate Loans 50
Section 2.12. Certain References. 50
Section 2.13. Payment on Non-Business Days. 51
Section 2.14. Use of Proceeds. 51
Section 2.15. Banks' Maximum Commitments. 51
Section 2.16. Replacement of Bank. 51
Section 2.17. Pro Rata Treatment. 52
Section 2.18. Declaration of Invalidation. 53
Section 2.19. Pro Rata Shares Pari Passu and Equal. 54
Section 2.20. Application of Funds Received by Bank. 54
ARTICLE III CONDITIONS OF LENDING 55
Section 3.01. Conditions Precedent to the Commitment and
to all Loans. 55
(A) The Commitment and Initial Loans. 55
(B) The Commitment and the Loans. 57
ARTICLE IV REPRESENTATIONS AND WARRANTIES 58
Section 4.01. Representations and Warranties of the
Borrower. 58
(A) Organization and Existence. 58
(B) Authorization and Absence of
Defaults. 58
(C) Acquisition of Consents and
Environmental Matters. 59
(D) Validity and Enforceability. 59
(E) Financial Information. 59
(F) No Litigation. 60
(G) Regulation U. 60
(H) Absence of Adverse Agreements. 61
(I) Taxes. 61
(J) ERISA. 61
(K) Ownership of Properties. 62
(L) Accuracy of Representations and Warranties. 62
(M) No Investment Company. 63
(N) Solvency, etc. 63
(O) Ownership Interests. 63
(P) Licenses, Registrations, Compliance
with Laws, etc. 63
(Q) Principal Place of Business; Books and Records. 64
ARTICLE V COVENANTS OF THE BORROWER 64
Section 5.01. Affirmative Covenants of the Borrower
Other than Reporting Requirements. 64
(A) Payment of Taxes, etc. 64
(B) Maintenance of Insurance. 64
(C) Preservation of Existence, etc. 64
(D) Compliance with Laws, etc. 65
(E) Visitation Rights. 65
(F) Keeping of Records and Books of
Account. 65
ii
(G) Maintenance of Properties, etc. 65
(H) Accounting System. 66
(I) Other Documents, etc. 66
(J) EBIT Coverage. 66
(K) Leverage Ratio. 66
(L) Officer's Certificates and Requests. 66
(M) Depository. 66
Section 5.02. Negative Covenants of the Borrower. 66
(A) Liens, etc. 67
(B) Dissolution, etc. 68
(C) Hostile Takeovers. 68
(D) Compliance with ERISA. 69
(E) Restricted Guaranties. 69
Section 5.03. Reporting Requirements. 69
Section 5.04. Confidential Financial Information. 72
ARTICLE VI EVENTS OF DEFAULT 73
Section 6.01. Events of Default. 73
ARTICLE VII REMEDIES OF BANKS 76
ARTICLE VIII ADMINISTRATIVE AGENT 77
Section 8.01. Appointment. 77
Section 8.02. Powers; General Immunity. 77
(A) Duties Specified. 77
(B) No Responsibility for Certain Matters. 78
(C) Exculpatory Provisions. 78
(D) Agent Entitled to Act as Bank. 79
Section 8.03. Representations and Warranties; No Responsibility
for Appraisal of Creditworthiness. 79
Section 8.04. Right to Indemnity. 79
Section 8.05. Payee of Note Treated as Owner. 80
Section 8.06. Resignation by Agent. 80
Section 8.07. Successor Agent. 81
ARTICLE IX MISCELLANEOUS 81
Section 9.01 Consent to Jurisdiction and Service of
Process. 81
Section 9.02. Indemnification. 83
Section 9.03. Rights and Remedies Cumulative. 84
Section 9.04. Delay or Omission Not Waiver. 84
Section 9.05. Waiver of Stay or Extension Laws. 85
Section 9.06. Amendments, etc. 85
Section 9.07. Addresses for Notices, etc. 86
Section 9.08. Costs, Expenses and Taxes. 87
Section 9.09. Participations. 88
Section 9.10. Binding Effect. 89
Section 9.11. Substitutions and Assignments. 89
Section 9.12. Actual Knowledge. 93
Section 9.13. Governing Law. 93
Section 9.14. Severability of Provisions. 93
Section 9.15. Headings. 94
Section 9.16. Counterparts. 94
Section 9.17. Integration. 94
iii
SCHEDULE OF EXHIBITS
--------------------
EXHIBIT A-1 Competitive Bid Loan Note
EXHIBIT A-2 Revolving Credit Note
EXHIBIT B Form of Request
EXHIBIT B-1 Competitive Bid Loan Request
EXHIBIT B-2 Competitive Bid Loan Offer
EXHIBIT B-3 Competitive Bid Loan Acceptance
EXHIBIT C Interest Rate Election Form
EXHIBIT D Compliance Certificate Form
EXHIBIT E Opinion of the Borrower's Counsel
EXHIBIT F Pending Litigation, etc.
EXHIBIT G Ownership Interests in Subsidiaries
EXHIBIT H Liens, etc.
EXHIBIT I Pro Rata Shares
EXHIBIT J Form of Substitution Agreement
iv
LOAN AGREEMENT
Dated as of February 8, 1995
WELLMAN, INC., a corporation organized under the laws of the State of
Delaware and having its principal place of business at Shrewsbury Executive
Center, 1040 Broad Street, Suite 302, Shrewsbury, New Jersey 07702 (the
"Borrower"), and FLEET NATIONAL BANK, a national banking association organized
under the laws of the United States and having a head office at 111 Westminster
Street, Providence, Rhode Island 02903 individually and in its capacity as agent
for itself and the other Banks (defined below) under this Agreement and the
Related Documents (defined below) and with respect to the Loans (defined below)
(Fleet National Bank, in its individual capacity, is hereinafter referred to as
a "Bank", and (except as otherwise indicated), in its capacity as agent, is
hereinafter referred to as "Agent"), Wachovia Bank of Georgia, N.A., as Co-Lead,
and the other Banks which presently are or hereafter become parties hereto,
hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING AND OTHER TERMS
Section 1.01. Certain Defined Terms.
------------ ---------------------
As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Adjusted CD Rate" means, with respect to any CD Rate Loan to be made
by the Banks for its Interest Period, the interest rate per annum determined by
Agent (fixed throughout such Interest Period (subject to adjustments for
Statutory Reserves) and rounded upwards, if necessary, to the next 1/16 of 1%)
which is equal to the sum of (A) the Assessment Rate and (B) the product of (i)
the Fixed Certificate of Deposit Rate in effect for such Interest Period
multiplied by (ii) the Statutory Reserves. The term "Fixed Certificate of
Deposit Rate" means the arithmetic average (rounded to the nearest 1/16 of 1%
or, if there is no nearest 1/16 of 1%, the next highest 1/16 of 1%) of the
prevailing rate per annum bid at 10:00 A.M. or as soon thereafter as is
practicable on the first Business Day of the Interest Period for such CD Rate
Loan by two or more certificate of deposit dealers of recognized standing
located in New York, New York and selected by each Reference Bank in its
discretion for the purchase at face value from such Reference Bank of
certificates of deposit of such Reference Bank in an amount approximately equal
to the principal amount of the CD Rate Loan in question to be made by the Banks
and with a maturity approximately equal to such Interest Period. "Statutory
Reserves" means a fraction (expressed as a decimal), the numerator of which is
the number one and the denominator of which is the number one minus the average
of the aggregate of the maximum reserve percentages (without duplication, but
including, without limitation, any basic, supplemental, emergency or marginal
reserve requirement then in effect) expressed as a decimal established by the
Board of Governors of the Federal Reserve System and any other banking authority
to which each Reference Bank is subject for new negotiable nonpersonal time
deposits in Dollars in the United States in the amount of such CD Rate Loan with
maturities approximately equal to the applicable Interest Period, such reserve
requirements including, without limitation, those imposed under Regulation D of
such Board of Governors, as same may be amended from time to time. Statutory
Reserves shall be adjusted automatically on and as of the effective date of any
change in such reserve percentage.
"Adjusted Indebtedness" shall have the meaning assigned thereto in the
definition of Leverage Ratio set forth herein.
"Adjusted Libor Rate" means, with respect to any Libor Loan to be made
by the Banks for its Interest Period, the interest rate per annum determined by
Agent (fixed throughout such Interest Period (subject to adjustments for the
Libor Rate Reserve Percentage) and rounded upwards, if necessary, to the next
1/16 of 1%) which is equal to the quotient of (i) (a) the rate of interest at
which Dollar deposits are offered in the London interbank market in an amount
approximately equal to the principal of such Libor Loan for a period of time
equal to such Interest Period that appears on the Telerate Page 3750 as of 11:00
a.m. London time two Business Days prior to the Business Day on which such
Interest Period begins or, (b) if no such rate appears on the Telerate Page
3750, the rate of interest determined by Agent to be the average of up to four
interest rates per annum at which Dollar deposits are offered in the London
interbank market in an amount approximately equal to the principal amount of
such Libor Loan, for a period of time equal to such Interest Period which appear
on the Reuter's Screen LIBO Page as of 11:00 a.m. London time two Business Days
prior to the Business Day on which such Interest Period begins if at least two
such offered rates so appear on the Reuter's Screen LIBO Page or (c) if no such
rate appears on the Telerate Page 3750 and fewer than two offered rates appear
on the Reuter's Screen LIBO Page, the rate of interest determined by Agent to be
the average of the interest rates per annum at which Dollar deposits are offered
to each Reference Bank by first-class banks in the London interbank market at
approximately 11:00 a.m., London time, two Business Days prior to the Business
Day on which such Interest Period begins, in an amount approximately equal to
the principal amount of such Libor Loan, for a period of time equal to such
Interest Period and (ii) a number equal to the number one minus the Libor Rate
Reserve Percentage. The "Libor Rate Reserve Percentage" applicable to any
Interest Period means the average of the maximum effective rates (expressed as a
decimal) of the statutory reserve requirements (without duplication, but
including, without limitation, basic, supplemental, marginal and emergency
reserves) applicable to each Reference Bank during such Interest Period under
regulations of the Board of Governors of the Federal Reserve System (or any
successor), including without limitation Regulation D or any other regulation
dealing with maximum reserve requirements which are applicable to each Reference
Bank with respect to its "Eurocurrency Liabilities", as that term may be defined
from time to time by the Board of Governors of the Federal Reserve System (or
any successor) or which in any other respect relate directly to the funding of
loans bearing interest at rates based on the interest rates at which Dollar
deposits in immediately available funds are offered to banks by first-class
banks in the London interbank market. If any Reference Bank fails to provide
its offered quotation to Agent, the Adjusted Libor Rate shall be determined on
the basis of the offered quotation(s) of the other Reference Bank(s). The
Adjusted Libor Rate shall be adjusted automatically on and as of the effective
date of any change in the Libor Rate Reserve Percentage.
"Affiliate" means singly and collectively, any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, the Borrower, and the legal representative,
successor or assign of any such Person. For purposes of this definition, a
Person shall be deemed to be "controlled by" the Borrower if the Borrower
possesses, directly or indirectly, power either to (i) vote 10% or more of the
securities having ordinary voting power for the election of directors of such
Person or (ii) direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Agent" means Fleet National Bank in its capacity as administrative
agent for itself and the other Banks under this Agreement and the Related
Documents and with respect to the Loans and any other financial institution
acting as a successor administrative agent under this Agreement and the Related
Documents and with respect to the Loans in accordance with Sections 8.06 and
8.07.
2
"Agreement" means this loan agreement, as same may be amended,
supplemented or otherwise modified from time to time.
"A.M." means a time from and including 12 o'clock midnight to and
excluding 12 o'clock noon on any Business Day using Providence, Rhode Island
time.
"Applicable Margin" means the percentage rate set forth below opposite
the Borrower's Leverage Ratio for the most recently completed fiscal quarter of
the Borrower for which Agent has received the financial statements required by
the terms of Section 5.03(C) hereof, or, with respect to the last fiscal quarter
of any fiscal year of the Borrower, for which Agent has received the audited
financial statements required by the terms of Section 5.03(B) hereof, any change
in the Applicable Margin to become retroactively effective (subject to the
provisions of Section 2.02(A)(ii)) as of the first day of the fiscal quarter
immediately following the end of the fiscal quarter or fiscal year to which such
financial statements relate (but in no event to a date prior to the Drawdown
Date, the Applicable Margin for the period from the Drawdown Date to the next
fiscal quarter end to be based on the Leverage Ratio for the Borrower's fiscal
quarter ending December 31, 1994), in each instance determined for Reference
Rate Loans, Libor Loans and CD Rate Loans, respectively:
Applicable Margin
--------------------
Reference CD
Rate Libor Rate
Leverage Ratio Loans Loans Loans
-------------- ----- ----- -----
Greater than 0.50 to 1 0% .50% .625%
Less than or equal to
0.50 to 1 but greater than
or equal to 0.40 to 1 0% .325% .450%
Less than
0.40 to 1 but
greater than or equal to
0.30 to 1 0% .25% .375%
Less than 0.30 to 1 0% .20% .325%
"Assessment Rate" means the rate for determining the then current
annual assessment payable by Agent to the Federal Deposit Insurance Corporation
(or any successor) for insuring time deposits made in Dollars at offices of
Agent in the United States as estimated by Agent (in good faith and based upon
such assessment for the immediately preceding calendar year) on the first day of
the Interest Period for the CD Rate Loan in question.
"Bank" or "Banks" means any financial institution which now is a party
to this Agreement or which hereafter becomes a party to this Agreement pursuant
to Section 2.02(C), 2.16 or 9.11.
"Borrowed Money" means with respect to Borrower the aggregate amount,
without duplication, of the following items as and to the extent reflected on
Borrower's consolidated balance sheet (exclusive of any such item only required
to be disclosed in a note to such balance sheet) prepared in accordance with
GAAP ("Borrower's GAAP Balance Sheet"): (a) all obligations for borrowed money;
(b) all Capitalized Lease Obligations; and (c) all obligations evidenced by
bonds, debentures, the Notes, other promissory notes or other similar
instruments.
3
"Borrower" has the meaning assigned in the first paragraph of this
Agreement.
"Borrower fiscal quarter" means any fiscal quarter of any fiscal year
of the Borrower.
"Borrower's GAAP Balance Sheet" has the meaning assigned in the
definition of Borrowed Money.
"Business Condition" means, with respect to any Person, such Person's
business, properties, earnings or condition (financial or other).
"Business Day" means (i) for all purposes other than as covered by
clause (ii) below, any day on which banks in Providence, Rhode Island or New
York, New York are not authorized or required to close; and (ii) with respect to
all notices and determinations in connection with, and payments of principal and
interest on, Libor Loans, any day which is a Business Day described in clause
(i) and which is also a day for trading by and between banks in Dollar deposits
in the London interbank market.
"Capitalized Lease Obligations" means all lease obligations which have
been in accordance with GAAP, capitalized on the books of the lessee.
"CD Rate" means, for any Interest Period, the Adjusted CD Rate in
effect on the first day of such Interest Period (subject to adjustment as
provided in the definition of Adjusted CD Rate) plus the Applicable Margin for
CD Rate Loans from time to time in effect.
"CD Rate Loan" means a Loan other than a Competitive Bid Loan bearing
interest at the CD Rate.
"Closing Date" means the date on which all of the conditions precedent
set forth in Section 3.01(A) other than Section 3.01(A)(f) and (m) have been
satisfied.
"Code" means the Internal Revenue Code of 1986 as amended from time to
time or any successor federal code.
"Commitment" means with respect to any Bank, such Bank's commitment to
make its Pro Rata Share of the Revolving Credit Loans as set forth in Section
2.01(B) up to the maximum outstanding amounts permitted in Section 2.01(B), as
adjusted for any voluntary reductions in the amount thereof pursuant to the
terms of Section 2.09 and, with respect to all of the Banks, the aggregate of
such commitments.
"Commonly Controlled Entity" means a Person, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 414(b), (c), (m) or (o) of the Code.
"Competitive Bid Loan" means a Loan evidenced by a Competitive Bid
Note made pursuant to and in accordance with Section 2.01(A).
"Competitive Bid Loan Acceptance" means a Competitive Bid Loan
acceptance in the form of Exhibit B-3 duly completed and delivered to the Agent
by the Borrower in accordance with Section 2.01(A).
"Competitive Bid Loan Note" means each promissory note of the Borrower
payable to the order of a Bank substantially in the form of Exhibit A-1 and
executed, delivered and completed by the Borrower.
4
"Competitive Bid Loan Offer" means a Competitive Bid Loan offer in the
form of Exhibit B-2 duly completed and delivered by a Bank in accordance with
Section 2.01(A).
"Competitive Bid Loan Request" means a written request for a
Competitive Bid Loan in substantially the form of Exhibit B-1 received by Agent
from the Borrower at the time and on the Business Day established under Section
2.01(A)(i).
"Consolidated Stockholders' Equity" means at any date the consolidated
stockholders' equity of the Borrower as set forth in the consolidated balance
sheet of the Borrower and its Subsidiaries most recently delivered to Agent
pursuant to Section 5.03(B) or (C) less an amount equal to the aggregate
redemption price of any outstanding shares of preferred stock of the Borrower
or any Subsidiary at such date which are unconditionally required by their terms
to be redeemed by the Borrower or any Subsidiary on or before February 8, 2000,
in each case determined in accordance with GAAP.
"Consolidated Tangible Assets" means, at any particular time, the
aggregate amount of all assets of Borrower and its Subsidiaries, less cost in
excess of net assets acquired, as set forth on the most recent Borrower's GAAP
Balance Sheet.
"Default" means an event or condition which with the giving of notice
or lapse of time or both would become an Event of Default.
"Delinquent Bank" means any Bank which fails to make available to
Agent such Bank's Pro Rata Share of any of the Loans in accordance with this
Agreement; provided that the failure of any of the Banks to so forward its Pro
Rata Share of any Libor Loan or CD Rate Loan due to the occurrence of one or
more of the events described in Section 2.10(B) or (C) or 2.11(A) for a period
of less than ninety (90) consecutive days in any instance shall not be deemed a
failure to so forward such Bank's Pro Rata Share of any Loan so long as such
Bank so forwards its Pro Rata Share of such Loan at the Reference Rate.
"Discharged Rights and Obligations" has the meaning assigned thereto
in Section 9.11.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Drawdown Date" means the date on which all of the conditions
precedent set forth in Section 3.01(A) have been satisfied and the initial
Revolving Credit Loan or Competitive Bid Loan is advanced to the Borrower.
"EBIT" means, for any fiscal period of the Borrower, Borrower's Net
Income from Continuing Operations for such fiscal period plus the amount of
income tax expense for such fiscal period, minus income tax benefit for such
fiscal period, plus Interest Expense for such fiscal period, minus interest
income for such fiscal period, all determined on a consolidated basis in
accordance with GAAP.
"EBIT Coverage" means the ratio of the sum of the Borrower's EBIT for
the four most recently completed fiscal quarters of the Borrower to the sum of
Interest Expense net of interest income for the four most recently completed
fiscal quarters of the Borrower, such ratio to first be calculated for the
Borrower's fiscal quarter ending December 31, 1994 and the immediately
preceding three Borrower fiscal quarters.
"ERISA" means the Employee Retirement Income Security Act of 1974 as
amended from time to time or any successor federal code.
5
"Events of Default" has the meaning assigned to that term in Section
6.01 of this Agreement.
"Exhibit" means, when followed by a letter, the exhibit attached to
this Agreement bearing that letter and by such reference fully incorporated in
this Agreement.
"Facility Fee" means the fee payable to the Agent for the pro rata
account of each Bank as set forth in Section 2.02(B)(i).
"Facility Fee Percentage" means the percentage rate set forth below
opposite the Borrower's Leverage Ratio for the most recently completed fiscal
quarter of the Borrower for which the Agent has received the financial
statements required by the terms of Section 5.03(C) hereof, or, with respect to
the last fiscal quarter of any fiscal year of the Borrower, for which the Agent
has received the audited financial statements required by the terms of Section
5.03(B) hereof, any change in the Facility Fee Percentage to become
retroactively effective (subject to the provisions of Section 2.02(B)(i)) as of
the first day of the fiscal quarter immediately following the end of the fiscal
quarter or fiscal year to which such financial statements relate (but in no
event to a date prior to the Drawdown Date, the Facility Fee Percentage for the
period from the Drawdown Date to the next fiscal quarter end to be based on the
Leverage Ratio for the Borrower's fiscal quarter ending December 31, 1994:
Leverage Ratio Facility Fee
-------------- -------------
Greater than 0.50 to 1 .25%
Less than or equal to
0.50 to 1 but greater than
or equal to 0.40 to 1 .175%
Less than 0.40 to 1
but greater than or equal to
0.30 to 1 .125%
Less than 0.30 to 1 .100%
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York, provided that (i) if such day
is not a Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next succeeding Business Day as so published, and (ii)
if no such rate is so published on such next succeeding Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to Agent on
such day on such transactions as determined by Agent.
"Fiber" means Fiber Industries, Inc., a Delaware corporation which is
whollyowned by Prince.
"Fiber Guaranty" means that certain guaranty by Fiber dated as of the
date hereof, and guarantying all Indebtedness of the Borrower then or thereafter
owing to Agent and/or the Banks pursuant to this Agreement and the Notes, as the
same may be amended, restated, supplemented or otherwise modified from time to
time.
6
"GAAP" means generally accepted accounting principles in effect from
time to time in the United States of America.
"Hostile Takeover" means the offer of the Borrower, Prince, and/or any
Subsidiary to acquire from the holders of securities of another Person (the
"Target") which has a class of equity securities registered under the Securities
Exchange Act of 1934, as amended, (the "Act") 30% or more of the total voting
power of any class of such Target's Voting Stock where there has been a public
announcement or commencement of the offer within the meaning of Rule 14d-2 under
the Act, if the Target's senior management or board of directors has stated or
at any time while the offer is outstanding states publicly (through the filing
of a Schedule 14D-9 with the Securities and Exchange Commission or otherwise),
its intention to oppose the acquisition by the Borrower, Prince and/or any
Subsidiary of the Target's Voting Stock or has advised or recommended to the
holders of the securities to which such offer relates that such holders reject
such offer or take any action other than to accept such offer, and such offer
shall be deemed a "Hostile Takeover" for purposes hereof from the time such
intention is so stated until such statement is withdrawn or the Target's senior
management and board of directors advise or recommend to the holders of the
securities to which the such offer relates that such holders accept such offer.
"Indebtedness" means, for any Person, without duplication, (i) all
indebtedness or other obligations of said Person for Borrowed Money, including,
without limitation, all reimbursement obligations of said Person with respect to
commercial letters of credit and all obligations of said Person for the deferred
purchase price of property or services, (ii) all indebtedness or other
obligations of any other Person ("Other Person") for Borrowed Money,
reimbursement obligations of any Other Person with respect to commercial letters
of credit and all obligations of any Other Person for the deferred purchase
price of property or services, the payment or collection of which said Person
has guaranteed (except by reason of endorsement for collection in the ordinary
course of business) or in respect of which said Person is liable, contingently
or otherwise, including, without limitation, liable by way of agreement to
purchase or lease, to provide funds for payment, to supply funds to purchase,
sell or lease property or services primarily to assure a creditor of such Other
Person against loss or otherwise to invest in or make a loan to the Other
Person, or otherwise to assure a creditor of such Other Person against loss,
(iii) all indebtedness or other obligations of any Other Person for Borrowed
Money or for the deferred purchase price of property or services secured by (or
for which the holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in any property owned by said
Person, whether or not said Person has assumed or become liable for the payment
of such indebtedness or obligations, (iv) Capitalized Lease Obligations of said
Person and (v) all other liabilities or obligations of said Person which would,
in accordance with GAAP, be classified as liabilities of such a Person.
"Initial Agreement" means that certain Loan Agreement dated as of
December 7, 1990 by and between the Borrower, Agent, and certain other
financial institutions party thereto, as amended to date.
"Interest Adjustment Date" means (i) as to any Reference Rate Loan the
Business Day elected by the Borrower in its applicable Interest Rate Election,
but being not less than (a) three (3) Business Days (or four (4) Business Days
in the case of an Interest Rate Election as to which the consent of the Banks is
required) after the receipt by Agent before 12:00 o'clock P.M. on a Business Day
of an Interest Rate Election changing the interest rate on such Loan to the
Libor Rate and (b) two (2) Business Days (or three (3) Business Days in the case
of an Interest Rate Election as to which the consent of the Banks is required)
after the receipt by Agent before 12:00 o'clock P.M. on a Business Day of an
Interest Rate Election changing the interest rate on such Loan to the CD Rate;
7
and (ii) as to any Libor Loan, the last Business Day of the Interest Period
pertaining to such Libor Loan and (iii) as to any CD Rate Loan, the last
Business Day of the Interest Period pertaining to such CD Rate Loan.
"Interest Expense" means the aggregate amount of interest expense
reported on Borrower's consolidated statement of income.
"Interest Period" means:
(a) With respect to each Libor Loan:
(i) initially, the period commencing on the date of such Libor
Loan and ending one, two, three, six or such greater number of months
thereafter as may be acceptable to all the Banks and as the Borrower
may elect in the applicable Interest Rate Election and subject to
Section 2.07; and
(ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such Libor Loan
and ending one, two, three, six or such greater number of months
thereafter as may be acceptable to all the Banks and as the Borrower
may elect in the applicable Interest Rate Election and subject to
Section 2.07;
provided that clauses (i) and (ii) of this definition are subject to
the following:
(A) any Interest Period (other than an Interest Period determined
pursuant to clause (C) below) which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the immediately preceding Business Day;
(B) any Interest Period which begins on the last Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall, subject to
clause (C) below, end on the last Business Day of a calendar month;
(C) no Interest Period shall end after the Repayment Date; and
(D) with respect to all Libor Loans and CD Rate Loans, no more
than ten (10) Interest Periods may be in effect at any time.
(b) With respect to each CD Rate Loan:
(i) initially, the period commencing on the date of such CD Rate
Loan and ending 30, 60, 90 or 180 or such greater number of days
(being an integral multiple of 30) as may be acceptable to all of the
Banks and as the Borrower may elect in the applicable Interest Rate
Election and subject to Section 2.07; and
(ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such CD Rate Loan
and ending 30, 60, 90 or 180 or such greater number of days (being an
integral multiple of 30) as may be acceptable to all of the Banks and
as the Borrower may elect in the applicable Interest Rate Election and
subject to Section 2.07; provided that clauses (b)(i) and (ii) of this
definition are subject to the following:
8
(A) any Interest Period (other than an Interest Period determined
pursuant to clause (B) below) which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day;
(B) no Interest Period shall end after the Repayment Date; and
(C) with respect to all Libor Loans and CD Rate Loans, no more
than ten (10) Interest Periods may be in effect at any time.
"Interest Rate Election" means the Borrower's irrevocable telecopied
or telephonic notice of election, which shall be promptly confirmed by a written
notice of election that Reference Rate, the CD Rate or the Libor Rate shall
apply to all or any portion of the Loans, which shall, subject to this
Agreement, be effective on the next Interest Adjustment Date, such telecopied or
telephonic notice and written confirmation thereof to be in the form of Exhibit
B and to be received by Agent prior to 12:00 o'clock P.M. on a Business Day and
at least three (3) Business Days prior to an Interest Adjustment Date in the
case of a Libor Loan (or four (4) Business Days in the case of an Interest Rate
Election as to which the consent of the Banks is required), at least two (2)
Business Days prior to an Interest Adjustment Date in the case of a CD Rate Loan
(or three (3) business Days in the case of an Interest Rate Election as to which
the consent of the Banks is required) and at least one (1) Business Day prior to
an Interest Adjustment Date in the case of a Reference Rate Loan, each such
Interest Rate Election, subject to the terms of this Agreement, to effect a
change in the interest rate on the applicable portion of the Loans then
outstanding, with respect to which such Interest Rate Election was made, such
change to occur on the Interest Adjustment Date next succeeding receipt of such
Interest Rate Election by Agent. Any Interest Rate Election received by Agent
after 12 o'clock P.M. on a Business Day shall be deemed, for all purposes of
this Agreement, to have been received prior to 12 o'clock P.M. on the next
succeeding Business Day. Interest Rate Elections shall be effective only as to
Loans other than Competitive Bid Loans.
"Investment" means any investment in any Person whether by means of a
purchase of capital stock, notes, bonds, debentures or other evidences of
Indebtedness and/or by means of a capital or partnership contribution, loan,
deposit, advance, and/or by means of a guaranty of the Indebtedness of such
Person or otherwise.
"Leverage Ratio" means, at any date, the ratio of (A) the sum, without
duplication, of (i) Borrower's Borrowed Money at such date plus (ii) the net
present value at such date (using a discount rate equal to the interest rate at
the date the lease was entered into of U.S. Treasury Notes quoted in the Federal
Reserve Statistical Release for the date of determination with a maturity
approximately equal to the initial term of the obligation in question) of the
aggregate rentals payable over the remaining term (exclusive of any optional
extensions or renewals) of any operating lease (or in the case of leases in
related transactions or a single project the aggregate net present value
calculated as set forth above of such operating leases of Borrower or any
Subsidiary) if the net present value amount exceeds 10% of Consolidated
Stockholders' Equity determined as of such date plus (iii) any reimbursement
obligation at such date with respect to any standby letter of credit (other than
a commercial letter of credit) under which Borrower or any Subsidiary is
obligated if such obligation under such reimbursement agreement (or in the case
of any standby letters of credit issued in connection with a single project or
as part of related transactions, the aggregate amount of reimbursement
obligations existing at such date on account of such letters of credit) exceeds
10% of Consolidated Stockholders' Equity (such Borrowed Money plus the amounts
referred to in clauses (ii) and (iii) is referred to as the "Adjusted
Indebtedness") to (B) the Borrower's Consolidated Stockholders' Equity plus
Adjusted Indebtedness at such date.
9
"Libor Loan" means a Loan other than a Competitive Bid Loan bearing
interest at the Libor Rate.
"Libor Rate" means, for any Interest Period, the Adjusted Libor Rate
in effect on the first day of such Interest Period (subject to adjustment as
provided in the definition of Adjusted Libor Rate) plus the Applicable Margin
for Libor Loans from time to time in effect.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other) or other security agreement
or preferential arrangement of any kind or nature whatsoever (including without
limitation any conditional sale or other title retention agreement and any
Capitalized Lease Obligation) having substantially the same economic effect as
any of the foregoing and the filing of any financing statement under the
applicable Uniform Commercial Code or comparable law of any jurisdiction in
respect of any of the foregoing.
"Loans" and "Loan" means at any time the outstanding principal amount
of Indebtedness owed to a Bank or the Banks, pursuant to this Agreement and, if
the context so requires, the advance of funds to the Borrower pursuant to a
Request and Interest Rate Election or pursuant to a Competitive Bid Loan
Request, subject to and in accordance with this Agreement.
"Majority Banks" means (a) if the Commitment is in effect, Banks
having, as of the date of determination, Pro Rata Shares of the Commitment
totalling at least sixty percent (60%) of the Commitment, or (b) if the
Commitment has been terminated under Article VII of this Agreement, Banks having
as of the date of determination Pro Rata Shares of the Loans totalling at least
sixty percent (60%) of the Loans; provided, that with respect to any
determination to be made by the Majority Banks as to which Agent shall have
notified the Banks, if any one or more of the Banks shall have failed to notify
Agent of such Bank's or Banks' respective decision regarding such determination
within twenty (20) Business Days following such notice from Agent, the Majority
Banks shall mean Banks having, as of the date of determination, Pro Rata Shares
totalling at least sixty percent (60%) of the aggregate of such Pro Rata Shares
of the Banks which have so notified Agent within such time period.
"Material Adverse Effect" means, with respect to the Borrower, an
effect or condition which is materially adverse to the Business Condition of the
Borrower and any Material Subsidiaries taken as a whole.
"Material Subsidiary" means Prince, Fiber and any other Subsidiary
which meets any of the following conditions: (i) Investments in and advances to
such Subsidiary by the Borrower exceed 10% of Consolidated Tangible Assets as of
the end of Borrower's most recently completed fiscal year, (ii) Borrower's share
of the total Tangible Assets (after inter-company eliminations) of such
Subsidiary exceeds 10% of Consolidated Tangible Assets as of Borrower's most
recently completed fiscal year or (iii) Borrower's equity in the Net Income from
Continuing Operations of such Subsidiary (before income taxes) exceeds 10% of
Borrower's consolidated Net Income from Continuing Operations (before income
taxes) for Borrower's most recently completed fiscal year, all as determined in
accordance with GAAP; provided, however, that in the event that the Borrower
acquires a new Subsidiary, pursuant to an acquisition, merger or otherwise, the
foregoing tests shall be applied to measure whether such new Subsidiary is a
Material Subsidiary as of the consummation of the transactions pursuant to which
the Borrower acquired such new Subsidiary, and thereafter at the end of each of
the Borrower's fiscal years.
"Multiemployer Plan" means a multiemployer plan as defined in Title IV
of ERISA.
10
"Net Income" means, for any period and for any Person, the
consolidated net income (or the consolidated net loss) of such Person and its
subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP.
"Net Income from Continuing Operations" means, for any fiscal period
of any Person, such Person's Net Income for such fiscal period plus (minus)
extraordinary losses (gains) for such fiscal period, plus (minus) net charges
(credits) due to the cumulative effective of changes in accounting principles
for such fiscal period, plus (minus) charges (credits) for discontinued
operations for such fiscal period, all determined on a consolidated basis in
accordance with GAAP.
"Note" or "Notes" means any Competitive Bid Note or Competitive Bid
Notes, and any Revolving Credit Note or Revolving Credit Notes of the Borrower
payable to the order of a Bank and substantially in the form of Exhibit A-1 and
Exhibit A-2, respectively.
"Notice Day" has the meaning assigned thereto in Section 2.07(D).
"Officer's Certificate" means a certificate signed by the President,
the Chief Financial Officer or Controller of the Borrower and delivered to
Agent.
"Old Loans" means the loans made to the Borrower by certain of the
Banks and certain other financial institutions party to the Initial Agreement
pursuant to the Initial Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor federal code.
"P.M." means a time from and including 12 o'clock noon on any Business
Day to the end of such Business Day using Providence, Rhode Island time.
"Person" means an individual, corporation, partnership, joint venture,
trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained for
employees of the Borrower, Fiber, Prince or any Commonly Controlled Entity as
defined in Section 3(3) of ERISA.
"Prince" means Prince, Inc., formerly known as Wellman Delaware
Holding Inc., a Delaware corporation with a principal place of business in
Wilmington, Delaware.
"Prince Guaranty" means that certain guaranty by Prince dated as of
the date hereof and guarantying all Indebtedness of the Borrower then or
thereafter owing to Agent and/or the Banks pursuant to this Agreement and the
Notes, as the same may be amended, restated, supplemented or otherwise modified
from time to time.
"Pro Rata Share" means (i) with respect to the Commitment, each Bank's
percentage share of the Commitment as set forth immediately opposite such Bank's
name on Exhibit I, as amended from time to time, (ii) with respect to the Loans,
each Bank's percentage share of the aggregate outstanding principal balance of
the Loans, (iii) with respect to the Loans other than Competitive Bid Loans,
each Bank's percentage share of the aggregate outstanding principal balance of
the Loans other than Competitive Bid Loans, and (iv) with respect to Competitive
11
Bid Loans, each Bank's percentage share of the aggregate outstanding principal
balance of the Competitive Bid Loans, all of which shares may be expressed as a
fraction or as the percentage equivalent of a fraction, the numerator of which
is the aggregate outstanding principal balance of such Bank's Commitment or
Loans in question, as the case may be, and the denominator of which is the
aggregate outstanding principal balance of all the Commitments or Loans in
question, as the case may be.
"Reference Bank" means the following three Banks: the Agent, Wachovia
Bank of Georgia, N.A. and Bank of America Illinois and in the event any such
Bank resigns or is removed as a reference bank by direction of the Agent and the
Borrower, such other Bank as may be selected by Agent and the Borrower in their
discretion from time to time as a reference bank for purposes of determining the
Adjusted Libor Rate and/or the Adjusted CD Rate.
"Reference Rate" means the higher of (i) the floating rate of interest
per annum designated from time to time by Agent as being its "prime rate" of
interest, such interest rate to be adjusted on the effective date of any change
thereof by Agent, it being understood that such rate of interest may not be the
lowest rate of interest from time to time charged by Agent and (ii) during the
last three (3) Business Days of each calendar year and the first two (2)
Business Days of the immediately succeeding calendar year, if higher than (i),
the Federal Funds Rate plus one-half percent (.50%) per annum, such interest
rate to be adjusted on the effective date of any change thereof by the Federal
Reserve Bank of New York.
"Reference Rate Loan" means a Loan bearing interest at the Reference
Rate.
"Related Documents" means the Fiber Guaranty and the Prince Guaranty.
"Repayment Date" means the earlier to occur of (i) February 7, 2000,
or (ii) such date on which the obligations of the Borrower under any of the
Notes shall have become immediately due and payable, whether by acceleration or
otherwise.
"Reportable Event" shall have the meaning assigned to that term in
Title IV of ERISA.
"Request" means a written request for a Loan other than a Competitive
Bid Loan in the form of Exhibit B, received by Agent from the Borrower at the
time and on the Business Day stipulated for an Interest Rate Election in
accordance with this Agreement, specifying the amount of the Loan, the date on
which the Borrower desires such Loan, and accompanied by an Interest Rate
Election for such Loan.
"Restricted Guaranty" means any guaranty, or in the case of guaranties
in related transactions or a single project, any guaranties in the aggregate, by
the Borrower or any Subsidiary of Indebtedness for Borrowed Money of another
Person (other than the Borrower or any Subsidiary) if the amount for which the
Borrower and/or any Subsidiary is obligated or contingently obligated under any
such guaranty, or in the case of guaranties in related transactions or a single
project, such guaranties, exceeds ten percent (10%) of Consolidated
Stockholders' Equity; provided that any guaranty or guaranties which constitute
Borrowed Money are excluded from this definition.
"Reuters Screen LIBO Page" means the display designated as Page "LIBO"
on the Reuters Monitor Money Rate Service (or such other page as may replace
the LIBO page on that service for the purpose of displaying London interbank
offered rates of major banks).
12
"Revolving Credit Loan" means a Loan evidenced by a Revolving Credit
Note made pursuant to and in accordance with Section 2.01(B).
"Revolving Credit Note" means each promissory note of the Borrower
payable to the order of a Bank in substantially the form of Exhibit A-2.
"Section" means, when followed by a number, the section or subsection
of this Agreement bearing that number.
"Single Employer Plan" means any pension benefit plan as defined in
Section 3(2) of ERISA which is not a Multiemployer Plan.
"Subsidiary" means any corporation, if any, of which more than 50% of
the outstanding capital stock having ordinary voting power to elect a majority
of the board of directors or other managers of such corporation (irrespective of
whether or not at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by the Borrower or by
the Borrower and/or one or more Subsidiaries or the management of which
corporation is under control of the Borrower and/or any Subsidiary, directly or
indirectly through one or more Persons, and any Person which, under GAAP, should
at any time for financial reporting purposes be consolidated with the Borrower
and/or any Subsidiary.
"Substituted Bank" shall have the meaning assigned thereto in Section
9.11.
"Substitution Agreement" means a substitution agreement in the form of
Exhibit J entered into pursuant to Section 9.11 between a financial institution
and Agent (as agent for the Borrower and the Banks).
"Syndication Agent" means BA Securities, Inc., a Delaware corporation.
"Tangible Assets" means, at any particular time, the aggregate amount
of all assets of any Person, less cost in excess of net assets acquired, all
determined in accordance with GAAP.
"Telerate Page 3750" means the display designated as page "3750" on
the Telerate Service (or such other page as may replace the 3750 page on that
service or such other service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank offered
rates for U.S. dollar deposits).
"Voting Stock" of any Person means equity securities of such Person
which ordinarily have voting power for the election of directors (or Persons
performing similar functions) of such Person, whether at all times or only as
long as no senior class of securities has such voting power by reason of any
contingency.
"WIL" means Wellman International Limited, a company organized under
the laws of Ireland.
Section 1.02. Accounting Terms.
------------ ----------------
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP, for purposes of the calculations to be made
in Sections 5.01(J) and (K), calculations of amounts shall be made in accordance
with GAAP during the period of the financial statements referred to in Section
4.01(E), and all financial data submitted pursuant to this Agreement shall be
prepared in accordance with GAAP, except for interim unaudited financial
statements which may omit footnotes and may be subject to year-end audit
adjustments.
13
Section 1.03. Other Terms.
------------ -----------
The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
Section 2.01. The Loans.
------------ ---------
(A) The Competitive Bid Loans.
-------------------------
(i) Whenever the Borrower desires to incur Competitive Bid Loans,
the Borrower shall deliver to Agent, not later than 12:00 P.M. at
least one Business Day prior to the Business Day on which such
Competitive Bid Loans are to be made, a Competitive Bid Loan Request
which shall specify in each case the date of the proposed Competitive
Bid Loans, the aggregate amount of the proposed Competitive Bid Loans
(which shall be in the amount of at least Five Million Dollars
($5,000,000) and, to the extent in excess thereof in integral
multiples of One Million Dollars ($1,000,000)), and up to five (5)
maturity date(s) for repayment of the Competitive Bid Loans to be made
pursuant to such Competitive Bid Loan Request (each of which maturity
dates may not be earlier than the 7th day after the date of making
such Competitive Bid Loans or later than the first to occur of the
360th day after the date of such proposed Competitive Bid Loan and the
Repayment Date). Interest on each Competitive Bid Loan shall be
payable at the maturity of such Competitive Bid Loan. No Competitive
Bid Loan Request shall be given earlier than three Business Days
subsequent to the making or rejection of the last Competitive Bid
Loans. Agent shall promptly notify each Bank of each such Competitive
Bid Loan Request received by it from the Borrower in accordance with
Section 2.07(D).
(ii) Each Bank shall, if, in its sole discretion, it elects to do
so, irrevocably offer to make a Competitive Bid Loan to the Borrower
as part of such proposed Competitive Bid Loans at a fixed rate or
rates of interest (not to exceed more than two (2) interest rates for
each maturity requested by the Borrower) expressed as a numerical
absolute rate and specified by such Bank, by telecopying a completed
Competitive Bid Loan Offer to Agent before 9:30 A.M. on the date (the
"Reply Date") of the proposed Competitive Bid Loans specified in the
Competitive Bid Loan Request delivered with respect thereto pursuant
to Section 2.01(A)(i), setting forth the interest rate(s), maturity
date(s) and the amount(s) of each Competitive Bid Loan which such Bank
would be willing to make as part of such proposed Competitive Bid
Loans (which amounts may exceed such Bank's Commitment, but may not
exceed an amount equal to all of the Banks' Commitment less the sum of
(a) the aggregate amount of outstanding CD Rate Loans and Libor Loans
which are Revolving Credit Loans and as to which the Business Day on
which the Competitive Bid Loans in question are to be made is not an
Interest Adjustment Date for such CD Rate Loans and Libor Loans and
(b) the aggregate amount of outstanding Competitive Bid Loans after
giving effect to any concurrent repayment thereof); provided that the
minimum amount of any Bank's bid and Competitive Bid Loan shall be at
least Five Million Dollars ($5,000,000) and to the extent in excess
14
thereof, in integral multiples of One Million Dollars ($1,000,000),
and provided, further, that if Agent in its capacity as a Bank shall,
in its sole discretion, elect to make any such offer, it shall notify
the Borrower of such offer before 9:15 A.M. on the Reply Date by
telephone promptly followed by a telecopied completed Competitive Bid
Loan Offer. Agent shall give prompt notice of the Competitive Bid
Loans, if any, offered to be made by each Bank to the Borrower by
10:00 A.M. by telephone promptly followed by telecopied copies of
each Competitive Bid Loan Offer received by Agent. If any Bank shall
not notify Agent, before 9:30 A.M. on the Reply Date of its offer of a
Competitive Bid Loan, such Bank shall be deemed not to be making an
offer with respect to such Competitive Bid Loan.
(iii) The Borrower shall, in turn, before 10:30 A.M. on the Reply
Date, either
(1) cancel such Competitive Bid Loan Request by giving Agent
telephonic, immediately followed by telecopied, notice to that
effect, or
(2) accept one or more of the offers made by any Bank or
Banks pursuant to Section 2.01(A)(ii), in its sole discretion, by
giving telephonic notice, immediately followed by telecopied
completed Competitive Bid Loan Acceptances to Agent of the amount
and terms of each Competitive Bid Loan by each Bank (which amount
shall be equal to or greater than the minimum permitted amount of
a Competitive Bid Loan in accordance with Section 2.01(A)(ii), and
equal to or less than the maximum amount notified to the Borrower
by Agent on behalf of such Bank for such Competitive Bid Loan
pursuant to Section 2.01(A)(ii)) to be made by each Bank as part
of such Competitive Bid Loans, and reject any remaining offers
made by Banks pursuant to Section 2.01(A)(ii) by giving Agent
telephonic, immediately following by telecopied, notice to that
effect. Accepted Competitive Bid Loans may not exceed in the
aggregate the amount of Competitive Bid Loans requested by the
Borrower in the Competitive Bid Loan Request in question. If the
Borrower accepts any Competitive Bid Loan(s), the Borrower shall
select the Competitive Bid Loan(s) with the same maturity in
ascending order of offered interest rates. In the event that the
Borrower receives bids for Competitive Bid Loans having the same
maturity and interest rate, such Competitive Bid Loans bear
interest at an interest rate which is eligible for acceptance by
the Borrower, the Borrower desires to accept Competitive Bid Loans
in an aggregate amount which includes a portion of such bids, the
Borrower shall select a pro rata portion of each of such
Competitive Bid Loans rounded to the nearest One Million Dollars
($1,000,000) determined by multiplying the amount of Competitive
Bid Loans at such interest rate and for such maturity desired by
the Borrower by a fraction, the numerator of which shall be the
amount of such Competitive Bid Loans offered by the Bank in
question and the denominator of which shall be the aggregate
amount of all such offers; provided that if any such calculation
would result in a Competitive Bid Loan of less than the minimum
amount permitted by Section 2.01(A)(ii), the Borrower shall not
select such Competitive Bid Loans on a pro rata basis, but shall
select all or portions of such offers rounded to the nearest One
Million Dollars ($1,000,000) in such manner as to select the full
amount desired by the Borrower without causing any accepted
Competitive Bid Loan to be less than the minimum and otherwise in
the order of receipt by Agent of the bids for such accepted
Competitive Bid Loans.
15
(iv) If the Borrower notifies Agent that such Competitive Bid
Loan Request is cancelled pursuant to Section 2.01(A)(iii), Agent
shall give prompt notice thereof to the Banks and such Competitive Bid
Loan(s) shall not be made.
(v) If the Borrower accepts one or more of the offers made by the
Banks pursuant to Section 2.01(A)(iii)(2), Agent shall in turn (x)
within one-half hour after Agent receives the Borrower's telecopied
Competitive Bid Loan Acceptance notify each Bank that has made an
offer as described in Section 2.01(A)(ii), of the date, interest rate,
maturity date and amounts of the Competitive Bid Loan(s) accepted by
telecopying to each such Bank a copy of the Competitive Bid Loan
Acceptances received by Agent and (y) promptly thereafter notify each
Bank that did not offer to make a Competitive Bid Loan as part of such
Competitive Bid Loan(s), of the aggregate amount by maturity of the
Competitive Bid Loan(s) to be made.
(vi) No later than 1:00 P.M. on the Business Day on which each
Competitive Bid Loan is to be made, each Bank required to participate
therein will make available its share of such Competitive Bid Loan(s)
(as specified in Section 2.01(A)(iii) in accordance with Section
2.01(C)(i) provided that if any Competitive Bid Loan of such Bank is
maturing or being prepaid on such date, such Bank shall only so make
available the amount by which the aggregate principal amount of the
Competitive Bid Loan to be made by such Bank on such date exceeds the
aggregate principal amount of the Competitive Bid Loan of such Bank so
maturing or being prepaid. Agent will make available to the Borrower
the aggregate of the amounts (if any) so made available by Banks in
accordance with Section 2.01(C) and the Borrower shall not be liable
for any daylight overdraft charges in the event any such amounts are
not made available to the Agent by any Bank in accordance herewith.
