<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 1996
REGISTRATION NO. 33-84778
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FREEDOM CHEMICAL COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2819
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
51-0340498
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
------------------------
MELLON CENTER, SUITE 3500
1735 MARKET STREET
PHILADELPHIA, PA 19103
(215) 979-3100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SEE TABLE OF ADDITIONAL REGISTRANTS
------------------------
BRIAN F. MCNAMARA, VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
FREEDOM CHEMICAL COMPANY
MELLON CENTER, SUITE 3500
1735 MARKET STREET
PHILADELPHIA, PA 19103
(215) 979-3100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
MARK C. SMITH, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NY 10022
(212) 735-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
10 5/8% Senior Subordinated Notes due 2006(2)......... US$125,000,000 100% US$125,000,000 US$37,878.79(3)
Guarantees of 10 5/8% Senior Subordinated Notes due
2006 of Registrants other than Freedom Chemical
Company............................................. -- -- -- None(4)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Issued by Freedom Chemical Company, as obligor.
(3) $11,040.00 of the fee was previously paid in connection with the initial
filing of this Form S-1 on October 4, 1994.
(4) Pursuant to Rule 457(n), no separate fee is being paid with respect to these
guarantees.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO THE SAID SECTION
8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
STATE OR OTHER PRIMARY STANDARD
JURISDICTION OF INDUSTRIAL I.R.S. EMPLOYER
INCORPORATION OR CLASSIFICATION IDENTIFICATION
NAME ORGANIZATION CODE NUMBER NUMBER
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<S> <C> <C> <C>
Hilton Davis Chemical Co. ............................................... Delaware 2819 95-4071292
2235 Langdon Farm Road
Cincinnati, Ohio 45327
(513) 841-4000
Kalama Chemical, Inc. .................................................. Washington 2819 91-0862423
1296 Third Street, N.W.
Kalama, Washington 98625
(360) 673-2550
Freedom Textile Chemicals Co. .......................................... Delaware 2819 56-1767462
8309 Wilkinson Boulevard
Charlotte, North Carolina 28214
(704) 393-0089
Freedom Chemical Diamalt GmbH ........................................... Germany 2819 N/A
Postfach 50 02 70
D-80972 Munchen
Germany
(011) (49) 898106208
Freedom Textile Chemical Company ........................................ Delaware 2819 56-1949391
(South Carolina), Inc.
5025 South Main Street
Cowpens, South Carolina 29330
(803) 463-4393
Kalama Specialty Chemicals, Inc. ....................................... Washington 2819 91-0971783
1296 Third Street, N.W.
Kalama, Washington 98625
(360) 673-2550
Kalama Foreign Sales Corporation ........................................ Guam 2819 98-0102014
1296 Third Street, N.W.
Kalama, Washington 98625
(360) 673-2550
FCC Acquisition Corp. .................................................. Delaware 2819 23-2791891
Mellon Center, Suite 3500
1735 Market Street
Philadelphia, Pennsylvania 19103
(215) 979-3100
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED OCTOBER 31, 1996
OFFER FOR ALL OUTSTANDING
10 5/8% SENIOR SUBORDINATED NOTES DUE 2006 IN EXCHANGE FOR
10 5/8% SENIOR SUBORDINATED NOTES DUE 2006, WHICH HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OF
[LOGO]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1996, UNLESS EXTENDED.
------------------------
Freedom Chemical Company ('Freedom' and, collectively with its subsidiaries,
the 'Company') hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying Letter of Transmittal (which
together constitute the 'Exchange Offer'), to exchange an aggregate principal
amount of up to $125,000,000 of its 10 5/8% Senior Subordinated Notes due 2006
(the 'New Notes'), which have been registered under the Securities Act of 1933,
as amended (the 'Securities Act'), for a like principal amount of its issued and
outstanding 10 5/8% Senior Subordinated Notes due 2006 (the 'Old Notes' and,
together with the New Notes, the 'Notes') from the holders (the 'Holders')
thereof. The terms of the New Notes are identical in all material respects to
the Old Notes, except for certain transfer restrictions and registration rights
relating to the Old Notes and except for certain provisions providing for an
increase in the interest rate on the Old Notes under certain circumstances
relating to the timing of the Exchange Offer.
On October 17, 1996, Freedom issued $125,000,000 principal amount of Old
Notes. The Old Notes were issued pursuant to an offering exempt from
registration under the Securities Act and applicable state securities laws.
The Notes are redeemable at the option of Freedom, in whole or in part, at
any time on or after October 15, 2001 at the redemption prices set forth herein,
together with accrued and unpaid interest, if any, to the date of redemption. In
addition, on or prior to October 15, 1999, Freedom, at its option, may redeem in
the aggregate up to 35% of the original principal amount of the Notes at a
redemption price equal to 109.625% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of redemption, with the net cash
proceeds of one or more Public Equity Offerings (as defined herein); provided,
however, that at least $81.25 million aggregate principal amount of Notes remain
outstanding immediately after giving effect to such redemption. Upon a Change of
Control (as defined herein), (i) Freedom will have the option to redeem the
Notes, in whole or in part, at a redemption price equal to the principal amount
thereof, together with accrued and unpaid interest to the date of redemption,
plus the Applicable Premium (as defined herein) and (ii) each holder of Notes
will have the right to require Freedom to purchase such holder's Notes at a
price equal to 101% of the principal amount thereof, together with accrued and
unpaid interest to the date of purchase.
The Notes are unsecured senior subordinated obligations of Freedom and are
subordinated in right of payment to all existing and future Senior Debt (as
defined herein) of Freedom, including indebtedness under the Amended and
Restated Credit Agreement (as defined herein) entered into by Freedom and its
wholly owned subsidiary Freedom Chemical Diamalt GmbH ('Freedom Chemical
Diamalt') concurrently with the sale of the Old Notes, and rank pari passu in
right of payment with all other existing and future senior subordinated
indebtedness of Freedom. The Old Notes are, and the New Notes will be fully and
unconditionally guaranteed (the 'Guarantees'), on a joint and several basis, as
to payment of principal, premium, if any, and interest, by all of Freedom's
domestic subsidiaries and Freedom Chemical Diamalt (collectively, the
'Guarantors'). The Guarantees are general unsecured obligations of the
Guarantors, subordinated in right of payment to all existing and future Senior
Debt of the Guarantors, including such Guarantors' guarantees of Freedom's
obligations under the Amended and Restated Credit Agreement. As of June 30,
1996, on a pro forma basis after giving effect to the issuance of the Notes, the
initial borrowings under the Amended and Restated Credit Agreement, the Cash
Equity Investment (as defined herein) and, in each case, the application of the
proceeds therefrom, the Company would have had approximately $21.5 million of
Senior Debt outstanding and approximately $149.6 million of indebtedness
outstanding.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from October 17, 1996. Old Notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the Exchange Offer.
Holders of Old Notes whose Old Notes are accepted for exchange will not receive
any payment in respect of accrued interest on such Old Notes.
The New Notes are being offered hereunder in order to satisfy certain
obligations of Freedom contained in the Registration Rights Agreement (as
defined). Based on interpretations by the staff of the Securities and Exchange
Commission (the 'SEC'), as set forth in no-action letters issued to third
parties, Freedom believes that New Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by Holders thereof (other than any Holder which is an 'affiliate' of
Freedom within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such Holders' business and such Holders have no arrangement with any person
to participate in the distribution of such New Notes. However, the SEC has not
considered the Exchange Offer in the context of a no-action letter and there can
be no assurance that the staff of the SEC would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Each Holder,
other than a broker-dealer, must acknowledge that it is not engaged in, and does
not intend to engage in, a distribution of such New Notes and has no arrangement
or understanding to participate in a distribution of New Notes. Each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an 'underwriter' within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. Freedom has
agreed that, for a period of 180 days after the Expiration Date (as defined
herein), it will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See 'Plan of Distribution.'
Freedom will not receive any proceeds from the Exchange Offer. Freedom will
pay all the expenses incident to the Exchange Offer. Tenders of Old Notes
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. In the event Freedom terminates the Exchange Offer and does not
accept for exchange any Old Notes, Freedom will promptly return the Old Notes to
the Holders thereof. See 'The Exchange Offer.'
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes, or the
ability of Holders of the New Notes to sell their New Notes or the price at
which such Holders may be able to sell their New Notes. Merrill Lynch & Co.,
Schroder Wertheim & Co. and Smith Barney Inc. (the 'Initial Purchasers') have
advised Freedom that they currently intend to make a market in the New Notes.
The Initial Purchasers are not obligated to do so, however, and any
market-making with respect to the New Notes may be discontinued at any time
without notice. Freedom does not intend to apply for listing or quotation of the
New Notes on any securities exchange or stock market.
SEE 'RISK FACTORS' BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE
OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1996.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE
SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
AVAILABLE INFORMATION
Freedom has filed with the SEC a registration statement on Form S-1
(herein, together with all amendments and exhibits, referred to as the
'Registration Statement') under the Securities Act with respect to the New Notes
offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. For further
information with respect to Freedom and the New Notes offered hereby, reference
is made to the Registration Statement. Any statements made in this Prospectus
concerning the provisions of certain documents are not necessarily complete and,
in each instance, reference is made to the copy of such documents filed as an
exhibit to the Registration Statement otherwise filed with the SEC.
Upon the effectiveness of the Registration Statement, Freedom will become
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the 'Exchange Act'), and in accordance therewith, will file
reports and other information with the SEC. The Registration Statement, the
exhibits and schedules forming a part thereof and the reports and other
information filed by Freedom with the SEC in accordance with the Exchange Act
may be inspected, without charge, at the Public Reference Section of the SEC
located at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the SEC located at Seven World Trade Center, 13th Floor, New York,
New York 10048 and at Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of all or any portion of the material may be obtained
from the Public Reference Section of the SEC upon payment of the prescribed
fees. In addition, the SEC maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. The address of such site is http://www.sec.gov.
In the event that Freedom is not required to be subject to the reporting
requirements of the Exchange Act in the future, Freedom will be required under
the Indenture (as defined), pursuant to which the Old Notes were, and the New
Notes will be, issued, to continue to file with the SEC, and to furnish Holders
of the New Notes with, the information, documents and other reports specified in
Sections 13 and 15(d) of the Exchange Act.
i
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. As used in this Prospectus, unless the context
requires otherwise, 'Freedom' refers to Freedom Chemical Company and 'Company'
refers to Freedom and its subsidiaries.
THE COMPANY
GENERAL
Freedom Chemical Company is a leading global manufacturer and marketer of a
broad range of specialty and fine chemical products which are sold into several
market segments for use in food and beverage products, household and industrial
products, cosmetics and personal care products, pharmaceuticals, pet foods,
textile and paper products and many other diverse applications. The Company
focuses on niche products where it has strong market positions or a
manufacturing advantage. The Company believes that this focus, combined with
improved operating efficiencies resulting from the recently completed
Restructuring Program (as defined below), have enhanced the Company's potential
for future growth and profitability. For the 12 months ended June 30, 1996, the
Company's net sales and EBITDA (as defined herein) were $295.8 million and $26.3
million, respectively. Approximately 40.6% of the Company's 1995 net sales
consisted of sales made outside the United States. The Company's products are
manufactured at four facilities located in the United States, four facilities
located in Europe and two facilities located in India.
The Company estimates that approximately 38.6% of its 1995 domestic net
sales were derived from product lines for which it believes it is either the
largest or second largest U.S. producer. Typically, the Company's products are
important to the performance of its customers' products, but represent a
relatively small percentage of their total product costs. For example, although
food preservatives are essential to the quality of carbonated diet soft drinks
(such as Diet Coke(Registered)), the Company's preservatives, potassium benzoate
and sodium benzoate, generally represent less than $.01 of the total cost of one
24-can case. The Company has five core product lines:
o Food and Personal Care Ingredients. The Company manufactures and markets
food, drug and cosmetic colors, food preservatives and flavors and fragrances
to a broad array of customers, including food and beverage, pet food,
cosmetic, pharmaceutical and household product manufacturers. The Company
believes it is the largest U.S. manufacturer of two of the world's most widely
used food preservatives and is the second largest U.S. producer of food dyes.
Food and Personal Care Ingredients accounted for approximately $61.3 million,
or 20.6%, of the Company's 1995 net sales.
o Pharmaceutical Intermediates and Natural Additives. The Company manufactures
and markets a number of pharmaceutical intermediates and active ingredients
for use in prescription and over-the-counter pharmaceuticals, as well as
natural additives, including thickeners (which mimic the feel of fat), gelling
agents, bioproteins and amino acids, for use in foods, pet foods, shampoos and
cosmetics. The Company believes that it is the largest producer of cysteine in
the world. Pharmaceutical Intermediates and Natural Additives accounted for
approximately $35.0 million, or 11.8%, of the Company's 1995 net sales.
o Specialty Organic Chemicals and Intermediates. The Company manufactures and
markets a number of specialty and fine organic chemicals and chemical
intermediates, including benzaldehyde, benzoic acid, benzyl alcohol and
phenol, that are used to manufacture flavors and fragrances, adhesives,
plasticizers, alkyd and polyester resins, rubber chemicals and agricultural
intermediates. The Company is the sole U.S. producer of benzaldehyde and
believes that it is the largest U.S. producer of benzoic acid. Specialty
Organic Chemicals and Intermediates accounted for approximately $56.0 million,
or 18.9%, of the Company's 1995 net sales.
o Organic Pigments and Dyes. The Company manufactures and markets carbonless
copy and technical dyes for use in industrial and consumer products, and
pigments for use in paints, coatings, inks and plastics. The Company is a
leading manufacturer of blue carbonless copy dyes used in business forms, such
as credit card receipts, and of blue technical dyes used in a wide range of
household products, such as window cleaners. Organic Pigments and Dyes
accounted for approximately $68.7 million, or 23.1%, of the Company's 1995 net
sales.
1
<PAGE>
o Textile and Paper Chemicals. The Company manufactures and markets a wide
range of specialty and fine chemicals that are used in the textile and paper
industries. The Company is one of the two leading U.S. producers of glyoxal
and glyoxal resins which impart wrinkle resistance and shrinkage control to
cotton and cotton blend fabrics and are also used to enhance the absorbency of
paper. The Company also markets a complete line of textile processing
products. Textile and Paper Chemicals accounted for approximately $75.9
million, or 25.6%, of the Company's 1995 net sales.
The Company was formed in April 1992 by Joseph Littlejohn & Levy, a private
investment firm ('JLL'), and certain of the Company's present and past executive
officers. Freedom commenced operations in order to acquire the textile chemical
business (the 'Freedom Textile Acquisition') of American Cyanamid Company
('American Cyanamid'), a leading producer of glyoxal, which it renamed Freedom
Textile Chemicals Co. ('Freedom Textile'). Thereafter, as part of its strategy
to acquire specialty chemical companies with strong market positions,
complementary product lines and opportunities for operational improvement, the
Company acquired Hilton Davis Chemical Co. ('Hilton Davis'), a leading supplier
of food, drug and cosmetic colors, dyes and specialty and fine chemicals, in
September 1993 (the 'Hilton Davis Acquisition'), and Kalama Chemical Inc.
('Kalama'), a leading supplier of food and beverage preservatives and certain
flavors and fragrances, in May 1994 (the 'Kalama Acquisition'). In December
1994, the Company acquired substantially all the assets of Reilly-Whiteman Inc.
('Reilly-Whiteman'), a producer of textile and other industrial chemicals (the
'Reilly-Whiteman Acquisition'), and in January 1995, Freedom, through its wholly
owned subsidiary Freedom Chemical Diamalt, acquired certain assets of Diamalt
GmbH ('Diamalt'), a producer of pharmaceutical intermediates, natural additives
and food and pet food ingredients (the 'Diamalt Acquisition').
BUSINESS STRATEGY
The Company's objective is to continue to enhance its revenue growth and
profitability by leveraging its strong market positions in its core product
lines and by continuing to improve operating efficiencies. The Company plans to
achieve its objective through the following key strategies:
o Increase Capacity of Key Product Lines. The Company intends to increase sales
by investing in capacity expansions for key product lines currently operating
at or near full capacity and has budgeted approximately $8 million to $10
million for each of the next two years for capacity expansions and process
improvements. In 1995, the Company completed the construction and start-up of
a plant in Madras, India to produce amino acids and cysteine and its
derivatives. In addition, it expanded benzaldehyde production capacity at its
plant in Kalama, Washington by 50% and implemented cassia production capacity
at its plant in Vadodara, India. The Company's current major capacity
expansion projects include (i) further plant expansion at Kalama, Washington,
which will expand the Company's production capacity for benzoic acid, phenol,
benzaldehyde and flavor and fragrance chemicals, (ii) expansion of cysteine
production capacity at its plant in Raubling, Germany and (iii) expansion of
cassia production capacity at its plant in Vadodara, India. See 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources.'
o Introduce New or Technologically Improved Products. The Company's research
and development efforts focus on the development of new and technologically
advanced products to respond to customer demands, changes in the marketplace,
technology and environmental regulations. For example, the Company is
currently working with its customers and capitalizing on existing technology
to develop new value-added products such as 'wash-away' textile dyes and
specialty pigments, environmentally friendly water-based paint pigments,
textile chemicals with reduced formaldehyde content and new coatings that meet
stricter environmental regulations for volatile organic compounds. The Company
also has an active pharmaceutical intermediates program and recently began
production and sale of thymidine, an AZT intermediate utilized in producing
drugs for AIDS therapy.
o Continue to Improve Operating Efficiencies. The initiatives taken by the
Company in connection with the Restructuring Program (as defined herein) have
already yielded significant cost savings and the Company intends to implement
additional cost-saving and productivity-enhancing programs in the future.
Currently in 1996, the Company is undertaking the following programs: raw
material sourcing from multiple vendors, yield improvement programs, the
discontinuation of unprofitable or low margin product lines, the reduction of
2
<PAGE>
utility costs and the implementation of additional employee profit incentive
programs. The Company is analyzing additional opportunities to increase
operating efficiencies and profitability, including the possibility of further
consolidation of its manufacturing facilities.
o Broaden Product Offerings to Primary Markets. The Company seeks to broaden
its product lines through internal development and believes that offering a
complete product portfolio to a given customer will enable it to utilize more
effectively its direct sales force, become a more complete supplier to the
industries it serves and increase its unit sales per customer. Natural
chemicals, including thickeners, enzymes and sizing agents, are widely used in
the European textile industry and the Company intends to offer these products
in the United States as additional manufacturing capacity to produce these
products becomes available. In addition, the Company plans to capitalize on
its position in food and pet food ingredients by broadening its food colors,
preservatives and flavor product lines with natural additives such as amino
acids, polysaccharides, alginates and bioproteins, as well as with other
products used by the food and pet food industries.
o Expand Customer Base. The Company intends to expand and strengthen its
customer base by (i) focusing on relationships with key accounts, (ii)
creating incentives for its sales force to concentrate on fast-growing, high
margin areas within existing product segments, (iii) pursuing growth
opportunities in new markets outside the United States, including Mexico,
Central and South America and Asia, as such markets continue to develop
economically and the consumption of food, beverage, household and other
products containing the Company's products increases and (iv) cross-marketing
its products to existing customers who do not currently purchase such products
through, among other initiatives, an international sales force that will
market products from all of the Company's product groups.
o Enhance Growth through Selective Acquisitions. Freedom will continue to
selectively seek acquisitions with complementary product lines that offer the
opportunity to significantly improve profitability through integration with
the Company's existing businesses. The Company considers the following
characteristics in its acquisitions: (i) strong market positions, (ii) unique
product offerings, (iii) low cost manufacturing capacity and (iv)
technological or cost advantages.
THE RESTRUCTURING PROGRAM
In 1995, Freedom implemented a restructuring program (the 'Restructuring
Program') in which it identified a number of opportunities to reduce its overall
cost structure and enhance the Company's potential for future growth and
profitability. The Restructuring Program included (i) the consolidation of
certain of the Company's manufacturing facilities, (ii) the sale of a
non-strategic product line, (iii) the write-off of discontinued inventory and
capitalized expenses and (iv) the recognition of certain estimated environmental
remediation costs. As a part of these actions, the Company closed in April 1996
its Conshohocken, Pennsylvania plant which manufactured products in the Organic
Pigments and Dyes group and in May 1996 its Newark, New Jersey plant which
manufactured products in the Textile and Paper Chemicals groups and relocated
certain of those production capabilities and technology to its other facilities.
In addition, the Company reduced personnel by approximately 135 employees in
both administrative and manufacturing positions. The Restructuring Program
resulted in nonrecurring charges of $14.4 million for the year ended December
31, 1995.
Management expects that the Restructuring Program, which was recently
completed, will result in significant cost savings to the Company related to
reduced personnel costs and the elimination of redundant fixed overhead costs
resulting from the closure of the two facilities. Management estimates that the
Restructuring Program will yield annual cost savings of approximately $4.2
million, some of the benefits of which are evidenced in the Company's EBITDA
margin improving to 12.2% for the first six months ended June 30, 1996 as
compared to 10.7% for the same period of the prior year. As part of the
Company's business strategy, management will continue to seek to improve
operating efficiencies and reduce costs by optimizing the use of its
manufacturing facilities and implementing further administrative, manufacturing
and operating expense reductions. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and Note 17 to the Company's
Consolidated Financial Statements included herein.
3
<PAGE>
THE TRANSACTIONS
The Company has undertaken the following transactions to provide it with
greater flexibility in the next several years with respect to its capital
expenditure and working capital requirements.
Concurrently with the consummation of the offering of Old Notes, Freedom
amended and restated its existing credit agreement (the 'Freedom Credit
Agreement' and, as amended and restated, the 'Amended and Restated Credit
Agreement'). The Amended and Restated Credit Agreement provides for a revolving
loan facility of up to $85 million and includes Freedom and Freedom Chemical
Diamalt as borrowers. The obligations of Freedom under the Amended and Restated
Credit Agreement are guaranteed by all of Freedom's domestic subsidiaries and
Freedom Chemical Diamalt and are secured by a first priority lien on
substantially all of the properties and assets of Freedom and its domestic
subsidiaries and certain properties and assets of Freedom Chemical Diamalt. The
obligations of Freedom Chemical Diamalt under the Amended and Restated Credit
Agreement are guaranteed by Freedom. See 'Description of Amended and Restated
Credit Agreement.' The Company initially borrowed $21.5 million under the
Amended and Restated Credit Agreement. As a condition to such initial borrowing,
all of the Company's outstanding indebtedness under the Freedom Credit Agreement
and under Freedom Chemical Diamalt's existing credit agreement (the 'Diamalt
Credit Agreement' and, together with the Freedom Credit Agreement, the 'Existing
Credit Agreements') was repaid in full and the Diamalt Credit Agreement was
terminated.
Joseph Littlejohn & Levy Fund, L.P. ('JLL Fund I') and Joseph Littlejohn &
Levy Fund II, L.P. ('JLL Fund II' and, together with JLL Fund I, the 'JLL
Funds'), Freedom's two largest stockholders, invested an aggregate of
approximately $9.94 million of new cash equity (the 'JLL Cash Equity Investment'
and, together with a $60,000 Additional Equity Investment (as defined below) by
an executive officer of Freedom, the 'Cash Equity Investment') in Freedom
concurrently with the consummation of the offering of Old Notes, Freedom's other
stockholders (principally current and former management) have been offered an
opportunity to make additional equity investments (the 'Additional Equity
Investments') in Freedom in an amount sufficient to maintain their existing
ownership percentages, which offer expires on November 2, 1996. See 'Certain
Transactions.' Following consummation of the Cash Equity Investment, the JLL
Funds beneficially own, on a fully diluted basis, approximately 89.0% of
Freedom's issued and outstanding Series A Common Stock (the 'Common Stock'),
93.5% of Freedom's issued and outstanding Series B Redeemable Preferred Stock
(the 'Series B Preferred Stock') and 90.5% of Freedom's issued and outstanding
Series C Redeemable Preferred Stock (the 'Series C Preferred Stock' and,
together with the Series B Preferred Stock, the 'Preferred Stock').
In addition, concurrently with the consummation of the offering of Old
Notes, the Series B Preferred Stock and the Series C Preferred Stock of Freedom
were amended (the 'Preferred Stock Amendment') to extend the mandatory
redemption dates of such Preferred Stock to April 30, 2007 and May 31, 2007,
respectively.
The offering of Old Notes, the Cash Equity Investment, the initial
borrowing under the Amended and Restated Credit Agreement and, in each case, the
application of the proceeds therefrom are collectively referred to herein as the
'Transactions.'
------------------
The Company's principal executive offices are located at 1735 Market
Street, Philadelphia, Pennsylvania, 19103, and its telephone number is (215)
979-3100.
4
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Securities Offered........................... Up to $125,000,000 principal amount of 10 5/8% Senior Subordinated
Notes due 2006, which have been registered under the Securities
Act. The terms of the New Notes and the Old Notes are identical in
all material respects, except for certain transfer restrictions
and registration rights relating to the Old Notes and except for
certain interest provisions relating to the Old Notes described
below under '--Summary Description of the New Notes.'
The Exchange Offer........................... The New Notes are being offered in exchange for a like principal
amount of Old Notes. The issuance of the New Notes is intended to
satisfy obligations of Freedom contained in the Registration
Rights Agreement, dated October 17, 1996, among Freedom, the
Guarantors and the Initial Purchasers (the 'Registration Rights
Agreement'). For procedures for tendering, see 'The Exchange
Offer.'
Tenders, Expiration Date; Withdrawal......... The Exchange Offer will expire at 5:00 p.m., New York City time,
on , 1996, or such later date and time to which it is
extended. The tender of Old Notes pursuant to the Exchange Offer
may be withdrawn at any time prior to the Expiration Date. Any Old
Note not accepted for exchange for any reason will be returned
without expense to the tendering Holder thereof as promptly as
practicable after the expiration or termination of the Exchange
Offer.
Federal Income Tax Consequences.............. The exchange pursuant to the Exchange Offer should not result in
gain or loss to the Holders or the Company for federal income tax
purposes. See 'Certain Federal Income Tax Consequences.'
Use of Proceeds.............................. There will be no proceeds to the Company from the Exchange Offer.
Exchange Agent............................... The Bank of New York is serving as Exchange Agent in connection
with the Exchange Offer.
</TABLE>
CONSEQUENCES OF EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Freedom does not currently anticipate that it
will register Old Notes under the Securities Act. See 'Description of the
Notes--Registration Rights.' Based on interpretations by the staff of the SEC,
as set forth in no-action letters issued to third parties, Freedom believes that
New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold or otherwise transferred by Holders thereof (other
than any Holder which is an 'affiliate' of Freedom within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such Holders' business and such
Holders have no arrangement with any person to participate in the distribution
of such New Notes. However, the SEC has not considered the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the SEC would make a similar determination with respect to the Exchange Offer as
in such other circumstances. Each Holder, other than a broker-dealer, must
acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of New Notes and has no arrangement or understanding to participate
in a distribution of New Notes. Each broker-dealer
5
<PAGE>
that receives New Notes for its own account in exchange of Old Notes must
acknowledge that such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities and that it will deliver
a Prospectus in connection with any resale of such New Notes. See 'Plan of
Distribution.' In addition, to comply with the securities laws of certain
jurisdictions, it may be necessary to qualify for sale or register thereunder
the New Notes prior to offering or selling such New Notes. Freedom has agreed,
pursuant to the Registration Rights Agreement, subject to certain limitations
specified therein, to register or qualify the New Notes for offer or sale under
the securities laws of such jurisdictions as any Holder reasonably requests in
writing. Unless a Holder so requests, Freedom does not intend to register or
qualify the sale of the New Notes in any such jurisdictions. See 'The Exchange
Offer--Consequences of Exchanging Old Notes.'
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and except for certain provisions providing for an
increase in the interest rates on the Old Notes under certain circumstances
relating to timing of the Exchange Offer, which rights will terminate upon
consummation of the Exchange Offer. The New Notes will bear interest from the
most recent date to which interest has been paid on the Old Notes or, if no
interest has been paid on the Old Notes, from October 17, 1996. Accordingly,
registered Holders of New Notes on the relevant record date for the first
interest payment date following the consummation of the Exchange Offer will
receive interest accruing from the most recent date to which interest has been
paid or, if no interest has been paid, from October 17, 1996. Old Notes accepted
for exchange will cease to accrue interest from and after the date of
consummation of the Exchange Offer. Holders of Old Notes whose Old Notes are
accepted for exchange will not receive any payment in respect of interest on
such Old Notes otherwise payable on any interest payment date the record date
for which occurs on or after consummation of the Exchange Offer, which rights
will terminate upon consummation of the Exchange Offer.
<TABLE>
<S> <C>
Notes Offered................................ Up to $125,000,000 principal amount of the Company's 10 5/8%
Senior Subordinated Notes due 2006, which have been registered
under the Securities Act.
Maturity Date................................ October 15, 2006.
Interest Payment Dates....................... April 15 and October 15 of each year, commencing April 15, 1997.
Optional Redemption.......................... The Notes are redeemable at the option of Freedom, in whole or in
part, at any time on or after October 15, 2001 at the redemption
prices set forth herein, together with accrued and unpaid
interest, if any, to the date of redemption. In addition, on or
prior to October 15, 1999, Freedom, at its option, may redeem in
the aggregate up to 35% of the original principal amount of the
Notes at a redemption price equal to 109.625% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the
date of redemption, with the net cash proceeds of one or more
Public Equity Offerings; provided, however, that at least $81.25
million aggregate principal amount of Notes remain outstanding
immediately after giving effect to such redemption.
Ranking...................................... The Notes are unsecured senior subordinated obligations of Freedom
and are subordinated in right of payment to all existing and
future Senior Debt of Freedom, including indebtedness under the
Amended and Restated Credit Agreement, and rank pari passu in
right of payment with all other existing and future senior
subordinated indebtedness of Freedom. As of June 30, 1996, after
giving pro forma effect to the Transactions, the Company would
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
have had approximately $21.5 million of Senior Debt outstanding
and approximately $149.6 million of indebtedness outstanding.
Guarantees................................... The Notes are fully and unconditionally guaranteed, on a joint and
several basis, as to the payment of principal, premium, if any,
and interest by all of Freedom's domestic subsidiaries and Freedom
Chemical Diamalt (collectively, the 'Guarantors'). The Guarantees
are subordinated in right of payment to all existing and future
Senior Debt of the respective Guarantors, including such
Guarantors' guarantees of Freedom's obligations under the Amended
and Restated Credit Agreement. Freedom will cause any future
domestic Restricted Subsidiary of Freedom to guarantee, on a
senior subordinated basis, the due and punctual payment of all
amounts due under the Notes. See 'Description of the
Notes--Certain Covenants.'
Change of Control............................ Upon the occurrence of a Change of Control (as defined herein),
(i) Freedom will have the option to redeem the Notes, in whole or
in part, at a redemption price equal to the principal amount
thereof, together with accrued and unpaid interest to the date of
redemption, plus the Applicable Premium (as defined herein), and
(ii) subject to certain conditions, each holder of Notes will have
the right to require Freedom to purchase such holder's Notes at a
purchase price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of
purchase.
Asset Sales.................................. In the event of certain asset sales, Freedom will be required to
offer to purchase the Notes at a purchase price equal to 100% of
their principal amount together with accrued and unpaid interest,
if any, to the date of purchase with the net proceeds of such
assets sales.
Covenants.................................... The indenture pursuant to which the Old Notes were, and the New
Notes will be, issued (the 'Indenture') contains certain covenants
that, among other things, limit the ability of Freedom and any
Restricted Subsidiary (as defined herein) to (i) incur additional
indebtedness, (ii) issue preferred stock in Restricted
Subsidiaries, (iii) pay dividends or make other distributions,
(iv) repurchase equity interests or subordinated indebtedness, (v)
create certain liens, (vi) enter into certain transactions with
affiliates, (vii) consummate certain asset sales, (viii) sell
equity interests in any Restricted Subsidiaries which guarantee
the Notes, and (ix) merge or consolidate with any person. See
'Description of the Notes--Certain Covenants.'
Exchange Offer; Registrations Rights......... Holders of New Notes (other than as set forth below) are not enti-
tled to any registration rights with respect to the New Notes.
Pursuant to the Registration Rights Agreement, Freedom agreed, for
the benefit of the Holders of Old Notes, to file an Exchange Offer
Registration Statement (as defined). The Registration Statement of
which this Prospectus is a part constitutes the Exchange Offer
Registration Statement. Under certain circumstances, certain
Holders of Notes (including Holders who may not participate in the
Exchange Offer or who may not freely resell New Notes received in
the Exchange Offer) may require Freedom to file, and
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
cause to become effective, a shelf registration statement under
the Securities Act, which would cover resales of Notes by such
Holders. See 'Description of the Notes--Exchange Offer; Registra-
tion Rights.'
Use of Proceeds.............................. The Company will not receive any proceeds from the Exchange Offer.
The proceeds from the offering of the Old Notes, together with the
initial borrowings under the Amended and Restated Credit Agreement
and the proceeds from the Cash Equity Investment, which were
approximately $156.5 million in the aggregate, were used to repay
in full indebtedness outstanding under the Existing Credit
Agreements and to pay fees and expenses related to the
Transactions. See 'Use of Proceeds.'
</TABLE>
RISK FACTORS
Holders of the Old Notes should consider carefully the information set
forth under the caption 'Risk Factors' and all other information set forth in
this Prospectus before making a decision to tender their Old Notes in the
Exchange Offer.
8
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth certain summary consolidated financial data
for the periods indicated. The summary consolidated financial data as of
December 31, 1992 and 1993 and for the period April 14, 1992 (inception) to
December 31, 1992 (the '1992 Period') have been derived from the Company's
audited Consolidated Financial Statements not included herein. The summary
consolidated financial data as of December 31, 1994 and 1995 and for the years
ended December 31, 1993, 1994 and 1995 have been derived from the Company's
audited Consolidated Financial Statements and should be read in conjunction with
such audited Consolidated Financial Statements and the Notes thereto included
herein. The summary consolidated financial data as of June 30, 1996 and for the
six months ended June 30, 1995 and 1996 have been derived from the Company's
unaudited Consolidated Financial Statements included herein, which, in the
opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the Company's
financial position and results of operations for the unaudited periods.
Operating results for the six months ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER FOR THE SIX MONTHS
31, ENDED JUNE 30,
1992 ------------------------------- --------------------
PERIOD 1993 1994 1995 1995 1996
------- ------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(A):
Net sales...................................... $14,784 $54,831 $187,780 $296,888 $156,925 $155,787
Cost of goods sold............................. 10,695 45,295 144,845 233,533 119,966 116,482
Gross profit(b)................................ 4,089 9,536 42,935 63,355 36,959 39,305
Selling, general and administrative expense.... 3,588 8,292 26,948 50,399 25,919 24,158
Research and development expense............... 173 735 2,331 4,950 2,305 2,499
Restructuring and other charges(b)............. -- -- -- 12,495 2,662 --
Operating income (loss)........................ 328 509 12,741 (4,639) 5,998 12,573
Interest and debt expense...................... 531 1,556 6,682 13,805 6,992 6,789
Income (loss) before income taxes, equity in
income of joint ventures, and extraordinary
loss......................................... (347) (1,261) 6,320 (20,873) (817) 5,884
Net income (loss).............................. (305) (970) 2,186 (16,990) (1,988) 4,896
Less: preferred dividends...................... 345 1,621 3,694 4,611 1,883 1,862
Net income (loss) applicable to common
shares....................................... (650) (2,591) (1,508) (21,601) (3,871) 3,034
OTHER FINANCIAL DATA:
EBITDA(c)...................................... $ 1,257 $ 3,894 $ 23,787 $ 24,065 $ 16,753 $ 18,982
Depreciation and amortization.................. 929 2,550 7,969 12,690 6,153 6,334
Capital expenditures........................... 435 953 7,210 15,514 8,480 3,986
Gross margin(d)................................ 27.7% 17.4% 22.9% 21.3% 23.6% 25.2%
EBITDA margin(c)(d)............................ 8.5% 7.1% 12.7% 8.1% 10.7% 12.2%
Ratio of EBITDA to interest and debt
expense(c)................................... 2.4x 2.5x 3.6x 1.7x 2.4x 2.8x
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------
AS
ACTUAL ADJUSTED(E)
-------- ----------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................................... $ 39,332 $ 72,847
Total assets.......................................................................... 254,447 261,866
Total long-term debt (net of current portion)......................................... 115,655 147,527
Mandatory redeemable preferred stock and minority interest............................ 46,296 46,296
Stockholders' equity (deficit)........................................................ (17,098) (9,179)
</TABLE>
(Footnotes on next page)
9
<PAGE>
(Footnotes from previous page)
- ------------------
(a) The results of operations of the Company reflect the results of operations
of: Freedom Textile effective from its acquisition in May 1992, Hilton Davis
effective from its acquisition in September 1993, Kalama effective from its
acquisition in May 1994, Reilly-Whiteman effective from its acquisition in
December 1994 and Diamalt effective from its acquisition in January 1995.
See Note 3 to the Company's Consolidated Financial Statements included
herein.
(b) In 1995, the Company recorded restructuring and other charges totaling $14.4
million in connection with the Restructuring Program. These charges reduced
(i) gross profit from $65,287 to $63,355 and operating income (loss) from
$9,788 to $(4,639) for the year ended December 31, 1995 and (ii) gross
profit from $37,591 to $36,959 and operating income from $6,630 to $5,998
for the six months ended June 30, 1995. See Note 17 to the Company's
Consolidated Financial Statements included herein.
(c) EBITDA represents the sum of operating income (loss) plus depreciation and
amortization (excluding amortization of deferred financing costs, which is
included in interest and debt expense), restructuring and other charges,
noncash compensation expense and noncash expense resulting from
acquisitions. The Company recorded noncash expense resulting from
acquisitions of $835, $2,162 and $1,437 for the years ended December 31,
1993, 1994 and 1995, respectively, and $1,233 for the six months ended June
30, 1995, which amounts were included as part of cost of goods sold related
to purchase accounting revaluation of inventory. EBITDA is presented here to
provide additional information about the Company's ability to meet its
future debt service, capital expenditure and working capital requirements.
EBITDA is not a measure of financial performance under generally accepted
accounting principles ('GAAP') and should not be considered as an
alternative either to net income as an indicator of the Company's operating
performance, or to cash flows as a measure of the Company's liquidity.
(d) Gross margin is defined as gross profit as a percentage of net sales and
EBITDA margin is defined as EBITDA as a percentage of net sales.
(e) Adjusted to give effect to (i) the issuance of the Notes in the amount of
$125.0 million, (ii) initial borrowings under the Amended and Restated
Credit Agreement of $21.5 million, (iii) the repayment of outstanding
amounts under the Existing Credit Agreements of $146.9 million, (iv) the
extraordinary loss, net of taxes, associated with the write-off of deferred
financing costs of $2.1 million related to the Existing Credit Agreements
and (v) the issuance of shares of Common Stock for an aggregate amount of
$10.0 million in connection with the Cash Equity Investment.
10
<PAGE>
RISK FACTORS
Holders of Old Notes should consider carefully all of the information set
forth in this Prospectus and, in particular, should evaluate the following risks
before tendering their Old Notes in the Exchange Offer, although the risk
factors set forth below (other than '--Consequences of Failure to Exchange and
Requirements for Transfer of New Notes') are generally applicable to the Old
Notes as well as the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE AND REQUIREMENTS FOR TRANSFER OF NEW NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Freedom does not currently anticipate that it
will register Old Notes under the Securities Act. Based on interpretations by
the staff of the SEC, as set forth in no-action letters issued to third parties,
Freedom believes that New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by Holders thereof (other than any such Holder which is an
'affiliate' of Freedom within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes are acquired in the ordinary
course of such Holders' business and such Holders have no arrangement with any
person to participate in the distribution of such New Notes. However, the SEC
has not considered the Exchange Offer in the context of a no-action letter and
there can be no assurance that the staff of the SEC would make a similar
determination with respect to the Exchange Offer as in such other circumstances.
Each Holder, other than a broker-dealer, must acknowledge that it is not engaged
in, and does not intend to engage in, a distribution of New Notes and has no
arrangement or understanding to participate in a distribution of New Notes. If
any Holder is an affiliate of Freedom, is engaged in or intends to engage in or
has any arrangement or understanding with respect to the distribution of the New
Notes to be acquired pursuant to the Exchange Offer, such Holder (i) could not
rely on the applicable interpretations of the staff of the SEC and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an 'underwriter' within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. Freedom has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See 'Plan of Distribution.' However, to comply with the securities laws
of certain jurisdictions, if applicable, the New Notes may not be offered or
sold unless they have been registered or qualified for sale in such
jurisdictions or an exemption from registration or qualification is available
and is complied with. Freedom has agreed, pursuant to the Registration Rights
Agreement, subject to certain limitations specified therein, to register or
qualify the New Notes for offer or sale under the securities laws of such
jurisdictions as any Holder reasonably requests in writing. Unless Freedom is so
requested, Freedom does not currently intend to register or qualify the sale of
the New Notes in any such jurisdictions. See 'The Exchange Offer--Consequences
of Exchanging Old Notes.'
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
The Company is highly leveraged. As of June 30, 1996, on a pro forma basis
after giving effect to the Transactions, the Company would have had outstanding
approximately $149.6 million of indebtedness (including the Notes). In addition,
subject to the restrictions in the Amended and Restated Credit Agreement and the
Indenture, the Company may incur additional indebtedness from time to time to
finance acquisitions or capital expenditures or for other purposes. See
'Description of the Notes' and 'Description of Amended and Restated Credit
Agreement.' The degree to which the Company is leveraged could have important
consequences to
11
<PAGE>
holders of the Notes, including the following: (i) a substantial portion of
Freedom's consolidated cash flow from operations must be dedicated to the
payment of the principal of and interest on its outstanding indebtedness and
will not be available for other purposes, (ii) the Company's ability to obtain
additional financing in the future for working capital needs, capital
expenditures, acquisitions and general corporate purposes may be materially
limited or impaired or such financing may not be on terms favorable to the
Company, (iii) the Company may be more highly leveraged than its competitors
which may place it at a competitive disadvantage, and (iv) the Company's
leverage may make it more vulnerable to a downturn in its business or the
economy in general.
The Company anticipates that its cash balance together with cash flow from
operations and borrowings available under the Amended and Restated Credit
Agreement will be sufficient to fund anticipated operating expenses, capital
expenditures and to service its debt requirements as they become due. There can
be no assurance, however, that the amounts available from such sources will be
sufficient for such purposes. No assurance can be given that additional sources
of funding will be available if required or, if available, will be on terms
satisfactory to the Company. If the Company is unable to service its
indebtedness it will be forced to adopt an alternative strategy that may include
actions such as reducing or delaying capital expenditures, selling assets,
restructuring or refinancing its indebtedness, or seeking additional equity
capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms, if at all. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources.'
HOLDING COMPANY STRUCTURE
Freedom is a holding company which derives all of its operating income from
its subsidiaries. Accordingly, Freedom will be dependent on dividends and other
distributions from its subsidiaries to generate the funds necessary to meet its
obligations, including the payment of principal and interest on the Notes. The
ability of Freedom's subsidiaries to pay such dividends will be subject to,
among other things, the terms of any debt instruments of Freedom's subsidiaries
then in effect and applicable law. The holders of the Notes will have no direct
claim against Freedom's subsidiaries other than the claim created by the
Guarantees, if any, which may themselves be subject to legal challenge in the
event of the bankruptcy or insolvency of a Guarantor. See '--Fraudulent Transfer
Considerations.' If such a challenge were upheld, the Guarantees would be
invalidated and unenforceable. To the extent that the Guarantees are held to be
unenforceable or have been released pursuant to the terms of the Indenture, the
rights of holders of the Notes to participate in any distribution of assets of
any Guarantor upon liquidation, bankruptcy or reorganization may, as is the case
with other unsecured creditors of Freedom, be subject to prior claims of
creditors of such Guarantor. The Indenture, among other things, limits the
incurrence of additional debt by Freedom's Restricted Subsidiaries. However,
these limitations are subject to a number of important qualifications. See
'Description of the Notes.'
RESTRICTIONS IMPOSED BY THE TERMS OF FREEDOM'S INDEBTEDNESS; CONSEQUENCES OF
FAILURE TO COMPLY
The terms and conditions of the Amended and Restated Credit Agreement and
the Indenture impose restrictions that affect, among other things, the ability
of Freedom and its Restricted Subsidiaries to incur debt (including other
subordinated debt), pay dividends or make distributions, make acquisitions,
create liens, sell assets, create restrictions on the payment of dividends and
other payments by its Restricted Subsidiaries and make certain investments. The
Amended and Restated Credit Agreement also requires Freedom to maintain
specified financial ratios and tests, including maximum leverage ratios and
minimum interest coverage ratios. Moreover, the indebtedness outstanding under
the Amended and Restated Credit Agreement is guaranteed by all of Freedom's
domestic subsidiaries (and by (i) Freedom in respect of indebtedness incurred by
Freedom Chemical Diamalt and (ii) Freedom Chemical Diamalt in respect of
indebtedness incurred by Freedom) and is secured by a first priority lien on
substantially all of the properties and assets of Freedom and its domestic
subsidiaries, now owned or acquired later, and certain properties and assets of
Freedom Chemical Diamalt, including a pledge of all of the shares of Freedom's
existing and future domestic subsidiaries and up to 65% of the shares of
Freedom's existing and future foreign subsidiaries that are owned by Freedom or
one of its domestic subsidiaries (collectively, the 'Collateral').
Freedom's ability to comply with the foregoing provisions can be affected
by events beyond its control. The breach of any of these covenants could result
in a default under one or more of the debt instruments of Freedom or its
subsidiaries. In the event of a default under any indebtedness of Freedom or its
subsidiaries, the holders of
12
<PAGE>
such indebtedness could elect to declare all amounts outstanding under their
respective debt instruments to be due and payable. Any such declaration under a
debt instrument of Freedom or its subsidiaries is likely to result in an event
of default under one or more of the other debt instruments of Freedom or its
subsidiaries. If indebtedness of Freedom or its subsidiaries was to be
accelerated, there could be no assurance that the assets of Freedom or Freedom's
subsidiaries, as the case may be, would be sufficient to repay in full
borrowings under all of such debt instruments, including the Notes. In the case
of the Amended and Restated Credit Agreement, if such indebtedness were not so
repaid, refinanced or restructured, the lenders could proceed to realize on the
Collateral. See 'Description of the Notes' and 'Description of Amended and
Restated Credit Agreement.'
SUBORDINATION OF NOTES AND GUARANTEES
The Notes are general unsecured obligations of Freedom and are subordinated
in right of payment to all existing and future Senior Debt of Freedom, including
Freedom's guarantee of Freedom Chemical Diamalt's obligations under the Amended
and Restated Credit Agreement. In addition, the Guarantees of the Notes by each
of the Guarantors are general unsecured obligations of each of such Guarantors
and are subordinated in right of payment to all existing and future Senior Debt
of each of such Guarantors, including such Guarantors' guarantees of Freedom's
obligations under the Amended and Restated Credit Agreement. Subject to certain
limitations, the Indenture permits Freedom and its Restricted Subsidiaries,
including the Guarantors, to incur additional Senior Debt. See 'Description of
the Notes--Certain Covenants--Limitation on Incurrence of Indebtedness.' As a
result of the subordination provisions contained in the Indenture, in the event
of a liquidation or insolvency, holders of Senior Debt and trade creditors of
Freedom and the Guarantors may recover more, ratably, than the holders of the
Notes. The holders of any indebtedness of Freedom's subsidiaries (other than the
Guarantors) will be entitled to payment of their indebtedness from the assets of
such subsidiaries prior to the holders of any general unsecured obligations of
Freedom, including the Notes. In addition, in the event of a payment default
under the Amended and Restated Credit Agreement, no payments may be made on
account of the principal, premium, if any, or interest on the Notes until such
default has been cured or waived. Under certain circumstances, no payments may
be made for a specified period with respect to the principal, premium, if any,
or interest on the Notes if a nonpayment default exists under the Amended and
Restated Credit Agreement.
INTERNATIONAL OPERATIONS
The Company has significant assets located outside the United States and a
significant portion of the Company's sales and earnings are attributable to
operations conducted abroad and to export sales. The Company operates
manufacturing and other facilities in five countries and sells its products in
approximately 25 countries. For the six months ended June 30, 1996,
approximately 22% of the Company's assets were located outside the United
States, predominantly in Western Europe, and approximately 43% of the Company's
net sales consisted of sales made to customers located outside the United
States, predominantly in Western Europe and the Far East. The United States
dollar value of the Company's international sales and earnings varies with
currency exchange rate fluctuations. Changes in currency exchange rates could in
the future adversely affect the Company's results of operations as well as the
Company's ability to meet interest and principal obligations on the Notes. In
addition, international manufacturing, sales and raw materials sourcing are
subject to other inherent risks, including labor unrest, political instability,
restrictions on transfers of funds, export duties and quotas, domestic and
international customs and tariffs, unexpected changes in regulatory
environments, difficulty in obtaining distribution and support, and potentially
adverse tax consequences. Although such risks have not had a material adverse
effect on the Company in the past, there can be no assurance that these factors
will not have a material adverse impact on the Company's ability to increase or
maintain its international sales or on its results of operations in the future.
COMPETITIVE INDUSTRY
The Company faces competition from a substantial number of global and
regional competitors, some of which have greater financial, research and
development, production and other resources than the Company. The Company's
competitive position is based principally on customer service and support,
breadth of product line, product quality, manufacturing technology, facility
location, and, to a lesser extent, the selling prices of its products. The
Company's competitors can be expected to continue to improve the design and
performance of their specialty chemical products and to introduce new products
with competitive price and performance
13
<PAGE>
characteristics. There can be no assurance that the Company will have sufficient
resources to maintain its current competitive position or market share. See
'Business--Products' and '--Competition.'
ENVIRONMENTAL CONSIDERATIONS
Manufacturers of specialty and fine chemical products, including the
Company, are subject to a variety of U.S. and non-U.S. laws and regulations
relating to pollution and protection of the environment, including the storage,
handling, treatment, discharge and disposal of materials into the environment.
U.S. manufacturers of specialty and fine chemicals, including the Company, have
expended, and may be required to expend in the future, substantial funds for
compliance with such laws and regulations. Some risk of environmental liability
is inherent in the nature of the Company's business, and there is no assurance
that additional material environmental costs will not arise as a result of
compliance with existing and future legislation or other developments. The
Company does not currently anticipate any material adverse effect on its results
of operations, financial condition or competitive position as a result of
compliance with environmental requirements or as a result of the impact of
environmental considerations on the marketability of its products. However,
environmental laws and regulations are becoming increasingly more stringent. To
the extent that the cost of compliance increases and the Company cannot pass on
future increases to its customers, such increases may have an adverse impact on
the Company's profitability. As of June 30, 1996, the Company had reserves of
approximately $19.3 million for certain environmental expenditures. The Company
expects to have environmental expenditures of approximately $2.0 million to $3.0
million annually in each of the next two years. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and the Company's
Consolidated Financial Statements included herein. The Company believes that the
costs incurred in connection with most of the significant environmental
liabilities relating to the Company's properties will be covered by the
indemnities described below. See 'Business--Environmental Matters.'
Pursuant to the terms of agreements entered into in connection with the
Company's acquisitions of Freedom Textile's Charlotte facility, Hilton Davis,
Kalama and certain assets of Reilly-Whiteman, the Company is indemnified against
certain environmental liabilities by American Cyanamid, Sterling Winthrop, Inc.
('Sterling Winthrop') (at the time of the Hilton Davis Acquisition a subsidiary
of Eastman Kodak Company ('Eastman Kodak')), BC Sugar Refinery Limited ('BC
Sugar') and Reilly-Whiteman (collectively, the 'Environmental Indemnitors'),
respectively. Subsequent to such acquisitions, American Cyanamid distributed to
its stockholders all of the capital stock of its chemicals unit, Cytec
Industries Inc. ('Cytec'), and Eastman Kodak sold the capital stock of Sterling
Winthrop to a third party. Although, to date, the Company has continued to be
reimbursed for environmental liabilities in respect of Freedom Textile and
Hilton Davis by Cytec and a subsidiary of Eastman Kodak, respectively, the
latter of such entities has not formally acknowledged to the Company its
assumption of indemnification obligations in connection with such environmental
liabilities. No assurance can be given that such subsidiary of Eastman Kodak
will continue to reimburse the Company in the future. Moreover, no assurance can
be given that the Environmental Indemnitors (or any successor that assumes the
obligations of any such Environmental Indemnitor) will have the financial
resources to perform their respective responsibilities fully or that the Company
will not be required to incur expenses for liabilities under environmental
requirements including those for remediation before such time as the
Environmental Indemnitors (or any such successor) pay any amounts for which they
are ultimately held responsible. In any such event, the Company may be required
to incur significant costs, which could have a material adverse effect on the
Company.
VOTING CONTROL BY PRINCIPAL STOCKHOLDER
Following consummation of the Cash Equity Investment, the JLL Funds own, on
a fully diluted basis, an aggregate of approximately 89.0% of the outstanding
shares of Common Stock. The JLL Funds currently have sufficient voting power to
elect the entire Board of Directors of Freedom and, in general, to determine
(without the consent of Freedom's other stockholders) the outcome of any
corporate transaction or other matter submitted to the stockholders for
approval, including mergers, consolidations and the sale of all or substantially
all of Freedom's assets, and also the power to prevent or cause a change in
control of the Company. In addition, four of the seven current members of the
Board of Directors are general partners of or otherwise associated with JLL, the
general partner of each of the JLL Funds. See 'Principal Stockholders.'
14
<PAGE>
RAW MATERIAL PRICE VOLATILITY
The principal raw materials used by the Company in the manufacture of its
products, including toluene, can be subject to significant cyclical price
fluctuations. No single raw material accounted for more than 7% of the Company's
1995 cost of goods sold. While the selling prices of the Company's products tend
to increase or decrease over time with the cost of raw materials, such changes
may not occur simultaneously or to the same degree. There can be no assurance
that the Company will be able to pass any increases in raw material costs
through to its customers in the form of price increases. Significant increases
in the price of raw materials, if not offset by product price increases, would
have an adverse impact upon the profitability of the Company. See 'Business--Raw
Materials.'
RELIANCE ON CONTINUED OPERATION AND SUFFICIENCY OF MANUFACTURING FACILITIES
The Company's revenues are dependent on the continued operation of its
various manufacturing facilities. Although presently all operating plants are
considered to be in good condition, the operation of manufacturing plants
involves many risks, including the breakdown, failure or substandard performance
of equipment, power outages, the improper installation or operation of
equipment, natural disasters and the need to comply with directives of
governmental agencies. Many of the Company's product lines are manufactured at a
single facility and production would not be transferable to another site. The
occurrence of material operational problems, including but not limited to the
above events, may adversely affect the profitability of the Company during the
period of such operational difficulties.
LABOR RELATIONS
As of June 30, 1996, approximately 50% of the Company's domestic employees
were covered by collective bargaining agreements which expire at various times
in each of the next several years. As of June 30, 1996, approximately 34% of the
Company's domestic employees were covered by agreements which expire, or are
subject to renegotiation, at various times during the next 18 months, including
the agreement covering approximately 110 employees at the Company's Kalama,
Washington facility which expires in May 1997. The Company believes that it has
satisfactory relations with its unions and, therefore, anticipates reaching new
agreements on satisfactory terms as the existing agreements expire or shortly
thereafter. There can be no assurance, however, that new agreements will be
reached without a work stoppage or strike or will be reached on terms
satisfactory to the Company. A prolonged work stoppage or strike at any one of
its manufacturing facilities could have a material adverse effect on the
Company's results of operations. See 'Business--Employees.'
FRAUDULENT TRANSFER CONSIDERATIONS
The obligations of any Guarantor under its Guarantee may be subject to
avoidance under state fraudulent transfer laws or federal bankruptcy law. If a
court were to find, in a lawsuit by an unpaid creditor of a Guarantor or a
representative of creditors, such as a trustee in bankruptcy, (a) that such
Guarantor incurred the indebtedness represented by its Guarantee with the intent
to hinder, delay or defraud present or future creditors, or received less than a
reasonably equivalent value or fair consideration for any such indebtedness and
(b) at the time of such incurrence (i) was insolvent, (ii) was rendered
insolvent by reason of such incurrence, (iii) was engaged or about to engage in
a business or transaction for which its remaining assets constituted
unreasonably small capital to carry on its business or (iv) intended to incur,
or believed or reasonably should have believed that it would incur debts beyond
its ability to pay as such debts matured, such court could avoid such
Guarantor's obligations under its Guarantee, subordinate such Guarantee to all
other indebtedness of such Guarantor or take other action detrimental to the
holders of the Notes. In such an event, there can be no assurance that any
payment on such Guarantee could ever be recovered by holders of the Notes. In
addition, any payments by any Guarantor pursuant to such Guarantor's Guarantee
could be voided and may be required to be returned to such Guarantor or to a
fund for the benefit of its creditors.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, a Guarantor would be considered insolvent if the
sum of its debts, including contingent liabilities, were greater than the fair
saleable value of all of its assets at a fair valuation or if the present fair
saleable value of its assets were less than the amount that would
15
<PAGE>
be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature. Although, the
Company believes that each of the Guarantors is solvent under the foregoing
standards, there can be no assurance as to what standard a court would apply in
making such determination or that a court would reach the same conclusion. See
'Description of the Notes--The Guarantees.'
In rendering their opinions with respect to the validity of the New Notes
and the Guarantees, counsel for Freedom and the Guarantors will not express any
opinion as to the applicability of federal or state statutes relating to
fraudulent conveyances and obligations.
The obligations of Freedom Chemical Diamalt under its Guarantee are limited
under German law to the maximum amount that would not result in depletion of its
stated share capital.
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The New Notes are being offered to the Holders of the Old Notes. The Old
Notes were issued on October 17, 1996 to a small number of institutional
investors and are eligible for trading in the Private Offering, Resale and
Trading through Automated Linkages (PORTAL) Market, the National Association of
Securities Dealers' screenbased, automated market for trading of securities
eligible for resale under Rule 144A. To the extent that Old Notes are tendered
and accepted in the Exchange Offer, the trading market for the remaining
untendered Old Notes could be adversely affected. There is no existing trading
market for the New Notes, and there can be no assurance regarding the future
development of a market for the New Notes, or the ability of Holders of the New
Notes to sell their New Notes or the price at which such Holders may be able to
sell their New Notes. If such a market were to develop, the New Notes could
trade at prices that may be higher or lower than the initial offering price of
the Old Notes depending on many factors, including prevailing interest rates,
the Company's operating results and the market for similar securities. Although
the Initial Purchasers have informed Freedom that they currently intend to make
a market in the New Notes, they are not obligated to do so, and any such market
making may be discontinued at any time without notice. Accordingly, there can be
no assurance as to the development or liquidity of any market for the Notes.
Freedom does not intend to apply for listing of the New Notes on any securities
exchange or for quotation through the National Association of Securities Dealers
Automated Quotation System.
16
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The
gross proceeds of the offering of Old Notes, together with initial borrowings
under the Amended and Restated Credit Agreement and the proceeds of the Cash
Equity Investment, were used to repay in full indebtedness outstanding under the
Existing Credit Agreements and to pay fees and expenses related to the
Transactions, including, the discounts to the Initial Purchasers. See
'Capitalization.' The following table sets forth the sources and uses of funds
in connection with the Transactions:
<TABLE>
<CAPTION>
AMOUNTS
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Borrowings under Amended and Restated Credit Agreement(a)(b)...................... $ 21.5
Proceeds from sale of Old Notes................................................... 125.0
Proceeds from Cash Equity Investment.............................................. 10.0
-------
Total Sources.................................................................. $ 156.5
-------
-------
USES OF FUNDS:
Repayment of amounts outstanding under Freedom Credit Agreement(b)................ $ 125.4
Repayment of amounts outstanding under Diamalt Credit Agreement(c)................ 21.5
Fees and expenses(d).............................................................. 7.5
Working capital................................................................... 2.1
-------
Total Uses..................................................................... $ 156.5
-------
-------
</TABLE>
- ------------------
(a) Represents initial borrowings under the Amended and Restated Credit
Agreement, which provides for revolving loans of up to $85.0 million in the
aggregate.
(b) As of October 17, 1996, outstanding amounts under the Freedom Credit
Agreement included (i) $98.5 million under term loan facilities which
matured at various dates through 2002 and bore interest at a weighted
average rate of 8.9% per annum, (ii) $26.1 million under a revolving credit
facility, which matured on June 30, 2000 and bore interest at a weighted
average rate of 8.6% per annum and (iii) $0.8 million of accrued and unpaid
interest.
(c) As of October 17, 1996, the annual interest rate of borrowings under the
Diamalt Credit Agreement was 7.8%, and the maturity date of borrowings under
the Diamalt Credit Agreement was May 30, 1997.
(d) Represents estimated fees and expenses related to the Transactions,
including (i) discounts to the Initial Purchasers, (ii) lender fees and
(iii) legal, accounting and other professional fees and expenses.
17
<PAGE>
CAPITALIZATION
The following table sets forth the Company's short-term debt and
capitalization as of June 30, 1996 and as adjusted to reflect the consummation
of the Transactions as described under 'Use of Proceeds.' This table should be
read in conjunction with the Consolidated Financial Statements of the Company
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current maturities of long-term debt................................................. $ 7,879 $ 104
Short-term borrowings................................................................ 16,240 --
Notes payable........................................................................ 1,984 1,984
-------- -----------
Total short-term debt............................................................. $ 26,103 $ 2,088
-------- -----------
-------- -----------
Long-term debt (excluding current maturities):
Existing Credit Agreements........................................................... $114,628 $ --
Amended and Restated Credit Agreement................................................ -- 21,500
FCD construction loan................................................................ 1,018 1,018
Capital lease obligations............................................................ 9 9
Notes................................................................................ -- 125,000
-------- -----------
Total long-term debt (excluding current maturities)............................... 115,655 147,527
Minority interest(a)................................................................... 3,399 3,399
Mandatory redeemable preferred stock................................................... 42,897 42,897
Stockholders' equity (deficit)......................................................... (17,098) (9,179)
-------- -----------
Total capitalization.............................................................. $144,853 $ 184,644
-------- -----------
-------- -----------
</TABLE>
- ------------------
(a) Includes (i) $3,073 relating to the outstanding shares of Series A Preferred
Stock of Freedom Textile, (ii) $22 of accrued and unpaid dividends on the
outstanding shares of Series B Preferred Stock of Freedom Textile and (iii)
a 26% equity interest in a majority-owned subsidiary of Freedom Chemical
Diamalt not owned by the Company.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the
periods indicated. The selected consolidated financial data as of December 31,
1992 and 1993 and for the 1992 Period have been derived from the Company's
audited Consolidated Financial Statements not included herein. The selected
consolidated financial data as of December 31, 1994 and 1995, and for the years
ended December 31, 1993, 1994 and 1995, have been derived from the Company's
audited Consolidated Financial Statements and should be read in conjunction with
such audited Consolidated Financial Statements and the Notes thereto included
herein. The selected consolidated financial data as of June 30, 1996 and for the
six months ended June 30, 1995 and 1996 have been derived from the Company's
unaudited Consolidated Financial Statements included herein. The selected
consolidated financial data as of June 30, 1995 has been derived from the
Company's unaudited Consolidated Financial Statements not included herein. The
unaudited Consolidated Financial Statements have been prepared on the same basis
as the audited Consolidated Financial Statements included herein and, in the
opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the Company's
financial position and results of operations for the unaudited periods.
Operating results for the six months ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996. The selected consolidated financial data of Hilton Davis (the
'Predecessor') as of December 31, 1991 and 1992 and September 9, 1993 and for
the years ended December 31, 1991 and 1992 are derived from the audited
Consolidated Financial Statements of Hilton Davis not included herein. The
selected consolidated financial data for the period prior to the acquisition of
Hilton Davis from January 1, 1993 to September 9, 1993 (the '1993 Period') are
derived from the audited Consolidated Financial Statements of Hilton Davis and
should be read in conjunction with such audited Consolidated Financial
Statements and the Notes thereto included herein.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER FOR THE SIX MONTHS
31, ENDED JUNE 30,
1992 ------------------------------- --------------------
PERIOD 1993 1994 1995 1995 1996
------- ------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(A):
Net sales................................ $14,784 $54,831 $187,780 $296,888 $156,925 $155,787
Cost of goods sold....................... 10,695 45,295 144,845 233,533 119,966 116,482
------- ------- -------- -------- -------- --------
Gross profit(b).......................... 4,089 9,536 42,935 63,355 36,959 39,305
Selling, general and administrative
expense............................... 3,588 8,292 26,948 50,399 25,919 24,158
Noncash compensation expense(c).......... -- -- 915 150 75 75
Research and development expense......... 173 735 2,331 4,950 2,305 2,499
Restructuring and other charges(b)....... -- -- -- 12,495 2,662 --
------- ------- -------- -------- -------- --------
Operating income (loss).................. 328 509 12,741 (4,639) 5,998 12,573
Registration costs....................... -- -- -- 2,187 -- --
Other expense (income), net.............. -- (37) (545) (5) (303) (226)
Interest and debt expense................ 531 1,556 6,682 13,805 6,992 6,789
Minority interest........................ 144 251 284 247 126 126
------- ------- -------- -------- -------- --------
Income (loss) before income taxes, equity
in income of joint ventures and
extraordinary loss.................... (347) (1,261) 6,320 (20,873) (817) 5,884
Provision (benefit) for income taxes..... (42) (291) 2,858 (3,809) 1,291 1,443
Equity in income of joint ventures....... -- -- -- 74 120 455
------- ------- -------- -------- -------- --------
Income (loss) before extraordinary
loss.................................. (305) (970) 3,462 (16,990) (1,988) 4,896
Extraordinary loss, net(d)............... -- -- 1,276 -- -- --
------- ------- -------- -------- -------- --------
Net income (loss)........................ (305) (970) 2,186 (16,990) (1,988) 4,896
Less: preferred dividends................ 345 1,621 3,694 4,611 1,883 1,862
------- ------- -------- -------- -------- --------
Net income (loss) applicable to common
shares................................ $ (650) $(2,591) $ (1,508) $(21,601) $ (3,871) $ 3,034
------- ------- -------- -------- -------- --------
------- ------- -------- -------- -------- --------
(Continued on next page)
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(Continued from previous page)
<CAPTION>
FOR THE YEARS ENDED DECEMBER FOR THE SIX MONTHS
31, ENDED JUNE 30,
1992 ------------------------------- --------------------
PERIOD 1993 1994 1995 1995 1996
------- ------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA(e)................................ $ 1,257 $ 3,894 $ 23,787 $ 24,065 $ 16,753 $ 18,982
Depreciation and amortization............ 929 2,550 7,969 12,690 6,153 6,334
Capital expenditures..................... 435 953 7,210 15,514 8,480 3,986
Gross margin(f).......................... 27.7% 17.4% 22.9% 21.3% 23.6% 25.2%
EBITDA margin(e)(f)...................... 8.5% 7.1% 12.7% 8.1% 10.7% 12.2%
Ratio of EBITDA to interest and debt
expense(e)............................ 2.4x 2.5x 3.6x 1.7x 2.4x 2.8x
Ratio of earnings to fixed
charges(g)............................ -- -- 1.9x -- -- 1.8x
BALANCE SHEET DATA (AT PERIOD END):
Working capital.......................... $ 2,016 $23,964 $ 38,326 $ 37,455 $ 49,009 $ 39,332
Total assets............................. 18,377 101,234 231,064 243,156 275,445 254,447
Total long-term debt (net of current
portion).............................. 6,175 41,266 93,643 119,520 119,543 115,655
Mandatory redeemable preferred stock and
minority interest..................... 7,517 26,267 39,707 44,132 41,807 46,296
Stockholders' equity (deficit)........... 100 265 1,747 (18,743) (2) (17,098)
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY (HILTON DAVIS)
----------------------------------------
YEAR ENDED DECEMBER
31,
---------------------- 1993
1991 1992 PERIOD
-------- -------- ------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................................................... $105,160 $109,906 $ 79,618
Cost of goods sold(h)............................................. 86,501 89,037 62,744
-------- -------- ------------
Gross profit...................................................... 18,659 20,869 16,874
Selling, general and adminsitrative expense....................... 11,900 12,842 10,959
Research and development expense.................................. 329 724 769
-------- -------- ------------
Operating income.................................................. 6,430 7,303 5,146
Other expense (income), net....................................... 43 (15) 337
Interest and debt expense......................................... 4,258 3,247 1,998
-------- -------- ------------
Income before income taxes........................................ 2,129 4,071 2,811
Provision for income taxes(i)..................................... 835 1,592 1,155
-------- -------- ------------
Net income........................................................ $ 1,294 $ 2,479 $ 1,656
-------- -------- ------------
-------- -------- ------------
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges(g)............................. 1.5x 2.2x 2.3x
BALANCE SHEET DATA (AT PERIOD END):
Working capital................................................... $ 13,389 $ 16,577 $ 16,406
Total assets...................................................... 55,316 59,039 64,125
Total long term debt (net of current portion)..................... 36,085 37,163 37,492
Stockholders' equity (deficit).................................... (2,731) (472) 1,256
</TABLE>
(Footnotes on next page)
20
<PAGE>
(Footnotes from previous page)
- ------------------
(a) The results of operations of the Company reflect the results of operations
of: Freedom Textile effective from its acquisition in May 1992, Hilton Davis
effective from its acquisition in September 1993, Kalama effective from its
acquisition in May 1994, Reilly-Whiteman effective from its acquisition in
December 1994 and Diamalt effective from its acquisition in January 1995.
See Note 3 to the Company's Consolidated Financial Statements included
herein.
(b) In 1995, the Company recorded restructuring and other charges totaling
$14,427 in connection with the Restructuring Program. These charges reduced
(i) gross profit from $65,287 to $63,355 and operating income (loss) from
$9,788 to $(4,639) for the year ended December 31, 1995 and (ii) gross
profit from $37,591 to $36,959 and operating income from $6,630 to $5,998
for the six months ended June 30, 1995. See Note 17 to the Company's
Consolidated Financial Statements included herein.
(c) The Company has recorded noncash compensation expense of $915 and $150 for
the years ended December 31, 1994 and 1995, respectively, and $75 for each
of the six months ended June 30, 1995 and 1996 related to Common Stock
options granted and vested during those periods and Common Stock sold to
executive officers of the Company in connection with the Kalama Acquisition
during June 1994.
(d) The Company recorded an extraordinary loss in connection with the write-off
of deferred financing fees upon the consolidation of all the Company's
outstanding indebtedness under the Freedom Credit Agreement.
(e) EBITDA represents the sum of operating income (loss), plus depreciation and
amortization (excluding amortization of deferred financing costs, which is
included in interest and debt expense), restructuring and other charges,
noncash compensation expense and noncash expense resulting from
acquisitions. The Company recorded noncash expense resulting from
acquisitions of $835, $2,162 and $1,437 for the years ended December 31,
1993, 1994 and 1995, respectively, and $1,233 for the six months ended June
30, 1995, which amounts are included as part of cost of goods sold related
to purchase accounting revaluation of inventory. EBITDA is presented here to
provide additional information about the Company's ability to meet its
future debt service, capital expenditure and working capital requirements.
EBITDA is not a measure of financial performance under GAAP and should not
be considered as an alternative either to net income as an indicator of the
Company's operating performance, or to cash flows as a measure of the
Company's liquidity.
(f) Gross margin is defined as gross profit as a percentage of net sales and
EBITDA margin is defined as EBITDA as a percentage of net sales.
(g) Ratio of earnings to fixed charges is calculated as the ratio of the sum of
income (loss) before taxes and fixed charges to fixed charges. Fixed charges
consist of interest and debt expense, minority interest, capitalized
interest and one-third of rental expense. The Company's earnings were
insufficient to cover fixed charges by $347, $1,261 and $20,873 for the 1992
Period and for the years ended December 31, 1993 and 1995, respectively, and
$817 for the six months ended June 30, 1995.
(h) The Predecessor changed its method of accounting for maintenance parts
retroactive to January 1, 1990. The effect of this change was to reduce
retained earnings by $1,695 at January 1, 1990 and increase/(decrease) net
income by $66, $0, and $(60) for the years ended December 31, 1991 and 1992
and the 1993 Period.
(i) The Predecessor adopted Statement of Financial Accounting Standards (SFAS)
No. 109, 'Accounting for Income Taxes,' retroactive to January 1, 1990. The
effect of this change decreased accumulated deficit by $26 at January 1,
1991 and increased/(decreased) net income by $184, $(13) and $(80) for the
years ended December 31, 1991 and 1992 and the 1993 Period.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with 'Selected
Consolidated Financial Data' and the Consolidated Financial Statements of the
Company and the notes thereto included in this Prospectus.
GENERAL
The Company is a leading global manufacturer and marketer of a broad range
of specialty and fine chemical products which are sold into several market
segments for use in food and beverage products, household and industrial
products, cosmetics and personal care products, pharmaceuticals, pet foods,
textile and paper products and many other diverse applications. The Company
operates in one industry segment, with revenues derived from sales in five core
product groups: (i) Food and Personal Care Ingredients, (ii) Pharmaceutical
Intermediates and Natural Additives, (iii) Specialty Organic Chemicals and
Intermediates, (iv) Organic Pigments and Dyes and (v) Textile and Paper
Chemicals.
The revenue growth of each of the Company's product groups generally
fluctuates in response to the overall business trends of the industries of each
of its customers. During the second half of 1995 and the first half of 1996, for
example, the overall performance of the Company's Textile and Paper Chemicals
group declined as compared to prior periods as a result of lower textile
production rates and the impact of mill closings, both of which resulted from
decreased demand for the end products of textile mills. Such decline was
partially offset by the strong performance of the Company's Food and Personal
Care Ingredients and Specialty Organic Chemicals and Intermediates groups
attributable to expanded production capacity of benzoates and benzaldehyde.
The Company's sales have increased in each of the last three years
primarily as a result of three acquisitions: the Hilton Davis Acquisition on
September 9, 1993, the Kalama Acquisition on May 26, 1994 and the Diamalt
Acquisition on January 13, 1995, which was effective on January 1, 1995.
THE RESTRUCTURING PROGRAM
In 1995, Freedom implemented the Restructuring Program in which it
identified a number of opportunities to reduce its overall cost structure and
enhance the Company's potential for future growth and profitability. The
Restructuring Program included (i) the consolidation of certain of the Company's
manufacturing facilities, (ii) the sale of a non-strategic product line, (iii)
the write-off of discontinued inventory and capitalized expenses and (iv) the
recognition of certain estimated environmental remediation costs. As a part of
these actions, the Company closed in April 1996 its Conshohocken, Pennsylvania
plant which manufactured products in the Organic Pigments and Dyes group and in
May 1996 its Newark, New Jersey plant which manufactured products in the Textile
and Paper Chemicals group and relocated certain of those production capabilities
and technology to its other facilities. In addition, the Company reduced
personnel by approximately 135 employees in both administrative and
manufacturing positions. The Restructuring Program resulted in nonrecurring
charges of $14.4 million for the year ended December 31, 1995.
Management expects that the Restructuring Program, which was recently
completed, will result in significant cost savings to the Company related to
reduced personnel costs and the elimination of redundant fixed overhead costs
resulting from the closure of the two facilities. Management estimates that the
Restructuring Program will yield annual cost savings of approximately $4.2
million, some of the benefits of which are evidenced in the Company's EBITDA
margin improving to 12.2% for the first six months ended June 30, 1996 as
compared to 10.7% for the same period of the prior year. As part of the
Company's business strategy, management will continue to seek to improve
operating efficiencies and reduce costs by optimizing the use of its
manufacturing facilities and implementing further administrative, manufacturing
and operating expense reductions. See 'Business--The Restructuring Program' and
Note 17 to the Company's Consolidated Financial Statements included herein.
22
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain data from the Selected Consolidated
Financial Data expressed as a percentage of net sales.
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEARS ENDED MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------------- --------------
1993 1994 1995 1995 1996
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Net sales................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold........................................ 82.6 77.1 78.7 76.4 74.8
Gross profit.............................................. 17.4 22.9 21.3 23.6 25.2
Selling, general and administrative expense............... 15.1 14.4 17.0 16.5 15.5
Research and development expense.......................... 1.3 1.2 1.7 1.5 1.6
Restructuring and other charges........................... -- -- 4.2 1.7 --
Operating income (loss)................................... 0.9 6.8 (1.6) 3.8 8.1
Interest and debt expense................................. 2.8 3.6 4.6 4.5 4.4
Net income (loss)......................................... (1.8) 1.2 (5.7) (1.3) 3.1
Less: preferred dividends................................. 2.9 2.0 1.6 1.2 1.2
Net income (loss) applicable to common shares............. (4.7) (0.8) (7.3) (2.5) 1.9
</TABLE>
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net Sales. Net sales declined $1.1 million to $155.8 million in the six
months ended June 30, 1996 as compared to the same period in the prior year. The
decline in net sales was primarily due to a decrease in sales of Textile and
Paper Chemicals attributable to decreased demand in the textile and paper
industries, and of Organic Pigments and Dyes attributable to decreased demand
for inks resulting from the recent consolidation of the ink industry and an
increase in the price of paper. The decline in net sales was partially offset by
an increase in sales of Food and Personal Care Ingredients and Specialty Organic
Chemicals and Intermediates attributable to expanded production capacity of
benzoates and benzaldehyde as well as the positive impact of the overall
strength of the domestic and world economies on the Company's customers in such
product groups.
Gross Profit. The Company's gross profit increased $2.3 million to $39.3
million in the six months ended June 30, 1996 as compared to the same period in
the prior year. This increase in gross profit was primarily due to increased
sales volume of Food and Personal Care Ingredients and Specialty Organic
Chemicals and Intermediates attributable to expanded production capacity of
benzoates and benzaldehyde. In addition, significant factory cost reductions,
which were implemented in connection with the Restructuring Program and which
benefited the Company's Organic Pigments and Dyes group, had a positive effect
on the Company's gross profit. This increase also results from $0.6 million of
charges recorded in connection with the Restructuring Program which were
included in the six months ended June 30, 1995. Gross margins increased from
23.6% in the first six months of 1995 to 25.2% for the same period of 1996.
Selling, General and Administrative Expense. Selling, general and
administrative expense decreased $1.8 million to $24.2 million in the six months
ended June 30, 1996 as compared to the same period in the prior year primarily
due to staff reductions and plant closings, including those effected as part of
the Restructuring Program. As a percent of sales, selling, general and
administrative expense decreased from 16.5% in the first six months of 1995 to
15.5% for the same period of 1996.
Research and Development Expense. Research and development expense
increased $0.2 million to $2.5 million in the six months ended June 30, 1996 as
compared to the same period in the prior year. As a percent of sales, research
and development expense increased from 1.5% in the first six months of 1995 to
1.6% for the same period of 1996.
