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, 1996
/ / OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the Transition Period from ________ to ________
Commission File Number 1-12372
CYTEC INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3268660
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Five Garret Mountain Plaza
West Paterson, New Jersey 07424
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(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code (201) 357-3100
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on
Common Stock, par value Which Registered
$.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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 report(s) and (2) has been subject to such filing
requirements for the past 90 days. Yes x No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Aggregate market value of voting stock held by non-affiliates of the registrant
as of March 13, 1997, based upon the closing price of registrant's common stock
($39 7/8) on such date as reported on the composite transaction reporting system
including transactions on the New York Stock Exchange: $1,815,110,877.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of March 13, 1997: 45,520,022 shares of Common Stock, par value
$.01 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Part of form 10-K
Portions of Proxy Statement for 1997 Annual Meeting Parts III, IV
of Common Stockholders
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PART I
Item 1. Business
The Company is a vertically integrated specialty chemicals company which
focuses on value-added specialty products. The Company develops,
manufactures and markets specialty chemicals, specialty materials and
building block chemicals serving a broad group of end users, including the
water treatment, paper, mining, coatings, plastics, aerospace, automotive
and textile industries. The Company has manufacturing facilities in six
countries and sells its products worldwide. The Company had net sales of
$1,259.6 million and earnings from operations of $136.1 million in 1996. In
addition, the Company has a 50% interest in each of five unconsolidated
associated companies with aggregate net sales of $600.7 million and
earnings from operations of $56.0 million in 1996. The Company reported
$14.9 million of equity in net earnings of these associated companies in
1996. The Company's management regularly reviews the business portfolio of
the Company in terms of strategic fit and financial performance and may
from time-to-time dispose of products or product lines and/or acquire
additional products or technologies.
The Company sells products in three general product categories: specialty
chemicals, specialty materials and building block chemicals. Specialty
chemicals principally include water treating, paper and mining chemicals,
coatings and resin products, and polymer additives. Specialty materials
principally include aerospace adhesives and advanced composites. Building
block chemicals principally include acrylonitrile, acrylamide, melamine and
methanol.
Unless indicated otherwise, the term "Company", with respect to periods
beginning on or after December 17, 1993, the effective date of the transfer
of substantially all of the assets and liabilities of the chemicals
businesses of American Cyanamid Company ("Cyanamid") to the Company (the
"Spin-off"), refers collectively to Cytec Industries Inc., and its
subsidiaries, and with respect to periods prior to the Spin-off, the term
refers to the chemicals businesses of Cyanamid. Cyanamid was acquired by
American Home Products Corporation in November 1994. Cytec was incorporated
as an independent public company in December 1993.
Specialty Chemicals
The specialty chemicals product category, which represented revenues of
approximately $744.7 million in 1996 and $731.0 million in 1995, or
approximately 59.1% and 58.0%, respectively, of the Company's net sales in
such years, include primarily water treating, paper and mining chemicals,
coatings and resin products and polymer additives.
Set forth below are the Company's primary specialty chemical product lines,
major products and their principal applications.
<PAGE>
<TABLE>
<CAPTION>
PRODUCT LINE MAJOR PRODUCTS PRINCIPAL APPLICATIONS
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<S> <C> <C>
Water treating, paper and Organic flocculants - Industrial and municipal water treatment
mining chemicals(1) plants
- Paper manufacturing
- Mineral processing
Sizing agents, strength resins, - Fine paper, paperboard, towel and tissue
retention aids grades
Coatings and resin products(1)(2) Reagents - Mineral processing
Melamine cross-linkers - High performance automotive, coil, can
Polymer additives urethanes and wood coatings; radial tire resins
Ultraviolet absorbers - Plastics, coatings and fibers
and stabilizers
Other Antioxidants
Surfactants and specialty - Latex paints and coatings
monomers
Phosphine and phosphine - Electronics, chemical catalysts, and
derivatives mineral separation
</TABLE>
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(1) Some sales of this product line are made by Mitsui-Cytec Ltd.
("Mitsui-Cytec"), an unconsolidated associated company owned 50% by Mitsui
Toatsu Chemicals (Japan). See "Item 3-Legal Proceedings."
(2) Some sales of this product line are made by Dyno-Cytec K.S. ("Dyno-Cytec"),
an unconsolidated associated company owned 50% by Dyno Industrier AS
(Norway).
Water Treating, Paper and Mining Chemicals
The Company's water treating, paper and mining chemicals are comprised
primarily of organic flocculants, sizing agents and other specialty paper
additives and mining reagents. Organic flocculants are synthetic water
soluble polymers utilized primarily in liquid-solid separation processes
(i.e., separating solid waste or particulate matter from water). The
Company manufactures organic flocculants at five plants in North America
and two in Europe. In addition, Mitsui-Cytec manufactures and markets
organic flocculants in Japan. The Company manufactures all basic forms of
organic flocculants in hundreds of variations, designed to industry and
customer specific application requirements. The Company's primary markets
are municipal and industrial wastewater treatment, paper manufacturing and
mineral processing.
Water treatment is the largest market for organic flocculants, which are
used as coagulants in the treatment of municipal drinking water and
industrial influent water supplies, as sludge conditioners for municipal
waste water treatment, and as treatments in industrial waste streams to
remove suspended solids. Competition is generally intense in wastewater
treatment applications, particularly for municipal accounts, where
contracts are generally awarded on a competitive bid basis, and for those
industrial applications where service is not an important factor.
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The Company is one of the leading suppliers of organic flocculants to the
U.S. paper industry. Organic flocculants are used as performance aids in
the manufacturing of paper and as part of environmental wastewater
management. In addition to flocculants, paper chemical products include wet
and dry strength resins, alkaline and surface sizing agents and other
specialty additives. The Company is the leading global supplier of alkenyl
succinic anhydride-based paper sizing used in alkaline papermaking.
Alkaline papermaking processes are considered more environmentally
friendly, and also permit the use of lower cost paper fillers while
maintaining sheet strength. The Company also sells the specialized
flocculants used to treat the large volumes of water required to wash and
remove inks in paper recycling mills. Overall demand for paper chemicals is
cyclical, varying with paper industry production. When the paper industry
nears capacity constraints, demand for paper chemicals generally rises more
rapidly than paper production since many performance and processing
chemicals can help increase effective mill capacity when used in larger
quantities.
The Company's mining chemical products include organic flocculants and
reagents, and are primarily used in applications to separate minerals from
raw ores. The Company also manufactures and sells specialty reagents with
leading positions in cobalt/nickel separation and copper sulfide recovery
applications. Demand for mining chemicals is cyclical and varies with
industry conditions for the particular minerals with respect to which the
Company's products have processing applications.
The Company generally competes in the water treating, paper and mining
chemicals areas on the basis of cost, performance and service. In many
applications, the Company's products are positioned in the middle of the
market where the Company competes both against companies which offer higher
levels of service or a broader line of products at generally higher prices
and against companies which offer lower levels of service or product
performance at generally lower prices. Each of the Company's water
treating, paper and mining chemical product lines is marketed through a
specialized sales and technical services staff and also through
distributors and resellers.
Coatings and Resin Products
The Company manufactures and markets melamine cross-linking resins
("Resins"), primarily under the CYMEL(R) trademark, for industrial coatings
applications. The Company produces Resins using melamine, one of the
Company's building block chemicals. The Company, through associated
companies in Europe and Japan, and directly elsewhere, sells Resins
worldwide to manufacturers producing coatings for automotive, marine, wood
and metal finishings, and appliances, containers, coils and general
industrial maintenance coatings. The Company believes that it is one of the
largest global suppliers of Resins.
In addition, the Company manufactures a line of adhesion promoters under
the CYREZ(R) trademark. These products are used globally in the rubber
industry, the major application being in the manufacture of steel belted
radial tires to enhance the bonding of the steel and polyester cords to the
rubber.
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Polymer Additives
The Company is a significant global supplier to the plastics industry of
specialty additives which protect plastics from the ultraviolet radiation
of sunlight and from oxidation. Typical end use applications of the
Company's products include a wide variety of polyolefins which are used in
toys, lawn furniture and automotive applications, fibers for carpets,
spandex applications, engineered plastics and automotive coatings.
Demand for light stabilizers and high performance antioxidants for plastics
and coatings has been growing rapidly for several years, primarily due to
increasing manufacturer and consumer expectations for the service life of
plastics and coatings and the replacement of metal and other materials with
plastics in certain automotive applications and in outdoor toys and lawn
furniture. Novartis is the dominant competitor in this segment. The Company
has commenced a capital investment program to improve manufacturing
efficiency, expand capacity and improve the consistency and quality of its
polymer additive products at its Willow Island manufacturing facilities in
Belmont, West Virginia and its Botlek plant in the Netherlands.
Other Specialty Chemicals
The Company sells other specialty chemicals for a variety of applications.
The major products in this category are specialty surfactants, specialty
monomers, oil field chemicals and phosphine chemicals. The Company is the
global leader in sulfosuccinate surfactants which have wide application in
wetting, emulsification, foaming, dispersing and detergency functions in
the formulation of paints, paper coatings, adhesives, binders, cleaners,
cosmetics, inks, plastics and agricultural products. The Company also is
the largest supplier of ultra-high purity phosphine gas, used in
semiconductor manufacturing operations, and has significant positions in
various phosphine derivative products.
Specialty Materials
The specialty materials product category, which represented revenues of
approximately $320.5 million in 1996 and $305.6 million in 1995, or
approximately 25.4% and 24.3%, respectively, of the Company's net sales in
such years, include primarily aerospace adhesives and advanced composites.
In January, 1997, the Company sold its acrylic fibers business, which
accounted for approximately 11%, 10% and 11% of the Company's 1996, 1995
and 1994 net sales.
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<PAGE>
Set forth below are the Company's primary specialty materials product
lines, major products and their principal applications.
<TABLE>
<CAPTION>
PRODUCT LINE MAJOR PRODUCTS PRINCIPAL APPLICATIONS
-------------- ---------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Aerospace adhesives and Structural film adhesives - Commercial and military aviation,
advanced composites Prepregs of graphite, aramid automotive
and glass fibers
Acrylic plastics and methyl Acrylic plastic molding - Automotive, appliances, signs
methacrylate(1) compounds
Methyl methacrylate - Acrylic sheet and molding compounds
Refinery and styrene Hydroprocessing catalysts - Oil refining
catalysts(2) Reforming catalysts
Styrene catalysts - Styrene manufacturing
Other Polyester molding - Automotive, electrical and consumer
compounds appliance applications
Amino molding - Electrical components, dinnerware
compounds(3)
</TABLE>
(1) Product line manufactured and sold exclusively by CYRO Industries ("CYRO"),
an unconsolidated associated company owned 50% by a subsidiary of Huls
Corporation.
(2) Product line manufactured and sold exclusively by Criterion Catalyst
Company, L.P. ("Criterion Catalyst"), an unconsolidated associated company
owned 50% by subsidiaries of Royal Dutch Petroleum Company and The "Shell"
Transport and Trading Company, Public Limited Company.
(3) Product line manufactured and sold exclusively by AC Molding Compounds
("ACMC"), an unconsolidated associated company owned 50% by Creative
Moldings Ltd.
Aerospace Film Adhesives and Advanced Composites
The Company is the major global supplier of aerospace structural and
engineering adhesives. The Company also sells advanced composites with
strength-to-weight characteristics superior to traditional structural
metals such as aluminum and steel. Advanced composites are manufactured by
impregnating fabrics and tapes made from high performance fibers with
epoxy, phenolic and bismaleimide resins formulated by the Company.
The primary application for both aerospace adhesives and advanced
composites is commercial and military aerospace programs. Sales are
dependent to a large degree on the commercial and military aircraft build
rate and the number of applications and aircraft programs for which the
Company is a qualified supplier. Every current major aircraft program in
the Western world has qualified and uses the Company's adhesives. The
Company's advanced composites have also been qualified and are used on
several major aircraft programs including most Boeing aircraft programs and
the U.S. Navy's F/A-18 program.
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<PAGE>
The Company purchases from third parties both the fibers, usually graphite,
aramid or glass, and the raw resins used in the manufacture of composites.
The Company markets aerospace adhesives and advanced composite products
through a global sales and technical service staff which services
commercial aircraft manufacturers and their subcontractors and also markets
to U.S. and European defense programs.
Acrylic Plastics and Methyl Methacrylate
CYRO, an unconsolidated associated company, manufactures and sells acrylic
sheet and molding compound products, primarily under the ACRYLITE(R)
trademark. CYRO operates primarily in North America and manufactures its
acrylic products at three locations in the U.S. and at one location in
Canada. The Company's partner in CYRO, Huls Corporation, has an affiliate,
Rohm GmbH, which manufactures methyl methacrylate ("MMA") and acrylic sheet
products and molding compounds in Europe and makes its technological
expertise available to CYRO.
CYRO also manufactures MMA, most of which CYRO uses as a raw material in
the manufacture of acrylic sheet and molding compounds and the remainder of
which is sold to third parties. CYRO's world-scale MMA manufacturing
facilities are an integrated part of the Company's Fortier facility,
consuming substantially all the hydrocyanic acid produced by the Company in
connection with the manufacture of acrylonitrile. The Company anticipates
that over the near term it will also sell to CYRO for the production of MMA
approximately 25% of the Company's share of methanol production at the
Fortier facility. CYRO expanded its MMA annual production capacity by
approximately 25% in 1995 to 250 million pounds; at the same time the
Company expanded its acrylonitrile plant at the Fortier facility,
increasing the supply of hydrocyanic acid available to CYRO.
Refinery and Styrene Catalysts
Criterion Catalyst, an unconsolidated associated company, manufactures
primarily hydroprocessing catalysts, which are used in the refining of
crude oil. Criterion Catalyst also manufactures reforming catalysts which
are used in producing gasoline and other catalysts used in the manufacture
of styrene, a raw material for many plastics. Criterion Catalyst is the
largest global supplier of hydroprocessing catalysts. The market for
hydroprocessing catalysts has expanded rapidly in recent years as
legislation in the United States and many other countries has required, or
provided tax incentives for, removal of sulfur from diesel and gas fuel and
as "sour" crude oil with more sulfur has constituted an increasing
percentage of overall world crude supply. Accordingly, Criterion Catalyst
has commenced a global capital investment program to increase significantly
its worldwide manufacturing capacity in hydroprocessing catalysts.
Criterion Catalyst expects to continue to fund these investments without
recourse to the partners.
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<PAGE>
Other Specialty Materials
The Company sells other specialty materials for a variety of applications,
which utilize the Company's proprietary technology and are targeted to
niche markets. The major products in this category are polyester molding
compounds, which serve in numerous automotive, consumer appliance and
electrical applications, as well as urethane systems and precision parts
produced by the Company's subsidiary, Conap, Inc. Additionally, the
Company's associated company, A. C. Molding Compounds, is the largest
manufacturer of amino molding compounds in the United States. Amino molding
compounds are mature products the primary markets for which are electrical
components and dinnerware, where price competition is intense.
Building Block Chemicals
The building block chemicals product category represented revenues of
approximately $194.4 million in 1996 and $223.5 million in 1995, or
approximately 15.4% and 17.7%, respectively, of the Company's net sales in
each year.
These chemicals are manufactured primarily at the Company's world-scale,
highly integrated Fortier facility. The Fortier facility is located on the
Mississippi River near New Orleans, Louisiana and has ready access to all
major forms of transportation and supplies of raw materials.
The Company manufactures building block chemicals that can be used as raw
materials in its specialty chemicals product category. The Company utilizes
manufacturing joint ventures and long-term sales contracts to reduce market
risks and to assist the Company in obtaining world-scale production
economics.
The Company formerly used more than half of its production of its building
block chemicals in the manufacture of specialty chemicals, specialty
materials and other building block chemicals, although the proportion used
internally is expected to decline in 1997, with the sale of the acrylic
fibers business, which was a large user of acrylonitrile. The Company
believes this integration, particularly within the Fortier facility,
provides the Company with a cost-effective, reliable and high quality
supply of significant raw materials. The integration between the Company's
building block chemicals and the Company's specialty chemicals also reduces
the Company's exposure to the commodity chemicals pricing cycles that
characterize the market for building block chemicals. When building block
prices decrease, margins in the Company's specialty chemicals product lines
manufactured from the Company's building block chemicals tend to increase
and when building block prices increase, margins in such specialty
chemicals product lines tend to decrease.
Acrylonitrile
The Company anticipates that over the near term it will use internally
approximately 25% of its current acrylonitrile annual production capacity
of 475 million pounds to produce acrylamide and that approximately 33% will
be sold pursuant to a five-year supply
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agreement with the purchaser of its acrylic fibers business. The remainder
of the Company's production is sold to third parties. During the second
quarter of 1995, the Company completed an expansion of its acrylonitrile
plant at the Fortier facility to increase the plant's annual production
capacity by approximately 35% or 125 million pounds. All of the additional
production is being sold under a long term contract at a price determined
under a cost based formula subject to increases based partially on market
pricing. The profitability of producing acrylonitrile is influenced by
supply and demand, by the cost of propylene, which is the largest component
of the cost of producing acrylonitrile, and by manufacturing efficiency
(i.e., yield and co-product recovery). Hydrocyanic acid is produced as a
co-product of the acrylonitrile process. Substantially, all of the
hydrocyanic acid produced by the Company is sold to CYRO as a raw material
for MMA. See Item 3, "Legal Proceedings."
Acrylamide
The Company anticipates that over the near term it will use internally
approximately 40% of its acrylamide annual production capacity of 180
million pounds primarily for the production of polyacrylamides. The
remainder of the Company's production is sold to third parties. The company
manufactures acrylamide at its Fortier facility and also at its Botlek
facility in the Netherlands. The Company is one of the largest producers
and users of acrylamide in the world.
Melamine
The Company operates a melamine manufacturing plant with annual production
capacity of 150 million pounds at the Fortier facility for American
Melamine Industries ("AMEL"), a manufacturing joint venture which is owned
50% by a subsidiary of DSM N.V. The Company anticipates that over the near
term it will use internally approximately 75% of its 75 million pound share
of annual melamine production for the production of Resins. The remainder
of the Company's share of production is sold to third parties. AMEL is one
of the two North American manufacturers of melamine.
Methanol
The Company operates a methanol manufacturing plant with annual production
capacity of 190 million gallons at the Fortier facility for Fortier
Methanol Company, a manufacturing joint venture which is 70% owned by
Methanex Corporation. The Company anticipates that over the near term it
will sell to CYRO for the production of MMA approximately 25% of the
Company's share of methanol production. The remainder of the Company's
share of methanol production is sold to Methanex Corporation under a long
term contract based on market prices.
Other Building Block Chemicals
The Company also manufactures and sells ammonia and sulfuric acid. The
Company sold 50% of its ammonia plant at the Fortier facility to LaRoche
Industries in July 1994. The Company continues to operate the ammonia plant
for the manufacturing joint venture
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formed between subsidiaries of the Company and LaRoche Industries in
connection with the sale. The Company anticipates that over the near term
it will use internally approximately 90% of the Company's share of the
ammonia production from such joint venture for the production of
acrylonitrile by the Company and the production of melamine by AMEL. The
balance of the Company's share of ammonia is sold to LaRoche Industries
under a long term contract at market based prices.
The Company sells sulfuric acid to third parties and also toll converts
substantially all of CYRO's spent sulfuric acid arising from the
manufacture of MMA under a long term service contract.
Some of the Company's building block chemicals show marked seasonality,
such as ammonia, the prices of which fluctuate with agricultural planting
seasons as well as the cost of natural gas which constitutes the major
portion of the cost to manufacture ammonia. Prices of building block
chemicals also are sensitive to the stages of economic cycles, energy
prices and currency exchange rates, as well to as periods of insufficient
and excess capacity. The Company sells building block chemicals to third
parties through a direct sales force and distributors.
Competition
The Company operates in a highly competitive marketplace. It competes
against a number of other companies in each of its product lines, although
none of such companies competes with the Company in all of its product
lines. The Company's competitors are both larger and smaller than the
Company in terms of resources and market shares. Competition is generally
based on product performance, reputation for quality, price and customer
service and support. The degree and nature of competition depends on the
type of product involved.
In general, the Company competes by maintaining a broad range of products,
focusing its resources on products in which it has a competitive advantage
and fostering its reputation for quality products, competitive prices and
excellent customer service and support. Through research and development,
the Company seeks to increase margins by introducing value-added products
and products based on proprietary technologies.
Customers and Suppliers
Due to the diversity of product lines in which the Company competes, no
significant portion of the Company's sales or earnings is generated by one
customer, and the Company is not overly reliant on contracts with any one
public, private or governmental entity. See, however, the discussion under
"Acrylonitrile" above with respect to sales to the purchaser of the
Company's acrylic fibers business and Note 5 of the Notes to the
Consolidated Financial Statements in Item 8 regarding sales to CYRO and
other associated companies. With respect to suppliers, the Company's
vertical integration (i.e., its manufacture of intermediates used to
manufacture specialty chemicals) protects it from being reliant on other
companies for many significant intermediates. The only significant raw
materials required to manufacture the Company's building block chemicals
are
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natural gas, propylene, oxygen and sulfur, which are readily available from
several suppliers. For businesses which do not utilize the building block
chemicals, the Company attempts to retain multiple sources for high volume
raw materials in order to minimize its reliance on any one supplier. A
number of the Company's customers operate in cyclical industries such as
the aerospace, automotive and paper industries. As a result, demand for the
Company's products from customers in such industries is also cyclical. In
addition, the profitability of external sales of certain of the Company's
building block chemicals is cyclical due to the cyclicality typically
experienced with respect to the amount of industry wide capacity dedicated
to producing such chemicals.
International
The Company operates on a worldwide basis with manufacturing plants located
in five countries (other than the United States). Export sales from the
United States were $148.6 million for 1996, $158.8 million for 1995, and
$99.1 million for 1994.
The Company markets its products internationally through Company sales
offices, distributors and the associated companies described above. Foreign
operations (exclusive of United States export sales) accounted for
approximately 27%, 25% and 22%, in 1996, 1995, and 1994, respectively, of
net sales to unaffiliated companies.
International operations are subject to various risks which are not present
in domestic operations, including political instability, the possibility of
expropriation, restrictions on royalties, dividends and currency
remittances, instabilities of foreign currencies, requirements for
governmental approvals for new ventures and local participation in
operations such as local equity ownership and workers' councils. The
Company does not believe that there is currently any material likelihood of
a material adverse effect on the Company in connection with its existing
foreign operations.
Research and Process Development
The Company conducts research and development activities in its facility in
Stamford, Connecticut as well as in several of its production facilities.
The Company is in the process of further focusing its research and process
development efforts on its core product lines and manufacturing processes.
During the years ended December 31, 1996, 1995, and 1994, the Company
expended an aggregate of approximately $40.2 million, $44.2 million, and
$40.0 million, respectively, on Company-sponsored research and development
activities. The decrease in 1996 was the result of a reduction, completed
in late 1995, in non-value-added overhead costs at the Company's research
facilities.
Trademarks and Patents
Upon the completion of all transfers from Cyanamid, the Company and its
associated companies will have over 1,800 United States and foreign patents
and pending applications and trademark applications and registrations for
approximately 160 product names. The Company believes the loss of patent or
trademark protection on any one product or process would not have a
material adverse effect on the Company. While the
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existence of a patent is prima facie evidence of its validity, the Company
cannot assure that any of the Company's patents will not be challenged, and
it cannot predict the outcome of any challenge.
Employees
After the disposition of the acrylic fibers business in January 1997,
approximately 4,700 employees are engaged in the operations of the Company,
excluding employees of associated companies. Approximately 2,000 of the
Company's employees are covered by union contracts. The Company believes
that its relations with both employees and the related unions are good. A
number of the Company's union contracts covering approximately 50% of the
Company's unionized employees working at 10 separate Company facilities,
including Belmont (Willow Island), Botlek, Havre de Grace and Kalamazoo,
expire in the ordinary course prior to the end of 1997. Additionally, the
Coordinated Bargaining Benefit Agreement which defines the negotiated
employee benefits such as health, welfare, pension and savings plans with
all of the Company's U.S. unionized employees was renegotiated in 1996 and
now expires in December 2000. Although the Company expects that it will
reach agreement with the unions with respect to these union contracts,
there can be no assurance that this will occur.
Operating Risks
The Company's revenues are dependent on the continued operation of its
various manufacturing facilities. The operation of chemical manufacturing
plants involves many risks, including the breakdown, failure or substandard
performance of equipment, natural disasters, and the need to comply with
directives of, and maintain all necessary permits from, government
agencies. The occurrence of material operational problems, including but
not limited to the above events, may have a material adverse effect on the
productivity and profitability of a particular manufacturing facility, or
with respect to certain facilities, the Company as a whole, during the
period of such operational difficulties.
The Company's operations are also subject to various hazards incident to
the production of industrial chemicals, including the use, handling,
processing, storage and transportation of certain hazardous materials.
These hazards can cause personal injury and loss of life, severe damage to
and destruction of property and equipment, environmental damage and
suspension of operations. Claims arising from any future catastrophic
occurrence at one of the Company's locations may result in the Company
being named as a defendant in lawsuits asserting potentially large claims.
See Item 3, "Legal Proceedings."
Environmental Matters
The Company is subject to various federal, state and foreign laws and
regulations which impose stringent requirements for the control and
abatement of air and water pollutants and contaminants and the manufacture,
transportation, storage, handling and disposal of hazardous substances,
hazardous wastes, pollutants and contaminants.
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In particular, under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") and various other federal and state laws, a
current or previous owner or operator of a facility may be liable for the
removal or remediation of hazardous materials at the facility. Such laws
typically impose liability without regard to whether the owner or operator
knew of, or was responsible for, the presence of such hazardous materials.
In addition, pursuant to the Resource Conservation and Recovery Act
("RCRA") and state laws governing the generation, transportation,
treatment, storage or disposal of solid and hazardous wastes, owners and
operators of facilities may be liable for removal or remediation, or other
corrective action at areas where hazardous materials have been released at
a facility. The costs of removal, remediation or corrective action may be
substantial, and the presence of hazardous materials in the environment at
any of the Company's facilities, or the failure to abate such materials
promptly or properly, may adversely affect the Company's ability to operate
such facilities. CERCLA and analogous state laws also impose liability for
investigative, removal and remedial costs on persons who dispose of or
arrange for the disposal of hazardous substances at facilities owned or
operated by third parties. Liability for investigative, removal and
remedial costs under such laws is retroactive, strict, and joint and
several.
The Clean Air Act and similar state laws govern the emission of pollutants
into the atmosphere. The Federal Water Pollution Control Act and similar
state laws govern the discharge of pollutants into the waters of the United
States. RCRA and similar state laws govern the generation, transportation,
treatment, storage, and disposal of solid and hazardous wastes. Finally,
the Toxic Substances Control Act regulates the manufacture, processing, and
distribution of chemical substances and mixtures, as well as the
disposition of certain hazardous substances. The costs of compliance with
such laws and regulations promulgated thereunder may be substantial, and
regulatory standards under such statutes tend to evolve towards more
stringent requirements, which might, from time-to-time, make it uneconomic
or impossible to continue operating a facility. Noncompliance with such
requirements at any of the Company's facilities could result in substantial
civil penalties or the inability of the Company to operate all or part of
the facility.
In addition, certain state and federal laws govern the abatement, removal,
and disposal of asbestos-containing materials and the maintenance of
underground storage tanks and equipment which contains or is contaminated
by polychlorinated biphenyls.
Note 9 of the Notes to the Consolidated Financial Statements in Item 8 is
incorporated by reference herein.
See Item 3, "Legal Proceedings."
Item 2. Properties
The Company operates 20 manufacturing and research facilities located
primarily in the United States, the United Kingdom, The Netherlands,
Mexico, Canada and Colombia. Capital spending, exclusive of acquisitions,
for the years ended 1996, 1995, and 1994 was approximately $72.5 million,
$97.2 million, and $116.1 million, respectively, on an
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<PAGE>
historical basis. The Company experienced a reduction in capital
expenditures in 1996, due primarily to the acrylonitrile capacity
expansion, which was completed in 1995. Capital expenditures in 1997 are
expected to be in the range of $90.0 million to $95.0 million. Such capital
expenditures are intended either to provide necessary capacity, to improve
the efficiency of production units, to modernize or replace older
facilities, or to install equipment for protection of the environment.
The Company's major facilities and the principal product lines produced or
service provided at each such facility are as follows:
<TABLE>
<CAPTION>
FACILITY PRINCIPAL PRODUCT LINE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Anaheim, California............................................. Aerospace adhesives and advanced composites
Atequiza, Mexico................................................ Water treating, paper and mining chemicals
Avondale (Fortier), Louisiana................................... Building block chemicals; MMA
Belmont (Willow Island), West Virginia.......................... Polymer additives; coatings and resin products; surfactants
Bogota, Colombia................................................ Coatings and resin products
Botlek, The Netherlands......................................... Water treating, paper and mining chemicals; polymer additives;
building block chemicals; surfactants; specialty monomers
Bradford, England............................................... Water treating, paper and mining chemicals
Havre de Grace, Maryland........................................ Aerospace adhesives and advanced composites
Kalamazoo, Michigan............................................. Water treating, paper and mining chemicals; coatings and resin
products
Linden (Warners), New Jersey.................................... Surfactants
Longview, Washington............................................ Water treating, paper and mining chemicals
Mobile, Alabama................................................. Water treating, paper and mining chemicals
Olean, New York................................................. Urethane systems
Perrysburg, Ohio................................................ Polyester molding compounds
Stamford, Connecticut........................................... Research
Wallingford, Connecticut........................................ Coatings and resin products; acrylic plastics; amino molding
compounds; specialty monomers
Welland, Ontario................................................ Phosphine chemicals
Woodbridge, New Jersey.......................................... Water treating, paper and mining chemicals
Wrexham, Wales.................................................. Aerospace adhesives and advanced composites
</TABLE>
The Company owns all of the foregoing facilities and their sites except for
the site for the Botlek facility which is leased under a renewable long
term lease. In addition, the Company has one other leased regional plant
not listed above, which is related to the production of aluminum sulfate,
and it leases its corporate headquarters in West Paterson, New Jersey and
its regional headquarters in Coral Gables, Florida and Singapore. In
January, 1997 the Company announced plans to close the Linden, New Jersey
plant and to relocate manufacturing to its Belmont, West Virginia plant.
Item 3. Legal Proceedings
In connection with the Spin-off, the Company assumed from Cyanamid
substantially all liabilities for legal proceedings relating to Cyanamid's
chemicals businesses, other than any legal proceedings related to
remediation of Cyanamid's Bound Brook facility. As a result, although
Cyanamid is the named defendant in cases commenced prior to the Spin-off,
the Company is the party in interest and is herein described as the
defendant.
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<PAGE>
The Company is a defendant in twelve cases pending in state courts in
Jefferson, Dallas, Harrison and Hidalgo counties, Texas in which many
plaintiffs seek damages for injuries allegedly due to exposure to benzene,
butadiene, asbestos or other chemicals. Six of the cases involve several
hundred plaintiffs, while the remainder involve substantially fewer
plaintiffs; all of these cases involve multiple defendents. The Company
believes that its involvement in all but three of these cases results from
its former 50% ownership of Jefferson Chemical Company, which the Company
disposed of in 1975. It is not known at this time how many plaintiffs
eventually will assert claims against the Company.
The Company is one of many defendants in suits filed by approximately 26
former employees of Boeing-Vertol in state and federal courts in
Pennsylvania alleging exposure to asbestos-containing products. Of these
suits, 14 are inactive because plaintiffs have not yet developed any
symptoms and 12 are active. Most of these suits are still in the discovery
stage.
The Company is the defendant in a class action filed in Jefferson Parish
Court, Louisiana on behalf of persons residing in the city of Kenner,
Louisiana claiming damages allegedly caused by a sulfur dioxide emission on
August 11, 1992 from the Fortier facility. Prior to consolidation and
certification of the class, the original 29 cases had been remanded to
state court following a federal court ruling that the plaintiffs did not
individually assert damages in excess of the federal jurisdictional amount
of $50,000.
The Company is also the defendant in two class actions filed in Jefferson
Parish Court, Louisiana, on behalf of persons who allegedly sustained
injury as a result of an explosion and fire at the Company's Fortier
facility on February 21, 1996. The Company has not yet conducted any
discovery in these cases and, therefore, has no information on whether, or
to what extent, any members of the alleged class actually suffered any
injury.
The Company is one of several alleged processors of lead, lead pigments
and/or lead-based paints named as defendants in five cases pending in state
and federal courts in the states of New York and Ohio. The first suit,
filed in New York Supreme Court by the City of New York, the New York
Housing Authority, and the New York City Health and Hospitals Corporation,
seeks damages for the cost of removing lead-based paints from New York
City-owned buildings. The second suit, also filed in New York Supreme
Court, was brought on behalf of two minor children, who seek damages for
personal injuries allegedly caused by ingestion of lead-based paints. The
third suit is a class action pending in the United States District Court
for the Southern District of New York in which two minor children have
intervened and filed a complaint against the Company and six other alleged
processors of lead, lead pigments and/or lead-based paints seeking
injunctive relief, consisting of orders requiring the defendants to
contribute to courtadministered funds to (i) pay for medical monitoring of
class members; (ii) provide abatement of lead-based paint hazards in
dwellings in the city of New York where class members reside; and (iii)
provide notification to class members. The fourth case was brought in New
York Supreme Court by a single plaintiff who claims to have been injured
due to the presence of lead-based paints in buildings in which he resided.
In all four cases, the Company is named a defendant as the alleged
successor to the MacGregor Lead Company, from which the Company purchased
certain assets in 1971. The fifth
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<PAGE>
case is a class action brought in the Court of Common Pleas in Cuyahoga
County, Ohio on behalf of children with blood levels of lead greater than
20 micrograms per deciliter.
The EPA has brought an administrative action against the Company, alleging
certain violations of the boiler and industrial furnace regulations which
apply to the industrial furnace at the Company's Kalamazoo plant. The EPA's
complaint demands approximately $420,000 in penalties, primarily for
paperwork violations. In summary disposition proceedings, the
Administrative Law Judge ruled in favor of the Company in two of the
original six counts of the complaint; the remaining counts will be
adjudicated.
In February 1996, in an action brought against the Louisiana Department of
Environmental Quality ("DEQ") by the Louisiana Environmental Action
Network, the Louisiana Court of Appeals vacated and set aside a decision
(the "Decision") of the DEQ granting the Company an exemption from
Louisiana hazardous waste land disposal restrictions in order to operate
five waste disposal deep wells at the Fortier facility. The Court ruled
that the Decision was inadequate because it did not contain basic and
ultimate findings and articulate a rational connection between those
findings and the issuance of the exemption. The Court remanded the action
to the DEQ for the issuance of findings to support approval of the
exemption. Subsequently, the DEQ reissued the Decision in accordance with
the greater explanatory requirements of the Court of Appeals judgment, and
the plaintiffs have now appealed. Use of the deep wells is essential to
continued operation of the acrylonitrile plant at the Fortier facility. The
Company continues to operate the deep wells.
See also "Environmental Matters" under "Business" in Item 1, and Note 9 of
the Notes to the Consolidated Financial Statements in Item 8, which are
incorporated by reference herein.
In addition to liabilities with respect to the specific cases described
previously, because the production of certain chemicals involves the use,
handling, processing, storage and transportation of hazardous materials,
and because certain of the Company's products constitute or contain
hazardous materials, the Company has been subject to claims of injury from
direct exposure to such materials and from indirect exposure when such
materials are incorporated into other companies' products. There can be no
assurance that as a result of past or future operations, there will not be
additional claims of injury by employees or members of the public due to
exposure, or alleged exposure, to such materials. Furthermore, the Company
also has exposure to present and future claims with respect to workplace
exposure, workers' compensation and other matters, arising from events both
prior to and after the Spin-off. There can be no assurance as to the actual
amount of these liabilities or the timing thereof.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders of any class during
the fourth quarter of 1996.
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<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Common Stock of the Company is listed on the New York Stock Exchange.
On March 13, 1997, there were approximately 20,000 holders of record of the
Common Stock of the Company.
The high and low stock prices for each quarter during 1996 and 1995, which
were restated to reflect the three-for-one stock split, were:
1Q 2Q 3Q 4Q
- --------------------------------------------------------------------------------
1996
High 29 11/24 31 5/12 39 1/2 40 7/8
Low 20 3/8 27 25 1/3 34 3/8
1995
High 13 11/12 13 11/12 20 7/24 21 5/12
Low 10 7/12 10 7/8 13 2/3 17 11/12
- -------------------------------------------------------------------------------
No dividends have been paid on the Common Stock of the Company since its
inception, and the Company currently contemplates that it will not pay cash
dividends on the Common Stock in the foreseeable future. In addition, the
Company is restricted from paying dividends in excess of certain amounts
determined in accordance with the terms of its Series C Preferred Stock and
its bank credit facility. See Notes 8 and 15 of the Notes to the
Consolidated Financial Statements in Item 8, which are incorporated by
reference herein.
Item 6. Selected Financial Data
FIVE-YEAR SUMMARY
<TABLE>
<CAPTION>
(Dollars in millions, except per share amounts) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of operations data:
Net sales $ 1,259.6 $ 1,260.1 $ 1,101.3 $1,008.1 $1,044.7
Manufacturing cost of sales 898.1 912.2 817.9 959.9 819.9
Research and process development 40.2 44.2 40.0 42.7 34.1
Selling and technical services, and administrative and general 185.2 181.0 174.9 176.7 171.1
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from operations 136.1 122.7 68.5 (171.2)(1) 19.6
Interest and other income (expense), net 10.0 10.4 12.2 0.1 (7.0)
Interest expense 4.0 1.0 0.1 2.3 1.2
Income tax provision (benefit) 56.9 (136.2) 34.6 126.6(2) (7.1)
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before earnings of associated companies 85.2 268.3 46.0 (300.0) 18.5
Equity in net earnings of associated companies 14.9 13.9 10.1 14.3 9.1
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before cumulative effect of accounting changes 100.1 282.2 56.1 (285.7) 27.6
Cumulative effect of accounting changes -- -- -- (219.8)(3) --
Net earnings (loss) 100.1 282.2 56.1 (505.5) 27.6
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends on preferred stock -- (10.7) (14.6) (0.6) --
Excess of repurchase price over related book value of
Series A Stock and Series B Stock -- (195.2) -- -- --
Net earnings (loss) available for common stockholders $ 100.1 $ 76.3 $ 41.5 $ (506.1) $ 27.6
Net earnings per common share
Primary $ 2.01 $ 1.80 $ 1.05 $ -- $ --
Fully diluted $ 2.01 $ 1.43 $ .84 $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 16 -
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Other data
(At end of period, unless otherwise noted):
Additions to plants, equipment and facilities for the year
ended December 31 $ 72.5 $ 97.2 $ 116.1 $ 110.6 $ 100.8
Current assets 416.3 404.0 439.0 331.0 255.7
Current liabilities 312.8 317.7 320.1 262.1 203.1
Working capital 103.5 86.3 118.9 68.9 52.6
Plants, equipment and facilities 1,339.7 1,317.2 1,247.5 1,333.3 1,316.4
Net depreciated cost 582.2 605.7 586.7 581.4 576.5
Total assets 1,261.1 1,293.8 1,199.4 1,082.1 1,020.7
Long-term debt 89.0 66.0 -- -- 5.7
Other noncurrent liabilities 544.9 567.2 596.1 588.8 160.1
Redeemable preferred stock -- -- 199.9 199.9 --
Total stockholders' equity 314.4 342.9 83.3 31.4 651.8
See accompanying Notes to Consolidated Financial Statements
</TABLE>
(1) Includes provisions for environmental remediation of $162.3 recorded in the
third quarter of 1993 and the ongoing effect of a change in accounting principle
related to postretirement benefit expenses of $24.0.
(2) In addition to the charges discussed above in Note 1, a valuation allowance
of $193.0 was recorded as part of the 1993 income tax provision relating to
certain deferred tax assets existing as of December 31, 1993.
(3) Includes charge of $230.4 related to adoption of SFAS No. 106, "Accounting
for Postretirement Benefit Obligations other than Pensions" and benefit of $10.6
related to the adoption of SFAS No. 109, "Accounting for Income Taxes."
The selected financial data should be read in conjunction with the
Consolidated Financial Statements. See Item 8.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial
Statements. See Item 8. Dollars are in millions except share and per share
amounts.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship that certain items in
the Company's Consolidated Statements of Income bear to net sales:
Years Ended December 31,
1996 1995 1994
Net sales 100.0% 100.0% 100.0%
Manufacturing cost of sales 71.3 72.4 74.3
- --------------------------------------------------------------------------------
Gross profit 28.7 27.6 25.7
Selling and technical services 11.2 10.8 11.9
Research and process
development 3.2 3.5 3.6
Administrative and general 3.5 3.6 4.0
Earnings from operations 10.8 9.7 6.2
- --------------------------------------------------------------------------------
Net earnings 7.9 22.4(1) 5.1
Excess of repurchase price
over related book value
of Series A Stock and
Series B Stock -- (15.5) --
- 17 -
<PAGE>
Dividends on preferred stock -- (0.8) (1.3)
Net earnings available for
common stockholders 7.9% 6.1% 3.8%
- --------------------------------------------------------------------------------
(1) Includes the 15% effect of a partial reversal of the tax valuation
allowance.
NET SALES BY PRODUCT CATEGORY
The Company's net sales by product category are set forth below.
Years Ended December 31,
1996 1995 1994
-------- -------- --------
Specialty Chemicals $ 744.7 $ 731.0 $ 676.2
Specialty Materials 320.5 305.6 272.8
Building Block Chemicals(1) 194.4 223.5 152.3
$1,259.6 $1,260.1 $1,101.3
(1) More than half of the Company's production of building block chemicals were
used internally in the manufacture of specialty chemicals, specialty materials
and other building block chemicals. Such internal usage is not reflected in net
sales of building block chemicals.
The Company has a 50% interest in each of five unconsolidated associated
companies with aggregate net sales of $600.7 in 1996, $601.3 in 1995 and $500.7
in 1994, of which approximately 16.0% were sales of specialty chemicals in 1996
and 19.0% in 1995 and 1994 and approximately 84.0% were sales of specialty
materials in 1996 and 81.0% in 1995 and 1994.
YEAR ENDED DECEMBER 31, 1996, COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Net sales for 1996 were $1,259.6, which was essentially flat in comparison with
1995 net sales of $1,260.1. The Company's specialty product lines grew 2.8%
principally on higher volumes. Building Block Chemical net sales decreased 13.0%
as a result of lower selling prices and selling volumes in certain products.
International net sales grew to 39.1% of total net sales in 1996 from 37.9%
of total net sales in 1995. On a regional basis, sales in the United States
declined primarily due to decreased methanol sales as a result of lower selling
prices and volumes plus the effect of divested products in 1996. Earnings from
operations were up significantly in the United States as a result of cost
reduction programs and an improved product mix. Also included in 1995 results
for the region were startup costs associated with the expanded acrylonitrile
facility. Sales and earnings from operations in the Asia/Pacific region were
down principally due to lower export acrylic fiber and acrylonitrile selling
prices.
Specialty Chemicals net sales increased $13.7, or 1.9%, with the increase
spread among all regions of the world. Also affecting net sales in 1996 was the
effect of divesting certain minor product lines, which had a negative impact on
the year to year comparison in net sales. The most significant sales increases
were in paper chemicals, where sales increased principally in North America as a
result of a rebound in paper industry production and new business. Europe and
Latin American sales also had modest increases for the year. Mining chemical net
sales improved in most regions as new customers converted over to higher
technology products. Polymer Additives net sales increased primarily in the
North American and Asia/Pacific regions. Selling prices were up less than 1.0%
for Specialty Chemicals in 1996.
Specialty Materials net sales increased $14.9, or 4.9%. Aerospace Materials
net sales increased 9.3% due to volume increases at existing accounts and new
customers. In addition, aircraft build rates started to improve in late 1996,
and this trend is expected to continue in 1997. Acrylic Fibers net sales
increased 2.0%, but volume was up 11.0%. Selling prices for acrylic fibers were
down with the bulk of the price decrease coming from export sales.
Building Block Chemical net sales decreased $29.1, or 13.0%, primarily due
to acrylonitrile and methanol. Acrylonitrile volume was up due to the expanded
plant being in service for a full year, but this was more than offset by lower
selling prices. Methanol sales decreased as a result of lower selling prices in
the first half of 1996. In addition, methanol volumes were down in the first
half of 1996 as a result of production downtime due to repairs as well as a
shutdown in January 1996 due to poor economic conditions caused by low selling
prices coupled with high natural gas costs.
Manufacturing cost of sales improved to 71.3% of net sales from 72.4% of
net sales for 1995. Much of the improvement resulted from cost reduction
programs, improved plant efficiencies in batch operation facilities, and an
improved product mix as the Company divested or de-emphasized low margin
products. Raw materials were generally lower with the exception of natural gas,
which was significantly higher than the year ago period. Natural gas prices are
expected to remain well above 1995 levels in 1997. Selling prices
- 18 -
<PAGE>
were slightly higher in the specialty businesses with the exception of export
acrylic fibers, where prices were down significantly. The Company does not plan
on any significant price increases in 1997.
Selling and technical service expenses increased $5.0 and increased as a
percent of sales to 11.2% from the 10.8% of sales experienced in 1995. The 1996
amount reflected the full year effect of certain investments the Company made in
this area during 1995. In particular, investments in the international regions
have increased, partially offset by reduced expenses in North America, where the
Company has been able to rationalize its costs. This trend is expected to
continue in 1997.
Research and process development expenses decreased $4.0 and were 3.2% of
net sales in 1996. The decrease was the result of a reduction in non-value-added
overhead costs at our research facilities completed in late 1995. Technical
spending as it relates to our product lines increased from the prior year as
planned.
Administrative and general expenses decreased $0.8 in 1996 and decreased as
a percent of net sales to 3.5% from 3.6% in 1995. The Company continues to focus
on tight cost controls in this area and expects spending for 1997 to remain at
this level or possibly decrease.
Interest and other income (expense), net, decreased $0.4, principally as a
result of reduced interest income on lower cash balances maintained during the
year, partially offset by other income from royalties and technology sales and
fees.
Interest expense increased $3.0 due to higher levels of debt outstanding
primarily as a result of the Company's stock repurchase program.
The income tax provision for 1996 reflects an effective tax rate of 40.0%.
This was a decrease of approximately 3.0%, excluding the effect of a tax
valuation reversal in 1995. The lower effective rate was the result of a focused
tax strategy designed to reduce, where applicable, the Company's tax burden. In
addition, a one-time benefit of $1.4 was recorded in the fourth quarter to
recognize the tax effect of a noncash transaction completed in December 1996.
Equity in net earnings of associated companies, all of which are 50% owned,
represents the Company's after tax share of its associates' earnings. Such
earnings increased $1.0 from 1995. Increased earnings were reported by CYRO
Industries, reflecting the capacity expansions completed in the second half of
1995 plus lower raw material costs. Earnings of Dyno-Cytec improved over the
prior year as a result of higher sales and lower raw material costs. Partially
offsetting the above were reduced earnings from Criterion Catalyst Company. The
lower earnings were the result of several factors: the purchase of high cost
intermediate product from third parties due to capacity constraints, start-up
costs related to capacity expansions and lower hydroprocessing catalyst selling
prices.
Dividends on preferred stock were essentially eliminated as the Company
repurchased all of its Series A Cumulative Adjustable Preferred Stock ("Series A
Stock") and Series B Cumulative Convertible Preferred Stock ("Series B Stock")
in the second half of 1995. Dividends on the outstanding Series C Cumulative
Preferred Stock ("Series C Stock") were negligible.
Net earnings available for common stockholders increased $23.8, or 31.2%,
over the year ago period.
YEAR ENDED DECEMBER 31, 1995, COMPARED WITH YEAR ENDED DECEMBER 31, 1994
In 1995, net sales were $1,260.1, an increase of $158.8, or 14.4%, as compared
with 1994. The net sales increase was due primarily to improved sales volume and
higher selling prices in the majority of the Company's product lines.
International net sales grew to 37.9% of net sales in 1995 from 31.1% of net
sales in 1994.
Specialty Chemicals net sales increased $54.8, or 8.1%, with the largest
increases coming from international operations. The European net sales increase
was widely spread among most product lines and was due to improved economies,
market share gains and the favorable effect of exchange rates. Asia/Pacific net
sales gains were made primarily in Korea, Taiwan and Australia and across most
product lines. Latin American net sales increased as demand for the Company's
higher technology products continued to grow. U.S. net sales of Specialty
Chemicals increased $16.8, or 4.0%. U.S. net sales increases in the first half
of 1995 were offset in part by decreases in the second half of 1995 as a result
of what management believes to be a correction for high inventory levels by
certain customers and a slower growth rate in the U.S. economy. This
particularly impacted the polymer additives product line and coatings and resin
product lines.
Specialty Materials net sales increased $32.8, or 12.0%. Aerospace
Materials reported the largest increase in net sales principally due to new
business in the aerospace sector. Acrylic fibers reported a strong gain due
primarily to higher selling prices. Acrylic fiber selling volume was down in the
fourth quarter due to sharply reduced exports to China.
Building Block Chemicals net sales increased $71.2, or 46.7%. Methanol
sales accounted for $12.3 of the increase, since the methanol plant was still
under construction until September 1994. Partially offsetting the higher sales
volume were methanol selling prices that were much lower than during the fourth
quarter of 1994 and unscheduled maintenance downtime in the methanol
manufacturing facility in the third quarter of 1995. Acrylonitrile sales
increased due to additional capacity available from the expanded acrylonitrile
manufacturing plant, which started up in the second quarter of 1995. In
addition, acrylonitrile selling prices were well above the prior year. Partially
offsetting the higher acrylonitrile sales was unscheduled maintenance downtime
in the acrylonitrile manufacturing facility in the third quarter of 1995.
Acrylamide sales also increased over the prior year period, principally in the
United States and Europe.
Manufacturing cost of sales improved to 72.4% of net sales in 1995 as
compared with 74.3% of net sales for 1994. Much of the improvement was due to
manufacturing cost efficiencies as costs, excluding raw materials and utilities,
increased at a much lower rate than the growth in net sales. Overall, selling
prices were up for the year, but not in all product lines due to competitive
pressures. The
- 19 -
<PAGE>
bulk of the increase in selling prices occurred in the first nine months of
1995. Raw material costs started to decline in the third quarter of 1995 and
continued through the fourth quarter, although not for all raw materials.
Selling and technical service expenses increased $4.9, but decreased as a
percent of net sales to 10.8% from 11.9% in 1994. The increase in expenses
primarily reflected the full-year effect of the increased investment in
international markets. The decrease as a percent of net sales indicates that the
Company has been able to leverage its investment in this area.
Research and process development expenses increased $4.2, but were slightly
lower as a percent of net sales in 1995 as compared with 1994. The increase in
expenses was the result of costs associated with certain patent litigation
matters and higher spending on applications technology. The increase in spending
on applications technology was in line with the Company's targeted spending for
1995.
Administrative and general expenses increased $1.2 in 1995, but decreased as
a percent of net sales to 3.6% from 4.0% in 1994. The increase in expenses was
the result of the full-year impact of costs added in the second half of 1994 as
the Company started up certain functions as a result of becoming an independent
public company.
Interest and other income (expense), net, decreased $1.8 principally as a
result of decreased interest income on lower cash balances and a gain from the
sale of certain assets related to a minor product line which was included in the
third quarter of 1994.
Except for the partial reversal of the tax valuation allowance of $193.0 in
the fourth quarter of 1995, the income tax provision in each period was based on
the estimated effective tax rate for the full year.
Equity in net earnings of associated companies for 1995 increased $3.8 from
1994. Increased earnings were recorded by CYRO Industries as a result of higher
selling prices and increased sales of methyl methacrylate monomer due to a plant
expansion. Earnings from Criterion Catalyst Company also improved due to higher
selling volume, particularly of new and improved products. These increases were
partially offset by losses from Mitsui-Cytec due to expenses associated with the
start-up of a new resins manufacturing facility and the shutdown of an existing
resins facility.
Dividends on preferred stock were lower than the prior year period due to
the repurchase of all of the Series A Stock and Series B Stock. The reduced
dividends, offset in part by lower interest income and higher interest expense
from these transactions as well as the reduced fully diluted common shares
outstanding, had a positive impact of approximately $0.15 for the full year on
fully diluted earnings per common share. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Financial Condition."
Net earnings available for common stockholders reflected a $195.2 reduction
recorded in the fourth quarter of 1995 upon the completion of the repurchase of
the Series B Stock. The $195.2 represented the excess of the repurchase price of
the Series A Stock and Series B Stock over the related book value.
- 20 -
<PAGE>
LIQUIDITY AND FINANCIAL CONDITION
At December 31, 1996, the Company's cash balance was $20.4, an increase of $8.4
from year end 1995.
Net cash flows provided by operating activities totaled $170.8 for the year
ended December 31, 1996, compared with $160.8 in the same period of 1995. Cash
was favorably impacted on by increased net earnings, after adjusting for the
partial reversal of the tax valuation allowance in 1995, and improved accounts
receivable due to lower days outstanding. Inventory levels increased primarily
in the international regions as the Company expanded its presence outside of the
United States. Other liabilities decreased primarily as a result of increased
environmental spending in 1996 as more projects reached the remediation phase of
activity.
Environmental remediation spending for the years ended December 31, 1996,
1995 and 1994, was $26.8, $22.1, and $15.7, respectively. There can be no
assurances that the Company's annual cash expenditures will not be higher in the
future.
While it is not feasible to predict the outcome of all pending
environmental suits and claims, it is reasonably possible that there will be a
necessity for future provisions for environmental costs which, in management's
opinion, will not have a material effect on the financial position of the
Company, but could be material to the results of operations of the Company in
any one accounting period. The Company cannot estimate any additional amount of
loss or range of loss in excess of the recorded amount. Moreover, environmental
liabilities are paid over an extended period, and the timing of such payments
cannot be predicted with any confidence. See Note 9 of the Notes to the
Consolidated Financial Statements with respect to environmental matters.
The Company is also a party to various other claims and routine litigation
arising in the normal course of its business. Based on the advice of counsel,
management believes that the resolution of such claims and litigation will not
have a materially adverse effect on the financial position of the Company but
could be material to the results of operations of the Company in any one
accounting period.
Net cash flows used for investing activities totaled $41.0. Capital
expenditures for the year ended December 31, 1996 of $72.5 were lower than for
the corresponding period in 1995 due primarily to the acrylonitrile expansion
which was completed in 1995. Capital expenditures for the year 1997 are expected
to be in the range of $90.0 to $95.0.
During 1996, the Company received $25.0 from its associated company, CYRO
Industries, as a return of capital. CYRO Industries financed the distribution in
part by bank borrowings of $40.0. Also during the fourth quarter of 1996, the
Company sold the majority of the assets of its aluminum sulfate business and
received approximately $11.0 in cash proceeds before taxes.
The Company believes that, based on internal cash generation and current
levels of liquid assets, it will be able to fund operating cash requirements and
planned capital expenditures in 1997.
Net cash flows used for financing activities totaled $121.5 compared with
$161.0 in 1995. In 1995 the Company repurchased its Series A Stock and the
Series B Stock for a total of $395.1. Partially offsetting the above use of cash
in 1995 were proceeds from the
Company's stock offering, net of discount and expenses, of $181.2 and net
borrowings of $66.0. The reduction in preferred stock dividend payments of $14.4
favorably affected net cash flows used for financing activities in 1996. Net
cash flows used for financing activities in 1996 were principally affected by
the purchase of treasury stock of $148.7. In February 1996, the Board of
Directors approved a program to repurchase up to 1,700,000 (pre-split basis)
shares of the Company's common stock, of which approximately 885,400 shares were
repurchased prior to the Company's three-for-one stock split in July 1996. The
remaining authorized balance was adjusted for the stock split to bring the total
shares authorized for repurchase to approximately 3,329,200. Pursuant to this
program, for the year ended December 31, 1996, the Company repurchased
approximately 3,033,000 shares of its common stock on the open market
(equivalent to 4,803,800 on a post-split basis) at a cost of approximately
$148.7, leaving 296,200 shares remaining authorized to be repurchased. The
Company anticipates completing its current stock repurchase program during the
first quarter of 1997. Depending on the level, price and timing of repurchases,
borrowings may be required. In connection with the repurchase program, the
Company wrote put warrants on 1,500,000 shares of its common stock (on a
post-split basis) for which it received premiums of approximately $1.7 in cash.
At December 31, 1996, all warrants expired at no cost to the Company.
In June 1995, the Company executed a five-year (due on June 1, 2000) $150.0
unsecured revolving credit facility agreement (the "Credit Agreement"). Funds
are available for general corporate purposes including, without limitation, for
purposes of making acquisitions permitted under the Credit Agreement. At
December 31, 1996 and 1995, outstanding borrowings under the Credit Agreement
were $88.0 and $65.0, respectively. At December 31, 1996, the effective interest
rate on borrowings was 5.876%, which was based on short-term London Interbank
Offered Rate ("LIBOR") plus a .25% margin. The Credit Agreement contains
covenants customary for such facilities, including a leverage ratio and fixed
charge coverage ratio. Under the terms of the Credit Agreement, the Company had
an additional $62.0 available at December 31, 1996.
The Credit Agreement also provides that it is an event of default if any
person other than American Home Products Corporation and its subsidiaries
acquires more than 20% of the voting power of all voting stock of the Company.
The Company was in compliance with all material terms, covenants and conditions
of the Credit Agreement at December 31, 1996. Other debt was $1.0 at both
December 31, 1996 and 1995.
Under the terms of its Series C Stock, the Company must maintain a
debt-to-equity ratio of no more than 2-to-1 and must not incur more than $150.0
of debt unless the Company's equity is in excess of $200.0, in which case the
Company may incur additional debt as long as its debt-to-equity ratio is not
more than 0.75-to-1. At December 31, 1996, the Company had $89.0 in debt, $314.3
in equity, as defined in the Series C Stock covenants, and the ability to incur
up to an additional $146.7 in debt under the terms of the Series C Stock.
The Company filed with the Securities and Exchange Commission during 1996 a
shelf registration statement (which has yet to become effective) covering $300.0
of senior debt securities which may be offered by the Company from time to time.
Proceeds of any sale can be used for general corporate purposes, which may
include repayment of indebtedness and other liabilities, share repurchases,
additions to working capital, capital expenditures and acquisitions.
During 1996 and 1995, the Company made contributions to its VEBA to fund
certain employee and retiree health care benefits. The balance in the VEBA
trusts at December 31, 1996 and 1995 was $25.2 and $20.0, respectively.
The Company had foreign currency contracts at December 31, 1996 and 1995.
The contracts are utilized by the Company to hedge certain foreign currency
denominated receivables and payables and are not used for speculation. All
contracts are for periods of six months or less. At December 31, 1996, the
Company had net contracts to sell $14.7 of primarily European currencies for
U.S. dollars, and Dutch guilders having a value equivalent of $10.4 for other
European currencies. At December 31, 1995, the Company had net contracts to sell
$25.0 of primarily European currencies for U.S. dollars, and Dutch guilders
having a value equivalent of $1.5 for other European currencies. In addition,
the Company occasionally hedges to reduce its exposure to future price changes
of natural gas used in the Company's manufacturing activities. At December 31,
1996, the Company had contracts to buy natural gas at set future prices with
settlement dates through March 31, 1997. The maturity of these contracts highly
correlates to the actual purchases of the commodity. The contracts outstanding
at December 31, 1996 and 1995, were not material to the Company's consolidated
financial statements. During 1996, the Company entered into interest rate swap
agreements to manage its debt portfolio. These agreements were immaterial to the
Company's financial statements at December 31, 1996. There were no interest rate
swaps outstanding at December 31, 1995.
The impact of inflation on the Company is considered insignificant as the
rate of inflation has remained relatively low in recent years.
OTHER MATTERS
On January 31, 1997, the Company completed the sale of its Acrylic Fibers
business to a subsidiary of Sterling Chemicals, Inc. The assets transferred
include Cytec's plant located near Pensacola, Florida. The Company received
approximately $88.0 in cash, subject to certain post-closing adjustments, and
received other consideration including the assumption by Sterling of certain
contingent and other liabilities, with a value of approximately $15.0. The
Company expects to record a gain from this transaction in the first quarter of
1997. Cytec's Acrylic Fibers business had sales of approximately $138.7, $136.1
and $121.1 in 1996, 1995 and 1994, respectively.
On November 8, 1996, the Company announced a restructuring proposal for its
Botlek, Netherlands plant. The restructuring would include a major reengineering
of the plant organization, relocation of certain manufacturing operations to
other Cytec sites and staff
- 21 -
<PAGE>
reductions. The proposal was subject to negotiations with the Works Council and
the Unions. The negotiations were completed in February and the Company is
moving forward with the restructuring. The Company expects to record a charge
against earnings in the first quarter of 1997 related to this transaction.
On January 16, 1997, the Company announced the consolidation of its
surfactant and docusate manufacturing at its Willow Island, West Virginia
facility. As a result of this consolidation, the Company will close its Linden,
New Jersey plant. The phasedown of the Linden facility will occur over
approximately the next 18 months. The Company expects to record a charge against
earnings in the first quarter of 1997 related to this transaction.
The Company believes that the impact of the above divestiture and
restructurings will have an immaterial effect on the results of operations for
1997.
COMMENTS ON
FORWARD-LOOKING STATEMENTS
A number of the statements made by the Company in this Management's Discussion
and Analysis, or in other documents, including but not limited to the Company's
Annual Report to Stockholders, its press releases and its periodic reports to
the Securities and Exchange Commission, may be regarded as "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995.
Forward-looking statements include, among others, statements concerning the
Company's outlook for 1997, pricing trends and forces within the industry, cost
reduction strategies and their results, long-term goals of the Company and other
statements of expectations, beliefs, future plans and strategies, anticipated
events or trends, and similar expressions concerning matters that are not
historical facts.
All predictions as to future results contain a measure of uncertainty and,
accordingly, actual results could differ materially. Among the factors that
could cause a difference are: changes in the general economy, in demand for the
Company's products or in the costs and availability of its raw materials; the
actions of competitors; technological change; changes in employee relations,
including possible strikes; government regulations; litigation, including its
inherent uncertainty; difficulties in plant operations and materials
transportation; environmental matters; and other unforeseen circumstances. A
number of these factors are discussed in the Company's filings with the
Securities and Exchange Commission.
- 22 -
<PAGE>
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
(Dollars in millions, except share and per share amounts) 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 20.4 $ 12.0
Accounts receivable, less allowance for doubtful accounts of $11.1 in 1996 and $11.6 in 1995 206.5 216.8
Inventories 105.6 88.1
Deferred income taxes 65.1 74.5
Other current assets 18.7 12.6
Total current assets 416.3 404.0
Equity in net assets of and advances to associated companies 143.7 155.1
- ------------------------------------------------------------------------------------------------------------------------------------
Plants, equipment and facilities, at cost 1,339.7 1,317.2
Less accumulated depreciation (757.5) (711.5)
Net plant investment 582.2 605.7
- ------------------------------------------------------------------------------------------------------------------------------------
Intangibles resulting from business acquisitions, net of accumulated amortization 17.1 18.0
Deferred income taxes 89.6 107.1
Other assets 12.2 3.9
Total assets $1,261.1 $1,293.8
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 101.3 $ 98.3
Accrued expenses 205.1 218.3
Income taxes payable 6.4 1.1
Total current liabilities 312.8 317.7
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term debt 89.0 66.0
Other noncurrent liabilities 544.9 567.2
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity
Preferred stock, 20,000,000 shares authorized, issued and outstanding 4,000 shares,
Series C, $.01 par value at liquidation value of $25 share 0.1 0.1
Common Stock $.01 par value per share, 75,000,000 shares authorized, issued
48,377,683 shares in 1996, 48,315,193 shares in 1995 0.5 0.2
Additional paid-in capital 229.7 222.6
Retained earnings 217.9 117.8
Unearned compensation (2.4) (2.6)
Additional minimum pension liability -- (5.4)
Accumulated translation adjustments 8.8 10.3
Treasury stock, at cost, 2,883,485 shares in 1996, 6,917 shares in 1995 (140.2) (0.1)
Total stockholders' equity 314.4 342.9
Total liabilities and stockholders' equity $1,261.1 $1,293.8
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Contingent Liabilities and Commitments (Notes 4 and 9)
See accompanying Notes to Consolidated Financial Statements.