In the event that Competitive Bid Loan(s) made by a Bank mature on the
date of a requested Competitive Bid Loan, such Bank shall apply the
proceeds of the Competitive Bid Loan, if any, it is then making, to
the extent thereof, to the repayment of such maturing Competitive Bid
Loan(s), such Competitive Bid Loan and repayments being intended to be
a contemporaneous exchange.
(vii) Each Competitive Bid Loan shall be evidenced by the
Competitive Bid Loan Note and Exhibit 1 thereto delivered by the
Borrower to the Bank making such Loan and each Bank making any such
Loan or receiving payment on account of any such Loan shall note on
Exhibit 1 to its Competitive Bid Loan Note the date, amount, maturity,
interest rate and aggregate amount of principal outstanding under said
Note. Each Bank shall also note on Exhibit 1 to its Competitive Bid
Loan Note the amount of any payment or prepayment of any Competitive
Bid Loan evidenced by such Note. Section 2.03 shall be fully
applicable to and govern this Section 2.01(A)(vii) and any such
notations to the same extent as if such notations were notations on
any Bank's records.
(viii) Each Competitive Bid Loan shall be payable on the maturity
date specified in the Competitive Bid Loan Request relating to such
Competitive Bid Loan. No Competitive Bid Loan may be prepaid prior to
its maturity date without the prior written consent of the Bank which
made the Competitive Bid Loan in question. Written notice of any such
prepayment shall be given to Agent on or prior to the date on which
such prepayment occurs and Agent shall provide prompt notice thereof
to the other Banks.
16
(ix) The Borrower further agrees to pay to Agent for the account
of the applicable Bank or Banks such amounts as will compensate any of
the Banks for any increase in the cost to such Bank of making or
maintaining all or any portion of the Loans as Competitive Bid Loans
and for any reduction in the amount of any sum receivable by such Bank
under this Agreement in respect of making or maintaining all or any
portion of the Loans as Competitive Bid Loans, in either case, from
time to time by reason of:
(1) any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, such Bank, under or pursuant to any law, treaty,
rule, regulation (including, without limitation, any Regulations
of the Board of Governors of the Federal Reserve System) or
requirement in effect on or after the date hereof, any
interpretation thereof by any governmental authority charged with
administration thereof or by any central bank or other fiscal or
monetary authority or other authority, or any requirement imposed
by any central bank or such other authority whether or not having
the force of law; or
(2) any change in (including the introduction of any new)
applicable law, treaty, rule, regulation or requirement or in the
interpretation thereof by any official authority, or the
imposition of any requirement of any central bank, whether or not
having the force of law, which shall subject such Bank to any tax
(other than taxes on net income imposed on such Bank by the United
States of America or the state or nation in which the head office
of such Bank is located), levy, impost, charge, fee, duty,
deduction or withholding of any kind whatsoever or change the
taxation of such Bank with respect to making or maintaining all or
any portion of the Loans as Competitive Bid Loans and the interest
thereon (other than any change which affects, and to the extent
that it affects, the taxation of net income of such Bank by the
United States of America or the state or nation in which the head
office of such Bank is located); provided, that with respect to
any withholding the foregoing shall not apply to any withholding
tax described in sections 1441, 1442 or 3406 of the Code, or any
succeeding provision of any legislation that amends, supplements
or replaces any such section, or to any tax, levy, impost, duty,
charge, fee, deduction or withholding that results from any
noncompliance by a Bank with any federal, state or foreign law or
from any failure by a Bank to file or furnish any report, return,
statement or form the filing or furnishing of which would not have
an adverse effect on such Bank and would eliminate such tax,
impost, duty, deduction or withholding;
In any such event, such Bank shall promptly notify Agent thereof, and
of the reasons therefor, and Agent shall promptly notify the Borrower
thereof in writing stating the reasons provided to Agent by such Bank
therefor and the additional amounts required to fully compensate such
Bank for such increased or new cost or reduced amount as determined by
such Bank. Such additional amounts shall be payable on each date on
which interest is to be paid hereunder or, if there is no outstanding
principal amount under any of the Notes, within three (3) Business
Days after the Borrower's receipt of said notice. Such Bank's
certificate as to any such increased or new cost or reduced amount
(including calculations, in reasonable detail, showing how such Bank
computed such cost or reduction) shall be submitted by Agent to the
17
Borrower and shall, in the absence of manifest error, be conclusive
and binding. In determining any such amount, the Bank(s) may use any
reasonable averaging and attribution methods. Notwithstanding
anything to the contrary set forth above, the Borrower shall not be
obligated to pay any amounts pursuant to this Section 2.01(A)(ix) as a
result of any requirement or change referenced above with respect to
any period prior to the ninetieth (90th) day prior to the date on
which the Borrower is first notified thereof. If the Borrower shall,
as a result of the requirements of this Section 2.01(a)(ix) above, be
required to pay any Bank the additional costs referred to therein and
the Borrower, in its sole discretion, shall deem such additional
amounts to be material, the Borrower shall have the right to
substitute another bank satisfactory to the Agent for such Bank which
has certified the additional costs to the Borrower, and the Agent
shall use reasonable efforts to assist the Borrower to locate such
substitute bank. Any such substitution shall take place in accordance
with Section 9.11 and otherwise be on terms and conditions
satisfactory to the Agent, and until such time as such substitution
shall be consummated, the Borrower shall continue to pay such
additional costs. Upon any such substitution, the Borrower shall pay
or cause to be paid to the Bank that is being replaced, all principal,
interest (to the date of such substitution) and other amounts owing
hereunder to such Bank and such Bank will be released from liability
hereunder, except as provided in Section 9.10.
(x) In the event any of the Banks shall incur any loss or expense
(including, without limitation, any loss or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired
by such Bank to make or maintain all or any portion of the Loans as
Competitive Bid Loans) as a result of:
(1) payment or prepayment by the Borrower of all or any
portion of any Competitive Bid Loan on a date other than the
scheduled maturity date for such Competitive Bid Loan, for any
reason (including, without limitation, the acceleration of the
maturity thereof pursuant to Article VII);
(2) any failure by the Borrower to borrow any Competitive Bid
Loan which has been accepted by the Borrower under Section
2.01(A)(iii)(2) on the Reply Date for such Competitive Bid Loan
other than any such failure resulting from the failure of any
Bank which offered an accepted Competitive Bid Loan to make such
Competitive Bid Loan available in accordance with Section
2.01(A)(vi);
such Bank shall promptly notify Agent thereof, and of the reasons
therefor. Upon the request of Agent, the Borrower shall pay directly
to Agent for the account of such Bank such amount as will (in the
reasonable determination of such Bank, which shall be conclusive
absent manifest error) reimburse such Bank for such loss or expense.
Each Bank shall furnish to the Borrower, upon written request received
by Agent, a written statement setting forth the computation of any
such amounts payable to such Bank under this Section 2.01(A)(x).
(xi) Each Bank agrees that upon the occurrence of any of the
events described in Section 2.01(A)(ix) or (x), such Bank will
exercise all reasonable efforts to take such reasonable actions at no
expense to such Bank (other than expenses which are covered by the
Borrower's advance deposit of funds with such Bank for such purpose,
or if such Bank agrees, which the Borrower has agreed to pay or
reimburse to such Bank in full upon demand), in accordance with such
18
Bank's usual banking practices in such situations and subject to any
statutory or regulatory requirements applicable to such Bank, as such
Bank may take without the consent or participation of any other Person
to, in the case of an event described in Section 2.01(A)(ix) or (x),
mitigate the cost of such events to the Borrower.
(B) The Revolving Credit Loans.
--------------------------
Each Bank severally agrees, subject to the terms and conditions
contained in this Agreement, to make Revolving Credit Loans to the Borrower from
time to time after receipt by Agent from time to time before the Repayment Date
of, and at the times provided for in, a Request and an Interest Rate Election
from the Borrower in accordance with Article III, infra, during the period
commencing on the Drawdown Date and ending on the Business Day immediately
preceding the Repayment Date, in an aggregate principal amount at any one time
outstanding not to exceed (i) such Bank's Pro Rata Share of Three Hundred Thirty
Million Dollars ($330,000,000), less (ii) in each case, such Bank's Pro Rata
Share of the aggregate amount of any voluntary reductions made pursuant to
Section 2.09. Notwithstanding the foregoing, it is hereby understood by the
parties hereto that the maximum principal amount available to the Borrower
pursuant to this Section 2.01(B) shall be reduced by the outstanding aggregate
amount of Competitive Bid Loans.
(C) Funding and Pro Rata Shares.
---------------------------
(i) Promptly after receipt of a Request and Interest Rate
Election or a Competitive Bid Loan Request, Agent shall notify each
Bank by telephone, telex or telecopy of the proposed borrowing.
Subject to Section 2.01(A) or (B), as the case may be, each Bank
agrees that after its receipt of notification from Agent of Agent's
receipt of a Request and Interest Rate Election or in the case of a
Competitive Bid Loan Request, upon receipt by such Bank of
notification from Agent of the Borrower's acceptance of such Bank's
offer under Section 2.01(A)(v), such Bank shall send its Pro Rata
Share (or such portion thereof as may be necessary to provide Agent
with such Pro Rata Share in Dollars and in immediately available
funds, without consideration or use of any contra accounts of any
Bank) of the requested Loan by wire transfer to Agent so that Agent
receives such Pro Rata Share in Dollars and in immediately available
funds not later than 12:00 P.M. (Providence, Rhode Island time) on the
first day of the Interest Period for such Loan or, in the case of a
Competitive Bid Loan, on the Business Day on which such Competitive
Bid Loan is to be made, and Agent shall advance funds to the Borrower
upon Agent's receipt of such Pro Rata Shares in the amount of the Pro
Rata Shares of such Loan in Agent's possession. Unless Agent shall
have been notified by any Bank (which notice may be telephonic if
confirmed promptly in writing) prior to the first day of the Interest
Period in respect of any Loan which such Bank is obligated to make
under this Agreement or, in the case of a Competitive Bid Loan, on the
Business Day on which such Competitive Bid Loan is to be made, that
such Bank does not intend to make available to Agent such Bank's Pro
Rata Share of such Loan on such date, Agent may assume that such Bank
has made such amount available to Agent on such date and Agent in its
sole discretion may, but shall not be obligated to, make available to
the Borrower a corresponding amount on such date. If such
corresponding amount is not in fact made available to Agent by such
Bank, Agent shall be entitled to recover such corresponding amount
from such Bank promptly upon demand by Agent together with interest
thereon, for each day from such date until the date such amount is
19
paid to Agent, at the Federal Funds Rate for three (3) Business Days
and thereafter at the Reference Rate. If such Bank does not pay such
corresponding amount forthwith upon Agent's demand therefor, Agent
shall promptly notify the Borrower and the Borrower shall promptly pay
such corresponding amount to Agent. Nothing contained in this Section
shall be deemed to relieve any Bank from its obligation to fulfill its
obligations hereunder or to prejudice any rights which the Borrower
may have against any Bank as a result of any default by such Bank
hereunder.
(ii) Each Bank and the Borrower further agree that each Bank's
Pro Rata Share of the Commitment and, except as changed by events or
actions occurring in accordance with the terms and conditions of this
Agreement, the Loans (other than the Competitive Bid Loans), shall be
the percentage set forth opposite each Bank's name on Exhibit I, as
the same may from time to time be amended in accordance with Section
9.11.
(iii) Each Libor Loan and CD Rate Loan shall be in the amount of
at least Five Million Dollars ($5,000,000) and, to the extent in
excess thereof, in integral multiples of One Million Dollars
($1,000,000). Each Reference Rate Loan shall be in the amount of at
least Two Million Five Hundred Thousand Dollars ($2,500,000) and, to
the extent in excess thereof, in integral multiples of One Million
Dollars ($1,000,000). Each Bank's Pro Rata Share of the Loans shall
be evidenced by its Notes and the records of such Bank. Each
Revolving Credit Note payable to each Bank shall be dated as of the
Closing Date, shall be in the principal amount of such Bank's Pro Rata
Share of the Commitment, as applicable, and shall be payable in
accordance with its terms.
(D) Notwithstanding anything to the contrary set forth herein or in
the Notes, the entire outstanding principal balance of the Notes shall be due
and payable on the Repayment Date. In addition to each principal payment
required pursuant to the foregoing, in the event that the outstanding principal
balance(s) of the Revolving Credit Loans and the Competitive Bid Loans, in each
case, if any, exceeds the Commitment then in effect, the Borrower shall
immediately repay to Agent for the pro rata account of each Bank in immediately
available Dollars an amount equal to the excess. Any such payment shall be
applied in accordance with Section 2.06(B) as if the Borrower had not designated
the Loans to which such payment is to be applied.
Section 2.02. Interest and Fees on the Loans.
------------ ------------------------------
(A) Interest.
--------
(i) Interest shall accrue on each of the Loans (other than
Competitive Bid Loans) at the Reference Rate, the CD Rate or the Libor
Rate for each of such Loan's Interest Periods in accordance with the
Borrower's Interest Rate Elections for such Loans subject to and in
accordance with the terms and conditions of this Agreement and the
Notes. The Borrower shall pay such interest to Agent for the pro
rata account of each Bank in arrears on the Revolving Credit Loans
(including without limitation CD Rate Loans and Libor Loans)
outstanding from time to time after the Drawdown Date, in accordance
with the following: (a) if any such Loan is a Reference Rate Loan,
such payments shall be made quarterly on the last Business Day of each
March, June, September and December of each year commencing March 31,
20
1995; (b) if such Loan is a CD Rate Loan or a Libor Loan and is for a
term of more than 90 days, such payments shall be made quarterly on
the last Business Day of each March, June, September and December of
each year commencing March 31, 1995 and, in addition to each such
quarterly payment required pursuant to the foregoing, with respect to
each such Loan as to which an Interest Adjustment Date occurs, on each
such Interest Adjustment Date; and (c) if such Loan is a CD Rate Loan
or a Libor Loan and is for a term of 90 days or less, with respect to
each such Loan as to which an Interest Adjustment Date occurs, on each
such Interest Adjustment Date.
(ii) Any amount of principal or interest due under any Loan which
is not paid when due, whether at stated maturity, by acceleration or
otherwise, shall bear interest, payable on demand, at a floating
interest rate per annum equal to two percent (2.0%) above the rate
otherwise in effect with respect to such Loan.
(iii) Notwithstanding anything to the contrary set forth in this
Agreement, in the event that any change in the Applicable Margin
becomes retroactively effective and the Borrower has previously paid
an amount of interest hereunder which is either in excess of or less
than the amount of interest which the Borrower would have paid if the
new Applicable Margin had been in effect as of the date as of which
such change becomes retroactively effective, then the Borrower shall
promptly pay to Agent for the pro rata account of each Bank, and, if
applicable, each Bank shall promptly pay to Agent for the account of
the Borrower such amount (or, in the case of a payment to be made by
the Banks, each Bank's Pro Rata Share of such amount) as may be
necessary to adjust the interest paid by the Borrower to equal the
amount payable at the new Applicable Margin for the period for which
the Borrower paid interest based on the old Applicable Margin.
(B) Facility and Other Fees.
-----------------------
(i) As consideration for the Commitment, the Borrower shall pay
to Agent for the account of each Bank a Facility Fee on the average
daily amount of such Bank's Commitment, computed on a quarterly basis
in arrears on the last Business Day of each calendar quarter based
upon the average daily amount of such Bank's Commitment (without
regard to utilization) during that quarter (or portion thereof) as
calculated by the Agent, at a rate per annum equal to the Facility Fee
Percentage then in effect. Such Facility Fee shall accrue from the
Closing Date to the Repayment Date and shall be due and payable
quarterly in arrears on the last Business Day of each March, June,
September and December, commencing on March 31, 1995 and continuing
through the Repayment Date, with the final payment to be made on the
Repayment Date; provided that, in connection with any termination of
Commitments under Section 2.09, the accrued Facility Fee calculated
for the period ending on such date shall also be paid on the date of
such termination, with the following quarterly payment being
calculated on the basis of the period from such termination date to
such quarterly payment date. The Facility Fee provided in this
Section shall accrue at all times after the above-mentioned
commencement date, including at any time during which one or more
conditions in Article III are not met. Notwithstanding anything to
the contrary set forth in this Agreement, in the event that any change
in the Facility Fee Percentage becomes retroactively effective and the
Borrower has previously paid any Facility Fee hereunder which is
either in excess of or less than the Facility Fee which the Borrower
21
would have paid if the new Facility Fee Percentage had been in effect
as of the date as of which such change becomes retroactively
effective, then the Borrower shall promptly pay to Agent for the pro
rata account of each Bank, and, if applicable, each Bank shall
promptly pay to Agent for the account of the Borrower such amount (or,
in the case of a payment to be made by the Bank's each Bank's Pro Rata
Share of such amount) as may be necessary to adjust the Facility Fee
paid by the Borrower to equal the amount payable at the new Facility
Fee Percentage for the period for which the Borrower paid a Facility
Fee based on the old Facility Fee Percentage.
(ii) On the Closing Date and thereafter the Borrower shall pay to
Agent solely for Agent's account fees in amounts previously agreed
upon by Agent and the Borrower.
(iii) On the Closing Date the Borrower shall pay to the
Syndication Agent fees in amounts previously agreed upon by the
Syndication Agent and the Borrower.
(C) Increased Costs - Capital.
-------------------------
If, after the date hereof, any Bank or Banks at any time or times shall have
reasonably determined that the adoption or effectiveness of any applicable law,
governmental rule, regulation or order regarding capital adequacy of banks or
bank holding companies, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any such Bank or such Bank's holding company with any
policy, guideline, directive or request regarding capital adequacy (whether or
not having the force of law and whether or not failure to comply therewith would
be unlawful) of any such authority, central bank or comparable agency, expressly
including without limitation the 1988 Revised Basle Accord issued by the Basle
Committee on Banking Regulations and Supervisory Practices adopted prior to the
date hereof, that has or would have the effect of reducing the rate of return on
the capital of such Bank or such Bank's holding company as a consequence of the
obligations hereunder of such Bank and/or the Loans by such Bank to a level
below that which such Bank or such Bank's holding company would have achieved
but for such adoption, change or compliance (taking into consideration the
policies of such Bank or such Bank's holding company with respect to capital
adequacy immediately before such adoption, change or compliance and assuming
that the capital of such Bank or such Bank's holding company was fully utilized
prior to such adoption, change or compliance) by an amount reasonably deemed by
such Bank to be material, then the Borrower may at its sole option within 90
days after the first demand by such Bank (with a copy to Agent) provide a
replacement bank or banks for such Bank, which replacement bank or banks shall
be subject to the approval of Agent (which approval shall not be unreasonably
withheld), and shall take all actions necessary to transfer the rights and
obligations of such Bank hereunder and the other agreements relating to the
transactions contemplated by this Agreement to which such Bank is a party to
such replacement bank or banks within such 90-day period. Any such replacement
bank shall pay to the Bank being replaced the full amount of principal, accrued
interest and accrued fees owing by the Borrower to the Bank being replaced as of
the date such replacement is effective. In any event, the Borrower shall pay to
Agent for the account of such Bank from time to time as specified by such Bank
(with a copy to Agent) such additional amounts as shall be sufficient to
compensate such Bank or such Bank's holding company for such reduced return,
each such payment to be made by the Borrower within five (5) Business Days after
each demand by such Bank. A certificate of one of the officers of such Bank as
is so affected setting forth the amount to be paid to such Bank hereunder shall,
in the absence of manifest error, be conclusive. In determining such amount,
22
each Bank may use any reasonable averaging and attribution methods. At the
written request of the Borrower, any Bank to which any such amount is due or has
been paid shall provide the Borrower with a written explanation of the methods
used in calculating such amount. Each Bank will use its best efforts to inform
the Borrower and Agent of any event occurring after the date hereof which will
require payments to be made under this Section 2.02(C) promptly after such Bank
becomes aware of such event, but the failure of any Bank so to inform the
Borrower shall not affect any of the obligations of the Borrower hereunder.
Notwithstanding anything to the contrary set forth above, the Borrower shall not
be obligated to pay any amounts pursuant to this Section 2.02(C) as a result of
any such adoption, effectiveness, change or compliance referenced above with
respect to any period prior to the ninetieth (90th) day prior to the date on
which the Borrower is first notified thereof.
Section 2.03. Notations.
------------ ---------
At the time of (i) the making of each Loan evidenced by any of the
Notes, (ii) each change in the interest rate under any of the Notes effected as
a result of an Interest Rate Election; and (iii) each payment or prepayment of
any of the Notes, each Bank may enter upon its records an appropriate notation
evidencing (a) such Bank's Pro Rata Share of such Loan and (b) the interest rate
and Interest Adjustment Date applicable thereto or (c) such payment or
prepayment of principal and (d) in the case of payments or prepayments of
principal, the applicable Loan which was paid or prepaid. No failure to make,
or error in making, any such notation shall affect the Borrower's unconditional
obligations to repay the Loans and all interest, fees and other sums due in
connection with this Agreement and/or any of the Notes in full, nor shall any
such failure or error, standing alone, constitute grounds for disproving a
payment of principal by the Borrower. However, in the absence of manifest
error, such notations and each Bank's records containing such notations shall
constitute presumptive evidence of the facts stated therein, including, without
limitation, the outstanding amount of such Bank's Pro Rata Share of the Loans
and all amounts due and owing to such Bank at any time. Any such notations and
such Bank's records containing such notations may be introduced in evidence in
any judicial or administrative proceeding relating to this Agreement, any of the
Loans or any of the Notes.
Section 2.04. Computation of Interest and Fees.
------------ --------------------------------
Interest due under this Agreement and under the Notes with respect to
Competitive Bid Loans, Libor Loans and CD Rate Loans shall be computed on the
basis of a year of 360 days over the actual number of days elapsed and with
respect to Reference Rate Loans on the basis of a 365 (366) day year over the
actual number of days elapsed. The Facility Fees payable under Section
2.02(B)(i) shall be calculated on the basis of a 365(366) day year for the
actual number of days elapsed.
Section 2.05. Time of Payments and Prepayments in Immediately
------------ -----------------------------------------------
Available Funds and Setoff.
--------------------------
(A) Time.
----
All payments and prepayments of principal, fees, interest and any
other amounts owed from time to time under this Agreement and/or under any of
the Notes shall be made to Agent at the address referred to in Section 9.07 in
Dollars and in immediately available funds prior to 12:00 o'clock P.M. on the
23
Business Day that such payment is due provided that the Borrower hereby
authorizes and instructs Agent to charge against the Borrower's accounts, if
any, with Agent on each date on which a payment is due hereunder and/or under
any of the Notes an amount up to the principal, interest and fees due and
payable to the Banks or any Bank hereunder and/or under any of the Notes and
such charge shall be deemed payment hereunder and under the Notes in question to
the extent that immediately available funds are then in such accounts. The
Borrower may revoke the foregoing instruction by written notice to Agent given
in accordance with this Agreement. In addition, the Borrower hereby irrevocably
authorizes Agent, if and to the extent payment of any installment of principal,
interest and/or fees hereunder and/or under any of the Notes is not made when
due, to charge against the Borrower's accounts, if any, with Agent an amount
equal to the amount thereof not paid when due. Any such payment or prepayment
which is received by Agent in Dollars and in immediately available funds after
12 o'clock P.M. on a Business Day shall be deemed received for all purposes of
this Agreement on the next succeeding Business Day except that solely for the
purpose of determining whether a Default has occurred under Section 6.01(A), any
such payment or prepayment if received by Agent prior to the close of Agent's
business on a Business Day shall be deemed received on such Business Day. All
payments of principal, interest, fees and any other amounts which are owing to
any or all of the Banks hereunder and/or under any of the Notes that are
received by Agent in immediately available Dollars prior to 12:00 o'clock P.M.
on any Business Day shall, to the extent owing to the Banks other than Agent, be
sent by wire transfer by Agent (in each case, without deduction for any claim,
defense or offset of any type) before 2:00 o'clock P.M. on the same Business
Day. Each such wire transfer shall be addressed to each Bank in accordance with
the wire instructions set forth in Exhibit I hereto. The amount of each payment
wired by Agent to each such Bank shall be such amount as shall be necessary to
provide such Bank with its Pro Rata Share of such payment (without consideration
or use of any contra accounts of any Bank), or with such other amount as may be
owing to such Bank in accordance with this Agreement (in each case, without
deduction for any claim, defense or offset of any type). Each such wire
transfer shall be sent by Agent only after Agent has received immediately
available Dollars from or on behalf of the Borrower and each such wire transfer
shall provide each Bank receiving same with immediately available Dollars on
receipt by such Bank. Any such payments of immediately available Dollars
received by Agent after 12:00 o'clock P.M. and before 2:00 o'clock P.M. on any
Business Day shall be forwarded in the same manner by Agent to such Banks as
soon as practicable on said Business Day, and if any such payments of
immediately available Dollars are received by Agent after 2:00 o'clock P.M. on a
Business Day, Agent shall so forward same to such Banks before 10:00 o'clock
A.M. on the immediately succeeding Business Day. If Agent does not forward any
such payment to a Bank on the Business Day prescribed above, Agent shall pay to
said Bank upon demand interest to said Bank at the then effective Federal Funds
Rate for each day such payment is overdue.
(B) Setoff, etc.
-----------
Upon the occurrence and during the continuance of any Event of
Default, each Bank is hereby authorized at any time and from time to time,
without notice to the Borrower (any such notice being expressly waived by the
Borrower), to set off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and any other Indebtedness at
any time owing by such Bank to or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower now or hereafter existing
under this Agreement or any of the Notes irrespective of whether or not such
Bank shall have made any demand under this Agreement or any of its Notes and
although such obligations may be unmatured. Each such Bank agrees to promptly
notify the Borrower and Agent after any such setoff and application; provided
24
that the failure to give such notice shall not affect the validity of such
setoff and application. Promptly following any notice of setoff received by
Agent from a Bank pursuant to the foregoing, Agent shall notify each other Bank
thereof. The rights of each Bank under this Section 2.05(B) are in addition to
all other rights and remedies (including, without limitation, other rights of
setoff) which such Bank may have.
(C) Unconditional Obligations and No Deductions.
-------------------------------------------
The Borrower's obligation to make all payments provided for in this
Agreement and/or the Notes shall be unconditional. Each such payment shall be
made without deduction for any claim, defense or offset of any type, including,
without limitation, any withholdings and other deductions on account of income
or other taxes and regardless of whether any claims, defenses or offsets of any
type exist; provided, however, that the foregoing shall not apply to any
withholding tax or other amount that the Borrower is legally prohibited from
paying a Bank or Banks or where the Borrower could incur a civil or criminal
penalty it if paid such amount to a Bank or Banks. However, this Section
2.05(C) shall not constitute a waiver of any claims the Borrower may hereafter
have at law against any of the Banks. Amounts withheld by the Borrower and
remitted to proper taxing or other governmental authorities shall be treated as
having been paid by the Borrower to the Agent for the benefit of the Bank as to
which such withholding was made under this Agreement.
Section 2.06. Prepayment and Certain Payments.
------------ -------------------------------
(A) Voluntary Prepayments.
---------------------
All or any portion of the unpaid principal balance of any Reference
Rate Loan may be prepaid at any time by a payment to Agent of immediately
available Dollars by the Borrower and all or any portion of the unpaid principal
balance of any Libor Loan or CD Rate Loan may be prepaid or paid to Agent by a
payment of immediately available Dollars on the Interest Adjustment Date for
such Loan, upon, in the case of a Reference Rate Loan, one (1) Business Day
prior telephonic or telecopied notice promptly confirmed in writing from the
Borrower to Agent, and, in the case of a Libor Loan or a CD Rate Loan, on the
applicable Interest Adjustment Date and upon three (3) Business Days prior
telephonic or telecopied notice promptly confirmed in writing from the Borrower
to Agent, without premium or penalty; provided that all such payments and
prepayments of CD Rate Loans or Libor Loans shall be accompanied by the interest
accrued on the principal amount being paid or prepaid through the date of
payment or prepayment and provided further that each such partial payment or
prepayment of principal of a Libor Loan or a CD Rate Loan shall be in such
amount so that each outstanding Libor Loan and CD Rate Loan remains in a
principal amount of at least Five Million Dollars ($5,000,000) and, to the
extent in excess thereof, in the amount of One Million Dollars ($1,000,000) or
an integral multiple thereof, and provided further that each such partial
payment or prepayment of principal of a Reference Rate Loan shall be such amount
so that each outstanding Reference Rate Loan remains in a principal amount of at
least Two Million Five Hundred Thousand Dollars ($2,500,000) or, to the extent
in excess thereof, in integral multiples of Five Hundred Thousand Dollars
($500,000). The Borrower's notice of payment or prepayment to Agent shall
designate whether such payment or prepayment is a payment or prepayment of one
or more Reference Rate Loans, CD Rate Loans or Libor Loans. Any permitted
voluntary prepayment of any Loans shall be made without premium or penalty other
than the reimbursements provided for under any of Sections 2.01(A)(ix) and (x),
2.10(E) and (F) and 2.11 (C) and (D).
25
(B) Absence of Designation of Payment or Prepayment.
-----------------------------------------------
In the event that or to the extent that at the time of any payment or
prepayment of all or any portion of the Loans other than after the occurrence of
and during the continuance of an Event of Default, the Borrower fails to provide
Agent with telephonic or telecopied notice promptly confirmed in writing
designating whether such payment or prepayment is a payment or prepayment of
Competitive Bid Loans, Reference Rate Loans, CD Rate Loans or Libor Loans, Agent
shall allocate any such payment or prepayment to outstanding Revolving Credit
Loans which are Reference Rate Loans, if any, until paid or prepaid in full,
thereafter to such Revolving Credit Loans which are CD Rate Loans or Libor Loans
as to which such date is an Interest Adjustment Date for such CD Rate Loans or
Libor Loans until paid in full and thereafter to such Loans (other than
Competitive Bid Loans) as Agent, in its reasonable discretion, may designate or
select until paid or prepaid in full and thereafter to such Competitive Bid
Loans as Agent, in its reasonable discretion may designate or select; provided
that Agent shall select on a pro rata basis Competitive Bid Loans of the same
maturity and in the order of their maturity until paid or prepaid in full. In
the event that any mandatory payment is required under Section 2.02(C) or for
any other reason, unless an Event of Default has occurred and is continuing, and
on the date any such payment is due, the amount of Reference Rate Loans, if any,
plus the amount of CD Rate Loans and/or Libor Loans as to which such date is an
Interest Adjustment Date for such CD Rate Loans and Libor Loans is less than the
amount of such required payment or prepayment, such payment or prepayment shall
nevertheless be paid in full by the Borrower when due and the proceeds thereof
will, to the extent not directed to be applied to specific Loans by the
Borrower's above-referenced designation, be applied first to outstanding
Reference Rate Loans until paid in full, second to the CD Rate Loans and/or
Libor Loans as to which such date is an Interest Adjustment Date for such CD
Rate Loans and Libor Loans until paid in full, and thereafter to such Loans as
Agent, in its reasonable discretion, may designate or select and the Borrower
shall be liable for any additional cost or expense under Section 2.10(E) and/or
Section 2.11(C). If an Event of Default has occurred and is continuing, any
payment or prepayment referred to above shall be applied to all outstanding
Loans pro rata on the basis of each Bank's Pro Rata Share of the Loans on the
date of such payment or prepayment.
(C) Competitive Bid Loans.
---------------------
The outstanding aggregate amount of Competitive Bid Loans shall not at
any time exceed availability under the Commitment of the Banks. The aggregate
outstanding principal amount of any Competitive Bid Loans at any time shall
reduce availability under the Commitment of the Banks on a Dollar for Dollar
basis. Such availability shall be restored, subject to the maximum amount
thereof as same may have been reduced under Section 2.09 to the extent
necessary to permit repayment of any Competitive Bid Loans with Revolving Credit
Loans. Such reduction in availability shall not be deemed permanent reductions
in the amount of the Commitment.
Section 2.07. Interest Rate Elections.
------------ -----------------------
(A) Subject to the terms and conditions of this Agreement, the
Borrower shall have the right, exercisable by submission of an Interest Rate
Election, as to any Loan (other than Competitive Bid Loans) and as to any
portion of the then outstanding principal balance of the Loans (other than
Competitive Bid Loans), to be effective on the applicable Interest Adjustment
Date for the Loan in question, to elect the Reference Rate, the CD Rate or the
Libor Rate as the interest rate on such Loan and/or on the portion of the
26
outstanding principal balance of the Loans that is subject to an Interest Rate
Election on such Interest Adjustment Date.
(B) Interest Rate Elections with regard to the Libor Rate and the CD
Rate shall be subject to and governed by Section 2.10 and Section 2.11,
respectively.
(C) Notwithstanding any other provisions of this Agreement, no
Interest Rate Election shall be permitted if it would cause the outstanding
amount of Libor Loans and/or CD Rate Loans on any date on which the Commitment
is to be reduced in accordance with Section 2.09 to exceed the amount to which
the Commitment is to be reduced.
(D) On the Business Day that Agent is deemed to have received a
Competitive Bid Loan Request or a Request and/or an Interest Rate Election from
the Borrower, Agent shall notify each of the Banks thereof, by telecopying a
copy of the Borrower's Competitive Bid Loan Request, Request and/or Interest
Rate Election, as applicable, to each Bank. The Business Day on which the Banks
receive notice from Agent of Competitive Bid Loan Request or a Request and/or
Interest Rate Election is hereinafter referred to as a "Notice Day".
(E) In the case of a Request and/or Interest Rate Election for a Libor
Loan, at or prior to 12:00 o'clock P.M. on the Business Day immediately
succeeding the Notice Day, if the Interest Period selected by the Borrower in
such Interest Rate Election is an Interest Period which, under this Agreement,
requires the consent of the Banks, each Bank shall notify Agent, by telephone,
telecopy or telex, whether such Bank is willing to offer to the Borrower the
Interest Period so selected by the Borrower and, if not, subject to Section 2.10
(B), (C), (F) and (G), the longest Interest Period which such Bank is prepared
to offer to the Borrower with respect to such Loan, which Interest Period may
not be shorter than the longest Interest Period which does not require the
consent of the Banks under this Agreement. If any Bank fails to give any such
notice on or prior to the time set forth above, Agent shall base its below
selections on the notices received from Banks at or prior to such time. Agent
shall (a) select (i) if the Interest Period selected by the Borrower is one
which requires the consent of the Banks, the shortest Interest Period among
those which each Bank has indicated it is prepared to offer to the Borrower and
(ii) the Adjusted Libor Rate applicable thereto, (b) calculate the Libor Rate on
the basis thereof and (c) notify the Borrower and each Bank of such Libor Rate
and, if applicable, the available Interest Period, by telephone or telex, prior
to 2 o'clock P.M. on the same Business Day as the Business Day on which Agent
receives such determinations from the Banks. In accordance with Section
2.01(D), the Banks shall send to Agent by wire transfer Dollars (which are
immediately available to Agent upon receipt) for disbursement to the Borrower.
(F) In the case of a Request and/or Interest Rate Election for a CD
Rate Loan, at or prior to 11:00 o'clock A.M. on the Business Day immediately
succeeding the Notice Day, if the Interest Period selected by the Borrower in
such Interest Rate Election is an Interest Period which, under this Agreement,
requires the consent of the Banks, each Bank shall notify Agent, by telephone or
telex, whether such Bank is willing to offer to the Borrower the Interest Period
so selected by the Borrower and, if not, subject to Section 2.11(A), (B), (D) or
(E), the longest Interest Period which such Bank is prepared to offer to the
Borrower with respect to such Loan. If any Bank fails to give any such notice
on or prior to the time set forth above, Agent shall base its below selections
on the notices received from Banks at or prior to such time. Agent shall (a)
select (i) if the Interest Period selected by the Borrower is one which requires
the consent of the Banks, the shortest Interest Period among those which each
Bank has indicated it is prepared to offer to the Borrower and (ii) the Adjusted
CD Rate, (b) calculate the CD Rate on the basis thereof and (c) notify the
Borrower and each Bank of such CD Rate and, if applicable, the available
27
Interest Period, by telephone or telex, prior to 12:00 o'clock P.M. on the same
Business Day as the Business Day on which Agent receives such determinations
from all Banks. In accordance with Section 2.01(C), the Banks shall send to
Agent by wire transfer Dollars (which are immediately available to Agent upon
receipt) for disbursement to the Borrower.
(G) In the case of a Request and/or Interest Rate Election for a
Reference Rate Loan, Agent shall, concurrently with its notification to each of
the Banks pursuant to Section 2.07(D) notify such Bank of the Reference Rate
applicable to the Loan. At or prior to 12 o'clock P.M. on the Business Day
immediately succeeding the Notice Day, each Bank shall send to Agent by wire
transfer Dollars (which are immediately available to Agent upon receipt) for
disbursement to the Borrower in accordance with Section 2.01 of this Agreement.
Section 2.08. Interest in Absence of Interest Rate Election.
------------ ---------------------------------------------
If at any time all or any portion of the outstanding principal balance
of the Loans or any Pro Rata Share(s) thereof is not subject to an Interest Rate
Election because an Interest Adjustment Date occurs and Agent has not received a
timely Interest Rate Election from the Borrower which is effective in accordance
with the terms and conditions of this Agreement on such Interest Adjustment
Date, the interest rate on all or said portion of said outstanding principal
balance or any Pro Rata Share(s) thereof shall thereupon be and remain Reference
Rate until occurrence of an Interest Adjustment Date applicable to said
principal balance or Pro Rata Share(s) of the Loans for which Agent shall have
received a timely Interest Rate Election effective in accordance with the terms
and conditions of this Agreement on such Interest Adjustment Date and which
elects another available interest rate on all or said portion of said
outstanding principal balance or Pro Rata Share(s) of the Loans.
Section 2.09. Permanent Reduction of Commitment.
------------ ---------------------------------
At the Borrower's option, the Commitment may be permanently and
irrevocably reduced in whole or in part by an amount of at least Five Million
Dollars ($5,000,000) and, to the extent in excess thereof, in integral multiples
of One Million Dollars ($1,000,000) at any time, provided that (i) the Borrower
gives Agent written notice of the exercise of such option at least three (3)
Business Days prior to the effective date thereof, (ii) the aggregate
outstanding balances of the Revolving Credit Loans and the Competitive Bid
Loans, in each case, if any, do(es) not exceed the Commitment as so reduced in
any such case on the effective date of such reduction and (iii) the Borrower is
not and, after giving effect to such reduction, would not be in violation of
Section 2.07(C). Any such reduction shall concurrently reduce the Dollar amount
of each Bank's Pro Rata Share of the Commitment.
Section 2.10. Special Libor Loan Provisions.
------------ -----------------------------
The Libor Loans shall be subject to and governed by the following
terms and conditions:
(A) Requests.
--------
Each Request accompanied by an Interest Rate Election selecting the
Libor Rate must be received by Agent in accordance with the definition of
Interest Rate Election.
28
(B) Libor Loans Unavailable.
-----------------------
Notwithstanding any other provision of this Agreement, if, prior to or
on the date on which all or any portion of the Loans is to be made as or
converted into a Libor Loan, any of the Banks (or Agent with respect to (ii)
below) shall reasonably determine (which determination shall be conclusive and
binding on the Borrower), that
(i) Dollar deposits in the relevant amounts and for the relevant
Interest Period are not offered to such Bank in the London interbank
market,
(ii) by reason of circumstances affecting the London interbank
market, adequate and reasonable means do not exist for ascertaining
the Adjusted Libor Rate, or
(iii) the Adjusted Libor Rate shall no longer represent the
effective cost to such Bank for Dollar deposits in the London
interbank market for reasons other than the fact, standing alone, that
the Adjusted Libor Rate is based on an averaging of rates determined
by Agent and that such Bank's rate may exceed such average,
such Bank may elect not to accept any Interest Rate Election electing a Libor
Loan and such Bank shall notify Agent by telephone or telex thereof, stating the
reasons therefor, not later than the close of business on the second Business
Day prior to the date on which such Libor Loan is to be made. Agent shall
promptly give notice of such determination and the reason therefor to the
Borrower, and all or such portion of the Loans, as the case may be, which are
subject to any of Section 2.10(B)(i) through (iii) as a result of such Bank's
determination shall be made as or converted into, as the case may be, Reference
Rate Loans and such Bank shall have no further obligation to make Libor Loans,
until further written notice to the contrary is given by Agent to the Borrower.
If such circumstances subsequently change so that such Bank shall no longer be
so affected, such Bank's obligation to make or maintain its Pro Rata Share of
all or any portion of the Loans as Libor Loans shall be reinstated when such
Bank obtains actual knowledge of such change of circumstances and promptly after
obtaining such actual knowledge such Bank shall forward written notice thereof
to Agent. After receipt of such notice, Agent shall promptly forward written
notice thereof to the Borrower. Upon or after receipt by the Borrower of such
written notice, the Borrower may submit an Interest Rate Election in accordance
with this Agreement electing an Interest Period ending no later than the
Interest Adjustment Date for the then current Interest Period for the other
Banks' Pro Rata Shares of Libor Loans and electing the Libor Rate for such
Banks' or Bank's Pro Rata Share(s) of the Loans as to which such Bank's or
Banks' obligation(s) to make or maintain its or their Pro Rata Share(s) of the
Loans as Libor Loans was suspended and such Pro Rata Share(s) shall be converted
to Libor Loans in accordance with this Agreement. During any period throughout
which any of the Banks has or have no obligation to make or maintain its or
their Pro Rata Share(s) of the Loans as Libor Loans, no Interest Rate Elections
electing the Libor Rate shall be effective with regard to the Loans to the
extent of the Pro Rata Share(s) of such Bank(s).
(C) Libor Lending Unlawful.
----------------------
In the event that any change in applicable laws or regulations
(including the introduction of any new applicable law or regulation) or in the
interpretation thereof (whether or not having the force of law) by any
governmental or other regulatory authority charged with the administration
thereof, shall make it unlawful for any of the Banks to make or continue to
29
maintain its Pro Rata Share of all or any portion of the Loans as Libor Loans,
each such Bank shall promptly notify Agent by telephone or telex thereof, and of
the reasons therefor, and the obligation of such Bank to make or maintain its
Pro Rata Share of the Loans or such portion thereof as Libor Loans shall, upon
the happening of such event, terminate and Agent shall, by telephonic notice to
the Borrower, declare that such obligation has so terminated with respect to
such Bank, and such Pro Rata Share of the Loans or any portion thereof to the
extent then maintained as Libor Loans, shall, on the last day on which such Bank
can lawfully continue to maintain such Pro Rata Share of the Loans or any
portion thereof as Libor Loans, automatically convert into Reference Rate Loans.
Upon or after receipt by the Borrower of such written notice, the Borrower may
submit an Interest Rate Election in accordance with this Agreement electing an
Interest Period ending no later than the Interest Adjustment Date for the then
current Interest Period for the other Banks' Pro Rata Shares of Libor Loans and
electing the CD Rate for such Banks' or Bank's Pro Rata Share(s) of the Loans
as to which such Bank's or Banks' obligation(s) to make or maintain its or their
Pro Rata Share(s) of the Loans as Libor Loans was suspended and such Pro Rata
Share(s) shall be converted to CD Rate Loans in accordance with this Agreement.
If circumstances subsequently change so that such Bank shall no longer be so
affected, such Bank's obligation to make or maintain its Pro Rata Share of all
or any portion of the Loans as Libor Loans shall be reinstated when such Bank
obtains actual knowledge of such change of circumstances, and promptly after
obtaining such actual knowledge such Bank shall forward written notice thereof
to Agent. After receipt of such notice, Agent shall promptly forward written
notice thereof to the Borrower. Upon or after receipt by the Borrower of such
written notice, the Borrower may submit an Interest Rate Election in accordance
with this Agreement electing an Interest Period ending no later than the
Interest Adjustment Date for the then current Interest Period for the other
Banks' Pro Rata Shares of Libor Loans and electing the Libor Rate for such
Banks' or Bank's Pro Rata Share(s) of the Loans as to which such Bank's or
Banks' obligation(s) to make or maintain its or their Pro Rata Share(s) of the
Loans as Libor Loans was suspended and such Pro Rata Share(s) shall be converted
to Libor Loans in accordance with this Agreement. During any period throughout
which any of the Banks has or have no obligation to make or maintain its or
their Pro Rata Share(s) of the Loans as Libor Loans, no Interest Rate Elections
electing the Libor Rate shall be effective with regard to the Loans to the
extent of the Pro Rata Share(s) of such Bank(s).
(D) Additional Costs on Libor Loans.
-------------------------------
The Borrower further agrees to pay to Agent for the account of the
applicable Bank or Banks such amounts as will compensate any of the Banks for
any increase in the cost to such Bank of making or maintaining (or of its
obligation to make or maintain) all or any portion of its Pro Rata Share of the
Loans as Libor Loans and for any reduction in the amount of any sum receivable
by such Bank under this Agreement in respect of making or maintaining all or any
portion of such Bank's Pro Rata Share of the Loans as Libor Loans, in either
case, from time to time by reason of:
(i) any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by,
such Bank, under or pursuant to any law, treaty, rule, regulation
(including, without limitation, any Regulations of the Board of
Governors of the Federal Reserve System) or requirement in effect on
or after the date hereof, any interpretation thereof by any
governmental authority charged with administration thereof or by any
central bank or other fiscal or monetary authority or other authority,
or any requirement imposed by any central bank or such other authority
whether or not having the force of law; or
30
(ii) any change in (including the introduction of any new)
applicable law, treaty, rule, regulation or requirement or in the
interpretation thereof by any official authority, or the imposition of
any requirement of any central bank, whether or not having the force
of law, which shall subject such Bank to any tax (other than taxes on
net income imposed on such Bank by the United States of America or the
state or nation in which the head office of such Bank is located),
levy, impost, charge, fee, duty, deduction or withholding of any kind
whatsoever or change the taxation of such Bank with respect to making
or maintaining all or any portion of its Pro Rata Share of the Loans
as Libor Loans and the interest thereon (other than any change which
affects, and to the extent that it affects, the taxation of net income
of such Bank by the United States of America or the state or nation in
which the head office of such Bank is located); provided, that with
respect to any withholding the foregoing shall not apply to any
withholding tax described in sections 1441, 1442 or 3406 of the Code,
or any succeeding provision of any legislation that amends,
supplements or replaces any such section, or to any tax, levy, impost,
duty, charge, fee, deduction or withholding that results from any
noncompliance by a Bank with any federal, state or foreign law or from
any failure by a Bank to file or furnish any report, return, statement
or form the filing or furnishing of which would not have an adverse
effect on such Bank and would eliminate such tax, impost, duty,
deduction or withholding;
In any such event, such Bank shall promptly notify Agent thereof, and of the
reasons therefor, and Agent shall promptly notify the Borrower thereof in
writing stating the reasons provided to Agent by such Bank therefor and the
additional amounts required to fully compensate such Bank for such increased or
new cost or reduced amount as determined by such Bank. Such additional amounts
shall be payable on each date on which interest is to be paid hereunder or, if
there is no outstanding principal amount under any of the Notes, within three
(3) Business Days after the Borrower's receipt of said notice. Such Bank's
certificate as to any such increased or new cost or reduced amount (including
calculations, in reasonable detail, showing how such Bank computed such cost or
reduction) shall be submitted by Agent to the Borrower and shall, in the absence
of manifest error, be conclusive and binding. In determining any such amount,
the Bank(s) may use any reasonable averaging and attribution methods.