Operating Income (Loss). Operating income increased $6.6 million to $12.6
million in the six months ended June 30, 1996 as compared to the same period in
the prior year. Operating margins improved to 8.1% in the first six months of
1996 from 3.8% for the same period of the prior year primarily due to expanded
production capacity of benzoates and benzaldehyde and improved manufacturing
efficiencies as well as cost reductions primarily as a result of the
Restructuring Program. This increase also results from $3.3 million of charges
recorded in connection with the Restructuring Program which were included in the
six months ended June 30, 1995.
Interest and Debt Expense. Interest and debt expense decreased $0.2
million to $6.8 million in the six months ended June 30, 1996 as compared to the
same period in the prior year.
23
<PAGE>
Net Income (Loss). Net income increased $6.9 million to $4.9 million for
the six months ended June 30, 1996 as compared to the same period in the prior
year. The increase in the Company's net income resulted primarily from the
increased sales volume of Food and Personal Care Ingredients and Specialty
Organic Chemicals and Intermediates attributable to expanded production capacity
of benzoates and benzaldehyde as well as the reduction in overall costs, which
was part of the Restructuring Program. This increase also results from the
charges recorded in connection with the Restructuring Program which were
included in the six months ended June 30, 1995.
Preferred Dividends. The accretion of accrued and unpaid dividends on
Series B and Series C Preferred Stock was virtually unchanged for the six months
ended June 30, 1996 as compared to the same period in the prior year.
Net Income (Loss) Applicable to Common Shares. Net income applicable to
common shares increased by $6.9 million to $3.0 million for the six months ended
June 30, 1996 as compared to the same period in the prior year. The increase
resulted from the items referred to above under 'Net Income (Loss).'
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Restructuring Program. In 1995, the Company recorded restructuring and
other charges totalling $14.4 million in connection with the Restructuring
Program. The items covered by the charges included (i) plant closures
aggregating $7.4 million, (ii) workforce reductions aggregating $2.4 million,
(iii) estimated environmental remediation costs of $1.9 million and (iv) the
write-off of discontinued inventory and capitalized expenses totalling $2.7
million. Of the $14.4 million of charges, approximately $6.2 million represent
charges which require cash expenditures. As part of the Restructuring Program,
the Company sold a non-strategic product line. See 'Business--The Restructuring
Program' and Note 17 to the Company's Consolidated Financial Statements included
herein.
Net Sales. Net sales increased $109.1 million to $296.9 million in the
year ended December 31, 1995 as compared to the prior year. The increase in net
sales resulted primarily from the inclusion in 1995 of the operations of Freedom
Chemical Diamalt and one full year of the operations of Kalama. The increase in
net sales was partially offset by a decline in sales of Textile and Paper
Chemicals attributable to decreased demand in the textile industry.
Gross Profit. The Company's gross profit increased $20.4 million to $63.4
million in the year ended December 31, 1995 as compared to the prior year. This
increase in gross profit was primarily due to the inclusion in 1995 of the
operations of Freedom Chemical Diamalt, offset by charges of $1.9 million
recorded in connection with the Restructuring Program. Gross margins were 21.3%
for 1995 compared to 22.9% in 1994. This decrease was primarily due to declining
prices and higher raw material costs affecting the Company's Textile and Paper
Chemicals group.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $23.5 million to $50.4 million in the year
ended December 31, 1995 as compared to the prior year primarily due to the
inclusion in 1995 of the operations of each of Freedom Chemical Diamalt and
Kalama. In addition, the Company's Organic Pigments and Dyes group experienced
increased selling, general and administrative expense due to higher staffing
levels resulting from anticipated sales growth of that group, which did not
occur. As a percent of sales, selling, general and administrative expense
increased to 17.0% from 14.4% in 1994 principally due to the higher expense
ratio of the Pharmaceutical Intermediates and Natural Additives group due to
high social insurance costs in Europe and higher staffing levels of the Company
(which were subsequently reduced as part of the Restructuring Program).
Research and Development Expense. Research and development expense
increased $2.6 million to $5.0 million in the year ended December 31, 1995 as
compared to the prior year primarily due to the inclusion in 1995 of the
operations of each of Freedom Chemical Diamalt and Kalama.
Operating Income (Loss). Operating income declined $17.4 million to a loss
of $4.6 million in the year ended December 31, 1995 as compared to the prior
year primarily as a result of the Restructuring Program, which accounted for
$14.4 million of the decline, with the remainder attributable to lower sales
volumes and reduced margins in the Organic Pigments and Dyes and Textile and
Paper Chemicals groups.
Interest and Debt Expense. Interest and debt expense increased $7.1
million to $13.8 million in the year ended December 31, 1995 as compared to the
prior year principally due to the indebtedness incurred to finance the Diamalt
Acquisition, the Reilly-Whiteman Acquisition and interest expense on
indebtedness in connection with the Kalama Acquisition.
24
<PAGE>
Net Income (Loss). Net loss was $17.0 million in the year ended December
31, 1995 as compared to net income of $2.2 million in the prior year. The loss
resulted primarily from the charges recorded in connection with the
Restructuring Program, higher staffing levels in the Organic Pigments and Dyes
group and declines in net sales and gross profit in the Textile and Paper
Chemicals group.
Preferred Dividends. The accretion of accrued and unpaid dividends on
Series B and Series C Preferred Stock increased $0.9 million to $4.6 million in
the year ended December 31, 1995 as compared to the prior year. The increase
resulted primarily from the inclusion in 1995 of a full year of accrued and
unpaid dividends on Series C Preferred Stock issued in 1994 in connection with
the Kalama Acquisition.
Net Loss Applicable to Common Shares. Net loss applicable to common shares
increased $20.1 million to $21.6 million in the year ended December 31, 1995 as
compared to the prior year. The increase resulted from the items referred to
above under 'Net Income (Loss)' and 'Preferred Dividends.'
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Net Sales. Net sales increased $132.9 million to $187.8 million in the
year ended December 31, 1994 as compared to the prior year. The increase in net
sales resulted from the inclusion in 1994 of one full year of the operations of
Hilton Davis and approximately 32 weeks of the operations of Kalama.
Gross Profit. The Company's gross profit increased $33.4 million to $42.9
million in the year ended December 31, 1994 as compared to the prior year,
primarily as a result of the inclusion in 1994 of one year of the operations of
Hilton Davis and 32 weeks of the operations of Kalama. Gross margins increased
from 17.4% in the year ended December 31, 1993 to 22.9% in 1994 principally as a
result of the inclusion of higher margin product lines from the Kalama and
Hilton Davis operations.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $18.7 million to $26.9 million in the year
ended December 31, 1994 as compared to the prior year primarily due to the
inclusion in 1994 of one year of the operations of Hilton Davis and 32 weeks of
the operations of Kalama. As a percent of sales, selling, general and
administrative expense declined from 15.1% in 1993 to 14.4% in 1994 principally
due to the lower expense ratios of the Company's Organic Pigments and Dyes
group.
Research and Development Expense. Research and development expense
increased $1.6 million to $2.3 million in the year ended December 31, 1994 as
compared to the prior year primarily due to the inclusion in 1994 of one year of
the operations of Hilton Davis and 32 weeks of the operations of Kalama. As a
percent of sales, research and development expense decreased from 1.3% in 1993
to 1.2% in 1994.
Operating Income (Loss). Operating income increased $12.2 million to $12.7
million in the year ended December 31, 1994 as compared to the prior year.
Operating margins improved to 6.8% in the year ended December 31, 1994 from 0.9%
in the prior year primarily as a result of the Hilton Davis Acquisition and the
Kalama Acquisition.
Interest and Debt Expense. Interest and debt expense increased $5.1
million to $6.7 million in the year ended December 31, 1994 as compared to the
prior year principally due to the indebtedness incurred to finance the Hilton
Davis Acquisition and the Kalama Acquisition.
Extraordinary Loss, Net. Extraordinary loss, net, reflects a nonrecurring
charge of $1.3 million, net of tax, associated with the write-off of deferred
financing costs upon the refinancing of all of the Company's outstanding
indebtedness in 1994.
Net Income (Loss). Net income for the year ended December 31, 1994 was
$2.2 million as compared to a loss of $1.0 million in 1993. The increase in the
Company's profitability resulted from the inclusion of the operations of each of
Kalama and Hilton Davis, partially offset by the nonrecurring write-off of
deferred financing fees.
Preferred Dividends. The accretion of accrued and unpaid dividends on
Series B and Series C Preferred Stock increased $2.1 million to $3.7 million in
the year ended December 31, 1994 as compared to the prior year. The increase
resulted from the inclusion in 1994 of a full year of accrued and unpaid
dividends on Series B Preferred Stock issued in 1993 in connection with the
Hilton Davis Acquisition.
Net Loss Applicable to Common Shares. Net loss applicable to common shares
decreased $1.1 million to $1.5 million in the year ended December 31, 1994 as
compared to the prior year. The decrease resulted from the items referred to
above under 'Net Income (Loss)' and 'Preferred Dividends.'
25
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Provided by Operating Activities. Net cash provided by operating
activities for the six months ended June 30, 1996 was $0.9 million, an increase
of $8.1 million over the same period in the prior year. This increase was due
primarily to an increase in net income of $6.9 million. Net cash charges related
to the Restructuring Program in the six months ended June 30, 1995 were $0.5
million.
Net cash used by operating activities in the year ended December 31, 1995
was $3.1 million, a decrease of $17.3 million compared to the year ended
December 31, 1994. This decrease was primarily due to a decrease in net income.
Included in 1995 are net cash charges of $0.7 million related to the
Restructuring Program.
Net cash provided by operating activities in the year ended December 31,
1994 was $14.2 million, an increase of $13.8 million compared to the year ended
December 31, 1993. This increase was due primarily to the inclusion of the
operations of each of Kalama and Hilton Davis.
Net Cash Used in Investing Activities. Net cash used in investing
activities for the six months ended June 30, 1996 was $3.0 million, a decrease
of $20.8 million over the same period in the prior year. Capital expenditures in
the first six months of 1996 were $4.0 million compared to $8.5 million in the
first six months of 1995. Capital expenditures in 1995 included $5.1 million
related to an expansion program at the Company's Kalama facility. The first six
months of 1996 also included proceeds of $1.1 million generated from the sale of
a non-strategic product line.
Net cash used in investing activities for the year ended December 31, 1995
was $32.0 million, a decrease of $43.9 million compared to the year ended
December 31, 1994. Included in 1995 are a cash payment of $15.9 million in
connection with the Diamalt Acquisition and capital expenditures of $15.5
million, $5.1 million of which is related to an expansion of the Company's
Kalama facility. Included in 1994 are a cash payment of $68.3 million for the
acquisition of Kalama and capital expenditures of $7.2 million.
Net cash used in investing activities for the year ended December 31, 1994
was $75.9 million, an increase of $45.3 million compared to the year ended
December 31, 1993. Included in 1993 are a cash payment of $29.9 million for the
Hilton Davis Acquisition and capital expenditures of $1.0 million.
Net Cash Provided by Financing Activities. Net cash provided by financing
activities for the six months ended June 30, 1996 was $2.5 million, a decrease
of $26.7 million over the same period in the prior year. This decrease is due
primarily to both the Diamalt Acquisition as well as increased levels of capital
expenditures in the first six months of 1995.
Net cash provided by financing activities for the year ended December 31,
1995 was $33.7 million, a decrease of $29.7 million compared to the year ended
December 31, 1994. Included in 1995 is additional bank financing used both for
the Diamalt Acquisition as well as the expansion at the Company's Kalama
facility.
Net cash provided by financing activities in 1994 was $63.4 million, an
increase of $33.9 million compared to the year ended December 31, 1993. Included
in 1994 are proceeds of $9.7 million from the issuance by the Company of Series
B Preferred Stock, $2.3 million from the issuance by the Company of Common Stock
and $100.3 million from bank borrowings. These funds were used in 1994 primarily
in connection with the Kalama Acquisition and $44.6 million of long-term debt
refinancing. Included in 1993 are proceeds of $17.0 million from the issuance by
the Company of Series B Preferred Stock, $2.8 million from the issuance by the
Company of Common Stock and $62.9 million from bank borrowings. These funds were
used in 1993 primarily in connection with the financing of the Hilton Davis
Acquisition and the refinancing of $51.2 million of long-term debt.
Capital Expenditures. Capital expenditures for the six months ended June
30, 1996 were $4.0 million. Capital expenditures for the years ended December
31, 1995, 1994 and 1993 were $15.5 million, $7.2 million and $1.0 million,
respectively. The increase in capital expenditures over this period was due
primarily to the effects of the inclusion of the acquisitions of Kalama in 1994
and Diamalt in 1995. Capital expenditures in 1995 also included approximately
$5.1 million related to the expansion of benzaldehyde production at the
Company's Kalama facility. This expansion increased the Company's benzaldehyde
production by approximately 50%. Notwithstanding such expansion, benzaldehyde
production at the Company's Kalama facility is currently operating at capacity.
The Company expects to have capital equipment investments of approximately
$14.0 million to $18.0 million annually for each of the next two years. Among
other projects, the Company plans to expand its production of benzoic acid and
benzaldehyde at its Kalama facility during 1997. Such expansion will increase
the Company's production capacity for benzoic acid by approximately 60% and its
production capacity for benzaldehyde by an additional 15%.
26
<PAGE>
In addition to these capital expenditures, the Company estimates that its
expenditures in connection with environmental matters will be approximately $2.0
million to $3.0 million annually in each of the next two years. Freedom does not
believe that these estimated environmental expenditures will have a material
adverse effect on the Company's financial position. See 'Business--Environmental
Matters.'
Liquidity. As of June 30, 1996 the Company had $39.3 million of working
capital (current assets less current liabilities) and $4.7 million available
under the Freedom Credit Agreement.
Concurrently with the consummation of the offering of the Old Notes,
Freedom amended and restated the Freedom Credit Agreement to, among other
things, increase the amount of the revolving loan facility to $85 million and
include Freedom Chemical Diamalt as a co-borrower. Amounts outstanding under the
Amended and Restated Credit Agreement bear interest at Citicorp USA, Inc.'s
published prime rate plus 1.5% per annum or, at Freedom's option, LIBOR plus
2.5% per annum, with each such margin subject to adjustment based on the
Company's compliance with various debt ratios as specified in the Amended and
Restated Credit Agreement. See 'Description of Amended and Restated Credit
Agreement.' In addition, concurrently with the consummation of the offering of
the Old Notes, the JLL Funds invested an aggregate of approximately $9.94
million in the Company in connection with the JLL Cash Equity Investment.
The Company expects that its ongoing cash requirements will consist
primarily of interest payments on its outstanding indebtedness, including the
Notes and any borrowings under the Amended and Restated Credit Agreement.
Following consummation of the Transactions, the Company had approximately $63.5
million available under the Amended and Restated Credit Agreement.
The Company expects that cash flows from operations and available
borrowings under the Amended and Restated Credit Agreement will provide
sufficient working capital to operate the Company's business, to make expected
capital expenditures and to meet the Company's foreseeable liquidity
requirements.
EFFECT OF INFLATION; FOREIGN CURRENCY EXCHANGE RATES
Inflation generally affects the Company by increasing the cost of labor,
equipment and raw materials. The Company does not believe that inflation has had
any material effect on the Company's business over the last three years.
The Company's substantial foreign operations expose it to the risk of
exchange rate fluctuations. If foreign currency denominated revenues are greater
than costs, the translation of foreign currency denominated costs and revenues
into U.S. dollars will improve profitability when the foreign currency
strengthens against the U.S. dollar and will reduce profitability when the
foreign currency weakens. In addition, the remeasurement of foreign currency
denominated assets and liabilities into U.S. dollars gives rise to foreign
exchange gains or losses which are included in the determination of net income.
The Company does not currently participate in hedging transactions related to
foreign currency.
IMPACT OF RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ('FASB') issued
Statement of Financial Accounting Standards No. 121, 'Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of'
('SFAS No. 121'). SFAS No. 121, adopted by the Company in the first quarter of
1996, established criteria for recognizing, measuring and disclosing impairments
of long-lived assets, including intangibles and goodwill. The adoption of SFAS
No. 121 has not had a significant impact on the Company's results of operations
or financial position.
In October 1995, FASB issued Statement of Financial Accounting Standards
No. 123, 'Accounting for Stock-Based Compensation' ('SFAS No. 123'), which
became effective for transactions entered into in fiscal years beginning after
December 15, 1995. SFAS No. 123 encourages a fair value based method of
accounting for employee stock options or similar equity instruments, but allows
continued use of the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, 'Accounting for Stock Issued to
Employees' ('APB No. 25'). Companies electing to continue to use APB No. 25 must
make pro forma disclosures of net income as if the fair value based method of
accounting had been applied. The new accounting standard has not had an impact
on the Company's net income or financial position, as the Company has chosen to
continue to utilize the accounting guidance set forth in APB No. 25.
27
<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), Freedom will accept for exchange Old Notes which are properly
tendered on or prior to the Expiration Date and not withdrawn as permitted
below. As used herein, the term 'Expiration Date' means 5:00 p.m., New York City
time, on , 1996; provided, however, that if Freedom, in its sole
discretion, has extended the period of time for which the Exchange Offer is
open, the term 'Expiration Date' means the latest time and date to which the
Exchange Offer is extended.
As of the date of this Prospectus, $125 million aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1996, to all Holders
of Old Notes known to Freedom. Freedom's obligation to accept Old Notes for
exchange pursuant to the Exchange Offer is subject to certain conditions as set
forth under '--Certain Conditions to the Exchange Offer' below.
Freedom expressly reserves the right, at any time or from time to time, to
extend the period of time during which the Exchange Offer is open, and thereby
delay acceptance for exchange of any Old Notes, by giving oral or written notice
of such extension to the Holders thereof as described below. During any such
extension, all Old Notes previously tendered will remain subject to the Exchange
Offer and may be accepted for exchange by Freedom. Any Old Notes not accepted
for exchange for any reason will be returned without expense to the tendering
Holder thereof as promptly as practicable after the expiration or termination of
the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
Freedom expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under '--Certain Conditions to the Exchange Offer.' Freedom will
give oral or written notice of any extension, amendment, non-acceptance or
termination to the Holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued by means of a press release or
other public announcement no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to Freedom of Old Notes by a Holder thereof as set forth below
and the acceptance thereof by Freedom will constitute a binding agreement
between the tendering Holder and Freedom upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal. Except as set forth below, a Holder who wishes to tender Old Notes
for exchange pursuant to the Exchange Offer must transmit a properly completed
and duly executed Letter of Transmittal, including all other documents required
by such Letter of Transmittal, to The Bank of New York (the 'Exchange Agent') at
the address set forth below under 'Exchange Agent' on or prior to the Expiration
Date. In addition, either (i) certificates for such Old Notes must be received
by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely
confirmation of a book-entry transfer (a 'Book-Entry Confirmation') of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the 'Book-Entry Transfer Facility') pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the Holder must comply
with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY
OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED
THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO
LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO FREEDOM.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered Holder of the Old Notes who
has not completed the box entitled 'Special Issuance Instructions' or 'Special
Delivery
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<PAGE>
Instructions' on the Letter of Transmittal or (ii) for the account of an
Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a
financial institution (including most banks, savings and loan associations and
brokerage houses) that is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchanges Medallion Program (collectively, 'Eligible Institutions').
If Old Notes are registered in the name of a person other than a signer of the
Letter of Transmittal, the Old Notes surrendered for exchange must be endorsed
by, or be accompanied by a written instrument or instruments of transfer or
exchange, in satisfactory form as determined by Freedom in its sole discretion,
duly executed by the registered Holder with the signature thereon guaranteed by
an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
Freedom in its sole discretion, which determination shall be final and binding.
Freedom reserves the absolute right to reject any and all tenders of any
particular Old Notes not properly tendered or to not accept any particular Old
Note which acceptance might, in the judgment of Freedom or its counsel, be
unlawful. Freedom also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to any particular Old
Notes either before or after the Expiration Date (including the right to waive
the ineligibility of any Holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer as
to any particular Old Notes either before or after the Expiration Date
(including the Letter of Transmittal and the instructions thereto) by Freedom
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes for exchange must be
cured within such reasonable period of time as Freedom shall determine. Neither
Freedom, the Exchange Agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of Old
Notes for exchange, nor shall any of them incur any liability for failure to
give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered Holder or Holders of Old Notes, such Old Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered Holder or Holders that appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
Freedom, proper evidence satisfactory to Freedom of their authority to so act
must be submitted.
By tendering, each Holder will represent to Freedom that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the Holder, and that neither the Holder nor such
other person has any arrangement or understanding with any person to participate
in the distribution of the New Notes. In the case of a Holder that is not a
broker-dealer, each such Holder, by tendering, will also represent to Freedom
that such Holder is not engaged in, or intends to engage in, a distribution of
the New Notes. If any Holder or any such other person is an 'affiliate,' as
defined under Rule 405 of the Securities Act, of Freedom, is engaged in or
intends to engage in or has an arrangement or understanding with any person to
participate in a distribution of such New Notes to be acquired pursuant to the
Exchange Offer, such Holder or any such other person (i) could not rely on the
applicable interpretations of the staff of the SEC and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See 'Plan of Distribution.' The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
'underwriter' within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
Freedom will accept, promptly after the Expiration Date, all Old Notes properly
tendered and will issue the New Notes promptly after acceptance of the Old
Notes. See '--Certain Conditions to the Exchange Offer' below. For purposes of
the
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<PAGE>
Exchange Offer, Freedom shall be deemed to have accepted properly tendered Old
Notes for exchange when, as and if Freedom has given oral or written notice
thereof to the Exchange Agent, with written confirmation of any oral notice to
be given promptly thereafter.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from October 17, 1996. Accordingly, registered Holders of New Notes
on the relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from October 17, 1996. Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
of Old Notes whose Old Notes are accepted for exchange will not receive any
payment in respect of accrued interest on such Old Notes otherwise payable on
any interest payment date the record date for which occurs on or after
consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
Holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering Holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry procedures described
below, such non-exchanged Old Notes will be credited to an account maintained
with such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at the address
set forth below under '--Exchange Agent' on or prior to the Expiration Date or
the guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent received from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by Freedom (by facsimile
transmission, mail or hand delivery), setting forth the name and address of the
Holder of Old Notes and the amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange ('NYSE') trading days after the Expiration Date, the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the Letter
of Transmittal will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be, and
all other documents required by the Letter of Transmittal, are received by the
Exchange Agent within three NYSE trading days after the Expiration Date.
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<PAGE>
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address or, in the case of Eligible
Institutions, at the facsimile number, set forth below under '--Exchange Agent'
prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice
of withdrawal must (i) specify the name of the person having tendered the Old
Notes to be withdrawn (the 'Depositor'), (ii) identify the Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes), (iii) contain a statement that such holder is withdrawing his election
to have such Old Notes exchanged, (iv) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes in the name of the person
withdrawing the tender and (v) specify the name in which such Old Notes are
registered, if different from that of the Depositor. If Old Notes have been
tendered pursuant to the procedure for book-entry transfer described above, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by Freedom, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Any Old Notes that have been tendered for exchange but which are not
exchanged for any reason will be returned to the Holder thereof without cost to
such Holder (or, in the case of Old Notes tendered by book-entry transfer into
the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described above, such Old Notes will be credited
to an account maintained with the Book-Entry Transfer Facility for the Old
Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following the procedures described under '-- Procedures for
Tendering Old Notes' above at any time on or prior to 5:00 p.m., New York City
time, on the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, Freedom shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof, or (ii) resulting in a material delay in the
ability of Freedom to accept for exchange or exchange some or all of the
Old Notes pursuant to the Exchange Offer; or any statute, rule, regulation,
order or injunction shall be sought, proposed, introduced, enacted,
promulgated or deemed applicable to the Exchange Offer or any of the
transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the sole judgment of Freedom
might directly or indirectly result in any of the consequences referred to
in clauses (i) or (ii) above or, in the sole judgment of Freedom, might
result in the holders of New Notes having obligations with respect to
resales and transfers of New Notes which are greater than those described
in the interpretation of the SEC referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the
Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by a governmental agency or authority which may adversely affect the
ability of Freedom to complete the
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<PAGE>
transactions contemplated by the Exchange Offer, (iii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States or any limitation by any governmental agency or authority
which adversely affects the extension of credit or (iv) a commencement of a
war, armed hostilities or other similar international calamity directly or
indirectly involving the United States, or, in the case of any of the
foregoing existing at the time of the commencement of the Exchange Offer, a
material acceleration or worsening thereof; or
(c) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of Freedom and its subsidiaries taken as a whole that, in the
sole judgment of Freedom, is or may be adverse to the Company, or Freedom
shall have become aware of facts that, in the sole judgment of Freedom,
have or may have adverse significance with respect to the value of the Old
Notes or the New Notes; which in the sole judgment of Freedom in any case,
and regardless of the circumstances (including any action by Freedom)
giving rise to any such condition, makes it inadvisable to proceed with the
Exchange Offer and/or with such acceptance for exchange or with such
exchange.
The foregoing conditions are for the sole benefit of Freedom and may be
asserted by Freedom regardless of the circumstances giving rise to any such
condition or may be waived by Freedom in whole or in part at any time and from
time to time in its sole discretion. The failure by Freedom at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, Freedom will not accept for exchange any Old Notes tendered,
and no New Notes will be issued in exchange for any such Old Notes, if at such
time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939.
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at the address set forth below. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
The Bank of New York, Exchange Agent
By Mail or Hand Delivery:
The Bank of New York
Reorganization Section
101 Barclay Street - 7E
New York, New York 10286
Attention: Ms. Jodi Smith
By Facsimile Transmission:
(for Eligible Institutions only):
(212) 571-3080
Attention: Ms. Jodi Smith
Confirm by Telephone:
(212) 815-2791
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
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<PAGE>
FEES AND EXPENSES
Freedom will not make any payment to brokers, dealers, or others soliciting
acceptances of the Exchange Offer. The estimated cash expenses to be incurred in
connection with the Exchange Offer will be paid by Freedom and are estimated in
the aggregate to be $300,000.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
Freedom to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Freedom does not currently anticipate that it
will register Old Notes under the Securities Act. See 'Description of the
Notes--Registration Rights.' Based on interpretations by the staff of the SEC,
as set forth in no-action letters issued to third parties, Freedom believes that
New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold or otherwise transferred by Holders thereof (other
than any such Holder which is an 'affiliate' of Freedom within the meaning of
Rule 405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such Holders' business and such
Holders have no arrangement or understanding with any person to participate in
the distribution of such New Notes. However, the SEC has not considered the
Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the SEC would make a similar determination with
respect to the Exchange Offer as in such other circumstances. Each Holder, other
than a broker-dealer, must acknowledge that it is not engaged in, and does not
intend to engage in, a distribution of New Notes and has no arrangement or
understanding to participate in a distribution of New Notes. If any Holder is an
affiliate of Freedom, is engaged in or intends to engage in or has any
arrangement or understanding with respect to the distribution of the New Notes
to be acquired pursuant to the Exchange Offer, such Holder (i) could not rely on
the applicable interpretations of the staff of the SEC and (ii) must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes must acknowledge that such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with any resale of such New Notes. See 'Plan of Distribution.' In
addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. Freedom has
agreed, pursuant to the Registration Rights Agreement, subject to certain
limitations specified therein, to register or qualify the New Notes for offer or
sale under the securities laws of such jurisdictions as any Holder reasonably
requests in writing. Unless Freedom is so requested, Freedom does not intend to
register or qualify the sale of the New Notes in any such jurisdictions.
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<PAGE>
BUSINESS
OVERVIEW
The Company is a leading global manufacturer and marketer of a broad range
of specialty and fine chemical products which are sold into several market
segments for use in food and beverage products, household and industrial
products, cosmetics and personal care products, pharmaceuticals, pet foods,
textile and paper products and many other diverse applications. The Company
focuses on niche products where it has strong market positions or a
manufacturing advantage. The Company believes that this focus, combined with
improved operating efficiencies resulting from the recently completed
Restructuring Program, have enhanced the Company's potential for future growth
and profitability. For the 12 months ended June 30, 1996, the Company's net
sales and EBITDA were $295.8 million and $26.3 million, respectively.
Approximately 40.6% of the Company's 1995 net sales consisted of sales made
outside the United States. The Company's products are manufactured at four
facilities located in the United States, four facilities located in Europe and
two facilities located in India.
The Company estimates that approximately 38.6% of its 1995 domestic net
sales were derived from product lines for which it believes it is either the
largest or second largest U.S. producer. Typically, the Company's products are
important to the performance of its customers' products, but represent a
relatively small percentage of their total product costs. For example, although
food preservatives are essential to the quality of carbonated diet soft drinks
(such as Diet Coke), the Company's preservatives, potassium benzoate and sodium
benzoate, generally represent less than $.01 of the total cost of one 24-can
case. The Company has five core product lines:
(i) Food and Personal Care Ingredients, such as food colors, drug and
cosmetic colors, food preservatives and flavors and fragrances,
(ii) Pharmaceutical Intermediates and Natural Additives, such as
cysteine and its derivatives, bioproteins, amino acids and thymidine,
(iii) Specialty Organic Chemicals and Intermediates, such as
benzaldehyde, benzoic acid, phenol and derivative products,
(iv) Organic Pigments and Dyes, which are used in carbonless copy
paper, household products, paints, printing inks and plastics, and
(v) Textile and Paper Chemicals, such as permanent press and wrinkle
resistance resins, textile pigments, water repellents, flame retardants,
dye assistants, softeners, fiber lubricants and textile processing aids.
THE RESTRUCTURING PROGRAM
In 1995, the Company implemented the Restructuring Program in which it
identified a number of opportunities to reduce its overall cost structure and
enhance the Company's potential for future growth and profitability. The
Restructuring Program included (i) the consolidation of certain of the Company's
manufacturing facilities, (ii) the sale of a non-strategic product line, (iii)
the write-off of discontinued inventory and capitalized expenses and (iv) the
recognition of certain estimated environmental remediation costs. As a part of
these actions, the Company closed in April 1996 its Conshohocken, Pennsylvania
plant which manufactured products in the Organic Pigments and Dyes group and in
May 1996 its Newark, New Jersey plant which manufactured products in the Textile
and Paper Chemicals group and relocated certain of those production capabilities
and technology to its other facilities. In addition, the Company reduced
personnel by approximately 135 employees in both administrative and
manufacturing positions. The Restructuring Program resulted in nonrecurring
charges of $14.4 million for the year ended 1995 and included the following
charges: (a) plant closures aggregating $7.4 million, (b) workforce reductions
aggregating $2.4 million, (c) estimated environmental remediation costs of $1.9
million and (d) the write-off of discontinued inventory and capitalized expenses
totalling $2.7 million.
Management expects that the Restructuring Program, which was recently
completed, will result in significant cost savings to the Company related to
reduced personnel costs and the elimination of redundant fixed
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overhead costs resulting from the closure of the two facilities. Management
estimates the Restructuring Program will yield annual cost savings of
approximately $4.2 million, some of the benefits of which are evidenced in the
Company's EBITDA margin improving to 12.2% for the first six months ended June
30, 1996 as compared to 10.7% for the same period of the prior year. As part of
the Company's business strategy, management will continue to seek to improve
operating efficiencies and reduce costs by optimizing the use of its
manufacturing facilities and implementing further administrative, manufacturing
and operating expense reductions. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and Note 17 to the Company's
Consolidated Financial Statements included herein.
BUSINESS STRATEGY
The Company's objective is to continue to enhance revenue growth and
profitability by leveraging its strong market positions in its core product
lines and by continuing to improve operating efficiencies. The Company plans to
achieve its objective through the following key strategies:
o Increase Capacity of Key Product Lines. The Company intends to increase
sales by investing in capacity expansions for key product lines currently
operating at or near full capacity and has budgeted approximately $8
million to $10 million for each of the next two years for capacity
expansions and process improvements. In 1995, the Company completed the
construction and start-up of a plant in Madras, India to produce amino
acids and cysteine and its derivatives. In addition, it expanded
benzaldehyde production capacity at its plant in Kalama, Washington by
50% and implemented cassia production capacity at its plant in Vadodara,
India. The Company's current major capacity expansion projects include
(i) further plant expansion at Kalama, Washington, which will expand the
Company's production capacity for benzoic acid, phenol, benzaldehyde and
flavor and fragrance chemicals, (ii) expansion of cysteine production
capacity at its plant in Raubling, Germany and (iii) expansion of cassia
production capacity at its plant in Vadodara, India. See 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources.'
o Introduce New or Technologically Improved Products. The Company's
research and development efforts focus on the development of new and
technologically advanced products to respond to customer demands, changes
in the marketplace, technology and environmental regulations. The Company
is currently working with its customers and capitalizing on existing
technology to develop new value-added products such as 'wash-away'
textile dyes and specialty pigments, environmentally friendly water-based
paint pigments, textile chemicals with reduced formaldehyde content and
new coatings that meet stricter environmental regulations for volatile
organic compounds. The Company also has an active pharmaceutical
intermediates program and recently began production and sale of
thymidine, an AZT intermediate utilized in producing drugs for AIDS
therapy.
o Continue to Improve Operating Efficiencies. The initiatives taken by the
Company in connection with the Restructuring Program have already yielded
significant cost savings and the Company intends to implement additional
cost-saving and productivity-enhancing programs in the future. Currently
in 1996, the Company is undertaking the following programs: raw material
sourcing from multiple vendors, yield improvement programs, the
discontinuation of unprofitable or low margin product lines, the
reduction of utility costs and the implementation of additional employee
profit incentive programs. The Company is analyzing additional
opportunities to increase operating efficiencies and profitability,
including the possibility of further consolidation of its manufacturing
facilities.
o Broaden Product Offerings to Primary Markets. The Company seeks to
broaden its product lines through internal development and believes that
offering a complete product portfolio to a given customer will enable it
to utilize more effectively its direct sales force, become a more
complete supplier to the industries it serves and increase its unit sales
per customer. Natural chemicals, including thickeners, enzymes and sizing
agents, are widely used in the European textile industry and the Company
intends to offer these products in the United States as additional
manufacturing capacity to produce these products becomes available. In
addition, the Company plans to capitalize on its position in food and pet
food ingredients by broadening its food colors, preservatives and flavors
product lines with natural additives
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<PAGE>
such as amino acids, polysaccharides, alginates and bioproteins, as well
as with other products used by the food and pet food industries.
o Expand Customer Base. The Company intends to expand and strengthen its
customer base by (i) focusing on relationships with key accounts, (ii)
creating incentives for its sales force to concentrate on fast growing,
high margin areas within existing product segments, (iii) pursuing growth
opportunities in new markets outside the United States, including Mexico,
Central and South America and Asia, as such markets continue to develop
economically and the consumption of food, beverage, household and other
products containing the Company's products increases and (iv)
cross-marketing its products to existing customers who do not currently
purchase such products through, among other initiatives, an international
sales force that will market products from all of the Company's product
groups.
o Enhance Growth through Selective Acquisitions. Freedom will continue to
selectively seek acquisitions with complementary product lines that offer
the opportunity to significantly improve profitability through
integration with the Company's existing businesses. The Company considers
the following characteristics in its acquisitions: (i) strong market
positions, (ii) unique product offerings, (iii) low cost manufacturing
capacity and (iv) technological or cost advantages.
PRODUCTS
The table below sets forth the Company's 1995 net sales by product group,
principal products, principal end markets and selected well-known customers.
<TABLE>
<CAPTION>
SELECTED
PRODUCT GROUP PRINCIPAL WELL-KNOWN
(1995 NET SALES) PRINCIPAL PRODUCTS END MARKETS CUSTOMERS
<S> <C> <C> <C> <C> <C>
Food and Personal Food Colors Food and Beverage Coca-Cola
Care Ingredients Preservatives Drug and Cosmetic Mars
($61.3 Million) Flavor and Fragrance Nestle
Chemicals PepsiCo
Drug and Cosmetic Colors Procter & Gamble
Ralston Purina
Pharmaceutical Cysteine Pharmaceutical Boehringer
Intermediates and Cassia Cosmetic Brantford
Natural Additives Bioproteins Food IFF
($35.0 Million) Amino Acids Pet Food E. Merck
Thymidine Quest
Ratiopharm
Specialty Organic Benzaldehyde Food and Beverage BASF
Chemicals and Benzyl Alcohol Drug and Cosmetic Borden
Intermediates Benzoic Acid Rubber Ciba Geigy
($56.0 Million) Benzyl Amines Photographic Miles
Phenol Housing Milliken
Plasticizers Automotive
Organic Pigments Carbonless Copy Dyes Specialty Papers Appleton Papers
and Dyes Technical Dyes Household Products Mead Corporation
($68.7 Million) Pigments Paints and PPG
Paints and Coatings Pigments Pigments S.C. Johnson
Ink Pigments Photographic Sherwin-Williams
Textile and Paper Glyoxal Textiles C.H. Patrick
Chemicals Glyoxal Reactants and Resins Paper Cytec
($75.9 Million) Natural Chemicals Textile Printing Hoechst-Celanese
Textile Processing Products Oil Field Milliken
Mining
</TABLE>
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FOOD AND PERSONAL CARE INGREDIENTS
Food Colors
Food colors, which are also known as FD&C ('Food, Drug, and Cosmetic')
colors, are used extensively in the U.S. and around the world in a wide variety
of food and beverage products, including dairy products, chewing gum, cake
icings, spice mixes, snack foods and soft drinks, as well as pet foods. There
are two types of food colors: (i) synthetic or artificial food colors, which are
man-made and certified by the FDA, and (ii) natural food colors, which are
derived from various natural sources and do not require FDA certification.
Synthetic food colors are preferable to natural food colors in many applications
because they are more consistent in quality and color than natural colors, and
are better able to withstand heat and other conditions encountered during food
production and preparation.
The Company's product line of food colors consists of synthetic primary
(red, yellow and blue) colors for food, beverages and pet foods. The Company
manufactures these colors in two forms: dyes, which are soluble, and 'lakes,'
which are insoluble (generally produced by combining dyes with a metallic salt).
The Company's food color business has exhibited strong growth in recent
years as a result of modest growth in the overall market and the Company's
successful efforts to increase market share. The Company expects to continue to
grow this business in the future and plans to invest in capacity expansions, new
marketing initiatives and a greater emphasis on international markets (which
markets exceed the size of the U.S. market) to achieve this goal.
In 1995 and the first six months of 1996, the Company expanded its capacity
of yellow, red and blue food color dyes. This expansion resulted in total
capacity of food color dyes of approximately 6.5 million pounds, a 44% increase
over 1994.
Preservatives (Sodium Benzoate and Potassium Benzoate)
The Company believes it is the leading U.S. producer of sodium benzoate and
potassium benzoate, which are widely used food preservatives. Benzoates are
derivatives of benzoic acid, which the Company produces internally. Most
carbonated diet soft drinks contain either sodium or potassium benzoate. Other
preservative applications include food, pharmaceuticals and toiletries.
Benzoates can also be used as industrial preservatives and as a corrosion
inhibitor in anti-freeze for aluminum car engines. Potassium benzoate is used as
a substitute for sodium benzoate when a low sodium content is desired.
The Company believes significant international growth for sodium benzoate
and potassium benzoate will occur in the future as diet soft drink consumption
increases in Mexico, Central and South America, Eastern Europe and the Asia
Pacific region.
Flavor and Fragrance Chemicals
The Company produces a range of flavors for foods and fragrance chemicals
that provide various aromas to perfumes, soaps, cosmetics and household items.
The Company's products include jasmine-like fragrances for use in cosmetics,
perfumes and soaps and cinnamon-like flavors and fragrances used in
confectioneries, gums, soaps and perfumes. The Company's flavor and fragrance
chemicals are derived from benzaldehyde, a specialty intermediate which the
Company produces internally. See '--Specialty Organic Chemicals and
Intermediates; Benzaldehyde.' The Company is one of only two flavor and
fragrance manufacturers that produces its own benzaldehyde, the key ingredient
for this line of products. The Company believes that this backward integration
gives the Company a cost advantage over its non-integrated competitors.
The Company believes that there is significant growth potential for flavor
and fragrance chemicals and the Company intends to increase its production of
these products through a planned production capacity expansion at its Kalama,
Washington plant, which expansion is expected to be completed in 1997.
Drug and Cosmetic Colors
The Company manufactures drug and cosmetic ('D&C') colors which are similar
to food colors. Like food colors, D&C colors must be certified by the FDA.
Freedom manufactures dyes and lakes used in toiletries (shampoos, skin creams
and toothpaste), as well as cosmetics and pharmaceuticals.
The Company sells a full line of over 100 D&C colors to the cosmetics
industry, with its top ten products accounting for approximately two-thirds of
D&C sales. Colors produced by the Company include various reds,
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yellows, oranges, greens, and violet. The Company expects to increase sales of
D&C colors, improve the profitability of its D&C color operations and reduce
overhead costs as a result of its transfer of production capabilities and
technology from its Newark plant to its Cincinnati plant.
PHARMACEUTICAL INTERMEDIATES AND NATURAL ADDITIVES
The Company's Pharmaceutical Intermediates and Natural Additives group is
comprised of a wide variety of products with diverse applications. Products in
this group are used in the pharmaceutical, cosmetics, food and pet food
industries and are derived from naturally occurring materials that are refined
and chemically converted in the Company's plants. Products in this group include
cysteine and its derivative products, active ingredients, thickeners (which
mimic the feel of fat), gelling agents, cassia, bioproteins and amino acids.
The Company believes that there is potential for significant growth in the
use of products in the Pharmaceutical Intermediates and Natural Additives group
as consumption of natural products increases. The Company expects to grow this
business in the future and plans to invest in capacity expansions to increase
production of cassia, cysteine and its derivatives and amino acids.
Cysteine
The Company manufactures cysteine at its manufacturing facilities in
Raubling, Germany and Madras, India. Cysteine is used as a food additive and
flavor enhancer for meats and is also used in solution for feeding premature
infants. Cysteine derivatives are used as pharmaceuticals for bronchial therapy
and as antioxidants. Cysteine derivatives are also used in cosmetics. The
Company believes that it is the largest producer in the world of cysteine and
its derivatives.
Cassia
Cassia, an inexpensive alternative to locust bean gum and other gelling
agents, is used extensively in Europe as a gelling agent in canned pet foods and
as an additive in textile printing. The Company owns the patent rights to the
use of cassia in pet foods in the United States, Japan and many countries in
Western Europe. Such patent rights have expiration dates ranging from 2004 to
2006. The Company has developed a patented pet food additive made from cassia
and currently has sales contracts with several leading European pet food makers
for cassia to be used in pet foods.
Bioproteins
The Company produces bioproteins, which are used in shampoos, cosmetics and
other personal care products as well as in foods. The Company manufactures two
types of bioproteins: (i) hydrolyzed vegetable proteins (soy, rice and wheat),
and (ii) hydrolyzed animal proteins (collagen, keratin and elastin).
Amino Acids
The Company manufactures amino acids, which have wide application in foods
and health foods as flavor enhancers and additives to prevent the browning of
fruit and vegetables, in baking, for gluten softening and in pharmaceuticals for
the treatment of bronchial, intestinal and other illnesses. Amino acids are also
used to formulate residue free digestible diets, also known as 'astronaut food.'
Thymidine
The Company recently began manufacturing thymidine, an AZT pharmaceutical
intermediate utilized in producing drugs for AIDS therapy, and entered into a
contract to sell small quantities of this product to a major pharmaceutical
manufacturer.
SPECIALTY ORGANIC CHEMICALS AND INTERMEDIATES
Benzaldehyde
The Company is the sole U.S. producer of benzaldehyde, a versatile
intermediate and ingredient of flavors and fragrances from which a steady supply
of new product applications is being developed by the Company and others. In
addition, benzaldehyde has been approved by the FDA as a synthetic flavoring
substance and is used to produce almond and cherry flavors. It is also used as a
fragrance for soap and toiletries. The industries that
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consume benzaldehyde and its derivatives include chemical intermediates,
fragrances, pharmaceuticals and photographic chemicals. Examples of products
that contain benzaldehyde or its derivatives include: ampicillin, photographic
developers, contact lens cleaners, ink, perfumes, candy, vitamins and soap. In
1995, the Company expanded its benzaldehyde production capacity by approximately
50% at a cost of approximately $5 million.
Benzoic Acid
Benzoic acid is used as an intermediate in the manufacture of a wide
variety of products including other chemical intermediates, paints and coatings,
polyesters, plasticizers, dyestuffs, preservatives, drilling mud additives and
other applications. In addition to using benzoic acid as an intermediate in the
production of preservatives, plasticizers and phenol, the Company sells benzoic
acid to third parties. The Company believes that it is the largest domestic
producer of benzoic acid and plans to increase its production of benzoic acid
through a planned 40% production capacity expansion at its Kalama, Washington
plant, which expansion is expected to be completed in 1996. Such expansion will
enable the Company to increase its production of benzaldehyde, which is
co-produced with benzoic acid, in 1996.
Benzyl Alcohol
The Company believes that it is the leading domestic producer of benzyl
alcohol, which it produces from benzaldehyde. Benzyl alcohol is sold to the
food, personal care and other industries for a number of applications including
use in sweeteners, contact lens cleaners, lotions and ointments for relief of
insect bites, dispersing agents and activators, anti-static treating compounds,
photographic chemicals, and as a raw material in the manufacture of various
esters used in soaps, perfumes and flavorings.
Phenol
Unlike other chemicals manufactured by the Company, phenol, produced from
benzoic acid, is a commodity chemical. The primary consumers of phenol are the
housing, automotive and appliance industries. Phenol is used as a raw material
in the manufacture of (i) engineering plastics, (ii) resins for wood adhesives,
(iii) paper coatings, and (iv) medicinal consumer products such as
Campho-Phenique(Registered) and Chloroseptic(Registered) throat spray. The
Company's phenol production is consumed mostly by the wood products industry in
the Pacific Northwest region where the Company is the only producer of phenol.
Plasticizers
Freedom markets plasticizers under the brand name K-FLEX(Registered) which
are used extensively in polyvinyl acetate films. K-FLEX(Registered) is also used
as an ingredient in 'white glue' packaging adhesives such as Elmer's Glue,
polyvinyl chloride plastic products and plastic coatings on tools.
ORGANIC PIGMENTS AND DYES
Carbonless Copy Dyes
Carbonless copy dyes, also referred to as color formers, are applied to
paper for use in multi-part business forms such as credit card receipts and
computer printouts, among other applications. Carbonless forms have been in
existence since the 1950's and the Company has continually increased its market
share from 'one time' carbon paper in business forms. The Company sells color
formers to specialty coated paper manufacturers which produce this grade of
paper for the business forms industry. The Company also markets a line of
thermally activated dyes for thermal paper used in telephone facsimile machines,
thermally produced labels and thermal labels used in supermarkets and other
retail applications.
The Company believes there are several factors that will account for future
volume growth in the color former area: (i) industry manufacturing capacity has
decreased within the past twelve months with the exit of two less efficient
manufacturers, which should enable remaining competitors to increase market
share, (ii) the Company expects the domestic carbonless and thermal business
forms market to grow with increased usage of thermally produced labels, and
(iii) the Company anticipates the market for carbonless and thermal paper to
continue to grow in developing countries, especially in Mexico, Central and
South America and Asia.
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Technical Dyes
Technical dyes are similar to food colors except that they are not
manufactured to the same strict purity standards and are not subject to FDA
certification. They are used in a wide range of industrial and consumer
products, including household products such as cleaning supplies and dishwasher
detergents, paper, writing instruments, turf and pond applications and cat
litter.
The Company's product line consists of a variety of water soluble dyes
including Acid Blue #9 and Tartrazine, a widely used yellow dye, as well as a
number of other specialty dyes. Acid Blue #9 is the Company's best-selling
technical dye and it is primarily used in toilet bowl cleaners and other
household products. Acid Blue #9 also absorbs ultraviolet light and is sold as a
water treatment chemical to prevent algae growth in ponds and water treatment
facilities. Tartrazine is used in photographic chemicals, detergents, other
household products such as window cleaners and detergents, and felt tip markers.
The Company believes that it is the world's leading manufacturer of Acid
Blue #9. The Company has significantly expanded its production capacity for Acid
Blue #9 through yield and process improvements. This expansion will allow the
Company to take advantage of the growth in demand for its pond and turf
applications.
Pigments
The Company markets pigments for three main product lines: (i) paints and
coatings, (ii) inks, and (iii) plastic dispersions.
Paints and Coatings Pigments. The Company manufactures and sells pigments
which are incorporated in paints and coatings used in the architectural,
industrial, automotive, and other paint and coating markets. The Company's
product line is broad, covering all coating types from water-based paints to
solvent-based paints. End products in which the Company's products are used
include house paint, automotive paint, wood stains, and paints for a variety of
industrial uses such as farm, road and railroad equipment, office furniture,
computers, containers and machine shop equipment.
Ink Pigments. The Company's product line consists of pigments which are
incorporated in ink used for printing newspapers, magazines and books. The
Company is a small participant in the ink colors market and intends to increase
its focus on higher margin specialty markets, such as high performance inks for
glossy publications.
Plastics Pigments. The Company competes in a small and highly specialized
portion of the plastic pigments market, where it manufactures finely dispersed
pigment suspensions for producers of colored plastic articles such as amber
medicine vials and tinted lenses.
TEXTILE AND PAPER CHEMICALS
The Company manufactures and markets a broad line of chemicals for use in
the textile and paper industries. The textile product line consists of fabric
preparation chemicals used in most stages of textile processing including
weaving, knitting, preparation, dyeing, printing and finishing. Products sold by
the Company include glyoxal, glyoxal reactants and resins, textile pigments,
water repellents, flame retardants, softeners, dye assistants, lubricants and
antimigrants. The Company believes it has an advantage over many of its
competitors because of the proximity of its plants to most of the major textile
companies in the U.S., which allows the Company to respond more quickly and in a
more cost efficient manner than its competitors to customers' larger orders.
Glyoxal
The Company is the leading domestic manufacturer of glyoxal, a derivative
of ethylene glycol. Glyoxal is used by the Company to produce its line of
glyoxal reactants, and is also sold directly to textile mills and chemical
companies which also produce reactants. The Company believes that its patented
continuous process to produce glyoxal makes it the lowest cost domestic
producer. The Company expects most of the growth in glyoxal sales to be for
non-textile applications such as the manufacture of oil field chemicals, xanthum
gums, agricultural chemicals and paper processing additives.
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Glyoxal Reactants and Resins
Glyoxal reactants or permanent press resins are custom-made products sold
to textile mills to provide wrinkle resistance and shrinkage control for cotton
and cotton blend fabrics used in household furnishings and apparel. Success in
this product line requires the technical ability to develop cost-effective
reactants, custom designed to solve the problems of the textile mills.
Management believes that the Company's technical expertise and vertical
integration with glyoxal production provide it with a significant competitive
advantage. The Company also manufactures glyoxal-based resins for the paper
industry where they are used to enhance absorbency.
Natural Chemicals
Natural chemicals consist of products which are used in the textile, paper
and leather industries to thicken water. Products in this group are made from
agar-agar, starch, guar, cassia, alginates, enzymes and tamarind. These natural
raw materials are chemically modified and blended to produce finished products.
Textile printers require thickeners for achieving specific levels of ink
viscosity. These additives are also used for sizing in the paper industry and
also for leather treatment. The manufacturing process is customized for each
customer and consists of chemical treatment, milling, drying and blending. The
Company produces 40 different semifinished natural chemical products which can
then be combined with 100 different ingredients to meet customer requirements.
Other Textile Processing Products
The Company produces a range of textile chemical processing products
including softeners, defoamers, lubricants, scours, dye bath additives and other
processing aids. The Company also markets complementary textile chemicals on a
commission basis, including melamine resins, antimigrants, dye fixatives for the
dyeing process and flame retardants. The Company supplies the textile industry
with a complete line of aqueous dispersions of organic pigments and pigment
fixatives for the printing of home furnishings and apparel. Management believes
that significant growth opportunities exist for this product line. The Company
also manufactures water repellent chemicals used for non-woven fabrics.
SALES, MARKETING AND DISTRIBUTION
Freedom sells specialty and fine chemicals to manufacturers who incorporate
the Company's products into their finished goods. Some of the Company's
well-known customers include Borden, The Coca-Cola Company, Cytec Industries,
The Mead Corporation, The Pepsi Cola Company, Procter and Gamble Company,
Ralston Purina, S.C. Johnson & Sons and Sherwin-Williams. The Company has more
than 5,500 customers. Sales to the top ten customers represented approximately
14.8% of the Company's 1995 net sales and no single customer represented more
than 3% of the Company's 1995 net sales.
The Company's products are often critical to the performance of its
customers' products but typically represent a relatively small percentage of the
total product cost. Management believes that there are three key factors to
marketing its products successfully:
o Quality. Many of the Company's specialty and fine chemical products are
used to ensure and enhance the performance of their customers' end
products and therefore consistency and high quality are essential. The
Company believes that its reputation as a manufacturer of value-added,
high-quality specialty and fine chemicals provides it with a competitive
advantage when marketing its products to existing and potential
customers.
o Highly Trained and Technical Sales Force. Because of the specialized
nature of many of the niche markets the Company serves, its direct sales
force must have advanced technical knowledge of the Company's products
and the applications for which they are used. As a result, many of the
Company's direct salespeople have a number of years of industry
experience and significant technical expertise related to the products
they sell.
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o Superior Customer Service. Many of Freedom's research and development
specialists provide technical support services directly to the customer
enabling the Company to offer formulating expertise and develop a better
understanding of customer's process technology. In addition to technical
support, the Company endeavors to meet the demands of its many customers
who operate 'just-in-time' inventory systems requiring prompt and
reliable delivery of the Company's specialty and fine chemical products.
The Company's strategically located manufacturing facilities as well as
its broad distribution network allow it to meet the technical and
logistical demands of its diverse customer base.
The Company has recently expanded both its direct selling efforts and its
international distributor network. The Company anticipates growth in many of its
product groups as Mexico, Central and South America and Asia continue to develop
economically and consumption of food, beverage, household and other products
containing products manufactured by the Company increases. The Company believes
there are significant opportunities to enhance international revenues by
focusing on increasing the level of technical service, providing more assistance
in product development, and broadening the scope of the Company's product line
offered to its international customers. In addition, the Company continues to
seek opportunities to cross-market products to both its domestic and
international customers.
MANUFACTURING FACILITIES
The Company has ten manufacturing facilities which allow it to carry out a
broad array of chemical reactions. The chart below sets forth the locations and
sizes of the Company's manufacturing facilities and products manufactured at
each of its sites:
<TABLE>
<CAPTION>
OWNED OR APPROXIMATE PRODUCTS
LOCATION LEASED(A) SQUARE FOOTAGE MANUFACTURED
- ---------------------------------------- ---------------- -------------- --------------------------------
<S> <C> <C> <C>
Kalama, Washington...................... Owned 550,000 Food and Personal Care Products;
Specialty Organic Chemicals and
Intermediates
Charlotte, North Carolina............... Owned 500,000 Textile and Paper Chemicals
Cincinnati, Ohio........................ Owned/Leased(b) 450,000 Food and Personal Care
Ingredients; Organic Pigments
and Dyes
Cowpens, South Carolina................. Owned 40,000 Textile and Paper Chemicals
Raubling, Germany....................... Owned/Leased(c) 354,000 Pharmaceutical Intermediates and
Natural Additives
Munich, Germany......................... Leased(d) 162,000 Textile and Paper Chemicals;
Food and Personal Care
Ingredients
Vernon, France.......................... Owned 47,300 Textile and Paper Chemicals
Dewsbury, United Kingdom................ Owned 14,000 Organic Pigments and Dyes
Vadodara, India......................... Owned(e) 295,100 Pharmaceutical Intermediates and
Natural Additives
Madras, India........................... Owned/Leased(f) 112,700 Pharmaceutical Intermediates and
Natural Additives
</TABLE>
(Footnotes on next page)
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(Footnotes from previous page)
- ------------------
(a) For information concerning the Company's rental obligations, see Note 12 the
Company's Consolidated Financial Statements included herein.
(b) The land on which the plant is located is leased, with the lease expiring in
2043.
(c) Approximately 15% of the land on which the plant is located is leased and
with the lease expiring in 2001.
(d) The land on which the plant is located is leased. The lease on part of the
land on which the plant is located is renewable at the Company's option
through 2009. The Company is currently renegotiating the lease on the other
part of the land on which a warehouse and research facility are located,
which lease expires in December 1996. To the extent such lease is not
renegotiated, the Company plans to relocate the warehouse and research
facility.
(e) The plant is owned by a joint venture in which the Company has a 74%
interest. The land on which the plant is located is owned.
(f) The land on which the plant is located is leased, with the lease expiring in
2010.
The Company employs both continuous and batch process technologies to
produce its products. Glyoxal, benzoic acid, phenol and benzaldehyde are
produced using continuous processes. Batch processing is used to convert these
products into downstream specialty textile chemicals and food ingredients. Batch
processing technologies are also used in the production of most of the coloring
agents, specialty organics and paper coating products.
The Company is subject to extensive regulation by numerous governmental
authorities, including the FDA and corresponding state and foreign agencies, and
to various domestic and foreign safety standards. The Company's regulatory
compliance programs have been expanded to encompass compliance with
international standards known as ISO 9002 standards, which will become mandatory
in Europe in 1999. The FDA is in the process of adopting the ISO 9002 standards
as regulatory standards for the United States, and it is anticipated that these
standards will be phased in for U.S. manufacturers over a period of time. Three
of the Company's plants have achieved ISO 9002 certification.
RAW MATERIALS
The raw materials used in the Company's business consist chiefly of a wide
variety of organic intermediates and inorganic chemicals which are purchased
from manufacturers in the United States, Europe and Asia. In 1995, no single raw
material accounted for more than 7% of the Company's cost of goods sold. Total
raw materials cost was approximately $134 million or 45% of net sales in 1995.
Many of the Company's products are produced from toluene whose primary use
is as an octane enhancer in gasoline. Consequently, the price of toluene varies
with the prices of competing gasoline additives and premium and clear gasoline.
Except in unusual circumstances (e.g., during the Persian Gulf War), the price
of toluene has been relatively stable over the past five years. Total toluene
costs in 1995 were approximately $16.4 million. Due to increased demand for
toluene in Asia, the Company's Asian toluene suppliers have indicated that
beginning in 1997, they may not be able to meet the Company's supply
requirements. Consequently, the Company has made arrangements to obtain toluene
from suppliers located in areas adjacent to the Gulf of Mexico.
The raw materials used for the Company's natural additives and food
ingredient products include guar, locust beans, cassia, alginates, agar-agar and
amino acids. The Company obtains these raw materials primarily from suppliers in
India and China, and believes that these raw materials are generally available
in sufficient quantities to meet its supply needs. The primary raw materials
used for the Company's pharmaceutical products are cystine and cysteine, which
are derived from human hair. Srinivasa, a joint venture in which the Company has
a 40% interest, sells cystine production to the Company, supplying one third of
the Company's needs. The Company also purchases cystine and cysteine from
suppliers in China. The Company's raw material strategy for
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products in its Pharmaceutical Intermediates and Natural Additives group is to
procure and process raw materials in countries such as India, a country which is
an important source of raw materials and where labor costs are relatively low
and the Company has long established relationships.
The Company believes that for most of its raw materials alternate sources
of supply are available to the Company at competitive prices.
RESEARCH AND DEVELOPMENT
Research, development and technical service efforts are conducted by
approximately 50 chemists and technicians at the various facilities of the
Company. Technical service is an important aspect of the Company's overall sales
effort. Many of the Company's products are sold on the basis of their ability to
solve a specific problem for a customer. In many cases, products are custom
designed or reformulated to solve a particular customer's operating problems or
product needs.
Technology is an important component of the Company's competitive position,
providing the Company with a low cost position and enabling the Company to
produce high quality products. Patents protect some of the Company's technology,
but a great deal of the Company's competitive advantage revolves around know-how
built up over many years of commercial operation, including 20 years of
operating experience in carrying out the continuous catalytic oxidation of
ethylene glycol and toluene by the Company and its predecessors. The Company
does not believe its technical expertise can be easily duplicated. The Company
recently commercialized a process for thymidine, an AZT intermediate.
The Company possesses important ultra filtration technology for the
purification of food colors, dyes and pigments. The Company also possesses what
it believes to be unique 'flushing' technology and know-how for the production
of flushed pigments. This technology enables the Company to produce pigments of
extremely fine particle size, which improves the pigments' quality. Finally, the
Company and its predecessors have over 20 years experience in the production of
carbonless copy dyes and a strong technological position in the production of
blue color formers.
The Company devotes its research and development resources to the
development of new products, the development of new processes, the improvement
of existing processes and products, and technical support for its customers.
PATENTS AND TRADEMARKS
The Company owns patents, tradenames and trademarks and uses know-how,
trade secrets, formulae and manufacturing techniques which assist in maintaining
the competitive positions of certain of its products, including food colors,
pigments, dyes, flavors and fragrances. Patents, formulae and know-how are of
particular importance in the manufacture of a number of the dyes and flavor
ingredients sold in the Company's specialty chemical business. The Company
believes that no single patent, trademark or other individual right is of such
importance, and, accordingly, the expiration or termination thereof would not
materially affect its business. The Company is also licensed to use certain
patents and technology owned by foreign companies to manufacture products
complementary to its own products, for which it pays royalties in amounts not
considered material.
CUSTOMERS
The Company does not consider any segment of its business to be dependent
on a single customer or a few customers, the loss of any of which would have an
adverse effect on the Company's results. No single customer accounted for more
than 3% of the Company's 1995 net sales. A former international distributor for
the Company accounted for approximately 7.1% of the Company's 1995 net sales.
Following the Diamalt Acquisition, the Company began marketing its products
internationally through Freedom Chemical Diamalt's extensive sales force and
terminated its distribution agreement with such international distributor
effective January 1996. For additional information on the Company's customers,
see '--Products' and '--Sales, Marketing and Distribution.'
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COMPETITION
The Company is engaged in a highly competitive industry and, with respect
to all of its major products, faces competition from a substantial number of
global and regional competitors. Some of the companies with which the Company
competes have greater financial, research and development, production and other
resources than the Company. The Company's competitive position is based
principally on customer service and support, product quality, manufacturing
technology, facility location and, to a lesser extent, price. See '--Sales,
Marketing and Distribution.'
EMPLOYEES
As of June 30, 1996, the Company had approximately 1,105 employees
worldwide, of whom 48% were salaried employees and 52% were hourly employees. Of
these, 172 employees were in management and administration, 91 in sales and
marketing, 50 were chemists or technicians and 792 were in production.
Approximately 50% of the Company's domestic employees were covered by collective
bargaining agreements with three unions. These agreements expire from May 1997
through March 1999. The Company considers its relations with both its union and
non-union employees to be good.
ENVIRONMENTAL MATTERS
Chemical companies such as the Company are subject to extensive
environmental laws and regulations concerning, among other things, emissions to
the air, discharges to land, surface water and subsurface water, the generation,
handling, storage, transportation, treatment and disposal of waste and other
materials, and the remediation of environmental pollution relating to such
companies' (past and present) properties and operations ('Environmental Laws').
Costs and expenses under such Environmental Laws incidental to ongoing
operations are generally included within operating budgets. Potential costs and
expenses may also be incurred in connection with the repair or upgrade of
facilities to meet existing or new requirements under Environmental Laws. In
many instances, the ultimate costs under Environmental Laws and the time period
during which such costs are likely to be incurred are difficult to predict.
In connection with the purchase of a number of the Company's facilities,
the Company has obtained contractual rights to be indemnified for certain types
of environmental liability relating to the prior operations of those facilities.
In addition, pursuant to the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1990, as amended ('CERCLA' or 'Superfund'),
the Company has a private cause of action against other potentially responsible
parties ('PRPs'), including prior owners or operators. As described more fully
below, the Company consequently believes that the costs to be incurred in
connection with most of the significant environmental liabilities associated
with conditions existing prior to the Company's ownership of, and remediation
actions that may be required relating to, certain of the Company's past and
present properties will be the responsibility of other parties and, therefore,
are not likely to have a material adverse effect on the Company's financial
position, although the effect on results of operations could be material when
these conditions are resolved in a future period. However, no assurance can be
given that the parties discussed below will have the financial resources to
perform fully their responsibilities under such agreements or that such other
parties will not challenge their liability under such agreements. In any such
event, the Company may be required to incur significant liabilities. As of June
30, 1996, the Company had reserves of approximately $19.3 million for certain
environmental expenditures as discussed in more detail below. See Notes 3 and 11
to the Company's Consolidated Financial Statements included herein.
Under certain Environmental Laws, the Company may be liable for the
remediation of environmental pollution at certain on-site and off-site waste
management areas. Under CERCLA and similar state laws, the current and former
owner or operator of real property may be liable for the costs of removal or
remediation of certain hazardous or toxic materials on, under or emanating from
such property, regardless of whether the owner or operator knew of, or was
responsible for, the presence of such materials. In addition, CERCLA and similar
state laws impose liability for investigation, cleanup costs and natural
resource damages on persons who disposed of or arranged for the disposal of
hazardous substances at third-party sites. Under the federal Resource
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Conservation and Recovery Act of 1976, as amended ('RCRA'), the holder of a
permit to treat or store hazardous waste can be required to remediate
environmental pollution from solid waste management areas at the permitted
facility regardless of when the contamination occurred. Under the New Jersey
Industrial Site Recovery Act ('ISRA'), formerly known as the Environmental
Cleanup Responsibility Act, the owner of an industrial establishment can be
required to remediate environmental pollution at the time of a transfer or
shutdown of the facility.
The Company has sent wastes from its operations to various third-party
waste disposal sites. From time to time the Company receives notices from
representatives of governmental agencies and private parties contending that the
Company is potentially liable for a portion of the investigation and remediation
costs and damages at formerly owned or operated sites and third-party sites,
some of which are discussed herein. Although there can be no assurance, the
Company does not believe that its liabilities in connection with such
third-party sites, either individually or in the aggregate, will have a material
adverse effect on the Company's financial position or results of operations.
Hilton Davis. Extensive environmental studies of the Hilton Davis facility
in Cincinnati have been conducted by Sterling Winthrop, a former owner of the
facility, pursuant to a consent decree between Sterling Winthrop and the State
of Ohio. These studies have identified soil and ground water pollution at a
number of locations throughout the facility. Virtually all of this contamination
occurred prior to 1987. In connection with the Company's purchase of Hilton
Davis from PMC, Inc. ('PMC'), the Company entered into an Environmental Matters
Agreement (the 'EMA'), dated September 9, 1993, with Sterling Winthrop which,
with certain exceptions, requires Sterling Winthrop to take responsibility for
environmental conditions that predate 1987. Claims for indemnity for any such
conditions not identified in the EMA must be made within ten years and are
subject to a maximum amount of $20 million. Under the EMA, the Company has
agreed to share responsibility with Sterling Winthrop for two specific
environmental conditions, provided, however, that the Company's obligations
shall not exceed $1.0 million. Currently, the Company has not incurred any costs
in connection with these matters. In addition, the EMA requires the Company to
be responsible for environmental conditions that post-date 1986. In addition,
pursuant to the Stock Purchase Agreement with PMC (the 'PMC Stock Purchase
Agreement'), PMC made certain environmental representations and warranties and
indemnified Freedom for its breach thereof, subject to a maximum amount of $1.0
million. In connection with its purchase of Hilton Davis, the Company's
environmental consultant conducted a Phase I Assessment of the Cincinnati
facility. This assessment did not disclose any environmental conditions for
which the Company is likely to be responsible which would have a material
adverse effect on the Company's financial position or results of operations.
At the time the Company and Sterling Winthrop entered into the EMA,
Sterling Winthrop was a wholly owned subsidiary of Eastman Kodak. In November
1994, Eastman Kodak sold the capital stock of Sterling Winthrop to SmithKline
Beecham plc ('SmithKline Beecham'). SmithKline Beecham subsequently sold the
capital stock of Sterling Winthrop to Miles Inc., a subsidiary of Bayer AG.
Following these transactions, Sterling Winthrop advised the Company that Eastman
Kodak had retained Sterling Winthrop's liabilities in respect of Hilton Davis
and to address further correspondence in respect of the EMA to Eastman Kodak.
Subsequently, 360 North Pastoria Environmental Corporation, a subsidiary of
Eastman Kodak ('360 North'), notified the Company that (i) the Company should
send all future communications under the EMA to 360 North and (ii) Sterling's
responsibilities under the EMA would be managed by 360 North. Accordingly, since
the Sterling Winthrop sale the Company has been dealing with 360 North in
respect of matters arising under the EMA and 360 North has been performing
Sterling Winthrop's obligations under the EMA (including bearing the cost of the
performance of the work plan for closure of the surface impoundments at the
Cincinnati facility referred to below). Notwithstanding the foregoing, neither
Eastman Kodak nor 360 North has formally acknowledged to the Company its
assumption of Sterling Winthrop's obligations under the EMA nor has the Company
formally consented to any such assumption.
The State of Ohio has approved a work plan for closure of surface
impoundments formerly involved in wastewater treatment operations at the
Cincinnati facility. A former on-site landfill is also under investigation.
Under the EMA, Sterling Winthrop is wholly responsible for these matters and has
commenced performing the remediation of the surface impoundments. Consequently,
the Company believes that it will not be required to incur significant liability
in connection with such conditions.
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On or about June 24, 1994, the United States Environmental Protection
Agency ('EPA') Region 5 filed an administrative complaint (Complaint and
Proposed Compliance Order, BEW 013-94) seeking approximately $1.6 million in
fines and penalties against Hilton Davis for alleged violations of EPA
regulations relating to industrial boilers. The particular unit which is the
subject of the complaint is out of service and has not operated since August 21,
1992. The Company expects the matter to be settled in the near future. The
Company has made a claim for indemnification against PMC, the former owner of
Hilton Davis, with respect to this matter; PMC has indicated that it will
contest the claim. There can be no assurances that such claim will be
successful.
In connection with the requirements of New Jersey's ISRA relating to
certain prior transfers of the Hilton Davis facility in Newark, New Jersey,
Sterling Winthrop, as a 'former owner,' investigated and completed certain
remedial actions relating to soil and ground water pollution at that facility.
Under the EMA, Sterling Winthrop is also required to comply with its previous
obligations under ISRA. Manufacturing operations at this facility ceased in May
1996. While the Company believes that it will not be required to incur
significant liability in connection with environmental conditions at this
facility, there can be no assurance that the State of New Jersey will not
conclude, in the future, that additional remediation is required, for which the
Company might be considered responsible.
On or about February 24, 1994, the State of New Jersey filed a complaint in
the Superior Court against Hilton Davis and thirty-two other defendants (State
of New Jersey v. Ace Service Corp., No. SOM L 247-94, Somerset County) under the
New Jersey Spill Control Act and other laws seeking recovery of past and future
costs incurred in response to alleged releases and threatened releases of
hazardous substances at a third-party warehouse. Sterling Winthrop assumed the
defense of this matter pursuant to the EMA.
Freedom Textile. In connection with the Company's purchase of Freedom
Textile's Charlotte, North Carolina facility from American Cyanamid, the Company
entered into the Agreement for the Purchase and Sale of Assets, dated February
28, 1992 (the 'Freedom Textile Asset Purchase Agreement'), with American
Cyanamid, which requires American Cyanamid to take responsibility for corrective
actions with respect to certain environmental conditions. In January 1994,
American Cyanamid distributed to its stockholders all of the capital stock of
its chemicals unit, Cytec. The Company believes that in connection with this
transaction Cytec assumed American Cyanamid's environmental indemnity
obligations to the Company under the Freedom Textile Asset Purchase Agreement.
Since the Cytec spin-off, the Company has been dealing with Cytec in respect of
matters arising under the Freedom Textile Asset Purchase Agreement and Cytec has
been performing American Cyanamid's obligations under the Agreement. The
Settlement Agreement, dated December 30, 1994, among Freedom Textile, Cytec and
American Cyanamid, which settled certain claims, including certain environmental
claims regarding the Charlotte facility, recited that Cytec is the successor to
American Cyanamid with regard to the Freedom Textile Asset Purchase Agreement.
The Company has notified American Cyanamid that it is cooperating with Cytec in
coordinating the fulfillment of American Cyanamid's obligations under the
Freedom Textile Asset Purchase Agreement as a matter of convenience to American
Cyanamid and has not waived its contractual rights to look to American Cyanamid
as the party liable for performance under the Freedom Textile Asset Purchase
Agreement.
In connection with the Charlotte facility's hazardous waste (i.e., RCRA)
permits, the EPA and the State of North Carolina have required the facility to
conduct a RCRA facility investigation and to implement corrective action as may
be necessary at two on-site solid waste management units. Pursuant to the
Freedom Textile Asset Purchase Agreement, American Cyanimid is responsible for
any requirements which may be imposed by the EPA or the State of North Carolina
with respect to these two solid waste management units as well as other pre-
existing environmental conditions. Consequently, the Company believes that it
will not be required to incur significant liability in connection with these
units.
The Company acquired certain assets of Achem Corporation ('Achem') in 1993
as part of the Hilton Davis Aquisition and in 1995 transferred such assets to a
subsidiary of Freedom Textile. Environmental investigations have revealed soil
and groundwater contamination at the Cowpens, South Carolina facility. The
groundwater contamination has migrated off-site. The Company has reached
agreement with the South Carolina Department of Health and Environmental Control
('SCDHEC') on an administrative consent agreement which requires the Company to
conduct additional investigation and take corrective measures. The Company has
submitted a
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Remedial Investigation Work Plan to SCDHEC. SCDHEC has recently advised the
Company that such work plan will be accepted following certain minor revisions.
Certain former owners of Achem, which sold the facility to Hilton Davis, have
agreed to assume and pay all amounts due resulting from the consent agreement or
incurred in performance of Achem's obligations under the consent agreement, and
have further agreed that such costs may be deducted from the final purchase
price payment due to them of $350,000. Currently, however, the Company believes
that remediation costs are likely to exceed this amount and, in any event, may
exceed the financial resources of such owners.
Environmental investigations have also revealed soil and groundwater
pollution under the chemicals process building at the Cowpens site, the source
of which is unknown at this time. The contamination consists of a solvent
floating on groundwater. The Company has implemented an Initial Product
Abatement Plan ('IPAP') approved by SCDHEC and requested that the IPAP be
terminated with ongoing monitoring.
During March 1996, the Company instituted litigation against PMC, all the
former owners and operators of the Cowpens site and IT Corporation. The action
seeks recovery of all costs of investigation and remediation of soil and
groundwater contamination at that site. The claims against PMC are based on the
PMC Stock Purchase Agreement as well as on CERCLA. There can be no assurance
that the claims will be successful.
As of June 30, 1996, the Company had a reserve of approximately $1.9
million for environmental expenditures associated with remediation of the
Cowpens facility. Although the Company believes that this reserve is based on a
reasonable estimate of potential costs of remediation, there can be no assurance
that such costs will not exceed this amount.
In connection with the sale of the former facility located in Greenville,
South Carolina, Freedom Textile has agreed to reimburse the buyer for the costs
of removing contaminated soil resulting from an underground storage tank which
was removed several years ago. The soil removal has not occurred but due to the
anticipated limited extent of contamination, the Company does not believe that
the cost of the soil removal will be significant. Moreover, the Company has
tendered a claim for indemnification to Sterling Winthrop. Neither Sterling
Winthrop nor Eastman Kodak has accepted responsibility for this claim.
Reilly Whiteman. In connection with the Reilly-Whiteman Acquisition, the
Company and Reilly-Whiteman entered into the Asset Purchase Agreement, dated
November 8, 1994 (as amended, the 'Reilly-Whiteman Asset Purchase Agreement').
Pursuant to the Reilly-Whiteman Asset Purchase Agreement, Reilly-Whiteman
remains responsible for investigating and remediating certain environmental
matters at the Conshohocken facility which arose from Reilly-Whiteman's
operation of that facility prior to the acquisition. These environmental matters
include contamination from fuel oil leaking from an underground storage tank and
a tank farm at such facility. Pursuant to the Reilly-Whiteman Asset Purchase
Agreement, Reilly-Whiteman is currently addressing all of these matters.
Consequently, the Company does not believe that these matters are likely to be
material to the Company's financial position or results of operations.
Manufacturing operations at the Conshohocken facility ceased in April 1996.
Kalama. In connection with a RCRA investigation of the Kalama, Washington
facility by the EPA and the State of Washington, the EPA has required the
Company to conduct a RCRA facility investigation ('RFI') and to implement
corrective action as may be necessary on portions of the site. The EPA has
approved the Company's interim corrective measures ('ICM') work plan and RFI
report describing proposed interim remediation of the site. The Company is now
designing proposed interim corrective measures and studying data to prepare a
proposed final remediation plan. In connection with these submissions, the EPA
will require remediation of certain environmental conditions at the Kalama
facility. The Company believes that the interim corrective measures will provide
most, if not all, of the remediation required by the EPA.
In connection with the Company's purchase of Kalama from BC Sugar, the
Company entered into the Stock Purchase Agreement among Freedom, Chatterton
Petrochemical Corporation, a wholly owned subsidiary of BC Sugar ('Chatterton'),
and BC Sugar, dated as of May 11, 1994, and subsequently amended (the 'Kalama
Stock Purchase Agreement'), which, with certain exceptions, requires BC Sugar
and Chatterton to indemnify and reimburse the Company for the RCRA corrective
actions at Kalama. Pursuant to the agreement, BC Sugar and
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Chatterton remain responsible for the costs of investigation, negotiations with
the EPA and the State, and installation of the capital expenditure component of
the cleanup required by EPA or the State at the Kalama facility. BC Sugar and
Chatterton are also collectively responsible for a total of 50% of the costs of
operation and maintenance of the corrective action until five years after the
installation of the capital expenditure component at the site. All of the
indemnifications and other provisions in the Kalama Stock Purchase Agreement
whereby BC Sugar and Chatterton agreed to remain responsible for costs,
including those provisions described below, are subject to an aggregate limit of
$44 million, including certain costs which may be directly incurred or paid by
BC Sugar and Chatterton. As of July 31, 1996, approximately $5.2 million had
been credited against this limit.
In September 1995, an action was filed against Kalama by the U.S.
Department of Justice on behalf of the EPA, alleging violations of the Clean Air
Act at the Kalama facility which existed prior to the Company's purchase of it.
The Company has executed a consent decree settling the matter and expects
execution by the Department of Justice and the EPA in the near future. The
settlement contemplates the payment of a penalty as well as an additional
payment to fund supplemental environmental projects, both totaling approximately
$1.9 million. Under the Kalama Stock Purchase Agreement, BC Sugar and Chatterton
agreed to remain responsible for certain liabilities arising from violations of
environmental laws occurring before May 26, 1994 at sites owned by Kalama to the
extent such liabilities in the aggregate exceed certain thresholds and subject
to the $44 million aggregate limit. The Company has tendered a formal
indemnification claim to BC Sugar for the alleged air violations. Consequently,
the Company does not believe that this penalty is likely to be material to the
Company's financial position or results of operations.