- 23 -
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
(Dollars in millions, except per share amounts) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 1,259.6 $ 1,260.1 $ 1,101.3
Manufacturing cost of sales 898.1 912.2 817.9
Selling and technical services 140.9 135.9 131.0
Research and process development 40.2 44.2 40.0
Administrative and general 44.3 45.1 43.9
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings from operations 136.1 122.7 68.5
Interest and other income (expense), net 10.0 10.4 12.2
Interest expense 4.0 1.0 0.1
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 142.1 132.1 80.6
Income tax provision (benefit) 56.9 (136.2) 34.6
Earnings before earnings of associated companies 85.2 268.3 46.0
Equity in net earnings of associated companies 14.9 13.9 10.1
Net earnings 100.1 282.2 56.1
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends on preferred stock -- (10.7) (14.6)
Excess of repurchase price over related book value of
Series A Stock and Series B Stock -- (195.2) --
Net earnings available for common stockholders $ 100.1 $ 76.3 $ 41.5
Earnings per common share
Primary $ 2.01 $ 1.80 $ 1.05
Fully diluted $ 2.01 $ 1.43 $ .84
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
- 24 -
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
(Dollars in millions) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows provided by (used for) operating activities
Net earnings $ 100.1 $ 282.2 $ 56.1
Noncash items included in net earnings:
Equity in undistributed net earnings of associated companies (14.6) (17.2) (9.9)
Depreciation 79.7 83.0 78.1
Amortization 9.3 6.9 7.9
Deferred income taxes 23.7 (181.6) (7.9)
Other -- -- (1.2)
Changes in operating assets and liabilities:
Accounts receivable 7.6 6.3 (18.7)
Inventories (18.4) (12.4) 0.5
Accounts payable 3.7 4.8 (10.8)
Accrued expenses (3.2) (9.4) 60.1
Income taxes payable 10.5 (4.2) 5.8
Other assets (5.9) 11.1 4.4
Other liabilities (21.7) (8.7) (1.9)
Net cash flows provided by operating activities 170.8 160.8 162.5
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows provided by (used for) investing activities
Additions to plants, equipment and facilities (72.5) (97.2) (116.1)
Proceeds from dispositions of businesses and sale of assets 13.5 -- 31.1
Return of capital from associated companies 25.0 -- --
Change in other assets (7.0) 11.4 (11.2)
Net cash flows used for investing activities (41.0) (85.8) (96.2)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows provided by (used for) financing activities
Purchase of treasury stock (148.7) -- (0.1)
Change in long-term borrowings 23.0 66.0 --
Proceeds from exercise of stock options 2.5 1.3 --
Proceeds received on sale of put warrants 1.7 -- --
Proceeds from stock offering, net of discounts and expenses -- 181.2 --
Purchase of Series A Stock -- (90.0) --
Purchase of Series B Stock -- (305.1) --
Dividend payments on preferred stock -- (14.4) (11.5)
Net cash flows used for financing activities (121.5) (161.0) (11.6)
Effect of exchange rate changes on cash and cash equivalents 0.1 0.3 (0.5)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 8.4 (85.7) 54.2
Cash and cash equivalents, beginning of year 12.0 97.7 43.5
Cash and cash equivalents, end of year $ 20.4 $ 12.0 $ 97.7
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
- 25 -
<PAGE>
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
Years Ended December 31, 1996, 1995 and 1994,
<TABLE>
<CAPTION>
Additional
Preferred Common Paid-In Retained
(Dollars in millions) Stock Stock Capital Earnings
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $ 0.1 $ 0.1 $ 23.7 $ --
Net earnings -- -- -- 56.1
Dividends on preferred stock -- -- -- (14.6)
Award of, and changes in, per-
formance and restricted stock -- -- 10.5 --
Amortization of performance
and restricted stock -- -- -- --
Purchase of treasury stock -- -- -- --
Translation adjustment -- -- -- --
- -----------------------------------------------------------------------------------------
Balance at December 31, 1994 0.1 0.1 34.2 41.5
Net earnings -- -- -- 282.2
Dividends on preferred stock -- -- -- (10.7)
Award of, and changes in, per-
formance and restricted stock -- -- 4.9 --
Amortization of performance
and restricted stock -- -- -- --
Issuance of common stock
from stock offering -- 0.1 181.1 --
Excess of repurchase price over
related book value of Series A
Stock and Series B Stock -- -- -- (195.2)
Proceeds received from stock options -- -- 1.3 --
Tax benefit on stock options -- -- 1.1 --
Additional minimum
pension liability -- -- -- --
Translation adjustment -- -- -- --
- -----------------------------------------------------------------------------------------
Balance at December 31, 1995 0.1 0.2 222.6 117.8
Net earnings -- -- -- 100.1
Award of, and changes in, per-
formance and restricted stock -- -- 7.7 --
Amortization of performance and
restricted stock -- -- -- --
Three-for-one stock split -- 0.3 (0.3) --
Purchase of treasury stock -- -- -- --
Exercise of employee stock options -- -- (8.5) --
Proceeds received from stock
options and put warrants -- -- 4.2 --
Tax benefit on stock options -- -- 4.0 --
Additional minimum pension
liability -- -- -- --
Translation adjustment -- -- -- --
Balance at December 31, 1996 $ 0.1 $ 0.5 $ 229.7 $ 217.9
- -----------------------------------------------------------------------------------------
<CAPTION>
Minimum Accumulated
Unearned Pension Translation Treasury
(Dollars in millions) Compensation Liability Adjustments Stock Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $ -- $ -- $ 7.3 $ -- $ 31.2
Net earnings -- -- -- -- 56.1
Dividends on preferred stock -- -- -- -- (14.6)
Award of, and changes in, per-
formance and restricted stock (10.5) -- -- -- --
Amortization of performance
and restricted stock 6.4 -- -- -- 6.4
Purchase of treasury stock -- -- -- (0.1) (0.1)
Translation adjustment -- -- 4.3 -- 4.3
- ----------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 (4.1) -- 11.6 (0.1) 83.3
Net earnings -- -- -- -- 282.2
Dividends on preferred stock -- -- -- -- (10.7)
Award of, and changes in, per-
formance and restricted stock (4.9) -- -- -- --
Amortization of performance
and restricted stock 6.4 -- -- -- 6.4
Issuance of common stock
from stock offering -- -- -- -- 181.2
Excess of repurchase price over
related book value of Series A
Stock and Series B Stock -- -- -- -- (195.2)
Proceeds received from stock options -- -- -- -- 1.3
Tax benefit on stock options -- -- -- -- 1.1
Additional minimum
pension liability -- (5.4) -- -- (5.4)
Translation adjustment -- -- (1.3) -- (1.3)
- ----------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 (2.6) (5.4) 10.3 (0.1) 342.9
Net earnings -- -- -- -- 100.1
Award of, and changes in, per-
formance and restricted stock (8.2) -- -- 0.1 (0.4)
Amortization of performance and
restricted stock 8.4 -- -- -- 8.4
Three-for-one stock split -- -- -- -- --
Purchase of treasury stock -- -- -- (148.7) (148.7)
Exercise of employee stock options -- -- -- 8.5 --
Proceeds received from stock
options and put warrants -- -- -- -- 4.2
Tax benefit on stock options -- -- -- -- 4.0
Additional minimum pension
liability -- 5.4 -- -- 5.4
Translation adjustment -- -- (1.5) -- (1.5)
Balance at December 31, 1996 $ (2.4) $ -- $ 8.8 $(140.2) $314.4
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 26 -
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except share amounts, unless otherwise indicated)
1. GENERAL
On December 17, 1993 (the "Effective Date"), Cytec Industries Inc. (the
"Company") was formed and became an independent public company. American
Cyanamid Company ("Cyanamid") distributed all of the Company's common stock to
existing Cyanamid stockholders (the "Distribution"). Cyanamid retained 100% of
the preferred stock issued by the Company. In 1995, the Company repurchased all
of its Series A Cumulative Adjustable Preferred Stock ("Series A Stock") and
Series B Cumulative Convertible Preferred Stock ("Series B Stock"). Prior to the
Effective Date, the Company was operated as Cytec Industries, a business unit of
Cyanamid. In connection with the Distribution, the Company assumed substantially
all of the assets and liabilities (including certain liabilities pertaining to
environmental matters, retiree health care and life insurance obligations and
pension liabilities) of Cyanamid's global chemicals businesses. During 1994
Cyanamid was acquired by American Home Products Corporation.
2. SUMMARY OF
ACCOUNTING POLICIES
Principles of Consolidation. The financial statements include the accounts of
the Company and its subsidiaries on a consolidated basis. All significant
intercompany transactions and balances have been eliminated. Operations outside
the United States, Canada and Europe are generally included on a fiscal year
basis ending November 30. In prior years, European operations were also reported
on a November 30 fiscal year basis. The effect of the change to current month
reporting is reflected in other income for 1996 and is not considered material
to the results of operations. The equity method of accounting is used for
investments in associated companies (all 50% owned).
Foreign Currency Translation. For most of the Company's international
operations, all elements of financial statements are translated into U.S.
dollars using current exchange rates, with translation adjustments accumulated
in stockholders' equity. For other international operations, certain financial
statement amounts are translated at historical exchange rates with all other
assets and liabilities translated at current exchange rates and the resultant
translation adjustments for these operations recorded in earnings. These
international operations are generally in hyperinflationary economies, all of
which are in Latin America.
Depreciation and Amortization. Depreciation is provided primarily on a
straight-line composite method over the estimated useful lives of various
classes of assets. When such depreciable assets are sold or otherwise retired
from service, their cost, less amounts realized on sale or salvage, is charged
or credited to the accumulated depreciation account. Expenditures for
maintenance and repairs are charged to current operating expenses. Acquisitions,
additions and betterments either to provide necessary capacity, improve the
efficiency of production units, modernize or replace older facilities or install
equipment for protection of the environment, are capitalized. Intangibles
resulting from business acquisitions are carried at cost and amortized over a
period of up to 40 years unless, in the opinion of management, their lives are
limited, or they have sustained a permanent diminution in value, in which case
they are either immediately charged to operations or amortized over lesser
periods.
Cash and Cash Equivalents. Securities with maturities of three months or less
when purchased are considered to be cash equivalents.
Financial Instruments. The carrying values of financial instruments (principally
cash and cash equivalents, accounts receivable, other assets, accounts payable
and long-term debt) included in the Company's consolidated balance sheets
approximated fair values at December 31, 1996 and 1995. Fair values were
determined through a combination of management estimates and information
obtained from independent third parties using the latest available market data.
The Company also uses derivative, or off-balance sheet, financial instruments to
manage exposure to fluctuations in interest rates, foreign exchange rates and
certain raw material prices. Derivative financial instruments currently utilized
by the Company include interest rate swaps, foreign currency exchange contracts
and forward commodity contracts. The Company does not hold or issue derivative
financial instruments for trading or speculative purposes.
Interest rate swap agreements are used to manage the Company's debt
portfolio and involve the exchange of fixed and floating rate interest payments
periodically over the life of the agreements without the exchange of the
underlying principal amounts. The interest differential to be paid or received
on the Company's indebtedness is accrued as interest rates change and recognized
as an adjustment to interest expense in the statement of income.
- 27 -
<PAGE>
Foreign currency exchange contracts are utilized by the Company to hedge
receivables and payables, primarily intercompany accounts denominated in a
currency other than the functional currency of the business. The financial
impact of contracts involving intercompany accounts are eliminated in
consolidation. Other transactions' gains or losses are deferred and included in
the basis of the transaction when it is settled.
Forward commodity contracts consist of natural gas contracts traded on
organized exchanges for the purpose of hedging anticipated natural gas
purchases. Gains and losses on these contracts are offset and are recognized as
an adjustment of the purchase price of the hedged inventory item.
Inventories. Inventories are carried at the lower of cost or market. Cost is
determined on the last-in, first-out (LIFO) method for substantially all
inventories in the United States with all other inventories determined on the
first-in, first-out (FIFO) or average cost method.
Income Taxes. Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis and operating loss and tax credit carryforwards. A valuation allowance is
provided when it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Income taxes have been provided for, assuming repatriation of substantially
all of the undistributed earnings of the Company's foreign subsidiaries and
associated companies.
Postretirement and Postemployment Benefits. The Company sponsors postretirement
and postemployment benefit plans. The net periodic costs are recognized for
these plans as employees render the service necessary to earn the related
benefits.
Earnings per Share. Primary earnings per share are based on earnings after
preferred stock dividend requirements and in 1995, the excess of the repurchase
price over the related book value of Series A Stock and Series B Stock. The
resulting net earnings available for common stockholders is divided by the
weighted average number of shares of common stock outstanding adjusted for
dilutive common stock equivalents (based on 49,678,000 in 1996, 42,368,000 in
1995 and 39,450,477 in 1994). Fully diluted earnings per share are computed as
above, except that in 1995 the Series B Stock (through the date of redemption)
was assumed to be converted into common stock as of the beginning of each period
presented and the related dividend is added back to the primary earnings (based
on 49,913,000 in 1996, 56,903,000 in 1995 and 57,116,100 in 1994).
Stock-Based Compensation. Effective as of January 1, 1996, the Company adopted
Statement of Financial Accounting Standards ("SFAS") 123, "Accounting For
Stock-Based Compensation." SFAS 123 encourages, but does not require, companies
to record compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting For Stock Issued to Employees," and
related Interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price at the date of the
grant over the amount an employee must pay to acquire the stock. Because the
Company grants options at a price equal to the market price of the stock at the
date of grant, no compensation expense is recorded. Compensation cost for
performance and restricted stock is recorded based on the quoted market price of
the Company's common stock at the end of the period through the date of vesting.
The fair value of the stock is charged to stockholders' equity and amortized to
expense over the performance periods. Compensation cost for stock appreciation
rights payable in cash is amortized to expense over the maturity period. The
Company, as required, has provided pro forma disclosures of compensation expense
as determined under the provisions of SFAS 123.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of. The
Company adopted the provisions of SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," as of January
1, 1996. This Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to the future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
the cost to sell. Adoption of this Statement did not have an impact on the
Company's financial position or results of operations as the Company previously
followed the basic tenets of this statement.
- 28 -
<PAGE>
Risks and Uncertainties. The Company is engaged primarily in the manufacture and
sale of a highly diversified line of chemical products throughout the world. The
Company's revenues are dependent on the continued operation of its various
manufacturing facilities. The operation of chemical manufacturing plants
involves many risks, including the breakdown, failure or substandard performance
of equipment, natural disasters and the need to comply with directives of
government agencies. The occurrence of material operational problems, including
but not limited to the above events, may have a materially adverse effect on the
productivity and profitability of a particular manufacturing facility, or with
respect to certain facilities, the Company as a whole, during the period of such
operational difficulties.
The Company's operations are also subject to various hazards incidental to
the production of industrial chemicals, including the use, handling, processing,
storage and transportation of certain hazardous materials. These hazards can
cause personal injury and loss of life, severe damage to and destruction of
property and equipment, environmental damage and suspension of operations.
Claims arising from any future catastrophic occurrence involving the Company may
result in the Company being named as a defendant in lawsuits potentially
asserting large claims.
The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers. No single
customer accounted for more than 5% of the Company's net sales. The Company is
exposed to credit losses in the event of nonperformance by counterparties on
interest rate swaps and other risk management instruments. The counterparties to
these transactions are major financial institutions and organized exchanges,
thus the Company considers the risk of default to be minimal. The Company does
not require collateral or other security to support the financial instruments
with credit risk.
In conformity with generally accepted accounting principles, management of
the Company has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosures of contingent
liabilities and pro forma compensation expense to prepare the Company's
consolidated financial statements. Actual results could differ from these
estimates.
3.DISPOSITIONS AND
OTHER TRANSACTIONS
In April of 1994, the Company and its partner ("Partner") in its former
phosphate mining business negotiated the early buyout of certain notes
receivable from a third party, in which the Company received $18.3 for its
share. In June of 1994, the Company and its Partner also sold certain assets
related to the Company's former phosphate mining business.The Company received
$22.3 as its share of the proceeds in the third quarter of 1994. In July of
1994, the Company received $13.3 from LaRoche Industries for a 50% interest in
the Company's ammonia manufacturing facility. The result of this transaction was
to create a manufacturing joint venture between subsidiaries of LaRoche
Industries and the Company. These transactions did not have a material effect on
the Company's 1994 operating results.
On December 6, 1996, the Company completed the sale of the majority of the
assets of its aluminum sulfate business to GEO Specialty Chemicals, Inc., of
Cleveland, Ohio. The transaction included seven manufacturing plants in the
Southeast and a kaolin calcining plant and associated reserves in Andersonville,
Georgia. The Company received cash proceeds of approximately $11.0 from the
sale. This transaction did not have a material effect on the Company's 1996
operating results.
4. FINANCIAL INSTRUMENTS
The Company occasionally utilizes derivative, or off-balance sheet, financial
instruments to manage its exposure to fluctuations in interest rates, foreign
exchange rates and certain raw material prices. The Company does not hold or
issue financial instruments for trading or speculative purposes. While these
instruments are subject to the risk of loss from changes in exchange and
interest rates, and commodity prices, these losses would generally be offset by
gains on the related exposures.
Interest rate swap agreements are used to reduce the Company's exposure to
fluctuations in interest rates. As of December 31, 1996, the Company was party
to four interest rate swap agreements, each with notional values of $20.0 and
maturity dates during 2001. Two of the swaps related to the debt on the
Company's consolidated balance sheet and effectively changed its variable rate
interest obligations to fixed rate interest obligations. The fixed rates were
set at 6.25% and 6.16%, respectively. The two remaining swaps related to the
Company's unconsolidated pro rata share of debt under the CYRO Industries joint
venture. The first of these swaps changed its fixed interest rate exposure to
floating interest rate and was subsequently offset by a swap that converted the
variable rate debt back to a fixed rate of 6.37%. The variable interest rate
employed on each of the swaps is equal to one-month London Interbank Offered
Rate ("LIBOR") plus a margin. The latter two swaps are marked to market on a
current basis. The notional amounts of interest rate swaps do not represent
amounts exchanged by the parties and are not a measure of the Company's exposure
to credit or market risk. The amounts exchanged are calculated on the basis of
the notional amounts and the other terms of the agreements. Notional amounts are
not included in the consolidated balance sheet. There were no interest rate
swaps outstanding at December 31, 1995.
Foreign currency exchange contracts are utilized by the Company to hedge
receivables and payables, primarily intercompany accounts denominated in
currencies other than the functional currency of the business. At December 31,
1996, the Company had net contracts to sell $14.7 of primarily European
currencies for U.S. dollars, and Dutch guilders having a value equivalent of
$10.4 for other
- 29 -
<PAGE>
European currencies. All contracts are for periods of six months or less. At
December 31, 1995, the Company had net contracts to sell $25.0 of primarily
European currencies for U.S. dollars, and Dutch guilders having a value
equivalent of $1.5 for other European currencies.
Forward commodity contracts consist of natural gas contracts traded on
organized exchanges for the purpose of hedging anticipated natural gas
purchases. The maturity of these contracts highly correlate to the actual
purchases of the commodity. Any gains or losses on the contracts will be
reflected in the cost of the commodity as it is actually purchased. The
contracts outstanding at December 31, 1996 and 1995, were not material to the
Company's consolidated financial statements.
The carrying amounts of derivative financial instruments were immaterial to
the Company's consolidated financial statements at December 31, 1996 and 1995.
The fair values of these financial instruments and the methods and assumptions
used to determine such values are as follows:
Interest Rate Swaps: The fair values of the Company's interest rate swaps were
estimated based on valuations from financial institutions and represent the
estimated amounts that the Company would receive or pay to terminate the
agreement at December 31. At December 31, 1996, these fair value valuations were
immaterial to the Company's consolidated financial statements. There were no
swaps outstanding at December 31, 1995.
Foreign Currency Exchange Contracts: The fair values of short-term foreign
currency exchange contracts were $25.0 and $26.5 at December 31, 1996 and 1995,
respectively, based on exchange rates at December 31.
Forward Commodity Contracts: The fair values of the Company's forward commodity
contracts were estimated based on available quoted market prices at December 31.
The fair values at December 31, 1996 and 1995 were immaterial to the Company's
consolidated financial statements.
5. EQUITY IN NET ASSETS OF AND ADVANCES TO ASSOCIATED COMPANIES
The Company has a 50% interest in each of five associated companies: CYRO
Industries, Criterion Catalyst Company, Mitsui-Cytec, Dyno-Cytec and AC Molding
Compounds.
The aggregate cost of investments in associated companies accounted for
under the equity method was $40.4 at December 31, 1996 and 1995. Summarized
financial information for the Company's investments in and advances to
associated companies as of and for the years ended December 31, 1996, 1995 and
1994, is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Net sales $ 600.7 $ 601.3 $ 500.7
Gross profit 154.1 146.8 123.1
Net earnings 52.2 50.9 33.3
The Company's share of net
earnings, less taxes
provided by the Company $ 14.9 $ 13.9 $ 10.1
- ------------------------------------------------------------------------------------------------------------------------------------
Current assets $ 292.3 $ 268.7 $ 251.5
Noncurrent assets 304.4 265.2 228.5
Total assets $ 596.7 $ 533.9 $ 480.0
- ------------------------------------------------------------------------------------------------------------------------------------
Current liabilities $ 144.9 $ 114.9 $ 106.0
Noncurrent liabilities 153.4 103.3 96.4
Equity 298.4 315.7 277.6
Total liabilities and equity $ 596.7 $ 533.9 $ 480.0
The Company's share of equity $ 149.2 $ 157.9 $ 138.8
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Sales to associated companies (primarily CYRO Industries) amounted to
$40.0, $34.0 and $23.8 in 1996, 1995 and 1994, respectively. Purchases from
associated companies were immaterial.
- 30 -
<PAGE>
6. INVENTORIES
At December 31, 1996 and 1995, LIFO inventories comprised approximately 59% and
62%, respectively, of consolidated inventories.
1996 1995
Finished goods $ 85.7 $ 77.4
Work in progress 16.9 15.4
Raw materials and supplies 53.7 51.7
- --------------------------------------------------------------------------------
156.3 144.5
Less reduction to LIFO cost (50.7) (56.4)
Total inventories $ 105.6 $ 88.1
- --------------------------------------------------------------------------------
7. PLANTS, EQUIPMENT AND FACILITIES
1996 1995
Land and land improvements $ 42.6 $ 41.5
Buildings 143.8 149.0
Machinery and Equipment 1,093.3 1,059.4
Construction in progress 60.0 67.3
Plants, equipment and facilities, at cost $1,339.7 $1,317.2
- --------------------------------------------------------------------------------
8. LONG-TERM DEBT
In June 1995, the Company executed a five-year (due on June 1, 2000) $150.0
unsecured revolving credit facility agreement (the "Credit Agreement"). Funds
are available for general corporate purposes of the Company and its subsidiaries
including, without limitation, for purposes of making acquisitions permitted
under the Credit Agreement. At December 31, 1996 and 1995, outstanding
borrowings under the Credit Agreement were $88.0 and $65.0, respectively. At
December 31, 1996, the effective interest rate on borrowings was 5.876%, which
was based on short-term LIBOR rates plus a .25% margin. The Credit Agreement
contains covenants customary for such facilities, including a leverage ratio and
fixed charge coverage ratio. Under the terms of the Credit Agreement, the
Company had an additional $62.0 available at December 31, 1996. The Credit
Agreement also provides that it is an event of default if any person other than
American Home Products Corporation and its subsidiaries acquires more than 20%
of the voting power of all voting stock of the Company. The Company was in
compliance with all material terms, covenants and conditions of the Credit
Agreement at December 31, 1996. Other debt was $1.0 at both December 31, 1996
and 1995. The aggregate fair value of the Company's debt approximates its
carrying value due to the variable nature and frequent repricing of the debt
which is based on market conditions.
Under the terms of its Series C Cumulative Preferred Stock ("Series C
Stock"), the Company must maintain a debt-to-equity ratio of no more than 2-to-1
and must not incur more than $150.0 of debt unless the Company's equity is in
excess of $200.0, in which case the Company may incur additional debt as long as
its debt-to-equity ratio is not more than 0.75-to-1. At December 31, 1996, the
Company had $89.0 in debt, $314.3 in equity, as defined in the Series C Stock
covenants, and the ability to incur up to an additional $146.7 in debt under the
terms of the Series C Stock.
9. ENVIRONMENTAL MATTERS
AND OTHER CONTINGENT LIABILITIES AND COMMITMENTS
The Company is subject to substantial costs arising out of environmental laws
and regulations, which include obligations to remove or limit the effects on the
environment of the disposal or release of certain wastes or substances at
various sites. Liability for investigative, removal and remedial costs under
certain federal and state laws is retroactive, strict and joint and several. The
Company is currently a party to, or otherwise involved in, legal proceedings
directed at the cleanup of approximately 65 Superfund sites. Since the laws
pertaining to these sites provide for joint and several liability, a
governmental plaintiff could seek to recover all remediation costs at a waste
disposal site from any one of the potentially responsible parties ("PRPs") for
such site, including the Company, despite the involvement of other PRPs. In some
cases, the Company is one of several hundred identified PRPs, while in others it
is the only one or one of only a few. Generally, where there are a number of
financially solvent PRPs, liability has been apportioned, or the Company
believes, based on its experience with such matters, that liability will be
apportioned based on the type and amount of waste disposed by each PRP at such
disposal site and the number of financially solvent PRPs. The Company
- 31 -
<PAGE>
is conducting remediation at, or is otherwise responsible for, a number of
non-Superfund sites. Proceedings involving environmental matters, such as
alleged discharge of chemicals or waste material into the air, water or soil,
are pending against the Company in various states. In many cases, future
environmental-related expenditures cannot be quantified with a reasonable degree
of accuracy. In addition, from time to time in the ordinary course of its
business, the Company is informed of, and receives inquiries with respect to,
new sites which may contain environmental contamination for which the Company
may be responsible.
It is the Company's policy to accrue and charge against earnings,
environmental cleanup costs when it is probable that a liability has been
incurred and an amount is reasonably estimable. As assessments and cleanups
proceed, these accruals are reviewed periodically and adjusted, if necessary, as
additional information becomes available. These accruals can change
substantially due to such factors as additional information on the nature or
extent of contamination, methods of remediation required, and other actions by
governmental agencies or private parties. Cash expenditures often lag behind the
period in which an accrual is recorded by a number of years.
In accordance with the above policies, as of December 31, 1996 and 1995,
the aggregate environmental related accruals were $177.5 and $198.3,
respectively, of which $25.0 was included in accrued expenses in 1996 and $23.0
in 1995, with the remainder included in other noncurrent liabilities.
Environmental remediation spending for the years ended December 31, 1996, 1995
and 1994, was $26.8, $22.1 and $15.7, respectively. All accruals have been
recorded without giving effect to any possible future insurance proceeds.
Various environmental matters are currently being litigated and potential
insurance recoveries are unknown at this time but are considered unlikely.
While it is not feasible to predict the outcome of all pending
environmental suits and claims, it is reasonably possible that there will be a
necessity for future provisions for environmental costs which, in management's
opinion, will not have a material effect on the financial position of the
Company, but could be material to the results of operations of the Company in
any one accounting period. The Company cannot estimate any additional amount of
loss or range of loss in excess of the recorded amounts. Moreover, environmental
liabilities are paid over an extended period and the timing of such payments
cannot be predicted with any confidence.
The Company is also a party to various other claims and routine litigation
arising in the normal course of its business. Based on the advice of counsel,
management believes that the resolution of such claims and litigation will not
have a material adverse effect on the financial position of the Company, but
could be material to the results of operations of the Company in any one
accounting period.
Rental expense under property and equipment leases was $12.5 in 1996, $13.3
in 1995 and $13.4 in 1994. Estimated future minimum rental expenses under
property and equipment leases that have initial or remaining noncancelable lease
terms in excess of one year as of December 31, 1996, are:
Operating
Leases
1997 $ 8.5
1998 7.0
1999 6.5
2000 6.1
2001 5.7
Thereafter 6.1
Total minimum lease payments $39.9
- --------------------------------------------------------------------------------
At December 31, 1996 and 1995, the Company had $13.9 and $15.3,
respectively, of letters of credit outstanding for environmental and insurance
related matters.
- 32 -
<PAGE>
10. INCOME TAXES
The income tax provision (benefit) for the years ended December 31, 1996, 1995
and 1994, is based on earnings before income taxes as follows:
1996 1995 1994
Domestic $116.8 $107.8 $ 61.8
Foreign 25.3 24.3 18.8
Total $142.1 $132.1 $ 80.6
- --------------------------------------------------------------------------------
The components of the provision (benefit) for the years ended December 31,
1996, 1995 and 1994, are composed of the following:
1996 1995 1994
Current:
Federal $20.2 $ 25.2 $28.1
Foreign 6.6 9.3 10.1
Other, principally state 2.2 6.9 6.3
Total $29.0 $ 41.4 $44.5
- --------------------------------------------------------------------------------
Deferred:
Federal $22.2 $(157.9) $(8.4)
Foreign 1.3 1.1 (0.6)
Other, principally state 4.4 (20.8) (0.9)
Total $27.9 $(177.6) $(9.9)
Total income tax
provision (benefit) $56.9 $(136.2) $34.6
- --------------------------------------------------------------------------------
Domestic and foreign earnings of consolidated companies before income taxes
include all earnings derived from operations in the respective U.S. and foreign
geographic areas, whereas provisions (benefits) for income taxes include all
income taxes payable to (receivable from) U.S., foreign and other governments as
applicable, regardless of the situs in which the taxable income (loss) is
generated.
The temporary differences which give rise to a significant portion of
deferred tax assets and liabilities as of December 31, 1996 and 1995, are as
follows:
1996 1995
Deferred tax assets:
Allowance for bad debts $ 4.7 $ 6.7
Employee benefit accruals 6.9 8.1
Insurance accruals 9.8 9.0
Operating accruals 23.7 25.1
Inventory 8.8 8.2
Environmental accruals 66.9 78.0
Postretirement obligations 157.0 157.4
Other 12.0 14.2
Gross deferred tax assets 289.8 306.7
Valuation allowance (24.4) (24.4)
Net deferred tax assets 265.4 282.3
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Plants, equipment and facilities (99.3) (89.3)
Other (11.4) (11.4)
Gross deferred tax liabilities (110.7) (100.7)
Net deferred tax assets $154.7 $181.6
- --------------------------------------------------------------------------------
- 33 -
<PAGE>
In the fourth quarter of 1995, the Company made a partial reversal of
$193.0 of the previously established valuation allowance. The amount of this
reversal represented the Company's best estimate of the tax benefits which, more
likely than not, will be realized in future periods. Based on the Company's most
recent review of its tax position, no adjustment of the valuation allowance was
made in 1996.
A reconciliation between the Company's effective tax rate and the U.S.
federal income tax rate is as follows:
1996 1995 1994
Federal income tax rate 35.0% 35.0% 35.0%
Valuation allowance adjustment -- (146.3) --
Income subject to other than
the federal income tax rate 0.2 1.8 1.3
State taxes, net of
federal benefits 2.4 4.1 4.6
Tax on undistributed
foreign earnings -- 0.2 3.0
Other, net 2.4 2.1 (0.9)
Effective tax rate 40.0% (103.1)% 43.0%
- --------------------------------------------------------------------------------
11. RETIREMENT PLANS
The Company has defined benefit pension plans that cover employees in the United
States and a number of foreign countries. A separate pension plan is maintained
from which benefits solely attributable to Cyanamid service will be paid (the
"Past Service Retirement Plan"). Under certain circumstances, the Company is
obligated by the terms of the Series C Stock to make an annual contribution to
the Past Service Retirement Plan.The Company has met the funding requirements
for 1996 and 1995 and expects to fund the Past Service Retirement Plan in
accordance with the terms of the Series C Stock.
Net periodic pension expense for the years ended December 31, 1996, 1995 and
1994, included the following components:
1996 1995 1994
Service cost $ 9.0 $ 7.4 $ 8.3
Interest cost on projected
benefit obligation 15.5 14.2 11.7
Actual (return) loss on
plan assets (20.8) (23.5) 3.5
Net amortization and deferral 7.3 10.5 (14.5)
Net periodic pension expense $ 11.0 $ 8.6 $ 9.0
The funded status as of December 31, 1996 and 1995, for the Company's
retirement plans are shown below.
Funded Status 1996 1995
Actuarial present value of benefit obligations:
Vested benefit obligations $ 174.3 $ 156.7
Accumulated benefit obligation 188.5 171.0
- --------------------------------------------------------------------------------
Projected benefit obligation 221.6 203.7
Plan assets at fair value, primarily
marketable securities 192.0 162.2
- --------------------------------------------------------------------------------
Projected benefit obligation
over plan assets 29.6 41.5
Unrecognized net loss (24.1) (37.0)
Unrecognized prior service cost (3.3) (3.8)
Unrecognized transition asset 2.2 2.5
Adjustment required to recognize
minimum liability -- 9.8
- --------------------------------------------------------------------------------
Accrued pension cost recognized on
the Company's balance sheet $ 4.4 $ 13.0
- --------------------------------------------------------------------------------
- 34 -
<PAGE>
The provisions of SFAS No. 87, "Employers' Accounting for Pensions,"
requires recognition in the balance sheet of an additional minimum liability
when accumulated benefits are in excess of plan assets. In the fourth quarter of
1995, the Company recorded a $9.8 adjustment, to recognize the minimum liability
required primarily under the Past Service Retirement Plan. The adjustment, which
had no effect on 1995 earnings, was offset by recording a separate reduction to
stockholders' equity of $5.4, net of taxes of $4.4. At December 31, 1996, the
minimum liability adjustment of $9.8 was not needed and, accordingly was
eliminated since the plan assets exceeded the accumulated benefits.
The following table sets forth the major assumptions used to determine the
above information:
1996 1995 1994
Assumed discount rate 7.50% 7.25% 8.25%
Assumed rates for
future compensation
increases 4.0-10.0% 3.0-10.0% 4.0-10.0%
Expected long-term rate
of return on plan assets 9.0% 9.0% 9.0%
- --------------------------------------------------------------------------------
12. POSTRETIREMENT BENEFITS
OTHER THAN PENSIONS
The Company sponsors postretirement and postemployment benefit plans. The
postretirement plans provide medical and life insurance benefits to retirees who
meet minimum age and service requirements. The postemployment plans provide
salary continuation, disability related benefits, severance pay and continuation
of health costs during the period after employment but before retirement.
Net periodic postretirement benefit costs for the years ended December 31,
1996, 1995 and 1994, included the following components:
1996 1995 1994
Service cost $ 1.6 $ 1.7 $ 1.1
Interest cost 22.1 26.3 25.2
Actual return on plan assets (0.5) (0.6) (0.2)
Net amortization and deferral (4.7) (4.5) (4.2)
$ 18.5 $ 22.9 $ 21.9
- --------------------------------------------------------------------------------
The accrued postretirement benefit cost recognized in the Company's
consolidated balance sheets at December 31, 1996 and 1995, includes $20.0 in
accrued expenses and $364.7 and $364.6, respectively, in other noncurrent
liabilities. The following table presents the plan's funded status at December
31, 1996 and 1995:
1996 1995
Accumulated postretirement benefit obligation:
Retirees and surviving spouses $ 271.5 $ 300.5
Fully eligible active plan participants 38.0 32.5
Other active plan participants 8.7 9.2
- --------------------------------------------------------------------------------
Total accumulated postretirement
benefit obligation 318.2 342.2
Fair value of plan assets 11.5 10.5
- --------------------------------------------------------------------------------
Accumulated postretirement benefit
obligation over fair value of
plan assets 306.7 331.7
Unrecognized net gain (loss) 18.9 (10.6)
Unrecognized negative prior service cost 59.1 63.5
Accrued postretirement benefit cost $ 384.7 $ 384.6
- --------------------------------------------------------------------------------
- 35 -
<PAGE>
Measurement of the accumulated postretirement benefit obligations ("APBO")
was based on actuarial assumptions, including a discount rate of 7.50%, 7.25%
and 8.25% at December 31, 1996, 1995 and 1994, respectively. The assumed rate of
future increases in the per capita cost of health care benefits (health care
cost trend rate) is 9.50% in 1997, decreasing evenly over 5 years to 5.0%, and
remaining at that level thereafter. The health care cost trend rate has a
significant effect on the reported amounts of APBO and related expense. For
example, increasing the health care cost trend rate by one percentage point in
each year would increase the APBO at December 31, 1996, and the 1997 aggregate
service and interest cost by approximately $26.4 and $2.2, respectively.
13. OTHER FINANCIAL INFORMATION
Accrued expenses at December 31, 1996 and 1995, included the following:
1996 1995
Pensions and other employee benefits $ 27.7 $ 32.9
Other postretirement employee benefits 20.0 20.0
Salaries and wages 7.8 9.4
Environmental 25.0 23.0
Other 124.6 133.0
$ 205.1 $ 218.3
- --------------------------------------------------------------------------------
Cash payments during the years ended December 31, 1996, 1995 and 1994,
included interest of $4.0, $0.5 and $0.1, respectively. Income taxes paid in
1996, 1995 and 1994 were $49.2, $57.2 and $46.6, respectively. Income taxes paid
include foreign taxes paid in 1996 and 1995 of $10.7 and $7.2, respectively.
Foreign taxes paid in 1994 were considered immaterial.
Included in accounts receivable at December 31, 1996 and 1995, are
miscellaneous receivables of approximately $32.2 and $41.6, respectively.
14. STOCKHOLDERS' EQUITY
Stock Split. In June 1996, the Company declared a three-for-one stock split of
the Company's common stock effected in the form of a stock dividend. All share
and per share data, including stock option information but excluding treasury
shares through the date of the distribution of the stock dividend on July 23,
1996, have been restated to reflect the stock split.
Common Stock. The Company is authorized to issue 75 million shares of common
stock with a par value of $.01 per share, of which 45,494,198 shares were
outstanding at December 31, 1996. On January 27, 1997, the Board of Directors
approved, subject to a vote of the stockholders, a proposal to increase the
number of authorized shares of common stock to 150 million shares. At December
31, 1996, the Company had reserved approximately 11,714,355 shares for issuance
under the 1993 Stock Award and Incentive Plan (the "1993 Plan") described below.
Stock Award and Incentive Plan. The 1993 Plan is administered by a committee of
the Board of Directors (the "Committee"). The 1993 Plan provides for grants of a
variety of awards, such as stock options (including incentive stock options and
nonqualified stock options), stock appreciation rights (including limited stock
appreciation rights), restricted stock (including performance shares),
restricted stock units, deferred stock awards and dividend equivalents, and
other stock or cash-based awards, to be made to selected employees and
independent contractors of the Company and its subsidiaries and affiliates at
the discretion of the Committee. In addition, automatic formula grants of
restricted stock and nonqualified stock options are awarded to non-employee
directors.
The stock option component of the 1993 Plan provides for the granting of
nonqualified stock options to officers, directors and certain key employees at
100% of the market price on the date the option was granted. Options are
generally exercisable in cumulative installments of 331/3% per year commencing
one year after the date of grant and annually thereafter, with contract lives of
generally 10 years from the date of grant. A summary of the status of the
Company's stock options as of December 31, 1996, 1995 and 1994, and changes
during the year ended on those dates is presented below.
- 36 -
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Under Option:
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 4,487,037 $ 6.86 3,924,900 $ 5.44 -- $--
Granted 876,130 25.14 850,800 13.16 4,093,440 5.47
Exercised (429,059) 5.78 (245,877) 5.47 -- --
Forfeited (27,912) 14.12 (42,786) 9.62 (168,540) 5.42
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 4,906,196 $10.18 4,487,037 $ 6.86 3,924,900 $5.44
- ------------------------------------------------------------------------------------------------------------------------------------
Options exercisable at year-end 2,374,586 $ 6.39 1,239,306 $ 5.46 21,810 $5.42
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average fair value of
options granted during the year $10.65 $ 5.94
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The fair value of each stock option granted during 1996 and 1995 is
estimated on the date of grant using the Black-Scholes option pricing model with
the following assumptions:
1996 1995
Expected life (years) 6.0 6.0
Expected volatility 30.69% 30.69%
Expected dividend yield -- --
Risk-free interest rate 5.87% 7.11%
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Exercise Prices Outstanding Life Price Exercisable Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 4.75-10.00 3,237,519 7.12 years $ 5.44 2,084,389 $ 5.43
11.67-19.58 802,297 8.14 years 13.16 288,097 13.16
25.08-37.75 866,380 9.13 years 25.16 2,100 25.08
- ------------------------------------------------------------------------------------------------------------------------------------
4.75-37.75 4,906,196 7.64 years $10.18 2,374,586 $ 6.39
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company has issued performance stock, a form of restricted stock, with
restrictions related to the Company's financial performance for the applicable
periods. Awards made in 1994 were for the 1994, 1995 and 1996 performance
periods, while awards made in 1995 and 1996 were for the 1997 and 1998
performance periods, respectively. Restrictions lapse on the stock upon the
attainment of performance criteria established by the Committee which, under
certain circumstances, may be revised. The amount of unearned compensation
recognized as expense was $8.4 in 1996 and $6.4 in 1995 and 1994, respectively.
A summary of restricted stock award activity is as follows:
1996 1995 1994
Outstanding awards -
beginning of year 357,936 568,872 --
New awards granted 58,107 74,226 840,900
Shares with restrictions
lapsed (255,123) (252,825) (252,678)
Restricted shares forfeited (29,616) (32,337) (19,350)
Outstanding awards -
end of year 131,304 357,936 568,872
- --------------------------------------------------------------------------------
Weighted average market
value of stock
on award date $ 23.26 $ 13.13 $ 5.47
- --------------------------------------------------------------------------------
Included within "Shares with restrictions lapsed" in 1996 above, are
193,935 shares which were forfeited by certain participants. The Company issued
these participants equivalent deferred stock awards which will be distributed in
the form of shares of common stock, generally, following termination of
employment.
- 37 -
<PAGE>
In late 1995, the Company implemented a stock appreciation plan for all
eligible active employees which excluded those employees who customarily receive
stock options. The stock appreciation units represent a potential payout to
employees, in cash, of the difference between the base price of the Company's
stock of $20.00 per share and the lesser of the price at term, or $33.33. The
stock appreciation units mature 50% at December 31, 1997 and December 31, 1999.
In December 1996, the plan was amended to provide for the immediate payout of
five hundred dollars per participant which represented 25.0% of the total
maximum payout. The compensation cost related to 1996 was $2.2 and was
considered immaterial in 1995.
A summary of changes in common stock issued and treasury stock for the
years ended December 31, 1996, 1995 and 1994 follows:
Common Treasury
Stock Stock
Balance at December 31, 1993 36,842,377 --
Award of performance stock, net
of forfeitures 791,550 --
Award of restricted stock 30,000 --
Purchase of treasury stock -- 6,917
- --------------------------------------------------------------------------------
Balance at December 31, 1994 37,663,927 6,917
Issuance pursuant to public offering 10,363,500 --
Issuance pursuant to stock option plan 245,877 --
Award of performance stock,
net of forfeitures 41,889 --
- --------------------------------------------------------------------------------
Balance at December 31, 1995 48,315,193 6,917
Purchase of treasury stock -- 3,033,000
Issuance pursuant to stock option plan 235,389 (153,676)
Award of performance stock
and restricted stock 50,652 (2,485)
Forfeitures and performance
stock deferrals (223,551) (271)
- --------------------------------------------------------------------------------
Balance at December 31, 1996 48,377,683 2,883,485
Shares held in treasury prior to July 23, 1996 were not subject to the
stock split.
There were no dividends declared on common stock in 1996 and 1995.
The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its stock-based compensation plans.
Accordingly, no compensation costs have been recognized for its stock option
plan. The compensation costs that have been charged against income for its
restricted stock awards and stock appreciation plan were noted above. Set forth
as follows are the Company's net earnings and earnings per share,presented both
"as reported" and "pro forma," as if compensation cost had been determined
consistent with the provisions of SFAS 123:
1996 1995
Net earnings available for common stockholders:
As reported $ 100.1 $ 76.3
Pro forma 98.0 75.3
Primary earnings per share:
As reported $ 2.01 $ 1.80
Pro forma 1.97 1.77
Fully diluted earnings per share:
As reported $ 2.01 $ 1.43
Pro forma 1.97 1.42
- --------------------------------------------------------------------------------
- 38 -
<PAGE>
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply for awards prior to 1995,
and the Company anticipates granting additional awards in future years.
15. PREFERRED STOCK -
REDEEMABLE AND NON-REDEEMABLE
The Company is authorized to issue 20 million shares of preferred stock with a
par value of $.01 per share in one or more classes or series with rights and
privileges as adopted by the Board of Directors. As of the Effective Date, the
Company had issued to Cyanamid 8 million shares of preferred stock having an
aggregate liquidation and redemption value of $200.0, which included shares of
Series A Stock, par value $.01 per share, Series B Stock, par value $.01 per
share, and Series C Stock, par value $.01 per share. During 1995, the Company
repurchased all of its outstanding Series A Stock and Series B Stock (see
"Preferred Stock Repurchase" below).
The Series C Stock, of which 4,000 shares are issued and outstanding, is
perpetual, has a liquidation and redemption value of $0.1, an annual dividend of
$1.83 per share (7.32%) and is redeemable at the Company's option under certain
limited circumstances. Shares of Series C Stock are not transferable except to a
subsidiary of Cyanamid. The Series C Stock provides Cyanamid with the right to
elect one director to the Company's Board of Directors and contains certain
covenants requiring the Company to satisfy its environmental remediation
obligations, retiree health care and life insurance obligations and certain
pension contribution obligations in a timely and proper manner, and certain
other covenants requiring the Company to maintain specified financial ratios and
restricting the Company from taking certain actions, including paying dividends
on its common stock in certain circumstances, merging or consolidating or
selling all or substantially all of the Company's assets or incurring
indebtedness in violation of certain covenants, without the consent of Cyanamid
as the holder of the Series C Stock. In the event that the Company fails to
comply with certain of such covenants, Cyanamid, as the holder of the Series C
Stock, will have additional rights which may include approval of the Company's
capital expenditures and, in certain more limited circumstances, appointing
additional directors to the Company's Board of Directors, which together with
Cyanamid's existing representative, would constitute a majority of the Company's
Board of Directors. The Company agreed with Cyanamid in the preferred stock
repurchase agreement that it would not redeem the Series C Stock prior to
December 16, 1999.
Preferred Stock Repurchase. In August 1995, the Company entered into a preferred
stock repurchase agreement with Cyanamid pursuant to which the Company agreed to
repurchase all outstanding shares of its Series A Stock and its Series B Stock
from Cyanamid. The Company repurchased the Series A Stock on August 23, 1995,
for $90.0 plus $1.2 of accrued dividends. On November 7, 1995, the Company
repurchased the Series B Stock for $305.1 plus $0.6 of accrued dividends, which
was financed by the proceeds of a stock offering of 9.6 million shares of the
Company's common stock, $100.0 in borrowings under the Company's Credit Facility
and available cash.
The Series A Stock had an aggregate liquidation value of $95.5 and an
aggregate annual dividend of $8.4. The Series B Stock had an aggregate
liquidation value of $104.4, an aggregate annual dividend of $6.3, and was also
convertible at a conversion price of $6.26 per share into 16,660,611 shares of
common stock, or approximately 29.6% of the common stock outstanding on a fully
diluted basis (assuming conversion of the Series B Stock) prior to the
repurchase.
The Company also agreed to pay to Cyanamid an additional amount if, during
the two-year period commencing on November 7, 1995, any person announces an
offer to acquire and thereafter acquires more than 50% of the Company's issued
and outstanding common stock (a "Transaction").
The additional amount will be payable within 30 days following consummation
of a Transaction and will equal, subject to antidilution adjustments, 6,297,111
multiplied by the excess, if any, of the purchase price per share of common
stock paid in the Transaction over the greater of the average price of common
stock during a defined period of time preceding announcement of the Transaction
and $17.66. The additional amount payable will be proportionately reduced if the
Transaction and any related transactions collectively constitute an offer to
acquire less than 100% of the Company. In order to induce the Company to agree
to pay such additional amount, Cyanamid agreed on behalf of itself and American
Home Products Corporation that, during such two-year period, neither company
would directly or indirectly take any action having the purpose of inducing any
person to seek to acquire the Company, and Cyanamid further agreed that it would
reject any request for a waiver, consent or approval in connection with an offer
or possible offer to acquire the Company made to it, including any waiver,
consent or approval under the Series C Stock.
After the repurchase, the shares of the Series A Stock and Series B Stock
were retired and assumed the status of authorized but unissued shares of
preferred stock, and the Company is not currently authorized to issue any
additional shares of Series A Stock or Series B Stock.
- 39 -
<PAGE>
16. SUBSEQUENT
EVENTS (UNAUDITED)
On January 31, 1997, the Company completed the sale of its Acrylic Fibers
business to a subsidiary of Sterling Chemicals, Inc. The assets transferred
include Cytec's plant located near Pensacola, Florida. The Company received
approximately $88.0 in cash, subject to certain post-closing adjustments, and
received other consideration, including the assumption by Sterling of certain
contingent and other liabilities, with a value of approximately $15.0. The
Company expects to record a gain from this transaction in the first quarter of
1997. Cytec's Acrylic Fibers business had sales of approximately $138.7, $136.1
and $121.1 in 1996, 1995 and 1994, respectively.
On November 8, 1996, the Company announced a restructuring proposal for its
Botlek, Netherlands plant. The restructuring would include a major reengineering
of the plant organization, relocation of certain manufacturing operations to
other Cytec sites and staff reductions. The proposal was subject to negotiations
with the Works Council and the Unions. The negotiations were completed in
February and the Company is moving forward with the restructuring. The Company
expects to record a charge against earnings in the first quarter of 1997 related
to this transaction.
On January 16, 1997, the Company announced the consolidation of its
surfactant and docusate manufacturing at its Willow Island, West Virginia
facility. As a result of this consolidation, the Company will close its Linden,
New Jersey plant. The phasedown of the Linden facility will occur over
approximately the next 18 months. The Company expects to record a charge against
earnings in the first quarter of 1997 related to this transaction.
The Company believes that the impact of the above divestiture and
restructurings will have an immaterial effect on the results of operations for
1997.
17. OPERATIONS
BY GEOGRAPHIC AREAS
The Company is engaged primarily in the manufacture and sale of a highly
diversified line of chemical products.
Net sales to unaffiliated customers presented below are based upon the sales
destination which is consistent with management's view of the business.
U.S. exports included in net sales are also based upon the sales
destination and represent direct sales of U.S.-based entities to unaffiliated
customers outside the United States.
Earnings from operations are also based upon destination and consist of total
net sales less operating expenses.
Identifiable assets are those assets used in the Company's operations in each
geographic area. Unallocated assets are primarily miscellaneous receivables,
construction in progress, and cash and cash equivalents.
- 40 -
<PAGE>
OPERATIONS BY GEOGRAPHIC AREAS
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
United States $ 766.6 $ 782.2 $ 758.7
Other Americas 110.9 100.3 94.5
Europe, Mideast, Africa 219.7 207.1 142.5
Asia/Pacific Rim 162.4 170.5 105.6
Total $1,259.6 $1,260.1 $1,101.3
- ---------------------------------------------------------------------------------------------
U.S. exports included in net sales above
Other Americas $ 34.3 $ 28.3 $ 20.7
Europe, Mideast, Africa 13.9 21.8 23.6
Asia/Pacific Rim 100.4 108.7 54.8
Total $ 148.6 $ 158.8 $ 99.1
- ---------------------------------------------------------------------------------------------
Earnings from operations
United States $ 91.9 $ 52.6 $ 28.8
Other Americas 19.7 13.2 12.5
Europe, Mideast, Africa 21.2 22.3 11.0
Asia/Pacific Rim 3.3 34.6 16.2
Total $ 136.1 $ 122.7 $ 68.5
- ---------------------------------------------------------------------------------------------
Interest, and other income (expense), net $ 10.0 $ 10.4 $ 12.2
Interest expense 4.0 1.0 0.1
Earnings before income taxes $ 142.1 $ 132.1 $ 80.6
Equity in net earnings of associated companies $ 14.9 $ 13.9 $ 10.1
- ---------------------------------------------------------------------------------------------
Identifiable assets
United States $ 574.1 $ 591.1 $ 529.8
Other Americas 106.1 101.2 95.9
Europe, Mideast, Africa 117.4 108.1 95.1
Asia/Pacific Rim 21.6 19.1 16.8
Total $ 819.2 $ 819.5 $ 737.6
Equity in net assets of and advances to associated companies $ 143.7 $ 155.1 $ 137.6
Unallocated assets $ 298.2 $ 319.2 $ 324.2
Total assets $1,261.1 $1,293.8 $1,199.4
- ---------------------------------------------------------------------------------------------
</TABLE>
MANAGEMENT STATEMENT
Your management has prepared and is responsible for the accompanying
Consolidated Financial Statements. These statements have been prepared in
conformity with generally accepted accounting principles appropriate in the
circumstances and necessarily include some amounts based on management's
estimates and judgments. All financial information in this annual report is
consistent with that in the Consolidated Financial Statements.
The Company's accounting systems include internal controls designed to
provide reasonable assurance of the reliability of its financial records and the
proper safeguarding and use of its assets. Such controls are based on
established policies and procedures, and are implemented by trained, skilled
personnel with an appropriate segregation of duties. The internal controls are
complemented by the Company's internal auditors who conduct regular and
extensive internal audits.
The Company's independent auditors, KPMG Peat Marwick LLP, have audited the
Consolidated Financial Statements. Their audits were conducted in accordance
with generally accepted auditing standards as indicated in their report.
- 41 -
<PAGE>
The Board of Directors exercises its responsibility for these financial
statements through its Audit Committee, composed solely of nonmanagement
directors, which meets periodically with management, the internal auditors and
the independent auditors to review internal accounting control, auditing and
financial reporting matters. The independent auditors and the internal auditors
have full and free access to the Audit Committee.
Darryl D. Fry
Chairman and Chief Executive Officer
James P. Cronin
Executive Vice President and Chief Financial Officer
West Paterson, NJ
January 27, 1997
- -------------------------------------------------------------------------------
INDEPENDENT
AUDITOR'S REPORT
The Board of Directors
and Stockholders
Cytec Industries Inc.:
We have audited the accompanying consolidated balance sheets of Cytec Industries
Inc. and subsidiaries, as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cytec
Industries Inc. and subsidiaries at December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Short Hills, NJ
January 27, 1997
- 42 -
<PAGE>
QUARTERLY DATA
<TABLE>
<CAPTION>
(Dollars in millions, except per share amounts) 1Q 2Q 3Q 4Q Year
- ------------------------------------------------------------------------------------------------------------------------------------
1996
<S> <C> <C> <C> <C> <C>
Net sales $ 304.5 $ 318.1 $ 321.7 $ 315.3 $ 1,259.6
Gross profit1 86.9 91.7 92.1 90.8 361.5
Net earnings 22.6 25.4 26.0 26.1 100.1
Earnings per common share2
Primary $ .44 $ .51 $ .53 $ .54 $ 2.01
Fully diluted $ .44 $ .51 $ .53 $ .54 $ 2.01
- ------------------------------------------------------------------------------------------------------------------------------------
1995
Net sales $ 310.7 $ 333.1 $ 320.3 $ 296.0 $ 1,260.1
Gross profit1 87.2 87.2 85.3 88.2 347.9
Net earnings3 22.1 22.6 22.4 215.1 282.2
Dividends on preferred stock 3.7 3.7 2.8 0.5 10.7
Excess of repurchase price over related
book value of Series A Stock and
Series B Stock4 -- -- -- 195.2 195.2
Earnings per common share2
Primary $ .46 $ .47 $ .48 $ .41 $ 1.80
Fully diluted $ .35 $ .36 $ .37 $ .37 $ 1.43
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Gross profit is derived by subtracting manufacturing cost of sales from net
sales.
2 The sum of the quarters may not equal the full year primary and fully
diluted earnings per share as each period is calculated separately.
3 See Note 10 to the Consolidated Financial Statements for a discussion of
the partial reversal of the deferred income tax valuation allowance
recorded in the fourth quarter 1995.
4 See Note 15 to the Consolidated Financial Statements for a discussion of
the repurchase of Series A Stock and Series B Stock.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
- 43 -
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Executive Officers
Set forth below is certain information concerning the
executive officers of the Company. Each such person was first
elected to the indicated office with the Company on December
17, 1993 unless otherwise specified, and serves at the
pleasure of the Board of Directors of the Company.
<TABLE>
<CAPTION>
Name Age Positions
---- --- -----------------------------------------------------------------------------------------
<S> <C> <C>
D. D. Fry 58 Mr. Fry is Chairman of the Board and Chief Executive Officer of the Company, having also
served as President of the Company from its inception until January 7, 1997. From
January 1991 to December 1993, he was an Executive Vice President of Cyanamid and
President of the Chemicals Group of Cyanamid.
D. Lilley 50 Mr. Lilley was elected President and Chief Operating Officer and a member of the Board of
Directors effective January 8, 1997. From 1994 until that date, he was a Vice President of
American Home Products Corporation, responsible for the Global Medical Device business.
Prior to that time, he was Vice President and a member of the Executive Committee of
Cyanamid.
S. M. Crum 45 Mr. Crum is an Executive Vice President of the Company. From March 1992 to December
1993, he was a Group Vice President of the Chemicals Group of Cyanamid. From April
1991 to March 1992, he was a Vice President, Polymer Products Division of Cyanamid.
J. P. Cronin 43 Mr. Cronin is Executive Vice President and Chief Financial Officer of the Company, having
previously served as Vice President and Chief Financial Officer of the Company from its
inception until he was elected an Executive Vice President in September 1996. From
October 1992 to December 1993, he was Controller and Chief Financial Officer of the
Chemicals Group of Cyanamid. From March 1991 to October 1992, he was Group
Controller, Chemicals Group of Cyanamid.
E. F. Jackman 51 Mr. Jackman is Vice President, General Counsel and Secretary of the Company. From July
1992 to December 1993, he was General Counsel of the Chemicals Group of Cyanamid.
From January 1991 to July 1992, he was a Manager of the Legal Department of Cyanamid.
H. Porosoff 51 Mr. Porosoff was elected Vice President and Chief Technology Officer of the Company in
June 1995. From December 1993 to June 1995, he was Vice President, Research and
Development of the Company. From March 1992 to December 1993, he was Vice President
and Director of Research for the Chemicals Group of Cyanamid. From January 1989 to
March 1992, he was Director of Chemicals Research for Cyanamid.
J. W. Hirsch 54 Mr. Hirsch is Vice President, Employee Resources of the Company. From January 1991
to December 1993, he was the Personnel Director of the Chemicals Group of Cyanamid.
K. Shah 48 Mr. Shah was elected Vice President - Corporate Planning and Business Development and
Investor Relations of the Company in December 1995, having previously served as Director,
Corporate Planning and Business Development and Investor Relations since December 1993.
Prior to 1993, he served the Chemicals Group of Cyanamid since 1979 in a number of
capacities (primarily planning and business development) including as Director, Planning and
Business Development of the Chemicals Group from 1991 to 1993.
D. M. Drillock 39 Mr. Drillock was elected Controller of the Company in December 1995, having previously
served as Controller in a non-officer capacity since December 1993. Prior to this, he served
the Chemicals Group of Cyanamid as Division Controller.
T. P. Wozniak 43 Mr. Wozniak is Treasurer of the Company, having joined the Company in November 1993.
Prior to joining the Company, he served since 1987 as Assistant Treasurer of AMAX Inc.
</TABLE>
- 44 -
<PAGE>
The remainder of the information required by this Item is incorporated
by reference from pages 1, 2, 8 and 9 of the Registrant's definitive
Proxy Statement for its 1997 Annual Meeting of Common Stockholders
filed pursuant to Regulation 14A.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference
from pages 11 through 14 down to "COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE REPORT," and from pages 18 and 19 down to
"INFORMATION CONCERNING INDEPENDENT PUBLIC ACCOUNTANTS" of the
Registrant's definitive Proxy Statement for its 1997 Annual Meeting of
Common Stockholders filed pursuant to Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated by reference
from pages 8 and 9 of the Registrant's definitive Proxy Statement for
its 1997 Annual Meeting of Common Stockholders filed pursuant to
Regulation 14A.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by reference
from page 10 of the Registrant's definitive Proxy Statement for its
1997 Annual Meeting of Common Stockholders filed pursuant to
Regulation 14A.
- 45-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) List of Financial Statements:
Cytec Industries Inc. and Subsidiaries Consolidated Financial
Statements (See Item 8):
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1995, and 1994
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995, and 1994
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1996, 1995, and 1994
Notes to Consolidated Financial Statements
(a)(2) Cytec Industries Inc. and Subsidiaries Financial Statement Schedules
for the Years Ended December 31, 1996, 1995, and 1994
Independent Auditors' Report
Schedule II - Valuation and Qualifying Accounts
All schedules, other than indicated above, are omitted because of the
absence of the conditions under which they are required or because the
information required is shown in the financial statements or notes thereto.
(a)(3) Exhibits:
Exhibit No. Description
----------- -----------
2.1 Transfer and Distribution Agreement**
2.2 Preferred Stock Repurchase Agreement****
2.3 Amendment No. 1 to Preferred Stock Repurchase Agreement****
3.1 Certificate of Incorporation (incorporated by reference to
correspondingly numbered exhibit in Quarterly Report on Form
10-Q for Quarter ended September 30, 1996)
3.2 By-laws (incorporated by reference to correspondingly
numbered exhibit in Quarterly Report on Form 10-Q for
Quarter ended September 30, 1996)
4.1 Form of Common Stock Certificate*
- 46 -
<PAGE>
4.4 Certificate of Designations, Preferences and Rights of
Series C Preferred Stock**
4.7 Form of Series C Preferred Stock Certificate*
10.1 Environmental Matters Agreement**
10.2 OPEB Matters Agreement**
10.3 Tax Sharing Agreement**
10.4 Corporate Services Agreement**
10.6(a) Cytec Services Agreement**
10.6(b) Consulting Services Agreement**
10.7 Intellectual Property Agreements (consisting of (i)
Assignment of U.S. Patents, (ii) Assignment of U.S. Patent
Applications, (iii) Assignment of Foreign Patents and Patent
Applications, (iv) Assignment of Records of Invention, (v)
Exclusive Patent and Knowhow License, (vi) Option Agreement
for Non-Exclusive Patent and Knowhow License, (vii) Non-
Exclusive Patent and Knowhow License, (viii) Agreement re
access to CL File and (ix) Assignment of Knowhow)**
10.8 Trademark and Copyright Assignment Agreement**
10.9(a) Aminonitrile Manufacturing Services Agreement**
10.10 Shared Facility and Distribution Agreements** (consisting of
(i) Willow Island Services Agreement, (ii) Willow Island
Services Agreement - Cytec to Cyanamid and (iii) Willow
Island Ground Lease).
10.12 Amended and Restated Credit Agreement
10.13 Executive Compensation Plans and Arrangements
10.13(a) 1993 Stock Award and Incentive Plan, as amended
(incorporated by reference to Exhibit I to the Registrant's
definitive Proxy Statement for its 1997 Annual Meeting of
Common Stockholders filed pursuant to Regulation 14A.)