Notwithstanding anything to the contrary set forth above, the Borrower shall not
be obligated to pay any amounts pursuant to this Section 2.10(D) as a result of
any requirement or change referenced above with respect to any period prior to
the ninetieth (90th) day prior to the date on which the Borrower is first
notified thereof. If the Borrower shall, as a result of the requirements of
this Section 2.10(D) above, be required to pay any Bank the additional costs
referred to therein and the Borrower, in its sole discretion, shall deem such
additional amounts to be material, the Borrower shall have the right to
substitute another bank satisfactory to the Agent for such Bank which has
certified the additional costs to the Borrower, and the Agent shall use
reasonable efforts to assist the Borrower to locate such substitute bank. Any
such substitution shall take place in accordance with Section 9.11 and otherwise
be on terms and conditions satisfactory to the Agent, and until such time as
such substitution shall be consummated, the Borrower shall continue to pay such
additional costs. Upon any such substitution, the Borrower shall pay or cause
to be paid to the Bank that is being replaced, all principal, interest (to the
date of such substitution) and other amounts owing hereunder to such Bank and
such Bank will be released from liability hereunder, except as provided in
Section 9.10.
31
(E) Libor Funding Losses.
--------------------
In the event any of the Banks shall incur any loss or expense
(including, without limitation, any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Bank to
fund or maintain all or any portion of the Loans as Libor Loans) as a result of:
(i) payment or prepayment by the Borrower of all or any portion
of any Libor Loan on a date other than the Interest Adjustment Date
for such Libor Loan, for any reason; provided, however that this
clause shall not be deemed to grant the Borrower any right to convert
a Libor Loan to a Reference Rate Loan or a CD Rate Loan prior to the
end of any Interest Period or to imply such right;
(ii) conversion of all or any portion of any Libor Loan on a day
other than the last day of an Interest Period applicable to such Loan
to a Reference Rate Loan or a CD Rate Loan for any reason including,
without limitation, acceleration of the Loans upon or after an Event
of Default, any Interest Rate Election or any other cause whether
voluntary or involuntary and whether or not referred to or described
in this Agreement, other than any such conversion resulting solely
from application of Section 2.10(B) or (C) by any Bank; or
(iii) any failure by the Borrower to borrow the Loans as Libor
Loans on the date specified in any Interest Rate Election selecting
the Libor Rate, other than any such failure resulting solely from
application of Section 2.10(B) or (C) by any Bank;
such Bank shall promptly notify Agent thereof, and of the reasons therefor.
Upon the request of Agent, the Borrower shall pay directly to Agent for the
account of such Bank such amount as will (in the reasonable determination of
such Bank, which shall be conclusive absent manifest error) reimburse such Bank
for such loss or expense. Each Bank shall furnish to the Borrower, upon
written request received by Agent, a written statement setting forth the
computation of any such amounts payable to such Bank under this Section 2.10(E).
(F) Banking Practices.
-----------------
Each Bank agrees that upon the occurrence of any of the events
described in Section 2.02(C) and/or 2.10(B)(i), (ii) or (iii), (D) or (E), such
Bank will exercise all reasonable efforts to take such reasonable actions at no
expense to such Bank (other than expenses which are covered by the Borrower's
advance deposit of funds with such Bank for such purpose, or if such Bank
agrees, which the Borrower has agreed to pay or reimburse to such Bank in full
upon demand), in accordance with such Bank's usual banking practices in such
situations and subject to any statutory or regulatory requirements applicable to
such Bank, as such Bank may take without the consent or participation of any
other Person to, in the case of an event described in Section 2.02(C) and/or
2.10(D) or (E), mitigate the cost of such events to the Borrower and, in the
case of an event described in Section 2.10(B)(i), (ii) or (iii), to seek Dollar
deposits in any other interbank Libor market in which such Bank regularly
participates and in which the applicable determination(s) described in Section
2.10(B)(i), (ii) or (iii), as the case may be, does not apply.
32
(G) Borrower's Option on Unavailability or Increased Cost of Libor
--------------------------------------------------------------
Loans.
-----
In the event of any conversion of all or any portion of any Bank's Pro
Rata Share of any Libor Loans to a Reference Rate Loan for reasons beyond the
Borrower's control or in the event that any Bank's Pro Rata Share of all or any
portion of the Libor Loans becomes subject, under Section 2.10(D) or (E), to
additional costs, the Borrower shall have the option, subject to the other terms
and conditions of this Agreement, to convert such Bank's Pro Rata Share to a
Reference Rate Loan or to a CD Rate Loan by making Interest Rate Elections for
Interest Periods which (i) end on the Interest Adjustment Date for such Libor
Loan or (ii) end on Business Days occurring prior to such Interest Adjustment
Date, in which case at the end of the last of such Interest Periods any such CD
Rate Loan shall automatically convert to a Reference Rate Loan and the Borrower
shall have no further right to make an Interest Rate Election with respect to
such Reference Rate Loan other than an Interest Rate Election which is effective
on the Interest Adjustment Date for such Libor Loan. So long as all or any
portion of a Bank's Pro Rata Share of the Loans remains a CD Rate Loan while the
corresponding Pro Rata Shares of the Loans held by the other Banks are Libor
Loans as a result of the Borrower's exercise of its options under this Section
2.10(G), the Interest Periods of the Borrower's Interest Rate Elections insofar
as applicable to such Bank's CD Rate Loan shall remain subject to the
immediately preceding sentence. The Borrower's options set forth in this
Section 2.10(G) may be exercised, if and only if the Borrower pays, concurrently
with delivery to Agent of each such Interest Rate Election and thereafter in
accordance with Section 2.10(D), (E) and (F) all amounts provided for therein to
Agent in accordance with this Agreement.
Section 2.11. Special CD Rate Loan Provisions.
------------ -------------------------------
The CD Rate Loans shall be subject to and governed by the following
terms and conditions:
(A) CD Rate Loans Unavailable or Unlawful.
-------------------------------------
In the event that:
(i) on any date on which the Adjusted CD Rate would otherwise be
set, any of the Reference Banks shall have determined in good faith
(which determination shall be final and conclusive, absent manifest
error) that, by reason of changes affecting the market for
certificates of deposit maintained by dealers of recognized standing
in New York, New York, adequate and reasonable means do not exist for
ascertaining the Adjusted CD Rate, or
(ii) any of the Banks shall have determined in good faith (which
determination shall be final and conclusive, absent manifest error)
that:
(a) the making or maintaining or continuation of or
conversion of its Pro Rata Share of any Loan as or to a CD Rate
Loan has been made unlawful or any such making, continuation or
conversion has been made impracticable by (1) the occurrence of a
contingency which materially and adversely affects the market for
certificates of deposit maintained by dealers in New York, New
York of recognized standing or (2) compliance by such Bank in good
33
faith with any applicable law or governmental regulation,
guideline or order or interpretation or change thereof by any
governmental authority charged with the interpretation or
administration thereof or with any request or directive of any
such governmental authority (whether or not having the force of
law); or
(b) on or prior to any date on which all or any portion of
such Bank's Loans are to be made as or converted into a CD Rate
Loan the Adjusted CD Rate shall no longer represent the effective
cost to such Bank for certificates of deposit other than by reason
of the fact, standing alone, that the Adjusted CD Rate is based
on an averaging of rates determined by reference to the Reference
Banks and that such Bank's rate make exceed such average.
then, and in any such event, such Bank shall promptly notify Agent thereof, and
of the reasons therefor, and the obligation of any such Bank to make or maintain
its Pro Rata Share of the Loans as CD Rate Loans, shall, upon the happening of
such event, terminate and Agent shall by telephonic notice to the Borrower
declare that such obligation has so terminated, and such Pro Rata Share of the
Loans to the extent then maintained as CD Rate Loans, shall in the case of
Section 2.11(A)(ii)(a) automatically convert into Reference Rate Loans on the
last day on which such Bank may lawfully continue to maintain such Pro Rata
Share of the Loans or any portion thereof as CD Rate Loans or shall, in the case
of Section 2.11(A)(i) or (ii)(b), be made as or converted into Reference Rate
Loans upon the happening of the event described in either such clause. Such
telephonic notice shall be promptly confirmed in writing. If circumstances
subsequently change so that such Bank shall no longer be so affected, such
Bank's obligation to make or maintain its Pro Rata Share of all or any portion
of the Loans as CD Rate Loans shall be reinstated when such Bank obtains actual
knowledge of such change of circumstances and promptly after obtaining such
actual knowledge such Bank shall forward written notice thereof to Agent. After
receipt of such notice, Agent shall promptly forward written notice thereof to
the Borrower. During any period throughout which any of the Banks has or have
no obligation to make or maintain its or their Pro Rata Share(s) of the Loans as
CD Rate Loans, no Interest Rate Elections electing the CD Rate shall be
effective with regard to the Loans to the extent of the Pro Rata Share(s) of
such Bank(s).
(B) Additional Costs on CD Rate Loans.
---------------------------------
In case any law, regulation, treaty or official directive or the
interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof or the compliance with any
guideline or request of any central bank or other governmental authority
(whether or not having the force of law):
(i) subjects any of the Banks to any tax with respect to payments
of principal or interest or any other amounts hereunder by the
Borrower (except for taxes on the overall net income of such Bank
imposed by the United States of America or the state or nation in
which the head office of such Bank is located), or
(ii) imposes, modifies or deems applicable any reserve, special
deposit or similar requirement against assets held by, or deposits in
or for the account of, or loans by, any of the Banks (other than such
requirements as are included in the determination of the CD Rate
hereunder), or
34
(iii) imposes upon any of the Banks any other condition with
respect to making or maintaining its Pro Rata Share of any of the
Loans as CD Rate Loans,
and the result of any of the foregoing is to increase the cost to such Bank or
reduce the income receivable by such Bank with respect to its Pro Rata Share of
any CD Rate Loans, such Bank shall promptly notify Agent thereof, and of the
reasons therefor, and Agent shall promptly notify the Borrower thereof stating
the reasons therefor provided to Agent by such Bank and the additional amounts
required to fully compensate such Bank for such increased or new cost or reduced
amount as determined by such Bank. Such additional amounts shall be payable on
each date on which interest is to be paid hereunder or, if there is no
outstanding principal amount under any of the Notes, on the last business day of
the calendar quarter in which the Borrower received the notice in question.
Such Bank's certificate as to any such increased or new cost or reduced amount
(including calculations, in reasonable detail, showing how such Bank computed
such cost or reduction) shall be submitted by Agent to the Borrower before the
Borrower is required to pay any such additional amount and shall, in the absence
of manifest error, be conclusive and binding. In determining any such amount
the Bank(s) may use any reasonable attribution and averaging methods.
Notwithstanding anything to the contrary set forth above, the Borrower shall not
be obligated to pay any amounts pursuant to this Section 2.11(B) as a result of
any requirement or change referenced above with respect to any period prior to
the ninetieth (90th) day prior to the date on which the Borrower is first
notified thereof. If the Borrower shall, as a result of the requirements of
this Section 2.11(B) above, be required to pay any Bank the additional costs
referred to therein and the Borrower, in its sole discretion, shall deem such
additional amounts to be material, the Borrower shall have the right to
substitute another bank satisfactory to the Agent for such Bank which has
certified the additional costs to the Borrower, and the Agent shall use
reasonable efforts to assist the Borrower to locate such substitute bank. Any
such substitution shall take place in accordance with Section 9.11 and otherwise
be on terms and conditions satisfactory to the Agent, and until such time as
such substitution shall be consummated, the Borrower shall continue to pay such
additional costs. Upon any such substitution, the Borrower shall pay or cause
to be paid to the Bank that is being replaced, all principal, interest (to the
date of such substitution) and other amounts owing hereunder to such Bank and
such Bank will be released from liability hereunder, except as provided in
Section 9.11.
(C) CD Rate Funding Losses.
----------------------
In the event any of the Banks shall incur any loss or expense
(including, without limitation, any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Bank to
fund or maintain all or any portion of the Loans as CD Rate Loans) as a result
of
(i) payment or prepayment by the Borrower of all or any portion
of any CD Rate Loan on a date other than the Interest Adjustment Date
for such CD Rate Loan, for any reason; provided, however, that this
clause shall not be deemed to grant the Borrower any right to convert
a CD Rate Loan to a Reference Rate Loan or a Libor Loan prior to the
end of any Interest Period or to imply such right,
(ii) conversion of all or any portion of any CD Rate Loan on a
day other than the last day of an Interest Period applicable to such
Loan to a Reference Rate Loan or a Libor Loan for any reason
including, without limitation, acceleration of the Loans upon or after
an Event of Default, any Interest Rate Election or any other voluntary
35
or involuntary cause whether referred to or described in this
Agreement or not, other than any such conversion resulting solely from
application of Section 2.11(A) by any Bank, or
(iii) any failure by the Borrower to borrow the Loans as CD Rate
Loans on the date specified in any Interest Rate Election selecting
the CD Rate, other than any such failure resulting solely from
application of Section 2.11(A) by any Bank,
such Bank shall promptly notify Agent thereof, and of the reasons therefor.
Upon the request of Agent, the Borrower shall pay directly to Agent such amount
as will (in the reasonable determination of such Bank, which shall be conclusive
absent manifest error) reimburse such Bank for such loss or expense. Each Bank
shall furnish to the Borrower before the Borrower is required to make any such
payment, upon written request received by Agent, a written statement setting
forth the computation of any such amounts payable to such Bank under this
Section 2.11(C).
(D) Banking Practices.
-----------------
Each Bank agrees that upon the occurrence of any of the events
described in Section 2.11(A), (B) or (C), such Bank will exercise its best
efforts to take such reasonable actions at no expense to such Bank (other than
expenses which are covered by the Borrower's advance deposit of funds with such
Bank for such purpose or, if such Bank agrees, which the Borrower has agreed to
pay or reimburse to such Bank in full upon demand), in accordance with such
Bank's usual banking practices in such situations and subject to any statutory
or regulatory requirements applicable to such Bank as such Bank may take without
the consent or participation of any other Person to, in the case of an event
described in Section 2.11(B) or (C) mitigate the cost of such events to the
Borrower and, in the case of an event described in Section 2.11(A) to seek
certificates of deposit in any other market in which such Bank regularly
participates and in which the applicable determination described in Section
2.11(A), does not apply.
(E) Borrower's Option on Unavailability or Increased Cost of CD Rate
----------------------------------------------------------------
Loans.
-----
In the event of any conversion to a Reference Rate Loan of all or any
portion of any Bank's Pro Rata Share of any CD Rate Loan for reasons beyond the
Borrower's control or in the event that any Bank's Pro Rata Share of all or any
portion of the CD Rate Loans becomes subject, under Section 2.11(B) or (C), to
additional costs, the Borrower shall have the option, subject to the other terms
and conditions of this Agreement, to convert such Bank's Pro Rata Share to a
Reference Rate Loan or to a Libor Loan by making Interest Rate Elections for
Interest Periods which (i) end on the Interest Adjustment Date for such CD Rate
Loan or (ii) end on Business Days occurring prior to such Interest Adjustment
Date, in which case at the end of the last of such Interest Periods such Libor
Loan shall automatically convert to a Reference Rate Loan and the Borrower shall
have no further right to make an Interest Rate Election with respect to such
Reference Rate Loan other than an Interest Rate Election which is effective on
the Interest Adjustment Date for such CD Rate Loan. So long as all or any
portion of a Bank's Pro Rata Share of the Loans remains a Libor Loan while the
corresponding Pro Rata Shares of the Loans held by the other Banks remain CD
Rate Loans as a result of the Borrower's exercise of its options under this
Section 2.11(E), the Interest Periods of the Borrower's Interest Rate Elections
with respect to such Bank's Libor Loan shall remain subject to the immediately
preceding sentence. The Borrower's options set forth in this Section 2.11(E)
36
may be exercised if and only if the Borrower pays, concurrently with delivery to
Agent of each such Interest Rate Election and thereafter in accordance with
Sections 2.11(B), (C) and (D) all amounts provided for therein to Agent in
accordance with this Agreement.
Section 2.12. Certain References.
------------ ------------------
Any references in Article I, Sections 2.01, 2.03, 2.05, 2.10, 2.11,
2.15, 2.16, 2.17, 4.02(A), 4.02(B), Article VII, or Sections 9.02, 9.04, 9.09 or
9.10 to "any of the Banks" shall be construed to mean any one or more of the
Banks from time to time and as often as the referenced situation or event may
exist or occur and any references in said Sections to "such Bank" shall be
construed to mean any one or more of such Banks from time to time and as often
as the referenced situation or event may exist or occur.
Section 2.13. Payment on Non-Business Days.
------------ ----------------------------
Subject to the definition of Interest Period, whenever any payment to
be made hereunder or under any of the Notes shall be stated to be due on a day
other than a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of fees, if any, and interest under this Agreement and
under the Notes.
Section 2.14. Use of Proceeds.
------------ ---------------
The Borrower shall use the Loans (i) to repay the outstanding amount
of the Old Loans and other Borrowed Money and (ii) for working capital and other
lawful business requirements of the Borrower and the Subsidiaries, all subject
to and in accordance with the provisions of this Agreement.
Section 2.15. Banks' Maximum Commitments.
------------ --------------------------
No Bank shall be obligated to make its Pro Rata Share of any Loan if
after giving effect to the making of such Loan either (a) the aggregate amount
of Loans outstanding hereunder would exceed the then current Commitment or (b)
such Bank's Pro Rata Share of the Loans other than Competitive Bid Loans would
exceed its Pro Rata Share of the then current Commitment, unless such Bank shall
have determined in its sole discretion that such Loan satisfies the credit
standards of such Bank and unless such Bank has obtained the prior written
consent of the Majority Banks; provided that any Bank may (but shall not be
obligated to) make Competitive Bid Loans without the consent of any of the other
Banks in accordance with Section 2.01(A). The obligations of the Banks to make
Loans and their respective Pro Rata Shares of Loans hereunder are several and
not joint. If any of the Banks defaults in the performance of its obligations
hereunder, such default shall not, in and of itself, relieve the other Banks
from their obligations hereunder but no such default shall obligate any other
Bank to make any Loan in excess of their respective Pro Rata Shares of the
Commitment.
Section 2.16. Replacement of Bank.
------------ -------------------
In the event that any of the Banks becomes a Delinquent Bank and
remains so for ten (10) Business Days after written notice thereof to Agent from
the Borrower and to the Delinquent Bank from the Borrower, Agent and/or the
other Banks, in each case, with copies of such notice to each other party to
37
this Agreement, Agent, the Borrower and the other Banks shall exercise good
faith efforts to reach mutual agreement on and to implement (i) a means of
replacing the Delinquent Bank with another bank or banks or (ii) the purchase of
the Delinquent Bank's Pro Rata Share of the Loans and Commitment by some or all
of the other Banks. Each Bank agrees that in the event that it becomes a
Delinquent Bank, it shall take all such actions as may be reasonably requested
by the Borrower, Agent and/or the other Banks at the Delinquent Bank's sole cost
and expense to permit its replacement and/or purchase of its Pro Rata Shares of
the Loans and the Commitment at no more than the outstanding principal amount of
such Pro Rata Share of the Loans plus accrued interest thereon and that it shall
indemnify and hold harmless the Borrower, Agent and the other Banks from and
against all out-of-pocket loss, cost or expense (including reasonable attorney's
fees) resulting from its acts or omissions in becoming and being a Delinquent
Bank or resulting from replacement of the Delinquent Bank and/or purchase of the
Delinquent Bank's Pro Rata Share of the Loans and the Commitment including,
without limitation, any costs or expenses arising under Section 2.02(C) and/or
2.10(D) or (E) and/or Section 2.11(B), (C) or (D) and all out-of-pocket costs
and expenses incurred by any of the Borrower, Agent or the other Banks in
connection with any resulting necessary amendments of this Agreement, any of the
Notes, any of the Related Documents and/or any other document, instrument or
agreement entered into in connection therewith which result from replacement of
such Delinquent Bank and/or purchase of such Delinquent Bank's Pro Rata Shares
of the Loans and the Commitment, but excluding any credit risk of any Banks
which purchase all or any part of the Delinquent Bank's Pro Rata Share of the
Loans. The indemnifications set forth in this Section 2.16 shall not be deemed
to limit any rights or remedies of the Borrower or any Bank against the
Delinquent Bank.
Section 2.17. Pro Rata Treatment.
------------ ------------------
Each payment and prepayment of interest and/or principal on the Loans
(other than Competitive Bid Loans) to Agent for the account of the Banks or the
Banks hereunder (whether directly made by the Borrower or received by Agent or a
Bank through the exercise of a right of set-off or otherwise), shall be made pro
rata, according to each Bank's Pro Rata Share of the Loans (other than
Competitive Bid Loans) and according, in the case of payments or prepayments, to
the then outstanding principal amounts of the Notes which are being paid or
prepaid and each payment and prepayment of fees under Section 2.02(B)(i)
(whether directly made by the Borrower or received by Agent or a Bank through
the exercise of a right of set-off or otherwise), shall be made pro rata,
according to each Bank's Pro Rata Share of the Commitment; provided, however,
that any amounts payable by the Borrower pursuant to any of Sections
2.01(A)(ix) or (x), 2.02(C), 2.05(C) and/or pursuant to any of Sections 2.10(D),
(E) or (F), Section 2.11(B), (C), (D) or (E), Section 9.02 or Section 9.08 shall
be paid to Agent for the account of the Bank or Banks entitled to such amounts
and any amounts payable pursuant to Section 2.16 shall be paid to the Bank or
Banks entitled to such amounts; and provided further, however, in the event that
pursuant to Section 2.10(B), (C) or (G) or Section 2.11(A) or (E) any of the
Banks has a Reference Rate Loan in lieu of a Libor Loan or a CD Rate Loan as a
result of application of any of the provisions of such Sections and the Borrower
pays or prepays a Libor Loan or a CD Rate Loan the Borrower shall concurrently
prepay such Bank's Reference Rate Loan on a pro rata basis as a condition to any
such prepayment, all to the end that following any partial prepayment, each
Bank's Pro Rata Share of the Loans (other than Competitive Bid Loans) shall be
equal to such Bank's Pro Rata Share of the Commitment. Each payment and
prepayment of interest and/or principal on the Competitive Bid Loans (whether
directly made by the Borrower or received by a Bank through the exercise of a
right of set-off or otherwise) shall be allocated to each Bank having a
Competitive Bid Loan in accordance with the terms of such Bank's Competitive Bid
Loan and in the event of any such payment which is in an amount less than the
38
full amount then due and owing to Banks having Competitive Bid Loans
outstanding, shall be allocated pro rata to all such Banks then owed a payment
based on the amount of the payments then due and owing to each such Bank;
provided, however, that any amounts payable by the Borrower pursuant to any of
Section 2.01(A)(ix) or (x) shall be paid to Agent for the account of the Bank or
Banks entitled to such amounts. Notwithstanding the foregoing provisions of
this Section 2.17, upon the occurrence and during the continuance of an Event of
Default, each payment and prepayment of principal and interest on the Loans to
Agent for the account of the Banks or to the Banks hereunder (whether directly
made by the Borrower or received by Agent or a Bank through the exercise of a
right of set-off or otherwise), shall be made pro rata, according to each Bank's
Pro Rata Share of the Loans.
Section 2.18. Declaration of Invalidation.
------------ ---------------------------
Each Bank agrees that, to the extent that any amount received by any
Bank from the Borrower or otherwise on account of any of the Loans, is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or judicially required to be repaid to a debtor-in-possession, trustee,
receiver, custodian or any other Person in connection with any proceeding
referred to in Section 6.01(B) or (C) or any similar cause of action (a
"Preference"), then, to the extent of such Preference, each Bank shall upon
demand reimburse the Bank(s) subjected to such Preference the amount necessary
to cause each Bank to be affected by such Preference in proportion to its Pro
Rata Share of the Loans.
Section 2.19. Pro Rata Shares Pari Passu and Equal.
------------ ------------------------------------
The Pro Rata Share of each Bank in the Loans and the Commitment shall
be pari passu and equal with the Pro Rata Shares of all other Banks and no Bank
shall have priority over any other.
Section 2.20. Application of Funds Received by Bank.
------------ -------------------------------------
As long as any amounts due under any of the Notes or this Agreement are
outstanding, if any Bank shall receive from the Borrower or any other Person,
whether by exercise of a right of setoff pursuant to Section 2.05 or otherwise,
or resulting from a banker's lien or by voluntary payment, counterclaim, cross
action, suit at law or in equity or by proof of claim in bankruptcy, liquidation
or similar proceedings, or by sale or disposition of any collateral or by
payment made under any policy of insurance or otherwise (but excluding any
amounts received by such Bank from Agent in accordance with this Agreement) any
amount in respect of its Note or the Notes (other than an amount owing by the
Borrower to such Bank under any of Section 2.01(A)(ix) or (x), 2.10, 2.11, 2.16,
9.02 or 9.08 of this Agreement), such Bank shall promptly send by wire transfer
the portion of such amount remaining after deduction by such Bank of any
expenses or costs incurred by such Bank in connection with obtaining such amount
to Agent in Dollars which are immediately available to Agent upon receipt
together with such Bank's accounting of the gross amount so received and the
expenses or costs deducted therefrom. Agent shall, promptly after Bank's
receipt of such amount in immediately available Dollars, send to each Bank by
wire transfer Dollars (which are immediately available to such Bank upon
receipt) in such amount as may be necessary to cause each Bank (including the
Bank which wired the above-referenced amount to Agent) to receive payment of a
portion of said amount so received by Agent which is proportionate to such
Bank's Pro Rata Share of the Loans. If any such payment in respect of any such
amount is made by any Bank pursuant to this Section 2.20 and if such amount or
any part thereof is thereafter recovered from such Bank, the related payment to
39
Agent and by Agent to the Banks shall be rescinded, to the extent of said
recovery, and any distribution or payment restored as to the portion of such
payment so recovered, but without interest. This Section 2.20 shall be applied
so as to maintain for each Bank its Pro Rata Share of the Loans and if no Loans
are outstanding, of the Commitment.
ARTICLE III
CONDITIONS OF LENDING
Section 3.01. Conditions Precedent to the Commitment and to all
------------ -------------------------------------------------
Loans.
-----
(A) The Commitment and Initial Loans.
--------------------------------
The Commitment and the obligation of each Bank to make its Pro Rata
Share of the initial Revolving Credit Loan are subject to performance by the
Borrower of all of its obligations under this Agreement and to the satisfaction
of the conditions precedent that all legal matters incidental to the Loans shall
be satisfactory to counsel for Agent and the Banks shall have received on or
before the Closing Date all of the following, each dated the Closing Date or
another date acceptable to Agent and each to be in the form and substance
approved by Agent and the Banks on the Closing Date or the Drawdown Date, as the
case may be:
(a) The Revolving Credit Notes, the Competitive Bid Loan Notes,
this Agreement and the Related Documents (this Agreement to be in
sufficient executed original copies for each party hereto and as to
each of the other documents and instruments other than those to which
Agent and/or the Banks are parties, copies of the executed originals
thereof certified by the Borrower as being accurate and complete), all
of which shall be delivered to the Agent at the offices of Edwards &
Angell located in New York, New York.
(b) Certificates from the respective secretaries of the Borrower,
Prince and Fiber certifying as to the resolutions of the board of
directors and/or shareholders of the Borrower, Prince and Fiber
authorizing and approving each of this Agreement, the Revolving Credit
Notes, the Related Documents and the other documents, instruments and
agreements referred to in this Agreement to which the Borrower, Prince
and/or Fiber is a party, as the case may be, and other matters
contemplated hereby and certifying as to the names and signatures of
each officer of the Borrower, Prince or Fiber authorized to sign each
document, instrument or agreement to be executed and delivered by or
on behalf of the Borrower, Prince or Fiber. Each Bank and the Agent
may conclusively rely on each such secretary's certificate until Agent
shall receive a further certificate of the secretary of the Borrower,
Prince or Fiber, as the case may be, cancelling or amending the prior
certificate and submitting the signatures of the officers named in
such further certificate.
(c) Favorable opinions of Edwards & Angell, counsel for the
Borrower, Prince and Fiber, substantially in the form of Exhibit E.
(d) Certificates of the Secretaries of State of Delaware, North
Carolina, Massachusetts, New Jersey and South Carolina dated
reasonably near the Closing Date, which state that the Borrower is
40
duly organized or qualified and in good standing as a corporation in
such state, Certificates of the Secretaries of State of Delaware,
North Carolina and South Carolina dated reasonably near the Closing
Date, which state that Fiber is duly organized or qualified and in
good standing as a corporation in such state and a Certificate of the
Secretary of State of Delaware dated reasonably near the Closing Date,
which states that Prince is duly organized or qualified and in good
standing as a corporation in such state.
(e) Evidence satisfactory to Agent that the ownership interests in
Prince, Fiber and the Subsidiaries are as set forth in Exhibit G.
(f) A Request and an Interest Rate Election and/or a Competitive
Bid Loan Request on or before the Drawdown Date.
(g) Payment to Agent of the initial fees required under Section
2.02(B)(ii) and to the Syndication Agent of the fees required under
Section 2.02(B)(iii).
(h) An Officer's Certificate in the form of Exhibit D to the
extent applicable on the Closing Date, duly completed and reflecting,
inter alia, compliance by the Borrower with the financial covenants
provided for herein based on an internally prepared balance sheet of
the Borrower as at December 31, 1994.
(i) True copies of any revisions to the financial statements
provided pursuant to Section 4.01(E).
(j) An Officer's Certificate to the effect that from September 30,
1994 to the Closing Date, to the best of such officer's knowledge, no
event has occurred or condition exists which has had, is having or
would in the reasonably foreseeable future have a Material Adverse
Effect, and certifying that the representations contained therein are
true and correct.
(k) No action, suit or other proceeding (governmental or
otherwise) shall be pending or threatened (other than those disclosed
in the Exhibits hereto) which, if adversely determined, would be
likely to have a Material Adverse Effect.
(l) Termination of the commitments for the Old Loans in accordance
with the terms of the Initial Agreement on or prior to the Closing
Date and repayment in full of any outstanding Old Loans and all other
amounts due under the Initial Agreement on or prior to the Closing
Date.
(m) The occurrence of the Drawdown Date on or prior to February
28, 1995 and the initial funding of the Revolving Credit Loans or
Competitive Bid Loans on the Drawdown Date.
(n) Uniform Commercial Code Form UCC-11 information reports on the
Borrower, Prince and Fiber.
(B) The Commitment and the Loans.
----------------------------
The Commitment and the obligation of each Bank to make its Pro Rata
Share of any Loan are subject to performance by the Borrower of all its
obligations under this Agreement and to the satisfaction of the following
further conditions precedent:
41
(a) The fact that, immediately prior to and upon the making of
each Loan, no Event of Default or Default shall have occurred and be
continuing;
(b) The fact that the representations and warranties of the
Borrower contained in Article IV, infra, are true and correct in all
material respects on and as of the date of each Loan except as altered
hereafter by actions not prohibited hereunder. The Borrower's
delivery of the Notes to the Banks and each of the Borrower's Requests
and Competitive Bid Loan Requests shall be deemed to be a
representation and warranty by the Borrower as of the date of such
Loan as to the facts specified in Section 3.01 (B)(a) and (b);
(c) Receipt by Agent on or prior to the Business Day specified in
the definition of Interest Rate Election (including, in the case of
the initial Loan, a Business Day occurring prior to the Drawdown Date)
of a written Request stating the amount requested for the Loan in
question and an Interest Rate Election for such Loan or a Competitive
Bid Loan Request, all signed by a duly authorized officer of the
Borrower on behalf of the Borrower;
(d) That there exists no law or regulation by any governmental
authority having jurisdiction over any of the Banks which would make
it unlawful in any respect for such Bank to make its Pro Rata Share of
the Loan, including, without limitation, Regulations U, T, G and X of
the Board of Governors of the Federal Reserve System and there has
been no material adverse change in the financial condition, business
operations or property of the Borrower and the Subsidiaries, if any,
on a consolidated basis.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the Borrower.
------------ ----------------------------------------------
The Borrower represents and warrants to the Agent and the Banks that,
upon and after giving effect to the Loans and the application of the proceeds
thereof (which representations and warranties shall survive the making of the
Loans) as follows:
(A) Organization and Existence.
--------------------------
The Borrower and each of the Subsidiaries is a corporation, duly
organized, validly existing and in good standing under the laws of the state or
country of its incorporation, is duly qualified to do business in all
jurisdictions in which such qualification is required, except where failure to
be so organized, existing, in good standing or qualified would not have a
Material Adverse Effect and has all requisite power and authority to conduct its
business, to own its properties and to execute and deliver, and to perform all
of its obligations under this Agreement, the Related Documents and the Notes.
(B) Authorization and Absence of Defaults.
-------------------------------------
The execution, delivery to the Banks and performance by the Borrower,
Prince and Fiber of this Agreement, the Related Documents and the Notes to which
each of them is a party have been duly authorized by all necessary corporate and
42
governmental action and do not and will not (i) require any consent or approval
of the shareholders or board of directors of the Borrower, Fiber or of any
Affiliate or Subsidiary which has not been obtained, (ii) violate any provision
of any law, rule, regulation (including, without limitation, Regulations U and X
of the Board of Governors of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Borrower and/or any Subsidiary and/or the articles of
incorporation or by-laws, where applicable, of the Borrower and/or any
Subsidiary, (iii) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Borrower and/or any Material Subsidiary is or are a
party or parties or by which it or they or its or their properties may be bound
or affected; or (iv) result in, or require, the creation or imposition of any
Lien on any of its or their respective properties or revenues. The Borrower and
each Subsidiary is in compliance with any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or any such
indenture, agreement, lease or instrument, except where the failure to be in
compliance would not have a Material Adverse Effect on the Borrower.
(C) Acquisition of Consents and Environmental Matters.
-------------------------------------------------
No authorization, consent, approval, license, exemption of or filing
or registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, other than those which
have been obtained, is or will be necessary to the valid execution and delivery
to the Banks or performance by the Borrower, Prince and Fiber of this Agreement,
the Related Documents and the Notes and/or the execution, delivery and
performance by any Material Subsidiary of any document, instrument or agreement
referred to in this Agreement to which such Material Subsidiary is a party. All
environmental risks arising out of any of Borrower's or any Subsidiary's assets
and known to the Borrower have been and shall be at all times properly reserved
for in accordance with GAAP on Borrower's balance sheets provided pursuant to
Section 4.01(E) and Sections 5.03(B) and (C).
(D) Validity and Enforceability.
---------------------------
This Agreement constitutes and each of the Related Documents and each
of the Notes when delivered hereunder will constitute, the legal, valid and
binding obligations of the Borrower, Prince and/or Fiber, enforceable against
the Borrower, Prince or Fiber, as the case may be, in accordance with their
respective terms and each other instrument and agreement referred to in this
Agreement to which the Borrower, Prince and/or Fiber is a party is similarly
legal, valid, binding and enforceable against each such Person party thereto.
(E) Financial Information.
---------------------
The following information with respect to the Borrower has heretofore
been furnished to the Banks:
(i) the consolidated balance sheets of the Borrower and any
Subsidiaries as at December 31, 1993 and as at December 31, 1992
together with consolidated statements of income and cash flows for the
fiscal year then ending, certified by Ernst & Young, independent
certified public accountants; and
(ii) the unaudited consolidated balance sheet of the Borrower and
any Subsidiaries as at September 30, 1994 together with the unaudited
consolidated statements of earnings for the nine-month period then
ended.
43
Each of the financial statements referred to above in Section 4.01(E) (i) and
(ii) was (and each of the financial statements to be delivered to Agent pursuant
to Section 5.03(B) and (C) will be) prepared in accordance with GAAP, subject in
the case of interim financial statements, to year-end adjustments and the
absence of certain financial statements and footnotes. Each of the financial
statements referred to above in Section 4.01(E) (i) and (ii) fairly presents in
all material respects (and each of the financial statements to be delivered to
Agent pursuant to Section 5.03(B) and (C) will fairly present in all material
respects) the financial condition of the Person being reported on at the dates
thereof and the results of operations for the periods ended on such dates and is
(and those subsequently delivered hereunder, will be) complete and correct in
all material respects, subject in the case of interim financial statements, to
year-end adjustments and the absence of certain statements and footnotes. Since
September 30, 1994, no event has occurred or condition exists which has had, is
having or would in the reasonably foreseeable future have a Material Adverse
Effect.
(F) No Litigation.
-------------
There are no actions, suits or proceedings pending or, to the
knowledge of the Borrower, threatened against the Borrower and/or any Subsidiary
or any of their properties before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
if determined adversely to the Borrower and/or any Material Subsidiary would
draw into question the legal existence of the Borrower and/or any Subsidiary
and/or the validity, authorization and/or enforceability of this Agreement, any
of the Related Documents or Notes and/or any provision thereof and/or could have
a Material Adverse Effect, except those matters, if any, described on Exhibit F,
none of which, in the Borrower's good faith opinion, will have such a Material
Adverse Effect.
(G) Regulation U.
------------
The Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System (12 CFR
Part 221), does not own and has no present intention of acquiring any such
margin stock or a "margin security" within the meaning of Regulation G of the
Board of Governors of the Federal Reserve System (12 CFR, Part 207). None of
the proceeds of the Loans will be used directly or indirectly by the Borrower
for the purpose of purchasing or carrying, or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry,
any such margin security or margin stock or for any other purpose which might
constitute the transaction contemplated hereby a "purpose credit" within the
meaning of said Regulation G or Regulation U, or cause this Agreement to violate
any other regulation of the Board of Governors of the Federal Reserve System or
the Securities and Exchange Act of 1934, as amended, or any rules or regulations
promulgated under either said statute.
(H) Absence of Adverse Agreements.
-----------------------------
Neither the Borrower nor any Subsidiary is a party to any indenture,
loan or credit agreement or any lease or other agreement or instrument or
subject to any corporate restriction which would have a Material Adverse Effect
on the Borrower or on the ability of any of the Borrower, Prince and Fiber to
carry out its obligations under this Agreement, the Related Documents or the
Notes.
44
(I) Taxes.
-----
The Borrower and each Subsidiary has filed all tax returns (federal,
state, local and foreign) required to be filed as of the date hereof and paid
all taxes shown thereon to be due, including interest and penalties, or provided
on a consolidated basis reserves deemed adequate by the Borrower for payment
thereof.
(J) ERISA.
-----
The Borrower, Prince, Fiber and any Commonly Controlled Entity do not
maintain or contribute to any Single Employer Plan which is not in compliance
with ERISA (other than failures to comply which do not result in a Material
Adverse Effect), as amended, or which has incurred any accumulated funding
deficiency within the meaning of section 412 and 418B of the Code, or which has
applied for or obtained a waiver from the Internal Revenue Service of any
minimum funding requirement under section 412 of the Code. The Borrower,
Prince, Fiber and any Commonly Controlled Entity have not incurred any liability
(other than with respect to premiums) to the PBGC in connection with any Single
Employer Plan covering any employees of the Borrower, Prince, Fiber or any
Commonly Controlled Entity in amount exceeding Ten Million Dollars ($10,000,000)
in the aggregate or ceased operations at any facility or withdrawn from any such
plan in a manner which could subject any of them to liability under Title IV of
ERISA in amount exceeding Ten Million Dollars ($10,000,000) in the aggregate,
and know of no facts or circumstance which might give rise to any liability
(other than with respect to premiums) of the Borrower, Prince, Fiber or any
Commonly Controlled Entity to the PBGC under Title IV of ERISA in amount
exceeding Ten Million Dollars ($10,000,000) in the aggregate. The Borrower,
Prince, Fiber and any Commonly Controlled Entity have not incurred any
withdrawal liability in an amount exceeding Ten Million Dollars ($10,000,000) in
the aggregate (including but not limited to any contingent or secondary
withdrawal liability) within the meaning of Sections 4201 of ERISA, to any
Multiemployer Plan, and no event has occurred, and there exists no condition or
set of circumstances, which presents a risk of the occurrence of any withdrawal
from or the partition, termination, reorganization or insolvency of any
Multiemployer Plan which could result in any liability to a Multiemployer Plan
in amount exceeding Ten Million Dollars ($10,000,000) in the aggregate.
The Borrower, Prince, Fiber and any Commonly Controlled Entity, do not
maintain any Plan which is a group health plan (as defined in Section 607 of
ERISA) which has not complied with the continuation coverage requirements of
Section 4980B of the Code and Part 6 of Title I of ERISA except where such
failure to comply with such requirements would not result in any Material
Adverse Effect.
Full payment has been made of all amounts which the Borrower, Prince,
Fiber and any Commonly Controlled Entity are required to have paid as
contributions to any Plan under applicable law or under any Plan or any
agreement relating to any Plan to which the Borrower, Prince, Fiber or any
Commonly Controlled Entity is a party to the extent necessary to avoid any
Material Adverse Effect. The Borrower, Prince, Fiber and each Commonly
Controlled Entity have made adequate provision for reserves to meet
contributions that have not been made because they are not yet due under the
terms of any Plan or related agreements.
Neither the Borrower, Prince, Fiber nor any Commonly Controlled Entity
has any knowledge, nor do any of them have any reason to believe that any
Reportable Event which could result in a liability or liabilities of Ten Million
Dollars ($10,000,000) or more in the aggregate has occurred with respect to any
Plan.
45
(K) Ownership of Properties.
-----------------------
The Borrower and each Material Subsidiary owns all of its properties
and assets free and clear of all Liens, except those permitted under Section
5.02(A).
(L) Accuracy of Representations and Warranties.
------------------------------------------
None of the Borrower's or any Material Subsidiary's representations or
warranties set forth in any agreement or instrument entered into in connection
with this Agreement, any Related Document or in any document or certificate
furnished pursuant to this Agreement or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make any
statement of fact contained herein or therein, in light of the circumstances
under which it was made, not misleading; except that unless provided otherwise
any such document or certificate which is dated speaks as of the date stated and
not the present.
(M) No Investment Company.
---------------------
Neither the the Borrower nor any Subsidiary is an "investment company"
or, to the best of their knowledge, a company "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of 1940, as
amended.
(N) Solvency, etc.
-------------
After giving effect to each Loan outstanding and to be made under this
Agreement as of and immediately after each time this representation and warranty
is given, the Borrower (a) will be able to pay its debts as they become due, (b)
will have funds and capital sufficient to carry on its business and all
businesses in which it is about to engage, and (c) will own property having a
value, on a going concern basis, greater than the amount required to pay its
Indebtedness, including for this purpose unliquidated and disputed claims. The
Borrower will not be rendered insolvent by the execution and delivery of this
Agreement or the consummation of any transactions contemplated herein.
(O) Ownership Interests.
-------------------
The schedule of ownership interests in Subsidiaries is set forth in
Exhibit G and is true, accurate and complete.
(P) Licenses, Registrations, Compliance with Laws, etc.
--------------------------------------------------
The Borrower and each of the Subsidiaries have all permits,
governmental licenses, registrations and approvals, material to carrying out
their respective businesses as presently conducted and as required by law or the
rules and regulations of any federal, foreign governmental, state, county or
local association, corporation or governmental agency, body, instrumentality or
commission having jurisdiction over the Borrower or any of the Subsidiaries,
including but not limited to the United States Environmental Protection Agency,
the United States Department of Labor, the United States Occupational Safety and
Health Administration, the United States Equal Employment Opportunity Commission
and analogous and related state and foreign agencies except where the failure to
46
have such permits, licenses, registrations and approvals would not have a
Material Adverse Effect. There is no violation or failure of compliance or
allegation of such violation or failure of compliance on the part of the
Borrower or any of the Subsidiaries with any of the foregoing permits, licenses,
registrations, approvals, rules or regulations and there is no action,
proceeding or investigation pending or to the knowledge of the Borrower
threatened nor has the Borrower or any Subsidiary received any notice of such
which might result in the termination or suspension of any such permit,
license, registration or approval, except with respect to such permits,
licenses, registrations and approvals the violation, failure of compliance,
termination or suspension of which would not have a Material Adverse Effect .
The Borrower is not aware of any condition which could reasonably be expected to
result in an environmental liability of the Borrower or any Subsidiary which
would be reasonable likely to have a Material Adverse Effect on the Borrower
except as referenced on Exhibit F.
(Q) Principal Place of Business; Books and Records.
----------------------------------------------
The Borrower's principal place of business is located at the
Borrower's address set forth in Section 9.07. All of the Borrower's material
books and records are kept at its principal place of business or in Borrower's
offices in Charlotte, North Carolina or Johnsonville, South Carolina.
ARTICLE V
COVENANTS OF THE BORROWER
Section 5.01. Affirmative Covenants of the Borrower Other than
------------ ------------------------------------------------
Reporting Requirements.
----------------------
From the date hereof and thereafter for so long as any portion of the
Commitment is outstanding or the Borrower is indebted to the Agent and/or any of
the Banks under any of the Notes, any of the Related Documents and/or this
Agreement, the Borrower will, with respect to itself and, unless noted otherwise
below, with respect to each of the Material Subsidiaries unless the Majority
Banks shall otherwise consent in writing:
(A) Payment of Taxes, etc.
---------------------
Pay and discharge all taxes and assessments and governmental charges
or levies imposed upon it or upon its income or profits, or upon any properties
belonging to it except as contested in good faith and where, on a consolidated
basis, reserves deemed adequate by Borrower have been provided for.
(B) Maintenance of Insurance.
------------------------
Maintain insurance with responsible and reputable insurance companies
or associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties and in
accordance with the requirements of any governmental agency having jurisdiction
over the Borrower and/or any Subsidiary. The Borrower shall provide the Banks
with such evidence as Agent may request from time to time as to the maintenance
of all such insurance.
47
(C) Preservation of Existence, etc.
------------------------------
Preserve and maintain in full force and effect the corporate existence
(except as permitted by Section 5.02(B)), rights, franchises and privileges of
the Borrower and each Material Subsidiary in the jurisdiction of its
organization, preserve and maintain all licenses, governmental approvals,
trademarks, patents, trade secrets, copyrights and trade names owned or
possessed by the Borrower or any Material Subsidiary and which are necessary to
its business and operations or the ownership of its properties and qualify or
remain qualified as a foreign corporation in each jurisdiction in which such
qualification is necessary to its business and operations or the ownership of
its properties except when the failure to so preserve, maintain or qualify would
not have a Material Adverse Effect.
(D) Compliance with Laws, etc.
-------------------------
Comply with the requirements of all present and future applicable
laws, rules, regulations and orders (including, without limitation,
environmental laws, rules and regulations, and orders concerning environmental
matters) of any governmental authority having jurisdiction over it and/or its
business, except where the failure to comply would not have a Material Adverse
Effect on the Borrower.
(E) Visitation Rights.
-----------------
Permit, at any reasonable time after and during the continuance of a
Default or Event of Default any of the Banks or Agent or any agents or
representatives thereof, to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of the Borrower and
any of the Subsidiaries to discuss the affairs, finances and accounts of the
Borrower and any of the Subsidiaries with any of its or their officers and/or
any independent certified public accountant of the Borrower and/or of such
Subsidiary and, whether or not any Default or Event of Default exists, permit,
at any reasonable time and at their expense, any of the Banks, or Agent or any
agents or representatives thereof to visit the properties of the Borrower and
any of the Subsidiaries and to discuss the affairs, finances and accounts of the
Borrower or any of the Subsidiaries with the chief financial officer and/or
chief executive officer of the Borrower.
(F) Keeping of Records and Books of Account.
---------------------------------------
Keep adequate records and books of account of the Borrower and any
Material Subsidiary, in which complete entries will be made in accordance with
GAAP and with applicable requirements of any governmental authority having
jurisdiction over the Borrower and/or any Material Subsidiary in question,
reflecting all financial transactions.
(G) Maintenance of Properties, etc.
------------------------------
Maintain and preserve all of its properties necessary or beneficial to
the proper conduct of its business, in good working order and condition,
ordinary wear and tear excepted, to the extent necessary to avoid a Material
Adverse Effect.
48
(H) Accounting System.
-----------------
Maintain a standard system of accounting in accordance with GAAP and
in accordance with the requirements of any governmental authority having
jurisdiction over the Borrower and/or any Material Subsidiary.
(I) Other Documents, etc.