In connection with the requirements of New Jersey's ISRA relating to
certain prior transfers of the Kalama facility in Garfield, New Jersey, the
State and the Company have investigated contamination of the site and the
potential for migration of contamination offsite. Kalama terminated
manufacturing operations at the Garfield facility in May 1994. Under the Kalama
Stock Purchase Agreement, subject to the $44 million aggregate limit described
above, BC Sugar and Chatterton are responsible for the costs of investigation,
negotiations with the State, installation of the capital expenditure component
of the remedy and 50% of the costs of operation and maintenance of the remedy
until five years after its installation.
In connection with the settlement of certain litigation between Kalama and
Tenneco Polymers, Inc. ('Tenneco Polymers'), the successor in interest of the
prior owner of the Garfield site, Kalama entered into a Settlement Agreement
(the 'Tenneco Settlement Agreement'), dated April 28, 1994, with Tenneco
Polymers. The Tenneco Settlement Agreement requires Tenneco Polymers to conduct
the cleanup of the Garfield facility required by the State of New Jersey and to
pay for 80% of the cleanup costs and makes Kalama responsible for the remaining
20% of such costs. Pursuant to the Kalama Stock Purchase Agreement, BC Sugar and
Chatterton have agreed to remain responsible for Kalama's portion of the cleanup
costs under the Tenneco Settlement Agreement subject to the limitations on their
liability described above. In connection with the settlement of the litigation,
Tenneco Corporation has entered a guarantee dated May 2, 1994, for the benefit
of Kalama, of Tenneco Polymers' obligations under the Tenneco Settlement
Agreement. Pursuant to the Tenneco Settlement Agreement, Tenneco Polymers has
assumed responsibility for the Garfield site investigation and is currently
negotiating the nature and scope of the required remediation with the State of
New Jersey.
Pursuant to the Kalama Stock Purchase Agreement, BC Sugar also remains
responsible for the vast majority of any necessary costs of remediation of
asbestos at the Garfield facility, which is currently estimated to cost
approximately $840,000. However, because the manufacturing operations at the
facility have ceased and because the facility is to be remediated under ISRA,
the Company has not yet determined the extent of asbestos remediation that is
legally required. The Company does not believe that this matter will materially
impact the Company's financial position or results of operations.
Extensive environmental studies of the Kalama facility in Beaufort, South
Carolina have been conducted by Kalama's subsidiary Kalama Specialty Chemicals,
Inc. ('KSCI'), pursuant to an administrative order of consent between KSCI and
the EPA. The facility has been listed on the EPA's National Priorities List
pursuant to CERCLA. As a result of these studies, the EPA has chosen a remedy
which KSCI has agreed to perform pursuant to a consent decree which has been
lodged in U.S. District Court. Manufacturing operations at this facility have
ceased. Under the Kalama Stock Purchase Agreement, subject to the $44 million
aggregate limit described above,
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BC Sugar and Chatterton have undertaken responsibility for the costs of
investigation, negotiations with the EPA, installation of the capital
expenditure component of the remedy and 50% of the costs of operation and
maintenance of the remedy until five years after its installation.
As of June 30, 1996, the Company had reserves of approximately $17.2
million for environmental expenditures associated with remediation of the
Kalama, Garfield and Beaufort facilities, which expenditures the Company expects
to be made over the next 30 years.
Kalama has been named as a PRP pursuant to CERCLA at the Pasco Sanitary
Landfill site ('Pasco') in Washington State. At Pasco, Kalama has been
participating in voluntary site investigation and cleanup based on a share of
less than approximately two percent of the total site liability. While there can
be no assurance that Kalama's final share of total liability at Pasco will not
be greater than two percent, there are numerous solvent entities with extensive
resources which have also been named as PRPs at Pasco. Various contingencies
such as the incomplete status of investigation, the uncertainty of remediation
selection and effectiveness, the search for additional PRPs, the absence of
binding commitments allocating liability among PRPs, and the joint and several
nature of liability under CERCLA make it impossible to predict Kalama's total
liability at Pasco at this time.
Under the Kalama Stock Purchase Agreement, BC Sugar and Chatterton remain
responsible for the offsite CERCLA sites identified on schedules thereto,
including Pasco. Subject to the $44 million aggregate limit described above, BC
Sugar's and Chatterton's liability for these sites continues until three years
after the installation of capital expenditures component of remedies at all of
the Kalama, Washington, Garfield and Beaufort facilities, but in any event no
later than May 26, 2004.
Freedom Chemical Diamalt. Since 1961, the Company's facility in Vernon,
France has been discharging production wastewater without pretreatment into the
River Seine. According to an analysis completed by the Company in early 1996,
such production wastewater includes concentrations of pollutants which are not
in compliance with legal limits or limits which are acceptable for discharge to
the municipal wastewater treatment plant. The Company plans to resolve this
matter by negotiating permission to discharge the wastewater to the municipal
wastewater treatment plant for a fee and by shifting production of certain raw
materials to the facility under construction in India. The Company believes that
the French environmental authorities will refrain from penalizing the Company
for these discharges while a solution is sought. Although there can be no
assurance that such negotiations will be succesful or that the environmental
authorities will not penalize the Company for such discharges into the river,
the Company believes that, if assessed, any such penalties are not likely to be
material to the Company's financial position or results of operations.
LITIGATION
On March 28, 1994, a grand jury sitting in the Southern District of Ohio
issued a subpoena (the 'Hilton Davis Subpoena') to Hilton Davis, seeking the
production of certain documents to determine whether there has been or may have
been a violation of the Sherman Act (15 U.S.C. Section 1). The Hilton Davis
Subpoena covers the period from January 1, 1988 through April 5, 1994 and seeks
production of documents relating to pigments (defined as raw materials used in
the production of offset and gravure printing ink). The investigation is being
conducted by the Antitrust Division of the Department of Justice. The Company
completed its response to the Hilton Davis Subpoena on July 8, 1994. Three
Hilton Davis employees have been subpoenaed and have testified before the grand
jury and three other employees of the Company were interviewed by the Department
of Justice in lieu of requiring their testimony before the grand jury. It is
premature to assess what action, if any, the grand jury may take. The Company
has been informed that it is not a target of the investigation.
The Company is subject to various legal proceedings and administrative
actions, all of which are of an ordinary or routine nature incidental to the
operations of the Company. Although it is impossible to predict the outcome of
any legal proceeding, in the opinion of the Company's management, such
proceedings and actions are not likely to have a material adverse effect on the
Company's financial position or results of operations. For a description of
certain environmental matters and related legal proceedings involving the
Company, see '--Environmental Matters.'
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of Freedom.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Fred P. Rullo(1)................................ 56 Chairman of the Board of Directors, Chief
Executive Officer and President
Robert A. Kirchner.............................. 60 Senior Vice President; President, Kalama
Robert G. Kitchen............................... 43 Senior Vice President; President,
Hilton Davis
Brian F. McNamara............................... 48 Vice President, Secretary and General Counsel
Dennis M. Monahan............................... 49 Chief Financial Officer
Edward J. Rish.................................. 53 Executive Vice President, Freedom Textile
Dale E. Smith................................... 53 Vice President, Human Resources
Helmut E. Wolf.................................. 47 President, Freedom Chemical Diamalt
Timothy J. Clark................................ 32 Director
Peter A. Joseph(1).............................. 44 Director
Robert J. Lanigan(1)............................ 67 Director
Paul S. Levy(1)................................. 48 Director
Angus C. Littlejohn, Jr......................... 46 Director
Harold A. Sorgenti(2)........................... 62 Director
</TABLE>
- ------------------
(1) Member of the Compensation Committee.
(2) Mr. Sorgenti resigned from his position as Executive Chairman and as
Chairman of the Board of Directors in July 1996, but remains a Director of
Freedom.
Set forth below is the background of each of Freedom's executive officers
and directors.
Fred P. Rullo has served as Chairman and Chief Executive Officer of Freedom
since July 1996 and as President and a Director of Freedom since April 1992. Mr.
Rullo spent 26 years with Atlantic Richfield Co. ('Atlantic Richfield') and ARCO
Chemical Company ('ARCO Chemical') where he was Vice President of Specialty
Chemicals. In addition, Mr. Rullo served as Executive Vice President of Lyondell
Petrochemical Company ('Lyondell') from 1985 to 1989 and President of ABB
Combustion Engineering Systems and Service Inc. ('ABB') from 1989 to 1991. Mr.
Rullo is also a director of Naxcor, Inc., a privately-held biogenetics company.
Robert A. Kirchner has served as Senior Vice President of Freedom since
1994 and as President of Kalama since 1981 and was a co-founder of Kalama in
1971. Prior to serving as President, Mr. Kirchner had been Plant Manager, Vice
President, Operations and Executive Vice President of Kalama. Prior to 1971, Mr.
Kirchner was with The Dow Chemical Company.
Robert G. Kitchen has served as Senior Vice President of Freedom and
President of Hilton Davis since January 1996. Prior to that he had served as
President of Freedom Textile since June 1992. He spent the previous 17 years
with Lyondell and Atlantic Richfield. His most recent position at Lyondell was
Vice President, Business Management and Marketing for Lyondell's entire
petrochemical product lines. Throughout his career, he held positions in
manufacturing, engineering, planning, product management and marketing.
Brian F. McNamara has served as Vice President, Secretary and General
Counsel of Freedom since October 1994. Prior to joining Freedom, Mr. McNamara
spent the previous 17 years with Combustion Engineering, Inc. (which was
acquired by Asea Brown Boveri, Inc. ('Asea Brown Boveri'), an affiliate of ABB,
in 1989) ('Combustion Engineering'), most recently as Vice President and General
Counsel of ABB's Systems Division.
Dennis M. Monahan has served as Chief Financial Officer of Freedom since
July 1996 and as Corporate Controller of Freedom from March 1995 to July 1996.
Prior to that time he had his own financial services consulting practice for
three years, spent four years as Chief Financial Officer of The Johnson
Companies
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employee benefits division and spent a total of 18 years with Atlantic Richfield
and ARCO Chemical in various financial and accounting positions.
Edward J. Rish has served as Executive Vice President and General Manager
of Freedom Textile since July 1996. Mr. Rish joined the Company in February 1993
as Vice President Sales and Marketing. Prior to joining the Company he had over
25 years of experience in textile chemicals with Diamond Shamrock Inc., Jordan
Chemicals and PPG Industries Inc.
Dale E. Smith has served as Vice President Human Resources and
Administration of Freedom since October 1993. Prior to joining Freedom, Mr.
Smith was with Asea Brown Boveri for 11 years. His most recent position with
Combustion Engineering was Vice President, Human Resources. In his 27 years of
management experience he has held positions in administration, operations and
human resources.
Helmut E. Wolf has served as President of Freedom Chemical Diamalt since
January 1996. Dr. Wolf acted as General Manager, Research Department of Diamalt
from 1989 to 1995, and continued in such capacity after the Diamalt Acquisition.
Prior to 1989, he served in other managerial and technical capacities at
Diamalt.
Timothy J. Clark has served as a Director of Freedom since June 1996. Mr.
Clark is a principal of JLL, which he joined in 1993. Prior to that time, Mr.
Clark was corporate planning manager of Edgcomb Metals Com-pany and a financial
analyst at the Blackstone Group. Mr. Clark is also a director of Hayes Wheels
International, Inc. ('Hayes Wheels').
Peter A. Joseph has served as a Director of Freedom since April 1992. Mr.
Joseph has been a partner of JLL from its inception in 1988. Mr. Joseph has
served as President of Lancer Industries, Inc. ('Lancer'), an industrial holding
company and the limited partner of JLL Associates since April 1992 and as
Secretary and director of Lancer since July 1989. Mr. Joseph is also a director
of OrNda HealthCorp ('OrNda'), Foodbrands America, Inc. ('Foodbrands'), Hayes
Wheels and Fairfield Manufacturing Company, Inc. ('Fairfield'). Mr. Joseph is
also Vice President and Secretary of Fairfield.
Robert J. Lanigan has served as a Director of Freedom since June 1996. Mr.
Lanigan also serves as Chairman Emeritus of the board of directors of
Owens-Illinois, Inc., and as a director of Chrysler Corporation, The Coleman
Company, Sonat, Inc., Transocean Offshore, Inc. and The Dun & Bradstreet
Corporation. Mr. Lanigan is associated with JLL as a special limited partner of
JLL Associates II, L.P. ('JLL Associates II'). Prior to that, Mr. Lanigan served
as an executive officer of Owens-Illinois, Inc.
Paul S. Levy has served as a Director of Freedom since April 1992. Mr. Levy
has been a partner of JLL from its inception in 1988. Mr. Levy has served as
Chairman of the Board of Directors and Chief Executive Officer of Lancer since
July 1989. Mr. Levy is also a director of OrNda, Foodbrands, Hayes Wheels and
Fairfield. Mr. Levy is also Vice President and Assistant Secretary of Fairfield.
Angus C. Littlejohn, Jr. has served as a Director of Freedom since April
1992. Mr. Littlejohn is Chief Executive Officer of Littlejohn & Co., a company
he founded in August 1996. Mr. Littlejohn was a partner of JLL from its
inception in 1988 until his resignation in August 1996. Mr. Littlejohn served as
Vice Chairman of Lancer from April 1992 until July 1996 and as Chief Financial
Officer and a director of Lancer from July 1989 until July 1996. From July 1989
until April 1992 Mr. Littlejohn served as President of Lancer. Mr. Littlejohn is
also a director of OrNda and Foodbrands.
Harold A. Sorgenti has served as a Director of Freedom since April 1992 and
had served as Executive Chairman and Chairman of the Board of Freedom from April
1992 until July 1996. Mr. Sorgenti spent 32 years with Atlantic Richfield and
ARCO Chemical. From 1979 to 1991 he was President of ARCO Chemical and was Chief
Executive Officer of ARCO Chemical from 1987 to 1991. Mr. Sorgenti serves on the
boards of Provident Mutual Life Insurance Company and Crown Cork and Seal, Inc.
Mr. Sorgenti is a former chairman of the Chemical Manufacturers Association.
None of the officers or directors has any family relationship with any
other officer or director. The Board of Directors currently consists of seven
members, four of whom (Messrs. Clark, Joseph, Levy and Lanigan) are designees of
the JLL Funds.
Freedom, each of the JLL Funds, Messrs. Sorgenti and Rullo, RULCO, Inc., a
corporation wholly owned by Mr. Rullo ('Rulco'), Freedom Investment Corp., a
corporation wholly owned by Mr. Sorgenti ('FIC'), and certain other stockholders
of Freedom have entered into a stockholders agreement (the 'Stockholders'
Agreement'), pursuant to which, among other things, the parties agreed that
Messrs. Sorgenti and Rullo, Rulco,
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<PAGE>
FIC and the other stockholders will vote their shares in favor of JLL's nominees
to the Board of Directors and JLL will vote its shares in favor of the
nomination to the Board of Directors of Messrs. Sorgenti and Rullo.
ELECTION OF DIRECTORS AND COMMITTEES
Directors are elected at the annual meeting of stockholders and hold office
until their successors have been duly elected and qualified or until their
death, resignation or removal.
The Board of Directors has established a compensation committee (the
'Compensation Committee'), which reviews and approves the compensation of the
officers and directors of the Company and makes recommendations to the Board of
Directors with respect to standards for setting compensation levels. The
Compensation Committee also administers Freedom's stock option and other
employee benefit plans. See '--Management Equity Plan' and '--Compensation
Interlocks and Insider Participation.'
EXECUTIVE COMPENSATION
The following table sets forth in summary form all compensation for all
services rendered in all capacities to the Company for the years ended December
31, 1995, 1994 and 1993 of the Chief Executive Officer of Freedom and the other
four most highly compensated executive officers of the Company (collectively
with the Chief Executive Officer, the 'Named Executive Officers'):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION(6)
NAME & PRINCIPAL POSITION YEAR $ $ (#) $
- ----------------------------------------------- ---- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Harold A. Sorgenti (1) ........................ 1995 $400,000 $ -- -- $ 4,618
Executive Chairman and 1994 260,385 400,000 1,129(3) 1,404
Chairman of the Board(2) 1993 75,000 125,000 4,275(3) --
Fred P. Rullo (1) ............................. 1995 $400,000 $ -- -- $ 3,038
President(2) 1994 353,462 400,000 752(3) 3,814
1993 275,000 125,000 2,850(3) 3,893
Robert G. Kitchen ............................. 1995 $193,071 $ -- 225(4) $ 5,134
President, Freedom Textile 1994 175,769 120,000 175(4) 3,555
1993 165,114 42,000 -- 3,403
Robert A. Kirchner ............................ 1995 $227,796 $ 77,380 -- $ 6,903
President, Kalama 1994 227,796(5) 84,704 400(4) 6,903
1993 -- -- -- --
Helmut E. Wolf ................................ 1995 $172,200(7) $ -- 110(4) $ 10,464(7)
President, Freedom Chemical Diamalt 1994 -- -- -- --
1993 -- -- -- --
</TABLE>
- ------------------
(1) The amounts listed for Messrs. Sorgenti and Rullo under the salary column
for 1995 were paid directly to Messrs. Sorgenti and Rullo pursuant to their
respective employment agreements. During the fiscal year ended December 31,
1994, Freedom paid $350,000 to The Freedom Group Partnership, a Pennsylvania
limited partnership ('The Freedom Group'), for its management of the Company
pursuant to an agreement, dated May 26, 1994, between The Freedom Group and
the Company (the '1994 Management Agreement'), which amount was paid to
Messrs. Sorgenti and Rullo. FIC and Rulco are the limited and general
partners of The Freedom Group. During the fiscal year ended December 31,
1993, Freedom paid $350,000 to The Freedom Group for fees under an
agreement, dated May 4, 1992, between the Company and The Freedom Group (the
'1992 Management Agreement'). Pursuant to the 1992 Management Agreement,
from March 31, 1992 through December 31, 1993, The Freedom Group incurred
expenses on behalf of Freedom and Freedom advanced funds to The Freedom
Group in respect of such expenses. The aggregate amount of
(Footnotes continued on next page)
53
<PAGE>
(Footnotes continued from previous page)
such advances was approximately $1.4 million (including the $350,000
referred to above) as of December 31, 1993. Freedom forgave the remaining
outstanding advance effective December 7, 1994. Except for the bonus
payments set forth in the table above and the portion of the salary payments
for the 1994 year discussed above, Freedom did not make any direct payments
to Mr. Sorgenti or Mr. Rullo; however, for purposes of this disclosure,
payments to The Freedom Group are deemed attributable to such persons, each
as sole shareholder of the general partners (FIC and Rulco, respectively)
thereof.
(2) Mr. Sorgenti was Executive Chairman and Chairman of the Board of Directors
until July 2, 1996 (the 'Sorgenti Resignation Date'), at which time he
resigned from these positions. Mr. Rullo assumed Mr. Sorgenti's position's
as Executive Chairman and Chairman of the Board of Directors in July 1996.
(3) In connection with the Freedom Textile Acquisition, on May 4, 1992, pursuant
to an option agreement between The Freedom Group and Freedom (the 'Textile
Option Agreement'), Freedom granted The Freedom Group an option to purchase
1,837 shares of Common Stock at an exercise price of $100.00 per share. In
connection with the Hilton Davis Acquisition, on September 9, 1993, pursuant
to an option agreement between The Freedom Group and Freedom (the 'Hilton
Davis Option Agreement'), Freedom granted The Freedom Group an option to
purchase 7,500 shares of Common Stock at an exercise price of $100.00 per
share. In connection with the Kalama Acquisition, on May 26, 1994, pursuant
to an option agreement between The Freedom Group and Freedom (the 'Kalama
Option Agreement'), Freedom granted The Freedom Group an option to purchase
1,981 shares of Common Stock at an exercise price of $105.40 per share.
Effective December 7, 1994, Freedom and The Freedom Group amended and
restated each of these option agreements (collectively, the 'Amended and
Restated Option Agreements'). Pursuant to the Amended and Restated Option
Agreements, Freedom granted to The Freedom Group options to purchase an
aggregate of 11,318 shares of Common Stock, of which options to purchase
9,337 shares are exercisable at an exercise price of $100.00 per share and
options to purchase 1,981 shares are exercisable at an exercise price of
$105.40 per share. Pursuant to the Amended and Restated Option Agreements,
of the options to purchase 11,318 shares, options to purchase 6,790 shares
were deemed to be attributable to Mr. Sorgenti and options to purchase 4,528
shares were deemed to be attributable to Mr. Rullo. Pursuant to an agreement
with Freedom, in January 1994 The Freedom Group exercised options to
purchase 5,322 of the shares attributable to Mr. Sorgenti and transferred
such shares to FIC and FIC transferred such shares to affiliates of Mr.
Sorgenti. Pursuant to an assignment agreement dated April 14, 1995 (the
'McPhail Assignment'), the Freedom Group assigned to Donald W. McPhail, one
of its limited partners and a former Vice President of Freedom, a 5%
interest in certain partnership property, including options to purchase 567
shares of Common Stock (of the options to purchase 11,318 shares originally
granted). Also on April 14, 1995, pursuant to separate assignment agreements
(together with the McPhail Assignment, the 'Assignments'), the Freedom Group
assigned to FIC and Rulco a 57% and a 38% interest, respectively, in certain
partnership property, including options to purchase, respectively, 1,129
shares of Common Stock and 4,300 shares of Common Stock (in each case, of
the options to purchase 11,318 shares originally granted). On July 2, 1996,
Mr. Sorgenti resigned from his position as Executive Chairman of Freedom
and, pursuant to the Amended and Restated Option Agreements (after giving
effect to the Assignments), 100% of the options held by FIC are currently
exercisable. Pursuant to the Amended and Restated Option Agreements (after
giving effect to the Assignments), as of May 4, 1996, 80% (or 3,440) of the
options held by Rulco are currently exercisable and the remaining 20% will
vest on May 4, 1997. See 'Certain Transactions.'
(4) Pursuant to the Management Equity Plan, in 1995 Freedom granted Mr. Kitchen
and Dr. Wolf options to purchase shares of Series B common stock of Freedom
(the 'Series B Common Stock') at an exercise price of $255 per share and in
1994 Freedom granted Messrs. Kitchen and Kirchner options to purchase shares
of Series B Common Stock at an exercise price of $100 per share. The options
become exercisable on December 31, 1998, subject to the Company attaining
certain performance goals, and otherwise become fully exercisable on
December 31, 2004, except in the case of the options granted to Mr. Kitchen
in 1994, which options become fully exercisable on December 31, 2003.
(5) The amount listed represents total salary for 1994; however, Freedom
acquired Kalama in May 1994.
(6) The amounts listed for 1995 represent the Company's contributions to the
Company's 401(k) plan and group life insurance for such individuals, and in
the case of Dr. Wolf, the Company's statutory contribution to social
insurance in Germany.
(7) Amounts paid in Deutschemarks (DM) and converted to U.S. dollars based on
the average exchange rate of 1.4883 DM to one U.S. dollar. (The average
exchange rate was calculated as the sum of the average monthly purchase and
selling rates of the U.S. dollar determined at the end of each month during
1995 divided by 12).
54
<PAGE>
Options Grants in Last Fiscal Year. The following table sets forth
information with respect to the total number of options to purchase Series B
Common Stock granted to the Named Executive Officers in 1995. No options to
purchase Common Stock were granted to any of the Named Executive Officers in
1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE OF
INDIVIDUAL OPTION GRANTS ASSUMED ANNUAL
------------------------------------------------------ RATES OF STOCK
NUMBER OF PERCENT PRICE
SECURITIES OF TOTAL APPRECIATION
UNDERLYING OPTIONS FOR OPTION
OPTIONS GRANTED TO EXERCISE OR TERM(2)
GRANTED EMPLOYEES BASE PRICE EXPIRATION ---------------
NAME (#)(1) IN 1995 ($/SH) DATE 5%
- ------------------------------------------- ---------- ----------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Robert G. Kitchen.......................... 225 16.5% 255 1/31/05 0
Helmut E. Wolf............................. 110 8.1% 255 1/31/05 0
<CAPTION>
NAME 10%
- ------------------------------------------- ---------------
<S> <C>
Robert G. Kitchen.......................... $ 4,136
Helmut E. Wolf............................. $ 2,022
</TABLE>
- ------------------
(1) Represents options to purchase shares of Series B Common Stock granted
pursuant to the Management Equity Plan. The options become exercisable on
December 31, 1998, subject to the Company attaining certain performance
goals, and otherwise become fully exercisable on December 31, 2004, provided
that the Named Executive Officer continues to be employed by the Company on
such date.
(2) Assumes a fair market value per share of Common Stock of $105.40 as of the
date of grant.
Aggregated Option Exercises and Holdings and December 31, 1995 Option
Values. The following table sets forth information with respect to the
aggregate number of unexercised options to purchase Common Stock and Series B
Common Stock granted in all years to the Named Executive Officers and held by
them as of December 31, 1995, and the value of unexercised in-the-money options
(i.e., options that had a positive spread between the exercise price and the
fair market value of Common Stock or Series B Common Stock, as the case may be)
as of December 31, 1995:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1995 AT DECEMBER 31, 1995
(#) ($)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE(5)
- ----------------------------------------- ------------------------------- --------------------
<S> <C> <C>
Harold A. Sorgenti....................... 677/452(1)(2) 0/0
Fred P. Rullo............................ 2,580/1,720(1)(3) 12,101/8,068
Robert G. Kitchen........................ 0/400(4) 0/0
Robert A. Kirchner....................... 0/400(4) 0/0
Helmut E. Wolf........................... 0/110 0/0
</TABLE>
- ------------------
(1) The options to purchase Common Stock listed in the table were granted to The
Freedom Group pursuant to the Amended and Restated Option Agreements and
subsequently transferred to its general partners, FIC and Rulco, pursuant to
the Assignments. Messrs. Sorgenti and Rullo are the respective sole
shareholders of FIC and Rulco.
(2) On July 2, 1996, Mr. Sorgenti resigned from his position as Executive
Chairman of Freedom. Pursuant to the Amended and Restated Option Agreements,
100% of Mr. Sorgenti's options are exercisable for a period of one year
following his resignation.
(3) As of May 4, 1996, 80% (or 3,440) of Mr. Rullo's options are exercisable and
the remaining 20% will become exercisable on May 4, 1997.
(4) Represents options to purchase shares of Series B Common Stock granted
pursuant to the Management Equity Plan. The options become exercisable on
December 31, 1998, subject to the Company attaining certain performance
goals, and otherwise become fully exercisable on December 31, 2004 (except
in the case of the 175 options granted to Mr. Kitchen in 1994, which become
fully exercisable on December 31, 2003), provided that the Named Executive
Officer continues to be employed by the Company on such date.
(5) Assumes a fair market value per share of Common Stock of $105.40 at December
31, 1995.
55
<PAGE>
PENSION PLAN TABLE
The following table shows the combined maximum annual pension benefits
payable under the Freedom Textile Chemicals Co. Retirement Plan (the 'Pension
Plan') and the Freedom Group Supplemental Executive Retirement Plan (the 'SERP')
in the specified compensation and years-of-service classifications in effect for
employees of Freedom and Freedom Textile. The benefits are computed as single
life annuity amounts.
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------
COMPENSATION 5 10 15 20 25 30
- ------------------------------------------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000........................................ $ 3,227 $ 6,454 $ 9,881 $12,908 $18,135 $19,362
75,000........................................ 5,185 10,329 15,494 20,658 25,823 30,987
100,000........................................ 7,102 14,204 21,306 28,408 35,510 42,612
125,000........................................ 9,040 18,079 27,119 36,158 46,198 54,237
150,000........................................ 10,977 21,954 32,931 43,885 54,595 65,862
175,000........................................ 13,916 26,829 38,744 51,668 64,573 77,487
200,000........................................ 14,862 29,704 44,556 59,408 74,260 89,112
225,000........................................ 16,790 33,579 50,369 67,158 83,946 100,737
250,000........................................ 18,727 37,454 56,181 74,908 93,635 112,362
275,000........................................ 20,665 41,329 61,994 82,658 103,323 123,967
300,000........................................ 22,602 45,204 67,806 90,406 113,010 135,612
325,000........................................ 24,540 49,079 73,619 98,158 122,698 147,237
350,000........................................ 26,477 52,954 79,431 105,908 132,385 158,862
375,000........................................ 28,414 56,829 85,243 113,658 142,072 170,487
400,000........................................ 30,351 60,704 91,055 121,408 151,759 182,112
425,000........................................ 32,288 64,579 96,867 129,158 161,446 193,737
450,000........................................ 34,225 68,454 102,679 136,908 171,133 205,362
475,000........................................ 36,162 72,392 108,491 144,658 180,820 216,987
500,000........................................ 38,099 76,204 114,303 152,408 190,507 228,612
</TABLE>
The Pension Plan is a non-contributory plan which provides a lifetime
income upon an employee's retirement at or after having attained age 65 and
having completed at least 5 years of service, or upon an earlier date if various
stated conditions are satisfied. Benefits under the Pension Plan are determined
by a formula related to an employee's age, service and final average
compensation at retirement. The benefits as disclosed in the table are not
reduced by Social Security benefits. The SERP is an unfunded obligation which
provides benefits to participants (including the Named Executive Officers) which
would otherwise be restricted under the Pension Plan by virtue of the
limitations imposed on qualified plans by Sections 415 and 401(a)(4) of the
Internal Revenue Code (the 'Code').
An employee's final average compensation is determined based upon the
highest 60 consecutive months of service during the last 120 consecutive months.
Final average compensation includes base salary and bonuses.
At December 31, 1995, the credited years of service and the average annual
earnings under the Pension Plan and the SERP of the Named Executive Officers
were as follows:
<TABLE>
<CAPTION>
AVERAGE ANNUAL CREDITED YEARS
COMPENSATION OF SERVICE
-------------- --------------
<S> <C> <C>
Harold A. Sorgenti.......................................... $340,115 4.0
Fred P. Rullo............................................... 443,844 4.0
Robert G. Kitchen........................................... 191,360 3.6
*Robert Kirchner............................................. -- --
*Helmut E. Wolf.............................................. -- --
</TABLE>
- ------------------
* Not a participant in the Pension Plan
MANAGEMENT EQUITY PLAN
On June 30, 1994, the Board adopted and the stockholders approved the 1994
Management Equity Plan (the 'Management Equity Plan') which provides for grants
of options to purchase shares of Common Stock and Series B Common Stock to
executive officers, other key employees and consultants of the Company. The
Management Equity Plan also provides for the grant of stock appreciation rights
('SARs') in tandem with an option award. The purpose of the Management Equity
Plan is to afford an incentive to such participants to increase their efforts on
behalf of the Company and to promote the success of the Company's business.
Each option grant is evidenced by an agreement between the grantee and
Freedom (an 'Option Agreement'). An Option Agreement provides the number of
shares of Common Stock or Series B Common Stock, as appropriate, covered by the
award, the option price and the exercise period (which will be ten years and one
month
56
<PAGE>
unless otherwise provided in the option agreement). In addition, the
Compensation Committee may establish appropriate performance goals which, if
attained, will accelerate the exercisability and vesting of the option award.
The performance goals are based on the Company attaining a pre-established level
of annual and cumulative earnings before interest, taxes, depreciation and
amortization. If such performance goals are not attained, the option becomes
exercisable based on its original exercise schedule (rather than on an
accelerated exercise schedule).
Freedom has authorized and reserved 4,185 shares of Common Stock and 4,185
shares of Series B Common Stock for awards under the Management Equity Plan.
Such shares are subject to adjustment in the event of certain transactions which
affect the capitalization of the Company. In the event of such a transaction,
the number of shares of Common Stock available for awards, the number of such
shares covered by outstanding awards and the option price or SAR price may be
equitably adjusted by the Compensation Committee, in order to reflect such event
and preserve the value of outstanding awards.
The Management Equity Plan provides that in the event of a Change of
Control of Freedom (as such term is defined in the Management Equity Plan)
following an initial public offering all awards which are outstanding at such
time shall become immediately exercisable and otherwise nonforfeitable. The
Board, at any time, may amend or terminate the plan, provided, that an amendment
which requires stockholder approval in order for the Management Equity Plan to
continue to comply with Rule 16b-3 shall not be effective unless approved by the
requisite vote of the stockholders of Freedom. In addition, no amendment or
termination may adversely affect any award previously granted without the
written consent of the participant.
As of July 15, 1996, 3,655 options to purchase shares of Series B Common
Stock were outstanding under the Management Equity Plan. Such options vest over
five years provided that the Company achieves certain annual and cumulative
performance goals.
No awards may be granted under the Management Equity Plan after June 30,
2004.
EMPLOYMENT CONTRACTS WITH NAMED EXECUTIVE OFFICERS
Freedom is party to an employment agreement with Mr. Kitchen (the 'Kitchen
Employment Agreement') providing for his employment with Freedom until December
31, 1996 at an annual base salary of not less than $210,000, plus
performance-based bonuses. If Mr. Kitchen's employment is terminated by Freedom
other than for Cause (as defined in the Kitchen Employment Agreement), the
Kitchen Employment Agreement provides that he will receive his base salary in
effect at the time of termination and benefits for a period of 18 months
following such termination, plus a prorated portion of the incentive bonus for
such year.
Kalama is party to an employment agreement with Mr. Kirchner (the 'Kirchner
Employment Agreement') providing for his employment with Kalama until December
31, 1996 at a salary and bonus to be fixed from time to time by the Board of
Directors of Kalama plus benefits. If Mr. Kirchner's employment is terminated by
Kalama other than for Cause (as defined in the Kirchner Employment Agreement),
the Kirchner Employment Agreement provides that he will receive his salary in
effect at the time of termination for a period following such termination, of
one month for every year or part of the year that Mr Kirchner was employed by
Kalama.
Freedom Chemical Diamalt is a party to an employment agreement with Dr.
Wolf (the 'Wolf Employment Agreement'), which is currently being renegotiated,
providing for his employment with Freedom Chemical Diamalt at an annual salary
of not less than DM273,000. Pursuant to the Wolf Employment Agreement, Dr. Wolf
is entitled to receive as severance benefits his salary in effect at the time of
termination for a period following such termination of not less than 12 months.
See 'Certain Transactions' for a description of the 1994 Employment
Agreements with Messrs. Rullo and Sorgenti.
COMPENSATION OF DIRECTORS
Directors who are full-time employees of the Company receive no additional
compensation for serving on the Board or its committees. Directors who are not
full-time employees of the Company are reimbursed for traveling costs and other
out-of-pocket expenses incurred in attending meetings. Directors who serve on
the Compensation Committee receive no additional compensation.
COMPENSATION INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has a Compensation Committee consisting of Messrs.
Rullo, Joseph, Lanigan and Levy. Except for Mr. Rullo, Freedom's Chairman of the
Board, Chief Executive Officer and President, no officer or employee of the
Company has participated in deliberations of the Board of Directors concerning
executive officer compensation. Mr. Rullo has entered into certain agreements
with Freedom which are discussed under 'Certain Transactions.'
57
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of October 17, 1996, after giving effect
to the Cash Equity Investment, certain information regarding the beneficial
ownership of Common Stock by (i) each of Freedom's directors, (ii) each person
believed by Freedom to own beneficially more than 5% of its outstanding Common
Stock, (iii) each of the Named Executive Officers and (iv) all executive
officers and directors of Freedom as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY % OF COMMON
NAMED EXECUTIVE OFFICERS, DIRECTORS AND 5% STOCKHOLDERS OWNED(1) STOCK(2)(3)
- -------------------------------------------------------------------- ---------------- -----------
<S> <C> <C>
Joseph Littlejohn and Levy Fund, L.P................................ 91,825(4)(5) 63.34
Joseph Littlejohn and Levy Fund II, L.P............................. 37,136(4)(5) 25.62
Harold A. Sorgenti.................................................. 8,370(6) 13.93
Fred P. Rullo....................................................... 4,534(7) 7.27
Peter A. Joseph..................................................... 128,961(5) 88.96
Paul S. Levy........................................................ 128,961(5) 88.96
Angus C. Littlejohn, Jr............................................. -- --
Robert J. Lanigan................................................... -- --
Timothy J. Clark.................................................... -- *
Robert A. Kirchner.................................................. 745(8) *
Robert G. Kitchen................................................... 356(9) *
Helmut E. Wolf...................................................... --(10) --
All directors and executive officers as a group (14 persons)........ 143,073(11) 99.88
</TABLE>
- ------------------
* Less than 1%.
(1) Unless otherwise indicated, each beneficial owner has both sole voting and
sole investment power with respect to the shares beneficially owned by him.
The number of shares shown as beneficially owned includes all options held
by such person, entity or group which are exercisable within 60 days.
(2) The percentages of beneficial ownership as to each person, entity or group
assume that all options held by such person, entity or group which are
exercisable within 60 days, but not those held by others shown in the
table, have been exercised.
(3) Percentages are calculated based on 138,964 shares of Common Stock
outstanding as of October 17, 1996.
(4) All of such shares are owned by the JLL Fund I and the JLL Fund II, as
indicated. Messrs. Joseph and Levy are officers and directors of Lancer, a
limited partner of JLL Associates and the owner of 100% of the capital
stock of JLL Inc. which, pursuant to contract, manages the JLL Fund I.
Messrs. Joseph and Levy are each general partners of JLL Associates and JLL
Associates II, which is the general partner of the JLL Fund I and JLL Fund
II, respectively. Messrs. Joseph and Levy disclaim beneficial ownership of
all such shares. By virtue of the Stockholders' Agreement, Messrs. Sorgenti
and Rullo, FIC and Rulco may be deemed to have a beneficial ownership
interest in such shares. Messrs. Sorgenti and Rullo, FIC and Rulco have
disclaimed beneficial ownership of such shares.
(5) Messrs. Joseph and Levy may be deemed to beneficially own the shares held
by the JLL Funds. See Note 4 above.
(6) Includes 1,624 shares held by Mr. Sorgenti directly, 549 shares held by The
Harold A. Sorgenti 1994 Five Year Grantor Retained Annuity Trust, 516
shares by The Harold A. Sorgenti 1994 Two Year Grantor Retained Annuity
Trust, 1,552 shares held by FIC, 3,000 shares held by the Sorgenti Family
Partnership, L.P., a Delaware limited partnership ('SFP'), and 1,129 shares
subject to currently exercisable options held by FIC. Mr. Sorgenti
disclaims beneficial ownership of the 3,000 shares held by SFP. By virtue
of the Stockholders' Agreement, JLL Fund I and JLL Fund II may be deemed to
have a beneficial ownership interest in such shares. JLL Fund I and JLL
Fund II have disclaimed beneficial ownership of such shares.
(7) Includes 367 shares held by Mr. Rullo directly, 727 shares held in the name
of Rulco and 3,440 shares subject to currently exercisable options held by
Rulco. Does not include options to purchase 860 shares of Common Stock
subject to options held by Rulco that currently are not exercisable. By
virtue of the Stockholders' Agreement, JLL Fund I and JLL Fund II may be
deemed to have a beneficial ownership interest in such shares. JLL Fund I
and JLL Fund II have disclaimed beneficial ownership of such shares. See
'Certain Transactions.'
(8) Includes 285 shares of Common Stock held by Mr. Kirchner directly. Does not
include 400 shares of Series B Common Stock subject to options held by Mr.
Kirchner that are not currently exercisable.
(9) Includes 356 shares of Common Stock held by Mr. Kitchen directly. Does not
include 500 shares of Series B Common Stock subject to options held by Mr.
Kitchen that are not currently exercisable.
(10) Does not include 300 shares of Series B Common Stock subject to options
held by Dr. Wolf that are not currently exercisable.
(11) Does not include 2,250 shares of Series B Common Stock subject to options
held by such executive officers and directors that currently are not
exercisable.
58
<PAGE>
CERTAIN TRANSACTIONS
Set forth below is a summary of certain agreements and arrangements entered
into by the Company and related parties.
On September 9, 1993, Freedom loaned Rulco $200,000 to enable it to
purchase 300 shares of Common Stock and 170 shares of the Series B Preferred
Stock (collectively, the 'Pledged Stock'). Fred P. Rullo, Chairman of the Board
of Directors, Chief Executive Officer and President of Freedom, is the sole
shareholder of Rulco. All unpaid principal and interest is due and payable in
full on December 31, 1999. The loan bears interest at a rate per annum equal to
the highest rate payable by Freedom under the Freedom Credit Agreement.
Repayment of the loan is guaranteed by Mr. Rullo and is collateralized by the
Pledged Stock.
Effective December 7, 1994, JLL and The Freedom Group entered into an
agreement, (the '1994 Conditional Bonus Agreement') which terminated an
agreement in principle the parties had entered into in 1992 and amended and
restated the conditional bonus provided for in such agreement in principle. The
1994 Conditional Bonus Agreement provides that JLL will pay a bonus (a
'Conditional Bonus') to The Freedom Group out of the cash proceeds realized by
JLL in connection with the disposition of all or a portion of its investments in
Freedom, which cash proceeds are in excess of certain thresholds. On April 14,
1995, pursuant to the Assignments, The Freedom Group assigned to FIC, Rulco and
Donald W. McPhail, respectively, 57%, 38% and 5% interests in its rights under
the 1994 Conditional Bonus Agreement, including its interest in the Conditional
Bonus. Under GAAP as currently in effect, if JLL were to pay a Conditional Bonus
to such assignees, the payment of such bonus may be treated as a contribution to
the capital of Freedom by JLL and Freedom may have to recognize compensation
expense with respect to such bonus payment. If Freedom were required under GAAP
to accord a payment by JLL in this manner, Freedom would have to record a
non-cash charge to Freedom's earnings in the quarter such bonus is earned.
Effective December 7, 1994, Freedom entered into employment agreements with
each of Mr. Rullo (the 'Rullo Employment Agreement') and Mr. Sorgenti (the
'Sorgenti Employment Agreement' and, together with the Rullo Employment
Agreement, the '1994 Employment Agreements'). The terms of the Rullo Employment
Agreement and the Sorgenti Employment Agreement are substantially similar.
Pursuant to the Rullo Employment Agreement, Mr. Rullo served as President of
Freedom, and pursuant to the Sorgenti Employment Agreement, prior to his
resignation, Mr. Sorgenti served as the Executive Chairman of Freedom. The Rullo
Employment Agreement will be automatically extended for additional one year
terms unless either Freedom or Mr. Rullo elects not to extend the term. Under
the 1994 Employment Agreements, each of Mr. Sorgenti and Rullo were entitled to
an annual base salary of not less than $400,000, and subject to Freedom's
meeting certain performance criteria established by the Board of Directors or
the Compensation Committee, an annual bonus of up to 150% of the base salary.
On July 2, 1996, Mr. Sorgenti resigned from his position as Executive
Chairman of Freedom. Pursuant to the Sorgenti Employment Agreement, as a result
of Mr. Sorgenti's resignation, Freedom will pay to Mr. Sorgenti a severance
benefit in an aggregate amount of $962,558 in substantially equal monthly
installments over a period of two years. In addition, pursuant to the Amended
and Restated Option Agreements, 100% of the Sorgenti Shares (as such term is
defined in the Amended and Restated Option Agreements) became vested and
immediately exercisable; provided that The Freedom Group will have until July 2,
1997 to exercise such options and thereafter such options will expire. Also
pursuant to the Sorgenti Employment Agreement, Freedom will maintain health
benefits for Mr. Sorgenti until 18 months after the Sorgenti Resignation Date.
Upon termination of Mr. Rullo's employment with Freedom, (i) by Freedom
other than for Cause (as defined in the Rullo Employment Agreement), or (ii) by
Mr. Rullo for Good Reason (as defined in the Rullo Employment Agreement),
Freedom will pay to Mr. Rullo, in substantially equal monthly installments over
a period of two years an amount equal to the product of two multiplied by the
amount of the average of the annual compensation actually paid to Mr. Rullo with
respect to the three years immediately preceding the year in which such
termination of employment occurs. In addition, Freedom will continue to maintain
health benefits for Mr. Rullo, until the later of the end of the initial term of
the Rullo Employment Agreement and 18 months after the date of such termination.
The Rullo Employment Agreement also contains certain confidentiality,
noncompetition and non-disclosure provisions.
JLL does not receive any fees from Freedom. Freedom reimburses JLL for its
out-of-pocket expenses.
The JLL Funds and an executive officer of the Company made Cash Equity
Investments in the Company in an aggregate of $10 million (approximately $9.94
million and $60,000, respectively) concurrently with the consummation of the
offering of Old Notes. Freedom's other stockholders (principally current and
former management) have been offered an opportunity to make Additional Equity
Investments in the Company in an amount sufficient to maintain their existing
ownership percentages and, in most cases, will be offered loans by Freedom in
the amount of the purchase price. Such offer expires on November 2, 1996.
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DESCRIPTION OF AMENDED AND RESTATED CREDIT AGREEMENT
The Amended and Restated Credit Agreement provides for a revolving loan
facility of up to $85 million, which includes a $25 million letter of credit
sub-facility and a $5 million swing loan sub-facility. Up to $50 million of the
total facility is available for borrowings in German Deutschmarks, British
pounds sterling or French francs. Amounts outstanding under the Amended and
Restated Credit Agreement bear interest at Citicorp's published prime rate plus
1.5% per annum or, at Freedom's option, LIBOR plus 2.5% per annum, with each
such margin subject to adjustment based on the Company's compliance with various
debt ratios as specified in the Amended and Restated Credit Agreement (which
margins range from 0.5% to 1.5% for the prime-based rate, and 1.5% to 2.5% for
the LIBOR-based rate). Freedom is obligated to pay a fee equal to 0.5% of the
unused credit facilities and to pay standard letter of credit fees to issuing
banks. Borrowings under the Amended and Restated Credit Agreement are available
until, and will be repayable no later than, October 17, 2001.
The indebtedness outstanding under the Amended and Restated Credit
Agreement is guaranteed by all of Freedom's domestic subsidiaries (and by (i)
Freedom in respect of indebtedness incurred by Freedom Chemical Diamalt and (ii)
Freedom Chemical Diamalt in respect of indebtedness incurred by Freedom) and
secured by a first priority lien on substantially all of the properties and
assets, including present and future inventory, cash deposits, equipment,
accounts receivable and real property, of Freedom and its domestic subsidiaries
and certain of the properties and assets of Freedom Chemical Diamalt, in each
case now owned or acquired later, including a pledge of all of the shares of
Freedom's respective existing and future domestic subsidiaries and up to 65% of
the shares of Freedom's existing and future foreign subsidiaries which are owned
by Freedom or one of its domestic subsidiaries.
The Amended and Restated Credit Agreement contains various covenants which
restrict Freedom and its subsidiaries with respect to, among other things,
incurring other indebtedness, entering into merger or consolidation
transactions, disposing of their assets (other than in the ordinary course of
business), acquiring assets (with permitted exceptions), making certain
restricted payments, repaying the Notes, creating any liens on Freedom's assets,
making investments, creating guarantee obligations, and entering into sale and
leaseback transactions and transactions with affiliates. The Amended and
Restated Credit Agreement also requires that Freedom comply with various
financial covenants, including a leverage ratio, a minimum fixed charge coverage
ratio, a maximum capital expenditure test and a minimum interest coverage ratio.
The Amended and Restated Credit Agreement also contains events of default
similar to those contained in the Freedom Credit Agreement, including default
upon the nonpayment of principal, interest, fees or other amounts, the
occurrence of a change of control, a cross default with respect to other
obligations of Freedom and its subsidiaries, failure to comply with certain
covenants, conditions or provisions under the Amended and Restated Credit
Agreement, the existence of certain unstayed or undischarged judgments, the
invalidity or unenforceability of the relevant security documents, the making of
materially false or misleading representations or warranties, commencement of
reorganization, bankruptcy, insolvency or similar proceedings or the occurrence
of certain ERISA events. Upon the occurrence and during the continuance of an
event of default under the Amended and Restated Credit Agreement, the agent may
declare all obligations thereunder to be immediately due and payable.
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DESCRIPTION OF THE NOTES
GENERAL
The New Notes offered hereby will be issued under an Indenture (the
'Indenture'), dated as of October 15, 1996, by and among the Company, the
Guarantors and The Bank of New York, as trustee (the 'Trustee'). The following
is a summary of the material provisions of the Indenture. This summary does not
purport to be complete and is subject to the detailed provisions of, and is
qualified in its entirety by reference to, the Trust Indenture Act of 1939, as
amended (the 'Trust Indenture Act'), the Notes and the Indenture, including the
definitions of certain terms contained therein and including those terms made
part of the Indenture by reference to the Trust Indenture Act. A copy of the
Indenture is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. The definitions of certain terms used in the following
summary are set forth below under '--Certain Definitions.' Reference is made to
the Indenture for the full definition of all such terms, as well as any other
capitalized terms used herein for which no definition is provided.
MATURITY AND INTEREST
The New Notes will be unsecured senior subordinated obligations of the
Company limited in aggregate principal amount to $125,000,000. The New Notes
will mature on October 15, 2006. Interest on the New Notes will accrue at the
rate of 10 5/8% per annum and will be payable semi-annually in arrears on April
15 and October 15 in each year, commencing on April 15, 1997, to holders of
record on the immediately preceding April 1 and October 1, respectively.
Interest on the New Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from October 17, 1996
(the 'Issue Date'). Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
of Old Notes whose Old Notes are accepted for exchange will not receive any
payment in respect of interest on such Old Notes otherwise payable on any
interest payment date the record date for which occurs on or after the
consummation of the Exchange Offer. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
The Trustee will authenticate and deliver from time to time New Notes for
original issue only in exchange for a like principal amount of Old Notes.
Principal of, premium, if any, and interest on the New Notes will be
payable at the office or agency of the Company maintained for such purpose in
The City of New York or, at the option of the Company, payment of interest may
be made by check mailed to the holders of the New Notes at their respective
addresses as set forth in the register of holders of New Notes. Until otherwise
designated by the Company, the Company's office or agency in The City of New
York will be the office of the Trustee maintained for such purpose. The New
Notes will be issued in fully registered form, without coupons, and in
denominations of $1,000 and integral multiples thereof. No service charge will
be made for any transfer, exchange or redemption of New Notes, except in certain
circumstances for any tax or other governmental charge that may be imposed in
connection therewith.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Notes.
All Old Notes and New Notes will be treated as a single class of securities
under the Indenture.
THE GUARANTEES
The Notes are guaranteed on a senior subordinated basis by each of the
Guarantors. Each of the Guarantors (subject to the third sentence of the next
paragraph with respect to Freedom Chemical Diamalt) has fully and
unconditionally guaranteed (each, a 'Guarantee') on a joint and several basis
all of the Company's obligations under the Notes and the Indenture, including
its obligations to pay principal, premium, if any, and interest with respect to
the Notes. The Guarantees are subordinated to all existing and future Senior
Debt of the respective Guarantors, including such Guarantor's guarantees of the
Company's obligations under the Amended and Restated Credit Agreement. Except as
provided in '--Certain Covenants' below, the Company is not restricted from
selling or otherwise disposing of any of the Guarantors.
Pursuant to the Guarantees, if the Company defaults in payment of any
amount owing in respect of any Notes, each Guarantor is obligated to duly and
punctually pay the same. Pursuant to the terms of the Indenture, each of the
Guarantors has agreed that its obligations under its Guarantee are
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or the Indenture, the absence of any action to enforce the same or any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a Guarantor. Notwithstanding the foregoing, in the event
that the articles of incorporation of Freedom Chemical
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Diamalt are amended with the result that Freedom Chemical Diamalt becomes
classified as a controlled foreign corporation under U.S. federal tax law, at
the option of the Company, upon written notice to the Trustee, the Guarantee of
Freedom Chemical Diamalt may be amended to eliminate the guarantee of Freedom
Chemical Diamalt in the form existing on the Issue Date and to provide instead
for the full and unconditional guarantee by Freedom Chemical Diamalt of the
obligations of the other Guarantors under their respective Guarantees. In
addition, notwithstanding the foregoing, each Guarantor's liability under its
Guarantee is limited to the maximum amount that would not result in such
Guarantor's Guarantee constituting a fraudulent conveyance or fraudulent
transfer under applicable law and, in the case of Freedom Chemical Diamalt, the
liability of such Guarantor is limited at any time to the maximum amount that
would not result in a depletion of such Guarantor's stated share capital.
If no Default exists or would exist under the Indenture, concurrently with
any sale or disposition (by merger or otherwise) of any Guarantor (other than a
transaction subject to the provisions described under '--Merger, Consolidation
and Sale of Assets') by the Company or a Restricted Subsidiary to any person or
entity that is not a Subsidiary of the Company which transaction is in
compliance with the terms of the Indenture, such Guarantor will automatically
and unconditionally be released from all obligations under its Guarantee.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on, the
Notes is subordinated, as set forth in the Indenture, in right of payment to the
prior payment in full, in cash, of all existing and future Senior Debt
(including the indebtedness under the Amended and Restated Credit Agreement).
The Notes are senior subordinated indebtedness of the Company ranking pari passu
with all other existing and future senior subordinated indebtedness of the
Company.
Upon any payment or distribution of cash, securities or other property of
the Company to creditors upon any liquidation, dissolution or winding up of the
Company, or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property or securities, the holders of
any Senior Debt of the Company will be entitled to receive payment in full, in
cash, of all Obligations due in respect of such Senior Debt (including interest
after the commencement of any such proceeding at the rate specified in the
agreements governing such Senior Debt) before the holders of the Notes will be
entitled to receive any payment or distribution with respect to the Notes.
The Company also may not make any payment upon or in respect of the Notes
if (i) a default in the payment of the principal of, premium, if any, or
interest on any Designated Senior Debt occurs and is continuing, whether at
maturity or on a date fixed for prepayment or by declaration of acceleration or
otherwise, or (ii) the Trustee has received written notice ('Payment Blockage
Notice') from the representative of any holders of Designated Senior Debt that a
nonpayment default has occurred and is continuing with respect to such
Designated Senior Debt that permits such holders to accelerate the maturity of
such Designated Senior Debt. Payments on the Notes shall resume (and all past
due amounts on the Notes, with interest thereon as specified in the Indenture,
shall be paid) (i) in the case of a payment default in respect of any Designated
Senior Debt, on the date on which such default is cured or waived or otherwise
ceases to exist; and (ii) in the case of a nonpayment default in respect of any
Designated Senior Debt, on the earlier of (a) the date on which such nonpayment
default is cured or waived, or (b) 179 days after the date on which the Payment
Blockage Notice with respect to such default was received by the Trustee, in
each case, unless the maturity of any Designated Senior Debt has been
accelerated and the Company has defaulted with respect to the payment of such
Designated Senior Debt, or (c) the date on which such Payment Blockage Period
(as defined below) shall have been terminated by written notice to the Company
or the Trustee from the representative of the holders of Designated Senior Debt
initiating such Payment Blockage Period. During any consecutive 365-day period,
the aggregate number of days in which payments due on the Notes may not be made
as a result of nonpayment defaults on Designated Senior Debt (a 'Payment
Blockage Period') shall not exceed 179 days, and there shall be a period of at
least 186 consecutive days in each consecutive 365-day period when such payments
are not prohibited. No event or circumstance that creates a default under any
Designated Senior Debt that (i) gives rise to the commencement of a Payment
Blockage Period or (ii) exists at the commencement of or during any Payment
Blockage Period shall be made the basis for the commencement of any subsequent
Payment Blockage Period unless such default has been cured or waived for a
period of not less than 90 consecutive days following the commencement of the
initial Payment Blockage Period.
As a result of the subordination provisions described above, in the event
of liquidation or insolvency, holders of Notes may recover less ratably than
creditors holding Senior Debt of the Company. In such
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circumstances, funds which would otherwise be payable to the holders of the
Notes will be paid to the holders of the Senior Debt to the extent necessary to
pay the Senior Debt in full in cash, and the Company may be unable to meet its
obligations fully with respect to the Notes.
If the Company fails to make any payment on the Notes when due or within
any applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of Default
under the Indenture and would enable the holders of the Notes to accelerate the
maturity thereof. See '--Events of Default.'
As of June 30, 1996, on a pro forma basis after giving effect to the
offering of the Old Notes, initial borrowings under the Amended and Restated
Credit Agreement and the Cash Equity Investment and the application of the
proceeds therefrom, there would have been outstanding approximately $21.5
million of Senior Debt of the Company, including Indebtedness under the Amended
and Restated Credit Agreement.
REDEMPTION
Mandatory Redemption. The Notes are not subject to any mandatory sinking
fund redemption prior to maturity.
Optional Redemption. The Notes are redeemable at the option of the
Company, in whole or in part, at any time on or after October 15, 2001 at the
redemption prices (expressed as percentages of the principal amount of the
Notes) set forth below plus in each case accrued and unpaid interest, if any, to
the date of redemption, if redeemed during the twelve-month period beginning on
October 15, of the years indicated below.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------- ----------
<S> <C>
2001.......................................................... 105.312%
2002.......................................................... 103.541%
2003.......................................................... 101.771%
2004 and thereafter........................................... 100.000%
</TABLE>
In addition, at any time on or prior to October 15, 1999, the Company may,
at its option, redeem up to 35% of the aggregate principal amount of Notes
originally issued with the net cash proceeds of one or more Public Equity
Offerings (as defined below), at 109.625% of the aggregate principal amount
thereof plus accrued and unpaid interest, if any, to the date of redemption;
provided, however, that not less than $81.25 million principal amount of the
Notes is outstanding immediately after giving effect to such redemption (other
than any Notes owned by the Company or any of its Affiliates) and such
redemption is effected within 60 days of such issuance or investment.
As used in the preceding paragraph, a 'Public Equity Offering' means an
underwritten public offering of Capital Stock (other than Disqualified Stock) of
the Company pursuant to an effective registration statement filed under the
Securities Act which public equity offering results in gross proceeds to the
Company of not less than $35.0 million.
In addition, at any time on or prior to October 15, 2001, upon the
occurrence of a Change of Control, the Company may, at its option, redeem all
but not less than all of the Notes, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium plus accrued and unpaid
interest, if any, to the date of redemption. Notice of redemption of the Notes
pursuant to this paragraph shall be mailed to holders of the Notes not more than
60 days and not less than 30 days following the occurrence of a Change of
Control.
Selection and Notice. If less than all of the Notes are to be redeemed at
any time, selection of the Notes to be redeemed will be made by the Company in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not listed on a
securities exchange, on a pro rata basis or by lot or any other method as the
Trustee shall deem fair and appropriate; provided, that Notes redeemed in part
shall only be redeemed in integral multiples of $1,000; provided, further, that
any such redemption pursuant to the provisions relating to a Public Equity
Offering shall be made on a pro rata basis or on as nearly a pro rata basis as
practicable (subject to the procedures of The Depository Trust Company or any
other Depository). Notices of any optional or mandatory redemption shall be
mailed by first class mail at least 30 but not more than 60 days before the
redemption date to each holder of Notes to be redeemed at such holder's
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed, and the Trustee shall authenticate and mail to
the holder of the original Note a new Note in principal amount equal to the
unredeemed portion of the original Note promptly after the original Note has
been canceled. On and after the redemption date, interest will cease to accrue
on Notes or portions thereof called for redemption.
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CHANGE OF CONTROL
In the event of a Change of Control, each holder of Notes will have the
right, unless the Company has given a notice of redemption, subject to the terms
and conditions of the Indenture, to require the Company to offer to purchase all
or any portion (equal to $1,000 or an integral multiple thereof) of such
holder's Notes at a purchase price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase, in accordance with the terms set forth below (a 'Change of Control
Offer').
The Amended and Restated Credit Agreement prohibits the Company from
purchasing any Notes pursuant to a Change of Control Offer prior to repayment in
full of the indebtedness under the Amended and Restated Credit Agreement. Any
additional credit agreements or other agreements relating to unsubordinated
indebtedness to which the Company becomes a party may contain similar
restrictions and provisions. Moreover, the Amended and Restated Credit Agreement
contains a 'change of control' provision that is similar to the provision in the
Indenture relating to a Change of Control, and the occurrence of such a 'change
of control' would constitute a default under the Amended and Restated Credit
Agreement. The Company's obligations under the Amended and Restated Credit
Agreement represent obligations senior in right of payment to the Notes and the
Amended and Restated Credit Agreement will not permit the purchase of the Notes
absent consent of the lenders thereunder in the event of a Change of Control
(although the failure by the Company to comply with its obligations in the event
of a Change of Control would constitute a Default under the Notes).
If the Company is unable to obtain the requisite consents and/or repay all
indebtedness which prohibits the repurchase of the Notes upon the occurrence of
a Change of Control, the Company would remain prohibited by such indebtedness
from purchasing any Notes and, as a result, the Company could not commence a
Change of Control Offer to purchase the Notes within 30 days of the occurrence
of the Change of Control, which would constitute an Event of Default under the
Indenture. The Company's failure to commence such a Change of Control Offer
would also constitute an event of default under the Amended and Restated Credit
Agreement which would permit the lenders thereunder to accelerate all of the
Company's indebtedness under the Amended and Restated Credit Agreement. If a
Change of Control were to occur, there can be no assurance that the Company
would have sufficient assets to first satisfy its obligations under the Amended
and Restated Credit Agreement or other agreements relating to indebtedness, if
accelerated, and then to purchase all of the Notes that might be delivered by
holders seeking to accept a Change of Control Offer.
On or before the 30th day following the occurrence of any Change of
Control, the Company shall mail to each holder of Notes at such holder's
registered address a notice stating: (i) that a Change of Control has occurred
and that such holder has the right to require the Company to purchase all or a
portion (equal to $1,000 or an integral multiple thereof) of such holder's Notes
at a purchase price in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase (the
'Change of Control Purchase Date'), which shall be a business day, specified in
such notice, that is not earlier than 30 days or later than 60 days from the
date such notice is mailed, (ii) the amount of accrued and unpaid interest, if
any, as of the Change of Control Purchase Date, (iii) that any Note not tendered
will continue to accrue interest, (iv) that, unless the Company defaults in the
payment of the purchase price for the Notes payable pursuant to the Change of
Control Offer, any Notes accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control Purchase Date,
(v) the procedures, consistent with the Indenture, to be followed by a holder of
Notes in order to accept a Change of Control Offer or to withdraw such
acceptance, and (vi) such other information as may be required by the Indenture
and applicable laws and regulations.
On the Change of Control Purchase Date, the Company will (i) accept for
payment all Notes or portions thereof tendered pursuant to the Change of Control
Offer, (ii) deposit with the Paying Agent the aggregate purchase price of all
Notes or portions thereof accepted for payment and any accrued interest on such
Notes as of the Change of Control Purchase Date, and (iii) deliver or cause to
be delivered to the Trustee all Notes tendered pursuant to the Change of Control
Offer. The Paying Agent shall promptly mail to each holder of Notes or portions
thereof accepted for payment an amount equal to the purchase price for such
Notes plus accrued and unpaid interest, if any, thereon, and the Trustee shall
promptly authenticate and mail to each holder of Notes accepted for payment in
part a new Note equal in principal amount to any unpurchased portion of the
Notes, and any Note not accepted for payment in whole or in part shall be
promptly returned to the holder of such Note. On and after a Change of Control
Purchase Date, interest will cease to accrue on the Notes or portions thereof
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accepted for payment, unless the Company defaults in the payment of the purchase
price therefor. The Company will announce the results of the Change of Control
Offer to holders of the Notes on or as soon as practicable after the Change of
Control Purchase Date.
The Company will comply with the applicable tender offer rules, including
the requirements of Section 14(e) and Rule 14e-1 under the Exchange Act, and all
other applicable securities laws and regulations in connection with any Change
of Control Offer and will be deemed not to be in violation of any of the
covenants under the Indenture to the extent such compliance is in conflict with
such covenants.
CERTAIN COVENANTS
Limitation on Incurrence of Indebtedness. The Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary to, create,
incur, assume or directly or indirectly guarantee or in any other manner become
directly or indirectly liable for ('incur') any Indebtedness (including Acquired
Debt), except that the Company and any Guarantor may incur Indebtedness if, at
the time of, and immediately after giving pro forma effect to, such incurrence
of Indebtedness, the Consolidated Cash Flow Coverage Ratio of the Company for
the most recently ended four fiscal quarters for which financial statements are
available would be at least 2.0 to 1.0 until October 15, 1999 and 2.25 to 1.0
thereafter.
The foregoing limitations will not apply to the incurrence of any of the
following (collectively, 'Permitted Indebtedness'), each of which shall be given
independent effect:
(i) Indebtedness of the Company and the Guarantors arising under the
Amended and Restated Credit Agreement not to exceed in outstanding
principal amount the greater of (a) $90.0 million at any time outstanding
or (b) the sum of (x) 80% of the consolidated book value of the net
accounts receivable of the Person Incurring such Indebtedness and its
Restricted Subsidiaries and (y) 50% of the consolidated book value of the
inventory of the Person Incurring such Indebtedness and its Restricted
Subsidiaries, in each case determined in accordance with GAAP;
(ii) Indebtedness of the Company and the Guarantors represented by the
Notes and the Guarantees;
(iii) Indebtedness of the Company and the Guarantors represented by
the Exchange Notes;
(iv) Indebtedness of the Company or any Restricted Subsidiaries which
is outstanding on the Issue Date ('Existing Indebtedness');
(v) Indebtedness owed by any Restricted Subsidiary to the Company or
to another Restricted Subsidiary, or owed by the Company to any Restricted
Subsidiary; provided, however, that any such Indebtedness shall be at all
times held by a Person which is either the Company or a Restricted
Subsidiary of the Company (provided that such Indebtedness may be pledged
or otherwise assigned to the holders of Senior Bank Debt); provided,
further, however, that upon either (a) the transfer or other disposition of
any such Indebtedness to a Person other than the Company or another
Restricted Subsidiary or (b) the sale, lease, transfer or other disposition
of shares of Capital Stock (including by consolidation or merger) of any
such Restricted Subsidiary to a Person other than the Company or another
Restricted Subsidiary, the incurrence of such Indebtedness shall be deemed
to be an incurrence that is not permitted by this clause (v);
(vi) Indebtedness of the Company or any Restricted Subsidiary arising
with respect to Interest Rate Agreement Obligations and Currency Agreement
Obligations incurred for the purpose of fixing or hedging interest rate
risk or currency risk with respect to any fixed or floating rate
Indebtedness that is permitted by the terms of the Indenture to be
outstanding or any receivable or liability the payment of which is
determined by reference to a foreign currency; provided in no event shall
any Restricted Subsidiary incur Indebtedness under any Interest Rate
Agreement Obligations or any Currency Agreement Obligations under this
clause (vi) relating to Indebtedness or obligations of the Company;
(vii) Indebtedness represented by performance, completion, guarantee,
surety and similar bonds provided by the Company or any Restricted
Subsidiary in the ordinary course of business consistent with past
practice;
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(viii) Any Indebtedness incurred in connection with or given in
exchange for the renewal, extension, substitution, refunding, defeasance,
refinancing or replacement (a 'refinancing') of any Existing Indebtedness
or any Indebtedness described in clauses (ii) and (iii) above or any
Indebtedness issued after the Issue Date and not incurred in violation of
the Indenture ('Refinancing Indebtedness'); provided, however, that (a) the
principal amount of such Refinancing Indebtedness shall not exceed the
principal amount (or accrued amount, if less) of the Indebtedness so
refinanced (plus the premiums paid in connection therewith and the
reasonable expenses incurred in connection therewith); (b) with respect to
Refinancing Indebtedness of any Indebtedness other than Senior Debt, if the
Weighted Average Life to Maturity of the Indebtedness being refinanced is
equal to or greater than the Weighted Average Life to Maturity of the Notes
the Refinancing Indebtedness shall have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the
Notes; (c) with respect to Refinancing Indebtedness other than Senior Debt
incurred by the Company, such Refinancing Indebtedness shall rank no more
senior than, and shall be at least as subordinated in right of payment to
the Notes as, the Indebtedness being refinanced; and (d) the obligor on
such Refinancing Indebtedness shall be the obligor on the Indebtedness
being refinanced or the Company;
(ix) Indebtedness of the Company or any Restricted Subsidiary (a)
representing Capitalized Lease Obligations and (b) in respect of Purchase
Money Obligations for property acquired in the ordinary course of business,
which taken together do not exceed $10.0 million in aggregate amount at any
time outstanding;
(x) Indebtedness of Foreign Subsidiaries of the Company not to exceed
a principal amount outstanding at any time of $20.0 million in the
aggregate for all Foreign Subsidiaries, to be used for working capital,
capital expenditures, joint ventures, acquisitions and other general
corporate purposes; and
(xi) Indebtedness (including Acquired Debt) of the Company or any
Restricted Subsidiary in addition to that described in clauses (i) through
(x) above, and any renewals, extensions, substitutions, refinancings or
replacements of such Indebtedness, so long as the aggregate principal
amount of all such Indebtedness incurred pursuant to this clause (xi) does
not exceed $10.0 million at any one time outstanding.
For purposes of determining any particular amount of Indebtedness under
this 'Limitation on Incurrence of Indebtedness' covenant, Guarantees, Liens or
obligations with respect to letters of credit supporting Indebtedness otherwise
included in the determination of such particular amount shall not be included.
For purposes of determining compliance with this 'Limitation on Indebtedness'
covenant, in the event that an item of Indebtedness meets the criteria of more
than one of the types of Indebtedness described in the definition of Permitted
Indebtedness or is entitled to be Incurred pursuant to the first paragraph of
this 'Limitation on Incurrence of Indebtedness' covenant, the Company, in its
sole discretion, shall classify such item of Indebtedness and only be required
to include the amount and type of such Indebtedness in one of such clauses or
pursuant to the first paragraph hereof.
Indebtedness of any Person which is outstanding at the time such Person
becomes a Restricted Subsidiary or is merged with or into or consolidated with
the Company or a Restricted Subsidiary shall be deemed to have been incurred at
the time such Person becomes a Restricted Subsidiary or is merged with or into
or consolidated with the Company or a Restricted Subsidiary, and Indebtedness
which is assumed at the time of the acquisition of any asset shall be deemed to
have been incurred at the time of such acquisition.
Limitation on Restricted Payments. The Indenture provides that the Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, make any Restricted Payment, unless at the time of and immediately
after giving effect to the proposed Restricted Payment (with the value of any
such Restricted Payment, if other than cash, to be determined reasonably and in
good faith by the Board of Directors of the Company), (i) no Default or Event of
Default shall have occurred and be continuing or would occur as a consequence
thereof, (ii) the Company could incur at least $1.00 of additional Indebtedness
pursuant to the first paragraph under '--Limitation on Incurrence of
Indebtedness' and (iii) the aggregate amount of all Restricted Payments made
after the Issue Date shall not exceed the sum of (a) an amount equal to 50% of
the Company's aggregate cumulative Consolidated Net Income accrued on a
cumulative basis during the period (treated as one accounting period) beginning
on October 1, 1996 and ending on the last day of the fiscal quarter of the
Company immediately preceding the date of such proposed Restricted Payment (or,
if such aggregate cumulative Consolidated Net Income for such period shall be a
deficit, minus 100% of such deficit), plus (b) the aggregate
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amount of all net cash proceeds (other than proceeds from the Cash Equity
Investment) received since the Issue Date by the Company from (x) the issuance
and sale (other than to a Restricted Subsidiary) of Capital Stock (other than
Disqualified Stock), (y) the issuance to a Person who is not a Subsidiary of the
Company of any options, warrants or other rights to acquire Capital Stock of the
Company (in each case, exclusive of any Disqualified Stock or any options,
warrants or other rights that are redeemable at the option of the holder, or are
required to be redeemed, prior to the Stated Maturity of the Notes) and (z) the
issuance and sale by the Company after the Issue Date of Disqualified Stock or
debt securities that have been converted into or exchanged for Capital Stock of
the Company (other than Disqualified Stock), in each case to the extent that
such proceeds are not used to redeem, repurchase, retire or otherwise acquire
Capital Stock or any Indebtedness of the Company or make any Restricted
Investment, pursuant to clauses (ii) or (iv) of the next paragraph, plus (c) the
amount of the net reduction in Investments by the Company in Unrestricted
Subsidiaries resulting from (x) the payment of dividends or the repayment in
cash of the principal of loans or the cash return on any Investment, in each
case to the extent received by the Company or any Restricted Subsidiary of the
Company from Unrestricted Subsidiaries, (y) the release or extinguishment of any
guarantee of Indebtedness of any Unrestricted Subsidiary, and (z) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries of the
Company (valued as provided in the definition of 'Investment'), such aggregate
amount of the net reduction in Investments not to exceed in the case of any
Unrestricted Subsidiaries the amount of Restricted Investments previously made
by the Company or any Restricted Subsidiary of the Company in such Unrestricted
Subsidiary, which amount was included in the calculation of the amount of
Restricted Payments, plus (d) to the extent that any Restricted Investment that
was made after the Issue Date is sold for cash or otherwise liquidated or repaid
for cash, the amount of cash proceeds received with respect to such Restricted
Investment, net of taxes and the cost of disposition, not to exceed the amount
of Restricted Investments made after the Issue Date. For purposes of this
covenant, the aggregate amount of Restricted Investments made by the Company and
its Restricted Subsidiaries after the date of the Indenture shall equal the
aggregate gross amount of such Restricted Investments, less reductions in
connection with the write-down of any portion of such Restricted Investments to
the extent deducted from the Consolidated Net Income of the Company.
The foregoing provisions do not prohibit, so long as there is no Default or
Event of Default continuing, the following actions (collectively, 'Permitted
Payments'):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such declaration date such payment would have
been permitted under the Indenture and such payment shall be deemed to have
been paid on such date of declaration for purposes of clause (iii) of the
preceding paragraph;
(ii) the redemption, repurchase, retirement or other acquisition of
any Capital Stock or any Indebtedness of the Company that is subordinated
in right of payment to the Notes in exchange for, or out of the proceeds
of, the substantially concurrent sale (other than to a Restricted
Subsidiary) of Capital Stock of the Company (other than any Disqualified
Stock);
(iii) any purchase or defeasance of Subordinated Indebtedness to the
extent required upon a Change of Control or Asset Sale (as defined therein)
by the Indenture or other agreement or instrument pursuant to which such
Subordinated Indebtedness was issued, but only if the Company (x) in the
case of a Change of Control, has complied with its obligations under the
provisions described under the covenant entitled 'Change of Control' or (y)
in the case of an Asset Sale has applied the Net Cash Proceeds from such
Asset Sale in accordance with the provisions under the covenant entitled
'Limitation on Asset Sales;'
(iv) any Restricted Investment made with the proceeds of the
substantially concurrent sale of Capital Stock (other than Disqualified
Stock);
(v) Restricted Investments in an amount such that the sum of the
aggregate amount of Restricted Investments made pursuant to this clause (v)
after the Issue Date and outstanding (net of any returns in cash thereof or
cash received in liquidation or on disposition thereof) made pursuant to
this clause (v) does not exceed at any time $15.0 million;
(vi) the repurchase of Capital Stock of the Company (including
options, warrants or other rights to acquire such Capital Stock) from
departing or deceased directors, officers or employees of the Company or
its Subsidiaries pursuant to the terms of an employee benefit plan or
employee agreement; provided that an
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aggregate amount of all such repurchases shall not exceed $1.5 million in
any fiscal year, provided that the Company may carry forward up to $1.0
million of the unused portion in any fiscal year to the next fiscal year,
and provided, further, that such payments shall not exceed $2.5 million per
annum in any subsequent fiscal year;
(vii) the payment of cash dividends required to be made on the Series
A Redeemable Preferred Stock outstanding as of the Issue Date and the
repurchase or redemption of such stock at a price not to exceed 100% of
liquidation value plus accrued dividends; and
(viii) Restricted Payments (other than a dividend or other
distribution declared on any Capital Stock of the Company or a payment to
purchase, redeem or otherwise acquire or retire for value any Capital Stock
of the Company) not to exceed $2.5 million in the aggregate.
For purposes of clause (iii) of the first paragraph of this covenant,
Permitted Payments made pursuant to clauses (i), (v), (vi) and (vii) (only with
respect to cash dividends paid with respect to Series A Redeemable Preferred
Stock) of the immediately preceding paragraph shall be included (with respect to
clause (i), as of the date of declaration) as Restricted Payments made since the
Issue Date.
Limitation on Asset Sales. The Indenture provides that the Company will
not, and will not permit any Restricted Subsidiary to, make any Asset Sale
unless (i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the fair
market value of the assets or other property sold or disposed of in the Asset
Sale and (ii) at least 75% of such consideration consists of either cash or Cash
Equivalents; provided, however, that, at the option of the Company, clause (ii)
shall not be applicable to Asset Sales (or portions of Asset Sales) that, in the
aggregate from the Issue Date, do not involve assets representing less than 5%
of the Consolidated Total Assets of the Company as of the last fiscal quarter
prior to the execution of the agreement for such Asset Sale. For purposes of
this covenant (x) 'cash' shall include the amount of any Indebtedness (other
than any Indebtedness that is by its terms subordinated to the Notes) of the
Company or such Restricted Subsidiary as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet or in the notes thereto that
is assumed by the transferee of any such assets or other property in such Asset
Sale or is no longer the liability of the Company or any Restricted Subsidiary
(and excluding any liabilities that are incurred in connection with or in
anticipation of such Asset Sale), but only to the extent that such assumption is
effected on a basis under which there is no further recourse to the Company or
any of the Restricted Subsidiaries with respect to such liabilities, and (y) any
securities, notes or other obligations received by the Company or any such
Restricted Subsidiary in connection with such Asset Sale that are converted by
the Company or such Restricted Subsidiary into cash within 60 days of receipt
shall be deemed to be cash for purposes of this provision.
Within 365 days after any Asset Sale, the Company may elect to apply the
Net Proceeds from such Asset Sale to (a) permanently reduce any Senior Debt of
the Company and/or (b) make an investment in, or acquire assets and properties
that will be used in the business of the Company and the Restricted Subsidiaries
existing on the Issue Date or in businesses reasonably related thereto. Pending
the final application of any such Net Proceeds, the Company may temporarily
reduce Indebtedness or temporarily invest such Net Proceeds in cash or Cash
Equivalents. Any Net Proceeds from an Asset Sale not applied or invested as
provided in the first sentence of this paragraph within 365 days of such Asset
Sale will be deemed to constitute 'Excess Proceeds.'
Each date that the aggregate amount of Excess Proceeds in respect of which
an Asset Sale Offer has not been made exceeds $10.0 million shall be deemed an
'Asset Sale Offer Trigger Date.' As soon as practicable, but in no event later
than 20 business days after each Asset Sale Offer Trigger Date, the Company
shall commence an offer (an 'Asset Sale Offer') to purchase the maximum
principal amount of Notes and other Indebtedness of the Company that ranks pari
passu in right of payment with the Notes (to the extent required by the
instrument governing such other Indebtedness) that may be purchased out of the
Excess Proceeds. Any Notes and other Indebtedness to be purchased pursuant to an
Asset Sale Offer shall be purchased pro rata based on the aggregate principal
amount of Notes and all such other Indebtedness outstanding, and all Notes shall
be purchased at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase. To the extent that any Excess Proceeds remain after completion of
an Asset Sale Offer, the Company may use the remaining amount for general
corporate purposes otherwise
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permitted by the Indenture. Upon the consummation of any Asset Sale Offer, the
amount of Excess Proceeds shall be deemed to be reset to zero.