10.13(b) Form of Performance Stock Award/Performance Cash Award Grant
Letter
10.13(c) Rule No. 1 under 1993 Stock Award and Incentive Plan
10.13(d) Form of Stock Option Grant Letter
10.13(e) Rule No. 2, as amended, under 1993 Stock Award and Incentive
Plan
- 47 -
<PAGE>
10.13(f) Rule No. 3 under 1993 Stock Award and Incentive Plan*****
10.13(g) Executive Income Continuity Plan (incorporated by reference
to correspondingly numbered exhibit to Quarterly Report on
Form 10-Q for quarter ended September 30, 1996)
10.13(h) Key Manager Income Continuity Plan (incorporated by
reference to correspondingly numbered exhibit to Quarterly
Report on Form 10-Q for quarter ended September 30, 1996)
10.13(i) Employee Income Continuity Plan******
10.13(j) Cytec Excess Retirement Benefit Plan***
10.13(k) Cytec Supplemental Employees Retirement Plan******
10.13(l) Cytec Executive Supplemental Employees Retirement Plan******
10.13(m) Compensation Tax Equalization Plan***
10.13(n) Cytec Supplemental Savings and Profit Sharing Plan******
10.13(p) Trust Agreement effective as of January 1, 1994 between
Cytec Industries Inc. and First Fidelity Bank N.A.
(Exhibit 10.13(p) incorporated by reference to corresponding
exhibit to Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995.)
10.13(q) Deferred Compensation Plan*****
10.13(r) Deferred Compensation Agreement with F. W. Armstrong*****
10.14 Acrylonitrile Supply agreement between Cyanamid and
Manhattan Chemical Inc., dated January 29, 1993*
10.15 Master Agreement between American Cyanamid Company, et. al.
and Shell Oil Company, et. al., dated April 1, 1988*
10.16 Limited Partnership Agreement between Mivida Corporation,
et. al. and Shell Polymers and Catalysts Enterprises, Inc.,
et. al., dated April 1, 1988*
10.17 Partnership Agreement between Cyanamid Plastics, Inc., and
Rohacryl, Inc., dated July 1, 1976*
10.18(a) Joint Venture Agreement between Cyanamid Melamine, Inc., and
DCP Melamine North America, Inc., dated April 15, 1986*
- 48 -
<PAGE>
10.18(b) Agreement dated April 15, 1986 between Cyanamid and DSM
Chemische Production BV, as amended October 24, 1994
(Exhibit 10.18(b) incorporated by reference from
corresponding exhibit to Annual Report on Form 10-K for year
ended December 31, 1994.)
10.19 Mineral Rights Agreement between Cyanamid, Kerr-McGee
Corporation, Brewster Phosphates and International Minerals
& Chemical Corporation, dated May 7, 1986*
10.20 Mineral Lease between Cyanamid, Kerr-McGee Corporation,
Brewster Phosphates and International Minerals & Chemical
Corporation, dated October 10, 1986*
10.21(a) Joint Venture Agreement dated as of February 23, 1984 among
Cyanamid Overseas Corporation and Dyno Industrier A.S.
10.21(b) Amendment to Joint Venture Agreement dated as of December
16, 1993, among Cyanamid Overseas Corporation, Dyno
Industrier A.S. and Cytec Overseas Corporation
(Exhibits 10.21(a) and (b) incorporated by reference from
corresponding Exhibit in quarterly report on Form 10-Q for
the quarter ended March 31, 1994.)
10.22(a) Joint Venture Agreement between Cyanamid Methanol, Inc. and
MG Fortier, Inc.
10.22(b) Methanol Sales Agreement between Cyanamid Methanol, Inc. and
MG Fortier, Inc.
10.22(c) Methanol Sales Contract between Fortier Methanol Company and
Cyanamid Methanol, Inc.
(Exhibits 10.22(a), (b) and (c) incorporated by reference
from Exhibits 10(i), 10(j) and 10(k) to quarterly report on
Form 10-Q for the quarter ended September 30, 1994.)
10.23 Asset Purchase Agreement dated as of December 23, 1996
between Sterling Fibers, Inc., Sterling Chemicals, Inc.,
Sterling Chemicals Holdings, Inc., Cytec Acrylic Fibers
Inc., Cytec Technology Corp. and Cytec Industries, Inc.
11(a) Historical Earnings Per Share computations for the year
ended December 31, 1996
11(b) Historical Earnings Per Share computations for the year
ended December 31, 1995
- 49 -
<PAGE>
11(c) Historical Earnings Per Share computations for the year
ended December 31, 1994
12 Computation of Ratio of Earnings to Fixed Charges
21 Subsidiaries of the Company
23 Consent of KPMG Peat Marwick LLP (related to the
consolidated financial statements of Cytec Industries Inc.
and Subsidiaries)
24(a-f) Powers of Attorney of F. W. Armstrong, G. W. Burns, L. L.
Hoynes, Jr., D. Lilley, W. P. Powell, and J. R. Satrum
27 Financial Data Schedule
----------
* Incorporated by reference to corresponding exhibit to
Registrant's Registration Statement on Form 10, as amended.
** Incorporated by reference to corresponding exhibit to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.
*** Incorporated by reference to Exhibit 10(a) through (h),
respectively, to Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1994.
**** Incorporated by reference to Exhibits 2(b), (Exhibit 2.2)
and 2(c) (Exhibit 2.3) and 99(a) (Exhibit 10.12) to
Registrant's Registration Statement on Form S-3,
Registration No. 33-97328.
***** Incorporated by reference to corresponding exhibits to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996.
****** Incorporated by reference to exhibits 10.13(i), 10.13(k),
10.13(l) and 10.13(n) to Registrant's Report on Form 10-Q
for the quarter ended June 30, 1996.
- 50 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CYTEC INDUSTRIES INC.
(Registrant)
DATE: March 27, 1997 By:/s/D. D. Fry
-------------------------
D. D. Fry
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
DATE: March 27, 1997 /s/D. D. Fry
-------------------------
D. D. Fry
Chairman and Chief Executive Officer
F. W. Armstrong, Director }
G. A. Burns, Director }
D. Lilley, Director } By:/s/E. F. Jackman
-------------------------
Attorney in Fact
L. L. Hoynes, Jr., Director }
W. P. Powell, Director }
J. R. Satrum, Director }
DATE: March 27, 1997 /s/J. P. Cronin
---------------------------------------
J. P. Cronin, Executive Vice President,
Chief Financial and Accounting Officer
- 51 -
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Cytec Industries Inc.
Under date of January 27, 1997 we reported on the consolidated balance sheets of
Cytec Industries Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1996, as
contained in the 1996 annual report to stockholders. These consolidated
financial statements and our report thereon are included in the annual report on
Form 10-K for the year 1996. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedules as listed in the accompanying index. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statement schedules based on our audits.
In our opinion, such financial statements 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.
KPMG Peat Marwick LLP
Short Hills, New Jersey
January 27, 1997
- 52 -
<PAGE>
Schedule II
Cytec Industries Inc.
Valuation and Qualifying Accounts
Year-ended December 31, 1996
(Millions of dollars)
<TABLE>
<CAPTION>
Additions or (deductions) Other
Balance charged or (credited) to Additions or Balance
Description 12/31/95 expenses (deductions) 12/31/96
- ----------- -------- ------------------------- ----------- --------
<S> <C> <C> <C> <C>
Reserves deducted
from related assets:
Doubtful
accounts $11.6 -- $(0.5)(1) $11.1
Total investments
and advances and
other assets $ 7.2 -- -- $ 7.2
<CAPTION>
Additions or (deductions) Other
Balance charged or (credited) to Additions or Balance
Description 12/31/94 expenses (deductions) 12/31/95
- ----------- -------- ------------------------- ----------- --------
<S> <C> <C> <C> <C>
Reserves deducted
from related assets:
Doubtful
accounts $11.6 -- -- $11.6
Total investments
and advances and
other assets $ 7.2 -- -- $ 7.2
<CAPTION>
Additions or (deductions) Other
Balance charged or (credited) to Additions or Balance
Description 12/31/93 expenses (deductions) 12/31/94
- ----------- -------- ------------------------- ----------- --------
<S> <C> <C> <C> <C>
Reserves deducted
from related assets:
Doubtful
accounts $ 9.5 $ 2.6 $(0.5)(1) $11.6
Total investments
and advances and
other assets $ 7.2 -- -- $ 7.2
</TABLE>
(1) Principally bad debts written off, less recoveries and exchange
- 53 -
<PAGE>
Exhibit Index
-------------
Page Herein
-----------
2.1 *
2.2 *
2.3 *
3.1 *
3.2 *
4.1 *
4.4 *
4.7 *
10.1 *
10.2 *
10.3 *
10.4 *
10.6(a) *
10.6(b) *
10.7 *
10.8 *
10.9(a) *
10.10 *
10.12
10.13(a) *
10.13(b)
10.13(c)
10.13(d)
10.13(e)
10.13(f) *
10.13(g) *
10.13(h) *
10.13(i) *
10.13(j) *
10.13(k) *
10.13(l) *
10.13(m) *
10.13(n) *
10.13(p) *
10.13(q) *
10.13(r) *
10.14 *
10.15 *
10.16 *
10.17 *
10.18(a) *
10.18(b) *
10.19 *
- 54 -
<PAGE>
Page Herein
-----------
10.20 *
10.21(a) *
10.21(b) *
10.22(a) *
10.22(b) *
10.22(c) *
10.23
11(a)
11(b)
11(c)
21
23
24 (a-f)
27
* Denotes exhibit incorporated by reference
- 55 -
EXHIBIT 10.12
CONFORMED COPY
AS AMENDED
THROUGH 3/21/97
U.S. $150,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 1, 1995
Among
CYTEC INDUSTRIES INC.,
as Borrower,
and
THE BANKS NAMED HEREIN,
as Banks,
and
CITIBANK, N.A.,
as Agent
<PAGE>
T A B L E O F C O N T E N T S
Section Page
- ------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01. Certain Defined Terms................................................. 1
1.02. Computation of Time Periods........................................... 19
1.03. Accounting Terms...................................................... 19
1.04. Currency Equivalents Generally........................................ 19
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
2.01. The Revolving Advances; Redemption Borrowings......................... 20
2.02. Making the Revolving Advances......................................... 21
2.03. Fees.................................................................. 23
2.04. Reduction or Termination of the Commitments........................... 23
2.05. Repayment of Revolving Advances....................................... 24
2.06. Interest on Revolving Advances........................................ 24
2.07. Interest Rate Determination........................................... 25
2.08. Voluntary Conversion of Revolving Advances............................ 25
2.09. Prepayments of Revolving Advances..................................... 26
2.10. Increased Costs....................................................... 27
2.11. Illegality............................................................ 28
2.12. Payments and Computations............................................. 29
2.13. Taxes................................................................. 30
2.14. Sharing of Payments, Etc.............................................. 32
2.15. The Competitive Bid Advances.......................................... 33
2.16. Voluntary Redenomination of Revolving Advances........................ 37
2.17. Currency Equivalents.................................................. 38
2.18. Use of Proceeds....................................................... 39
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.15....... 39
3.02. Additional Conditions Precedent to Effectiveness...................... 41
3.03. Conditions Precedent to Each Revolving Borrowing...................... 41
<PAGE>
ii
3.04. Conditions Precedent to Each Redemption Borrowing..................... 41
3.05. Conditions Precedent to Each Competitive Bid Borrowing................ 42
3.06. Determinations Under Sections 3.01 and 3.02........................... 42
3.07. Notice of Effective Date.............................................. 43
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Borrower........................ 43
ARTICLE V
COVENANTS OF THE BORROWER
5.01. Affirmative Covenants................................................. 46
5.02. Negative Covenants.................................................... 51
5.03. Financial Covenants................................................... 58
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default..................................................... 59
ARTICLE VII
THE AGENT
7.01. Authorization and Action.............................................. 62
7.02. Agent's Reliance, Etc................................................. 63
7.03. Citibank and Affiliates............................................... 63
7.04. Lender Credit Decision................................................ 63
7.05. Indemnification....................................................... 64
7.06. Successor Agent....................................................... 64
ARTICLE VIII
MISCELLANEOUS
8.01. Amendments, Etc....................................................... 65
<PAGE>
iii
8.02. Notices, Etc.......................................................... 65
8.03. No Waiver; Remedies................................................... 66
8.04. Costs and Expenses.................................................... 66
8.05. Right of Setoff....................................................... 67
8.06. Binding Effect........................................................ 68
8.07. Assignments, Designations and Participations.......................... 68
8.08. Confidentiality....................................................... 72
8.09. Governing Law......................................................... 72
8.10. Execution in Counterparts............................................. 73
8.11. Jurisdiction, Etc..................................................... 73
8.12. Judgment.............................................................. 73
8.13. Effective Date Assignments; Etc....................................... 74
8.14. Waiver of Jury Trial.................................................. 75
<PAGE>
iv
Schedules
- ---------
Schedule I - List of Applicable Lending Offices
Schedule 3.01(b) - Disclosed Litigation
Schedule 4.01(h) - Environmental Laws Disclosure
Schedule 4.01(i) - Environmental Investigation and Clean-up Properties
Schedule 4.01(j) - Hazardous Materials
Schedule 5.01(k) - Transactions with Affiliates
Schedule 5.02(a) - Existing Liens
Schedule 5.02(b) - Existing Debt
Schedule 8.13 - Existing Lenders, Existing Commitments and Existing
Advances
Exhibits
- --------
Exhibit A-1 - Form of Revolving Promissory Note
Exhibit A-2 - Form of Competitive Bid Promissory Note
Exhibit B-1 - Form of Notice of Revolving Borrowing
Exhibit B-2 - Form of Notice of Competitive Bid Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Designation Agreement
Exhibit E - Form of Notice of Redenomination
Exhibit F-1 - Form of Opinion of Special New York Counsel to the
Borrower
Exhibit F-2 - Form of Opinion of General Counsel of the Borrower
The Company agrees to furnish supplementally to the Commission the
foregoing schedules and exhibits upon request.
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 1, 1995
CYTEC INDUSTRIES INC., a Delaware corporation (the "Borrower"),
the banks (the "Banks") listed on the signature pages hereof and CITIBANK, N.A.
("Citibank"), as agent (the "Agent") for the Lenders hereunder, agree as
follows:
PRELIMINARY STATEMENTS. The Borrower entered into a Credit
Agreement dated as of December 17, 1993 (as amended by Amendment No. 1 thereto
dated June 30, 1994, Amendment No. 2 thereto dated September 19, 1994 and
Amendment No. 3 thereto dated May 17, 1995, the "Original Credit Agreement")
with certain lenders parties thereto (the "Existing Lenders") and Citibank, as
agent for the Existing Lenders. The Borrower has requested that the Banks and
the Agent amend and restate the Original Credit Agreement as hereinafter set
forth, and the Banks and the Agent have agreed to do so.
NOW, THEREFORE, in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree that as of the Effective Date, the
Original Credit Agreement is hereby amended and restated as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING 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):
"Advance" means a Revolving Advance or a Competitive Bid Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person. For
purposes of this definition, the term "control" (including the terms
"controlling", "controlled by" and "under common control with") of a
Person means the possession, direct or indirect, of the power to direct
or cause the direction of the
<PAGE>
2
management and policies of such Person, whether through the ownership of
Voting Stock, by contract or otherwise, or, in the case of an Affiliate
of the Borrower, to vote 10% or more of the Voting Stock of such Person.
"Alternative Currency" means lawful money of Great Britain,
lawful money of the Netherlands or lawful money of Japan, or any other
lawful currency other than Dollars that is freely transferable and
convertible into Dollars as the Borrower, with the consent of the
Required Lenders and the Agent, shall designate.
"American Home Products" means American Home Products
Corporation, a Delaware corporation.
"Applicable Lending Office" means, with respect to each Lender,
such Lender's Domestic Lending Office in the case of a Base Rate Advance
and such Lender's Eurocurrency Lending Office in the case of a
Eurocurrency Rate Advance and, in the case of a Competitive Bid Advance,
the office of such Lender notified by such Lender to the Agent as its
Applicable Lending Office with respect to such Competitive Bid Advance.
"Applicable Margin" means (a) for each Revolving Borrowing (other
than any Redemption Borrowing), a percentage per annum determined by
reference to the Leverage Ratio and the Fixed Charge Coverage Ratio as
set forth below:
<TABLE>
<CAPTION>
Applicable Margin Applicable Margin
Leverage Fixed Charge for Eurocurrency for Base
Level Ratio Coverage Ratio Rate Advances Rate Advances
----- ----- -------------- ------------- -------------
<S> <C> <C> <C> <C>
1 less than or equal to 0.40:1 greater than or equal to 3.00:1 0.250% 0%
2 greater than 0.40:1 greater than or equal to 3.00:1 0.300% 0%
and less than or
equal to 0.50:1
3 greater than 0.50:1 greater than or equal to 3.00:1 0.375% 0%
and less than or
equal to 0.55:1
4 greater than 0.55:1 less than 3.00:1 0.875% 0%
</TABLE>
and (b) for each Redemption Borrowing, the Applicable Margin in effect
for Revolving Borrowings under clause (a) plus 0.25% per annum. The
Applicable Margin for each Eurocurrency Rate Advance shall be determined
by reference to the ratios in effect on the first day of each Interest
Period for such Advance; provided, however, that no change in the
Applicable Margin shall be effective until three Business Days after the
date on which the Agent receives financial statements pursuant to
Section 5.01(l)(i) or (ii), or a certificate of the chief financial
officer of the Borrower, demonstrating such ratios and if the
<PAGE>
3
Leverage Ratio and the Fixed Charge Coverage Ratio shall fall within
different levels, the Applicable Margin shall be based upon the level
that would result in a higher Applicable Margin.
"Applicable Percentage" means a percentage per annum determined
by reference to the Leverage Ratio and the Fixed Charge Coverage Ratio
as set forth below:
<TABLE>
<CAPTION>
Leverage Fixed Charge Applicable
Level Ratio Coverage Ratio Percentage
----- ----- -------------- ----------
<S> <C> <C> <C>
1 less than or equal to greater than or equal to 3.00:1 0.175%
0.40:1
2 greater than 0.40:1 greater than or equal to 3.00:1 0.200%
and less than or
equal to 0.50:1
3 greater than 0.50:1 greater than or equal to 3.00:1 0.250%
and less than or
equal to 0.55:1
4 greater than 0.55:1 less than 3.00:1 0.500%
</TABLE>
provided, however, that no change in the Applicable Percentage shall be
effective until three Business Days after the date on which the Agent
receives financial statements pursuant to Section 5.01(l)(i) or (ii), or
a certificate of the chief financial officer of the Borrower,
demonstrating such ratios and if the Leverage Ratio and the Fixed Charge
Coverage Ratio shall fall within different levels, the Applicable
Percentage shall be based upon the level that would result in the higher
Applicable Percentage.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Agent, in substantially the form of Exhibit C hereto.
"Base Rate" means a fluctuating interest rate per annum in effect
from time to time, which rate per annum shall at all times be equal to
the highest of:
(a) the rate of interest announced publicly by Citibank in
New York, New York, from time to time, as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of 1% or, if
there is no nearest 1/4 of 1%, to the next higher 1/4 of 1%) of
(i) 1/2 of 1% per annum, plus (ii) the rate obtained by dividing
(A) the latest three-week moving average of secondary market
morning offering rates in the United States for three-month
certificates of deposit of major United States money market
banks, such three-week moving
<PAGE>
4
average (adjusted to the basis of a year of 360 days) being
determined weekly on each Monday (or, if such day is not a
Business Day, on the next succeeding Business Day) for the
three-week period ending on the previous Friday by Citibank on
the basis of such rates reported by certificate of deposit
dealers to and published by the Federal Reserve Bank of New York
or, if such publication shall be suspended or terminated, on the
basis of quotations for such rates received by Citibank from
three New York certificate of deposit dealers of recognized
standing selected by Citibank, by (B) a percentage equal to 100%
minus the average of the daily percentages specified during such
three-week period by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement)
for Citibank with respect to liabilities consisting of or
including (among other liabilities) three-month U.S. dollar
non-personal time deposits in the United States, plus (iii) the
average during such three-week period of the annual assessment
rates estimated by Citibank for determining the then current
annual assessment payable by Citibank to the Federal Deposit
Insurance Corporation (or any successor) for insuring U.S. dollar
deposits of Citibank in the United States; and
(c) 1/2 of 1% per annum above the Federal Funds Rate.
"Base Rate Advance" means a Revolving Advance denominated in
Dollars which bears interest as provided in Section 2.06(a)(i).
"Borrowing" means a Revolving Borrowing or a Competitive Bid
Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable
Business Day relates to any Eurocurrency Rate Advances, on which
dealings are carried on in the London interbank market and banks are
open for business in London and in the country of issue of the currency
of such Eurocurrency Rate Advance.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System maintained by the U.S.
Environmental Protection Agency.
"Commitment" has the meaning specified in Section 2.01(a)(ii).
<PAGE>
5
"Competitive Bid Advance" means an advance by a Lender to the
Borrower as part of a Competitive Bid Borrowing resulting from the
competitive bidding procedure described in Section 2.15 and refers to a
Fixed Rate Advance or a LIBO Rate Advance.
"Competitive Bid Borrowing" means a borrowing consisting of
simultaneous Competitive Bid Advances from each of the Lenders whose
offer to make one or more Competitive Bid Advances as part of such
borrowing has been accepted under the competitive bidding procedure
described in Section 2.15.
"Competitive Bid Note" means a promissory note of the Borrower
payable to the order of any Lender, in substantially the form of Exhibit
A-2 hereto, evidencing the indebtedness of the Borrower to such Lender
resulting from a Competitive Bid Advance made by such Lender.
"Competitive Bid Reduction" has the meaning specified in Section
2.01(a)(ii).
"Confidential Information" means information that the Borrower
furnishes to the Agent or any Lender on a confidential basis, but does
not include any such information that is or becomes generally available
to the public or that is or becomes available to the Agent or such
Lender from a source other than the Borrower.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Convert", "Conversion" and "Converted" each refers to a
conversion of all or any portion of Revolving Advances of one Type into
Revolving Advances of the other Type, or in the case of Eurocurrency
Rate Advances, into Revolving Advances with a different Interest Period,
pursuant to Section 2.07, 2.08 or 2.11.
"Cyanamid" means American Cyanamid Company, a Maine corporation
and a wholly owned Subsidiary of American Home Products.
"Cyanamid Preferred Stock" means capital stock issued by the
Borrower to Cyanamid that is entitled to a preference or priority over
any other capital stock issued by the Borrower upon any distribution of
the Borrower's assets, whether by dividend or upon liquidation.
"CYRO" means CYRO Industries, a partnership, and its successors
and assigns, for so long as the Borrower or any of its Subsidiaries
shall have an equity interest therein.
"Debt" of any Person means (a) all indebtedness of such Person
for borrowed money, (b) all obligations of such Person for the deferred
purchase price of property or
<PAGE>
6
services (other than trade payables not overdue by more than 60 days
incurred in the ordinary course of such Person's business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all obligations of such Person created or
arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights
and remedies of the seller or lender under such agreement in the event
of default are limited to repossession or sale of such property), (e)
all obligations of such Person as lessee under leases that have been or
should be, in accordance with GAAP, recorded as capital leases
("Capitalized Leases"), valued at the amount that is or should be
capitalized as required by GAAP, (f) all obligations, contingent or
otherwise, of such Person under acceptance, letter of credit or similar
facilities, (g) all Debt of others referred to in clauses (a) through
(f) above guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Debt or to advance or
supply funds for the payment or purchase of such Debt, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make
payment of such Debt or to assure the holder of such Debt against loss,
(iii) to supply funds to or in any other manner invest in the debtor
(including any agreement to pay for property or services irrespective of
whether such property is received or such services are rendered) or (iv)
otherwise to assure a creditor against loss, and (h) all Debt of others
referred to in clauses (a) through (f) above secured by (or for which
the holder of such Debt has an existing right, contingent or otherwise,
to be secured by) any Lien on property (including, without limitation,
accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Debt,
provided, however, that the amount of any Debt included in this clause
(h) shall be limited to the greater of the book value and the fair
market value of the property on which such Lien is granted.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Designated Bidder" means (a) an Eligible Assignee or (b) a
special purpose corporation that is engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its
business and that issues (or the parent of which issues) commercial
paper rated at least "Prime-1" (or the then equivalent grade) by Moody's
or "A-1" (or the then equivalent grade) by S&P that, in the case of
either clause (a) or (b), (i) is organized under the laws of the United
States or any State thereof, (ii) shall have become a party hereto
pursuant to Section 8.07(d), (e) and (f) and (iii) is not otherwise a
Lender.
<PAGE>
7
"Designation Agreement " means a designation agreement entered
into by a Lender (other than a Designated Bidder) and a Designated
Bidder, and accepted by the Agent, in substantially the form of Exhibit
D hereto.
"Disclosed Litigation" has the meaning specified in Section
3.01(b).
"Dollars" and the "$" sign each means lawful money of the United
States.
"Domestic Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender, or such other office of
such Lender as such Lender may from time to time specify to the Borrower
and the Agent.
"EBITDA" means, for any period, net income (or net loss) plus
the sum of (a) interest expense (net of all payments made or received by
the Borrower in respect of Hedge Agreements to which it is a party), (b)
income tax expense, (c) depreciation expense, (d) amortization expense,
(e) other post-retirement benefits expense and (f) extraordinary or
non-recurring losses included in determining such net income (or net
loss), less the sum of (i) accrued interest income not received in cash
and (ii) extraordinary or non-recurring gains included in determining
such net income (or net loss), in each case determined in accordance
with GAAP for such period.
"Effective Date" means the first date on which the conditions set
forth in Sections 3.01 and 3.02 have been fulfilled.
"Eligible Assignee" means (i) a Lender, (ii) an Affiliate of a
Lender and (iii) any other Person approved by the Agent and the
Borrower, such approval not to be unreasonably withheld.
"Environmental Action" means any administrative, regulatory or
judicial action, suit, demand, demand letter, claim, notice of
non-compliance or violation, proceeding, consent order or consent
agreement relating in any way to any Environmental Law, Environmental
Permit or Hazardous Materials or arising from alleged injury or threat
of injury to health, safety or the environment, including, without
limitation, (a) by any governmental or regulatory authority for
enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any governmental or regulatory authority or any third
party for damages, contribution, indemnification, cost recovery,
compensation or injunctive relief.
<PAGE>
8
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment, decree
or judicial or agency interpretation, policy or guidance relating to the
environment, health, safety or Hazardous Materials.
"Environmental Permit" means any permit, approval, license or
other authorization required under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV
of ERISA is a member of the Borrower's controlled group, or under common
control with the Borrower, within the meaning of Section 414 of the
Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect to any
Plan unless the 30-day notice requirement with respect to such event has
been waived by the PBGC or the penalty with respect to a failure to
provide notice has been waived, or (ii) the requirements of subsection
(1) of Section 4043(b) of ERISA (without regard to subsection (2) of
such Section) are met with respect to a contributing sponsor, as defined
in Section 4001(a)(13) of ERISA, of a Plan, and an event described in
paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is
reasonably expected to occur with respect to such Plan within the
following 30 days; (b) the provision by the administrator of any Plan of
a notice of intent to terminate such Plan, pursuant to Section
4041(a)(2) of ERISA (including any such notice with respect to a plan
amendment referred to in Section 4041(e) of ERISA); (c) the cessation of
operations at a facility of the Borrower or any of its ERISA Affiliates
in the circumstances described in Section 4062(e) of ERISA; (d) the
withdrawal by the Borrower or any of its ERISA Affiliates from a
Multiple Employer Plan during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (e) the failure by
the Borrower or any of its ERISA Affiliates to make a payment to a Plan
required under Section 302(f)(1) of ERISA; (f) the adoption of an
amendment to a Plan requiring the provision of security to such Plan,
pursuant to Section 307 of ERISA; or (g) the institution by the PBGC of
proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or
the occurrence of any event or condition described in Section 4042 of
ERISA that could constitute grounds for the termination of, or the
appointment of a trustee to administer, a Plan, provided, however, that
an event or condition described in Section 4042(a)(4) of ERISA shall be
an ERISA Event only if the Borrower or any ERISA Affiliate knows or has
reason to know thereof.
"Eurocurrency Liabilities" has the meaning assigned to that term
in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
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9
"Eurocurrency Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurocurrency Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender (or, if no such office
is specified, its Domestic Lending Office), or such other office of such
Lender as such Lender may from time to time specify to the Borrower and
the Agent.
"Eurocurrency Rate" means, for any Interest Period for each
Eurocurrency Rate Advance comprising part of the same Revolving
Borrowing, an interest rate per annum equal to the rate per annum
obtained by dividing (a) the rate per annum at which deposits in Dollars
or in the relevant Alternative Currency are offered by the principal
office of Citibank in London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days before
the first day of such Interest Period in an amount substantially equal
to Citibank's Eurocurrency Rate Advance comprising part of such
Revolving Borrowing to be outstanding during such Interest Period and
for a period equal to such Interest Period by (b) a percentage equal to
100% minus the Eurocurrency Rate Reserve Percentage for such Interest
Period.
"Eurocurrency Rate Advance" means a Revolving Advance denominated
in Dollars or in an Alternative Currency which bears interest as
provided in Section 2.06(a)(ii).
"Eurocurrency Rate Reserve Percentage" for any Interest Period
for all Eurocurrency Rate Advances or LIBO Rate Advances comprising part
of the same Borrowing means the reserve percentage applicable two
Business Days before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank of
the Federal Reserve System in New York City with respect to liabilities
or assets consisting of or including Eurocurrency Liabilities (or with
respect to any other category of liabilities that includes deposits by
reference to which the interest rate on Eurocurrency Rate Advances or
LIBO Rate Advances is determined) having a term equal to such Interest
Period.
"Events of Default" has the meaning specified in Section 6.01.
"Executive Committee" means the committee designated from time to
time as such by the Board of Directors of the Borrower and composed, as
of the date hereof, of the chief executive officer, the chief financial
officer and the two executive vice presidents of the Borrower.
"Existing Advance" means, for each Existing Lender, all of such
Existing Lender's rights in and to, and all of its obligations under,
the Advances (as defined in the Original
<PAGE>
10
Credit Agreement) owing to it under the Original Credit Agreement, the
aggregate amount of which for each Existing Lender is set forth opposite
its name on Schedule 8.13 hereto.
"Existing Commitment" means, for each Existing Lender, all of
such Existing Lender's rights in and to, and all of its obligations
under, the Commitment (as defined in the Original Credit Agreement) held
by it under the Original Credit Agreement, the aggregate amount of which
for each Existing Lender is set forth opposite its name on Schedule 8.13
hereto.
"Existing Lenders" has the meaning specified in the Preliminary
Statements.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fixed Charge Coverage Ratio" means, at any time, for any period,
the ratio of (x) the sum of (i) Consolidated EBITDA of the Borrower and
its Subsidiaries, (ii) cash expenditures for environmental remediation
and (iii) cash expenditures for benefit payments for other
post-retirement benefits made by the Borrower directly to retirees of
the Borrower or any of its Subsidiaries or to any VEBA (to the extent
not expensed during such period) to (y) the sum of (i) cash interest
expense, (ii) cash expenditures for environmental remediation, (iii)
cash expenditures for benefit payments for other post-retirement
benefits made by the Borrower directly to retirees of the Borrower or
any of its Subsidiaries or to any VEBA and (iv) dividends accrued or
paid on the Series A Preferred Stock, the Series B Preferred Stock and
the Series C Preferred Stock, in each case, during such period.
"Fixed Rate Advance" has the meaning specified in Section
2.15(a)(i), which Advance shall be denominated in Dollars.
"Foreign Currency" means lawful currency other than Dollars which
is freely transferable and convertible into Dollars.
"Funded Debt" of any Person means Debt in respect of the
Advances, in the case of the Borrower, and all other Debt of such Person
that by its terms matures more than one
<PAGE>
11
year after the date of its creation or matures within one year from such
date but is renewable or extendible, at the option of such Person, to a
date more than one year after such date or arises under a revolving
credit or similar agreement that obligates the lender or lenders to
extend credit during a period of more than one year after such date,
including, without limitation, all amounts of Funded Debt of such Person
required to be paid or prepaid within one year after the date of its
creation, the current portion of all long-term Debt and all short-term
Debt for borrowed money.
"GAAP" has the meaning specified in Section 1.03.
"Hazardous Materials" means petroleum and petroleum products,
radioactive materials, asbestos-containing materials, radon gas and any
other chemicals, materials or substances designated, classified or
regulated as being "hazardous" or "toxic", or words of similar import,
under any federal, state, local or foreign statute, law, ordinance,
rule, regulation, code, order, judgment, decree or judicial or agency
interpretation, policy or guidance.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements (other than non-financial commodities contracts).
"Insufficiency" means, with respect to any Plan, the amount, if
any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"Interest Period" means, for each Eurocurrency Rate Advance
comprising part of the same Revolving Borrowing and each LIBO Rate
Advance comprising part of the same Competitive Bid Borrowing, the
period commencing on the date of such Eurocurrency Rate Advance or LIBO
Rate Advance or the date of the Conversion of any Base Rate Advance into
such Eurocurrency Rate Advance and ending on the last day of the period
selected by the Borrower pursuant to the provisions below and,
thereafter, with respect to Eurocurrency Rate Advances, each subsequent
period commencing on the last day of the immediately preceding Interest
Period and ending on the last day of the period selected by the Borrower
pursuant to the provisions below. The duration of each such Interest
Period shall be one, two, three or six months, as the Borrower may, upon
notice received by the Agent not later than 11:00 A.M. (New York City
time) on the third Business Day prior to the first day of such Interest
Period, select; provided, however, that:
(i) the Borrower may not select any Interest Period
which ends after the Termination Date;
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12
(ii) Interest Periods commencing on the same date for
Eurocurrency Rate Advances comprising part of the same Revolving
Borrowing or for LIBO Rate Advances comprising part of the same
Competitive Bid Borrowing shall be of the same duration;
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day
of such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, however, that, if such
extension would cause the last day of such Interest Period to
occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day;
and
(iv) whenever the first day of any Interest Period occurs
on a day of an initial calendar month for which there is no
numerically corresponding day in the calendar month that succeeds
such initial calendar month by the number of months equal to the
number of months in such Interest Period, such Interest Period
shall end on the last Business Day of such succeeding calendar
month.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Investment" in any Person means any loan or advance to such
Person, any purchase or other acquisition of any capital stock,
warrants, rights, options, obligations or other securities of such
Person, any capital contribution to such Person or any other investment
in such Person, including, without limitation, any arrangement pursuant
to which the investor incurs Debt of the types referred to in clauses
(g) and (h) of the definition of "Debt" in respect of such Person.
"Lenders" means the Banks listed on the signature pages hereof
and each Person that shall become a party hereto pursuant to Section
8.07(a), (b) and (c) and, except when used in reference to a Revolving
Advance, a Revolving Borrowing, a Revolving Note, a Commitment or a
related term, each Designated Bidder.
"Leverage Ratio" means, at any time, the ratio of (a) Total Debt
to (b) the sum of (i) Total Debt plus (ii) gross long-term liabilities
incurred in connection with "expected post retirement benefit
obligations" within the meaning of Statement of Financial Accounting
Standards No. 106 plus (iii) shareholders' equity of the Borrower, in
each case, of the Borrower and its Subsidiaries as of the last day of
the immediately preceding fiscal quarter of the Borrower as determined
on a Consolidated basis in accordance with GAAP.
<PAGE>
13
"LIBO Rate" means, for any Interest Period for all LIBO Rate
Advances comprising part of the same Competitive Bid Borrowing, an
interest rate per annum equal to the rate per annum obtained by dividing
(a) the rate per annum at which deposits in Dollars are offered by the
principal office of Citibank in London, England to prime banks in the
London interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period in an amount substantially
equal to the amount that would be Citibank's ratable share of such
Borrowing if such Borrowing were to be a Revolving Borrowing to be
outstanding during such Interest Period and for a period equal to such
Interest Period by (b) a percentage equal to 100% minus the Eurocurrency
Rate Reserve Percentage for such Interest Period.
"LIBO Rate Advance" has the meaning specified in Section
2.15(a)(i), which Advance shall be denominated in Dollars.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance
on title to real property.
"Marketable Securities" means any of the following, to the extent
owned by the Borrower or any of its Subsidiaries free and clear of all
Liens and, in the case of clauses (a), (b), (c) and (f) below, having a
maturity of not greater than 180 days from the date of acquisition
thereof and, in the case of clause (g) below, having a maturity of not
greater than, or an option on the part of the holder thereof to resell
such investments within, 180 days from the date of acquisition thereof:
(a) obligations of the Government of the United States or any agency or
instrumentality thereof or obligations unconditionally guaranteed by the
full faith and credit of the Government of the United States or of the
Government of the United Kingdom, Canada or Australia, (b) certificates
of deposit or bankers acceptances of or time deposits with any
commercial bank (or any foreign branch thereof) that is a Lender or is
organized under the laws of the United States or any State thereof or
Austria, Canada, Australia, countries in the European Economic
Community, Norway, New Zealand, Switzerland, Sweden or Japan and has
assets of at least $1 billion (or the equivalent thereof) in an
aggregate amount invested with any such bank not to exceed 1/4 of 1% of
the assets of such bank, (c) commercial paper in an aggregate amount of
no more than $10,000,000 per issuer outstanding at any time, issued by
any corporation organized under the laws of any State of the United
States and rated at least "Prime-1" (or the then equivalent grade) by
Moody's or "A-1" (or the then equivalent grade) by S&P or master notes
or money market notes of such issuers, (d) repurchase agreements with a
term of not more than seven days and fully collateralized by securities
of the Government of the United States entered into with any Lender or
any other bank meeting the qualifications specified in clause (b) above
or with securities dealers of recognized national standing, (e)
<PAGE>
14
institutional money market funds sponsored by securities dealers of
recognized national standing which invest in short term liquid
investments, (f) Euronotes and Euro-commercial paper of the countries
referred to in clause (b) above and of any corporation the commercial
paper of which is rated the equivalent of at least "Prime-1" (or the
then equivalent grade) by Moody's or "A-1" (or the then equivalent
grade) by S&P, or (g) adjustable rate preferred and money market
preferred investments of issuers the obligations of which are rated at
least "Aa" (or the then equivalent grade) by Moody's or "AA" (or the
then equivalent grade) by S&P.
"Material Adverse Change" means any material adverse change in
the business, condition (financial or otherwise), operations, properties
or prospects of the Borrower and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a)
the business, condition (financial or otherwise), operations, properties
or prospects of the Borrower and its Subsidiaries taken as a whole, (b)
the rights and remedies of the Agent or any Lender under this Agreement
or any Note or (c) the ability of the Borrower to perform its
obligations under this Agreement or any Note.
"Material Subsidiary" means, at any time, a Subsidiary of the
Borrower having at least 1% of the total Consolidated assets of the
Borrower and its Subsidiaries (determined as of the last day of the most
recent fiscal quarter of the Borrower) or at least 2% of the total
Consolidated revenues of the Borrower and its Subsidiaries for the
twelve month period ending on the last day of the most recent fiscal
quarter of the Borrower.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Borrower or any of its ERISA
Affiliates (other than one considered an ERISA Affiliate only pursuant
to subsection (m) or (o) of Section 414 of the Internal Revenue Code) is
making or accruing an obligation to make contributions, or has within
any of the preceding five plan years made or accrued an obligation to
make contributions.
"Multiple Employer Plan" means a single employer plan, as defined
in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of
the Borrower or any of its ERISA Affiliates and at least one Person
other than the Borrower and its ERISA Affiliates or (b) was so
maintained and in respect of which the Borrower or any of its ERISA
Affiliates could have liability under Section 4064 or 4069 of ERISA in
the event such plan has been or were to be terminated.
<PAGE>
15
"1994 10K" means the Borrower's annual report for its 1994 fiscal
year on Form 10K filed with the Securities and Exchange Commission on
March 29, 1995.
"Note" means a Revolving Note or a Competitive Bid Note.
"Notice of Competitive Bid Borrowing" has the meaning specified
in Section 2.15(a).
"Notice of Revolving Borrowing" has the meaning specified in
Section 2.02(a).
"Original Credit Agreement" has the meaning specified in the
Preliminary Statements.
"Original Currency" has the meaning specified in Section 8.12.
"Other Currency" has the meaning specified in Section 8.12.
"Payment Office" means, for any Alternative Currency, such
office of Citibank as shall be from time to time selected by the Agent
and notified by the Agent to the Borrower and the Lenders.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor.
"Permitted Liens" means such of the following as to which (i) (A)
no enforcement or collection proceeding shall have been commenced or, if
any such proceeding has been commenced, it is being contested in good
faith and by proper proceedings and as to which adequate reserves are
being maintained and (B) no execution, levy or foreclosure proceeding
shall have been commenced or, if any such proceeding has been commenced,
it is being contested in good faith, by proper proceedings, adequate
reserves with respect thereto are being maintained and there shall not
be any period of ten consecutive days during which a stay shall not be
in effect or (ii) the amount secured thereby does not exceed,
individually or in the aggregate, $2,000,000 (or the equivalent thereof
in any Alternative Currency): (a) Liens for taxes, assessments and
governmental charges or levies to the extent not required to be paid
under Section 5.01(b) hereof; (b) Liens imposed by law, such as
materialmen's, mechanics', carriers', workmen's, warehousemen's and
repairmen's Liens and other similar Liens arising in the ordinary course
of business securing obligations that are not overdue for a period of
more than 30 days other than by reason of a contest as permitted above;
(c) pledges or deposits to secure obligations under workers'
compensation or unemployment insurance laws or other social security
laws and legislation or to secure public or statutory obligations; (d)
easements, zoning restrictions, rights of way and other encumbrances on
title to real property that do not render title to
<PAGE>
16
the property encumbered thereby unmarketable or materially adversely
affect the use of such property for its present purposes; and (e)
pledges or deposits to secure the performance of bids, trade contracts,
leases (other than Capitalized Leases), surety or appeal bonds or other
obligations of a like nature incurred in the ordinary course of
business.
"Person" means an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated
association, joint venture, limited liability company or other entity,
or a government or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Preferred Stock" means, with respect to any corporation, capital
stock issued by such corporation that is entitled to a preference or
priority over any other capital stock issued by such corporation upon
any distribution of such corporation's assets, whether by dividend or
upon liquidation.
"Redemption Borrowing" has the meaning specified in Section
2.01(b).
"Redenominate", "Redenomination" and "Redenominated" each refers
to the redenomination of each Revolving Advance comprising part of the
same Revolving Borrowing from Dollars into an Alternative Currency or
from an Alternative Currency into Dollars or another Alternative
Currency pursuant to Section 2.16.
"Register" has the meaning specified in Section 8.07(g).
"Required Lenders" means at any time Lenders owed at least 51% of
the then aggregate unpaid principal amount of the Revolving Advances
owing to Lenders or, if no such principal amount is then outstanding,
Lenders having at least 51% of the Commitments (provided that, for
purposes hereof, neither the Borrower, nor any of its Affiliates, if a
Lender, shall be included in (i) the Lenders holding such amount of the
Revolving Advances or having such amount of the Commitments or (ii)
determining the aggregate unpaid principal amount of the Revolving
Advances or the total Commitments).
"Revolving Advance" means an advance by a Lender to the Borrower
as part of a Revolving Borrowing, and refers to a Base Rate Advance or a
Eurocurrency Rate Advance (each of which shall be a "Type" of Revolving
Advance).
"Revolving Borrowing" means a borrowing consisting of
simultaneous Revolving Advances of the same Type made by each of the
Lenders pursuant to Section 2.01(a)(ii).
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17
"Revolving Note" means a promissory note of the Borrower payable
to the order of any Lender, in substantially the form of Exhibit A-1
hereto, evidencing the aggregate indebtedness of the Borrower to such
Lender resulting from the Revolving Advances made by such Lender.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"Series A Certificate" means the Certificate of Designations,
Preferences and Rights of Series A Cumulative Adjustable Preferred Stock
of the Borrower dated March 15, 1994, as in effect on the date hereof.
"Series A Preferred Stock" means the capital stock of the
Borrower issued in accordance with the terms of the Series A
Certificate.
"Series B Certificate" means the Certificate of Designations,
Preferences and Rights of Series B Cumulative Convertible Preferred
Stock of the Borrower dated March 15, 1994, as in effect on the date
hereof.
"Series B Preferred Stock" means the capital stock of the
Borrower issued in accordance with the terms of the Series B
Certificate.
"Series C Certificate" means the Certificate of Designations,
Preferences and Rights of Series C Cumulative Preferred Stock of the
Borrower dated December 17, 1993, as in effect on the date hereof.
"Series C Preferred Stock" means the capital stock of the
Borrower issued in accordance with the terms of the Series C
Certificate.
"Single Employer Plan" means a single employer plan, as defined
in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of
the Borrower or any of its ERISA Affiliates and no Person other than the
Borrower and its ERISA Affiliates or (b) was so maintained and in
respect of which the Borrower or any of its ERISA Affiliates could have
liability under Section 4069 of ERISA in the event such plan has been or
were to be terminated.
"Spin-Off" means the dividend consisting of all of the
outstanding common stock of the Borrower made by Cyanamid to its
stockholders.
"Subsidiary" of any Person means any corporation, limited
liability company, partnership, joint venture, trust or estate (i) that
is, in accordance with GAAP, Consolidated in the Consolidated financial
statements of the Borrower or (ii) of which (or
<PAGE>
18
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether 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), (b) the
interest in the capital or profits of such limited liability company,
partnership or joint venture or (c) the beneficial interest in such
trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"Termination Date" means the earlier of June 1, 2000 and the date
of termination in whole of the Commitments pursuant to Section 2.04 or
6.01.
"Total Debt" means, at any time, the sum of, without duplication
(a) Preferred Stock of the Borrower plus (b) Funded Debt plus (c)
long-term liabilities (other than Funded Debt and long-term liabilities
in respect of benefit payments for other post-retirement benefits) plus
(d) Debt of the Borrower or any of its Subsidiaries of the type
described in clause (g) or (h) of the definition of "Debt" relating to
Debt of Persons that are not Subsidiaries of the Borrower in which the
Borrower or any of its Subsidiaries has an equity interest or of direct
or indirect unconsolidated Subsidiaries of the Borrower, in each case,
of the Borrower and its Subsidiaries as of the last day of the
immediately preceding fiscal quarter of the Borrower as determined on a
Consolidated basis in accordance with GAAP.
"United States" and "U.S." each means United States of America.
"VEBA" means any trust organized by the Borrower as a voluntary
employee benefits association.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even though the right so to vote has been suspended by the
happening of such a contingency.
"Withdrawal Liability" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
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19
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(e) ("GAAP"), provided,
however, that, if (a) any changes in accounting principles from those used in
the preparation of the Borrower's financial statements dated December 31, 1994
are required by the rules, regulations, pronouncements or opinions of the
Financial Accounting Standards Board or the American Institute of Certified
Public Accountants (or successors thereto or agencies with similar functions)
and are adopted by the Borrower with the agreement of its independent certified
public accountants and (b) such changes would affect (or result in a change in
the method of calculation of) any of the covenants set forth in Section 5.02 or
5.03, the parties hereto agree to enter into good-faith negotiations in order to
amend such provisions, in a manner satisfactory to the Required Lenders, to
equitably reflect such changes with the intention that the criteria for
evaluating compliance with such covenants by the Borrower shall be the same
after such changes as if such changes had not been made; provided further,
however, that until the amendment of such provisions shall be agreed upon by the
Borrower and the Required Lenders, for purposes of determining compliance with
any covenant set forth in Sections 5.02 and 5.03, such terms shall be construed
in accordance with GAAP as in effect on the date of this Agreement applied on a
basis consistent with the application used in preparing the Borrower's audited
financial statements referred to in Section 4.01(e).
SECTION 1.04. Currency Equivalents Generally. For all purposes of
this Agreement other than Article II, the equivalent in any Alternative Currency
or any Foreign Currency of an amount in Dollars shall be determined at the rate
of exchange quoted by Citibank in New York City, at 9:00 A.M. (New York City
time) on the date of determination, to prime banks in New York City for the spot
purchase in the New York foreign exchange market of such amount of Dollars with
such Alternative Currency or such Foreign Currency, as the case may be.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Advances; Redemption Borrowings.
(a) (i) Effective as of the Effective Date, each Existing Lender hereby sells
and assigns all of its rights in and to, and all of its obligations under, each
Existing Advance owing to it and the Existing Commitment held by it to the Banks
and each Bank hereby purchases and assumes, pro rata based on such Bank's
Commitment, all of the Existing Lenders' rights in and to, and obligations
under, the Existing Advances and the Existing Commitments, the amounts of which
are set forth opposite its name on Schedule 8.13 hereto.
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20
(ii) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make Revolving Advances to the Borrower from time to
time on any Business Day during the period from the Effective Date until the
Termination Date in an aggregate amount (determined in Dollars) not to exceed at
any time outstanding the Dollar amount set forth opposite such Lender's name on
the signature pages hereof or, if such Lender has entered into any Assignment
and Acceptance, set forth for such Lender in the Register maintained by the
Agent pursuant to Section 8.07(g), as such amount may be reduced pursuant to
Section 2.04 (such Lender's "Commitment"), provided that the aggregate amount of
the Commitments of the Lenders shall be deemed used from time to time to the
extent of the aggregate amount of the Competitive Bid Advances then outstanding
and such deemed use of the aggregate amount of the Commitments shall be
allocated among the Lenders ratably according to their respective Commitments
(such deemed use of the aggregate amount of the Commitments being a "Competitive
Bid Reduction"), provided further that the Borrower may not request a Revolving
Borrowing, and no Revolving Borrowing shall be made, if, after giving effect
thereto, the aggregate amount of the Debt of the Borrower or the Borrower and
its Subsidiaries would contravene (i) any provision contained in the Borrower's
charter or by-laws or (ii) any contractual restriction binding on or affecting
the Borrower. Each Revolving Borrowing shall be in an aggregate amount of
$5,000,000 (or in the equivalent thereof in any Alternative Currency) or an
integral multiple of $1,000,000 (or in the equivalent thereof in any Alternative
Currency) in excess thereof (or, if less, an aggregate amount equal to the
amount by which the aggregate amount of a proposed Competitive Bid Borrowing
requested by the Borrower exceeds the aggregate amount of Competitive Bid
Advances offered to be made by the Lenders and accepted by the Borrower in
respect of such Competitive Bid Borrowing, if such Competitive Bid Borrowing is
made on the same date as such Revolving Borrowing) and shall consist of
Revolving Advances of the same Type made on the same day by the Lenders ratably
according to their respective Commitments. Notwithstanding anything herein to
the contrary, no Revolving Borrowing may be made in an Alternative Currency if,
after giving effect to the making of such Revolving Borrowing, the aggregate
amount of outstanding Revolving Advances denominated in one or more Alternative
Currencies would exceed the Dollar equivalent of $20,000,000. Within the limits
of each Lender's Commitment, the Borrower may borrow under this Section
2.01(a)(ii), prepay pursuant to Section 2.09(b) and reborrow under this Section
2.01(a)(ii). For purposes of this Section 2.01(a)(ii) and all other provisions
of this Article II, the equivalent in Dollars of any Alternative Currency or the
equivalent in any Alternative Currency of Dollars or of any other Alternative
Currency shall be determined in accordance with Section 2.17.
(b) The Borrower may designate in a Notice of Revolving Borrowing
that the proceeds of the proposed Revolving Borrowing (a "Redemption Borrowing")
shall be applied to redeem or purchase in part the Series A Preferred Stock, the
Series B Preferred Stock or the common stock of the Borrower issuable upon
conversion of the Series B Preferred Stock, provided that (i) the aggregate
amount of all Redemption Borrowings shall not exceed $120,000,000 from
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21
the date hereof, (ii) no more than two Redemption Borrowings shall be made in
any calendar year and (iii) each Redemption Borrowing shall be denominated in
Dollars.
SECTION 2.02. Making the Revolving Advances. (a) Each Revolving
Borrowing shall be made on notice, given not later than (x) 10:00 A.M. (New York
City time) on the date of the proposed Revolving Borrowing, in the case of a
Revolving Borrowing consisting of Base Rate Advances, and not later than (y)
11:00 A.M. (New York City time) on the third Business Day prior to the date of
the proposed Revolving Borrowing, in the case of a Revolving Borrowing
consisting of Eurocurrency Rate Advances denominated in Dollars, and (z) 11:00
A.M. (New York City time) on the fifth Business Day prior to the date of the
proposed Revolving Borrowing, in the case of a Revolving Borrowing consisting of
Eurocurrency Rate Advances denominated in an Alternative Currency, in each case
by the Borrower to the Agent, which shall give to each Lender prompt notice
thereof by telephone, telecopier, telex or cable. Each such notice of a
Revolving Borrowing (a "Notice of Revolving Borrowing") shall be by telephone,
telecopier, telex or cable, confirmed immediately in writing, in substantially
the form of Exhibit B-1 hereto, specifying therein (i) the requested date of
such Revolving Borrowing, (ii) the requested Type of Advances comprising such
Revolving Borrowing, (iii) the requested aggregate amount of such Revolving
Borrowing, (iv) in the case of a Revolving Borrowing comprised of Eurocurrency
Rate Advances, the requested Interest Period for each such Revolving Advance and
the currency of such Revolving Borrowing and (v) whether such Revolving
Borrowing is a Redemption Borrowing.
In the case of a Revolving Borrowing comprised of Eurocurrency
Rate Advances in an Alternative Currency (other than the lawful money of Great
Britain, the lawful money of the Netherlands and the lawful money of Japan), the
obligation of each Lender to make its Eurocurrency Rate Advance in the requested
Alternative Currency as part of such Revolving Borrowing is subject to the
confirmation by such Lender to the Agent not later than the fourth Business Day
before the requested date of such Revolving Borrowing that such Lender agrees to
make its Eurocurrency Rate Advance in the requested Alternative Currency, which
confirmation shall be notified immediately by the Agent to the Borrower. If any
Lender shall not have so provided to the Agent such confirmation, the Agent
shall promptly notify the Borrower and each Lender that a Lender has not
provided such confirmation, whereupon the Borrower may, by notice to the Agent
not later than the third Business Day before the requested date of such
Revolving Borrowing, withdraw the Notice of Revolving Borrowing relating to such
requested Borrowing. If the Borrower does so withdraw such Notice of Revolving
Borrowing, the Revolving Borrowing requested in such Notice of Revolving
Borrowing shall not occur and the Agent shall promptly so notify each Lender. If
the Borrower does not so withdraw such Notice of Revolving Borrowing, the Agent
shall promptly so notify each Lender and such Notice of Revolving Borrowing
shall be deemed to be a Notice of Revolving Borrowing which requests a Revolving
Borrowing comprised of Eurocurrency Rate Advances in an aggregate amount in
Dollars equivalent, on the date the Agent so notifies each Lender, to the amount
of the originally
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22
requested Revolving Borrowing in such an Alternative Currency; and in such
notice by the Agent to each Lender the Agent shall state such aggregate
equivalent amount of such Revolving Borrowing in Dollars and such Lender's
ratable portion of such Borrowing.
Each Lender shall, before 11:00 A.M. (New York City time) on the
date of such Revolving Borrowing, make available for the account of its
Applicable Lending Office to the Agent (i) in the case of a Revolving Borrowing
in Dollars, at its address referred to in Section 8.02, in same day funds, such
Lender's ratable portion of such Revolving Borrowing in Dollars, and (ii) in the
case of a Revolving Borrowing in an Alternative Currency, at such account
maintained at the Payment Office for such Alternative Currency as shall have
been notified by the Agent to the Lenders prior thereto, in same day funds, such
Lender's ratable portion of such Revolving Borrowing in such Alternative
Currency. After the Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the Agent will make such funds
available to the Borrower at the Agent's aforesaid address or at the applicable
Payment Office.
(b) Anything in subsection (a) above to the contrary
notwithstanding, the Borrower may not select Eurocurrency Rate Advances for any
Revolving Borrowing if the aggregate amount of such Revolving Borrowing is less
than $5,000,000 (or its equivalent in any Alternative Currency) or if the
obligation of the Lenders to make Eurocurrency Rate Advances shall then be
suspended pursuant to Section 2.07.
(c) Each Notice of Revolving Borrowing shall be irrevocable and
binding on the Borrower. In the case of any Revolving Borrowing which the
related Notice of Revolving Borrowing specifies is to be comprised of
Eurocurrency Rate Advances, the Borrower shall indemnify each Lender against any
loss, cost or expense incurred by such Lender as a result of any failure to
fulfill on or before the date specified in such Notice of Revolving Borrowing
for such Revolving Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Revolving Advance to
be made by such Lender as part of such Revolving Borrowing when such Revolving
Advance, as a result of such failure, is not made on such date.
(d) Unless the Agent shall have received notice from a Lender
prior to the date of any Revolving Borrowing that such Lender will not make
available to the Agent such Lender's ratable portion of such Revolving
Borrowing, the Agent may assume that such Lender has made such portion available
to the Agent on the date of such Revolving Borrowing in accordance with
subsection (a) of this Section 2.02 and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Lender shall not have so made such ratable
portion available to the Agent, such Lender and the Borrower severally agree to
repay to the Agent forthwith on demand such corresponding amount
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23
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the Agent, at
(i) in the case of the Borrower, the interest rate applicable at the time to
Revolving Advances comprising such Revolving Borrowing and (ii) in the case of
such Lender, the Federal Funds Rate. If such Lender shall repay to the Agent
such corresponding amount, such amount so repaid shall constitute such Lender's
Revolving Advance as part of such Revolving Borrowing for purposes of this
Agreement and, if the Borrower shall repay to the Agent such corresponding
amount pursuant to this clause (d), such repayment shall not relieve such Lender
from its obligations hereunder to the Borrower.
(e) The failure of any Lender to make the Revolving Advance to be
made by it as part of any Revolving Borrowing shall not relieve any other Lender
of its obligation, if any, hereunder to make its Revolving Advance on the date
of such Revolving Borrowing, but no Lender shall be responsible for the failure
of any other Lender to make the Revolving Advance to be made by such other
Lender on the date of any Revolving Borrowing.
SECTION 2.03. Fees. (a) Facility Fee. The Borrower agrees to pay
to the Agent for the account of each Lender (other than the Designated Bidders)
a facility fee on the aggregate amount of such Lender's Commitment from the
Effective Date in the case of each Bank and from the later of the Effective Date
and the effective date specified in the Assignment and Acceptance pursuant to
which it became a Lender in the case of each other Lender until the Termination
Date at a rate per annum equal to the Applicable Percentage in effect from time
to time, payable on the last day of each March, June, September and December,
commencing June 30, 1995, and on the Termination Date.
(b) Agent's Fees. The Borrower shall pay to the Agent for its own
account such fees as may from time to time be agreed between the Borrower and
the Agent.
SECTION 2.04. Reduction or Termination of the Commitments. The
Borrower shall have the right, upon at least three Business Days' notice to the
Agent, to terminate in whole or reduce ratably in part the unused portions of
the respective Commitments of the Lenders, provided that each partial reduction
shall be in the aggregate amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof and provided further that the aggregate amount of
the Commitments of the Lenders shall not be reduced to an amount that is less
than the aggregate principal amount of the Competitive Bid Advances then
outstanding.
SECTION 2.05. Repayment of Revolving Advances. The Borrower shall
repay to the Agent for the ratable account of the Lenders on the Termination
Date the principal amount of the Revolving Advances then outstanding.
SECTION 2.06. Interest on Revolving Advances. (a) Scheduled
Interest. The Borrower shall pay interest on the unpaid principal amount of each
Revolving Advance owing to
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24
each Lender from the date of such Revolving Advance until such principal amount
shall be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Revolving
Advance is a Base Rate Advance, a rate per annum equal at all times to
the Base Rate in effect from time to time, payable in arrears monthly on
the last day of each month during such periods and on the date such Base
Rate Advance shall be Converted or paid in full.
(ii) Eurocurrency Rate Advances. During such periods as such
Revolving Advance is a Eurocurrency Rate Advance, a rate per annum equal
at all times during each Interest Period for such Revolving Advance to
the sum of (x) the Eurocurrency Rate for such Interest Period for such
Revolving Advance plus (y) the Applicable Margin in effect on the first
day of such Interest Period, payable on the last day of such Interest
Period and, if such Interest Period has a duration of more than three
months, on each day which occurs during such Interest Period every three
months from the first day of such Interest Period and on the date such
Eurocurrency Rate Advance shall be Converted or paid in full.
(b) Default Interest. The Borrower shall pay interest on (i) the
unpaid principal amount of each Revolving Advance that is not paid when due from
the date such amount shall be due until such amount shall be paid in full,
payable in arrears on the dates referred to in clause (a)(i) or (a)(ii) above,
at a rate per annum equal at all times to 2% per annum above the rate per annum
required to be paid on such Revolving Advance pursuant to clause (a)(i) or
(a)(ii) above and (ii) the amount of any interest, fee or other amount payable
hereunder that is not paid when due, from the date such amount shall be due
until such amount shall be paid in full, payable in arrears on the date such
amount shall be paid in full and on demand, at a rate per annum equal at all
times to 2% per annum above the rate per annum required to be paid on Base Rate
Advances pursuant to clause (a)(i) above.
SECTION 2.07. Interest Rate Determination. (a) The Agent shall
give prompt notice to the Borrower and the Lenders of the applicable interest
rate determined by the Agent for purposes of Section 2.06(a)(i) or (ii).
(b) If, with respect to any Eurocurrency Rate Advances, the
Required Lenders notify the Agent that the Eurocurrency Rate for any Interest
Period for such Advances will not adequately reflect the cost to such Required
Lenders of making, funding or maintaining their respective Eurocurrency Rate
Advances for such Interest Period, the Agent shall forthwith so notify the
Borrower and the Lenders, whereupon
(i) each Eurocurrency Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a
Base Rate Advance, and
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25
(ii) the obligation of the Lenders to make, or to Convert
Revolving Advances into, Eurocurrency Rate Advances shall be suspended
until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
(c) If the Borrower shall fail to select the duration of any
Interest Period for any Eurocurrency Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Agent will forthwith so notify the Borrower and the Lenders and such Revolving
Advances will automatically, on the last day of the then existing Interest
Period therefor, Convert into Base Rate Advances.
(d) On the date on which the aggregate unpaid principal amount of
Eurocurrency Rate Advances comprising any Borrowing shall be reduced, by payment
or prepayment or otherwise, to less than $5,000,000 (or its equivalent in any
Alternative Currency), such Revolving Advances shall automatically Convert into
Base Rate Advances at the end of the applicable Interest Period for such
Revolving Advances.
SECTION 2.08. Voluntary Conversion of Revolving Advances. The
Borrower may on any Business Day, upon notice given to the Agent not later than
11:00 A.M. (New York City time) on the third Business Day prior to the date of
the proposed Conversion and subject to the provisions of Sections 2.07 and 2.12,
Convert, pro rata based on the Lenders' respective Commitments, Revolving
Advances of one Type denominated in Dollars comprising the same Borrowing into
Revolving Advances of the other Type denominated in Dollars or, in the case of
Eurocurrency Rate Advances (whether denominated in Dollars or in Alternative
Currency), into Revolving Advances with a different Interest Period; provided,
however, that in the event of any Conversion of Eurocurrency Rate Advances into
Base Rate Advances or Eurocurrency Rate Advances with a different Interest
Period on a day other than the last day of an Interest Period for the
Eurocurrency Rate Advances being Converted, the Borrower shall reimburse the
Lenders in respect of such Eurocurrency Rate Advances to the extent required by
Section 8.04(c) and any Conversion of Base Rate Advances into Eurocurrency Rate
Advances shall be in an amount not less than the minimum amount specified in
Section 2.02(b). Each such notice of a Conversion shall, within the restrictions
specified above, specify (i) the date of such Conversion, (ii) the Revolving
Advances to be Converted and (iii) if such Conversion is into Eurocurrency Rate
Advances, the duration of the Interest Period for each such Revolving Advance.
Each notice of Conversion shall be irrevocable and binding on the Borrower.
SECTION 2.09. Prepayments of Revolving Advances. (a) The Borrower
shall have no right to prepay any principal amount of any Revolving Advances
other than as provided below.
(b) The Borrower may, upon at least three Business Days' notice,
in the case of Eurocurrency Rate Advances, and one Business Day's notice given
not later than 11:00 A.M.