--------------------
Pay, perform and fulfill all of its obligations and covenants under
each of the Related Documents, and any other material document, instrument or
agreement to which it is a party including without limitation other documents
evidencing and/or securing Indebtedness in accordance with their respective
terms, giving effect to any grace periods therein specified; provided, that with
respect to documents, instruments and agreements other than the Related
Documents so long as the Borrower and/or any Subsidiary is contesting in good
faith any alleged failure by the Borrower and/or Subsidiary to pay, perform and
fulfill such obligations and covenants by proper proceedings and has made a
reserve deemed adequate by the Borrower or other provision in accordance with
GAAP on account thereof and such alleged failure by the Borrower and/or any
Subsidiary has not resulted in any Material Adverse Effect on the Borrower
and/or on any Bank's or on Agent's interests under this Agreement, the Notes
and/or the Related Documents, the Borrower shall not be deemed in violation of
this Section 5.01(I).
(J) EBIT Coverage.
-------------
Maintain EBIT Coverage at the end of each Borrower fiscal quarter
ending after the Closing Date of not less than 2.5 to 1.0.
(K) Leverage Ratio.
--------------
Maintain at the end of each of Borrower's fiscal quarters a Leverage
Ratio of not greater than .55 to 1.0.
(L) Officer's Certificates and Requests.
-----------------------------------
Provide each Officer's Certificate required under this Agreement and
each Request so that the statements contained therein are accurate and complete
in all material respects.
(M) Depository.
----------
Use one or more of the Banks as a principal depository of the
Borrower's funds.
Section 5.02. Negative Covenants of the Borrower.
------------ ----------------------------------
From the date hereof and thereafter for so long as any portion of the
Commitment is outstanding or the Borrower is indebted to the Agent and/or any of
the Banks under any of the Notes, any of the Related Documents and/or this
Agreement, the Borrower will not, with respect to itself and, unless noted
otherwise below, with respect to each of the Material Subsidiaries, without the
prior written consent of the Majority Banks:
49
(A) Liens, etc.
----------
Create, incur, assume or suffer to exist any Lien of any nature, upon
or with respect to any of its properties and assets, now owned or hereafter
acquired, or assign as collateral or otherwise convey as collateral, any right
to receive income, except that the foregoing restrictions shall not apply to any
Liens:
(a) for taxes, assessments or governmental charges or levies on
property if the same are being contested in good faith and for which
proper reserve or other provision has been made in accordance with
GAAP; or if the failure to pay same would not have a Material Adverse
Effect.
(b) imposed by law, such as carriers', warehousemen's and
mechanics' liens, bankers' set off rights and other similar Liens
arising in the ordinary course of business for sums not yet due or
being contested in good faith and by appropriate proceedings
diligently conducted and for which proper reserve or other provision
has been made in accordance with GAAP;
(c) arising in the ordinary course of business out of pledges or
deposits under worker's compensation laws, unemployment insurance, old
age pensions, or other social security or retirement benefits, or
similar legislation;
(d) arising from or upon any judgment or award, provided that such
judgment or award is being, or is expected to be, contested in good
faith by proper appeal proceedings and only so long as execution
thereon shall be stayed and provided that the existence thereof shall
not constitute an Event of Default under Section 6.01(D);
(e) those set forth on Exhibit H;
(f) those now or hereafter granted pursuant to the Related
Documents or otherwise now or hereafter granted to Agent and/or any of
the Banks as collateral for the Loans and/or the Borrower's other
obligations arising in connection with or under this Agreement;
(g) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of
the Borrower's or any Subsidiary's business;
(h) easements, rights of way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of business by the Borrower or any
Subsidiary;
(i) securing any other Indebtedness of the Borrower and/or any
Subsidiary in the aggregate principal amount at any one time
outstanding not in excess of ten percent (10%) of Consolidated
Stockholders' Equity; provided, that in no event shall there exist any
Lien on any of the ownership interests or the shares of capital stock
of any Material Subsidiary other than WIL; and
(j) on assets of WIL (other than as prohibited by the proviso in
Section 5.02(A)(i)) and its Subsidiaries.
50
(B) Dissolution, etc.
----------------
(i) Dissolve, liquidate, wind up, except for dissolution of any
Subsidiary other than a Material Subsidiary, (ii) merge or consolidate with any
Person if (a) Borrower is not the surviving corporation or (b) after any merger
or consolidation, a Default or Event of Default shall have occurred, (iii) sell,
assign, lease or otherwise dispose of or permit the disposal of or turn over the
management of (whether in one transaction or in a series of related
transactions) all or substantially all of its assets except to Borrower or to
any Subsidiary, or (iv) sell (whether in one transaction or in a series of
related transactions) any asset material to the Borrower or to the Borrower and
the Subsidiaries taken as a whole (whether now owned or hereafter acquired and
whether any such asset is leased back on an operating lease basis or as a
Capitalized Lease Obligation but excluding transactions of the type described in
paragraph 2 of Exhibit H); provided that such restriction shall not apply (x) to
any such assets which are promptly replaced with assets of substantially like
kind, value and usefulness which are owned by the Borrower or a Subsidiary and
(y) to any transaction to the extent that the aggregate book value of Tangible
Assets sold (measured at the time of such transaction in question) of the assets
involved in any such transaction does not exceed ten percent (10%) of
Consolidated Tangible Assets.
(C) Hostile Takeovers.
-----------------
Make or commit to make any Investment by the Borrower and/or any of
the Subsidiaries in connection with a Hostile Takeover.
(D) Compliance with ERISA.
---------------------
With respect to the Borrower, Prince, Fiber and any Commonly Controlled Entity
(a) terminate, or cease to have an obligation to contribute to, any
Multiemployer Plan so as to result in any material liability of the Borrower,
Prince, Fiber or any Commonly Controlled Entity to PBGC or to any Multiemployer
Plan, (b) engage in any "prohibited transaction" (as defined in section 4975 of
the Code) involving any Plan which would result in a material liability of the
Borrower, Prince, Fiber or any Commonly Controlled Entity for an excise tax or
civil penalty in connection therewith, (c) incur or suffer to exist any material
"accumulated funding deficiency" (as defined in section 302 of ERISA and
sections 412 and/or 418B of the Code) of the Borrower, Prince, Fiber or any
Commonly Controlled Entity, whether or not waived, involving any Single Employer
Plan, (d) incur or suffer to exist any Reportable Event or the appointment of a
trustee or institution of proceedings for appointment of a trustee for any
Single Employer Plan if, in the case of a Reportable Event, same continues
unremedied for ten (10) days after notice of such Reportable Event pursuant to
section 4043(a), (c) or (d) of ERISA is given, if it is reasonably likely to
result in a material liability of the Borrower, Prince, Fiber or any Commonly
Controlled Entity, (e) allow or suffer to exist any event or condition, which
presents a material risk of incurring a material liability of the Borrower,
Prince, Fiber or any Commonly Controlled Entity to PBGC by reason of termination
of any such Single Employer Plan or (f) cause or permit any Plan maintained by
the Borrower, Prince, Fiber and/or any Commonly Controlled Entity to be
administered in a manner which is not in substantial compliance with ERISA. For
purposes of this Section 5.02(D) "material liability" shall be deemed to mean
any liability of Ten Million Dollars ($10,000,000) or more in the aggregate.
51
(E) Restricted Guaranties.
---------------------
Be or become liable or contingently liable on any Restricted Guaranty
if the amount for which Borrower and/or any Subsidiary is obligated or
contingently obligated thereunder would if added to Indebtedness for Borrowed
Money, cause Borrower not to be in compliance with Section 5.01(K).
Section 5.03. Reporting Requirements.
------------ ----------------------
From the date hereof and thereafter for so long as any portion of the
Commitment is outstanding or the Borrower, Prince, and/or Fiber is indebted to
the Agent and/or any of the Banks under any of the Notes, any of the Related
Documents and/or this Agreement, the Borrower will, unless the Majority Banks
shall otherwise consent in writing, furnish or cause to be furnished to Agent
with sufficient copies for each of the Banks:
(A) as soon as possible and in any event upon acquiring knowledge of
an Event of Default or Default, continuing on the date of such statement, the
written statement of an officer of the Borrower setting forth details of such
Event of Default or Default and the action which the Borrower proposes to take
with respect thereto;
(B) as soon as practicable after the end of each fiscal year of the
Borrower and in any event within ninety (90) days thereafter, a consolidated
balance sheet of the Borrower and the Subsidiaries as at the end of such year,
the related consolidated statement of income of the Borrower and the
Subsidiaries for such year setting forth in each case commencing with the
December 31, 1994 statements, the corresponding figures for the preceding fiscal
year, and the related statement of cash flows during such year, such
consolidated statements to be certified by a so-called "Big-6" firm of
independent certified public accountants or other firm of independent certified
public accountants selected by the Borrower and reasonably acceptable to the
Majority Banks (it being understood that, so long as the Borrower is required to
file an Annual Report on Form 10-K with the Securities and Exchange Commission,
the foregoing requirements of this Section 5.03(B) shall be deemed satisfied if
the Borrower has delivered to Agent copies of its Annual Report on Form 10-K for
the relevant fiscal year, certified by an officer of the Borrower in an
Officer's Certificate as being a true and correct copy thereof);
(C) as soon as is practicable after the end of each of the fiscal
quarters of each Borrower fiscal year and in any event within sixty (60) days
thereafter, a consolidated balance sheet of the Borrower and the Subsidiaries as
of the end of such period, the related consolidated statement of income of the
Borrower and the Subsidiaries for such period and the fiscal year to that date
and the related consolidated statement of cash flows of the Borrower and the
Subsidiaries for the fiscal year to that date, subject to changes resulting from
year-end adjustments, such balance sheet and statements to be prepared and
certified by an officer of the Borrower in an Officer's Certificate as having
been prepared in accordance with GAAP except for footnotes and year-end
adjustments, and to be in form satisfactory to the Majority Banks, it being
understood that, for so long as the Borrower is required to file quarterly
reports on Form 10-Q with the Securities and Exchange Commission, the foregoing
requirements of this Section 5.03(C) shall be deemed satisfied if the Borrower
has delivered to Agent copies of such quarterly report on Form 10-Q, certified
by an officer of the Borrower in an Officer's Certificate as being true and
correct copies thereof;
52
(D) simultaneously with the furnishing of each of the year-end
financial statements of the Borrower and the Subsidiaries to be delivered
pursuant to Section 5.03(B) and each of the quarterly statements of the Borrower
and the Subsidiaries to be delivered pursuant to Section 5.03(C) an Officer's
Certificate of an officer of the Borrower which shall contain a statement in the
form of Exhibit D to the effect that no Event of Default or Default has
occurred, without having been waived in writing, or if there shall have been an
Event of Default not previously waived in writing pursuant to the provisions
hereof, or a Default, such Officer's Certificate shall disclose the nature
thereof. In each such Officer's Certificate the officer of the Borrower shall
also calculate, set forth and certify to the accuracy of the amounts required to
be calculated in the financial covenants of the Borrower contained in this
Agreement and described in Exhibit D;
(E) promptly after the commencement thereof, notice of all material
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
against the Borrower and/or any Subsidiary which have reasonable merit and if
adversely determined would have a Material Adverse Effect;
(F) promptly after the sending or filing thereof, copies of all
regular, periodic and special reports, if any, which the Borrower or any of the
Material Subsidiaries files with the Securities and Exchange Commission;
(G) such other information respecting the business, properties or the
condition or operations, financial or otherwise, of the Borrower or any of the
Subsidiaries as Agent may from time to time reasonably request;
(H) written notice of the fact and of the details of any sale or
transfer of any material ownership interest in any Material Subsidiary given
promptly after the Borrower acquires knowledge thereof; provided, however, that
this clause shall not be deemed to constitute or imply any consent to any such
sale or transfer;
(I) prompt written notice of any event or condition which has had, is
having or would in the reasonably foreseeable future be likely to have a
Material Adverse Effect, and an explanation thereof and of the actions the
Borrower and/or any Subsidiary propose to take with respect thereto;
(J) written notice of any of the following events which could have a
Material Adverse Effect, as soon as possible and in any event within 15 days
after the Borrower knows or has reason to know thereof: (i) the occurrence or
expected occurrence of any Reportable Event with respect to any Plan, or (ii)
the institution of proceedings or the taking or expected taking of any other
action by PBGC or the Borrower or any Commonly Controlled Entity to terminate,
withdraw or partially withdraw from any Plan and, with respect to any
Multiemployer Plan, the Reorganization (as defined in Section 4241 of ERISA) or
Insolvency (as defined in Section 4245 of ERISA) of such Plan and in addition to
such notice, deliver to the Agent whichever of the following may be applicable:
(a) an Officer's Certificate setting forth details as to such Reportable Event
and the action that the Borrower or Commonly Controlled Entity proposes to take
with respect thereto, together with a copy of any notice of such Reportable
Event that may be required to be filed with PBGC, or (b) any notice delivered by
PBGC evidencing its intent to institute such proceedings or any notice to PBGC
that such Plan is to be terminated, as the case may be; and
(K) promptly and in any event within five (5) days thereafter, written
notice of any failure to make any payment when due on any Indebtedness for
Borrowed Money having an outstanding principal balance of Ten Million Dollars
($10,000,000) or more.
53
Section 5.04. Confidential Financial Information.
------------ ----------------------------------
The Banks and Agent shall, with respect to any and all financial
statements or other reports or documents delivered by the Borrower to the Banks
or Agent pursuant to Section 5.03 and any other information provided to the
Banks or the Agent (other than in a public forum, including an analyst's meeting
and other than any such information which is publicly available other than
solely as a result of disclosure by the Agent or any of the Banks) and to the
extent that such information therein contained or provided has not theretofore
otherwise been disclosed in such a manner as to render such information no
longer confidential (other than as a result of disclosure by Agent or Bank in
violation of its obligation hereunder), employ reasonable procedures designed to
maintain the confidential nature of the information therein contained; provided,
however, that any Bank or Agent may disclose or disseminate such information to:
(a) the Bank's and Agent's respective employees, agents, attorneys and
accountants who would ordinarily have access to such information in the normal
course of the performance of their duties in connection with the administration
of the Loans; (b) upon at least five (5) Business Days (unless sooner required
by law) prior notice to the Borrower (during which period the Agent and the
Banks will not actively oppose any efforts by the Borrower to obtain a
protective order), such third parties as any Bank or Agent may, in its
discretion, deem reasonably necessary in connection with or in response to (i)
compliance with any law, ordinance or governmental order, regulation, rule,
policy, subpoena, investigation or request, or (ii) any order, decree, judgment,
subpoena, notice of discovery or similar ruling or pleading issued, filed,
served or purported on its face to be issued, filed or served (x) by or under
authority of any court, tribunal, arbitration board or any governmental agency,
commission, authority board or similar entity or (y) in connection with any
proceeding, case or matter pending (or on its face purported to be pending)
before any court, tribunal, arbitration board or any governmental agency,
commission, authority, board or similar entity; provided that without notice to
the Borrower, the Agent and any Bank may disclose such information to bank
examiners of governmental agencies having regulatory authority over the Agent or
the Bank in question in connection with such examiner's examinations of Agent or
such Bank's books and records, or (iii) collection by judicial proceeding of any
of the Indebtedness now or hereafter owing by the Borrower and/or any Subsidiary
to the Agent and/or any of the Banks or enforcement of any rights or remedies
now or hereafter possessed by Agent and/or any of the Banks pursuant to this
Agreement, any of the Notes or any of the Related Documents; (c) subject to
Section 9.09, any prospective purchaser (including an affiliate of any Bank), in
connection with the resale or proposed resale by it of any portion of its Note
or other participation in its Pro Rata Share of the Loans; provided that the
prospective participant has signed an agreement binding such participant under
this Section 5.04 as if it were a Bank and (d) any entity utilizing such
information to rate or classify any Bank's or the Agent's debt or equity
securities for sale to the public; provided that such rating agency has agreed
to keep such information confidential pursuant to an agreement reasonably
satisfactory to the Borrower.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01. Events of Default.
------------ -----------------
The Borrower shall be in default under this Agreement, the Related
Documents and the Notes upon the occurrence of any one or more of the following
events ("Events of Default"):
54
(A) if the Borrower shall fail to make due and punctual payment of any
fees, interest, principal and/or other amounts payable under this Agreement as
provided in any of the Notes and/or in this Agreement within five (5) days after
the date when the same is due and payable, whether at the due date thereof or at
a date fixed for prepayment or if the Borrower shall fail to make any such
payment of fees, interest, principal and/or any other amount under this
Agreement any of the Notes on the date when such payment becomes due and payable
by acceleration;
(B) if the Borrower or any Material Subsidiary shall make an
assignment for the benefit of creditors, or shall fail generally to pay its or
their debts as they become due, or shall admit in writing its or their inability
to pay its debts as they become due or shall file a voluntary petition in
bankruptcy, or shall file any petition or answer seeking any reorganization,
arrangement, composition, adjustment, liquidation, dissolution or similar relief
under the present or any future federal bankruptcy laws or other applicable
federal, state or other statute, law or regulation, or shall seek or consent to
or acquiesce in the appointment of any trustee, receiver or liquidator of it or
of all or any substantial part of its properties, or if partnership or corporate
action shall be taken for the purpose of effecting any of the foregoing; or
(C) to the extent not described in Section 6.01(B), (i) if the
Borrower or any Material Subsidiary shall be the subject of a bankruptcy
proceeding, or (ii) if any proceeding against any of them seeking any
reorganization, arrangement, composition, adjustment, liquidation, dissolution,
or similar relief under the present or any future federal bankruptcy law or
other applicable federal, foreign, state or other statute, law or regulation
shall be commenced, or (iii) if any trustee, receiver or liquidator of any of
them or of all or any substantial part of any or all of their properties shall
be appointed without their consent or acquiescence; provided that in any of the
cases described above in this Section 6.01(C), such proceeding or appointment
shall not be an Event of Default if the Borrower or the Material Subsidiary in
question shall cause such proceeding or appointment to be discharged, vacated,
dismissed or stayed within thirty (30) days after commencement thereof; or
(D) if final judgment or final judgments aggregating more than Ten
Million Dollars ($10,000,000) but less than Twenty Million Dollars ($20,000,000)
shall be rendered against the Borrower or any Material Subsidiary and shall
remain undischarged, unstayed or unpaid for an aggregate of thirty (30) days
(whether or not consecutive) after entry thereof and enforcement proceedings
thereunder have commenced or if any final judgment or judgments or any certain
legal obligation to pay money as a result of litigation aggregating Twenty
Million Dollars ($20,000,000) or more shall be rendered against or incurred by
the Borrower and/or any Material Subsidiary and is undischarged, unstayed or
unpaid; or
(E) if the Borrower or any Material Subsidiary shall default (after
giving effect to any applicable grace period) in the due and punctual payment of
the principal of or interest on any Borrowed Money (which definition, for the
purposes of this Section 6.01(E), shall be expanded to include Material
Subsidiaries wherever the Borrower is mentioned therein) in excess of Ten
Million Dollars ($10,000,000) (other than the Loans), or if any default shall
have occurred and be continuing after any applicable grace period under any
agreement, mortgage, note or other instrument evidencing, securing or providing
for the creation of such Borrowed Money, which results in the acceleration of
such Borrowed Money; or
(F) (i) if there shall be a default in the performance of the
Borrower's obligations under Section 5.01(C) (insofar as such subsection (C)
requires the preservation of the corporate existence of the Borrower or any
Material Subsidiaries), any of Section 5.01(J), Section 5.01(K), or Section
5.02 of this Agreement, or
55
(G) if there shall be any default in the performance of any covenant
or condition contained in this Agreement, any of the Notes or in any of the
Related Documents other than a covenant or condition referred to in any other
subsection of this Section 6.01 and such default shall continue unremedied or
unwaived, (i) in the case of any covenant or condition contained in Section
5.03, for five (5) Business Days after notice from the Agent, or (ii) in the
case of any other covenant or condition for which no other grace period is
provided, for thirty (30) days, or (iii) if any of the representations and
warranties made or deemed made by the Borrower to the Banks or Agent pursuant to
this Agreement proves to have been false or misleading in any material respect
when made; or
(H) any certification of the financial statements, furnished to Agent
for the Banks pursuant to Section 5.03(B), shall contain any qualification;
provided, however, that such qualifications will not be deemed an Event of
Default if in each case (i) such certification shall state that the examination
of the financial statements covered thereby was conducted in accordance with
generally accepted auditing standards, including but not limited to all such
tests of the accounting records as are considered necessary in the circumstances
by the independent certified public accountants preparing such statements, (ii)
such financial statements were prepared in accordance with GAAP and (iii) such
qualification does not involve the "going concern" status of the entity being
reported upon; or
(I) if twenty percent (20%) or more of the issued and outstanding
Voting Stock of the Borrower is owned by any Person and any Affiliate or
Affiliates of such Person (an "Acquiring Group") and a majority of the Board of
Directors of the Borrower is comprised of Persons who are not members of the
Borrower's Board of Directors on the date hereof (the "Incumbent Board");
provided, that any person who becomes a Director of Borrower's Board of
Directors after the date hereof whose election, or nomination for election by
Borrower's stockholders, was approved by a vote of at least 3/4 of the Directors
comprising the Incumbent Board (either by specific vote or by approval of the
proxy statement of Borrower in which such Person is named as a nominee for
director without objection to such nomination) shall be, for purposes hereof,
considered as though such Person were a member of the Incumbent Board.
ARTICLE VII
REMEDIES OF BANKS
Upon the occurrence of any one or more of the Events of Default, the
Agent, at the request of the Majority Banks, shall, by notice to the Borrower,
declare the obligation of the Banks to make the Loans and each Bank's obligation
to make its Pro Rata Shares of the Loans to be terminated, whereupon the same
and the Commitment shall forthwith terminate, and Agent, at the request of the
Majority Banks, shall, by notice to the Borrower, declare the entire unpaid
principal amount of the Notes and all fees and interest accrued and unpaid
thereon and/or under this Agreement, and/or any of the Related Documents and any
and all other Indebtedness under this Agreement, the Notes and/or any of the
Related Documents of the Borrower and/or any Subsidiary to any of the Banks
and/or to any holder of all or any portion of each Note to be forthwith due and
payable, whereupon all such Notes, and all such accrued fees and interest and
other such Indebtedness under this Agreement, any of the Notes and/or any of the
Related Documents shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower; provided, however that upon the
occurrence of an Event of Default under Section 6.01(B) or (C), all of the
unpaid principal amounts of the Notes, all fees and interest accrued and unpaid
thereon and/or under this Agreement and/or under the Related Documents and any
56
and all other such Indebtedness of the Borrower, Prince and/or Fiber to any of
the Banks and/or to any such holder under this Agreement, any of the Notes
and/or any of the Related Documents shall thereupon be due and payable in full
without any need for Agent and/or any Bank to make any such declaration or take
any action and the Banks' obligations to make the Loans and the Commitment shall
simultaneously terminate. Agent shall, in accordance with the votes of the
Majority Banks, exercise all remedies on behalf of and for the account of each
Bank and on behalf of its respective Pro Rata Share of the Loans, its Note and
Indebtedness of the Borrower, Prince and/or Fiber owing to it or any of the
foregoing, including without limitation all remedies available under or as a
result of this Agreement, the Notes or any of the Related Documents without any
such exercise being deemed to modify in any way the fact that each Bank shall be
deemed a separate creditor of the Borrower, Prince and/or Fiber to the extent of
its Note and Pro Rata Share of the Loans and any other amounts payable to such
Bank under this Agreement and/or the Related Documents Agent shall be deemed a
separate creditor of the Borrower, Prince and/or Fiber to the extent of the fees
payable under Section 2.02(B)(ii) and Syndication Agent shall be deemed a
separate creditor of the Borrower, Prince and/or Fiber to the extent of the fees
payable under Section 2.02 (B)(iii).
ARTICLE VIII
ADMINISTRATIVE AGENT
Section 8.01. Appointment.
------------ -----------
Agent is hereby appointed as agent hereunder and each Bank hereby
authorizes Agent to act hereunder and under the Related Documents as its agent
hereunder and thereunder. Agent agrees to act as such upon the express
conditions contained in this Article VIII. The provisions of this Article VIII
are solely for the benefit of Agent, and neither the Borrower nor any third
party shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement,
Agent shall act solely as agent of the Banks and does not assume and shall not
be deemed to have assumed any obligation towards or relationship of agency or
trust with or for the Borrower.
Section 8.02. Powers; General Immunity.
------------ ------------------------
(A) Duties Specified.
----------------
Each Bank irrevocably authorizes Agent to take such action on such
Bank's behalf, including without limitation to execute and deliver the Related
Documents to which Agent is a party and to exercise such powers hereunder and
under the Related Documents and other instruments and agreements referred to
herein as are specifically delegated to Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto. Agent shall
have only those duties and responsibilities which are expressly specified in
this Agreement or in any of the Related Documents and it may perform such duties
by or through its agents or employees. The duties of Agent shall be mechanical
and administrative in nature; and Agent shall not have by reason of this
Agreement or any of the Related Documents a fiduciary relationship in respect of
any Bank; and nothing in this Agreement or any of the Related Documents,
expressed or implied, is intended to or shall be so construed as to impose upon
Agent any obligations in respect of this Agreement or any of the Related
Documents or the other instruments and agreements referred to herein except as
expressly set forth herein or therein.
57
(B) No Responsibility for Certain Matters.
-------------------------------------
Agent shall not be responsible to any Bank for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement, the Notes, the Related Documents or any other
document, instrument or agreement now or hereafter executed in connection
herewith or therewith, or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statement or in
any financial or other statements, instruments, reports, certificates or any
other documents in connection herewith or therewith by or on behalf of the
Borrower and/or any Subsidiary to Agent or any Bank, or be required to ascertain
or inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained herein or therein or as to the use
of the proceeds of the Loans or of the existence or possible existence of any
Default or Event of Default.
(C) Exculpatory Provisions.
----------------------
Neither Agent nor any of its officers, directors, employees or agents
shall be liable to any Bank for any action taken or omitted hereunder or in
connection herewith unless caused by its or their gross negligence or willful
misconduct. If Agent shall request instructions from Banks with respect to any
act or action (including the failure to take an action) in connection with this
Agreement, Agent shall be entitled to refrain from such act or taking such
action unless and until Agent shall have received instructions from the Majority
Banks. Without prejudice to the generality of the foregoing, (i) Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for the Borrower), accountants, experts and
other professional advisors selected by it; and (ii) no Bank shall have any
right of action whatsoever against Agent as a result of Agent acting or (where
so instructed) refraining from acting under this Agreement or the other
instruments and agreements referred to herein in accordance with the
instructions of the Majority Banks. Agent shall be entitled to refrain from
exercising any power, discretion or authority vested in it under this Agreement
or the other instruments and agreements referred to herein unless and until it
has obtained the instructions of the Majority Banks.
(D) Agent Entitled to Act as Bank.
-----------------------------
The agency hereby created shall in no way impair or affect any of the
rights and powers of, or impose any duties or obligations upon, Agent in its
individual capacity as a Bank hereunder. With respect to its participation in
the Loans and the Commitment Agent shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
performing the duties and functions delegated to it hereunder, and the term
"Bank" or "Banks" or any similar term shall, unless the context clearly
otherwise indicates, include Agent in its individual capacity. Agent and its
affiliates may accept deposits from, lend money to and generally engage in any
kind of banking, trust, financial advisory or other business with the Borrower
or any Affiliate or Subsidiary as if it were not performing the duties specified
herein, and may accept fees and other consideration from the Borrower for
services in connection with this Agreement and otherwise without having to
account for the same to the Banks.
58
Section 8.03. Representations and Warranties; No Responsibility for
------------ -----------------------------------------------------
Appraisal of Creditworthiness.
-----------------------------
Each Bank represents and warrants that it has made its own independent
investigation of the financial condition and affairs of the Borrower and the
Subsidiaries in connection with the making of the Loans hereunder and has made
and shall continue to make its own appraisal of the creditworthiness of the
Borrower and the Subsidiaries. Agent shall not have any duty or responsibility
either initially or on a continuing basis to make any such investigation or any
such appraisal on behalf of Banks or to provide any Bank with any credit or
other information with respect thereto whether coming into its possession before
the making of any Loan or at any time or times thereafter (except for
information received by Agent under Section 5.03 hereof which Agent will
promptly forward to the Banks), and Agent shall further not have any
responsibility with respect to the accuracy of or the completeness of the
information provided to Banks.
Section 8.04. Right to Indemnity.
------------ ------------------
Each Bank severally agrees to indemnify Agent proportionately to its
Pro Rata Share of the Commitment, to the extent Agent shall not have been
reimbursed by the Borrower and/or any Subsidiary, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including, without limitation, counsel fees and disbursements)
or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against Agent in performing its duties hereunder or in
any way relating to or arising out of this Agreement, any of the Notes and/or
any of the Related Documents; provided that no Bank shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
negligence or willful misconduct; and provided further, in the event that, after
a Bank has made a payment to Agent in connection with such indemnification
obligation, Agent receives payment from or on behalf of the Borrower and/or any
Subsidiary for such obligation, Agent shall reimburse such Bank an amount equal
to its Pro Rata Share of such amount received from the Borrower and/or and
Subsidiary. If any indemnity furnished to Agent for any purpose shall, in the
opinion of Agent, be insufficient or become impaired, Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished.
Section 8.05. Payee of Note Treated as Owner.
------------ ------------------------------
Agent may deem and treat the payee of any Note as the owner thereof
for all purposes hereof unless and until a written notice of the assignment or
transfer thereof shall have been filed with Agent. Any request, authority or
consent of any person or entity who, at the time of making such request or
giving such authority or consent, is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee or assignee of that Note or of
any Note or Notes issued in exchange for such Note.
Section 8.06. Resignation by Agent.
------------ --------------------
(A) Agent may resign from the performance of all its functions and
duties hereunder at any time by giving 30 days' prior written notice to the
Borrower and each of the Banks. Such resignation shall take effect upon the
acceptance by a successor Agent of appointment pursuant to clauses (b) and (c)
below or as otherwise provided below.
59
(B) Upon any such notice of resignation, the Majority Banks shall
appoint a successor Agent who shall be satisfactory to the Borrower and shall be
an incorporated bank or trust company with a combined surplus and undivided
capital of at least Four Hundred Million Dollars ($400,000,000).
(C) If a successor Agent shall not have been so appointed within said
30 day period, the resigning Agent, with the consent of the Borrower, shall then
appoint a successor Agent who shall serve as the Agent until such time, if any,
as the Majority Banks, with the consent of the Borrower, appoint a successor
Agent as provided above.
(D) If no successor Agent has been appointed pursuant to clause (B) or
(C) by the 40th day after the date such notice of resignation was given by the
resigning Agent, the resigning Agent's resignation shall become effective and
the Majority Banks shall thereafter perform all the duties of the resigning
agent hereunder until such time, if any, as the Majority Banks, with the consent
of the Borrower, appoint a successor Agent as provided above.
Section 8.07. Successor Agent.
------------ ---------------
Agent may resign at any time as provided in Section 8.06, and Agent
may be removed at any time with or without cause by an instrument or concurrent
instruments in writing delivered to the Borrower and Agent and signed by the
Majority Banks. Upon any such notice of resignation or any such removal, the
Majority Banks shall have the right, upon five days notice to and the approval
of (which approval shall not be unreasonably withheld) the Borrower, to appoint
a successor Agent. Upon the acceptance of any appointment as the Agent
hereunder by a successor Agent, that successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring or removed Agent, and the retiring or removed Agent shall be discharged
from its duties and obligations as the Agent under this Agreement. After any
retiring or removed Agent's resignation or removal hereunder as the Agent the
provisions of this Article VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Agent under this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Consent to Jurisdiction and Service of Process.
------------ ----------------------------------------------
(A) Except to the extent prohibited by applicable law, the Borrower
irrevocably on its own behalf and on behalf of each Subsidiary:
(i) agrees that any suit, action, or other legal proceeding
arising out of this Agreement or any of the Loans may be brought in
the courts of record of any of the State of Rhode Island, the State of
New York, the State of Delaware or any state or jurisdiction in which
any assets of the Borrower and/or any Subsidiary may then be located
or the courts of the United States located in any of such states;
(ii) consents to the jurisdiction of each such court in any such
suit, action or proceeding; and
(iii) waives any objection which it may have to the laying of
venue of such suit, action or proceeding in any of such courts.
60
NO PARTY TO THIS INSTRUMENT, INCLUDING BUT NOT LIMITED TO ANY ASSIGNEE
OR SUCCESSOR OF A PARTY, SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED UPON, OR ARISING OUT OF,
THIS AGREEMENT, THE NOTES, THE RELATED DOCUMENTS OR ANY OF THE OTHER DOCUMENTS,
INSTRUMENTS AND AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THEREWITH OR
THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG THE PARTIES HERETO, OR ANY OF
THEM. NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL
HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS
NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY
THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO
PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
For such time as any of the Indebtedness of the Borrower and/or any
Subsidiary to Agent and/or to any of the Banks under this Agreement, any of the
Related Documents and/or any of the Notes shall be unpaid in whole or in part
and/or any part of the Commitment is in effect, the Borrower irrevocably
designates its registered agent for service of process in each state or
jurisdiction in which any suit, action or legal proceeding may be brought under
this Agreement, any of the Notes and/or any of the Related Documents, and, in
the absence thereof, the Secretary of State or other like authority if such
jurisdiction has no Secretary of State of whichever state or other jurisdiction
any suit, action or legal proceedings may be brought under this Agreement, any
of the Notes and/or any of the Related Documents is the jurisdiction or state in
which any such suit, action or other legal proceeding is filed, as its agent to
accept and acknowledge on its behalf service of any and all process in any such
suit, action or proceeding brought in any such court and agrees and consents
that any such service of process upon such agent and written notice of such
service to the Borrower by registered or certified mail shall be taken and held
to be valid personal service upon the Borrower regardless of where the Borrower
shall then be doing business and that any such service of process shall be of
the same force and validity as if service were made upon it according to the
laws governing the validity and requirements of such service in each such state
or jurisdiction and waives any claim of lack of personal service or other error
by reason of any such service. Any notice, process, pleadings or other papers
served upon the aforesaid designated agent shall, within three (3) Business Days
after such service, be sent by certified or registered mail to the Borrower at
its address set forth in this Agreement and to David K. Duffell, Esq. at Edwards
& Angell at its address set forth in Section 9.07.
Section 9.02. Indemnification.
------------ ---------------
The Borrower irrevocably agrees to and does hereby indemnify and hold
harmless Agent, Syndication Agent and each of the Banks, their agents or
employees and each Person, if any, who controls any of the Banks within the
meaning of Section 15 of the Securities Act of 1933, as amended, and each and
all and any of them (the "Indemnified Parties"), against any and all losses,
claims, actions, causes of action, damages or liabilities (including any amount
paid in settlement of any action, commenced or threatened and any amount
described in Section 8.04), joint or several, to which they, or any of them, may
become subject under statutory law or at common law, and to reimburse the
Indemnified Parties for any legal or other out-of-pocket expenses reasonably
incurred by it or them in connection with investigating, preparing for or
defending against any actions, commenced or threatened by any third party
against any of the Indemnified Parties, insofar as such losses, claims, damages,
liabilities or actions arise out of or are related to any act or omission of the
Borrower and/or any Subsidiary with respect to any of the Related Documents,
this Agreement, any of the Notes, any of Loans and/or any offering of securities
by the Borrower and/or any Subsidiary after the date hereof and/or in connection
with the Securities and Exchange Act of 1933 and/or failure to comply with any
61
applicable federal, state or foreign governmental law, rule, regulation, order
or decree, including without limitation, any losses, claims, damages,
liabilities or actions which arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact with respect to matters relative
to any of the foregoing contained in any document distributed in connection
therewith, or the omission or alleged omission to state in any of the foregoing
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Promptly upon receipt of notice of the commencement of any action, or
information as to any threatened action against any of the Indemnified Parties
in respect of which indemnity or reimbursement may be sought from the Borrower
on account of the agreement contained in this Section 9.02, notice shall be
given to the Borrower in writing of the commencement or threatening thereof,
together with a copy of all papers served, but the omission so to notify the
Borrower of any such action shall not release the Borrower from any liability
which it may have to such Indemnified Parties otherwise than on account of the
indemnity agreement contained in this Section 9.02 unless such omission
materially prejudiced Borrower's ability to defend against such action. In no
event shall the Borrower be liable for any fees or outofpocket expenses,
including fees and outofpocket expenses of legal counsel incurred by any of the
Indemnified Parties for services performed more than twenty (20) days prior to
any such notice in connection with any such action.
In case any such action shall be brought against any of the
Indemnified Parties, the Borrower shall be entitled to participate in (and, to
the extent that it shall wish, to select counsel and to direct) the defense
thereof at its own expense. Any of the Indemnified Parties shall have the right
to employ its or their own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party unless the
employment of such counsel shall have been authorized in writing by the Borrower
in connection with the defense of such action or the Borrower shall not have
employed counsel to have charge of the defense of such action or such
Indemnified Party shall have received an opinion from an independent counsel
that there may be defenses available to it which are different from or
additional to those available to the Borrower (in which case the Borrower shall
not have the right to direct the defense of such action on behalf of such
Indemnified Party), in any of which events the same shall be borne by the
Borrower. If any Indemnified Party settles any claim or action with respect to
which the Borrower has agreed to indemnify such Indemnified Party pursuant to
the terms hereof, the Borrower shall have no liability pursuant to this Section
9.02 to such Indemnified Party with respect to such claim or action unless the
Borrower shall have consented in writing to the terms of such settlement.
The provisions of Section 9.02 shall be effective only to the fullest
extent permitted by law.
Section 9.03. Rights and Remedies Cumulative.
------------ ------------------------------
No right or remedy conferred upon or reserved to Agent and/or to the
Banks in this Agreement is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given under this
Agreement or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy under this Agreement, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
62
Section 9.04. Delay or Omission Not Waiver.
------------ ----------------------------
No delay in exercising or failure to exercise by Agent and/or any of
the Banks any right or remedy accruing upon any Default or Event of Default
shall impair any such right or remedy or constitute a waiver of any such Default
or Event of Default or an acquiescence therein. Every right and remedy given
by this Agreement or by law to Agent and/or any of the Banks may be exercised
from time to time, and as often as may be deemed expedient, by Agent and/or any
of the Banks.
Section 9.05. Waiver of Stay or Extension Laws.
------------ --------------------------------
The Borrower covenants (to the extent that it may lawfully do so) that
neither the Borrower nor any Subsidiary will at any time insist upon, or plead
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Agreement; and the Borrower
(to the extent that it may lawfully do so) hereby expressly waives all benefit
and advantage of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to Agent and/or any of the
Banks, but will suffer and permit the execution of every such power as though no
such law had been enacted.
Section 9.06. Amendments, etc.
------------ ---------------
No amendment, modification, termination, or waiver of any provision of
this Agreement other than Section 2.02(B)(ii) or (iii) or Section 9.11(I), or of
any of the Notes or Related Documents nor consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be in a
written notice given to the Borrower by Agent, and consented to in writing by
the Majority Banks and Agent shall give any such notice if the Majority Banks so
consent or direct Agent to do so; provided, however, that any such amendment,
modification, termination, waiver or consent shall require a written notice
given to the Borrower by Agent and consented to in writing by all of the Banks
if the effect thereof is to (i) change any of the provisions affecting the
interest rate on the Loans or the fees set forth in Section 2.02(B)(i), (ii)
extend or modify the Commitment, (iii) change any Bank's Pro Rata Share of the
Commitment or the Loans (except as otherwise set forth in Section 9.11), (iv)
modify this Section 9.06 or the first sentence of Section 9.10, (v) change the
definition of Majority Banks, (vi) reduce the amount of principal due hereunder
or (vii) extend any due date for payment of principal, interest or fees, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. Agent acting alone shall have the
right to consent to any amendment of Section 2.02(B)(ii) or 9.11(I). The
Syndication Agent alone shall have the right to consent to any amendment of
Section 2.02(B)(iii). Any amendment or modification of this Agreement must be
signed by the Borrower, Agent and, except in the case of amendment of Section
2.02(B)(ii) or (iii) or 9.11(I), at least all of the Banks consenting thereto
who shall then hold the Pro Rata Shares of the Loans required for such
amendment or modification under this Section 9.06 and Agent shall sign any such
amendment if such Banks so consent or direct Agent to do so provided that any
Bank dissenting therefrom shall be given an opportunity to sign any such
amendment or modification. No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances. In the event that the Borrower wishes any such
amendment, modification, termination, waiver or consent, the Borrower shall
notify Agent thereof and Agent shall within five (5) Business Days following
such notice notify the Banks thereof, which notice from Agent shall constitute a
63
notice to the Banks for the purposes of the definition of Majority Banks set
forth in Section 1.01.
Section 9.07. Addresses for Notices, etc.
------------ --------------------------
All notices, requests, demands and other communications provided for
hereunder (other than those which, under the terms of this Agreement, may be
given by telephone, which shall be effective when received verbally) shall be in
writing (including telegraphic, telexed or telecopied communication) and mailed,
telegraphed, telexed, telecopied or delivered to the applicable party at the
addresses indicated below:
If to the Borrower:
Wellman, Inc.
Shrewsbury Executive Center
1040 Broad Street
Suite 302
Shrewsbury, New Jersey 07702
Attention: Keith R. Phillips
Vice President, Chief
Financial Officer and Treasurer
Audrey Goodman
Assistant Treasurer
Telecopy: (908) 542-9344
With copies to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, Rhode Island 02903
Attention: David K. Duffell, Esquire
Telecopy: (401) 276-6611
If to Agent:
Fleet National Bank
111 Westminster Street
Providence, Rhode Island 02903
Attention: Timothy J. McCormick
Vice President
Telex: 927513 FLEET PVD
Telecopy: (401) 278-5726
With copies to:
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, Rhode Island 02903
Attention: Malcolm Farmer III, Esquire
Telecopy: (401) 277-9600
Telex: 952039 HATS PVD-UD
If to any Bank, to the address(es) set forth immediately below such
Bank's name on Exhibit I, as same may be amended from time to time;
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to the delivery with the
terms of this Section. All such notices, requests, demands and other
communications shall be effective when received. Requests, Interest Rate
64
Elections, certificates, items provided pursuant to Section 5.03, other than
subsection 5.03(A), and other routine mailings or notices need not be
accompanied by a copy to legal counsel for Agent, the Banks or the Borrower.
Section 9.08. Costs, Expenses and Taxes.
------------ -------------------------
The Borrower agrees to pay on demand the reasonable fees and out-of-
pocket expenses of Messrs. Hinckley, Allen & Snyder, counsel for Agent, in
connection with the preparation, execution, delivery, amendment and
administration of the documents involved in each Bank's Commitment and of this
Agreement, the Notes, the Related Documents and the other instruments and
documents to be delivered hereunder. The Borrower agrees to pay on demand all
reasonable outofpocket costs and expenses (including without limitation
reasonable attorneys' fees (including the allocated costs of staff counsel,
provided that any allocation of such costs is made in accordance with the
relevant Bank's customary practice and is without duplication of the expense of
any outside counsel for the relevant Bank for the relevant matter, there being a
general understanding or presumption that the hourly rates and time charges for
in-house counsel will not exceed those charged by outside counsel)) incurred by
Agent and, to the extent incurred in connection with suing on a Note, any of the
Banks, upon or after an Event of Default, if any, in connection with the
enforcement of this Agreement, any of the Related Documents, any of the Notes
and the other instruments and documents to be delivered under this Agreement and
any amendments to this Agreement or in connection with any amendments, waivers
or consents of or under this Agreement, any of the Related Documents, any of the
Notes or any other such instruments and documents. In addition, the Borrower
shall pay on demand any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution and delivery of this
Agreement, the Related Documents, the Notes and the other instruments and
documents to be delivered hereunder and agrees to save Agent and the Banks
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes or fees.
Section 9.09. Participations.
------------ --------------
Each Bank may sell participations, in all or part of its Pro Rata
Share of any Loan or Loans made by it and/or its Commitment or any other
interest herein or in any of its Notes to another financial or rated institution
(it being understood that the foregoing shall in no way restrict a Bank's
ability to sell participations in its Competitive Bid Loans in the secondary
market so long as such Bank retains all voting rights arising in connection
therewith), in which event the participant shall not have any rights under this
Agreement, the Related Documents or any Note or any other document delivered in
connection herewith (the participant's rights against that Bank in respect of
that participation to be those set forth in the agreement executed by that Bank
in favor of the participant relating thereto); provided that any Bank granting a
participation or participations shall retain all voting rights in any and all
such Bank's participation agreements on all decisions subject to decision by the
Majority Banks or by all the Banks under this Agreement, the Notes and the
Related Documents so that the participation agreement or other arrangements
between a Bank and its participants may only provide that such Bank will obtain
the approval of such participant prior to such Bank's agreeing to any amendment
or waiver of any provisions of this Agreement which would (A) extend the
maturity of any Note, (B) reduce the amount of principal, any interest rate or
any Facility Fee under this Agreement or (C) increase the Commitment of the Bank
granting the participation other than as permitted by Section 2.15 or 2.16 and
all amounts payable by the Borrower hereunder or thereunder shall be determined
as if that Bank had not sold such participation. Each Bank may furnish any
information concerning such Bank, the Loans, the Borrower and any Subsidiary in
65
the possession of that Bank from time to time to participants (including
prospective participants); provided that any Bank providing any confidential
information about the Borrower and/or any Subsidiary to any such participant or
prospective participant shall obtain such participant's or prospective
participant's agreement to keep confidential any such confidential information.
Section 9.10. Binding Effect.
------------ --------------
This Agreement shall be binding upon and inure to the benefit of the
Borrower, Agent and the Banks and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights hereunder
or any interest herein or delegate any of its obligations hereunder without the
prior written consent of all of the Banks. This Agreement and all covenants,
representations and warranties made herein and/or in any certificates, or
documents or instruments now or hereafter delivered pursuant hereto shall
survive the making of the Loans, the execution and delivery of the Related
Documents and the Notes and shall continue in effect so long as any amounts
payable under or in connection with this Agreement, any of the Related Documents
and/or any of the Notes or any other Indebtedness of the Borrower, Prince and/or
Fiber under this Agreement, any of the Related Documents and/or any of the Notes
to the Agent and/or any of the Banks remains unpaid or the Commitment remains
outstanding; provided, however, that Sections 2.01(A)(ix) and (x), 2.02(C), 2.10
(D), (E) and (F) and Section 2.11(B), (C) and (D), Section 5.04 and Section 9.02
shall survive and remain in full force and effect after expiration of the
Commitment and repayment in full of all amounts payable under or in connection
with all of the Notes, the Related Documents, this Agreement and any other such
Indebtedness of the Borrower, Prince and/or Fiber under this Agreement, any of
the Related Documents and/or any of the Notes.
Section 9.11. Substitutions and Assignments.
------------ -----------------------------
Upon the request of any Bank, Agent, the Borrower and such Bank may,
subject to the terms and conditions hereinafter set forth, take the actions set
forth below to substitute one or more financial institutions (a "Substituted
Bank") as a Bank or Banks hereunder having a Pro Rata Share as specified in the
relevant Substitution Agreement executed in connection therewith.
Notwithstanding any other provision of this Section 9.11 each of the Agent (in
its individual capacity), Bank of America Illinois and Wachovia Bank of Georgia,
N.A. must retain a Pro Rata Share of no less than ten percent (10%) of the
aggregate Pro Rata Shares of all of the Banks; provided, however, that during
the continuance of any Default or Event of Default, such Pro Rata Share may be
reduced below ten percent (10%) (provided that such Bank's Pro Rata Share of the
Commitment is either reduced to Zero Dollars ($0) or remains at all time equal
to or greater than Ten Million Dollars ($10,000,000)) without the prior consent
of the Borrower. Notwithstanding anything to the contrary set forth in Section
9.06, the requirement that the Agent (in its individual capacity), Bank of
America Illinois and Wachovia Bank of Georgia, N.A. each retain a Pro Rata Share
of no less than ten percent (10%) of the aggregate Pro Rata Shares of all of the
Banks may be waived, with respect to any of the Agent (in its individual
capacity), Bank of America Illinois and Wachovia Bank of Georgia, N.A., by such
Bank and the Borrower without the consent of any other Bank.