Notice of an Asset Sale Offer shall be mailed by the Company not later than
the 20th business day after the related Asset Sale Offer Trigger Date to each
holder of Notes at such holder's registered address, stating: (i) that an Asset
Sale Offer Trigger Date has occurred and that the Company is offering to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds (to the extent provided in the immediately preceding paragraph),
at an offer price in cash in an amount equal to 100% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of the purchase
(the 'Asset Sale Offer Purchase Date'), which shall be a business day, specified
in such notice, that is not earlier than 30 days or later than 60 days from the
date such notice is mailed, (ii) the amount of accrued and unpaid interest, if
any, as of the Asset Sale Offer Purchase Date, (iii) that any Note not tendered
will continue to accrue interest, (iv) that, unless the Company defaults in the
payment of the purchase price for the Notes payable pursuant to the Asset Sale
Offer, any Notes accepted for payment pursuant to the Asset Sale Offer shall
cease to accrue interest after the Asset Sale Offer Purchase Date, (v) the
procedures, consistent with the Indenture, to be followed by a holder of Notes
in order to accept an Asset Sale Offer or to withdraw such acceptance, and (vi)
such other information as may be required by the Indenture and applicable laws
and regulations.
On the Asset Sale Offer Purchase Date, the Company will (i) accept for
payment the maximum principal amount of Notes or portions thereof tendered
pursuant to the Asset Sale Offer that can be purchased out of Excess Proceeds
from such Asset Sale that are to be applied to an Asset Sale Offer (to the
extent provided in the second preceding paragraph), (ii) deposit with the Paying
Agent an amount in cash equal to the aggregate purchase price of all Notes or
portions thereof accepted for payment and any accrued and unpaid interest, if
any, on such Notes as of the Asset Sale Offer Purchase Date, and (iii) deliver
or cause to be delivered to the Trustee all Notes tendered pursuant to the Asset
Sale Offer. If less than all Notes tendered pursuant to the Asset Sale Offer are
accepted for payment by the Company for any reason consistent with the
Indenture, selection of the Notes to be purchased by the Company shall be in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
pro rata basis or by lot; provided, however, that Notes accepted for payment in
part shall only be purchased in integral multiples of $1,000. The Paying Agent
shall promptly mail to each holder of Notes or portions thereof accepted for
payment an amount in cash equal to the purchase price for such Notes plus
accrued and unpaid interest, if any, thereon, and the Trustee shall promptly
authenticate and mail to such holder of Notes accepted for payment in part a new
Note equal in principal amount to any unpurchased portion of the Notes, and any
Note not accepted for payment in whole or in part shall be promptly returned to
the holder of such Note. On and after an Asset Sale Offer Purchase Date,
interest will cease to accrue on the Notes or portions thereof accepted for
payment, unless the Company defaults in the payment of the purchase price
therefor. The Company will announce the results of the Asset Sale Offer to
holders of the Notes on or as soon as practicable after the Asset Sale Offer
Purchase Date.
The Company will comply with the applicable tender offer rules, including
the requirements of Section 14(e) and Rule 14e-1 under the Exchange Act, and all
other applicable securities laws and regulations in connection with any Asset
Sale Offer and will be deemed not to be in violation of any of the covenants
under the Indenture to the extent such compliance is in conflict with such
covenants.
Limitation on Liens. The Indenture provides that the Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, create,
incur, assume or suffer to exist any Lien securing Indebtedness that is pari
passu with or subordinated in right of payment to the Notes (other than
Permitted Liens) on any asset now owned or hereafter acquired, or any income or
profits therefrom, or assign or convey any right to receive income therefrom to
secure any such Indebtedness, unless the Notes are equally and ratably secured
thereby.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides that the Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to (i) pay dividends or
make any other distributions to the Company or any other Restricted Subsidiary
on its Capital Stock or with respect to any other interest or participation in,
or measured by, its profits, or pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (ii) make loans or advances to the Company or any
other Restricted Subsidiary or (iii) transfer any of its properties or assets to
the
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Company or any other Restricted Subsidiary, except for such encumbrances or
restrictions existing under or by reason of (a) the Amended and Restated Credit
Agreement or any other Indebtedness as in effect on the Issue Date, and any
amendments, restatements, renewals, replacements or refinancings thereof;
provided, however, that such amendments, restatements, renewals, replacements or
refinancings are no more restrictive with respect to such dividend and other
payment restrictions than those contained in the Amended and Restated Credit
Agreement or such other Indebtedness (or, if more restrictive, than those
contained in the Indenture) immediately prior to any such amendment,
restatement, renewal, replacement or refinancing, (b) applicable law, (c) any
instrument governing Indebtedness or Capital Stock of an Acquired Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition); provided,
however, that such restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Acquired Person, (d) by
reason of customary non-assignment provisions in leases entered into the
ordinary course of business and consistent with past practices, (e) Purchase
Money Indebtedness for property acquired in the ordinary course of business that
only impose restrictions on the property so acquired, (f) an agreement for the
sale or disposition of the Capital Stock or assets of such Restricted
Subsidiary; provided, however, that such restriction is only applicable to such
Restricted Subsidiary or assets, as applicable, and such sale or disposition
otherwise is permitted under '--Limitation on Asset Sales' above, (g)
Refinancing Indebtedness permitted under the Indenture; provided, however, that
the restrictions contained in the agreements governing such Refinancing
Indebtedness are no more restrictive in the aggregate than those contained in
the agreements governing the Indebtedness being refinanced immediately prior to
such refinancing, (h) the Indenture, the Notes and the Guarantees, (i) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not individually or in the aggregate, detract from the
value of property or assets of the Company or any Restricted Subsidiary in any
manner material to the Company or any Restricted Subsidiary, or (j) any
instrument governing Indebtedness of a Foreign Subsidiary which is permitted by
the terms of the Indenture.
Nothing contained in this 'Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries' covenant shall prevent the
Company or any Restricted Subsidiary from (1) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted in the 'Limitation on Liens'
covenant or (2) restricting the sale or other disposition of property or assets
of the Company or any of its Restricted Subsidiaries that secure Indebtedness of
the Company or any of its Restricted Subsidiaries.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any
Affiliate of the Company (other than the Company or a Restricted Subsidiary)
unless (1) such transaction or series of transactions is on terms that are no
less favorable to the Company or such Restricted Subsidiary, as the case may be,
than would be available in a comparable transaction in arm's-length dealings
with an unrelated third party, and (2) the Company delivers to the Trustee (a)
with respect to any transaction or series of transactions involving aggregate
payments in excess of $1.0 million, an Officers' Certificate certifying that
such transaction or series of related transactions complies with clause (1)
above and (b) with respect to any transaction or series of transactions
involving aggregate payments in excess of $5.0 million, an Officer's Certificate
certifying that such transaction or series of related transactions has been
approved by a majority of the members of the Board of Directors of the Company
and evidenced by a resolution of the Board of Directors set forth in an
Officer's Certificate, and (c) with respect to any transaction or series of
transactions involving aggregate payments in excess of $10.0 million, an opinion
as to the fairness to the Company from a financial point of view issued by an
investment banking firm, accounting firm or appraisal firm of national standing.
Notwithstanding the foregoing, this covenant will not apply to (i) employment
agreements or compensation or employee benefit arrangements with any officer,
director or employee of the Company entered into in the ordinary course of
business (including customary benefits thereunder and including reimbursement or
advancement of out of pocket expenses, loans to officers, directors and
employees in the ordinary course of business and director's and officer's
liability insurance), (ii) any transaction entered into by or among the Company
or one of its Restricted Subsidiaries with one or more Restricted Subsidiaries
of the Company, (iii) any Restricted Payment not prohibited by the 'Limitation
on Restricted Payments' covenant, (iv) transactions permitted by, and complying
with, the provisions described under '--Merger, Consolidation and Sale of
Assets,' (v) any sale or issuance of Capital Stock (other than
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Disqualified Stock) of the Company and (vi) the grant or performance of
registration rights with respect to securities of the Company.
Limitation on Incurrence of Senior Subordinated Indebtedness. The Company
will not, directly or indirectly, incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinated or junior in
right of payment to any Senior Debt of the Company and senior in any respect in
right of payment to the Notes. For purposes of this provision, no Indebtedness
shall be deemed to be subordinated in right of payment to any other Indebtedness
by reason of the fact that such other Indebtedness is secured by any Lien or is
subject to a Guarantee.
Limitation on Designation of Unrestricted Subsidiaries. The Indenture
provides that the Company will not designate any Subsidiary of the Company
(other than a newly created Subsidiary in which no Investment has previously
been made) as an 'Unrestricted Subsidiary' under the Indenture (a 'Designation')
unless:
(a) no Default shall have occurred and be continuning at the time of
or after giving effect to such Designation;
(b) immediately after giving effect to such Designation the Company
would be able to incur $1.00 of Indebtedness (other than Permitted
Indebtedness) under the covenant described above under the caption
'--Limitation on Incurrence of Indebtedness;' and
(c) the Company would not be prohibited under the Indenture from
making an Investment at the time of Designation in an amount (the
'Designation Amount') equal to the Fair Market Value of such Restricted
Subsidiary on such date.
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
described above under the caption '--Limitation on Restricted Payments' for all
purposes of the Indenture in the Designation Amount. The Indenture will further
provide that neither the Company nor any Restricted Subsidiary shall at any time
(x) provide credit support for, or a guarantee of, any Indebtedness of any
Unrestricted Subsidiary (including any undertaking, agreement or instrument
evidencing such Indebtedness); provided that the Company and its Restricted
Subsidiaries may pledge Capital Stock or Indebtedness of any Unrestricted
Subsidiary on a nonrecourse basis such that the pledgee has no claim whatsoever
against the Company other than to obtain such pledged property or (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary, except to the extent permitted under the covenant described above
under the caption '--Limitation on Restricted Payments.'
The Indenture further provides that the Company will not revoke any
Designation of a Subsidiary as an Unrestricted Subsidiary (a 'Revocation'),
unless:
(a) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation shall be deemed to have
been incurred at such time and shall have been permitted to be incurred for
all purposes of the Indenture.
All Designations and Revocations must be evidenced by Board Resolutions
delivered to the Trustee certifying compliance with the foregoing provisions.
Provision of Financial Statements. The Indenture provides that, whether or
not the Company is then subject to Section 13(a) or 15(d) of the Exchange Act,
the Company will file (unless such filing is not permitted under the Exchange
Act) with the Commission, so long as Notes are outstanding, the annual reports,
quarterly reports and other periodic reports which the Company would have been
required to file with the Commission pursuant to such Section 13(a) or 15(d) if
the Company were so subject, and such documents shall be filed with the
Commission on or prior to the respective dates (the 'Required Filing Dates') by
which the Company would have been required so to file such documents if the
Company were so subject. The Company will also in any event (i) within 15 days
of each Required Filing Date, (a) transmit by mail to all holders of Notes, as
their names and addresses appear in the Note register, without cost to such
holders and (b) file with the Trustee copies of the annual reports, quarterly
reports and other periodic reports which the Company would have been required to
file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act
if the Company were subject to such Sections and (ii) if filing such documents
by the Company with the Commission is prohibited under the
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Exchange Act, promptly upon written request and payment of the reasonable cost
of duplication and delivery, supply copies of such documents to any prospective
holder at the Company's cost.
Future Guarantors. The Indenture provides that the Company and each
Guarantor shall cause each Restricted Subsidiary of the Company (other than any
Foreign Subsidiary) which, after the date of the Indenture (if not then a
Guarantor), becomes a Restricted Subsidiary to execute and deliver an indenture
supplemental to the Indenture and thereby become a Guarantor which shall be
bound by the Guarantee of the Notes in the form set forth in the Indenture
(without such future Guarantor being required to execute and deliver the
Guarantee endorsed on the Notes).
Additional Covenants. The Indenture also contains covenants with respect
to the following matters: (i) payment of principal, premium and interest; (ii)
maintenance of an office or agency in The City of New York; (iii) maintenance of
corporate existence; (iv) payment of taxes and other claims; (v) maintenance of
properties; and (vi) maintenance of insurance.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Indenture provides that the Company shall not, in any single
transaction or series of related transactions, consolidate or merge with or into
(whether or not the Company is the Surviving Person), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets in one or more related transactions (other than a consolidation or
merger with or into a Wholly Owned Restricted Subsidiary; provided that, in
connection with any such merger or consolidation, no consideration (other than
Common Stock in the Surviving Person or the Company) shall be issued or
distributed to the shareholders of the Company) to, another Person, and the
Company will not permit any Restricted Subsidiary to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in a sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the properties and assets of the Company and the Restricted Subsidiaries, taken
as a whole, to another Person, unless (i) the Surviving Person is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; (ii) the Surviving Person (if other than the Company)
assumes all the obligations of the Company under the Notes (and the Guarantees
of the Company's Restricted Subsidiaries shall be confirmed as applying to such
Surviving Person's obligations), and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; (iii) at the time of
and immediately after such transaction, no Default or Event of Default shall
have occurred and be continuing; and (iv) the Surviving Person will and after
giving pro forma effect to such transaction, the Surviving Person would be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
first paragraph of the covenant described under '--Certain Covenants--Limitation
on Incurrence of Indebtedness.'
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraph in
which the Company is not the Surviving Person, the Surviving Person is to assume
all the obligations of the Company under the Notes, the Indenture and, if then
in effect, the Registration Rights Agreement pursuant to a supplemental
indenture or other written agreement, as the case may be, such Surviving Person
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company and the Company would be discharged from its obligations under
the Indenture, the Notes and the Registration Rights Agreement.
EVENTS OF DEFAULT
The Indenture provides that each of the following constitutes an Event of
Default:
(i) a default for 30 days in the payment when due of interest on any
Note (whether or not prohibited by the subordination provisions of the
Indenture);
(ii) a default in the payment when due of principal on any Note
(whether or not prohibited by the subordination provisions of the
Indenture), whether upon maturity, acceleration, optional or mandatory
redemption, required repurchase or otherwise;
(iii) the failure by the Company to comply with its obligations under
'Merger, Consolidation and Sale of Assets' above;
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(iv) failure to perform or comply with any covenant, agreement or
warranty in the Indenture (other than the defaults specified in clauses
(i), (ii) or (iii) above) which failure continues for 60 days after written
notice thereof has been given to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the then outstanding Notes;
(v) the occurrence of one or more defaults under any agreements,
indentures or instruments under which the Company or any Significant
Subsidiary then has outstanding Indebtedness in excess of $5.0 million in
the aggregate and, if not already matured at its final maturity in
accordance with its terms, such Indebtedness shall have been accelerated
and such Indebtedness shall not have been repaid or such acceleration
rescinded within 30 days of such acceleration or final maturity;
(vi) one or more judgments, orders or decrees for the payment of money
in excess of $5.0 million, either individually or in the aggregate shall be
entered against the Company or any Significant Subsidiary or any of their
respective properties and which judgments, orders or decrees are not paid,
discharged, bonded or stayed or stayed pending appeal for a period of 60
days after their entry;
(vii) certain events of bankruptcy, dissolution, insolvency,
reorganization, administration or similar proceedings of the Company or any
Significant Subsidiary; or
(viii) any Guarantee of a Significant Subsidiary ceases to be in full
force and effect (other than as expressly provided for under the Indenture)
or is declared null and void, or any Guarantor which is a Significant
Subsidiary denies that it has any further liability under any Guarantee, or
gives notice to such effect (other than by reason of the termination of the
Indenture or the release of any such Guarantee in accordance with the
Indenture).
If any Event of Default (other than as specified in clause (vii) of the
preceding paragraph with respect to the Company) occurs and is continuing, the
Trustee or the holders of at least 25% in aggregate principal amount of the then
outstanding Notes may, and the Trustee at the request of such holders shall,
declare all the Notes to be due and payable immediately by notice in writing to
the Company, and to the Company and the Trustee if by the holders, specifying
the respective Event of Default and that such notice is a 'notice of
acceleration,' and the Notes shall become immediately due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
the events specified in clause (vii) of the preceding paragraph with respect to
the Company, the principal of, premium, if any, and any accrued interest on all
outstanding Notes shall ipso facto become immediately due and payable without
further action or notice. Holders of the Notes may not enforce the Indenture or
the Notes except as provided in the Indenture.
The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except (i) a continuing Default or Event of Default in the payment
of the principal of, or premium, if any, or interest on, the Notes (which may
only be waived with the consent of each holder of Notes affected), or (ii) in
respect of a covenant or provision which under the Indenture cannot be modified
or amended without the consent of the holder of each Note outstanding. Subject
to certain limitations, holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal, premium or interest) if it determines that withholding
notice is in their interest.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
The Indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on any of the Notes or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company or any of the Guarantors in the
Indenture, or in any of the Notes or the Guarantees or because of the creation
of any Indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer, director, employee or controlling person of the Company or
any of the Guarantors or any successor Person thereof. Each Holder, by accepting
the Notes, waives and releases all such liability.
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DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company discharged with respect to the outstanding Notes and
to have terminated the obligations of the Guarantors with respect to the
Guarantees ('defeasance'). Such defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by the
outstanding Notes and the Company and each of the Guarantors and to have
satisfied all other obligations under the Notes and the Indenture except for (i)
the rights of holders of the outstanding Notes to receive, solely from the trust
fund described below, payments in respect of the principal of, premium, if any,
and interest on such Notes when such payments are due, (ii) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes, and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee under the Indenture, and (iv) the defeasance provisions of the
Indenture. In addition, the Company may, at its option and at any time, elect to
have the respective obligations of the Company and the Guarantors released with
respect to certain covenants that are described in the Indenture ('covenant
defeasance') and any omission to comply with such obligations shall not
constitute a Default or an Event of Default with respect to the Notes. In the
event that a covenant defeasance occurs, certain events (not including
non-payment, bankruptcy and insolvency events) described under '--Events of
Default' will no longer constitute Events of Default with respect to the Notes.
In order to exercise either defeasance or covenant defeasance, (i) the
Company shall irrevocably deposit with the Trustee, as trust funds in trust, for
the benefit of the holders of the Notes, cash in United States dollars, U.S.
Government Obligations (as defined in the Indenture), or a combination thereof,
in such amounts as will be sufficient, in the report of a nationally recognized
firm of independent public accountants or a nationally recognized investment
banking firm, to pay and discharge the principal of, premium, if any, and
interest on the outstanding Notes to redemption or maturity; (ii) the Company
shall have delivered to the Trustee an opinion of counsel in the United States
to the effect that the holders of the outstanding Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such
defeasance or covenant defeasance, as the case may be, and will be subject to
Federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance or covenant defeasance, as the
case may be, had not occurred (in the case of defeasance, such opinion must
refer to and be based upon a ruling of the Internal Revenue Service or a change
in applicable Federal income tax laws); (iii) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit or insofar as
clause (vi) under the first paragraph under '--Events of Default' is concerned,
at any time during the period ending on the 91st day after the date of deposit;
(iv) such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a Default under, the Indenture or any other material
agreement or instrument to which the Company is a party or by which it is bound;
and (v) the Company shall have delivered to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions precedent under the
Indenture to either defeasance or covenant defeasance, as the case may be, have
been complied with and that no violations under agreements governing any other
outstanding Indebtedness would result therefrom.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes, as expressly
provided for in the Indenture) as to all outstanding Notes when (i) either (a)
all the Notes theretofore authenticated and delivered (except lost, stolen or
destroyed Notes which have been replaced or paid) have been delivered to the
Trustee for cancellation or (b) all Notes not theretofore delivered to the
Trustee for cancellation have become due and payable and the Company has
irrevocably deposited or caused to be deposited with the Trustee an amount in
United States dollars sufficient to pay and discharge the entire indebtedness on
the Notes not theretofore delivered to the Trustee for cancellation, for the
principal of, premium, if any, and interest to the date of deposit; (ii) the
Company has paid or caused to be paid all other sums payable under the Indenture
by the Company; and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an opinion of counsel each stating that all conditions precedent
under the Indenture relating to the satisfaction and discharge of the Indenture
have been complied with.
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RELEASE OF GUARANTEE
So long as no Event of Default shall have occurred and be continuing upon
the sale or disposition (whether by merger, stock purchase, asset sale or
otherwise) of a Guarantor (or all or substantially all of the assets of any such
Guarantor or 50% or more of the Capital Stock of any such Guarantor) to an
entity which is not a Subsidiary of the Company, which transaction is otherwise
in compliance with the Indenture, such Guarantor shall be deemed released from
all its obligations under its guarantee of the Notes; provided, however, that
any such termination shall occur only to the extent that all obligations of such
Guarantor under all its guarantees of, and under all of its pledges of assets or
other security interests which secure, any Indebtedness of the Company shall
also terminate upon such release, sale or transfer. Upon the release of any
Guarantor from its Guarantee pursuant to the provisions of the Indenture, each
other Guarantor not so released shall remain liable for the full amount of
principal of, and interest on, the Notes as and to the extent provided in the
Indenture.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two paragraphs, the Indenture or the Notes
may be amended or supplemented with the written consent of the holders of at
least a majority in aggregate principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for the Notes), and any existing Default or Event of Default or compliance with
any provision of the Indenture or the Notes may be waived with the consent of
the holders of a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes).
Without the consent of each holder affected, an amendment or waiver shall
not: (i) reduce the principal amount of the Notes whose holders must consent to
an amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note, or alter the provisions with respect to the
redemption of the Notes in a manner adverse to the holders of the Notes, (iii)
reduce the rate of or change the time for payment of interest on any Notes, (iv)
waive a Default or Event of Default in the payment of principal of, premium, if
any, or interest on the Notes (except that holders of at least a majority in
aggregate principal amount of the then outstanding Notes may (a) rescind an
acceleration of the Notes that resulted from a non-payment default, and (b)
waive the payment default that resulted from such acceleration), (v) make any
Note payable in money other than that stated in the Notes, (vi) make any change
in the provisions of the Indenture relating to waivers of past Defaults or the
rights of holders of Notes to receive payments of principal of, or premium, if
any, or interest on, the Notes, (vii) waive a redemption payment with respect to
any Note, or (viii) modify or change any of the provisions of the Indenture
relating to the subordination of the Notes in a manner adverse to the holders of
the Notes.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
(i) to cure any ambiguity, defect or inconsistency, (ii) to provide for
uncertificated Notes in addition to or in place of certificated Notes, (iii) to
provide for the assumption of the Company's obligations to holders of the Notes
in the event of any Disposition involving the Company in which the Company is
not the Surviving Person, (iv) to make any change that would provide any
additional rights or benefits to the holders of the Notes or that does not
adversely affect the rights of any such holder, (v) to comply with the
requirements of the Securities and Exchange Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act, (vi)
to provide for additional Guarantors of the Notes, (vii) to evidence the release
of any Guarantor as described under '--Release of Guarantee,' (viii) to evidence
and provide for the acceptance of appointment by a successor trustee under the
Indenture with respect to the Notes, or (ix) to eliminate the Guarantee of
Freedom Chemical Diamalt in the form existing on the Issue Date and provide for
the full and unconditional Guarantee by Freedom Chemical Diamalt upon the
occurrence of certain events.
TRANSFER AND EXCHANGE
The registered holder of a Note will be treated as the owner of it for all
purposes. A holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a holder among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. Neither the Company nor the Registrar shall be
required to issue, register the transfer of or exchange any Note (i) during a
period beginning at the opening of business on the day that the Trustee receives
notice of any redemption from the Company and ending
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at the close of business on the day the notice of redemption is sent to holders,
(ii) selected for redemption, in whole or in part, except the unredeemed portion
of any Note being redeemed in part may be transferred or exchanged, and (iii)
during a Change of Control Offer or an Asset Sale Offer if such Note is tendered
pursuant to such Change of Control Offer or Asset Sale Offer and not withdrawn.
THE TRUSTEE
The Bank of New York is the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
The Indenture (including the provisions of the Trust Indenture Act
incorporated by reference therein) contains limitations on the rights of the
Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, if it acquires any
conflicting interest (as defined in the Trust Indenture Act) it must eliminate
such conflict or resign.
The Bank of New York was a lender under the Freedom Credit Agreement and is
a lender under the Amended and Restated Credit Agreement.
GOVERNING LAW
The Indenture is, and the New Notes and the Guarantees will be, governed by
the laws of the State of New York, without regard to the principles of conflicts
of law.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for the definition of all other terms used in the
Indenture.
'Acquired Debt' means, with respect to any specified Person, Indebtedness
of any other Person (the 'Acquired Person') existing at the time the Acquired
Person merges with or into, or becomes a Subsidiary of, such specified Person,
including Indebtedness incurred in connection with, or in contemplation of, the
Acquired Person merging with or into, or becoming a Subsidiary of, such
specified Person, provided that Indebtedness of such Person which is redeemed,
defeased, retired or otherwise repaid at the time of or immediately upon
consummation of the transactions by which such Person becomes a Restricted
Subsidiary or such Asset Acquisition shall not be Acquired Debt.
'Affiliate' means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
'control' (including, with correlative meanings, the terms 'controlling,'
'controlled by' and 'under common control with') of any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
'Amended and Restated Credit Agreement' means the Company's Amended and
Restated Credit Agreement, dated as of October 11, 1996 among the Company,
Freedom Chemical Diamalt, as co-borrower, Citicorp USA, Inc. as agent, the
financial institutions party thereto in their capacities as lenders and issuing
banks thereunder, together with the related documents thereto (including without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended, modified, restated, supplemented, renewed,
refunded, replaced or refinanced from time to time, including (i) any related
notes, letters of credit, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, restated, supplemented, renewed, refunded, replaced or refinanced from
time to time, and (ii) any notes, guarantees, collateral documents, instruments
and agreements executed in connection with any such amendment, modification,
restatement, supplement, renewal, refunding, replacement or refinancing.
'Applicable Premium' means, with respect to a Note, the greater of (i) 1.0%
of the then outstanding principal amount of such Note or (ii) the excess of (A)
the present value of the required interest and principal payments due on such
Note, computed using a discount rate equal to the Treasury Rate plus 75 basis
points, over (B) the then outstanding principal amount of such Note; provided
that in no event will the Applicable Premium exceed the amount of the applicable
redemption price upon an optional redemption less 100%, at any time on or after
October 15, 2001.
'Asset Sale' means (i) any sale, lease, conveyance or other disposition by
the Company or any Restricted Subsidiary (other than to the Company or a
Restricted Subsidiary and other than directors' qualifying shares) of
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any assets (including by way of a sale-and-leaseback) other than in the ordinary
course of business (provided that (x) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company shall not
be an 'Asset Sale' but instead shall be governed by the provisions of the
Indenture described under 'Merger, Consolidation and Sale of Assets' and (y)
Investments made in compliance with the Restricted Payments covenant shall not
be deemed to be Asset Sales), or (ii) the issuance or sale of Capital Stock
(other than Disqualified Stock) of any Restricted Subsidiary, in the case of
each of (i) and (ii), whether in a single transaction or a series of related
transactions, to any Person (other than to the Company or a Restricted
Subsidiary and other than directors' qualifying shares) for Net Proceeds in
excess of $1,000,000; provided, however, the following transactions shall not be
deemed Asset Sales:
(i) the Company and the Restricted Subsidiaries may (x) convey, sell,
lease, transfer, assign or otherwise dispose of assets pursuant to and in
accordance with the limitation on mergers, sales or consolidations
provisions in the Indenture and (y) make Restricted Payments permitted by
the Restricted Payment covenant in the Indenture;
(ii) the Company and the Restricted Subsidiaries may create or assume
Liens (or permit any foreclosure thereon) securing Indebtedness to the
extent that such Lien does not violate the '--Limitation on Liens' covenant
above; and
(iii) the Company and the Restricted Subsidiaries may consummate any
sale or series of related sales of assets or properties of the Company and
the Restricted Subsidiaries having an aggregate Fair Market Value of less
than $2,500,000 in any fiscal year.
'Capital Lease Obligation' of any Person means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease for property leased by such Person that would at such time be
required to be capitalized on the balance sheet of such Person in accordance
with GAAP.
'Capital Stock' of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, of
such Person, including any Preferred Stock.
'Cash Equivalents' means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Rating Services or Moody's Investors
Service, Inc.; (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from Standard & Poor's Rating Services or at least P-1 from Moody's
Investors Service, Inc.; (iv) certificates of deposit or bankers' acceptances
(or, with respect to foreign banks, similar instruments) maturing within one
year from the date of acquisition thereof issued by any bank organized under the
laws of the United States of America or any state thereof or the District of
Columbia or any member of the European Economic Community any U.S. branch of a
foreign bank having at the date of acquisition thereof combined capital and
surplus of not less than $200 million; (v) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications specified
in clause (iv) above; and (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above.
'Cash Flow' means, with respect to any period, the (i) Consolidated Net
Income of the Company and its Restricted Subsidiaries for such period, plus (ii)
provision for taxes based on income or profits, to the extent such provision for
taxes was included in computing such Consolidated Net Income, and any provision
for taxes utilized in computing the net losses under clause (i) hereof, plus
(iii) Consolidated Interest Expense of the Company and its Restricted
Subsidiaries for such period, plus (iv) depreciation, amortization (including
deferred financing costs and expenses) and all other non-cash charges or
expenses (including minority interests), to the extent such depreciation,
amortization and other non-cash charges or expenses (including minority
interests) were deducted in computing such Consolidated Net Income (including
amortization of goodwill and other intangibles).
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'Change of Control' means the occurrence of any of the following events:
(i) any 'person' or 'group' (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Permitted Holders, is or becomes (including by
merger, consolidation or otherwise) the 'beneficial owner' (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to
have beneficial ownership of all shares that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of 50% or more of the voting power of the
total outstanding Voting Stock of the Company; (ii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election to such Board of Directors, or whose nomination for election by the
stockholders of the Company, was approved by a vote of 66 2/3% of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of such Board of Directors of the
Company then in office; or (iii) the sale or other disposition (including by
merger, consolidation or otherwise) of all or substantially all of the Capital
Stock or assets (where the transferee of such assets has assumed the obigation
of the Company under the Notes pursuant to the covenant described under 'Merger,
Consolidation and Sale of Assets') of the Company and its Restricted
Subsidiaries to any Person or Group (as defined in Rule 13d-5 of the Exchange
Act) excluding transfers or conveyances to or among the Company's Restricted
Subsidiaries and other than to the Permitted Holders as an entirety or
substantially as an entirety in one transaction or a series of related
transactions.
'Company' means Freedom Chemical Company, a Delaware corporation, unless
and until a successor replaces it in accordance with the Indenture and
thereafter means such successor.
'Consolidated Cash Flow Coverage Ratio' means, with respect to any date of
determination, the ratio of (i) the aggregate amount of Cash Flow for the period
of the most recent four consecutive fiscal quarters for which financial
statements are available, to (ii) Consolidated Interest Expense for such four
fiscal quarters of the Company, determined on a pro forma basis after giving pro
forma effect to (i) the incurrence of such Indebtedness and (if applicable) the
application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness was incurred, and the application of such
proceeds occurred, at the beginning of such four-quarter period; (ii) the
incurrence, repayment or retirement of any other Indebtedness by the Company and
its Restricted Subsidiaries since the first day of such four-quarter period as
if such Indebtedness was incurred, repaid or retired at the beginning of such
four-quarter period; (iii) in the case of Acquired Debt, the related acquisition
as if such acquisition had occurred at the beginning of such four-quarter
period; and (iv) any acquisition or disposition by the Company and its
Restricted Subsidiaries of any company or any business or any assets out of the
ordinary course of business (without regard to clause (iii) of the definition of
Consolidated Net Income), or any related repayment of Indebtedness, in each case
since the first day of such four-quarter period, assuming such acquisition,
disposition or related repayment had been consummated on the first day of such
four-quarter period.
'Consolidated Interest Expense' means, with respect to any period, the sum
of (i) the interest expense of the Company and its Restricted Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP
consistently applied (except as provided herein), including, without limitation,
(a) amortization of debt discount, (b) the net cash payments, if any, under
interest rate contracts, (c) the interest portion of any deferred payment
obligation, (d) accrued interest, and (e) all commissions, discounts and other
fees and charges owed with respect to letters of credit, bankers' acceptance
financing or similar facilities, plus (ii) the interest component of the Capital
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by the
Company during such period, of the Company and its Restricted Subsidiaries, plus
(iii) all cash dividends paid during such period by the Company and its
Restricted Subsidiaries with respect to any Disqualified Stock (other than by
Restricted Subsidiaries of such Person to such Person or such Person's
Restricted Subsidiaries and other than any dividend paid in Capital Stock (other
than Disqualified Stock)), in each case as determined on a consolidated basis in
accordance with GAAP consistently applied; provided, that Consolidated Interest
Expense shall exclude the amortization of fees related to the issuance of the
Notes and fees (other than letters of credit) related to any bank indebtedness
of the Company or any Restricted Subsidiary, including Senior Bank Debt.
'Consolidated Net Income' means, with respect to any period, the net income
(or loss) of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP consistently applied,
adjusted to the extent included in calculating such net income (or loss), by
excluding, without duplication, (i) extraordinary gains and losses, (ii) the
portion of net income (or loss) of the Company
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and its Restricted Subsidiaries allocable to interests in unconsolidated Persons
or Unrestricted Subsidiaries, except to the extent of the amount of dividends or
distributions actually paid to the Company or its Restricted Subsidiaries by
such other Person during such period, (iii) net income (or loss) of any Person
combined with the Company or any of its Restricted Subsidiaries on a 'pooling of
interests' basis attributable to any period prior to the date of combination,
(iv) net gain or loss in respect of sale, transfer or disposition of assets
(including, without limitation, pursuant to sale and leaseback transactions)
other than in the ordinary course of business, (v) the net income of any
Restricted Subsidiary to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income to the Company is not
at the time permitted, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders (other than pursuant to the Notes or the Indenture), (vi)
Refinancing Expenses (including any write-off of deferred financing costs
related to the Existing Credit Agreements) to the extent recognized as an
expense prior to December 31, 1996, (vii) the non-recurring cumulative effect of
a change in accounting principles, (viii) non-recurring gains and non-recurring,
non-cash losses and costs, (ix) any non-cash compensation expense in connection
with the exercise of, grant to or repurchase from officers, directors, and
employees of stock, stock options or stock equivalents, or (x) any non-cash
charge or expense arising by reason of the application of APB no. 16.
'Consolidated Total Assets' means, as of any date, the total assets of the
Company and its Restricted Subsidiaries, all as set forth on the most recently
available consolidated balance sheet of the Company and its Restricted
Subsidiaries prepared in conformity with GAAP.
'Currency Agreement Obligations' means the obligations of any person under
a foreign exchange contract, currency swap agreement or other similar agreement
or arrangement to protect such person against fluctuations in currency values.
'Default' means any event that is, or after the giving of notice or passage
of time or both would be, an Event of Default.
'Designated Senior Debt' means (i) the Senior Bank Debt, and (ii) any other
Senior Debt of the Company permitted to be incurred under the Indenture the
principal amount of which is $5 million or more at the time of the designation
of such Senior Debt as 'Designated Senior Debt' by the Company in a written
instrument delivered to the Trustee.
'Disposition' means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person
is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.
'Disqualified Stock' means (i) any Preferred Stock of any Restricted
Subsidiary and (ii) any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof (other than upon the occurrence of an 'asset sale' or a change of
control of the Company in circumstances where the holders of the Notes would
have similar rights), in whole or in part on or prior to the stated maturity of
the Notes.
'Dollars' and '$' means lawful money of the United States of America.
'Exchange Act' means the Securities Exchange Act of 1934, as amended.
'Fair Market Value' means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
'Foreign Subsidiary' means a Subsidiary of a Person not organized under the
laws of the United States or any political subdivision thereof and the
operations of which are located substantially outside the United States.
'GAAP' means generally accepted accounting principles in the United States
set forth in the Statements of Financial Accounting Standards and the
Interpretations, Accounting Principles Board Opinions and AICPA Accounting
Research Bulletins which are applicable as of the Issue Date and consistently
applied.
'Guarantee' means a guarantee (other than by endorsement of negotiable
instruments for collection or deposit in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
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'Guarantor' means (i) each of Freedom Textile Chemicals Co., Hilton Davis
Chemical Co., Kalama Chemical, Inc., Kalama Specialty Chemical, Inc., Freedom
Chemical Diamalt GmbH, Kalama Foreign Sales Corporation, Freedom Textile
Chemical Company (South Carolina) Inc., FCC Acquisition Corp., (ii) each of the
Company's Restricted Subsidiaries who become Restricted Subsidiaries after the
Issue Date and which are organized in the United States and (iii) any other
Restricted Subsidiary of the Company that the Company designates as a Guarantor
in a written instrument delivered to the Trustee.
'Indebtedness' means, with respect to any Person, without duplication, and
whether or not contingent, (i) all indebtedness of such Person for borrowed
money or which is evidenced by a note, bond, debenture or similar instrument,
(ii) all obligations of such Person to pay the deferred or unpaid purchase price
of property or services, which purchase price is due more than six months after
the date of placing such property in service or taking delivery and title
thereto or the completion of such service (other than obligations related to
premiums payable in connection with insurance obtained in the ordinary course of
business), (iii) all Capital Lease Obligations of such Person, (iv) all
obligations of such Person in respect of letters of credit or bankers'
acceptances issued or created for the account of such Person, (v) to the extent
not otherwise included in this definition, all net obligations of such Person
under Interest Rate Agreement Obligations or Currency Agreement Obligations of
such Person, (vi) all liabilities of others of the kind described in the
preceding clause (i), (ii) or (iii) secured by any Lien on any property owned by
such Person even though such Person has not assumed or become liable for the
payment of such liabilities; provided, however, the amount of such Indebtedness
for purposes of this definition shall be limited to the lesser of the amount of
Indebtedness secured by such Lien or the value of the property subject to such
Lien, (vii) all Disqualified Stock issued by such Person and all Preferred Stock
issued by a Subsidiary of such Person, and (viii) to the extent not otherwise
included, any guarantee by such Person of any other Person's indebtedness or
other obligations described in clauses (i) through (vii) above. 'Indebtedness'
of the Company and the Restricted Subsidiaries shall not include (i) current
trade payables incurred in the ordinary course of business and payable in
accordance with customary practices and (ii) non-interest bearing installment
obligations and accrued liabilities incurred in the ordinary course of business
which are not more than 90 days past due (or, if overdue for more than 90 days,
are being contested in good faith). The principal amount outstanding of any
Indebtedness issued with original issue discount is the accreted value of such
Indebtedness and Indebtedness shall not include any liability for federal,
state, local or other taxes.
'Interest Rate Agreement Obligations' means, with respect to any Person,
the Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
'Investment' in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement but excluding advances to customers and employees in the
ordinary course of business) to, capital contribution (by means of any transfer
of cash or other property to others or any payment for property or services for
the account or use of others) to, or any purchase or acquisition of Capital
Stock, bonds, notes, debentures or other similar instruments issued by, such
Person and shall include the designation of a Restricted Subsidiary as an
Unrestricted Subsidiary. For purposes of the definition of 'Unrestricted
Subsidiary' and the 'Limitation on Restricted Payments' covenant described
above, (i) 'Investment' shall include the Fair Market Value of the assets (net
of liabilities) of any Restricted Subsidiary of the Company at the time that
such Restricted Subsidiary of the Company is designated an Unrestricted
Subsidiary and shall exclude the Fair Market Value of the assets (net of
liabilities) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary of the Company and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its Fair Market Value at the time of such transfer, in each case as determined
by the Board of Directors in good faith.
'Issue Date' means October 17, 1996, the date on which the Old Notes were
originally issued under the Indenture.
'Lien' means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in any asset and any filing of, or agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
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'Net Proceeds' means, with respect to any Asset Sale by any Person, the
aggregate cash or Cash Equivalent proceeds received by such Person and/or its
Affiliates in respect of such Asset Sale, which amount is equal to the excess,
if any, of (i) the cash or Cash Equivalent received by such Person and/or its
Affiliates (including any cash payments received by way of deferred payment
pursuant to, or monetization of, a note or installment receivable or otherwise,
but only as and when received) in connection with such Asset Sale, over (ii) the
sum of (a) the amount of any Indebtedness that is secured by such asset and
which is required to be repaid by such Person in connection with such Asset
Sale, plus (b) all fees, commissions and other expenses incurred (including,
without limitation, the fees and expenses of legal counsel and investment
banking, underwriting and brokerage fees and expenses) by such Person in
connection with such Asset Sale, plus (c) provision for taxes, including income
taxes, attributable to the Asset Sale or attributable to required prepayments or
repayments of Indebtedness with the proceeds of such Asset Sale, plus (d)
appropriate amounts to be provided by the Company or any Restricted Subsidiary
of the Company as a reserve against any liabilities associated with such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, plus (e) if
such Person is a Restricted Subsidiary, any dividends or distributions payable
to holders of minority interests in such Restricted Subsidiary from the proceeds
of such Asset Sale.
'Obligations' means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
'Permitted Holders' means (i) collectively or individually Joseph
Littlejohn & Levy Fund, L.P., Joseph Littlejohn & Levy Fund L.P. II, The Freedom
Group Partnership; or (ii) any Affiliate of any of the Persons described in
clause (i) and with respect to Joseph Littlejohn & Levy Fund, L.P. and Joseph
Littlejohn & Levy Fund II, L.P., any partnership or corporation which is managed
or controlled by JLL Associates, L.P. or any Affiliate thereof. For purposes of
this definition, 'control,' as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities or by contract or otherwise.
'Permitted Investments' means (i) any Investment in the Company or any
Restricted Subsidiary; (ii) any Investment in Cash Equivalents; (iii) any
Investment in a Person (an 'Acquired Person') if, as a result of such
Investment, (a) the Acquired Person becomes a Restricted Subsidiary of the
Company, or (b) the Acquired Person either (1) is merged, consolidated or
amalgamated with or into the Company or one of its Restricted Subsidiaries and
the Company or such Restricted Subsidiary is the Surviving Person, or (2)
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or one of its Restricted Subsidiaries; (iv) Investments in accounts
and notes receivable acquired in the ordinary course of business; (v) any
securities received in connection with an Asset Sale that complies with the
covenant described under 'Limitations on Asset Sales'; (vi) interest rate and
currency agreement obligations permitted pursuant to the second paragraph of the
covenant described under 'Incurrence of Indebtedness' above; (vii) investments
in or acquisitions of Capital Stock or similar interests in Persons (other than
Affiliates of the Company) received in the bankruptcy or reorganization of or by
such Person or any exchange of such investment with the issuer thereof or taken
in settlement of or other resolution of claims or disputes, and, in each case,
extensions, modifications and renewals thereof; (viii) loans or advances to
officers, directors and employees made in the ordinary course of business, not
to exceed $1.0 million in the aggregate; (ix) Investments for which the sole
consideration provided is the Capital Stock of the Company (other than
Disqualified Stock); (x) Investments in evidences of Indebtedness, securities or
other property received by the Company or any Restricted Subsidiary from another
Person in connection with any bankruptcy proceeding or by reason of a
composition or readjustment of debt or a reorganization of such Person or as a
result of foreclosure, perfection or enforcement of any Lien in exchange for
evidences of Indebtedness, securities or other property of such Person held by
the Company or any Restricted Subsidiary, or for other liabilities or
obligations of such other Person to the Company or any Restricted Subsidiary
that were created in accordance with the terms of the Indenture; (xi) any
Investments existing in an Acquired Person at the time of the acquisition of
such Acquired Person, provided that such Investment is not incurred in
connection with, or in contemplation of such acquisition; (xii) loans or
advances to stockholders of the Company solely for the purchase of Capital Stock
of the Company by such stockholders, not to exceed $4.0 million in the
aggregate; and (xiii) any other Investments that do not exceed $1.0 million in
amount in the aggregate at any one time outstanding.
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'Permitted Liens' means (i) Liens on assets or property of the Company that
secure Senior Debt of the Company and Liens on assets or property of a
Restricted Subsidiary that secure Senior Debt of such Restricted Subsidiary;
(ii) Liens securing Indebtedness of a Person existing at the time that such
Person is merged into or consolidated with the Company or a Restricted
Subsidiary; provided, however, that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of such Person; (iii) Liens on property acquired by the Company
or a Restricted Subsidiary; provided, however, that such Liens were in existence
prior to the contemplation of such acquisition and do not extend to any other
property; (iv) Liens in respect of Interest Rate Obligations and Currency
Agreement Obligations permitted under the Indenture; (v) Liens in favor of the
Company or any Restricted Subsidiary; (vi) Liens incurred, or pledges and
deposits in connection with the performance of tenders, bids, leases, workers'
compensation, bankers' acceptances, unemployment insurance and other social
security benefits, and leases, surety and appeal bonds, government contracts and
other obligations of like nature incurred by the Company or any Restricted
Subsidiary in the ordinary course of business; (vii) Liens imposed by law,
including, without limitation, mechanics', carriers', warehousemen's,
material-men's, suppliers' and vendors' Liens, incurred by the Company or any
Restricted Subsidiary in the ordinary course of business; (viii) Liens for ad
valorem, income or property taxes or assessments and similar charges which
either are not delinquent or are being contested in good faith by appropriate
proceedings for which the Company has set aside on its books reserves to the
extent required by GAAP; (ix) Liens existing on the Issue Date; (x) Liens
securing the Notes or Guarantees; (xi) Liens securing or arising from Purchase
Money Obligations permitted to be incurred under clause (ix) of the definition
of Permitted Indebtedness, provided such Liens relate to the property (and
monetary proceeds thereof) which was acquired or constructed with such Purchase
Money Obligations and the Capital Stock of any Person formed to acquire such
property and that does not own any other material property; (xii) easements,
rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Restricted Subsidiaries; (xiii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries, taken as a whole; (xiv) Liens arising from the
rendering of a final judgment or order against the Company or any Restricted
Subsidiary of the Company that does not give rise to an Event of Default; (xv)
Liens securing reimbursement obligations with respect to letters of credit that
encumber documents and other property relating to such letters of credit and the
products and proceeds thereof; (xvi) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (xvii) Liens encumbering customary
initial deposits and margin deposits, and other Liens that are either within the
general parameters customary in the industry and incurred in the ordinary course
of business, in each case, securing Indebtedness under Interest Rate Agreement
Obligations and Currency Agreement Obligations and forward contracts, options,
future contracts, futures, options or similar agreements or arrangements
designed to protect the Company or any of its Restricted Subsidiaries from
fluctuations in the price of commodities; and (xviii) Liens on or sales of
receivables in the ordinary course of business (including in connection with the
establishment of an accounts receivable facility).
'Person' means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
'Preferred Stock' as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over Capital Stock of any other class of such Person.
'Purchase Money Obligation' means any Indebtedness secured by a Lien on
assets related to the business of the Company or the Restricted Subsidiaries,
and any additions and accessions thereto, which are purchased or constructed by
the Company or any Restricted Subsidiary at any time after the Issue Date;
provided that (i) any security agreement or conditional sales or other title
retention contract pursuant to which the Lien on such assets is created
(collectively a 'Security Agreement') shall be entered into within 180 days
after the purchase or substantial completion of the construction of such assets
and shall at all times be confined solely to the assets so purchased or
acquired, any additions and accessions thereto and any proceeds therefrom, (ii)
at no time shall the aggregate principal amount of the outstanding Indebtedness
secured thereby be increased, except in connection with the purchase of
additions and accessions thereto and except in respect of fees and other
obligations in
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respect of such Indebtedness and (iii) (A) the aggregate outstanding principal
amount of Indebtedness secured thereby (determined on a per asset basis in the
case of any additions and accessions) shall not at the time such Security
Agreement is entered into exceed 100% of the purchase price to the Company or
any Restricted Subsidiary of the assets subject thereto or (B) the Indebtedness
secured thereby shall be with recourse solely to the assets so purchased or
acquired, any additions and accessions thereto and any proceeds therefrom.
'Refinancing Expenses' means (i) legal, accounting, printing, engraving,
registration, blue sky and other fees and expenses incurred by the Company which
are directly attributable to the Offering, the amendment and restatement of the
Freedom Credit Agreement, the initial borrowings under the Amended and Restated
Credit Agreement and the repayment of amounts outstanding under the Existing
Credit Agreements, the Cash Equity Investment and the Additional Equity
Investments and the Exchange Offer, and (ii) fees, discounts and commissions
paid to the Initial Purchasers in connection with the Offering or to any agent
or lender under the Amended and Restated Credit Agreement.
'Restricted Investment' means an Investment other than a Permitted
Investment.
'Restricted Payment' means (i) any dividend or other distribution declared
or paid on any Capital Stock of the Company (other than dividends or
distributions payable solely in Capital Stock (other than Disqualified Stock) of
the Company or dividends or distributions payable to the Company or any
Restricted Subsidiary); (ii) any payment to purchase, redeem or otherwise
acquire or retire for value any Capital Stock of the Company; (iii) any
voluntary or optional payment to purchase, redeem, defease or otherwise acquire
or retire for value any Indebtedness that is subordinated in right of payment to
the Notes other than a purchase, redemption, defeasance or other acquisition or
retirement for value that is paid for with the proceeds of Refinancing
Indebtedness that is permitted under the covenant described under '--Certain
Covenants--Limitation on Incurrence of Indebtedness'; or (iv) any Restricted
Investment.
'Restricted Subsidiary' means each direct or indirect Subsidiary of the
Company other than an Unrestricted Subsidiary.
'Senior Bank Debt' means (i) the Indebtedness outstanding or arising under
the Amended and Restated Credit Agreement, (ii) all obligations incurred by or
owing to the holders of such Indebtedness outstanding or arising under the
Amended and Restated Credit Agreement (including, but not limited to, all fees
and expenses of counsel and all other charges, fees and expenses), and (iii) all
interest rate agreement obligations arising in connection thereafter with any
party to the Amended and Restated Credit Agreement.
'Senior Debt' means with respect to the Company, the principal of and
interest (including post-petition interest) on, and all other amounts owing in
respect of, (i) Senior Bank Debt, (ii) any other Indebtedness incurred by the
Company (including, but not limited to, reasonable fees and expenses of counsel
and all other charges, fees and expenses incurred in connection with such
Indebtedness), unless the instrument creating or evidencing such Indebtedness or
pursuant to which such Indebtedness is outstanding expressly provides that such
Indebtedness is on a parity with or subordinated in right of payment to the
Notes. Notwithstanding the foregoing, Senior Debt shall not include (i) any
Indebtedness for federal, state, local or other taxes, (ii) any Indebtedness
among or between the Company, any Restricted Subsidiary and/or their Affiliates
which is not pledged or otherwise assigned to the agent for the holders of
Senior Bank Debt, (iii) any Indebtedness incurred for the purchase of goods or
materials, or for services obtained, in the ordinary course of business or any
obligations in respect of any such Indebtedness, (iv) any Indebtedness that is
incurred in violation of the Indenture, (v) Indebtedness evidenced by the Notes
or (vi) Indebtedness of a person that is expressly subordinate or junior in
right of payment to any other Indebtedness of such Person.
'Series A Redeemable Preferred Stock' means the 2,800 shares of Freedom
Textile's $1,000 par value Series A Preferred Stock, as the terms of such
Preferred Stock were in effect on the Issue Date.
'Significant Subsidiary' means any Subsidiary that would be a 'significant
subsidiary' as defined in Article 1, Rule 1-02 of Regulation S-X promulgated
pursuant to the Securities Act, as such Regulation S-X is in effect on the Issue
Date.
'Subordinated Indebtedness' means Indebtedness of the Company subordinated
in right of payment to the Notes.
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'Subsidiary' of a Person means (i) any corporation more than 50% of the
outstanding voting power of the Voting Stock of which is owned or controlled,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person, or by such Person and one or more other Subsidiaries thereof, or
(ii) any limited partnership of which such Person or any Subsidiary of such
Person is a general partner, or (iii) any other Person (other than a corporation
or limited partnership) in which such Person, or one or more other Subsidiaries
of such Person, or such Person and one or more other Subsidiaries thereof,
directly or indirectly, has more than 50% of the outstanding partnership or
similar interests or has the power, by contract or otherwise, to direct or cause
the direction of the policies, management and affairs thereof.
'Surviving Person' means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
'Treasury Rate' means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two business days prior to the date fixed
for prepayment (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the then
remaining term to October 15, 2001; provided, however, that if the then
remaining term to October 15, 2001 is not equal to the constant maturity of a
United States Treasury Security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the then
remaining term to October 15, 2001 is less than one year, the weekly average
yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
'Unrestricted Subsidiary' means Indiamalt and any other Subsidiary of the
Company (other than a Guarantor) designated as such pursuant to and in
compliance with the covenant described under '--Limitation on Designations of
Unrestricted Subsidiaries.' Any such designation may be revoked by a Board
Resolution of the Company delivered to the Trustee, subject to the provisions of
such covenant.
'Voting Stock' of a Person means Capital Stock of such Person of the class
or classes pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
'Weighted Average Life to Maturity' means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, with (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
aggregate principal amount of such Indebtedness.
'Wholly Owned Restricted Subsidiary' means any Restricted Subsidiary with
respect to which all of the outstanding voting securities (other than directors'
qualifying shares) of which are owned, directly or indirectly, by the Company or
a Surviving Person of any Disposition involving the Company, as the case may be.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the New Notes will be issued in fully
registered form, without coupons. Except as described below, the New Notes will
be deposited with, or on behalf of, The Depository Trust Company, New York, New
York (the 'Depository'), and registered in the name of Cede & Co. ('Cede') as
the Depository's nominee in the form of a global Note (the 'Global Note') or
will remain in the custody of the Trustee pursuant to the FAST Balance
Certificate Agreement between the Depository and the Trustee.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company and organized under the laws of the State of New
York, a member of the Federal Reserve System, a 'clearing corporation' within
the meaning of the New York Uniform Commercial Code, and 'a clearing agency'
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository was created to hold securities of institutions that have accounts
with the Depository ('participants') and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities
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certificates. The Depository's participants include securities brokers and
dealers (which may include the Initial Purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to the
Depository's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. The Depository
agrees with and represents to its participants that it will administer its
book-entry system in accordance with its rules and by-laws and requirements of
law.
The Depository will credit, on its book-entry registration and transfer
system, the respective principal amounts of the New Notes represented by such
Global Note to the accounts of participants. Ownership of beneficial interests
in the Global Note will be limited to participants or persons that may hold
interests through participants. Ownership of beneficial interests in the Global
Note will be shown on, and the transfer of those ownership interests will be
effected only through, records maintained by the Depository (with respect to
participants' interest) and such participants (with respect to the owners of
beneficial interests in the Global Note other than participants). The laws of
some jurisdictions may require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and laws
may impair the ability to transfer or pledge beneficial interests in the Global
Note.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Note, the Depository or such nominee, as the case may be,
will be considered the sole owner and holder of the related New Notes for all
purposes of such New Notes. Owners of beneficial interests in the Global Note
will not be entitled to have the New Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of certificated Notes in definitive form and will not be considered to
be the owners or holders of any New Notes under the Global Note. Accordingly,
each person owning a beneficial interest in the Global Note must rely on the
procedures of the Depository and, if such person is not a participant, on the
procedures of the participant through which such person owns its interests, to
exercise any right of a holder of New Notes under the Global Note. The Company
understands that under existing industry practice, in the event an owner of a
beneficial interest in the Global Note desires to take any action that the
Depository, as the holder of the Global Note, is entitled to take, the
Depository would authorize the participants to take such action, and that the
participants would authorize beneficial owners owning through such participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Payment of principal of and interest on New Notes represented by the Global
Note registered in the name of and held by the Depository or its nominee will be
made to the Depository or its nominee, as the case may be, as the registered
owner and holder of the Global Note.
The Company expects that the Depository or its nominee, upon receipt of any
payment of principal or interest in respect of the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of the Depository or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Notes through such participants will be governed by standing instructions and
customary practices, and will be the responsibility of such participants. The
Company will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Notes for any Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for
other aspect of the relationship between the Depository and its participants or
the relationship between such participants and the owners of beneficial
interests in the Global Notes owning through such participants.
Unless and until they are exchanged in whole or in part for certificated
New Notes in definitive form, the Global Note may not be transferred except as a
whole by the Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository.
Beneficial owners of New Notes registered in the name of the Depository or
its nominee will be entitled to be issued, upon request, New Notes in definitive
certificated form.
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CERTIFICATED NOTES
The New Notes represented by the Global Note are exchangeable for
certificated New Notes in definitive form of like tenor as such New Notes in
denominations of U.S.$1,000 and integral multiples thereof if (i) the Depository
notifies the Company that it is unwilling or unable to continue as Depository
for the Global Note or if at any time the Depository ceases to be a clearing
agency registered under the Exchange Act, (ii) the Company in its discretion at
any time determines not to have all of the New Notes represented by the Global
Note or (iii) a default entitling the holders of the Notes to accelerate the
maturity thereof has occurred and is continuing. Any New Note that is
exchangeable pursuant to the preceding sentence is exchangeable for certificated
Notes issuable in authorized denominations and registered in such names as the
Depository shall direct.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor Freedom will have any responsibility for the performance by the
Depository or its respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
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EXCHANGE OFFER; REGISTRATION RIGHTS
In connection with the initial issuance and sale of the Old Notes, the
Initial Purchasers and their assignees became entitled to the benefits of the
Registration Rights Agreement. Pursuant to the Registration Rights Agreement
with the Initial Purchasers, for the benefit of the holders of the Old Notes,
the Company is obligated, at its expense, (i) to file the Registration Statement
of which this Prospectus forms a part with the SEC with respect to a registered
offer to exchange the Old Notes for the New Notes, which will have terms
substantially identical in all material respect to those of the Old Notes
(except that the New Notes will not contain terms with respect to transfer
restrictions) on or before December 16, 1996 and (ii) to use its best efforts to
cause the Registration Statement to be declared effective under the Securities
Act by February 14, 1997. Upon the effectiveness of the Registration Statement,
the Company will offer the New Notes in exchange for surrender of the Old Notes.
The Company will keep the Exchange Offer open for 30 days (or longer if required
by applicable law) after the date notice of the Exchange Offer is mailed to the
Holders of the Old Notes. For each Old Note surrendered to the Company pursuant
to the Exchange Offer, the Holder of such Old Note will receive a New Note
having a principal amount equal to that of the surrendered Old Note. Interest on
each New Note will accrue from the last interest payment date on which interest
was paid on the Old Note surrendered in exchange thereof or, if no interest has
been paid on such Old Note, from October 17, 1996. Under existing
interpretations of the SEC staff, the New Notes would in general be freely
transferable by holders other than affiliates of the Company after the Exchange
Offer without further registration under the Securities Act if the holder of the
New Notes represents that it is acquiring the New Notes in the ordinary course
of its business, that it has no arrangement or understanding with any person to
participate in the distribution of New Notes and that it is not an affiliate of
the Company, as such terms are interpreted by the SEC; provided that
broker-dealers ('Participating Broker-Dealers') receiving New Notes in the
Exchange Offer will have a prospectus delivery requirement with respect to
resales of such New Notes. The SEC has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to New Notes (other than a resale of an unsold allotment from the original sale
of the Old Notes) with this Prospectus contained in the Registration Statement.
Under the Registration Rights Agreement, the Company is required to allow
Participating Broker-Dealers and other persons, if any, with similar prospectus
delivery requirements to use this Prospectus in connection with the resale of
such New Notes.
Each holder of Old Notes (other than certain specified holders) who wishes
to exchange such Old Notes for New Notes in the Exchange Offer will be required
to make certain representations, including representations that any New Notes to
be received by it will be acquired in the ordinary course of its business and
that at the time of the commencement of the Exchange Offer it has no arrangement
with any person to participate in the distribution (within the meaning of the
Securities Act) of the New Notes.
Freedom has agreed to pay all expenses incident to the Exchange Offer and
will indemnify the Holders against certain liabilities, including liabilities
under the Securities Act.
In the event that (i) applicable interpretations of the staff of the
Commission do not permit Freedom to effect such an Exchange Offer, (ii) for any
other reason the Exchange Offer is not consummated within 150 days of the Issue
Date, (iii) a holder of the Old Notes is not permitted to participate in the
Exchange Offer or does not receive freely tradeable New Notes pursuant to the
Exchange Offer or (iv) under certain circumstances, the Initial Purchasers of
the Old Notes or the holders of a majority in aggregate principal amount of Old
Notes so request (any of (i) through (iv) being an 'Event' and the date thereof,
the 'Event Date'), Freedom will, at its cost, (a) as promptly as practicable
and, in any event, within 30 days after such Event Date (which shall be no
earlier than 60 days after the Issue Date), file a shelf registration statement
(the 'Shelf Registration Statement') covering resales of the Notes, (b) use its
best efforts to cause the Shelf Registration Statement to be declared effective
under the Securities Act and (c) use its best efforts to keep effective the
Shelf Registration Statement for a period of three years after the Issue Date or
such shorter period when all Notes have been sold thereunder. Freedom will, in
the event a Shelf Registration Statement is declared effective, provide to each
holder of the Notes copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement has become effective and take certain other actions as are required to
permit unrestricted resales of the Notes. A holder of Notes that sells such
Notes pursuant to the Shelf Registration Statement generally will be required to
be named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement that are applicable
to such a holder (including certain indemnification obligations).
87
<PAGE>
If on or prior to 60 days following the Issue Date, an Exchange Offer
Registration Statement has not been filed with the Commission, additional
interest will accrue on the Old Notes from and including the 61st day following
the Issue Date until, but excluding, the date such registration statement is
filed. In addition, if on or prior to 120 days following the Issue Date, such
Exchange Offer Registration Statement is not declared effective, additional
interest will accrue on the Old Notes from and including the 121st day following
the Issue Date until, but excluding, the date such registration statement is
declared effective. Further, if on or prior to 150 days following the Issue Date
the Exchange Offer is not consummated, additional interest will accrue on the
Old Notes from and including the 151st day following the Issue Date until, but
excluding, the consummation of the Exchange Offer. If an Event shall have
occurred, and if by 180 days after the Issue Date a Shelf Registration is not
declared effective, additional interest will accrue on the Old Notes not
exchanged as a result of such law or interpretation from and including the 181st
day after the Issue Date, until the effective date of the Shelf Registration
Statement. In each case, additional interest will be payable semi-annually in
arrears, with the first semiannual payment due on the first interest payment
date in respect of the Old Notes following the date from which additional
interest begins to accrue, and will accrue, under each circumstance set forth
above at a rate per annum equal to an additional one-half of one percent (0.50%)
of the principal amount of the Old Notes upon the occurrence of each such
circumstance, which rate will increase by one-quarter of one percent (0.25%) for
each 90-day period that such additional interest continues to accrue under any
such circumstance, with an aggregate maximum increase in the interest rate per
annum equal to one percent (1.0%).
If applicable, in the event that the Shelf Registration Statement ceases to
be effective prior to the third anniversary of the Issue Date for a period in
excess of 45 days, whether or not consecutive, in any given year, then, the
interest rate borne by the Notes shall increase by an additional one-half of one
percent (0.50%) per annum on the 46th day in the applicable year such Shelf
Registration Statement ceases to be effective. Such interest rate will increase
by an additional one-quarter of one percent (0.25%) per annum for each
additional 90 days that such Shelf Registration Statement is not effective,
subject to the same aggregate maximum increase in the interest rate per annum of
one percent (1.0%) referred to above. Upon the filing of the Exchange Offer
Registration Statement, the effectiveness of the Exchange Offer Registration
Statement, or the consummation of the Exchange Offer, as the case may be, the
interest rate borne by the Notes will be reduced by the full amount of any such
increase to the extent that such increase related to the failure of any such
event to have occurred. Upon the effectiveness of a Shelf Registration
Statement, the interest rate borne by the Notes shall be reduced to the original
interest rate of the Notes unless and until increased as described above.
Interest on each New Note will accrue from October 17, 1996 or from the
most recent interest payment date to which interest was paid on the Old Note
surrendered in exchange therefor or on the New Note, as the case may be. The New
Notes will bear interest at 10 5/8% per annum, except that, if any interest
accrues on the New Notes in respect of any period prior to their issuance, such
interest will accrue at the rate or rates borne by the Notes from time to time
during such period.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
consequences associated with the exchange of Old Notes for New Notes and the
ownership and disposition of the New Notes by holders who acquired the New Notes
pursuant to the Exchange Offer. The summary is based upon current laws,
regulations, rulings and judicial decisions, all of which are subject to change.
The discussion below does not address all aspects of United States federal
income taxation that may be relevant to particular holders in the context of
their specific investment circumstances or certain types of holders subject to
special treatment under such laws (for example, financial institutions, banks,
tax-exempt organizations and insurance companies). In addition, the discussion
does not address any aspect of state, local or foreign taxation and assumes that
a holder of the New Notes (i) will hold them as 'capital assets' (generally,
property held for investment) within the meaning of Section 1221 of the Code and
(ii) will not own, directly or indirectly, 10% or more of the total combined
voting power of all classes of stock of Freedom entitled to vote.
For purposes of the discussion, a 'United States holder' is an individual
who is a citizen or resident of the United States, a corporation, partnership or
other entity created under the laws of the United States or any
88
<PAGE>
political subdivision thereof, or an estate or trust that is subject to United
States federal income taxation without regard to the source of income and a
'Non-United States holder' is any holder who is not a United States holder.
PROSPECTIVE PURCHASERS OF THE NEW NOTES ARE URGED TO CONSULT THEIR TAX
ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
ACQUIRING, OWNING AND DISPOSING OF THE NEW NOTES AS WELL AS THE APPLICATION OF
STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not be treated as an exchange or other taxable event for U.S. federal
income tax purposes because under Treasury regulations, the New Notes should not
be considered to differ materially in kind or extent from the Old Notes. Rather,
the New Notes received by a holder should be treated as a continuation of the
Old Notes in the hands of such holder. As a result, there should be no U.S.
federal income tax consequences to holders who exchange Old Notes for New Notes
pursuant to the Exchange Offer and any such holder should have the same tax
basis and holding period in the New Notes as it had in the Old Notes immediately
before the exchange.
UNITED STATES HOLDERS
Interest payable on the New Notes will be includible in the income of a
United States holder in accordance with such holder's regular method of
accounting. If a New Note is redeemed, sold or otherwise disposed of, a United
States holder generally will recognize gain or loss equal to the difference
between the amount realized on the sale or other disposition of such New Note
(to the extent such amount does not represent accrued but unpaid interest) and
such holder's tax basis in the New Note. Subject to the market discount rules
discussed below, such gain or loss will be capital gain or loss, assuming that
the holder has held the New Note as a capital asset, and will be long-term if
the holder has held the New Note for more than one year at the time of
disposition.
Under the market discount rules of the Code, a holder (other than a holder
who made the election described below) who purchased an Old Note with 'market
discount' (generally defined as the amount by which the stated redemption price
at maturity exceeds the holder's purchase price) will be required to treat any
gain recognized on the redemption, sale or other disposition of the New Note
received in the exchange as ordinary income to the extent of the market discount
that accrued during the holding period of such New Note (which would include the
holding period of the Old Note). A holder who has elected under applicable Code
provisions to include market discount in income annually as such discount
accrues will not, however, be required to treat any gain recognized as ordinary
income under these rules. Holders should consult their tax advisors as to the
portion of any gain that would be taxable as ordinary income under these
provisions.
NON-UNITED STATES HOLDERS
An investment in the New Notes by a Non-United States holder generally will
not give rise to any United States federal income tax consequences if the
interest received or any gain recognized on the sale, redemption or other
disposition of the New Notes by such holder is not treated as effectively
connected with the conduct by such holder of a trade or business in the United
States, and in the case of gains derived by an individual, such individual is
not present in the United States for 183 days or more and certain other
requirements are met. Under current Treasury regulations, in order to avoid
back-up withholding of 31% on payments of interest (i) a Non-United States
holder of the New Notes generally must certify to the issuer or its agent, under
penalties of perjury, that it is not a United States person and complete and
provide the payor with a U.S. Treasury Form W-8 (or a suitable substitute form),
which includes its name and address, or (ii) a securities clearing organization,
bank or other financial organization that holds customers' securities in the
ordinary course of business (a 'financial institution') and holds the New Note,
must certify under penalties of perjury that such a Form W-8 (or suitable
substitute form) has been received from the beneficial owner of the New Notes by
it or by a financial institution between it and the beneficial owner, and must
furnish the payor with a copy thereof.
On April 22, 1996, the Internal Revenue Service proposed regulations (the
'Proposed Regulations') which, if enacted in their current form, could affect
the procedures to be followed by a Non-United States holder in establishing such
holder's status as a Non-United States holder for purposes of the backup
withholding rules discussed above. The Proposed Regulations, if adopted in their
current form, generally would be effective for payments made after December 31,
1997. Prospective investors should consult their tax advisors concerning the
potential adoption of the Proposed Regulations and the potential effect of such
regulations on an investment in the New Notes.
89
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. Freedom has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 1997 (90 days from the date of this Prospectus),
all dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an 'underwriter' within the meaning of the
Securities Act and any profit on any such resale of New Notes and any commission
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date Freedom will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. Freedom has agreed to pay all expenses incident to the Exchange
Offer (including the expenses of one counsel for the holders of the Notes) other
than commissions or concessions of any brokers or dealers and will indemnify the
Holders of the Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters as to the validity of the New Notes and the
Guarantees offered hereby will be passed upon for the Company by Skadden, Arps,
Slate, Meagher & Flom LLP, New York, New York. Certain legal matters relating to
the issuance of the Guarantees offered hereby will be passed upon for the
Guarantors as to matters of Washington law by Bogle & Gates, Seattle,
Washington, as to matters of German law by Boesebeck, Barz & Partner, Frankfurt,
The Federal Republic of Germany, and as to matters of Guam law by Carlsmith Ball
Wichman Case & Ichiki, Agana, Guam.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1994 and
1995, and the consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995, included in this Prospectus have been included herein in reliance on
the report of Coopers and Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The consolidated statements of operations, changes in stockholders' equity
and cash flows of the Predecessor for the period January 1, 1993 to September 9,
1993, included in this Prospectus have been included herein in reliance on the
report, which includes explanatory paragraphs regarding the Predecessor's change
in accounting for income taxes and maintenance parts, of Coopers and Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
90
<PAGE>
The consolidated balance sheets of Kalama and subsidiaries as of September
30, 1993, and May 26, 1994, and the consolidated statements of operations,
changes in stockholder's equity and cash flows for the year ended September 30,
1993, and the period October 1, 1993 to May 26, 1994, included in this
Prospectus have been included herein in reliance on the report, which includes
explanatory paragraphs regarding Kalama's change in its method of accounting for
income taxes and involvement in various environmental matters, of KPMG Peat
Marwick LLP, independent certified public accountants, given on the authority of
that firm as experts in accounting and auditing.