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26
(New York City time), in the case of Base Rate Advances, to the Agent stating
the proposed date and aggregate principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay the outstanding principal amounts of
the Revolving Advances comprising part of the same Revolving Borrowing in whole
or ratably in part, together with accrued interest to the date of such
prepayment on the principal amount prepaid; provided, however, that (x) each
partial prepayment shall be in an aggregate principal amount not less than
$5,000,000 or the equivalent thereof in an Alternative Currency (determined on
the date notice of repayment is given in accordance with Section 2.17) or an
integral multiple of $1,000,000 or the equivalent thereof in an Alternative
Currency (determined on the date notice of repayment is given in accordance with
Section 2.17) in excess thereof, (y) in the event of any such prepayment of a
Eurocurrency Rate Advance, the Borrower shall be obligated to reimburse the
Lenders in respect thereof to the extent required by Section 8.04(c) and (z) any
such prepayment occurring within 6 months after the making of any Redemption
Borrowing shall be applied first to prepay any outstanding Revolving Borrowings
(other than Redemption Borrowings) and second to prepay any outstanding
Redemption Borrowings.
(c) The Borrower shall, on each Business Day, prepay an aggregate
principal amount of the Revolving Advances comprising part of the same Revolving
Borrowings equal to the amount by which the aggregate principal amount of the
Advances then outstanding exceeds the aggregate Commitments of the Lenders on
such Business Day. For purposes of this subsection (c), the aggregate principal
amount of Eurocurrency Rate Advances denominated in any Alternative Currency
shall be determined in Dollars as set forth in Section 2.17. The Agent shall
give prompt notice of any prepayment required under this Section 2.09(c) to the
Borrower and the Lenders.
(d) On any Business Day on which the aggregate amount of the Debt
of the Borrower or of the Borrower and its Subsidiaries would, but for the
operation of this subsection (d), contravene (i) any provision contained in the
Borrower's charter or by-laws or (ii) any contractual restriction binding on or
affecting the Borrower, the Borrower shall, on such Business Day, prepay an
aggregate principal amount of the Advances comprising part of the same
Borrowings in an amount sufficient to prevent the occurrence of any such
contravention.
SECTION 2.10. Increased Costs. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation, with respect to any Eurocurrency Rate Advance, after the date
hereof, and with respect to any LIBO Rate Advance, after the date on which one
or more Lenders offered to make such LIBO Rate Advance pursuant to Section
2.15(a)(ii) or (ii) the compliance with any guideline or request from any
central bank or other governmental authority (whether or not having the force of
law), with respect to any Eurocurrency Rate Advance, after the date hereof, and
with respect to any LIBO Rate Advance, after the date on which one or more
Lenders offered to make such LIBO Rate Advance pursuant to Section 2.15(a)(ii),
there shall be any increase in the cost (other than in taxes, except to the
extent that the same are required to be paid pursuant to Section 2.13) to any
Lender of agreeing to make or making, funding or maintaining any Eurocurrency
Rate Advance or LIBO Rate Advance, then the
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27
Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to the Agent), pay to the Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased cost;
provided, however, that, before making any such demand, each Lender agrees to
use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Applicable Lending Office if
the making of such a designation would avoid the need for, or reduce the amount
of, such increased cost and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender. A certificate as to the
amount of such increased cost, setting forth the basis therefor in reasonable
detail and submitted by such Lender to the Borrower and the Agent together with
any demand under this subsection (a), shall be presumed correct absent
demonstrable error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) after the date
hereof affects or would affect the amount of capital required or expected to be
maintained by such Lender or any corporation controlling such Lender and that
the amount of such capital is increased by or based upon the existence of such
Lender's commitment to lend hereunder and other commitments of this type, then,
upon demand by such Lender (with a copy of such demand to the Agent), the
Borrower shall pay to the Agent for the account of such Lender, from time to
time as specified by such Lender, additional amounts sufficient to compensate
such Lender or such corporation in the light of such circumstances, to the
extent that such Lender reasonably determines such increase in capital to be
allocable to the existence of such Lender's commitment to lend hereunder;
provided, however, that, before making any such demand, each Lender agrees to
use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Applicable Lending Office if
the making of such a designation would avoid the need for, or reduce the amount
of, such additional amounts payable under this subsection (b) and would not, in
the reasonable judgment of such Lender, be otherwise disadvantageous to such
Lender. A certificate as to such amounts, setting forth the basis therefor in
reasonable detail and submitted to the Borrower and the Agent by such Lender
together with any demand under this paragraph (b) shall be presumed correct
absent demonstrable error.
(c) Notwithstanding any other provision in this Section 2.10, no
Lender shall be entitled to demand compensation pursuant to this Section 2.10
unless such Lender shall certify to the Borrower that it is at the time the
general policy or practice of such Lender to demand such compensation in similar
circumstances under comparable provisions of other comparable credit agreements
with borrowers of similar credit quality. The Borrower shall pay each Lender the
amount shown as due on any certificate delivered by such Lender pursuant to
paragraph (a) or (b) above within 30 days after its receipt of the same.
(d) No Lender shall be entitled to compensation under this
Section 2.10 for any costs incurred or reductions suffered with respect to any
event or circumstance unless such Lender shall have notified the Borrower, not
more than 120 days after such Lender becomes aware of
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28
such event or circumstance, that it will demand compensation for such costs or
reductions in a certificate described in the last sentence of each of paragraphs
(a) and (b) above.
SECTION 2.11. Illegality. (a) Notwithstanding any other provision
of this Agreement, if any Lender shall notify the Agent and the Borrower that
the introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for any Lender or its Eurocurrency
Lending Office to perform its obligations hereunder to make Eurocurrency Rate
Advances in Dollars or in any Alternative Currency or LIBO Rate Advances or to
fund or maintain Eurocurrency Rate Advances in Dollars or in any Alternative
Currency or LIBO Rate Advances hereunder, (i) the obligation of such Lender to
make Eurocurrency Rate Advances in Dollars or in such Alternative Currency or
LIBO Rate Advances, as the case may be, or to Convert Revolving Advances into
Eurocurrency Rate Advances shall be suspended, whereupon any request by the
Borrower for a Borrowing comprised of Eurocurrency Rate Advances or LIBO Rate
Advances shall, as to such Lender only, be deemed a request for a Base Rate
Advance until such Lender shall notify the Agent and the Borrower that the
circumstances causing such suspension no longer exist and (ii) such Lender may
require that all outstanding Eurocurrency Rate Advances in Dollars or in such
Alternative Currency and LIBO Rate Advances, as the case may be, made by it be
Converted to Base Rate Advances, in which event all such Eurocurrency Rate
Advances in Dollars or in such Alternative Currency and LIBO Rate Advances, as
the case may be, shall be automatically Converted to Base Rate Advances as of
the effective date of such notice; provided, however, that each Lender agrees to
use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Eurocurrency Lending Office if
the making of such a designation would enable such Lender to withdraw its notice
under this subsection (a) and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender. In the event any Lender
shall notify the Agent and the Borrower of the occurrence of the circumstances
causing such suspension under this Section 2.11(a), all payments and prepayments
of principal that would otherwise have been applied to repay the Eurocurrency
Rate Advances or LIBO Rate Advances that would have been made by such Lender or
the Converted Eurocurrency Rate Advances shall instead be applied to repay the
Base Rate Advances made by such Lender in lieu of such Eurocurrency Rate
Advances or LIBO Rate Advances, or resulting from the Conversion of such
Eurocurrency Rate Advances.
(b) For purposes of this Section 2.11, a notice to the Borrower
by any Lender shall be effective as to each Eurocurrency Rate Advance and LIBO
Rate Advance, if lawful, on the last day of the Interest Period currently
applicable to such Eurocurrency Rate Advance or LIBO Rate Advance, as the case
may be; in all other cases such notice shall be effective on the date of the
occurrence of the circumstances causing such suspension under subsection (a)
above.
SECTION 2.12. Payments and Computations. (a) The Borrower shall
make each payment hereunder and under the Notes, except with respect to
principal of, interest on, and other
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29
amounts relating to, Advances denominated in an Alternative Currency, not later
than 12:00 Noon (New York City time) on the day when due in Dollars to the Agent
at its address referred to in Section 8.02 in same day funds. The Borrower shall
make each payment hereunder and under the Notes with respect to principal of,
interest on, and other amounts relating to Advances denominated in an
Alternative Currency not later than 12:00 Noon (at the Payment Office for such
Alternative Currency) on the day when due in such Alternative Currency to the
Agent in same day funds by deposit of such funds to the Agent's account
maintained at such Payment Office. The Agent will promptly thereafter cause to
be distributed like funds relating to the payment of principal or interest or
facility fees ratably (other than amounts payable pursuant to Section 2.10,
2.13, 2.15 or 8.04(c)) to the Lenders for the account of their respective
Applicable Lending Offices, and like funds relating to the payment of any other
amount payable to any Lender to such Lender for the account of its Applicable
Lending Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and recording of
the information contained therein in the Register pursuant to Section 8.07(g),
from and after the effective date specified in such Assignment and Acceptance,
the Agent shall make all payments hereunder and under the Notes in respect of
the interest assigned thereby to the Lender assignee thereunder, and the parties
to such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) The Borrower hereby authorizes each Lender, if and to the
extent payment owed to such Lender is not made when due hereunder or under the
Note held by such Lender, to charge from time to time against any or all of the
Borrower's accounts with such Lender any amount so due.
(c) All computations of interest based on the Base Rate shall be
made by the Agent on the basis of a year of 365 or 366 days, as the case may be,
and all computations of interest based on the Eurocurrency Rate or the Federal
Funds Rate and of facility fees shall be made by the Agent on the basis of a
year of 360 days, in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest or facility fees are payable. Each determination by the Agent of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(d) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall 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 interest or facility fee, as
the case may be; provided, however, if such extension would cause payment of
interest on or principal of Eurocurrency Rate Advances or LIBO Rate Advances to
be made in the next following calendar month, such payment shall be made on the
next preceding Business Day.
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30
(e) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Lenders hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the Agent,
each Lender shall repay to the Agent forthwith on demand such amount distributed
to such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Agent, at the Federal Funds Rate.
SECTION 2.13. Taxes. (a) Any and all payments by the Borrower
hereunder or under the Notes shall be made, in accordance with Section 2.12,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Agent, taxes
imposed on its income, and franchise taxes imposed on it, by the jurisdiction
under the laws of which such Lender or the Agent (as the case may be) is
organized or any political subdivision thereof and, in the case of each Lender,
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction of such Lender's Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Note to any Lender or the Agent, (i)
the sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.13) such Lender or the Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall
pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under the Notes or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.13) paid by such Lender or the Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be made within 30 days from the date such
Lender or the Agent (as the case may be) makes written demand therefor.
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31
(d) Within 30 days after the date of any payment of Taxes, the
Borrower will furnish to the Agent, at its address referred to in Section 8.02,
the original or a certified copy of a receipt evidencing payment thereof. In the
case of any payment hereunder or under the Notes by the Borrower through an
account or branch outside the United States or on behalf of the Borrower by a
payor that is not a United States person, if the Borrower determines that no
Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause
such payor to furnish, to the Agent, at such address, an opinion of counsel
acceptable to the Agent stating that such payment is exempt from Taxes. For
purposes of this Section 2.13, the terms "United States" and "United States
person" shall have the meanings specified in Section 7701 of the Internal
Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each initial Lender and on the date of the
Assignment and Acceptance pursuant to which it becomes a Lender in the case of
each other Lender, and from time to time thereafter if requested in writing by
the Borrower (but only so long as such Lender remains lawfully able to do so),
shall provide the Borrower with Internal Revenue Service Form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Lender is entitled to benefits under an income tax treaty
to which the United States is a party which reduces the rate of withholding tax
on payments of interest or certifying that the income receivable pursuant to
this Agreement or the Notes is effectively connected with the conduct of a trade
or business in the United States. If the form provided by a Lender at the time
such Lender first becomes a party to this Agreement indicates a United States
interest withholding tax rate in excess of zero, withholding tax at such rate
shall be considered excluded from "Taxes" as defined in Section 2.13(a).
(f) For any period with respect to which a Lender has failed to
provide the Borrower with the appropriate form described in Section 2.13(e)
(other than if such failure is due to a change in law occurring subsequent to
the date on which a form originally was required to be provided, or if such form
otherwise is not required under the first sentence of subsection (e) above),
such Lender shall not be entitled to indemnification under Section 2.13(a) with
respect to Taxes imposed by the United States; provided, however, that should a
Lender become subject to Taxes because of its failure to deliver a form required
hereunder, the Borrower, at the requesting Lender's expense, shall take such
steps as the Lender shall reasonably request to assist the Lender to recover
such Taxes.
(g) Any Lender claiming any additional amounts payable pursuant
to this Section 2.13 shall use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Eurocurrency Lending Office if the making of such a change would avoid the need
for, or reduce the amount of, any such additional amounts
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32
that may thereafter accrue and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender.
(h) The Agent or any Lender will notify the Borrower if it
becomes aware of any circumstances that entitle the Borrower to a refund of
Taxes paid by the Borrower pursuant to this Section 2.13 if the Borrower would
not otherwise know or have reason to know of its entitlement to such refund.
Within 30 days of the written request of the Borrower therefor, the Lenders and
the Agent, as appropriate, shall, at the Borrower's expense, execute and deliver
to the Borrower such certificates, forms or other documents that can be
furnished consistent with the facts and that are reasonably necessary to assist
the Borrower in applying for refunds of Taxes paid by the Borrower pursuant to
either Section 2.13(a) or Section 2.13(c).
(i) Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 2.13 shall survive the payment in full of principal and interest
hereunder and under the Notes.
SECTION 2.14. Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of setoff, or otherwise) on account of the Revolving Advances owing to it
(other than pursuant to Section 2.10, 2.13 or 8.04(c)) in excess of its ratable
share of payments on account of the Revolving Advances obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the Revolving Advances owing to them as shall be necessary to
cause such purchasing Lender to share the excess payment ratably with each of
them, provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of
such Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.14 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of setoff) with respect
to such participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
SECTION 2.15. The Competitive Bid Advances. (a) Each Lender
severally agrees that the Borrower may make Competitive Bid Borrowings under
this Section 2.15 from time to time on any Business Day during the period from
the date hereof until the date occurring 30 days prior to the Termination Date
in the manner set forth below; provided that, following the making of each
Competitive Bid Borrowing, (x) the aggregate amount of the Competitive Bid
Advances of all Lenders then outstanding shall not exceed $100,000,000, (y) the
aggregate amount of the Competitive Bid Advances of any one Lender then
outstanding shall not exceed
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33
$50,000,000 and (z) the aggregate amount of the Advances then outstanding shall
not exceed the aggregate amount of the Commitments of the Lenders (computed
without regard to any Competitive Bid Reduction); provided further that the
Borrower may not request a Competitive Bid Borrowing, and no Competitive Bid
Borrowing shall be made, if, after giving effect thereto, the aggregate amount
of Debt of the Borrower or the Borrower and its Subsidiaries would contravene
(i) any provision contained in the Borrower's charter or by-laws or (ii) any
contractual restriction binding on or affecting the Borrower.
(i) The Borrower may request a Competitive Bid Borrowing under
this Section 2.15 by delivering to the Agent, by telephone, telecopier,
telex or cable, a notice of a Competitive Bid Borrowing (a "Notice of
Competitive Bid Borrowing"), in substantially the form of Exhibit B-2
hereto, specifying therein the requested (v) date of such proposed
Competitive Bid Borrowing, (w) aggregate amount of such proposed
Competitive Bid Borrowing, (x) in the case of a Competitive Bid
Borrowing consisting of LIBO Rate Advances, Interest Period, or in the
case of a Competitive Bid Borrowing consisting of Fixed Rate Advances,
maturity date for repayment of each Fixed Rate Advance to be made as
part of such Competitive Bid Borrowing (which maturity date may not be
earlier than the date occurring seven days after the date of such
Competitive Bid Borrowing or later than the earlier of (I) 180 days
after the date of such Competitive Bid Borrowing and (II) the
Termination Date), (y) interest payment date or dates relating thereto
and (z) other terms (if any) to be applicable to such Competitive Bid
Borrowing, not later than 10:00 A.M. (New York City time) (A) at least
one Business Day prior to the date of the proposed Competitive Bid
Borrowing, if the Borrower shall specify in the Notice of Competitive
Bid Borrowing that the rates of interest to be offered by the Lenders
shall be fixed rates per annum (each Advance comprising part of such
Competitive Bid Borrowing being referred to herein as a "Fixed Rate
Advance") and (B) at least four Business Days prior to the date of the
proposed Competitive Bid Borrowing, if the Borrower shall instead
specify in the Notice of Competitive Bid Borrowing that the rates of
interest to be offered by the Lenders are to be based on the LIBO Rate
(each Advance comprising part of any such Competitive Bid Borrowing that
is offered by the Lenders at the LIBO Rate is referred to herein as a
"LIBO Rate Advance"). Subject to subsection (a)(iii)(x) below, each
Notice of Competitive Bid Borrowing shall be irrevocable and binding on
the Borrower. The Agent shall in turn promptly notify each Lender of
each request for a Competitive Bid Borrowing received by it from the
Borrower by sending such Lender a copy of the related Notice of
Competitive Bid Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects to do
so, irrevocably offer to make one or more Competitive Bid Advances to
the Borrower as part of such proposed Competitive Bid Borrowing at a
rate or rates of interest specified by such Lender in its sole
discretion, by written notice (the "Offer") to the Agent (which shall
give prompt notice thereof to the Borrower), before 9:30 A.M. (New York
City time) on the date of
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34
such proposed Competitive Bid Borrowing, in the case of a Competitive
Bid Borrowing consisting of Fixed Rate Advances and before 10:00 A.M.
(New York City time) three Business Days before the date of such
proposed Competitive Bid Borrowing, in the case of a Competitive Bid
Borrowing consisting of LIBO Rate Advances, of the minimum amount and
maximum amount of each Competitive Bid Advance which such Lender would
be willing to make as part of such proposed Competitive Bid Borrowing
(which amounts may, subject to the proviso to the first sentence of this
Section 2.15(a), exceed such Lender's Commitment, if any), the rate or
rates of interest therefor and such Lender's Applicable Lending Office
with respect to such Competitive Bid Advance; provided that if the Agent
in its capacity as a Lender shall, in its sole discretion, elect to make
any such offer, it shall notify the Borrower of such offer at least 30
minutes before the time and on the date on which notice of such election
is to be given to the Agent by the other Lenders. If any Lender shall
elect not to make such an offer, such Lender shall so notify the Agent,
before 10:00 A.M. (New York City time) on the date on which notice of
such election is to be given to the Agent by the other Lenders, and such
Lender shall not be obligated to, and shall not, make any Competitive
Bid Advance as part of such Competitive Bid Borrowing; provided that the
failure by any Lender to give such notice shall not cause such Lender to
be obligated to make any Competitive Bid Advance as part of such
proposed Competitive Bid Borrowing.
(iii) The Borrower shall, in turn, before 10:30 A.M. (New York
City time) on the date of such proposed Competitive Bid Borrowing, in
the case of a Competitive Bid Borrowing consisting of Fixed Rate
Advances and before 11:00 A.M. (New York City time) three Business Days
before the date of such proposed Competitive Bid Borrowing, in the case
of a Competitive Bid Borrowing consisting of LIBO Rate Advances, either:
(x) cancel such Competitive Bid Borrowing by giving the
Agent notice to that effect, or
(y) accept one or more of the offers made by any Lender
or Lenders pursuant to paragraph (ii) above, in its sole
discretion, by giving written notice to the Agent of the amount
of each Competitive Bid Advance (which amount shall be equal to
or greater than the minimum amount, and equal to or less than
the maximum amount, notified to the Borrower by the Agent on
behalf of such Lender for such Competitive Bid Advance pursuant
to paragraph (ii) above) to be made by each Lender as part of
such Competitive Bid Borrowing, and reject any remaining offers
made by Lenders pursuant to paragraph (ii) above by giving the
Agent notice to that effect. The Borrower shall accept the
offers made by any Lender or Lenders to make Competitive Bid
Advances in order of the lowest to the highest rates of interest
offered by such Lenders. If two or more Lenders have offered the
same interest rate, the amount to be borrowed at such interest
rate will be allocated
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35
among such Lenders in proportion to the amount that each such
Lender offered at such interest rate.
(iv) If the Borrower notifies the Agent that such Competitive Bid
Borrowing is cancelled pursuant to paragraph (iii)(x) above, the Agent
shall give prompt notice thereof to the Lenders and such Competitive Bid
Borrowing shall not be made.
(v) If the Borrower accepts one or more of the offers made by any
Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent shall
in turn promptly notify (A) each Lender that has made an offer as
described in paragraph (ii) above, of the date and aggregate amount of
such Competitive Bid Borrowing and whether or not any offer or offers
made by such Lender pursuant to paragraph (ii) above have been accepted
by the Borrower, (B) each Lender that is to make a Competitive Bid
Advance as part of such Competitive Bid Borrowing, of the amount of each
Competitive Bid Advance to be made by such Lender as part of such
Competitive Bid Borrowing, and (C) each Lender that is to make a
Competitive Bid Advance as part of such Competitive Bid Borrowing, upon
receipt, that the Agent has received forms of documents appearing to
fulfill the applicable conditions set forth in Article III. Each Lender
that is to make a Competitive Bid Advance as part of such Competitive
Bid Borrowing shall, before 12:00 noon (New York City time) on the date
of such Competitive Bid Borrowing specified in the notice received from
the Agent pursuant to clause (A) of the preceding sentence or any later
time when such Lender shall have received notice from the Agent pursuant
to clause (C) of the preceding sentence, make available for the account
of its Applicable Lending Office to the Agent at its address referred to
in Section 8.02, in same day funds, such Lender's portion of such
Competitive Bid Borrowing. Upon fulfillment of the applicable conditions
set forth in Article III and after receipt by the Agent of such funds,
the Agent will make such funds available to the Borrower at the Agent's
aforesaid address or at the applicable Payment Office. Promptly after
each Competitive Bid Borrowing the Agent will notify each Lender of the
amount of the Competitive Bid Borrowing, the consequent Competitive Bid
Reduction and the dates upon which such Competitive Bid Reduction
commenced and will terminate.
(vi) If the Borrower notifies the Agent that it accepts one or
more of the offers made by any Lender or Lenders pursuant to paragraph
(iii)(y) above, such notice of acceptance shall be irrevocable and
binding on the Borrower. The Borrower shall indemnify each Lender
against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in the related
Notice of Competitive Bid Borrowing for such Competitive Bid Borrowing
the applicable conditions set forth in Article III, including, without
limitation, any loss (including loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Competitive
Bid Advance to be made
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36
by such Lender as part of such Competitive Bid Borrowing when such
Competitive Bid Advance, as a result of such failure, is not made on
such date.
(b) Each Competitive Bid Borrowing shall be in an aggregate
amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof
and, following the making of each Competitive Bid Borrowing, the Borrower and
each Lender shall be in compliance with the limitations set forth in the proviso
to the first sentence of subsection (a) above.
(c) Within the limits and on the conditions set forth in this
Section 2.15, the Borrower may from time to time borrow under this Section 2.15,
repay or prepay pursuant to subsection (d) below, and reborrow under this
Section 2.15, provided that a Competitive Bid Borrowing shall not be made within
three Business Days of the date of any other Competitive Bid Borrowing.
(d) The Borrower shall repay to the Agent for the account of each
Lender that has made a Competitive Bid Advance, on the maturity date of each
Competitive Bid Advance (such maturity date being that specified by the Borrower
for repayment of such Competitive Bid Advance in the related Notice of
Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above), the
then unpaid principal amount of such Competitive Bid Advance. The Borrower shall
have no right to prepay any principal amount of any Competitive Bid Advance
unless, and then only on the terms, specified by the Borrower for such
Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above.
(e) The Borrower shall pay interest on the unpaid principal
amount of each Competitive Bid Advance from the date of such Competitive Bid
Advance to the date the principal amount of such Competitive Bid Advance is
repaid in full, at the rate of interest for such Competitive Bid Advance
specified by the Lender making such Competitive Bid Advance in its notice with
respect thereto delivered pursuant to subsection (a)(ii) above, payable on the
interest payment date or dates specified by the Borrower for such Competitive
Bid Advance in the related Notice of Competitive Bid Borrowing delivered
pursuant to subsection (a)(i) above. The Borrower shall pay interest on (i) the
unpaid principal amount of each Competitive Bid Advance that is not paid when
due from the date such amount shall be due until such amount shall be paid in
full, payable in arrears on the date or dates interest is payable thereon, at a
rate per annum equal at all times to 2% per annum above the rate per annum
required to be paid on such Competitive Bid Advance under the terms of the Offer
for such Competitive Bid Advance unless otherwise agreed in such Offer and (ii)
the amount of any interest on each Competitive Bid Advance that is not paid when
due, from the date such amount shall be due until such amount shall be paid in
full, payable in arrears on the date such amount shall be paid in full and on
demand, at a rate per annum equal at all times to 2% per annum above the rate
per annum required to be paid on such Competitive Bid Advance under the terms of
the Offer for such Competitive Bid Advance unless otherwise agreed in such
Offer.
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37
(f) The indebtedness of the Borrower resulting from each
Competitive Bid Advance made to the Borrower as part of a Competitive Bid
Borrowing shall be evidenced by a Competitive Bid Note of the Borrower payable
to the order of the Lender making such Competitive Bid Advance.
(g) Upon delivery of each Notice of Competitive Bid Borrowing,
the Borrower shall pay a non-refundable fee of $1,800 to the Agent for its own
account.
SECTION 2.16. Voluntary Redenomination of Revolving Advances. The
Borrower may, upon notice given to the Agent at least five Business Days prior
to the date of the proposed Redenomination, request that all Eurocurrency Rate
Advances comprising part of the same Revolving Borrowing be Redenominated from
Dollars into an Alternative Currency or from an Alternative Currency into
Dollars or another Alternative Currency; provided, however, that any
Redenomination shall be made on, and only on, the last day of an Interest Period
for such Revolving Advances. Each such notice of request of a Redenomination (a
"Notice of Redenomination") shall be by telephone, telecopier, telex or cable,
in substantially the form of Exhibit E hereto, specifying (i) the Eurocurrency
Rate Advances comprising the Revolving Borrowing to be Redenominated, (ii) the
date of the proposed Redenomination, (iii) the currency into which such
Revolving Advances are to be Redenominated and (iv) the duration of the Interest
Period for such Revolving Advances upon being so Redenominated. In the case of a
Notice of Redenomination which requests a Redenomination of Revolving Advances
into an Alternative Currency (other than the lawful money of Great Britain, the
lawful money of the Netherlands and the lawful money of Japan), such
Redenomination is subject to the confirmation by each Lender to the Agent not
later than the fourth Business Day before the requested date of such
Redenomination that such Lender agrees to such Redenomination, which
confirmation shall be notified immediately by the Agent to the Borrower. If any
Lender shall not have so provided to the Agent such confirmation, the requested
Redenomination will not occur and the Agent shall promptly notify the Borrower
and each Lender that a Lender has not provided such confirmation and that the
requested Redenomination will not occur. If each Lender shall have so provided
to the Agent such confirmation or if such Notice of Redenomination requests a
Redenomination of Revolving Advances into Dollars, the lawful money of Great
Britain, the lawful money of the Netherlands or the lawful money of Japan, each
Revolving Advance so requested to be Redenominated will be Redenominated, on the
date specified therefor in such Notice of Redenomination, into an equivalent
amount thereof in the currency requested in such Notice of Redenomination, such
equivalent amount to be determined on such date in accordance with Section 2.17,
and, upon being so Redenominated, will have an initial Interest Period as
requested in such Notice of Redenomination.
SECTION 2.17. Currency Equivalents. For purposes of the
provisions of this Article II, (i) the equivalent in Dollars of any Alternative
Currency shall be determined by using the quoted spot rate at which Citibank's
principal office in London offers to exchange Dollars for
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38
such Alternative Currency in London at 11:00 A.M. (London time) two Business
Days prior to the date on which such equivalent is to be determined, (ii) the
equivalent in any Alternative Currency of any other Alternative Currency shall
be determined by using the quoted spot rate at which Citibank's principal office
in London offers to exchange such Alternative Currency for the equivalent in
Dollars of such other Alternative Currency in London at 11:00 A.M. (London time)
two Business Days prior to the date on which such equivalent is to be
determined, and (iii) the equivalent in any Alternative Currency of Dollars
shall be determined by using the quoted spot rate at which Citibank's principal
office in London offers to exchange such Alternative Currency for Dollars in
London at 11:00 A.M. (London time) two Business Days prior to the date on which
such equivalent is to be determined. The equivalent in Dollars of each
Eurocurrency Rate Advance made in an Alternative Currency shall be recalculated
hereunder on each date that it shall be necessary to determine the unused
portion of each Lender's Commitment, or any or all Revolving Advance or Advances
outstanding on such date.
SECTION 2.18. Use of Proceeds. The proceeds of the Advances shall
be available (and the Borrower agrees that it shall use such proceeds) (a) in
the case of all Borrowings other than Redemption Borrowings, solely for general
corporate purposes of the Borrower and its Subsidiaries, including, without
limitation, for purposes of making acquisitions permitted hereunder, but
excluding (x) the redemption or purchase by the Borrower of the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and
the common stock of the Borrower issuable upon the conversion of the Series B
Preferred Stock and (y) the prepayment of Redemption Borrowings and (b) in the
case of Redemption Borrowings, solely for the redemption or purchase by the
Borrower of the Series A Preferred Stock, the Series B Preferred Stock and the
common stock of the Borrower issuable upon the conversion of the Series B
Preferred Stock in accordance with the terms of the Series A Certificate or
Series B Certificate, as the case may be, or on such other terms and conditions
as the Required Lenders and the Agent shall agree.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Sections
2.01 and 2.15. Sections 2.01 and 2.15 of this Agreement shall become effective
as of the Effective Date, subject to the conditions precedent that:
(a) There shall have occurred no Material Adverse Change since
December 31, 1994.
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39
(b) There shall exist no action, suit, investigation, litigation
or proceeding affecting the Borrower or any of its Subsidiaries pending
or threatened before any court, governmental agency or arbitrator that
(i) could reasonably be expected to have a Material Adverse Effect other
than the matters described on Schedule 3.01(b) (the "Disclosed
Litigation") or (ii) purports to affect the legality, validity or
enforceability of this Agreement or any Note or the consummation of the
transactions contemplated hereby, and there shall have been no material
adverse change in the status, or financial effect on the Borrower or any
of its Subsidiaries, of the Disclosed Litigation from that described on
Schedule 3.01(b).
(c) All governmental and third party consents and approvals
necessary in connection with this Agreement or the transactions
contemplated hereby and with the execution, delivery and performance of
this Agreement and the Notes shall have been obtained (without the
imposition of any conditions that are not acceptable to the Lenders) and
shall remain in effect and all material governmental and third party
consents and approvals necessary in order for the Borrower to conduct
its business as contemplated by the 1994 10K shall have been obtained
(without the imposition of any conditions that are not acceptable to the
Lenders) and shall remain in effect, and no law or regulation shall be
applicable in the reasonable judgment of the Lenders that restrains,
prevents or imposes materially adverse conditions upon the transactions
contemplated hereby.
(d) The Borrower shall have paid all accrued fees and expenses of
the Agent and all accrued financing fees of the Lenders (including the
accrued fees and expenses of counsel to the Agent); provided, however,
that the Borrower shall only be obligated to pay on the Effective Date
those expenses for which it has received invoices at least one Business
Day prior to the Effective Date.
(e) The Agent shall have received on or before the Effective Date
the following, each dated such day, in form and substance satisfactory
to the Agent and (except for the Revolving Notes) in sufficient copies
for each Lender:
(i) The Notes to the order of the Lenders, respectively.
(ii) Certified copies of the resolutions of the Board of
Directors of the Borrower approving this Agreement and the Notes,
and of all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to this
Agreement and the Notes.
(iii) A certificate of the Secretary or an Assistant
Secretary of the Borrower certifying the names and true
signatures of the officers of the Borrower
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40
authorized to sign this Agreement and the Notes and the other
documents to be delivered hereunder.
(iv) An environmental assessment update report prepared by
the Borrower, in form, scope and substance reasonably
satisfactory to the Lenders, as to any environmental hazards or
liabilities to which the Borrower or any of its Subsidiaries may
be subject, and the Lenders shall be reasonably satisfied with
the amount and nature of any such hazards or liabilities and with
the Borrower's plans with respect thereto.
(v) A certified copy of the Series A Certificate, the
Series B Certificate and the Series C Certificate.
(vi) A favorable opinion of Cravath, Swaine & Moore,
special counsel for the Borrower, substantially in the form of
Exhibit F-1 hereto and as to such other matters as any Lender
through the Agent may reasonably request.
(vii) A favorable opinion of Edward F. Jackman, Esq.,
General Counsel of the Borrower, substantially in the form of
Exhibit F-2 hereto and as to such other matters as any Lender
through the Agent may reasonably request.
(viii) A favorable opinion of Shearman & Sterling, counsel
for the Agent, in form and substance satisfactory to the Agent.
SECTION 3.02. Additional Conditions Precedent to Effectiveness.
The effectiveness of Sections 2.01 and 2.15 of this Agreement shall be subject
to the further conditions precedent that on the Effective Date the following
statements shall be true and the Agent shall have received for the account of
each Lender a certificate signed by a duly authorized officer of the Borrower,
dated the Effective Date, stating that the following statements are true:
(i) The representations and warranties contained in Section 4.01
are correct on and as of the Effective Date, and
(ii) No event has occurred and is continuing that constitutes a
Default.
SECTION 3.03. Conditions Precedent to Each Revolving Borrowing.
The obligation of each Lender to make a Revolving Advance on the occasion of
each Revolving Borrowing shall be subject to the further conditions precedent
that on the date of such Revolving Borrowing the following statements shall be
true (and each of the giving of the applicable Notice of Revolving Borrowing and
the acceptance by the Borrower of the proceeds of such Revolving
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41
Borrowing shall constitute a representation and warranty by the Borrower that on
the date of such Revolving Borrowing such statements are true):
(i) The representations and warranties contained in Section 4.01
are correct on and as of the date of such Revolving Borrowing, before
and after giving effect to such Revolving Borrowing and to the
application of the proceeds therefrom, as though made on and as of such
date,
(ii) No event has occurred and is continuing, or would result
from such Revolving Borrowing or from the application of the proceeds
therefrom, that constitutes a Default, and
(iii) After giving effect to such Revolving Borrowing, the
aggregate amount of Debt of the Borrower and of the Borrower and its
Subsidiaries will not contravene (A) any provision contained in the
Borrower's charter or by-laws or (B) any contractual restriction binding
on or affecting the Borrower.
SECTION 3.04. Conditions Precedent to Each Redemption Borrowing.
The obligation of each Lender to make a Revolving Advance on the occasion of
each Redemption Borrowing shall be subject to the further condition precedent
that if the terms and conditions of the redemption or purchase of the Series A
Preferred Stock, the Series B Preferred Stock or the common stock of the
Borrower issuable upon conversion of the Series B Preferred Stock for which the
Borrower proposes to use the proceeds of such Redemption Borrowing vary in any
respect from the terms and conditions set forth in the Series A Certificate for
such redemption or purchase, in the case of a proposed redemption or purchase of
the Series A Preferred Stock, or the Series B Certificate for such redemption or
purchase, in the case of a proposed redemption or purchase of the Series B
Preferred Stock or the common stock of the Borrower issuable upon conversion of
the Series B Preferred Stock, the Lenders shall have consented in writing to
such redemption or purchase on such terms and conditions.
SECTION 3.05. Conditions Precedent to Each Competitive Bid
Borrowing. The obligation of each Lender that is to make a Competitive Bid
Advance on the occasion of a Competitive Bid Borrowing to make such Competitive
Bid Advance as part of such Competitive Bid Borrowing is subject to the
conditions precedent that (i) the Agent shall have received the written
confirmatory Notice of Competitive Bid Borrowing with respect thereto, (ii) on
or before the date of such Competitive Bid Borrowing, but prior to such
Competitive Bid Borrowing, the Agent shall have received a Competitive Bid Note
payable to the order of such Lender for any Competitive Bid Advances to be made
by such Lender as part of such Competitive Bid Borrowing, in a principal amount
equal to the aggregate Commitments of the Lenders hereunder, and (iii) on the
date of such Competitive Bid Borrowing the following statements shall be true
(and each of the giving of the applicable Notice of Competitive Bid Borrowing
and the acceptance by the
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42
Borrower of the proceeds of such Competitive Bid Borrowing shall constitute a
representation and warranty by the Borrower that on the date of such Competitive
Bid Borrowing such statements are true):
(a) the representations and warranties contained in Section 4.01
are correct on and as of the date of such Competitive Bid Borrowing,
before and after giving effect to such Competitive Bid Borrowing and to
the application of the proceeds therefrom, as though made on and as of
such date,
(b) no event has occurred and is continuing, or would result from
such Competitive Bid Borrowing or from the application of the proceeds
therefrom, that constitutes a Default,
(c) no event has occurred and no circumstance exists as a result
of which the information concerning the Borrower that has been provided
to the Agent and each Lender by the Borrower in connection herewith
would include an untrue statement of a material fact or omit to state
any material fact or any fact necessary to make the statements contained
therein, in the light of the circumstances under which they were made,
not misleading, and
(d) after giving effect to such Competitive Bid Borrowing, the
aggregate amount of Debt of the Borrower or the Borrower and its
Subsidiaries will not contravene (i) any provision contained in the
Borrower's charter or by-laws or (ii) any contractual restriction
binding on or affecting the Borrower.
SECTION 3.06. Determinations Under Sections 3.01 and 3.02. For
purposes of determining compliance with the conditions specified in Sections
3.01 and 3.02, each Lender shall be deemed to have consented to, approved or
accepted or to be satisfied with each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to
the Lenders unless an officer of the Agent responsible for the transactions
contemplated by this Agreement shall have received notice from such Lender prior
to the proposed Effective Date, as notified by the Borrower to the Lenders,
specifying its objection thereto.
SECTION 3.07. Notice of Effective Date. Upon the occurrence of
the Effective Date, the Agent shall notify the Lenders that the Effective Date
has occurred in accordance with Sections 3.01 and 3.02, which notice shall be
conclusive and binding on the parties hereto for all purposes.
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43
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the Borrower of
this Agreement and the Notes are within the Borrower's corporate powers,
have been duly authorized by all necessary corporate action, and do not
contravene (i) the Borrower's charter or by-laws or (ii) any law binding
on or affecting the Borrower or any contractual restriction binding on,
or, to the best of Borrower's knowledge, affecting, the Borrower.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the
Borrower of this Agreement or the Notes.
(d) This Agreement is, and each of the Notes when delivered
hereunder will be, the legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with their
respective terms subject to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally.
(e) The balance sheets of the Borrower and its Subsidiaries as at
December 31, 1994, and the related statements of income and cash flows
of the Borrower and its Subsidiaries for the fiscal year then ended, and
the Consolidated balance sheet of the Borrower and its Subsidiaries as
at March 31, 1995, and the related Consolidated statement of income and
cash flows of the Borrower and its Subsidiaries for the three months
then ended, duly certified by the chief financial officer of the
Borrower, copies of which have been furnished to each Bank, fairly
present, subject, in the case of said balance sheet as at March 31,
1995, and said statement of income and cash flows for the three months
then ended, to year-end audit adjustments, the financial condition of
the Borrower and its Subsidiaries as at such dates and the results of
the operations of the Borrower and its Subsidiaries for the periods
ended on such dates, all in accordance with generally accepted
accounting principles consistently applied, and since December 31, 1994,
there has been no Material Adverse Change.
(f) There is no pending action or proceeding against or, to the
best of the Borrower's knowledge, otherwise affecting the Borrower or
any of its Subsidiaries or, to
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44
the best of the Borrower's knowledge, threatened action or proceeding
affecting the Borrower or any of its Subsidiaries, including, without
limitation, any Environmental Action, before any court, governmental
agency or arbitrator that (i) could be reasonably likely to have a
Material Adverse Effect (other than the Disclosed Litigation) or (ii)
purports to affect the legality, validity or enforceability of this
Agreement or any Note, and there has been no change in the status, or
financial effect on the Borrower or any of its Subsidiaries, of the
Disclosed Litigation from that described on Schedule 3.01(b) that could
be reasonably expected to have a Material Adverse Effect.
(g) Following application of the proceeds of each Advance, not
more than 25 percent of the value of the assets (either of the Borrower
only or of the Borrower and its Subsidiaries on a Consolidated basis)
subject to the provisions of Section 5.02(a) or 5.02(c) or subject to
any restriction contained in any agreement or instrument between the
Borrower and any Lender or any Affiliate of any Lender relating to Debt
and within the scope of Section 6.01(d) will be margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System). For purposes of this Section 4.01(g), "assets" of the
Borrower or any of its Subsidiaries includes, without limitation, the
treasury stock of the Borrower that has not been retired.
(h) Other than as set forth on Schedule 4.01(h), the operations
and properties of the Borrower and each of its Subsidiaries comply in
all respects with all applicable Environmental Laws, all necessary
Environmental Permits have been obtained and are in effect for the
operations and properties of the Borrower and its Subsidiaries, the
Borrower and its Subsidiaries are in compliance with all such
Environmental Permits, except to the extent that any such noncompliance
or failure to obtain any necessary permits could not be reasonably
expected to have a Material Adverse Effect, and to the knowledge of the
Borrower, no circumstances exist that could be reasonably expected to
(i) form the basis of an Environmental Action against the Borrower or
any of its Subsidiaries or any of their properties that could have a
Material Adverse Effect or (ii) cause any such property to be subject to
any restrictions on ownership, occupancy, use or transferability under
any applicable Environmental Law that could have a Material Adverse
Effect.
(i) Other than the properties set forth on Schedule 4.01(i) or
such other properties as to which a Material Adverse Effect could not
reasonably be expected to result, none of the properties currently or
formerly owned or operated by the Borrower or any of its Subsidiaries is
listed or, to the knowledge of the Borrower, proposed for listing on the
National Priorities List under CERCLA or on the CERCLIS or any analogous
state list.
(j) Other than the locations set forth on Schedule 4.01(j) or
such other locations as to which a Material Adverse Effect could not
reasonably be expected to result, neither
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45
the Borrower nor any of its Subsidiaries has transported or arranged for
the transportation of any Hazardous Materials to any location that is
listed or, to the knowledge of the Borrower, proposed for listing on the
National Priorities List under CERCLA or on the CERCLIS or any analogous
state list; other than as set forth on Schedule 4.01(j), Hazardous
Materials have not been released or disposed of on any property
currently or formerly owned or operated by the Borrower or any of its
Subsidiaries in material violation of any applicable Environmental Law
or in a manner which could result in material liability to the Borrower
or any of its Subsidiaries; and all Hazardous Materials have been used,
treated, handled, stored and disposed of on such properties in material
compliance with all applicable Environmental Laws and Environmental
Permits.
(k) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan.
(l) Schedule B (Actuarial Information) to the 1994 annual report
(Form 5500 Series) for each Plan, copies of which will have been filed
with the Internal Revenue Service and furnished to the Lenders on or
prior to September 30, 1995, will be complete and accurate in all
material respects and will fairly present the funding status of such
Plan as of the date set forth therein, and since the date of such
Schedule B there shall have been no material adverse change in such
funding status.
(m) Neither the Borrower nor any of its ERISA Affiliates (other
than one considered an ERISA Affiliate only pursuant to subsection (m)
or (o) of Section 414 of the Internal Revenue Code) has incurred or is
reasonably expected to incur any Withdrawal Liability to any
Multiemployer Plan.
(n) Neither the Borrower nor any of its ERISA Affiliates (other
than one considered an ERISA Affiliate only pursuant to subsection (m)
or (o) of Section 414 of the Internal Revenue Code) has been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning of Title IV of
ERISA, and, to the best of the Borrower's knowledge, no such
Multiemployer Plan is reasonably expected to be in reorganization or to
be terminated, within the meaning of Title IV of ERISA.
(o) The Borrower and its Subsidiaries have no material liability
not reflected on the Borrower's financial statements with respect to
"expected post retirement benefit obligations" within the meaning of
Statement of Financial Accounting Standards No. 106.
(p) Neither the Borrower nor any of its Subsidiaries is an
"investment company", or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company", as such terms are
defined in the Investment Company Act of 1940,
<PAGE>
46
as amended. Neither the making of any Advances nor the application of
the proceeds or repayment thereof by the Borrower, nor the consummation
of the other transactions contemplated hereby, will violate any
provision of such Act or any rule, regulation or order of the Securities
and Exchange Commission thereunder.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will, unless the Required Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects with all applicable
laws, rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA; provided, however, that neither the
Borrower nor any of its Subsidiaries shall be required to comply with
any applicable laws, rules, regulations or orders to the extent the
applicability thereof to the Borrower is being contested in good faith
and by proper proceedings and appropriate reserves are being maintained
with respect to such circumstances in accordance with GAAP.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of
its Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its property and (ii) all lawful claims
that, if unpaid, might by law become a Lien upon its property; provided,
however, that neither the Borrower nor any of its Subsidiaries shall be
required to pay or discharge any such tax, assessment, charge or claim
that is being contested in good faith and by proper proceedings and as
to which appropriate reserves are being maintained in accordance with
GAAP.
(c) Compliance with Environmental Laws. Comply, and cause each of
its Subsidiaries and exercise its best efforts to cause all lessees and
other Persons occupying its properties to comply, in all material
respects, with all applicable Environmental Laws and Environmental
Permits applicable to its operations and properties; obtain and renew
all Environmental Permits necessary for its operations and properties
except to the extent that the failure to obtain or renew any of such
Environmental Permits could not reasonably be expected to have a
Material Adverse Effect; and conduct, and cause each of its Subsidiaries
to conduct, any investigation, study, sampling and testing, and
undertake any cleanup, removal, remedial or other action necessary to
remove and clean up all Hazardous
<PAGE>
47
Materials from any of its properties, in accordance with the
requirements of all applicable Environmental Laws; provided, however,
that neither the Borrower nor any of its Subsidiaries shall be required
to undertake any such cleanup, removal, remedial or other action to the
extent that its obligation to do so is being contested in good faith and
by proper proceedings and reserves appropriate in the reasonable
judgment of the Borrower and its accountants are being maintained with
respect to such circumstances.
(d) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to 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 in the same general areas in which the
Borrower or such Subsidiary operates.
(e) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain,
its corporate existence, material rights (charter and statutory) and
material franchises; provided, however, that the Borrower and its
Subsidiaries may consummate any merger or consolidation or liquidation
permitted under Section 5.02(e) and provided further that neither the
Borrower nor any of its Subsidiaries shall be required to preserve any
right or franchise if the Board of Directors of the Borrower or such
Subsidiary shall reasonably determine that the preservation thereof is
no longer desirable in the conduct of the business of the Borrower or
such Subsidiary, as the case may be, and that the loss thereof is not
disadvantageous in any material respect to the Borrower, such Subsidiary
or the Lenders.
(f) Visitation Rights. At any reasonable time and from time to
time, permit the Agent or any of the Lenders 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 its Subsidiaries, and to discuss the affairs,
finances and accounts of the Borrower and any of its Subsidiaries with
any of their officers or directors and with their independent certified
public accountants.
(g) Preparation of Environmental Reports. If a Default caused by
reason of breach of Section 4.01(f) with respect to environmental
matters (including, without limitation, with respect to any
Environmental Action), (h), (i) or (j) or 5.01(c) shall have occurred
and be continuing, at the reasonable request of the Required Lenders
through the Agent, provide to the Lenders within 75 days after such
request, at the expense of the Borrower, an environmental site
assessment report for the properties described in such request, prepared
by an environmental consulting firm acceptable to the Agent, indicating
the presence or absence of Hazardous Materials and the estimated cost of
any compliance, removal or remedial action in connection with any
Hazardous Materials on such properties.
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48
(h) Keeping of Books. Keep, and cause each of its Subsidiaries to
keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of the Borrower and each such Subsidiary in accordance with
generally accepted accounting principles in effect from time to time.
(i) Maintenance of Properties, Etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, all of its
properties that are material in the conduct of its business in good
working order and condition, ordinary wear and tear excepted; provided,
however, that neither the Borrower nor any of its Subsidiaries shall be
required to maintain and preserve any such property if the Board of
Directors of the Borrower or such Subsidiary shall reasonably determine
that the maintenance and preservation thereof is no longer desirable in
the conduct of the business of the Borrower or such Subsidiary, as the
case may be, and that the loss thereof is not disadvantageous in any
material respect to the Borrower, such Subsidiary or the Lenders.
(j) Compliance with Terms of Leaseholds. Make all payments and
otherwise perform in all material respects all obligations in respect of
all leases of real property material to the business of the Borrower or
any of its Subsidiaries, keep all leases of real property in full force
and effect and not allow such leases to lapse or be terminated or any
rights to renew such leases to be forfeited or cancelled except where
the failure to do so could not reasonably be expected to have a Material
Adverse Effect, notify the Agent of any material default by any party
with respect to such leases and cooperate with the Agent in all material
respects to cure any such default, and cause each of its Subsidiaries to
do so.
(k) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, (i) other than with respect to transactions
between the Borrower and its wholly owned Subsidiaries or between wholly
owned Subsidiaries, all transactions otherwise permitted under this
Agreement with any of their Affiliates, Cyanamid or American Home
Products on terms that are fair and reasonable and no less favorable to
the Borrower or such Subsidiary than it would obtain in a comparable
arm's-length transaction with a Person not an Affiliate, Cyanamid or
American Home Products, other than as described on Schedule 5.01(k), and
(ii) with respect to transactions between the Borrower and its wholly
owned Subsidiaries, all transactions otherwise permitted under this
Agreement on terms that are no less favorable to the Borrower than it
would obtain in a comparable arm's-length transaction with a Person not
an Affiliate except where failure to do so could not reasonably be
expected to have a Material Adverse Effect, provided, however, that the
Borrower shall not engage in any transaction with any such Subsidiary
that would render such Subsidiary insolvent or cause a default under, or
a breach of, any material contract to which such Subsidiary is a party.
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49
(l) Reporting Requirements. Furnish to the Lenders:
(i) as soon as available and in any event within 45 days
after the end of each of the first three quarters of each fiscal
year of the Borrower, Consolidated balance sheets of the Borrower
and its Subsidiaries as of the end of such quarter and
Consolidated statements of income and cash flows of the Borrower
and its Subsidiaries for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter,
duly certified (subject to year-end audit adjustments) by the
chief financial officer of the Borrower and a certificate of the
chief financial officer of the Borrower as to compliance with the
terms of this Agreement, setting forth in reasonable detail the
calculations and other information necessary to demonstrate
compliance with Section 5.03 and, if requested by the Required
Lenders through the Agent, setting forth in reasonable detail the
calculations and other information necessary to demonstrate
compliance with Sections 5.02 (a), (b), (c) and (d);
(ii) as soon as available and in any event within 90 days
after the end of each fiscal year of the Borrower, a copy of the
annual audit report for such year for the Borrower and its
Subsidiaries, containing Consolidated and consolidating balance
sheets of the Borrower and its Subsidiaries as of the end of such
fiscal year and Consolidated and consolidating statements of
income and a Consolidated statement of cash flows, in each case,
of the Borrower and its Subsidiaries for such fiscal year, in
each case accompanied by an unqualified opinion by KPMG Peat
Marwick or other independent public accountants of recognized
national standing acceptable to the Required Lenders and a
certificate of the chief financial officer of the Borrower as to
compliance with the terms of this Agreement, setting forth in
reasonable detail the calculations and other information
necessary to demonstrate compliance with Section 5.03 and, if
requested by the Required Lenders through the Agent, setting
forth in reasonable detail the calculations and other information
necessary to demonstrate compliance with Sections 5.02(a), (b),
(c) and (d);
(iii) as soon as possible and in any event within three
Business Days after an officer of the Borrower or, with respect
to ERISA matters, the employee of the Borrower responsible for
such matters or, with respect to ERISA matters of an ERISA
Affiliate, the employee of such ERISA Affiliate responsible for
such matters, knows or should know of the occurrence of each
Default, continuing on the date of such statement, a statement of
the chief financial officer of the Borrower setting forth details
of such Default and the action which the Borrower has taken and
proposes to take with respect thereto;
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50
(iv) promptly after the sending or filing thereof, copies
of all reports which the Borrower sends to its securityholders
generally, and copies of all reports and registration statements
which the Borrower or any Subsidiary files with the Securities
and Exchange Commission or any national securities exchange
(other than registration statements filed on Form S-8);
(v) promptly after the filing or receiving thereof, copies
of any report or notice with respect to any Plan or Multiemployer
Plan which the Borrower or any Subsidiary files under ERISA with
the Internal Revenue Service or the PBGC or the U.S. Department
of Labor or which the Borrower or any Subsidiary receives from
such entity;
(vi) promptly after an officer of the Borrower knows or
should know of the occurrence thereof, notice of any condition or
occurrence on any property of the Borrower or any of its
Subsidiaries that results in a material noncompliance by or
material liability with respect to the Borrower or any of its
Subsidiaries with any applicable Environmental Law or
Environmental Permit or could reasonably be expected to (A) form
the basis of an Environmental Action against the Borrower or any
of its Subsidiaries or such property that could have a Material
Adverse Effect or (B) cause any such property to be subject to
any restrictions on ownership, occupancy, use or transferability
under any Environmental Law that could have a Material Adverse
Effect;
(vii) promptly and in any event within 15 days after the
employee of the Borrower responsible for ERISA matters or the
employee of an ERISA Affiliate responsible for ERISA matters
knows or has reason to know that any ERISA Event has occurred, a
statement of the chief financial officer of the Borrower
describing such ERISA Event and the action, if any, that the
Borrower or such ERISA Affiliate has taken and proposes to take
with respect thereto;
(viii) promptly and in any event within two Business Days
after receipt thereof by the Borrower or any of its ERISA
Affiliates (other than one considered an ERISA Affiliate only
pursuant to subsection (m) or (o) of Section 414 of the Internal
Revenue Code), copies of each notice from the PBGC stating its
intention to terminate any Plan or to have a trustee appointed to
administer any such Plan;
(ix) promptly and in any event within 30 days after the
filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form
5500 Series) with respect to each Plan;
(x) promptly and in any event within 10 Business Days
after receipt thereof by the Borrower or any of its ERISA
Affiliates (other than one considered an ERISA Affiliate only
pursuant to subsection (m) or (o) of Section 414 of the
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51
Internal Revenue Code) from the sponsor of a Multiemployer Plan,
copies of each notice concerning (x) the imposition of Withdrawal
Liability by any such Multiemployer Plan, (y) the reorganization
or termination, within the meaning of Title IV of ERISA, of any
such Multiemployer Plan or (z) the amount of liability incurred,
or that may be incurred, by the Borrower or any of its ERISA
Affiliates in connection with any event described in clause (x)
or (y); and
(xi) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as any Lender through the Agent may from time to
time reasonably request.
SECTION 5.02. Negative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will not, without the written consent of the Required Lenders:
(a) Liens, Etc. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Lien on or with respect
to any of its properties, whether now owned or hereafter acquired, or
assign, or permit any of its Subsidiaries to assign, any right to
receive income, other than:
(i) Permitted Liens,
(ii) purchase money Liens upon or in any property acquired
or held by the Borrower or any Subsidiary in the ordinary course
of business to secure the purchase price of such property or to
secure Debt (including, without limitation, Capitalized Leases)
incurred solely for the purpose of financing the acquisition or
improvement of such property, or Liens existing on such property
at the time of its acquisition or improvement (other than any
such Lien created in contemplation of such acquisition or
improvement) or extensions, renewals or replacements of any of
the foregoing for the same or a lesser amount, provided, however,
that no such Lien shall extend to or cover any property other
than the property being acquired or improved (except to the
extent that construction financing may result in an encumbrance
on the underlying fee or leasehold), and no such extension,
renewal or replacement shall extend to or cover any property not
theretofore subject to the Lien being extended, renewed or
replaced, provided further that the aggregate principal amount of
the Debt secured by the Liens referred to in this clause (ii)
shall not exceed at any time outstanding $15,000,000 (or the
equivalent thereof in any Foreign Currency, determined as of the
date such Debt is issued or incurred),
(iii) the Liens described on Schedule 5.02(a),
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52
(iv) other Liens securing Debt outstanding in an aggregate
principal amount not to exceed $15,000,000 (or the equivalent
thereof in any Foreign Currency, determined as of the date such
Debt is issued or incurred),
(v) Liens upon or in any property of any Person that
becomes a Subsidiary of the Borrower after the date hereof that
are existing at the time such Person becomes a Subsidiary of the
Borrower (other than any such Lien created in contemplation of
such Person becoming a Subsidiary of the Borrower),
(vi) Liens on accounts receivable and other related assets
arising solely in connection with the sale or other disposition
of such accounts receivable pursuant to Section 5.02(c)(iv),
(vii) the replacement, extension or renewal of any Lien
permitted by clauses (ii), (iii), (iv) and (v) above upon or in
the same property theretofore subject thereto or the replacement,
extension or renewal (without increase in the amount or change in
any direct or contingent obligor) of the Debt secured thereby,
(viii) Liens on the assets of a Subsidiary of the
Borrower securing the obligations of such Subsidiary to the
Borrower or to another Subsidiary of the Borrower,
(ix) Liens on machinery and equipment of the Borrower
located in the State of Connecticut to secure performance of the
Borrower's grant obligations owing to the State of Connecticut or
any political subdivision thereof in an aggregate principal
amount not to exceed $2,500,000 from the date hereof, and
(x) Liens in respect of goods consigned to the Borrower or
any of its Subsidiaries in the ordinary course of business,
including, without limitation, goods which are the subject of
tolling agreements or manufacturing and servicing agreements to
which the Borrower or any of its Subsidiaries is a party;
provided that such Liens are limited to the goods so consigned
and the goods which are the subject of such agreements.
(b) Debt. Permit any of its Subsidiaries to create or suffer to
exist, and the Borrower shall use its best efforts to prohibit CYRO from
creating or suffering to exist, any Debt other than:
(i) Debt owed to the Borrower or to a wholly owned
Subsidiary of the Borrower,
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53
(ii) Debt of the Borrower's Subsidiaries existing on the
Effective Date and described on Schedule 5.02(b) (the "Existing
Debt"), and any Debt extending the maturity of, or refunding or
refinancing, in whole or in part, the Existing Debt, provided
that the terms of any such extending, refunding or refinancing
Debt, and of any agreement entered into and of any instrument
issued in connection therewith, are otherwise not prohibited by
this Agreement and provided further that the principal amount of
such Existing Debt shall not be increased above the principal
amount thereof (plus any undrawn lending commitments in respect
thereof) outstanding immediately prior to such extension,
refunding or refinancing, and the direct and contingent obligors
therefor shall not be changed, as a result of or in connection
with such extension, refunding or refinancing,
(iii) Debt of the Borrower's Subsidiaries secured by Liens
permitted by Section 5.02(a)(ii), (iv), (vii) or (ix) not to
exceed in the aggregate the amount set forth in such Section,
(iv) unsecured Debt of the Borrower's Subsidiaries
incurred in the ordinary course of business aggregating, on a
Consolidated basis, at any one time outstanding, not more than
$35,000,000 (or the equivalent thereof in any Foreign Currency,
determined as of the date such Debt is issued or incurred),
(v) Debt owed by any Subsidiary of the Borrower to the
Borrower or any other Subsidiary of the Borrower,
(vi) Debt of CYRO incurred in the ordinary course of
business (including, without limitation, in connection with
capital expenditures, acquisitions and partnership distributions)
aggregating not more than $65,000,000 (or the equivalent thereof
in any Foreign Currency, determined as of the date such Debt is
issued or incurred) at any one time outstanding,
(vii) Debt of any Person that becomes a Subsidiary of the
Borrower after the date hereof that is existing at the time such
Person becomes a Subsidiary of the Borrower (other than Debt
incurred in contemplation of such Person becoming a Subsidiary of
the Borrower),
(viii) indorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of
business,
(ix) Debt incurred in connection with the sale or other
disposition of accounts receivable pursuant to Section
5.02(c)(iv), and
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54
(x) Debt of the Borrower's wholly owned Subsidiaries
incorporated after June 15, 1996 under the laws of Canada or any
province thereof incurred for the purpose of lending proceeds of
such Debt to other Subsidiaries of the Borrower aggregating, on a
Consolidated basis, at any time outstanding, not more that
$60,000,000 (or the equivalent thereof in any Foreign Currency,
determined as of the date such Debt is issued or incurred)."
(c) Sales, Etc. of Assets. Sell, lease, transfer or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease, transfer
or otherwise dispose of, any assets, or grant any option or other right
to purchase, lease or otherwise acquire any assets, except (i) sales or
other dispositions of assets in the ordinary course of its business,
(ii) in a transaction authorized by subsection (e) of this Section,
(iii) sales of assets for fair value as determined in good faith by (A)
in the case of the sale of assets having a fair value of less than
$5,000,000 (or the equivalent thereof in any Foreign Currency,
determined as of the date such sale is made) in a single transaction or
a series of related transactions, the Executive Committee and (B) in the
case of the sale of assets having a fair value of $5,000,000 (or the
equivalent thereof in any Foreign Currency, determined as of the date
such sale is made) or more in a single transaction or a series of
related transactions, the Board of Directors of the Borrower, (iv) sales
of accounts receivable in an aggregate amount not to exceed $50,000,000
(or the equivalent thereof in any Foreign Currency, determined as of the
date such sale is made) at any time outstanding and (v) sales or other
dispositions of other assets for fair value in an aggregate amount not
to exceed $3,000,000 (or the equivalent thereof in any Foreign Currency,
determined as of the date such sale is made) in any calendar year;
provided, however, that notwithstanding the foregoing, the Borrower
shall not sell, lease, transfer or otherwise dispose of, and shall not
permit any of its Subsidiaries to sell, lease, transfer or otherwise
dispose of, all or substantially all of the assets of the Borrower and
its Subsidiaries, taken as a whole.
(d) Dividends, Etc. Declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or
securities on account of any shares of any class of capital stock of the
Borrower, or purchase, redeem or otherwise acquire for value (or permit
any of its Subsidiaries to do so) any shares of any class of capital
stock of the Borrower or any warrants, rights or options to acquire any
such shares, now or hereafter outstanding, except that the Borrower may
(i) declare and make any dividend payment or other distribution payable
in common stock of the Borrower, (ii) declare or pay cash dividends to
its stockholders (other than the declaration and payment of cash
dividends on the Cyanamid Preferred Stock) and purchase, redeem or
otherwise acquire shares of its capital stock or warrants, rights or
options to acquire any such shares for cash solely out of 25% of net
income of the Borrower and its Subsidiaries arising after December 31,
1994 and computed on a cumulative Consolidated basis in accordance with
GAAP, (iii) purchase outstanding shares of its common or preferred stock
for an aggregate
<PAGE>
55
amount not to exceed the sum of $15,000,000 plus the amount of net cash
proceeds from any future equity issuances, (iv) declare or pay cash
dividends on Cyanamid Preferred Stock and (v) redeem or purchase shares
of the Series A Preferred Stock and Series B Preferred Stock in
accordance with the terms and conditions set forth in the Series A
Certificate, in the case of a redemption or purchase of the Series A
Preferred Stock, and the Series B Certificate, in the case of a
redemption or purchase of the Series B Preferred Stock or, in the case
of any such redemption or purchase, in a transaction consented to by the
Lenders pursuant to Section 3.04; provided that, immediately after
giving effect to any such proposed action, no Event of Default, with
respect to any such proposed action described in clauses (i) and (ii)
above, and no Default, with respect to any proposed action described in
clauses (iii), (iv) and (v) above, would exist, provided, however, that
except as permitted by clause (iii) above, the Borrower shall not
declare or pay cash dividends to its stockholders on account of any
shares of its common stock or purchase, redeem or otherwise acquire
shares of its common stock or warrants, rights or options to acquire any
such shares for cash so long as the Consolidated "common equity" of the
Borrower and its Subsidiaries calculated in accordance with GAAP is less
than $85,000,000, provided further, however, that notwithstanding
anything else contained in this paragraph (d), the Borrower shall be
permitted to pay or make any dividend or distribution within 90 days
after the date of declaration thereof if at the time such dividend or
distribution was declared, such declaration was permitted pursuant to
the terms of this paragraph (d).