(A) In connection with any such substitution the Substituted Bank and
Agent shall enter into a Substitution Agreement pursuant to which such
Substituted Bank shall be substituted for the Bank requesting the substitution
in question (any such Bank being hereinafter referred to as a "Selling Bank") to
the extent of the reduction in the Selling Bank's Pro Rata Share specified
therein. In addition, to that extent such Substituted Bank shall assume such of
the obligations of such Selling Bank under this Agreement, the Related Documents
66
and the Notes as may be specified therein and this Agreement shall be amended by
execution and delivery of each Substitution Agreement to include such
Substituted Bank as a Bank for all purposes under this Agreement, the Related
Documents and the Notes and to substitute for the then existing Exhibit I to
this Agreement a new Exhibit I in the form of Schedule A to such Substitution
Agreement setting forth the Pro Rata Share of each Bank following execution
thereof. Each Bank and the Borrower hereby appoint Agent as agent on its behalf
to countersign and accept delivery of each Substitution Agreement and, to the
extent applicable, the provisions of Article VIII hereof shall apply mutatis
mutandis with respect to such appointment and anything done or omitted to be
done by Agent in pursuance thereof.
(B) Without prejudice to any other provision of this Agreement, each
Substituted Bank shall, by its execution of a Substitution Agreement, agree that
neither Agent nor any Bank is in any way responsible for or makes any
representation or warranty as to: (a) the accuracy and/or completeness of any
information supplied to such Substituted Bank in connection therewith, (b) the
financial condition, creditworthiness, affairs, status or nature of the Borrower
and/or any of the Subsidiaries or the observance by the Borrower, Prince and/or
Fiber or any other party of any of its obligations under this Agreement, any of
the Notes or any of the Related Documents or (c) the legality, validity,
effectiveness, adequacy or enforceability of this Agreement, any of the Notes or
any of the Related Documents.
(C) Agent shall be entitled to rely on any Substitution Agreement
delivered to it pursuant to this Section 9.11 which is complete and regular on
its face as to its contents and appears to be signed on behalf of the
Substituted Bank which is a party thereto, and Agent shall have no liability or
responsibility to any party as a consequence of relying thereon and acting in
accordance with and countersigning any such Substitution Agreement. The
effective date of each Substitution Agreement shall be the date specified as
such therein and each Bank prior to such effective date shall, for all purposes
hereunder, be deemed to have and possess all of its respective rights and
obligations hereunder up to 12:00 o'clock P.M. on the effective date thereof.
(D) Upon delivery to Agent of any Substitution Agreement pursuant to
and in accordance with this Section 9.11 and acceptance thereof by Agent (which
delivery shall be evidenced and accepted exclusively and conclusively by Agent's
countersignature thereon pursuant to the terms hereof without which such
Substitution Agreement shall be ineffective): (i) except as provided hereunder,
the respective rights of each Selling Bank and the Borrower against each other
under this Agreement, the Notes and the Related Documents with respect to the
portion of the Pro Rata Shares being assigned or delegated shall be terminated
and each Selling Bank and the Borrower shall each be released from all further
obligations to the other hereunder with respect thereto (all such rights and
obligations to be so terminated or released being referred to in this Section
9.11 as "Discharged Rights and Obligations"); and (ii) the Borrower and the
Substituted Bank shall each acquire rights against each other and assume
obligations towards each other which differ from the Discharged Rights and
Obligations only in so far as the Borrower and the Substituted Bank have assumed
and/or acquired the same in place of the Selling Bank in question and the
Substituted Bank shall assume a Pro Rata Share in the amount of the aggregate
reduction in the Pro Rata Shares of each Selling Bank, as specified in such
Substitution Agreement; and (iii) Agent, the Substituted Bank and the other
Banks shall acquire the same rights and assume the same obligations between
themselves as they would have acquired and assumed had such Substituted Bank
been an original party to this Agreement as a Bank possessing the Discharged
Rights and Obligations acquired and/or assumed by it in consequence of the
delivery of such Substitution Agreement to Agent.
67
(E) Discharged Rights and Obligations shall not include, and there
shall be no termination or release pursuant to this Section 9.11 of (i) any
rights or obligations arising pursuant to this Agreement in respect of the
period or in respect of payments hereunder made during the period prior to the
effective date of the relevant Substitution Agreement, or (ii) any rights or
obligations relating to the payment of any amount which has fallen due and not
been paid hereunder prior to such effective date or rights or obligations for
the payment of interest, damages or other amounts becoming due hereunder as a
result of such nonpayment.
(F) Notwithstanding anything to the contrary set forth above in this
Section 9.11, (a) any Bank shall have the right, subject to the terms and
conditions of this Section 9.11, to assign and delegate to one or more
Substituted Banks all, or any ratable part of all, of the Loans, the Commitment
and the other rights and obligations of such Bank hereunder, pursuant to a
Substitution Agreement; provided that no such assignment and delegation shall
occur without the prior written consent of the Borrower and the Agent (which
consent of the Borrower and the Agent shall not be unreasonably withheld or
delayed), and provided, further, that, unless each of the Borrower and the Agent
consents otherwise (each of which consents may be granted or withheld in the
absolute discretion of the party granting or withholding such consent), (i) each
such assignment shall be in a minimum amount of $10,000,000 (or, if less, the
entire amount of the Selling Bank's Commitment) and (ii) after giving effect to
any such assignment and delegation, except as otherwise provided in the second
sentence of this Section 9.11, the Selling Bank shall have either (x) retained a
Commitment in a minimum amount of $10,000,000 or (y) assigned its entire
Commitment to a Substituted Bank, (b) any Bank shall have the right to pledge
its Notes to a Federal Reserve Bank as security for such Bank's obligations to
such Federal Reserve Bank so long as such assignment does not alter such Bank's
obligations under this Agreement, any of the Notes and/or any of the Related
Documents, and (c) any Bank may assign one or more of its Competitive Bid Loans
in the secondary market so long as such Bank complies with all applicable
securities laws and retains all voting rights arising in connection therewith
and such Bank arranges with such assignee to act as such assignee's collection
agent in connection with such Competitive Bid Loan(s).
(G) With respect to any substitution of a Substituted Bank taking
place after the Drawdown Date, the Borrower shall issue to such Substituted Bank
and to such Selling Bank, new Notes reflecting the inclusion of such Substituted
Bank as a Bank and the reduction in the respective Pro Rata Shares of such
Selling Bank, such new Notes to be issued against receipt by the Borrower of the
existing Notes of such Selling Bank.
(H) Each Bank may furnish to any financial institution which such Bank
proposes to make a Substituted Bank or to a Substituted Bank any information
concerning such Bank, the Borrower and any Subsidiary in the possession of that
Bank from time to time; provided that any Bank providing any confidential
information about the Borrower and/or any Subsidiary to any such financial
institution shall obtain such financial institution's agreement to keep
confidential any such confidential information and shall provide a true copy of
any such confidentiality agreement to the Borrower.
(I) Any Selling Bank who makes a substitution pursuant to this Section
9.11 shall pay to the Agent a one-time administrative fee of $3,500 for each
substitution; provided, that in the event the provisions under this Agreement
for providing a replacement bank for a Delinquent Bank are implemented through
substitution under this Section 9.11, the $3,500 administration fee shall be
payable by the Delinquent Bank; provided further that, notwithstanding the
foregoing, each Bank may, subject to the other terms and conditions of this
Section 9.11, make a single substitution to an affiliated entity without paying
the above referenced administrative fee (it being understood by the Banks that
68
any such assignee shall not have the right to make any substitution without the
payment of the above referenced administrative fee).
Section 9.12. Actual Knowledge.
------------ ----------------
For purposes of this Agreement, neither Agent nor any Bank shall be
deemed to have actual knowledge of any fact or state of facts unless the senior
loan officer or any other officer responsible for the Borrower's account
established pursuant to this Agreement at Agent or such Bank, as the case may
be, shall, in fact, have actual knowledge of such fact or state of facts or
unless written notice of such fact shall have been received by Agent or such
Bank in accordance with Section 9.07.
Section 9.13. Governing Law.
------------ -------------
This Agreement and each of the Notes shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to its conflict of laws provisions.
Section 9.14. Severability of Provisions.
------------ --------------------------
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Section 9.15. Headings.
------------ --------
Article and Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
Section 9.16. Counterparts.
------------ ------------
This Agreement may be executed and delivered in any number of
counterparts each of which shall be deemed an original, and this Agreement shall
be effective when at least one counterpart hereof has been executed by each of
the parties hereto.
Section 9.17. Integration.
------------ -----------
This Agreement supersedes the Borrower's application for the Loans,
any commitment letters of the Agent, the Syndication Agent and/or, the Banks
generally describing the Loans and all other prior dealings between the
Borrower, Agent, Syndication Agent, any of the Banks and any of their respective
agents, employees or officers with respect to the Loans, except with respect to
the Agent's and Syndication Agent's agreements with the Borrower referred to in
Section 2.02(B)(ii) and (iii).
_________________________
SIGNATURES APPEAR ON NEXT PAGE
69
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as a sealed instrument by their respective officers thereunto duly
authorized, as of the date first above written.
In the presence of: WELLMAN, INC.
_____________________________ By:
Audrey Goodman
Assistant Treasurer
In the presence of: FLEET NATIONAL BANK, for itself as a Bank and
as Agent
_____________________________ By:
Timothy J. McCormick
Vice President
By:
In the presence of: BA SECURITIES, INC. as Syndication Agent
_____________________________ By:
[ ]
In the presence of: BANK OF AMERICA ILLINOIS
_____________________________ By:
[ ]
In the presence of: WACHOVIA BANK OF GEORGIA, N.A., as Co-Lead
_____________________________ By:
[ ]
In the presence of: BANK OF NOVA SCOTIA
_____________________________ By:
[ ]
In the presence of: THE BANK OF TOKYO TRUST COMPANY
_____________________________ By:
[ ]
In the presence of: CIBC, INC.
_____________________________ By:
[ ]
In the presence of: THE CHASE MANHATTAN BANK, N.A.
_____________________________ By:
[ ]
In the presence of: CHEMICAL BANK NEW JERSEY, N.A.
_____________________________ By:
[ ]
In the presence of: CREDIT LYONNAIS CAYMEN ISLAND BRANCH
_____________________________ By:
[ ]
In the presence of: FIRST FIDELITY BANK, N.A.
_____________________________ By:
[ ]
In the presence of: THE FUJI BANK, LIMITED
_____________________________ By:
[ ]
In the presence of: ISTITUTO BANCARIO SAN PAOLO DI TORINO SPA
_____________________________ By:
[ ]
In the presence of: KREDIETBANK NV
_____________________________ By:
[ ]
In the presence of: MELLON BANK, N.A.
_____________________________ By:
[ ]
In the presence of: MIDLANTIC BANK, N.A.
_____________________________ By:
[ ]
In the presence of: NATWEST BANK N.A.
_____________________________ By:
[ ]
In the presence of: SHAWMUT BANK, N.A.
_____________________________ By:
[ ]
In the presence of: TORONTO DOMINION (NEW YORK), INC.
_____________________________ By:
[ ]
SCHEDULE OF EXHIBITS
---------------------
EXHIBIT A-1 Competitive Bid Loan Note
EXHIBIT A-2 Revolving Credit Note
EXHIBIT B Form of Request
EXHIBIT B-1 Competitive Bid Loan Request
EXHIBIT B-2 Competitive Bid Loan Offer
EXHIBIT B-3 Competitive Bid Loan Acceptance
EXHIBIT C Interest Rate Election Form
EXHIBIT D Compliance Certificate Form
EXHIBIT E Opinion of the Borrower's Counsel
EXHIBIT F Pending Litigation, etc.
EXHIBIT G Ownership Interests in Subsidiaries
EXHIBIT H Liens, etc.
EXHIBIT I Pro Rata Shares
EXHIBIT J Form of Substitution Agreement
EXHIBIT A-1
-----------
COMPETITIVE BID LOAN NOTE
-------------------------
$330,000,000
New York, New York
February 8, 1995
FOR VALUE RECEIVED, WELLMAN, INC., a Delaware corporation, with a
principal business address at Shrewsbury Executive Center, 1040 Broad Street,
Suite 302, Shrewsbury, New Jersey 07702 (hereinafter referred to as the
"Borrower"), promises to pay to the order of [insert name of Bank], [a national
banking association organized and existing under the laws of the United States
of America] [a ------- banking corporation -------------] (the "Bank"), at the
Bank's head office located at [insert address] or to Fleet National Bank or any
successor agent under the Loan Agreement, (defined below) as agent for the Bank
(the "Fleet") in accordance with that certain Loan Agreement dated as of
February 8, 1995, by and among the Borrower, the Agent, the other banks party
thereto and the Bank (the "Loan Agreement") the aggregate unpaid principal
amount of all advances of funds under the Competitive Bid Loan(s) made by the
Bank to the Borrower or through the Agent to the Borrower pursuant to the Loan
Agreement.
The Borrower shall make such principal payments to the Agent or Bank
in such amounts as may be necessary, if any, to comply with Section 2.01(D) and
2.09 of the Loan Agreement.
The Borrower shall pay in full all unpaid principal, interest, fees
and other amounts due under this Note and/or under the Loan Agreement in
connection with the Competitive Bid Loan(s) evidenced by this Note on the
respective maturity date for each Competitive Bid Loan evidenced by this Note.
The Borrower promises to pay to the order of the Bank interest before
and after maturity on the principal amount of this Note outstanding from time to
time from the date hereof until payment in full of all principal, interest, fees
and other sums due under this Note and/or under the Loan Agreement in connection
with the Competitive Bid Loan evidenced by this Note, payable on the maturity
date for each Competitive Bid Loan evidenced by this Note, all in accordance
with the Loan Agreement. Subject to the other provisions of this Note, interest
shall accrue and be due and payable under this Note on the unpaid principal
balances of each Competitive Bid Loan evidenced by this Note at the rate(s) of
interest offered by the Bank and accepted by the Borrower for each Competitive
Bid Loan evidenced by this Note.
Any amount of principal or interest hereof which is not paid when due,
whether at stated maturity, by acceleration or otherwise, shall bear interest,
payable on demand, at a floating interest rate per annum equal to two percent
(2.0%) above the rate otherwise in effect.
Principal, interest, fees and other sums are payable in immediately
available Dollars to the Agent at its address set forth in the Loan Agreement
except, after an Event of Default, in the event the Bank is seeking to enforce
this Note and the Loan Agreement (but only to the extent provided in the Loan
Agreement), in which case, principal, interest, fees and other sums shall be
payable to the Bank at its address set forth above.
Exhibit 1 attached hereto is by this reference fully incorporated
herein.
This Note is one of the Competitive Bid Loan Notes referred to in, and
is entitled to the benefits of, the Loan Agreement. The applicable terms and
provisions of the Loan Agreement are incorporated herein by reference as if
fully set forth herein. Each capitalized term used in this Note and not
expressly defined in this Note shall have the meaning ascribed to such term in
the Loan Agreement. The Loan Agreement, among other things, contains provisions
for acceleration of the maturity of this Note upon the happening of certain
stated events and also for prepayments on account of principal of this Note
prior to the maturity of this Note upon the terms and conditions specified in
the Loan Agreement.
If this Note shall not be paid when due and shall be placed by the
holder hereof in the hands of an attorney for collection, through legal
proceedings or otherwise, the Borrower will pay reasonable attorneys' fees to
the holder hereof together with reasonable costs and expenses of collection.
All interest and fees payable under or in connection with this Note
shall be computed on the basis of the actual number of days elapsed using a 360-
day year.
All provisions of this Note and any other agreements between the
Borrower and the Bank are expressly subject to the condition that in no event,
whether by reason of acceleration of maturity of the Indebtedness evidenced by
this Note or otherwise, shall the amount paid or agreed to be paid to the Bank
which is deemed interest under applicable law exceed the maximum permitted rate
of interest under applicable law (the "Maximum Permitted Rate"), which shall
mean the law in effect on the date of this Note, except that if there is a
change in such law which results in a higher Maximum Permitted Rate, then this
Note shall be governed by such amended law from and after its effective date.
In the event that fulfillment of any provision of this Note, or the Loan
Agreement or any document, instrument or agreement providing security for this
Note results in the rate of interest charged hereunder being in excess of the
Maximum Permitted Rate, the obligation to be fulfilled shall automatically be
reduced to eliminate such excess. If, notwithstanding the foregoing, the Bank
receives an amount which under applicable law would cause the interest rate
hereunder to exceed the Maximum Permitted Rate, the portion thereof which would
be excessive shall automatically be deemed a prepayment of and be applied to the
unpaid principal balance of this Note to the extent of then outstanding
Reference Rate Loans and not a payment of interest and to the extent said
excessive portion exceeds the outstanding principal amount of Reference Rate
Loans, said excessive portion shall be repaid to the Borrower.
The Borrower expressly waives presentment, notice of acceleration and
intent to accelerate, demand for payment and protest and notice of protest and
nonpayment.
This Note shall for all purposes be governed by and construed in
accordance with the local laws of the State of New York.
Executed as a sealed instrument as of the date first above written.
In the presence of: WELLMAN, INC.
_____________________________ By:____________________________
Audrey Goodman
Assistant Treasurer
2
EXHIBIT 1
TO COMPETITIVE BID LOAN NOTE
Amount of
Principal
of
Competitive
Date of Amount of Bid Loan Unpaid Notation
Competitive Competitive Paid or Interest Maturity Principal Made
Bid Loan Bid Loan Prepaid Rate Date Balance By:
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EXHIBIT A-2
REVOLVING CREDIT NOTE
[Insert Maximum Amount of New York, New York
Bank's Pro Rata Share of February 8, 1995
Commitment]
FOR VALUE RECEIVED, WELLMAN, INC., a Delaware corporation, with a
principal business address at Shrewsbury Executive Center, 1040 Broad Street,
Suite 302, Shrewsbury, New Jersey 07702 (hereinafter referred to as the
"Borrower"), promises to pay to the order of [insert name of Bank], [a national
banking association organized and existing under the laws of the United States
of America] [a __________ banking corporation _______________] (the "Bank"), at
the Bank's head office located at [insert address] or to Fleet National Bank or
any successor agent under the Loan Agreement (defined below) (the "Agent") in
accordance with the Loan Agreement (defined below), the lesser of (i) the
principal sum of [insert Bank's Pro Rata Share of the Commitment]
($ .00), or (ii) the aggregate unpaid principal amount of all advances
of funds under the Revolving Credit Loan made by the Bank to the Borrower or
through the Agent to the Borrower pursuant to that certain Loan Agreement dated
as of February 8, 1995, by and among the Borrower, Agent, the other Banks party
thereto and the Bank (the "Loan Agreement").
The Borrower shall make such principal payments to the Bank in such
amounts as may be necessary, if any to comply with Section 2.01(D) and 2.09 of
the Loan Agreement.
The Borrower shall pay in full all unpaid principal, interest, fees
and other amounts due under this Note and/or under the Loan Agreement on the
Repayment Date.
The Borrower promises to pay to the order of the Bank interest before
and after maturity on the principal amount of this Note outstanding from time to
time from the date hereof until payment in full of all principal, interest, fees
and other sums due under this Note and/or under the Loan Agreement, payable
quarterly in arrears on the last Business Day of each March, June, September and
December of each year, commencing on the first such Business Day after the date
hereof, and, with respect to Bank's Pro Rata Share of any Libor Loan or CD Rate
Loan, on the Interest Adjustment Date on which each such Loan matures, all in
accordance with the Loan Agreement. Subject to the other provisions of this
Note, interest shall accrue and be due and payable under this Note on said
unpaid principal balance of this Note at a rate per annum equal to Reference
Rate, the CD Rate or the Libor Rate, in accordance with the Borrower's Interest
Rate Elections made from time to time pursuant to the Loan Agreement.
Any amount of principal or interest hereof which is not paid when due,
whether at stated maturity, by acceleration or otherwise, shall bear interest,
payable on demand, at a floating interest rate per annum equal to two percent
(2.0%) above the rate otherwise in effect.
Principal, interest, fees and other sums are payable in immediately
available Dollars to the Agent at its address set forth in the Loan Agreement
except, after an Event of Default, in the event the Bank is seeking to enforce
this Note and the Loan Agreement (but only to the extent provided in the Loan
Agreement), in which case, principal, interest, fees and other sums shall be
payable to the Bank at its address set forth above.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Loan Agreement. The applicable terms and provisions of the
Loan Agreement are incorporated herein by reference as if fully set forth
herein. Each capitalized term used in this Note and not expressly defined in
this Note shall have the meaning ascribed to such term in the Loan Agreement.
The Loan Agreement, among other things, contains provisions for acceleration of
the maturity of this Note upon the happening of certain stated events and also
for prepayments on account of principal of this Note prior to the maturity of
this Note upon the terms and conditions specified in the Loan Agreement.
If this Note shall not be paid when due and shall be placed by the
holder hereof in the hands of an attorney for collection, through legal
proceedings or otherwise, the Borrower will pay reasonable attorneys' fees to
the holder hereof together with reasonable costs and expenses of collection.
All interest and fees payable under or in connection with this Note
with respect to Libor Loans and CD Rate Loans shall be computed on the basis of
the actual number of days elapsed using a 360-day year and with respect to
Reference Rate Loans shall be computed on the basis of a 365 (366) day year for
the actual number of days elapsed.
All provisions of this Note and any other agreements between the
Borrower and the Bank are expressly subject to the condition that in no event,
whether by reason of acceleration of maturity of the Indebtedness evidenced by
this Note or otherwise, shall the amount paid or agreed to be paid to the Bank
which is deemed interest under applicable law exceed the maximum permitted rate
of interest under applicable law (the "Maximum Permitted Rate"), which shall
mean the law in effect on the date of this Note, except that if there is a
change in such law which results in a higher Maximum Permitted Rate, then this
Note shall be governed by such amended law from and after its effective date.
In the event that fulfillment of any provision of this Note, or the Loan
Agreement or any document, instrument or agreement providing security for this
Note results in the rate of interest charged hereunder being in excess of the
Maximum Permitted Rate, the obligation to be fulfilled shall automatically be
reduced to eliminate such excess. If, notwithstanding the foregoing, the Bank
receives an amount which under applicable law would cause the interest rate
hereunder to exceed the Maximum Permitted Rate, the portion thereof which would
be excessive shall automatically be deemed a prepayment of and be applied to the
unpaid principal balance of this Note to the extent of then outstanding
Reference Rate Loans and not a payment of interest and to the extent said
excessive portion exceeds the outstanding principal amount of Reference Rate
Loans, said excessive portion shall be repaid to the Borrower.
The Borrower expressly waives presentment, notice of acceleration and
intent to accelerate, demand for payment and protest and notice of protest and
nonpayment.
This Note shall for all purposes be governed by and construed in
accordance with the local laws of the State of New York.
Executed as a sealed instrument as of the date first above written.
In the presence of: WELLMAN, INC.
_____________________________ By:____________________________
Audrey Goodman
Assistant Treasurer
EXHIBIT 4(b)
The Directors
Wellman International Limited
Mullagh
Kells
Co Meath
July 12, 1994
Dear Sirs
On behalf of Ulster Investment Bank Limited, Ulster Bank Limited and Ulster Bank
Group Treasury Limited (collectively "Ulster Bank Group") I am pleased to
confirm that Ulster Bank Group has agreed to renew the facilities for Wellman
International Limited ("the Company') as described in this letter-
FACILITY A - OVERDRAFT FACILITY
Al. Lender:
Ulster Bank Limited ("UB"), Navan Branch.
A2. Borrower:
Wellman International Limited.
A3. Nature-of Facility:
Overdraft on the Company's current account at UB, Navan, Co Meath.
A4. Amount and Currency:
750,000 Irish Pounds (say seven hundred and fifty thousand Irish pounds).
A5. Purpose:
The facility will be made available for the purpose of financing the Company's
working capital.
A6. Tenor of Facility:
While this facility is repayable on demand at UB's absolute discretion, in the
absence of such demand it shall remain available until May 31, 1995 prior to
which date it will be reviewed. Renewal of overdraft status on such review will
be conditional upon the Company's current account showing regular fluctuations
to credit balances during the period of sanction subject to a minimum credit
period of 30 days in any 12 month period.
A7. Interest and Charges:
Interest is payable on the cleared daily balance drawn on this facility at UB's
Prime rate (which is currently 6% per annum but is subject to variation at UB's
sole discretion.
Interest will be debited to the Company's current account at intervals to be
determined by UB and subject to variation at the absolute discretion of UB.
Interest is currently charged quarterly effective on February 28, May 31, August
31 and November 30.
In the event of drawings in excess of the amount of the facility as specified
above arising without prior authorisation and being permitted by UB, an interest
charge in addition to that specified above will be paid above on such excess at
the rate of 3/4% per month (9% per annum) for the period of such excess (subject
to a minimum charge of 1 Irish Pound per month)- Such surcharge if applicable
is chargeable as part of the total interest charge for a charging period-
It is hereby agreed that UB will also obtain full recovery of the cost of all
transactions on the Company's current account in accordance with UB's standard
scale of charges as may be varied from time to time.
FACILITY B - DOCUMENTARY CREDIT FACILITY
B1. Provider:
UB, Navan Branch.
B2. 0bligor:
Wellman International Limited.
B3. Nature and Purpose:
Documentary Credit facility available to allow the Company to have amounts
outstanding on foot of Letters of Credit to a total aggregate amount not
exceeding the amount of the facility. The Letters of Credit are to be opened in
connection with the import of goods.
B4. Amount:
1,200,000 Irish Pounds (say one million two hundred thousand Irish pounds).
B5. Tenor of Facility:
This facility may be withdrawn at the absolute discretion of UR but in the event
it is not withdrawn it will remain available until May 31, 1995 prior to which
date it will be reviewed.
B6. Fee:
A fee of 1% per annum is payable and will be charged to the Obligor',.; current
account quarterly in advance in respect of amounts outstanding under this
facility plus acceptance commissions if appropriate.
FACILITY C - GUARANTEE TO-COLLECTOR OF CUSTOMS & EXCISE
Cl. Provider:
UB, Navan Branch.
C2. Obligor:
Wellman International Limited.
C3. Nature & Purpose:
Guarantee to the Collector of Customs & Excise in respect of the deferment of
VAT on imported goods.
C4. Nominal Amount:
25,000 Irish Pounds (say twenty five thousand Irish pounds) per month.
C5. Notional Risk Amount:
50,000 Irish Pounds (say twenty five thousand Irish pounds).
C6. Tenor of Facility:
This facility may be withdrawn at the absolute discretion of US but in the event
it is not withdrawn it will remain available until May 31, 1995 prior to which
date it will be reviewed.
C7. Fee:
A fee of 1% per annum calculated an the nominal amount is payable and will be
charged to the Obligor's current account quarterly in advance.
C8. Security:
In addition to the security applicable to all facilities herein this facility
together with interest and all other liabilities connected with the facility
shall be secured by an All-Monies Counter Indemnity from the Obligor in a form
acceptable to UIB.
FACILITY D - INWARD PROCESSING BONDS
D1. Provider:
UB, Navan Branch.
D2. Obligor:
Wellman International Limited.
D3. Nature & Purpose:
Inward Processing Bonds to the Collector of Customs & Excise in respect of duty
payable on imported goods.
D4. Amount:
340,000 Irish Pounds (say three hundred and forty thousand Irish pounds).
D5. Tenor of Facility:
This facility may be withdrawn at the absolute discretion of UB but in the event
that it is not withdrawn it will remain available until May 31, 1995 prior to
which date it will be reviewed.
D6. Fee:
A fee of 1% per annum calculated on the Bond amount is payable and will be
charged to the Obligor's current account quarterly in advance.
D7. Security:
In addition to the security applicable to all facilities herein this facility
together with interest and all other liabilities connected with the facility
shall be secured by an All-Monies Counter Indemnity from the obligor in a form
acceptable to UIB.
TERMS AND CONDITIONS APPLICABLE TO FACILITIES B, C AND D
Claims on UB:
In the event of any claim being made against UB by the beneficiaries or their
assigns under any guarantee or Letter of Credit issued under facilities e;, C or
D, US shall not be under any obligation to verify the validity of such a claim
and UB shall immediately call on the obligor to reimburse UB for any amounts
paid by UB as determined by UB.
Cash Cover:
In the event that UB cancels any of facilities 8, C and D, together or
individually, the Obligor shall immediately provide UB with cash cover in an
amount sufficient in UB'@,opinion to cover UB's liabilities arising through the
provision of these facilities to the Obligor. In the event that UB does not
immediately receive this cash cover UB shall set up a demand loan account at UB
Navan branch in the Obligor's name and interest will accrue from day to day on
this account on the basis of 365 day year at an interest rate representing the
aggregate of-.
(i) 1%; and
(ii) the rate percent per annum of the cost to UB as determined by UB of three
month deposits of comparable amounts in the Dublin interbank market and;
(iii) such additional rate as shall be determined by UB to be necessary to
compensate UB for the estimated cost of providing such a loan by reason of
liquidity reserve ratios, special deposits or any similar or other reserve
requirements of any fiscal, monetary or other authority.
FACILITY E -FORWARD CURRENCY DEALING LIMIT
El. Provider:
Ulster Bank Group Treasury Limited.
E2. On behalf of:
Wellman International Limited.
E3. Nature of Facility:
Forward Currency Dealing Limit.
E4. Amount and Currency:
1,000,000 Irish Pounds (one million Irish pounds) or currency equivalent. Under
this facility the Company may have outstanding for-ward/hedge contracts at any
one time to an aggregate value of 10.0 million Irish Pounds.
E5. Tenor of Facility:
This facility may be withdrawn at the absolute discretion of UB but in the event
that it is not withdrawn it will remain available until May 31, 1995 prior to
which date it will be reviewed.
FACILITY F - SHORT TERM DEMAND LOAN
Fl. Lender:
Ulster Investment Bank Limited ("UIB").
F2. Borrower:
Wellman International Limited.
F3. Nature:
Short Term Demand Loan.
F4. Amount & Currency:
1,250,000 Irish Pounds (say one million two hundred and fifty thousand Irish
pounds) to be drawn in Irish pounds, Sterling, US Dollars or any such other
currencies as may be agreed between UIB and the Company from time to time but
subject to availability of all necessary Exchange Control Approvals.
F5. Purpose:
The facility will be made available for the purpose of financing the Company's
working capital.
F6. Drawings:
The facility may be drawn in one or more advances upon satisfaction of the
conditions precedent but so that no advance shall be less than 100,000 Irish
Pounds unless otherwise agreed by UIB.
F7. Tenor of Facility:
The facility shall be repaid and all accrued interest and other liabilities of
the Company connected with the facility shall be paid upon demand being made at
any time at the absolute discretion of UIB. If no such demand shall be made,
the Company shall repay the facility in the currency or currencies in which it
is outstanding on May 31, 1995.
F8. Interest Rate:
Interest on each advance will be charged in respect of each period for which the
advance is drawn or received ("Interest Periods") at the aggregate of:-
(1) 0.75% per annum; and
(2) the cost to UIB of matching deposits of maturity equal to the interest
period chosen; and
(3) such additional rate ("the RAC cost"), if any, necessary to compensate UIB
for the cost of making or maintaining the facility for the Interest Period
by reasons of liquidity reserve ratios, special deposits or other reserve
requirements of the Central Bank of Ireland or any other fiscal, monetary or
other authority.
Interest Periods for each advance shall be successive periods of 1, 3 or 6
months following drawing, or such other intervals as may be agreed. Prior to
the commencement of each Interest Period the Company shall inform UIB whether
such Interest Period shall be of 1, 3 or 6 months, or shall agree another
interval with UIB, failing which such Interest Period shall be of 3 months.
Interest will be calculated on the basis of a 365 day year for Irish pounds,
Sterling and Hong Kong dollars and a 360 day year in the case of -ail] other
currencies.
Interest in respect of each Interest Period shall be paid without deduction for
taxes on the last day of such Interest Period, and any interest which is not
paid on the due date shall bear interest at 2% per annum above a rate calculated
in accordance with the above provisions, and shall be compounded monthly.
F9. Note Issuance Facility:
The facility may be utilized by way of a Non Committed Note Issuance in
accordance with the terms and conditions set out in the first schedule hereto
provided that aggregate utilization of the Facility by way of loan and note
issuance shall not exceed the amount available from time to time by way of the
loan.
FACILITY G - REVOLVING ACCEPTANCE CREDIT
G1. Provider:
UIB.
G2. Drawer:
Wellman International Limited.
G3. Nature:
Revolving Acceptance Credit No. U071
G4. Amount:
250,000 pounds Sterling (Two hundred and fifty thousand pounds sterling).
GS. Purpose:
To finance imports and/or exports arising in connection with the ordinary
trading engagements of the Drawer.
G6. Availability:
By way of the Drawer's drafts (in denominations of f-100,000 as far as possible)
drawn on the Bank at 90 days sight or such other usances as may be agreed
between us from time to time and so as to mature within the period of the
facility- The drafts should be enfaced with an indication of the underlying
trade transaction and be drawn under Credit No. U071. the drafts should be
endorsed in blank and be accompanied by brief details of the transaction.
Availability is subject to Exchange Control approval.
G7. Review Date:
Advances under this credit are repayable on demand by the Bank. However, it is
our intention that the facility will remain available until May 31, 1995 which
is the latest date for discount of drafts drawn hereunder. The facility will be
reviewed shortly before that date and in the absence of any unforeseen
circumstances, it would be our intention to renew it for a further period at
that time.
G8. Discount:
The Bank will offer the drafts for discount in the London discount market. On
the day of discounting the Bank will transfer to the order of the Drawer the net
proceeds being the face value of the drafts less discount at the rate for Bank
bills for rediscount with the Bank of England ruling in the London Market for
the time being and an acceptance commission at a rate of 0.75-t per annum.
G9. Cash Cover:
All drafts are to be covered by the Drawer in cash for full face value on demand
by the Bank but in any event not later than their respective maturity dates.
This cover should be provided in the account of Ulster Investment Bank Ltd at
National Westminster Bank Ltd 21 Lombard Street London, for the account of the
Bank. However, since this credit is revolving, the facility of drawing is again
open to the Drawer within the limits and conditions of the credit to meet the
maturing drafts.
G10. Additional Costs:
In the event of the cost to the Bank of providing the Drawer with this credit or
accepting or discounting bills drawn thereunder being increased by a change in
any applicable law or regulation or by any other cause, the Bank reserves the
right to increase the acceptance commission applicable hereunder as may be
necessary to compensate it for such increased costs,
FACILITY H - GUARANTEE TO TEE COMMISSIONERS OF HM CUSTOMS & EXCISE
Hl. Provider:
UIB
H2. Obligor:
Wellman International Limited.
H3. Nature and Purpose:
Guarantee to the Commissioners of HM Customs & Excise in respect of the
deferment of VAT on imported goods.
H4. Nominal Amount:
30,000 pounds Sterling (say thirty thousand pounds Sterling) per month.
H5. Notional Risk Amount:
60,000 pounds Sterling (say sixty thousand pounds Sterling).
H6. Tenor of Facility:
This facility may be withdrawn at the absolute discretion of UIB but in the
event that it is not withdrawn it will remain available until May 31, 1995 prior
to which date it will be reviewed.
H7. Fee:
A fee of 1% per annum calculated on the nominal amount is payable quarterly in
arrears.
H8. Security:
In addition to the security applicable to all facilities herein this facility
together with interest and all other liabilities connected with the facility
shall be secured by an All-Monies Counter Indemnity from the Obligor in a form
acceptable to UIB.
FACILITY I - TRANSIT GUARANTEE
Il. Provider:
UIB.
I2. Obligor:
Wellman International Limited
I3. Nature and Purpose:
Indemnity facility provided to the Obligor in relation to a Guarantee facility
provided by Ulster Bank, Trade Finance to the Signatories of The Convention on a
Common Transit Procedure in respect of the duties, taxes or levies payable on
any consignment of goods being transported through a Signatories Jurisdiction
should the said consignment become liable for duties, taxes or levies in the
event that the consignment does not leave that Jurisdiction.
I4. Nominal Amount:
43,750 Irish Pounds (forty three thousand, seven hundred and fifty pounds).
I5. Tenor of Facility:
This facility may be withdrawn at the absolute discretion of UIB but in the
event that it is not withdrawn it will remain available until May 31, 1995 prior
to which date it will be reviewed.
I6. Fee:
A fee of 1,600 Irish Pounds (one thousand six hundred Irish pounds) per annum is
payable quarterly in arrears.
I7. Security:
In addition to the security applicable to all facilities herein this facility
together with interest and all other liabilities connected with the facility
shall be secured by an All-Monies Counter Indemnity from the Obligor in a form
acceptable to UIB.
TERMS AND CONDITIONS APPLICABLE TO FACILITIES H & I
Claims on UIB:
In the event of any claim being made against UIB by the beneficiaries or their
assigns under any guarantee issued under facilities H or 1, UIB shall not be
under any obligations to verify the validity of such a claim and UIB shall
immediately call on the Obligor to reimburse UIB for any amounts paid by UIB as
determined by UIB.
Cash Cover:
In the event that UIB cancels facilities H and I, together or individually, the
Obligor shall immediately provide UIB with cash cover in an amount sufficient in
UIB's opinion to cover UIB's liabilities arising through the provision of these
facilities to the Obligor. In the event that UIB does not immediately receive
this cash cover UIB shall set up a demand loan account at UIB in the Obligor's
name and interest will accrue from day to day on this account on the basis of a
365 day year at an interest rate representing the aggregate of:
(i) 1%; and
(ii) the rate percent per annum of the cost to UIB as determined by UIB of
three month deposits of comparable amounts in the Dublin interbank
market; and
(iii) such additional rate as shall be determined by UIB to be necessary to
compensate UIB for the estimated cost of providing such a loan by
reason of liquidity reserve ratios, special deposits or any similar or
other reserve requirements of any fiscal, monetary or other authority.
J. TERMS AND CONDITIONS APPLICABLE TO ALL FACILITIES
J1. Security:
The above facilities together with all interest and all other liabilities shall
be secured by first fixed and floating charges on the Company shared Pari Passu
between Ulster Investment Bank Limited, Ulster Bank Limited ("UB") and with Bank
of Ireland ("BoI") on a basis agreed from time to time between UIB, UB, and BoI.
It is understood that security held shall be of a continuing nature and shall
secure all liabilities of the Company to Ulster Bank Group whether present or
future and whether of a direct or a contingent nature.
J2. Conditions Precedent:
A drawing on any of the above facilities cannot be made unless at the time the
Ulster Bank Group is satisfied that;
(i) no event has occurred since the date of this letter or would as a
result of a drawing occur which amounts or would with the passage of
time amount to a material adverse change in the business or assets of
the Company; and
(ii) all appropriate Exchange Control, Governmental and other consents and
approvals and all information required by the Ulster Bank Group shall
have been produced and the Ulster Bank Group shall be satisfied
therewith; and
(iii) the Security provided for in the Clause entitled "Security" has been
given to the Ulster Bank Group and the Ulster Bank Group is satisfied
therewith. Further, a drawing cannot be made if the Ulster Bank Group
declares the facilities to be terminated in accordance with the terms
hereof.
J3. Representations and Warranties:
The Company represents and warrants that:
(i) it is, and shall at the time of each drawing of the facilities be,
duly incorporated and be a validly existing body corporate with power
to enter into and perform its obligations in relation to the
facilities and all necessary corporate or other action for the
execution and performance of its obligations in relation to the
facilities has been duly taken;
(ii) it shall not at the time of any drawing Of the facilities be, in
default under any statutory or other obligation or under the terms and
conditions herein or under any other agreement to which it is a party
or under its memorandum and articles of association to an extent or in
a manner which would have a material adverse effect on its ability to
perform its obligations in relation to the facilities;
(iii) no litigation or other proceedings which would have a material adverse
effect on the ability of the Company to perform its said obligations
has, or at the time of any drawing of any of the facilities shall
have, been started or (to the best of the Company's knowledge and
belief) threatened and no proceedings have been taken, and no
resolution has been passed for the winding up of the Company;
(iv) all appropriate exchange control and other consents, licences,
authorisations and permits for the execution, delivery and performance
of this letter agreement have been obtained and shall, at the time of
each drawing of the facilities, be in full force and effect;
(v) full disclosure has been made to Ulster Bank Group prior to the date
of this letter of all facts in relation to the Company and its
business and affairs as are material and ought properly to be made
known to any person proposing to make financial facilities available
to the Company.
J4. Information:
The Company shall on request by the Ulster Bank Group supply to the Ulster Bank
Group all information relating to its business and affairs as the Ulster Bank
Group shall reasonably require.
J5. Legal Costs:
Any legal costs associated with enforcing any legal agreement connected herewith
shall be for the account of the Company.
J6. Judgment:
If for the purposes of obtaining judgment in any court it is necessary to
convert a sum hereunder ("the Currency") into Irish pounds, the rate of exchange
which shall be applied shall be that at which UIB in accordance with normal
banking procedures could purchase the Currency with Irish pounds on the Dublin
Foreign Exchange Market at 11-00 a.m. two Business Days prior to that on which
the final judgement is given, and the obligation of the Company in respect of
any such sum due from it hereunder, notwithstanding any such judgement in Irish
pounds, be discharged only to the extent that, at 11.00 a.m. on the Business Day
following receipt by UIB of any such sum adjudged to be due in Irish pounds, UIB
may in accordance with normal banking procedures purchase the Currency with
Irish pounds on such market- If the Currency so purchased falls short of the sum
originally due to UIB, the Company agrees that it shall as a separate obligation
and notwithstanding such judgement indemnify UIB against any such shortfall-
J7. Notices:
Any notice or demand hereunder shall be sufficiently given or made if delivered
or sent by registered post or by facsimile ' to the party to which it is
addressed at the addresses or facsimile numbers as may have been advised by
notice to the party giving or making the first mentioned notice or demand and
(if sent by registered post) shall be deemed to have been delivered 48 hours
following posting.
The addresses or facsimile numbers of the parties for the purposes aforesaid
are:-
Ulster Investment Bank Limited
2 Hume Street, Dublin 2. Facsimile 6763507
Wellman International Limited Facsimile 046 42259
Mullagh
Kells
Co Meath
J8. General:
No failure to exercise nor any delay in exercising any right or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right or remedy preclude any other or further exercise thereof, or the
exercise of any other right or remedy. The rights and remedies provided for
herein are cumulative and not exclusive of any rights or remedies provided by
law.
All payments whatsoever made by the Company hereunder shall be made to UB or UIB
as appropriate free of all deductions and without set-off or counterclaim and
without deduction for or on account of any taxes, levies, imposts, duties,
deductions, withholdings or other charges of whatsoever nature imposed, levied,
collected withheld or assessed unless the Company is compelled to deduct the
same. If so compelled, the Company shall pay such additional amount as may be
necessary in order that the net amounts which shall remain and be paid after
such taxes, levies, imposts, duties, deductions, withholdings or other charges
equal the respective amounts due hereunder.
This agreement shall be governed and construed by and in accordance with the
laws of the Republic of Ireland.
J9. Memorandum of Acceptance:
Please confirm the Company's acceptance of these facilities on the above terms
and conditions by having the attached duplicate of this letter signed by an
authorised representative of the Company and returned to me together with a copy
certified by a Director or the Secretary of the Company, of a Board Resolution
of the Company approving these facilities and authorising such representative to
sign the acceptance-
Yours faithfully
/s/ David Allen
David Allen
Manager
For and on behalf of Ulster Investment Bank Limited.
Ulster Bank Limited and Ulster Bank Group Treasury Limited
FIRST SCHEDULE
Note issuance Facility:
(i) During the tenor of the Facility and subject to the terms and conditions
of this letter, the Company may request UIB to procure purchasers for
notes to be issued by the Company in a form acceptable to UIB (the
"Notes") up to the principal amount of the facility, 1.25 million Irish
Pounds, provided that at no time shall the aggregate outstanding amount
of the Loan Facility and Note Issuance exceed 1.25 million Irish Pounds.
(ii) Whenever the Company wishes to issue Notes under this facility it shall
notify UIB not later than 10 a.m. on the proposed date of issue or later
with the agreement of UIB.
(iii) Following such request UIB shall notify the Company as to the rate of
interest payable by the Company on Notes for which UIB shall endeavour
to procure purchasers. Any note sold by UIB shall be sold at a
discounted value to be negotiated by UIB and agreed with the purchaser
of the Note.
On the issue of such Notes UIB shall pay over the amount agreed between
UIB and the Company exclusive of all fees due to UIB- The payment due to
the purchasers on such Notes by the Company shall be guaranteed by UIB.
-
UIB shall be entitled to a fee for procuring purchasers and for
guaranteeing payment of the Company's Notes. All fees shall be payable
on the date of issuance of Notes.
(iv) Each Note shall be issued in minimum amounts of 100,000 Irish Pounds and
have a maturity of 30, 60 or 90 days from the date of issue as the
Company and UIB may from time to time agree or such other number of days
as UIB may from time to time agree. The Company shall, from time to
time at the request of UIB, issue one Global Note in a denomination
equal to the total amount of purchases made on any one day having the
same maturity date (hereinafter called "the Global Note") which shall be
drawn in favour of Hume Street Nominees Limited (hereinafter called "the
Trustee")- The Trustee shall hold the Global Note upon trust for the
several persons specified in the schedule to the Global Note
(hereinafter called "the Holders") and shall at the request of any of
the Holders issue a Definitive Note for the value of such Holders
holding.
(v) The Company shall procure that UIB is supplied with a stock of duly
stamped and executed but unauthenticated Notes. Such Notes will become
effective upon completion by UIB in accordance with the terms of oral
contracts agreed for the sale of such Notes and the payment of such
Notes shall be guaranteed by UIB. By issuing a request for purchase the
Company irrevocably authorises UIB as its agent to complete each Note
prior to its issue by inserting thereon the amount of the Note, the
maturity date and the purchaser of the Note (or in the case of a Global
Note the Trustee).
(vi) In respect of all and any Notes issued by the Company under the
Facility, and remitted by the Company to UIB to be held in safe keeping
by UIB, UIB hereby undertakes that it shall hold such Notes in trust for
the Company until UIB receives instructions from the Company concerning
their endorsement and discount and any such Notes which require
completion as to their amounts shall be completed by UIB in accordance
with the Company's telephone instructions (subsequently confirmed in
writing). UIB undertakes to indemnify the Company and hold the Company
harmless against and from any loss, damage, suit and expenses (including
any reasonable legal fees) arising out of the loss, theft or misuse of
any such Notes while held by us in trust for the Company arising out of
UIB's failure to handle such Notes in accordance with the Company's
instructions.
(vii) UIB shall maintain at all times an up-to-date register with particulars
of purchasers of Notes.
(viii) The Company covenants with UIB that it will on or prior to the maturity
date of each Global Note or any of the Definitive Notes lodge to UIB's
account sufficient funds to enable the purchaser of each Note to be paid
the denominated value of such Note on its maturity date. All payments
to be made by the Company hereunder shall be made free and clear of any
and all deductions, withholding of income tax, levies, duties or other
revenue payment.
(iX) If the Company fails to lodge the funds referred to at (viii) above the
Trustee shall be entitled to call on UIB immediately under its guarantee
to pay to the Trustee the amount of such funds and UIB shall be entitled
to debit the amount paid by it to the Trustee to the Company's account
with UIB (or at UIB's option to a loan account opened by UIB in the
Company's name)- Any such amount so debited shall be repayable b@ the
Company on demand and shall bear interest as specified in clause x).
(X) Any amount due and payable by the Company to UIB pursuant to this Note
issuance Facility which is unpaid on a due date for payment shall bear
interest until the said amount has been discharged at 2% above the short
term inter bank interest rates as determined by UIB. All interest shall
be payable by the Company on demand.