91
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES (THE 'COMPANY')
Report of Coopers & Lybrand L.L.P., Independent Accountants................................................ F-2
Financial Statements:
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996 (unaudited)................. F-3
Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and 1995
and the six months ended June 30, 1995 and 1996 (unaudited).............................................. F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended
December 31, 1993, 1994 and 1995......................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995
and the six months ended June 30, 1995 and 1996 (unaudited).............................................. F-6
Notes to Consolidated Financial Statements................................................................. F-7
HILTON DAVIS CHEMICAL CO. AND SUBSIDIARY
Report of Coopers & Lybrand L.L.P., Independent Accountants................................................ F-31
Financial Statements:
Consolidated Statement of Operations for the period January 1, 1993 to September 9, 1993................... F-32
Consolidated Statement of Changes in Stockholders' Equity (Deficit) for the period January 1, 1993 to
September 9, 1993........................................................................................ F-33
Consolidated Statement of Cash Flows for the period January 1, 1993 to September 9, 1993................... F-34
Notes to Consolidated Financial Statements................................................................. F-35
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
Report of KPMG Peat Marwick LLP, Independent Accountants................................................... F-40
Financial Statements:
Consolidated Balance Sheets as of September 30, 1993 and May 26, 1994...................................... F-41
Consolidated Statements of Operations for the year ended September 30, 1993 and for the period October 1,
1993 to May 26, 1994..................................................................................... F-42
Consolidated Statements of Stockholder's Equity for the year ended September 30, 1993 and for the period
October 1, 1993 to May 26, 1994.......................................................................... F-43
Consolidated Statements of Cash Flows for the year ended September 30, 1993 and for the period October 1,
1993 to May 26, 1994..................................................................................... F-44
Notes to Consolidated Financial Statements................................................................. F-45
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Freedom Chemical Company
Philadelphia, Pennsylvania
We have audited the accompanying consolidated balance sheets of Freedom Chemical
Company and Subsidiaries as of December 31, 1994 and 1995 and the related
consolidated statements of operations, changes in stockholders' equity (deficit)
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Freedom Chemical
Company and Subsidiaries as of December 31, 1994 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
600 Lee Road
Wayne, Pennsylvania
March 26, 1996
F-2
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................................... $ 2,411 $ 1,450
Accounts receivable, net of allowance for doubtful accounts of $287, $260 and $374,
respectively............................................................................... 28,724 39,050
Refundable income taxes...................................................................... -- 2,742
Inventories.................................................................................. 39,382 46,848
Prepaid expenses and other current assets.................................................... 3,647 4,812
Environmental indemnification................................................................ 4,346 780
Deferred income taxes........................................................................ 3,240 2,107
-------- --------
Total current assets....................................................................... 81,750 97,789
Property, Plant and Equipment:
Land......................................................................................... 3,072 3,658
Buildings and improvements................................................................... 11,617 14,357
Machinery and equipment...................................................................... 75,148 97,679
Other........................................................................................ 4,373 4,506
-------- --------
94,210 120,200
Less accumulated depreciation................................................................. 8,854 18,734
-------- --------
85,356 101,466
Other assets:
Intangible assets, net....................................................................... 48,866 34,928
Environmental indemnification................................................................ 5,763 1,074
Deferred financing costs, net................................................................ 2,929 3,641
Investments in joint ventures................................................................ -- 511
Other........................................................................................ 6,400 3,747
-------- --------
Total assets............................................................................... $231,064 $243,156
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt......................................................... $ 7,112 $ 6,142
Short-term borrowings........................................................................ -- 12,238
Notes payable................................................................................ 165 753
Accounts payable............................................................................. 18,220 22,928
Accounts payable--shareholders............................................................... 273 --
Accrued expenses............................................................................. 8,883 8,985
Accrued compensation......................................................................... 4,425 4,618
Accrued restructuring and other charges...................................................... -- 3,470
Environmental................................................................................ 4,346 1,200
-------- --------
Total current liabilities..................................................................... 43,424 60,334
Long-term debt................................................................................ 93,643 119,520
Environmental................................................................................. 37,427 18,066
Deferred income taxes......................................................................... 9,740 11,058
Postretirement benefits....................................................................... 3,951 4,211
Accrued restructuring and other charges....................................................... -- 2,429
Other......................................................................................... 1,425 2,151
Minority interest............................................................................. 3,095 3,095
Commitments and contingencies................................................................. -- --
Mandatory redeemable preferred stock:
Series B, cumulative, $1,000 par value, authorized 40,000 shares; issued and outstanding
21,322 shares, stated at liquidation value of $1,000 per share plus accrued and unpaid
dividends of $4,891, $8,192 and $9,500, respectively....................................... 26,213 29,514
Series C, cumulative, $1,000 par value, authorized 15,000 shares; issued 9,137 shares,
outstanding 9,137, 8,976 and 8,916 shares, respectively, stated at liquidation value of
$1,054 per share plus accrued and unpaid dividends of $769, $2,079 and $2,707,
respectively............................................................................... 10,399 11,709
Less: Treasury stock, at cost (0, 161 and 221 shares of Series C preferred, respectively).... -- (188)
-------- --------
36,612 41,035
Stockholders' equity (deficit):
Common stock:
Series A, $.01 par value, authorized 85,000 shares; issued 59,355 shares, outstanding 59,355,
59,070 and 58,964 shares, respectively..................................................... 1 1
Series B, $.01 par value, authorized 10,000 shares; none issued or outstanding............... -- --
Additional paid-in capital.................................................................... 1,866 --
Accumulated deficit........................................................................... -- (19,735)
Cumulative translation adjustment............................................................. 80 1,281
-------- --------
1,947 (18,453)
Less: Stockholder note receivable............................................................. (200) (200)
Treasury stock, at cost (0, 285 and 391 shares of Series A common, respectively)............. -- (33)
Minimum pension liability.................................................................... -- (57)
-------- --------
Total stockholders' equity (deficit).......................................................... 1,747 (18,743)
-------- --------
Total liabilities and stockholders' equity (deficit)....................................... $231,064 $243,156
-------- --------
-------- --------
<CAPTION>
JUNE 30,
1996
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................................... $ 1,853
Accounts receivable, net of allowance for doubtful accounts of $287, $260 and $374,
respectively............................................................................... 49,750
Refundable income taxes...................................................................... 723
Inventories.................................................................................. 53,913
Prepaid expenses and other current assets.................................................... 4,057
Environmental indemnification................................................................ 792
Deferred income taxes........................................................................ 1,755
------------
Total current assets....................................................................... 112,843
Property, Plant and Equipment:
Land......................................................................................... 3,923
Buildings and improvements................................................................... 14,551
Machinery and equipment...................................................................... 101,076
Other........................................................................................ 4,470
------------
124,020
Less accumulated depreciation................................................................. 24,013
------------
100,007
Other assets:
Intangible assets, net....................................................................... 33,885
Environmental indemnification................................................................ 407
Deferred financing costs, net................................................................ 3,201
Investments in joint ventures................................................................ 819
Other........................................................................................ 3,285
------------
Total assets............................................................................... $254,447
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt......................................................... $ 7,879
Short-term borrowings........................................................................ 16,240
Notes payable................................................................................ 1,984
Accounts payable............................................................................. 29,728
Accounts payable--shareholders............................................................... --
Accrued expenses............................................................................. 9,969
Accrued compensation......................................................................... 4,587
Accrued restructuring and other charges...................................................... 1,924
Environmental................................................................................ 1,200
------------
Total current liabilities..................................................................... 73,511
Long-term debt................................................................................ 115,655
Environmental................................................................................. 16,012
Deferred income taxes......................................................................... 11,075
Postretirement benefits....................................................................... 4,372
Accrued restructuring and other charges....................................................... 2,275
Other......................................................................................... 2,349
Minority interest............................................................................. 3,399
Commitments and contingencies................................................................. --
Mandatory redeemable preferred stock:
Series B, cumulative, $1,000 par value, authorized 40,000 shares; issued and outstanding
21,322 shares, stated at liquidation value of $1,000 per share plus accrued and unpaid
dividends of $4,891, $8,192 and $9,500, respectively....................................... 30,822
Series C, cumulative, $1,000 par value, authorized 15,000 shares; issued 9,137 shares,
outstanding 9,137, 8,976 and 8,916 shares, respectively, stated at liquidation value of
$1,054 per share plus accrued and unpaid dividends of $769, $2,079 and $2,707,
respectively............................................................................... 12,337
Less: Treasury stock, at cost (0, 161 and 221 shares of Series C preferred, respectively).... (262)
------------
42,897
Stockholders' equity (deficit):
Common stock:
Series A, $.01 par value, authorized 85,000 shares; issued 59,355 shares, outstanding 59,355,
59,070 and 58,964 shares, respectively..................................................... 1
Series B, $.01 par value, authorized 10,000 shares; none issued or outstanding............... --
Additional paid-in capital.................................................................... --
Accumulated deficit........................................................................... (16,777)
Cumulative translation adjustment............................................................. (19)
------------
(16,795)
Less: Stockholder note receivable............................................................. (200)
Treasury stock, at cost (0, 285 and 391 shares of Series A common, respectively)............. (46)
Minimum pension liability.................................................................... (57)
------------
Total stockholders' equity (deficit).......................................................... (17,098)
------------
Total liabilities and stockholders' equity (deficit)....................................... $254,447
------------
------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............................................. $54,831 $187,780 $296,888 $156,925 $155,787
Cost of goods sold.................................... 45,295 144,845 233,533 119,966 116,482
------- -------- -------- -------- --------
Gross profit..................................... 9,536 42,935 63,355 36,959 39,305
Selling, general and administrative expense........... 8,292 26,948 50,399 25,919 24,158
Noncash compensation expense (note 18)................ -- 915 150 75 75
Research and development expense...................... 735 2,331 4,950 2,305 2,499
Restructuring and other charges (note 17)............. -- -- 12,495 2,662 --
------- -------- -------- -------- --------
Operating income (loss).......................... 509 12,741 (4,639) 5,998 12,573
Interest and debt expense, net of capitalized interest
of $168 and $111 for the year ended December 31,
1995 and the six months ended June 30, 1995,
respectively........................................ 1,556 6,682 13,805 6,992 6,789
Registration costs (note 17).......................... -- -- 2,187 -- --
Other income.......................................... 37 545 5 303 226
------- -------- -------- -------- --------
Income (loss) before minority interest, income
taxes and extraordinary item................... (1,010) 6,604 (20,626) (691) 6,010
Minority interest..................................... 251 284 247 126 126
------- -------- -------- -------- --------
Income (loss) before income taxes and
extraordinary item............................. (1,261) 6,320 (20,873) (817) 5,884
Provision (benefit) for income taxes.................. (291) 2,858 (3,809) 1,291 1,443
Equity in income of joint ventures.................... -- -- 74 120 455
------- -------- -------- -------- --------
Net income (loss) before extraordinary item...... (970) 3,462 (16,990) (1,988) 4,896
Extraordinary loss, net of applicable income tax
benefit of $725..................................... -- (1,276) -- -- --
------- -------- -------- -------- --------
Net income (loss)................................ (970) 2,186 (16,990) (1,988) 4,896
Less: preferred dividends............................. 1,621 3,694 4,611 1,883 1,862
------- -------- -------- -------- --------
Net income (loss) applicable to common
shares......................................... $(2,591) $ (1,508) $(21,601) $ (3,871) $ 3,034
------- -------- -------- -------- --------
------- -------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES A
COMMON STOCK ADDITIONAL CUMULATIVE STOCKHOLDER MINIMUM
----------------- PAID-IN ACCUMULATED TRANSLATION NOTE TREASURY PENSION
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT RECEIVABLE STOCK LIABILITY TOTAL
------- ------- ---------- ----------- ---------- ----------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1992.......... 7,500 $ 1 $ 404 $ (305) $ -- $ -- $ -- $ -- $ 100
1993:
Issuance of common
stock............. 30,000 -- 3,000 -- -- -- -- -- 3,000
Issuance of
stockholder note
receivable........ -- -- -- -- -- (200) -- -- (200)
Foreign currency
translation....... -- -- -- -- (44) -- -- -- (44)
Accrued and unpaid
preferred
dividends for the
year ended
December 31,
1993.............. -- -- (1,621) -- -- -- -- -- (1,621)
Loss................ -- -- -- (970) -- -- -- -- (970)
------- ------- ---------- ----------- ---------- ----------- -------- ------- --------
Balance at December
31, 1993.......... 37,500 1 1,783 (1,275) (44) (200) -- -- 265
1994:
Issuance of common
stock............. 21,855 -- 2,866 -- -- -- -- -- 2,866
Foreign currency
translation....... -- -- -- -- 124 -- -- -- 124
Accrued and unpaid
preferred
dividends for the
year ended
December 31,
1994.............. -- -- (2,783) (911) -- -- -- -- (3,694)
Net income.......... -- -- -- 2,186 -- -- -- -- 2,186
------- ------- ---------- ----------- ---------- ----------- -------- ------- --------
Balance at December
31, 1994.......... 59,355 1 1,866 -- 80 (200) -- -- 1,747
1995:
Foreign currency
translation....... -- -- -- -- 1,201 -- -- -- 1,201
Treasury shares
purchased (285
Series A common
shares)........... -- -- -- -- -- -- (33) -- (33)
Accrued and unpaid
preferred
dividends for the
year ended
December 31,
1995.............. -- -- (1,866) (2,745) -- -- -- -- (4,611)
Minimum pension
liability......... -- -- -- -- -- -- -- (57 ) (57)
Loss................ -- -- -- (16,990) -- (16,990)
------- ------- ---------- ----------- ---------- ----------- -------- ------- --------
Balance at December
31, 1995.......... 59,355 $ 1 $ -- $ (19,735) $ 1,281 $ (200) $ (33) $ (57 ) $(18,743)
------- ------- ---------- ----------- ---------- ----------- -------- ------- --------
------- ------- ---------- ----------- ---------- ----------- -------- ------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1993 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................... $ (970) $ 2,186
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................... 2,735 8,559
Provision for doubtful accounts............................. 112 142
Gain on sale of fixed assets................................ (6) --
Minority interest........................................... 251 284
Non-cash compensation expense............................... -- 915
Extraordinary loss.......................................... -- 2,001
Restructuring and other charges, net of payments............ -- --
Registration costs.......................................... -- --
Equity increase of joint ventures........................... -- --
Deferred income taxes....................................... (428) 258
Other changes that provided (used) cash:
Accounts receivable....................................... 150 (2,035)
Inventories............................................... 1,824 (438)
Prepaid expenses and other current assets................. 1,058 (658)
Accounts payable, accrued expenses and other
liabilities............................................. (4,314) 2,949
-------- --------
Net cash provided by (used in) operating activities......... 412 14,163
-------- --------
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired............. (29,890) (68,286)
Capital expenditures........................................ (953) (7,210)
Purchase of subsidiary stock from minority stockholders..... -- (142)
(Increase) decrease in investments in joint ventures........ -- --
Proceeds from sale of capital equipment..................... 50 185
Payments for environmental liabilities...................... -- (2,543)
Proceeds from environmental indemnification................. -- 2,292
Other....................................................... 165 (208)
-------- --------
Net cash used in investing activities....................... (30,628) (75,912)
-------- --------
Cash flows from financing activities:
Issuance of common stock.................................... 2,800 2,273
Issuance of preferred stock................................. 17,000 9,745
Revolving borrowings under Credit Agreement................. -- 36,250
Revolving repayments under Credit Agreement................. -- (28,500)
Term loan borrowings under Credit Agreement................. -- 95,500
Term loan repayments under Credit Agreement................. -- (3,000)
Short term borrowings under European Facility............... -- --
Repayments of short term borrowing under European Facility.. -- --
Borrowing of refinanced long-term debt...................... 62,931 --
Repayment of refinanced long-term debt...................... (25,771) (44,630)
Repayment of assumed long-term debt......................... (25,401) --
Purchase of treasury stock.................................. -- --
Payment of registration costs............................... -- --
Repayment of capital lease obligations...................... -- (134)
Payments for financing costs................................ (1,861) (3,250)
Dividends paid to minority interests........................ (122) (129)
Other....................................................... (79) (754)
-------- --------
Net cash provided by financing activities..................... 29,497 63,371
-------- --------
Effect of exchange rate changes on cash....................... -- --
-------- --------
Net increase (decrease) in cash and cash equivalents.......... (719) 1,622
Cash and cash equivalents, beginning of period................ 1,508 789
-------- --------
Cash and cash equivalents, end of period...................... $ 789 $ 2,411
-------- --------
-------- --------
<CAPTION>
JUNE 30,
------------------
1995 1995 1996
-------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................... $(16,990) $(1,988) $ 4,896
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................... 13,512 6,560 6,719
Provision for doubtful accounts............................. 36 (3) 144
Gain on sale of fixed assets................................ (188) (65) (87)
Minority interest........................................... 247 126 126
Non-cash compensation expense............................... 150 75 75
Extraordinary loss.......................................... -- -- --
Restructuring and other charges, net of payments............ 13,759 2,805 --
Registration costs.......................................... 2,187 -- --
Equity increase of joint ventures........................... (74) (120) (455)
Deferred income taxes....................................... (3,294) 195 367
Other changes that provided (used) cash:
Accounts receivable....................................... (8,308) (13,345) (11,303)
Inventories............................................... (1,787) (4,187) (8,040)
Prepaid expenses and other current assets................. 1,385 (936) (226)
Accounts payable, accrued expenses and other
liabilities............................................. (3,765) 3,726 8,722
-------- ------- -------
Net cash provided by (used in) operating activities......... (3,130) (7,157) 938
-------- ------- -------
Cash flows from investing activities:
Payments for acquisitions, net of cash acquired............. (15,874) (15,874) --
Capital expenditures........................................ (15,514) (8,480) (3,986)
Purchase of subsidiary stock from minority stockholders..... -- -- --
(Increase) decrease in investments in joint ventures........ (133) (211) 41
Proceeds from sale of capital equipment..................... 762 629 1,659
Payments for environmental liabilities...................... (3,943) (1,927) (1,355)
Proceeds from environmental indemnification................. 2,645 2,096 655
Other....................................................... 42 (16) 24
-------- ------- -------
Net cash used in investing activities....................... (32,015) (23,783) (2,962)
-------- ------- -------
Cash flows from financing activities:
Issuance of common stock.................................... -- -- --
Issuance of preferred stock................................. -- -- --
Revolving borrowings under Credit Agreement................. 86,830 56,250 31,000
Revolving repayments under Credit Agreement................. (73,830) (47,250) (29,500)
Term loan borrowings under Credit Agreement................. 18,200 18,200 --
Term loan repayments under Credit Agreement................. (7,000) (3,500) (3,547)
Short term borrowings under European Facility............... 16,516 11,252 4,890
Repayments of short term borrowing under European Facility.. (3,986) (3,750) (3)
Borrowing of refinanced long-term debt...................... -- -- --
Repayment of refinanced long-term debt...................... -- -- --
Repayment of assumed long-term debt......................... -- -- --
Purchase of treasury stock.................................. (221) -- (87)
Payment of registration costs............................... (1,004) (714) --
Repayment of capital lease obligations...................... (65) (45) (71)
Payments for financing costs................................ (1,391) (1,021) (33)
Dividends paid to minority interests........................ (247) (247) (130)
Other....................................................... (85) (19) (26)
-------- ------- -------
Net cash provided by financing activities..................... 33,717 29,156 2,493
-------- ------- -------
Effect of exchange rate changes on cash....................... 466 662 (66)
-------- ------- -------
Net increase (decrease) in cash and cash equivalents.......... (961) (1,122) 403
Cash and cash equivalents, beginning of period................ 2,411 2,411 1,450
-------- ------- -------
Cash and cash equivalents, end of period...................... $ 1,450 $ 1,289 $ 1,853
-------- ------- -------
-------- ------- -------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
1. DESCRIPTION OF BUSINESS
Freedom Chemical Company ('FCC' or 'the Company') was incorporated in
Delaware on April 14, 1992 for the purpose of acquiring specialty chemical
companies which manufacture and market specialty chemical products for diverse
applications. The Company focuses globally on niche markets where it has strong
market positions, which have relatively few competitors and where there are
significant barriers to entry. In addition, the Company's products are often
very important to the performance of its customers products, but typically
represent a relatively small percentage of their total costs. The Company has
five core product lines: (i) Food and Personal Care Ingredients; (ii)
Pharmaceutical Intermediates and Natural Additives; (iii) Specialty Organic
Chemicals and Intermediates; (iv) Organic Pigments and Dyes; and (v) Textile and
Paper Chemicals.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and include the accounts of Freedom
Chemical Company and its Subsidiaries (collectively, referred to as 'the
Company'). The Subsidiaries include: Freedom Textile Chemicals Company and
Subsidiaries ('FTCC'), Hilton Davis Chemical Company ('HDCC'), Kalama Chemical,
Inc. and Subsidiaries ('KCI'), Freedom Chemical Diamalt GmbH and Subsidiaries
('FCD') and Societe Francaise Des Colloides ('SFC') (note 3). All significant
intercompany accounts and transactions have been eliminated in consolidation.
Revenue Recognition
Revenue is recognized when title transfers. Net sales are comprised of the
total sales billed during the period less the sales value of goods returned,
trade discounts and customer allowances.
Cash and Cash Equivalents
All investments purchased with maturities of three months or less when
purchased are considered cash equivalents.
Inventory
Inventories are stated at the lower of cost or market. Cost is determined
by the last-in, first-out ('LIFO') method for approximately 70 percent and 42
percent of total inventories at December 31, 1994 and 1995, respectively. The
cost of the remaining inventories are valued using the first-in, first-out
('FIFO') method. Obsolete or unsaleable inventory is reflected at its estimated
net realizable value. Inventory costs include materials, direct labor and
manufacturing overhead.
Property, Plant and Equipment
Property, plant and equipment are recorded at their assigned values as
determined through the allocation of the respective acquisition purchase prices.
Additions are carried at cost and include expenditures for major renewals and
betterments. Maintenance, repairs and minor renewals are expensed as incurred.
Maintenance and repairs expense for the years ended December 31, 1993, 1994 and
1995 was $1,937, $7,409 and $8,704, respectively. Upon retirement or other
disposition, the cost and related accumulated depreciation are removed from the
accounts and any gain or loss is included in the results of operations. For
financial reporting purposes, depreciation is computed using the straight-line
method over the estimated useful lives of the related assets as follows:
buildings and improvements--15 to 31.5 years; machinery and equipment--4 to 13
years; other-- 5 years. Depreciation expense during the years ended December 31,
1993, 1994 and 1995 was $1,895, $6,367 and $10,255, respectively.
F-7
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
Maintenance/Inspection Shutdown Costs
Periodic plant shutdowns are scheduled for the performance of maintenance
and inspection of various pieces of equipment. Estimated costs related to these
shutdowns are accrued over the period between shutdowns.
Intangible Assets
Intangible assets consists of amounts relating to goodwill, patents and
other intangibles, including a sales agreement, trademark licenses,
organizational costs and covenants not to compete arising from acquisitions.
These amounts are being amortized on a straight-line basis over their remaining
useful lives as follows: goodwill--40 years; patents--6 to 10 years; and
other--1 to 8 years.
At each balance sheet date, management evaluates the recoverability of
intangible assets using certain financial indicators, such as historical and
future ability to generate income from operations. The Company's policy is to
record an impairment loss against the net unamortized cost of the intangible
asset in the period when it is determined that the carrying amount of the asset
may not be recoverable. This determination is based on an evaluation of such
factors as the occurrence of a significant event, a significant change in the
environment in which the business operates or if the expected future net cash
flows (undiscounted and without interest) would become less than the carrying
amount of the asset.
Deferred Financing Costs
Financing costs relating to bank borrowings are deferred and amortized over
the term of the debt agreements. In May 1994, the Company refinanced and
consolidated all existing Company debt through an amended and restated credit
agreement (the 'Credit Agreement'). In connection with the refinancing, the
Company incurred a before-tax extraordinary loss of $2,001, relating primarily
to the write-off of deferred financing fees on the old debt and prepayment
penalties. The after-tax loss was $1,276.
Amortization of deferred financing costs during the years ended December
31, 1993, 1994 and 1995 was $186, $590 and $822, respectively, and is classified
as interest expense in the consolidated statements of operations.
Investments in Joint Ventures
The Company's investments in affiliated companies which are not majority
owned or controlled are accounted for using the equity method. Investments
carried at equity and the percentage interest owned consist of Lyomark Pharma
GmbH (33.4%), Srinivasa Cystine Limited (40%), Prince Chemicals Co. Ltd. (50%),
Hackermalt Protein Verwaltungs GmbH (50%) and Diamo Handels GmbH (50%).
Income Taxes
Income tax expense is based on reported results of operations before
extraordinary items and income taxes. Deferred income taxes reflect the impact
of temporary differences between the amount of assets and liabilities recognized
for financial reporting purposes and such amounts recognized for tax purposes.
Deferred tax balances are adjusted to reflect tax rates, based on current tax
laws, that will be in effect in the years in which the temporary differences are
expected to reverse. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized.
F-8
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Foreign Currency Translation
Balance sheet accounts for foreign operations are translated at the
exchange rate as of the balance sheet date, and income statement items are
translated at the weighted average exchange rate for the period. The resulting
translation adjustments are included as a separate component of stockholders'
equity. Transaction gains and losses included in the consolidated statements of
operations were not significant for the years ended December 31, 1993 and 1994.
Transaction losses of $581 were included in the consolidated statement of
operations for the year ended December 31, 1995.
Environmental Liabilities and Recoveries
Environmental contingencies assumed in connection with business
acquisitions are recorded as liabilities in connection with the purchase.
Expenditures for ongoing compliance with environmental regulations that relate
to current operations are expensed or capitalized as appropriate. Expenditures
related to improving the condition of property compared with the condition of
that property when constructed or acquired are capitalized. The Company also
capitalizes expenditures that prevent future environmental contamination and
expenditures incurred in preparing a property for sale. Other expenditures are
expensed as incurred. Liabilities are recorded when environmental assessments
indicate that remedial efforts are probable and the costs can be reasonably
estimated. Estimates of the liability are based upon currently available facts,
existing technology, and presently enacted laws and regulations taking into
consideration the likely effects of inflation and other societal and economic
factors. All available evidence is considered including prior experience in
remediation of contaminated sites, other companies' clean-up experience and data
released by the Environmental Protection Agency (EPA) or other organizations.
These liabilities are included in the consolidated balance sheet at their
undiscounted amounts. Recoveries are evaluated separately from the liability.
Additional information regarding environmental recoveries and liabilities is
included in note 11.
Concentration of Credit Risk
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of its trade receivables. The Company sells a
majority of its products to a wide range of industrial plant and service
facilities. Trade receivables balances consist of a wide range of customers
located in the United States and internationally with the primary concentration
in North America. The Company performs ongoing credit evaluations of its
customers and generally does not require collateral. The Company maintains
reserves for potential credit losses and historically such losses have been
within management's expectations.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, trade receivables, trade payables and long-term debt. The book
value of cash and cash equivalents, trade receivables, and trade payables is
considered to be representative of their fair value because of their short
maturities. The carrying amount of long-term debt outstanding at December 31,
1994 and 1995 approximated fair value as the interest rates were variable and
set to market.
F-9
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
Significant Customers
Sales to a customer, which acts as an international distributor for the
Company, amounted to approximately $5.8 million or 10.6 percent, $19.9 million
or 10.6 percent, and $21.2 million or 7.1 percent, of net sales for the years
ended December 31, 1993, 1994 and 1995, respectively. At December 31, 1994 and
1995, respectively, approximately $2.3 million or 7.9 percent, and $1.2 million
or 3.0 percent of net accounts receivable, was due from this customer.
In 1995, the Company notified the international distributor that, effective
January 1996, the distributor agreement would be cancelled. As part of revamping
the structure of international sales, the Company will be utilizing the
resources of the FCD sales force to call on these customers. The Company does
not expect any negative impact on future international sales from this change.
New Pronouncements
In March 1995, the Financial Accounting Standards Board ('FASB') issued
Statement of Financial Accounting Standard No. 121, 'Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of'
('SFAS No. 121'), which is effective for years beginning after December 15,
1995. SFAS No. 121 established criteria for recognizing, measuring and
disclosing impairments of long-lived assets, including intangibles and goodwill.
The Company plans to adopt SFAS No. 121 in 1996 and is currently evaluating the
impact on its consolidated financial position and results of operations.
In October 1995, FASB issued Statement of Financial Accounting Standards
No. 123, 'Accounting for Stock-Based Compensation' ('SFAS No. 123'). SFAS No.
123 is required to be adopted for fiscal years beginning after December 15,
1995. SFAS No. 123 encourages a fair value based method of accounting for
employee stock options or similar equity instruments, but allows continued use
of the intrinsic value based method of accounting prescribed by Accounting
Principles Board Opinion No. 25, 'Accounting for Stock Issued to Employees'
('APB No. 25'). Companies electing to continue to use APB No. 25 must make
proforma disclosures of net income as if the fair value based method of
accounting had been applied. The Company is evaluating the provisions of SFAS
No. 123, but has not yet determined whether it will continue to follow the
provisions of APB No. 25 or change to the fair value method of SFAS No. 123.
3. BUSINESS ACQUISITIONS
The acquisitions described below have been accounted for under the purchase
method. The results of these acquisitions have been included in the results of
operations from the applicable acquisition dates. The purchase price of each
acquisition was allocated to assets and liabilities based on their estimated
fair values as of the date of acquisition. However, for the 1993 and 1995
acquisitions, the values assigned to all noncurrent assets were reduced
proportionately by the excess of the estimated fair value of the net assets
acquired over the purchase price. In connection with the 1994 acquisitions, the
excess of the purchase price over net assets acquired, net of adjustments, is
being amortized on a straight-line basis over 40 years. Deferred taxes were
established for differences between the assigned financial statement and tax
bases of assets and liabilities.
1993 Acquisition
In September 1993, the Company acquired all of the issued and outstanding
common stock of HDCC. This acquisition was financed by cash payments of $29,890.
In connection with the acquisition, liabilities of $11,187 were established and
$44,199 of liabilities were assumed. The cash portion was financed with bank
debt and proceeds from the issuance of FCC Series B preferred stock and FCC
common stock. The cash payment for the acquisition is summarized as follows:
$43,603 of current assets plus $41,673 of noncurrent assets acquired less
liabilities of $55,386 equals the cash payment of $29,890.
F-10
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
1994 Acquisitions
In May 1994, the Company acquired all of the issued and outstanding shares
of common stock of KCI from BC Sugar Refinery Limited ('BC Sugar') and
Chatterton Petrochemical Corporation (collectively referred to as 'BC Sugar').
This acquisition was financed by net cash payments of $60,315. In connection
with the acquisition, liabilities of $13,718 were established and $82,111 of
liabilities were assumed. The cash portion was financed with bank debt and
proceeds from the issuance of FCC Series C preferred stock and FCC common stock.
The cash payment for the acquisition is summarized as follows: $27,739 of
current assets plus $87,007 of noncurrent assets acquired plus goodwill of
$41,398 less liabilities of $95,829 equals the cash payment of $60,315.
In connection with the acquisition of KCI, the Company recorded liabilities
totaling $44,400 for estimated expenditures related to costs for assessment,
investigation, negotiations, legal representation, cleanup and remediation, and
fines and penalties for the environmental matters described in note 11. An
indemnification receivable of $12,700 from BC Sugar was recorded in accordance
with the KCI Stock Purchase Agreement. A deferred tax benefit of $15,600 was
also recorded. A trust fund was established to fund the indemnification
receivable from BC Sugar. In 1995, the Company revised its estimates related to
the aforementioned costs associated with environmental matters and reduced the
liability, indemnification receivable, and deferred tax asset originally
recorded by $19,263, $5,610 and $5,055, respectively. This resulted in a
reduction of goodwill of $8,598. At December 31, 1995 , the remaining liability,
indemnification receivable and deferred tax asset for the aforementioned matters
are $18,567, $1,854, and $7,002, respectively.
Additionally, in December 1994, the Company acquired certain assets of
Reilly-Whiteman, Inc. ('Reilly-Whiteman') through FCC Acquisition Corp.
('FCAC'), a subsidiary of FTCC. This acquisition was financed by net cash
payments of $7,971. In connection with the acquisition, liabilities of $305 were
established and $519 of liabilities were assumed. The cash portion was financed
with bank debt. The net cash payment for the acquisition is summarized as
follows: $1,814 of current assets plus $3,220 of noncurrent assets acquired plus
goodwill of $3,761, less liabilities of $824 equals the cash payment of $7,971.
In December 1995, the Company recognized an impairment loss of $4,029 on all
goodwill and other intangibles associated with this acquisition (note 17).
1995 Acquisition
In January 1995, the Company purchased certain assets and liabilities of
Diamalt GmbH and subsidiaries, headquartered in Munich, Germany, through its
subsidiary, FCD. The acquisition was financed by cash payments of $15,874 which
were financed with bank debt. The Company borrowed $23.5 million, $5.3 million
under the Revolving Credit Facility and $18.2 million as additional Term B debt.
In connection with the acquisition, liabilities of $700 were established and
$7,853 of liabilities were assumed. The net cash payment for the acquisition is
summarized as follows: $10,470 of current assets plus $13,957 of non-current
assets ($25,770 of non-current assets acquired less negative goodwill of
$11,813) less liabilities of $8,553 equals the cash payment of $15,874.
The following unaudited pro forma summary information combines the
consolidated results of operations of the Company, KCI and FCAC as if the
acquisitions had occurred on January 1, 1994. Results of operations for FCD were
not significant for 1994 and, accordingly, are not included in the 1994 pro
forma summary below.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1994
------------------
<S> <C>
Net sales............................................. $228,740
Operating income...................................... 20,889
Net income............................................ 6,565
</TABLE>
F-11
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
The pro forma results presented above do not necessarily represent results
which would have occurred if the respective acquisitions had taken place at the
beginning of each period, nor are they indicative of the results of future
combined operations. Pro forma information for 1995 is not presented since the
results of operations for FCD are included in the consolidated statement of
operations of the Company.
4. INVENTORIES
A summary of inventories and related reserves as of December 31, 1994 and
1995 is as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Raw materials and intermediates......................................... $18,014 $27,388
Finished goods.......................................................... 21,426 19,628
------- -------
39,440 47,016
Less: reserves.......................................................... (58) (168)
------- -------
$39,382 $46,848
------- -------
------- -------
</TABLE>
It is estimated that inventories would have been $2,350 lower than reported
at December 31, 1994 and $828 lower than reported at December 31, 1995, if
quantities valued on the LIFO basis were instead valued on the FIFO basis. The
difference at December 31, 1995 will be charged to operations in future periods,
if and when inventory quantities are reduced below the base year level. The
Company believes that a write-down of the carrying amount of inventories to
current or replacement cost is not appropriate, as no loss is expected to be
realized upon their final sale.
5. INTANGIBLES
A summary of intangible assets and related accumulated amortization as of
December 31, 1994 and 1995 is as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Goodwill................................................................ $45,159 $32,800
Patents................................................................. 2,090 2,558
Covenants not to compete................................................ 3,401 3,401
Other................................................................... 830 926
------- -------
51,480 39,685
Less: accumulated amortization.......................................... 2,614 4,757
------- -------
$48,866 $34,928
------- -------
------- -------
</TABLE>
Amortization expense for intangible assets was $654, $1,602 and $2,435, for
the years ended December 31, 1993, 1994 and 1995, respectively.
6. SHORT-TERM BORROWINGS
In 1995, FCD negotiated a European Revolving Facility aggregating $18.2
million. The European Revolving Facility has multiple maturities, with $11.2
million maturing in June 1996, and is collateralized by a $15.0 million letter
of credit under the Domestic Revolving Credit facility (note 7) and FCD accounts
receivable. The Company intends to renew the European Revolving Facility in June
1996 and reissue the $15.0 million letter of credit. Additionally, in 1996, FCD
negotiated an increase in the European Revolving Facility of $2.3 million, also
collateralized by FCD accounts receivables.
Borrowings of European revolving loans may be in the form of Base Rate
loans or European Currency loans. Under the European Revolving Facility, FCD had
$1.7 million and $10.5 million outstanding as Base Rate
F-12
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
and European Currency loans, respectively, at December 31, 1995. The rates in
effect on both Base Rate and European Currency loans were between 7.75 and 9.5
percent at December 31, 1995.
FCD also pays a commission on all outstanding letters of credit of 0.75
percent per annum of the face amount of each letter of credit issued. At
December 31, 1995, letters of credit outstanding totaled $0.8 million under the
European Revolving Facility.
7. LONG-TERM DEBT
Long-term debt at December 31, 1994 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
1994 1995
------- --------
<S> <C> <C>
The Credit Agreement:
Term A loan............................................................ $34,500 $ 27,500
Term B loan............................................................ 50,000 68,200
Acquisition Term loan.................................................. 8,000 8,000
Domestic Revolving loans............................................... 7,750 20,750
FCD construction loan.................................................. -- 1,093
Capital lease obligations.............................................. 505 119
------- --------
100,755 125,662
Less: current maturities............................................... 7,112 6,142
------- --------
$93,643 $119,520
------- --------
------- --------
</TABLE>
During 1994, the Company refinanced and consolidated all existing company
debt through an amended and restated credit agreement (the 'Credit Agreement'),
dated May 26, 1994. The Credit Agreement, as amended, consists of term loans,
revolving credit and letter of credit facilities aggregating approximately $146
million. As of December 31, 1995, the Credit Agreement was comprised of a Term A
loan for $27.5 million, a Term B loan for $68.2 million, an Acquisition Term
loan for $8.0 million, and a revolving credit facility (the 'Domestic Revolving
Credit Facility') for up to $42.5 million. These facilities are collateralized
by a pledge of the stock of FCC's subsidiaries, intercompany debt and
substantially all of the real and personal property of the subsidiaries.
Borrowings under the Credit Agreement were used to refinance indebtedness, to
pay certain fees and expenses related to such refinancing, purchase 100 percent
of the stock of KCI, acquire certain assets of Reilly-Whiteman and certain
assets of Diamalt GmbH (note 3).
During 1995, the Company negotiated amendments to the Credit Agreement for
the acquisition of FCD and to modify certain financial covenant requirements. In
connection with these amendments, the Company incurred financing costs of
$1,391.
The Company's ability to borrow under the Domestic Revolving Credit
Facility is based on the sum of stated percentages of its eligible accounts
receivable and inventory. Up to $25 million of this facility is available for
standby and documentary letters of credit. The Domestic Revolving Credit
Facility commitment is subject to a mandatory reduction in the amount of $5
million on both May 26, 1999 and May 26, 2000.
The Term A loan is payable in 22 consecutive quarterly installments,
ranging from $1,125 to $2,813, which commenced September 30, 1994, with a final
payment due on December 31, 1999. The Term B loan is payable in 12 consecutive
quarterly installments, ranging from $5,115 to $6,820, commencing September 30,
1999, with a final payment due on June 30, 2002. The Acquisition Term loan is
payable in 14 consecutive quarterly installments, ranging from $325 to $725
commencing September 30, 1996, with a final payment on December 31, 1999.
The Domestic Revolving Credit Facility has a final maturity on June 30,
2000. Borrowings of Domestic Revolving loans may be in the form of Base Rate
loans or Eurodollar Rate loans and must be in a principal
F-13
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
amount of at least $250 and $1,000, respectively. Under the Domestic Revolving
Credit Facility, FCC had $3.75 million and $4.00 million outstanding as Base
Rate loans and Eurodollar Rate loans, respectively, at December 31, 1994, and
$3.75 million and $17 million as Base Rate loans and Eurodollar Rate loans,
respectively, at December 31, 1995.
Loans under the Credit Agreement have a conversion option whereby FCC may
convert their borrowings to Base Rate loans or Eurodollar Rate loans
periodically. Therefore, interest is calculated at either the Base Rate plus
1.25 or 1.50 percent per annum, depending on certain performance levels, or the
Eurodollar Rate plus 2.75 or 3.00 percent per annum, depending on certain
performance levels, for Term A loans, Acquisition Term loans and Domestic
Revolving loans. Interest on the Term B loan is calculated at either the Base
Rate plus 2.00 or 2.25 percent per annum, depending on certain performance
levels, or the Eurodollar Rate plus 3.25 or 3.50 percent per annum, depending on
certain performance levels. The Term A and Term B loans outstanding at December
31, 1994 and 1995 were Eurodollar Rate loans. The Base Rate is the higher of the
lender's Base Rate or an Alternate Base Rate as calculated per the agreement.
The Eurodollar Rate is equal to the average LIBOR for the respective Eurodollar
interest period. Interest on Base Rate loans is payable on a quarterly basis and
on Eurodollar Rate loans at the earlier of the maturity of the Eurodollar Loan
or quarterly. The rates in effect at December 31, 1994 and 1995 were 8.75 and
8.875 percent, respectively, on the Term A loan, 9.25 and 9.375 percent,
respectively, on the Term B loan, 9.13 and 8.8125 percent , respectively, on the
Acquisition Term loan, 8.88 and 10.25 percent, respectively, on the Base Rate
Revolving loan and 9.75 and 8.75 percent, respectively, on the Eurodollar Rate
Domestic Revolving loan.
FCC must pay to the lenders a quarterly commitment fee equal to 0.50
percent of the unused portion of the Domestic Revolving Credit and Acquisition
Term Loan Facilities. The Company also pays a commission on all outstanding
letters of credit of 2.50 or 2.75 percent per annum of the face amount of each
letter of credit, depending on certain performance levels, as well as an initial
fee equal to 0.25 percent per annum of the face amount of each letter of credit
issued. At December 31, 1995, letters of credit outstanding under the Domestic
Revolving Credit Facility totaled $15.5 million, of which $15.0 million is used
to support short term borrowings under the European Revolving Facility. At
December 31, 1994, there were no letters of credit outstanding.
The Credit Agreement contains certain negative covenants which restrict the
Company from, among other things, incurring additional indebtedness, entering
into merger or consolidation transactions, disposing of all or substantially all
of its assets, making certain restricted payments, creating liens on the
Company's assets, creating guarantee obligations, creating material lease
obligations and exceeding limitations on capital expenditures. The Credit
Agreement also limits the Company's ability to pay dividends or make
distributions on its Common Stock. In addition, the Company must maintain
certain financial ratios including a fixed charge coverage ratio and a times
interest earned ratio, as well as certain other covenants, including the
maintenance of minimum net worth.
As part of the FCD acquisition, the Company assumed $1.1 million of long
term debt principally for plant expansion. This debt is collateralized by real
and personal property with payments due of $0.6 million in 1996 and $0.5 million
in 1997. Interest on the debt is principally calculated at the Eurodollar Rate
plus 3.00 percent per annum.
Capital lease obligations, principally collateralized by certain property,
plant, and equipment are due through 1999, with interest rates ranging from 8.0
percent to 12.5 percent. Total future minimum lease payments under capital lease
obligations at December 31, 1994 and 1995 are $614 and $119, respectively.
F-14
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
Aggregate maturities of long-term debt as of December 31, 1995 for the next
five years and thereafter are as follows:
<TABLE>
<CAPTION>
1996.......................................................... $ 6,142
<S> <C>
1997.......................................................... 9,670
1998.......................................................... 14,100
1999.......................................................... 17,712
2000.......................................................... 41,210
Thereafter.................................................... 36,828
--------
Total......................................................... $125,662
--------
--------
</TABLE>
8. INCOME TAXES
The provision (benefit) for income taxes for the years ended December 31,
1993, 1994 and 1995 consists of the following:
<TABLE>
<CAPTION>
1993 1994 1995
----- ------ -------
<S> <C> <C> <C>
Currently payable (receivable):
Federal.................................................................. $ 99 $2,223 $ (871)
State.................................................................... 38 377 192
Foreign.................................................................. -- -- 164
----- ------ -------
137 2,600 (515)
----- ------ -------
Deferred:
Federal.................................................................. (520) 224 (3,149)
State.................................................................... 92 34 (84)
Foreign.................................................................. -- -- (61)
----- ------ -------
(428) 258 (3,294)
----- ------ -------
Provision (benefit) for income taxes on income before
extraordinary item....................................................... (291) 2,858 (3,809)
Tax benefit from extraordinary item........................................ -- 725 --
----- ------ -------
Provision (benefit) for income taxes....................................... $(291) $2,133 $(3,809)
----- ------ -------
----- ------ -------
</TABLE>
F-15
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
Deferred tax (assets) liabilities are comprised of the following:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Allowance for doubtful accounts........................................ $ (161) $ (240) $ (215)
Nondeductible accruals................................................. (1,353) (1,593) (1,397)
Domestic net operating loss carryforwards.............................. (501) -- (1,778)
Foreign net operating loss carryforwards............................... -- -- (4,173)
Postretirement liability............................................... (61) (1,427) (1,482)
Alternative minimum tax credits........................................ (203) -- (633)
Other.................................................................. (543) (123) (346)
Deferred financing costs............................................... -- (660) --
Restructuring reserves................................................. -- -- (3,710)
Environmental accrual.................................................. -- (14,620) (7,002)
------- ------- -------
Gross deferred tax assets............................................ (2,822) (18,663) (20,736)
------- ------- -------
Fixed assets and intangibles........................................... 10,146 20,701 19,368
Inventory.............................................................. 1,154 315 512
Foreign temporary differences primarily in fixed assets
and inventory........................................................ -- -- 1,663
Other.................................................................. 167 -- 418
------- ------- -------
Gross deferred tax liabilities....................................... 11,467 21,016 21,961
------- ------- -------
Valuation allowance.................................................... -- 4,147 7,726
------- ------- -------
Net deferred tax (assets) liabilities................................ $ 8,645 $ 6,500 $ 8,951
------- ------- -------
------- ------- -------
</TABLE>
A reconciliation of the U.S. Federal income tax (benefit) rate to the
effective tax (benefit) rate is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----- ---- -----
<S> <C> <C> <C>
U.S. federal income tax rate.................................................. (34.0)% 34.0% (34.0)%
State income taxes, net of federal income tax benefit......................... 6.8 5.8 .6
Benefit of losses in the foreign jurisdictions................................ -- -- (12.1)
Increase in domestic valuation allowance...................................... -- -- 13.5
Valuation allowance attributable to foreign jurisdictions..................... -- -- 12.1
Noncash compensation expense.................................................. -- 7.2 .2
Nondeductible goodwill amortization........................................... -- 4.8 1.8
Foreign sales corporation..................................................... -- (3.5) (1.5)
Preferred stock dividend...................................................... 6.7 2.2 .4
Other nondeductible items..................................................... (2.6) (1.1) .7
----- ---- -----
Effective income tax (benefit) rate........................................... (23.1)% 49.4% (18.3)%
----- ---- -----
----- ---- -----
</TABLE>
At December 31, 1995, for Federal tax purposes, the Company has an
available tax net operating loss carryforward of approximately $5,229 expiring
in 2010. The Company also has alternative minimum tax credit carryforwards of
approximately $633 which have no expiration date. At December 31, 1995, a
foreign tax net operating loss carryforward of approximately $4,173 was
available with no expiration date.
At December 31, 1995, the Company maintains a valuation allowance based on
management's evaluation of the future realization of certain of the Federal and
foreign tax net operating loss carryforwards and the tax benefits of certain
temporary differences. Of the total valuation allowance, approximately $2,400
maintained in connection with tax benefits resulting from the acquisition of KCI
(see note 3) would reduce goodwill upon realization.
9. PENSION AND SAVINGS PLANS
The Company's domestic subsidiaries maintain certain noncontributory
defined benefit pension plans. The plans cover certain hourly and salaried
employees and provide benefits based on the participants' years of service. The
funding policies are consistent with statutory requirements and tax
considerations.
F-16
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
Net periodic pension cost includes the following components for the years
ended December 31, 1993, 1994 and 1995:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Service cost.......................................................... $185 $289 $432
Interest cost on projected benefit obligation......................... 30 98 127
Return on plan assets................................................. (28) (16) (370)
Plan deferrals and amortization....................................... (4) (18) 243
---- ---- ----
$183 $353 $432
---- ---- ----
---- ---- ----
</TABLE>
Contributions are made to trusts maintained by independent trustees. The
following table presents a reconciliation of the funded status of the plans to
the accrued pension liability, which is included in accrued compensation at
December 31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Plan assets at fair value.................................................. $1,230 $1,883
Actuarial present value of benefit obligations:
Accumulated benefit obligation (vested, 1994--$1,432;
1995--$2,010)......................................................... 1,489 2,133
Effect of increase in compensation....................................... 155 249
------ ------
Projected benefit obligation............................................. 1,644 2,382
------ ------
Projected benefit obligation in excess of plan assets.................... 414 500
Prior service costs...................................................... 19 17
Adjustment to recognize minimum liability................................ 87 10
Unrecognized loss........................................................ (206) (180)
------ ------
Accrued pension liability................................................ $ 314 $ 347
------ ------
------ ------
</TABLE>
Significant assumptions used in determining the pension obligation and the
related pension expense include weighted-average assumed discount rates of 7.25
percent to 8 percent at December 31, 1994 and 7 percent to 7.25 percent at
December 31, 1995. The expected long-term rates of return on plan assets were 8
percent to 10 percent at both December 31, 1994 and 1995. In addition, the
projected rate of compensation increase is 5 percent.
The Company's subsidiaries also maintain certain defined contribution
benefit plans. The plans cover salaried and certain hourly employees who meet
the eligibility requirements, and require the subsidiaries to match certain
employee contributions. Expenses relating to these plans were $49 for the year
ended December 31, 1993, $680 for the year ended December 31, 1994 and $1,025
for the year ended December 31, 1995.
The Company maintains a Supplemental Executive Retirement Plan to provide
supplemental retirement benefits to certain executives. At December 31, 1995,
the accrued liability for this plan was $348. In addition, the Company recorded
a minimum pension liability of $57 as a reduction of stockholders' equity.
10. POSTRETIREMENT BENEFITS
FTCC maintains plans to provide certain health care and life insurance
benefits to eligible retired employees. The plans are unfunded. FTCC immediately
recognized the accumulated postretirement benefit obligation measured as of the
acquisition date and as such included a liability of $120 in the purchase price
allocation.
F-17
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
In connection with the acquisition of KCI, the Company recorded a liability
of $3,563 for postretirement benefit obligations assumed from BC Sugar. However,
BC Sugar indemnified KCI for postretirement benefit obligations totaling $2,374
with respect to each participant who was retired or eligible to retire as of the
acquisition closing date. Accordingly, the Company recorded an indemnification
receivable of $1,543 and a deferred tax benefit of $831.
The following table sets forth the accumulated postretirement benefit
obligation, which is included in postretirement benefits at December 31, 1994
and 1995:
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Retirees................................................................... $2,448 $2,094
Active plan participants................................................... 1,503 1,399
------ ------
3,951 3,493
Unrecognized net gain...................................................... -- 718
------ ------
$3,951 $4,211
------ ------
------ ------
</TABLE>
The postretirement benefit costs for the years ended December 31, 1993,
1994 and 1995 include the following components:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Service cost.......................................................... $ 13 $ 80 $252
Interest cost......................................................... 11 152 253
---- ---- ----
$ 24 $232 $505
---- ---- ----
---- ---- ----
</TABLE>
The weighted-average assumed discount rate used to measure the accumulated
postretirement benefit obligation was 7 percent at December 31, 1994 and 1995.
At December 31, 1995, the health care cost rate was 5 percent. A one percentage
point increase in the assumed health care cost trend rate for each future year
would increase postretirement benefit costs for the year ended December 31, 1995
by $51. The effect on the accumulated postretirement benefit obligation as of
December 31, 1995 would be an increase of $422.
11. ENVIRONMENTAL CONTINGENCIES
Contingencies exist for the Company and certain of its subsidiaries because
of legal and administrative proceedings arising out of the acquisition of
businesses and the normal course of business. Such contingencies include
environmental proceedings directly and indirectly against the Company or its
subsidiaries as well as matters internally identified by the Company. The
resolution of such matters often spans several years and frequently includes
regulatory oversight and/or adjudication. Additionally, many remediation
requirements are not fixed and are likely to be affected by future
technological, site and regulatory developments. Consequently, the ultimate
extent of liabilities with respect to such matters as well as the timing of cash
disbursements cannot be determined with certainty.
In connection with the purchase of a number of the Company's facilities,
contractual rights were obtained to indemnify the Company for certain types of
environmental pollution relating to those facilities. As described more fully
below, the Company consequently believes that a portion of the costs incurred in
connection with environmental liabilities existing prior to the Company's
ownership and remediation actions that may be required relating to the Company's
past and present properties will be the responsibility of other parties.
Accordingly, the Company believes that future liabilities over the amounts
accrued, relating to environmental conditions existing prior to the Company's
ownership and remediation actions, are not likely to have a material adverse
effect on the financial position of the Company, although the effect on results
of operations could be material when these conditions are resolved in a future
period. However, no assurance can be given that the parties discussed below
F-18
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
will have the financial resources to fully perform their responsibilities under
such agreements or that they will not challenge their responsibilities under
such agreements. In any such event, the Company may not realize the
indemnification from such parties. However, management is not aware of any
inability of or objection, except as specifically discussed below, by the
aforementioned parties to fulfill their responsibilities.
The Company has sent wastes from its operations to various third-party
waste disposal sites. From time to time the Company receives notices from
representatives of governmental agencies and private parties contending that the
Company is potentially liable for a portion of the investigation and remediation
costs and damages at formerly owned or operated sites and third-party sites,
some of which are discussed herein. Although there can be no assurance, the
Company does not believe that its liabilities in connection with such
third-party sites, either individually or in the aggregate, will have a material
adverse effect on the Company's financial position or results of operations.
FTCC
In connection with the Company's purchase of FTCC's Charlotte, North
Carolina facility from American Cyanamid ('AC'), the Company entered into the
Agreement for the Purchase and Sale of Assets, dated February 28, 1992 (the
'Freedom Textile Asset Purchase Agreement'), with AC, which requires AC to take
responsibility for corrective actions with respect to certain environmental
conditions. In January 1994, AC distributed to its stockholders all of the
capital stock of its chemicals unit, Cytec. The Company believes that in
connection with this transaction, Cytec assumed AC's environmental indemnity
obligations to the Company under the Freedom textile Asset Purchase Agreement.
Since the Cytec spin-off, the Company has been dealing with Cytec in respect of
matters arising under the Freedom Textile Asset Purchase Agreement and Cytec has
been performing AC's obligations under the Agreement. The Settlement Agreement,
dated December 30, 1994, among the Company, Cytec and AC, which settled certain
claims, including certain environmental claims regarding the Charlotte facility,
recited that Cytec is the successor to AC with regard to the Freedom Textile
Asset Purchase Agreement. The Company has notified AC that it is cooperating
with Cytec in coordinating fulfillment of AC's obligations under the Freedom
Textile Asset Purchase Agreement as a matter of convenience to AC and has not
waived its contractual rights to look to AC as the party liable for performance
under the Freedom Textile Asset Purchase Agreement. Notwithstanding the
foregoing, Cytec has never formally acknowledged to the Company its assumption
of AC's obligations under the Freedom Textile Asset Purchase Agreement nor has
the Company formally consented to any such assumption.
In 1993, FTCC completed a Resource Conservation and Recovery Act ('RCRA')
investigation at its Charlotte, North Carolina facility required by the EPA and
the State of North Carolina. Currently pending investigation and negotiations
with these agencies may require the remediation of certain environmental
conditions at this facility. The Company currently does not have sufficient
information on which to base an estimate of potential costs associated with this
remediation. However, the prior owner of FTCC's Charlotte facility agreed to
indemnify FTCC for costs associated with remediation of these environmental
conditions. In addition, they have agreed to indemnify FTCC in part for certain
anticipated changes in environmental regulations which may affect the facility.
Accordingly, the Company does not believe that any liabilities incurred by FTCC
in relation to such environmental conditions or such anticipated changes at its
Charlotte facility are likely to have a material adverse effect on the Company's
financial position or results of operations.
In 1995, the Company transferred the textile assets of HDCC located in
Cowpens, South Carolina, acquired as part of the HDCC acquisition, to FTCC. In
1994, the Company reached a tentative agreement with the South Carolina
Department of Health and Environmental Control on an administrative consent
agreement requiring the former owner to take corrective measures and conduct
additional investigation, and the Company and the State of South Carolina agreed
on a work plan for assessment and remediation. As part of the FTCC Asset
Purchase Agreement, the former owner of the property agreed that the costs to be
expended for the investigation and remediation of the existing environmental
conditions would be deducted from the final purchase price payment
F-19
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
due to them of $350. At the time of acquisition, the Company recorded a
liability for $350 relating to the remediation of the payment due to the former
owners. In 1994, initial investigations disclosed offsite groundwater
contamination. The Company hired an environmental consultant to manage this
project and is developing an investigative plan. While the Company believes that
any remediation costs incurred may be recovered from the prior owners, a $1.9
million charge was recorded in 1995 for estimated remediation costs since any
recoveries or reimbursements from the prior owners are not currently
determinable.
HDCC
In connection with the acquisition of HDCC, Sterling Winthrop, Inc.
('SWI'), a former owner of HDCC, SWI entered into an Environmental Matters
Agreement ('EMA') with HDCC, whereby SWI has taken responsibility for
environmental conditions that predate 1987, with certain exceptions, as well as
for remediation of the land at HDCC's Cincinnati facility pursuant to an October
1986 Consent Decree entered into between the State of Ohio and SWI and its
subsidiary.
Under the EMA, HDCC has agreed to share responsibility with SWI for certain
specific environmental conditions. Also, HDCC is responsible for environmental
conditions that postdate 1986. In addition, PMC, Inc. ('PMC'), another prior
owner of HDCC, has placed $1 million of the purchase price paid by the Company
in an escrow account to indemnify HDCC against breaches of representations and
warranties contained in the Stock Purchase Agreement between PMC and the
Company, including schedules thereto, to the extent such liabilities (including
certain claims not related to the environment) exceeded $200 in the aggregate
and subject to a total cap of $1 million (excluding certain claims not related
to the environment). HDCC does not believe that it will be required to incur
significant liability in connection with such environmental conditions.
At the time the Company and SWI entered into the EMA, SWI was a wholly
owned subsidiary of Eastman Kodak ('EK'). In November 1994, EK sold the capital
stock of SWI to SmithKline Beecham plc ('SmithKline Beecham'). SmithKline
Beecham subsequently sold the capital stock of SWI to Miles Inc., a subsidiary
of Bayer AG. Following these transactions, SWI advised the Company that EK had
retained SWI's liabilities in respect of HDCC and to address further
correspondence in respect of the EMA to EK. Subsequently, 360 North Pastoria
Environmental Corporation, a subsidiary of EK ('360 North'), notified the
Company that (i) the Company should send all future communications under the EMA
to 360 North and (ii) SWI's responsibilities under the EMA would be managed by
360 North. Accordingly, since the SWI sale the Company has been dealing with 360
North in respect of matters arising under the EMA and 360 North has been
performing SWI's obligations under the EMA. Notwithstanding the foregoing,
neither EK nor 360 North has formally acknowledged to the Company its assumption
of SWI's obligations under the EMA nor has the Company formally consented to any
such assumption.
Additionally, under the EMA, SWI is required to comply with its previous
obligations pursuant to a January 1989 Administrative Consent Order entered into
between the New Jersey Department of Environmental Protection and Energy
('NJDEPE') and SWI relating to remediation of the land at the HDCC Newark, New
Jersey facility. While HDCC does not believe that it will be required to incur
significant liability in connection with environmental conditions at the Newark
facility, there can be no assurance that the State of New Jersey will not
conclude, in the future, that additional remediation is required, for which HDCC
may be considered responsible. The EMA also requires SWI to remediate
environmental matters, if any, at the Greenville, South Carolina facility
arising before December 31, 1986, subject to certain conditions set forth in the
EMA.
In June 1994, the EPA filed an administrative complaint against HDCC for
alleged violations of EPA regulations relating to industrial boilers at the
Cincinnati facility. The particular unit that is the subject of the complaint,
boiler number five, is out of service and has not operated since August 1992. In
1995, the Company made a monetary offer to the EPA to settle this claim and
continues to negotiate with the EPA. If the EPA does not accept the Company's
settlement offer, litigation is likely to ensue in which the Company intends to
assert all meritorious defenses available. The Company believes the outcome of
such litigation would not be material to the
F-20
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
Company's financial position or results of operations. The Company has made a
claim for indemnification against PMC with respect to this matter; PMC has
indicated that it will contest the claim. There can be no assurances that such
claim will be successful.
In connection with the acquisition of HDCC, the Company employed
environmental consultants to examine all HDCC sites and assess the related
environmental matters at these sites. Based on this examination, all known
environmental liabilities, including fines and penalties, that are the
responsibility of HDCC have been accrued for by HDCC as of the acquisition date.
KCI
KCI owns three manufacturing facilities: Kalama, Washington, Garfield, New
Jersey, and Beaufort, South Carolina. Operations at these three sites, as well
as operations by subsidiaries formerly owned by KCI, have generated
environmental liabilities. The Stock Purchase Agreement between FCC and BC Sugar
(the 'KCI Stock Purchase Agreement'), requires BC Sugar to indemnify and
reimburse the Company for certain environmental liabilities, as discussed in
more detail below.
The Company's Kalama, Washington facility is subject to an agreed order
between KCI and the EPA requiring KCI to remediate portions of the site and to
limit potential offsite contamination, pursuant to RCRA. The EPA has approved
Kalama's interim corrective measures work plan and RCRA facility investigation
report describing proposed remediation of the site. Capital equipment has been
installed in part of the facility and remediation is ongoing. The Company
believes that the interim corrective measures will provide most if not all of
the remediation required by the EPA.
The Company's Garfield facility is subject to an administrative consent
order with the State of New Jersey requiring remediation of portions of the site
and potentially requiring remediation of areas offsite, pursuant to the New
Jersey Industrial Site Recovery Act ('ISRA'). The Garfield facility cleanup is
also subject to a Settlement Agreement (the 'Tenneco Settlement Agreement'),
dated April 28, 1994, to terminate litigation between KCI and Tenneco Polymers,
Inc. ('Tenneco Polymers'), the successor in interest of the prior owner of the
site. The Tenneco Settlement Agreement requires Tenneco Polymers to conduct the
cleanup of the facility required by the State of New Jersey and to pay for 80
percent of the cleanup costs, with KCI responsible for the remaining 20 percent
of such costs. BC Sugar will remain responsible for certain of KCI's portion of
the cleanup costs pursuant to the KCI Stock Purchase Agreement as described
below. Tenneco Polymers is currently conducting additional site investigation
and discussing with the State of New Jersey the nature and scope of the required
remediation of the Garfield site. KCI has terminated manufacturing operations at
this facility.
The Company's Beaufort facility has been listed on the EPA's National
Priorities List pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act ('CERCLA'). KCI's subsidiary, Kalama Specialty
Chemicals, Inc. ('KSCI'), has conducted environmental studies of the site to
identify the extent of contamination and to evaluate the feasibility of
remediation alternatives, pursuant to an administrative order on consent between
KSCI and the EPA. The EPA and KSCI have reached agreement on a consent decree
under which KSCI is to perform the remediation strategy selected by the EPA.
Pilot equipment was installed and test work commenced in 1995. BC Sugar will
remain responsible for certain of KCI's portion of the cleanup costs pursuant to
the KCI Stock Purchase Agreement as described below. Manufacturing operations at
this facility have also ceased.
KCI and its subsidiaries have also been named as potentially responsible
parties ('PRPs') pursuant to CERCLA or similar state laws at five sites not
owned by KCI at which it is alleged that hazardous substances generated by KCI
or its subsidiaries were disposed. These sites are being remediated or studied
for remediation. KCI is cooperating with the relevant governmental agency and
other PRPs in the investigation and cleanup at each of these sites. Various
contingencies such as the incomplete status of investigation, the uncertainty of
remediation selection and effectiveness, the search for additional PRPs, the
absence of binding commitments allocating liability among PRPs and the joint and
several nature of liability under CERCLA make it impossible to
F-21
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
predict at this time KCI's total liability at these sites. KCI or one of its
subsidiaries has also been named as a PRP at sites under which an indemnitor
(other than BC Sugar) has agreed to undertake the defense and liability.
Finally, claims of liability have been received at other sites for which KCI has
denied responsibility. However, BC Sugar is responsible for certain liabilities
incurred at these Superfund sites pursuant to the KCI Stock Purchase Agreement,
as discussed in more detail below.
The KCI Stock Purchase Agreement provides certain indemnifications and
related provisions which address these liabilities. Pursuant to the agreement,
BC Sugar remains responsible for the costs of investigation, negotiations with
government agencies, and installation of the capital expenditure component of
the cleanup required by the government at each of the three facilities currently
owned by KCI (i.e. Kalama, Garfield and Beaufort). BC Sugar is also responsible
for a total of 50 percent of the costs of operation and maintenance arising from
the capital expenditure component of cleanup at these three sites until five
years after the installation of the capital expenditure component of each site.
In addition, BC Sugar is responsible for all costs incurred as a result of
KCI's liability at the offsite Superfund sites including the five at which KCI
is a cooperating PRP, sites at which an indemnitor other than BC Sugar has
agreed to accept responsibility and other identified sites at which KCI has
received claims but is currently denying liability, provided that the sites were
identified in the schedules to the Kalama Stock Purchase Agreement. BC Sugar's
liability for these sites continues until three years after the installation of
capital expenditures at all of the three currently owned facilities, but in any
event no later than May 26, 2004.
In the KCI Stock Purchase Agreement, BC Sugar also agreed to remain
responsible for certain liabilities arising from violations of environmental
laws occurring before May 26, 1994, at sites currently or formerly owned by KCI
to the extent such liabilities in the aggregate exceed $2,000 and claims are
made by the Company for such reimbursement before May 26, 1996. However, the KCI
Stock Purchase Agreement also includes certain warranties and representations by
BC Sugar that KCI was in compliance with environmental laws as of the closing
date (May 26, 1994), except as set forth in a schedule accompanying and
incorporated into the KCI Stock Purchase Agreement. BC Sugar further agreed to
indemnify the Company and KCI against liabilities arising out of the breach of
these representations and warranties to the extent each such liability exceeded
$50 individually and all such liabilities exceeded $600 in the aggregate, and
provided any such claim is made by the Company or KCI before May 26, 1996. All
of the indemnifications and other provisions whereby BC Sugar agreed to remain
responsible for costs in the KCI Stock Purchase Agreement, including those
described above, are subject to an aggregate limit of $44,000 and including
certain costs which may be directly incurred or paid by BC Sugar. The KCI Stock
Purchase Agreement required BC Sugar to establish a trust fund to provide
reimbursement for expenditures for environmental liabilities by KCI and the
Company for which BC Sugar is liable under the agreement.
As a result of the KCI Stock Purchase Agreement and the Tenneco Settlement
Agreement, the Company does not believe that any additional liabilities incurred
by KCI under environmental laws will be material to the Company's financial
position or results of operations.
In May 1991, the EPA issued a compliance order to KCI alleging nine
violations of the Clean Air Act, dating back to 1984, at the Kalama facility. In
July 1994, KCI was informally notified by the EPA that these violations (and
possibly other alleged violations of the Clean Air Act) had been referred to the
Department of Justice for possible initiation of an enforcement action. In 1995,
the Company reached a tentative understanding with the Department of Justice
which contemplates the payment of a penalty as well as an additional payment to
fund supplemental environmental projects, both totaling approximately $1.6
million. The Company has made a claim to BC Sugar for indemnification in this
matter, which is included in the liabilities established by the Company in
connection with the acquisition of KCI.
F-22
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
FCAC
In December 1994, the Company acquired certain assets of Reilly-Whiteman
through its subsidiary, FCAC and entered into a lease of the Reilly-Whiteman
facility at Conshohocken, Pennsylvania. Reilly-Whiteman incurred certain
environmental liabilities prior to December 1994, including alleged violations
of environmental regulations, some of which may have continued after that date.
However, pursuant to the Asset Purchase Agreement entered in connection with the
acquisition, the prior owner, the Reilly Corporation, has the responsibility for
claims or liabilities arising from operations prior to that date. Accordingly,
the Company does not believe that any known liabilities arising from the
Conshohocken facility are likely to have a material adverse effect on the
Company's financial position or results of operations.
12. COMMITMENTS AND CONTINGENCIES
The Company has entered into various operating lease agreements for the use
of certain real estate, buildings, office space, equipment and vehicles. A
number of these agreements provide for renewal options which, if exercised,
would extend the terms of the leases for varying periods of time. Rental expense
relating to operating leases for the years ended December 31, 1993, 1994 and
1995 was $318, $970 and $2,383, respectively.
Future minimum lease payments for all noncancellable operating leases with
initial or remaining terms in excess of one year as of December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING OPERATING LEASES
- ------------------------------------------------------------------ ----------------
<S> <C>
1996.............................................................. $ 2,890
1997.............................................................. 2,380
1998.............................................................. 2,080
1999.............................................................. 1,776
2000.............................................................. 1,680
----------------
Total minimum lease payments................................. $ 10,806
----------------
----------------
</TABLE>
In accordance with a management agreement between the Company and a
partnership controlled by two officers, a management fee paid to the partnership
and certain of the Company's corporate expenses paid by the aforementioned
partnership amounting to $1,076 in 1993 have been included in the related
results of operations. During 1994, the management agreement was amended and all
corporate expenses are now paid by the Company.
During 1994, the Company entered into employment agreements with the two
officers whereby each would continue to serve the Company in their present
capacity through May 1997. Under the employment agreements, the two officers are
each entitled to an annual base salary and, subject to the Company's meeting
certain performance criteria established by the Board of Directors or the
Compensation Committee, an annual bonus based on a percentage of the annual base
salary. In the event that these agreements are terminated by the Company without
cause, the two officers shall be entitled to severance benefits equal to two
times the officers' average final compensation, payable over two years.
The two officers also have a conditional bonus agreement with the majority
shareholder which entitles them to receive a cash bonus from the majority
shareholder if certain returns on the majority shareholder's investment are
realized. If such bonus is paid by the shareholder, the Company will treat it in
accordance with generally accepted accounting principles.
F-23
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
13. MINORITY INTEREST
In connection with its acquisition, FTCC issued 2,800 shares of its $1,000
par value Series A Preferred Stock to its former owner. The Series A Preferred
Stock is entitled to receive an 8.5 percent cumulative cash dividend paid
semiannually. The shares are subject to redemption, in whole or in part, at
$1,000 per share plus all unpaid dividends accrued thereon, at the option of the
Board of Directors of FTCC, or upon the earlier of an occurrence of an event of
mandatory redemption or May 4, 2002. The Company has $3,073 included in Minority
Interest on the consolidated balance sheets at December 31, 1994 and 1995
relating to the Series A Preferred Stock of FTCC. The Company has $238, $277 and
$247 reflected in Minority Interest on the consolidated statements of
operations, relating to the dividends paid or accrued by FTCC on their Series A
Preferred Stock, for the years ended December 31, 1993, 1994 and 1995,
respectively.
In addition, FTCC issued 114.75 shares of its $1,000 par value Series B
Preferred Stock to two executives of FTCC in connection with the acquisition.
The holders of this stock are entitled to receive a 10 percent cumulative cash
dividend payable quarterly. The Series B shares are subject to redemption, in
whole or in part, at $1,000 per share plus all unpaid dividends accrued thereon,
at the discretion of the Board of Directors of FTCC. On June 30, 1994, these
shares were exchanged one-for-one for shares of FCC's Series B Preferred Stock
(note 14). In consideration, FCC became the owner of the FTCC shares previously
held by the executives, making FCC the holder of 100 percent of FTCC's Series B
Preferred Stock. Therefore, at December 31, 1994 and 1995, there is $22 included
in Minority Interest on the consolidated balance sheet relating to the accrued
and unpaid dividends earned by the former owners of the stock prior to the date
of the exchange. The par value of the shares was eliminated in consolidation. In
addition, the Company has $13, $7 and $0 reflected in Minority Interest on the
consolidated statements of operations, relating to the Series B Preferred Stock
dividends paid or accrued by FTCC, for the years ended December 31, 1993, 1994
and 1995, respectively.
14. MANDATORY REDEEMABLE PREFERRED STOCK
Series B Preferred Stock
The holders of nonvoting Series B Preferred Stock are entitled to receive
an 11 7/8 percent cumulative cash dividend payable quarterly on the last day of
the month succeeding the end of a calendar quarter (the dividend payment date).
In the event of liquidation of the Company, the holders shall be entitled to
receive all of the par value plus any accrued and unpaid dividends.
Series B Preferred Stock, at the discretion of the Board of Directors of
the Company, shall be subject to redemption, in whole or in part, at $1,000 per
share plus all unpaid dividends accrued thereon (liquidation preference). Series
B Preferred Stock shall be subject to a mandatory redemption, at the liquidation
preference, on April 30, 2002.
For any quarterly dividend period in which dividends are not paid in cash
on the respective dividend payment date, such accrued and unpaid dividends shall
be added to the liquidation preference at the beginning of the subsequent
quarterly dividend period. The Company has paid no cash dividends. There were
$4,891 and $8,192 of accrued and unpaid dividends on the Series B Preferred
Stock at December 31, 1994 and 1995, respectively.
Series C Preferred Stock
The holders of nonvoting Series C Preferred Stock, par value $1,000, are
entitled to receive an 11 7/8 percent cumulative cash dividend payable quarterly
on the last day of the month succeeding the end of a calendar quarter (the
dividend payment date). In the event of liquidation of the Company, the holders
shall be entitled to receive $1,054 per share plus any accrued and unpaid
dividends (the liquidation preference). Series C stock shall be subject to
redemption, in whole or in part, at the liquidation preference, at the
discretion of the Board of Directors of the Company or under mandatory
redemption on May 31, 2004.
F-24
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
For any quarterly dividend period in which dividends are not paid in cash
on the respective dividend payment date, such accrued and unpaid dividends shall
be added to the liquidation preference at the beginning of the subsequent
quarterly dividend period. The Company has paid no cash dividends. There were
$769 and $2,079 of accrued and unpaid dividends relating to the Series C
Preferred Stock at December 31, 1994 and 1995, respectively.
In 1995, the Company purchased 161 shares of Series C Preferred Stock at an
aggregate cost of $188. These shares are classified as treasury stock at
December 31, 1995.
15. COMMON STOCK
In September 1994, the Company reclassified the par value of its Series A
Common Stock from $100 to $.01. All references to the Series A Common Stock in
the financial statements have been restated to reflect the reclassification as
of the Company's date of inception. In addition, the Company authorized the
issuance of 10,000 shares of a new Series B Common Stock. The holders of Common
Stock shall not be entitled to receive cash dividends, nor shall shares of
Common Stock be purchased, redeemed, or otherwise acquired by the Company until
the Series B Preferred Stock and the Series C Preferred Stock has been redeemed
in full.
In 1995, the Company purchased 285 shares of Series A Common Stock at an
aggregate cost of $33. These shares are classified as treasury stock at December
31, 1995.
16. EQUITY PARTICIPATION PLAN AND STOCK OPTIONS
Pursuant to the May 1992, September 1993 and May 1994 Stock Option
Agreements, collectively amended December 7, 1994, the Company granted
nonqualified stock options to acquire an aggregate of 1,837, 7,500 and 1,981
shares, respectively, of Series A Common Stock to two officers of the Company.
The options are exercisable at the fair market value of the shares on the date
of grant and are 60 percent vested as of December 31, 1995. The remaining
options will become vested at a rate of 20 percent each May 4 through 1997 or
immediately upon the occurrence of certain other events as set forth in the
stock option agreements. In January 1994, a stockholder exercised his option to
purchase 5,322 shares of Series A Common Stock. Approximately 27 percent of the
shares purchased represent restricted shares, which can be repurchased by the
Company, upon the occurrence of certain events, until the stockholder becomes
fully vested in these shares in accordance with the terms set forth in the Stock
Option Agreements.
In June 1994, the Company adopted an Equity Participation Plan (the 'Plan')
which provides for the award of nonqualified stock options and stock
appreciation rights ('SARs') to certain executive officers, key employees and
consultants of the Company and its subsidiaries. The Plan permits the Company to
grant, to any holder of an option, a SAR relating to all or some of the Series B
Common Stock shares covered by such options. The options vest ratably over 10
years, subject to acceleration to five years if certain performance goals are
met. The vesting period for the SARs coincides with the related options.
For options granted prior to May 1994, no compensation expense was
recognized, as the exercise price was equal to the estimated fair market value
on the date of grant. Noncash compensation expense of $218 was recorded for the
options granted and vested in May 1994 (note 18). Additionally, compensation
expense of $735 will be recognized over the vesting period of the options issued
in June 1994 and the remainder of the May 1994 options. At December 31, 1995,
5,996 and 3,165 shares of Series A and Series B Common Stock, respectively,
remained reserved for issuance in connection with the Stock Option Agreements at
December 31, 1995 and 1994, respectively. No SARs have been awarded.
F-25
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
The following is a summary of option transactions and exercise prices:
<TABLE>
<CAPTION>
SERIES A SERIES B PRICE
COMMON SHARES COMMON SHARES SHARE
------------- ------------- ---------
<S> <C> <C> <C>
Outstanding at December 31, 1992.......................... 1,837 -- $100.00
Granted................................................... 7,500 -- 100.00
------------- ------
Outstanding at December 31, 1993.......................... 9,337 --
Granted................................................... 1,981 -- 105.40
Granted................................................... -- 2,565 100.00
Exercised................................................. (5,322) -- 100.00
------------- ------
Outstanding at December 31, 1994.......................... 5,996 2,565
Granted................................................... -- 1,360 255.00
Forfeited................................................. -- (760) 100.00
------------- ------
Outstanding at December 31, 1995.......................... 5,996 3,165
------------- ------
------------- ------
Exercisable at December 31, 1995.......................... 3,598 497
------------- ------
------------- ------
</TABLE>
17. RESTRUCTURING AND OTHER CHARGES
In 1995, the Company recorded restructuring and other charges totaling
$14.4 million. These charges, which reduced gross profit from $65,287 to $63,355
and operating income (loss) from $9,788 to $(4,639), are aimed at reducing the
Company's overall cost structure, including both manufacturing and
administrative costs, through the closure of two manufacturing facilities and
personnel reductions in both administrative and manufacturing positions. In
addition, included in the charges are provisions related to unsaleable
inventory, estimated environmental remediation costs and an impairment loss on
intangibles.
These actions affect approximately 135 of the Company's employees in
manufacturing and headquarters locations throughout the United States and
Europe. Charges related to personnel reductions, including severance and related
benefits total $3.0 million. As of December 31, 1995, 30 employees have been
terminated and $0.3 million of termination benefits have been paid. The
remainder of the employees included in the cost reduction initiatives are
generally located at manufacturing facilities and will work through the plant
closing transition periods ending in 1996. At that time, the remaining cash
payments to employees of $2.7 million will be made.
Of the remaining $11.4 million of restructuring charges, $3.2 million
represent charges that require an outlay of cash, including lease and other
contract terminations, and environmental remediation related to the plan for
cost reduction. Of this amount, $0.1 million has been paid through December 31,
1995 with $1.0 million to be paid in 1996 and $2.1 million to be paid in years
after 1996, principally for environmental remediation.
Noncash charges of $8.2 million include increases in inventory reserves at
HDCC and FTCC of $1.9 million, writedowns of fixed assets associated with plant
closures at HDCC and FCAC of $2.2 million, and an impairment loss of $4.0
million on all goodwill and other intangibles associated with the FCAC
acquisition. The continued decline in the financial results of the operating
elements of the Company's FCAC business acquired in 1994, the resultant
strategic and operational review and the application of the Company's objective
measurement tests resulted in an evaluation of intangible assets for possible
impairment. The underlying factors contributing to the decline in financial
results included changes in the market place and worldwide economic conditions.
Additionally, in 1995, the Company recorded a charge of $2,187 for
registration costs associated with an aborted public offering.
F-26
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
18. COMPENSATION EXPENSE
The Company has recorded noncash compensation expense of $915 and $150 for
the years ended December 31, 1994 and 1995 related to common stock options
granted (note 16) and to a nonrecurring charge for common stock sold to
executive officers by the Company during June 1994 in connection with the
acquisition of KCI.
19. RELATED PARTY TRANSACTIONS
Included in loans to stockholders is a note receivable from a shareholder
in the principal amount of $200. Interest is earned quarterly at the highest
annual rate paid by the Company on its outstanding debt during such year. All
unpaid principal and interest due on the note is payable in full on December 31,
1999. The note is collateralized by 300 shares of common stock and 170 shares of
Series B Preferred Stock of the Company held by the stockholder.
20. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of cash flow information for the years ended
December 31, 1993, 1994 and 1995 is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ -------
<S> <C> <C> <C>
Cash paid for:
Interest (net of capitalized interest).......................... $1,286 $5,549 $12,748
------ ------ -------
------ ------ -------
Income taxes.................................................... $ 195 $2,741 $ 755
------ ------ -------
------ ------ -------
Non-cash investing and financing activities:
Issuance of note receivable to stockholder.................... $ 200 $ -- $ --
------ ------ -------
------ ------ -------
Accrued and unpaid dividends on Series B preferred
stock...................................................... $1,621 $2,925 $ 3,301
------ ------ -------
------ ------ -------
Accrued and unpaid dividends on Series C preferred
stock...................................................... $ -- $ 769 $ 1,310
------ ------ -------
------ ------ -------
Accrued and unpaid dividends for minority interest of
subsidiary................................................. $ 128 $ 277 $ 247
------ ------ -------
------ ------ -------
Capital expenditures included in accounts payable and accrued
expenses................................................... $ 216 $1,060 $ 330
------ ------ -------
------ ------ -------
</TABLE>
21. INTERNATIONAL OPERATIONS
The Company operates in one business segment, specialty chemicals.
Information about the Company's export sales by domestic operations and sales by
foreign operations, by geographic location, for the years ended December 31,
1993, 1994 and 1995 is presented below. HDCC export sales were primarily via a
distribution agreement with a subsidiary of the former owner of HDCC.
<TABLE>
<CAPTION>
1993 1994 1995
------ ------- --------
<S> <C> <C> <C>
Canada....................................................... $1,455 $ 7,928 $ 11,823
South and Latin America...................................... 651 4,312 8,845
Europe....................................................... 4,766 13,510 66,237
Asia & Pacific............................................... 2,531 14,103 31,318
Africa....................................................... -- 66 2,452
------ ------- --------
Total...................................................... $9,403 $39,919 $120,675
------ ------- --------
------ ------- --------
</TABLE>
F-27
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
With respect to foreign operating subsidiaries, the consolidated financial
statements include the amounts set forth below for 1995. These amounts were not
significant for 1993 and 1994.
<TABLE>
<CAPTION>
1995
-------
<S> <C>
Total assets................................................... $46,242
Total liabilities.............................................. 41,710
Net sales...................................................... 69,089
Loss........................................................... (5,083)
</TABLE>
22. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying consolidated balance sheet as of June 30, 1996 and the
related consolidated statements of operations and cash flows for the six month
period ended June 30, 1995 and 1996 have been prepared in accordance with
generally accepted principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal and recurring adjustments) considered necessary for a fair
presentation have been included. The results of operations for the six month
period ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996.
Inventories
A summary of the major classifications of inventories is as follows:
<TABLE>
<CAPTION>
JUNE 30,
1996
--------
<S> <C>
Raw materials, work in process and intermediates............... $ 30,306
Finished goods................................................. 24,649
Less: Reserves................................................. (1,042)
--------
$ 53,913
--------
--------
</TABLE>
It is estimated that inventories would have been $1,125 lower than reported
at June 30, 1996, if quantities valued on the LIFO basis were instead valued on
the FIFO basis.
Resignation of Executive Chairman
Effective July 2, 1996, the Executive Chairman and Chairman of the Board of
Directors resigned from his positions at the Company. This former executive will
continue to serve as a Director of the Company and remains a stockholder.
Pursuant to an employment agreement, the Company will provide the former
executive with a cash benefit to be paid in substantially equal monthly
installments over two years beginning July 1996. Also, pursuant to certain stock
option agreements, all options attributable to the former executive became 100%
vested and exercisable. In addition, with regard to certain options exercised by
the former executive in 1994 which were restricted and provided the Company with
a right to call such shares, the call rights have been terminated. Accordingly,
the Company recorded a charge of approximately $1 million in July 1996 resulting
from the former executive's resignation.
New Pronouncements
In March 1995, FASB issued SFAS No. 121, 'Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.' SFAS No. 121,
adopted by the Company in the first quarter of 1996, established criteria for
recognizing, measuring and disclosing impairments of long-lived assets,
including intangibles and goodwill. The adoption of SFAS No. 121 has not had a
significant impact on the Company's results of operations or financial position.
F-28
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
In October 1995, FASB issued SFAS No. 123, 'Accounting for Stock-Based
Compensation,' which became effective for transactions entered into in fiscal
years beginning after December 15, 1995. SFAS No. 123 encourages a fair value
based method of accounting for employee stock options or similar equity
instruments, but allows continued use of the intrinsic value based method of
accounting prescribed by APB No. 25, 'Accounting for Stock Issued to Employees.'
Companies electing to continue to use APB No. 25 must make pro forma disclosures
of net income as if the fair value based method of accounting had been applied.
The new accounting standard has not had an impact on the Company's net income or
financial position, as the Company has chosen to continue to utilize the
accounting guidance set forth in APB No. 25.
Environmental
KCI has been named as a defendant in a wrongful death action filed by the
estate of a neighbor of the Garfield plant, alleging that operations of the
plant caused cancer. The lawsuit is currently in the initial stages and KCI
intends to contest it vigorously. Because the claim indicates that the alleged
exposure predated the Company's acquisition of KCI, the Company has named BC
Sugar and Tenneco Polymers as third party defendants in the lawsuit. As a result
the Company does not believe that this lawsuit is likely to be material to the
Company's financial position or results of operations. However, BC Sugar and
Tenneco Polymers have not accepted responsibility for defending this claim.
Since 1961, the Company's facility in Vernon, France has been discharging
production wastewater without pretreatment into the River Seine. According to an
analysis completed by the Company in early 1996, such production wastewater
includes concentrations of pollutants which are not in compliance with legal
limits or limits which are acceptable for discharge to the municipal wastewater
treatment plant. The Company plans to resolve this matter by negotiating
permission to discharge the wastewater to the municipal wastewater treatment
plant for a fee and by shifting production of certain raw materials to the
facility under construction in India. The Company believes that the French
environmental authorities will refrain from penalizing the Company for these
discharges while a solution is sought. Although there can be no assurance that
such negotiations will be succesful or that the environmental authorities will
not penalize the Company for such discharges into the river, the Company
believes that, if assessed, any such penalties are not likely to be material to
the Company's financial position or results of operations.