(e) Mergers, Etc. Merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets
(whether now owned or hereafter acquired) to any Person, or permit any
of its Subsidiaries to do so, except that any Subsidiary of the Borrower
may merge or consolidate with or into, or dispose of assets to, or
liquidate into, any other Subsidiary of the Borrower and except that any
Subsidiary of the Borrower may merge into or dispose of assets to or
liquidate into the Borrower and the Borrower may merge or consolidate
with or into, or liquidate into, any other Person, provided in each case
that, immediately after giving effect to such proposed transaction, no
Default would exist and in the case of any merger, consolidation or
liquidation to which the Borrower is a party, if the Borrower is not the
surviving entity, the Person into which the Borrower shall be merged or
formed by any such consolidation or liquidation shall assume the
Borrower's obligations hereunder and under the Notes in an agreement or
instrument reasonably satisfactory in form and substance to all of the
Lenders.
(f) Intentionally Omitted.
(g) Change in Nature of Business. Engage, or permit any of its
Subsidiaries to engage, in any business other than the businesses
carried on at the date hereof by the Borrower and its Subsidiaries and
businesses related thereto.
<PAGE>
56
(h) Charter Amendments. Amend, or permit any of its Subsidiaries
to amend, its certificate of incorporation or bylaws in a manner
materially adverse to the rights and interests of the Agent and the
Lenders under this Agreement and the Notes.
(i) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required or permitted by generally
accepted accounting principles.
(j) Amendment, Etc. of Terms of the Cyanamid Preferred Stock.
Amend, modify or change in any manner any term or condition of the
Cyanamid Preferred Stock or take any other action in connection with the
Cyanamid Preferred Stock in either case that would materially impair the
value of the rights or interests of the Borrower thereunder or that
would materially impair the rights or interests of the Agent or any
Lender.
[(k) intentionally omitted]
(l) Hedge Agreements. Enter into Hedge Agreements, or permit its
Subsidiaries to do so, except with respect to interest rates (on fixed
rate or floating rate Delt with respect to which the Borrower is, or any
of its Subsidiaries are, exposed) and except to hedge against
fluctuations in currency exchange rates, in each case pursuant to
non-speculative Hedge Agreements entered into in the ordinary course of
business.
SECTION 5.03. Financial Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will, unless the Required Lenders otherwise consent in writing:
(a) Leverage Ratio. Maintain at all times a Leverage Ratio of
not greater than 0.55:1.
(b) Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage
Ratio of not less than 3.00:1 for each period of four fiscal quarters of
the Borrower ending on March 31, June 30, September 30 and December 31
of each year.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
<PAGE>
57
(a) The Borrower shall fail to pay any principal of any Advance
when the same becomes due and payable or the Borrower shall fail to pay
any interest on any Advance or make any other payment under this
Agreement or any Note within three Business Days after the same becomes
due and payable; or
(b) Any representation or warranty made by the Borrower herein or
by the Borrower (or any of its officers) in connection with this
Agreement shall prove to have been incorrect in any material respect
when made; or
(c) The Borrower shall fail to perform or observe (i) any term,
covenant or agreement contained in Section 2.18, 5.01(e), (k) or
(l)(iii), (vi), (vii), (viii) or (x), 5.02 or 5.03, or (ii) any other
term, covenant or agreement contained in this Agreement on its part to
be performed or observed if such failure shall remain unremedied for 15
days after written notice thereof shall have been given to the Borrower
by the Agent or any Lender; or
(d) The Borrower or any of its Subsidiaries or CYRO shall fail to
pay any principal of or premium or interest on or any other amount
payable in respect of any Debt or any Hedge Agreement which is
outstanding in a principal or notional amount of at least $10,000,000
(or the equivalent thereof in any Foreign Currency) in the aggregate
(but excluding Debt outstanding hereunder) of the Borrower or such
Subsidiary or CYRO (as the case may be), when the same becomes due and
payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt or Hedge Agreement; or any other event
shall occur or condition shall exist under any agreement or instrument
relating to any such Debt or Hedge Agreement and shall continue after
the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate,
or to permit the acceleration of, the maturity of such Debt or Hedge
Agreement; or any such Debt shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled required
prepayment, including, without limitation, a prepayment required in
connection with the sale of the sole asset or all assets securing such
Debt), redeemed, purchased or defeased, or an offer to prepay, redeem,
purchase or defease such Debt shall be required to be made, in each case
prior to the stated maturity thereof; or
(e) The Borrower or any Material Subsidiary or CYRO shall
generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding shall
be instituted by or against the Borrower or any Material Subsidiary or
CYRO seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its
<PAGE>
58
debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property and, in the case of
any such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a period
of 60 days, or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official
for, it or for any substantial part of its property) shall occur; or the
Borrower or any of its Subsidiaries or CYRO shall take any corporate
action to authorize any of the actions set forth above in this
subsection (e); or
(f) Any judgment or order for the payment of money in excess of
$5,000,000 (or the equivalent thereof in any Foreign Currency) shall be
rendered against the Borrower or any of its Subsidiaries and either (i)
enforcement proceedings shall have been commenced by any creditor upon
such judgment or order or (ii) there shall be any period of 10
consecutive days during which such judgment or order remains unpaid and
a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(g) Any non-monetary judgment or order shall be rendered against
the Borrower or any of its Subsidiaries that could be reasonably
expected to have a Material Adverse Effect, and there shall be any
period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect; or
(h) (i) Any Person (other than Cyanamid or American Home
Products) or two or more Persons acting in concert shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934),
directly or indirectly, of Voting Stock of the Borrower (or other
securities convertible into such Voting Stock) representing 20% or more
of the combined voting power of all Voting Stock of the Borrower; or
(ii) during any period of up to 24 consecutive months, commencing after
the Effective Date, individuals who at the beginning of such 24-month
period were directors of the Borrower shall cease for any reason to
constitute a majority of the board of directors of the Borrower (except
to the extent that individuals who were directors at the beginning of
such 24-month period were replaced by individuals (x) elected by a
majority of the remaining members of the board of directors of the
Borrower or (y) nominated for election by a majority of the remaining
members of the board of directors of the Borrower and thereafter elected
as directors by the shareholders of the Borrower), other than pursuant
to the terms of any agreement or instrument relating to the Cyanamid
Preferred Stock issued in connection with the Spin-Off; or (iii) any
Person (other than Cyanamid or American Home Products) or two
<PAGE>
59
or more Persons acting in concert (other than members of the Borrower's
management that have entered into employment agreements with the
Borrower solely to the extent such employment agreements require or
permit them to exercise a controlling influence over the management or
policies of the Borrower) shall have acquired by contract or otherwise,
or shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of, the power to
exercise, directly or indirectly, a controlling influence over the
management or policies of the Borrower; or
(i) Any ERISA Event shall have occurred that could reasonably be
expected to result in a liability of the Borrower or any of its ERISA
Affiliates to the PBGC or any Plan and the sum (determined as of the
date of occurrence of such ERISA Event) of the Insufficiency of the Plan
with respect to which such ERISA Event shall have occurred and the
Insufficiency of any and all other Plans with respect to which an ERISA
Event shall have occurred and then exist (or the liability of the
Borrower and its ERISA Affiliates related to any such ERISA Event)
exceeds $5,000,000; or
(j) The Borrower or any of its ERISA Affiliates shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred
Withdrawal Liability to such Multiemployer Plan for which the Borrower
could reasonably be expected to become liable in an amount that, when
aggregated with all other amounts required to be paid to Multiemployer
Plans by the Borrower and its ERISA Affiliates as Withdrawal Liability
(determined as of the date of such notification), exceeds $5,000,000 or
requires payments exceeding $1,000,000 per annum; or
(k) The Borrower or any of its ERISA Affiliates shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of
Title IV of ERISA, the Borrower could reasonably be expected to become
liable in connection with such reorganization or termination and as a
result of such reorganization or termination the aggregate annual
contributions of the Borrower and its ERISA Affiliates to all
Multiemployer Plans that are then in reorganization or being terminated
have been or will be increased over the amounts contributed to such
Multiemployer Plans for the plan years of such Multiemployer Plans
immediately preceding the plan year in which such reorganization or
termination occurs by an amount exceeding $1,000,000;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the Notes,
all interest thereon and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Notes, all such interest and all such
amounts shall become and be
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60
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 in the event of an actual or deemed entry of an order
for relief with respect to the Borrower under the Federal Bankruptcy Code, (A)
the obligation of each Lender to make Advances shall automatically be terminated
and (B) the Notes, all such interest and all such amounts shall automatically
become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement as are delegated to the Agent by
the terms hereof, together with such powers as are reasonably incidental
thereto. As to any matters not expressly provided for by this Agreement
(including, without limitation, enforcement or collection of the Notes), the
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions shall be binding upon all Lenders and all holders
of Notes; provided, however, that the Agent shall not be required to take any
action which exposes the Agent to personal liability or which is contrary to
this Agreement or applicable law. The Agent agrees to give to each Lender prompt
notice of each notice given to it by the Borrower pursuant to the terms of this
Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any of
its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (i) may treat
the payee of any Note as the holder thereof until the Agent receives and accepts
an Assignment and Acceptance entered into by the Lender which is the payee of
such Note, as assignor, and an Eligible Assignee, as assignee, as provided in
Section 8.07; (ii) may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (iii)
makes no warranty or representation to any Lender and shall not be responsible
to any Lender for any statements, warranties or representations (whether written
or oral) made in or in connection with this Agreement; (iv) shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of this Agreement on the part of the Borrower
or to inspect the property (including the books and records) of the Borrower;
(v) shall
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61
not be responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; and (vi) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram, cable or telex) believed by it to be genuine and signed or sent by the
proper party or parties.
SECTION 7.03. Citibank and Affiliates. With respect to its
Commitment, the Advances made by it and the Note issued to it, Citibank shall
have the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not the Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with, the Borrower, any of its Subsidiaries and any Person who may
do business with or own securities of the Borrower or any such Subsidiary, all
as if Citibank were not the Agent and without any duty to account therefor to
the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Agent or any other
Lender and based on the financial statements referred to in Section 4.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 7.05. Indemnification. The Lenders (other than the
Designated Bidders) agree to indemnify the Agent (to the extent not reimbursed
by the Borrower), ratably according to the respective principal amounts of the
Revolving Notes then held by each of them (or if no Revolving Notes are at the
time outstanding or if any Revolving Notes are held by Persons which are not
Lenders, ratably according to the respective amounts of their Commitments), from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement or any action
taken or omitted by the Agent under this Agreement, provided that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender (other than the Designated Bidders)
agrees to reimburse the Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice
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62
in respect of rights or responsibilities under, this Agreement, to the extent
that the Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Agent. The Agent may resign at any time
by giving written notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Agent with the consent of the Borrower (which consent shall not be unreasonably
withheld or delayed). If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days after
the retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent, which shall be a
commercial bank organized under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$50,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article VII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Revolving Notes, nor consent to any departure
by the Borrower therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Required Lenders, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that (a) no amendment, waiver or
consent shall, unless in writing and signed by all the Lenders (other than the
Designated Bidders), do any of the following: (i) waive any of the conditions
specified in Section 3.01, 3.02 or 3.04 (ii) increase the Commitments of the
Lenders or subject the Lenders to any additional obligations, (iii) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Revolving Notes, or the number of Lenders, which shall be required for the
Lenders or any of them to take any action hereunder or (iv) amend this Section
8.01 and (b) no amendment, waiver or consent shall, unless in writing and signed
by the Required Lenders and each affected Lender (other than the Designated
Bidders), do any of the following: (i) reduce the principal of, or interest on,
the Revolving Notes or any fees or other amounts payable hereunder or (ii)
postpone any date fixed for any scheduled payment of principal of, or interest
on, the Revolving Notes or any fees or other amounts payable hereunder; provided
further that no amendment, waiver or consent shall, unless in writing and signed
by the Agent in addition to the Lenders required above to take such action,
affect the rights or duties of the Agent under this
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63
Agreement or any Revolving Note. No amendment or waiver of any provision of any
Competitive Bid Note or the terms and conditions of any Offer or any Competitive
Bid Advance accepted by the Borrower in writing pursuant to Section
2.15(a)(iii)(y), nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Lender payee of such Competitive Bid Note or the Lender which has made, or
offers to make, such Competitive Bid Advance, as the case may be, and then any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 8.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered, if to the Borrower, at its address at Five Garret Mountain
Plaza, West Paterson, New Jersey 07424, Attention: Treasurer; if to any Bank, at
its Domestic Lending Office specified opposite its name on Schedule I hereto; if
to any other Lender, at its Domestic Lending Office specified in the Assignment
and Acceptance pursuant to which it became a Lender; and if to the Agent, at its
address at 399 Park Avenue, New York, New York 10043, Attention: Chemicals
Department, North American Global Finance Group; or, as to the Borrower or the
Agent, at such other address as shall be designated by such party in a written
notice to the other parties and, as to each other party, at such other address
as shall be designated by such party in a written notice to the Borrower and the
Agent. All such notices and communications shall, when mailed, telecopied,
telegraphed, telexed or cabled, be effective when deposited in the mails,
telecopied, delivered to the telegraph company, confirmed by telex answerback or
delivered to the cable company, respectively, except that notices and
communications to the Agent pursuant to Article II, III or VII shall not be
effective until received by the Agent.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any
Lender or the Agent to exercise, and no delay in exercising, any right hereunder
or under any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay
on demand all costs and expenses of the Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, (A) all reasonable due diligence, syndication
(including printing, distribution and bank meetings), transportation, computer,
duplication, consultant, and audit expenses and (B) the reasonable fees and
out-of-pocket expenses of counsel for the Agent with respect thereto and with
respect to advising the Agent as to its rights and responsibilities under this
Agreement. The Borrower further agrees to pay on demand all costs and expenses
of the Agent and the Lenders, if any (including, without
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64
limitation, reasonable counsel fees and expenses), in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, reasonable fees and expenses of counsel for the
Agent and each Lender in connection with the enforcement of rights under this
Section 8.04(a).
(b) The Borrower agrees to indemnify and hold harmless the Agent
and each Lender and each of their Affiliates and their officers, directors,
employees, agents and advisors (each, an "Indemnified Party") from and against
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of, or in connection with the
preparation for a defense of, any investigation, litigation or proceeding
arising out of, related to or in connection with (i) the Notes, this Agreement
or the transactions contemplated hereby or (ii) the actual or alleged presence
of Hazardous Materials on any property of the Borrower or any of its
Subsidiaries or any Environmental Action relating in any way to the Borrower or
any of its Subsidiaries, in each case whether or not such investigation,
litigation or proceeding is brought by the Borrower, its directors, shareholders
or creditors or an Indemnified Party or any other Person or any Indemnified
Party is otherwise a party thereto and whether or not the transactions
contemplated hereby are consummated (but excluding any such claim, damage, loss,
liability or expense of any Indemnified Party (i) to the extent such claim,
damage, loss, liability or expense is found in a final, non-appealable judgment
by a court of competent jurisdiction to have resulted from such Indemnified
Party's gross negligence or willful misconduct or (ii) arising from a successful
claim by the Borrower against such Indemnified Party). The Borrower also agrees
not to assert any claim against the Agent, any Lender, any of their Affiliates,
or any of their respective directors, officers, employees, attorneys and agents,
on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of or otherwise
relating to any of the transactions contemplated herein or in any other Loan
Document or the actual or proposed use of the proceeds of the Advances.
(c) If any payment of principal of, or Conversion or
Redenomination of, any Eurocurrency Rate Advance or LIBO Rate Advance is made by
the Borrower to or for the account of a Lender other than on the last day of the
Interest Period for such Advance, as a result of a payment or Conversion or
Redenomination pursuant to Section 2.07(d), 2.08, 2.09, 2.11 or 2.16,
acceleration of the maturity of the Notes pursuant to Section 6.01 or for any
other reason, the Borrower shall, upon demand by such Lender (with a copy of
such demand to the Agent), pay to the Agent for the account of such Lender any
amounts required to compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such payment or Conversion
or Redenomination, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender to fund or
maintain such Advance.
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65
SECTION 8.05. Right of Setoff. Upon (i) the occurrence and during
the continuance of any Event of Default and (ii) the making of the request or
the granting of the consent specified by Section 6.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to setoff and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender or such
Affiliate 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 and the Note held by such Lender, whether or not such Lender shall
have made any demand under this Agreement or such Note and although such
obligations may be unmatured. Each Lender agrees promptly to notify the Borrower
after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
of each Lender and its Affiliates under this Section are in addition to other
rights and remedies (including, without limitation, other rights of setoff)
which such Lender and its Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become
effective (other than Sections 2.01 and 2.15, which shall only become effective
upon satisfaction of the conditions precedent set forth in Article III) when it
shall have been executed by the Borrower and the Agent and when the Agent shall
have been notified by each Bank that such Bank has executed it and thereafter
shall be binding upon and inure to the benefit of the Borrower, the Agent and
each Lender and their respective successors and assigns, except that the
Borrower shall not have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Lenders.
SECTION 8.07. Assignments, Designations and Participations. (a)
Each Lender (other than the Designated Bidders) may and, if demanded by the
Borrower (following a demand by such Lender pursuant to Section 2.10 or 2.13 or
following the failure of such Lender to consent, if required under Section 3.04,
to the redemption or purchase of the Series A Preferred Stock or the Series B
Preferred Stock) upon at least 10 Business Days' notice to such Lender and the
Agent, will assign to one or more Persons all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Revolving Advances owing to it and the Revolving
Note or Notes held by it); provided, however, that (i) each such assignment
shall be of a constant, and not a varying, percentage of all rights and
obligations under this Agreement (other than any right to make Competitive Bid
Advances, Competitive Bid Advances owing to it and Competitive Bid Notes), (ii)
except in the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $5,000,000 and shall be an integral multiple of
$1,000,000, (iii) if the assigning Lender is
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66
assigning less than all of its Commitment, such assigning Lender shall retain a
Commitment of at least $5,000,000, (iv) each such assignment shall be to an
Eligible Assignee, (v) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with any Revolving Note or Notes subject to
such assignment and a processing and recordation fee of $2,500, (vi) each such
assignment made as a result of a demand by the Borrower pursuant to this Section
8.07(a) shall be arranged by the Borrower after consultation with the Agent and
shall be either an assignment of all of the rights and obligations of the
assigning Lender under this Agreement or an assignment of a portion of such
rights and obligations made concurrently with another such assignment or other
such assignments that together cover all of the rights and obligations of the
assigning Lender under this Agreement, (vii) no Lender shall be obligated to
make any such assignment as a result of a demand by the Borrower pursuant to
this Section 8.07(a) unless and until such Lender shall have received one or
more payments from either the Borrower or one or more Eligible Assignees in an
aggregate amount at least equal to the aggregate outstanding principal amount of
the Revolving Advances owing to such Lender, together with accrued interest
thereon to the date of payment of such principal amount and all other amounts
payable to such Lender under this Agreement and (viii) upon each such assignment
made as a result of a demand by the Borrower pursuant to this Section 8.07(a) to
an Eligible Assignee which is not, before giving effect to such assignment, a
Lender, the Borrower shall pay to the Agent a $2,500 administration fee. Upon
such execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, (x) the assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder and (y) the Lender assignor
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and
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67
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee confirms that it is an
Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of this Agreement are required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with any Revolving Note or Notes subject to such assignment,
the Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit C hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower. Within five Business Days
after its receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Agent (A) in exchange for the surrendered Revolving
Note or Notes a new Revolving Note to the order of such Eligible Assignee in an
amount equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a Commitment hereunder, a
new Revolving Note to the order of the assigning Lender in an amount equal to
the Commitment retained by it hereunder and (B) if such Eligible Assignee was
not a Lender before giving effect to such Assignment and Acceptance, a new
Competitive Bid Note to the order of such Eligible Assignee. Such new Revolving
Note or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Revolving Note or Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of Exhibit A-1 hereto. Such new Competitive Bid Note
shall be in an aggregate principal amount equal to the aggregate Commitments of
the Lenders hereunder, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of Exhibit A-2
hereto.
(d) Each Lender (other than the Designated Bidders) may designate
one or more banks or other entities to have a right to make Competitive Bid
Advances as a Lender pursuant to Section 2.15; provided, however, that (i) no
such Lender shall be entitled to make more than 2 such designations, (ii) each
such Lender making one or more of such designations shall retain the right to
make Competitive Bid Advances as a Lender pursuant to Section 2.15, (iii) each
such designation shall be to a Designated Bidder and (iv) the parties to each
such designation shall execute and deliver to the Agent, for its acceptance and
recording in the Register, a Designation Agreement. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Designation Agreement, the designee thereunder shall be a party
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68
hereto with a right to make Competitive Bid Advances as a Lender pursuant to
Section 2.15 and the obligations related thereto.
(e) By executing and delivering a Designation Agreement, the
Lender making the designation thereunder and its designee thereunder confirm and
agree with each other and the other parties hereto as follows: (i) such Lender
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
this Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other instrument or
document furnished pursuant hereto; (ii) such Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such designee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Designation Agreement; (iv) such designee will, independently and without
reliance upon the Agent, such designating Lender or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such designee confirms that it is a Designated Bidder; (vi)
such designee appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement as
are delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such designee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Lender.
(f) Upon its receipt of a Designation Agreement executed by a
designating Lender and a designee representing that it is a Designated Bidder,
the Agent shall, if such Designation Agreement has been completed and is
substantially in the form of Exhibit D hereto, (i) accept such Designation
Agreement, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower. Within five Business Days
after its receipt of such notice, and before any Competitive Bid Advance shall
be made by such designee pursuant to Section 2.15, the Borrower, at its own
expense, shall execute and deliver to the Agent a new Competitive Bid Note to
the order of such designee, which new Competitive Bid Note shall be in an
aggregate principal amount equal to the aggregate Commitments of the Lenders
hereunder, shall be dated the effective date of such Designation Agreement and
shall otherwise be in substantially the form of Exhibit A-2 hereto.
(g) The Agent shall maintain at its address referred to in
Section 8.02 a copy of each Assignment and Acceptance and each Designation
Agreement delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and, with respect
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69
to Lenders other than Designated Bidders, the Commitment of, and principal
amount of the Advances owing to, each Lender from time to time (the "Register").
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower, the Agent and the Lenders may treat
each Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(h) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment, the Advances owing to it and the Note or Notes held by it);
provided, however, that (i) such Lender's obligations under this Agreement
(including, without limitation, its Commitment to the Borrower hereunder) shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) such Lender shall
remain the holder of any such Note for all purposes of this Agreement, (iv) the
Borrower, the Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of this Agreement or any Note, or any consent to any departure by the
Borrower therefrom, except to the extent that such amendment, waiver or consent
would reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation.
(i) Any Lender may, in connection with any assignment,
designation or participation or proposed assignment, designation or
participation pursuant to this Section 8.07, disclose to the assignee, designee
or participant or proposed assignee, designee or participant, any information
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower; provided that, prior to any such disclosure, the assignee, designee or
participant or proposed assignee, designee or participant shall agree to
preserve the confidentiality of any confidential information relating to the
Borrower received by it from such Lender.
(j) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
SECTION 8.08. Confidentiality. (a) Neither the Agent nor any
Lender shall disclose any Confidential Information to any Person without the
consent of the Borrower, other
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70
than (i) to the Agent's or such Lender's Affiliates and their officers,
directors, employees, agents and advisors and to actual or prospective Eligible
Assignees and participants, and then only on a confidential basis, (ii) as
required by any law, rule or regulation or judicial process, provided that the
Agent or such Lender, as the case may be, shall give prior notice thereof to the
Borrower when practicable, and (iii) as requested or required by any state,
federal or foreign authority or examiner regulating banks or banking.
(b) Each Lender agrees that it will use the Confidential
Information only in connection with this Agreement (and any refinancings
hereof), the Advances made by it hereunder, its Commitment, the transactions
contemplated hereby and other transactions with the Borrower and any of its
Subsidiaries.
SECTION 8.09. Governing Law. This Agreement and the Notes shall
be governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 8.10. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties hereto
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State or, to the extent permitted by law, in
such federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any party may otherwise
have to bring any action or proceeding relating to this Agreement or the Notes
in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the Notes
in any New York State court or federal court of the United States of America
sitting in New York City. Each of the parties hereto hereby irrevocably waives,
to the fullest extent
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71
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.
SECTION 8.12. Judgment. (a) If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder or under
the Notes in any currency (the "Original Currency") into another currency (the
"Other Currency") the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Agent could purchase the Original
Currency with the Other Currency at 9:00 A.M. (New York City time) on the first
Business Day preceding that on which final judgment is given.
(b) The obligation of the Borrower in respect of any sum due in
the Original Currency from it to any Lender or the Agent hereunder or under the
Note or Notes held by such Lender shall, notwithstanding any judgment in any
Other Currency, be discharged only to the extent that on the Business Day
following receipt by such Lender or the Agent (as the case may be) of any sum
adjudged to be so due in such Other Currency, such Lender or the Agent (as the
case may be) may in accordance with normal banking procedures purchase Dollars
with such Other Currency; if the amount of Dollars so purchased is less than the
sum originally due to such Lender or the Agent (as the case may be) in the
Original Currency, the Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or the Agent (as the
case may be) against such loss, and if the amount of Dollars so purchased
exceeds the sum originally due to any Lender or the Agent (as the case may be)
in the Original Currency, such Lender or the Agent (as the case may be) agrees
to remit to the Borrower such excess.
SECTION 8.13. Effective Date Assignments; Etc. (a) As of the
Effective Date, prior to giving effect to any assignment under this Agreement as
of such date, each Existing Lender represents and warrants, as to the assignment
effected by such Existing Lender by this Agreement that as of the Effective Date
(i) its Existing Commitment is in the dollar amount specified as its Existing
Commitment on Schedule 8.13 hereto and the aggregate outstanding principal
amount of Existing Advances owing to it is in the dollar amount specified as the
aggregate outstanding principal amount of Existing Advances owing to such
Existing Lender on Schedule 8.13 hereto; and (ii) that such Existing Lender is
the legal and beneficial owner of such interest being assigned by it hereunder
and that such interest is free and clear of any adverse claim created by such
Existing Lender.
(b) Each Existing Lender and Bank confirms to, and agrees with,
each of the other Banks as to the assignment effected by this Agreement by such
Existing Lender or Bank, as the case may be, as follows: (i) each such Existing
Lender makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with the Original Credit Agreement or this Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Original Credit
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72
Agreement or this Agreement or any other instrument or document furnished
pursuant thereto or hereto; (ii) each such Existing Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or any of its Subsidiaries or the
performance of observance by the Borrower or any of its Subsidiaries of any of
its obligations under the Original Credit Agreement or this Agreement or any
other instrument or document furnished pursuant thereto or hereto; (iii) each
Bank confirms that it has received such documents and information as it has
deemed appropriate to make its own credit analysis and decision to execute and
deliver this Agreement and agrees that it shall have no recourse against the
Agent, any Existing Lender or any other Lender with respect to any matters
relating to the Original Credit Agreement or this Agreement; and (iv) each Bank
will, independently and without reliance upon the Agent, any Existing Lender or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement, the Note or Notes held by it and the
other documents executed in connection herewith.
(c) As of the Effective Date, (i) each Bank shall be a party to
this Agreement and, to the extent provided herein, have the rights and
obligations of a Lender hereunder and (ii) each Existing Lender shall, to the
extent provided herein, relinquish its rights and be released from its
obligations under this Agreement as to any assignment effected herein.
(d) From and after the Effective Date, the Agent shall make all
payments under this Agreement in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and
commitment fees with respect thereto) to the Banks and other Lenders hereunder.
(e) On or before the Effective Date, the Borrower shall have paid
all accrued interest, fees and other amounts payable and owing to the Existing
Lenders and the Agent (as defined in the Original Credit Agreement) as of the
Effective Date in connection with the Original Credit Agreement. Without
prejudice to the survival of any other agreement of the Borrower under the
Original Credit Agreement, all amounts that would be payable under Sections
2.10, 2.13 and 8.04 of the Original Credit Agreement shall be payable under this
Agreement to the extent that such amounts have not been paid as of the Effective
Date.
(f) As of the Effective Date, (i) the Original Credit Agreement
is amended and restated in full as set forth in this Agreement, (ii) the
Existing Commitments are terminated, (iii) the Notes (as defined in the Original
Credit Agreement) are cancelled and replaced by the Notes, (iv) all obligations
which, by the terms of the Original Credit Agreement, are evidenced by the Notes
(as defined in the Original Credit Agreement) are evidenced by the Notes and (v)
no fees shall be payable by the Borrower pursuant to Section 2.03(a) of the
Original Credit Agreement, except to the extent that such fees become due and
payable, and remain unpaid, on or prior to the Effective Date.
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73
SECTION 8.14. Waiver of Jury Trial. Each of the Borrower, the
Agent and the Lenders hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the Notes or the
actions of the Agent or any Lender in the negotiation, administration,
performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
CYTEC INDUSTRIES INC.
By /s/ J.P. Cronin
---------------------------------
Title: Executive Vice President
& Chief Financial Officer
[signed copies of the credit
agreement and each amendment
thereto are on file at the offices
of the Company]
CITIBANK, N.A.,
as Agent
By /s/ Mary W. Corkran
---------------------------------
Title: Vice President
$150,000,000 Total of the Commitments
Commitment Banks
$32,500,000 CITIBANK, N.A.
By /s/ Mary W. Corkran
---------------------------------
Title: Vice President
<PAGE>
74
$22,500,000 CORESTATES BANK, N.A.
By /s/ Melissa G. Landay
---------------------------------
Title: Vice President
$20,000,000 CREDIT LYONNAIS
NEW YORK BRANCH
By /s/ Mary E.Collier
---------------------------------
Title: Vice President
$22,500,000 FIRST UNION NATIONAL BANK
By /s/Carol Van Eck
---------------------------------
Title: Assistant
$30,000,000 MELLON BANK, N.A.
By /s/ John K. Walsh
---------------------------------
Title: Vice President
22,500,000 PNC BANK, NATIONAL ASSOCIATION
By /s/ Michael Nardo
---------------------------------
Title: Vice President
Exhibit 10.13(b)
E
PERFORMANCE STOCK AWARD & PERFORMANCE CASH AWARD UNDER
THE CYTEC INDUSTRIES INC.
1993 STOCK AWARD AND INCENTIVE PLAN
January 27, 1997
[Employee's Name and Address]
Shares of Performance Stock:_____
Amount of Performance Cash:$_____
Performance Period: January 1, 1999 to December 31, 1999
Dear Employee:
As a key employee of Cytec Industries Inc. (the "Company"), or of a
subsidiary or affiliate of the Company, you have been granted by the
Compensation and Management Development Committee (the "Committee") of the Board
of Directors for the one-year performance period indicated above a performance
stock award of the number of shares of the Common Stock, par value of $.01 per
share, of the Company indicated above ("Performance Stock"). In addition, as
indicated above, you have been awarded a performance cash award equal to the
number of shares of Performance Stock set forth above times approximately $40.00
per share ("Performance Cash"). These awards are subject to the terms and
conditions hereof and of the Company's 1993 Stock Award and Incentive Plan (the
"Plan"). Performance Stock is awarded pursuant to Section 6(d) of the Plan and
Performance Cash is awarded pursuant to Section 6(i) of the Plan.
The Company will cause a certificate for the Performance Stock to be
issued and registered in your name. Physical possession of the Performance Stock
shall be retained by the Company until it vests, as herein provided. A
certificate for any shares that vest will be forwarded to you at your address
appearing on the Company's stock register after vesting has occurred.
Performance Cash, to the extent it becomes payable, will be paid as soon as
practicable after determination that the Award is payable.
Certain restrictions with respect to these awards include, but are not
limited to, the following:
<PAGE>
(1) You shall execute in blank (undated), and return to the Secretary of
the Committee, the enclosed stock power, which the Company will use to reclaim
the Performance Stock if the conditions to vesting are not met. Any Performance
Stock that fails to vest as herein provided shall be forfeited. Any Performance
Stock forfeited hereunder shall revert to the Company. By your acceptance of the
Performance Stock you hereby irrevocably authorize the Company to complete the
stock power herein referred to and to deliver the stock power along with the
certificate for such Performance Stock to the Company's Transfer Agent so as to
effectuate any forfeiture provided for herein.
(2) Subject to Paragraphs (7), (8) and (10) below, and subject to the
attainment of performance goals as hereinafter provided, the awards of
Performance Stock and Performance Cash shall vest effective as of January 1,
2000; provided that such vesting shall be subject to the further requirement
that the Committee certify that the performance goals have been met.
(3) Performance goals, and the related payout matrix, for this award of
Performance Stock and for this award of Performance Cash have been set by the
Committee and will be advised to you in writing. The performance goals are based
on 1999 EPS and 1997-1999 cumulative Cash Flow. The performance goals provide
for the partial vesting of Performance Stock in the event that the EPS
performance goal is substantially, but not fully, achieved, and for partial or
full vesting of Performance Cash if the Cash Flow performance goal is achieved
and depending on the extent to which the EPS performance goal for full vesting
of Performance Stock is exceeded.
(4) The Performance Stock and the Performance Cash may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of; and
neither the right to receive Common Stock, nor any interest therein or under the
Plan, may be assigned; and any attempted assignment shall be void.
(5) Except as limited by this Agreement or the Plan, you shall have, as
holder of non-forfeited shares of the Performance Stock, all of the rights of a
common stockholder of the Company, including the right to vote and receive
dividends. Nevertheless, stock of the Company distributed in connection with a
stock split, stock dividend, recapitalization or other similar transaction shall
be deemed to be Performance Stock and shall be subject to restrictions and a
risk of forfeiture to the same extent as the Performance Stock with respect to
which such stock has been distributed. Performance Cash shall not bear any
interest.
(6) You may satisfy your mandatory federal and state income tax
withholding obligations with respect to any Performance Stock that vests
(subject to Committee acceptance, as set forth below, and subject to compliance
with Rule 16b-3 under the Securities Exchange Act of 1934 if you are an
executive officer of the Company) by requesting the Company to withhold the
number of shares of such Performance Stock having a fair market value as of the
date of vesting equal to (i) the aggregate mandatory federal and state income
tax withholding obligations with respect to all of your Performance Stock under
this Award which vests on such date minus (ii) the amount
<PAGE>
of your Performance Cash under this Award which vests on such date (net of
withholding), it hereby being agreed that (x) the net amount of such Performance
Cash will be utilized in satisfying such mandatory withholding obligations
before any Performance Stock is withheld and (y) the fair market value of any
Performance Stock that is withheld will be determined on the same basis that the
value of the Performance Stock is determined for federal income tax withholding
purposes. Your request must be submitted in writing to the Committee, on forms
approved by the Secretary to the Committee, no later than December 1, 1999. The
Committee shall have sole discretion to determine whether or not to accept your
request, and failure by the Committee to accept your request on or prior to the
date of vesting shall constitute a denial of your request.
(7) If your employment with the Company or a subsidiary terminates on or
prior to the end of the performance period, all unvested shares of Performance
Stock and all unvested Performance Cash shall be forfeited, except as provided
in paragraphs (8) and (9), below, or except as the Committee shall otherwise
determine.
(8) If your employment with the Company or a subsidiary or affiliate
terminates by reason of your (i) death, (ii) disability as defined in the
Company's Long-Term Disability Plan, (iii) retirement on or after your 60th
birthday, or (iv) under other circumstances determined by the Committee to be
not contrary to the best interest of the Company, then, if such termination
occurs in 1999, your Performance Stock award and your Performance Cash award
shall not be forfeited by reason of such termination of employment; and if your
employment so terminates in 1998, two-thirds of said awards shall not be so
forfeited; and if your employment so terminates in 1997, one-third of said
awards shall not be so forfeited.
(9) As provided in the Plan, upon the occurrence of a "change in
control" all unvested (and not previously forfeited) shares of Performance Stock
and all unvested (and not previously forfeited) Performance Cash shall
immediately vest. Upon such occurrence, the vested shares of Performance Stock
shall be delivered to you promptly and the vested Performance Cash shall be paid
to you promptly.
(10) The Committee's Rules of General Application, as in effect on the
date hereof, provide that under certain circumstances, in lieu of vesting, an
award of Performance Stock will be forfeited and you will be issued, instead, an
equivalent Deferred Stock Award.
(11) Nothing in this award shall confer on you any right to continue in
the employ of the Company or any of its subsidiaries or affiliates or interfere
in any way with the right of the Company or any subsidiary or affiliate to
terminate your employment at any time.
The Company reserves the right to require that stock certificates
issuable to you in connection with the Performance Stock award be delivered to
you only within the United States.
<PAGE>
The Common Stock issued to you hereunder may not be resold by you except
pursuant to an effective registration statement under the Securities Act of 1933
or pursuant to an exemption from registration, such as Rule 144.
You agree to pay the Company promptly, on demand, any withholding taxes
due in respect of the Awards made hereunder. The Company may deduct such
withholding taxes from any amounts owing to you by the Company.
Once Performance Stock and/or Performance Cash vests as herein provided,
it shall no longer be deemed to be Performance Stock or Performance Cash, as the
case may be, and your rights thereto shall not be subject to the restrictions of
this Agreement or of the Plan.
In the event of any conflict between the terms of this Agreement and the
provisions of the Plan, the provisions of the Plan shall govern.
If you accept the terms and conditions set forth in this Agreement,
please execute the enclosed copy of this letter where indicated and return it as
soon as possible, along with the enclosed stock power.
Very truly yours,
CYTEC INDUSTRIES INC.
BY:______________________
J. W. Hirsch
Secretary - Compensation
and Management
Development Committee
Enc.
ACCEPTED:
- ----------------------------
Employee Name:
Social Security No.
Date:
Exhibit 10.13(c)
[As amended 1/27/97]
RULES OF GENERAL APPLICATION UNDER
THE CYTEC INDUSTRIES INC. 1993
STOCK AWARD AND INCENTIVE PLAN
Rule 1. This Rule applies to Performance Stock Awards and related Performance
Cash Awards granted to Executive Officers of the Corporation by the Compensation
and Management Development Committee (the "Committee") with respect to the 1997,
1998 and 1999 Performance Periods.
(a) Definitions. As used in this Rule, the following terms shall have
the following respective meanings; provided that with respect to
Performance Stock Awards and Performance Cash Awards granted in 1997 and
thereafter, "Cash Flow" and "EPS" shall have the meaning ascribed
thereto in the Plan;
(i) "Cash Flow" means, with respect to any fiscal year
constituting a Performance Period, the consolidated increase
(decrease) in cash, cash equivalents and related marketable
securities of the Corporation, as set forth in the Corporation's
audited financial statements for such year, adjusted to exclude
the impact of financing activity, cash dividends paid to common
stockholders and purchases of treasury stock.
(ii) "EPS" means, with respect to any fiscal year constituting a
Performance Period, the consolidated fully-diluted earnings per
common share of the Corporation, as set forth in the
Corporation's audited financial statement for such year, subject
to paragraph (d).
(iii) "Performance Period" means January 1-December 31, 1997,
January 1-December 31, 1998 or January 1- December 31, 1999, as
the context requires.
(iv) "Plan" means the 1993 Stock Award and Incentive
Plan of the Corporation.
(v) Terms defined in the Plan and used, but not defined, in this
rule shall have the respective meanings ascribed thereto in the
Plan.
<PAGE>
2
(b) Payout Targets - Performance Stock Awards. Subject to paragraph (e)
below ("Deferred Stock Awards"), and subject to the terms of the
Performance Stock Award and Performance Cash Award Grant Letters,
restrictions on Performance Stock Awards shall lapse if and to the
extent that the EPS performance targets set forth in a separate document
(hereinafter called the "Target Document") entitled "Performance
Stock/Cash Awards - 1997, 1998, 1999 Performance Periods - Executive
Officers" are met. The Target Document shall be identified by the
signature of the Secretary to the Committee and filed with the records
of the Committee.
(c) Payout Targets - Performance Cash Awards. Subject to paragraph (e)
below, and subject to the terms of the Performance Stock Award and
Performance Cash Award grant letters, recipients of Performance Stock
Awards shall be paid cash bonuses, called Performance Cash Awards, which
shall be in amounts awarded by the Committee and shall vest at the same
time as the related Performance Stock Award becomes nonforfeitable,
subject to attainment of EPS and Cash Flow performance criteria set
forth in the Target Document.
(d) Exclusions. In computing EPS for the 1997 and 1998 Performance
Periods, there shall be excluded (i) the impact of accounting changes
mandated by Generally Accepted Accounting Principles, (ii) restatement
of prior period financial results, and (iii) the impact of
"extraordinary items" (as defined in Generally Accepted Accounting
Principles).
(e) Deferred Stock Awards. (i) The Committee may, prior to the beginning
of the Performance Period with respect to a Performance Stock Award,
offer a Participant who has been granted such an award the opportunity
to elect to defer all or a specified portion of such award in the form
of a Deferred Stock Award. If a Participant elects deferral in
accordance with the procedures established by the Committee, then,
effective as of the date on which the related award of Performance Stock
is to vest, the total award (or such lesser percentage of such total
award as shall have been elected by the Participant and accepted by the
Committee) shall be forfeited, and the Participant will be issued
instead a Deferred Stock Award, as defined in Section 6(h) of the Plan,
equal to the number of shares of Performance Stock so forfeited. Such
Deferred Stock Award shall accrue Dividend Equivalents which will be
deferred in the form of additional Deferred Stock based on the Closing
Price of the Corporation's Common Stock in the New York Stock Exchange
Consolidated Tape on the date on which the related dividend is paid on
the Corporation's Common Stock.
(ii) Deferred Stock resulting from deferral of Dividend Equivalents will
likewise bear Dividend Equivalents.
<PAGE>
3
(f) Executive Committee. The Executive Committee is authorized to set
(and change) performance targets for Performance Stock and Performance
Cash granted to employees who are not "Executive Officers" of the
Corporation; provided that such performance targets shall be reported to
the Committee. The targets so reported shall be deemed approved and
ratified by the Committee, unless the Committee rejects them at its
first meeting following such report.
(g) Additional Bonuses. The foregoing long-term incentive awards are not
intended to be exclusive, and the Corporation may grant any other
additional forms of compensation, including but not limited to annual
incentive compensation, stock options, special recognition awards, stock
appreciation rights or any other form of compensation whatsoever.
Exhibit 10.13(d)
E-1
NONQUALIFIED STOCK OPTION UNDER
1993 STOCK AWARD AND INCENTIVE PLAN
[Date]
Number of Shares:
Purchase Price:
Dear Employee:
As a key employee of Cytec Industries Inc. (the "Company"), or of a
subsidiary of the Company, you have been granted by the Compensation and
Management Development Committee (the "Committee") of the Company's Board of
Directors a non-qualified stock option to purchase not more than the aggregate
number of shares of the Common Stock of the par value of $.01 each of the
Company ("Common Stock") set forth above at the per share purchase price set
forth above, all subject to the terms and conditions hereof and of the Company's
1993 Stock Award and Incentive Plan, as amended (the "Plan").
The date of grant of this option is the date of this letter, which is
the date on which the Committee voted to grant the option. The purchase price
represents 100% of the Fair Market Value per share of the Common Stock on the
date of the grant, as determined under the Plan.
Upon receipt by the Company of notification of exercise of option in the
form prescribed from time to time by the Committee and upon receipt of the
purchase price per share multiplied by the number of shares being purchased
pursuant to such exercise, the Company will cause a certificate or certificates
for such shares then purchased to be delivered to the person entitled thereto.
A copy of the Plan, under which this option is granted to you, is
available at the office of the Secretary to the Committee, and your attention is
directed to all the provisions of the Plan.
Certain restrictions with respect to this option include, but are not
limited to, the following:
(1) This option must be exercised if at all and to the extent exercised,
no later than ten years from the date of grant, and then only (except as
provided in paragraphs (5), (6) and (7) below) if you are then an employee of
the Company or of a company which on the date of exercise is a subsidiary or
Affiliate (as defined in the Plan) of the Company.
<PAGE>
(2) This option shall be exercisable in cumulative installments as
follows: to the extent of not more than one-third of the number of shares
subject hereto, at any time after the expiration of the first year of the term
hereof; to the extent of not more than an additional one-third of such shares,
at any time after the expiration of the second year of such term; and to the
extent of the remainder of such shares, at any time after the expiration of the
third year of such term; provided that, as specified in Section 7 of the Plan,
this option shall be immediately exercisable in full upon a Change of Control
(as defined in the Plan).
(3) This option is not transferable otherwise than by will or by the
laws of descent and distribution or, if then permitted under Rule 16b-3 under
the Securities Exchange Act of 1934, pursuant to a qualified domestic relations
order as defined under the Internal Revenue Code and it may be exercised during
your lifetime, only by you or your guardian or legal representative.
Notwithstanding the prior sentence, you may transfer this option, in whole or in
part, to (i) your spouse, (ii) your child or children, (iii) your grandchild or
grandchildren or (iv) a trust for any of the foregoing; provided that the
transfer shall be subject to all of the terms of the Plan and this grant letter
and, in addition, (A) the transferred option may not be retransferred except to
you, (B) you remain liable for all withholding taxes payable on account of this
option, (C) the Company may place transfer restrictions against any shares of
Common Stock issued to a transferee upon exercise of this option in order to
assure compliance with the Securities Act of 1933, as amended, (D) you give
prompt written notice of the transfer to the Secretary of the Committee
including name, address, tax I.D. number and date of birth of the transferee,
number of shares subject to the transfer, and such other information as the
Company may require and (E) this option shall be exercisable by the transferee
only to the extent that it would be exercisable by you if it had not been so
transferred.
(4) In the event of termination of your employment, this option, to the
extent not theretofore exercised, shall forthwith terminate unless such
termination of employment shall be by reason of a cause described in paragraph
(5), (6) or (7) below, in which case the provisions of paragraph (5), (6) or (7)
below, as the case may be, shall be applicable.
(5) In the event that your employment with the Company or a subsidiary
of the Company terminates by reason of (i) your death, (ii) your disability or
(iii) your retirement on or after your 55th birthday, and the date of such
termination is eight months or more after the date of grant of this option, this
option may be exercised by you, by your estate, by any transferee under
Paragraph 3 above, or by any person who acquires the right to exercise this
option by reason of your death, until the fifth anniversary of the date of
termination of your employment (subject to the installment exercise provisions
of Paragraph 2, above), but not after ten years from the date of grant, to the
extent of the total number of shares subject to this option.
<PAGE>
(6) In the event that the Company or a subsidiary of the Company
terminates your employment by reason of a job elimination, and the date of
termination is eight months or more after the date of grant of this option, this
option may be exercised (subject to the installment exercise provisions of
Paragraph 2, above) but not after ten years from the date of grant, to the
extent of the full number of shares subject to this option.
(7) In the event that the Company or a subsidiary of the Company
terminates your employment (except as provided in paragraph 6, above, in which
case paragraph 6 applies, and except for dishonesty or other good cause, in
which case this option expires), you may exercise this option at any time within
one year after any such termination, but not before the expiration of the first
year, nor after ten years, from the date of grant, to the extent of the number
of shares subject to this option which were purchasable by you at the date of
such termination of your employment.
(8) The Company, with the approval of an officer, may, at any time and
without cause, suspend the exercisability of this option if it becomes aware of
information that indicates that there may be grounds to terminate your
employment for dishonesty or other good cause. If upon conclusion of the
investigation the Company determines that it has not discovered grounds to
terminate your employment for dishonesty or other good cause, the suspension
shall be terminated.
(9) Nothing in this option shall confer on you any right to continue in
the employ of the Company or any of its subsidiaries or affiliates or interfere
in any way with the right of the Company or any subsidiary or affiliate to
terminate your employment at any time.
(10) Subject to such limitations, if any, as the Committee may
establish, you may satisfy your mandatory federal and state income tax
withholding obligations resulting from the exercise of this option by requesting
the Company to withhold shares of Common Stock having a fair market value, as
determined under the Plan, equal to the withholding obligations. In order to
prevent fractional shares, the number of shares withheld shall be rounded up to
the nearest whole share, with the value of the fraction, at the option of the
Company, being either paid to you in cash or retained as additional optional
withholding.
The Company reserves the right to require this option to be exercised
only within the United States and to require stock certificates issuable to you
upon such exercise to be delivered only within the United States to you or to
such person who is appropriately authorized by you.
Prior to the earliest time that this option may be exercised by you, the
Company will deliver to you a prospectus which meets the requirements of the
Securities Act of 1933, as amended, and which further describes the Plan and
options granted thereunder.
<PAGE>
In no event is the grant of this option to you to be deemed, directly or
indirectly, a recommendation by the Company that you at any time exercise this
option.
In the event of any conflict between the terms of this option and the
provisions of the Plan, the provisions of the Plan shall govern.
Very truly yours,
CYTEC INDUSTRIES INC.
BY:
-----------------------
J. W. Hirsch
Secretary-Compensation
and Management
. Development Committee
Exhibit 10.13(e)
RULES OF GENERAL APPLICATION UNDER THE
CYTEC INDUSTRIES INC. 1993
STOCK AWARD AND INCENTIVE PLAN
(Adopted 6/22/95; amended 1/27/97)
Rule 2. This Rule applies to stock options granted to employees of the
Corporation and its subsidiaries by the Compensation and Management Development
Committee (the "Committee").
(a) If an employee retires on or after his 60th birthday under the
Corporation's or a subsidiary's retirement plan, any option granted
eight months or more prior to the date of such retirement shall become
exercisable (but not beyond the original expiration date of the option)
to the extent of the full number of shares that are subject to the
option.
(b) If an employee's employment terminates under circumstances
determined by the Committee (in the case of officers) or the Executive
Committee (in the case of other employees), not to be contrary to the
best interests of the Corporation, then any option held by such
employee, provided that it was granted eight months or more prior to
such termination of employment, shall become exercisable in full and
shall remain exercisable until the original expiration date of the
option.
This Rule does not apply to options granted on or after January 27, 1997.
EXHIBIT 10.23
========================================================================
ASSET PURCHASE AGREEMENT
between
STERLING FIBERS, INC.
STERLING CHEMICALS, INC.
STERLING CHEMICALS HOLDINGS, INC.
CYTEC ACRYLIC FIBERS INC.,
CYTEC TECHNOLOGY CORP.,
and
CYTEC INDUSTRIES INC.,
Dated as of December 23, 1996
Sale of Acrylic Fibers Business
========================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions and Terms
SECTION 1.01. Definitions................................. 2
SECTION 1.02. Interpretation.............................. 21
ARTICLE II
Purchase and Sale of Acquired Assets
SECTION 2.01. Purchase and Sale........................... 22
SECTION 2.02. Definitions of Acquired Assets and
Excluded Assets.......................... 22
SECTION 2.03. Assumption of Certain Liabilities........... 26
SECTION 2.04. Consideration............................... 29
SECTION 2.05. Reconciliation of the Consideration......... 30
ARTICLE III
The Closing
SECTION 3.01. Closing Date................................ 32
SECTION 3.02. Transactions To Be Effected at the
Closing.................................. 32
SECTION 3.03. Prorations.................................. 33
ARTICLE IV
Representations and Warranties
SECTION 4.01. Representations and Warranties of
the Cytec Parties........................ 34
SECTION 4.02. Representations and Warranties of
Purchaser................................ 50
i
<PAGE>
Page
----
ARTICLE V
Covenants
SECTION 5.01. Covenants of the Cytec Parties
Relating to Conduct
of Business.............................. 52
SECTION 5.02. Purchaser's Access to Information
Prior to Closing......................... 55
SECTION 5.03. Records; Financial Information;
Attorney Work Product.................... 56
SECTION 5.04. Conditions to Closing....................... 58
SECTION 5.05. Employee Matters............................ 58
SECTION 5.06. Expenses.................................... 64
SECTION 5.07. Transfer Taxes.............................. 64
SECTION 5.08. Brokers or Finders.......................... 64
SECTION 5.09. Bulk Transfer Laws.......................... 65
SECTION 5.10. Purchase Price Allocation................... 65
SECTION 5.11. No Additional Representations............... 65
SECTION 5.12. Post-Closing Exposure to
Acrylonitrile and Asbestos............... 66
SECTION 5.13. Amendment of Intercompany
Licenses................................. 67
SECTION 5.14. Real Property Easement; Santa Rosa
First Refusal and
Lease Agreement.......................... 67
SECTION 5.15. Actions of Purchaser........................ 67
SECTION 5.16. Signs; Use of "Cytec" or "Cyanamid"
Name..................................... 67
SECTION 5.17. Products, Supplies and Documents............ 68
SECTION 5.18. Delivery of Assets.......................... 68
SECTION 5.19. No Solicitation............................. 69
SECTION 5.20. Audited Financial Statements................ 69
SECTION 5.21. Pilko Assessment............................ 70
SECTION 5.22. Title Policy................................ 77
SECTION 5.23. Further Assurances.......................... 78
SECTION 5.24. Reimbursement for Certain Excess
Medical Claims and Expenses.............. 78
SECTION 5.25. Services Agreement Issue.................... 78
SECTION 5.26. Certain Matters Related to Cyanamid......... 78
SECTION 5.27. Amendment to Disclosure Schedule ........... 80
ARTICLE VI
Conditions Precedent
ii
<PAGE>
Page
----
SECTION 6.01. Conditions to Each Party's
Obligations.............................. 80
SECTION 6.02. Conditions to the Obligations of the
Sterling Parties......................... 81
SECTION 6.03. Conditions to the Obligations of the
Cytec Parties............................ 83
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination................................. 85
SECTION 7.02. Amendments and Waivers...................... 87
ARTICLE VIII
Indemnification
SECTION 8.01. Indemnification by the
Cytec Parties............................ 88
SECTION 8.02. Indemnification by Purchaser,
Guarantee of STX Chemicals............... 91
SECTION 8.03. Losses Net of Insurance, etc................ 93
SECTION 8.04. Termination of Indemnification.............. 94
SECTION 8.05. Procedure................................... 94
SECTION 8.06. Payment .................................... 97
SECTION 8.07. No Consequential Damages .................. 97
SECTION 8.08. Effect of Certain Breaches
and Inaccuracies......................... 97
ARTICLE IX
General Provisions
SECTION 9.01. Notices..................................... 99
SECTION 9.02. Headings.................................... 100
SECTION 9.03. Survival of Representations,
Warranties and Covenants................. 100
SECTION 9.04. Severability................................ 101
SECTION 9.05. Counterparts................................ 101
SECTION 9.06. Entire Agreement; No Third Party
Beneficiaries............................ 101
SECTION 9.07. Governing Law............................... 102
SECTION 9.08. Consent to Jurisdiction..................... 102
SECTION 9.09. Publicity................................... 103
SECTION 9.10. Assignment.................................. 103
SECTION 9.11. Amendments and Waivers...................... 103
SECTION 9.12. Remedies.................................... 104
iii
<PAGE>
Page
----
SECTION 9.13. Prevailing Party Costs...................... 104
SECTION 9.14. No Liability of Natural Person.............. 104
iv
<PAGE>
Exhibits
- --------
Exhibit A Acrylonitrile Assignment and
Assumption
Exhibit B Form of Special Warranty Deed
Exhibit C Form of Earn-Out Agreement
Exhibit D Form of Easement Agreement
Exhibit E Form of Environmental Permits
Assignment and Assumption
Exhibit F Form of Intellectual Property
Assignments
Exhibit F-1 Form of Cytec Technology Assignment
of Trademark Registration
Exhibit F-2 Form of Agreement to Assign Foreign
Trademarks between Cytec
Technology and Purchaser
Exhibit F-3 Form of Assignment of Know-How to
Purchaser among Parent, Cytec
Technology and Purchaser
Exhibit F-4 Form of Assignment of U.S. Patents
and Patent Applications to
Purchaser among Parent, Cytec
Technology and Purchaser
Exhibit F-5 Form of Assignment of Foreign patent
and Patent Applications to
Purchaser between Cytec Technology
and Purchaser
Exhibit G Form of Non-Competition Agreement
Exhibit H Form of Occupancy Agreements
Exhibit I Form of Designation of Rights
Exhibit J Form of Santa Rosa First Refusal and
Lease Agreement
Exhibit K Form of Services Agreement
Exhibit L Form of Trademark License Agreement
Exhibit M Form of Assumption Agreement
Exhibit N Form of Legend for Preferred Stock
Certificate
Exhibit O Form of General Conveyance, Transfer
and Assignment
v
<PAGE>
Appendices
- ----------
Appendix A List of Certain Business Employees
Appendix B List of Business Equipment located
outside the Santa Rosa Facility
Appendix C List of Cytec Santa Rosa Employees
Appendix C-1 List of Most Senior 25% of Acquired
Employees
Appendix C-2 List of Certain Acquired Employees
Appendix D Description of Excluded Real
Property located in Santa Rosa
County
Appendix E Certain Environmental Conditions
Appendix F [Intentionally Omitted]
Appendix G Computation of Certain Business
Inventory and Cytec Services
Payable
Appendix H List of Deep Well System
Appendix I List of Certain Permitted Liens
Appendix J Description of Santa Rosa Facility
Appendix K Specified Cytec Representatives
Appendix L Specified Sterling Representatives
Appendix M Acrylonitrile Assets Being
Transferred to Purchaser
Appendix N Pro Forma Balance Sheet Data
Appendix O Scope of Work for Pilko Assessment
Disclosure Schedules
- --------------------
Schedule 4.01(a) Organization, Standing and Power
Schedule 4.01(b) Corporate Authority
Schedule 4.01(c)-1 Exclusions to the Unaudited Financial
Statements
Schedule 4.01(c)-2 Cost of Acrylonitrile Purchases
Schedule 4.01(d) Undisclosed Liabilities
Schedule 4.01(e) Compliance with Applicable Laws
Schedule 4.01(f) Litigation; Decrees
Schedule 4.01(g) Permits
Schedule 4.01(i) Products
Schedule 4.01(k) Real Property
Schedule 4.01(l) Business Accounts Receivable
Schedule 4.01(m) Certain Changes or Events
Schedule 4.01(n) Intellectual Property
Schedule 4.01(n)-1 Cytec Owned Intellectual Property
Schedule 4.01(n)-2 Other Intellectual Property
Schedule 4.01(n)-3 Licenses and Other Rights
Schedule 4.01(n)-4 Interferences or Other Consented
Schedule 4.01(p) Environmental Matters
Schedule 4.01(q) Sufficiency of Acquired Assets
vi
<PAGE>
Schedule 4.01(r) Contracts
Schedule 4.01(s) Employee Pension Benefit Plan
Schedule 4.01(w) Triggering of Obligations
Schedule 4.01(x) Future Commitments
Schedule 4.01(y) Bonus Agreements
Schedule 4.01(z) Bonds
Schedule 4.01(aa) Labor Matters
Cytec Industries Inc. agrees to furnish supplementally to the Commission the
foregoing appendices, exhibits and schedules upon request.
vii
<PAGE>
ASSET PURCHASE AGREEMENT dated as of December 23, 1996
(this "Agreement"), between STERLING FIBERS, INC., a Delaware
corporation ("Purchaser"), STERLING CHEMICALS, INC., a
Delaware corporation ("STX Chemicals"), STERLING CHEMICALS
HOLDINGS, INC., a Delaware corporation and the indirect sole
stockholder of Purchaser and the direct stockholder of STX
Chemicals ("STX"), CYTEC ACRYLIC FIBERS INC., a Delaware
corporation ("Seller"), CYTEC TECHNOLOGY CORP., a Delaware
corporation ("Cytec Technology"), and CYTEC INDUSTRIES INC., a
Delaware corporation and the sole stockholder of Seller and
Cytec Technology.
WHEREAS Parent (as defined below), through Seller,
is engaged in the Business (as defined below); and
WHEREAS Parent, through Cytec Technology, owns certain of the
Business Intellectual Property (as defined below); and
WHEREAS Parent wishes to sell and to cause Seller to sell to
Purchaser, and Purchaser wishes to purchase from Parent and Seller,
substantially all the assets of the Business and Purchaser is willing to assume
substantially all the liabilities of the Business, in each case upon the terms
and subject to the conditions set forth in this Agreement; and
WHEREAS Cytec Technology wishes to transfer all of the Business
Intellectual Property owned by it to Purchaser, upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable
<PAGE>
2
consideration, the receipt and sufficiency of which are acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
Definitions and Terms
SECTION 1.01. Definitions. As used in this Agreement, the following
terms shall have the meanings
provided below:
"Acquired Assets" shall have the meaning given such term in Section
2.02(a).
"Acquired Contracts" shall mean (i) all Contracts (including
Acquired Employee Contracts) to which any Cytec Party is a party on the Closing
Date that relate primarily to or arise primarily out of the operation of the
Business and which were entered into in the ordinary course of the Business;
provided that "Acquired Contracts" shall not include any Excluded Contracts.
"Acquired Employee Contract" shall mean any employment contract
with a Business Employee who is offered employment by Purchaser and accepts such
offer within the requisite time periods in Section 5.05
"Acquired Employees" shall have the meaning given such term in
Section 5.05(a).
"Acquisition Transaction" shall have the meaning given such term in
Section 5.19.
"Acrylonitrile Assignment and Assumption" shall mean the Assignment
and Assumption Agreement dated as of the Closing Date between Seller and
Purchaser in the form of Exhibit A.
"Acrylonitrile Supply Agreement" shall mean the Acrylonitrile
Supply Agreement dated as of September 1, 1996, between Parent and Seller.
"Affiliate" shall mean, with respect to any person, any other
person that directly or indirectly Controls, is Controlled by or is under common
Control with such first person. A person shall be deemed to "Control" another
person if such first person has the power to direct or cause the direction of
such other person, whether through ownership of securities, by contract or
otherwise. Each of the Cytec Parties is deemed to be an Affiliate of the other
Cytec
<PAGE>
3
Parties and none of the Cytec Parties shall be deemed to be an Affiliate of
Cyanamid. Each of the Sterling Parties is deemed to be an Affiliate of the other
Sterling Parties.
"Ancillary Agreements" shall mean the Earn-Out Agreement, the
Services Agreement, the Occupancy Agreements, the Assumption Agreement, the
Acrylonitrile Assignment and Assumption, the Acrylonitrile Supply Agreement, the
Non- Competition Agreement, the Easement Agreement, the Trademark License
Agreement, the Intellectual Property Assignments, the Conveyance Documents, the
Santa Rosa First Refusal and Lease Agreement and the Environmental Permits
Assignment and Assumption.
"Arbitrator" shall have the meaning given such term in Section
2.05(c).
"Assumed Liabilities" shall have the meaning given such term in
Section 2.03(a).
"Assumption Agreement" shall have the meaning given such term in
Section 2.03(a).
"Attorney Work Product" shall mean all notes, memoranda,
correspondence or similar material reflecting the legal conclusions,
recommendations or work product of Parent's attorneys acting as counsel for any
Cytec Party in matters relating to the Business on or prior to the Closing Date,
whether such materials are in the files of Parent's in-house law division, in
the files of managers or other personnel of Parent or any of its Affiliates or
in the files of Parent's outside counsel.
"Audited Financial Statements" shall have the meaning given such
term in Section 5.20.
"Balance Sheet Data" shall have the meaning given such term in
Section 4.01(c).
"Benefit Plan" shall have the meaning given such term in Section
4.01(s).
"Business" shall mean the development, manufacture, marketing, sale
and distribution by or on behalf of Seller or Parent of acrylic fiber and the
unrelated manufacture at the Santa Rosa Facility by or on behalf of Seller or
Parent of chemicals for Omniglow Corporation, a California corporation.
"Business Accounts Payable" shall mean, without duplication, all
Intercompany Payables and all liabilities of the Cytec Parties of the types set
forth in the Balance Sheet
<PAGE>
4
Data under the line items: "Acrylonitrile Payable", "Vouchered Invoice Accrual",
"Unvouchered Invoice Accrual", "Unvouchered Inventory Accrual", "Accrued Freight
Payable", "Cytec Services Payable", "Construction Retainage", "Accrued
Utilities", "Accrued Property Taxes" and "Accrued Sales & Use Tax", "Accrued
Wages, Holiday & Vacation", and "Customer Claims/Sales Allowances", but only if
and to the extent such liabilities relate primarily to or arise primarily out of
the operation of the Business and, in the case of such liabilities incurred
after September 30, 1996, only if and to the extent such liabilities were
incurred in the ordinary course of business.