(xi) UIB shall be entitled at any time and from time to time, or upon demand,
to require the Company by notice in writing forthwith to pay to UIB or
to an account specified by UIB such sums as UIB shall specify as being
required (in UIB's opinion) to provide for all obligations (actual or
contingent) of the Company hereunder to UIB (whether pursuant to the
obligation of the Company to indemnify UIB in connection with amounts
payable by UIB in respect of Notes issued under the Note Issuance
Facility hereunder or otherwise) whereupon such specified sums shall be
forthwith due and payable by the Company to UIB as a simple contract
debt.
(xii) Failing payment by the Company in accordance with clause (xi), and
without prejudice to UIB's other rights, UIB shall be entitled forthwith
and without further notice to enforce any and all securities held in
respect of the Company's liabilities to UIB. Following service by UIB
of a notice as aforesaid, and without prejudice to UIB's other rights,
UIB shall have a right of set off against any sums actually received and
the balance from time to time on any account with UIB as aforesaid in
respect of amounts due or to become due to UIB from the Company and
shall be entitled to retain such sums and balances pending discharge in
full of any such amounts and from time to time to debit any such account
with amounts due from time to time to UIB from the Company.
(xiii) UIB as guarantor of the Notes is empowered by the Company hereunder to
make all payments required to be made to the purchasers of Notes free
and clear of any and all deductions including (without limitation)
withholding taxes. If UIB is obliged by law to deduct any such amount,
the amount payable to such third parties will be automatically increased
so that the amount accruing to such third parties after such deduction
would be the amount which would have accrued had no such deduction being
required. The Company shall on demand indemnify UIB against all claims,
demands, losses,damages, liabilities, costs and expenses whatsoever
which UIB shall incur as a result of the Company's failure to provide
sufficient funds so that UIB may honour its guarantee of the Notes. A
certificate of UIB of the amount claimed under the indemnity shall save
for manifest error be conclusive and binding.
(xiv) UIB shall at its absolute discretion be entitled to cancel the Note
Issuance Facility specified herein and require immediate payment of
monies deemed by UIB to be sufficient to honour the payment upon
maturity of the amount of each Note upon maturity of the amount of each
Note then outstanding- UIB shall credit such payment to an interest
bearing account which shall be debited only with the payment of Notes as
they become due and any ultimate balance of accrued interest shall
(provided that there are no other monies then owing by the Company to
UIB) be paid to the Company after all liabilities of the Company to the
purchasers of Notes have been discharged.
EXHIBIT 4(c)
Private and Confidential
26th August 1994
AD/CIFT/FL
The Directors,
Wellman International Ltd,
Mullagh,
Kells,
Co Meath
Attn: Mr. Eamon Hodge, Finance Director
Dear Sirs,
Arising from recent discussions, we are pleased to confirm that Bank of Ireland
wishes to extend the following facilities, on the terms outlined.
I. FACILITY : OVERDRAFT.
Option : Money market or Irish Pound commercial notes
can be drawn at the discretion of the Bank, but
at all times within the absolute facility
amount set out below.
Amount : Money market or 750,000 Irish Pounds.
(Irish Pounds Seven Hundred and Fifty
Thousand).
Interest Rate : Prime.
This is currently 6.03% pa in total, but
subject to variation from time to time at the
discretion of the Bank.
Changes in the Prime rate automatically apply
and are advised to the Borrower in the next
account statement issued.
In the event of money market or commercial note
options being exercised, the facility margin
will be established prior to drawdown.
Interest Payment : Interest on overdraft facilities will be
calculated & accrued daily on all drawings and
charged quarterly in arrears in the months of
March, June, September and December.
Interest on money market facilities will be
calculated & accrued daily on all drawings and
charged at the end of each Interest Period, but
in any event not less frequently than on a
quarterly basis in arrears.
When commercial notes are discounted,
commission will be calculated for the period on
the drawn amount and deducted at drawdown.
In the event that any interest is unpaid, it
will be compounded on a quarterly basis.
Interest Period : In the case of money market or commercial note
options being exercised, periods of 1, 3 or 6
months duration may be chosen, or such other
period as may be agreed by the Bank.
In selecting an Interest Period, the Borrower
will ensure that the period selected coincides
with any repayment due to the extent of the
amount of that repayment.
Repayment : The facility is repayable on demand and in the
event of such demand the facility is withdrawn.
For the avoidance of doubt, General Conditions
or the selection of a particular interest
period do not prejudice the demand nature of
this facility.
Purpose To assist the Borrower in the funding of its
Working Capital requirement.
Borrower : Wellman International Ltd.
Lender : Bank of Ireland, Kells, Co. Meath.
2. FACILITY : UNCOMMITTED LINE of CREDIT.
Option : Cash, Irish Pound commercial notes, guarantee
and treasury products can be drawn at the
discretion of the Bank, but at all times within
the absolute facility amount set out below.
Amount : 4,500,000 Irish Pounds.
(Irish Pounds Four Million Five Hundred
Thousand).
Currency : A freely available currency at the discretion
of the Bank.
The base currency will however remain the Irish
Pound and at each rollover all drawings must be
realigned to the underlying Irish Pound
equivalent base as pertained at the previous
rollover.
Interest Rate : Cost of Funds + 0.4%pa + Reserve Asset Cost, if
applicable, in the case of a cash drawing.
In the event of the commercial note option
being exercised, acceptance commission will be
charged at the rate of 0.4%pa over the
appropriate Cost of Funds on the face value of
the notes.
For the remaining options, pricing will be
agreed prior.
Interest Payment : Interest on cash facilities will be calculated
& accrued daily on all drawings and charged at
the end of each Interest Period, but in any
event not less frequently than on a quarterly
basis in arrears.
When commercial notes are discounted,
commission will be calculated for the period on
the drawn amount and deducted at drawdown.
In the event that any interest is unpaid, it
will be compounded on a quarterly basis.
Interest Period : In the case of cash or commercial note options
being exercised, periods of 1, 3 or 6 months
duration may be chose, or such other period as
may be agreed by the Bank.
In selecting an Interest Period, the Borrower
will ensure that the period selected coincides
with any repayment due to the extent of the
amount of that repayment.
Availability : Utilization of this facility will at all times
be at the sole discretion of the Bank.
Repayment : The facility is repayable on demand and in the
event of such demand the facility is withdrawn.
For the avoidance of doubt, General Conditions
or the selection of a particular interest
period do not prejudice the demand nature of
this facility.
Purpose : To assist the Borrower in the funding of its
Working Capital requirement.
Borrower : Wellman International Ltd.
Lender : Bank of Ireland Corporate Banking.
3. FACILITY : LETTER of CREDIT LINE.
Amount : 500,000 Irish Pounds.
(Irish Pounds Five Hundred Thousand).
Conditions : This facility is subject to Bank of Ireland
International Banking Division's standard terms
and conditions for facilities of this type.
Purpose : To assist the company undertake foreign trade
transactions.
Issued By : Bank of Ireland International Banking Division.
On Behalf Of : Wellman International Ltd.
4. FACILITY : TREASURY LINE,
to include, at the discretion of the Bank,
transactions on the spot, forward option and
swap markets.
Amount : The Bank will provide foreign exchange and
interest rate management facilities to which it
apportions an internal rewriting risk weighing
(variable), rather than a maximum transaction
level, in aggregate 1,500,000 Irish Pounds
(Irish Pounds One Million Five Hundred
thousand).
Maturity : The maturity of any individual contract cannot
exceed 12 months in the case of a foreign
exchange transaction, or 24 months in the case
of an interest rate transaction, unless
otherwise agreed in writing by the Bank.
Availability : The provision of this facility will at all
times be at the sole discretion of the Bank.
Purpose : To assist in the management of foreign exchange
and interest rate exposures, undertaken by the
company in the course of its existing business
activity.
Available To : Wellman International Ltd.
Provided By : Bank of Ireland Group Treasury.
SECURITY:
All obligations of the borrower to the Bank will be secured by:
1. A debenture, in a form acceptable to the Bank, incorporating first fixed
and floating charges over the assets of Wellman International Ltd, at
all times stamped to cover the aggregate level of facilities detailed
above.
2. An inter-lender agreement between Bank of Ireland and Ulster Investment
Bank in a form acceptable to the Bank.
3. Insurance in respect of consequential loss, fire, product and third
party liability, must be maintained in a form acceptable to the Bank.
The Bank's interest should be noted on all relevant documentation, with
both the policies and renewal confirmations being available to the Bank
on request.
REPRESENTATIONS AND WARRANTIES:
The Borrower represents and warrants that it has:
(a) The full power, authority and legal right to perform its obligations
hereunder and to observe the terms and conditions hereof.
(b) No law suits or other legal proceedings pending or, so far as any of the
directors know, threatened before any court or tribunal, which in the
opinion of such directors would adversely affect in any material respect
the company's financial condition or operation.
(c) No knowledge of any present or possible future liability to any action,
claim, or proceeding under Environmental Law.
On each drawing and rollover of loan facilities, the Representations and
Warranties outlined above are deemed to be repeated.
GENERAL CONDITIONS:
1. A minimum consolidated tangible net worth of 27m Irish Pounds will be
maintained at all times.
2. On a consolidated basis, the ratio of Bank Debt to Tangible Net Worth
will not exceed 0.7.
3. Wellman International Ltd will at all times for the duration of the
facilities outlined above remain a wholly owned subsidiary of Wellman
International Investments Ltd, which in turn will remain a wholly owned
subsidiary of Wellman, Inc.
4. Wellman International Ltd will furnish the Bank with a copy of its
audited annual report and accounts, to include consolidated balance
sheet, profit and loss account and cash flow statement, within 180 days
of the financial year end.
5. Wellman International Ltd will furnish the Bank with consolidated
management accounts, to include balance sheet, profit and loss account
and cashflow statement, within 90 days of the financial half year end.
6. Wellman International Ltd will furnish the Bank with a comprehensive
annual budget and supporting commentary within 60 days of the beginning
of the financial year.
7. Wellman Inc., will furnish the Bank with a copy of its audited annual
report and accounts promptly after publication.
8. Wellman International Ltd will furnish the Bank with such other
information on its financial affairs and general condition as may
reasonably be required from time to time.
9. Wellman International Ltd and its Subsidiary companies undertake not to
create or permit to subsist any new Charge, whether floating or
specific, or permit to subsist any other encumbrance of any kind,
including the issue of guarantees to third parties, on the whole or any
part of their undertaking, property, or assets, including uncalled
capital.
10. The Borrower must utilise the facilities solely for the specific Purpose
stated.
11. There must not, in the opinion of the Bank, occur any material adverse
change in the Borrower's business, undertakings, assets or financial
condition or those of any member of the Group.
12. The Borrower will promptly notify the Bank of any claim, notice, or
other communication served on it in respect of any modification,
revocation, or suspension of any Environmental Licence applicable to it,
or any requirement to be fulfilled by it under Environmental Law and the
cost of compliance with such requirement, or any alleged breach of any
Environmental Law which might, if substantiated, have a material adverse
effect on its financial condition, or on its ability to perform its
obligations under this letter.
13. The Borrower indemnifies the Bank at all times against any cost, damage,
loss, or penalty, incurred or suffered, which arises by virtue of any
actual or alleged breach of Environmental Law.
14. The Bank will be entitled to, without notice to or consent from the
Borrower, combine, consolidate, or set-off any sums of money or parts
thereof, as may from time to time be due and owing by the Borrower, as
principal or surety to the Bank, whether actual or contingent, howsoever
arising, against or with any or all sums due by the Bank to the
Borrower.
15. In the event that in the opinion of the Bank any change in applicable
law or regulation, or in the interpretation thereof, will make it
unlawful, or any circumstance connected with the availability to the
Bank of the relevant currency on the interbank market occurs, as a
result of which the Bank is of the opinion that it is not practicable
for the Bank to maintain or give effect to its obligations as
contemplated herein, the Bank will promptly give written notice thereof
to the Borrower, whereupon the obligations of the Bank as contemplated
herein will cease and the Borrower will forthwith, or within such period
as may be allowed by law, repay to the Bank any amounts due and payable
under this facility.
16. Acceptance of this letter will act as authority to charge under advice
appropriate interest payments, guarantee fees, or other amounts due, by
debiting the relevant account.
17. Acceptance of this letter will indemnify the Bank against any loss
arising as a result of the Bank acting in good faith when accepting
Irish Pounds or currency telephone / telefax transfer or drawdown
instructions signed by two relevant authorised signatories.
18. In the event of the commercial note option being considered, the
Borrower may wish to seek independent tax and legal advice concerning
the tax treatment of discounts on commercial paper and Section 8(ii)(a)
of the Central Bank Act 1971, respectively.
19. A delay or failure on the part of the Bank in exercising any power,
privilege, or right hereunder will not operate as a waiver thereof, nor
will any partial or single exercise of any such power, privilege, or
right preclude their further exercise, the rights and remedies provided
herein being cumulative and not exclusive of those provided by law.
20. The method for calculating overdraft interest may be changed from time
to time at the discretion of the Bank. In the event of such a change,
one months prior notice will be given to the Borrower.
21. Working capital facilities, including overdraft, are repayable on
demand.
22. The limit on an overdraft is absolute. In the event, however, of any
excess drawing over the agreed limit being permitted by the Bank, a
surcharge of 0.50% per month will apply to the excess until such time as
it is rectified. Any such drawing cannot be taken as an implied
increased limit. In addition, a 1% p.a. charge is payable on current
account balances which are off-set.
23. A certificate given under the hand of an authorised official of the Bank
as to any amount payable to it under this letter will, save for manifest
error, be conclusive evidence as to the amount due to the Bank.
24. The terms of this letter are governed by and construed according to the
laws of Ireland.
DEFINITIONS:
(i) Associate is defined as a company in which any member of the Group
holds, or may in the future hold, more than twenty per cent, but not
exceeding fifty per cent, of the issued voting share capital.
(ii) Bank means The Governor and Company of the Bank of Ireland, otherwise
referred to as Bank of Ireland, or any of its Subsidiary or Associate
companies.
(iii) Bank Debt is defined as a monetary obligation to any financial
institution, in any manner whatsoever, for which the Borrower is, or
will become, liable.
(iv) Borrower is defined as Wellman International Ltd.
(v) Charge is defined as a charge, debenture, encumbrance, lien, mortgage,
pledge, or other security interest, of any nature, on the whole or any
part of the undertaking, property, or assets of the company in question.
(vi) Cost of Funds means DIBOR or LIBOR, as appropriate.
(Vii) Current Ratio means the figure produced by dividing Current Assets by
Current Liabilities.
(viii) Environmental Law means all circulars, codes of practice, guidance
notices, legislation, orders or regulations, including statutory
modifications and re-enactments thereof, concerning the protection of
the environment and the control of pollution, whether or not having the
force of law, and whether imposed in Ireland, or by an association,
community, federation, or other organisation of which Ireland is a
member.
(ix) Environmental Licence means any approval, authorisation, consent,
licence or permit required by Environmental Law.
(x) Group is defined as all those bodies corporate which are Subsidiary or
Associate companies of the Borrower's ultimate Holding Company.
(xi) Holding Company is defined in Section 155 of the Companies Act 1963, or
analogous provision of Law.
(xii) Lender is defined as The Governor and Company of the Bank of Ireland or
any of its Subsidiary or Associate companies, irrespective of any
company, branch, office, entity or location outlined under a specific
Facility in this letter.
(xiii) Regulatory Authority includes the Central Bank of Ireland and any
relevant fiscal, monetary or other association, authority, community,
federation or organisation.
(xiv) Related company is defined in Section 4(5) of the Companies (Amendment)
Act 1990, as amended, or as detailed in analogous legislation.
(xv) Reserve Asset Cost means the cost to the Bank of maintaining any reserve
ratio, special deposit, liquidity or similar requirement of any
Regulatory Authority.
(xvi) Subsidiary is defined in Section 155 of the Companies Act 1963, or
analogous provisions of law.
(xvii) Tangible Net Worth means the aggregate of share capital, retained
earnings and other reserves, less intangible assets and reserves arising
from the future revaluation of fixed assets.
JUDGEMENTS:
If for the purposes of obtaining judgement in any court it is necessary to
convert a sum due in one currency into another currency, the rate of exchange
that will be applied will be that at which the Bank could purchase the first
currency with the second currency on the business day preceding that on which
final judgement is given. Notwithstanding such judgement, any shortfall in the
amount ultimately due to the Bank will remain the responsibility of the
Borrower.
CAPTIONS:
The captions in this letter are for convenience of reference only and will not
define or limit the provisions hereof.
MANAGEMENT:
In so signing this letter the authorised signatories acknowledge that the terms
and conditions contained herein are based on the Bank's own opinion.
Furthermore, it is accepted that all decisions regarding the management of the
Borrower remain the responsibility of its Board.
REVIEW:
Unless repayment has been demanded in the meantime or there has been a change in
circumstance warranting an earlier review, the above facilities will be reviewed
again before 30th June 1995, or on such other date as is agreed between us.
ACCEPTANCE:
In order to signify your acceptance of the foregoing facilities, together with
their terms, the attached duplicate letter should be accepted on behalf of
Wellman International Ltd and its Subsidiary companies by two authorised
signatories and returned to this office, together with an appropriate board
resolution, authorising acceptance of this letter and specifying signatories
thereto within 30 days of the date hereof, or within such other period as is
agreed by the Bank.
Yours faithfully
/s/ Edmund Magee /s/ Geraldine Hannon
EXHIBIT 4(o)
MONEY MARKET NOTE
SHAWMUT BANK, N.A.
$25,000,000 Dated: December 16,1994
FOR VALUE RECEIVED, WELLMAN, INC. (the "Borrower"), hereby promises to pay to
the order of Shawmut Bank, N.A. (the "Bank") at the office of the Bank at One
Federal Street, Boston, Massachusetts 02211 or at such other address as the
holder hereof may designate, the principal sum of TWENTY-FIVE MILLION DOLLARS
($25,000,000), or the aggregate unpaid principal amount of all advances made by
the Bank to the Borrower hereunder, whichever is less, in lawful money of the
United States and to pay interest on each advance as set forth below and to pay
all costs, including attorneys' fees, incurred in the collection or enforcement
of this Note.
This Note has been executed and delivered subject to the following terms and
conditions:
(1) ADVANCES. This is not a commitment to make advances and the Bank may
refuse, in its sole discretion, to make any advances requested by the Borrower.
If any advance is made, the Bank may, at its option, record on the books and
records of the Bank or endorse on Schedule I hereto, an appropriate notation
evidencing any advance, the interest rate applicable to such advance, the date
such advance is due, each repayment on account of the principal thereof, and the
amount of interest paid; and the Borrower authorizes the Bank to maintain such
records or make such notations and agrees that the amount shown on the books and
records or on said Schedule 1, as applicable, as outstanding from time to time
shall constitute prima facie evidence of the amount owing to the Bank pursuant
to this Note. In the event the amount shown on Schedule I conflicts with the
amount noted as due pursuant to the books and records of the Bank, the books and
records of the Bank shall control the disposition of the conflict.
(2) REPAYMENT OF ADVANCES. The Borrower shall repay the aggregate unpaid
principal amount of all advances made by the Bank at the earlier of the date
such advance is due as set forth on Schedule I hereto or April 30, 1995 (as such
date may be extended, in writing from time to time, in the Bank's sole and
absolute discretion, the "Termination Date").
(3) INTEREST RATE. Each advance hereunder shall bear interest at the
fixed per annum rate agreed to by the Bank and the Borrower at the time of such
advance. Each such advance will be due and payable as set forth on Schedule I
hereto and interest thereon will be payable on the date such advance is due. In
addition, promptly following the making of each advance hereunder, the Bank
shall furnish to the Borrower a written confirmation of such advance showing the
amount, interest rate and maturity date applicable thereto, provided, however,
that any failure by the Bank to furnish such a confirmation to the Borrower in
connection with an advance shall not release or otherwise impair the Borrower's
obligation to repay such advance, together with interest thereon, as provided in
this Note. Upon default or after the maturity date of any advance, or after
judgement has been rendered on this Note, the unpaid principal balance of all
advances shall, at the option of the Bank, bear interest at a rate which is two
(2) percentage points per annum greater than the rate which would otherwise be
in effect. Interest on this Note shall be computed on the basis of a 360-day
year and actual days elapsed.
(4) prepayments. The Borrower may not prepay any advance prior to the
maturity date noted on Schedule I with respect to such advance. In the event
that a prepayment of a advance is permitted or required hereunder and such
prepayment results in any loss (including any lost profit), cost or expense to
the Bank, the Bank shall notify the Borrower of the amount thereof and the
Borrower shall immediately pay such amount to the Bank.
(5) EVENTS OF DEFAULT. Each of the following shall constitute an "Event
of Default" hereunder: (a) failure of Borrower to pay or perform any of its
liabilities or obligations to Bank under this Note, whether now existing or
hereafter arising, when due to be paid or performed; or (b) dissolution of,
termination of the existence of, insolvency of, business failure of, application
for or appointment of a receiver, trustee, conservator or liquidator of any part
of the property of, assignment for the benefit of creditors by, or the
commencement of any case or proceeding (whether for the purpose of liquidation
or rehabilitation or otherwise) under any bankruptcy or insolvency laws of, by
or against Borrower; provided, however, that the commencement of an
involuntary bankruptcy proceeding against the Borrower shall not constitute an
Event of Default unless such proceeding continues undischarged for a period of
60 days after the commencement thereof.
(6) ACCELERATION. At any time upon the occurrence of an Event of Default
hereunder, all advances outstanding hereunder, together with accrued interest
thereon, shall become immediately due and payable. at the option of the Bank,
without demand which is expressly waived by the Borrower.
(7) WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY IRREVOCABLY
WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING HEREAFTER INSTITUTED BY THE
BORROWER OR THE BANK IN CONNECTION WITH THIS NOTE OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
(8) WAIVERS, BINDING EFFECT, MISCELLANEOUS.
(a) Borrower waives presentment, demand, notice, protest, notice of
acceptance of this Note, notice of advances made, credit extended, notice of
nonpayment or other action taken in reliance hereon.
(b) The provisions of this Note shall bind the successors and assigns of
the Borrower and shall inure to the benefit of the Bank, its successors and
assigns.
(c) This Note shall be governed and construed under the laws of the
Commonwealth of Massachusetts.
(d) If any provision of this Note shall to any extent be held invalid or
unenforceable, then only such provision shall be denied ineffective and the
remainder of this Note shall not be affected.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed as
a sealed instrument.
WITNESS: WELLMAN, INC.
/s/ Claudia Schwinn 12/20/94 /s/ Audrey Goodman
Name: Audrey Goodman
Title: Assistant Treasurer
Wellman, Inc.
EXHIBIT 4(p)
MONTE DEI PASCHI DI SIENA
$15,000,000 DATE: JAN. 17,1995
FOR VALUE RECEIVED, WELLMAN, INC. (the "Borrower"), hereby promises to pay
to the order of Monte dei Paschi di Siena (the "Bank") at the office of the Bank
at 245 Park Avenue, New York, New York 10167 or at such other address as the
holder hereof may designate, the principal sum of FIFTEEN MILLION DOLLARS
($15,000,000), or the aggregate unpaid principal amount of all advances made by
the Bank to the Borrower hereunder, whichever is less, in lawful money of the
United States and to pay interest on each advance as set forth below and to pay
all costs, including attorney's fees, incurred in the collection or enforcement
of this Note.
This Note has been executed and delivered subject to the following terms
and conditions:
(1) ADVANCES. This is not a commitment to make advances and the Bank may
refuse, in its sole discretion, to make any advances requested by the Borrower.
If any advance is made, the Bank may, as its option, record on the books and
records of the Bank or endorse on Schedule I hereto, an appropriate notation
evidencing any advance, the interest rate applicable to such advance, the date
such advance is due, each repayment on account of the principal thereof, and the
amount of interest paid; and the Borrower authorizes the Bank to maintain such
records or make such notations and agrees that the amount shown on the books and
records or on said Schedule I, as applicable, as outstanding from time to time
shall constitute prima facie evidence of the amount owing to the Bank pursuant
to this Note. In the event the amount shown on Schedule I conflicts with the
amount noted as due pursuant to the books and records of the Bank, the books and
records of the Bank shall control the disposition of the conflict.
(2) REPAYMENT OF ADVANCES. The Borrower shall repay the aggregate unpaid
principal amount of all advances made by the Bank at the earlier of the date
such advance is due as set forth on Schedule I hereto or January 13, 1996 (as
such date may be extended, in writing from time to time, in the Bank's sole and
absolute discretion, the "Termination Date").
(3) INTEREST RATE. Each advance hereunder shall bear interest at the
fixed per annum rate agreed to by the Bank and the Borrower at the time of such
advance. Each such advance will be due and payable as set forth on Schedule I
hereto and interest thereon Will be payable on the date such advance is due. In
addition, promptly following the making of each advance hereunder, the Bank
shall furnish to the Borrower a written confirmation of such advance showing the
amount, interest rate and maturity date applicable thereto, provided, however,
that any failure by the Bank to furnish such a confirmation to the Borrower in
connection with an advance shall not release or otherwise impair the Borrower's
obligation to repay such advance, together with interest thereon, as provided in
this Note. Upon default or after the maturity date of any advance, or after
judgement has been rendered on the Note, the unpaid principal balance of all
advances shall, at the option of the Bank, bear interest at a rate which is two
(2) percentage points per annum greater than the rate which would otherwise be
in effect. Interest on this Note shall be computed on the basis of a 360-day
year and actual days elapsed.
(4) PREPAYMENTS. The Borrower may not prepay any advance prior to the
maturity date noted on Schedule I with respect to such advance, In the event
that a prepayment of an advance is permitted or required hereunder and such
prepayment results in any loss (including any lost profit), cost or expense to
the Bank, the Bank shall notify the Borrower of the amount thereof and the
Borrower shall immediately pay such amount to the Bank.
(5) EVENTS OF DEFAULT. Each of the following shall constitute an "Event
of Default" hereunder: (a) failure of Borrower to pay or preform any of its
liabilities or obligations to Bank under this Note, whether now existing or
hereafter arising, when due to be paid or performed; or (b) dissolution of,
termination of the existence of, insolvency of, business failure of, application
for or appointment of a receiver, trustee, conservator or liquidator of any part
of the property of, assignment for the benefit of creditors by, or the
commencement of any case or proceeding (whether for the purpose of liquidation
or rehabilitation or otherwise) under any bankruptcy or insolvency laws of, by
or against Borrower; provided, however, that the commencement of an involuntary
bankruptcy proceeding against the Borrower shall not constitute an Event of
Default unless such proceeding continues undischarged for a period of 60 days
after the commencement thereof.
(6) ACCELERATION. At any time upon the occurrence of an Event of Default
hereunder, all advances outstanding hereunder, together with accrued interest
thereon, shall become immediately due and payable, at the option of the Bank,
without demand which is expressly waived by the Borrower.
(7) WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY IRREVOCABLY
WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING HEREAFTER INSTITUTED BY THE
BORROWER OR THE BANK IN CONNECTION WITH THIS NOTE OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
8) WAIVERS, BINDING EFFECT, MISCELLANEOUS.
(a) Borrower waives presentment, demand, notice, protest, notice of
acceptance of this Note, notice of advances made, credit extended, notice of
nonpayment or other action taken in reliance hereon.
(b) The provisions of this Note shall bind the successors and assigns of
the Borrower and shall inure to the benefit of the Bank, its successors and
assigns.
(c) This Note shall be governed and construed under the laws of New York.
(d) If any provision of this Note shall to any extent be held invalid or
unenforceable, then only such provision shall be deemed ineffective and the
remainder of this Note shall not be affected.
IN WITNESS THEREOF, the Borrower has caused this Note to be duly executed
as a sealed instrument.
WITNESS: WELLMAN, INC.
/s/ Claudia Schwinn 1/17/95 By: /s/ Audrey Goodman
Name: Audrey Goodman
Title: Assistant Treasurer, Wlm, Inc.
EXHIBIT 10(b)(1)
EMPLOYMENT AGREEMENT
AGREEMENT by and between WELLMAN, INC., a Delaware corporation (the
"Company") and THOMAS M. DUFF (the "Executive"), dated as of the 1st day of
January, 1990.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued service and dedication of the Executive. In
addition, the Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements currently and upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. The Board of Directors also believes that the autonomy, authority
and responsibility possessed by the Executive is a significant attribute of his
employment and a Change of Control would be likely to significantly diminish the
attractiveness to Executive of employment by the Company, and has determined to
allow Executive to chose whether to continue in the employ of the Company upon a
Change of Control. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall be the first date
during the "Employment Period" (as defined in Section 1(b)) on which a Change of
Control occurs. Anything in this Agreement to the contrary notwithstanding, if
the Executive's employment with the Company is terminated or the Executive
ceases to be an officer of the Company prior to the date on which a Change of
Control occurs, and it is reasonably demonstrated that such termination of
employment (1) was at the request of a third party who has taken steps
reasonably calculated to effect the Change of Control or (2) otherwise arose in
connection with or anticipation of the Change of Control, then for all purposes
of this Agreement the "Effective Date" shall mean the date immediately prior to
the date of such termination of employment.
(b) The "Employment Period" is the period commencing on the date hereof and
ending on the third anniversary of such date; provided, however, that commencing
on the date one year after the date hereof, and on each annual anniversary of
such date (such date and each annual anniversary thereof is hereinafter referred
to as the "Renewal Date"), the Employment Period may be extended so as to
terminate three years from such Renewal Date, if prior to the Renewal Date the
Company shall give notice in writing to the Executive that the Employment Period
shall be so extended and the Executive agrees to such extension in writing.
Notwithstanding the foregoing, unless the Employment Period has already
terminated, the Employment Period shall be automatically extended upon a Change
of Control so as to terminate three years from the Effective Date (such three
year period of the Employment Period being hereinafter referred to as the
"Change of Control Employment Period").
(c) "Change of Control". For the purpose of this Agreement, a "Change of
Control" shall mean:
(i) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or the combined voting power of
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Company Voting Securities"), provided,
however, that any acquisition by the Company or its subsidiaries, or any
employee benefit plan (or related trust) of the Company or its subsidiaries, or
any corporation with respect to which, following such acquisition, more than 50%
of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of the
Outstanding Company Common Stock and Company Voting Securities, as the case may
be, shall not constitute a Change of Control; or
(ii) Individuals who, as of January 1, 1990, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided that any individual becoming a director subsequent to January 1,
1990 whose election, or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(iii) Approval by the stockholders of the Company of (x) a
reorganization, merger or consolidation, in each case, with respect to which all
or substantially all of the individuals and entities who were the respective
beneficial owners of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such reorganization, merger or consolidation do
not, following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such reorganization, merger
or consolidation, or (y) a complete liquidation or dissolution of the Company or
(z) the sale or other disposition of all or substantially all of the assets of
the Company.
(iv) Anything in this Agreement to the contrary notwithstanding, if an
event that would, but for this paragraph, constitute a Change of Control results
from or arises out of a purchase or other acquisition of the Company, directly
or indirectly, by a corporation or other entity in which the Executive has a
direct or indirect equity interest, such event shall not constitute a Change of
Control; provided, however, that the limitation contained in this sentence shall
not apply to any direct or indirect equity interest in a corporation or other
entity (1) which equity interest is part of a class of equity interests which
are publicly traded on any securities exchange or other market system, (2)
received by the Executive, without the Executive's concurrence or consent, as a
result of a purchase or other acquisition of the Company by such corporation or
other entity, or (3) received by the Executive, without the Executive's
concurrence or consent, in connection with a purchase or other acquisition of
the Company by such corporation or other entity in respect of any stock options
or performance awards granted to the Executive by the Company.
2. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and, subject to Executive's right to terminate his employment for
Good Reason (as hereinafter defined), the Executive hereby agrees to remain in
the employ of the Company for the Employment Period.
3. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, the Company agrees to employee the Executive as President and
Chief Executive Officer, or in such other capacity as the Company may designate,
provided that during the Change of Control Employment Period, (A) the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 90-day period immediately
preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or any office or location less than 35 miles from such location
and in no event shall Executive be required to travel outside such location more
often than 45 days in any calendar year.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the company and to use the Executive's reasonable best
efforts to perform faithfully and efficiently such responsibilities. During the
Change of Control Employment Period it shall not be a violation of this
Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") of at least
$500,000 which shall be payable no less frequently than monthly. Within 30 days
following the end of each three year period within the Employment Period, the
Annual Base Salary shall be reviewed for consideration of possible increases
based on the Executive's performance and other relevant circumstances in such a
manner as shall be substantially consistent with increases in base salary
awarded in the ordinary course of business to other peer executives of the
Company and its affiliated companies. Any increase in Annual Base Salary shall
not serve to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this Agreement shall refer to Annual
Base Salary as so increased. As used in this Agreement, the term "affiliated
companies" includes any company controlled by, controlling or under common
control with the Company.
(ii) Executive Bonus Plan. In addition to Annual Base Salary, during
each year of the Employment Period, the Executive shall be designated as a
participant in the Company's Executive Bonus Plan (the "Bonus Plan"), which
provides for bonus payments of up to 100% of Executive's Annual Base Salary and,
subject to meeting the criteria of the Bonus Plan, shall receive the bonus award
provided for therein (the "Annual Award").
(iii) Annual Bonus. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year during the Change of Control Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to (x) the
average annualized (for any fiscal year consisting of less than twelve full
months or with respect to which the Executive has been employed by the Company
for less than twelve full months) bonus (the "Recent Annual Bonus") paid or
payable to the Executive by the Company and its affiliated companies in respect
of the two fiscal years immediately preceding the fiscal year in which the
Effective Date occurs less (y) the Annual Award actually paid to the Executive
with respect to the current fiscal year under the Bonus Plan. Each such Annual
Bonus shall be paid not later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iv) Incentive, Savings and Retirement Plans. In addition to Annual
Base Salary, the Annual Award and Annual Bonus payable as hereinabove provided,
the Executive shall be eligible to participate during the Employment Period in
all incentive, savings and retirement plans, practices, policies and programs
applicable to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive during the Change of Control Employment Period with incentive, savings
and retirement benefits opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the 90-day period immediately preceding
the Effective Date.
(v) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) and applicable to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide benefits during the Change
of Control Employment Period which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and programs in effect at
any time during the 90-day period immediately preceding the Effective Date.
(vi) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive provided that during the Change of Control Employment Period such
reimbursement shall be in accordance with the most favorable policies, practices
and procedures of the Company and its affiliated companies in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(vii) Fringe Benefits. During the Change of Control Employment
Period, the Executive shall be entitled to fringe benefits in accordance with
the most favorable plans, practices, programs and policies of the Company and
its affiliated companies in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect at any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
(viii) Office and Support Staff. During the Change of Control
Employment Period, the Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its affiliated companies
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(ix) Vacation. During the Change of Control Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plan, policies, programs and practices of the Company and its
affiliated companies as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided at any time thereafter with respect to other peer incentives of the
Company and its affiliated companies.
(x) Perquisites. During the Employment Period the Company also will
furnish the Executive without cost to him, (i) a Company owned or leased
full-sized luxury automobile not more than three years old (Jaguar [SJ6] or
equivalent), (ii) an annual examination of the Executive by a physician selected
in accordance with the Company's current policy, and (iii) personal financial,
investment and tax advice not to exceed $15,000 per annum, to the extent costs
and expenses of the Executive to be reimbursed are properly documented for
federal income taxation purposes to preserve any deduction for such
reimbursement to which the Company may be entitled.
(xi) Deferrals. Prior to January 31, in each calendar year during the
Employment Period, the Executive may elect to defer receipt of up to 50% of the
Base Salary provided for under Section 3(b)(i) above and up to 100% of the Bonus
Award under Section 3(b)(ii) above, otherwise payable to the Executive during
such year, to a date or event specified by the Executive that shall be no later
than the 10th anniversary of the date of the Executive's termination of
employment by the Company. Upon the date specified by the Executive for receipt
of his deferred compensation, the Executive will be entitled to a cash payment
in a lump sum or annual installments as he shall have previously elected, equal
to the aggregate amount of deferrals increased by the "Interest Equivalent" on
such deferrals. The "Interest Equivalent" shall be equal to the amount of
interest that would have been earned had such deferrals been immediately
invested in an interest bearing account bearing the "Applicable Rate" at the
time such payment of Base Salary or Bonus Award would otherwise have been made
to the Executive. The "Applicable Rate" shall be an annual rate determined as
of the first business day of each year, applied prospectively to the deferred
compensation account, equal to the greater of the "Prime Rate" announced by
Fleet National Bank as its Prime Rate as of the first business day of each
calendar year, or the yield to maturity on ten-year United States Treasury
Bonds.
4. Termination of Employment. (a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of "Disability" set forth below), it may give to the Executive
written notice in accordance with Section 11(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means the absence of the Executive from
the Executive's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for "Cause". For purposes of this Agreement,
"Cause" means (i) an act or acts of personal dishonesty taken by the Executive
and intended to result in substantial personal enrichment of the Executive at
the expense of the Company, (ii) repeated violations by the Executive of the
Executive's obligations under Section 3(a) of this Agreement which are
demonstrably willful and deliberate on the Executive's part and which are not
remedied in a reasonable period of time after receipt of written notice from the
Company or (iii) the conviction of the Executive of a felony involving moral
turpitude; and prior to the Change of Control Employment Period also shall mean
gross misconduct and the willful failure to perform the directives of the Board
of Directors and which are not remedied in a reasonable time after written
notice thereof.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" means
(i) a Change of Control and/or (ii) if Executive shall elect to remain in the
employ of the Company during the Change of Control Employment Period, the
occurrence of any one or more of the following during the Change of Control
Employment Period:
A. the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 3(a)(i)(A) of this Agreement, or any other action by the Company
which results in a diminition in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
B. any failure by the Company to comply with any of the
provisions of Section 3(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
C. the Company's requiring the Executive to be based at any
office or location other than that described in Section 3(a)(i)(B) hereof;
D. any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
E. any failure by the Company to comply with and satisfy Section
10(c) of this Agreement.
The Company acknowledges and agrees that a material inducement to
Executive in entering into this Agreement was the right of Executive to
terminate his employment for Good Reason, as defined herein, including the right
to determine whether to continue in the employ of the Company upon a Change of
Control or terminate such employment and receive the monetary payments and other
benefits provided for in Section 5(e).
(d) Notice of Termination. Any termination on or after the Effective
Date by the Company for Cause or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 11(b) of this Agreement. For purpose of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, and (ii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than
fifteen days after the giving of such notice), and (iii) if the Date of
Termination is on or after the Effective Date, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision referred to in clause (1) hereof.
The failure by the Executive to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason shall not waive
any right of the Executive hereunder or preclude the Executive from asserting
such fact or circumstance in enforcing the Executive's rights hereunder.
(e) Date of Termination. "Date of Termination" means the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be; provided, however, that (i) if the Executive's employment is terminated by
the Company other than for Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Executive of such termination and
(ii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive
or the Disability Effective Date, as the case may be.
5. Obligations of the Company upon Termination. (a) Death. If the
Executive's employment is terminated by reason of the Executive's death during
the Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement,
provided that if the Executive's death occurs during the Change of Control
Employment Period, the Company shall have the following obligations: (i) the
Executive's Annual Base Salary through the Date of Termination to the extent not
theretofore paid, (ii) the product of the greater of the Annual Bonus paid or
payable (and annualized for any fiscal year consisting of less than twelve full
months or for which the Executive has been employed for less than twelve full
months) to the Executive for the most recently completed fiscal year during the
Employment Period, if any, and the Recent Annual Bonus (such greater amount
hereafter referred to as the "Highest Annual Bonus") and a fraction, the
numerator of which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365 and (iii) any
compensation previously deferred by the Executive (together with any accrued
interest thereon) and not yet paid by the Company (the amounts described in
paragraphs (i), (ii) and (iii) are hereafter referred to as "Accrued
Obligations"). All Accrued Obligations shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date
of Termination. Anything in this Agreement to the contrary notwithstanding, if
the Executive's death occurs during the Change of Control Employment Period, the
Executive's family shall be entitled to receive benefits at least equal to the
most favorable benefits provided by the Company and any of its affiliated
companies to surviving families of peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating
to family death benefits, if any, as in effect with respect to other peer
executives and their families at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect on the date of the Executive's death with
respect to other peer executives of the Company and its affiliated companies and
their families.
(b) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executives, other than for Accrued
Obligations. All Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. Anything in this
Agreement to the contrary notwithstanding, if the Disability Effective Date
occurs during the Change of Control Employment Period, the Executive shall be
entitled after the Disability Effective Date to receive disability and other
benefits at least equal to the most favorable of those provided by the company
and its affiliated companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, as in effect with respect to other peer executives and their
families at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their families.
(c) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive the Annual Base Salary through the Date of Termination
plus the amount of any compensation previously deferred by the Executive, in
each case to the extent theretofore unpaid. If the Executive terminates
employment during the Employment Period other than for Good Reason, this
Agreement shall terminate without further obligations to the Executive, other
than for Accrued Obligations. In such case, all Accrued Obligations shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
(d) Termination Other than for Cause or Disability Prior to the
Effective Date. If, during the Employment Period but prior to the Effective
Date, the Company shall terminate the Executive's employment other than for
Cause or Disability.
(i) the Company shall pay to the Executives:
A. an amount equal to the product of (x) the Annual Base Salary
and (y) a fraction, the numerator of which is the number of months remaining in
the Employment Period immediately prior to the Executive's termination of
employment and the denominator of which is twelve, such amount to be paid in
equal monthly installments; and
B. an amount equal to the product of (i) the Highest Annual Bonus
and (ii) a fraction, the numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the denominator of which is
365, such amount to be paid in equal monthly installments; and
C. any compensation previously deferred by the Executive
(together with any accrued interest therein) and not yet paid by the Company,
such amount to be paid in a lump sum within 30 days following the Date of
Termination; and
(ii) for the remainder of the Employment Period, the Company
shall continue benefits to the Executive and/or the Executive's family equal to
those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 3(b)(v) of this Agreement
in effect as of the Date of Termination if the Executive's employment had not
been terminated. For purposes of determining eligibility of the Executive for
retiree benefits pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until the end of the
Employment Period and to have retired on the last day of such period.
(e) Termination for Good Reason; Termination During Change of Control
Employment Period. If the Executive shall terminate his employment under this
Agreement for Good Reason or if during the Change of Control Employment Period,
the Company shall terminate the Executive's employment other than for Cause or
Disability:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of
Termination all Accrued Obligations;
(ii) the Company shall pay to the Executive as
severance pay within 30 days after the Date of
Termination an amount equal to the product of (x) 3
and (y) the sum of (i) Annual Base Salary and (ii) the
Highest Annual Bonus; and
(iii) from the Date of Termination through the
end of the Change of Control Employment Period, or
such longer period as any plan, program, practice or
policy may provide, the Company shall continue
benefits to the Executive and/or the Executive's
family at least equal to those which would have been
provided to them in accordance with the plans,
programs, practices and policies described in Section
3(b)(v) of this Agreement if the Executive's
employment had not been terminated in accordance with
the most favorable plans, practices, programs or
policies of the Company and its affiliated companies
applicable to other peer executives and their families
during the 90-day period immediately preceding the
Effective Date, or, if more favorable to the
Executive, as in effect at any time thereafter with
respect to other peer executives of the Company and
its affiliated companies and their families. For
purposes of determining eligibility of the Executive
for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall
be considered to have remained employed until the end
of the Change of Control Employment Period and to have
retired on the last day of such period.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices, provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the Company or any of its
affiliated companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program except as explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and amounts payable to
Executive from any other employment or source shall not reduce the amounts
payable to Executive hereunder. The Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company or others of the validity of enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by the Executive about the amount of any payment
pursuant to Section 8 of this Agreement), plus in each case interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Internal
Revenue Code of 1986, as amended (the "Code").
8. Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Company to or for the benefit of the
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by Ernst &
Young (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within fifteen business days
of the Date of Termination, if applicable, or such earlier time as is requested
by, the Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. The initial Gross-Up Payment, if any, as determined
pursuant to this Section 8(b), shall be paid to the Executive within five days
of the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with an opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 8(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but not later than twenty business days after the Executive knows
of such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which it gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim.
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation
with respect to such claim by an attorney reasonably
selected by the Company.
(iii) cooperate with the Company in good faith
in order effectively to contest such claim.
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 8(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income
tax, including interest or penalties with respect thereto, imposed with respect
to such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid. 9. Confidential
Information. The Executive shall hold in a fiduciary capacity for the benefit
of the Company all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 9 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement during or with
respect to the Change of Control Employment Period.
10. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives. (b)
All notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party, or by Federal Express, Express Mail
or other overnight courier service, or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Thomas M. Duff
5 North Ward Avenue
Rumson, New Jersey 07760
If to the Company:
The Compensation Committee
of the Board of Directors of Wellman, Inc.
c/o Dr. Richard P. Heitmiller
12 Sullivan Street
Nashua, New Hampshire 03060
and:
Jonathan M. Nelson
c/o Narragansett Capital, Inc.
Fleet Center - 9th Floor
50 Kennedy Plaza
Providence, RI 02903
with a copy to:
David K. Duffell, Esq.
c/o Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) This Agreement contains the entire understanding of the Company
and the Executive with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to
the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
By /s/ Thomas M. Duff
Thomas M. Duff
WELLMAN, INC.
By /s/ Clifford J. Christenson
Clifford J. Christenson,
Chief Financial Officer
Exhibit 10(b)(2)
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement (the "Agreement"), made as of
the 1st day of January, 1995, by and between WELLMAN, INC., a Delaware
corporation (the "Company") and THOMAS M. DUFF (the "Executive").
W I T N E S S E T H: WHEREAS, the parties hereto entered into an Employment
Agreement dated as of January 1, 1990 as amended by a First Amendment thereto
dated as of January 1, 1993 (collectively, the "Original Employment Agreement"),
pursuant to which the Company agreed to continue to employ the Executive, and
the Executive agreed to remain in the employ of the Company; and
WHEREAS, the parties have agreed to certain modifications to the Original
Employment Agreement as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
set forth herein, and for good and valuable other consideration, receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Defined Terms. All capitalized terms not defined herein shall
have the same meaning ascribed to such terms in the Original Employment
Agreement.
Section 2. Amendment to Original Employment Agreement. Effective as of the
date hereof, the first sentence of Section 3(b)(i) of the Original Employment
Agreement is amended to read in its entirety as follows:
"The Executive shall receive an annual base salary ("Annual Base Salary") in
an amount as shall be determined by the Board of Directors."
Section 3. Ratification. Each party hereto hereby ratifies and confirms all of
its obligations, covenants, duties and agreements set forth in the Original
Employment Agreement, as amended by the terms hereof. All references to the
"Employment Agreement" or the "Agreement" or any other defined term amended
hereby contained in the Original Employment Agreement, shall be deemed to be
amended to refer to the Original Employment Agreement, as amended by the terms
hereof or to such amended defined term, as the case may be.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to
the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
By /s/ Thomas M. Duff
Thomas M. Duff
WELLMAN, INC.
By /s/ Clifford J. Christenson
Title: Executive VP
EXHIBIT 10(c)y
EMPLOYMENT AGREEMENT
AGREEMENT by and between WELLMAN, INC., a Delaware corporation (the
"Company"), and Clifford J. Christenson (the "Executive"), dated as of the 1st
day of December, 1994.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued service and dedication of the Executive. In
addition, the Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in
the event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements currently and upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. The Board of Directors also believes that the autonomy, authority
and responsibility possessed by the Executive is a significant attribute of his
employment and a Change of Control would be likely to significantly diminish the
attractiveness to Executive of employment by the Company, and has determined to
allow Executive to chose whether to continue in the employ of the Company upon a
Change of Control. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall be the first date
during the "Employment Period" (as defined in Section 1(b)) on which a Change of
Control occurs. Anything in this Agreement to the contrary notwithstanding, if
the Executive's employment with the Company is terminated or the Executive
ceases to be an officer of the Company prior to the date on which a Change of
Control occurs, and it is reasonably demonstrated that such termination of
employment (1) was at the request of a third party who has taken steps
reasonably calculated to effect the Change of Control or (2) otherwise
arose in connection with or anticipation of the Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination of employment.