Other Events
The Company is preparing for an offering (the 'Offering') of $125 million
of senior subordinated notes due 2006 (the 'Notes'), pursuant to Rule 144A of
the Securities Act of 1933, as amended. Subsequent to the closing of the
Offering, the Company intends to file a registration statement to register notes
having substantially identical terms as the Notes and to make an offer to
exchange such registered notes for the outstanding Notes. The net proceeds of
the Offering are intended to repay a combination of term and revolving loans
under the Company's current Domestic Revolving Credit Facility and the European
Revolving Facility.
Concurrently with the consummation of the Offering, the Company will amend
and restate its existing credit agreement ('Amended and Restated Credit
Agreement'). The Amended and Restated Credit Agreement will provide for a
revolving loan facility of up to $85 million and include Freedom Chemical
Diamalt GmbH ('Diamalt') as a co-borrower. The obligations of the Company under
the Amended and Restated Credit Agreement will be guaranteed by all of the
Company's domestic subsidiaries and Diamalt and collateralized by a first
priority lien on substantially all of the properties and assets of the Company
and certain properties and assets of Diamalt. The obligations of Diamalt under
the Amended and Restated Agreement will be guaranteed by the Company.
On or prior to the consummation of the Offering, the Company's majority
stockholder has committed to invest an aggregate of $10 million of new cash
equity in the Company (the 'Cash Equity Investment'). The Company's other
stockholders will also be offered an opportunity to make additional cash equity
investments in the Company in an amount sufficient to maintain their existing
ownership percentages.
F-29
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
In addition, concurrently with the consummation of the Offering, the Series
B Preferred Stock and the Series C Preferred Stock of the Company will be
amended (the 'Preferred Stock Amendment') to extend the mandatory redemption
dates of such Preferred Stock to April 2007 and May 2007, respectively.
The consummation of the Offering is contingent upon the prior or concurrent
(i) execution of the Amended and Restated Credit Agreement, (ii) consummation of
the Cash Equity Investment and (iii) effectiveness of the Preferred Stock
Amendment.
F-30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Hilton Davis Chemical Co.
Cincinnati, Ohio
We have audited the accompanying consolidated statements of operations, changes
in stockholders' equity (deficit) and cash flows of the Hilton Davis Chemical
Co. and Subsidiary for the period January 1, 1993 to September 9, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows of
the Hilton Davis Chemical Co. and Subsidiary for the period January 1, 1993 to
September 9, 1993 in conformity with generally accepted accounting principles.
As explained in Note 2 and Note 3 to the financial statements, Hilton Davis
Chemical Co. changed its method of accounting for income taxes and maintenance
parts effective January 1, 1990.
COOPERS & LYBRAND L.L.P.
600 Lee Road
Wayne, Pennsylvania
September 9, 1994
F-31
<PAGE>
HILTON DAVIS CHEMICAL CO. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1
THROUGH
SEPTEMBER 9, 1993
-----------------
<S> <C>
Net sales............................................................................................ $79,618
Cost of goods sold................................................................................... 62,744
-----------------
Gross profit.................................................................................... 16,874
Selling, general and administrative expense.......................................................... 10,959
Research and development expense..................................................................... 769
-----------------
Operating income................................................................................ 5,146
Interest and debt expense............................................................................ 1,998
Other expense........................................................................................ 337
-----------------
Income before income taxes...................................................................... 2,811
Provision for income taxes........................................................................... 1,155
-----------------
Net income........................................................................................... $ 1,656
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-32
<PAGE>
HILTON DAVIS CHEMICAL CO. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
---------------- RETAINED EARNINGS/ TRANSLATION
SHARES AMOUNT (ACCUMULATED DEFICIT) ADJUSTMENT TOTAL
------ ------ --------------------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992............................. 10 $ 10 $ (245) $ (237) $ (472)
Net income............................................. 1,656 1,656
Foreign currency translation........................... 72 72
--
------ ---------- ---------- -------
Balance, September 9, 1993............................. 10 $ 10 $ 1,411 $ (165) $ 1,256
--
--
------ ---------- ---------- -------
------ ---------- ---------- -------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-33
<PAGE>
HILTON DAVIS CHEMICAL CO. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1
THROUGH
SEPTEMBER 9, 1993
-----------------
<S> <C>
Cash flows provided by operating activities:
Net income................................................................................... $ 1,656
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................................................. 1,712
Amortization of debt discount............................................................. 988
Bad debt expense.......................................................................... 100
Deferred income taxes..................................................................... (458)
Change in assets and liabilities:
Increase in accounts receivable........................................................... (3,586)
Increase in inventories................................................................... (1,646)
Increase in prepaid expenses and other
current assets.......................................................................... (2,171)
Increase in due from affiliates........................................................... (3,322)
Increase in accounts payable and accrued expenses......................................... 171
-----------------
Net cash flows provided by operating activities................................................ 88
-----------------
Cash flows used in investing activities:
Capital expenditures......................................................................... (2,838)
Other........................................................................................ 72
-----------------
Net cash flows used in investing activities.................................................... (2,766)
-----------------
Cash flows provided by (used in) financing activities:
Borrowings under revolving credit agreement.................................................. 66,798
Repayments under revolving credit agreement.................................................. (63,790)
Repayments of long-term debt................................................................. (333)
-----------------
Net cash flows provided by financing activities................................................ 2,675
-----------------
Net decrease in cash........................................................................... (3)
Cash beginning of period....................................................................... 382
-----------------
Cash end of period............................................................................. $ 379
-----------------
-----------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-34
<PAGE>
HILTON DAVIS CHEMICAL CO. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ACQUISITION OF THE COMPANY
On September 9, 1993, a Purchase and Sale Agreement among the equity owners
of the Hilton Davis Chemical Co. (the 'Company') and Freedom Chemical
Acquisition Corporation (FCAC), which is a wholly-owned subsidiary of Freedom
Chemical Company was consummated under which FCAC acquired all of the
outstanding common stock of the Company.
The purchase price for the Company totaled approximately $68,800, including
assumed liabilities of approximately $44,200, plus FCAC acquisition costs of
approximately $11,187. In conjunction with the acquisition of the Company by
FCAC, a definitive agreement was entered into between Sterling Winthrop, Inc.
(SWI) (a former owner of the Company) and FCAC whereby outstanding litigation
(Note 7) was settled and certain indebtedness to Sterling Drug, Inc. (Sterling)
was forgiven. Additionally, SWI entered into a comprehensive environmental
matters agreement with FCAC, whereby SWI is responsible for remediation of the
land at the Company's Cincinnati facility in accordance with a consent decree
entered into between the State of Ohio and SWI, and its subsidiary; the
remediation of the land at the Company's Newark, New Jersey facility pursuant to
an Administrative Consent Order entered into between the New Jersey Department
of Environmental Protection and Energy and SWI; the remediation of the site at
Greenville, South Carolina and other environmental matters, if any, arising on
or before December 31, 1986.
The accompanying consolidated financial statements of the Company have been
prepared on a pre-acquisition basis of accounting and do not reflect the effects
of the acquisition by FCAC or the related financing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and include the accounts of the Company
and its wholly-owned subsidiary. All significant intercompany accounts and
transactions have been eliminated in consolidation. The significant accounting
policies utilized in the preparation of the financial statements are as follows:
Business
The Company, a Delaware corporation, was incorporated on October 23, 1986
and is a majority-owned subsidiary of PMC, Inc. the former Parent ('PMC'). The
Company produces colorants and other specialty chemicals used in foods,
cosmetics, household products, printing inks, industrial coatings, paper
(carbonless) and textiles.
Inventory
Inventory cost is determined by the last-in, first-out ('LIFO') method for
substantially all inventories relating to domestic manufacturing operations. The
cost of remaining inventories, which in the aggregate represent 1% of total
inventories, are valued using the first-in, first-out ('FIFO') method. Inventory
costs include the cost of materials, direct labor and manufacturing overhead.
Liquidation of LIFO inventory layers did not materially affect cost of sales for
the period January 1, 1993 to September 9, 1993.
Property, Plant and Equipment
Maintenance, repairs and minor renewals are charged to expense as incurred
and expenditures for major renewals and betterments are capitalized. Upon
retirement or other disposition, cost and related accumulated depreciation are
removed from the accounts and any gain or loss is included in results of
operations. For financial
F-35
<PAGE>
HILTON DAVIS CHEMICAL CO. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
reporting purposes, depreciation is computed using the straight-line method over
the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings and improvements............................... 20 to 25 years
Machinery and equipment.................................. 3 to 10 years
</TABLE>
Leasehold improvements are amortized over the estimated useful lives or the
term of the related leases, whichever is shorter, using the straight-line
method.
Intangible Assets
Intangible assets consist of patents which are valued at cost less
accumulated amortization and are being amortized on a straight-line basis over
their respective useful lives which range from 8 to 16 years. Amortization
expense was $51 for the period January 1, 1993 to September 9, 1993.
Income Taxes
During the period January 1, 1993 to September 9, 1993, the Company adopted
Statement of Financial Accounting Standards No. 109, 'Accounting for Income
Taxes' (SFAS 109) and elected to apply the provision of SFAS 109 retroactive to
January 1, 1990. Accordingly, the beginning balance of accumulated deficit as of
January 1, 1993 has been restated to reflect a decrease of $197. In addition,
the consolidated statement of operations for the period January 1, 1993 to
September 9, 1993 has been restated to comply with the provisions of SFAS 109.
The impact of applying SFAS 109 on consolidated net income for the period
January 1, 1993 to September 9, 1993 was a decrease of $80. Under SFAS No. 109,
deferred income taxes are provided under the asset and liability method. This
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred income taxes are
determined based on the differences between the financial statement and tax
basis of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.
Foreign Currency Translation
The statement of operations for the Company's foreign operation is
translated into U.S. dollars using an average monthly rate of exchange.
Transaction gains and losses included in income were not significant for the
period January 1, 1993 to September 9, 1993. The foreign operation is immaterial
to the Company.
Forward Exchange Contracts
In connection with export sales billed in foreign currencies, the Company
enters into forward exchange contracts to reduce the risk of foreign exchange
rate movements. These forward exchange contracts are accounted for as hedges
and, accordingly, gains and losses on these contracts are deferred and
recognized in the period in which the transaction is completed.
Environmental
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed currently. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable, and when the
costs associated with them can be reasonably estimated. Generally, this
coincides with the completion of a feasibility study or the Company's commitment
to a formal plan of action.
F-36
<PAGE>
HILTON DAVIS CHEMICAL CO. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
3. CHANGE IN ACCOUNTING METHOD
The Company changed its method of accounting for maintenance parts
retroactive to January 1, 1990. Management believes that expensing these items
instead of capitalizing them provides a better matching of costs and revenues
and more fairly reflects the current value of assets. Accordingly, the
consolidated statement of operations for the period January 1, 1993 to September
9, 1993 has been restated. The effect of this change was to increase January 1,
1990 (accumulated deficit) by $1,695 to $(3,808) and decrease net income for the
period January 1, 1993 to September 9, 1993 by $60.
4. LONG-TERM DEBT
The Company maintained an arrangement with PMC, pursuant to which the PMC
provided the Company with the ability to obtain loans and issue letters of
credit under the Credit Agreement between PMC and Congress Financial Corporation
('Congress'). The related interest thereon has been reflected in the
consolidated statement of operations for the period presented, based on
allocations from PMC to the Company representing the Company's pro rata share of
the available collateral base, and is subject to interest at the rate charged by
the lenders. Interest is calculated at 'prime' plus 1% (7% at December 31,
1992).
5. INCOME TAXES
The provision for income taxes for the period January 1, 1993 to September
9, 1993 consists of the following:
<TABLE>
<CAPTION>
1993
------
<S> <C>
Currently payable:
Federal........................................................ $1,523
State.......................................................... 90
------
1,613
Deferred:
Federal........................................................ (458)
State.......................................................... --
------
$1,155
------
------
</TABLE>
A reconciliation of the U.S. Federal income tax to the effective tax rate
for the period January 1, 1993 to September 9, 1993 is as follows:
<TABLE>
<CAPTION>
1993
----
<S> <C>
U.S. federal income tax rate....................................... 34.0%
State income taxes, net of federal income tax benefit.............. 2.1
Nondeductible fees and penalties................................... 4.6
Meals and entertainment............................................ .4
----
Effective income tax rate.......................................... 41.1%
----
----
</TABLE>
F-37
<PAGE>
HILTON DAVIS CHEMICAL CO. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
6. PENSION AND SAVINGS PLAN
The Company has a noncontributory defined benefit pension plan which covers
certain of its union hourly employees. The plan provides benefits based on the
participants' years of service. The Company's funding policy, consistent with
statutory requirements and tax considerations, is based on actuarial
computations utilizing the unit credit actuarial method of calculation.
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1993
TO
SEPTEMBER 9, 1993
------------------
<S> <C>
Service cost (benefits earned)........................ $ 70
Interest cost on projected benefit obligation......... 36
Return on plan assets................................. (43)
Net amortization and deferral......................... 10
---
$ 73
---
---
</TABLE>
Significant assumptions used in determining the pension obligation and the
related pension expense include a discount rate of 7.25% for the period January
1, 1993 to September 9, 1993. The expected long-term rate of return on plan
assets was 10% for the period January 1, 1993 to September 9, 1993.
The Company also has a 401(k) Retirement Savings Plan for salaried
employees who meet its eligibility requirements. The Company matches certain
employee contributions. The Company's expense was $126 for the period January 1,
1993 to September 9, 1993.
7. COMMITMENTS AND CONTINGENCIES
In connection with the 1986 stock purchase of the Company from Sterling,
Sterling agreed to remedy certain known environmental matters and to finance a
substantial portion of the purchase price via two non-interest bearing notes
collateralized by the site property. The Company subsequently modified the
timing and amount of payment made under these notes (which were renegotiated
during 1990) due to management's claim that Sterling had failed to perform the
environmental clean-up as specified within the contract.
During June 1992, the Company filed a complaint against Sterling seeking a
temporary restraining order to prevent Sterling from filing a foreclosure action
against the Company. The Company claimed that Sterling had breached various
covenants in the purchase agreement thereby releasing the Company from its
obligation under the notes. The application for the restraining order was
denied. The following day Sterling filed a complaint against the Company seeking
judgment on the unpaid notes and foreclosure on the property collateralizing the
notes. The Company filed a counterclaim and answer setting forth affirmative
defenses and claims for affirmative relief, including the Company's claim that
Sterling's breach of the contractual obligations negated any obligation by the
Company to make the disputed payments.
In connection with the sale of the Company to FCAC as discussed in Note 1,
this litigation was settled and certain indebtedness to Sterling was forgiven.
The Company has entered into various lease agreements for the rental of
office equipment and vehicles, all of which are classified as operating leases.
Rental expense for the period January 1, 1993 to September 9, 1993 was $483.
8. RELATED-PARTY TRANSACTIONS
The Company purchased various new materials from a division of its parent
during the period January 1, 1993 to September 9, 1993, amounting to
approximately $27,535. Additionally, the division purchased approximately
$10,654 of products from the Company during the period January 1, 1993 to
September 9, 1993.
F-38
<PAGE>
HILTON DAVIS CHEMICAL CO. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
9. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of cash flow information for the period January 1,
1993 to September 9, 1993 is as follows:
<TABLE>
<CAPTION>
1993
------
<S> <C>
Cash paid for:
Interest....................................................... $2,087
------
------
State income taxes............................................. $ 167
------
------
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued
expenses.................................................... $ 645
------
------
</TABLE>
10. FOREIGN SALES
The Company operates in one business segment, specialty chemicals.
Information about the Company's export sales, which were primarily via a
distribution agreement with a subsidiary of the former owner, and foreign
subsidiary sales by geographic location, for the period January 1, 1993 to
September 9, 1993 is presented below:
<TABLE>
<CAPTION>
1993
-------
<S> <C>
Canada......................................................... $ 1,431
South America.................................................. 371
Latin America.................................................. 1,132
Europe:
U.K.......................................................... 761
Western...................................................... 4,896
Eastern...................................................... 245
Asia & Pacific................................................. 2,892
Africa......................................................... 2
-------
Total........................................................ $11,735
-------
-------
</TABLE>
F-39
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Kalama Chemical, Inc.:
We have audited the accompanying consolidated balance sheets of Kalama Chemical,
Inc. and subsidiaries as of May 26, 1994 and September 30, 1993, and the related
consolidated statements of operations, stockholder's equity, and cash flows for
the period October 1, 1993 to May 26, 1994 and the year ended September 30,
1993. 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 Kalama Chemical,
Inc. and subsidiaries as of May 26, 1994 and September 30, 1993, and the results
of their operations and their cash flows for the period October 1, 1993 to May
26, 1994 and the year ended September 30, 1993 in conformity with generally
accepted accounting principles.
As discussed in note 9 to the consolidated financial statements, the Company is
involved in various environmental matters. The ultimate outcome of certain
contingencies cannot presently be determined. Accordingly, the provision for the
total liability that may result has not been recognized in the accompanying
consolidated financial statements.
As discussed in note 1(i) to the consolidated financial statements, the Company
changed its method of accounting for income taxes effective October 1, 1993.
KPMG PEAT MARWICK LLP
August 22, 1994
F-40
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 26, SEPTEMBER 30,
ASSETS 1994 1993
------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................................... $ 3,837 $ 817
Marketable securities............................................................... 518 94
Accounts receivable:
Trade, less allowance for doubtful accounts of $253 in 1994 and $241 in 1993...... 11,810 11,371
B. C. Sugar affiliate............................................................. 1,281 --
Kalama International.............................................................. -- 454
Other............................................................................. 197 203
Inventories......................................................................... 8,205 9,556
Accrued environmental recoveries.................................................... 9,422 --
Deferred income taxes............................................................... 2,001 632
Prepaid expenses and other current assets........................................... 643 281
------- -------------
Total current assets............................................................ 37,914 23,408
------- -------------
Property, plant and equipment, at cost:
Land................................................................................ 1,473 1,473
Buildings and improvements.......................................................... 2,286 2,953
Equipment........................................................................... 27,566 28,643
------- -------------
31,325 33,069
Less accumulated depreciation....................................................... 11,544 11,868
------- -------------
19,781 21,201
------- -------------
Construction in progress............................................................ 1,664 3,973
Net property, plant and equipment............................................... 21,445 25,174
------- -------------
Other assets:
Accrued environmental recoveries.................................................... 18,923 34,975
Deferred income taxes............................................................... 4,021 --
Other............................................................................... 761 777
------- -------------
Total other assets.............................................................. 23,705 35,752
------- -------------
$83,064 $84,334
------- -------------
------- -------------
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
Current liabilities:
Short-term borrowings............................................................... $ -- $ 950
Current installments of long-term debt.............................................. -- 1,910
Accounts payable.................................................................... 5,076 5,019
Accrued payroll and employee benefits............................................... 918 1,121
Accrued environmental liabilities................................................... 4,663 594
Other accrued liabilities........................................................... 2,863 1,332
Income taxes payable................................................................ 3,202 742
------- -------------
Total current liabilities....................................................... 16,722 11,668
------- -------------
Deferred income taxes................................................................. -- 4,258
Accrued environmental liabilities..................................................... 43,434 35,975
Stockholder's equity:
Common stock, no par value. Authorized 8,000,000 shares; issued and outstanding
1,769,352 shares at stated value of $100.......................................... 100 100
Additional paid-in capital.......................................................... 30,954 30,954
Retained earnings (deficit)......................................................... (8,146) 1,379
------- -------------
Total stockholder's equity...................................................... 22,908 32,433
------- -------------
Commitments, contingencies and subsequent events...................................... $83,064 $84,334
------- -------------
------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-41
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED
OCTOBER 1, 1993 SEPTEMBER 30,
TO MAY 26, 1994 1993
--------------- -------------
<S> <C> <C>
Net sales...................................................................... $51,565 $75,821
Cost of sales.................................................................. 40,715 60,278
--------------- -------------
Gross profit.............................................................. 10,850 15,543
--------------- -------------
Operating expenses:
Selling and administrative................................................... 3,207 4,589
Environmental, net........................................................... 20,494 2,775
Loss on Garfield, New Jersey, plant shutdown................................. 1,864 --
--------------- -------------
Total operating expenses.................................................. 25,565 7,364
--------------- -------------
Earnings (loss) from operations........................................... (14,715) 8,179
Interest expense............................................................... (17) (384)
Other income, net.............................................................. 307 369
--------------- -------------
Earnings (loss) before income tax expense (benefit)....................... (14,425) 8,164
Income tax expense (benefit)................................................... (5,248) 2,680
--------------- -------------
Net earnings (loss)....................................................... $(9,177) $ 5,484
--------------- -------------
--------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-42
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TOTAL
------------------- PAID-IN EARNINGS STOCKHOLDER'S
SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
--------- ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1992......................... 1,769,352 $100 $ 30,054 $(4,105) $26,949
Net earnings for the year ended September 30, 1993.... -- -- -- 5,484 5,484
--------- ------ ---------- -------- -------
Balance at September 30, 1993......................... 1,769,352 100 30,054 1,379 32,433
Net loss for the period from October 1, 1993
to May 26, 1994..................................... -- -- -- (9,177) (9,177)
Dividend of Kalama Trading, Inc. to a B.C. Sugar
affiliate........................................... -- -- -- (348) (348)
--------- ------ ---------- -------- -------
Balance at May 26, 1994............................... 1,769,352 $100 $ 30,054 $(8,146) $22,908
--------- ------ ---------- -------- -------
--------- ------ ---------- -------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
F-43
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1, 1993 YEAR ENDED
TO MAY 26, SEPTEMBER 30,
1994 1993
--------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss)............................................................. $(9,177) $ 5,484
Adjustment to reconcile net earnings (loss) to net cash provided by operating
activities:
Depreciation and amortization................................................. 2,350 3,374
Equity in income of joint ventures............................................ (50) (5)
Deferred income taxes......................................................... (9,815) 120
Loss on Garfield, New Jersey, plant shutdown.................................. 1,864 --
Changes in certain assets and liabilities:
Decrease (increase) in accounts receivable.................................. (1,310) (2,731)
Decrease in inventories..................................................... 1,074 1,416
Decrease (increase) in prepaid expenses and other current assets............ (362) 119
Increase (decrease) in accounts payable..................................... 57 (522)
Increase (decrease) in accrued liabilities.................................. (134) 971
Increase in income taxes payable............................................ 2,460 742
Increase (decrease) in accrued environmental liabilities, net of accrued
environmental recoveries................................................... 18,158 (1,882)
--------------- -------------
Net cash provided by operating activities................................ $ 5,115 $ 7,086
--------------- -------------
Cash flows from investing activities:
Additions to property, plant and equipment...................................... (887) (5,677)
Proceeds from Garfield, New Jersey manufacturing facility asset sale less
payments of facility closing costs............................................ 1,995 --
Joint ventures distribution..................................................... 50 635
Increase of marketable securities............................................... (424) (94)
Other........................................................................... 31 126
--------------- -------------
Net cash provided by (used in) investing activities......................... 765 (5,010)
--------------- -------------
Cash flows from financing activities:
Repayments of short-term borrowings............................................. (950) (915)
Repayment of long-term debt..................................................... (1,910) (855)
--------------- -------------
Net cash used in financing activities....................................... (2,860) (1,770)
--------------- -------------
Net increase (decrease) in cash and cash equivalents........................ 3,020 306
Cash and cash equivalents at beginning of period.................................. 817 511
--------------- -------------
Cash and cash equivalents at end of period........................................ $ 3,837 $ 817
--------------- -------------
Supplemental disclosures of cash flow information--cash paid during the period
for:
Interest........................................................................ $ 48 $ 376
Income taxes, net of refunds received........................................... 1,940 1,450
--------------- -------------
Supplemental schedule of noncash financing activity--dividend of Kalama Trading,
Inc. to a B.C. Sugar affiliate.................................................. $ 348 $ --
--------------- -------------
--------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-44
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Change of Ownership
A stock purchase agreement dated as of May 11, 1994 and effective May 26,
1994 transferred ownership of the common stock of Kalama Chemical, Inc. (Kalama
or Company) from B.C. Sugar Refinery Limited (B.C. Sugar) and Chatterton
Petrochemical Corporation (collectively referred to as B.C. Sugar or the Parent)
to Freedom Chemical Company (Freedom). Kalama's common stock was pledged as
security by B.C. Sugar pursuant to B.C. Sugar's agreements with certain lenders.
(b) Basis of Presentation
The consolidated financial statements for the year ended September 30, 1993
include the accounts of the Company and its wholly-owned subsidiaries, Kalama
Trading, Inc. (Trading) and Kalama Foreign Sales Corporation (KFS Corporation).
Effective May 26, 1994, the Company transferred its interest in Trading to
a company ultimately owned by B.C. Sugar, at net book value. Trading carried its
50% interest in two trading company joint ventures; Kalama International (a
partnership) and Pelican Trading Company, Limited; at cost, plus equity in
undistributed net earnings. The Company's equity in net earnings of the trading
companies was $50 for the period ended May 26, 1994 and, $5 for the year ended
September 30, 1993.
As a result of the transfer, the consolidated financial statements as of
May 26, 1994 do not include the financial position of Trading. A summary of
financial information for the trading companies, accounted for by the equity
method, is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1993
-------------
<S> <C>
Total assets................................................................... $ 8,707
Total liabilities.............................................................. $ 8,734
</TABLE>
All significant intercompany transactions and accounts have been eliminated
in consolidation.
(c) Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the date of purchase to be cash equivalents.
(d) Marketable Securities
Marketable securities are held for sale and are carried at the lower of
cost or market value. The cost of the marketable securities approximates market
value at May 26, 1994 and September 30, 1993.
(e) Inventories
Inventories are stated at the lower of cost (average cost for finished
goods and first-in, first-out for raw materials and supplies) or market.
Inventories consist of the following:
<TABLE>
<CAPTION>
MAY 26, SEPTEMBER 30,
1994 1993
------- -------------
<S> <C> <C>
Raw materials, principally toluene............................................. $3,430 $ 3,616
Manufactured finished goods.................................................... 2,958 4,479
Supplies....................................................................... 1,817 1,461
------- -------------
$8,205 $ 9,556
------- -------------
------- -------------
</TABLE>
F-45
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(f) Property, Plant and Equipment
Depreciation is provided on the straight-line method. Estimated useful
lives are as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
IN YEARS
------------
<S> <C>
Buildings and improvements............................................. 15-20
Equipment.............................................................. 2-15
</TABLE>
Normal maintenance and repairs are charged to operations as incurred;
additions, renewals or betterments are capitalized. Construction in progress
includes capital additions which are not yet in service.
(g) Maintenance/Inspection Shutdown Costs
The Company schedules periodic plant shutdowns for the performance of
nonroutine maintenance and inspection of various pieces of equipment. Estimated
costs related to these shutdowns are accrued over the period between shutdowns.
(h) Environmental Liabilities and Recoveries
Expenditures for ongoing compliance with environmental regulations that
relate to current operations are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations, and
which do not contribute to current or future revenue generation, are expensed.
Liabilities are recorded when environmental assessments indicate that remedial
efforts are probable and the costs can be reasonably estimated. Estimates of the
liability are based upon currently available facts, existing technology, and
presently enacted laws and regulations taking into consideration the likely
effects of inflation and other societal and economic factors. All available
evidence is considered including prior experience in remediation of contaminated
sites, other companies' clean-up experience, and data released by the
Environmental Protection Agency (EPA) or other organizations. These liabilities
are included in the consolidated balance sheets at their undiscounted amounts
unless otherwise noted. Recoveries are evaluated separately from the liability
and are recorded separately from the associated liability in the consolidated
balance sheets. Additional information regarding environmental liabilities is
included in note 9.
(i) Income Taxes
Through September 30, 1993, income taxes were computed using the asset and
liability method under Statement of Financial Accounting Standards No. 96
(Statement 96). Under the asset and liability method of Statement 96, deferred
tax assets and liabilities were recognized for all events that had been
recognized in the consolidated balance sheets. Under Statement 96, the future
tax consequences of recovering assets or settling liabilities at their financial
statement carrying amounts were considered in calculating deferred taxes.
Generally, Statement 96 prohibited consideration of any other future events in
calculating deferred taxes.
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (Statement 109), Accounting for Income Taxes, which
also requires an asset and liability approach to financial accounting and
reporting for income taxes. Deferred income tax assets and liabilities are
computed for differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in net deferred tax assets and
liabilities. There was no current or cumulative effect of this change in
accounting for income taxes.
F-46
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(j) Revenue Recognition
Revenue is generally recognized upon shipment of products to customers.
(2) SHORT-TERM BORROWINGS AND NOTE PAYABLE TO BANK
During the period ended May 26, 1994, the Company repaid all borrowings
under a short-term secured line of credit with a bank and terminated the credit
facility. Outstanding borrowings under this line of credit were $950 at
September 30, 1993.
In October 1993, the Company repaid a note payable to a bank. The unpaid
balance was $1,910 at September 30, 1993.
(3) OFF-BALANCE SHEET RISK, CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF
FINANCIAL INSTRUMENTS
(a) Off-Balance Sheet Risk
The Company enters into forward exchange contracts, generally with terms of
90 days or less, as a hedge against some of its foreign currency receivables.
The Company does not engage in speculation, nor does the Company hedge
nontransaction-related balance sheet exposure. Offsetting gains or losses on
these contracts are recognized concurrently with the exchange gains and losses
stemming from the associated receivables. As of May 26, 1994 and September 30,
1993, the Company had approximately $1,140 and $1,170, respectively, of foreign
exchange contracts outstanding, which are mainly denominated in Japanese and
European currencies.
(b) Concentrations of Credit Risk
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of its trade accounts receivable. Trade accounts
receivable balances consist of a wide range of customers located in the United
States and internationally with concentration in North America.
(c) Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, trade accounts receivable, trade accounts payable, short-term
borrowings, long-term debt and foreign currency forward contracts. The book
value of cash and cash equivalents, trade accounts receivable and trade accounts
payable are considered to be representative of their fair values because of
their short maturities. Based on the period-end rates and maturity dates, the
carrying value of foreign currency forward contracts approximated fair value at
May 26, 1994 and September 30, 1993. The carrying amount of short-term
borrowings and long-term debt outstanding at September 30, 1993 approximated
fair value as the interest rates were variable and set to market.
(4) SALE OF CUSTOMER LIST, EQUIPMENT, TRADEMARKS AND TECHNICAL DATA
In December 1993, the Company sold the customer list and certain equipment,
trademarks and technical data (asset sale) of its Garfield, New Jersey chemical
manufacturing facility. The asset sale resulted in the closure of the Garfield,
New Jersey facility in May 1994. The net tangible assets remaining at May 26,
1994 consist of land, building and supplies inventory totaling $78 which were
not held for sale or disposition as of May 26, 1994. Included in other accrued
liabilities at May 26, 1994 is $1,316 representing unpaid employee severance and
related employee benefit costs, consultants' fees and other costs associated
with the asset sale and plant closure.
Proceeds from the sale of assets of approximately $2,750 less related costs
and expenses of approximately $4,614 are included in operating expenses.
Pursuant to the asset sale agreement, the Company manufactured and supplied
chemical products to NIPA Laboratories, Inc. from December 1993 until May 1994
resulting in revenues of $5,300.
F-47
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Net sales and cost of sales for the Garfield, New Jersey, manufacturing
facility are included in operations and are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1, YEAR ENDED
1993 TO SEPTEMBER 30,
MAY 26, 1994 1993
------------ -------------
<S> <C> <C>
Net sales............................................................... $9,470 $14,487
Cost of sales........................................................... 9,724 13,903
</TABLE>
(5) INCOME TAXES
As discussed in note 1(i), the Company adopted Statement No. 109 effective
October 1, 1993. There was no cumulative effect on the consolidated financial
statements, accordingly, no adjustment has been made for prior tax amounts.
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1, YEAR ENDED
1993 TO SEPTEMBER 30,
MAY 26, 1994 1993
------------ -----------------
<S> <C> <C>
Current income taxes:
Federal taxes.................................................... $ 4,270 $ 2,421
State and local taxes............................................ 130 139
------------ -------
4,400 2,560
Deferred income taxes............................................... (9,648) 120
------------ -------
$ (5,248) $ 2,680
------------ -------
------------ -------
</TABLE>
Income tax expense (benefit) differs from the amount computed by applying
the statutory Federal income tax rate to pretax earnings (loss) as a result of
the following:
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1 YEAR ENDED
1993 TO SEPTEMBER 30,
MAY 26, 1994 1993
------------ -------------
<S> <C> <C>
Taxes computed at the statutory Federal income tax rate................... $ (4,905) $ 2,776
State and local taxes, net of Federal tax benefit......................... 86 92
Tax benefit from foreign sales corporation................................ (153) (181)
Other, net................................................................ (276) (7)
------------ -------------
$ (5,248) $ 2,680
------------ -------------
------------ -------------
</TABLE>
F-48
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
MAY 26, 1994 1993
------------ -------------
<S> <C> <C>
Deferred tax assets:
Garfield plant closure costs............................................ $ 447 $ --
Maintenance/inspection shutdown costs................................... 259 229
Employee compensation and benefits...................................... 277 318
Environmental liabilities, net.......................................... 9,069 353
Other................................................................... 103 85
------------ -------------
Total gross deferred tax assets................................. 10,155 985
------------ -------------
Deferred tax liabilities:
Depreciation of plant and equipment..................................... 4,133 4,611
Other................................................................... -- --
------------ -------------
Total gross deferred tax liabilities............................ 4,133 4,611
------------ -------------
Net deferred tax assets (liabilities)........................... $6,022 $(3,626)
------------ -------------
------------ -------------
</TABLE>
No valuation allowance has been established for the deferred tax assets at
October 1, 1993 and May 26, 1994. For the Company to realize its gross deferred
tax assets, it must achieve future pretax earnings. Although the Company
believes such pretax earnings will be achieved, a lack of such earnings could
result in an increased provision for income taxes.
(6) INVESTMENT
The Company has an investment of $500 in common stock of Primex, Ltd.
(Primex), a captive insurance company which was formed for the purpose of
providing certain comprehensive general and product liability coverage for its
members. In past years, the Company has participated in insurance programs
provided by Primex. However in 1993 the Company obtained insurance from other
sources. It is currently the Company's intent to hold its investment in Primex
for the foreseeable future, although all members have the right to redeem their
shares at any time. If the Company were to redeem its shares, the redemption
amount would be approximately $500. The Primex common stock held by the Company
is subject to a lien in favor of Primex. All Primex shares held by the Company
are subject to a right of first refusal agreement in favor of Primex.
(7) TRANSACTION WITH RELATED PARTIES
As discussed in note 1(b), effective May 26, 1994, the Company transferred
its interest in Trading to a company ultimately owned by B.C. Sugar for
Trading's net book value. Concurrently, the Company transferred its interest in
an advance made by Trading to Kalama International to the B.C. Sugar affiliate
for the amount of the advance. The Company has recorded accounts receivable of
$1,281 at May 26, 1994 to reflect amounts due from the B.C. Sugar affiliate
resulting from the transfer of the advance.
As discussed in note 10(b), the Company transferred all obligations and
liabilities arising out of its defined benefit retirement plan for hourly
employees of the Company's Garfield, New Jersey manufacturing facility, which
closed in May 1994, to a company ultimately owned by B.C. Sugar.
During 1993, Kalama paid $2,487 to B.C. Sugar for supplies and equipment.
F-49
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(8) COMMITMENTS
(a) Leases
At May 26, 1994, the Company is obligated under noncancelable operating
leases for office space, rolling stock and office equipment which provide for
payment of taxes, insurance and maintenance in addition to periodic rental.
Future minimum lease payments are as follows:
<TABLE>
<S> <C>
Year ending May 26:
1995............................................................... $319
1996............................................................... 248
1997............................................................... 114
1998............................................................... 68
1999............................................................... 20
---------
Total minimum lease payments.................................. $769
---------
---------
</TABLE>
The Company receives, as a partial offset to lease payments due for rolling
stock, a mileage credit from railroads based on loaded distances traveled.
Depending on the annual usage of the rolling stock, the Company's minimum lease
payments may be significantly reduced.
Rent expense was approximately $372 and $470 for the period ended May 26,
1994 and the year ended September 30, 1993, respectively.
(b) Employment Agreements
The Company has employment agreements with certain executive officers which
expire on December 31, 1996. The employment agreements provide for discretionary
bonuses to be determined by the Board of Directors or senior officers. The
employment agreements also provide for a salary and for severance benefits to
these officers upon termination of employment.
(9) ENVIRONMENTAL MATTERS
In January 1988, a wholly-owned subsidiary of the Company entered into an
Administrative Consent Order with the EPA in which the subsidiary undertook to
conduct a remedial investigation and feasibility study for environmental
contamination at the subsidiary's former manufacturing facility and adjoining
property in Beaufort, South Carolina. The EPA issued its Record of Decision
(ROD) in September 1993 setting forth the cleanup plan required for this site.
The plan calls for a 30-year remediation program with a present value cost,
discounted at 5%, of approximately $3,500. Implementation of the plan is
expected to begin in September 1994. The ROD also requires additional
investigation which could lead to other cleanup requirements beyond those
included in the $3,500 cost estimate.
In December 1988, the Company entered into an Administrative Consent Order
with the New Jersey Department of Environmental Protection and Energy (NJDEPE)
with respect to investigation and cleanup of contamination at its Garfield, New
Jersey manufacturing facility. Under the order, the Company must investigate and
propose a cleanup plan acceptable to the NJDEPE. During 1993, investigation was
completed at the site and a remediation plan was conditionally approved by
NJDEPE in March 1994. Remediation is projected over a 30-year period at an
estimated undiscounted cost of approximately $26,600. Depending upon the results
of continuing investigation, there is presently a reasonable possibility that
additional remediation costs of approximately $3,000 may be incurred in
connection with this site. The Company has brought suit against the prior owner
of the facility, Tenneco Polymers, Inc. (Tenneco), to ensure their participation
in the costs associated with investigation and remediation at the site. The
court granted summary judgment to the Company, that
F-50
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Tenneco, pursuant to the terms of the acquisition agreement, must indemnify the
Company from liability resulting from Tenneco's period of operation.
In May 1994, the Company settled its litigation claims against Tenneco. The
settlement requires Tenneco to conduct the Garfield site cleanup, pay 80% of the
future cleanup costs and to defend against and hold the Company harmless from
future liability resulting from environmental contamination in the soil and
ground water at the Garfield site, including any third-party claims from
adjoining property. The Company remains responsible for 20% of future cleanup
costs.
In April 1991, the Company entered into an Agreed Order with the EPA which
requires the investigation and remediation of contamination associated with a
number of accidental releases at its Kalama, Washington plant as well as
potential contamination in specified process areas resulting from plant
operations. The initial investigatory work is nearing completion and a work plan
for specific interim correction measures has been negotiated with the EPA, the
implementation of which will cost approximately $1,000. The final remedial
alternatives for the site will be considered after approval of the final
investigative report which is expected to be submitted to the EPA in September
1994. The remediation method selected could require as much as 30 years to
complete. Preliminary undiscounted cost estimates to cleanup the site range from
approximately $15,300 to $30,200. This cost estimate does not include possible
cleanup costs associated with the on-site wetlands where contamination may be
present at levels which are unacceptable to the EPA. The Company anticipates
additional testing and analysis of the wetlands site to begin after August 1994.
It is not possible at this time to estimate the costs to cleanup the wetlands,
but the costs could be significant.
In October 1991, the Company was named as one of many potentially
responsible parties by the Washington Department of Ecology (DOE) at the Pasco
Landfill Superfund site near Pasco, Washington. The Company is participating
with other companies alleged to have generated waste that was received at the
Pasco site. The parties named by the DOE are alleged to be jointly and severally
liable for costs associated with the investigation and cleanup of the site. The
final draft of the Phase I Remedial Investigation report was submitted to the
DOE in January 1994 and indicates that both soil and ground water contamination
were detected during the investigation. It is not possible at this time to
estimate the costs to cleanup this site, but the costs could be significant. The
total cost estimate will be materially affected by decisions which will be made
by the DOE following the results of additional investigation which is expected
to begin in 1995.
The Company is named as one of many potentially responsible parties at
various Superfund sites where investigation and cleanup of environmental
contamination is being required by the EPA or state counterpart. The parties
named by the EPA are alleged to be jointly and severally liable for costs
associated with the investigation and cleanup of the sites. It is not possible
at this time to estimate the costs of investigation and cleanup at many of the
Superfund sites, but the costs could be significant.
In May 1991, the EPA issued a compliance order alleging nine violations of
the Clean Air Act dating back to 1984. In July 1994, the Company was informally
notified by the EPA that these violations had been referred to the Department of
Justice for possible initiation of an enforcement action and that fines and
penalties recommended by the EPA exceeded $1,000. The Company has not received
any other notice that the EPA or Department of Justice has initiated any
enforcement action against the Company for these alleged violations. No amount
has been recorded by the Company as it is not possible at this time to determine
the costs of the potential fines, penalties and enforcement action, if any.
The Company completed settlements with eight of its insurers prior to
September 30, 1993, and believes that the likelihood of recovery against the
remaining carriers is very strong. Accrued environmental recoveries represent
the total estimated recoveries from insurers or other third parties based upon
currently available information with regard to actions brought by the Company
for damages and declaratory relief for costs incurred and to be incurred.
Accrued environmental liabilities represent the total estimated costs inclusive
of estimated
F-51
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
costs of cleanup, additional investigative studies, EPA oversight, site
preparation and associated legal costs based upon currently available
information. Accrued environmental recoveries consist of the following:
<TABLE>
<CAPTION>
MAY 26, SEPTEMBER 30,
1994 1993
------- -------------
<S> <C> <C>
Beaufort, South Carolina...................................................... $ 4,082 $ 5,800
Garfield, New Jersey.......................................................... 20,256 26,850
Kalama, Washington............................................................ 3,865 2,325
Various Superfund sites....................................................... 142 --
------- -------------
28,345 34,975
Less current portion.......................................................... 9,422 --
------- -------------
Noncurrent accrued environmental recoveries.............................. $18,923 $34,975
------- -------------
------- -------------
</TABLE>
Accrued environmental liabilities consist of the following:
<TABLE>
<CAPTION>
MAY 26, SEPTEMBER 30,
1994 1993
------- ------------------
<S> <C> <C>
Beaufort, South Carolina................................................. $ 4,082 $ 5,800
Garfield, New Jersey..................................................... 27,027 26,878
Kalama, Washington....................................................... 15,774 3,459
Pasco, Washington........................................................ 175 --
Various Superfund sites.................................................. 195 --
Various legal costs...................................................... 844 432
------- ----------
48,097 36,569
Less current portion..................................................... 4,663 594
------- ----------
Noncurrent accrued environmental liabilities........................ $43,434 $ 35,975
------- ----------
------- ----------
</TABLE>
At May 26, 1994, the expected payments for each of the five succeeding
years and the aggregate amount thereafter for the Beaufort site are as follows:
<TABLE>
<S> <C>
Year ending May 26:
1995.................................................................. $ 1,873
1996.................................................................. 501
1997.................................................................. 134
1998.................................................................. 134
1999.................................................................. 120
Thereafter............................................................ 2,922
-------
Expected aggregate undiscounted payments......................... 5,684
Less amount representing interest.......................................... 1,602
-------
Present value of expected aggregate payments included in accrued
environmental liabilities...................................... $ 4,082
-------
-------
</TABLE>
F-52
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Environmental expenses, net included in the consolidated statements of
operations are comprised of the following:
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1, YEAR ENDED
1993 TO SEPTEMBER 30,
MAY 26, 1994 1993
------------ -------------
<S> <C> <C>
Environmental expense..................................................... $ 30,990 $36,305
Environmental recoveries.................................................. 10,496 33,530
------------ -------------
Total........................................................... $ 20,494 $ 2,775
------------ -------------
------------ -------------
</TABLE>
(10) EMPLOYEE BENEFITS
(a) Defined Contribution Plan
The Company has a defined contribution pension plan covering all eligible
union and nonunion employees. The Company contributes up to 4% of the gross
wages of eligible participants. The Company also has a section 401(k) tax
deferred savings plan covering all eligible salaried and Kalama plant hourly
employees. The Company contributes fifty cents for each dollar contributed by a
participant, with a maximum contribution of 3% of a participant's earnings.
Total expense of the plans was approximately $429 and $616 for the period
ended May 26, 1994 and the year ended September 30, 1993, respectively.
(b) Defined Benefit Plan
Effective May 25, 1994, the Company transferred all the obligations and
liabilities arising out of its defined benefit retirement plan (Plan) for
eligible hourly employees of the Company's Garfield, New Jersey manufacturing
facility, which closed in May 1994, to a company ultimately owned by B.C. Sugar.
Per the transfer agreement, the transfer of obligations and liabilities arising
from the Plan is for the events occurring before and after May 25, 1994.
The Plan provided pension benefits based upon a participant's length of
service. The Company's funding policy was to contribute annually an amount equal
to the minimum contribution required by the law and no more than the amount
deductible for Federal income tax purposes.
Net periodic pension cost is comprised of the following:
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1, YEAR ENDED
1993 TO SEPTEMBER 30,
MAY 26, 1994 1993
------------ ------------------
<S> <C> <C>
Service cost for the benefits earned during the period................ $ 31 $ 47
Interest cost on the projected benefit obligation..................... 108 166
Actual return on plan assets.......................................... (80) (376)
Net amortization and deferral......................................... (55) 202
------ -------
Total....................................................... $ 4 $ 39
------ -------
------ -------
</TABLE>
F-53
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
The funded status of the Plan is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1993
------------------
<S> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................................... $2,502
-------
Accumulated benefit obligation.......................................... $2,598
-------
Projected benefit obligation.............................................. 2,598
Plan assets at fair value................................................. 2,878
-------
Plan assets in excess of the projected benefit obligation....... (280)
Unrecognized net gain..................................................... 416
Unrecognized obligation................................................... (99)
-------
Accrued pension cost included in accrued payroll and employee
benefits in the consolidated financial statements............. $ 37
-------
-------
</TABLE>
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation and the expected long-term
rate of return on assets was 6.5%. No rate of increase in compensation levels
was assumed in accounting for the Plan.
Plan assets consist primarily of annuities purchased under group contracts
and funds holding fixed income and equity investments.
(11) POSTRETIREMENT EMPLOYEE BENEFITS OTHER THAN PENSIONS
The Company provides certain health care insurance benefits for retired
employees. The Company's employees may become eligible for these benefits
depending on their age and length of service. These benefits are provided
through insurance companies whose premiums are based on benefits paid during the
year. The Company recognizes the cost of providing those benefits by expensing
the annual insurance premiums.
Total expense of providing these benefits was $30 and $41 for the period
ended May 26, 1994 and the year ended September 30, 1993, respectively.
In December 1990, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 106 (Statement 106), Employers' Accounting
for Postretirement Benefits Other Than Pensions. The Statement requires
employers to accrue the cost of postretirement benefits during the employees'
working careers. The provisions of the statement are effective for the Company
for the fiscal year beginning after December 15, 1994, although earlier
implementation is permitted. The Company plans to implement Statement 106
effective October 1, 1995. The Company may adopt the new standard prospectively
or via a cumulative catch-up adjustment. The Statement allows two alternatives
in accounting for the unrecognized, unfunded accumulated postretirement benefit
obligation (APBO). The unfunded APBO can be recognized immediately or it can be
amortized over 20 years. The Company has not yet decided which of these two
methods will be adopted.
The Company engaged an actuarial consultant that has estimated that the
APBO is $3,563 at May 26, 1994 based on the Plan terms currently in place. This
estimate is subject to change based on a number of factors, including changes in
the assumed health care cost trend and other assumptions used in determining the
APBO.
F-54
<PAGE>
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(12) OTHER INCOME, NET
Other income, net is comprised of the following:
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1, YEAR ENDED
1993 TO SEPTEMBER 30,
MAY 26, 1994 1993
------------ -----------------
<S> <C> <C>
Insurance settlement.................................................. $ -- $ 289
Equity in income of joint ventures.................................... 50 5
Interest and dividends................................................ 55 48
Other, net............................................................ 202 27
------ ------
Total....................................................... $307 $ 369
------ ------
------ ------
</TABLE>
(13) GEOGRAPHIC SEGMENT INFORMATION
The Company operates in one industry segment: manufacturing and marketing
chemical products. The Company's products are marketed mainly in the United
States, Asia, Canada and Mexico. Export sales by geographic area are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 1, YEAR ENDED
1993 TO SEPTEMBER 30,
MAY 26, 1994 1993
------------ -----------------
<S> <C> <C>
Canada and Mexico..................................................... $ 5,748 $ 7,501
Asia, excluding Japan................................................. 3,186 3,482
Japan................................................................. 2,558 3,338
Other................................................................. 2,433 3,632
------------ -----------------
$ 13,925 $17,953
------------ -----------------
------------ -----------------
</TABLE>
(14) SUBSEQUENT EVENTS
(a) Change of Ownership
As discussed in note 1(a), B.C. Sugar transferred all of the common stock
of the Company to Freedom effective May 26, 1994, in accordance with the May 11,
1994 stock purchase agreement (Agreement). Under terms of the Agreement, B.C.
Sugar has indemnified Freedom in relation to certain environmental and other
matters.
(b) Income Tax Examination
Subsequent to May 26, 1994, the Internal Revenue Service (IRS) completed
its examination of the Company for fiscal years ended September 30, 1989 through
1993. The Company has received notification that approximately $400 of
environmental costs deducted during these periods will be disallowed by the IRS,
however, these amounts will be deductible over future periods not expected to
exceed seven years.
F-55
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY GUARANTOR OR ANY INITIAL PURCHASER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available information........................... i
Summary......................................... 1
Risk Factors.................................... 11
Use of Proceeds................................. 17
Capitalization.................................. 18
Selected Consolidated Financial Data............ 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 22
The Exchange Offer.............................. 28
Business........................................ 34
Management...................................... 51
Principal Stockholders.......................... 58
Certain Transactions............................ 59
Description of Amended and Restated Credit
Agreement..................................... 60
Description of the Notes........................ 61
Exchange Offer; Registration Rights............. 87
Certain United States Federal Income Tax
Considerations................................ 88
Plan of Distribution............................ 90
Legal Matters................................... 90
Experts......................................... 90
Index to Financial Statements................... F-1
</TABLE>
UNTIL , 1997 (90 DAYS FOLLOWING THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES WHETHER OR NOT PARTICIPATING
IN THIS EXCHANGE OFFER MAY BE REQUIRED TO DELIVER A PROSPECTUS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$125,000,000
[LOGO
FREEDOM CHEMICAL COMPANY]
10 5/8% SENIOR SUBORDINATED
NOTES DUE 2006
---------------------------------------
PROSPECTUS
---------------------------------------
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................................ $ 37,878.79
Printing and engraving expenses............................................. *
Legal fees and expenses..................................................... *
Accounting fees and expenses................................................ *
Miscellaneous............................................................... *
-----------
Total.................................................................. $ *
-----------
-----------
</TABLE>
---------------------------
* to be filed by amendment
The Company will bear all of such expenses.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
I. Freedom Chemical Company, Hilton Davis Chemical Co., Freedom Textile
Chemicals Co., Freedom Textile Chemical Company (South Carolina), Inc. and
FCC Acquisition Corp.
Section 145 of the Delaware General Corporation Law ('DGCL') provides
generally and in pertinent part that a Delaware corporation may indemnify its
directors and officers against expenses, judgments, fines, and settlements
actually and reasonably incurred by them in connection with any civil suit or
action, except actions by or in the right of the corporation, or any
administrative or investigative proceeding if, in connection with the matters in
issue, they acted in good faith and in a manner they reasonably believed to be
in, or not opposed to, the best interests of the corporation, and in connection
with any criminal suit or proceeding, if in connection with the matters in
issue, they had no reasonable cause to believe their conduct was unlawful.
Section 145 further provides that, in connection with the defense or settlement
of any action by or in the right of the corporation, a Delaware corporation may
indemnify its directors and officers against expenses actually and reasonably
incurred by them if, in connection with the matters in issue, they acted in good
faith, in a manner they reasonably believed to be in, or not opposed to, the
best interest of the corporation, and without negligence or misconduct in the
performance of their duties to the corporation. Section 145 further permits a
Delaware corporation to grant its directors and officers additional rights of
indemnification through by-law provisions and otherwise.
The Sixth Article of the Restated Certificate of Incorporation of Freedom
Chemical Company ('Freedom') and Article VII of the By-laws of Freedom provide
that Freedom shall indemnify its directors and officers to the fullest extent
permitted by Delaware law.
Article VI of the By-laws of Hilton Davis Chemical Co. ('Hilton Davis')
provides that Hilton Davis shall indemnify its directors and officers to the
fullest extent permitted by Delaware law.
The Sixth Article of the Certificate of Incorporation of Freedom Textile
Chemicals Co. ('Freedom Textile') and Article VII of the By-laws of the Freedom
Textile provide that Freedom Textile shall indemnify its directors and officers
to the fullest extent permitted by Delaware law.
The Sixth Article of the Certificate of Incorporation of Freedom Textile
Chemical Company (South Carolina), Inc. ('Freedom Textile South Carolina') and
Article VIII of the By-laws of Freedom Textile South Carolina provide that
Freedom Textile South Carolina shall indemnify its directors and officers to the
fullest extent permitted by Delaware law.
II-1
<PAGE>
The Sixth Article of the Certificate of Incorporation of FCC Acquisition
Corp. ('FCCAC') and Article VIII of the By-laws of FCCAC provide that FCCAC
shall indemnify its directors and officers to the fullest extent permitted by
Delaware law.
Section 102(b)(7) of the Delaware law provides that a certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware law (relating
to liability for unauthorized acquisitions or redemptions of, or dividends on,
capital stock) or (iv) for any transaction from which the director derived an
improper personal benefit. The Sixth Article of each of (i) Freedom's Restated
Certificate of Incorporation, (ii) Freedom Textile's Certificate of
Incorporation and (iii) FCCAC's Certificate of Incorporation contains the
following provision:
'A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
DGCL, (iv) for any transaction from which the director derived an improper
personal benefit. If the DGCL is hereafter amended to authorize the further
elimination or limitation of the liability of directors, then the liability
of the directors of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended DGCL. Any appeal or modification of this paragraph
by the stockholders of the Corporation shall be prospective only, and shall
not adversely affect any limitation on the personal liability of a director
of the Corporation existing at the time of such repeal or modification.'
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Freedom, Hilton
Davis, Freedom Textile, Freedom Textile South Carolina and FCCAC, respectively,
pursuant to the foregoing provisions, each of Freedom, Hilton Davis, Freedom
Textile, Freedom Textile South Carolina and FCCAC has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
The foregoing summaries are necessarily subject to the complete text of the
statutes, Freedom's Restated Certificate of Incorporation, the Certificates of
Incorporation of each of Hilton Davis, Freedom Textile, Freedom Textile South
Carolina and FCCAC, respectively, and the By-laws of each of Freedom, Hilton
Davis, Freedom Textile, Freedom Textile South Carolina and FCCAC, respectively,
and the agreements referred to above and are qualified in their entirety by
reference thereto.
II. Kalama Chemical, Inc. and Kalama Specialty Chemicals, Inc.
Section 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act. Article IX of the By-laws of
Kalama Chemical, Inc. ('Kalama Chemical') provides that Kalama Chemical shall
indemnify its directors, officers, employees and agents to the fullest extent
permitted by applicable law. Article IX of the By-laws of Kalama Specialty
Chemicals, Inc. ('Kalama Specialty Chemicals') has the effect of indemnifying
its directors, officers, employees and agents to the fullest extent permitted by
applicable law.
Section 23B.08.320 of the Washington Business Corporation Act authorizes a
corporation to limit a director's personal liability to the corporation or its
shareholders for monetary damages for conduct as a director, except in certain
circumstances involving intentional misconduct, a knowing violation of law,
self-dealing or illegal corporate loans or distributions, or any transaction
from which the director personally received a benefit in money, property or
services to which the director is legally entitled. Article VIII to the Articles
of Incorporation of Kalama Chemical and Article XIV to the Articles of
Incorporation of Kalama Specialty Chemicals contain provisions implementing, to
the fullest extent permitted by Washington law, such limitations on a director's
liability to the corporation and its shareholders.
II-2
<PAGE>
The foregoing summaries are necessarily subject to the complete text of the
statutes, the Articles of Incorporation of each of Kalama Chemical and Kalama
Specialty Chemicals, respectively, and the By-laws of each of Kalama Chemical
and Kalama Specialty Chemicals, respectively, and the agreements referred to
above and are qualified in their entirety by reference thereto.
III. Freedom Chemical Diamalt GmbH
The laws of Germany make no provision for indemnification of officers and
directors.
IV. Kalama Foreign Sales Corporation
Section 2117(b) of the Guam Code Annotated provides that a director of a
foreign sales corporation may be indemnified if such director acted in good
faith and reasonably believed (i) in the case of conduct in a official capacity
with the corporation, that such conduct was in the corporation's best interest
and (ii) in all cases, such conduct was at least not opposed to the
corporation's best interests, and (iii) in the case of any criminal proceeding,
such director had no reasonable cause to believe such director's conduct was
unlawful.
Article X of Kalama Foreign Sales Corporation's ('Kalama Foreign Sales')
Articles of Incorporation provides that no director or officer shall be held
liable to the corporation for any loss or damage suffered by it on account of
any action or omission by such director or officer if such director or officer
acted in good faith and in a manner such director or officer reasonably believed
to be in or not opposed to the best interests of the corporation, unless with
respect to an action or suit by or in the right of the corporation to procure a
judgment in its favor such director or officer shall have been adjudged to be
liable for negligence or misconduct in the performance of his or her duty to the
corporation.
The foregoing summaries are necessarily subject to the complete text of the
statutes, Kalama Foreign Sales' Articles of Incorporation, its By-laws and the
agreements referred to above and are qualified in their entirety by reference
thereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since November 1, 1993 Freedom has sold or issued the following securities
that were not registered under the Securities Act:
1. On January 18, 1994 Freedom issued 5,322 shares of Series A Common Stock
to Freedom Investment Corp., pursuant to the exercise of options held by The
Freedom Group, for an aggregate purchase price of $532,200.
2. On May 26, 1994 Freedom issued 14,231.5 shares of Series A Common Stock
and 8,064.52 shares of Series C Preferred Stock to Joseph Littlejohn & Levy Fund
II, L.P. for an aggregate purchase price of $10,000,000.
3. On June 30, 1994 Freedom issued 426.94 shares of Series A Common Stock
and 241.94 shares of Series C Preferred Stock to Freedom Investment Corp. for an
aggregate purchase price of $300,000.
4. On June 30, 1994 Freedom issued 426.94 shares of Series A Common Stock
and 241.94 shares of Series C Preferred Stock to RULCO, INC. for an aggregate
purchase price of $300,000.
5. On June 30, 1994 Freedom issued 31.98 shares of Series A Common Stock
and 18.12 shares of Series C Preferred Stock to Donald W. McPhail for an
aggregate purchase price of $22,470.
6. On June 30, 1994 Freedom issued 284.63 shares of Series A Common Stock
and 161.29 shares of Series C Preferred Stock to Robert A. Kirchner for an
aggregate purchase price of $200,000.
7. On June 30, 1994 Freedom issued 284.63 shares of Series A Common Stock
and 161.29 shares of Series C Preferred Stock to Nicholas E. Lynam for an
aggregate purchase price of $200,000.
8. On June 30, 1994 Freedom issued 81.9 shares of Series A Common Stock and
46.41 shares of Series C Preferred Stock to Robert G. Kitchen for an aggregate
purchase price of $57,500.
II-3
<PAGE>
9. On June 30, 1994 Freedom issued 106.74 shares of Series A Common Stock
and 60.48 shares of Series C Preferred Stock to Leslie E. Schenk for an
aggregate purchase price of $75,000.
10. On June 30, 1994 Freedom issued 106.74 shares of Series A Common Stock
and 60.48 shares of Series C Preferred Stock to Dale E. Smith for an aggregate
purchase price of $75,000.
11. On June 30, 1994 Freedom issued 142.31 shares of Series A Common Stock
and 80.65 shares of Series C Preferred Stock to Richard E. Gilleland for an
aggregate purchase price of $100,000.
12. On June 30, 1994 Freedom issued 135 shares of Series A Common Stock and
76.5 shares of Series B Preferred Stock to Robert G. Kitchen in connection with
a share-for-share exchange of 135 shares of common stock and 76.5 shares of
Series B Preferred Stock of Freedom Textile Chemicals Co. held by Robert G.
Kitchen. The consideration for such issuance was $90,000 worth of shares of
Freedom Textile Chemicals Co.
13. On June 30, 1994 Freedom issued 67.5 shares of Series A Common Stock
and 38.25 shares of Series B Preferred Stock to James C. Trecek in connection
with a share-for-share exchange of 67.5 shares of common stock and 38.25 shares
of Series B Preferred Stock of Freedom Textile Chemicals Co. held by James C.
Trecek. The consideration for such issuance was $45,000 worth of shares of
Freedom Textile Chemicals Co.
14. On June 30, 1994 Freedom issued 70.5 shares of Series A Common Stock to
Robert G. Kitchen in consideration of the cancellation of Robert G. Kitchen's
entitlement to certain equity securities of Freedom Textile Chemical Co.
15. On June 30, 1994 Freedom issued 67.5 shares of Series A Common Stock to
James C. Trecek in consideration of the cancellation of James C. Trecek's
entitlement to certain equity securities of Freedom Textile Chemical Co.
16. On October 17, 1996, Freedom sold $125,000,000 aggregate principal
amount of Freedom's 10 5/8% Senior Subordinated Notes due 2006 (the 'Old Notes')
to Merrill Lynch, Pierce, Fenner & Smith Incorporated, Schroder Wertheim & Co.
Incorporated and Smith Barney Inc., which Old Notes were guaranteed on a senior
subordinated basis by each of the Guarantors. In accordance with the agreement
pursuant to which the Initial Purchasers purchased the Old Notes, such Initial
Purchasers agreed to offer and sell the Old Notes only to qualified
institutional buyers in reliance on Rule 144A under the Securities Act, and to a
limited number of institutional 'accredited investors' (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act).
17. On October 17, 1996 Freedom issued 56,635 shares of Series A Common
Stock to Joseph Littlejohn & Levy Fund, L.P. for an aggregate purchase price of
$7,079,375.
18. On October 17, 1996 Freedom issued 22,904.26 shares of Series A Common
Stock to Joseph Littlejohn & Levy Fund II, L.P. for an aggregate purchase price
of $2,863,032.50.
19. On October 17, 1996 Freedom issued 460.74 shares of Series A Common
Stock to Robert A. Kirchner for an aggregate purchase price of $57,592.50.
The issuances of securities described above were made in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act for
transactions not involving a public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- --------------------------------------------------------------------------------------------------
<S> <C>
3.1 Restated Certificate of Incorporation of Freedom Chemical Company and Certificate of Designation
for Preferred Stock.**
3.2 By-laws of Freedom Chemical Company.*
3.3 Certificate of Incorporation of Hilton Davis Chemical Co.**
3.4 By-laws of Hilton Davis Chemical Co.**
3.5 Articles of Incorporation of Kalama Chemical, Inc.**
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- --------------------------------------------------------------------------------------------------
<S> <C>
3.6 By-laws of Kalama Chemical, Inc.**
3.7 Certificate of Incorporation of Freedom Textile Chemicals Co.**
3.8 By-laws of Freedom Textile Chemicals Co.**
3.9 Articles of Association of Freedom Chemical Diamalt GmbH.**
3.10 Certificate of Incorporation of Freedom Textile Chemical Company (South Carolina), Inc.**
3.11 By-laws of Freedom Textile Chemical Company (South Carolina), Inc.**
3.12 Articles of Incorporation of Kalama Specialty Chemicals, Inc.**
3.13 By-laws of Kalama Specialty Chemicals, Inc.**
3.14 Articles of Incorporation of Kalama Foreign Sales Corporation.**
3.15 By-laws of Kalama Foreign Sales Corporation.**
3.16 Certificate of Incorporation of FCC Acquisition Corp.**
3.17 By-laws of FCC Acquisition Corp.**
4.1 Indenture dated as of October 15, 1996, among Freedom Chemical Company, the Guarantors named
therein and The Bank of New York, as trustee, relating to the 10 5/8% Senior Subordinated Notes
due 2006 of Freedom Chemical Company and exhibits thereto, including Form of 10 5/8% Senior
Subordinated Note due 2006 of Freedom Chemical Company.**
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding legality of securities being
registered.***
5.2 Opinion of Bogle & Gates regarding legality of securities being registered.***
5.3 Opinion of Boesebeck, Barz & Partner regarding legality of securities being registered.***
5.4 Opinion of Carlsmith Ball Wichman Case & Ichiki regarding legality of securities being
registered.***
10.1 Registration Rights Agreement, dated October 17, 1996 among Freedom Chemical Company, the
Guarantors named therein and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Schroder Wertheim
& Co. Incorporated and Smith Barney Inc.**
10.2 Amended and Restated Credit Agreement, dated as of October 17, 1996 among Freedom Chemical
Company, Freedom Chemical Diamalt GmbH, the institutions from time to time party thereto as
lenders, the institutions from time to time party thereto as issuing bank and Citicorp USA, Inc.,
as Agent.**
10.3 Share Pledge Agreement, dated January 16, 1995, by and among Freedom Chemical Company, Hilton
Davis Chemical Co. and Citicorp USA, Inc.**
10.4 Amendment to Share Pledge Agreement, dated January 17, 1995, by and among Freedom Chemical
Company, Hilton Davis Chemical Co. and Citicorp USA, Inc.**
10.5 Security Assignment Agreement, dated January 16, 1995, between Freedom Chemical Company and
Citicorp USA, Inc.**
10.6 Stock Purchase Agreement, dated as of May 11, 1994, among BC Sugar Refinery Limited, Chatterton
Petrochemical Corporation and Freedom Chemical Company.*
10.7 Amendment No. 1 to Stock Purchase Agreement, dated as of May 26, 1994, among BC Sugar Refinery
Limited, Chatterton Petrochemical Corporation and Freedom Chemical Company.*
10.8 Settlement Agreement dated as of April 28, 1994 between Tenneco Polymers, Inc. and Kalama
Chemical, Inc.*
10.9 Stock Purchase Agreement, dated as of May 21, 1993, between PMC, Inc. and Freedom Chemical
Acquisition Corporation.*
10.10 Amendment No. 1 to Stock Purchase Agreement, dated as of September 9, 1993, between PMC, Inc. and
Freedom Chemical Company.*
10.11 Definitive Agreement, dated as of August 13, 1993, between Sterling Winthrop Inc. and Freedom
Chemical Acquisition Corporation.*
10.12 Ground Lease, dated September 9, 1993, between The SDI Divestiture Corp. and Hilton Davis Chemical
Co.*
10.13 Amendment to Ground Lease Provisions, dated September 9, 1993.*
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- --------------------------------------------------------------------------------------------------
<S> <C>
10.14 Escrow Agreement, dated September 9, 1993, by and among PMC, Inc., Freedom Chemical Acquisition
Corporation and CoreStates Bank, N.A.*
10.15 Environmental Matters Agreement, dated September 9, 1993, among Freedom Chemical Acquisition
Corporation, Hilton Davis Chemical Co. and Sterling Winthrop, Inc.*
10.16 Agreement for the Purchase and Sale of Assets, dated February 28, 1992, between Freedom Textile
Chemicals Co. and American Cyanamid Company.**
10.17 [Intentionally Omitted]
10.18 Employment Agreement, dated November 15, 1994, by and between Freedom Chemical Company and Fred P.
Rullo.**
10.19 Employment Agreement, dated November 15, 1994, by and between Freedom Chemical Company and Harold
A. Sorgenti.**
10.20 Employment Agreement, dated June 1, 1991, between Kalama Chemical, Inc. and Robert A. Kirchner.**
10.21 Employment Agreement, dated January 17, 1996, between Freedom Textile Chemicals Co. and Robert G.
Kitchen.**
10.22 Employment Agreement between Freedom Chemical Diamalt GmbH and Helmut Wolf.***
10.23 Letter Agreement, dated May 8, 1992, between The Freedom Group and Robert Kitchen.*
10.24 Employment Agreement, dated March 13, 1992, between Freedom Textile Chemicals Co. and James B.
Trecek.*
10.25 Agreement, dated December 7, 1994, by and among Freedom Chemical Company, the Freedom Group
Partnership, Joseph Littlejohn & Levy Fund, L.P., Joseph Littlejohn & Levy Fund II, L.P., Harold
A. Sorgenti and Fred P. Rullo.**
10.26 Stockholders' Agreement, dated as of May 4, 1992, among Freedom Chemical Company, Joseph
Littlejohn & Levy Fund, L.P., Harold A. Sorgenti and Fred P. Rullo.*
10.27 Amendment to Stockholders' Agreement, dated as of September 9, 1993, by and among Freedom Chemical
Company, Joseph Littlejohn & Levy Fund, L.P., Freedom Investment Corp., Harold A. Sorgenti, Fred
P. Rullo and RULCO, Inc.*
10.28 Amendment No. 2 to Stockholders' Agreement, dated as of June 30, 1994, by and among Freedom
Chemical Company, Joseph Littlejohn & Levy Fund, L.P., Joseph Littlejohn & Levy Fund II, L.P.,
Freedom Investment Corp., Harold A. Sorgenti, Fred P. Rullo and RULCO, Inc.*
10.29 Stockholders' Agreement, dated as of June 30, 1993, by and among Freedom Chemical Company, Joseph
Littlejohn & Levy Fund, L.P., Donald W. McPhail and Stamford-Atlanta Capital Corporation.*
10.30 Amendment to Stockholders' Agreement, dated as of June 30, 1994, by and among Freedom Chemical
Company, Joseph Littlejohn & Levy Fund, L.P., Joseph Littlejohn and Levy Fund II, L.P., Donald W.
McPhail and Stamford-Atlanta Capital Corporation.*
10.31 Stockholders' Agreement, dated as of June 30, 1994, by and among Freedom Chemical Company, Joseph
Littlejohn & Levy Fund, L.P., Joseph Littlejohn & Levy Fund II, L.P., and the individual
shareholders whose names are set forth on the signature page thereto.*
10.32 Stockholders' Agreement, dated as of June 30, 1994, by and among Freedom Chemical Company, Joseph
Littlejohn & Levy Fund, L.P., Joseph Littlejohn & Levy Fund II, L.P., and Richard E. Gilleland.*
10.33 Freedom Chemical Company 1994 Management Equity Plan.**
10.34 Form of Stock Option Agreement.*
10.35 Amended and Restated Stock Option Agreement, dated as of November 15, 1994, between Freedom
Chemical Company and The Freedom Group Partnership.**
10.36 Amended and Restated Stock Option Agreement, dated as of November 15, 1994, between Freedom
Chemical Company and The Freedom Group Partnership.**
10.37 Amended and Restated Stock Option Agreement, dated as of November 15, 1994, between Freedom
Chemical Company and The Freedom Group Partnership.**
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- --------------------------------------------------------------------------------------------------
<S> <C>
10.38 Letter, dated January 18, 1994, from The Freedom Group to Freedom Chemical Company.*
10.39 Letter, dated January 24, 1994, from Freedom Investment Corp. to Joseph Littlejohn & Levy Fund,
L.P.; Letter, dated January 24, 1994, from Harold A. Sorgenti and Ann R. Sorgenti to Joseph
Littlejohn & Levy Fund, L.P.; Letter, dated January 24, 1994, from Sorgenti Family Partnership,
L.P. to Joseph Littlejohn & Levy Fund, L.P.*
10.40 Subscription Agreement, dated as of October 17, 1996 between Freedom Chemical Company and Joseph
Littlejohn & Levy Fund, L.P.**
10.41 Subscription Agreement, dated as of October 17, 1996 between Freedom Chemical Company and Joseph
Littlejohn & Levy Fund II, L.P.**
10.42 Assignment Agreement, dated as of May 26, 1994, between Kalama Chemical, Inc. and United States
Trust Company.*
10.43 Trust Agreement, dated May 26, 1994, among Chatterton Petrochemical Corporation, Freedom Chemical
Company, Kalama Chemical, Inc. and United States Trust Company of New York.*
12.1 Statement re: Computation of ratio of earnings to fixed charges for Freedom Chemical Company and
Subsidiaries and for Hilton Davis Chemical Co. and Subsidiary.**
21.1 Subsidiaries of Freedom Chemical Company.**
21.2 Subsidiaries of Hilton Davis Chemical Co.**
21.3 Subsidiaries of Kalama Chemical, Inc.**
21.4 Subsidiaries of Freedom Textile Chemicals Co.**
21.5 Subsidiaries of Freedom Chemical Diamalt GmbH.**
21.6 Subsidiaries of Freedom Textile Chemical (South Carolina), Inc.**
21.7 Subsidiaries of Kalama Specialty Chemicals, Inc.**
21.8 Subsidiaries of Kalama Foreign Sales Corporation.**
21.9 Subsidiaries of FCC Acquisition Corp.**
23.1 Consent of Coopers & Lybrand L.L.P., independent accountants.**
23.2 Consent of KPMG Peat Marwick LLP, independent certified public accountants.**
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in their opinion filed as Exhibit
5.1 to this Registration Statement).***
23.4 Consent of Bogle & Gates (included in their opinion filed as Exhibit 5.2 to this Registration
Statement).***
23.5 Consent of Boesebeck, Barz & Partner (included in their opinion filed as Exhibit 5.3 to this
Registration Statement).***
23.6 Opinion of Carlsmith Ball Wichman Case & Ichiki (included in their opinion filed as Exhibit 5.4 to
this Registration Statement).***
24.1 Powers of Attorney of certain directors and officers of the Company authorizing Fred P. Rullo and
Brian F. McNamara to sign the Registration Statement and amendments thereto on their behalf (set
forth on signature pages of Registration Statement).**
25.1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York on Form
T-1.**
27.1 Financial Data Schedule.**
99.1 Form of Letter of Transmittal.**
99.2 Form of Notice of Guaranteed Delivery.**
99.3 Form of Letter to Clients.**
99.4 Form of Letter to Brokers, Dealers, Trust Companies and Other Nominees.**
</TABLE>
- ------------------
* Filed previously
** Filed herewith
*** To be filed by amendment.
II-7
<PAGE>
(b) Financial Statement Schedules
The following financial statement schedule is filed herewith:
<TABLE>
<CAPTION>
SCHEDULE PAGE
- ----------------------------------------------------------------------------------------------------------- ----
<S> <C>
Freedom Chemical Company and Subsidiaries (the 'Company')
Report of Independent Accountants.......................................................................... S-1
Financial Statement Schedule for the years ended December 31, 1993, 1994 and 1995:
Schedule II--Valuation and Qualifying Accounts........................................................ S-2
</TABLE>
All other supplemental schedules are omitted because of the absence of
conditions under which they are required or because the information is shown in
the financial statements or notes thereto or in other supplemental schedules.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933, (ii) to reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement, and (iii) to include any material information with
respect to the plan for distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) To file a post-effective amendment to the registration statement
to include any financial statements required by Rule 3-19 of Regulation S-X
at the start of any delayed offering or throughout a continuous offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of
Philadelphia, state of Pennsylvania, on October 31, 1996.
FREEDOM CHEMICAL COMPANY
(Registrant)
___________/s/ FRED P. RULLO___________
Fred P. Rullo
Chief Executive Officer and President
POWERS OF ATTORNEY
We, the undersigned officers and directors of Freedom Chemical Company,
hereby severally constitute and appoint Fred P. Rullo and Brian F. McNamara, and
each of them singly, our true and lawful attorneys with full power to them, and
each of them singly, to sign for us and in our names in the capacities indicated
below, the Registration Statement on Form S-1 (No. 33-84778), this amendment
thereto and any and all pre-effective and post-effective amendments to the
Registration Statement, and generally to do all such things in our names and on
our behalf in our capacities as officers and directors to enable Freedom
Chemical Company to comply with the provisions of the Securities Act of 1933,
and all requirements of the Securities and Exchange Commission, hereby ratifying
and confirming our signatures as they may be signed by our said attorneys or any
of them, to the Registration Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<S> <C> <C>
/s/ FRED P. RULLO Chairman, Chief Executive Officer and October 31, 1996
- ------------------------------------------ President (Principal Executive Officer)
Fred P. Rullo
/s/ DENNIS M. MONAHAN Chief Financial Officer (Principal Financial October 31, 1996
- ------------------------------------------ Officer and Principal Accounting Officer)
Dennis M. Monahan
/s/ TIMOTHY J. CLARK Director October 31, 1996
- ------------------------------------------
Timothy J. Clark
/s/ PETER A. JOSEPH Director October 31, 1996
- ------------------------------------------
Peter A. Joseph
/s/ ROBERT J. LANIGAN Director October 31, 1996
- ------------------------------------------
Robert J. Lanigan
/s/ PAUL S. LEVY Director October 31, 1996
- ------------------------------------------
Paul S. Levy
/s/ ANGUS C. LITTLEJOHN Director October 31, 1996
- ------------------------------------------
Angus C. Littlejohn
/s/ HAROLD A. SORGENTI Director October 31, 1996
- ------------------------------------------
Harold A. Sorgenti
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Cincinnati,
state of Ohio, on October 31, 1996.
HILTON DAVIS CHEMICAL CO.
(Registrant)
/s/ ROBERT G. KITCHEN
------------------------------------
Robert G. Kitchen
President and Chief Executive Officer
POWERS OF ATTORNEY
We, the undersigned officers and directors of Hilton Davis Chemical Co.,
hereby severally constitute and appoint Fred P. Rullo and Brian F. McNamara, and
each of them singly, our true and lawful attorneys with full power to them, and
each of them singly, to sign for us and in our names in the capacities indicated
below, the Registration Statement on Form S-1 (No. 33-84778), this amendment
thereto and any and all pre-effective and post-effective amendments to the
Registration Statement, and generally to do all such things in our names and on
our behalf in our capacities as officers and directors to enable Hilton Davis
Chemical Co. to comply with the provisions of the Securities Act of 1933, and
all requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys or any of
them, to the Registration Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ ---------------------------------------------- ----------------
<S> <C> <C>
/s/ ROBERT G. KITCHEN President, Chief Executive Officer and October 31, 1996
- ------------------------------------------ Director (Principal Executive Officer)
Robert G. Kitchen
/s/ GARY SOMMER Chief Financial Officer (Principal Financial October 31, 1996
- ------------------------------------------ Officer and Principal Accounting Officer)
Gary Sommer
/s/ FRED P. RULLO Chairman of the Board of Directors October 31, 1996
- ------------------------------------------
Fred P. Rullo
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Kalama,
state of Washington, on October 31, 1996.
KALAMA CHEMICAL, INC.