"Business Accounts Receivable" shall mean, without duplication, (i)
all assets of the Cytec Parties of the types set forth in the Balance Sheet Data
under the line items: "Employee Cash Advance", "Miscellaneous Receivables",
"Accounts Receivable" (less "Reserves") and "Miscellaneous Prepayments", but
only if and to the extent such assets relate primarily to or arise primarily out
of the operation of the Business and, in the case of such assets acquired by the
Cytec Parties after September 30, 1996, only if and to the extent such assets
were acquired in the ordinary course of business and (ii) all notes, bonds and
other evidences of indebtedness relating to the assets and accounts receivable
referred to in clause (i) above, including any security interests related
thereto and any rights of the Cytec Parties with respect to any third party
collection procedures or any other actions or proceedings which have been or may
be commenced in connection therewith.
The term "business day" shall mean any day other than a Saturday,
Sunday or other day on which banks in the City of New York or the City of
Houston are permitted or required to close by Governmental Rule.
"Business Employee" shall mean (i) each employee of any of the
Cytec Parties that is employed by such Cytec Party immediately prior to the
Closing in connection with the Business at the Santa Rosa Facility and (ii) each
person listed on Appendix A or a replacement of any such person of which Seller
shall have given Purchaser prompt written notice prior to the Closing Date.
"Business Equipment" shall mean (i) all machinery and equipment,
tools, furniture, appliances, fixtures, trucks, trailers, automobiles and other
tangible personal property in each case that are (A) located at or used
primarily in respect of the Santa Rosa Facility or the office that is the
subject of the New York Lease and (B) used or held for use primarily in
connection with the Business and (ii) the items listed on
<PAGE>
5
Appendix B located outside the Santa Rosa Facility; provided that "Business
Equipment" shall not include any Business Records.
"Business Intellectual Property" shall mean all Intellectual
Property listed on Schedule 4.01(n) (including all trade names listed on such
Schedule), and all copyrights and Know How owned or held by any Cytec Party that
relate primarily to or arise primarily out of the Business; provided, however,
that "Business Intellectual Property" shall not include the Licensed
Intellectual Property.
"Business Inventory" shall mean all Inventory (including Inventory
in transit or located at customers' premises on consignment) that relates
primarily to or arises primarily out of the operation of the Business and are
included in Inventory in a manner consistent with Parent's and Seller's standard
historical practices, together with all rights against suppliers of such
Inventory (including claims receivable for rejected Inventory).
"Business Records" shall mean all the files, books, records,
correspondence, lists, papers and other instruments and data of the Cytec
Parties, of whatever nature and wherever located, that relate primarily to the
Business or the Acquired Assets or arise primarily out of the operation of the
Business, including accounting, tax and financial records, personnel and labor
relations records, maintenance and production records, environmental records and
reports, sales records, customer lists, supplier lists, blueprints,
specifications, plats, maps, surveys and building and machinery diagrams;
provided that "Business Records" shall not include any Excluded Records.
"Capital Expenditure Deficiency" shall mean the excess, if any, of
the Required Capital Expenditure Amount over the aggregate amount of all
expenditures capitalized in accordance with GAAP and Seller's standard
historical practice and that are incurred by the Cytec Parties with respect to
the Business from January 1, 1996 through December 31, 1996. "Required Capital
Expenditure Amount" shall mean (i) $5,000,000 or, if the Closing occurs prior to
December 31, 1996, such amount pro rated in accordance with the number of days
from January 1, 1996, through the Closing Date, less (ii) the estimated amount
of expenditures capitalized in accordance with GAAP and Seller's standard
practice as of the date hereof, that are proposed to be incurred by the Cytec
Parties with respect to the Business in respect of which Purchaser has withheld
its consent as permitted by Section 5.01.
<PAGE>
6
"Cash Amount" shall have the meaning given such term in Section
2.04(a)(i).
"Closing" and "Closing Date" shall have the respective meanings
given such terms in Section 3.01.
"Closing Date Cash Payment" shall have the meaning given such term
in Section 2.04(b)(iii).
"Closing Date Net Working Capital" shall mean the Net Working
Capital as of the Closing Date.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" shall have the meaning given such term
in Section 5.02.
"Contracts" shall mean contracts, leases, inden tures, agreements,
commitments, purchase orders and all other legally binding arrangements, whether
in existence on the date hereof or subsequently entered into.
"Conveyance Documents" shall have the meaning given such term in
Section 3.02(a).
"Corporate Software" shall mean any software owned or licensed by
any Cytec Party that is not unique to the Santa Rosa Facility.
"Cost of Remediation" shall have the meaning given such term in
Section 5.21(a).
"Current Environmental Laws" shall mean, with respect to any
determination made under Section 5.21, all Environmental Laws in effect on the
date of such determination and all Environmental Laws not in effect on such date
but which are reasonably expected to be in effect on the later of the Closing
Date and Outside Date, but, in each case, only to the extent that such
Environmental Laws apply to the Acquired Assets in accordance with their
Pre-Closing Use. "Pre-Closing Use" shall include levels of product throughput,
emissions of Hazardous Substances subject to any Environmental Permit, the water
supply for any Acquired Asset, and the overall use of the Acquired Asset in
question.
"Cyanamid" shall mean American Cyanamid Company.
"Cytec Defined Benefit Plan" shall mean the Cytec Salaried and
Nonbargaining Employees Retirement Plan.
<PAGE>
7
"Cytec Determined Actions" shall have the meaning given such term
in Section 5.21(a).
"Cytec Escambia Bay Liabilities" shall have the meaning given such
term in Section 8.01(b).
"Cytec Facilities" shall mean the Santa Rosa Facility and each other
manufacturing plant owned or operated by Parent or any of its subsidiaries prior
to the Closing Date.
"Cytec Knowledge Loss" shall mean any Loss arising out of,
resulting from or in connection with any liability or obligation that is the
subject of an inaccuracy in or breach of any representation or warranty made by
any Cytec Party in this Agreement or any of the Ancillary Agreements, but only
to the extent that a Specified Cytec Executive had actual knowledge of such
breach or inaccuracy as of the date of this Agreement or as of the Closing Date.
"Cytec Party" shall mean each of Parent, Seller and Cytec
Technology.
"Cytec Santa Rosa Employee" shall mean any person employed by
Parent or any of its subsidiaries at the Santa Rosa Facility on or prior to the
Closing Date (i) who is listed on Appendix C, or (ii) who is not an Acquired
Employee as of the Closing and who is not at any time after the Closing employed
by STX or any of its subsidiaries at the Santa Rosa Facility.
"Cytec Savings Plan" shall mean the Cytec Savings and Profit
Sharing Plan.
"Cytec Specified Exposure Liability" shall mean any obligation or
liability that results from, arises out of or is in any way connected with a
claim, demand or cause of action for or relating to injury to or death of any
Cytec Santa Rosa Employee arising out of, attributable to or occasioned by
exposure to acrylonitrile or asbestos at any Cytec Facility, whether such
exposure occurs before or after the Closing.
"Cytec Technology" has the meaning specified in the introductory
paragraph hereof.
"Disclosure Schedules" shall mean the Schedules attached hereto
that are referred to in Section 4.01 of this Agreement, as such Schedules may be
amended in accordance with Section 5.27.
<PAGE>
8
"Earn-Out Agreement" shall mean the Earn-Out Agreement dated as of
the Closing Date between Parent and the Purchaser in the form of Exhibit C.
"Earn-Out Payment" shall have the meaning given such term in the
Earn-Out Agreement.
"Easement Agreement" shall mean the Easement Agreements dated as of
the Closing Date between Purchaser and Parent in the form of Exhibits D-1, D-2
and D-3.
"Environmental Arbitrator" shall have the meaning given such term
in Section 5.21(d)(i).
"Environmental Law" shall mean any and all Governmental Rules,
including any judgment, Environmental Permit, approval, decision or
determination, pertaining to the environment, now or hereafter in effect and
applicable to the Acquired Assets or the Business, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. ss.
9601 et seq., as amended by the Superfund Amendment and Reauthorization Act of
1986 (collectively, "CERCLA"), the Federal Water Pollution Control Act, 33
U.S.C. ss. 1251 et seq., the Solid Waste Disposal Act of 1976, 42 U.S.C. ss.
6901 et seq., the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 et seq., the Hazardous Materials
Transportation Act, 49 Ap. U.S.C.A. ss. 1801 et seq., the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. ss. 136 et seq. and comparable state and
local Governmental Rules, and other environmental conservation and protection
Governmental Rules.
"Environmental Permit" shall have the meaning given such term in
Section 4.01(p)(i)(A).
"Environmental Permits Assignment and Assumption" shall mean the
Environmental Permits Assignment and Assumption Agreement dated as of the
Closing Date between Purchaser and Parent in the form of Exhibit E.
"ERISA" shall have the meaning given such term in Section 4.01(s).
"Escambia Bay" shall mean the bay commonly known as Escambia Bay
adjoining the Santa Rosa Facility.
"Escambia Bay Liabilities" shall mean all obligations and
liabilities arising out of, as a result of or in connection with the Release or
alleged Release of any Hazardous Substance or nutrient by any Cytec Party or
from the
<PAGE>
9
Santa Rosa Facility prior to the Closing Date into Escambia Bay.
"Estimated Closing Date Net Working Capital" shall have the meaning
given such term in Section 2.04(b)(iii).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Excluded Assets" shall have the meaning given such
term in Section 2.02(b).
"Excluded Contracts" shall mean (i) all Contracts that relate
primarily to the Excluded Assets, (ii) all Benefit Plans other than the
Transferred Benefit Plans, (iii) all Contracts that relate primarily to the
Leased Property, including the leases described in Schedule 4.01(k), (iv)
subject to the Environmental Permits Assignment and Assumption, (A) the Letter
of Credit Issued to the Florida Department of Regulation issued to the Florida
Department of Environmental Regulation issued by First Union National Bank in
the amount of $315,311 and the related Underground Injection Control Standby
Trust Fund Agreement and (B) any agreement in respect of a financial assurance
provided by a Cytec Party under the Resource Conversation and Recovery Act (v)
all Contracts required to be listed on Schedule 4.01(y) and (vi) subject to
Section 5.05, any Contract with a current or former director, officer, employee
or agent of Parent or any of its Affiliates providing for any severance
payments, termination payments, bonuses or other forms of compensation on
account (wholly or partially) of the sale of the Acquired Assets to Purchaser
pursuant to this Agreement.
"Excluded Liabilities" shall have the meaning given such term in
Section 2.03(b).
"Excluded Real Property" shall mean the real prop erty that is owned
or leased by Parent, Seller or any other subsidiary of Parent (i) located in
Santa Rosa County, Florida, and described as "Excluded Real Property" in
Appendix D or (ii) located outside Santa Rosa County, Florida, including real
property located in Stamford, Connecticut, West Paterson, New Jersey, Charlotte,
North Carolina or the Netherlands.
"Excluded Records" shall mean (i) copies of Business Records
retained by the Cytec Parties pursuant to Section 5.03(a), (ii) the Retiree
Records, (iii) Attorney Work Product, (iv) tax returns and work papers, and any
related correspondence, in respect of Taxes based on gross receipts,
<PAGE>
10
income or profits, and (v) files, books, records, correspondence, lists, papers
and other instruments and data of the Cytec Parties, of whatever nature or
wherever located, that relate primarily to the Excluded Assets or the Excluded
Liabilities.
"Facility Conditions" shall mean the environmental conditions at the
Santa Rosa Facility as of the Closing Date.
"Financing" shall mean the financing of Purchaser's acquisition of
the Business, as contemplated by the commitment letter from The Chase Manhattan
Bank dated as of December 20, 1996, a copy of which has been delivered to
Parent, or pursuant to other terms (including with respect to conditions to
funding) reasonably acceptable to Parent.
"GAAP" shall mean United States generally accepted accounting
principles.
"Governmental Entity" shall mean any nation or government, any
federal, state, county, province, city, town, municipality, local or other
political subdivision thereof or thereto and any court, tribunal, department,
commission, board, bureau, instrumentality, agency, council or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of government and any other governmental entity with authority over
the applicable person, assets or properties.
"Governmental Rule" shall mean any law, judgment, order, decree,
statute, ordinance, rule or regulation issued or promulgated by any Governmental
Entity.
"Hazardous Substances" shall have the same meaning as such term is
given in the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, 42 U.S.C. ss. 9601 et seq., (CERCLA), as amended by the Superfund
Amendment and Reauthorization Act of 1986, and equivalent state law provisions
and shall also mean any hazardous or toxic substances or contaminated materials
including asbestos (friable, nonfriable or any other form), polychlorinated
biphenyls and any flammable materials, explosives, radioactive materials,
hazardous materials, hazardous waste, hazardous or toxic or regulated substances
or related materials defined in or under any Environmental Law and any other
substance, waste, pollutant, contaminant or material, including petroleum
products and derivatives, crude oil or fractions thereof or any chemical which
causes cancer or reproductive effects, which are defined by applicable
Governmental Rule as hazardous or toxic or the use, transport, disposal,
storage, treatment,
<PAGE>
11
recycling, handling or Release of which is regulated or governed by any
applicable Governmental Rules.
"Holdings Pension Plans" shall mean the Sterling Chemicals, Inc.
Salaried Employees Pension Plan and the Sterling Chemicals, Inc. Hourly Pension
Plan.
"HSR Act" shall mean Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Immaterial Environmental Breaches" shall mean (i) environmental
conditions or breaches of Environmental Laws that are identified in Appendix E
and (ii) violations of Environmental Laws that (A) do not require Remedial
Action, (B) do not otherwise apply to the correction of a condition in order to
allow the continued operation of any Acquired Asset as it was operated prior to
Closing and (C) would not reasonably be expected to result in the imposition of
material fines or penalties by any Governmental Entity.
"Intellectual Property" shall mean (i) patents (including reissues,
divisions, contributions and extensions thereof), patent applications,
trademarks, trademark regis trations, service marks, trade names, copyrights,
brand names, inventions, designs and all pending applications for and
registrations of patents, trademarks, service marks and copy rights, (ii)
Know-How and (iii) rights to use any of the fore going.
"Intellectual Property Assignments" shall mean the following
assignments and agreements, each dated as of the Closing Date: (i) the
Assignment of Trademark Registration by Cytec Technology in the form of Exhibit
F-1; (ii) the Agreement to Assign Foreign Trademarks between Cytec Technology
and Purchaser in the form of Exhibit F-2; (iii) the Assignment of Know-How to
Purchaser among Parent, Cytec Technology and Purchaser in the form of Exhibit
F-3; (iv) the Assignment of U.S. Patents and Patent Applications to Purchaser
among Parent, Cytec Technology and Purchaser in the form of Exhibit F-4; and (v)
the Assignment of Foreign Patent and Patent Applications to Purchaser between
Cytec Technology and Purchaser in the form of Exhibit F-5.
"Intercompany Payable" shall mean any payable owed to Parent or any
subsidiary of Parent for acrylonitrile or any other product or service purchased
by or provided to the Business in the ordinary course of business.
"Inventory" shall mean raw materials, work-in-progress, finished
goods, supplies, parts, packaging materials and other accessories related
thereto and other inventories.
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12
"Know-How" shall mean (i) trade secrets, (ii) know-how, (iii)
formulae, (iv) processes, (v) product and other designs, (vi) specifications,
(vii) quality control procedures, (viii) manufacturing, engineering and other
drawings, (ix) technology and (x) technical information.
"Leased Property" shall have the meaning given such term in Section
4.01(k).
"Licensed Intellectual Property" shall mean the Intellectual
Property that is the subject of the Trademark License Agreement.
"Lien" shall mean any mortgage, claim, charge, lien, security
interest, easement, right of way, pledge, restriction or encumbrance of any
nature whatsoever.
"Loss" shall mean any loss, liability, claim, obligation, demand,
fine, penalty, judgment, deficiency, damage or cost or expense, including court
costs and reason able legal fees and expenses.
"Marketing Materials" shall mean all advertising materials,
customer lists, training materials and market research materials.
"Material Adverse Effect" shall mean a material adverse effect on
(i) the business, operations, assets, condition (financial or otherwise) or
results of operations of the Business taken as a whole, (ii) the prospects of
the Business taken as a whole (excluding any effect on such prospects caused by
economic, tax or other matters of general applicability or matters generally
affecting the industry in which the Business operates), (iii) any Cytec Party's
ability to comply with or satisfy in any material respect any material covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement or any of the Specified Ancillary Agreements, (iv) the ability of
Purchaser to operate the Business in the manner currently conducted immediately
after the Closing Date as a result of a Service Agreement Issue or (v) any Cytec
Party's ability to consummate the Closing by the date of termination pursuant to
Section 7.01(a)(iv) or 7.01(a)(v).
"Material Contract" shall have the meaning given such term in
Section 4.01(r).
"Net Working Capital" shall mean, as of any date, the excess of (i)
the aggregate amount of (A) all Business
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13
Accounts Receivable as of such date, net of reasonable reserves, in each case
computed in accordance with GAAP in a
<PAGE>
14
manner consistent with Parent's and Seller's historical prac tice, and (B) all
Business Inventory as of such date, valued at the standard cost of such
inventory less any lower of cost or market adjustment, and, in the case of
Business Inventory of acrylonitrile and Business Inventory of acrylic fiber, com
puted in accordance with Appendix G, over (ii) the sum of (A) the Capital
Expenditure Deficiency, if any, and (B) the aggregate amount of all Business
Accounts Payable as of such date, computed in accordance with GAAP in a manner
consistent with Parent's and Seller's historical practice, except in the case of
the Intercompany Payable and the Cytec Services Payables, which shall be
computed as set forth in Appendix G.
"New York Lease" shall mean the Lease Agreement dated as of March
15, 1996, between Parent and Robert H. Arno, Landlord.
"Non-Competition Agreement" shall mean the Non-Competition
Agreement dated as of the Closing Date, among Purchaser and the Cytec Parties in
the form of Exhibit G.
"Non-Permitted Names" shall have the meaning given such term in
Section 5.16.
"Notice of Disagreement" shall have the meaning given such term in
Section 2.05(b).
"Occupancy Agreements" shall mean the Occupancy Agreements dated as
of the Closing Date between Purchaser and Parent in the form of Exhibit H in
respect of Purchaser's occupancy of certain property located in each of
Stamford, Connecticut; Charlotte, North Carolina; and West Paterson, New Jersey.
"Off-Site Environmental Liabilities" shall mean all obligations and
liabilities arising as a result of the treating, storing, transporting,
handling, recycling, reclaiming, disposal, or Release, or arranging for any of
the same, of Hazardous Substances prior to the Closing Date by any of the Cytec
Parties or in respect of the Santa Rosa Facility, but only to the extent that
such treating, storing, transporting, handling, recycling, reclaiming disposal
or Release occurred at, in connection with, or to a location outside the Santa
Rosa Facility; provided, however, that "Off- Site Environmental Liabilities"
shall not include (i) the Escambia Bay Liabilities or (ii) any obligation or
liability occurring solely at, or solely in connection with, the deep well
system described on Appendix H.
"Operative Documents" shall mean this Agreement and the Ancillary
Agreements.
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15
"OSHA" shall mean the Federal Occupational Safety and Health Act,
29 U.S.C. ss.ss. 651 et seq., and the regulations promulgated thereunder.
"Outside Date" means January 31, 1997, unless an arbitration
proceeding may be available under Section 5.21 or a Services Agreement Issue has
arisen, in which event such term shall mean the later of (i) January 31, 1997
and (ii) the date that is two business days after the arbitrator announces its
arbitral award in respect of the Threshold Issue or such Services Agreement
Issue has been resolved; provided, however, that in no event shall the Outside
Date be later than February 14, 1997.
"Parent" shall mean Cytec Industries Inc., a Delaware corporation
and the sole stockholder of Seller and Cytec Technology, and, for any period
prior to December 17, 1993, shall also be deemed to refer to Cyanamid.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permits" shall mean permits, licenses, consents, franchises,
approvals and authorizations by or from any Governmental Entity; provided,
however, that "Permits" shall not include any Environmental Permits.
"Permitted Lien" shall mean:
(a) any Lien disclosed in Appendix I or any encroachment,
easement or right-of-way referred to in the Survey;
(b) any mechanics', carriers', workmen's, repair men's, and
other like Lien securing obligations (except to the extent such
obligations are Excluded Liabilities) that (i) relate primarily to
the operation of the Business, (ii) were incurred in the ordinary
course of business prior to the Closing and (iii) are not yet due
and payable or are past due but may be paid at any time without
penalty and are reflected in the Balance Sheet Data or in the
calculation of Closing Date Net Working Capital, as applicable,
but excluding any such Lien that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse
Effect;
(c) any Lien arising prior to the Closing for Taxes
relating primarily to the operation of the Business (i) that are
not yet due and payable or that are being contested in good faith
by appropriate proceedings diligently pursued and which would not
reasonably be
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16
expected to have a Material Adverse Effect and (ii) with respect to
which appropriate reserves (determined in accordance with GAAP) are
reflected in the Balance Sheet Data or in the calculation of
Closing Date Net Working Capital, as applicable;
(d) with respect to the Santa Rosa Facility, (i) easements,
covenants, rights-of-way, and other encumbrances or restrictions
of record to the extent not reflected on Appendix I, (ii) any
recorded grants or recorded reservations of surface or subsurface
rights of others in and to the removal and mining of oil, gas or
minerals, including rights of ingress and egress with respect
thereto, (iii) zoning, building, land use and other restrictions
imposed under any Governmental Rule (other than any Lien arising
as a result of any Environmental Law) and (iv) Liens arising as a
result of any Environmental Law, unrecorded easements, covenants,
rights-of-way or other encumbrances, restrictions or imperfections
of title, but excluding any of the foregoing in clause (i), (ii),
(iii) or (iv) which, individually or in the aggregate, materially
interfere with the use of the Santa Rosa Facility in the Business
as presently conducted and any of the foregoing which,
individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect;
(e) any imperfection of title or other encumbrance that,
individually or in the aggregate with other such imperfections and
encumbrances, (i) is not substantial in character or amount, (ii)
does not materially interfere with the use of the Acquired Assets
in the Business as presently conducted and (iii) would not
reasonably be expected to have a Material Adverse Effect; and
(f) Liens created by or arising as a result of any
circumstances particular to any of the Sterling Parties.
Notwithstanding the foregoing, Permitted Liens shall not include any Lien (other
than Liens of the type described in clause (f) above) imposed by ERISA.
The term "person" shall mean any individual, corporation,
partnership, limited liability company, joint ven ture, trust, business
association, organization, Governmental Entity or other entity.
"Phase I Study" shall mean the report for the Phase I Study
conducted by Pilko at Purchaser's direction prior to the date hereof, a copy of
which has been delivered to Seller.
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17
"Pilko" shall have the meaning given such term in Section 5.21(a).
"Pilko Assessment" shall have the meaning given such term in
Section 5.21(a).
"Post-Closing Actions" shall have the meaning given such term in
Section 5.21(d).
"Preferred Stock" shall mean 100,000 shares of the Preferred Stock
of STX with the terms, limitations, relative rights and preferences set forth in
Exhibit I.
"Purchaser" has the meaning specified in the introductory paragraph
hereof.
"Purchaser Indemnified Person" has the meaning specified in Section
8.01(a).
"Purchaser Indemnity Obligations" shall have the meaning given such
term in Section 8.02(e).
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment.
"Remedial Action" shall mean (i) any soil removal, soil or
groundwater treatment, or containment of Hazardous Substances (including, in the
case of containment, any deed restriction) or (ii) any studies or investigations
related to the foregoing; provided, however, that Remedial Action shall not
include (A) any activity in connection with the retrofit or closure of, or any
post-closure activity at, any landfill or closed landfill at the Santa Rosa
Facility, (B) the removal of any asbestos; (C) the removal of any underground
storage tank abandoned in place not in violation of any Environmental Law or
Environmental Permit; or (D) the purchase or repair of any equipment, including
any pollution control equipment (other than monitoring wells or equipment
necessary in connection with soil removal or soil or groundwater treatment).
"Reportable Event" shall mean a "reportable event" as defined in
Section 4043 of ERISA.
"Retiree Records" shall mean all records relating primarily to a
retired employee of Parent or Seller.
"Santa Rosa Facility" shall mean the real property located in Santa
Rosa County, Florida on which the Business is operated, as such real property is
more specifically described
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18
in Appendix J, including all tenements, hereditaments, easements, rights-of-way,
rights, licenses, estates, patents, privileges and appurtenances belonging,
pertaining or relating to such real property and the entire right, title and
interest of the Cytec Parties, if any, in, to or under all streets, ways,
alleys, passages, gores, pipes, pipelines, sewers, sewer rights, ditches,
waters, water courses, water rights and powers, railroad sidings, minerals,
mineral rights and mineral interests upon, above, in, under or pertaining to
such real property and all claims or demands whatsoever of the Cytec Parties,
either in law or in equity, with respect to such real property, together with
all buildings, fixtures, structures, facilities and improvements thereon;
provided that "Santa Rosa Facility" shall not include any Excluded Real
Property.
"Santa Rosa First Refusal and Lease Agreement" shall mean the Lease
Agreement, dated as of the Closing Date between the Cytec Parties and Purchaser
in the form of Exhibit J.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Seller" has the meaning specified in the introductory paragraph
hereof.
"Seller Indemnified Person" has the meaning specified in Section
8.02(a).
"Services Agreement" shall mean the Services Agreement dated as of
the Closing Date between Purchaser and Parent in the form of Exhibit K.
"Services Agreement Issue" shall mean the inability of the Cytec
Parties to perform in any material respect any Service (as defined in the
Services Agreement).
"Specified Ancillary Agreements" shall mean the Acrylonitrile
Supply Agreement, the Easement Agreement, the Trademark License Agreement, the
Environmental Permits Assignment and Assumption and the Non-Competition
Agreement.
"Specified Cytec Representatives" shall mean the persons listed on
Appendix K.
"Specified Sterling Representatives" shall mean the persons listed
on Appendix L.
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19
"Statement" shall have the meaning given such term in Section
2.05(a).
"Sterling Determined Actions" shall have the meaning given such
term in Section 5.21(c).
"Sterling Escambia Bay Liabilities" shall mean all Escambia Bay
Liabilities other than the Cytec Escambia Bay Liabilities.
"Sterling Specified Exposure Liability" shall mean any obligation
or liability that results from, arises out of or is in any way connected with a
claim, demand or cause of action for or relating to injury to or death of any
person, other than a Cytec Santa Rosa Employee, arising out of, attributable to
or occasioned by exposure to acrylonitrile or asbestos at the Santa Rosa
Facility, whether such exposure occurs before or after the Closing.
"Sterling Party" shall mean each of STX, Purchaser and STX
Chemicals.
"STX" has the meaning specified in the introductory paragraph
hereof.
"STX Chemicals" has the meaning specified in the introductory
paragraph hereof.
"STX Guarantee Cap" shall have the meaning given such term in
Section 8.02(e).
"Survey" has the meaning specified in Section 4.01(ee).
"Tax" shall mean all Federal, state, local and foreign taxes,
charges, fees, levies and other assessments, including any income, alternative
or add-on minimum tax, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, withholding, payroll, employment, excise, stamp,
property, environmental or other tax, together with all interest, penalties and
additions with respect thereto.
"Texas City Facility" shall mean the manufacturing facilities
located at Texas City, Texas that are owned or operated by STX Chemicals.
"Title Commitment" shall have the meaning given such term in
Section 4.01(ee).
"Trademark License Agreement" shall mean the Trademark License
Agreement dated as of the Closing Date,
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20
among Purchaser, Parent and Cytec Technology in the form of Exhibit L.
"Transactions" shall mean the transactions contemplated by the
Operative Documents, including the
Financing.
"Transferred Benefit Plans" shall have the meaning given such term
in Section 5.05(g).
"Unaudited Financial Statements" shall have the meaning given such
term in Section 4.01(c).
"WARN Act" shall have the meaning given such term in Section
5.05(i).
SECTION 1.02. Interpretation. (a) When used in this Agreement, the
words "include" and "including" shall be deemed to be followed by the words
"without limitation".
(b) When used in this Agreement, the word "primarily" shall be
deemed to be followed by the words "or exclusively".
(c) Any terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(d) When used in this Agreement, unless a contrary intention is
evident, the word "or" is not exclusive.
(e) All references to Articles, Sections, Exhibits, Schedules and
Appendices shall be deemed references to Articles, Sections, Exhibits, Schedules
and Appendices to this Agreement.
(f) Unless otherwise specified, all accounting terms not defined in
this Agreement shall have the meanings determined by GAAP.
(g) This Agreement shall be deemed drafted jointly by all the
parties hereto and shall not be specifically construed against any party hereto
based on any claim that such party or its counsel drafted this Agreement.
(h) When used in this Agreement, the words "hereof", "herein" and
"hereunder" and words of similar import refer to this Agreement as a whole and
not to any particular provision of this Agreement.
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21
(i) Reference in this Agreement to any Contract means
such Contract as amended, supplemented or modified from time to
time in accordance with the terms thereof.
(j) Unless otherwise specified, reference to any
Governmental Rule, any Permit or any Environmental Permit means
such Governmental Rule, Permit or Environmental Permit as amended,
modified, codified, reenacted, supplemented or superseded in whole
or in part, and in effect from time to time.
ARTICLE II
Purchase and Sale of Acquired Assets
SECTION 2.01. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, on the Closing Date, the Cytec Parties shall sell,
assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase,
acquire and accept, all of the right, title and interest in, to and under the
Acquired Assets held by the Cytec Parties.
SECTION 2.02. Definitions of Acquired Assets and Excluded Assets.
(a) The term "Acquired Assets" shall mean the properties, assets, goodwill and
rights of whatever kind and nature, real or personal, tangible or intangible,
other than the Excluded Assets existing on the Closing Date that relate
primarily to or arise primarily out of the operation of the Business, including:
(i) the Santa Rosa Facility;
(ii) all Business Equipment;
(iii) all Business Inventory;
(iv) all Business Accounts Receivable;
(v) all Business Intellectual Property;
(vi) subject to Section 2.02(c), all Acquired
Contracts;
(vii) all Marketing Materials in the possession of the
Cytec Parties (or any of them) that relate primarily to or arise
primarily out of the operation of the Business;
(viii) all Business Records;
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22
(ix) subject to Section 2.02(c), all Permits and
Environmental Permits that relate primarily to or arise primarily
out of the operation of the Business;
(x) the Transferred Benefit Plans;
(xi) all insurance proceeds and insurance claims of
any Cytec Party under insurance policies (excluding any insurance
policies of Cyanamid or any of its Affiliates) which relate
primarily to or arise primarily out of any part of the Acquired
Assets, net of any applicable deductibles and other limitations and
net of any costs of collection (excluding, however, (A) any such
proceeds or claims relating to any damage, defect or other
impairment that is repaired or corrected in all material respects
prior to the Closing and (B) any such proceeds or claims under
workers compensation insurance policies, unless the relevant claim
is filed by an Acquired Employee more than one year after the
Closing Date and then to the extent and only to the extent that no
Cytec Party would be obligated to reimburse the insurer for any
amount of such claim); and, to the extent transferable, the benefit
of and the right to enforce covenants and warranties, if any, which
any of the Cytec Parties are entitled to enforce with respect to
the Acquired Assets against their predecessors in title (excluding
Cyanamid) to the Acquired Assets; and
(xii) all prepaid rentals and other prepaid expenses,
bonds and deposits relating to any of the Acquired Assets or the
Business.
(b) The term "Excluded Assets" shall mean the following:
(i) cash on hand or in banks and cash equivalents
owned by any Cytec Party relating to the operations of the
Business;
(ii) all rights of the Cytec Parties under the
Operative Documents and the agreements, instruments and
certificates delivered in connection with this Agreement;
(iii) all files, books, records, correspondence,
lists, papers and other instruments prepared in connection with the
sale of the Business, including the bids and other information
received from third persons in respect of the Business and analyses
relating to the sale of the Business;
(iv) any assets under any Benefit Plan;
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23
(v) all rights relating to the Excluded Liabilities;
(vi) the Excluded Contracts;
(vii) the Excluded Real Property (other than the
rights of Purchaser created by the Occupancy Agreements);
(viii) the Licensed Intellectual Property (other than
the rights of Purchaser created by the Trademark License
Agreement);
(ix) the Excluded Records;
(x) all properties, assets and rights that are related
to Parent's business of manufacturing and selling acrylonitrile,
other than the items listed on Appendix M;
(xi) all rights of Parent or Seller to obtain draw
backs of customs duties paid prior to the Closing Date on materials
used directly or indirectly in the manufacture of acrylic fiber or
any other product produced in the Business, based on the export
prior to the Closing of acrylic fiber or such other products,
except to the extent such drawback is reflected in the calculation
of Closing Date Net Working Capital;
(xii) subject to Sections 5.16 and 5.17, all rights,
title and interests to the trademark "Cytec" alone or as part of a
trademark and the trade names "Cytec Industries Inc.", "Cytec
Acrylic Fibers Inc." and "Cytec Technology Corp."; and
(xiii) the Corporate Software (other than the rights
of Purchaser created by the Services Agreement).
(c) Nothing in this Agreement shall be construed as an attempt by
any Cytec Party to assign any Acquired Contract or to transfer any Permit or
Environmental Permit to the extent that such Acquired Contract, Permit or
Environmental Permit is not assignable without the necessary consent of the
other party or parties thereto. The Cytec Parties shall use commercially
reasonable efforts, in cooperation with Purchaser, (i) to secure any necessary
consent to the assignment to Purchaser at Closing of all Acquired Contracts
which require such consent, (ii) to the extent that any such consent has not
been obtained as of Closing, to secure any such consent as soon as practicable
thereafter and (iii) to make any requisite filings or deliver any requisite
notices to be made or delivered by any Cytec Party in connection with the
transfer of any transferable Permits or Environmental Permits; provided,
however, that none of the Cytec Parties shall be
<PAGE>
24
required to make any payment to any person or forego any benefits in order to
obtain any such consent. If the Closing is consummated notwithstanding the
absence of all third party consents necessary to the assignment of any Acquired
Contract, or the transfer of any transferable Permits or Environmental Permits,
at such time as such consents have been obtained, or such requisite filings and
notices have been made or delivered, as applicable, such Acquired Contract,
Permit or Environmental Permit shall be assigned or transferred to Purchaser
automatically without any other conveyance or other action by Purchaser or any
of the Cytec Parties. At any time after the Closing during which any Acquired
Contract has not been assigned to Purchaser due to the absence of consent of any
third party, or any transferable Permit or Environmental Permit has not been
transferred to Purchaser in accordance with the requirements for such transfer,
the Cytec Parties shall hold such Acquired Contract or, to the extent permitted
by applicable law, Permit or Environmental Permit, for the exclusive benefit of
Purchaser. Notwithstanding anything in this Agreement to the contrary, each
Acquired Contract which should be set forth on the Disclosure Schedules and
which may not be assigned to Purchaser without the consent of a third party
shall constitute an Excluded Contract, and any and all liabilities and
obligations thereunder shall constitute Excluded Liabilities, until the earliest
to occur of (i) the obtaining of such consent, (ii) the receipt by Purchaser of
a benefit under such Acquired Contract after the Cytec Parties have complied
with the second sentence of this Section 2.02(c), (iii) the performance by such
third party of any of its obligations under such Acquired Contract after the
Cytec Parties have complied with the second sentence of this Section 2.02(c) and
(iv) any act or course of conduct that constitutes a waiver by such third party
of its rights and remedies relating to the assignment of such Acquired Contract
without such third party's consent. Until such time as the consent to the
transfer of any Permit or Environmental Permit referred to in the second
preceding sentence is obtained, to the extent that Purchaser is not receiving
the benefits of such Permit or Environmental Permit as contemplated by this
Section 2.02(c), such Permit or Environmental Permit shall constitute an
Excluded Asset and any and all liabilities and obligations under such Permit or
Environmental Permit shall constitute Excluded Liabilities.
SECTION 2.03. Assumption of Certain Liabilities. (a) Upon the terms
and subject to the conditions of this Agreement, Purchaser and the Cytec Parties
shall execute and deliver at the Closing an Assumption Agreement, in the form of
Exhibit M (the "Assumption Agreement"), pursuant to which Purchaser shall assume
and agree to pay, perform and discharge when due, all liabilities or obligations
whatsoever, whether
<PAGE>
25
arising before or after the Closing and whether known or unknown, fixed or
contingent, other than the Excluded Liabilities, that relate primarily to or
arise primarily out of the operation of the Business (the "Assumed
Liabilities"), including:
(i) all obligations and liabilities of Parent (which
term, for purposes of this Section 2.03(a), shall exclude Cyanamid)
or Seller under the Acquired Contracts;
(ii) all Business Accounts Payable in existence as of
the Closing Date;
(iii) all obligations and liabilities in respect of
any and all acrylic fiber or activator sold by the Business at any
time, including obligations and liabilities for refunds,
adjustments, allowances, repairs, exchanges, returns and warranty,
merchantability and other claims;
(iv) all obligations and liabilities of Parent or
Seller in respect of amounts paid by any customer of the Business
in excess of amounts owed by such customer;
(v) all obligations and liabilities arising as a
result of the ownership or occupancy of Parent or Seller, or the
operation of the activities conducted at, the Santa Rosa Facility
or any Leased Property, other than the Excluded Real Property,
including all obligations and liabilities relating to personal
injury or Environmental Laws, other than Off-Site Environmental
Liabilities and Escambia Bay Liabilities;
(vi) all obligations and liabilities of Parent or
Seller to or in respect of any current or former
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26
employee of the Business, other than any obligations
or liabilities arising under or in connection with the
Excluded Contracts;
(vii) all the obligations and liabilities arising
under or in connection with the Benefit Plans to the extent assumed
by Purchaser under Section 5.05;
(viii) any obligation or liability for Taxes attrib
utable to the Business or relating to the Acquired Assets, other
than Taxes based on gross receipts, income or profits for any
periods (or portions thereof) ending on or prior to the Closing
Date and other than Taxes that are the responsibility of any of the
Cytec Parties pursuant to Section 5.07; and
(ix) subject to Section 2.02(c), all obligations and
liabilities arising out of the Business which pertain to Business
Intellectual Property;
(x) any Sterling Specified Exposure Liability; and
(xi) any Sterling Escambia Bay Liability.
Notwithstanding anything contained herein or in the Assumption Agreement to the
contrary, Purchaser shall not be responsible for, and the Assumed Liabilities
shall not include, the Excluded Liabilities, all of which the Cytec Parties
agree to retain, pay, perform, fulfill, discharge and remain responsible for.
Nothing in this Section 2.03(a) or in any Ancillary Agreement is intended to
negate or impair the indemnification obligations of the Cytec Parties under
Article VIII or elsewhere in this Agreement.
(b) The term "Excluded Liabilities" shall mean:
(i) all obligations or liabilities of the Cytec
Parties under the Operative Documents (other than the obligations
and liabilities assigned to Purchaser under the Acrylonitrile
Assignment and Assumption);
(ii) all obligations or liabilities under the Excluded
Contracts;
(iii) all obligations and liabilities relating to the
Excluded Assets;
(iv) any obligation or liability for Taxes that are
the responsibility of any of the Cytec Parties pursuant to Section
5.07;
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27
(v) any obligation or liability of Parent or Seller
for Taxes based on gross receipts, income or profits attributable
to the Business or relating to the Acquired Assets for any periods
(or portions thereof) ending on or prior to the Closing Date;
(vi) except as otherwise provided in Section 5.05, any
obligation or liability of Parent or Seller arising under or in
connection with any Benefit Plan;
(vii) any Off-Site Environmental Liability;
(viii) any Intercompany Payable to the extent such
Intercompany Payable is not a Business Accounts Payable;
(ix) any obligation or liability in respect of any
breach or alleged breach by any Cytec Party or any director,
officer, employee or agent of any Cytec Party of any Governmental
Rule in respect of antitrust matters (other than the Transactions);
(x) any obligation or liability of the Cytec Parties,
other than those obligations and liabilities to be assumed by
Purchaser pursuant to Section 5.05 and other than those obligations
and liabilities included in the definition of "Business Accounts
Payable", relating to any salaries, bonuses, wages or other
compensation or any employee benefit of whatsoever nature
(including payments relating to retirement, death, illness, sick
leave, vacations and severance) arising out of service to or
employment by any of the Cytec Parties or any of their Affiliates
prior to the Closing Date;
(xi) any Cytec Specified Exposure Liability; and
(xii) any Cytec Escambia Bay Liability.
SECTION 2.04. Consideration. (a) The total consideration to be paid
by Purchaser to the Cytec Parties for the Acquired Assets shall consist of:
(i) the payment to Parent of cash in the amount of
$56,000,000, plus the Closing Date Net Working Capital (the "Cash
Amount");
(ii) the delivery to Parent of the Preferred Stock;
(iii) the assumption by Purchaser of the Assumed
Liabilities pursuant to the Assumption Agreement; and
(iv) the Earn-Out Payments, if any.
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28
(b) As of Closing, Purchaser shall:
(i) deliver to Parent a certificate, registered in the
name of Parent, evidencing the Preferred Stock, such certificate to
bear the legend set forth in Exhibit N;
(ii) execute and deliver the Assumption Agreement;
and
(iii) pay to Parent an amount in cash equal to the
Closing Date Cash Payment. For purposes hereof, the "Closing Date
Cash Payment" shall equal the sum of $56,000,000 plus 95% of the
Estimated Closing Date Net Working Capital. Not later than five
business days prior to the Closing Date, Parent shall deliver to
Purchaser an estimate of Net Working Capital as of the Closing Date
(the "Estimated Closing Date Net Working Capital"), including an
estimate of the amount of each of the Business Accounts Receivable,
Business Inventory and Business Accounts Payable as of the Closing
Date.
(c) After the Closing:
(i) in accordance with Section 2.05, (A) Purchaser
shall pay to Parent the excess, if any, of the Cash Amount over the
Closing Date Cash Payment, if any, plus interest on such excess
accruing from the Closing Date through the date such excess is paid
at a rate per annum equal to 6% or (B) Parent shall pay to
Purchaser the excess of the Closing Date Cash Payment over the Cash
Amount, if any, plus interest on such excess accruing from the
Closing Date through the date such excess is paid at a rate per
annum equal to 6%; and
(ii) in accordance with the Earn-Out Agreement,
Purchaser shall pay to Parent the Earn-Out Payments, if any.
Any payment required to be made pursuant to Section 2.04(c)(i) shall be made in
immediately available funds within ten business days after the Statement becomes
final and binding on the parties.
SECTION 2.05. Reconciliation of the Consideration. (a) Within 30
days after the Closing Date, Parent shall prepare and deliver to Purchaser a
statement (the "Statement"), certified by an officer of Parent and Seller,
setting forth the Closing Date Net Working Capital, including the amount of each
of Business Accounts Receivable, Business Inventory, Business Accounts Payable
and the Capital Expenditure Deficiency as of the Closing Date. Purchaser and
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29
its auditors shall have the right to observe any physical count of the Business
Inventory for purposes of determining Closing Date Net Working Capital. If
requested by Parent, Purchaser shall assist Parent in the preparation of the
Statement and shall provide Parent and its accountants access at all reasonable
times to the personnel, properties, books and records of the Business for such
purpose.
(b) During the 30-day period following Purchaser's receipt of the
Statement (the "Review Period"), Parent and Seller shall provide Purchaser and
its independent auditors access to the working papers of Parent or Parent's
auditors relating to the Statement. The Statement shall become final and binding
upon the parties at the end of the Review Period, unless Purchaser gives written
notice of its disagreement with the Statement ("Notice of Disagreement") to
Parent prior to the end of the Review Period. Any Notice of Disagreement shall
specify in reasonable detail the nature of any dis agreement so asserted. If a
Notice of Disagreement is received by Parent in a timely manner, then the
Statement (as revised in accordance with clause (i) or (ii) below) shall become
final and binding upon the Cytec Parties and the Sterling Parties on the earlier
of (i) the date Parent and Purchaser resolve in writing any differences they
have with respect to the matters specified in the Notice of Disagreement or (ii)
the date any disputed matters are finally resolved in writing by the Arbitrator.
(c) During the 30-day period following the delivery of a Notice of
Disagreement, Parent and Purchaser shall seek in good faith to resolve in
writing any differences which they may have with respect to the matters
specified in the Notice of Disagreement. During such period, (i) Parent and its
auditors shall have access to the working papers of Purchaser or Purchaser's
auditors relating to the Notice of Disagreement and (ii) Purchaser and its
auditors shall have access to the working papers of Parent and Parent's auditors
relating to the disputed matters identified in the Notice of Disagreement. If,
at the end of such 30-day period, Parent and Purchaser have not so resolved such
differences, Parent and Purchaser shall submit to Arthur Andersen LLP (Chicago
office) or such other nationally recognized independent public accounting firm
as Purchaser and Parent may mutually agree upon in writing (the "Arbitrator")
for arbitration, all matters which remain in dispute and which were properly
included in the Notice of Disagreement. The Arbitrator will base its decision on
a calculation of the Closing Date Net Working Capital that is determined in all
respects by reference to this Agreement. The Arbitrator shall render a decision
resolving the matters in dispute within 30 days following the submission
thereto. Such decision shall be final and binding on the Cytec Parties
<PAGE>
30
and the Sterling Parties as an arbitral award. Except as specified in the next
sentence, the cost of any arbitration (including the fees and expenses of the
Arbitrator) pursuant to this Section 2.05(c) shall be borne by Purchaser and the
Cytec Parties in inverse proportion as they may prevail on matters resolved by
the Arbitrator, which proportionate allocations shall also be determined by the
Arbitrator at the time the determination of the Arbitrator is rendered on the
merits of the matters submitted. The fees and disbursements of the Cytec
Parties' counsel and independent auditors incurred in connection with the
preparation of the Statement and its review of any Notice of Disagreement or any
arbitration shall be borne by the Cytec Parties, and the fees and disbursements
of Purchaser's counsel and independent auditors incurred in connection with
their review of the Statement or any arbitration shall be borne by Purchaser.
(d) During the period of time from and after the Closing Date
through the resolution of any adjustment contem plated by this Section 2.05,
Purchaser shall not knowingly take any actions with respect to the accounting
books and records of the Business on which the Statement is to be based that are
not consistent with the past practices of the Business in any material respects
except to the extent required by GAAP. Also during such period, Purchaser shall
afford to Parent and any accountants, counsel or financial advisers retained by
Parent in connection with any adjustment to the Purchase Price contemplated by
this Section 2.05 reasonable access during normal business hours to all the
properties, books, contracts, personnel and records of the Business relevant to
the adjustment contemplated by this Section 2.05. Likewise, during such period,
Parent shall afford to Purchaser and any accountants, counsel or financial
advisors retained by Purchaser in connection with any adjustment to the Purchase
Price contemplated by this Section 2.05 reasonable access during normal business
hours to all the books, contracts, personnel and records of Parent or Seller
relevant to the adjustment contemplated by this Section 2.05.
ARTICLE III
The Closing
SECTION 3.01. Closing Date. The closing of the sale and transfer of
the Acquired Assets (hereinafter called the "Closing") shall take place at the
offices of Andrews & Kurth, L.L.P., 4200 Texas Commerce Tower, 600 Travis,
Houston, Texas 77002, at 10:00 a.m., Houston, Texas time, on the second business
day following the satisfaction of the conditions set
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31
forth in Article VI, or at such other time, date and place as shall be fixed by
agreement among the parties hereto (such date of the Closing being hereinafter
referred to as the "Closing Date").
SECTION 3.02. Transactions To Be Effected at the Closing. At the
Closing:
(a) each of the Cytec Parties, as appropriate, shall duly execute
and deliver to Purchaser (i) a General Conveyance, Transfer and Assignment
covering all of the Acquired Assets in the form of Exhibit O, (ii) a special
warranty deed in the form of Exhibit B, in recordable form, covering the real
property included in the Acquired Assets and (iii) such other deeds, bills of
sale, assignments and other instruments of conveyance and transfer, consistent
with the provisions of this Agreement, as Purchaser may reasonably request
(collectively, the "Conveyance Documents").
(b) the Cytec Parties shall deliver or cause to be delivered to
Purchaser the documents required to be delivered by them and referred to in
Section 6.02, in each case appropriately executed;
(c) the Sterling Parties shall deliver or cause to be delivered to
Seller (i) the documents required to be delivered by them and referred to in
Section 6.03, in each case appropriately executed, (ii) the stock certificate in
respect of the Preferred Stock, and (iii) the Closing Date Cash Payment by wire
transfer in immediately available funds to the bank account or accounts
designated in writing by Parent at least five business days prior to the Closing
Date; and
(d) each other person party to an Ancillary Agreement shall execute
and deliver such Ancillary Agreement.
SECTION 3.03. Prorations. At the Closing, ad valorem, property and
similar Taxes on or with respect to the Acquired Assets, except those included
in the calculation of Closing Date Net Working Capital, shall be prorated
between Parent and Purchaser as of the Closing Date, with Parent liable to the
extent such items relate to any time period prior to the Closing Date and
Purchaser liable to the extent such items relate to periods subsequent to the
Closing Date. Except as otherwise agreed by Parent and Purchaser, the net amount
of all such prorations will be settled and paid on the Closing Date. If the
Closing shall occur before the tax rate applicable to the year in which the
Closing occurs is fixed, the apportionment of taxes shall be based upon the
estimated tax rate for such year.
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32
ARTICLE IV
Representations and Warranties
SECTION 4.01. Representations and Warranties of the Cytec Parties.
Each of the Cytec Parties hereby represents and warrants to each of the Sterling
Parties as follows:
(a) Organization, Standing and Power. Each Cytec Party is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has the requisite power and authority to own the Acquired Assets
owned by it and each of Parent and Seller has the requisite power and authority
to carry on the Business as currently conducted. Each Cytec Party is qualified
or registered to do business and is in good standing in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing will not, when taken together
with all other such failures, have a Material Adverse Effect. Parent has made
available to Purchaser true and complete copies of the Certificate of
Incorporation and By-laws of each Cytec Party, in each case as amended through
the date of this Agreement. Except as described in Schedule 4.01(a), no portion
of the Business is conducted by any Affiliate of Parent other than Seller and
Cytec Technology.
(b) Authority. Each of the Cytec Parties has all corporate power and
authority to execute and deliver the Operative Documents to which it is a party
and to consummate the Transactions. The execution and delivery by each Cytec
Party of the Operative Documents to which it is a party and the consummation of
the Transactions by such Cytec Party have been duly authorized by all necessary
corporate action on the part of such Cytec Party, and do not and will not
require the approval of the stockholders of Parent. This Agreement has been duly
executed and delivered by each of the Cytec Parties and constitutes, and each
Ancillary Agreement to be entered into by such Cytec Party will be duly executed
and delivered at the Closing and when so executed and delivered will constitute,
a legal, valid and binding obligation of such Cytec Party enforceable against
such Cytec Party in accordance with its terms subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws affecting creditors' rights generally from time to time in effect and to
general principles of equity (including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing) regardless of whether
considered in a proceeding in equity or at law.
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Except as set forth on Schedule 4.01(b), the execution and delivery of this
Agreement do not, and the consummation of the Transactions and the compliance
with the terms thereof will not (i) violate in any material respect any material
Governmental Rule applicable to any Cytec Party, the Business or the Acquired
Assets, (ii) conflict with any provision of the certificate of incorporation or
By-laws of any Cytec Party, (iii) conflict in any material respect with any
material provision contained in, or constitute a material default under, any
material Permit applicable to the Business or any material Contract to which any
Cytec Party is a party or by which any Cytec Party or any of its property is
bound, (iv) result in the creation of any Lien upon any of the Acquired Assets
other than liens created by a Sterling Party or (v) require any material
consent, approval, order or authorization of, or the registration, declaration
or filing with, any Governmental Entity or any other person, except, in the case
of Parent, (A) for the filing of a premerger notification report by Parent under
the HSR Act and (B) the filing by Parent with the SEC of such reports under
Section 13(a) of the Exchange Act as may be required in connection with this
Agreement.
(c) Financial Statements. Appendix N sets forth the unaudited pro
forma balance sheet data of the Business as of September 30, 1996 (the "Balance
Sheet Data"), and the unaudited Pro Forma Statements of Operations of the
Business for the fiscal years ended December 31, 1994 and December 31, 1995, and
for the nine-month period ended September 30, 1996 (such pro forma statements,
together with the Balance Sheet Data, being referred to collectively as the
"Unaudited Financial Statements"). Each of (i) the Unaudited Financial
Statements and (ii) Parent's financial statements (which have been prepared in
accordance with GAAP) have been prepared from the books and records of Parent.
The Unaudited Financial Statements fairly present in all material respects the
financial condition and results of operations of the Business for the periods
indicated, except in each case as described on Schedule 4.01(c)-1 and as may be
described in the notes included therein. The cost of acrylonitrile purchases
reflected in the Unaudited Financial Statements since January 1, 1994 is set
forth in Schedule 4.01(c)-2.
(d) Undisclosed Liabilities. The Business does not have any
liabilities or obligations (whether or not accrued or contingent), and none of
the Acquired Assets are subject to any liabilities or obligations, in either
case, which would be required to be reflected in the Balance Sheet Data (or
disclosed in a footnote thereto) if the Balance Sheet Data were prepared as a
balance sheet prepared in accordance with GAAP, consistent with the historical
practices of the
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34
Business, except (i) as disclosed in the Balance Sheet Data or in Schedule
4.01(d), (ii) for liabilities incurred in the ordinary course of business,
consistent with past practice since the date of the Balance Sheet Data which are
not, individually or in the aggregate, material and (iii) for Excluded
Liabilities. Except as disclosed in the Disclosure Schedules, none of the Cytec
Parties has knowledge of any material contingent liabilities of the Business.
(e) Compliance with Applicable Laws. Each Cytec Party is in
compliance in all material respects with all material Governmental Rules which
relate to the Business or the Acquired Assets. Except as set forth in Schedule
4.01(e), no Cytec Party has received any written notice since December 17, 1993,
and, to the knowledge of any Cytec Party, since December 31, 1986, of any
asserted material violation of any such material Governmental Rules and no Cytec
Party has received any written notice that any material unresolved investigation
or review by any Governmental Entity with respect to the Business or the
Acquired Assets is pending or that any such investigation or review is
contemplated. This Section 4.01(e) does not relate to environmental matters,
which are the subject exclusively of Section 4.01(p).
(f) Litigation; Decrees. Schedule 4.01(f) sets forth a list of
certain lawsuits, claims, actions, investiga tions and proceedings relating to
the Business. Except as set forth in such Schedule, there are no material suits,
claims, actions, investigations or proceedings pending or, to the knowledge of
any Cytec Party, threatened, and there are no material judgments, orders,
injunctions or decrees of any Governmental Entity or arbitrational tribunal, in
each case against or affecting any Cytec Party, the Business or the Acquired
Assets or that challenges or seeks to enjoin or prevent the Transactions. None
of the Cytec Parties is in default in any material respect under any material
Governmental Rule or any judgment, order, injunction or decree of any
Governmental Entity or arbitrational tribunal relating to the Business or the
Acquired Assets. This Section 4.01(f) does not relate to environmental matters,
which are the subject exclusively of Section 4.01(p).
(g) Permits. The Cytec Parties possess all the Permits listed in
Schedule 4.01(g), and such Permits (i) constitute all Permits necessary to
conduct the Business as now being conducted except for Permits, the absence or
loss of which would not reasonably be expected to (A) have a Material Adverse
Effect, (B) restrict, interfere with or otherwise adversely affect, in any
material respect, the ability of Seller to conduct the Business as now being
conducted, or (C) result in the imposition of material fines
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35
or penalties on Seller by one or more Governmental Entities and (ii) have not
been revoked and have not expired in accordance with their terms. All Permits
listed in Schedule 4.01(g), except as otherwise set forth therein, are either
(i) assignable to Purchaser without the consent or approval of any Governmental
Entity or third party or (ii) of such ministerial nature that suitable
replacements are generally readily obtainable in due course upon proper
application therefor and without substantial risk of any material civil penalty.
There are no Administrative Proceedings, suits, demands or investigations
pending or, to the knowledge of the Cytec Parties, threatened which seek the
revocation, cancellation, suspension or any adverse modification of any Permit
listed in Schedule 4.01(g). None of the Cytec Parties is in violation of the
terms of any such Permits, except for violations that, singly or in the
aggregate, would not be reasonably expected to result in a Material Adverse
Effect.
(h) Business Inventory. None of the Business Inventory fails to meet
Seller's applicable quality and shipping specifications for such Inventory as in
effect on the date hereof. In the event of a breach of the representation in the
immediately preceding sentence, the aggregate amount of the Loss arising from or
in connection with such breach for purposes of Section 8.01 shall equal the book
value of the Business Inventory not meeting such specifications as of the
Closing Date, and, if Purchaser elects to seek indemnification pursuant to
Section 8.01 with respect to such breach, Purchaser shall promptly return to
Seller, free carrier Santa Rosa Facility, the Business Inventory not meeting
such specifications. The amount of Business Inventory reflected in the Balance
Sheet Data and in Closing Date Net Working Capital reflects the amount of the
actual Business Inventory as of September 30, 1996 or the Closing Date, as
applicable, booked in accordance with Seller's standard historical practice and
as of the date hereof, computed in a manner consistent with GAAP, except to the
extent set forth in Appendix G or Schedule 4.01(c)-1.
(i) Products. Except as set forth in Schedule 4.01(i) and except for
customer credits in the ordinary course of business, which do not in the
aggregate exceed $250,000, the Cytec Parties have not (i) received payment under
any Acquired Contract which requires delivery in the future of any products or
services for which such payment was received and which, when aggregated with all
other such payments, exceed $100,000 (other than any payment the amount of which
is offset against any receivable included in Business Accounts Receivable in the
Balance Sheet Data or the calculation of Closing Date Net Working Capital) or
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36
(ii) delivered under any such Acquired Contract materially more products or
services than any third party is obligated to acquire thereunder.
(j) Title to Acquired Assets. The Cytec Parties have good, valid and
marketable title to all the Acquired Assets free and clear of all Liens other
than Permitted Liens. This paragraph (j) does not relate to real property or
Leased Property, which are the subject exclusively of Section 4.01(k), or to
Intellectual Property, which is exclusively the subject of Section 4.01(n).
(k) Real Property. Seller has good and marketable title (within the
meaning of Florida real property law) to the Santa Rosa Facility, free and clear
of all Liens other than Permitted Liens. Schedule 4.01(k) sets forth a list of
all real property and interests in real property (other than the New York Lease)
leased by any of the Cytec Parties and used with respect to the operations of
the Business (each parcel of such real property and each such interest in real
property being herein called a "Leased Property"). Each agreement listed on
Schedule 4.01(k) creates, in favor of the relevant Cytec Party, a valid
leasehold interest in the Leased Property covered thereby. To the knowledge of
the Cytec Parties, none of the Cytec Parties is in default, and no notice of
alleged default has been received by any of the Cytec Parties, under any
agreement listed on Schedule 4.01(k), no lessor is in default or alleged to be
in default thereunder and there exists no condition or event which, after notice
or lapse of time or both, would constitute a default by any party thereto,
except for such defaults or alleged defaults that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
(l) Business Accounts Receivable. All the accounts receivable
included under the line item "Accounts Receivable" in the Balance Sheet Data
represent, and all the other Business Accounts Receivable represent, arms'
length sales or transactions actually made or entered into in the ordinary
course of the Business. All of the Business Accounts Receivable, net of
reserves, are due within 12 months after the Closing and, except as would not be
material in the aggregate to the Business taken as a whole, (i) are not subject
to any counterclaim or set-off (other than normal consumer product return
rights) and (ii) are not in dispute. Schedule 4.01(l) contains an aged schedule
as of its date of items in the line item "Accounts Receivable" that are the
Business Accounts Receivable.
(m) Absence of Certain Changes or Events. Except as set forth in
the Disclosure Schedules, including
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37
Schedule 4.01(m), since the date of the Balance Sheet Data, (i) Parent has
conducted the Business, or has caused Seller to conduct the Business, in the
ordinary course consistent with past practice, (ii) to the knowledge of the
Cytec Parties, there has not occurred any event or condition which, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect and (iii) there has not occurred any event or condition which would be
prohibited by Section 5.01 if such event or condition had taken place without
the consent of Purchaser after the date hereof and prior to the Closing Date.
(n) Intellectual Property. Schedule 4.01(n)-1 sets forth a true and
complete list of all Intellectual Property owned or held by any Cytec Party that
arises primarily out of the Business, other than any copyrights or Know-How. To
the extent indicated on such Schedule, such Intellectual Property has been duly
registered in, filed in or issued by the United States Patent and Trademark
Office and other designated jurisdictions. To the extent such Intellectual
Property is shown as registered in Schedule 4.01(n)-1, such Intellectual
Property has been properly registered in all material respects, all material
pending registrations and applications have been properly made and filed and
each annuity, maintenance, renewal or other fee relating to material
registrations or applications are current. Except as set forth on Schedule
4.01(n)-2, a Cytec Party is the sole and exclusive owner or holder of all of the
Business Intellectual Property and since December 17, 1993, and, to the
knowledge of any Cytec Party, since December 31, 1986, no Cytec Party has
received any written notice, the subject of which has not been resolved, from
any other person challenging the right of any Cytec Party to use any of the
Business Intellectual Property or any rights thereunder. To the knowledge of the
Cytec Parties, (i) the Business has been and is being conducted without material
infringement of, and the Business Intellectual Property does not infringe in any
material respect on, any Intellectual Property of any person and (ii) no person
is infringing upon the Business Intellectual Property. Except as set forth on
Schedule 4.01(n)-3, no Cytec Party has granted any licenses or other rights and
none of them has any obligation to grant licenses or other rights to any of the
Business Intellectual Property to any other person. Except as set forth on
Schedule 4.01(n)-4, there are no inter ferences or other contested proceedings,
either pending or, to the knowledge of any Cytec Party, threatened in the United
States Copyright Office, the United States Patent and Trade mark Office or any
Federal, state or local court or before any other governmental agency or
tribunal, relating to any pending application with respect to any of the
Business Intellectual Property.
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(o) Title to Seller and Cytec Technology Shares. Parent is the sole
stockholder of Seller and Cytec Technology and, in such capacity, Parent has
consented to the Transactions and to the execution, delivery and performance by
Seller and Cytec Technology of the Operative Documents to which they are a
party.
(p) Environmental Matters. (i) Except as
disclosed on Schedule 4.01(p) or except as would not,
individually or in the aggregate, have a Material Adverse
Effect:
(A) Seller possesses all permits, licenses, consents, franchises,
approvals and authorizations necessary or required under any Environmental
Law (each such permit, license, consent, franchise or approval being
referred to as an "Environmental Permit") for the conduct of the Business
as it is currently being conducted, including those on Schedule
4.01(p)(i)(A);
(B) since December 17, 1993, and, to the knowledge of each Cytec
Party, since December 31, 1986, each of Parent and Seller is and has been
in compliance with all Environmental Permits and with all Environmental
Laws applicable to the Business or the Acquired Assets, except to the
extent such noncompliance has been cured or resolved without any
compliance order or schedule of compliance;
(C) since December 17, 1993, and, to the knowledge of each Cytec
Party, since December 31, 1986, neither Parent nor Seller has received any
written notices, demand letters or written requests for information from
any Governmental Entity or any third party indicating that any of the
Cytec Parties is or may be in violation of, or liable under, any
Environmental Law applicable to the Business or the Acquired Assets or any
Environmental Permit, except to the extent that the subject of such
notices, letters or requests has been cured or resolved without any
compliance order or schedule of compliance;
(D) there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings pending or, to
the knowledge of Parent or Seller, threatened against Parent or Seller (I)
alleging that any of the Cytec Parties may be in violation of, or liable
under, any Environmental Law applicable to the Business or the Acquired
Assets or (II) seeking to revoke, cancel, suspend or modify any of the
Environmental Permits applicable to the Business or the Acquired Assets;
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39
(E) since December 17, 1993, and, to the knowledge of each Cytec
Party, since December 31, 1986, no reports have been filed, or are
required to be filed, with any Governmental Entity by Parent or Seller
concerning the Release of any Hazardous Substance in violation of any
Environmental Law applicable to the Santa Rosa Facility;
(F) Seller has made available to Purchaser copies of all
environmental investigations, studies, audits, tests, reviews or other
analyses in the possession or under the control of any Cytec Party
regarding compliance or noncompliance by the Business with any
Environmental Law.