(b) The "Employment Period" is the period commencing on the date hereof and
ending on the earlier of the third anniversary hereof or the Date of Termination
(as defined in Section 4(f); provided, however, that if the Date of
Termination has not yet occurred, commencing on the third anniversary hereof and
on each annual anniversary of such date (such date and each annual anniversary
thereof is hereinafter referred to as a "Renewal Date"), the Employment Period
will be extended so as to terminate three years from such Renewal Date unless
either party shall have delivered to the other a Notice of Termination (as
defined in Section 4(e)). Notwithstanding the foregoing, unless the Employment
Period has already terminated, the Employment Period shall be automatically
extended upon a Change of Control so as to terminate three years from the
Effective Date (such three year period of the Employment Period being
hereinafter referred to as the "Change of Control Employment Period").
(c) "Change of Control". For the purpose of this Agreement, a "Change of
Control" shall mean:
(i) There shall have occurred a change in control which the Company
would be required to report in response to Item 1 of Form 8-K promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or if such
regulation is no longer in effect, any regulations promulgated by the Securities
and Exchange Commission pursuant to the Exchange Act which are intended to serve
similar purposes;
(ii) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Company Voting Securities"), provided, however, that any
acquisition by the Company or its subsidiaries, or any employee benefit plan (or
related trust) of the Company or its subsidiaries, or any corporation with
respect to which, following such acquisition, more than 50% of, respectively,
the then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Company Voting Securities immediately prior to
such acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the Outstanding Company Common Stock
and Company Voting Securities, as the case may be, shall not constitute a Change
of Control; or
(iii) Individuals who, as of January 1, 1994, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided that any individual becoming a director subsequent to
January 1, 1994 whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act); or
(iv) Approval by the stockholders of the Company of (x) a
reorganization, merger or consolidation, in each case, with respect to which all
or substantially all of the individuals and entities who were the respective
beneficial owners of the Outstanding Company Common Stock and Company
Voting Securities immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation, or (y) a complete liquidation or
dissolution of the Company, or (z) the sale or other disposition of all or
substantially all of the assets of the Company.
(v) Anything in this Agreement to the contrary notwithstanding, if an
event that would, but for this paragraph, constitute a Change of Control results
from or arises out of a purchase or other acquisition of the Company, directly
or indirectly, by a corporation or other entity in which the Executive has a
direct or indirect equity interest, such event shall not constitute a Change of
Control; provided, however, that the limitation contained in this sentence shall
not apply to any direct or indirect equity interest in a corporation or other
entity (1) which equity interest is part of a class of equity interests which
are publicly traded on any securities exchange or other market system, (2)
received by the Executive, without the Executive's concurrence or consent, as a
result of a purchase or other acquisition of the Company by such corporation or
other entity, or (3) received by the Executive, without the Executive's
concurrence or consent, in connection with a purchase or other acquisition of
the Company by such corporation or other entity in respect of any stock
options or performance awards granted to the Executive by the Company.
2. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company during the Employment Period, in each case subject to the terms and
conditions of this Agreement.
3. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, the Company agrees to employ the Executive as Executive Vice
President, or in such other capacity as the Company may designate, provided that
during the Change of Control Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 90-day period immediately preceding the Effective Date and (B)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any office or location
less than 35 miles from such location and in no event shall Executive be
required to travel outside such location more often than 45 days in any
calendar year.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and to use the Executive's reasonable best
efforts to perform faithfully and efficiently such responsibilities. During the
Change of Control Employment Period it shall not be a violation of this
Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance
with this Agreement. It is expressly understood and agreed that to the extent
that any such activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date
shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") in an
amount determined annually by the Compensation Committee of the Board of
Directors of the Company. The Annual Base Salary shall be payable no less
frequently than monthly.
(ii) Management Incentive Compensation Plan. In addition to Annual
Base Salary, during each year of the Employment Period, the Executive shall be
designated as a participant in the Company's Management Incentive Compensation
Plan (the "Bonus Plan") and, subject to meeting the criteria of the Bonus Plan,
shall receive the bonus award provided for therein (the "Annual Award").
(iii) Annual Bonus. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year during the Change of Control Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to (x) the
average annualized (for any fiscal year consisting of less than twelve
full months or with respect to which the Executive has been employed by the
Company for less than twelve full months) bonus (the "Recent Annual Bonus") paid
or payable to the Executive by the Company and its affiliated companies in
respect of the two fiscal years immediately preceding the fiscal year in which
the Effective Date occurs less (y) the Annual Award actually paid to the
Executive with respect to the current fiscal year under the Bonus Plan. Each
such Annual Bonus shall be paid not later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(iv) Incentive, Savings and Retirement Plans. In addition to Annual
Base Salary, the Annual Award and Annual Bonus payable as hereinabove provided,
the Executive shall be eligible to participate during the Employment Period in
all incentive, savings and retirement plans, practices, policies and programs
applicable to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive during the Change of Control Employment Period with incentive, savings
and retirement benefits opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the 90-day period immediately preceding
the Effective Date.
(v) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) and applicable to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide benefits during the Change
of Control Employment Period which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and programs in effect at
any time during the 90-day period immediately preceding the Effective Date.
(vi) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive provided that during the Change of Control Employment Period such
reimbursement shall be in accordance with the most favorable policies, practices
and procedures of the Company and its affiliated companies in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(vii) Fringe Benefits. During the Change of Control Employment
Period, the Executive shall be entitled to fringe benefits in accordance with
the most favorable plans, practices, programs and policies of the Company and
its affiliated companies in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect at any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
(viii) Office and Support Staff. During the Change of Control
Employment Period, the Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its affiliated companies
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(ix) Vacation. During the Change of Control Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plan, policies, programs and practices of the Company and its
affiliated companies as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided at any time thereafter with respect to other peer incentives of the
Company and its affiliated companies.
(x) Perquisites. During the Employment Period the Company also will
furnish the Executive without cost to him, (i) a Company owned or leased
full-sized luxury automobile not more than three years old, and (ii) an annual
examination of the Executive by a physician selected in accordance with the
Company's current policy, to the extent costs and expenses of the Executive to
be reimbursed are properly documented for federal income taxation purposes to
preserve any deduction for such reimbursement to which the Company may be
entitled.
4. Termination of Employment. (a) Prior to Effective Date. At any time
prior to the Effective Date, the Executive's employment may be terminated for
any reason, with or without cause, by the Company or by the Executive by
delivery of a Notice of Termination (as defined below) to the other party
hereto given in accordance with Section 11(b) of this Agreement.
(b) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of
"Disability" set forth below), it may give to the Executive written notice
in accordance with Section 11(b) of this Agreement of its intention to terminate
the Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this
Agreement, "Disability" means the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's
legal representative (such agreement as to acceptability not to be withheld
unreasonably).
(c) Cause. The Company may terminate the Executive's employment
during the Change of Control Employment Period for "Cause". For purposes of
this Agreement, "Cause" means (i) an act or acts of personal dishonesty taken by
the Executive and intended to result in substantial personal enrichment of the
Executive at the expense of the Company, (ii) repeated violations by the
Executive of the Executive's obligations under Section 3(a) of this Agreement
which are demonstrably willful and deliberate on the Executive's part and which
are not remedied in a reasonable period of time after receipt of written notice
from the Company, or (iii) the conviction of the Executive of a felony involving
moral turpitude.
(d) Good Reason. The Executive's employment may be terminated by the
Executive during the Change of Control Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" means (i) a Change of Control and/or
(ii) if Executive shall elect to remain in the employ of the Company during the
Change of Control Employment Period, the occurrence of any one or more of the
following during the Change of Control Employment Period:
A. the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a)(i)(A) of this Agreement, or any other action
by the Company which results in a diminition in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by
the Executive;
B. any failure by the Company to comply with any of the provisions
of Section 3(b) of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is remedied
by the Company promptly after receipt of notice thereof given by the
Executive;
C. the Company's requiring the Executive to be based at any office
or location other than that described in Section 3(a)(i)(B) hereof;
D. any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
E. any failure by the Company to comply with and satisfy Section
10(c) of this Agreement.
The Company acknowledges and agrees that a material inducement to Executive
in entering into this Agreement was the right of Executive to determine whether
to continue in the employ of the Company upon a Change of Control or terminate
such employment and receive the monetary payments and other benefits provided
for in Section 5(e).
(e) Notice of Termination. Any termination by the Company or by the
Executive shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 11(b) of this Agreement. For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i) if
the Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
thirty days after the giving of such notice), and (ii) if the Date of
Termination is on or after the Effective Date, indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under such provision. The failure by the Executive
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing the Executive's rights hereunder.
(f) Date of Termination. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be; provided, however, that (i) if the Executive's employment is
terminated by the Company other than for death or Disability, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination, and (ii) if the Executive's employment is terminated by reason
of death or Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may be.
5. Obligations of the Company upon Termination.
(a) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, provided that if the Executive's death occurs during the
Change of Control Employment Period, the Company shall have the following
obligations: (i) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (ii) the product of the greater
of the Annual Bonus paid or payable (and annualized for any fiscal year
consisting of less than twelve full months or for which the Executive has been
employed for less than twelve full months) to the Executive for the most
recently completed fiscal year during the Employment Period, if any, and the
Recent Annual Bonus (such greater amount hereafter referred to as the "Highest
Annual Bonus") and a fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and the denominator of
which is 365 and (iii) any compensation previously deferred by the Executive
(together with any accrued interest thereon) and not yet paid by the Company
(the amounts described in paragraphs (i), (ii) and (iii) are hereafter referred
to as "Accrued Obligations"). All Accrued Obligations, as well as any amounts
(the "SERP Amounts") payable to the Executive pursuant to the Wellman,
Inc. Executive Restoration Plan (the "Plan"), shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, if the Executive's death occurs during the Change of Control
Employment Period, the Executive's family shall be entitled to receive benefits
at least equal to the most favorable benefits provided by the Company and any of
its affiliated companies to surviving families of peer executives of the Company
and such affiliated companies under such plans, programs, practices and policies
relating to family death benefits, if any, as in effect with respect to other
peer executives and their families at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its affiliated
companies and their families.
(b) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. All Accrued Obligations, and all SERP Amounts if the Disability
Effective Date occurs during the Change of Control Employment Period, shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding, if the
Disability Effective Date occurs during the Change of Control Employment Period,
the Executive shall be entitled after the Disability Effective Date to receive
disability and other benefits at least equal to the most favorable of those
provided by the Company and its affiliated companies to disabled executives
and/or their families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect with respect to other peer
executives and their families at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families.
(c) Termination during Change of Control Employment Period for Cause
or Other than for Good Reason. If the Executive's employment shall be
terminated for Cause during the Change of Control Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive the Annual Base Salary through the
Date of Termination plus the amount of any compensation previously deferred by
the Executive, in each case to the extent theretofore unpaid. If the Executive
terminates employment during the Change of Control Employment Period other than
for Good Reason, this Agreement shall terminate without further obligations to
the Executive, other than for Accrued Obligations. In such case, all Accrued
Obligations and all SERP Amounts shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
(d) Termination Other than for Death or Disability Prior to the
Effective Date. If the Executive's employment shall be terminated during the
Employment Period but prior to the Effective Date, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. In such case, all Accrued Obligations shall be paid to the
executive in a lump sum in cash within 30 days of the Date of Termination.
(e) Termination During Change of Control Employment Period for Good
Reason. If the Executive shall terminate his employment during the Change of
Control Employment Period for Good Reason or if the Company shall terminate the
Executive's employment during the Change of Control Employment Period other than
for Cause or Disability:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination all Accrued Obligations and
all SERP Amounts, provided that notwithstanding the terms of the Plan,
100% of the Company Contribution Credit Account (as defined therein) shall
be deemed vested;
(ii) the Company shall pay to the Executive as severance pay within
30 days after the Date of Termination an amount equal to the product of
(x) 3 and (y) the sum of (i) Annual Base Salary and (ii) the Highest
Annual Bonus; and
(iii) from the Date of Termination through the end of the Change of
Control Employment Period, or such longer period as any plan, program,
practice or policy may provide, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which
would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 3(b)(v) of this Agreement if
the Executive's employment had not been terminated in accordance with the
most favorable plans, practices, programs or policies of the Company and
its affiliated companies applicable to other peer executives and their
families during the 90-day period immediately preceding the Effective
Date, or, if more favorable to the Executive, as in effect at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies and their families. For purposes of determining
eligibility of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to
have remained employed until the end of the Change of Control Employment
Period and to have retired on the last day of such period.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the Company or any of its
affiliated companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program except as explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and amounts payable to
Executive from any other employment or source shall not reduce the amounts
payable to Executive hereunder. The Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by the Executive about the amount of any payment
pursuant to Section 8 of this Agreement), plus in each case interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Internal
Revenue Code of 1986, as amended (the "Code").
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by Ernst &
Young (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within fifteen business days
of the Date of Termination, if applicable, or such earlier time as is requested
by the Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. The initial Gross-Up Payment, if any, as determined
pursuant to this Section 8(b), shall be paid to the Executive within five days
of the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish
the Executive with an opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 8(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but not later than twenty business days after the Executive knows
of such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which it gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to
contest such claim;
(iv) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify
and hold the Executive harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section
8(c), the Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax, including
interest or penalties with respect thereto, imposed with respect to such
advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement during or with respect to the Change of Control Employment Period.
10. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party, or by Federal Express,
Express Mail or other overnight courier service, or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Clifford J. Christenson
7 Honeysuckle Court
Holmdel, NJ 07733
If to the Company:
The Compensation Committee
of the Board of Directors of Wellman, Inc.
c/o Wellman, Inc.
1040 Broad Street
Shrewsbury, NJ 07702
with a copy to:
David K. Duffell, Esq.
c/o Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) This Agreement contains the entire understanding of the Company
and the Executive with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to
the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
Clifford J. Christenson
WELLMAN, INC.
By
Thomas M. Duff
President
EXHIBIT 10(e)
EMPLOYMENT AGREEMENT
AGREEMENT by and between WELLMAN, INC., a Delaware corporation (the
"Company"), and Keith R. Phillips (the "Executive"), dated as of the 1st day of
December, 1994.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued service and dedication of the Executive. In
addition, the Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements currently and upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. The Board of Directors also believes that the autonomy, authority
and responsibility possessed by the Executive is a significant attribute of his
employment and a Change of Control would be likely to significantly diminish the
attractiveness to Executive of employment by the Company, and has determined to
allow Executive to chose whether to continue in the employ of the Company upon a
Change of Control. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall be the first date
during the "Employment Period" (as defined in Section 1(b)) on which a Change of
Control occurs. Anything in this Agreement to the contrary notwithstanding, if
the Executive's employment with the Company is terminated or the Executive
ceases to be an officer of the Company prior to the date on which a Change of
Control occurs, and it is reasonably demonstrated that such termination of
employment (1) was at the request of a third party who has taken steps
reasonably calculated to effect the Change of Control or (2) otherwise arose in
connection with or anticipation of the Change of Control, then for all purposes
of this Agreement the "Effective Date" shall mean the date immediately prior to
the date of such termination of employment.
(b) The "Employment Period" is the period commencing on the date hereof and
ending on the earlier of the third anniversary hereof or the Date of Termination
(as defined in Section 4(f); provided, however, that if the Date of Termination
has not yet occurred, commencing on the third anniversary hereof and on each
annual anniversary of such date (such date and each annual anniversary thereof
is hereinafter referred to as a "Renewal Date"), the Employment Period will be
extended so as to terminate three years from such Renewal Date unless either
party shall have delivered to the other a Notice of Termination (as defined in
Section 4(e)). Notwithstanding the foregoing, unless the Employment Period has
already terminated, the Employment Period shall be automatically extended upon a
Change of Control so as to terminate three years from the Effective Date (such
three year period of the Employment Period being hereinafter referred to as the
"Change of Control Employment Period").
(c) "Change of Control". For the purpose of this Agreement, a "Change of
Control" shall mean:
(i) There shall have occurred a change in control which the Company
would be required to report in response to Item 1 of Form 8-K promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or if such
regulation is no longer in effect, any regulations promulgated by the Securities
and Exchange Commission pursuant to the Exchange Act which are intended to serve
similar purposes;
(ii) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Company Voting Securities"), provided, however, that any
acquisition by the Company or its subsidiaries, or any employee benefit plan (or
related trust) of the Company or its subsidiaries, or any corporation with
respect to which, following such acquisition, more than 50% of, respectively,
the then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Company Voting Securities immediately prior to such
acquisition in substantially the same proportion as their ownership, immediately
prior to such acquisition, of the Outstanding Company Common Stock and Company
Voting Securities, as the case may be, shall not constitute a Change of Control;
or (iii) Individuals who, as of January 1, 1994, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided that any individual becoming a director subsequent to
January 1, 1994 whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act); or
(iv) Approval by the stockholders of the Company of (x) a
reorganization, merger or consolidation, in each case, with respect to which all
or substantially all of the individuals and entities who were the respective
beneficial owners of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such reorganization, merger or consolidation do
not, following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such reorganization, merger
or consolidation, or (y) a complete liquidation or dissolution of the Company,
or (z) the sale or other disposition of all or substantially all of the assets
of the Company.
(v) Anything in this Agreement to the contrary notwithstanding, if an
event that would, but for this paragraph, constitute a Change of Control results
from or arises out of a purchase or other acquisition of the Company, directly
or indirectly, by a corporation or other entity in which the Executive has a
direct or indirect equity interest, such event shall not constitute a Change of
Control; provided, however, that the limitation contained in this sentence shall
not apply to any direct or indirect equity interest in a corporation or other
entity (1) which equity interest is part of a class of equity interests which
are publicly traded on any securities exchange or other market system, (2)
received by the Executive, without the Executive's concurrence or consent, as a
result of a purchase or other acquisition of the Company by such corporation or
other entity, or (3) received by the Executive, without the Executive's
concurrence or consent, in connection with a purchase or other acquisition of
the Company by such corporation or other entity in respect of any stock options
or performance awards granted to the Executive by the Company.
2. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company during the Employment Period, in each case subject to the terms and
conditions of this Agreement.
3. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, the Company agrees to employ the Executive as Vice President
and Chief Financial Officer, or in such other capacity as the Company may
designate, provided that during the Change of Control Employment Period, (A) the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 90-day period immediately
preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or any office or location less than 35 miles from such location
and in no event shall Executive be required to travel outside such location more
often than 45 days in any calendar year.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and to use the Executive's reasonable best
efforts to perform faithfully and efficiently such responsibilities. During the
Change of Control Employment Period it shall not be a violation of this
Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") in an
amount determined annually by the Compensation Committee of the Board of
Directors of the Company. The Annual Base Salary shall be payable no less
frequently than monthly.
(ii) Management Incentive Compensation Plan. In addition to Annual
Base Salary, during each year of the Employment Period, the Executive shall be
designated as a participant in the Company's Management Incentive Compensation
Plan (the "Bonus Plan") and, subject to meeting the criteria of the Bonus Plan,
shall receive the bonus award provided for therein (the "Annual Award").
(iii) Annual Bonus. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year during the Change of Control Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to (x) the
average annualized (for any fiscal year consisting of less than twelve full
months or with respect to which the Executive has been employed by the Company
for less than twelve full months) bonus (the "Recent Annual Bonus") paid or
payable to the Executive by the Company and its affiliated companies in respect
of the two fiscal years immediately preceding the fiscal year in which the
Effective Date occurs less (y) the Annual Award actually paid to the Executive
with respect to the current fiscal year under the Bonus Plan. Each such Annual
Bonus shall be paid not later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iv) Incentive, Savings and Retirement Plans. In addition to Annual
Base Salary, the Annual Award and Annual Bonus payable as hereinabove provided,
the Executive shall be eligible to participate during the Employment Period in
all incentive, savings and retirement plans, practices, policies and programs
applicable to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive during the Change of Control Employment Period with incentive, savings
and retirement benefits opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the 90-day period immediately preceding
the Effective Date.
(v) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) and applicable to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide benefits during the Change
of Control Employment Period which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and programs in effect at
any time during the 90-day period immediately preceding the Effective Date.
(vi) Expenses. During the Employment Period, the Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by the
Executive provided that during the Change of Control Employment Period such
reimbursement shall be in accordance with the most favorable policies, practices
and procedures of the Company and its affiliated companies in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(vii) Fringe Benefits. During the Change of Control Employment
Period, the Executive shall be entitled to fringe benefits in accordance with
the most favorable plans, practices, programs and policies of the Company and
its affiliated companies in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect at any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
(viii) Office and Support Staff. During the Change of Control
Employment Period, the Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its affiliated companies
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(ix) Vacation. During the Change of Control Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plan, policies, programs and practices of the Company and its
affiliated companies as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided at any time thereafter with respect to other peer incentives of the
Company and its affiliated companies.
(x) Perquisites. During the Employment Period the Company also will
furnish the Executive without cost to him, (i) a Company owned or leased
full-sized luxury automobile not more than three years old, and (ii) an annual
examination of the Executive by a physician selected in accordance with the
Company's current policy, to the extent costs and expenses of the Executive to
be reimbursed are properly documented for federal income taxation purposes to
preserve any deduction for such reimbursement to which the Company may be
entitled. 4. Termination of Employment. (a) Prior to Effective Date. At
any time prior to the Effective Date, the Executive's employment may be
terminated for any reason, with or without cause, by the Company or by the
Executive by delivery of a Notice of Termination (as defined below) to the other
party hereto given in accordance with Section 11(b) of this Agreement.
(b) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of
"Disability" set forth below), it may give to the Executive written notice in
accordance with Section 11(b) of this Agreement of its intention to terminate
the Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" means the absence of the Executive from the Executive's duties with
the Company on a full-time basis for 180 consecutive business days as a result
of incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(c) Cause. The Company may terminate the Executive's employment
during the Change of Control Employment Period for "Cause". For purposes of
this Agreement, "Cause" means (i) an act or acts of personal dishonesty taken by
the Executive and intended to result in substantial personal enrichment of the
Executive at the expense of the Company, (ii) repeated violations by the
Executive of the Executive's obligations under Section 3(a) of this Agreement
which are demonstrably willful and deliberate on the Executive's part and which
are not remedied in a reasonable period of time after receipt of written notice
from the Company, or (iii) the conviction of the Executive of a felony involving
moral turpitude.
(d) Good Reason. The Executive's employment may be terminated by the
Executive during the Change of Control Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" means (i) a Change of Control and/or
(ii) if Executive shall elect to remain in the employ of the Company during the
Change of Control Employment Period, the occurrence of any one or more of the
following during the Change of Control Employment Period:
A. the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a)(i)(A) of this Agreement, or any other action
by the Company which results in a diminition in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by
the Executive;
B. any failure by the Company to comply with any of the provisions of
Section 3(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
C. the Company's requiring the Executive to be based at any office or
location other than that described in Section 3(a)(i)(B) hereof;
D. any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
E. any failure by the Company to comply with and satisfy Section
10(c) of this Agreement.
The Company acknowledges and agrees that a material inducement to Executive
in entering into this Agreement was the right of Executive to determine whether
to continue in the employ of the Company upon a Change of Control or terminate
such employment and receive the monetary payments and other benefits provided
for in Section 5(e).
(e) Notice of Termination. Any termination by the Company or by the
Executive shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 11(b) of this Agreement. For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i) if
the Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
thirty days after the giving of such notice), and (ii) if the Date of
Termination is on or after the Effective Date, indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under such provision. The failure by the Executive
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing the Executive's rights hereunder.
(f) Date of Termination. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be; provided, however, that (i) if the Executive's employment is
terminated by the Company other than for death or Disability, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination, and (ii) if the Executive's employment is terminated by reason
of death or Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may be.
5. Obligations of the Company upon Termination.
(a) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, provided that if the Executive's death occurs during the
Change of Control Employment Period, the Company shall have the following
obligations: (i) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (ii) the product of the greater
of the Annual Bonus paid or payable (and annualized for any fiscal year
consisting of less than twelve full months or for which the Executive has been
employed for less than twelve full months) to the Executive for the most
recently completed fiscal year during the Employment Period, if any, and the
Recent Annual Bonus (such greater amount hereafter referred to as the "Highest
Annual Bonus") and a fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and the denominator of
which is 365 and (iii) any compensation previously deferred by the Executive
(together with any accrued interest thereon) and not yet paid by the Company
(the amounts described in paragraphs (i), (ii) and (iii) are hereafter referred
to as "Accrued Obligations"). All Accrued Obligations, as well as any amounts
(the "SERP Amounts") payable to the Executive pursuant to the Wellman, Inc.
Executive Restoration Plan (the "Plan"), shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date
of Termination. Anything in this Agreement to the contrary notwithstanding, if
the Executive's death occurs during the Change of Control Employment Period, the
Executive's family shall be entitled to receive benefits at least equal to the
most favorable benefits provided by the Company and any of its affiliated
companies to surviving families of peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating
to family death benefits, if any, as in effect with respect to other peer
executives and their families at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect on the date of the Executive's death with
respect to other peer executives of the Company and its affiliated companies and
their families.
(b) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. All Accrued Obligations, and all SERP Amounts if the Disability
Effective Date occurs during the Change of Control Employment Period, shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding, if the
Disability Effective Date occurs during the Change of Control Employment Period,
the Executive shall be entitled after the Disability Effective Date to receive
disability and other benefits at least equal to the most favorable of those
provided by the Company and its affiliated companies to disabled executives
and/or their families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect with respect to other peer
executives and their families at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families.
(c) Termination during Change of Control Employment Period for Cause
or Other than for Good Reason. If the Executive's employment shall be
terminated for Cause during the Change of Control Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive the Annual Base Salary through the
Date of Termination plus the amount of any compensation previously deferred by
the Executive, in each case to the extent theretofore unpaid. If the Executive
terminates employment during the Change of Control Employment Period other than
for Good Reason, this Agreement shall terminate without further obligations to
the Executive, other than for Accrued Obligations. In such case, all Accrued
Obligations and all SERP Amounts shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
(d) Termination Other than for Death or Disability Prior to the
Effective Date. If the Executive's employment shall be terminated during the
Employment Period but prior to the Effective Date, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
(e) Termination During Change of Control Employment Period for Good
Reason. If the Executive shall terminate his employment during the Change of
Control Employment Period for Good Reason or if the Company shall terminate the
Executive's employment during the Change of Control Employment Period other than
for Cause or Disability:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination all Accrued Obligations and
all SERP Amounts, provided that notwithstanding the terms of the Plan, 100%
of the Company Contribution Credit Account (as defined therein) shall be
deemed vested;
(ii) the Company shall pay to the Executive as severance pay within
30 days after the Date of Termination an amount equal to the product of (x)
3
and (y) the sum of (i) Annual Base Salary and (ii) the Highest Annual Bonus;
and
(iii) from the Date of Termination through the end of the Change of
Control Employment Period, or such longer period as any plan, program,
practice or policy may provide, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs,
practices and policies described in Section 3(b)(v) of this Agreement if
the Executive's employment had not been terminated in accordance with the
most favorable plans, practices, programs or policies of the Company and
its affiliated companies applicable to other peer executives and their
families during the 90-day period immediately preceding the Effective Date,
or, if more favorable to the Executive, as in effect at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies and their families. For purposes of determining eligibility of
the Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have remained
employed until the end of the Change of Control Employment Period and to
have retired on the last day of such period.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the Company or any of its
affiliated companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program except as explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and amounts payable to
Executive from any other employment or source shall not reduce the amounts
payable to Executive hereunder. The Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by the Executive about the amount of any payment
pursuant to Section 8 of this Agreement), plus in each case interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Internal
Revenue Code of 1986, as amended (the "Code").
8. Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Company to or for the benefit of the
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by Ernst &
Young (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within fifteen business days
of the Date of Termination, if applicable, or such earlier time as is requested
by the Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. The initial Gross-Up Payment, if any, as determined
pursuant to this Section 8(b), shall be paid to the Executive within five days
of the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with an opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 8(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but not later than twenty business days after the Executive knows
of such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which it gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to
contest such claim;
(iv) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income
tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 8(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax, including interest or penalties with respect
thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes for
the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement during or with respect to the Change of Control Employment
Period.
10. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party, or by Federal Express,
Express Mail or other overnight courier service, or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Keith Phillips
177 Rumson Road
Rumson, NJ 07702
If to the Company:
The Compensation Committee
of the Board of Directors of Wellman, Inc.
c/o Wellman, Inc.
1040 Broad Street
Shrewsbury, NJ 07702
with a copy to:
David K. Duffell, Esq.
c/o Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) This Agreement contains the entire understanding of the Company
and the Executive with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to
the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
Keith R. Phillips
WELLMAN, INC.
By
Thomas M. Duff
President
EXHIBIT 10(f)
EMPLOYMENT AGREEMENT
AGREEMENT by and between WELLMAN, INC., a Delaware corporation (the
"Company"), and James P. Casey (the "Executive"), dated as of the 1st day of
December, 1994. The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued service and dedication of the
Executive. In addition, the Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change of Control and to encourage
the Executive's full attention and dedication to the Company currently and in
the event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements currently and upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. The Board of Directors also believes that the autonomy, authority
and responsibility possessed by the Executive is a significant attribute of his
employment and a Change of Control would be likely to significantly diminish the
attractiveness to Executive of employment by the Company, and has determined to
allow Executive to chose whether to continue in the employ of the Company upon a
Change of Control. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall
be the first date during the "Employment Period" (as defined in Section 1(b)) on
which a Change of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if the Executive's employment with the Company is terminated or
the Executive ceases to be an officer of the Company prior to the date on which
a Change of Control occurs, and it is reasonably demonstrated that such
termination of employment (1) was at the request of a third party who has taken
steps reasonably calculated to effect the Change of Control or (2) otherwise
arose in connection with or anticipation of the Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination of employment.
(b) The "Employment Period" is the period commencing on the date hereof and
ending on the earlier of the third anniversary hereof or the Date of Termination
(as defined in Section 4(f); provided, however, that if the Date of Termination
has not yet occurred, commencing on the third anniversary hereof and on each
annual anniversary of such date (such date and each annual anniversary thereof
is hereinafter referred to as a "Renewal Date"), the Employment Period will be
extended so as to terminate three years from such Renewal Date unless either
party shall have delivered to the other a Notice of Termination (as defined in
Section 4(e)). Notwithstanding the foregoing, unless the Employment Period has
already terminated, the Employment Period shall be automatically extended upon a
Change of Control so as to terminate three years from the Effective Date (such
three year period of the Employment Period being hereinafter referred to as the
"Change of Control Employment Period").
(c) "Change of Control". For the purpose of this Agreement, a "Change of
Control" shall mean:
(i) There shall have occurred a change in control which the Company
would be required to report in response to Item 1 of Form 8-K promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or if such
regulation is no longer in effect, any regulations promulgated by the Securities
and Exchange Commission pursuant to the Exchange Act which are intended to serve
similar purposes;
(ii) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Company Voting Securities"), provided, however, that any
acquisition by the Company or its subsidiaries, or any employee benefit plan (or
related trust) of the Company or its subsidiaries, or any corporation with
respect to which, following such acquisition, more than 50% of, respectively,
the then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Company Voting Securities immediately prior to such
acquisition in substantially the same proportion as their ownership, immediately
prior to such acquisition, of the Outstanding Company Common Stock and Company
Voting Securities, as the case may be, shall not constitute a Change of Control;
or
(iii) Individuals who, as of January 1, 1994, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided that any individual becoming a director subsequent to
January 1, 1994 whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act); or
(iv) Approval by the stockholders of the Company of (x) a
reorganization, merger or consolidation, in each case, with respect to which all
or substantially all of the individuals and entities who were the respective
beneficial owners of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such reorganization, merger or consolidation do
not, following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such reorganization, merger
or consolidation, or (y) a complete liquidation or dissolution of the Company,
or (z) the sale or other disposition of all or substantially all of the assets
of the Company.
(v) Anything in this Agreement to the contrary notwithstanding, if an
event that would, but for this paragraph, constitute a Change of Control results
from or arises out of a purchase or other acquisition of the Company, directly
or indirectly, by a corporation or other entity in which the Executive has a
direct or indirect equity interest, such event shall not constitute a Change of
Control; provided, however, that the limitation contained in this sentence shall
not apply to any direct or indirect equity interest in a corporation or other
entity (1) which equity interest is part of a class of equity interests which
are publicly traded on any securities exchange or other market system, (2)
received by the Executive, without the Executive's concurrence or consent, as a
result of a purchase or other acquisition of the Company by such corporation or
other entity, or (3) received by the Executive, without the Executive's
concurrence or consent, in connection with a purchase or other acquisition of
the Company by such corporation or other entity in respect of any stock options
or performance awards granted to the Executive by the Company.
2. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company during the Employment Period, in each case subject to the terms and
conditions of this Agreement.
3. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, the Company agrees to employ the Executive as Vice President,
or in such other capacity as the Company may designate, provided that during the
Change of Control Employment Period, (A) the Executive's position (including
status, offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 90-day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the Executive was
employed immediately preceding the Effective Date or any office or location less
than 35 miles from such location and in no event shall Executive be required to
travel outside such location more often than 45 days in any calendar year.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and to use the Executive's reasonable best
efforts to perform faithfully and efficiently such responsibilities. During the
Change of Control Employment Period it shall not be a violation of this
Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance
with this Agreement. It is expressly understood and agreed that to the extent
that any such activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date
shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") in an
amount determined annually by the Compensation Committee of the Board of
Directors of the Company. The Annual Base Salary shall be payable no less
frequently than monthly.
(ii) Management Incentive Compensation Plan. In addition to Annual
Base Salary, during each year of the Employment Period, the Executive shall be
designated as a participant in the Company's Management Incentive Compensation
Plan (the "Bonus Plan") and, subject to meeting the criteria of the Bonus Plan,
shall receive the bonus award provided for therein (the "Annual Award").
(iii) Annual Bonus. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year during the Change of Control Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to (x) the
average annualized (for any fiscal year consisting of less than twelve full
months or with respect to which the Executive has been employed by the Company
for less than twelve full months) bonus (the "Recent Annual Bonus") paid or
payable to the Executive by the Company and its affiliated companies in respect
of the two fiscal years immediately preceding the fiscal year in which the
Effective Date occurs less (y) the Annual Award actually paid to the Executive
with respect to the current fiscal year under the Bonus Plan. Each such Annual
Bonus shall be paid not later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iv) Incentive, Savings and Retirement Plans. In addition to Annual
Base Salary, the Annual Award and Annual Bonus payable as hereinabove provided,
the Executive shall be eligible to participate during the Employment Period in
all incentive, savings and retirement plans, practices, policies and programs
applicable to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive during the Change of Control Employment Period with incentive, savings
and retirement benefits opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the 90-day period immediately
preceding the Effective Date.
(v) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) and applicable to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide benefits during the Change
of Control Employment Period which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and programs in effect at
any time during the 90-day period immediately preceding the Effective Date.
(vi) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive provided that during the Change of Control Employment Period such
reimbursement shall be in accordance with the most favorable policies, practices
and procedures of the Company and its affiliated companies in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(vii) Fringe Benefits. During the Change of Control Employment
Period, the Executive shall be entitled to fringe benefits in accordance with
the most favorable plans, practices, programs and policies of the Company and
its affiliated companies in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect at any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
(viii) Office and Support Staff. During the Change of Control
Employment Period, the Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its affiliated companies
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(ix) Vacation. During the Change of Control Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plan, policies, programs and practices of the Company and its
affiliated companies as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided at any time thereafter with respect to other peer incentives of the
Company and its affiliated companies.
(x) Perquisites. During the Employment Period the Company also will
furnish the Executive without cost to him, (i) a Company owned or leased
full-sized luxury automobile not more than three years old, and (ii) an annual
examination of the Executive by a physician selected in accordance with the
Company's current policy, to the extent costs and expenses of the Executive to
be reimbursed are properly documented for federal income taxation purposes to
preserve any deduction for such reimbursement to which the Company may be
entitled.
4. Termination of Employment. (a) Prior to Effective Date. At any time
prior to the Effective Date, the Executive's employment may be terminated for
any reason, with or without cause, by the Company or by the Executive by
delivery of a Notice of Termination (as defined below) to the other party hereto
given in accordance with Section 11(b) of this Agreement.
(b) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of
"Disability" set forth below), it may give to the Executive written notice in
accordance with Section 11(b) of this Agreement of its intention to terminate
the Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" means the absence of the Executive from the Executive's duties with
the Company on a full-time basis for 180 consecutive business days as a result
of incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(c) Cause. The Company may terminate the Executive's employment
during the Change of Control Employment Period for "Cause". For purposes of
this Agreement, "Cause" means (i) an act or acts of personal dishonesty taken by
the Executive and intended to result in substantial personal enrichment of the
Executive at the expense of the Company, (ii) repeated violations by the
Executive of the Executive's obligations under Section 3(a) of this Agreement
which are demonstrably willful and deliberate on the Executive's part and which
are not remedied in a reasonable period of time after receipt of written notice
from the Company, or (iii) the conviction of the Executive of a felony involving
moral turpitude.
(d) Good Reason. The Executive's employment may be terminated by the
Executive during the Change of Control Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" means (i) a Change of Control and/or
(ii) if Executive shall elect to remain in the employ of the Company during the
Change of Control Employment Period, the occurrence of any one or more of the
following during the Change of Control Employment Period:
A. the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a)(i)(A) of this Agreement, or any other action
by the Company which results in a diminition in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by
the Executive;
B. any failure by the Company to comply with any of the provisions of
Section 3(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
C. the Company's requiring the Executive to be based at any office or
location other than that described in Section 3(a)(i)(B) hereof;
D. any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
E. any failure by the Company to comply with and satisfy Section
10(c) of this Agreement.
The Company acknowledges and agrees that a material inducement to Executive
in entering into this Agreement was the right of Executive to determine whether
to continue in the employ of the Company upon a Change of Control or terminate
such employment and receive the monetary payments and other benefits provided
for in Section 5(e).
(e) Notice of Termination. Any termination by the Company or by the
Executive shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 11(b) of this Agreement. For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i) if
the Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
thirty days after the giving of such notice), and (ii) if the Date of
Termination is on or after the Effective Date, indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under such provision. The failure by the Executive
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing the Executive's rights hereunder.
(f) Date of Termination. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be; provided, however, that (i) if the Executive's employment is
terminated by the Company other than for death or Disability, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination, and (ii) if the Executive's employment is terminated by reason
of death or Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may be.
5. Obligations of the Company upon Termination.
(a) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, provided that if the Executive's death occurs during the
Change of Control Employment Period, the Company shall have the following
obligations: (i) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (ii) the product of the greater
of the Annual Bonus paid or payable (and annualized for any fiscal year
consisting of less than twelve full months or for which the Executive has been
employed for less than twelve full months) to the Executive for the most
recently completed fiscal year during the Employment Period, if any, and the
Recent Annual Bonus (such greater amount hereafter referred to as the "Highest
Annual Bonus") and a fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and the denominator of
which is 365 and (iii) any compensation previously deferred by the Executive
(together with any accrued interest thereon) and not yet paid by the Company
(the amounts described in paragraphs (i), (ii) and (iii) are hereafter referred
to as "Accrued Obligations"). All Accrued Obligations, as well as any amounts
(the "SERP Amounts") payable to the Executive pursuant to the Wellman, Inc.
Executive Restoration Plan (the "Plan"), shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date
of Termination. Anything in this Agreement to the contrary notwithstanding, if
the Executive's death occurs during the Change of Control Employment Period, the
Executive's family shall be entitled to receive benefits at least equal to the
most favorable benefits provided by the Company and any of its affiliated
companies to surviving families of peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating
to family death benefits, if any, as in effect with respect to other peer
executives and their families at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect on the date of the Executive's death with
respect to other peer executives of the Company and its affiliated companies and
their families.
(b) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. All Accrued Obligations, and all SERP Amounts if the Disability
Effective Date occurs during the Change of Control Employment Period, shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding, if the
Disability Effective Date occurs during the Change of Control Employment Period,
the Executive shall be entitled after the Disability Effective Date to receive
disability and other benefits at least equal to the most favorable of those
provided by the Company and its affiliated companies to disabled executives
and/or their families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect with respect to other peer
executives and their families at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families.
(c) Termination during Change of Control Employment Period for Cause
or Other than for Good Reason. If the Executive's employment shall be
terminated for Cause during the Change of Control Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive the Annual Base Salary through the
Date of Termination plus the amount of any compensation previously deferred by
the Executive, in each case to the extent theretofore unpaid. If the Executive
terminates employment during the Change of Control Employment Period other than
for Good Reason, this Agreement shall terminate without further obligations to
the Executive, other than for Accrued Obligations. In such case, all Accrued
Obligations and all SERP Amounts shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
(d) Termination Other than for Death or Disability Prior to the
Effective Date. If the Executive's employment shall be terminated during the
Employment Period but prior to the Effective Date, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
(e) Termination During Change of Control Employment Period for Good
Reason. If the Executive shall terminate his employment during the Change of
Control Employment Period for Good Reason or if the Company shall terminate the
Executive's employment during the Change of Control Employment Period other than
for Cause or Disability:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination all Accrued Obligations and
all SERP Amounts, provided that notwithstanding the terms of the Plan, 100%
of the Company Contribution Credit Account (as defined therein) shall be
deemed vested;
(ii) the Company shall pay to the Executive as severance pay within
30 days after the Date of Termination an amount equal to the product of (x)
3 and (y) the sum of (i) Annual Base Salary and (ii) the Highest Annual
Bonus; and
(iii) from the Date of Termination through the end of the Change of
Control Employment Period, or such longer period as any plan, program,
practice or policy may provide, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs,
practices and policies described in Section 3(b)(v) of this Agreement if
the Executive's employment had not been terminated in accordance with the
most favorable plans, practices, programs or policies of the Company and
its affiliated companies applicable to other peer executives and their
families during the 90-day period immediately preceding the Effective Date,
or, if more favorable to the Executive, as in effect at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies and their families. For purposes of determining eligibility of
the Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have remained
employed until the end of the Change of Control Employment Period and to
have
retired on the last day of such period.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as
the Executive may have under any other agreements with the Company or any of its
affiliated companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program except as explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and amounts payable to
Executive from any other employment or source shall not reduce the amounts
payable to Executive hereunder. The Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by the Executive about the amount of any payment
pursuant to Section 8 of this Agreement), plus in each case interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Internal
Revenue Code of 1986, as amended (the "Code").
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by Ernst &
Young (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within fifteen business days
of the Date of Termination, if applicable, or such earlier time as is requested
by the Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. The initial Gross-Up Payment, if any, as determined
pursuant to this Section 8(b), shall be paid to the Executive within five days
of the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with an opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 8(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but not later than twenty business days after the Executive knows
of such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which it gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to
contest such claim;
(iv) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income
tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 8(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax, including interest or penalties with respect
thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes for
the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement during or with respect to the Change of Control Employment Period.
10. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party, or by Federal Express,
Express Mail or other overnight courier service, or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
James P. Casey
12 Saddle Ridge Road
Hohokus, NJ 07423
If to the Company:
The Compensation Committee
of the Board of Directors of Wellman, Inc.
c/o Wellman, Inc.
1040 Broad Street
Shrewsbury, NJ 07702
with a copy to:
David K. Duffell, Esq.
c/o Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) This Agreement contains the entire understanding of the Company
and the Executive with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to
the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
James P. Casey
WELLMAN, INC.
By
Thomas M. Duff
President
EXHIBIT 10(g)
EMPLOYMENT AGREEMENT
AGREEMENT by and between WELLMAN, INC., a Delaware corporation (they
"Company"), and Paul D. Apostol (the "Executive"), dated as of the 1st day of
December, 1994.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued service and dedication of the Executive. In
addition, the Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements currently and upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. The Board of Directors also believes that the autonomy, authority
and responsibility possessed by the Executive is a significant attribute of his
employment and a Change of Control would be likely to significantly diminish the
attractiveness to Executive of employment by the Company, and has determined to
allow Executive to chose whether to continue in the employ of the Company upon a
Change of Control. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall be the first date
during the "Employment Period" (as defined in Section 1(b)) on which a Change of
Control occurs. Anything in this Agreement to the contrary notwithstanding, if
the Executive's employment with the Company is terminated or the Executive
ceases to be an officer of the Company prior to the date on which a Change of
Control occurs, and it is reasonably demonstrated that such termination of
employment (1) was at the request of a third party who has taken steps
reasonably calculated to effect the Change of Control or (2) otherwise arose in
connection with or anticipation of the Change of Control, then for all purposes
of this Agreement the "Effective Date" shall mean the date immediately prior to
the date of such termination of employment.
(b) The "Employment Period" is the period commencing on the date hereof and
ending on the earlier of the third anniversary hereof or the Date of Termination
(as defined in Section 4(f); provided, however, that if the Date of Termination
has not yet occurred, commencing on the third anniversary hereof and on each
annual anniversary of such date (such date and each annual anniversary thereof
is hereinafter referred to as a "Renewal Date"), the Employment Period will be
extended so as to terminate three years from such Renewal Date unless either
party shall have delivered to the other a Notice of Termination (as defined in
Section 4(e)). Notwithstanding the foregoing, unless the Employment Period has
already terminated, the Employment Period shall be automatically extended upon a
Change of Control so as to terminate three years from the Effective Date (such
three year period of the Employment Period being hereinafter referred to as the
"Change of Control Employment Period").
(c) "Change of Control". For the purpose of this Agreement, a "Change of
Control" shall mean:
(i) There shall have occurred a change in control which the Company
would be required to report in response to Item 1 of Form 8-K promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or if such
regulation is no longer in effect, any regulations promulgated by the Securities
and Exchange Commission pursuant to the Exchange Act which are intended to serve
similar purposes;
(ii) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Company Voting Securities"), provided, however, that any
acquisition by the Company or its subsidiaries, or any employee benefit plan (or
related trust) of the Company or its subsidiaries, or any corporation with
respect to which, following such acquisition, more than 50% of, respectively,
the then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Company Voting Securities immediately prior to such
acquisition in substantially the same proportion as their ownership, immediately
prior to such acquisition, of the Outstanding Company Common Stock and Company
Voting Securities, as the case may be, shall not constitute a Change of Control;
or
(iii) Individuals who, as of January 1, 1994, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided that any individual becoming a director subsequent to
January 1, 1994 whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act); or
(iv) Approval by the stockholders of the Company of (x) a
reorganization, merger or consolidation, in each case, with respect to which all
or substantially all of the individuals and entities who were the respective
beneficial owners of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such reorganization, merger or consolidation do
not, following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such reorganization, merger
or consolidation, or (y) a complete liquidation or dissolution of the Company,
or (z) the sale or other disposition of all or substantially all of the assets
of the Company.
(v) Anything in this Agreement to the contrary notwithstanding, if an
event that would, but for this paragraph, constitute a Change of Control results
from or arises out of a purchase or other acquisition of the Company, directly
or indirectly, by a corporation or other entity in which the Executive has a
direct or indirect equity interest, such event shall not constitute a Change of
Control; provided, however, that the limitation contained in this sentence shall
not apply to any direct or indirect equity interest in a corporation or other
entity (1) which equity interest is part of a class of equity interests which
are publicly traded on any securities exchange or other market system, (2)
received by the Executive, without the Executive's concurrence or consent, as a
result of a purchase or other acquisition of the Company by such corporation or
other entity, or (3) received by the Executive, without the Executive's
concurrence or consent, in connection with a purchase or other acquisition of
the Company by such corporation or other entity in respect of any stock options
or performance awards granted to the Executive by the Company.
2. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company during the Employment Period, in each case subject to the terms and
conditions of this Agreement.
3. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, the Company agrees to employ the Executive as Vice President,
or in such other capacity as the Company may designate, provided that during the
Change of Control Employment Period, (A) the Executive's position (including
status, offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 90-day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the Executive was
employed immediately preceding the Effective Date or any office or location less
than 35 miles from such location and in no event shall Executive be required to
travel outside such location more often than 45 days in any calendar year.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and to use the Executive's reasonable best
efforts to perform faithfully and efficiently such responsibilities. During the
Change of Control Employment Period it shall not be a violation of this
Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") in an
amount determined annually by the Compensation Committee of the Board of
Directors of the Company. The Annual Base Salary shall be payable no less
frequently than monthly.