(Registrant)
/s/ ROBERT A. KIRCHNER
------------------------------------
Robert A. Kirchner
President
POWERS OF ATTORNEY
We, the undersigned officers and directors of Kalama Chemical, Inc., hereby
severally constitute and appoint Fred P. Rullo and Brian F. McNamara, and each
of them singly, our true and lawful attorneys with full power to them, and each
of them singly, to sign for us and in our names in the capacities indicated
below, the Registration Statement on Form S-1 (No. 33-84778), this amendment
thereto and any and all pre-effective and post-effective amendments to the
Registration Statement, and generally to do all such things in our names and on
our behalf in our capacities as officers and directors to enable Kalama
Chemical, Inc. to comply with the provisions of the Securities Act of 1933, and
all requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys or any of
them, to the Registration Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<S> <C> <C>
/s/ ROBERT A. KIRCHNER President and Director (Principal Executive October 31, 1996
- ------------------------------------------ Officer)
Robert A. Kirchner
/s/ JOHN W. HAGEN Controller (Principal Financial Officer and October 31, 1996
- ------------------------------------------ Principal Accounting Officer)
John W. Hagen
/s/ FRED P. RULLO Director October 31, 1996
- ------------------------------------------
Fred P. Rullo
/s/ MARK A. FLEISCHAUER Director October 31, 1996
- ------------------------------------------
Mark A. Fleischauer
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of
Philadelphia, state of Pennsylvania, on October 31, 1996.
FREEDOM TEXTILE CHEMICALS CO.
(Registrant)
/s/ FRED P. RULLO
------------------------------------
Fred P. Rullo
President and Chief Executive Officer
POWERS OF ATTORNEY
We, the undersigned officers and directors of Freedom Textile Chemicals
Co., hereby severally constitute and appoint Fred P. Rullo and Brian F.
McNamara, and each of them singly, our true and lawful attorneys with full power
to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Registration Statement on Form S-1 (No.
33-84778), this amendment thereto and any and all pre-effective and
post-effective amendments to the Registration Statement, and generally to do all
such things in our names and on our behalf in our capacities as officers and
directors to enable Freedom Textile Chemicals Co. to comply with the provisions
of the Securities Act of 1933, and all requirements of the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorneys or any of them, to the Registration Statement
and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<S> <C> <C>
/s/ FRED P. RULLO President, Chief Executive Officer and October 31, 1996
- ------------------------------------------ Director (Principal Executive Officer,
Fred P. Rullo Principal Financial Officer and Principal
Accounting Officer)
/s/ BRIAN F. MCNAMARA Director October 31, 1996
- ------------------------------------------
Brian F. McNamara
</TABLE>
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Munich,
Federal Republic of Germany, on October 31, 1996.
FREEDOM CHEMICAL DIAMALT GMBH
(Registrant)
/s/ HELMUT WOLF
------------------------------------
Helmut Wolf
Managing Director
POWERS OF ATTORNEY
We, the undersigned officers and directors of Freedom Chemical Diamalt
GmbH, hereby severally constitute and appoint Fred P. Rullo and Brian F.
McNamara, and each of them singly, our true and lawful attorneys with full power
to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Registration Statement on Form S-1 (No.
33-84778), this amendment thereto and any and all pre-effective and
post-effective amendments to the Registration Statement, and generally to do all
such things in our names and on our behalf in our capacities as officers and
directors to enable Freedom Chemical Diamalt GmbH to comply with the provisions
of the Securities Act of 1933, and all requirements of the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorneys or any of them, to the Registration Statement
and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- --------------------------------------------- ---------------------------------------------- ----------------
<S> <C> <C>
/s/ HELMUT WOLF Managing Director (Principal Executive
- --------------------------------------------- Officer)
Helmut Wolf October 31, 1996
/s/ S. KURT HOLDERER Executive Vice President (Principal Financial
- --------------------------------------------- Officer and Principal Accounting Officer)
S. Kurt Holderer October 31, 1996
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of
Philadelphia, state of Pennsylvania, on October 31, 1996.
FREEDOM TEXTILE CHEMICAL COMPANY
(SOUTH CAROLINA), INC.
(Registrant)
___________/s/ FRED P. RULLO__________
Fred P. Rullo
Chief Executive Officer
POWERS OF ATTORNEY
We, the undersigned officers and directors of Freedom Textile Chemical
Company (South Carolina), Inc., hereby severally constitute and appoint Fred P.
Rullo and Brian F. McNamara, and each of them singly, our true and lawful
attorneys with full power to them, and each of them singly, to sign for us and
in our names in the capacities indicated below, the Registration Statement on
Form S-1 (No. 33-84778), this amendment thereto and any and all pre-effective
and post-effective amendments to the Registration Statement, and generally to do
all such things in our names and on our behalf in our capacities as officers and
directors to enable Freedom Textile Chemical Company (South Carolina), Inc. to
comply with the provisions of the Securities Act of 1933, and all requirements
of the Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys or any of them, to the
Registration Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<S> <C> <C>
/s/ FRED P. RULLO Chief Executive Officer and Director October 31, 1996
- ------------------------------------------ (Principal Executive Officer, Principal
Fred P. Rullo Financial Officer and Principal Accounting
Officer)
/s/ BRIAN F. MCNAMARA Director October 31, 1996
- ------------------------------------------
Brian F. McNamara
</TABLE>
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Kalama,
state of Washington, on October 31, 1996.
KALAMA SPECIALTY CHEMICALS, INC.
(Registrant)
________/s/ ROBERT A. KIRCHNER________
Robert A. Kirchner
President
POWERS OF ATTORNEY
We, the undersigned officers and directors of Kalama Specialty Chemicals,
Inc., hereby severally constitute and appoint Fred P. Rullo and Brian F.
McNamara, and each of them singly, our true and lawful attorneys with full power
to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Registration Statement on Form S-1 (No.
33-84778), this amendment thereto and any and all pre-effective and
post-effective amendments to the Registration Statement, and generally to do all
such things in our names and on our behalf in our capacities as officers and
directors to enable Kalama Specialty Chemicals, Inc. to comply with the
provisions of the Securities Act of 1933, and all requirements of the Securities
and Exchange Commission, hereby ratifying and confirming our signatures as they
may be signed by our said attorneys or any of them, to the Registration
Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<C> <S> <C>
/s/ ROBERT A. KIRCHNER President and Director (Principal Executive October 31, 1996
- ------------------------------------------ Officer)
Robert A. Kirchner
/s/ JOHN W. HAGEN Controller (Principal Financial Officer and October 31, 1996
- ------------------------------------------ Principal Accounting Officer)
John W. Hagen
/s/ THOMAS J. LOBUE Director October 31, 1996
- ------------------------------------------
Thomas J. Lobue
/s/ JOHN P. FAIRMAN Director October 31, 1996
- ------------------------------------------
John P. Fairman
</TABLE>
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Kalama,
state of Washington, on October 31, 1996.
KALAMA FOREIGN SALES CORPORATION
(Registrant)
________/s/ ROBERT A. KIRCHNER________
Robert A. Kirchner
President
POWERS OF ATTORNEY
We, the undersigned officers and directors of Kalama Foreign Sales
Corporation, severally constitute and appoint Fred P. Rullo and Brian F.
McNamara, and each of them singly, our true and lawful attorneys with full power
to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Registration Statement on Form S-1 (No.
33-84778), this amendment thereto and any and all pre-effective and
post-effective amendments to the Registration Statement, and generally to do all
such things in our names and on our behalf in our capacities as officers and
directors to enable Kalama Foreign Sales Corporation to comply with the
provisions of the Securities Act of 1933, and all requirements of the Securities
and Exchange Commission, hereby ratifying and confirming our signatures as they
may be signed by our said attorneys or any of them, to the Registration
Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ---------------------------------------------- ---------------------------------------------- ----------------
<S> <C> <C>
/s/ ROBERT A. KIRCHNER President and Director October 31, 1996
- --------------------------------------------- (Principal Executive Officer)
Robert A. Kirchner
/s/ JOHN W. HAGEN Controller and Director October 31, 1996
- --------------------------------------------- (Principal Financial Officer and Principal
John W. Hagen Accounting Officer)
/s/ WILLIAM C. WILLIAMS Director October 31, 1996
- ---------------------------------------------
William C. Williams
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of
Philadelphia, state of Pennsylvania, on October 31, 1996.
FCC ACQUISITION CORP.
(Registrant)
/s/ FRED P. RULLO
------------------------------------
Fred P. Rullo
President and Chief Executive Officer
POWERS OF ATTORNEY
We, the undersigned officers and directors of FCC Acquisition Corp., hereby
severally constitute and appoint Fred P. Rullo and Brian F. McNamara, and each
of them singly, our true and lawful attorneys with full power to them, and each
of them singly, to sign for us and in our names in the capacities indicated
below, the Registration Statement on Form S-1 (No. 33-84778), this amendment
thereto and any and all pre-effective and post-effective amendments to the
Registration Statement, and generally to do all such things in our names and on
our behalf in our capacities as officers and directors to enable FCC Acquisition
Corp. to comply with the provisions of the Securities Act of 1933, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys or any of
them, to the Registration Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ----------------------------------------- -------------------------------------------- ------------------
<S> <C> <C>
/s/ FRED P. RULLO President, Chief Executive Officer and October 31, 1996
- ---------------------------------------- Director (Principal Executive Officer,
Fred P. Rullo Principal Financial Officer and Principal
Accounting Officer)
/s/ BRIAN F. MCNAMARA Director October 31, 1996
- ----------------------------------------
Brian F. McNamara
</TABLE>
II-17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
In connection with our audits of the consolidated financial statements of
Freedom Chemical Company and Subsidiaries as of December 31, 1994 and 1995, and
for each of the three years in the period ended December 31, 1995, which
financial statements are included in the Prospectus, we have also audited the
financial statement schedule listed in Item 16 herein.
In our opinion, this financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Wayne, Pennsylvania
March 26, 1996
S-1
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED ADDITIONS BALANCE AT
BEGINNING TO COSTS CHARGED TO END
OF PERIOD AND EXPENSES OTHER ACCOUNTS DEDUCTIONS OF PERIOD
---------- ------------ -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
For the year ended December 31, 1993................. $ 35 $ 112 -- $ 2 $ 145
---------- ------------ ------- ---------- ----------
---------- ------------ ------- ---------- ----------
For the year ended December 31, 1994................. $ 145 $ 142 -- -- $ 287
---------- ------------ ------- ---------- ----------
---------- ------------ ------- ---------- ----------
For the year ended December 31, 1995................. $ 287 $ 36 -- $ 63 $ 260
---------- ------------ ------- ---------- ----------
---------- ------------ ------- ---------- ----------
INVENTORY RESERVES:
For the year ended December 31, 1993................. -- -- -- -- --
---------- ------------ ------- ---------- ----------
---------- ------------ ------- ---------- ----------
For the year ended December 31, 1994................. -- $ 58 -- -- $ 58
---------- ------------ ------- ---------- ----------
---------- ------------ ------- ---------- ----------
For the year ended December 31, 1995................. $ 58 $1,964 -- $1,854 $ 168
---------- ------------ ------- ---------- ----------
---------- ------------ ------- ---------- ----------
VALUATION ALLOWANCE FOR DEFERRED TAXES:
For the year ended December 31, 1993................. -- -- -- -- --
---------- ------------ ------- ---------- ----------
---------- ------------ ------- ---------- ----------
For the year ended December 31, 1994................. -- $ 147 $4,000 -- $4,147
---------- ------------ ------- ---------- ----------
---------- ------------ ------- ---------- ----------
For the year ended December 31, 1995................. $4,147 $5,326 -- $1,747 $7,726
---------- ------------ ------- ---------- ----------
---------- ------------ ------- ---------- ----------
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NUMBER
- ------- ----------------------------------------------------------------------------------------------- ------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of Freedom Chemical Company and Certificate of
Designation for Preferred Stock.**
3.2 By-laws of Freedom Chemical Company.*
3.3 Certificate of Incorporation of Hilton Davis Chemical Co.**
3.4 By-laws of Hilton Davis Chemical Co.**
3.5 Articles of Incorporation of Kalama Chemical, Inc.**
3.6 By-laws of Kalama Chemical, Inc.**
3.7 Certificate of Incorporation of Freedom Textile Chemicals Co.**
3.8 By-laws of Freedom Textile Chemicals Co.**
3.9 Articles of Association of Freedom Chemical Diamalt GmbH.**
3.10 Certificate of Incorporation of Freedom Textile Chemical Company (South Carolina), Inc.**
3.11 By-laws of Freedom Textile Chemical Company (South Carolina), Inc.**
3.12 Articles of Incorporation of Kalama Specialty Chemicals, Inc.**
3.13 By-laws of Kalama Specialty Chemicals, Inc.**
3.14 Articles of Incorporation of Kalama Foreign Sales Corporation.**
3.15 By-laws of Kalama Foreign Sales Corporation.**
3.16 Certificate of Incorporation of FCC Acquisition Corp.**
3.17 By-laws of FCC Acquisition Corp.**
4.1 Indenture dated as of October 15, 1996, among Freedom Chemical Company, the Guarantors named
therein and The Bank of New York, as trustee, relating to the 10 5/8% Senior Subordinated Notes
due 2006 of the Company and exhibits thereto, including Form of 10 5/8% Senior Subordinated
Note due 2006 of Freedom Chemical Company.**
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding legality of securities being
registered.***
5.2 Opinion of Bogle & Gates regarding legality of securities being registered.***
5.3 Opinion of Boesebeck, Barz & Partner regarding legality of securities being registered.***
5.4 Opinion of Carlsmith Ball Wichman Case & Ichiki regarding legality of securities being
registered.***
10.1 Registration Rights Agreement, dated October 17, 1996 among Freedom Chemical Company, the
Guarantors named therein and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Schroder
Wertheim & Co. Incorporated and Smith Barney Inc.**
10.2 Amended and Restated Credit Agreement, dated as of October 17, 1996 among Freedom Chemical
Company, Freedom Chemical Diamalt GmbH, the institutions from time to time party thereto as
lenders, the institutions from time to time party thereto as issuing bank and Citicorp USA,
Inc., as Agent.**
10.3 Share Pledge Agreement, dated January 16, 1995, by and among Freedom Chemical Company, Hilton
Davis Chemical Co. and Citicorp USA, Inc.**
10.4 Amendment to Share Pledge Agreement, dated January 17, 1995, by and among Freedom Chemical
Company, Hilton Davis Chemical Co. and Citicorp USA, Inc.**
10.5 Security Assignment Agreement, dated January 16, 1995, between Freedom Chemical Company and
Citicorp USA, Inc.**
10.6 Stock Purchase Agreement, dated as of May 11, 1994, among BC Sugar Refinery Limited, Chatterton
Petrochemical Corporation and Freedom Chemical Company.*
10.7 Amendment No. 1 to Stock Purchase Agreement, dated as of May 26, 1994, among BC Sugar Refinery
Limited, Chatterton Petrochemical Corporation and Freedom Chemical Company.*
10.8 Settlement Agreement dated as of April 28, 1994 between Tenneco Polymers, Inc. and Kalama
Chemical, Inc.*
10.9 Stock Purchase Agreement, dated as of May 21, 1993, between PMC, Inc. and Freedom Chemical
Acquisition Corporation.*
</TABLE>
<PAGE>
<TABLE>
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NO. DESCRIPTION OF EXHIBIT NUMBER
- ------- ----------------------------------------------------------------------------------------------- ------
<S> <C> <C>
10.10 Amendment No. 1 to Stock Purchase Agreement, dated as of September 9, 1993, between PMC, Inc.
and Freedom Chemical Company.*
10.11 Definitive Agreement, dated as of August 13, 1993, between Sterling Winthrop Inc. and Freedom
Chemical Acquisition Corporation.*
10.12 Ground Lease, dated September 9, 1993, between The SDI Divestiture Corp. and Hilton Davis
Chemical Co.*
10.13 Amendment to Ground Lease Provisions, dated September 9, 1993.*
10.14 Escrow Agreement, dated September 9, 1993, by and among PMC, Inc., Freedom Chemical Acquisition
Corporation and CoreStates Bank, N.A.*
10.15 Environmental Matters Agreement, dated September 9, 1993, among Freedom Chemical Acquisition
Corporation, Hilton Davis Chemical Co. and Sterling Winthrop, Inc.*
10.16 Agreement for the Purchase and Sale of Assets dated February 28, 1992, between Freedom Textile
Chemicals Co. and American Cyanamid Company.**
10.17 [Intentionally Omitted]
10.18 Employment Agreement, dated November 15, 1994, by and between Freedom Chemical Company and Fred
P. Rullo.**
10.19 Employment Agreement, dated November 15, 1994, by and between Freedom Chemical Company and
Harold A. Sorgenti.**
10.20 Employment Agreement, dated June 1, 1991, between Kalama Chemical, Inc. and Robert A.
Kirchner.**
10.21 Employment Agreement, dated January 17, 1996, between Freedom Textile Chemicals Co. and Robert
G. Kitchen.**
10.22 Employment Agreement between Freedom Chemical Diamalt GmbH and Helmut Wolf.***
10.23 Letter Agreement, dated May 8, 1992, between The Freedom Group and Robert Kitchen.*
10.24 Employment Agreement, dated March 13, 1992, between Freedom Textile Chemicals Co. and James B.
Trecek.*
10.25 Agreement, dated December 7, 1994, by and among Freedom Chemical Company, the Freedom Group
Partnership, Joseph Littlejohn & Levy Fund, L.P., Joseph Littlejohn & Levy Fund II, L.P.,
Harold A. Sorgenti and Fred P. Rullo.**
10.26 Stockholders' Agreement, dated as of May 4, 1992, among Freedom Chemical Company, Joseph
Littlejohn & Levy Fund, L.P., Harold A. Sorgenti and Fred P. Rullo.*
10.27 Amendment to Stockholders' Agreement, dated as of September 9, 1993, by and among Freedom
Chemical Company, Joseph Littlejohn & Levy Fund, L.P., Freedom Investment Corp., Harold A.
Sorgenti, Fred P. Rullo and RULCO, Inc.*
10.28 Amendment No. 2 to Stockholders' Agreement, dated as of June 30, 1994, by and among Freedom
Chemical Company, Joseph Littlejohn & Levy Fund, L.P., Joseph Littlejohn & Levy Fund II, L.P.,
Freedom Investment Corp., Harold A. Sorgenti, Fred P. Rullo and RULCO, Inc.*
10.29 Stockholders' Agreement, dated as of June 30, 1993, by and among Freedom Chemical Company,
Joseph Littlejohn & Levy Fund, L.P., Donald W. McPhail and Stamford-Atlanta Capital
Corporation.*
10.30 Amendment to Stockholders' Agreement, dated as of June 30, 1994, by and among Freedom Chemical
Company, Joseph Littlejohn & Levy Fund, L.P., Joseph Littlejohn and Levy Fund II, L.P., Donald
W. McPhail and Stamford-Atlanta Capital Corporation.*
10.31 Stockholders' Agreement, dated as of June 30, 1994, by and among Freedom Chemical Company,
Joseph Littlejohn & Levy Fund, L.P., Joseph Littlejohn & Levy Fund II, L.P., and the individual
shareholders whose names are set forth on the signature page thereto.*
10.32 Stockholders' Agreement, dated as of June 30, 1994, by and among Freedom Chemical Company,
Joseph Littlejohn & Levy Fund, L.P., Joseph Littlejohn & Levy Fund II, L.P., and Richard E.
Gilleland.*
10.33 Freedom Chemical Company 1994 Management Equity Plan.**
10.34 Form of Stock Option Agreement.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NUMBER
- ------- ----------------------------------------------------------------------------------------------- ------
<S> <C> <C>
10.35 Amended and Restated Stock Option Agreement, dated as of November 15, 1994, between Freedom
Chemical Company and The Freedom Group Partnership.**
10.36 Amended and Restated Stock Option Agreement, dated as of November 15, 1994 between Freedom
Chemical Company and The Freedom Group Partnership.**
10.37 Amended and Restated Stock Option Agreement, dated as of November 15, 1994, between Freedom
Chemical Company and The Freedom Group Partnership.**
10.38 Letter, dated January 18, 1994, from The Freedom Group to Freedom Chemical Company.*
10.39 Letter, dated January 24, 1994, from Freedom Investment Corp. to Joseph Littlejohn & Levy Fund,
L.P.; Letter, dated January 24, 1994, from Harold A. Sorgenti and Ann R. Sorgenti to Joseph
Littlejohn & Levy Fund, L.P.; Letter, dated January 24, 1994, from Sorgenti Family Partnership,
L.P. to Joseph Littlejohn & Levy Fund, L.P.*
10.40 Subscription Agreement, dated as of October 17, 1996 between Freedom Chemical Company and
Joseph Littlejohn & Levy Fund, L.P.**
10.41 Subscription Agreement, dated as of October 17, 1996 between Freedom Chemical Company and
Joseph Littlejohn & Levy Fund II, L.P.**
10.42 Assignment Agreement, dated as of May 26, 1994, between Kalama Chemical, Inc. and United States
Trust Company.*
10.43 Trust Agreement, dated May 26, 1994, among Chatterton Petrochemical Corporation, Freedom
Chemical Company, Kalama Chemical, Inc. and United States Trust Company of New York.*
12.1 Statement re: Computation of ratio of earnings to fixed charges of Freedom Chemical Company and
Subsidiaries and of Hilton Davis Chemical Co. and Subsidiary.**
21.1 Subsidiaries of Freedom Chemical Company.**
21.2 Subsidiaries of Hilton Davis Chemical Co.**
21.3 Subsidiaries of Kalama Chemical, Inc.**
21.4 Subsidiaries of Freedom Textile Chemicals Co.**
21.5 Subsidiaries of Freedom Chemical Diamalt GmbH.**
21.6 Subsidiaries of Freedom Textile Chemical (South Carolina), Inc.**
21.7 Subsidiaries of Kalama Specialty Chemicals, Inc.**
21.8 Subsidiaries of Kalama Foreign Sales Corporation.**
21.9 Subsidiaries of FCC Acquisition Corp.**
23.1 Consent of Coopers & Lybrand L.L.P., independent accountants.**
23.2 Consent of KPMG Peat Marwick LLP, independent certified public accountants.**
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in their opinion filed as Exhibit
5.1 to this Registration Statement).***
23.4 Consent of Bogle & Gates (included in their opinion filed as Exhibit 5.2 to this Registration
Statement).***
23.5 Consent of Boesebeck, Barz & Partner (included in their opinion filed as Exhibit 5.3 to this
Registration Statement).***
23.6 Opinion of Carlsmith Ball Wichman Case & Ichiki (included in their opinion filed as Exhibit 5.4
to this Registration Statement).***
24.1 Powers of Attorney of certain directors and officers of the Company authorizing Fred P. Rullo
and Brian F. McNamara to sign the Registration Statement and amendments thereto on their behalf
(set forth on signature pages of Registration Statement).**
25.1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York on Form
T-1.**
27.1 Financial Data Schedule.**
99.1 Form of Letter of Transmittal.**
99.2 Form of Notice of Guaranteed Delivery.**
99.3 Form of Letter to Clients.**
99.4 Form of Letter to Brokers, Dealers, Trust Companies and Other Nominees.**
</TABLE>
- ------------------
* Filed previously
** Filed herewith
*** To be filed by amendment.
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
FREEDOM CHEMICAL COMPANY
--------------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
--------------------------------------------
Freedom Chemical Company, a Delaware corporation (hereinafter called
the "Corporation"), does hereby certify as follows:
FIRST: Article FOURTH of the Corporation's Certificate of
Incorporation is hereby amended to read in its entirety as set forth below:
FOURTH: The total number of shares of all classes of stock which the
Corporation is authorized to issue is 265,000 shares, consisting of 200,000
shares of Series A Common Stock, par value $.01 per share, 10,000 shares of
Series B Common stock, par value $.01 per share, and 55,000 shares of Preferred
Stock, par value $1,000 per share, with such voting powers, designations,
preferences, rights, qualifications, limitations, or restrictions as the Board
of Directors shall specify. In accordance with this Section Fourth, the Board of
Directors has designated such shares of Preferred Stock with the voting powers,
preferences, rights, qualifications, limitations, and restrictions as set forth
on Exhibit A and Exhibit B hereto.
(a) Rights and Privileges of Common Stock
As used herein, the term "Common Stock" shall include the Series A
Common Stock and the Series B Common Stock. Except as otherwise provided herein,
all shares of Series A Common Stock and Series B Common Stock will be identical
and will entitle the holders thereof to the same rights and privileges.
1. VOTING RIGHTS.
Except as otherwise required by law or as otherwise provided herein,
on all matters submitted to
<PAGE>
the Corporation's stockholders, (a) the holders of Series A Common Stock will be
entitled to one vote per share and (b) the holders of Series B Common Stock will
have no right to vote.
2. CONVERSION OF SERIES B COMMON STOCK.
The Corporation shall be entitled, at any time or from time-to-time,
to convert any or all of the shares of Series B Common stock into that number of
shares of Series A Common Stock as may be determined by the Board of Directors
from time-to-time. Each conversion of shares of Series B Common Stock into
shares of Series A Common Stock will be effective upon resolution of the Board
of Directors stating the number of shares of Series B Common Stock to be
converted into Series A Common Stock. Such shares of Series B Common Stock shall
be converted without any action on the part of the holder thereof.
SECOND: The foregoing amendment was duly adopted in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
2
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be duly executed in its corporate name this 16th day of October, 1996.
FREEDOM CHEMICAL COMPANY
By:/s/ Fred P. Rullo
-----------------
Fred P. Rullo
President
3
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
FREEDOM CHEMICAL COMPANY
Pursuant to Sections 242 and 228 of the
General Corporation Law of the State of Delaware
FREEDOM CHEMICAL COMPANY (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "GCL"), hereby certifies to the Secretary of State of the State of
Delaware as follows:
FIRST. That pursuant to a Certificate of Designation, Rights and
Preferences (the "Certificate of Designation") included as Exhibit A to the
Certificate of Correction filed on September 21, 1994 with the Secretary of
State of the State of Delaware to correct the Corporation's Certificate of
Amendment filed on April 30, 1992 (the "Effective Date") with the Secretary of
State of the State of Delaware, the Corporation, as of the Effective Date,
established a series of its authorized preferred stock, par value $1,000 per
share, designated the "Series B Redeemable Preferred Stock."
SECOND. That, pursuant to the Corporation's Amended and Restated
Certificate of Incorporation filed on September 21, 1994 with the Secretary of
State of the State of Delaware, the Corporation amended the provisions of the
Certificate of Designation.
THIRD. That, pursuant to the authority conferred upon the Board of
Directors by the provisions of the Amended and Restated Certificate of
Incorporation of the Corporation, the Board of Directors of the Corporation
adopted a resolution further amending the Certificate of Designation to extend
the mandatory redemption date thereof as set forth in this Certificate of
Amendment.
FOURTH. That, as required by the Amended and Restated Certificate of
Incorporation, the holders of at least 50% of all of the outstanding shares of
Series B
<PAGE>
Redeemable Preferred Stock have, by resolution adopted on October 2, 1996,
approved the amendment contemplated hereby.
FIFTH. To effect the foregoing, Section 3(a) of the Certificate of
Designation shall be amended and restated in its entirety as follows:
"(a) Mandatory Redemption. As a mandatory redemption for the
retirement of the shares of Series B Preferred Stock, the Corporation
shall redeem, out of Legally Available Funds (if such shares remain
outstanding) on April 30, 2007, 100% of all shares Series B Preferred
Stock then issued and outstanding, in each case at the redemption price of
the Liquidation Preference of the then outstanding shares. Immediately
prior to authorizing or making such redemption with respect to the Series
B Preferred Stock, the Corporation, by resolution of its Board of
Directors shall, to the extent of any Legally Available Funds, declare a
dividend on the Series B Preferred Stock payable on the redemption date in
an amount equal to any accrued and unpaid dividends (including Additional
Dividends) on the Series B Preferred Stock as of such date and, if the
Corporation does not have sufficient Legally Available Funds to declare
and pay all dividends (including Additional Dividends) accrued at the time
of such redemption, any remaining accrued and unpaid dividends (including
Additional Dividends) shall be added to the redemption price. If the
Corporation shall fail to discharge its obligation to redeem all of the
outstanding shares of Series B Preferred Stock required to be redeemed
pursuant to this Section 3(a) (the "Mandatory Redemption Obligation"), the
Mandatory Redemption Obligation shall be discharged as soon as the
Corporation is able to discharge such Mandatory Redemption Obligation. If
and so long as the Mandatory Redemption Obligation shall not fully be
discharged, (i) dividends on the Series B Preferred Stock shall continue
to accrue and be added to the dividend payable pursuant to the second
preceding sentence and (ii) the Corporation shall not declare or pay any
dividend or make any distribution on its securities not otherwise
permitted by Section 2(e) of this Certificate."
2
<PAGE>
SIXTH. This Certificate of Amendment shall be effective upon its
filing with the Secretary of State of the State of Delaware.
3
<PAGE>
IN WITNESS WHEREOF, Freedom Chemical Company has caused this
Certificate of Amendment to be executed in its corporate name and on its behalf
this 16th day of October, 1996.
Freedom Chemical Company
By:/s/ Fred P. Rullo
-----------------
Name: Fred P. Rullo
Title:President
7
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
FREEDOM CHEMICAL COMPANY
Pursuant to Sections 242 and 228 of the
General Corporation Law of the State of Delaware
FREEDOM CHEMICAL COMPANY (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "GCL"), hereby certifies to the Secretary of State of the State of
Delaware as follows:
FIRST. That, pursuant to a Certificate of Designation, Rights and
Preferences (the "Certificate of Designation") included as Exhibit B to the
Corporation's Amended and Restated Certificate of Incorporation filed on
September 21, 1994 with the Secretary of State of the State of Delaware, the
Corporation established a series of its authorized preferred stock, par value
$1,000 per share, designated the "Series C Redeemable Preferred Stock."
SECOND. That, pursuant to the authority conferred upon the Board of
Directors by the provisions of the Amended and Restated Certificate of
Incorporation of the Corporation, the Board of Directors of the Corporation
adopted a resolution amending the provisions of the Certificate of Designation
to extend the mandatory redemption date of the Series C Redeemable Preferred
Stock to May 31, 2007 as set forth in this Certificate of Amendment.
THIRD. That, as required by the Amended and Restated Certificate of
Incorporation, the holders of at least 50% of all of the outstanding shares of
Series C Redeemable Preferred Stock have, by resolution adopted on October 2,
1996, approved the amendment contemplated hereby.
FOURTH. To effect the foregoing, Section 3(a) of the Certificate of
Designation shall be amended and restated in its entirety as follows:
<PAGE>
"(a) Mandatory Redemption. As a mandatory redemption for the
retirement of the shares of Series C Preferred Stock, the Corporation
shall redeem, out of Legally Available Funds (if such shares remain
outstanding) on May 31, 2007, 100% of all shares Series C Preferred Stock
then issued and outstanding, in each case at the redemption price of the
Liquidation Preference of the then outstanding shares. Immediately prior
to authorizing or making such redemption with respect to the Series C
Preferred Stock, the Corporation, by resolution of its Board of Directors
shall, to the extent of any Legally Available Funds, declare a dividend on
the Series C Preferred Stock payable on the redemption date in an amount
equal to any accrued and unpaid dividends (including Additional Dividends)
on the Series C Preferred Stock as of such date and, if the Corporation
does not have sufficient Legally Available Funds to declare and pay all
dividends (including Additional Dividends) accrued at the time of such
redemption, any remaining accrued and unpaid dividends (including
Additional Dividends) shall be added to the redemption price. If the
Corporation shall fail to discharge its obligation to redeem all of the
outstanding shares of Series C Preferred Stock required to be redeemed
pursuant to this Section 3(a) (the "Mandatory Redemption Obligation"), the
Mandatory Redemption Obligation shall be discharged as soon as the
Corporation is able to discharge such Mandatory Redemption Obligation. If
and so long as the Mandatory Redemption Obligation shall not fully be
discharged, (i) dividends on the Series C Preferred Stock shall continue
to accrue and be added to the dividend payable pursuant to the second
preceding sentence and (ii) the Corporation shall not declare or pay any
dividend or make any distribution on its securities not otherwise
permitted by Section 2(e) of this Certificate."
FIFTH. This Certificate of Amendment shall be effective upon its
filing with the Secretary of State of the State of Delaware.
2
<PAGE>
IN WITNESS WHEREOF, Freedom Chemical Company has caused this
Certificate of Amendment to be executed in its corporate name and on its behalf
this 16th day of October, 1996.
Freedom Chemical Company
By: /s/ Fred P. Rullo
-----------------
Name: Fred P. Rullo
Title:President
10
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FREEDOM CHEMICAL COMPANY
Pursuant to Sections 228, 242 and 245 of the General Corporation Law of
the State of Delaware (the "DGCL"), Freedom Chemical Company, a corporation
organized and existing under and by virtue of the DGCL (the "Corporation"), does
hereby certify as follows:
1. The Corporation was organized in the State of Delaware on April 14, 1992.
2. Such amendments and additions made by the following Amended and Restated
Certificate of Incorporation have been duly authorized and approved in
conformity with the DGCL.
3. The Corporation hereby further amends and restates the Certificate of
Incorporation of the Corporation to read in its entirety as follows:
FIRST: The name of the Corporation is Freedom Chemical Company
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in the
state of Delaware is Corporation Trust Center, 1209 Orange Street, the City of
Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the DGCL.
FOURTH: The total number of shares of all classes of stock which the
Corporation is authorized to issue is 150,000 shares, consisting of 85,000
shares of Series A Common Stock, par value $.01 per share, 10,000 shares of
Series B Common Stock, par value $.01 per share, 55,000 shares of Preferred
Stock, par value $1,000 per share, with such voting powers, designations,
preferences, rights, qualifications, limitations, or restrictions as the Board
of Directors shall specify. In accordance with this Section Fourth, the Board of
Directors has designated such shares of
<PAGE>
Preferred Stock with the voting powers, preferences, rights, qualifications,
limitations, and restrictions as set forth on Exhibit A and Exhibit B hereto.
(a) Rights and Privileges of Common Stock
As used herein, the term "Common Stock" shall include the Series A
Common Stock and the Series B Common Stock. Except as otherwise provided herein,
all shares of Series A Common Stock and Series B Common Stock will be identical
and will entitle the holders thereof to the same rights and privileges.
1. VOTING RIGHTS.
Except as otherwise required by law or as otherwise provided herein,
on all matters submitted to the Corporation's stockholders, (a) the holders of
Series A Common Stock will be entitled to one vote per share and (b) the holders
of Series B Common Stock will have no right to vote.
2. CONVERSION OF SERIES B COMMON STOCK.
The Corporation shall be entitled, at any time or from time-to-time,
to convert any or all of the shares of Series B Common Stock into that number of
shares of Series A Common Stock as may be determined by the Board of Directors
from time-to-time. Each conversion of shares of Series B Common Stock into
shares of Series A Common Stock will be effective upon resolution of the Board
of Directors stating the number of shares of Series B Common Stock to be
converted into Series A Common Stock. Such shares of Series B Common Stock shall
be converted without any action on the part of the holders thereof.
FIFTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, alter or
repeal the by-laws of the Corporation.
SIXTH: A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve
2
<PAGE>
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, (iv) for any transaction from which the director derived an improper
personal benefit. If the DGCL is hereafter amended to authorize the further
elimination or limitation of the liability of directors, then the liability of
the directors of the Corporation, in addition to the limitation on personal
liability provided herein, shall be limited to the fullest extent permitted by
the amended DGCL. Any appeal or modification of this paragraph by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
SEVENTH: Election of directors need not be by written ballot unless the
by-laws of the Corporation shall so provide.
EIGHTH: (a) Each person who was or is a party or is threatened to be made
a party to or is involved in any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the DGCL, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement) actually
and reasonably incurred or suffered by such person in connection therewith and
such indemnification shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of his or
her heirs, executors and administrators; provided,
3
<PAGE>
however, that, except as provided in paragraph (b) hereof, the Corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the board of directors of the Corporation.
The right to indemnification conferred in this Section shall be a contract right
and shall include the right to be paid by the Corporation the expenses incurred
in defending any such proceeding in advance of its final disposition; provided,
however, that, if the DGCL requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of any undertaking, by or on behalf of
such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Section or otherwise. The Corporation may, under
procedures authorized from time to time by action of its board of directors,
grant rights to indemnification and to be paid by the Corporation the expenses
incurred in defending any proceeding in advance of its final deposition to
employees and agents of the Corporation to the fullest extent authorized by the
DGCL.
(b) If a claim under paragraph (a) of this Section is not paid in
full by the Corporation within thirty days after a written claim has been
received by the Corporation, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the DGCL for the Corporation to indemnify the claimant for the amount claimed,
but the burden of providing such defense shall be on the Corporation. Neither
the failure of the Corporation (including its board of directors, independent
legal counsel, or its stockholders) to have made a determination prior to the
commencement of
4
<PAGE>
such action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
DGCL, nor an actual determination by the Corporation (including its board of
directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
(c) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Section shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
NINTH: The Corporation may maintain insurance, at its expense, to protect
itself and any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation, partnership, joint
venture, trust or other enterprise against any such expense, liability or loss,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the DGCL.
4. That the foregoing Amended and Restated Certificate of Incorporation was
approved by the Board of Directors of the Corporation and was duly adopted by
written consent of the stockholders of the Corporation in accordance with the
applicable provisions of Sections 228, 242 and 245 of the DGCL.
5. Effective upon the filing of the foregoing Amended and Restated Certificate
of Incorporation with the Secretary of State of the State of Delaware (such time
referred to as the "Effective Time"), a reclassification (the
"Reclassification") of the Corporation's common stock, par value $100 per share
(the "Common Stock" shall occur as follows: each issued and outstanding share of
the Corporation's Common Stock shall be reclassified without any action on the
part of the holder thereof into one (1) share of Series A Common Stock, par
value $.01 per share (the "Series A Common Stock"). From and after the Effective
Time, the holders of
5
<PAGE>
those outstanding certificates which immediately prior to the Effective Time
represented shares of Common Stock ("Common Certificates") shall cease to have
any rights with respect to such shares and shall be deemed to have all rights
with respect to that number of shares of Series A Common Stock equal to the
number of shares of Common Stock represented by such Common Certificate. Upon
the surrender to the Corporation of all Certificates held by a holder of shares
of Common Stock, together with such stock transfer powers and other documents
reasonably requested by the Corporation, the holder of such Certificates shall
receive therefor a certificate or certificates for a number of shares of Series
A Common Stock equal to the number of shares of Common Stock represented by such
Certificates. From and after the Effective Time, the Corporation shall be
entitled to treat any unsurrendered Certificates as evidencing the ownership of
the number of shares of Series A Common Stock into which the shares represented
by such Certificates shall have been reclassified, notwithstanding the failure
to surrender such Certificates. A holder of a Certificate shall be entitled to
receive all dividends or distributions in respect of shares of Series A Common
Stock into which the shares of Common Stock were reclassified at the Effective
Time, notwithstanding the failure to surrender such Certificates in exchange for
a certificate or certificates for a number of shares of Series A Common Stock as
set forth above.
6
<PAGE>
IN WITNESS WHEREOF, Freedom Chemical Company has caused this Amended
and Restated Certificate of Incorporation to be executed in its corporate name
this 30th day of June, 1994.
FREEDOM CHEMICAL COMPANY
BY: /s/ Fred P. Rullo
-----------------
Name:
Title: President
ATTEST:
BY: Donald W. McPhail
-----------------
Name:
Title: Secretary
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EXHIBIT A
RIGHTS AND PREFERENCES
OF THE
SERIES B REDEEMABLE PREFERRED STOCK
OF
FREEDOM CHEMICAL COMPANY
----------------------------------------
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
----------------------------------------------
FREEDOM CHEMICAL COMPANY (the "Corporation"), a company organized
and existing under and by virtue of the provisions of the General Corporation
Law of the State of Delaware (the "GCL"), certifies as follows:
FIRST: The Certificate of Incorporation of the Corporation
authorizes the issuance of 55,000 shares of Preferred Stock, par value $1,000
per share and, further, authorizes the Board of Directors of the Corporation, by
resolution or resolutions, at any time and from time to time, to divide and
establish any or all of the unissued shares of Preferred Stock not then
allocated to any class or series of Preferred Stock into one or more classes or
series, and without limiting the generality of the foregoing, to fix and
determine the designation of each such class or series, the number of shares
which shall constitute such class or series and certain relative rights and
preferences of the shares of each class or series so established.
SECOND: The Board of Directors of the Corporation pursuant to an
action by written consent duly adopted in accordance with Section 141(f) of the
GCL as of the 30th day of April, 1992 authorized the issuance of a series of the
Corporation's Preferred Stock, par value $1,000 per share.
THIRD: The Board of Directors of the Corporation pursuant to an
action by written consent duly adopted in accordance with Section 141(f) of the
GCL as of the 30th day
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of June, 1994, did duly adopt the following resolutions amending the terms and
provisions of said Preferred Stock to be known as Series B Preferred Stock:
RESOLVED, that the Board of Directors, pursuant to authority vested in it
by the provisions of the Certificate of Incorporation of the Corporation,
hereby amends and restates the issue of a series of the Corporation's
Preferred Stock, par value $1,000 per share, and hereby fixes the
designation, dividend rate, redemption provisions, voting powers, rights
on liquidation or dissolution, and other preferences and relative
participating, optional or other rights, and the qualifications,
limitations or restrictions thereof (in addition to those set forth in
said Certificate of Incorporation) as follows:
1. Designation. The Preferred Stock of the Corporation created
and authorized hereby shall be designated as "Redeemable Preferred Stock, Series
B" (hereinafter called the "Series B Preferred Stock"), which will consist of
40,000 shares of such Series B Preferred Stock.
2. Dividends.
(a) Each holder of record of a share of Series B
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors, out of funds of the Corporation legally available therefor
pursuant to the General Corporation Law of the State of Delaware (the "Legally
Available Funds"), cumulative dividends during each Quarterly Dividend Period
(as hereinafter defined) that such share of Series B Preferred Stock is
outstanding determined by multiplying the Dividend Rate (hereinafter defined)
times the Liquidation Preference (hereinafter defined) of such Series B
Preferred Stock, times a fraction the numerator of which is the number of days
in such Quarterly Dividend Period and the denominator of which is 360. The
"Dividend Rate" shall be eleven and seven eighths percent (117/8%). Such
dividends shall be payable quarterly on April 30, July 31, October 31 and
January 31, in each year (each, a "Dividend Payment Date"), commencing July 31,
1992. Such dividends shall be fully cumulative and shall accrue on a quarterly
basis (whether or not declared) from the first day of each Quarterly Dividend
Period as to which such dividend may be payable as herein provided, and be
payable on the Dividend Payment Date first succeeding the end of such Quarterly
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Dividend Period, except that with respect to the first quarterly dividend, such
dividend shall accrue from the date of issue of the Series B Preferred Stock.
(b) For any Quarterly Dividend Period in which dividends
are not paid in cash on the Dividend Payment Date first succeeding the end of
such Quarterly Dividend Period, such accrued dividends shall be added (solely
for the purpose of calculating dividends payable on the Series B Preferred
Stock) to the Liquidation Preference (as hereinafter defined) of the Series B
Preferred Stock effective at the beginning of the Quarterly Dividend Period
succeeding the Quarterly Dividend Period as to which such dividends were not
paid and shall thereafter accrue additional dividends in respect thereof
("Additional Dividends") at the Dividend Rate until such unpaid dividends have
been paid in full.
(c) Each such dividend shall be paid to the holders of
record of shares of Series B Preferred Stock as they appear on the stock
register of the Corporation on such record date as shall be fixed by the Board
of Directors of the Corporation or a duly authorized committee thereof, which
date shall be not more than 30 days nor less than 10 days preceding the Dividend
Payment Date relating thereto. The Board of Directors of the Corporation may, in
its sole discretion, elect to make payments of dividends in additional shares of
Series B Preferred Stock. The number of shares of Series B Preferred Stock
payable as such dividends shall be calculated by dividing the aggregate dollar
amount which would be payable as a dividend in cash by the Liquidation
Preference of the then outstanding Series B Preferred Stock. In order that no
fractional shares of Series B Preferred Stock need be issued, whenever the
Corporation shall declare and pay a dividend payable in additional shares of
Series B Preferred Stock, the Corporation shall declare and pay in cash, out of
Legally Available Funds, to each holder any portion of such dividend payable to
such holder which is not evenly divisible by the Liquidation Preference of the
then outstanding Series B Preferred Stock. A dividend paid in additional shares
of Series B Preferred Stock shall be deemed satisfied in full if the sum of the
aggregate Liquidation Preference of such additional shares of Series B Preferred
Stock and any cash so paid is equal to the amount of the dividend which was
payable on such Dividend Payment Date.
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(d) If dividends (including Additional Dividends) are
not paid in full or declared in full and sums are not set apart for the payment
thereof upon the Series B Preferred Stock and any other preferred stock ranking
on a parity as to dividends with the Series B Preferred Stock, all dividends
declared upon shares of Series B Preferred Stock and any other preferred stock
ranking on a parity as to dividends shall be declared pro rata so that in all
cases the amount of dividends declared per share on the Series B Preferred Stock
and such other preferred stock shall bear to each other the same ratio that
accumulated dividends per share, including Additional Dividends or accrued
dividends, as the case may be, on the shares of Series B Preferred Stock and
such other preferred stock shall bear to each other. Except as provided in the
preceding sentence, unless full cumulative dividends (including Additional
Dividends) on the Series B Preferred Stock have been paid or declared in full or
set aside for payment thereof, no dividends shall be declared or paid or set
aside for payment, or other distribution made, upon the Common Stock of the
Corporation or any other capital stock of the Corporation ranking junior to or
on a parity with the Series B Preferred Stock as to dividends or liquidation
rights.
(e) The following terms shall have the meanings set
forth below:
"Business Day" means, with respect to the Series B
Preferred Stock, any day other than a Saturday, a Sunday or any day on which the
New York Stock Exchange is closed.
"Quarterly Dividend Period" means the period from
January 1 through the next March 31, from April 1 through the next June 30, from
July 7 through the next September 30 or from October 1 through the next December
31, provided that the first Quarterly Dividend Period shall mean the period
commencing May 4, 1992 and ending on June 30, 1992.
3. Redemption.
(a) Mandatory Redemption. As a mandatory redemption
for the retirement of the shares of Series B Preferred Stock, the Corporation
shall redeem, out of Legally Available Funds (if such shares remain outstanding)
on April 30, 2002, 100% of all shares Series B Preferred Stock
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then issued and outstanding, in each case at the redemption price of the
Liquidation Preference of the then outstanding shares. Immediately prior to
authorizing or making such redemption with respect to the Series B Preferred
Stock, the Corporation, by resolution of its Board of Directors shall, to the
extent of any Legally Available Funds, declare a dividend on the Series B
Preferred Stock payable on the redemption date in an amount equal to any accrued
and unpaid dividends (including Additional Dividends) on the Series B Preferred
Stock as of such date and, if the Corporation does not have sufficient Legally
Available Funds to declare and pay all dividends (including Additional
Dividends) accrued at the time of such redemption, any remaining accrued and
unpaid dividends (including Additional Dividends) shall be added to the
redemption price. If the Corporation shall fail to discharge its obligation to
redeem all of the outstanding shares of Series B Preferred Stock required to be
redeemed pursuant to this Section 3(a) (the "Mandatory Redemption Obligation"),
the Mandatory Redemption Obligation shall be discharged as soon as the
Corporation is able to discharge such Mandatory Redemption Obligation. If and so
long as the Mandatory Redemption Obligation shall not fully be discharged, (i)
dividends on the Series B Preferred Stock shall continue to accrue and be added
to the dividend payable pursuant to the second preceding sentence and (ii) the
Corporation shall not declare or pay any dividend or make any distribution on
its securities not otherwise permitted by Section 2(e) of this Certificate.
(b) Optional Redemption. The Series B Preferred Stock
shall be redeemable, in whole or in part, out of Legally Available Funds, at the
option of the Corporation, at any time upon giving notice as provided in
paragraph (c) below, at the redemption price of one hundred percent (100%) of
the Liquidation Preference of the outstanding Series B Preferred Stock.
Immediately prior to authorizing or making any such redemption with respect to
the Series B Preferred Stock, and as a condition precedent to the Corporation so
redeeming at its option, in whole or in part, shares of the Series B Preferred
Stock, the Corporation, by resolution of its Board of Directors shall, to the
extent of any Legally Available Funds, declare a dividend on the Series B
Preferred Stock payable on the redemption date in an amount equal to any accrued
and unpaid dividends (including Additional Dividends) on the Series B Preferred
Stock as of such date and if the Corporation does not have sufficient Legally
Available Funds to declare and
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pay all dividends (including Additional Dividends) accrued at the time of such
redemption, any remaining accrued and unpaid dividends (including Additional
Dividends) shall be added to the redemption price.
(c) Notice of Redemption. At least 30 days but not more
than 60 days prior to the date fixed for the redemption of shares of the Series
B Preferred Stock pursuant to paragraph (a) or (b) above, written notice of such
redemption shall be mailed to each holder of record of shares of Series B
Preferred Stock to be redeemed in a postage prepaid envelope addressed to such
holder at his post office address as shown on the records of the Corporation;
provided, however, that no failure to mail such notice nor any defect therein
shall affect the validity of the proceeding for the redemption of the shares of
Series B Preferred Stock to be redeemed. Each such notice shall state: (i) the
redemption date; (ii) the number of shares of Series B Preferred Stock to be
redeemed and, if less than all the shares held by such holder are to be redeemed
from such holder, the number of shares to be redeemed from such holder or the
method of calculating such number; (iii) the cash redemption price; (iv) the
place or places where certificates for such shares are to be surrendered for
payment of the redemption prices; and (v) that dividends on the shares to be
redeemed shall cease to accrue on such redemption date thereof. On or after the
redemption date each holder of shares of Series B Preferred Stock to be redeemed
shall present and surrender his certificate or certificates for such shares to
the Corporation at the place designated in such notice and thereupon the
redemption price of such shares shall be paid to or on the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be cancelled. In case less than all the
shares represented by such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares. From and after the redemption date
(unless default shall be made by the Corporation in payment of the redemption
price) all dividends on the shares of Series B Preferred Stock designated for
redemption in such notice shall cease to accrue and all rights of the holders
thereof as stockholders of the Corporation, except the right to receive the
redemption price thereof (including all accrued and unpaid dividends up to the
redemption date), without interest, upon the surrender of certificates
representing the same, shall cease and terminate and such shares shall not
thereafter be trans-
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ferred (except with the consent of the Corporation) on the books of the
Corporation and such shares shall not be deemed to be outstanding for any
purpose whatsoever.
(d) Reissuances. Shares of Series B Preferred Stock
which have been issued and reacquired in any manner, including shares purchased
or redeemed or exchanged, shall (upon compliance with any applicable provisions
of the laws of the State of Delaware) have the status of authorized and unissued
shares of the class of preferred stock undesignated as to series and may be
redesignated and reissued as part of any series of the preferred stock;
provided, however, that no such issued and reacquired shares of Series B
Preferred Stock shall be reissued or sold as Series B Preferred Stock.
(e) Selection of Shares to be Redeemed. If less than all
of the shares of Series B Preferred Stock are to be redeemed, the Board of
Directors of the Corporation shall allocate the aggregate Liquidation Preference
of shares to be redeemed pro rata (or as nearly pro rata as practicable) or by
lot at the direction of the Board of Directors of the Corporation. Regardless of
the method used, the calculation of the number of shares to be redeemed shall be
based upon whole shares, such that the Corporation shall in no event be required
to issue fractional shares of Series B Preferred Stock or cash in lieu thereof.
4. Voting Rights.
(a) The holders of the Series B Preferred Stock shall
not, except as required by law or as otherwise set forth herein, have any right
or power to vote on any question or in any proceeding or to be represented at,
or to receive notice of, any meeting of the Corporation's stockholders. On any
matters on which the holders of the Series B Preferred Stock shall be so
entitled to vote, they shall be entitled to one vote for each share held.
(b) In case at any time (i) the equivalent of six or
more full quarterly dividends (whether consecutive or not) on the Series B
Preferred Stock shall not have been paid in cash (whether or not such dividends
have been paid in the form of Series B Preferred Stock) or (ii) the Corporation
shall have failed to make the mandatory redemption of shares of Series B
Preferred Stock as set
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forth in Section 3(a) of this Certificate, then during the period (hereinafter,
with respect to the Series B Preferred Stock, the "Voting Period") commencing
with such time and ending with the time when (x) all arrears in dividends on the
Series B Preferred Stock shall have been declared and paid in cash in full or,
if dividends have been paid by issuance of additional shares of Series B
Preferred Stock, in addition to paying any arrears in dividends in cash, the
Corporation shall have redeemed a sufficient number of shares of Series B
Preferred Stock such that the then outstanding number of shares of Series B
Preferred Stock does not exceed the number of shares of Series B Preferred Stock
initially issued, or (y) the Corporation shall have redeemed all shares of the
Series B Preferred Stock as set forth in Section 3, as the case may be, at any
meeting of the stockholders of the Corporation held for the election of
directors during the Voting Period, the holders of a majority of the outstanding
shares of Series B Preferred Stock represented in person or by proxy at said
meeting shall be entitled, as a class, to the exclusion of the holders of all
other classes or series of stock of the Corporation, to elect one of the
directors of the Corporation. During any Voting Period, the Board of Directors
of the Corporation shall, without further action, be increased to include such
additional director, and the remaining directors shall be elected by the other
class or classes of stock entitled to vote therefor, at each meeting of
stockholders held for the purpose of electing directors.
(c) At any time when the voting rights set forth in
Section 4(b) with respect to the election of directors shall have vested in the
holders of Series B Preferred Stock and if such right shall not already have
been initially exercised, a proper officer of the Corporation shall, upon the
written request of holders of record of 25% of Series B Preferred Stock then
outstanding, addressed to the Secretary of the Corporation, call a special
meeting of holders of Series B Preferred Stock for the purpose of electing a
director as provided in Section 4(b). Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of stockholders at
the place for holding annual meetings of stockholders of the Corporation or, if
none, at a place designated by the Secretary of the Corporation. If such meeting
shall not be called by the proper officers of the Corporation within 30 days
after the personal service of such written request upon the Secretary of the
Corporation, or within 30 days after
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mailing the same within the United States, by registered mail, addressed to the
Secretary of the Corporation at its principal office (such mailing to be
evidenced by the registry receipt issued by the postal authorities), then the
holders of record of 25% of the shares of Series B Preferred Stock then
outstanding may designate in writing a holder of Series B Preferred Stock to
call such meeting at the expense of the Corporation, and such meeting may be
called by such person so designated upon the notice required for annual meetings
of stockholders and shall be held at the same place as is elsewhere provided in
this Section 4(c). Any holder of Series B Preferred Stock which would be
entitled to vote at such meeting shall have access to the stock books of the
Corporation for the purpose of causing a meeting of the stockholders to be
called pursuant to the provisions of this Section 4(c). Notwithstanding the
other provisions of this Section 4(c), however, no such special meeting shall be
called during a period within 90 days immediately preceding the date fixed for
the next annual meeting of stockholders.
(d) At any meeting held for the purpose of electing
directors at which the holders of Series B Preferred Stock shall have the right
to elect directors as provided herein, the presence in person or by proxy of the
holders of at least one-third of the then outstanding shares of Series B
Preferred Stock shall be required and be sufficient to constitute a quorum of
such class for the election of directors by such class. At any such meeting or
adjournment thereof (i) the absence of a quorum of the holders of Series B
Preferred Stock shall not prevent the election of directors other than the one
to be elected by the holders of stock of such class, and the absence of a quorum
or quorums of the holders of capital stock entitled to elect other directors
shall not prevent the election of the director to be elected by the holders of
Series B Preferred Stock and (ii) in the absence of a quorum of the holders of
any class of stock entitled to vote for the election of directors, a majority of
the holders present in person or by proxy of such class shall have the power to
adjourn the meeting for the election of directors which the holders of such
class are entitled to elect, from time to time without notice (except as
required by law) other than announcement at the meeting, until a quorum shall be
present.
(e) Any director who shall have been elected by holders
of Series B Preferred Stock may be removed at any time during a Voting Period,
either for or
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without cause, by and only by the affirmative vote of the holders of record of a
majority of the outstanding shares of Series B Preferred Stock given at a
special meeting of such stockholders called for such purpose, and any vacancy
thereby created may be filled during such Voting Period by the holders of Series
B Preferred Stock present in person or represented by proxy at such meeting. Any
director elected by holders of Series B Preferred Stock who dies, resigns or
otherwise ceases to be a director shall be replaced in any manner in which such
director could have been elected in accordance with this Section 4. At the end
of the Voting Period, the holders of Series B Preferred Stock shall be
automatically divested of all voting power vested in them under this subsection
(e) but subject always to the subsequent vesting hereunder of voting power in
the holders of Series B Preferred Stock in the event of (i) any similar
cumulated arrearage in payment of quarterly dividends occurring thereafter or
(ii) the failure of the Corporation to make the mandatory redemption provided
for in Section 3(a). The term of any director elected pursuant to the provisions
of this paragraph (e) shall in all events expire at the end of the Voting Period
and upon such expiration the number of directors constituting the Board of
Directors shall, without further action, be reduced by one, subject always to
the increase by one of the number of directors pursuant to Section 4(b) hereof
in case of the future right of the holders of Series B Preferred Stock to elect
a director as provided herein.
5. Priority of Series B Preferred Stock in Event of
Liquidation or Dissolution. In the event of any liquidation, dissolution, or
winding up of the affairs of the Corporation, whether voluntary or otherwise,
after payment or provision for payment of the debts and other liabilities of the
Corporation, the holders of the Series B Preferred Stock shall be entitled to
receive, out of the remaining net assets of the Corporation, the amount of one
thousand dollars ($1000.00) in cash for each share of Series B Preferred Stock
(the "Liquidation Preference"), plus an amount equal to all dividends (including
Additional Dividends) accrued and unpaid on each such share up to the date fixed
for distribution, before any distribution shall be made to the holders of the
Common Stock of the Corporation or any other stock ranking (as to any such
distribution) junior to the Series B Preferred Stock. In the event of any
involuntary or voluntary liquidation, dissolution or winding up of the affairs
of the Corporation, the Corporation by
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resolution of its Board of Directors shall, to the extent of any Legally
Available Funds, declare a dividend on the Series B Preferred Stock payable
before any distribution is made to any holder of any series of preferred stock
or common stock or any other stock of the Corporation ranking junior to the
Series B Preferred Stock as to liquidation, dissolution or winding up, in an
amount equal to any accrued and unpaid dividends (including Additional
Dividends) on the Series B Preferred Stock as of such date if the Corporation
does not have sufficient Legally Available Funds to declare and pay all
dividends (including Additional Dividends) accrued at the time of such
liquidation, any remaining accrued and unpaid dividends (including Additional
Dividends) shall be added to the payment to be received by the holders of the
Series B Preferred Stock for such Series B Preferred Stock in such liquidation.
If, upon any liquidation, dissolution or winding up of the Corporation, the
assets distributable among the holders of any series of preferred stock ranking
(as to any such distribution) on a parity with the Series B Preferred Stock
shall be insufficient to permit the payment in full to the holders of all such
series of preferred stock of all preferential amounts payable to all such
holders, then the entire assets of the Corporation thus distributable shall be
distributed ratably among, the holders of the Series B Preferred Stock and all
series of the preferred stock ranking (as to any such distribution) on a parity
with the Series B Preferred Stock in proportion to the respective amounts that
would be payable per share if such assets were sufficient to permit payment in
full. Except as otherwise provided in this Section 5, holders of Series B
Preferred Stock shall not be entitled to any distribution in the event of
liquidation, dissolution or winding up of the affairs of the Corporation.
For the purposes of this Section 5, neither the
voluntary sale, lease, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all the
property or assets of the Corporation, nor the consolidation or merger of the
Corporation with one or more other corporations, shall be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary.
6. Limitations.
(a) So long as any shares of the Series B Preferred
Stock are outstanding and unless the vote or
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consent of the holders of a greater number of shares shall then be required by
law, the consent of the holders of at least 50% of all of the outstanding shares
of Series B Preferred Stock (given in person or by proxy, at a special meeting
of stockholders called for such purpose or at any annual meeting of
stockholders, with the holders of Series B Preferred Stock voting as a class and
with each share of Series B Preferred Stock having one vote) shall be necessary
for authorizing, effecting or validating the amendment, alteration or repeal of
any of the provisions of this Certificate of Designation or of any amendment
thereto, or of any resolution or resolutions providing for the issue of any
stock, that would have an adverse effect on the designations, rights,
preferences or privileges of shares of Series B Preferred Stock. Such vote or
consent are expressly understood not to be required with respect to the creation
of any class or series of capital stock as to which no vote or consent is
required under Section 6(b) below.
(b) So long as any shares of the Series B Preferred
Stock are outstanding and unless the vote or consent of the holders of a greater
number of shares shall then be required by law, the consent of the holders of at
least 50% of all of the outstanding shares of Series B Preferred Stock (given in
person or by proxy, by a vote at a special meeting of holders of Series B
Preferred Stock called for such purpose or at any annual or special meeting of
stockholders, with the holders of Series B Preferred Stock voting as a class and
with each share of Series B Preferred Stock having one vote) shall be required
prior to the creation of any class or series of capital stock ranking prior to
the Series B Preferred Stock with respect to rights to receive dividends,
mandatory redemption payments and distributions upon liquidation or winding up
of the Corporation.
(c) Nothing herein contained shall be construed so as to
require a class vote or the consent of the holders of the outstanding shares of
Series B Preferred Stock (i) in connection with any increase in the total number
of authorized or issued shares of Common Stock, or (ii) in connection with the
authorization or increase or issuance of any class or series of capital stock
ranking junior to or on a parity with the Series B Preferred Stock as to
dividends, mandatory redemption payments and distributions upon liquidation,
dissolution or winding up of the Corporation; provided, however, that the
Corporation shall
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not issue more shares of Series B Preferred Stock other than as dividends in
lieu of cash dividends. Nothing herein contained shall in any way limit the
right and power of the Corporation to issue any bonds, notes, mortgages,
debentures, and other obligations, or to incur indebtedness to banks and to
other lenders.
7. Ranking of Series B Preferred Stock. With regard to rights
to receive dividends, mandatory redemption payments and distributions upon
liquidation, dissolution or winding up of the Corporation, the Series B
Preferred Stock shall rank (i) on parity with any other series of preferred
stock established by the Board of Directors, in the terms of which specifically
provided that such series shall rank on parity with the Series B Preferred Stock
with respect to rights to receive dividends, mandatory redemption payments and
distributions upon liquidation or winding up of the Corporation and (ii) except
as permitted in accordance with Section 6(b), prior to any other equity
securities of the Corporation, including all classes of the Common Stock, par
value $.01 per share, of the Corporation. The Series B Preferred Stock shall
rank on parity with the Redeemable Preferred Stock, Series C of the Corporation
with respect to rights to receive dividends, mandatory redemption payments and
distributions upon liquidation or winding up of the Corporation.
RESOLVED, that the appropriate officers of the Corporation are hereby
authorized to execute and acknowledge a certificate setting forth these
resolutions and to cause such certificate to be filed and recorded, all in
accordance with the requirements of Section 151 of the Delaware General
Corporation Law.
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EXHIBIT B
RIGHTS AND PREFERENCES
OF THE
SERIES C REDEEMABLE PREFERRED STOCK
OF
FREEDOM CHEMICAL COMPANY
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Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
----------------------------------------------
FREEDOM CHEMICAL COMPANY (the "Corporation"), a company organized
and existing under and by virtue of the provisions of the General Corporation
Law of the State of Delaware (the "GCL"), certifies as follows:
FIRST: The Certificate of Incorporation of the Corporation
authorizes the issuance of 55,000 shares of Preferred Stock, par value $1,000
per share and, further, authorizes the Board of Directors of the Corporation, by
resolution or resolutions, at any time and from time to time, to divide and
establish any or all of the unissued shares of Preferred Stock not then
allocated to any class or series of Preferred Stock into one or more classes or
series, and without limiting the generality of the foregoing, to fix and
determine the designation of each such class or series, the number of shares
which shall constitute such class or series and certain relative rights and
preferences of the shares of each class or series so established.
SECOND: The Board of Directors of the Corporation pursuant to an
action by written consent duly adopted in accordance with Section 141(f) of the
GCL as of the 30th day of June, 1994, did duly adopt the following resolutions
authorizing the issuance of a series of the Corporation's Preferred Stock, par
value $1,000 per share, and setting forth the terms and provisions of said
Preferred Stock to be known as Series C Preferred Stock:
<PAGE>
RESOLVED, that the Board of Directors, pursuant to authority vested in it
by the provisions of the Certificate of Incorporation of the Corporation,
hereby authorizes the creation of a series of the Corporation's Preferred
Stock, par value $1,000 per share, and hereby fixes the designation,
dividend rate, redemption provisions, voting powers, rights on liquidation
or dissolution, and other preferences and relative participating, optional
or other rights, and the qualifications, limitations or restrictions
thereof (in addition to those set forth in said Certificate of
Incorporation) as follows:
1. Designation. The Preferred Stock of the Corporation created
and authorized hereby shall be designated as "Redeemable Preferred Stock, Series
C" (hereinafter called the "Series C Preferred Stock"), which will consist of
15,000 shares of such Series C Preferred Stock.
2. Dividends.
(a) Each holder of record of a share of Series C
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors, out of funds of the Corporation legally available therefor
pursuant to the General Corporation Law of the State of Delaware (the "Legally
Available Funds"), cumulative dividends during each Quarterly Dividend Period
(as hereinafter defined) that such share of Series C Preferred Stock is
outstanding determined by multiplying the Dividend Rate (hereinafter defined)
times the Liquidation Preference (hereinafter defined) of such Series C
Preferred Stock, times a fraction the numerator of which is the number of days
in such Quarterly Dividend Period and the denominator of which is 360. The
"Dividend Rate" shall be eleven and seven eighths percent (117/8%). Such
dividends shall be payable quarterly on April 30, July 31, October 31 and
January 31, in each year (each, a "Dividend Payment Date"), commencing July 31,
1994. Such dividends shall be fully cumulative and shall accrue on a quarterly
basis (whether or not declared) from the first day of each Quarterly Dividend
Period as to which such dividend may be payable as herein provided, and be
payable on the Dividend Payment Date first succeeding the end of such Quarterly
Dividend Period, except that with respect to the first quarterly dividend, such
dividend shall accrue from the date of issue of the Series C Preferred Stock.
2
<PAGE>
(b) For any Quarterly Dividend Period in which dividends
are not paid in cash on the Dividend Payment Date first succeeding the end of
such Quarterly Dividend Period, such accrued dividends shall be added (solely
for the purpose of calculating dividends payable on the Series C Preferred
Stock) to the Liquidation Preference (as hereinafter defined) of the Series C
Preferred Stock effective at the beginning of the Quarterly Dividend Period
succeeding the Quarterly Dividend Period as to which such dividends were not
paid and shall thereafter accrue additional dividends in respect thereof
("Additional Dividends") at the Dividend Rate until such unpaid dividends have
been paid in full.
(c) Each such dividend shall be paid to the holders of
record of shares of Series C Preferred Stock as they appear on the stock
register of the Corporation on such record date as shall be fixed by the Board
of Directors of the Corporation or a duly authorized committee thereof, which
date shall be not more than 30 days nor less than 10 days preceding the Dividend
Payment Date relating thereto. The Board of Directors of the Corporation may, in
its sole discretion, elect to make payments of dividends in additional shares of
Series C Preferred Stock. The number of shares of Series C Preferred Stock
payable as such dividends shall be calculated by dividing the aggregate dollar
amount which would be payable as a dividend in cash by the Liquidation
Preference of the then outstanding Series C Preferred Stock. In order that no
fractional shares of Series C Preferred Stock need be issued, whenever the
Corporation shall declare and pay a dividend payable in additional shares of
Series C Preferred Stock, the Corporation shall declare and pay in cash, out of
Legally Available Funds, to each holder any portion of such dividend payable to
such holder which is not evenly divisible by the Liquidation Preference of the
then outstanding Series C Preferred Stock. A dividend paid in additional shares
of Series C Preferred Stock shall be deemed satisfied in full if the sum of the
aggregate Liquidation Preference of such additional shares of Series C Preferred
Stock and any cash so paid is equal to the amount of the dividend which was
payable on such Dividend Payment Date.
(d) If dividends (including Additional Dividends) are
not paid in full or declared in full and sums are not set apart for the payment
thereof upon the Series C Preferred Stock and any other preferred stock ranking
on a
3
<PAGE>
parity as to dividends with the Series C Preferred Stock, all dividends declared
upon shares of Series C Preferred Stock and any other preferred stock ranking on
a parity as to dividends shall be declared pro rata so that in all cases the
amount of dividends declared per share on the Series C Preferred Stock and such
other preferred stock shall bear to each other the same ratio that accumulated
dividends per share, including Additional Dividends or accrued dividends, as the
case may be, on the shares of Series C Preferred Stock and such other preferred
stock shall bear to each other. Except as provided in the preceding sentence,
unless full cumulative dividends (including Additional Dividends) on the Series
C Preferred Stock have been paid or declared in full or set aside for payment
thereof, no dividends shall be declared or paid or set aside for payment, or
other distribution made, upon the Common Stock of the Corporation or any other
capital stock of the Corporation ranking junior to or on a parity with the
Series C Preferred Stock as to dividends or liquidation rights.
(e) The following terms shall have the meanings set
forth below:
"Business Day" means, with respect to the Series C
Preferred Stock, any day other than a Saturday, a Sunday or any day on which the
New York Stock Exchange is closed.
"Quarterly Dividend Period" means the period from
January 1 through the next March 31, from April 1 through the next June 30, from
July 1 through the next September 30 or from October 1 through the next December
31.
3. Redemption.
(a) Mandatory Redemption. As a mandatory redemption
for the retirement of the shares of Series C Preferred Stock, the Corporation
shall redeem, out of Legally Available Funds (if such shares remain outstanding)
on May 31, 2004, 100% of all shares Series C Preferred Stock then issued and
outstanding, in each case at the redemption price of the Liquidation Preference
of the then outstanding shares. Immediately prior to authorizing or making such
redemption with respect to the Series C Preferred Stock, the Corporation, by
resolution of its Board of Directors shall, to the extent of any Legally
Available Funds, declare a dividend on the Series C Preferred Stock payable on
the
4
<PAGE>
redemption date in an amount equal to any accrued and unpaid dividends
(including Additional Dividends) on the Series C Preferred Stock as of such date
and, if the Corporation does not have sufficient Legally Available Funds to
declare and pay all dividends (including Additional Dividends) accrued at the
time of such redemption, any remaining accrued and unpaid dividends (including
Additional Dividends) shall be added to the redemption price. If the Corporation
shall fail to discharge its obligation to redeem all of the outstanding shares
of Series C Preferred Stock required to be redeemed pursuant to this Section
3(a) (the "Mandatory Redemption Obligation"), the Mandatory Redemption
Obligation shall be discharged as soon as the Corporation is able to discharge
such Mandatory Redemption Obligation. If and so long as the Mandatory Redemption
Obligation shall not fully be discharged, (i) dividends on the Series C
Preferred Stock shall continue to accrue and be added to the dividend payable
pursuant to the second preceding sentence and (ii) the Corporation shall not
declare or pay any dividend or make any distribution on its securities not
otherwise permitted by Section 2(e) of this Certificate.
(b) Optional Redemption. The Series C Preferred Stock
shall be redeemable, in whole or in part, out of Legally Available Funds, at the
option of the Corporation, at any time upon giving notice as provided in
paragraph (c) below, at the redemption price of one hundred percent (100%) of
the Liquidation Preference of the outstanding Series C Preferred Stock.
Immediately prior to authorizing or making any such redemption with respect to
the Series C Preferred Stock, and as a condition precedent to the Corporation so
redeeming at its option, in whole or in part, shares of the Series C Preferred
Stock, the Corporation, by resolution of its Board of Directors shall, to the
extent of any Legally Available Funds, declare a dividend on the Series C
Preferred Stock payable on the redemption date in an amount equal to any accrued
and unpaid dividends (including Additional Dividends) on the Series C Preferred
Stock as of such date and if the Corporation does not have sufficient Legally
Available Funds to declare and pay all dividends (including Additional
Dividends) accrued at the time of such redemption, any remaining accrued and
unpaid dividends (including Additional Dividends) shall be added to the
redemption price.
(c) Notice of Redemption. At least 30 days but not more
than 60 days prior to the date fixed for
5
<PAGE>
the redemption of shares of the Series C Preferred Stock pursuant to paragraph
(a) or (b) above, written notice of such redemption shall be mailed to each
holder of record of shares of Series C Preferred Stock to be redeemed in a
postage prepaid envelope addressed to such holder at his post office address as
shown on the records of the Corporation; provided, however, that no failure to
mail such notice nor any defect therein shall affect the validity of the
proceeding for the redemption of the shares of Series C Preferred Stock to be
redeemed. Each such notice shall state: (i) the redemption date; (ii) the number
of shares of Series C Preferred Stock to be redeemed and, if less than all the
shares held by such holder are to be redeemed from such holder, the number of
shares to be redeemed from such holder or the method of calculating such number;
(iii) the cash redemption price; (iv) the place or places where certificates for
such shares are to be surrendered for payment of the redemption prices; and (v)
that dividends on the shares to be redeemed shall cease to accrue on such
redemption date thereof. On or after the redemption date each holder of shares
of Series C Preferred Stock to be redeemed shall present and surrender his
certificate or certificates for such shares to the Corporation at the place
designated in such notice and thereupon the redemption price of such shares
shall be paid to or on the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In case less than all the shares represented by
such certificate are redeemed, a new certificate shall be issued representing
the unredeemed shares. From and after the redemption date (unless default shall
be made by the Corporation in payment of the redemption price) all dividends on
the shares of Series C Preferred Stock designated for redemption in such notice
shall cease to accrue and all rights of the holders thereof as stockholders of
the Corporation, except the right to receive the redemption price thereof
(including all accrued and unpaid dividends up to the redemption date), without
interest, upon the surrender of certificates representing the same, shall cease
and terminate and such shares shall not thereafter be transferred (except with
the consent of the Corporation) on the books of the Corporation and such shares
shall not be deemed to be outstanding for any purpose whatsoever.
(d) Reissuances. Shares of Series C Preferred Stock
which have been issued and reacquired in any manner, including shares purchased
or redeemed or exchanged,
6
<PAGE>
shall (upon compliance with any applicable provisions of the laws of the State
of Delaware) have the status of authorized and unissued shares of the class of
preferred stock undesignated as to series and may be redesignated and reissued
as part of any series of the preferred stock; provided, however, that no such
issued and reacquired shares of Series C Preferred Stock shall be reissued or
sold as Series C Preferred Stock.
(e) Selection of Shares to be Redeemed. If less than all
of the shares of Series C Preferred Stock are to be redeemed, the Board of
Directors of the Corporation shall allocate the aggregate Liquidation Preference
of shares to be redeemed pro rata (or as nearly pro rata as practicable) or by
lot at the direction of the Board of Directors of the Corporation. Regardless of
the method used, the calculation of the number of shares to be redeemed shall be
based upon whole shares, such that the Corporation shall in no event be required
to issue fractional shares of Series C Preferred Stock or cash in lieu thereof.
4. Voting Rights.
(a) The holders of the Series C Preferred Stock shall
not, except as required by law or as otherwise set forth herein, have any right
or power to vote on any question or in any proceeding or to be represented at,
or to receive notice of, any meeting of the Corporation's stockholders. On any
matters on which the holders of the Series C Preferred Stock shall be so
entitled to vote, they shall be entitled to one vote for each share held.
(b) In case at any time (i) the equivalent of six or
more full quarterly dividends (whether consecutive or not) on the Series C
Preferred Stock shall not have been paid in cash (whether or not such dividends
have been paid in the form of Series C Preferred Stock) or (ii) the Corporation
shall have failed to make the mandatory redemption of shares of Series C
Preferred Stock as set forth in Section 3(a) of this Certificate, then during
the period (hereinafter, with respect to the Series C Preferred Stock, the
"Voting Period") commencing with such time and ending with the time when (x) all
arrears in dividends on the Series C Preferred Stock shall have been declared
and paid in cash in full or, if dividends have been paid by issuance of
additional shares of Series C Preferred Stock,
7
<PAGE>
in addition to paying any arrears in dividends in cash, the Corporation shall
have redeemed a sufficient number of shares of Series C Preferred Stock such
that the then outstanding number of shares of Series C Preferred Stock does not
exceed the number of shares of Series C Preferred Stock initially issued, or (y)
the Corporation shall have redeemed all shares of the Series C Preferred Stock
as set forth in Section 3, as the case may be, at any meeting of the
stockholders of the Corporation held for the election of directors during the
Voting Period, the holders of a majority of the outstanding shares of Series C
Preferred Stock represented in person or by proxy at said meeting shall be
entitled, as a class, to the exclusion of the holders of all other classes or
series of stock of the Corporation, to elect one of the directors of the
Corporation. During any Voting Period, the Board of Directors of the Corporation
shall, without further action, be increased to include such additional director,
and the remaining directors shall be elected by the other class or classes of
stock entitled to vote therefor, at each meeting of stockholders held for the
purpose of electing directors.
(c) At any time when the voting rights set forth in
Section 4(b) with respect to the election of directors shall have vested in the
holders of Series C Preferred Stock and if such right shall not already have
been initially exercised, a proper officer of the Corporation shall, upon the
written request of holders of record of 25% of Series C Preferred Stock then
outstanding, addressed to the Secretary of the Corporation, call a special
meeting of holders of Series C Preferred Stock for the purpose of electing a
director as provided in Section 4(b). Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of stockholders at
the place for holding annual meetings of stockholders of the Corporation or, if
none, at a place designated by the Secretary of the Corporation. If such meeting
shall not be called by the proper officers of the Corporation within 30 days
after the personal service of such written request upon the Secretary of the
Corporation, or within 30 days after mailing the same within the United States,
by registered mail, addressed to the Secretary of the Corporation at its
principal office (such mailing to be evidenced by the registry receipt issued by
the postal authorities), then the holders of record of 25% of the shares of
Series C Preferred Stock then outstanding may designate in writing a holder of
Series C Preferred Stock to call such meeting at the expense
8
<PAGE>
of the Corporation, and such meeting may be called by such person so designated
upon the notice required for annual meetings of stockholders and shall be held
at the same place as is elsewhere provided in this Section 4(c). Any holder of
Series C Preferred Stock which would be entitled to vote at such meeting shall
have access to the stock books of the Corporation for the purpose of causing a
meeting of the stockholders to be called pursuant to the provisions of this
Section 4(c). Notwithstanding the other provisions of this Section 4(c),
however, no such special meeting shall be called during a period within 90 days
immediately preceding the date fixed for the next annual meeting of
stockholders.