(ii) The Santa Rosa Facility is not currently on and has never been
on, and, to the knowledge of Parent or Seller, is not listed and has never been
proposed for listing on, any federal or state "superfund" or "super lien" list,
including CERCLA, and neither Parent nor Seller is currently taking, nor has it
ever been required to take, any material corrective action with respect to the
Santa Rosa Facility under the Resource Conservation and Recovery Act or any
other Environmental Law, except for any such actions covered by an Environmental
Permit.
(iii) All financial assurances required by or under any
Environmental Laws for the conduct of the Business as presently conducted are,
to the knowledge of the Cytec Parties after due inquiry, in place.
(q) Sufficiency of Acquired Assets. Except as set forth on Schedule
4.01(q), the Acquired Assets, together with the rights and services to be
provided to Purchaser pursuant to the Operative Documents, are sufficient for
the operation of the Business immediately after the Closing in substantially the
same manner as it is currently operated; provided, however, that no
representation is made pursuant to this Section 4.01(q) with respect to any
restriction or condition on the ability of any Sterling Party to own or operate
the Business arising out of facts or circumstances that are attributable to any
of the Sterling Parties.
(r) Contracts. Except for Contracts listed on Schedule 4.01(r)(i)
through (xviii), which correspond to the numbered categories in the definition
of "Material Contract" provided below, 4.01(s), 4.01(x), 4.01(y) or 4.01(z), and
except for Excluded Contracts, none of the Cytec Parties is a party to or bound
by any Material Contract. "Material Contract" shall mean any Contract of the
types (whether one or
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40
more) listed below which relates primarily to the Business, the Acquired Assets
or the Assumed Liabilities or which, by its terms or by operation of law, would
be binding on Purchaser or the Business immediately after the Closing (it being
understood that no representation is made pursuant to this Section 4.01(r) with
respect to any restriction or condition on the ability of any Sterling Party to
own or operate the Business arising out of facts or circumstances that are
attributable to any of the Sterling Parties):
(i) a Contract for the employment of any person with an annual base
salary in excess of $50,000 or any consulting agreement involving
aggregate future financial obligations of any Cytec Party in excess of
$50,000;
(ii) a Contract, other than a Benefit Plan, with any person
providing any term of employment or compensation guarantee that is not
terminable without penalty prior to the first anniversary of the date of
this Agreement;
(iii) except for Contracts set forth on Schedule 4.01(w) or Schedule
4.01(y), a Contract with or for the benefit of, any person providing for
severance payments, termination payments or other benefits, the amount,
nature, vesting or payment of which is contingent upon, or will be
accelerated or otherwise affected by, a "change of control" or other
similar event or occurrence;
(iv) a Contract with any labor union or association;
(v) a Contract with, or for the benefit of, any director, officer
or Affiliate of any of the Cytec Parties;
(vi) an indenture, note, loan or credit agreement or other Contract
relating to the borrowing of money by any of the Cytec Parties or to the
direct or indirect guarantee or assumption by any of the Cytec Parties of
the obligation of any other person in excess of $100,000;
(vii) any Contract containing a covenant not to
compete or a material agreement to keep confidential any
information of a third party;
(viii) a lease or similar agreement under which any of the Cytec
Parties is a lessee of, or holds or operates, any real property owned by
any third party;
(ix) a Contract involving future payment for goods or services by
any of the Cytec Parties of more than $100,000 (unless terminable at the
option of such Cytec
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Party (or, immediately after the Closing, Purchaser) without payment or
penalty upon no more than 60 days' notice);
(x) a Contract involving the obligation of any of the Cytec Parties
to deliver in the future products or services for payment of more than
$100,000 (unless terminable at the option of such Cytec Party without
payment or penalty upon no more than 60 days' (or, immediately after the
Closing, Purchaser) notice);
(xi) a Contract for the sale of any of the Acquired Assets (other
than sales of Inventory in the ordinary course of business) for more than
$50,000 individually or $250,000 in the aggregate with all other Contracts
containing such obligation or the grant of any preferential rights (it
being understood that licenses and exclusive dealing arrangements are not
considered to be preferential rights for this purpose) to purchase any of
the Acquired Assets or requiring the consent of any person to the transfer
of any of the Acquired Assets;
(xii) a Contract evidencing or creating any Lien on the Acquired
Assets (other than Permitted Liens arising for matters occurring on or
before the Closing Date);
(xiii) a Contract with any Governmental Entity (which Contract does
not otherwise come within the definition of Material Contract), the loss
of which would reasonably be expected, individually or in the aggregate,
(a) to have a Material Adverse Effect, (b) to restrict, interfere with or
otherwise adversely affect, in any material respect, any Cytec Party's
(or, immediately after the Closing, Purchaser's) ability to conduct the
Business in substantially the same manner in which it is currently
conducted or (c) to result in the imposition of any material fines or
penalties on any Cytec Party (or, immediately after the Closing,
Purchaser) by one or more Governmental Entities;
(xiv) any Contract that would restrict, in any material respect, the
ability of such Cytec Party (or, immediately after the Closing, Purchaser)
(a) to incur or assume indebtedness, (b) to sell, transfer, convey,
encumber or otherwise dispose of the Business or any material item of the
Acquired Assets or (c) to continue to conduct the Business in
substantially the same manner in which it is currently conducted;
(xv) a Contract with, or for the benefit of, Cyanamid
or any of its Affiliates;
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42
(xvi) a Contract involving a joint venture, profit sharing or
similar arrangement (other than the Benefit Plans and commission
arrangements entered into in the ordinary course of business);
(xvii) a Contract obligating or that would obligate any of the Cytec
Parties (or, immediately after the Closing, Purchaser) to make a loan or
advance in excess of $50,000 to, or an investment in excess of $50,000
individually or $250,000 in the aggregate with all other Contracts
containing such obligation, any person, other than extensions of credit in
connection with sales of Inventory or the rendering of services by the
Business in the ordinary course of business; or
(xviii) a Contract obligating any of the Cytec Parties to pay monies
in excess of $250,000, but excluding any such Contract which is terminable
at the option of the applicable Cytec Party without payment or penalty
upon no more than 60 days' notice.
Complete and correct copies of all Material Contracts, together with all
modifications and amendments thereto, have been delivered to Purchaser by
Parent. Each Acquired Contract that is a Material Contract is a valid and
binding obligation of the Cytec Parties a party thereto. None of the Cytec
Parties is in default in any material respect, and no notice of alleged material
default has been received by any of the Cytec Parties under any Acquired
Contract. To the knowledge of any Cytec Party, (x) no other person is in default
in any material respect or alleged to be in default in any material respect
under any of the Acquired Contracts and (y) there exists no condition or event
which, after notice of lapse of time or both, would constitute a material
default by any party thereto.
(s) Employee Benefits. (i) Schedule 4.01(s) contains a list and
brief description of each "employee pension benefit plan" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA), stock option, stock purchase, stock appreciation, stock bonus, deferred
compensation plan, program or arrangement, and each other employee fringe
benefit plan, program or arrangement maintained, provided or contributed to or
required to be maintained, provided or contributed to by any of the Cytec
Parties or any of their Affiliates (excluding Cyanamid and any of its
Affiliates) for the benefit of, or relating to, any present or former Business
Employees or their beneficiaries (all the foregoing being herein called "Benefit
Plans"). The Unaudited Financial Statements reflect an
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43
allocation of costs relating to the Benefit Plans by the Parent to the Business
in accordance with Schedule 4.01(c)-2. Except as set forth in Schedule
4.01(c)-2, the allocated costs of the Benefit Plans reflected in the Unaudited
Financial Statements are not different in any material respect from the actual
costs therefor. Parent has made available to Purchaser true, complete and
correct copies of (i) each Benefit Plan (or, in the case of any unwritten
Benefit Plan, a description thereof) and (ii) the most recent summary plan
description for each Benefit Plan (if any such description was required).
(ii) No Benefit Plan is a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA), and, since December 17, 1993, none of the Cytec
Parties has ever contributed nor been obligated to contribute to any such
multiemployer plan. Each of the Cytec Savings Plan and the Cytec Defined Benefit
Plan is in compliance in all material respects with ERISA and all other
applicable material laws, and has been administered in accordance with its terms
in all material respects.
(t) Terminations, Proceedings, Penalties, Etc. Since December 17,
1993, with respect to each employee benefit plan (including the Benefit Plans)
that relates to the Business or any present or former Business Employees and
that is subject to the provisions of Title IV of ERISA and in respect of which
any of the Cytec Parties (excluding Cyanamid) or any of their respective assets
and properties may, directly or indirectly, be subject to any liability,
contingent or otherwise, or the imposition of any Lien (whether by reason of the
complete or partial termination of any such plan, the funded status of any such
plan, any "complete withdrawal" (as defined in Section 4203 of ERISA) or
"partial withdrawal" (as defined in Section 4205 of ERISA) by any person from
any such plan, or otherwise):
(i) no such plan has been terminated so as to subject, directly or
indirectly, any of the Acquired Assets to any liability or the imposition
of any Lien under Title IV of ERISA;
(ii) no proceeding has been initiated or, to the knowledge of any of
the Cytec Parties, threatened by any person (including the PBGC) to
terminate any such plan;
(iii) no Reportable Event has occurred with respect to
any such plan; and
(iv) no such plan which is subject to Section 302 of ERISA or
Section 412 of the Code has incurred any "accumulated funding deficiency"
(as defined in
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44
Section 302 of ERISA and Section 412 of the Code, respectively) whether or
not waived.
(u) Prohibited Transactions. There have been no "prohibited
transactions" by any Cytec Party within the meaning of Section 406 or 407 of
ERISA or Section 4975 of the Code for which a statutory or administrative
exemption does not exist with respect to any Benefit Plan.
(v) Full Funding. As of December 31, 1995, except as disclosed in
Parent's Annual Report to Shareholders for 1995 (a copy of which has been
delivered to Purchaser), the funds available under the Cytec Defined Benefit
Plan and the Cytec Past Service Retirement Plan equal or exceed the amounts
required to be paid, on account of rights vested or accrued as of December 31,
1995 (using the actuarial methods and assumptions used at December 31, 1995 by
the Cytec Parties' actuaries in connection with the funding of such plans).
(w) No Triggering of Obligations; Controlled Group; Affiliated
Service Group. (i) The consummation of the Transactions will not, except as
disclosed on Schedule 4.01(w) or as otherwise contemplated by this Agreement,
(A) entitle any Acquired Employee to severance pay or unemployment compensation
or (B) accelerate the time of vesting of compensation due to any Acquired
Employee.
(ii) Since December 17, 1993, none of the Cytec Parties has been a
member of an "affiliated service group" within the meaning of Section 414(m) of
the Code. The consummation of the Transactions will not result in any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the Code for
which an exemption is not available.
(x) Future Commitments. Except as set forth in Schedule 4.01(x),
none of the Cytec Parties has announced any plan or legally binding commitment
to create any additional Benefit Plans or to amend or modify any existing
Benefit Plan which plans, commitments, amendments and modifications, in the
aggregate, would result in the Benefit Plans thereafter not being substantially
equivalent in value to the Benefit Plan as in effect since January 1, 1996.
(y) Bonus Agreements. Except for those agreements listed on Schedule
4.01(y), no Cytec Party nor any subsidiary of any Cytec Party has any agreement
with any Acquired Employee that entitles such employee to any bonus or other
incentive compensation in connection with the consummation of the Transactions
or for which the consummation of the
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45
Transactions would accelerate the time of payment or increase the amount of
compensation due to any Acquired Employee.
(z) Bonds. Schedule 4.01(z) is a complete and accurate list and
description of all bonds, deposits, financial assurances and insurance coverage
required by Governmental Rule to be submitted to Governmental Entities in
connection with the conduct of the Business as presently being conducted, except
for bonds, deposits, financial assurances and insurance coverage the failure of
which to provide would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(aa) Labor Matters. Except as disclosed on Schedule 4.01(aa) or as
would not individually or in the aggregate reasonably be expected to have a
Material Adverse Effect, (i) since December 17, 1993, and, to the knowledge of
each Cytec Party, since December 31, 1986, none of the Cytec Parties has
experienced any labor disputes, demands for certification or any work stoppage
due to labor disagreements, (ii) there is no unfair labor practice charge or
complaint pending or, to the knowledge of any of the Cytec Parties, threatened
against any Cytec Party in respect of the Business, (iii) there is no labor
strike, dispute, request for representation, slowdown or stoppage actually
pending or, to the knowledge of any of the Cytec Parties, threatened against or
affecting any of the Cytec Parties in respect of the Business nor any secondary
boycott with respect to any products produced by the Business, (iv) no grievance
is pending, nor has any arbitration proceeding arising out of or under
collective bargaining agreements been requested, and no such arbitration
proceeding is pending or scheduled, in each case in respect of the Business, (v)
there are no Administrative Proceedings or suits against any of the Cytec
Parties in respect of the Business concerning alleged employment discrimination
or other employment related matters pending or, to the knowledge of any of the
Cytec Parties, threatened before the U.S. Equal Employment Opportunity
Commission or any state or federal court or Governmental Entity, and (vi) no
person has, to the knowledge of any of the Cytec Parties, asserted that any of
the Cytec Parties is liable in any material amount for any arrears of wages or
any taxes or penalties for failure to comply with any of the foregoing.
(bb) Investment Representation. The acquisition of the Preferred
Stock by Parent is for Parent's own account, is for investment purposes and is
not with a view to, or for offer or sale for STX in connection with, the
distribution of any shares of Preferred Stock in violation of the Securities Act
or any state securities laws. Parent has no present
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46
intention of selling or otherwise disposing of any shares of Preferred Stock.
Parent has reviewed all information relating to STX and its subsidiaries that
Parent deems necessary or desirable in connection with its decision to acquire
the Preferred Stock.
(cc) Taxes. Each of the Cytec Parties has filed and properly
completed all Tax returns and other reports that it is required by Governmental
Rule to file on or before the date hereof or the Closing Date, as applicable,
with respect to the Business or the Acquired Assets and has paid all Taxes that
are due and payable for periods ending on or before the date hereof or the
Closing Date, as applicable, pursuant to such returns and reports, the
non-payment of which might (i) subject the Acquired Assets to sale, forfeiture
or loss, (ii) interfere in any material respect with the use or disposition of
any Acquired Asset or (iii) have a Material Adverse Effect.
(dd) No Knowledge of Misrepresentations. The Specified Cytec
Representatives have no actual knowledge that the representations and warranties
of any Sterling Party made in this Agreement are not true.
(ee) Survey and Title Commitment. The Cytec Parties have heretofore
delivered to Purchaser (i) a true and correct copy of a land survey prepared by
Baskerville-Donovan, Inc. dated December 20, 1996, with respect to the Santa
Rosa Facility (the "Survey") and (ii) a true and correct copy of a current
owner's ALTA title policy commitment prepared by Lawyer's Title Insurance
Corporation dated October [27], 1996 (the "Title Commitment").
SECTION 4.02. Representations and Warranties of Purchaser. Each of
the Sterling Parties hereby represents and warrants to Parent as follows:
(a) Organization, Standing and Power. Each of the Sterling Parties
(i) is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has the requisite power and authority to
carry on its business as now being conducted and (ii) is qualified or registered
to do business and is in good standing in each jurisdiction in which the
properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified and in good standing will not, when taken together with all
other such failures, have a material adverse effect on the business, operations,
assets, condition (financial or otherwise) or results of operations of STX and
its subsidiaries, taken as a whole. Purchaser has heretofore made
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47
available to Parent true and complete copies of the certificates of
incorporation and by-laws of the Sterling Parties, in each case as amended
through the date of this Agreement.
(b) Authority. Each of the Sterling Parties has all corporate power
and authority to execute and deliver the Operative Documents to which it is a
party and to consummate the Transactions, and STX has all corporate power and
authority to issue the Preferred Stock. The execution and delivery by each
Sterling Party of the Operative Documents to which it is a party and the
consummation of the Transactions by such Sterling Party have been duly
authorized by all necessary corporate action on the part of such Sterling Party,
and do not and will not require the approval of the stock holders of STX. This
Agreement has been duly executed and delivered by each Sterling Party and
constitutes, and each Ancillary Agreement to which such Sterling Party is a
party will be duly executed and delivered by such Sterling Party at the Closing
and when so executed and delivered will consti tute, a legal, valid and binding
obligation of such Sterling Party enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and to general principles of equity (including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing) regardless of whether considered in a proceeding in equity or at law.
The execution and delivery of this Agreement by the Sterling Parties do not, and
the consummation of the Transactions by the Sterling Parties will not, (i)
violate any Governmental Rule applicable to it, (ii) conflict with any provision
of the certificate of incorporation or by-laws of any Sterling Party, (iii)
conflict with any provision contained in, or constitute a default under, any
material Contract to which any Sterling Party is a party or by which any
Sterling Party or any of their respective properties are bound or (iv) require
the consent, approval, order or authorization of, or the registration,
declaration or filing with, any Governmental Entity or other person, except as
provided in paragraph (d) below and except for (A) the filing of a premerger
notification report by Purchaser under the HSR Act and (B) the filing by STX
with the SEC of such reports under Section 13(a) of the Exchange Act as may be
required in connection with this Agreement.
(c) Litigation; Decrees. There are no (i) judgments, orders,
injunctions or decrees of any Governmental Entity or arbitrational tribunal
against any Sterling Party, (ii) suits, claims, actions, investigations or
proceedings pending or, to the knowledge of Purchaser,
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48
threatened in writing against or affecting any Sterling Party which, in the
cases of clauses (i) or (ii), would reasonably be expected to prevent or
materially delay the ability of such Sterling Party to perform its obligations
hereunder.
(d) No Knowledge of Misrepresentations. The Specified Sterling
Representatives have no actual knowledge that the representations and warranties
of any Cytec Party made in this Agreement or any Ancillary Agreement are not
true.
(e) Preferred Stock. When delivered to Parent in accordance with
this Agreement, the Preferred Stock will be duly authorized, validly issued,
fully-paid and nonassessable. All corporate action (including stockholder
approval) required on the part of STX for the authorization, issue and sale of
the Preferred Stock has been duly and validly taken, except for the filing of an
appropriate certificate of designation relating to the Preferred Stock in
accordance with the Delaware General Corporation Law and the Certificate of
Incorporation and Bylaws of STX.
(f) SEC Reports; Phase I Study. Purchaser has heretofore provided to
Parent true and complete copies of (i) STX's annual report on Form 10-K for the
fiscal year ended September 30, 1996, (ii) STX's proxy statement dated July 19,
1996 relating to a special meeting of its stockholders held on August 20, 1996,
(iii) Amendment No. 3 to STX's Registration Statement on Form S-1 (Registration
No. 333-04343), as filed with the SEC on August 12, 1996, including all exhibits
thereto which have been requested by Parent, (iv) the Phase I Study and (v) the
Holdings Pension Plans. The audited financial statements included in the annual
report referred to in clause (i) above have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated therein or in the notes thereto) and fairly present the
consolidated financial position and operations of STX and its subsidiaries on
the date and for the period covered thereby (except as may be indicated thereon
or in the notes thereto).
(g) Financing. Purchaser has obtained the commitment of The Chase
Manhattan Bank in respect of the Financing and such commitment has neither been
revoked nor expired in accordance with its terms.
(h) Capital Stock. The authorized capital stock of STX consists of
20,000,000 shares of Common Stock, par value $0.01 per share and 2,000,000
shares of preferred stock ("STX Preferred Stock"). As of the date hereof, no
shares of STX Preferred Stock are outstanding. No shares of Senior Stock or
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49
Parity Stock (each as defined in the Designation of Rights in respect of the
Preferred Stock) are outstanding.
ARTICLE V
Covenants
SECTION 5.01. Covenants of the Cytec Parties Relating to Conduct of
Business. During the period from the date of this Agreement and continuing until
the Closing, each of the Cytec Parties agrees (except as expressly provided in
this Agreement or Schedule 5.01 hereto, or to the extent that Purchaser shall
otherwise consent in writing) that:
(a) Ordinary Course. Each of the Cytec Parties shall (i) operate the
Business and the Acquired Assets in the ordinary course in substantially the
same manner as presently conducted, (ii) maintain the Business Records in
substantially the same manner as presently maintained, (iii) use commercially
reasonable efforts to preserve intact the Business' present business
organization and reputation in all material respects, (iv) to the extent
consistent with the past practices of the Business in the ordinary course of its
business, keep available the services of substantially all of the Business'
present officers and employees, (v) prevent the Business Employees from being
exposed to acrylonitrile or asbestos at the Santa Rosa Facility at levels above
those permitted by OSHA (it being understood that the sole liability of the
Cytec Parties for breach of this clause (v) shall be for the incremental Losses
from exposure of such persons to acrylonitrile or asbestos between the date
hereof and the Closing Date), (vi) to the extent consistent with the past
practices of the Business in the ordinary course of its business, preserve the
Business' relationships and goodwill with customers, suppliers and others having
business dealings with the Business and (vii) maintain its current repair and
maintenance practices for capital equipment and real property (including
improvements thereon and fixtures thereto); provided, however, that nothing
contained in this paragraph shall be deemed to require the expenditure of any
funds out side the ordinary course of business.
(b) No Dispositions, Etc.; Limitation on Acquisitions. None of the
Cytec Parties shall, directly or indirectly, (i) sell, lease, transfer or
otherwise dispose of, or agree to sell, lease, transfer or otherwise dispose of,
any of the Acquired Assets other than sales of Business Inventory and other
dispositions in the ordinary course of business consistent with prior practice
and except that (A) Parent may transfer any Acquired Assets owned by it to
Seller and
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(B) Cytec Technology may transfer any Business Intellectual Property owned by it
to Seller, (ii) purchase, acquire or lease any assets or properties which would
constitute Acquired Assets and the accounts payable in respect of which will be
included as Business Account Payables on the Closing Date, other than in the
ordinary course of business consistent with prior practice or (iii) pledge or
encumber any of the Acquired Assets other than in the ordinary course of
business consistent with past practice.
(c) Employees. None of the Cytec Parties shall, directly or
indirectly, (i) enter into or amend, or commit itself to enter into or amend,
any employment, severance, consulting, compensation or special pay Contract,
with respect to termination of employment or otherwise, or other similar
Contracts with any Business Employees except in the ordinary course of business
consistent with past practice, (ii) pay or agree to pay any material pension,
retirement, allowance or other employee benefit to any present Business
Employee, other than for benefit entitlements under Benefit Plans in effect on
the date of the Balance Sheet Data in accordance with the terms of such Benefit
Plans, (iii) adopt, enter into or amend, or commit itself to adopt, enter into
or amend, any of the Benefit Plans, except (A) to comply with changes in
applicable Governmental Rules, (B) as made on a basis applicable to Parent and
its subsidiaries on a company-wide basis (in which case Parent shall promptly
advise Purchaser thereof) or (C) to the extent all such adoptions, entrances and
commitments would result in the benefits under the Benefit Plans thereafter not
being substantially equivalent in value to the Benefit Plans as of the date
hereof, or (iv) increase the salary of any Business Employee, except as required
pursuant to existing employment Contracts or in the ordinary course of business
consistent with prior practice.
(d) Material Contracts. Notwithstanding anything in this Agreement
to the contrary, none of the Cytec Parties shall, directly or indirectly, enter
into any Material Contract, including any Material Contract for the purchase of
capital assets, without the prior written consent of Purchaser (which consent
shall not be unreasonably withheld). None of the Cytec Parties shall amend,
modify or terminate, or agree to amend, modify or terminate, any Acquired
Contract, in each case in any material respect, other than in the ordinary
course of business consistent with past practice. The Cytec Parties shall
promptly deliver to Purchaser a copy of any such amendment, modification or
termination.
(e) Other Actions. None of the Cytec Parties shall, directly or
indirectly, take any action that would reasonably be expected to (i) result in
any of the
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51
representations and warranties of any Cytec Party set forth in this Agreement
becoming untrue in any material respect, (ii) result in any of the conditions of
the Closing set forth in Article VI not being satisfied in a timely manner or
(iii) individually or in the aggregate, have a Material Adverse Effect.
(f) Advise of Changes. Parent shall advise Purchaser in writing
within a reasonable time thereafter of the occurrence after the date hereof and
on or prior to the Closing Date of any matter or event that (i) has had or would
be reasonably expected, individually or in the aggregate, to have a Material
Adverse Effect, (ii) has caused or would reasonably be expected to cause any of
its representations or warranties in this Agreement to be untrue or incorrect
from the date hereof to the Closing Date or (iii) has caused or would reasonably
be expected to cause any of the conditions set forth in Article VI to not be
satisfied in a timely manner; provided, however, that the delivery of any such
notice pursuant to this paragraph (f) shall not limit or otherwise affect the
remedies hereunder of Purchaser.
SECTION 5.02. Purchaser's Access to Information Prior to Closing.
The Cytec Parties shall afford to the Sterling Parties and their respective
directors, officers, employees, accountants, financial advisors, financing
sources, environmental consultants, counsel and other representatives reasonable
access upon reasonable advance notice and during normal business hours during
the period prior to the Closing to all the Acquired Assets, the Business
Employees and other personnel who perform duties in respect of the Acrylic
Fibers Business and, to the extent that they relate in any material respect to
the Acquired Assets, the Assumed Liabilities or the Acquired Employees, the
Excluded Records; provided, however, that the Cytec Parties shall not be
required to disclose any information with respect to an Acquired Employee to the
extent that such disclosure is prohibited by applicable law. The Cytec Parties
consent and agree that Purchaser and its directors, officers, employees,
accountants, financial advisors, financing sources, environmental consultants,
counsel and other representatives shall be entitled at any time to solicit
information from and to otherwise contact any and all Governmental Entities and
other third parties with respect to matters involving the Business or the
Acquired Assets, including compliance with Environmental Laws. The Sterling
Parties shall have the right, at their sole expense, to make and retain copies,
extracts and summaries of all such reports, books and records and information
made available hereunder. Subject to Sections 4.02(d) and 5.12, no investigation
by or on behalf of the Sterling Parties shall affect in any manner the
representations, warranties,
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52
covenants or indemnities of the Cytec Parties contained in the Operative
Documents, the right of the Sterling Parties to rely upon such representations
and warranties or the conditions to the obligations of any party to consummate
the Closing. Purchaser acknowledges that any information being provided to it or
its representatives by Parent pursuant to this Agreement is subject to the terms
of a confidentiality agreement between The Sterling Group, Inc. and Goldman
Sachs & Co., on behalf of Parent, dated May 31, 1996 (the "Confidentiality
Agreement"), which terms are incorporated herein by reference.
SECTION 5.03. Records; Financial Information; Attorney Work Product.
(a) On the Closing Date, the Cytec Parties shall deliver or cause to be
delivered to Purchaser all of the Business Records; provided, however, that the
Cytec Parties shall be entitled to retain copies of such Business Records as it
deems appropriate. Each of the Cytec Parties agrees that, at its own expense, it
(i) shall preserve and keep all Excluded Records for a period of (A) in the case
of tax returns, schedules, work papers and other supporting documentation, for a
period of seven years from the Closing Date, or for any longer periods as may be
required by any Governmental Entity or as may be prudent in connection with any
ongoing litigation or Administrative Proceeding, and (B) in the case of all
other Excluded Records, for a period of four years, and (ii) shall make the
foregoing available to the Sterling Parties after the Closing during normal
business hours as may be reasonably requested. In the event any Cytec Party
wishes to destroy any of the Excluded Records after the time specified above, it
shall first give 60 days' prior written notice to the Sterling Parties,
whereupon the Sterling Parties shall have the right, at their option and
expense, and upon prior written notice given to such Cytec Party within such
60-day period, to take possession of all or any portion of such Excluded
Records.
(b) Purchaser agrees that, at its own expense, it (i) shall preserve
and keep the Business Records delivered to it at the Closing by the Cytec
Parties (A) in the case of tax returns, schedules, work papers and other
supporting documentation, for a period of seven years from the Closing Date, or
for any longer periods as may be required by any Governmental Entity or as may
be prudent in connection with ongoing litigation or Administrative Proceedings,
and (B) in the case of all other Business Records, for a period of four years,
and (ii) shall make the foregoing available to Parent after the Closing during
normal business hours as may be reasonably requested. In the event Purchaser
wishes to destroy such Business Records after the time specified above, it shall
first give 60 days' prior written notice to Parent, whereupon Parent shall have
the right, at its option and
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53
expense, and upon prior written notice given to Purchaser within such 60-day
period, to take possession of all or any portion of such Business Records.
(c) All information received or retained by the Cytec Parties or any
representative of either of them pursuant to paragraph (a) or (b) of this
Section 5.03 shall be treated as confidential by each of them and such
representatives and, except to the extent such information is or becomes
generally available, the Cytec Parties and their respective representatives
shall use all reasonable efforts to maintain the confidentiality of such
information, all upon and subject to the terms and conditions set forth in the
Confidentiality Agreement. If any of the Cytec Parties or any of their
respective representatives is required to disclose any such information by or to
any Governmental Entity, Parent shall, to the extent feasible, prior to such
disclosure, notify the Sterling Parties of such requirement. The Sterling
Parties shall have the right, at its own expense, to seek confidential treatment
of any information to be so disclosed.
(d) After the Closing, upon reasonable written notice, the Sterling
Parties shall furnish to the Cytec Parties and their accountants, counsel and
other representatives access, during normal business hours, to such information
(including records pertinent to the Business and the Acquired Assets) as is
reasonably necessary (i) for financial reporting and accounting matters or the
preparation and filing of any returns, reports or forms, (ii) for the defense of
any Tax claim or assessment, (iii) to comply with applicable Governmental Rules
or (iv) for other legitimate purposes.
(e) After the Closing, upon reasonable written notice, each of the
Cytec Parties shall furnish to the Sterling Parties and their accountants,
counsel and other representatives access, during normal business hours, to such
information (including records pertinent to the Business and the Acquired
Assets) and assistance relating to the Business and the Acquired Assets as is
reasonably necessary (i) for financial reporting and accounting matters or the
preparation and filing of any returns, reports or forms, (ii) for the defense of
any Tax claim or assessment, (iii) to comply with applicable Governmental Rules
or (iv) for other legitimate purposes.
(f) After the Closing, upon any of the Sterling Parties' reasonable
request, each of the Cytec Parties shall furnish or cause to be furnished to the
Sterling Parties and their counsel copies of such Attorney Work Product and
Excluded Records as is reasonable or necessary for any of the
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54
Sterling Parties' defense of any claim or threatened claim by any third party
(other than any Cytec Party or any Affiliate thereof) or prosecution of any
patent application or trademark registration in connection with the Business. In
the event that copies of any Attorney Work Product and Excluded Records are
transferred to the Sterling Parties, such copies shall only be accepted by the
Sterling Parties on the understanding that such copies are merely supplied as an
aid to the Sterling Parties' understanding the background and nature of various
issues, and that such files do not and shall not be deemed to be representations
or legal opinions on which the Sterling Parties or any other person is entitled
to rely.
SECTION 5.04. Conditions to Closing. (a) Each Sterling Party and
each Cytec Party shall take all reasonable actions necessary to cause each of
the conditions specified with respect to such party in Article VI to be met as
promptly as practicable and to comply promptly with all legal require ments
which may be imposed on it with respect to the Closing (including (i) the prompt
filing of the premerger notification report under the HSR Act and the furnishing
of all information required under the HSR Act and (ii) the prompt filing of all
preclosing notices or applications required under Environmental Laws), and shall
cooperate with and furnish information to each other and to other parties in
connection with any such legal requirements.
(b) Each party shall use commercially reasonable efforts to take all
actions necessary to obtain (and will cooperate with the other parties in
obtaining), any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other third party necessary to consummate the
Closing as contemplated by this Agreement.
SECTION 5.05. Employee Matters. (a) Offer of Employment. Prior to
the Closing Date and at a time chosen in consultation with the Cytec Parties,
Purchaser shall offer employment, effective on the Closing Date, in a comparable
position, at the same location and at no less favorable base salary and annual
bonus arrangements (other than gain- sharing), to each Business Employee,
including each such Business Employee receiving disability benefits or otherwise
on leave from active employment; excluding, however, (i) any Business Employee
receiving long-term disability benefits, (ii) any Business Employee on temporary
disability leave from active employment who has been on such leave for six
months or more as of the Closing Date and (iii) any Business Employee on
temporary disability leave from active employment as of the Closing Date who
does not actually return to work within six months after the date such temporary
disability leave commenced. All Business Employees who accept Purchaser's
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55
offer of employment within one day after the Closing Date or, in the case of a
Business Employee who returns to work within six months from taking temporary
disability leave, within one day after the date of return from temporary
disability, shall become employees of Purchaser effective as of the later of
such acceptance and the Closing Date, and shall be referred to herein as
"Acquired Employees". It is specifically understood and agreed that (A) any
offer of employment by Purchaser to a Business Employee on temporary disability
leave from active employment as of the Closing Date shall be contingent upon the
return of such Business Employee to full time employment within six months after
the date such temporary disability leave commenced (or if required by law, any
such later date) and (B) any such Business Employee's employment by Purchaser
shall be deemed to commence on the date such Business Employee actually returns
to full time employment with Purchaser. The Sterling Parties hereby agree to
reimburse the Cytec Parties for the actual wages or salary of each person who
becomes an Acquired Employee and who was on temporary disability leave as of the
Closing Date for the period commencing on the Closing Date through the return
date of such person.
(b) Maintenance of Benefits. Purchaser shall main tain (or cause its
Affiliates to maintain) for a period of one year after the Closing Date, without
interruption, benefit plans and arrangements that will provide benefits to
Acquired Employees that are, in the aggregate, substantially equivalent in value
to those provided pursuant to the Benefit Plans as of the date hereof, excluding
any such Benefit Plans in respect of incentive compensation, gain-sharing and
equity-based compensation such as stock options, restricted stock grants, stock
appreciation rights and stock bonuses. For purposes of calculating value, the
Benefit Plans referred to in clauses (c), (d), (e), (f) and (g) below shall be
included.
(c) Severance Payments. (i) The Cytec Parties shall indemnify and
hold harmless the Sterling Parties for (A) any severance payments due to any
Business Employees who do not accept Purchaser's offer of employment made in
accordance with Section 5.05(a) and (B) any bonuses or other compensation due to
any Acquired Employee pursuant to any agreement required to be listed in
Schedule 4.01(y).
(ii) The Sterling Parties hereby agree that prior to the first
anniversary of the Closing Date, they will not, and will not permit their
subsidiaries to, hire as an employee or consultant any Business Employee who
does not accept Purchaser's offer of employment pursuant to Section 5.05(a)
unless prior to such hiring, the Sterling Parties have paid the Cytec Parties an
amount equal to the amount of any severance payments referred to in clause
(i)(A) of the
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immediately preceding paragraph in respect of such Business Employee plus an
amount equal to the amount of any pension payment paid by any of the Cytec
Parties to such Business Employee under the Cytec Defined Benefit Plan during
the period commencing on the Closing Date and ending on the date that any of the
Sterling Parties or their subsidiaries hire such employee.
(iii) Purchaser shall indemnify and hold harmless the Cytec Parties
for any severance payments due to any Acquired Employee as a result of the
Transactions. Notwithstanding anything herein to the contrary, for a period of
one year following the Closing Date, Purchaser shall provide (or cause its
Affiliates to provide) to each Acquired Employee severance benefits and
severance pay that are no less favorable than those provided under the Benefit
Plans in effect on the date of this Agreement.
(iv) Parent shall indemnify and hold harmless the Sterling Parties
for any severance payments due to any Business Employees to whom Purchaser has
offered employment in a comparable position at no less favorable base salary and
bonus levels who does not accept Purchaser's offer of employment and become an
Acquired Employee.
(d) Participation in Benefit Plans. Acquired Employees shall be
given credit by Purchaser for all service with the Cytec Parties (or service
credited by the Cytec Parties, including service with Cyanamid and its
Affiliates) under all employee benefit plans and arrangements of Purchaser or
any of its subsidiaries in which such Acquired Employees become participants for
purposes of eligibility and vesting (but not for purposes of benefit
calculations, except with respect to the roll-up feature of the Cytec Defined
Benefit Plan as provided in Section 5.05(e)), to the same extent as if such
service were rendered to Purchaser. Purchaser shall cause to be waived any
pre-existing condition limitation under its welfare plans that might otherwise
apply to an Acquired Employee. Purchaser agrees to recognize (or cause to be
recognized) the dollar amount of all expenses incurred by Acquired Employees
during the calendar year in which the Closing occurs for purposes of satisfying
the calendar year deductibles and co-payments limitations for such year under
the relevant benefit plans of Purchaser.
(e) Pension Benefits. Notwithstanding Section 5.05(b), for a period
of one year after the Closing Date, Purchaser shall provide (or cause its
Affiliates to provide) pension benefits to each Acquired Employee pursuant to
(i) one of the Holdings Pension Plans or (ii) a defined benefit plan that is
identical in all material respects
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(including with respect to the roll-up feature) to, or more advantageous to such
Acquired Employee than, the Cytec Defined Benefit Plan as in effect on the
Closing Date; provided, however, that Purchaser shall not be required to give
past service credit for service with or credited by any of the Cytec Parties for
purposes of benefit calculations, except, in the case of clause (ii), with
respect to the roll-up feature of the Cytec Defined Benefit Plan.
(f) Post-retirement Benefits. Notwithstanding any thing to the
contrary contained herein, with respect to any Acquired Employee who, as of the
Closing Date, (i) was at least 55 years old and had completed at least 10 years
of service with any of the Cytec Parties (including, prior to January 1, 1994,
Cyanamid) or any of their respective Affiliates, (ii) at July 31, 1990, had
combined age plus years of service with Cyanamid equal to at least 65, or (iii)
is identified on Schedule 5.05(f) and who remains employed by Purchaser until
the later of such Acquired Employee's 55th birthday or the time such Acquired
Employee has at least 10 years of service with the Cytec Parties (including,
prior to January 1, 1994, Cyanamid), Purchaser or any of their respective
Affiliates, Purchaser shall continue to provide postretirement medical and life
insurance benefits for such Acquired Employee that are no less favorable to such
Acquired Employee than those benefits provided by Parent or Seller under the
plans set forth on Schedule 4.01(s) as in effect on the date hereof, and
Purchaser shall not reduce the level of such benefits without the prior written
consent of Parent; provided, that such consent shall not be withheld to the
extent that any of the Cytec Parties or Cyanamid has similarly reduced the level
of such benefits. For purposes of this Agreement, an increase in premiums
required to be paid for postretirement benefits shall be considered a reduction
in such benefits. Parent shall notify Purchaser in writing to the extent that
Parent becomes aware of a reduction in postretirement medical and life insurance
benefits under the plans set forth on Schedule 4.01(s).
(g) Medical Benefits. Notwithstanding Section 5.05(b), Purchaser
shall provide (or cause its Affiliates to provide) to each Acquired Employee for
as long as such Acquired Employee remains employed by Purchaser or any of its
Affiliates or employed in connection with the Business (i) for a period of 18
months following the Closing Date, medical benefits that are no less favorable
to such Acquired Employee than those medical benefits provided to such Acquired
Employee by Parent or Seller on the date hereof, including benefits under the
agreements with Principal Health HMO and Health Options (Blue Cross/Blue Shield)
HMO, which agreements (the "Transferred Benefit Plans") will be assigned to and
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assumed by Purchaser as of the Closing Date, and (ii) after 18 months following
the Closing Date, medical benefits with an annual benefit level of at least $100
per Acquired Employee.
(h) Vacation and Other Pay. Purchaser shall assume the obligations
of the Cytec Parties with respect to accrued but untaken vacation and sick and
holiday pay earned by Acquired Employees as of the Closing Date to the extent
such obligations are reflected in the calculation of Closing Date Net Working
Capital or such obligations relate to 1997 vacation pay that is not reflected in
the calculation of Closing Date Net Working Capital in accordance with the Cytec
Parties' historical practices.
(i) WARN Act. Purchaser agrees to provide any required notice under
the Worker Adjustment and Retraining Notification Act, as amended (the "WARN
Act"), and any similar statute, and to otherwise comply with any such statute
with respect to any "plant closing" or "mass layoff" (as defined in the WARN
Act) or similar event affecting Acquired Employees and occurring on or after the
Closing Date. Purchaser shall indemnify and hold harmless Parent and its
Affiliates with respect to any liability under the WARN Act or similar statute
arising from the actions of Purchaser or its Affiliates on or after the Closing
Date. Parent shall indemnify Purchaser for any WARN Act liability arising prior
to the Closing Date from the actions of the Cytec Parties taken prior to the
Closing Date.
(j) Workers Compensation. Parent shall be responsible for workers'
compensation liabilities with respect to any claim (or relevant portion thereof)
of any Acquired Employee that is filed within one year after the Closing Date to
the extent the incident or alleged incident giving rise to such claim occurred
prior to the Closing Date. The foregoing shall not apply to any Sterling
Specified Exposure Liability.
(k) Vesting. Parent shall cause each Acquired Employee to be fully
vested in his or her account balance, if any, as of the Closing Date under the
Cytec Savings Plan. Parent shall also cause each Acquired Employee to be fully
vested in his or her accrued benefit, if any, under the Cytec Defined Benefit
Plan or shall continue to provide service credit, for vesting purposes only,
under the Cytec Defined Benefit Plan for the term of such Acquired Employee's
employment with Purchaser and its Affiliates. Purchaser hereby agrees to deliver
written notification to Parent of the date of termination of employment by
Purchaser and its Affiliates of each Acquired Employee and any change in marital
status of any Acquired Employee addressed to Director,
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59
Employee Benefits, Cytec Industries Inc., Five Garret Mountain Plaza, West
Paterson, NJ 07424.
(l) Savings Plans. The parties hereto agree that Parent shall
transfer the account balances of each Acquired Employee under the Cytec Savings
Plan to a trust under a savings plan maintained by a Sterling Party (the
"Purchaser Savings Plan") as soon as practicable after the date of such Acquired
Employee's employment by Purchaser. The account balances of the Acquired
Employees shall be determined as of the transfer date. The transfer of the
account balances shall be made in cash or marketable assets, as agreed by the
parties, and, to the extent applicable, participant promissory notes. In
consideration of such transfer, the applicable Sterling Party shall assume all
obligations in respect of such transferred account balances to the Acquired
Employees under the Cytec Savings Plan and shall indemnify and hold harmless the
Cytec Parties in respect of such obligations. Such transfer shall be made in
accordance with all applicable laws and the regulations thereunder, and the
parties hereby agree to make all filings required under applicable law in
connection therewith. Prior to the Closing Date, the Sterling Parties shall
deliver to Parent a copy of the determination letter from the Internal Revenue
Service with respect to the Purchaser Savings Plan, which letter shall indicate
that the Purchaser Savings Plan is qualified under Section 401(a) of the Code
and the trust thereunder is exempt from tax under Section 501(a) of the Code.
SECTION 5.06. Expenses. Whether or not the Closing takes place,
except as otherwise provided in this Agreement, all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses.
SECTION 5.07. Transfer Taxes. Parent shall pay or cause to be paid
all sales, use, transfer, stamp or documentary Taxes applicable to the
conveyance, assignment and transfer from any Cytec Party to Purchaser of the
Acquired Assets and any other transfer or documentary Taxes or any filing or
recording fees and related expenses applicable to such conveyance, assignment
and transfer (including filing fees and recording fees with respect to the
transfer and recording of the Business Intellectual Property but excluding such
intangible or documentary taxes incurred solely in connection with the
Financing); provided, however, that Purchaser shall be responsible for the costs
of preparing any forms to be filed. Each Cytec Party shall prepare and file in a
timely manner all returns and other documents required in connection with the
foregoing Taxes and shall provide Purchaser with evidence of filing of such
returns and
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documents and payment of such Taxes promptly thereafter. Purchaser shall prepare
and make all filings and recordings in respect of the transfer of Business
Intellectual Property; provided, however, that to the extent Purchaser has
chosen not to make any filing or recording, Parent shall pay to Purchaser 50% of
the filing or recording fees which would otherwise have been payable therefor.
SECTION 5.08. Brokers or Finders. Each of the Sterling Parties and
the Cytec Parties represents, as to itself and its Affiliates, that no agent,
broker, investment banker or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement based in any way on
any agreement, understanding or arrangement with such party, except, as to
Parent and its Affiliates, Goldman Sachs & Co. whose fees and expenses will be
paid by Parent and, as to Purchaser and its Affiliates, The Sterling Group,
Inc., whose fees and expenses will be paid by Purchaser. Each of Purchaser and
Parent respectively agrees to indemnify and hold the other harmless from and
against any and all claims, liabilities or obligations with respect to any other
fees, commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by such party or its Affiliates.
SECTION 5.09. Bulk Transfer Laws. Purchaser hereby waives compliance
by the Cytec Parties with the provisions of any so-called "bulk transfer law" of
any jurisdiction in connection with the sale of the Acquired Assets to
Purchaser. The Cytec Parties shall indemnify and hold harmless Purchaser against
any and all liabilities that may be asserted by third parties against Purchaser
as a result of noncompliance with any such bulk transfer law.
SECTION 5.10. Purchase Price Allocation. Parent and STX shall
cooperate in determining an allocation of the consideration to be paid by
Purchaser among the Acquired Assets consistent with Section 1060 of the Code and
the regulations thereunder that is mutually acceptable. None of the Cytec
Parties nor the Sterling Parties (nor any of their respective Affiliates or
representatives) shall take any position on any Tax return, including Form 8594,
or with any taxing authority or in any judicial proceeding that is inconsistent
with the allocation of the Purchase Price as finally determined pursuant to this
Section 5.10. Parent shall deliver to STX, and STX shall deliver to Parent, a
copy of such Form 8594 of such party at least 10 days prior to the filing
thereof.
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61
SECTION 5.11. No Additional Representations. (a) Each Sterling Party
acknowledges that, to its knowledge, it and its representatives have been
permitted full and complete access to the Acquired Assets that it and its
representatives have desired or requested to see or review, and that, to its
knowledge, its representatives have had an opportunity to meet with the officers
and employees of Parent and Seller to discuss the Business. Each Sterling Party
acknowledges that none of the Cytec Parties or any other person has made any
representation or warranty, express or implied, as to the accuracy or
completeness of any information regarding the Business or the Acquired Assets
except as expressly set forth in this Agreement and the Disclosure Schedules.
Each Sterling Party further acknowledges that none of the Cytec Parties nor any
other person will be subject to any liability to any of the Sterling Parties or
any other person resulting from (i) the distribution to Purchaser, or
Purchaser's use of, the Confidentiality Memorandum prepared by Goldman, Sachs &
Co. dated May, 1996 or any of the documents or materials examined by Purchaser
in the "data room" organized by Parent in connection with the Transactions or
(ii) the management presentation heretofore made by Parent and Seller to STX
Chemicals and STX in connection with the Transactions; provided, however, that
nothing in this sentence is intended to or shall in any manner (A) affect any
representation, warranty, covenant or indemnity of the Cytec Parties (or any of
them) contained in the Operative Documents (or any of them) or (B) relieve,
release or discharge any of the Cytec Parties or any other person from liability
resulting from or attributable to its fraud, bad faith or wilful misconduct;
and, provided further, that none of the Sterling Parties or the Specified
Sterling Representatives shall be deemed for any purpose to have knowledge of
any information contained in the documents or materials referred to in clause
(i) above solely as a result of such information's inclusion in the data room.
Purchaser acknowledges that, should the Closing occur, Purchaser will acquire
the Acquired Assets without any representation or warranty as to merchantability
or fitness for any particular purpose, in an "as is" condition and on a "where
is" basis, except as other wise expressly represented or warranted in this
Agreement or the Conveyance Documents.
(b) Each Cytec Party acknowledges that (i) it and its
representatives have been permitted full and complete access to the business,
properties and records of the Sterling Parties that it and its representatives
have desired or requested to see or review, (ii) its representatives have had an
opportunity to meet with the officers and employees of the Sterling Parties to
discuss the business, properties, affairs and financial condition of the
Sterling Parties and (iii) none
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of the Sterling Parties has made any representation or warranty (express or
implied) to the Cytec Parties except as set forth in this Agreement.
SECTION 5.12. Post-Closing Exposure to Acrylonitrile and Asbestos.
The Sterling Parties hereby agree that they will not, and will not permit any of
their Affiliates to, cause or permit any of the persons listed in Appendix C to
be exposed to acrylonitrile or asbestos at the Santa Rosa Facility at levels
above those permitted by OSHA (it being understood that the sole liability of
the Sterling Parties for breach of this Section 5.12 shall be for the
incremental Losses from such exposure of such persons).
SECTION 5.13. Amendment of Intercompany Licenses. Prior to the
Closing, the Cytec Parties shall amend or cause to be amended each agreement or
other arrangement pursuant to which any Cytec Party has granted licenses or
other rights to any of the Business Intellectual Property to any subsidiary of
Parent in order to delete or remove the Business Intellectual Property from each
such agreement or arrangement.
SECTION 5.14. Real Property Easement; Santa Rosa First Refusal and
Lease Agreement. At the Closing, Purchaser and Seller shall (i) execute and
deliver the Easement Agreement, the Santa Rosa First Refusal and Lease Agreement
and (ii) cause to be recorded such agreements or, in each case, a memorandum
thereof.
SECTION 5.15. Actions of Purchaser. (a) General. Purchaser shall not
take any action that would reasonably be expected to (i) result in any of the
representations or warranties of any Sterling Party set forth in this Agreement
becoming untrue in any material respect, (ii) result in any of the conditions of
the Closing set forth in Article VI not being satisfied in a timely manner or
(iii) result in any of the conditions to the Financing not being satisfied.
(b) Advise of Changes. Purchaser shall advise Parent in writing
within a reasonable time thereafter of the occurrence after the date hereof and
on or prior to the Closing Date of any matter or event that would be reasonably
expected to cause any of its representations and warranties in this Agreement to
be untrue or incorrect from the date hereof to the Closing Date, to cause any of
the conditions set forth in Article VI to not be satisfied in timely manner or
to cause any of the conditions to the Financing to not be satisfied.
SECTION 5.16. Signs; Use of "Cytec" or "Cyanamid"
Name. As soon as practicable, and in any event within 60 days
after the Closing Date, Purchaser, at its own expense, shall
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remove (or, if necessary, on an interim basis cover up) any and all exterior and
interior signs and identifiers which refer or pertain to Parent or any of its
subsidiaries at the Santa Rosa Facility. After such period, subject to Section
5.17, Purchaser shall not use or display the name "Cytec" or "Cyanamid" or
variations thereof, or other trade marks, trade names, logos or identifiers
using such name or otherwise owned by or licensed to any Cytec Party which have
not been assigned or licensed to Purchaser (collectively, "Non-Permitted
Names"), without the prior written consent of Parent.
SECTION 5.17. Products, Supplies and Documents. Purchaser shall have
the right to use existing products, supplies and documents (including purchase
orders, forms, labels, shipping materials, catalogues, sales brochures,
operating manuals, instructional documents and similar mate rials, and
advertising material) being transferred to it pursuant hereto which have
imprinted thereon or otherwise use a Non-Permitted Name for a period not to
exceed 180 days following the Closing Date; provided, however, that Purchaser
agrees (i) to use only those such supplies and documents existing in inventory
as of the Closing Date and (ii) not to order or utilize in any manner any
additional supplies and documents which have imprinted thereon or otherwise use
a trademark or trade name of Parent or any of its subsidiaries, except as
expressly permitted by the Trademark License Agreement.
SECTION 5.18. Delivery of Assets. The Cytec Parties shall make the
Acquired Assets available to Purchaser (a) at the locations where the Acquired
Assets are currently located if such premises are part of the Acquired Assets or
the Leased Real Property and (b) at any location under clause (a) if the
Acquired Assets (other than Business Inventory in transit or on consignment at
customers' premises) are currently located at premises which are not part of the
Acquired Assets; provided, however, that the Business Equipment and other
tangible items of Acquired Assets associated with any Business Employee (or
replacement therefor) who becomes an Acquired Employee and who is transferred
prior to the Closing Date to another location of the Business may be transferred
to such other location. The Cytec Parties shall be solely responsible for any
and all costs, fees, charges and expenses incurred in connection with the
movement of any of the Acquired Assets referred to in clause (b) of the
immediately preceding sentence to a location referred to in clause (a) of the
immediately preceding sentence. If, at any time after the Closing Date, any of
the Cytec Parties discovers in its possession or under its control any other
Acquired Assets, such Cytec Party shall forthwith
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deliver such Acquired Assets to Purchaser at the sole cost and expense of such
Cytec Party.
SECTION 5.19. No Solicitation. Each of the Cytec Parties shall
immediately cease any discussions or negotiations with any parties (other than
Purchaser and its Affiliates) that may be ongoing with respect to the direct or
indirect acq uisition or purchase of all or any substantial amount of the
Business or the Acquired Assets or any capital stock or other equity interests
of Seller, whether by merger, consolidation, business combination, sale of
assets, sale of securities, recapitalization, liquidation, dissolution or
otherwise, and whether for cash, securities or any other consideration or
combination thereof (other than, in any case, in connection with an acquisition
or purchase of other assets of Parent, in which case such acquisition or
purchase to the extent applicable to the Business shall be subject to this
Agreement) (each such transaction, an "Acquisition Transaction"). After the date
hereof and prior to the Closing or earlier termination of this Agreement:
(i) none of the Cytec Parties shall, and each of the
Cytec Parties shall not permit any of its Affiliates to, (A)
solicit, initiate, encourage (including by way of furnishing
information) or take any other action to facilitate any Acquisition
Transaction or (B) participate in any discussions or negotiations
regarding any Acquisition Transaction, and
(ii) each of the Cytec Parties shall, and shall cause
each of its Affiliates to, use its reasonable best efforts to cause
its officers, directors and employees and any investment banker,
financial advisor, attorney, accountant or other agent or
representative retained by it to not, (A) solicit, initiate,
encourage (including by way of furnishing information) or take any
other action to facilitate any Acquisition Transaction or (B)
participate in any discussions or negotiations regarding any
Acquisition Transaction.
SECTION 5.20. Audited Financial Statements. Within 45 days after
the Closing Date, Parent shall cause its auditors to provide to Purchaser, at
Parent's expense, audited financial statements for calendar year 1996 addressed
to STX and relating to the Business (the "Audited Financial Statements"), and
Parent shall provide to Purchaser unaudited financial statements, relating to
the Business, but in each case only to the extent required to be filed or that
Purchaser needs to complete information that is required to be filed under the
Securities Act or the Exchange Act in connection with any filings with the SEC.
The Audited Financial
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65
Statements shall be accompanied by a consent, executed by the auditors
performing the audit, permitting the Sterling Parties to file the Audited
Financial Statements and such auditor's report with the SEC. Such Audited
Financial Statements and unaudited financial statements shall comply as to form
with the published rules and regulations of the SEC. Parent will provide
reasonable assistance to Purchaser in obtaining any opinions, certificates,
consents, letters or schedules relating to the Audited Financial Statements, as
may be required under the Securities Act or Exchange Act in connection with any
filings of the Audited Financial Statements with the SEC.
SECTION 5.21. Pilko Assessment. (a) Initial Determination. Seller
shall promptly engage Pilko & Associates, Inc. ("Pilko") to undertake a Phase II
environmental assessment of the Acquired Assets, for which the scope of work
shall be set forth in Appendix O (the "Pilko Assessment"). The terms of Pilko's
engagement (i) shall provide for expedited laboratory testing for testing
required in connection with the Pilko Assessment, where necessary, (ii) shall
require Pilko to make the determination described in Section 5.21(b) below, as
necessary, and to otherwise comply with such Section and (iii) shall provide
that each of Purchaser and Seller shall be responsible (severally and not
jointly) for 50% of the costs and expenses in respect of the Pilko Assessment.
On or prior to January 8, 1997, Pilko shall produce a final written report,
addressed to the Cytec Parties, setting forth the results of the Pilko
Assessment. Within the five business day period after delivery of the Pilko
Assessment (the "Cytec Evaluation Period"), Seller shall make a good faith
determination, based on the results of the Pilko Assessment, of the actual
out-of-pocket costs and expenses to the Cytec Parties of the Remedial Actions
required in order to bring the Facility Conditions into compliance with Current
Environmental Laws (such determination being referred to as the "Cost of
Remediation"); provided, however, that the Cytec Parties shall not consider in
its determination any Remedial Actions to address or correct Immaterial
Environmental Breaches. In determining the Cost of Remediation, Seller shall
consider the Remedial Actions that the Cytec Parties would undertake in
accordance with the Cytec Parties' historical practice at the Santa Rosa
Facility (such Remedial Actions being referred to as the "Cytec Determined
Actions"). Seller shall notify Purchaser of Seller's Cost of Remediation of the
Cytec Determined Actions not later than the last day of the Cytec Determination
Period.
(b) Termination Right of Seller. If Seller's good faith
determination of the Cost of Remediation of the Cytec Determined Actions exceeds
$10,000,000 and Seller desires to
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terminate this Agreement, then on or prior to the last day of the Cytec
Evaluation Period, Parent shall notify Purchaser and Pilko of such
determination. Within the five business day period following any such
notification, Pilko shall make a determination of the Cost of Remediation of the
Cytec Determined Actions, and deliver a letter to each of Purchaser and Seller
setting forth such determination. If Pilko's determination of the Cost of
Remediation of the Cytec Determined Actions exceeds $10,000,000, Seller, at
Seller's sole option, may terminate this Agreement and in such case the Cytec
Parties shall not have any obligation to deliver the Pilko Assessment to any
Sterling Party.
(c) Termination Rights of Purchaser and Seller. In the event that
Seller chooses not to terminate this Agreement notwithstanding its right to do
so pursuant to Section 5.21(b), or Seller does not have the right to terminate
this Agreement pursuant to Section 5.21(b), on the last day of the Cytec
Evaluation Period, Seller shall deliver the Pilko Assessment and a description
of the Cytec Determined Actions to Purchaser. Upon its receipt of such delivery,
Purchaser shall immediately engage Pilko to undertake a Phase II environmental
assessment of the Acquired Assets, which shall be addressed to Purchaser and the
banks participating in the Financing or their agent (such assessment being
referred to as "Purchaser's Phase II"). The scope of work for Purchaser's Phase
II shall be the same scope of work as that of the Pilko Assessment. As of and
after Purchaser's engagement of Pilko as contemplated above, Purchaser shall
have the unconditional right to independently consult with Pilko personnel,
review all materials in any way relating to the Pilko Assessment or performance
thereof, including all technical materials and reports, and Pilko is hereby
unconditionally authorized to independently consult with Purchaser and its
counsel, and to disclose all such materials. Purchaser's Phase II shall be
completed and delivered to Purchaser within the two business day period
following Seller's delivery of the Pilko Assessment to Purchaser. The Sterling
Parties shall be responsible for all costs and expenses in respect of
Purchaser's Phase II. Within the five business day period following delivery of
Purchaser's Phase II to Purchaser (the "Sterling Determination Period"),
Purchaser shall make a good-faith determination of the Cost of Remediation of
the specific Remedial Actions required to bring the Facility Conditions into
compliance with Current Environmental Laws, based on remediation standards
deemed appropriate by the Sterling Parties; provided, however, that Purchaser
shall not consider in its determination any Remedial Actions to address or
correct Immaterial Environmental Breaches ("Sterling's Initial Determination").
If Sterling's Initial Determination exceeds $10,000,000, Purchaser, at its
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sole option, may terminate this Agreement. In the event that Purchaser chooses
not to terminate this Agreement notwithstanding its right to do so pursuant to
this Section 5.21(c), on the last day of the Sterling Determination Period,
Purchaser shall deliver to the Cytec Parties its good-faith determination of the
Cost of Remediation of the specific Remedial Actions required to bring the
Facility Conditions into compliance with Current Environmental Laws, based on
Purchaser's good faith belief of the alternative risk-based remediation
standards for industrial properties historically applied by the Sterling Parties
(such Remedial Actions being referred to as the "Sterling Determined Actions");
provided, however, that the Sterling Determined Actions shall not include any
Remedial Actions to address or correct Immaterial Environmental Breaches. Within
three business days after the end of the Sterling Determination Period (the
"Cytec Reevaluation Period"), Seller, at its sole option, may terminate this
Agreement, unless the Sterling Parties unconditionally agree to pay all Costs of
Remediation of Post-Closing Actions in excess of $10,000,000, in which event
Seller shall not have the right to terminate this Agreement.
(d) Mutual Determination. (i) In the event that neither Purchaser
nor Seller chooses to terminate this Agreement notwithstanding its right to do
so pursuant to Section 5.21(c), or neither Purchaser nor Seller has the right to
terminate this Agreement pursuant to Section 5.21(c), then during the three
business day period following the last day of the Sterling Determination Period
or the Cytec Reevaluation Period, as applicable (the "Mutual Determination
Period"), Seller and Purchaser shall use their reasonable best efforts to agree
upon a list of actions, taken from the Cytec Determined Actions and the Sterling
Determined Actions, that the Cytec Parties will be required to undertake after
the Closing Date (the "Post-Closing Actions"), it being understood that the
Post-Closing Actions shall not include Remedial Actions to address or correct
Immaterial Environmental Breaches. If Seller and Purchaser cannot agree upon the
Post- Closing Actions, then the Post-Closing Actions, to the extent required,
shall be determined by binding arbitration conducted in accordance with the
provisions hereof and the rules of the American Arbitration Association. Such
arbitration shall be conducted in the State of Florida or such other place as
Seller and Purchaser shall mutually agree by Law Engineering, Inc. (Florida
office) or, if it is not available or unwilling to act as arbitrator, then
Seller and Purchaser together shall select one consultant from a list of three
other nationally recognized environmental consulting firms provided by Law
Engineering, Inc. (other than Pilko or any of its Affiliates) generally
recognized as having current competence with respect
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to the environmental laws of the State of Florida and the United States, or if
the parties fail to agree within five business days such firm as selected by the
American Arbitration Association (such firm being referred to as the
"Environmental Arbitrator"). The fees and expenses of the Environmental
Arbitrator shall be borne equally by Seller and Purchaser.
(ii) If Purchaser's determination of the Cost of Remediation of the
Sterling Determined Actions is less than $10,000,000 and Seller believes in good
faith that the Cost of Remediation of the Sterling Determined Actions is greater
than $10,000,000, the Environmental Arbitrator shall first consider whether or
not the Cost of Remediation of the Sterling Determined Actions is reasonably
likely to exceed $10,000,000 (the "Threshold Issue"). If the Environmental
Arbitrator decides that such Cost of Remediation is reasonably likely to exceed
$10,000,000, Seller may terminate this Agreement, unless the Sterling Parties
unconditionally agree to pay all Costs of Remediation of Post-Closing Actions in
excess of $10,000,000. Unless this Agreement has been terminated, the
Environmental Arbitrator shall then determine the Post-Closing Actions by
choosing the Cytec Determined Actions, except to the extent that (A) a Cytec
Determined Action conflicts with a Sterling Determined Action and (B) the
Environmental Arbitrator determines that a conflicting Sterling Determined
Action is (I) a Remedial Action that is consistent with the historical practices
of the Sterling Parties (in accordance with alternative risk-based remediation
standards for industrial properties historically applied by the Sterling
Parties) at the Texas City Facility, if applicable, (II) a Remedial Action
mandated by a Governmental Entity, if the applicable Facility Condition would
not arise at the Texas City Facility because of differences in the operations at
the Texas City Facility and the Santa Rosa Facility (other than in respect of
landfills or spray irrigation), or (III) a Remedial Action that is in accordance
with standard chemical industry practices (in accordance with alternative
risk-based remediation standards for industrial properties), if the applicable
Facility Condition is in respect of a landfill or spray irrigation, in which
case the Environmental Arbitrator shall choose the Sterling Determined Actions.