(ii) Management Incentive Compensation Plan. In addition to Annual
Base Salary, during each year of the Employment Period, the Executive shall be
designated as a participant in the Company's Management Incentive Compensation
Plan (the "Bonus Plan") and, subject to meeting the criteria of the Bonus Plan,
shall receive the bonus award provided for therein (the "Annual Award").
(iii) Annual Bonus. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year during the Change of Control Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to (x) the
average annualized (for any fiscal year consisting of less than twelve full
months or with respect to which the Executive has been employed by the Company
for less than twelve full months) bonus (the "Recent Annual Bonus") paid or
payable to the Executive by the Company and its affiliated companies in respect
of the two fiscal years immediately preceding the fiscal year in which the
Effective Date occurs less (y) the Annual Award actually paid to the Executive
with respect to the current fiscal year under the Bonus Plan. Each such Annual
Bonus shall be paid not later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iv) Incentive, Savings and Retirement Plans. In addition to Annual
Base Salary, the Annual Award and Annual Bonus payable as hereinabove provided,
the Executive shall be eligible to participate during the Employment Period in
all incentive, savings and retirement plans, practices, policies and programs
applicable to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive during the Change of Control Employment Period with incentive, savings
and retirement benefits opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its
affiliated companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the 90-day period immediately preceding
the Effective Date.
(v) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) and applicable to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide benefits during the Change
of Control Employment Period which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and programs in effect at
any time during the 90-day period immediately preceding the Effective Date.
(vi) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive provided that during the Change of Control Employment Period such
reimbursement shall be in accordance with the most favorable policies, practices
and procedures of the Company and its affiliated companies in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(vii) Fringe Benefits. During the Change of Control Employment
Period, the Executive shall be entitled to fringe benefits in accordance with
the most favorable plans, practices, programs and policies of the Company and
its affiliated companies in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect at any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
(viii) Office and Support Staff. During the Change of Control
Employment Period, the Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its affiliated companies
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(ix) Vacation. During the Change of Control Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plan, policies, programs and practices of the Company and its
affiliated companies as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided at any time thereafter with respect to other peer incentives of the
Company and its affiliated companies.
(x) Perquisites. During the Employment Period the Company also will
furnish the Executive without cost to him, (i) a Company owned or leased
full-sized luxury automobile not more than three years old, and (ii) an annual
examination of the Executive by a physician selected in accordance with the
Company's current policy, to the extent costs and expenses of the Executive to
be reimbursed are properly documented for federal income taxation purposes to
preserve any deduction for such reimbursement to which the Company may be
entitled.
4. Termination of Employment. (a) Prior to Effective Date. At any time
prior to the Effective Date, the Executive's employment may be terminated for
any reason, with or without cause, by the Company or by the Executive by
delivery of a Notice of Termination (as defined below) to the other party hereto
given in accordance with Section 11(b) of this Agreement.
(b) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of
"Disability" set forth below), it may give to the Executive written notice in
accordance with Section 11(b) of this Agreement of its intention to terminate
the Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" means the absence of the Executive from the Executive's duties with
the Company on a full-time basis for 180 consecutive business days as a result
of incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(c) Cause. The Company may terminate the Executive's employment
during the Change of Control Employment Period for "Cause". For purposes of
this Agreement, "Cause" means (i) an act or acts of personal dishonesty taken by
the Executive and intended to result in substantial personal enrichment of the
Executive at the expense of the Company, (ii) repeated violations by the
Executive of the Executive's obligations under Section 3(a) of this Agreement
which are demonstrably willful and deliberate on the Executive's part and which
are not remedied in a reasonable period of time after receipt of written notice
from the Company, or (iii) the conviction of the Executive of a felony involving
moral turpitude.
(d) Good Reason. The Executive's employment may be terminated by the
Executive during the Change of Control Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" means (i) a Change of Control and/or
(ii) if Executive shall elect to remain in the employ of the Company during the
Change of Control Employment Period, the occurrence of any one or more of the
following during the Change of Control Employment Period:
A. the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a)(i)(A) of this Agreement, or any other action
by the Company which results in a diminition in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by
the Executive;
B. any failure by the Company to comply with any of the provisions of
Section 3(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
C. the Company's requiring the Executive to be based at any office or
location other than that described in Section 3(a)(i)(B) hereof;
D. any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
E. any failure by the Company to comply with and satisfy Section
10(c) of this Agreement.
The Company acknowledges and agrees that a material inducement to Executive in
entering into this Agreement was the right of Executive to determine whether to
continue in the employ of the Company upon a Change of Control or terminate such
employment and receive the monetary payments and other benefits provided for in
Section 5(e).
(e) Notice of Termination. Any termination by the Company or by the
Executive shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 11(b) of this Agreement. For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i) if
the Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
thirty days after the giving of such notice), and (ii) if the Date of
Termination is on or after the Effective Date, indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under such provision. The failure by the Executive
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing the Executive's rights hereunder.
(f) Date of Termination. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be; provided, however, that (i) if the Executive's employment is
terminated by the Company other than for death or Disability, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination, and (ii) if the Executive's employment is terminated by reason
of death or Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may be.
5. Obligations of the Company upon Termination.
(a) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, provided that if the Executive's death occurs during the
Change of Control Employment Period, the Company shall have the following
obligations: (i) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (ii) the product of the greater
of the Annual Bonus paid or payable (and annualized for any fiscal year
consisting of less than twelve full months or for which the Executive has been
employed for less than twelve full months) to the Executive for the most
recently completed fiscal year during the Employment Period, if any, and the
Recent Annual Bonus (such greater amount hereafter referred to as the "Highest
Annual Bonus") and a fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and the denominator of
which is 365 and (iii) any compensation previously deferred by the Executive
(together with any accrued interest thereon) and not yet paid by the Company
(the amounts described in paragraphs (i), (ii) and (iii) are hereafter referred
to as "Accrued Obligations"). All Accrued Obligations, as well as any amounts
(the "SERP Amounts") payable to the Executive pursuant to the Wellman, Inc.
Executive Restoration Plan (the "Plan"), shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date
of Termination. Anything in this Agreement to the contrary notwithstanding, if
the Executive's death occurs during the Change of Control Employment Period, the
Executive's family shall be entitled to receive benefits at least equal to the
most favorable benefits provided by the Company and any of its affiliated
companies to surviving families of peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating
to family death benefits, if any, as in effect with respect to other peer
executives and their families at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect on the date of the Executive's death with
respect to other peer executives of the Company and its affiliated companies and
their families.
(b) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. All Accrued Obligations, and all SERP Amounts if the Disability
Effective Date occurs during the Change of Control Employment Period, shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding, if the
Disability Effective Date occurs during the Change of Control Employment Period,
the Executive shall be entitled after the Disability Effective Date to receive
disability and other benefits at least equal to the most favorable of those
provided by the Company and its affiliated companies to disabled executives
and/or their families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect with respect to other peer
executives and their families at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families.
(c) Termination during Change of Control Employment Period for Cause
or Other than for Good Reason. If the Executive's employment shall be
terminated for Cause during the Change of Control Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive the Annual Base Salary through the
Date of Termination plus the amount of any compensation previously deferred by
the Executive, in each case to the extent theretofore unpaid. If the Executive
terminates employment during the Change of Control Employment Period other than
for Good Reason, this Agreement shall terminate without further obligations to
the Executive, other than for Accrued Obligations. In such case, all Accrued
Obligations and all SERP Amounts shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
(d) Termination Other than for Death or Disability Prior to the
Effective Date. If the Executive's employment shall be terminated during the
Employment Period but prior to the Effective Date, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
(e) Termination During Change of Control Employment Period for Good
Reason. If the Executive shall terminate his employment during the Change of
Control Employment Period for Good Reason or if the Company shall terminate the
Executive's employment during the Change of Control Employment Period other than
for Cause or Disability:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination all Accrued Obligations and
all SERP Amounts, provided that notwithstanding the terms of the Plan, 100%
of the Company Contribution Credit Account (as defined therein) shall be
deemed vested;
(ii) the Company shall pay to the Executive as severance pay within 30
days after the Date of Termination an amount equal to the product of (x) 3
and (y) the sum of (i) Annual Base Salary and (ii) the Highest Annual
Bonus; and
(iii) from the Date of Termination through the end of the Change of
Control Employment Period, or such longer period as any plan, program,
practice or policy may provide, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs,
practices and policies described in Section 3(b)(v) of this Agreement if
the Executive's employment had not been terminated in accordance with the
most favorable plans, practices, programs or policies of the Company and
its affiliated companies applicable to other peer executives and their
families during the 90-day period immediately preceding the Effective Date,
or, if more favorable to the Executive, as in effect at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies and their families. For purposes of determining eligibility of
the Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have remained
employed until the end of the Change of Control Employment Period and to
have retired on the last day of such period.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the Company or any of its
affiliated companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program except as explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and amounts payable to
Executive from any other employment or source shall not reduce the amounts
payable to Executive hereunder. The Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by the Executive about the amount of any payment
pursuant to Section 8 of this Agreement), plus in each case interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Internal
Revenue Code of 1986, as amended (the "Code").
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by Ernst &
Young (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within fifteen business days
of the Date of Termination, if applicable, or such earlier time as is requested
by the Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. The initial Gross-Up Payment, if any, as determined
pursuant to this Section 8(b), shall be paid to the Executive within five days
of the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with an opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 8(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but not later than twenty business days after the Executive knows
of such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which it gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to
contest such claim;
(iv) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income
tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 8(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax, including interest or penalties with respect
thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes for
the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement during or with respect to the Change of Control Employment Period.
10. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
11. Miscellaneous. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party, or by Federal Express,
Express Mail or other overnight courier service, or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Paul D. Apostol
95 Wildwood Road
Ridgewood, NJ 07450
If to the Company:
The Compensation Committee
of the Board of Directors of Wellman, Inc.
c/o Wellman, Inc.
1040 Broad Street
Shrewsbury, NJ 07702
with a copy to:
David K. Duffell, Esq.
c/o Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) This Agreement contains the entire understanding of the Company
and the Executive with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to
the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
Paul D. Apostol
WELLMAN, INC.
By
Thomas M. Duff
President
Exhibit 10(k)
DESCRIPTION OF DIRECTORS' RESTRICTED STOCK PLAN
Pursuant to the Wellman, Inc. Directors' Restricted Stock Plan, each
non-employee director of Wellman, Inc. is eligible to receive a total 2,000
shares of Wellman, Inc. Common Stock which vest over a period of three years
commencing on the date he was first elected to the Board of Directors, provided
he has continuously served as a director for the preceding twelve months.
EXHIBIT 10(l)
WELLMAN, INC.
DIRECTORS DEFERRED COMPENSATION PLAN
ARTICLE I - Title
The title of this plan shall be the "Wellman, Inc. Directors Deferred
Compensation Plan".
ARTICLE II - Definitions
a. "Beneficiary" shall mean any person or persons last designated by a
Participant to receive amounts payable in accordance with this Plan in the event
of the Participant's death. In the absence of such person or persons, the
Participant's Beneficiary shall be deemed to be his estate.
b. "Cash Account" shall have the meaning set forth in Article 3(b).
c. "Common Stock" shall mean Wellman, Inc. Common Stock, par value $.001
per share.
d. "Company" shall mean Wellman, Inc., a Delaware corporation and any
corporation which shall succeed to the business of such corporation and adopt
this Plan pursuant to the terms hereof.
e. "Compensation" shall mean the annual retainer and meeting fees payable
by the Company to a Participant.
f. "Deferred Compensation Account" shall mean the Cash Account and/or the
Stock Account, as specified in Article 3(b) hereof.
g. "Deferral Election Form" shall mean the form made available by the
Corporation to a Participant which, when properly executed by the Participant,
effects his participation in the Plan for the next following Plan Year.
However, within the first year in which the Participant has become eligible for
the Plan, the Participant may make a Deferral Election which effects his
participation in the Plan with respect to Compensation earned following his
election but within the same Plan Year. A Deferral Election, once made, shall
continue in effect from Plan Year to Plan Year until it is modified or
revoked. Such change shall only be effective as of the first day of the Plan
Year following the Plan Year in which it is executed.
h. "Director" shall mean an individual who is a duly elected and acting
member of the Board of Directors of the Company.
i. "Participant" shall mean a Director who is not also an employee of the
Company and who elects to participate in this Plan.
j. "Plan" shall mean the plan set forth herein, as from time to time
amended.
k. "Stock Account" shall have the meaning set forth in Article 3(b).
l. "Plan Year" shall mean the calendar year.
m. The singular as used herein shall include the plural and the plural
shall refer to the singular and any pronoun shall refer to any gender, all
whenever the same shall be required by the context.
n. The Plan was effective May 1, 1994.
ARTICLE III - Deferrals
(a) The amount of a Participant's Compensation deferred for any Plan Year
will be determined by a properly executed Deferral Election Form.
(b) Such deferred amounts referred to in Article 3(a) hereof shall be
credited to a Participant's Deferred Compensation Account in accordance with the
Participant's properly executed Deferral Election Form.
(c) Any amounts allocated as a credit to the Stock Account shall be
converted to share units as follows: Amounts credited as of a date in any
calendar month (or such other period not to exceed a year as may be specified by
the Company's Board of Directors in a duly adopted resolution) shall be
converted to a number of share units determined on the basis of the closing
price of shares of Common Stock on the New York Stock Exchange on the last
trading day of that month (or other period specified by the Board of Directors),
as reported by The Wall Street Journal.
Share units shall be credited with dividend equivalents as and when dividends
are declared on shares of Common Stock. Such credits shall be converted to
additional share units determined on the basis of the closing price of shares of
Common Stock on the New York Stock Exchange on the last trading day of the
month in which such dividends are paid, as reported by The Wall Street Journal.
The value of share units credited to a Participant hereunder as of any relevant
date shall equal the closing price of shares of Common Stock on the New York
Stock Exchange on such date or on the nearest preceding trading date, as
reported by The Wall Street Journal.
(d) The amount allocated as credit to the Cash Account shall be converted
to a cash balance to be credited with interest in the following manner:
Interest shall be credited on a monthly basis in the Cash Account determined by
multiplying the beginning balance of such account less distributions for such
month by the rate of interest equal to the total return earned by the Lehman
Aggregate Bond Index for such month or other index specified by the Company's
Board of Directors.
ARTICLE IV - Distributable Events and Distribution of Amounts
(a) The Participant, upon retirement or resignation as a member of the
Company's Board of Directors, shall receive his Deferred Compensation Account in
five annual installments payable as of the beginning of each Plan Year following
his retirement or resignation date. Such installments shall equal the Deferred
Compensation Account as of the end of the Plan Year in which the Participant
shall retire or resign divided by the appropriate number of remaining annual
installments. Payments to a Participant or a Beneficiary shall be made first
from the Participant's Cash Account and then from the participant's Stock
Account, as those sub-accounts are defined pursuant to Article 3.
At the discretion of the Board of Directors, the entire Deferred Compensation
account may be payable in a single lump sum distribution based on market value
of the Participant's account as of the end of a calender quarter following a
Participant's retirement or resignation. Once a lump sum distribution is made
to the Participant there shall be no further benefits payable to a Participant
or any Beneficiary hereunder.
All payments to a Participant and Beneficiaries hereunder shall be made in cash.
(b) A Participant shall designate in writing a Beneficiary to receive any
payments to which he would have been entitled under the terms hereof. The
Beneficiary may be designated or changed by the Participant (without the consent
of any prior Beneficiary) on a form provided by the Secretary of the Company
and delivered to the Secretary before the Participant's death. If no such
Beneficiary shall have been designated, or if no designated Beneficiary shall
survive the Participant, payments shall be made to the Participant's estate.
If the Participant's service on the Board is terminated because of death, then
the Company shall make payments to his designated Beneficiary in the same manner
and to the extent as provided in Article 4(a) as if the Participant had retired
on the date of his death.
(c) No benefits shall be paid nor loans granted hereunder while the
Participant serves as a director of the Company's Board of Directors. Benefits
hereunder shall be paid solely in accordance with the provisions of Articles
3(a) and 3(b).
ARTICLE V - Miscellaneous
(a) The Company's obligations hereunder shall be unfunded and an unsecured
promise to pay. The Company shall not be obligated under any circumstances to
fund its financial obligations hereunder. All assets which the Company may
acquire to help cover its financial liabilities are and remain general assets of
the Company subject to the claims of its creditors. The Company does not give,
and this agreement does not give, any beneficial ownership interest in any asset
of the Company to a Participant or his Beneficiary. All rights of ownership in
any assets are and remain in the Company. The Company's liability for payment
of benefits shall be determined only under the provisions of this agreement as
it may be amended from time to time.
Notwithstanding the above, the Company reserves the right to establish a Rabbi
Trust for this agreement similar to the trust described in Revenue Procedure
92-64 or any successor thereto or as otherwise provided by the Internal Revenue
Code.
(b) The rights of a Participant or any Beneficiary shall be solely those of
an unsecured general creditor of the Company. The Participant or Beneficiary
shall have the right to receive those payments specified under this agreement
only from the Company. These parties have no right to look to any specific or
special property separate from the Company to satisfy a claim for benefit
payments.
A Participant agrees that neither he nor his Beneficiary shall have any right,
claim, security interest, or any beneficial ownership interest whatsoever in any
general asset that the Company may acquire or use to help support its financial
obligations hereunder. Any general asset used or acquired by the Company in
connection with the liabilities it has assumed hereunder shall not be deemed to
be held under any trust for the benefit of the Director or his Beneficiary, and
no general asset shall be considered security for the performance of the
obligations of the Company.
Any such asset shall remain a general, unpledged and unrestricted asset of the
Company.
The Director also understands and agrees that his participation in the
acquisition of any general asset for the Company shall not constitute a
representation to the Director or his Beneficiary that any of them has a special
or beneficial interest in any general asset.
(c) To the maximum extent permitted by law, no benefit under this agreement
shall be assignable or subject in any manner to alienation, sale, transfer,
claims of creditors, pledge, attachment or encumbrances of any kind.
(d) This Agreement shall be binding upon the parties hereto, their
beneficiaries, heirs, executors, administrators and successors.
(e) This Agreement shall be executed in duplicate counterparts, one such
counterpart for each party hereto and each copy of which shall serve as an
original for all purposes, but both counterpart copies shall constitute one and
the same agreement.
(f) If the Internal Revenue Service determines that any amount which a
Participant has elected to defer receiving pursuant to this Agreement is taxable
in the year in which such amount would have been paid but for such election,
such amount shall be paid to the Director immediately.
(g) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts made and fully
performed therein, except to the extent that the parties' respective rights and
obligations are subject to mandatory local, state and Federal laws or
regulations.
(h) This Agreement sets forth the entire agreement and understanding of the
parties relating to the subject matter hereof, and supersedes all prior
agreements, arrangements, or understandings relating to the subject matter
hereof.
EXHIBIT 10(m)
WELLMAN, INC.
AMENDED AND RESTATED DIRECTORS' RETIREMENT PLAN
ARTICLE I
TITLE
The title of this plan shall be the "Wellman, Inc. Directors' Retirement
Plan".
ARTICLE II
DEFINITIONS
As used herein, the following words and phrases shall have the following
respective meanings unless clearly indicated to the contrary by the context:
(a) Plan: The plan set forth herein, as from time to time amended.
(b) Committee: The Compensation Committee of the Company's Board of
Directors.
(c) Company: Wellman, Inc., a Delaware corporation, and any corporation
which shall succeed to the business of such corporation and adopt the Plan.
(d) Director: An individual who is a duly elected and acting member of the
Board of Directors of the Company.
(e) Participant: A Director who is not also an employee of the Company.
(f) Continuous Service: The period of a Participant's continuous tenure on
the Board of Directors of the Company prior to the termination of such tenure,
measured in complete years of service, which may include service completed prior
to the Effective Date but shall not include service completed prior to June 15,
1987 and shall not include service completed prior to any break in the
Participant's tenure as a Director.
In the event of the occurrence of a takeover, a Participant serving as a
Director immediately prior thereto shall receive credit for the full year of
service otherwise interrupted by the takeover.
(g) Annual Director's Fee: A Participant's total annual retainer,
excluding meeting fees, for the twelve consecutive month period immediately
preceding the date on which he ceased to be a Participant.
(h) Retirement Benefit: The amount payable to the Participant in
accordance with the provisions of Article III.
(i) Plan Year: The calendar year.
(j) Effective Date: The Plan was effective October 30, 1991; it was
subsequently amended and restated effective May 17, 1994.
ARTICLE III
AMOUNT AND PAYMENT OF RETIREMENT BENEFIT
(a) Each Participant whose tenure as Director terminates on or after his
completion of at least three (3) full years of Continuous Service shall be
entitled to receive a Retirement Benefit in an amount equal to the Annual
Director's Fee multiplied by the Participant's number of full years of
Continuous Service. Subject to final determination by the Committee, the
Participant may elect to receive his Retirement Benefit either in a lump sum
payment or in five (5) annual installment payments. Payment of a Participant's
Retirement Benefit shall be made or commence if in installments within ninety
days (90) of the date on which the Participant's tenure as Director terminates.
(b) In the event of the death of a Participant who is eligible for a
Retirement Benefit under this Article IV but who dies prior to receipt of the
Retirement Benefit then accrued but unpaid, the Retirement Benefit shall be paid
to the Participant's designated beneficiary in the manner and at the time
payable hereunder to the Participant. If no beneficiary is designated or if the
designated beneficiary is not surviving, any amount payable under this paragraph
(b) shall be paid pursuant to the laws of intestacy which would be applicable
with respect to the Participant.
(c) In the event a Participant's Retirement Benefit is payable in
installments, interest shall be credited for the period beginning after the
initial installment payment is made to the remaining installments at the rate
determined by the Committee.
(d) All benefits payable pursuant to the Plan shall be paid from the
Company's general operating assets, or through the purchase of insurance, as the
Committee may determine. In no event shall a Participant have a right to any
asset of the Company to enforce his rights to benefits hereunder. Each
Participant shall have rights to benefits no greater than the rights of a
general unsecured creditor of the Company. The Company's obligation under the
Plan, if any, with respect to a Director constitutes a mere promise by the
Company to pay benefits in the future.
(e) Except as may be required by law, a Participant's rights to benefits
under the Plan are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment or garnishment by
creditors of the Participant or the Participant's beneficiary.
ARTICLE IV
ADMINISTRATION
(a) The Committee shall be responsible for the administration of the Plan
and shall have the power and discretion to construe and interpret the provisions
of the Plan, to determine eligibility for benefits under the Plan and to answer
all questions arising under the Plan.
(b) Each person entitled to receive a payment under the Plan shall be
responsible for filing with the Committee such person's mailing address and each
change therein.
(c) The Committee shall keep such record of its proceedings relative to the
Plan as it deems necessary or advisable for the administration of the Plan.
(d) The review and appeal procedures for claims for benefits under the Plan
shall be the same as those procedures set forth in the Wellman, Inc. Retirement
Plan.
ARTICLE V
MISCELLANEOUS
(a) The expenses of the Plan and of the Committee in administering the Plan
shall be borne by the Company.
(b) The Company reserves the right to amend and/or terminate the Plan from
time to time and at any time as it deems appropriate by written instrument duly
adopted by the Board of Directors, without the consent of or notice to any
Participant. In addition, the Committee shall be authorized to make minor or
ministerial amendments to the Plan, as well as amendments required by applicable
federal or state law (or authorized or made desirable by such statutes). Any
such amendment or termination shall not affect the rights of any Participant
(without his written consent) to any benefit under the Plan to which the
Participant may have already become entitled as a result of Service prior to the
effective date of the amendment or termination.
(c) In the event that the Company shall be reorganized by way of merger,
consolidation, transfer of assets or otherwise, so that another corporation,
partnership, or other entity or person shall succeed to all or substantially all
of the Company's business, such successor shall be substituted for the Company
under the Plan.
(d) The Plan shall not be interpreted as conferring any right upon any
Director to continue in such position.
(e) The Plan shall be interpreted and construed in accordance with the laws
of the State of Delaware.
EXHIBIT 10(n)
WELLMAN, INC.
EXECUTIVE RETIREMENT RESTORATION PLAN
Effective as of January 1, 1993
TABLE OF CONTENTS
SECTION TITLE PAGE
PREAMBLE 1
I DEFINITIONS 2
1.1 Beneficiary 2
1.2 Code 2
1.3 Committee 2
1.4 Company 2
1.5 Company Contribution Credits 2
1.6 Company Contribution Credits Account 2
1.7 Compensation 2
1.8 Contribution Credits Account 3
1.9 Deferral Election Form 3
1.10 Disability 3
1.11 Employee Contribution Credits 3
1.12 Employee Contribution Credits Account 3
1.13 ESOP 3
1.14 IRS 3
1.15 Limited Compensation 3
1.16 Participant 3-4
1.17 Plan 4
1.18 Plan Year 4
1.19 Profit Sharing Plan 4
1.20 Qualified Retirement Plans 4
1.21 Retirement 4
1.22 Retirement Plan 4
1.23 Service 4
1.24 The Masculine Gender 4
II ELIGIBILITY FOR RETIREMENT BENEFITS 5
TABLE OF CONTENTS
(continued)
SECTION TITLE PAGE
III CONTRIBUTIONS TO THE PLAN 6
3.1 Amount of Company Contribution Credits 6
3.2 Amount of Employee Contribution Credits 7
3.3 Crediting of Earnings 7-8
IV DISTRIBUTABLE EVENTS AND DISTRIBUTION OF AMOUNTS 9
4.1 Retirement 9
4.2 Death 9
4.3 Termination of Employment 10
4.4 Withdrawals/Loans Not Allowed 10
V MISCELLANEOUS 11-13
PREAMBLE
The purpose of the Wellman, Inc. Executive Retirement Restoration Plan is to
provide for a selected group of senior executives an unfunded, non-qualified
defined contribution plan whose purposes are to (1) restore employer
contributions which cannot be made to the Company's qualified retirement plans
on behalf of these executives due to various IRS restrictions imposed on such
plans and (2) provide a mechanism for these executives to defer compensation
which cannot be contributed to the Company's qualified retirement plans due to
similar and additional IRS restrictions.
The Company plans whose employer contributions and employee deferral
opportunities are restored within this Plan include the following:
* the Wellman, Inc. Employee Stock Ownership Plan and Trust; and
* the Wellman, Inc. Retirement Plan.
The senior executives who are eligible to participate in this Plan will be
nominated and confirmed by the Compensation Committee of the Board of Directors
of Wellman, Inc. Each eligible executive must complete a Deferral Election Form
prior to the beginning of the period for which such deferrals shall become
effective. The deferrals permitted within a Plan year shall not exceed the
maximum percent of pay allowed to be contributed by other employees under the
Company's qualified plans and shall be made only if an eligible executive is
otherwise prohibited from making such pre-tax contributions to the qualified
retirement plans due to IRS limits.
This Plan shall be effective January 1, 1993 with a proviso that any
compensation deferred by the executive into this Plan shall not be taken out of
compensation earned prior to the effective date of the executive's election.
SECTION I
DEFINITIONS
1.1 "Beneficiary" shall mean any person or persons last designated by the
Participant to receive amounts payable in accordance with this Plan in the event
of the Participant's death. In the absence of such designated person or
persons, the Participant's beneficiary shall be deemed to be his estate.
1.2 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.3 "Committee" shall mean the Compensation Committee as appointed by the Board
of Directors of the Company, which has been given authority by the Board of
Directors to designate Participants and to administer the Plan.
1.4 "Company" means Wellman, Inc. and all affiliated employers participating in
the Qualified Retirement Plans.
1.5 "Company Contribution Credits" shall mean the amount of Company
contributions allocated to a Participant's account for any Plan Year to restore
lost Company contributions under the Qualified Retirement Plans in accordance
with Section 3.1.
1.6 "Company Contribution Credits Account" shall mean the account that will be
established by the Company to which shall be credited the Participant's Company
Contribution Credits plus any earnings credited thereon in accordance with
Section 3.3.
1.7 "Compensation" shall mean the base compensation paid to a Participant
during the Plan Year with respect to services performed for the Company plus
bonuses and payments made under the Profit Sharing Plan (other than such bonuses
and Profit Sharing Plan payments received after the Participant's termination of
employment with the Company) plus any elective contributions made by the Company
on behalf of the Participant with respect to such Plan Year which are not
includible in his gross income under Sections 125 or 402(g) of the Code or as
deferred under this Plan as Employee Contribution Credits, determined without
regard to any limitation imposed under Section 401(a)(17) of the Code. In no
event shall Compensation include any compensation attributable to a
Participant's receipt or exercise of any stock options.
1.8 "Contribution Credits Account" shall mean the sum of the Company
Contribution Credits Account and Employee Contribution Credits Account.
1.9 "Deferral Election Form" shall mean the form made available by the
Committee to a Participant which, when properly executed by the Participant,
effects his participation in the Plan for the next following Plan Year.
However, within the first year in which the Participant has become eligible for
the Plan, the Participant may make a Deferral Election which effects his
participation in the Plan with respect to Compensation earned following his
election but within the same Plan Year. A Deferral Election, once made, shall
continue in effect from Plan Year to Plan Year until it is modified or revoked.
Such change shall only be effective as of the first day of the Plan Year
following the Plan Year in which it is executed.
1.10 "Disability" shall mean total disability as determined by the Committee.
1.11 "Employee Contribution Credits" shall mean the amount of employee
contributions allocated to a Participant's account for any Plan Year based on
the Participant's election to defer Compensation in accordance with Section 3.2.
1.12 "Employee Contribution Credits Account" shall mean the account that will be
established by the Company to which shall be credited the Participant's Employee
Contribution Credits plus any earnings credited thereon in accordance with
Section 3.3.
1.13 "ESOP" shall mean the Wellman, Inc. Employee Stock Ownership Plan and
Trust.
1.14 "IRS" shall mean the Internal Revenue Service.
1.15 "Limited Compensation" shall mean a Participant's Compensation as defined
in Section 1.7 but determined with regard to the limitation imposed under
Section 401(a) (17) of the Code.
1.16 "Participant" shall mean an individual who is in a select group of
management or highly compensated employees of the Company designated as a
Participant by the Committee. An employee shall become a Participant in the
Plan once he is selected by, named, or identified in the resolutions of the
Committee for inclusion in the Plan, and subsequently completes a Deferral
Election Form which provides for amounts to be credited to this Plan in
accordance with Section 3.2.
A Participant shall have the right exercisable within thirty days prior to
the beginning of any calendar year to elect to have Employee Contribution
Credits allocated to his Employee Contribution Credits Account for the ensuing
Plan Year by so electing on a new Deferral Election Form.
If a Participant does not execute and file a new Deferral Election Form
with the Committee, the Deferral Election previously made by the Participant
shall continue in effect.
1.17 "Plan" shall mean the Wellman, Inc. Executive Retirement Restoration Plan.
1.18 "Plan Year" shall mean the period from January 1, 1993 to December 31, 1993
and the twelve month period ending each December 31 thereafter.
1.19 "Profit Sharing Plan" shall mean the Wellman, Inc. Employee Profit Sharing
Plan.
1.20 "Qualified Retirement Plans" shall mean the following basic retirement
plans sponsored by Wellman, Inc. for its employees: (a) the ESOP and (b) the
Retirement Plan.
1.21 "Retirement" shall mean the termination of a Participant's employment with
the Company, and any member of the same controlled group of corporations, as
defined in Section 1563(a) of the Code, on one of the retirement dates specified
in Section II.
1.22 "Retirement Plan" shall mean the Wellman, Inc. Retirement Plan.
1.23 "Service" shall mean a Participant's Service as defined in the ESOP.
1.24 The masculine gender, where appearing in the Plan, will be deemed to
include the feminine gender, and the singular may include the plural, unless the
context clearly indicates the contrary. Wherever appropriate, terms used in
this Plan shall have the meaning assigned to such terms under the Qualified
Retirement Plans.
SECTION II
ELIGIBILITY FOR RETIREMENT BENEFITS
Each Participant is eligible to retire and receive a benefit under this Plan
upon his Retirement beginning on one of the following dates:
(a) "Normal Retirement Date", which is the date the Participant attains
his 65th birthday;
(b) "Early Retirement Date", which is the date on or after the date the
Participant attains his 55th birthday and completes 5 years of Service;
(c) "Postponed Retirement Date", which is the date following the
Participant's Normal Retirement Date on which the Participant terminates
employment with the Company. To the extent permitted by law, the Company
reserves the right to require that a Participant obtain written consent
from the Committee to continue his employment beyond his Normal Retirement
Date in accordance with this Section II;
(d) "Disability Retirement Date", which is the date on which the
Participant's employment is terminated due to Disability.
SECTION III
CONTRIBUTIONS TO THE PLAN
3.1 Amount of Company Contribution Credits
The Company Contribution Credits for a Participant under this Plan on behalf of
each Plan Year shall equal the sum of the following: (a) the excess, if any,
of (i) the amount of Pension Contributions and Performance Contributions under
the Retirement Plan to which the Participant would have been entitled based on
his Compensation and without regard to Code restrictions on contributions made
by or on behalf of the Participant over (ii) the amount of Pension Contributions
and Performance Contributions actually contributed by the Company to the
Retirement Plan based on his Limited Compensation; (b) the excess, if any, of
(i) the amount of Basic Contributions under the ESOP to which the Participant
would have been entitled based on his Compensation and without regard to Code
restrictions on contributions made by or on behalf of the Participant over (ii)
the amount of Basic Contributions actually contributed by the Company to the
ESOP based on his Limited Compensation; and (c) the excess, if any, of (i) the
combined amount of Company matching contributions under the Retirement Plan and
the ESOP to which the Participant would have been entitled without regard to
Code restrictions on contributions made by or on behalf of the Participant based
on (A) the sum of his Employee Contribution Credits as defined under this Plan
and his Compensation Deferral Contributions under the Retirement Plan and under
the ESOP and (B) the actual matching contribution percentages for the Plan Year
over (ii) the combined amount of Company matching contributions actually
contributed to the Retirement Plan and ESOP based on the Compensation Deferral
Contributions made on behalf of the Participant to these plans and the actual
matching contribution percentages for the Plan Year. With respect to a
Participant whose date of employment occurs during the Plan Year in which he is
first eligible to participate, the calculation of Company Contribution Credits
under this Section 3.1 shall be made under the presumption that the Participant
was eligible upon his date of employment with the Company to participate in the
Retirement Plan and the ESOP, but without presuming contributions on his behalf.
3.2 Amount of Employee Contribution Credits
The Employee Contribution Credits for a Participant under this Plan on behalf of
each Plan Year shall equal the excess, if any, of (i) the Compensation Deferral
Contributions which would have been made on behalf of the Participant under the
Retirement Plan and under the ESOP based on his Compensation and without regard
to Code restrictions on contributions made by or on behalf of the Participant
over (ii) the amount of Compensation Deferral Contributions actually made on
behalf of the Participant to the Retirement Plan and ESOP based on his Limited
Compensation. With respect to a Participant whose date of employment occurs
during the Plan Year in which he is first eligible to participate, the
calculation of Employee Contribution Credits under this Section 3.2 shall be
made under the presumption that the Participant was eligible upon his date of
employment with the Company to participate in the Retirement Plan and the ESOP,
but without presuming contributions on his behalf.
The amount of Employee Contribution Credits for any Plan Year will be determined
by a properly executed Deferral Election Form which requires the Employee to
irrevocably agree to make the maximum Compensation Deferral Contributions for
the applicable Plan Year as permitted under the Retirement Plan and ESOP.
3.3 Crediting of Earnings
(A) Sub-Accounts
Each Participant's Company Contribution Credits Account and Employee
Contribution Credits Account shall be comprised of two sub-accounts: a
Cash Account and a Stock Account.
For Plan Years up to and including the earlier of the Plan Year in which a
Participant attains age 55 or incurs a distributable event under Section
IV, new Company Contribution Credits and Employee Contribution Credits
shall be credited to the Stock Account. For Plan Years thereafter, new
Company Contribution Credits and Employee Contribution Credits shall be
credited to the Cash Account. As of December 31st of the earlier of the
Plan Year in which the Participant attains age 55 or incurs a distributable
event under Section IV, and as of December 31st of each Plan Year
thereafter, a portion of the dollar value of the Participant's existing
Stock Account shall be automatically transferred to the Cash Account. The
portion so transferred shall be a ratio the numerator of which is the
number of December 31sts that have occurred since the earlier of the date
that the Participant attained age 55 or incurred a distributable event and
the denominator of which is 10. For example, as of the first December 31st
on or following a Participant's 55th birthday, 1/10th of the value of the
Stock Account will be transferred to the Cash Account, as of the second
December 31st, 2/10ths, and so on.
(B) Stock Account
The amount allocated as a credit to the Stock Account shall be converted to
share units as follows: Amounts credited as of a date in any calendar
month (or such other period not to exceed a year as may be specified by the
Compensation Committee in a duly adopted resolution) shall be converted to
a number of share units determined on the basis of the closing price of
shares of common stock of Wellman, Inc. on the New York Stock Exchange on
the last trading day of that month (or other period specified by the
Compensation Committee), as reported by The Wall Street Journal.
Share units shall be credited with dividend equivalents as and when
dividends are declared on shares of common stock of Wellman, Inc. Such
credits shall be converted to additional share units determined on the
basis of the closing price of shares of common stock of Wellman, Inc. on
the New York Stock Exchange on the last trading day of the month in which
such dividends are paid, as reported by The Wall Street Journal.
The value of share units credited to a Participant hereunder as of any
relevant date shall equal the closing price of shares of common stock of
Wellman, Inc. on the New York Stock Exchange on such date or on the nearest
preceding trading date, as reported by The Wall Street Journal.
(C) Cash Account
The amount allocated as a credit to the Cash Account shall be converted to
a cash balance to be credited with interest as follows: Interest shall be
credited on a monthly basis in each Cash Account and shall be determined by
multiplying the beginning balance of such account less distributions for
such month by the rate of interest equal to the total return earned by the
Lehman Aggregate Bond Index for such month or other index specified by the
Compensation Committee.
SECTION IV
DISTRIBUTABLE EVENTS AND DISTRIBUTION OF AMOUNTS
4.1 Retirement
A Participant who reaches Retirement and retires from the Company shall receive
his Contribution Credits Account in ten annual installments payable as of the
beginning of each Plan Year following his Retirement date. Such installments
shall equal the Contribution Credits Account as of the end of the Plan Year in
which the Participant shall retire or terminate employment divided by the
appropriate number of remaining annual installments. Payments to a Participant
or Beneficiary shall be made first from the Participant's Cash Account and then
from the Participant's Stock Account, as those sub-accounts are defined pursuant
to Section 3.3 of the Plan.
At the discretion of the Compensation Committee, the entire Contribution Credits
Account may be payable in a single lump sum distribution based on market value
of the Participant's account as of the end of a calendar quarter following the
Participant's Retirement. Once a lump sum distribution is made to the
Participant, there shall be no further benefits payable to the Participant or
his Beneficiary from the Plan.
All payments to Participants and Beneficiaries from the Plan shall be made in
cash.
4.2 Death
At the time that an Employee becomes a Participant, he shall designate in
writing a Beneficiary to receive any payments to which he would have been
entitled under the terms of the Plan. The Beneficiary referred to in this
paragraph may be designated or changed by the Participant (without the consent
of any prior Beneficiary) on a form provided by the Committee and delivered to
the Committee before his death. If no such Beneficiary shall have been
designated, or if no designated Beneficiary shall survive the Participant,
payments shall be made to the Participant's estate.
If the Participant's employment is terminated because of death, then the Company
shall deem the Participant to be fully vested and make payments to his
designated Beneficiary in the same manner and to the extent as provided in
Section 4.1 as if the Participant had retired on the date of his death.
4.3 Termination of Employment
In the event a Participant's employment with the Company terminates after five
years of Service for reasons other than Retirement or death, the Company shall
make payment to the Participant of the entire Contribution Credits Account in
the same manner and to the extent provided in Section 4.1 as if the person
retired on the date of termination. If the Participant's employment terminates
prior to five years of Service, the entire Employee Contribution Credits Account
and only the vested portion, if any, of the Company Contribution Credits Account
will be available for payment to the Participant in the same manner and to the
extent provided in Section 4.1 as if the person retired on the date of
termination. The Company Contribution Credits Account shall become vested, or
non-forfeitable, to the Participant in twenty percent (20%) increments based on
the Participant's years of Service as follows:
Years of Service Percent Vested
Less than One 0%
One 20%
Two 40%
Three 60%
Four 80%
Five 100%
4.4 Withdrawals/Loans Not Allowed
No benefits shall be paid nor loans granted from this Plan while a Participant
is an employee of the Company. Benefits from the Plan shall be paid solely in
accordance with the provisions of Sections 4.1, 4.2 and 4.3 of the Plan.
SECTION V
MISCELLANEOUS
5.1 The Company may, in its sole discretion, terminate, suspend or amend this
Plan at any time or from time to time, in whole or in part. Upon termination,
the Company shall pay to each Participant the entire value of his Contribution
Credits Account which would have been available had the Participant had a
termination of Service after five years of Service. The Company will make
payments in either installments or a single lump sum as soon as practicable
after the effective date of the termination of the Plan. All payments to
Participants pursuant to this Section 5.1 shall be made in cash.
5.2 Nothing contained herein will confer upon any Participant the right to be
retained in the service of the Company, nor will it interfere with the right of
the Company to discharge or otherwise deal with Participants without regard to
the existence of this Plan.
5.3 The Company's obligations under this Plan shall be unfunded and an
unsecured promise to pay. The Company shall not be obligated under any
circumstances to fund its financial obligations under this Plan. All assets
which the Company may acquire to help cover its financial liabilities are and
remain general assets of the Company subject to the claims of its creditors.
The Company does not give, and the Plan does not give, any beneficial ownership
interest in any asset of the Company to a Participant or his Beneficiary. All
rights of ownership in any assets are and remain in the Company. The Company's
liability for payment of benefits shall be determined only under the provisions
of this Plan as it may be amended from time to time.
Notwithstanding the above, the Company reserves the right to establish a Rabbi
Trust for this Plan similar to the trust described in Revenue Procedure 92-64 or
any successor thereto or as otherwise provided by the Code.
5.4 The rights of a Participant or any Beneficiary of the Participant shall be
solely those of an unsecured general creditor of the Company. A Participant or
Beneficiary of the Participant shall have the right to receive those payments
specified under this Plan only from the Company. These parties have no right to
look to any specific or special property separate from the Company to satisfy a
claim for benefit payments.
A Participant agrees that neither he nor his Beneficiary shall have any right,
claim, security interest, or any beneficial ownership interest whatsoever in any
general asset that the Company may acquire or use to help support its financial
obligations under this Plan. Any general asset used or acquired by the Company
in connection with the liabilities it has assumed under this Plan shall not be
deemed to be held under any trust for the benefit of the Participant or his
Beneficiary, and no general asset shall be considered security for the
performance of the obligations of the Company.
Any such asset shall remain a general, unpledged and unrestricted asset of the
Company.
A Participant also understands and agrees that his participation in the
acquisition of any general asset for the Company shall not constitute a
representation to the Participant or his Beneficiary that any of them has a
special or beneficial interest in any general asset.
5.5 To the maximum extent permitted by law, no benefit under this Plan shall be
assignable or subject in any manner to alienation, sale, transfer, claims of
creditors, pledge, attachment or encumbrances of any kind.
5.6 The Committee may adopt rules and regulations to assist it in the
administration of the Plan. The Committee has sole and absolute discretion to
interpret all provisions of the Plan and to determine entitlement to benefits
under the Plan. The decision by the Committee regarding the Plan's provisions
and benefits is final.
5.7 The Plan shall be binding upon the Company and any successor company
through merger, acquisition or consolidation, and upon a Participant, his
Beneficiary, heirs, executors and administrators.
5.8 The Company may, in its sole discretion, permit the Participant to take a
leave of absence for a period determined by the Committee. During such leave,
the Participant will still be considered to be in the continuous employment of
the Company for purposes of this Plan.
5.9 Each Participant shall receive a copy of this Plan or any amendments
thereto and the Committee will make available for inspection by any Participant
a copy of any rules and regulations used by the Committee in administering the
Plan. Each Participant shall also be notified of any suspension or termination
of this Plan.
5.10 The Company reserves the right to indefinitely or permanently suspend the
portion of the remaining installment payouts with respect to the Company
Contribution Credits Account should a Participant, upon his termination of
employment or Retirement from the Company, begin working on a consulting basis
or as an employee of a competing organization. The Participant will continue to
receive the remaining installment payments with respect to his Employee
Contribution Credits Account.
The determination of whether the Participant is associated with the competing
organization will be left solely up to the Committee and such determination will
be final.
5.11 This Plan is established under and will be construed according to the laws
of the State of Delaware, except to the extent preempted by ERISA or other
federal regulations.
EXHIBIT 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statements (Form S-
8, Nos. 33-17196, 33-44822, 33-44877, 33-44876, 33-22459, 33-38491, 33-54075,
33-54079, 33-54077 and Form S-3, No. 33-36001) pertaining to various stock
option and employee savings plans of Wellman, Inc. of our report dated February
14, 1995, with respect to the consolidated financial statements and financial
statement schedules included in this Annual Report (Form 10-K) of Wellman, Inc.
Ernst & Young LLP
Charlotte, North Carolina
March 27, 1995
EXHIBIT 23(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statements (Form S-
8, Nos. 33-17196, 33-44822, 33-44877, 33-44876, 33-22459, 33-38491, 33-54075,
33-54079, 33-54077 and Form S-3, No. 33-36001) pertaining to various stock
option and employee savings plans of Wellman, Inc. of our report dated 19
January 1995, with respect to the consolidated financial statements of Wellman
International Limited and subsidiary at 31 December 1994 and for each of the
three years in the period ended 31 December 1994, included in this Annual Report
(Form 10-K) of Wellman, Inc.
KPMG Stokes Kennedy Crowley
Chartered Accountants
Registered Auditors
Dublin, Ireland
27 March 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FDS for fiscal year 10-k
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 21,556
<SECURITIES> 0
<RECEIVABLES> 119,278
<ALLOWANCES> 4,733
<INVENTORY> 122,914
<CURRENT-ASSETS> 272,227
<PP&E> 654,006
<DEPRECIATION> 206,130
<TOTAL-ASSETS> 1,040,640
<CURRENT-LIABILITIES> 84,319
<BONDS> 256,331
<COMMON> 33
0
0
<OTHER-SE> 577,540
<TOTAL-LIABILITY-AND-EQUITY> 1,040,640
<SALES> 936,133
<TOTAL-REVENUES> 936,133
<CGS> 724,874
<TOTAL-COSTS> 724,874
<OTHER-EXPENSES> 89,518
<LOSS-PROVISION> 1,101
<INTEREST-EXPENSE> 13,741
<INCOME-PRETAX> 108,000
<INCOME-TAX> 43,200
<INCOME-CONTINUING> 64,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,800
<EPS-PRIMARY> 1.94
<EPS-DILUTED> 1.94
</TABLE>
EXHIBIT 28(a)
REPORT OF INDEPENDENT AUDITORS TO MEMBERS OF WELLMAN INTERNATIONAL LIMITED
We have audited the accompanying consolidated balance sheets of Wellman
International Limited and subsidiary at 31 December 1994 and 1993, and the
related consolidated profit and loss accounts, retained earnings, and changes in
financial position for each of the three years in the period ended 31 December
1994, all expressed in Irish pounds (not presented separately herewith). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above, expressed in Irish
pounds, present fairly, in all material respects, the consolidated financial
position of Wellman International Limited and subsidiary at 31 December 1994 and
1993, and the consolidated results of operations and changes in financial
position for each of the three years in the period ended 31 December 1994 in
conformity with accounting principles generally accepted in the United States of
America.
KPMG Stokes Kennedy Crowley
Chartered Accountants
Registered Auditors
Dublin, Ireland
19 January 1995