The Environmental Arbitrator shall determine the Post-Closing Actions within 15
business days of its appointment. The Environmental Arbitrator shall furnish
Seller and Purchaser with a written report of its determination within the
15-business day period referred to above, which report shall (i) be signed by
the Environmental Arbitrator, and (ii) identify and describe the Post-Closing
Actions, to the extent required. The determination of the matters resolved by
the Environmental Arbitrator shall be final and binding on the
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Cytec Parties and the Sterling Parties as an arbitral award. The Closing may
occur notwithstanding the commencement of an arbitration proceeding contemplated
hereby, unless the Environmental Arbitrator is to determine the Threshold Issue
and has not done so.
(e) Remediation; Responsibility for Costs Thereof. If the Closing
occurs, then Parent shall undertake to complete all Post-Closing Actions,
subject to the last sentence of this Section 5.21(e), and shall undertake such
Post-Closing Actions in a reasonably expeditious, cost-efficient manner. The
Cytec Parties shall be responsible for the Costs of Remediation in respect of
the Post-Closing Actions that are Cytec Determined Actions. Each of the Cytec
Parties, on the one hand, and the Sterling Parties, on the other hand, shall be
responsible for, and the Sterling Parties shall reimburse the Cytec Parties on a
monthly basis for, 50% of the excess out-of-pocket costs and expenses of the
Cytec Parties for completing any Post-Closing Actions that are not Cytec
Determined Actions over the out-of-pocket costs and expenses of completing the
comparable Cytec Determined Actions; provided, however, that the Cytec Parties
shall not be responsible for Costs of Remediation in respect of any Post-Closing
Actions in excess of $10,000,000, or for undertaking any Remedial Actions after
such Costs of Remediation have exceeded $10,000,000, if the Sterling Parties
have unconditionally agreed in writing to pay all such Costs of Remediation in
excess of $10,000,000 pursuant to this Section 5.21. Subject to the following
sentence, in the event that any Governmental Entity involved in the approval or
oversight of the conduct or completion of the Post-Closing Actions requires that
any action not contemplated by the Post- Closing Actions be taken in order to
bring a Facility Condition into compliance with Environmental Laws, or that any
Remedial Action be taken through a different method or to a more stringent
extent, the Cytec Parties shall, at their sole cost and expense, complete any
such required action that is a Remedial Action required to bring the relevant
Facility Condition into compliance with Current Environmental Laws (other than
any Remedial Action to address or correct an Immaterial Environmental Breach),
and the Sterling Parties shall, at their sole cost and expense, complete all
other such actions. The Sterling Parties hereby agree that they will not, and
will not permit their Affiliates to, take any actions (other than actions
required by law) for the purpose of causing, or which could reasonably be
expected to cause, (a) any Governmental Entity which has any involvement,
jurisdiction or influence over the Post-Closing Actions, to modify, alter or
adjust such Post-Closing Actions, as determined in accordance with this
Agreement, in any manner which would be adverse to the Cytec Parties or (b) the
involvement of any Governmental Entity with the carrying out
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of the Post-Closing Actions (or to the extent any Governmental Entity is
involved, to increase such involvement), provided, however, that nothing
contained in this sentence shall be deemed or construed to prohibit any of the
Sterling Parties from bringing any action before a court or tribunal of
competent jurisdiction for the purpose of enforcing the obligations of the Cytec
Parties to complete the Post-Closing Actions, as determined in accordance with
the terms of this Agreement. The Cytec Parties shall provide the Sterling
Parties with copies of all correspondence, reports, plans, laboratory data and
other papers filed with, sent to or received from any such Governmental Entity
which are related to the Post-Closing Actions as promptly as practicable under
the circumstances.
(f) Notwithstanding anything to the contrary contained herein, the
Sterling Parties shall not be obligated to indemnify any Seller Indemnified
Person (pursuant to Article VIII hereof or otherwise) for the costs and expenses
of the Post-Closing Actions that are the responsibility of the Cytec Parties
pursuant to this Section 5.21. Notwithstanding anything to the contrary
contained herein, the Cytec Parties shall not be obligated to indemnify any
Purchaser Indemnified Person (pursuant to Article VIII hereof or otherwise) for
the costs and expenses of the Post-Closing Actions that are the responsibility
of the Sterling Parties.
(g) Responsibility for Costs of Pilko Assessment. If the Closing
occurs, Purchaser shall, at the Closing, reimburse Seller for the 50% of the
costs and expenses in respect of the Pilko Assessment paid by Seller. If the
Closing does not occur, on the date of termination of this Agreement, Purchaser
shall reimburse Seller for the 50% of the costs and expenses in respect of
preparing the Pilko Assessment paid by Seller, unless (i) this Agreement is
terminated by Seller pursuant to Section 5.21(b), 5.21(c) or 5.21(d) or by
Purchaser pursuant to Section 5.21(c) or (ii) the conditions set forth in
Section 6.01(c) or Section 6.02 (other than Section 6.02(f)) shall not have been
satisfied. In the case of clause (i) or (ii) of the immediately preceding
sentence, Seller shall reimburse Purchaser for the 50% of the costs and expenses
in respect of the Pilko Assessment paid by Purchaser.
(h) Access; Cooperation. (i) The Sterling Parties hereby agree to
provide access to Parent after the Closing during normal business hours upon
reasonable prior notice from Parent to the extent necessary to enable Parent to
comply with Section 5.21(e) above. The Sterling Parties further agree to fully
cooperate with the Cytec Parties in order that the Cytec Parties may fulfill
their obligations under this Section 5.21,
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including by causing the cooperation of the employees of the Sterling Parties,
and none of the Sterling Parties shall take any actions with respect to the
Santa Rosa Facility which would be reasonably expected to interfere, including
by increasing the costs associated therewith, with any Post- Closing Action. To
the extent that as a result of any Post- Closing Action, any discussions or
negotiations with any Governmental Entity shall be required, Parent shall be
entitled to direct such discussions and negotiations, including the negotiations
of any clean-up levels and remediation strategies, and Purchaser shall be
entitled to observe such discussions and negotiations. Parent shall consult with
the Sterling Parties during the course of any such discussion or negotiations.
(ii) In conducting the Post-Closing Actions, the Cytec Parties shall
use commercially reasonable efforts so as not to (A) interfere in any material
respect with the ability of Purchaser to perform its obligations (other than any
such obligations that are solely for the benefit of the Cytec Parties), or
exercise or enforce its rights, in either case under this Agreement, the
Acrylonitrile Supply Agreement, the Acrylonitrile Assignment and Assumption or
the Assumption Agreement, (B) interfere in any material respect with the ability
of Purchaser to perform its obligations under, or to comply with, any
Governmental Rule, Permit or Environmental Permit applicable to the Business or
the Acquired Assets, (C) interfere with the operation or maintenance of the
plant at the Santa Rosa Facility or the conduct of the Business in the ordinary
course as currently conducted if such interference would reasonably be expected
to have a material adverse effect on the financial condition of Purchaser or the
Business, (D) cause the revocation or termination of any Permit or Environmental
Permit necessary for the operation of the plant at the Santa Rosa Facility or
the conduct of the Business in the ordinary course of business substantially as
currently conducted or (E) require the shutdown of all or any significant part
of the plant at the Santa Rosa Facility, other than a shutdown which will
coincide with a scheduled shutdown of such plant substantially in accordance
with current practices.
SECTION 5.22. Title Policy. On or prior to the Closing Date, Seller,
at its sole cost and expense, shall cause to be issued to Purchaser an ALTA form
of Owner's Title Policy (the "Title Policy"), which shall insure in the amount
of the fair market value of the Santa Rosa Facility good and marketable fee
simple title in Purchaser to the Santa Rosa Facility (it being understood that
any insurance coverage in excess of $7,400,000 shall be at the cost and expense
of the Sterling Parties), including any appurtenant easement tracts,
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and shall provide for extended coverage over the general exceptions for survey
matters normally contained therein and rights of parties in possession. The
Title Policy shall provide, by way of affirmative endorsements, (i) that the
Santa Rosa Facility parcels of land are contiguous and (ii) such other coverage
or endorsements as may reasonably be required by Purchaser or The Chase
Manhattan Bank, N.A., as lender to Purchaser, subject, in each case, only to (A)
Permitted Liens and (B) such additional standard printed exceptions (other than
general exceptions as are to be deleted or insured against as provided herein)
customarily contained in such form of owner's ALTA title insurance policy. The
Title Policy shall indicate (i) that the Santa Rosa Facility has an unencumbered
and unobstructed right of access to a public road and (ii) which Permitted Liens
pertain to which parcel or tract of land at the Santa Rosa Facility.
SECTION 5.23. Further Assurances. The Cytec Parties and the Sterling
Parties will use commercially reasonable efforts to take, or cause to be taken,
all action, and to do, or cause to be done, all things necessary to carry out
all of their respective obligations under this Agreement and the Ancillary
Agreements and to consummate and make effective the Transactions.
SECTION 5.24. Reimbursement for Certain Excess Medical Claims and
Expenses. Parent hereby agrees to reimburse the Sterling Parties for claims for
reimbursement of medical expenses under the Transferred Benefit Plans incurred
prior to the Closing Date and other expenses in connection with Transferred
Benefit Plans incurred prior to the Closing Date, but only to the extent that
such costs and expenses which have not been previously paid by the Cytec Parties
exceeds $400,000.
SECTION 5.25. Services Agreement Issue. If, as of January 31, 1997,
or any date thereafter prior to February 14, 1997, a Services Agreement Issue
arises, the Cytec Parties and the Sterling Parties shall use commercially
reasonable efforts to identify alternative arrangements for the provision of the
applicable Service.
SECTION 5.26. Certain Matters Related to Cyanamid. (a) Each Sterling
Party hereby irrevocably and unconditionally agrees that it shall not, and shall
not permit any Purchaser Indemnified Person to, make any claims against, or seek
any indemnity from, Cyanamid or any of Cyanamid's successors in interest (other
than a Cytec Party, but excluding Cyanamid) in respect of any Loss relating to
the Business, the Acquired Assets or the Assumed Liabilities (i) for which the
Sterling Parties are obligated to indemnify any
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of the Cytec Parties pursuant to this Agreement and (ii) for which any Cytec
Party is obligated to indemnify Cyanamid under the Transfer and Distribution
Agreement or the Environmental Matters Agreement, each dated December 17, 1993,
between Parent and Cyanamid including, in each case, any agreements listed as
exhibits to such documents.
(b) Each Sterling Party hereby agrees that prior to the sale by it
to any person (including any Affiliate of such Sterling Party) (any such person,
a "Transferee") of the Business or all or substantially all of the Acquired
Assets, or a substantial part of the Santa Rosa Facility and prior to the
assumption of all or a substantial part of the Assumed Liabilities by any
Transferee, such Sterling Party shall notify such Transferee of the terms of
this Section 5.26 and the provisions of this Agreement related hereto, and shall
cause such Transferee to execute an acknowledgment that such Transferee is bound
by the provisions of this Section 5.26 and such provisions, as a successor to
such Sterling Party.
(c) Purchaser hereby agrees to perform the obligations of Parent
pursuant to Section 5.1 of the Environmental Matters Agreement dated as of
December 17, 1993, between Cyanamid and Parent (the "Environmental Matters
Agreement") to the extent, but only to the extent, such obligations relate to
the Santa Rosa Facility, except that (i) Purchaser shall deliver any reports
required to be delivered under Section 5.1 of the Environmental Matters
Agreement to Parent, rather than the Environmental Oversight Committee (as
defined in the Environmental Matters Agreement) and (ii) each report required to
be submitted under such Section shall be submitted to Parent no later than
August 1 and February 1 of each year; provided, however, that Purchaser shall
not be required to perform any obligations pursuant to this Section 5.26(c) that
any Cytec Party is required to perform under Section 5.21.
(d) Purchaser hereby agrees to conduct any remediation, other than
remediation the Cytec Parties are required to complete under Section 5.21, in
accordance with Environmental Laws and with generally accepted industry
practices.
(e) Parent hereby agrees to seek the consent of Cyanamid to the
assignment of the Transfer Agreement (Project 7) dated December 17, 1993,
between Parent and Cyanamid within 30 days after the date of this Agreement, it
being understood
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that Parent shall not have any obligation to negotiate the terms of such consent
with Cyanamid.
SECTION 5.27. Amendment to Disclosure Schedule. Not later than
January 15, 1997, the Cytec Parties, in their sole discretion, may elect to
deliver to Purchaser one or more revised Schedules chosen by the Cytec Parties;
provided, however, that no such Schedule shall include an addition of any matter
that was not previously listed in another Schedule prior to the revision thereof
(it being understood that the disclosure of such matter shall be as deemed
appropriate by the Cytec Parties). The parties hereto agree that (i) the
Disclosure Schedules shall thereafter be deemed to be amended and restated as
set forth in such revised Disclosure Schedules and (ii) disclosure of any matter
therein shall not be deemed an admission by Parent that such disclosure is
material or constitutes a Material Adverse Effect.
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligations. The respective
obligations of the Sterling Parties and the Cytec Parties to consummate the
Closing shall be subject to the satisfaction on or prior to the Closing Date of
the following conditions:
(a) HSR. Any applicable waiting period under the HSR Act shall have
expired or been terminated.
(b) No Injunctions or Restraints. No statute, rule, regulation or
executive order shall have been enacted or issued by a Governmental Entity, and
no decree, temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other Governmental
Entity, and no other legal restraint or prohibition preventing the consummation
of the Transactions shall be in effect; provided, however, that each of the
parties to this Agreement shall have used commercially reasonable efforts to
prevent the entry of any such injunction or other order or decree and to appeal
as promptly as possible any injunction or other order or decree that may be
entered.
(c) Remediation Matters. No Threshold Issue shall have been
submitted to the Environmental Arbitrator which has not been resolved by the
Environmental Arbitrator and there shall not be a possibility that a Threshold
Issue may later arise.
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SECTION 6.02. Conditions to the Obligations of the Sterling Parties.
The obligations of the Sterling Parties to consummate the Closing is subject to
the satisfaction on and as of the Closing Date of each of the following
additional conditions:
(a) Representations and Warranties. The representations and
warranties of the Cytec Parties set forth in this Agreement shall be true and
correct on and as of the Closing as though made on and as of the Closing, (i)
except to the extent such representations and warranties are made as of a
specified earlier date (in which case such representations and warranties shall
be true and correct in all material respects as of such earlier specified date)
and (ii) except for breaches of representations and warranties as to matters
that, individually or in the aggregate (and without regard to any materiality
qualifications contained therein) are not reasonably likely to have a Material
Adverse Effect, and Purchaser shall have received a certificate signed by an
authorized officer of each Cytec Party to such effect.
(b) Performance of Obligations of the Cytec Parties. Each of the
Cytec Parties shall have performed or complied in all material respects with all
obligations, conditions and covenants required to be performed by it under this
Agreement at or prior to the Closing, and Purchaser shall have received a
certificate signed by an authorized officer of each Cytec Party to such effect.
(c) Opinion of Counsel to the Cytec Parties. Purchaser shall have
received an opinion dated the Closing Date of Cravath, Swaine & Moore, counsel
to the Cytec Parties, to the effect that:
(i) Each of the Cytec Parties is a corporation duly organized,
validly existing and in good standing under the laws of Delaware.
(ii) Each of the Cytec Parties has the corporate power and authority
to execute and deliver the Operative Documents to which it is a party and
to consummate the Transactions. The execution and delivery by each of the
Cytec Parties of the Operative Documents to which it is a party and the
consummation of the Transactions by each of the Cytec Parties have been
duly authorized by all necessary corporate action and will not require the
approval of the stockholders of Parent. Each of the Operative Documents to
which any Cytec Party is a party has been duly executed and delivered by
such Cytec Party and such Operative Document constitutes a legal, valid
and binding obligation of such Cytec Party enforceable
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against such Cytec Party in accordance with its respective terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights
generally from time to time in effect and to general public policy
considerations and principles of equity (including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing)
regardless of whether considered in a proceeding in equity or at law.
(iii) The execution and delivery by each of the Cytec Parties of the
Operative Documents to which it is a party do not, and the consummation by
each of the Cytec Parties of the Transactions will not, (A) violate any
Federal law or the General Corporation Law of the State of Delaware or (B)
conflict with any provision of the certificate of incorporation or by-laws
of any of the Cytec Parties. Such counsel need not express any opinion,
however, as to any violation of any law or regulation which may have
become applicable to a Cytec Party as a result of the involvement of
Purchaser in the Transactions because of Purchaser's legal or regulatory
status or because of any other facts specifically pertaining to Purchaser.
In rendering such opinion, such counsel may rely, to the extent it deems it
appropriate to do so, on certificates of officers or employees of the Cytec
Parties and of public officials as to matters of fact and authenticity of
documents and on opinions of counsel in other states as to questions of law of
such states.
(d) Ancillary Agreements. Each of the Cytec Parties shall have
executed and delivered the Ancillary Agreements to which it is a party.
(e) Other Documents. Each of the Cytec Parties shall have furnished
to Purchaser such other documents relating to such Cytec Party's corporate
existence and authority, including copies of resolutions of the board of
directors of each Cytec Party, as Purchaser may reasonably request.
(f) Financing. All of the conditions to the availability of the
Financing, as set forth in the commitment letter previously delivered to Parent
(or, if Parent has given its written approval of alternative financing terms
proposed by Purchaser, the terms of the written commitment in respect thereof),
shall have been met and Purchaser shall have obtained the Financing.
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(g) No Material Adverse Effect. Since the date of this Agreement,
there shall not have occurred any change that constitutes, and no event or
events shall have occurred since the date of this Agreement which have resulted
in or constitute a Material Adverse Effect.
(h) Title Policy; Survey Certification; Estoppel Letter. The Cytec
Parties shall have delivered to Purchaser (i) the Title Policy, (ii) a
certification of the Survey by Baskerville-Donovan, Inc., and (iii) a zoning
estoppel letter addressed to Purchaser and the banks party to the Financing
(which may be included on the Survey).
SECTION 6.03. Conditions to the Obligations of the Cytec Parties.
The obligations of the Cytec Parties to consummate the Closing is subject to the
satisfaction on and as of the Closing Date of each of the following additional
conditions:
(a) Representations and Warranties. The repre sentations and
warranties of the Sterling Parties set forth in this Agreement shall be true and
correct in all material respects as of the Closing as though made on and as of
the Closing, except to the extent such representations and warranties were made
as of an earlier specified date (in which case such representations and
warranties shall be true and correct in all material respects as of such
specified earlier date), and Parent shall have received a certificate signed by
an authorized officer of each of the Sterling Parties to such effect.
(b) Performance of Obligations of the Sterling Parties. The Sterling
Parties shall have performed in all material respects all obligations required
to be performed by them under this Agreement at or prior to the Closing, and
Parent shall have received a certificate signed by an authorized officer of each
Sterling Party to such effect.
(c) Opinion of Purchaser's Counsel. Parent shall have received an
opinion dated the Closing Date of Andrews & Kurth, L.L.P., counsel to the
Sterling Parties, to the effect that:
(i) Each of the Sterling Parties is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware.
(ii) Each of the Sterling Parties has the requisite
corporate power and corporate authority to execute and
deliver the Operative Documents to which it is a party
and to consummate the Transactions. The execution and
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delivery by each Sterling Party of the Operative Documents to which it is
a party and the consummation of the Transactions by such Sterling Party
have been duly authorized by all necessary corporate action on the part of
such Sterling Party and will not require the approval of STX's
stockholders. Each Sterling Party has duly executed and delivered each
Operative Document to which it is a party and such Operative Document
constitutes a legal, valid and binding obligation of such Sterling Party
enforceable against such Sterling Party in accordance with their
respective terms subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws
affecting creditors' rights generally from time to time in effect and to
public policy considerations and general principles of equity (including,
without limitation, concepts of materiality, reasonableness, good faith
and fair dealing) regardless of whether considered in a proceeding in
equity or at law.
(iii) The execution and delivery by each Sterling Party of the
Operative Documents to which it is a party do not, and the consummation by
such Sterling Party of the Transactions will not, (A) violate any Federal
law or the General Corporation Law of the State of Delaware or (B)
conflict with any provision of the certificate of incorporation or by-laws
of Purchaser. Such counsel need not express any opinion, however, as to
any violation of any law or regulation which may have become applicable to
Purchaser as a result of the involvement of any Cytec Party in the
Transactions because of any Cytec's Party's legal or regulatory status or
because of any other facts specifically pertaining to any Cytec Party.
(iv) STX has duly authorized the issuance of the Preferred Stock to
Parent in accordance with this Agreement. When so issued, the Preferred
Stock shall be duly authorized, validly issued, fully-paid and
nonassessable. The issuance of the Preferred Stock to Parent in accordance
with this Agreement will not conflict with any provision of the
Certificate of Incorporation or Bylaws of STX.
In rendering such opinion, counsel may rely, to the extent it deems it
appropriate to do so, on certificates of officers or employees of any of the
Sterling Parties and of public officials as to matters of fact and authenticity
of documents, on opinions of counsel in other states as to questions of law of
such states and on opinions of attorneys in STX's in-house law department. In
addition, counsel may presume that the delivery of the Preferred Stock to Parent
in accordance with
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the Transactions is exempt from the registration requirements under the
Securities Act and the Securities Exchange Act of 1934, as amended.
(d) Ancillary Agreements. Purchaser shall have executed and
delivered the Ancillary Agreements to which it is a party.
(e) Other Documents. Purchaser shall have furnished to Parent such
other documents relating to the corporate existence and authority of the
Sterling Parties, including copies of resolutions of the respective boards of
directors of the Sterling Parties, as Parent may reasonably request.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination. (a) Notwithstanding anything to the
contrary in this Agreement, this Agreement may be terminated and the
Transactions abandoned at any time prior to the Closing:
(i) by mutual written consent of Seller and Purchaser;
(ii) by Seller if any of the conditions set forth in Sections 6.01
or 6.03 shall have become incapable of fulfillment and shall not have been
waived by Parent, provided that no Cytec Party is in breach in any
material respects of any of its representations, warranties, covenants or
agreements contained in this Agreement;
(iii) by Purchaser if any of the conditions set forth in Sections
6.01 or 6.02 shall have become incapable of fulfillment and shall not have
been waived by Purchaser, provided that no Sterling Party is in breach in
any material respects of any of its representations, warranties, covenants
or agreements contained in this Agreement;
(iv) by Purchaser if the Closing has not occurred by the Outside
Date, unless the failure to do so by such time is due to a breach of any
representation or warranty contained in this Agreement or a breach of any
agreement or covenant in this Agreement by, or otherwise on account of
material delay or default on the part of, any Sterling Party;
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(v) by Seller if the Closing has not occurred by the Outside Date,
unless the failure to do so by such time is due to a breach of any
representation or warranty contained in this Agreement or a breach of any
agreement or covenant contained in this Agreement by, or otherwise on
account of material delay or default on the part of, any Cytec Party; or
(vi) by Seller or Purchaser, as provided in Section 5.21.
(b) In the event of termination by Seller, on the one hand, or
Purchaser, on the other hand, pursuant to this Section 7.01, written notice
thereof shall forthwith be given to the other party and the transactions
contemplated by this Agreement shall be terminated, without further action by
any party. If this Agreement is terminated pursuant to this Section 7.01:
(i) to the extent provided in the Confidentiality Agreement,
Purchaser shall return all documents and other material received from the
Cytec Parties relating to the Transactions, whether so obtained before or
after the execution hereof, to Parent;
(ii) all confidential information received by Purchaser with respect
to the Cytec Parties or the Business shall be treated in accordance with
the Confidentiality Agreement, which shall remain in full force and effect
notwithstanding the termination of this Agreement;
(iii) to the extent provided in the Confidentiality Agreement, each
Cytec Party shall return all documents and other material received from
the Sterling Parties relating to the Transactions, whether so obtained
before or after the execution hereof, to Purchaser; and
(iv) all confidential information received by the Cytec Parties with
respect to the Sterling Parties shall be treated in accordance with the
Confidentiality Agreement.
(c) If this Agreement is terminated pursuant to this Section 7.01,
this Agreement shall become null and void and of no further force and effect,
except that the provisions of the last sentence of Section 5.02 and the
provisions of Sections 5.03, 5.06, 5.08, 5.21(c) and 7.01 and Articles VIII and
IX shall survive such termination (but, in the case of Article VIII, only to the
extent such Article relates to Sections of this Agreement that survive such
termination).
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Nothing in this Section 7.01 shall be deemed to release any party from any
liability for any breach by such party of any of the terms and provisions of
this Agreement.
SECTION 7.02. Amendments and Waivers. This Agreement may not be
amended except by an instrument in writing signed on behalf of Parent and
Purchaser. By an instrument in writing, Purchaser may (i) extend the time for
the performance of any of the obligations or other acts of the Cytec Parties,
(ii) waive any inaccuracies in the representations and warranties of the Cytec
Parties contained herein or (iii) waive compliance by any Cytec Parties with any
term or provision of this Agreement that such Cytec Party was or is obligated to
comply with or perform. By an instrument in writing, Parent may (i) extend the
time for the performance of any of the obligations or other acts of any Sterling
Party, (ii) waive any inaccuracies in the representations and warranties of any
Sterling Party contained herein or (iii) waive compliance by any Sterling Party
with any term or provision of this Agreement that such Sterling Party was or is
obligated to comply with or perform. Any agreement on the part of any party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party by one of its duly authorized
officers. The failure of any party hereto to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights.
ARTICLE VIII
Indemnification
SECTION 8.01. Indemnification by the Cytec Parties. (a) In addition
to their other indemnification obligations contained herein, the Cytec Parties
hereby agree, jointly and severally, to indemnify the Sterling Parties and their
Affiliates and their respective officers, directors, employees and agents and
their respective heirs, executors, personal representatives, administrators,
successors and assigns (the "Purchaser Indemnified Persons"), against, and agree
to defend and hold them harmless from and against, any Loss which may be imposed
on, incurred by or asserted against any of Purchaser Indemnified Persons to the
extent such Loss arises out of or results from or in connection with the
following:
(i) any inaccuracy in or breach by any Cytec Party
of any representation or warranty contained in this
Agreement;
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(ii) any breach by any Cytec Party of any of its
covenants or agreements contained in this Agreement; or
(iii) any Excluded Liability, other than any Cytec
Escambia Bay Liability;
provided, however, that the Cytec Parties shall not have any liability under
this Section 8.01(a) for any Assumed Liabilities; and provided, further, that
(x) no Cytec Party shall have any liability for any claim pursuant to Section
8.01(a)(i) above unless the Loss in respect thereof exceeds $10,000; (y) no
Cytec Party shall have any liability pursuant to Section 8.01(a)(i) above unless
and until the aggregate of all Losses for all claims under Section 8.01(a)(i)
above exceeds on a cumulative basis an amount equal to $1,000,000 and then only
to the extent of any such excess; and (z) the total indemnification to be paid
by the Cytec Parties under Section 8.01(a)(i) shall not in any event exceed
$29,000,000.
(b) In addition to their other indemnification obligations contained
herein, the Cytec Parties hereby agree, jointly and severally, to indemnify each
Purchaser Indemnified Person against, and agree to defend and hold harmless each
Purchaser Indemnified Person from the following (the following liabilities being
referred to as the "Cytec Escambia Bay Liabilities"):
(i) to the extent that a notice of claim in respect of each such
Loss is delivered to the Cytec Parties prior to the fifth anniversary of
the Closing Date:
(A) 50% of the amount of the first $5,000,000 of Losses
imposed on, incurred by or asserted against the Purchaser
Indemnified Persons arising out of Escambia Bay Liabilities;
(B) the remaining 50% of the amount of the first $5,000,000 of
Losses imposed on, incurred by or asserted against the Purchaser
Indemnified Persons arising out of Escambia Bay Liabilities, but
only to the extent that each such Loss does not occur after any
environmental survey or assessment, other than the testing of
wastewater generated from the Santa Rosa Facility, conducted or
directed by, or at the expense of, any Sterling Party or any of
their respective Affiliates, unless such survey or assessment is
consistent with the historical practices of the Cytec Parties
regarding surveys or assessments in Escambia Bay or required by any
Environmental Law or Environmental Permit; and
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(C) in the event that the Cytec Parties have fully indemnified
the Purchaser Indemnified Persons pursuant to clause (A) above and
have not been obligated to make any indemnity payments pursuant to
clause (B) above, the next $2,500,000 of Losses in excess of the
first $5,000,000 of Losses imposed on, incurred by or asserted
against the Purchaser Indemnified Persons arising out of Escambia
Bay Liabilities, but only to the extent that a notice of claim in
respect of each such Loss is delivered to the Cytec Parties prior to
the fifth anniversary of the Closing Date; and
(ii) in the event that Purchaser Indemnified Persons have actually
made payments in excess of $29,000,000 (net of any indemnity payments from
the Cytec Parties pursuant to this Section 8.01(b) and net of any amounts
recovered or recoverable under insurance policies upon the use of
commercially reasonable efforts) in respect of Losses arising out of
Escambia Bay Liabilities, the amount of all additional Losses arising out
of Escambia Bay Liabilities that are imposed on, incurred by or asserted
against any Purchaser Indemnified Person, whether or not the notice of
claim in respect of any such Loss is delivered to the Cytec Parties prior
to the fifth anniversary of the Closing Date.
(c) The Sterling Parties acknowledge and agree that their sole and
exclusive remedy with respect to any and all claims relating to any breach of
any representation or warranty, or, except as otherwise specifically provided
herein, any failure to perform any covenant (exclusive of indemnification
obligations), contained in this Agreement, the Assumption Agreement or the
General Conveyance, Transfer and Assignment shall be pursuant to the
indemnification provisions set forth in this Agreement.
(d) Notwithstanding anything in this Article VIII to the contrary,
the Cytec Parties shall not have any liability under this Section 8.01 for any
portion of any Losses resulting from or attributable to (i) any fraud or willful
misconduct of a Purchaser Indemnified Person in connection with the Transactions
or (ii) any gross negligence of a Purchaser Indemnified Person in connection
with the Transactions excluding, however, any gross negligence of such Purchaser
Indemnified Person in making any representation or warranty or in the
preparation of the Disclosures Schedules or Appendices related thereto in
connection with the Transactions.
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SECTION 8.02. Indemnification by Purchaser, Guarantee of STX
Chemicals. (a) In addition to its other indemnification obligations contained
herein, Purchaser hereby agrees to indemnify each Cytec Party (excluding,
however, Cyanamid) and its Affiliates and their respective officers, directors
and employees and agents and their respective heirs, executors, personal
representatives, administrators, successors and assigns (the "Seller Indemnified
Persons") against, and agrees to defend and hold them harmless from and against
any Loss which may be imposed on, incurred by or asserted against any Seller
Indemnified Person to the extent such Loss arises out of, or results from or in
connection with:
(i) any inaccuracy in or breach by any Sterling
Party of any representation or warranty contained in this
Agreement;
(ii) any breach by any Sterling Party of any covenant
contained in this Agreement;
(iii) the operation of the Business after the Closing
Date, including in respect of environmental matters; or
(iv) any Assumed Liability, including any obligation or liability
included in Section 2.03(a)(v) (other than those matters for which the
Cytec Parties are responsible pursuant to Section 5.21);
provided, however, that Purchaser shall not have any liability under this
Section 8.02(a) for any Excluded Liabilities; and, provided, further, that (x)
Purchaser shall not have any liability for any claim pursuant to Section
8.02(a)(i) above unless the Loss in respect thereof exceeds $10,000, (y)
Purchaser shall not have any liability pursuant to Section 8.02(a)(i) above
unless and until the aggregate of all Losses for all claims pursuant to Section
8.02(a)(i) above exceeds on a cumulative basis an amount equal to $1,000,000 and
then only to the extent of such excess; and (z) the total indemnification to be
paid by Purchaser under Section 8.02(a)(i) shall not in any event exceed
$15,000,000. Notwithstanding anything in this Article VIII, other than Section
8.02(b) below, to the contrary, (x) in no event shall any of the Sterling
Parties have any liability under Section 8.02(a)(iv) for any portion of any
Losses resulting from or attributable to a breach by any Cytec Party of its
representations, warranties or obligations under this Agreement (irrespective of
the expiration of any such representation or warranty), and (y) except to the
extent that any Cytec Party is required to indemnify, hold harmless or defend
Cyanamid (other than with respect to Excluded
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85
Liabilities), in no event shall any of the Sterling Parties be obligated or
required to indemnify, hold harmless or defend Cyanamid under this Section 8.02
with respect to any Loss or any other matter whatsoever, it being specifically
understood and agreed that all direct indemnity obligations of any Sterling
Party contained in the Operative Documents are solely for the benefit of the
Seller Indemnified Persons.
(b) In addition to its other indemnification obligations contained
herein, Purchaser hereby agrees to indemnify each Seller Indemnified Person
against, and agrees to defend and hold them harmless from and against any Loss
that may be imposed on, incurred by or asserted against any Seller Indemnified
Person to the extent such Loss arises out of, or results from or in connection
with any Assumed Liability that is the subject of an inaccuracy in or breach of
any representation or warranty made by any Cytec Party in this Agreement;
provided, however, that (x) Purchaser shall not have any liability for claims
pursuant to this Section 8.02(b) in respect of Cytec Knowledge Losses unless and
until the aggregate of all Cytec Knowledge Losses in respect of claims pursuant
to this Section 8.02(b) exceeds on a cumulative basis an amount equal to
$1,000,000, and then only to the extent of such excess, and (y) the total
indemnification to be paid by Purchaser under this Section 8.02(b) shall not in
any event exceed $15,000,000.
(c) The Cytec Parties acknowledge and agree that their sole and
exclusive remedy with respect to any and all claims relating to any breach of
any representation or warranty or, except as otherwise specifically provided
herein, any failure to perform any covenant (exclusive of indemnification
obligations), contained in this Agreement, the Assumption Agreement or the
General Conveyance Transfer and Assignment, shall be pursuant to the
indemnification provisions set forth in this Agreement.
(d) Notwithstanding anything in this Article VIII to the contrary,
Purchaser and STX Chemicals shall not have any liability under this Section 8.02
for any portion of any Losses resulting from or attributable to (i) any fraud or
willful misconduct of a Seller Indemnified Person in connection with the
Transactions or (ii) any gross negligence of a Seller Indemnified Person in
connection with the Transactions excluding, however, any gross negligence of
such Seller Indemnified Person in making any representation or warranty or in
the preparation of the Disclosure Schedules or Appendices related thereto in
connection with the Transactions.
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(e) STX Chemicals hereby guarantees to the Seller Indemnified
Parties the due and punctual payment of all indemnity obligations of Purchaser
under this Section 8.02 (the "Purchaser Indemnity Obligations"); provided,
however, that the aggregate liability of STX Chemicals under this Section
8.02(e) as of any date shall not exceed the STX Guarantee Cap at such date. STX
Chemicals waives presentation to, demand of, payment from and protest to any
Seller Indemnified Party of any Purchaser Indemnity Obligations, and also waives
notice of protest for nonpayment. STX Chemicals further agrees that the
guarantee set forth herein constitutes a guarantee of payment when due and not
of collection. Upon payment by STX Chemicals of any sums to any Seller
Indemnified Person as provided herein, all rights of STX Chemicals against
Purchaser arising as a result thereof by way of right of subrogation or
otherwise shall in all respects be subordinate and junior in rights of payment
to the prior payment in full of the Purchaser Indemnity Obligations and any
other amounts due and payable from time to time by Purchaser to any Cytec Party
under any Operative Document. The "STX Guarantee Cap" shall mean, at any time,
the lesser of (i) $15,000,000 minus the aggregate amount of all Purchaser
Indemnity Obligations actually paid by STX Chemicals as of such date and (ii)
$30,000,000 minus the sum of (A) the aggregate amount of Earn-Out Payments
received by the Cytec Parties as of such date, (B) the aggregate amount of cash
dividends paid on the Preferred Stock as of such date and two-thirds of the
liquidation value of all Additional Shares issued as of such date, (C) the
aggregate amount paid by STX for the redemption of shares of Preferred Stock as
of such date, (D) the aggregate amount of all Purchaser Indemnity Obligations
actually paid by Purchaser as of such date and (E) the aggregate amount of all
Purchaser Indemnity Obligations actually paid by STX Chemicals as of such date.
SECTION 8.03. Losses Net of Insurance, etc. The amount of any Loss
for which indemnification is provided under this Article VIII shall be net of
any amounts recovered or recoverable with the use of commercially reasonable
efforts by the indemnified party under insurance policies with respect to such
Loss.
SECTION 8.04. Termination of Indemnification. (a) The obligations of
the Cytec Parties pursuant to Section 8.01(a)(i) shall terminate, in the case of
each representation or warranty of the Cytec Parties contained in this
Agreement, when the applicable representation or warranty terminates pursuant to
Section 9.03, unless notice of a claim shall have been delivered to the Cytec
Parties prior to the expiration of the applicable survival period specified in
Section 9.03 with respect to the applicable representation or
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warranty, in which case the obligations of the Cytec Parties pursuant thereto
shall not terminate until such claim is resolved. The obligations of the Cytec
Parties pursuant to the other clauses of Section 8.01 shall not terminate.
(b) The obligations of Purchaser pursuant to Section 8.02(a)(i)
shall terminate, in the case of each representation or warranty of the Sterling
Parties contained in this Agreement, when the applicable representation or
warranty terminates pursuant to Section 9.03 unless notice of a claim shall have
been delivered to the Sterling Parties prior to expiration of the applicable
survival period specified in Section 9.03 with respect to such representation or
warranty, in which case the obligations of Purchaser pursuant to Section
8.02(a)(i) with respect to such representation or warranty shall not terminate
until such claim is resolved. The obligations of Purchaser pursuant to the other
clauses of Section 8.02 shall not terminate. The obligations of STX Chemicals
pursuant to Section 8.02(e) with respect to each Purchaser Indemnity Obligation
shall terminate on the earlier of (i) the date on which such Purchaser Indemnity
Obligation terminates pursuant to this Section 8.04(b) and (ii) the date on
which the STX Guarantee Cap is first reduced to zero.
SECTION 8.05. Procedure. (a) In order for any indemnified party (the
"indemnified party") to be entitled to any indemnification provided for under
this Agreement, such indemnified party shall, within 15 business days following
the actual discovery of the matters giving rise to any Loss, notify the
indemnifying party (the "indemnifying party") in writing of its claim for
indemnification for such Loss, specifying in reasonable detail the nature of
such Loss and the amount of the liability estimated to accrue therefrom;
provided, however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the indemnifying party
shall have been actually and materially prejudiced as a result of such failure.
There after, the indemnified party shall deliver to the indemnifying party,
promptly and in any event within ten business days' after the indemnified
party's receipt thereof, all information and documentation reasonably requested
by the indemnifying party with respect to such Loss.
(b) In the event that a Loss arises out of or results from matters
in respect of a claim made by a third party (a "Third Party Claim"), the
indemnifying party shall be entitled to participate in the defense of such Third
Party Claim and, if it so chooses, to assume the defense of such Third Party
Claim with counsel selected by the indemnifying party; provided, however, that
the indemnifying party shall
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elect to assume such defense within 10 business days of receipt of initial
notice of such Third Party Claim from the indemnified party, unless the
indemnifying party and the indemnified party would not be prejudiced in any
material respect by the assumption of such claim at a later date. Should the
indemnifying party so elect to assume the defense of a Third Party Claim, the
indemnifying party shall not be liable to the indemnified party for any legal
expenses subsequently incurred by the indemnified party in connection with the
defense thereof. If the indemnifying party assumes such defense, the indemnified
party shall have the right to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by the
indemnifying party, it being understood that the indemnifying party shall
control such defense. The indemnifying party shall be liable for the fees and
expenses of counsel employed by the indemnified party for any period during
which the indemnifying party has not assumed the defense thereof. Whether or not
the indemnifying party elects to defend or prosecute a Third Party Claim, all of
the parties hereto shall cooperate in the defense or prosecution of such Third
Party Claim. Such cooperation shall include the retention and (upon the request
of the party defending or prosecuting such Third Party Claim) the provision to
the defending or prosecuting party of records and information which are
reasonably relevant to such Third Party Claim, and making employees, officers
and directors and agents available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. If
the indemnifying party elects to defend or prosecute any Third Party Claim, the
indemnifying party will not settle, compromise or discharge such Third Party
Claim without the consent of the Indemnified party (such consent to not be
unreasonably withheld or delayed); provided, however, that the indemnified party
shall consent to any settlement, compromise or discharge of such Third Party
Claim which the indemnifying party may recommend and which by its terms
obligates the indemnifying party to pay the full amount of the liability in
connection with such Third Party Claim, provided that (x) such settlement,
compromise or discharge does not impose any form of injunctive relief applicable
to the indemnified party and (y) fully releases the indemnified party from any
further claims with respect to the matters giving rise to such Third Party
Claim. In the event that the indemnifying party recommends any such settlement,
compromise or discharge of such Third Party Claim and the indemnified party
unreasonably withholds its consent thereto and the ultimate resolution of such
Third Party Claim results in an amount of Losses in excess of the amount of
Losses which would have been payable or suffered under such settlement,
compromise or discharge, the indemnifying party shall not be
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obligated to indemnify the indemnifying party to the extent of
such excess.
(c) If the indemnifying party does not assume the defense of any
Third Party Claim, the indemnified party will have the right to defend, settle,
compromise or discharge such Third Party Claim or consent to the entry of a
judgment with respect to such Third Party Claim, on behalf of and for the
account and risk of the indemnifying party, and the indemnifying party shall
thereafter have no right to challenge the indemnified party's defense,
settlement, compromise, discharge or consent to judgment of such Third Party
Claim, except to the extent such defense, settlement, compromise, discharge or
consent to judgment would impose any form of injunctive relief applicable to the
indemnifying party without the consent of the indemnifying party (such consent
not to be unreasonably withheld) or to the extent that notwithstanding the
foregoing, the indemnified party or the indemnifying party would not be fully
released from further claims with respect to the matters giving rise to such
Third Party Claim. In the event that the indemnified party recommends any
settlement, compromise or discharge of a Third Party Claim that would impose any
form of injunctive relief applicable to the indemnifying party and the
indemnifying party unreasonably withholds its consent thereto and the ultimate
resolution of such Third Party Claim results in Losses by the indemnified party,
the indemnifying party shall be obligated to indemnify the indemnified party
therefor.
SECTION 8.06. Payment. Within 30 days after demand therefor, the
indemnifying party shall pay the indemnified party any amount due under this
Article VIII (including reasonable attorneys' fees) and, within 30 days after
demand therefor, shall reimburse each indemnified party for all reasonable
expenses for which the indemnified party is entitled to be indemnified
hereunder. Upon judgment, determination, discharge, settlement or compromise of
any Third Party Claim, the indemnifying party shall promptly pay on behalf of
the indemnified party, and/or to the indemnified party in reimbursement of any
amount theretofore required to be paid by it, the amount so determined by such
judgment, determination, discharge, settlement or compromise and all other
claims of the indemnified party with respect thereto, unless in the case of a
judgment or determination the indemnifying party intends to appeal such judgment
or determination; provided, however, that if the indemnifying party desires to
appeal from an adverse judgment or determination, then the indemnifying party
shall post and pay the cost of the security or bond to stay execution of the
judgment or determination pending appeal and shall pay the full cost of appeal.
Upon the payment in full by the
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indemnifying party of all of such amounts, the indemnifying party shall succeed
to the rights of the indemnified party, to the extent such rights are not waived
in settlement, against the third party who made such Third Party Claim.
SECTION 8.07. No Consequential Damages. Notwithstanding any
provision of this Agreement to the contrary, in no event shall (i) the Cytec
Parties be obligated under this Agreement to indemnify the Purchaser Indemnified
Persons for any special or consequential damages or (ii) Purchaser or STX
Chemicals be obligated under this Agreement to indemnify the Seller Indemnified
Persons for any special or consequential damages.
SECTION 8.08. Effect of Certain Breaches and Inaccuracies. (a)
Subject to Section 4.01(dd) but notwithstanding anything else in this Agreement
to the contrary, unless a Specified Cytec Representative has actual knowledge of
the applicable breach or inaccuracy, (i) none of the rights or remedies of the
Cytec Parties under this Agreement or any Ancillary Agreement will be impaired
or adversely affected in any respect by or on account of any knowledge by any
person that the representations and warranties of any Sterling Party made in
this Agreement or any Ancillary Agreement are not true, (ii) none of the
Sterling Parties shall be relieved, released or discharged in any respect of any
of their representations, warranties, covenants or indemnities contained in this
Agreement or any Ancillary Agreement by or on account of any knowledge by any
person that the representations and warranties of any Sterling Party made in
this Agreement or any Ancillary Agreement are not true and (iii) none of the
Cytec Parties nor any other person shall have or be subject to any liability
resulting from or based on any knowledge by any person that the representations
and warranties of any Sterling Party made in this Agreement or any Ancillary
Agreement are not true.
(b) Subject to Section 4.02(d) but notwithstanding anything else in
this Agreement to the contrary, unless any Specified Sterling Representative has
actual knowledge of the applicable breach or inaccuracy, (i) none of the rights
or remedies of the Sterling Parties under this Agreement or any Ancillary
Agreement shall be impaired or adversely affected in any respect by or on
account of any knowledge by any person that the representations and warranties
of any Cytec Party made in this Agreement or any Ancillary Agreement are not
true, (ii) none of the Cytec Parties shall be relieved, released or discharged
in any respect of any of their respective representations, warranties, covenants
or indemnities contained in this Agreement or any Ancillary Agreement by or on
account of any knowledge by any person that
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the representations and warranties of any Cytec Party made in this Agreement or
any Ancillary Agreement are not true and (iii) none of the Sterling Parties nor
any other person shall have or be subject to any liability resulting from or
based on any knowledge by any person that the representations and warranties of
any Cytec Party made in this Agreement or any Ancillary Agreement are not true.
ARTICLE IX
General Provisions
SECTION 9.01. Notices. All notices, requests and other
communications hereunder shall be in writing and shall be sent, delivered or
mailed, addressed as follows:
(a) if to a Sterling Party, to the applicable
Sterling Party:
c/o Sterling Chemicals Holdings, Inc.
1200 Smith Street
Suite 1900
Houston, Texas 77002
Attention: F. Maxwell Evans, General Counsel
with a copy (which shall not constitute
notice) to:
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
600 Travis
Houston, Texas 77002
Attention: David G. Elkins, Esq.
(b) if to a Cytec Party, to:
Cytec Industries Inc.
Five Garret Mountain Plaza
West Paterson, New Jersey 07424
Attention: Secretary
with a copy (which shall not constitute
notice) to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: John T. Gaffney, Esq.
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Each such notice, request or other communication shall be given (i) by hand
delivery, (ii) by certified mail or (iii) by nationally recognized courier
service. Each such notice, request or communication shall be effective when
delivered at the address specified in this Section 9.01 (or in accordance with
the latest unrevoked direction from the receiving party).
SECTION 9.02. Headings. The table of contents and headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 9.03. Survival of Representations, Warranties and Covenants.
All representations, warranties, covenants and agreements of the Cytec Parties
or the Sterling Parties in the Operative Documents shall survive the execution
and delivery of the Operative Documents and the Closing, regardless of any
investigation made by or on behalf of any party; provided, however, that:
(a) the representations and warranties of the Cytec Parties
contained in the Operative Documents, other than those referred to in
clauses (b), (c) and (d) below and other than those contained in Section
4.01(dd) (which shall survive indefinitely), shall terminate and have no
further force or effect after the expiration of the one-year period
commencing on the Closing Date, unless notice of a claim relating thereto
shall be delivered by a Purchaser Indemnified Person to Parent prior to
the expiration of such one-year period, in which case such representation
or warranty shall survive following such period solely with respect to
such claim until such claim is resolved;
(b) the representations and warranties of the Cytec Parties
contained in Section 4.01(p) which relate to (A) matters in respect of the
exposure of the Cytec Santa Rosa Employees to acrylonitrile or asbestos,
or (B) Releases or alleged Releases of Hazardous Substances into Escambia
Bay shall terminate and have no further force and effect as of the
Closing;
(c) the representations and warranties of the Cytec Parties
contained in Section 4.01(j) and 4.01(k) shall terminate and have no
further force and effect after the expiration of the three-year period
commencing on the Closing Date, unless notice of a claim relating thereto
shall be delivered by a Purchaser Indemnified Person to Parent prior to
the expiration of such three-year period, in which case such
representation or warranty shall
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survive following such period solely with respect to such
claim until such claim is resolved;
(d) the representations and warranties of the Cytec Parties
contained in Sections 4.01(s)(ii), 4.01(t), 4.01(u), 4.01(v), 4.01(w)(ii),
and 4.01(cc) shall terminate and have no further force or effect upon the
expiration of the statute of limitations period applicable thereto, unless
notice of a claim relating thereto shall be delivered by a Purchaser
Indemnified Person to Parent prior to the expiration of the applicable
period, in which case such representations or warranties shall survive
following such period solely with respect to such claim until such claim
is resolved; and
(e) the representations and warranties of the Sterling Parties
contained in the Operative Documents, other than those contained in
Sections 4.02(d) (which shall survive indefinitely), shall terminate and
have no further force or effect after the expiration of the one-year
period commencing on the Closing Date, unless notice of a claim relating
thereto shall be delivered by a Seller Indemnified Person to Purchaser
prior to the expiration of such one-year period, in which case such
representation or warranty shall survive following such period solely with
respect to such claim until such claim is resolved.
SECTION 9.04. Severability. If any provision of this Agreement, or
the application thereof to any person, place or circumstances, shall be held by
a court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such provisions as applied to other persons,
places, and circumstances shall remain in full force and effect.
SECTION 9.05. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
SECTION 9.06. Entire Agreement; No Third Party Beneficiaries. This
Agreement, the Ancillary Agreements and the Confidentiality Agreement set forth
all of the promises, agreements, conditions, understandings, representations and
warranties among the parties with respect to the Transactions and supersede all
prior agreements and understandings, both
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written and oral, among the parties hereto and thereto with respect to the
subject matter hereof and thereof. Except as specifically provided in Article
VIII with respect to Purchaser Indemnified Persons and Seller Indemnified
Persons, such agreements are not intended to confer upon any person other than
the parties hereto and thereto any rights or remedies hereunder or thereunder.
Notwithstanding anything to the contrary contained in the Operative Documents,
nothing contained in any Operative Document is intended to confer any benefit on
Cyanamid.
SECTION 9.07. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
SECTION 9.08. Consent to Jurisdiction. Each of the Sterling Parties
and the Cytec Parties irrevocably submits to the exclusive jurisdiction of any
Delaware state court and any Federal court located in Delaware for the purposes
of any suit, action or other proceeding arising out of this Agreement or any
transaction contemplated hereby. Each of the Sterling Parties and the Cytec
Parties further agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set forth in Section
9.01 shall be effective service of process for any action, suit or proceeding in
Delaware with respect to any matters to which it has submitted to jurisdiction
as set forth above in the immediately preceding sentence. Each of the Sterling
Parties and the Cytec Parties irrevocably and uncon ditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in any Delaware state
court and any Federal Court located in the State of Delaware and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum. Except to the extent required to
enforce any order (including any order for injunctive relief), award or judgment
of or by a Delaware state court or a Federal court located in Delaware, each of
the Sterling Parties and the Cytec Parties agrees not to pursue any legal action
against any party to this Agreement in respect of the Transactions or any matter
related thereto other than in a Delaware state court or a Federal court located
in Delaware.
SECTION 9.09. Publicity. Neither the Cytec Parties, on the one hand,
nor the Sterling Parties, on the other hand, shall issue or cause the
publication of any press
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release or other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld, except to the extent required for
such party to meet the requirements or regulations of any applicable
Governmental Rule or stock exchange on which the securities of such party may be
listed, in which case such party shall notify the other party and give such
other party opportunity to comment.
SECTION 9.10. Assignment. Except for the assignment for collateral
purposes of this Agreement to secure indebtedness of Purchaser or its Affiliates
and except as permitted below, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties and any attempt to
do so shall be null and void. The rights of any assignee contemplated by the
foregoing sentence shall be subject in all respects to any defense, set-off,
counterclaim or similar right against the assignor by the non-assigning party
hereto (including any defense, set-off, counterclaim or other right arising
after such assignment is made) and any assignee shall have no greater rights
than those of the assignor. Any assignment by any of the parties hereto pursuant
to the preceding sentences shall not relieve such party of any of its
obligations under this Agreement or the other Operative Documents to which it is
a party. Subject to the preceding sentences, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns. Each party shall require any
successor, other than a successor by operation of law, to all or substantially
all of the business and/or assets of such party to expressly and unconditionally
assume and agree to perform this Agreement in the same manner and to the same
extent that such party would be required to perform it if no succession had
taken place.
SECTION 9.11. Amendments and Waivers. No amendment, modification,
restatement or supplement of this Agreement shall be valid unless the same is in
writing and signed by the parties hereto. No waiver of any provision of this
Agreement shall be valid unless in writing and signed by the party against whom
that waiver is sought to be enforced. No failure or delay on the part of any
party hereto in exercising any right, power or privilege hereunder and no course
of dealing between or among any of the parties hereto shall operate as a waiver
of any right, power or privilege hereunder. No single or partial exercise of any
right, power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. No
notice to or demand on any party in
<PAGE>
96
any case shall entitle such party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of any party
to any other or further action in any circumstances without notice or demand.
SECTION 9.12. Remedies. The parties agree that the obligations
contained in this Agreement relate to special, unique and extraordinary matters
and that a violation of any of the terms hereof or thereof would cause
irreparable injury in an amount which would be impossible to estimate or
determine and for which any remedy at law would be inadequate. As such, the
parties agree that if any party fails or refuses to fulfill any of its
obligations under this Agreement or to make any payment or deliver any
instrument required hereunder or thereunder, then the other parties shall have
the remedy of specific performance, which remedy shall be cumulative and
nonexclusive and shall be in addition to any other rights and remedies otherwise
available under any other Contract or at law or in equity and to which such
parties might be entitled.
SECTION 9.13. Prevailing Party Costs. Notwithstanding anything
contained herein or in any Ancillary Agreement to the contrary, if any party
commences an action against any other party to enforce any of the terms,
covenants, conditions or provisions of this Agreement or any Ancillary Agreement
or because of a breach by a party of its obligations under this Agreement or any
Ancillary Agreement, the prevailing party in any such action shall be entitled
to recover its Losses, including reasonable attorneys' fees, incurred in
connection with the prosecution or defense of such action, from the losing
party.
SECTION 9.14. No Liability of Natural Persons. Notwithstanding
anything to the contrary contained in this Agreement or any Ancillary Agreement,
no person who is a former, present or future officer, director, employee,
stockholder or agent of any Cytec Party or any Sterling Party, and no other
natural person shall have any liability under this Agreement or any of the
Ancillary Agreements;
<PAGE>
97
provided, however, that nothing contained in this Section 9.14 shall release any
person from liability for such person's fraud, bad faith or wilful misconduct.
This Section 9.14 shall not be deemed to release or limit any claim that a Cytec
Party shall have against any person who is an officer, director or employee of
any Cytec Party or any of its Affiliates prior to or after the Closing Date.
IN WITNESS WHEREOF, the Sterling Parties and each of the Cytec
Parties have caused this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first written above.
STERLING FIBERS, INC.
by
--------------------------------
Name:
Title:
STERLING CHEMICALS, INC.,
by
--------------------------------
Name:
Title:
STERLING CHEMICALS HOLDINGS,INC.,
by
--------------------------------
Name:
Title:
CYTEC ACRYLIC FIBERS INC.,
by
--------------------------------
Name:
Title:
<PAGE>
98
CYTEC TECHNOLOGY CORP.,
by
--------------------------------
Name:
Title:
CYTEC INDUSTRIES INC.,
by
--------------------------------
Name:
Title:
Exhibit 11(A)
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
Historical Earnings Per Share Computations
(Thousands of Dollars, except per share amounts)
Year Ended
December 31, 1996
---------------------
Fully
Primary Diluted
-------- --------
Net earnings available for common stockholders $100,100 $100,100
Weighted average number of shares of common
stock outstanding during the period
exclusive of the following: 47,335 47,335
Common stock equivalents:
Restricted stock 236 317
Non qualified stock options 2,107 2,261
-------- --------
Adjusted weighted average number of share of
common stock outstanding during the period 49,678 49,913
======== ========
Earnings per share $ 2.01 $ 2.01
======== ========
See Note 2 of the Notes to the Consolidated Financial Statements incorporated by
reference herein for explanation of earnings per share calculations.
Exhibit 11(B)
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
Historical Earnings Per Share Computations
(Thousands of Dollars, except per share amounts)
Year Ended
December 31, 1995
------------------------
Fully
Primary Diluted
--------- ---------
Net earnings $ 282,170 $ 282,170
Excess of repurchase price over related
book value of Series A stock and
Series B stock (195,202) (195,202)
Preferred stock dividend requirements (10,707) (5,397)
--------- ---------
Net earnings available for common stockholders $ 76,261 $ 81,571
========= =========
Weighted average number of shares of common
stock outstanding during the period
exclusive of the following: 40,473 40,473
Common stock equivalents:
Restricted stock 353 464
Non qualified stock options 1,542 1,842
Assumed conversion of Series B preferred stock -- 14,124
--------- ---------
Adjusted weighted average number of share of
common stock outstanding during the period 42,368 56,903
========= =========
Earnings per share $ 1.80 $ 1.43
========= =========
See Note 2 of the Notes to the Consolidated Financial Statements incorporated by
reference herein for explanation of earnings per share calculations.
Exhibit 11(C)
CYTEC INDUSTRIES INC. AND SUBSIDIARIES
Historical Earnings Per Share Computations
(Thousands of Dollars, except per share amounts)
Year Ended
December 31, 1994
-----------------------
Fully
Primary Diluted
-------- --------
Net earnings $ 56,069 $ 56,069
Preferred Stock dividend requirements (14,640) (8,377)
-------- --------
Net earnings available for common stockholders $ 41,429 $ 47,692
======== ========
Weighted average number of shares of common
stock outstanding during the period
exclusive of the following: 38,562 38,562
Common stock equivalents:
Restricted stock 267 500
Non qualified stock options 621 1,392
Assumed conversion of Series B preferred stock -- 16,662
-------- --------
Adjusted weighted average number of share of
common stock outstanding during the period 39,450 57,116
======== ========
Earnings per share $ 1.05 $ .84
======== ========
See Note 2 of the Notes to the Consolidated Financial Statements incorporated by
reference herein for explanation of earnings per share calculations.
Exhibit 12
Cytec Industries Inc.
Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in millions)
Year Ended Year Ended
---------- ----------
12/31/96 12/31/95
---------- ----------
Earnings (loss) before income taxes 168.3 158.1
Add:
Interest on indebtedness
net of capitalized interest 6.4 2.6
Portion of rents representative
of the interest factor 5.4 5.4
----- -----
Earnings as adjusted 180.1 166.1
===== =====
Fixed charges:
Interest on indebtedness 8.0 3.2
Portion of rents representative
of the interest factor 5.4 5.4
----- -----
Fixed charges 13.4 8.6
===== =====
Ratio of earnings to fix charges 13.4 19.3
===== =====
Exhibit 21
CYTEC INDUSTRIES INC. 2/24/97
Subsidiary Listing
Subsidiaries
State or Country
N A M E : of Organization
- --------- ---------------
Aviatrix Corporation Delaware
CONAP, Inc. Delaware
Cyquim de Colombia Delaware
S.A.
Cytec Acrylic Fibers Inc. Delaware
Cytec Aerospace Far Delaware
East Corp.
Cytec Aerospace England
Limited
Cytec Ammonia Inc. Delaware
Cytec Australia Limited Delaware
Cytec Brewster Phosphates Delaware
Inc.
Cytec Canada Inc. Ontario
Cytec de Argentina Delaware
S.A.
Cytec de Chile S.A. Delaware
Cytec de Mexico S.A. Mexico
de C.V.
Cytec de Puerto Rico, Inc. Puerto Rico
Cytec do Brasil Ltd. Delaware
Cytec do Brasil Ltda. Brazil
Cytec Engineered Materials Delaware
Inc.
Cytec Global Holdings Delaware
Inc.
Cytec Hong Kong Limited Hong Kong
Cytec Industries B.V. Netherlands
<PAGE>
Cytec Industries Italia Italy
Cytec Industries Pte. Ltd. Singapore
Cytec Industries England
Cytec International Barbados
Sales Corp.
Cytec International Jamaica.
Sales Corporation Limited
Cytec Japan Limited Delaware
Cytec Korea Inc. Delaware
Cytec Melamine Inc. New Jersey
Cytec Methanol Inc. Delaware
Cytec Molding Compounds Delaware
Inc.
Cytec Overseas Corp. Delaware
Cytec Plastics Inc. Delaware
Cytec Realty Corp. Delaware
Cytec Taiwan Corp. Delaware
Cytec Technology Corp. Delaware
Cytec UK Holdings England
Limited
D Aircraft Products California
Mivida Corporation Delaware
Piney River Recovery Delaware
Corp.
Quimicos Cyquim, C.A. Venezuela
Exhibit 23
Accountant's Consent
The Board of Directors
Cytec Industries Inc.:
We consent to incorporation by reference in the registration statements (Nos.
33-80710, 33-83576 and 33-85666) on Form S-8 of Cytec Industries Inc. of our
reports dated January 27, 1997, relating to the consolidated balance sheets of
Cytec Industries Inc. and subsidiaries as of December 31, 1996 and 1995 and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1996, and the
related schedules, which reports appear in the December 31, 1996 annual report
on Form 10-K of Cytec Industries Inc.
KPMG Peat Marwick LLP
Short Hills, New Jersey
March 27, 1997
EXHIBIT 25(a-f)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director or
an officer, or both, of Cytec Industries Inc., a Delaware corporation ("Cytec"),
does hereby make, constitute and appoint J. P. Cronin, D. D. Fry and E. F.
Jackman, the address of each of which is in care of Cytec, 5 Garret Mountain
Plaza, West Paterson, New Jersey 07424, and each of them, the true and lawful
attorney for the undersigned, with full power of substitution and revocation to
each for the undersigned, and in the name, place and stead of the undersigned,
to sign in any and all capacities and to file or cause to be filed, an annual
report on Form 10-K with the Securities and Exchange Commission, pursuant to the
Securities Exchange Act of 1934, as amended, and any and all amendments to such
Form 10-K, hereby giving to each of such attorneys full power to do everything
whatsoever required or necessary to be accomplished in and about the premises as
fully as the undersigned could do if personally present, hereby ratifying and
confirming all that such attorneys or substitutes or any of them shall lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has set his hand this ____ day of March,
1997.
------------------------------
Name*
*Separate powers of attorney signed by F. W. Armstrong, G. A.
Burns, L. L. Hoynes, Jr., D. Lilley, W. P. Powell and J. R. Satrum.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form-10K and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-START> JAN-01-1996
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 20,400
<SECURITIES> 0
<RECEIVABLES> 217,600
<ALLOWANCES> 11,100
<INVENTORY> 105,600
<CURRENT-ASSETS> 416,300
<PP&E> 1,339,700
<DEPRECIATION> (757,500)
<TOTAL-ASSETS> 1,261,100
<CURRENT-LIABILITIES> 312,800
<BONDS> 0
0
100
<COMMON> 500
<OTHER-SE> 313,800
<TOTAL-LIABILITY-AND-EQUITY> 1,261,100
<SALES> 1,259,600
<TOTAL-REVENUES> 1,259,600
<CGS> 898,100
<TOTAL-COSTS> 1,123,500
<OTHER-EXPENSES> (10,000)<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,000
<INCOME-PRETAX> 142,100
<INCOME-TAX> 56,900
<INCOME-CONTINUING> 85,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100,100<F2>
<EPS-PRIMARY> 2.01
<EPS-DILUTED> 2.01
<FN>
<F1> This number represents interest income
<F2> This number includes equity in net income of associated
companies of $14,900,000 for the twelve months ended
December 31, 1996.
</FN>
</TABLE>