(d) At any meeting held for the purpose of electing
directors at which the holders of Series C Preferred Stock shall have the right
to elect directors as provided herein, the presence in person or by proxy of the
holders of at least one-third of the then outstanding shares of Series C
Preferred Stock shall be required and be sufficient to constitute a quorum of
such class for the election of directors by such class. At any such meeting or
adjournment thereof (i) the absence of a quorum of the holders of Series C
Preferred Stock shall not prevent the election of directors other than the one
to be elected by the holders of stock of such class, and the absence of a quorum
or quorums of the holders of capital stock entitled to elect other directors
shall not prevent the election of the director to be elected by the holders of
Series C Preferred Stock and (ii) in the absence of a quorum of the holders of
any class of stock entitled to vote for the election of directors, a majority of
the holders present in person or by proxy of such class shall have the power to
adjourn the meeting for the election of directors which the holders of such
class are entitled to elect, from time to time without notice (except as
required by law) other than announcement at the meeting, until a quorum shall be
present.
(e) Any director who shall have been elected by holders
of Series C Preferred Stock may be removed at any time during a Voting Period,
either for or without cause, by and only by the affirmative vote of the holders
of record of a majority of the outstanding shares of Series C Preferred Stock
given at a special meeting of such stockholders called for such purpose, and any
vacancy thereby created may be filled during such Voting Period by the holders
of Series C Preferred Stock present in person or represented by proxy at such
meeting. Any director elected
9
<PAGE>
by holders of Series C Preferred Stock who dies, resigns or otherwise ceases to
be a director shall be replaced in any manner in which such director could have
been elected in accordance with this Section 4. At the end of the Voting Period,
the holders of Series C Preferred Stock shall be automatically divested of all
voting power vested in them under this subsection (e) but subject always to the
subsequent vesting hereunder of voting power in the holders of Series C
Preferred Stock in the event of (i) any similar cumulated arrearage in payment
of quarterly dividends occurring thereafter or (ii) the failure of the
Corporation to make the mandatory redemption provided for in Section 3(a). The
term of any director elected pursuant to the provisions of this paragraph (e)
shall in all events expire at the end of the Voting Period and upon such
expiration the number of directors constituting the Board of Directors shall,
without further action, be reduced by one, subject always to the increase by one
of the number of directors pursuant to Section 4(b) hereof in case of the future
right of the holders of Series C Preferred Stock to elect a director as provided
herein.
5. Priority of Series C Preferred Stock in Event of
Liquidation or Dissolution. In the event of any liquidation, dissolution, or
winding up of the affairs of the Corporation, whether voluntary or otherwise,
after payment or provision for payment of the debts and other liabilities of the
Corporation, the holders of the Series C Preferred Stock shall be entitled to
receive, out of the remaining net assets of the Corporation, the amount of one
thousand fifty four dollars ($1054.00) in cash for each share of Series C
Preferred Stock (the "Liquidation Preference"), plus an amount equal to all
dividends (including Additional Dividends) accrued and unpaid on each such share
up to the date fixed for distribution, before any distribution shall be made to
the holders of the Common Stock of the Corporation or any other stock ranking
(as to any such distribution) junior to the Series C Preferred Stock. In the
event of any involuntary or voluntary liquidation, dissolution or winding up of
the affairs of the Corporation, the Corporation by resolution of its Board of
Directors shall, to the extent of any Legally Available Funds, declare a
dividend on the Series C Preferred Stock payable before any distribution is made
to any holder of any series of preferred stock or common stock or any other
stock of the Corporation ranking junior to the Series C Preferred Stock as to
liquidation, dissolution or winding up, in an amount
10
<PAGE>
equal to any accrued and unpaid dividends (including Additional Dividends) on
the Series C Preferred Stock as of such date if the Corporation does not have
sufficient Legally Available Funds to declare and pay all dividends (including
Additional Dividends) accrued at the time of such liquidation, any remaining
accrued and unpaid dividends (including Additional Dividends) shall be added to
the payment to be received by the holders of the Series C Preferred Stock for
such Series C Preferred Stock in such liquidation. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets distributable among the
holders of any series of preferred stock ranking (as to any such distribution)
on a parity with the Series C Preferred Stock shall be insufficient to permit
the payment in full to the holders of all such series of preferred stock of all
preferential amounts payable to all such holders, then the entire assets of the
Corporation thus distributable shall be distributed ratably among, the holders
of the Series C Preferred Stock and all series of the preferred stock ranking
(as to any such distribution) on a parity with the Series C Preferred Stock in
proportion to the respective amounts that would be payable per share if such
assets were sufficient to permit payment in full. Except as otherwise provided
in this Section 5, holders of Series C Preferred Stock shall not be entitled to
any distribution in the event of liquidation, dissolution or winding up of the
affairs of the Corporation.
For the purposes of this Section 5, neither the
voluntary sale, lease, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all the
property or assets of the Corporation, nor the consolidation or merger of the
Corporation with one or more other corporations, shall be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary.
6. Limitations.
(a) So long as any shares of the Series C Preferred
Stock are outstanding and unless the vote or consent of the holders of a greater
number of shares shall then be required by law, the consent of the holders of at
least 50% of all of the outstanding shares of Series C Preferred Stock (given in
person or by proxy, at a special meeting of stockholders called for such purpose
or at any annual meeting of stockholders, with the holders of Series C Preferred
Stock voting as a class and with each share of
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<PAGE>
Series C Preferred Stock having one vote) shall be necessary for authorizing,
effecting or validating the amendment, alteration or repeal of any of the
provisions of this Certificate of Designation or of any amendment thereto, or of
any resolution or resolutions providing for the issue of any stock, that would
have an adverse effect on the designations, rights, preferences or privileges of
shares of Series C Preferred Stock. Such vote or consent are expressly
understood not to be required with respect to the creation of any class or
series of capital stock as to which no vote or consent is required under Section
6(b) below.
(b) So long as any shares of the Series C Preferred
Stock are outstanding and unless the vote or consent of the holders of a greater
number of shares shall then be required by law, the consent of the holders of at
least 50% of all of the outstanding shares of Series C Preferred Stock (given in
person or by proxy, by a vote at a special meeting of holders of Series C
Preferred Stock called for such purpose or at any annual or special meeting of
stockholders, with the holders of Series C Preferred Stock voting as a class and
with each share of Series C Preferred Stock having one vote) shall be required
prior to the creation of any class or series of capital stock ranking prior to
the Series C Preferred Stock with respect to rights to receive dividends,
mandatory redemption payments and distributions upon liquidation or winding up
of the Corporation.
(c) Nothing herein contained shall be construed so as to
require a class vote or the consent of the holders of the outstanding shares of
Series C Preferred Stock (i) in connection with any increase in the total number
of authorized or issued shares of Common Stock, or (ii) in connection with the
authorization or increase or issuance of any class or series of capital stock
ranking junior to or on a parity with the Series C Preferred Stock as to
dividends, mandatory redemption payments and distributions upon liquidation,
dissolution or winding up of the Corporation; provided, however, that the
Corporation shall not issue more shares of Series C Preferred Stock other than
as dividends in lieu of cash dividends. Nothing herein contained shall in any
way limit the right and power of the Corporation to issue any bonds, notes,
mortgages, debentures, and other obligations, or to incur indebtedness to banks
and to other lenders.
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7. Ranking of Series C Preferred Stock. With regard to rights
to receive dividends, mandatory redemption payments and distributions upon
liquidation, dissolution or winding up of the Corporation, the Series C
Preferred Stock shall rank (i) on parity with any other series of preferred
stock established by the Board of Directors, in the terms of which specifically
provided that such series shall rank on parity with the Series C Preferred Stock
with respect to rights to receive dividends, mandatory redemption payments and
distributions upon liquidation or winding up of the Corporation and (ii) except
as permitted in accordance with Section 6(b), prior to any other equity
securities of the Corporation, including all classes of the Common Stock, par
value $.01 per share, of the Corporation. The Series C Preferred Stock shall
rank on parity with the Redeemable Preferred Stock, Series B of the Corporation
with respect to rights to receive dividends, mandatory redemption payments and
distributions upon liquidation or winding up of the Corporation.
RESOLVED, that the appropriate officers of the Corporation are hereby
authorized to execute and acknowledge a certificate setting forth these
resolutions and to cause such certificate to be filed and recorded, all in
accordance with the requirements of Section 151 of the Delaware General
Corporation Law.
13
<PAGE>
CERTIFICATE OF INCORPORATION
OF
H.D. ACQUISITION CORP.
1. The name of the corporation is:
H.D. ACQUISITION CORP.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall
have authority to issue is Ten Thousand (10,000) and the par value of each of
such shares is One Dollar ($1.00) amounting in the aggregate to Ten Thousand
Dollars ($10,000.00).
5. The board of directors is authorized to make, alter or repeal the
by-laws of the corporation. Election of directors need not be by written ballot.
6. The name and mailing address of the incorporator is:
J. L. Austin
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
Delaware, do make this certificate, hereby declaring and certifying that this is
my act and deed and the facts herein stated are true, and accordingly have
hereunto set my hand this 20th day of October, 1986.
J. L. Austin
-------------------------------
J. L. Austin
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
H.D. ACQUISITION CORP.
A Delaware Corporation
H.D. ACQUISITION CORP., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by unanimous
written consent of its members, filed with the minutes of the Board, adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of H.D. ACQUISITION
CORP., be amended by changing the First Article thereof so that, as
amended, said Article shall be and read as follows:
The name of the Corporation is:
HILTON DAVIS CHEMICAL CO.
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said Amendment in
accordance with the
<PAGE>
provisions of Section 228 of the General Corporation Law of the State of
Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 228 and 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said H.D. ACQUISITION CORP. has caused this
certificate to be signed by KENNETH WILKINSON, its President, and attested by
LORI M. JOHNSON, its Assistant Secretary, this 2nd day of January, 1987.
H.D. ACQUISITION CORP.
By:/s/ K.H. Wilkinson
-------------------------------
Kenneth Wilkinson
President
ATTEST:
By:/s/ Lori M. Johnson
-------------------------------
Lori M. Johnson
Assistant Secretary
2
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
FCAC ACQUISITION CORPORATION
WITH AND INTO
HILTON DAVIS CHEMICAL CO.
(Pursuant to Section 253 of the General Corporation Law
of the State of Delaware)
FCAC Acquisition Corporation, a Delaware
corporation (the "Corporation"), does hereby certify:
FIRST: That the Corporation is incorporated
pursuant to the General Corporation Law of the State of Delaware.
SECOND: That the Corporation owns 100% of the
outstanding shares of each class of capital stock of Hilton Davis Chemical Co.,
a Delaware corporation ("Hilton Davis").
THIRD: That the Corporation by resolutions (a true
and correct copy of which is attached hereto as Exhibit A) of the Board of
Directors duly adopted by written consent as of the 9th day of May, 1993,
determined to merge the Corporation with and into Hilton Davis upon the terms
and subject to the conditions set forth in such resolutions (the "Merger"). Such
resolutions have not been modified or rescinded and are in full force and effect
on the date hereof.
FOURTH: That the Merger has been approved in all
respects by the sole stockholder of the Corporation pursuant to an action by
written consent dated as of the 9th day of September, 1993.
FIFTH: That the Merger shall be effective upon
filing of this Certificate of Ownership and Merger with the Secretary of State
of the State of Delaware.
3
<PAGE>
IN WITNESS WHEREOF, Freedom Chemical Acquisition
Corporation has caused this Certificate of Ownership and Merger to be executed
in its corporate name this 9th day of September, 1993.
FCAC ACQUISITION CORPORATION
By:/s/ Fred P. Rullo
-------------------------------
Name: Fred P. Rullo
Title: President
ATTEST:
By:/s/ Donald W. McPhail
-------------------------------
Name: Donald W. McPhail
Title: Secretary and Treasurer
4
<PAGE>
WRITTEN CONSENT IN LIEU OF A MEETING
OF THE BOARD OF DIRECTORS OF
FCAC ACQUISITION CORPORATION
The undersigned, being all of the members of the Board of Directors
of FCAC Acquisition Corporation, a Dela-ware corporation (the "Corporation"),
acting pursuant to ss.141(f) of the General Corporation Law of the State of
Dela-ware (the "GCL"), hereby adopt, by this written consent, the following
resolutions with the same force and effect as if they had been unanimously
adopted at a duly convened meeting of the Board of Directors of the Corporation:
Merger
RESOLVED, that it is deemed advisable that the Corporation merge
with and into its wholly owned subsidiary, Hilton Davis Chemical Co., a Delaware
corporation ("Hilton Davis"), with Hilton Davis remaining as the surviving
corporation (the "Merger"); and further
RESOLVED, that all of the capital stock of Hilton Davis held by the
Corporation shall be issued to the sole stockholder of the Corporation upon
surrender of any certificates therefor; and further
RESOLVED, that the officers of the Corporation be, and each of them
hereby is authorized and empowered, for, in the name of and on behalf of the
Corporation, to do and perform all such further acts and things including
executing and delivering and where necessary or appropriate filing with the
appropriate governmental agencies all such certificates, agreements, documents,
receipts or other papers and making all such payments, including payments of all
fees and expenses, as in the judgment of such officer shall be necessary,
desirable or appropriate to carry out and effectuate the intent of the foregoing
resolutions.
Miscellaneous
RESOLVED, that in addition to the specific authorizations set forth
in any of the foregoing resolutions, the appropriate officers of the Corporation
be, and they hereby are, authorized to take from time to time, in the name and
on behalf of the Corporation, any and all such action and to execute and deliver
from time to time any and all such agree-
<PAGE>
ments, instruments, requests, receipts, notes, applications, reports,
certificates and other documents and to obtain such consents and to take all
other actions as may be necessary or appropriate in their opinion to effectuate
and comply with the purpose and intent of any or all of the foregoing
resolutions; and further
RESOLVED, that all actions previously taken by any officer or
director of the Corporation in connection with the matters referred to in the
foregoing resolutions are hereby approved, adopted, ratified and confirmed in
all respects; and further
RESOLVED, that the Corporation is authorized, and the officers of
the Corporation be, and they hereby are, authorized and empowered, in the name
and on behalf of the Corporation, to take or cause to be taken, all such further
actions and to execute and deliver or cause to be executed and delivered, in the
name and on behalf of the Corporation, all such further agreements, documents,
certificates and undertakings and to incur and pay all such costs, fees and
expenses as in their judgment shall be necessary, appropriate or convenient to
carry into effect the purposes and intent of any and all of the foregoing
resolutions; and further
RESOLVED, that any person dealing with any officer or officers of
the Corporation in connection with any of the foregoing matters shall be
conclusively entitled to rely upon the authority of such officer and by his or
her execution of any document, agreement or instrument, the same being a valid
and binding obligation of the Corporation enforceable in accordance with its
terms.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned, being all of the directors of
the Corporation, have executed this written consent as of September 9th, 1993.
/s/ Paul S. Levy
-------------------------------
Paul S. Levy
/s/ Peter A. Joseph
-------------------------------
Peter A. Joseph
/s/ Angus C. Littlejohn, Jr.
-------------------------------
Angus C. Littlejohn, Jr.
/s/ Yvonne V. Cliff
-------------------------------
Yvonne V. Cliff
/s/ Harold A. Sorgenti
-------------------------------
Harold A. Sorgenti
/s/ Fred P. Rullo
-------------------------------
Fred P. Rullo
3
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
FREEDOM CHEMICAL ACQUISITION CORPORATION
WITH AND INTO
HILTON DAVIS CHEMICAL CO.
(Pursuant to Section 253 of the General Corporation Law
of the State of Delaware)
Freedom Chemical Acquisition Corporation, a Dela-ware corporation
(the "Corporation"), does hereby certify:
FIRST: That the Corporation is incorporated pursuant to the General
Corporation Law of the State of Delaware.
SECOND: That the Corporation owns 100% of the outstanding shares of
each class of capital stock of Hilton Davis Chemical Co., a Delaware corporation
("Hilton Davis").
THIRD: That the Corporation by resolutions (a true and correct copy
of which is attached hereto as Exhibit A) of the Board of Directors duly adopted
by written consent as of the day of May, 1994, determined to merger the
Corporation with and into Hilton Davis upon the terms and subject to the
conditions set forth in such resolutions (the "Merger"). Such resolutions have
not been modified or rescinded and are in full force and effect on the date
hereof.
FOURTH: That the Merger has been approved in all respects by the
sole stockholder of the Corporation pursuant to an action by written consent
dated as of the day of May, 1994.
FIFTH: That the Merger shall be effective upon filing of this
Certificate of Ownership and Merger with the Secretary of State of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, Freedom Chemical Acquisition Corporation has
caused this Certificate of Ownership and Merger to be executed in its corporate
name this 26th day of May, 1994.
FREEDOM CHEMICAL ACQUISITION
CORPORATION
By:/s/ Harold A. Sorgenti
-------------------------------
Name: Harold A. Sorgenti
Title: Chairman
ATTEST:
By:/s/Donald W. McPhail
-------------------------------
Name: Donald W. McPhail
Title: Secretary
<PAGE>
WRITTEN CONSENT IN LIEU OF A MEETING
OF THE BOARD OF DIRECTORS OF
FREEDOM CHEMICAL ACQUISITION CORPORATION
The undersigned, being all of the members of the Board of Directors
of Freedom Chemical Acquisition Corporation, a Delaware corporation (the
"Corporation"), acting pursuant to ss.141(f) of the General Corporation Law of
the State of Delaware (the "GCL"), hereby adopt, by this written consent, the
following resolutions with the same force and effect as if they had been
unanimously adopted at a duly convened meeting of the Board of Directors of the
Corporation:
Merger
RESOLVED, that it is deemed advisable that the Corporation merge
with and into its wholly owned subsidiary, Hilton Davis Chemical Co., a Delaware
corporation ("Hilton Davis"), with Hilton Davis remaining as the surviving
corporation (the "Merger"); and further
RESOLVED, that all of the capital stock of Hilton Davis held by the
Corporation shall be issued to the sole stockholder of the Corporation upon
surrender of any certificates therefor; and further
RESOLVED, that the officers of the Corporation be, and each of them
hereby is authorized and empowered, for, in the name of and on behalf of the
Corporation, to do and perform all such further acts and things including
executing and delivering and where necessary or appropriate filing with the
appropriate governmental agencies all such certificates, agreements, documents,
receipts or other papers and making all such payments, including payments of all
fees and expenses, as in the judgment of such officer shall be necessary,
desirable or appropriate to carry out and effectuate the intent of the foregoing
resolutions.
Miscellaneous
RESOLVED, that all actions heretofore taken by any officer or
director of the Corporation, in the name and on behalf of the Corporation,
related to or in connection with the matters referred to in these resolu-
2
<PAGE>
tions, including, without limitation, the creation of bank accounts, the
execution and delivery of any instruments, stock powers, or other documents, and
the incurrence and payment of any costs, fees or expenses, as any such officer
or director shall have deemed necessary or appropriate, are hereby ratified,
confirmed and approved in all respects; and further
RESOLVED, that the Corporation is authorized, and the officers of
the Corporation be, and they hereby are, authorized and empowered, in the name
and on behalf of the Corporation, to take or cause to be taken, all such further
actions and to execute and deliver or cause to be executed and delivered, in the
name and on behalf of the Corporation, all such further agreements, documents,
certificates and undertakings and to incur and pay all such costs, fees and
expenses as in their judgment shall be necessary, appropriate or convenient to
carry into effect the purposes and intent of any and all of the foregoing
resolutions; and further
RESOLVED, that any person dealing with any officer or officers of
the Corporation in connection with any of the foregoing matters shall be
conclusively entitled to rely upon the authority of such officer and by his or
her execution of any document, agreement or instrument, the same being a valid
and binding obligation of the Corporation enforceable in accordance with its
terms.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this consent as of
the 26th day of May, 1994.
/s/ Yvonne V. Cliff
-------------------------------
Yvonne V. Cliff
/s/ Peter A. Joseph
-------------------------------
Peter A. Joseph
/s/ Paul S. Levy
-------------------------------
Paul S. Levy
/s/ Angus C. Littlejohn, Jr.
-------------------------------
Angus C. Littlejohn, Jr.
/s/ Fred P. Rullo
-------------------------------
Fred P. Rullo
/s/ Harold A. Sorgenti
-------------------------------
Harold A. Sorgenti
4
<PAGE>
BYLAWS
OF
H.D. ACQUISITION CORP.
a Delaware Corporation
ARTICLE I. OFFICES
Section 1. Principal Executive Office.
The principal executive office of the corporation is hereby fixed
and located at: 2235 Langdon Farm Road, Hamilton County, Cincinnati, Ohio,
45237.
The Board of Directors (herein called the "Board") is hereby granted
full power and authority to change said principal executive office from one
location to another. Any such change shall be noted on the Bylaws opposite this
Section, or this Section may be amended to state the new location.
Section 2. Other Offices.
Branch or subordinate offices may at any time be established by the
Board at any place or places.
ARTICLE II. SHAREHOLDERS
Section 1. Place of Meetings.
Meetings of shareholders shall be held either at the principal
executive office of the corporation or at any other place within at without the
State of Ohio which may be designated either by the Board or by the written
consent of all persons entitled to vote thereat, given either before or after
the meeting and filed with the Secretary.
Section 2. Annual Meetings.
The annual meetings of shareholders shall be held on the first
Monday of December at 10:00 O'clock a.m., local time, or such other date at such
other time as may be fixed by the Board; provided, however, that should said day
fall upon a Saturday, Sunday, or legal holiday observed by the corporation at
its principal executive office, then any such annual meeting of shareholders
shall be held at the same time and place on the next day thereafter which is a
full business day. At such meetings directors shall be elected and any other
proper business m y be transacted.
Section 3. Special Meetings.
<PAGE>
Special meetings of the shareholders may be called at any time by
the Board, the Chairman of the Board, the President, or by the holders of shares
entitled to cast not less than 10 percent of the votes at such meeting. Upon
request in writing to the Chairman of the Board, the President, any Vice
President or the Secretary by any person (other than the Board) entitled to call
a special meeting of the shareholders the officer forthwith shall cause notice
to be given to the shareholders entitled to vote that a meeting will be held at
a time requested by the person or persons calling the meeting, not less than 35
nor more than 60 days after the receipt of the request. If the notice is not
given within 20 days after receipt of the request, the persons entitled to call
the meeting may give the notice.
Section 4. Notice of Annual or Special Meeting.
Written notice of each annual or special meeting of shareholders
shall be given to each shareholder entitled to vote thereat not less than 10 nor
more than 60 days before the date of the meeting. Such notice shall state the
place, date and hold of the meeting and (i) in the case of a special meeting,
the general nature of the business to be transacted, and no other business may
be transacted, or (ii) in the case of the annual meetings those matters which
the Board, at the time of the mailing of the notice, intends to present for
action by the shareholders but, subject to the provisions of applicable law, any
proper matter may be presented at the meeting for such action. The notice of any
meeting at which directors are to be elected shall include the names of nominees
intended at the time of the notice to be presented by management for election.
Notice of a shareholders meeting shall be given either personally or
by mail or by other means of written communication, addressed to the shareholder
at the address of such shareholder appearing on the books of the corporation or
given by the shareholder to the corporation for the purpose of notice; or, if no
such address appears or is given, at the place where the principal executive
office of the corporation is located or by publication at least once in a
newspaper of general circulation in the county in which the principal executive
office is located. Notice by mail shall be deemed to have been given at the time
a written notice is deposited in the United States mail, postage prepaid. Any
other written notice shall be deemed to have been given at the time it is
personally delivered to the recipient or is delivered to a common carrier for
transmission, or actually transmitted by the person giving the notice by
electronic means, to the recipient.
Section 5. Quorum.
A majority of the shares entitled to vote, represented in person or
by proxy, shall constitute a quorum at any meeting of shareholders. The
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
Section 6. Adjourned Meeting and Notice Thereof.
Any shareholders meeting, whether or not a quorum is present, may be
adjourned from time to time by the vote of a majority of the shares, the holders
of which are either present in person or represented by proxy thereat, but in
the absence of a quorum (except as provided in Section 5 of this Article) no
other business may be transacted at such meeting.
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<PAGE>
It shall not be necessary to give any notice of the time and place
of the adjourned meeting or of the business to be transacted thereat, other than
by announcement at the meeting at which such adjournment is taken; provided,
however, when any shareholders' meeting is adjourned for more than 45 days or,
if after adjournment a new record date is fixed for the adjourned meetings
notice of the adjourned meeting shall be given as in the case of an original
meeting.
Section 7. Voting.
The shareholders entitled to notice of any meeting or to vote at any
such meeting shall be only persons in whose name shares stand an the stock
records of the corporation on the record date determined in accordance with
section 8 of this Article.
Voting shall in all cases be subject to the provisions of the
Delaware General Corporation Law and to the following provisions:
(a) Subject to clause (g), shares held by an administrator,
executor, guardian, conservator or custodian may to voted by such holder either
in person or by proxy, without a transfer of such shares into the holder's name;
and shares standing in the name of a trustee may be voted by the trustee, either
in person or by proxy, but no trustee shall be entitled to vote shares held by
such trustee without a transfer of such shares into the trustee's name.
(b) Shares standing in the name of a receiver may be voted by
such receiver; and shares held by or under the control of a receiver; without
the transfer thereof into the receiver's name if authority to do so is contained
in the order of the court by which such receiver was appointed.
(c) Subject to the provisions of the Delaware General
Corporation Law, and except where otherwise agreed in writing between the
parties, a shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred
(d) Shares standing in the name of a minor may be voted and
the corporation may treat all rights incident thereto as exercisable by the
minor, in person or by proxy, whether or not the corporation has notice, actual
or constructive, of the nonage, unless a guardian of the minor's property has
been appointed and written notice of such appointment given to the corporation.
(e) Shares standing in the name of another corporation,
domestic or foreign, way be voted by such officer, agent or proxyholder as the
bylaws of such other corporation may prescribe, or in the absence of such
provision, as the Board of Directors of such other corporation may determine or,
in the absence of such determination by the chairman of the board, president at
any vice president of such other corporation. Shares which are purported to be
voted or any proxy purported to be executed in the name of a
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<PAGE>
corporation (whether or not any title of the person signing is indicated) shall
be presumed to be voted or the proxy executed in accordance with the provisions
of this subdivision, unless the contrary is shown.
(f) Shares of the corporation owned by any subsidiary shall
not be entitled to vote on any matter.
(g) Shares held by the corporation in a fiduciary capacity,
and shares of the corporation held in a fiduciary capacity by any subsidiary,
shall not be entitled to vote on any matter except to the extent that the
settlor or beneficial Owner Possesses and exercises a right to vote or to give
the corporation binding instructions as to how to vote such shares.
(h) If shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a shareholder voting agreement
or otherwise, or if two or more persons (including proxy-holders) have the same
fiduciary relationship respecting the same shares, unless the secretary of the
corporation is given written notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, their acts with respect to voting shall have the following
effect:
(i) If only one votes, such act binds all;
(ii) If more than one votes, the act of the majority so voting
binds all;
(iii) If more than one votes, but the vote is evenly split on
any particular matters each faction may vote the securities in question
proportionately.
If the instrument so filed or the registration of the shares shows that any such
tenancy is held in unequal interests, a majority or even split for the purpose
of this section shall be a majority at even split in interest.
Subject to the following sentence and to the provisions of the
Delaware General Corporation Law every shareholder entitled to vote at any
election of directory may cumulate such shareholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the shareholder's shares are
entitled, or distribute the shareholder's votes on the same principle among as
many candidates as the shareholder thinks fit. No shareholder shall be entitled
to cumulate votes for any candidate or candidates pursuant to the preceding
sentence unless such candidates or candidates' names have been placed in
nomination prior to the voting and the shareholder has given notice, at the
meeting prior to the voting of the shareholder's intention to cumulate the
shareholder's votes. If any one shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination.
-4-
<PAGE>
Elections need not be by ballot; provided, however, that all
elections for directors must be by ballot upon demand made by a shareholder at
the meeting and before the voting begins.
In any election of directors, the candidates receiving the highest
number of votes of the shares entitled to be voted for them up to the number of
directors to be elected by such shares are elected.
Section 8. Record Date.
The Board may fix, in advance, a record date for the determination
of the shareholders entitled to notice of any meeting or to vote or entitled to
receive payment of any dividend or other distribution, or any allotment of
rights, or to exercise rights in respect of any other lawful action. The record
date so fixed shall be not more than 60 nor less than 10 days prior to the date
of the meeting nor more than 60 days prior to any other action. When a record
date is so fixed, only shareholders of record on that date are entitled to
notice of and to vote at the meeting or to receive a dividend, distribution, or
allotment of rights, or to exercise any rights, as the case may be,
notwithstanding any transfer of shares on the books of the corporation after the
record date. A determination of shareholders of record entitled to notice of or
to vote at a meeting of shareholders shall apply to any adjournment of the
meeting unless the board fixes a new record date for the adjourned meeting. The
board shall fix a new record date if the meeting is adjourned for more than 45
days.
If no record date is fixed by the Board, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which the meeting is hold. The record date for determining
shareholders for any purpose other than set forth in this Section 8 or Section
10 of this Article shall be at the close of business or the day on which the
Board adapts the resolution relating thereto, at the sixtieth day prior to the
date of such other action, whichever is later.
Section 9. Consent of Absentees.
The transactions of any meeting of shareholders, however, called and
noticed, and wherever held, are as valid as though had at a meeting duly held
after regular call and notice, if a quorum is present either in person or by
proxy, and if, either before or after the meeting, each of the persons entitled
to vote, not present in person or by proxy, signs a written waiver of notice, or
a consent to the holding of a meeting or an approval of the minutes of the
meeting. Neither the business to be transacted at nor the purpose of any regular
or special meeting of shareholders need be specified in any written waiver of
notice, except as provided in the Delaware General Corporation Law.
Section 10. Action Without Meeting.
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<PAGE>
Subject to the Delaware General Corporation Law, any action which,
under any provision of the Delaware General Corporation Law, may be taken at any
annual or special meeting of shareholders, may be taken without a meeting and
without prior notice if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Unless a record date for voting purposes be fixed as provided in Section
8 of this Article, the record date for determining shareholders entitled to give
consent pursuant to this Section 10, when no prior action by the Board has been
taken, shall be the day on which the first written consent is given.
Section 11. Proxies.
Every person entitled to vote shares has the right to do so either
in person or by one or more persons authorized by a written proxy executed by
such shareholder and filed with the Secretary. Any proxy duly executed is not
revoked and continues in full force and effect until revoked by the person
executing it prior to the vote pursuant thereto by a writing delivered to the
corporation stating that the proxy shall be revoked or by a subsequent voting in
person by, the person executing the proxy, provided, however, that no proxy
shall be valid after the expiration of 11 months from the date of its execution
unless otherwise provided in the proxy.
Section 12. Inspectors of Election.
In advance of any meeting of shareholders the Board may appoint any
persons other than nominees for office as inspectors of election to act as such
meeting and any adjournment thereof. If inspectors of election be not so
appointed, or if any persons so appointed fail to appear or refuse to act, the
chairman of any such meeting may and on the request of any shareholder or
shareholder's proxy shall, make such appointment at the meeting. The number of
inspectors shall be either one or three. If appointed at a meeting on the
request of one or more shareholders or proxies, the majority of shares present
shall determine whether one or three inspectors are to be appointed.
The duties of such inspectors shall be as prescribed by the Delaware
General Corporation Law and shall include: determining the number of shares
outstanding and the voting power of each; the shares represented at the meeting;
the existence of a quorum; the authenticity, validity, and effect of proxies;
receiving votes, ballots, or consents; hearing and determining all challenges
and questions in any way arising in connection with the right to vote; counting
and tabulating all votes or consents; determining when the polls shall close;
determining the result; and doing such acts as may be proper to conduct the
election or vote with fairness to all shareholders. If there are three
inspectors of election, the decision, act, or certificate of a majority is
effective in all respects as the decision, act, or certificate of all.
ARTICLE III. DIRECTORS
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<PAGE>
Section 1. Powers.
Subject to limitations of the Articles of Incorporation of the
corporation, of these Bylaws, and of the Delaware General Corporation Law
relating to action required to be approved by the shareholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
Board. The Board may delegate the management of the day-to-day operation of the
business of the corporation to a management company or other person provided
that the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised under the ultimate direction of the Board.
Without prejudice to such general powers, but subject to the same limitations,
it is hereby expressly declared that the Board shall have the following powers
in addition to the other powers enumerated in these Bylaws:
(a) To select and remove all the other officers, agents, and
employees of the corporation, prescribe the powers and duties for them as may
not be inconsistent with law, or with the Articles or these Bylaws fix their
compensation, and require from them security for faithful service.
(b) To conduct, manage, and control the affairs and business
of the corporation and to make such rules and regulations therefor not
inconsistent with law, or with the Articles or these Bylaws, as they may deem
best.
(c) To adopt, make, and use a corporate seal, and to prescribe
the forms of certificates of stock, and to alter the form of such seal and of
stock, and to alter the form of such seal and of such certificates from time to
time as in their judgment they may deem best.
(d) To authorize the issuance of shares of stock of the
corporation from time to time, upon such terms and for such consideration as may
be lawful.
(e) To borrow money and incur indebtedness for the purposes of
the corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations, or other evidences of debts and securities therefor.
Section 2. Number and Qualification of Directors.
The authorized number of directors shall be three (3) until changed
by amendment of the Articles or by a Bylaw duly adopted by the shareholders
amending this Section 2.
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<PAGE>
Section 3. Election and Term of Office.
The directors shall be elected at each annual meeting of
shareholders but if any such annual meeting is not held or the directors are not
elected thereat, the directors may be elected at any special meeting of
shareholders held for that purpose. Each director shall hold office until the
next annual meeting and until a successor has been elected and qualified.
Section 4. Vacancies.
Any director may resign effective upon giving written notice to the
Chairman of the Board the President, the Secretary, or the Board, unless the
notice specifies a later time for the effectiveness of such resignation. if the
resignation is effective at a future time, a successor may be elected to take
office when the resignation becomes effective.
Vacancies in the Board, including those existing as a result of a
removal of a director, may be filled by a majority of the remaining directors,
though less than a quorum, or by a sole remaining director, and each director so
elected shall hold office until the next annual meeting and until such
director's successor has been elected and qualified.
A vacancy or vacancies on the Board shall be deemed to exist in case
of the death, resignation, of removal of any director, or if the authorized
number of directors be increased, or if the shareholders fail, at any annual or
special meeting of shareholders at which any director or directors are elected,
to elect the full authorized number of directors to be voted for at that
meeting.
The Board may declare vacant the office of a director who has been
declared of unsound mind by an order of court or who has been convicted of a
felony.
The shareholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors. Any such election by
written consent requires the consent of a majority of the outstanding shares
entitled to vote. If the Board accepts the resignation of a director tendered to
take effect at a future time, the Board or the shareholders shall have power to
elect a successor to take office when the resignation is to become effective.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of the director's term
of office.
Section 5. Place of Meeting.
Regular or special meetings of the Board shall be held at any place
within or without the State of California which has been designated from time to
time by the Board. In the absence of such designation regular meetings shall be
held at the principal executive office of the corporation.
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<PAGE>
Section 6. Regular Meetings.
Immediately following each annual meeting of shareholders, the Board
shall hold a regular meeting for the purpose of organization, election of
officers, and the transaction of other business.
Section 7. Special Meetings.
Special meetings of the Board for any purpose or purposes may be
called at any time by the Chairman of the Board, the President, the Secretary or
by any two directors.
Special meetings of the Board shall be held upon four days' written
notice or 48 hours' notice given personally or by telephone, telegraph, telex,
or other similar means of communication. Any such notice shall be addressed or
delivered to each director at such director's address as it is shown upon the
records of the corporation or as may have been given to the corporation by the
director for purposes of notice or, if such address is not shown or such records
or is not readily ascertainable, at the place in which the meetings of the
directors are regularly held.
Notice by mail shall be deemed to have been given at the time a
written notice is deposited in the United States mails, postage prepaid. Any
other written notice shall be deemed to have been given at the time it is
personally delivered to the recipient or is delivered to a common carrier for
transmission, or actually transmitted by the person giving the notice by
electronic means, to the recipient. Oral notice shall be deemed to have been
given at the time it is communicated, in person or by telephone or wireless, to
the recipient or to a person at the office of the recipient who the person
giving the notice has reason to believe will promptly communicate it to the
recipient.
Section 8. Quorum.
A majority of the authorized number of directors constitutes a
quorum of the Board for the transaction of business, except to adjourn as
hereinafter provided. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is present shall be
regarded as the act of the Board, unless a greater number be required by law or
by the Articles. A meeting at which a quorum is initially present may continue
to transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for such
meeting.
Section 9. Participation in Meetings by Conference Telephone.
Members of the Board may participate in a meeting through use of
conference telephone or similar communications equipment, so long as all members
participating in such meeting can hear one another.
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<PAGE>
Section 10. Waiver of Notice.
The transactions of any meeting of the Board however called and
noticed or wherever held are as valid as though had at a meeting duly held after
regular call and notice if quorum be present and if, either before or after the
meeting, each of the directors not present signs a written waiver of notice, a
consent to holding such meeting or an approval of the minutes thereof. All such
waivers, consents, or approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 11. Adjournment.
A majority of the directors present, whether or not a quorum is
present, may adjourn any directors' meeting to another time and place. Notice of
the time and place of holding an adjourned meeting need not be given to absent
directors if the time and place be fixed at the meeting adjourned. If the
meeting is adjourned for more than 24 hours, notice of any adjournment to
another time or place shall be given prior to the time of the adjourned meeting
to the directors who were not present at the time of the adjournment.
Section 12. Fees and Compensation.
Directors and members of committees may receive such compensation,
if any, for their services, and such reimbursement for expenses, as may be fixed
or determined by the Board.
Section 13. Action Without Meeting.
Any action required or permitted to be taken by the Board may be
taken without a meeting if all members of the Board shall individually or
collectively consent in writing to such action. Such consent or consents shall
have the same effect as a unanimous vote of the Board and shall be filed with
the minutes of the proceedings of the Board.
Section 14. Rights of Inspection.
Every director shall have the absolute right at any reasonable time
to inspect and copy all books, records, and documents of every kind and to
inspect the physical properties of the corporation and also of its subsidiary
corporations, domestic or foreign. Such inspection by a director may be made in
person or by agent or attorney and includes the right to copy and obtain
extracts.
Section 15. Committees.
The Board may appoint one or more committees, each consisting of two
or more directors and delegate to such committees any of the authority of the
Board except with respect to:
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<PAGE>
(a) The approval of any action for which the General
Corporation Law also requires shareholders' approval or approval of the
outstanding shares;
(b) The filling of vacancies on the Board or on any Committee;
(c) The fixing of compensation of the directors for serving on
the Board or on any committee;
(d) The amendment or repeal of Bylaws or the adoption of new
Bylaws;
(e) The amendment or repeal of any resolution of the Board
which by its express terms is not so amendment or repealable;
(f) A distribution to the shareholders of the corporation
except at a rate or in a periodic amount or within a price range determined by
the Board;
(g) The appointment of other committees of the Board or the
members thereof.
Any such committee must be appointed by resolution adopted by a
majority of the authorized number of directors and may be designated an
Executive Committee or by such other name as the Board shall specify. The Board
shall have the power to prescribe the manner in which proceedings of any such
committee shall be conducted. In the absence of any such prescription, such
committee shall have the power to prescribe the manner in which its proceedings
shall be conducted. Unless the Board or such committee shall otherwise provide,
the regular and special meetings and other actions of any such committee shall
be governed by the provisions of this Article applicable to meeting and actions
of the Board. Minutes shall be kept of each meeting of each committee.
ARTICLE IV. OFFICERS
Section 1. Officers.
The Officer of the corporation shall be a president, a secretary,
and a chief financial officer. The corporation may also have, at the discretion
of the Board, a chairman of the board, a treasurer, one or more vice-presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be elected or appointed in accordance with the provisions
of Section 3 of this Article.
Section 2. Election.
The officers of the corporation, except such officers as may be
elected or appointed in accordance with the provisions of Section 3 or Section 5
of this Article, shall be chosen annually by, and shall serve at the pleasure
of, the Board, and shall hold their
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<PAGE>
respective offices until their resignation, removal, or other disqualification
from service, or until their respective successors shall be elected.
Section 3. Subordinate Officers.
The Board may elect, and may empower the President to appoint, such
other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority, and perform such duties
as are provided in these Bylaws or as the Board may from time to time determine.
Section 4. Removal and Resignation.
Any officer may be removed either with or without cause, by the
Board of Directors at any time, or, except in the case of an officer chosen by
the Board, by any officer upon whom such power of removal may be conferred by
the Board. Any such removal shall be without prejudice to the rights, if any, of
the officer under any contract of employment of the officer.
Any officer may resign at any time by giving written notice to the
corporation, but without prejudice to the rights, if any, of the corporation
under any contract to which the officer is a party. Any such resignation shall
take effect at the date of the receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5. Vacancies.
A vacancy in any office because of death, resignation, removal,
disqualification, or any other cause shall be filled in the manner prescribed in
these Bylaws for regular election or appointment to such office.
Section 6. Chairman of the Board.
The Chairman of the Board, if there shall be such an officer, shall,
if present, preside at all meetings of the Board and exercise and perform such
other powers and duties as may be from time to time assigned the Board.
Section 7. President.
Subject to such powers, if any, as may be given by the Board to the
Chairman of the Board, if there be such an officer, the President is the general
manager and chief executive officer of the corporation and has, subject to the
control of the Board, general supervision, direction, and control of the
business and officers of the corporation. The President shall preside at all
meetings of the shareholders and, in the absence of the Chairman of the Board,
or if there be none, at all meetings of the Board. The President has the general
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<PAGE>
powers and duties of management usually vested in the office of president and
general manager of a corporation and such other powers and duties as may be
prescribed by the Board.
Section 8. Vice President.
In the absence or disability of the President, the Vice Presidents
in order of their rank as fixed by the Board or, if not ranked, the Vice
President designated by the Board; shall perform all the duties of the
President, and when so acting shall have all the powers of, and be subject to
all the restrictions upon, the President. The Vice Presidents shall have such
other powers and perform such other duties as from time to time may be
prescribed for them respectively by the Board.
Section 9. Secretary.
The Secretary shall keep or cause to be kept, at the principal
executive office and such other place as the Board may order, a book of minutes
of all meetings of shareholders, the Board, and its committees, with the time
and place of holding, whether regular at special, and, if special, how
authorized, the notice thereof given, the names of those present at Board and
committee meetings, the number of shares present at represented at shareholders'
meetings, and the proceedings thereof. The Secretary shall keep, or cause to be
kept, a copy of the Bylaws of the corporation at the principal executive office
or business office in accordance with the General Corporation Law of the State
of Delaware.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar if one be appointed, a share register, or a duplicate share register
showing the names of the shareholders and their addresses, the number and
classes of shares held by each, the number and date of certificates issued for
the same, and the number and date of cancellation of every certificate
surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board and of any committees thereof
required by these Bylaws or by law to be given, shall keep the seal of the
corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board.
Section 10. The Chief Financial Officer.
The Chief Financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, and shall send or cause to be sent to
the shareholders of the corporation such financial statements and reports as are
required to be sent to them by law or these Bylaws. The books of account shall
at all times be open to inspection by any director.
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<PAGE>
The Chief Financial Officer shall cause all moneys and other
valuables to be deposited in the name and to the credit of the corporation with
such depositories as may be designated by the Board. The Chief Financial Officer
shall disburse the funds of the corporation as may be ordered by the Board,
shall render to the President and directors, whenever they request it, an
account of all transactions as Chief Financial Officer and of the financial
condition of the corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board.
Section 11. Excessive Compensation.
If the Internal Revenue Service disallows as a business deduction to
the corporation any part of the salary or other compensation paid by it to any
officer, director, or employee, as being excessive compensation, that part
disallowed shall be repaid to the corporation by the officer, director or
employee.
ARTICLE V. OTHER PROVISIONS
Section 1. Inspection of Corporate Records.
(a) A shareholder or shareholders holding at least five
percent of the aggregate of the outstanding voting shares of the corporation or
who hold at least one percent of such voting shares and have filed a Schedule
14B with the United States Securities Exchange Commission relating to the
election of directors of the corporation shall have an absolute right to do
either or both of the following:
(i) Inspect and copy the record of shareholders' names and
addresses and shareholdings during usual business hours upon five business days'
prior written demand upon the corporation; or
(ii) Obtain from the transfer agent, if any, for the
corporation, upon five business days' prior written demand and upon the tender
of its usual charges for such a list (the amount of which charges shall be
stated to the shareholder by the transfer agent upon request), a list of the
shareholders' names and addresses who art entitled to vote for the election of
directors and their shareholdings, as of the most recent record date for which
it has been compiled or as of a date specified by the shareholder subsequent to
the date of demand.
(b) The record of shareholders shall also be open to
inspection and copying by any shareholder or holder of a voting trust
certificate at any time during usual business hours upon written demand on the
corporation, for a purpose reasonably related to such holder's interest as a
shareholder or holder of a voting trust certificate.
(c) The accounting books and records and minutes of
proceedings of the shareholders and the Board and committees of the Board shall
be open to inspection upon written demand on the corporation of any shareholder
or holder of a voting trust certificate at
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<PAGE>
any reasonable time during usual business hours, for a purpose reasonably
related to such holder's interest as a shareholder or as a holder of such voting
trust certificate.
(d) Any inspection and copying under this Article may be made
in person at by agent or attorney.
Section 2. Inspection of Bylaws.
The corporation shall keep in its principal executed office the
original or a copy of these Bylaws as amended to date which shall be open to
inspection by shareholders at all reasonable times during office hours. If the
principal executive office of the corporation is outside the state of California
and the corporation has no principal business office in such state, it shall
upon the written notice of any shareholder furnish to such shareholder a copy of
these Bylaws as amended to date.
Section 3. Endorsement of Documents; Contracts.
Subject to the provisions of applicable law, any note, mortgage,
evidence of indebtedness, contract, share certificate, conveyance, or other
instrument in writing and any assignment or endorsements thereof executed or
entered into between this corporation and any other person, when signed by the
Chairman of the Board, the President or any Vice President, and the Secretary,
any Assistant Secretary, the Chief Financial Officer, the Treasurer or any
Assistant Treasurer of this corporation shall be valid and binding on this
corporation in the absence of actual knowledge on the part of the other person
that the signing officers had no authority to execute the same. Any such
instruments may be signed by any other person or persons and in such manner as
from time to time shall be determined by the Board and, unless so authorized by
the Board, no officer, agent or employee shall have any power or authority to
bind the corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or amount.
Section 4. Certificates of Stock.
Every holder of shares of the corporation shall be entitled to have
a certificate signed in the name of the corporation by the Chairman of the
Board, the President or a Vice President and by the Chief Financial Officer or
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary, certifying the number of shares and the class or series of shares
owned by the shareholder. Any or all of the signatures on the certificate may be
facsimile. If any officer, transfer agents or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if such person were an
officer, transfer agent, or registrar at the date of issue.
Certificates for shares may be issued prior to full payment under
such
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<PAGE>
restrictions and for such purposes as the Board may provide; provided, however,
that on any certificate issued to represent any partly paid shares, the total
amount of the consideration to be paid therefor and the amount paid thereon
shall be stated.
Except as provided in this Section no new certificate for shares
shall be issued in lieu of an old one unless the latter is surrendered and
cancelled at the same time. The Board may, however, in case any certificate for
shares is alleged to have been lost, stolen, or destroyed, authorize the
issuance of a new certificate in lieu thereof, and the corporation may require
that the corporation be given a bond or other adequate security sufficient to
indemnify it against any claim that may be made against it (including expenses
or liability) on account of the alleged loss, theft, or destruction of such
certificate or the issuance of such new certificate.
Section 5. Representation of Shares of Other Corporations.
The President or any other officer or officers authorized by the
Board or the President are each authorized to vote, represent, and exercise on
behalf of the corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of the corporation. The
authority herein granted may be exercised either by any such officer in person
or by any other person authorized so to do by proxy or power of attorney duly
executed by said officer.
Section 6. Stock Purchase Plans.
The corporation may adopt and carry out a stock purchase plan or
agreement or stock option plan or agreement providing for the issue and sale of
its unissued shares, or of issues shares acquired or to be acquired, for such
consideration as may be fixed to one or more of the employees or directors of
the corporation or of a subsidiary or to a trustee on their behalf and for the
payment for such shares in installments or at one time, and may provide for
aiding any such persons in paying for such shares by compensation for services
rendered, promissory notes, or otherwise.
Any such stock purchase plan or agreement or stock option plan at
agreement may includes among other features, the fixing of eligibility for
participation therein the class and price of shares to be issued or sold under
the plan or agreement the number of shares which may be subscribed for, the
method of payment therefor, the effect of the termination of employment and
option or obligation on the part of the corporation to repurchase the shares
upon termination of employment, restrictions upon transfer of the shares the
time limits of the termination of the plan, and any other matters, not in
violation of applicable law, as may be included in the Plan as provided or
authorized by the Board or any committee of the Board.
Section 7. Annual Report to Shareholders.
The annual report to shareholders reported to in the Delaware
General Corporation Law is expressly waived, but nothing herein shall be
interpreted as prohibiting the
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<PAGE>
Board from issuing annual or other periodic reports to shareholders.
Section 8. Construction and Definitions.
Unless the context otherwise requires, the general provisions, rules
of construction, and definitions contained in the Delaware General Corporation
Law shall govern the construction of these Bylaws.
ARTICLE VI. INDEMNIFICATION
Section 1. Indemnification
The corporation shall have the power to indemnify its "agents," as
defined in the Delaware General Corporation Law, to the full extent permitted by
said Section and applicable law.
Section 2. Insurance.
The corporation shall have power to purchase and maintain insurance
on behalf of any agent of the corporation against any liability asserted against
or incurred by the agent in such capacity or arising out of the agent's status
as such whether or not the corporation would have the power to indemnify the
agent against such liability under the provisions of this Article.
Section 3. Nonapplicability to Fiduciaries of Employee Benefit
Plans.
This Article does not apply to any proceeding against any trustee,
investment managers or other fiduciary of an employee benefit plan in such
person's capacity as such, even though such person may also be an agent of the
corporation as defined in Section 1. Nothing contained in this Article shall
limit any right to indemnification to which such a trustee, investment manager,
or other fiduciary may be entitled by contract or otherwise which shall be
enforceable to the extent permitted by applicable law other than the Delaware
General Corporation Law.
ARTICLE VII. EMERGENCY BYLAWS
During any emergency consulting from an attack on the United States
or on a locality in which the corporation conducts its business or customarily
holds meetings of its Board or its shareholders or during any nuclear or atomic
disaster, or during the existence of any catastrophe or other similar emergency
condition, as a result of which a quorum of the Board or of the executive
committee, if any, cannot readily be convened for action, a meeting of the Board
or of said committee may be called by any officer or director. Such notice may
be given only to such of the directors or members of the committee, as the case
may be, as it may be feasible to reach at the time and by such means as may be
feasible at the time.
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<PAGE>
The director or directors in attendance at the meeting of the Board,
and the member or members of the executive committee, if any, in attendance at
the meeting of the committee shall constitute a quorum. If none are in
attendance at the meeting, the officers or other persons designated on a list
approved by the Board before the emergency, all in such order of priority and
subject to such conditions and for such period of time (not longer than
reasonably necessary after the termination of the emergency) as may be provided
in the resolution approving the list, shall, to the extent required to provide a
quorum at any meeting of the Board or of the executive committee, be deemed
directors or members of the committee, as the case may be, for such meeting.
The Board, either before or during any such emergency, may provide,
and from time to time modify, lines of succession in the event that during such
emergency any or all officers or agents of the corporation shall for any reason
be rendered incapable of discharging their duties. The Board, either before or
during any such emergency, may, effective in the emergency, change the principal
executive office or designate several alternative offices or authorize the
officers so to do.
ARTICLE VIII. AMENDMENTS
These Bylaws may be amended or repealed either by approval of the
outstanding shares or by the approval of the Board; provided, however, that a
Bylaw specifying or changing a fixed number of directors or the maximum or
minimum number or changing from a fixed to a variable Board or vice versa may
only be adopted by approval of the outstanding shares.
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<PAGE>
CERTIFICATE OF ASSISTANT SECRETARY
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting Assistant Secretary of H.D.
ACQUISITION CORP., incorporated under the laws of the State of Delaware; and
2. That the foregoing Bylaws, comprising twenty-one (21) pages,
constitute the original Bylaws of said Corporation duly adopted on the 21st day
of October, 1986.
IN WITNESS WHEREOF, I have subscribed my name and affixed the seal
of the Corporation.
/s/ Lori M. Johnson
--------------------------
LORI M. JOHNSON
Assistant Secretary
<PAGE>
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION
OF
KALAMA CHEMICAL, INC.
Pursuant to RCW 23A.16.020, the undersigned corporation adopts the
following Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is KALAMA CHEMICAL, INC.
SECOND: The following amendment to the Articles of Incorporation was
adopted by the shareholders of the corporation by a written consent in lieu of
special meeting of shareholders, in the manner prescribed by the Washington
Business Corporation Act:
The Articles of Incorporation of the corporation be hereby amended
by inserting after the end of ARTICLE VII thereof a new ARTICLE VIII
to read as follows:
ARTICLE VIII
Limitation on Liability of Directors
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for his or her conduct as a
director on or after the date this Article becomes effective, except for (i)
acts or omissions that involve intentional misconduct or a knowing violation of
law by the director, (ii) approval of certain distributions or loans in
violation of RCW 23A.08.450, or (iii) any transaction from which the director
will personally receive a benefit in money, property or services to which the
director is not legally entitled. If, after approval by shareholders of this
Article, the Washington Business Corporation Act is amended to authorize
corporate acton further eliminating or limiting the personal liability of
directors, then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Washington Business
Corporation Act, as so amended. Any amendment to or repeal of this Article shall
not adversely affect any right or protection of a director of
<PAGE>
the corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
THIRD: Such written consent in lieu of special meeting of
shareholders of the corporation is dated September 9, 1987.
FOURTH: The number of shares of the corporation outstanding at the
time of such adoption was 1,625,352 shares of Common Stock, each of which shares
was entitled to vote thereon.
FIFTH: The number of shares voted for and against such amendment
were as follows:
Number of Shares Number of Shares
Class Voted For Voted Against
----- --------- -------------
Common 1,625,352 0
SIXTH: Such amendment does not provide for an exchange,
reclassification or cancellation of issued shares.
DATED: September 9, 1987.
KALAMA CHEMICAL, INC.
By/s/ L.C. Macomber
------------------------
L.C. Macomber, Secretary
2
<PAGE>
KALAMA CHEMICAL, INC.
Affidavit of Value of Assets Received or to be Received for
Issuance of Nonpar Value Stock
STATE OF WASHINGTON )
) ss.
County of Cowlitz )
Robert A. Kirschner, being first duly sworn, on oath, deposes and
says: That he is and since December 15, 1970, has been Executive Vice President
of Kalama Chemical, Inc., a Washington corporation. This affidavit is made for
the purpose of computing the annual license fee as of July 1, 1979.
That on September 18, 1972, at a meeting of the shareholders of said
corporation, duly called for that purpose and held on said date at the principal
offices of the corporation at Kalama in the County of Cowlitz, State of
Washington, it was voted to amend the present Articles of Incorporation for said
corporation to increase the number of shares of common stock from 1,000,000 to
2,000,000 shares of nonpar value common stock and to eliminate the right of the
corporation to issue preferred shares, said corporation having never issued any
preferred stock. On September 26, 1976 a 4 for 1 stock split was made to
shareholders of record. That of said total authorized capital nonpar value
common stock the shareholders and/or directors of the corporation have voted to
issue, as of the date set forth below, a total of 2,366,960 shares, of which,
2,278,960 shares have actually been issued.
That the sole consideration received for such issued and outstanding
nonpar stock is the sum of $172,246.00.
Dated July 2, 1979.
/s/ Robert A Kirchner
---------------------
Executive Vice President
Subscribed and sworn to before me this 2nd day of July, 1979.
/s/ John W. Hagen
-----------------
Notary Public in and for the
State of Washington, residing
at Longview
3
<PAGE>
KALAMA CHEMICAL, INC.
Affidavit of Value of Assets Received or to be Received for
Insurance of Nonpar Value Stock
STATE OF WASHINGTON )
) ss.
County of Cowlitz )
Robert A. Kirschner, being first duly sworn, on oath, deposes and
says: That he is and since December 14, 1970, has been Vice President of Kalama
Chemical, Inc., a Washington corporation. This affidavit is made for the purpose
of computing the annual license fee as of July 1, 1978.
That on September 18, 1972, at a meeting of the shareholders of said
corporation, duly called for that purpose and held on said date at the principal
offices of the corporation at Kalama in the County of Cowlitz, State of
Washington, it was voted to amend the present Articles of Incorporation for said
corporation to increase the number of shares of common stock from 1,000,000 to
2,000,000 shares of nonpar value common stock and to eliminate the right of the
corporation to issue preferred shares, said corporation having never issued any
preferred stock. On September 26, 1976 a 4 for 1 stock split was made to
shareholders of record. That of said total authorized capital nonpar value
common stock the shareholders and/or directors of the corporation have voted to
issue, as of the date set forth below, a total of 2,366,960 shares, of which,
2,308,960 shares have actually been issued.
That the sole consideration received for such issued and outstanding
nonpar stock is the sum of $147,395.00.
Dated June 28, 1978.
/s/ Robert A. Kirchner
----------------------
Executive Vice President
Subscribed and sworn to before me this 28th day of June, 1978.
/s/ Michael P. Fuller
---------------------
Notary Public in and for the
State of Washington, residing
at Longview
4
<PAGE>
KALAMA CHEMICAL, INC.
Affidavit of Value of Assets Received or to be Received for
Issuance of Nonpar Value Stock
STATE OF WASHINGTON )
) ss.
County of Cowlitz )
Robert A. Kirschner, being first duly sworn, on oath, deposes and
says: That he is and since December 15, 1970, has been Vice President of Kalama
Chemical, Inc., a Washington corporation. This affidavit is made for the purpose
of computing the annual license fee as of July 1, 1977.
That on September 18, 1972, at a meeting of the shareholders of said
corporation, duly called for that purpose and held on said date at the principal
offices of the corporation at Kalama in the County of Cowlitz, State of
Washington, it was voted to amend the present Articles of Incorporation for said
corporation to increase the number of shares of common stock from 1,000,000 to
2,000,000 shares of nonpar value common stock and to eliminate the right of the
corporation to issue preferred shares, said corporation having never issued any
preferred stock. That of said total authorized capital nonpar value common stock
the shareholders and/or directors of the corporation have voted to issue, as of
the date set forth below, a total of 2,511,208 shares, of which 2,381,408 shares
have actually been issued.
That the sole consideration received for such issued and outstanding
nonpar stock is the sum of $629,274.00
Dated July 27, 1977.
/s/ Robert A. Kirchner
----------------------
Vice President
Subscribed and sworn to before me this 27th day of July, 1977.
/s/ Carmen L. Ayres
----------------------------
Notary Public in and for the
State of Washington, residing
at Longview
5
<PAGE>
ARTICLES OF AMENDMENT
of
KALAMA CHEMICAL, INC.
This Articles of Amendment of the Articles of Incorporation of the
above corporation is hereby executed by said corporation pursuant to the
provisions of Revised Code of Washington 23A.16.040 and 23A.16.050, as follows:
1. The present name of the corporation is Kalama Chemical, Inc.
2. The amendment to the Articles of Incorporation of said
corporation is as follows:
Article IV.
1. The aggregate number of shares which the corporation shall have
authority to issue is 8,000,000 shares and, on the effective date of
the Articles of Amendment that increase the number of authorized
shares to 8,000,000, each of the then issued and outstanding shares
of the corporation, plus those shares subject to any present option
plan, shall be split so that each such share becomes on the said
effective date four new shares of the corporation.
3. The date of the adoption of said amendment by the shareholders of
said corporation was September 8, 1976.
4. The number of shares outstanding of said corporation on said date
was 591,602 shares of common nonpar stock. The number of shares entitled to vote
on said amendment was 591,302 shares of common nonpar stock.
5. The number of shares voted for and against said amendment,
respectively, were as follows:
For Amendment: 564,779 Shares
Against Amendment: None Shares
6
<PAGE>
6. The amount of stated capital of the corporation remains
unchanged by said amendment.
Dated September 22, 1976.
KALAMA CHEMICAL, INC.
By/s/ Ted W. Palmer
-----------------
President
By/s/ L. C. Macomber
------------------
Secretary
7
<PAGE>
STATE OF WASHINGTON )
: ss.
County of Cowlitz )
TED W. PALMER, being first duly sworn, on oath deposes and says:
That he is the President of Kalama Chemical, Inc., that he has read the
foregoing Articles of Amendment, knows the contents thereof, and that same is
true to te best of his knowledge and belief.
/s/ Ted W. Palmer
-----------------
SUBSCRIBED AND SWORN to before me this 22nd day of September, 1976.
/s/ W.R. Studley
-----------------------------
Notary Public in and for the
State of Washington, residing
at Longview
8
<PAGE>
ARTICLES OF AMENDMENT
of
KALAMA CHEMICAL, INC.
This Articles of Amendment of the Articles of Incorporation of the
above corporation is hereby executed by said corporation pursuant to the
provisions of Revised Code of Washington 23A.16.040 and 23A.16.050, as follows:
1. The present name of the corporation is Kalama Chemical, Inc.
2. The amendment to the Articles of Incorporation of said
corporation is as follows:
Article IV.
1. The aggregate number of shares which the corporation shall
have authority to issue is 2,000,000 shares.
2. Such shares shall consist solely of a single class of
nonpar common stock of the aggregate value of $2,500,000.00
3. Shareholders of any such shares shall have no cumulative
voting rights.
[N.B.: Paragraph 4 which was added to
Article IV of the Articles of Incorpora-
tion of the above named corporation by
amendment adopted July 19, 1972, filed
in the Office of the Secretary of State
for the State of Washington on July 24,
1972, remains in full force and effect.]
2. The date of the adoption of said amendment by the shareholders of
said corporation was September 18, 1972.
4. The number of shares outstanding of said corporation is 579,052
shares of common nonpar stock. No preferred stock had been subscribed for or
issued at the time of the adoption of this amendment deleting the authorization
of said corporation to issue preferred stock. The number of shares entitled to
vote on said amendment was 579,052 shares of common nonpar stock.
9
<PAGE>
5. The number of shares voted for and against said amendment,
respectively, were as follows:
For Amendment: 553,552 Shares
Against Amendment: None Shares
Dated September 21, 1972.
KALAMA CHEMICAL, INC.
By/s/ Ted W. Palmer
---------------------
President
By/s/ W. R. Studley
---------------------
Assistant Secretary
STATE OF WASHINGTON )
: ss.
County of Cowlitz )
TED W. PALMER, being first duly sworn, on oath deposes and says:
That he is the President of Kalama Chemical, Inc., that he has read the
foregoing Articles of Amendment, knows the contents thereof, and that same is
true to te best of his knowledge and belief.
/s/ Ted W. Palmer
-----------------
SUBSCRIBED AND SWORN to before me this 21st day of September, 1972.
/s/ Vera J. Green
-----------------------------
Notary Public in and for the
State of Washington, residing
at Longview
10
<PAGE>
ARTICLES OF AMENDMENT
of
KALAMA CHEMICAL, INC.
This Articles of Amendment of the Articles of Incorporation of the
above corporation is hereby executed by said corporation, pursuant to the
provisions of Revised Code of Washington 23A.16.040 and 23A.16.050, as follows:
1. The present name of the corporation is Kalama Chemical, Inc.
2. The amendment to the Articles of Incorporation of said
corporation is as follows:
Article IV.
4. Shareholders of this corporation shall not have pre-emptive
rights to acquire additional shares offered for sale by the corporation.
3. The date of the adoption of said amendment by the shareholders of
said corporation was July 19, 1972.
4. The number of shares outstanding of said corporation is 491,000
of common stock. No preferred stock is outstanding and none has been subscribed
for or offered. The number of shares entitled to vote on said amendment was
491,000 shares of common stock.
DESIGNATION OF CLASS NO. OF OUTSTANDING SHARES
Common 491,000
Preferred None
11
<PAGE>
5. The number of shares voted for and against said amendment,
respectively, were as follows:
FOR AMENDMENT: 491,000 Common Shares
AGAINST AMENDMENT: None Shares
Dated July 19, 1972.
KALAMA CHEMICAL, INC.
By/s/ Ted W. Palmer
------------------------
President
By/s/ Robert A. Kirchner
------------------------
Secretary
12
<PAGE>
STATE OF WASHINGTON )
: ss.
County of Cowlitz )
TED W. PALMER, being first duly sworn, on oath deposes and says:
That he is the President of Kalama Chemical, Inc., that he has read the
foregoing Article of Amendment, knows the contents thereof, and that same is
true to te best of his knowledge and belief.
/s/ Ted W. Palmer
-----------------
SUBSCRIBED AND SWORN to before me this 19th day of July, 1976.
/s/ W. R. Studley
-----------------------------
Notary Public in and for the
State of Washington, residing
at Longview
13
<PAGE>
ARTICLES OF AMENDMENT
of
KALAMA CHEMICAL, INC.
This Articles of Amendment of the Articles of Incorporation of the
above corporation is hereby executed by said corporation pursuant to the
provisions of Revised Code of Washington 23A.16.040 and 23A.16.050, as follows:
1. The present name of the corporation is Kalama Chemical, Inc.
2. The amendment to the Articles of Incorporation of said
corporation is as follows:
Article IV.
1. The total number of shares of stock authorized and which may be
issued by this corporation shall consist of two classes, as follows:
COMMON STOCK - 1,000,000 shares of non par value
PREFERRED STOCK - 5000 shares at par value of
$100.00 per share.
3. The date of the adoption of said amendment by the shareholders of
said corporation was September 10, 1971.
4. The number of shares outstanding of said corporation is 440,000
of common stock. No preferred stock is outstanding and none has been subscribed
for or offered. The number of shares entitled to vote on said amendment was
440,000 shares of common stock.
DESIGNATION OF CLASS NO. OF OUTSTANDING SHARES
- --------------------------------------------------------------------------------
Common 440,000
Preferred None
5. The number of shares voted for and against said amendment,
respectively, were as follows:
FOR AMENDMENT: 440,000 Common Shares
14
<PAGE>
AGAINST AMENDMENT: None Shares
6. The present outstanding shares of common stock [having a par
value of 10 cents per share] will be exchanged for an equal number of shares of
common stock of the corporation which new shares will have "nonpar value, said
exchange to be with the present shareholders of the present outstanding shares
of common stock.
7. The manner in which said amendment effects a change in the amount
of stated capital of said corporation is as follows: It increases the amount of
stated capital of the corporation by $50,000.00.
The amount of stated capital as changed by said amendment is
$600,000.00.
Dated September 10th , 1971.
KALAMA CHEMICAL, INC.
By/s/ Ted W. Palmer
-----------------
President
By/s/ Robert A. Kirchner
----------------------
Secretary
15
<PAGE>
STATE OF WASHINGTON )
: ss.
County of Cowlitz )
TED W. PALMER, being first duly sworn, on oath deposes and says:
That he is the President of Kalama Chemical, Inc., that he has read the
foregoing Article of Amendment, knows the contents thereof, and that same is
true to te best of his knowledge and belief.
/s/ Ted W. Palmer
-----------------
SUBSCRIBED AND SWORN to before me this 10th day of September, 1971.
/s/ W. R. Studley
-----------------
Notary Public in and for the
State of Washington, residing
at Longview
16
<PAGE>
ARTICLES OF AMENDMENT
of
KALAMA & COLUMBIA LTD.
These Articles of Amendment of the Articles of Incorporation of the
above corporation are hereby executed by said corporation, pursuant to the
provisions of Revised Code of Washington 23A.16.040 and 23A.16.050, as follows:
1. The present name of the corporation is Kalama & Columbia Ltd.
2. The amendments to the Articles of Incorporation of said
corporation are as follows:
Article I.
The name of this corporation shall be KALAMA CHEMICAL, INC.,
and its existence shall be perpetual.
Article III.
1. The location and post office address of the registered office of
the corporation in this state shall be P.O. Box 427, Kalama, Washington 98625.
2. The registered agent of the corporation shall be Robert A.
Kirchner, whose address is P. O. Box 427, Kalama, Washington 98625.
3. The date of the adoption of said amendments by the shareholders
of said corporation was December 1, 1970.
4. The number of shares outstanding of said corporation is 10,000
shares of common stock and no preferred stock is outstanding. The number of
shares entitled to vote on said amendments was 10,000 shares of common stock.
17
<PAGE>
5. The number of shares voted for and against said amendments,
respectively, were as follows:
For Amendments: 10,000 shares
Against Amendments: none shares
Dated: December 11, 1970.
KALAMA & COLUMBIA LTD.
By/s/ W. R. Studley
------------------------
President
By/s/[Signature Illegible]
--------------------------
Secretary
18
<PAGE>
STATE OF WASHINGTON )
: ss.
County of Cowlitz )
W.R. STUDLEY, being first duly sworn, on oath deposes and says: That
he is the President of Kalama & Columbia Ltd., that he has read the foregoing
Articles of Amendment, knows the contents thereof, and that the same are true to
the best of his knowledge and belief.
/s/ W. R. Studley
-----------------
Subscribed and sworn to before me this 11th day of December, 1970.
/s/ Shirley Gaetting
-------------------------------------
Notary Public in and for the State of
Washington, residing at Longview.
19
<PAGE>
ARTICLES OF INCORPORATION
of
KALAMA & COLUMBIA LTD.
KNOW ALL MEN BY THESE PRESENTS: That I, Wayne D. Purcell, being a
citizen of the United States and a resident of the State of Washington, and
being over the age of 21 years, being desirous of forming a corporation under
the Washington Business Corporation Act hereby certify and adopt in triplicate
the following Articles of Incorporation:
Article I.
The name of this corporation shall be Kalama & Columbia Ltd., and
its existence shall be perpetual.
Article II.
The objects and purposes for which this corporation is formed are
and shall be:
1. To manufacture, produce, process, purchase, own, acquire, sell,
deal in and otherwise dispose of chemicals of every description, kind and type,
to develop and construct all plant, office, storage, shipping and other
facilities necessary for such manufacturing and the products thereof; to apply
for and obtain, to license, lease, purchase, register or otherwise acquire
patent rights, trademarks, trade names, trade labels, brand names and the like
covering all products, processed and materials developed or manufactured by the
Corporation;
20
<PAGE>
2. To engage in generally and carry on any lawful business or trade
which may, in the judgment of the Board of Directors, at any time, be necessary,
useful or advantageous to this corporation.
3. In furtherance of and not in limitation of the general powers
conferred by the laws of the State of Washington, it is expressly provided that
this corporation shall also have the following powers:
(a) To acquire by purchase or otherwise and to own, hold, cancel,
reissue, sell, pledge and otherwise deal in the stock of this
corporation, provided that the money or property of the
corporation shall not be used for the purchase of shares of
its own stock when such use would cause impairment of the
capital of the corporation. The corporation shall not be
entitled to vote, either directly, or indirectly, on any
shares of its own stock which it may hold.
(b) To acquire by purchase or otherwise and to own, hold, cancel,
reissue, sell, pledge and otherwise deal in the bonds,
debentures, notes and other securities and obligations of this
corporation.
(c) To acquire, purchase, lease, grant, bargain, sell and convey,
manage or otherwise dispose of real, personal, and mixed
property of every name, nature and description; to borrow
money and to make, execute and deliver its Promissory Note or
Notes thereof, and for the purpose of securing the same or any
indebtedness of the corporation, to mortgage or pledge its
real and/or personal property or any part thereof; to erect,
construct and maintain any and all buildings necessary or
proper to carry out the purposes and objects herein
enumerated; to buy, own, hold vote or sell, capital stock in
any other corporations; to enter into partnership or enter
into any agreement for the sharing of profits
21
<PAGE>
with any person, firm or corporation engaged in any business
or transaction capable of being conducted so as directly or
indirectly to benefit this corporation; to enter into, make,
perform and carry out contracts of every kind for any lawful
purposes pertaining to its business, with any individual,
entity, firm, association or corporation, or with any
governmental, municipal or public authority, domestic or
foreign.
(d) To do everything necessary, proper, convenient or incidental
to the accomplishment of the purposes and objects of this
corporation, or which is calculated directly or indirectly to
promote the welfare or interests of the corporation or enhance
the value or render profitable any of its property or rights.
(e) To do any and all things in this Articles set forth to the
same extent as a natural person might or could do, and in any
part of the world, as principals, agents, contractors,
trustees or otherwise, either alone or in the company with
others.
Article III
1. The location and post office address of the registered office of
the corporation in this state shall be 1577 Washington Way, Longview,
Washington.
2. The registered agent of the corporation shall be Wayne D.
Purcell, whose address is 1577 Washington Way, Longview, Wn.
ARTICLE IV.
1. The shares of stock authorized and which may be issued by this
corporation shall consist of two classes, as follows:
22
<PAGE>
COMMON STOCK - 500,000 shares at par value of 10 cents
per share
PREFERRED STOCK - 5000 shares at par value of
$100.00 per share
2. Each share of common stock shall be entitled to one (1) vote.
3. The Preferred Stock shall have the following rights, preference
and restrictions:
(a) Shall be entitled to 8% dividend annually on the par value of
said stock, which dividend shall be cumulative as earned and
payable annually on such dates as shall be selected from time
to time by the Board of Directors of the corporation but shall
not be entitled to any other dividend of any kind whatsoever.
(b) Shall not have voting rights except in the event of default of
payment of dividends for five (5) successive years, then
ninety (90) days after the fifth default, unless all defaults
on dividends are cured, each share of stock shall be entitled
to one hundred fifty (150) votes which voting rights shall
continue until all defaults in payment of dividends are cured,
at which time the voting rights of said stock shall cease.
(c) In the event of any dissolution, liquidation or winding up
(whether voluntary or involuntary) of the corporation the
Preferred Stock shall be paid in full, both the par value
thereof and all dividends unpaid thereon, before any amount
shall be paid to the holders of Common Stock, but the
Preferred stock shall not participate in any further distri-
bution of the assets of the corporation.
(d) The whole or any part of the Preferred stock may on any annual
dividend date, at the election of the Board of Directors, be
redeemed by paying therefor $100.00 per share plus all
accumulated unpaid dividends thereon at the date fixed for
such redemption. If less than
23
<PAGE>
all the shares of Preferred stock are to be redeemed, the
shares redeemed shall be selected in such manner as the Board
of Directors shall determine. The holders of Preferred stock
called for redemption shall not, from and after the fixed date
for the redemption of such stock, possess or exercise any
rights as stockholders of the corporation, the redemption
price of such shares, without interest, upon surrender
thereof.
Article V.
The amount of paid-in capital with which the corporation will begin
business is One Thousand and no/100 Dollars ($1,000.00)
Article VI.
1. The number of directors of the corporation shall be fixed as
provided in By-Laws, and may be changed from time to time by amending the
By-Laws, as therein provided, but the number of directors shall not be less than
three nor more than nine.
2. In furtherance of and not in limitation of the powers conferred
by the laws of the State of Washington, the Board of Directors is expressly
authorized to make, alter and repeal the By-Laws of this corporation, subject to
the power of the stockholders of the corporation to change or repeal such
By-Laws.
3. The corporation may enter into contracts and otherwise transact
business as vendor, purchaser or otherwise, with its directors, officers and
stockholders and with corporations, associations, firms and entities in which
they
24
<PAGE>
are or may be or become interested as directors, officers, shareholders, members
or otherwise, as freely as though such adverse interests did not exist, even
though the vote, action or presence of such director, officer or stockholder may
be necessary, to obligate the corporation upon such contracts or transactions;
and in the absence of fraud no such contract or transaction shall be avoided and
no such director, officer or stockholder shall be held liable to account to the
corporation, by reason of such adverse interests or by reason of any fiduciary
relationship to the corporation arising out of such office or stock ownership,
for any profit or benefit realized by him through any such contract or
transaction; provided in the case of directors and officers of the corporation
(but not in the case of stockholders who are not directors or officers) the
nature of the interest of such director or officer, though not necessarily the
details or extent thereof, be disclosed or known to the Board of Directors of
the corporation, at the meeting thereof at which such contract or transaction is
authorized or confirmed. A general notice that a director or officer of the
corporation is interested in any corporation, association, firm or entity shall
be sufficient disclosure as to such director or officer with respect to all
contracts and transactions with that corporation, association, firm or entity.
25
<PAGE>
4. Any contract, transaction or act of the corporation or of the
directors or of any officers of the corporation which shall be ratified by a
majority of a quorum of the stockholders of the corporation at any annual
meeting or any special meeting called for such purpose, shall, insofar as
permitted by law, be as valid and as binding as though ratified by every
stockholder of the corporation.
5. The first directors of this corporation shall be three in number
and their post office addresses are as follows:
Name Post Office Address
---- -------------------
William R. Studley 1577 Washington Way, Longview, Wash.
Wayne D.Purcell 1577 Washington Way, Longview, Wash.
Dave C. Spencer 1577 Washington Way, Longview, Wash.
The term of the first directors shall be until the first annual meeting of
the stockholders of the corporation., to be held on the 15th day of December,
1970, and until their successors are elected and qualified.
Article VII.
The name and post office address of the incorporation shall be as
follows:
Name Post Office Address
---- -------------------
Wayne D. Purcell 1577 Washington Way, Longview, Wash.
26
<PAGE>
IN WITNESS WHEREOF, the incorporator hereinabove named has hereunto
set his hand in triplicate, this 23rd day of October, 1970.
/s/ Wayne D. Purcell
--------------------
Incorporator
27
<PAGE>
BYLAWS
OF
KALAMA CHEMICAL, INC.
ARTICLE I
Offices
(1) Registered Office and Registered Agent: The registered office of
the corporation shall be located in the State of Washington at such place as may
be fixed from time to time by the Board of Directors upon filing of such notices
as may be required by law, and the registered agent shall have a business office
identical with such registered office.
(2) Other Offices: The corporation may have other offices within or
outside the State of Washington at such place or places as the Board of
Directors may from time to time determine.
ARTICLE II
Shareholders' Meeting
(1) Meeting Place: All meetings of the shareholders shall be held at
the registered office of the corporation, or at such other place as shall be
determined from time to time by the Board of Directors, and the place at which
any such meeting shall be held shall be stated in the notice of the meeting.
(2) Annual Meeting Time: Unless a different date and hour be fixed
by the Board of Directors, the annual meeting of the shareholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting, shall be held each year on the first Wednesday
following Labor Day at the hour of 10:00 AM if not a legal holiday, and if a
legal holiday, then on the day following, at the same hour.
<PAGE>
(3) Annual Meeting - Order of Business: At the annual meeting of
shareholders, the order of business shall be as follows:
(a) Calling the meeting to order.
(b) Proof of notice of meeting (or filing waiver).
(c) Reading of minutes of last annual meeting.
(d) Reports of officers.
(e) Reports of committees.
(f) Election of directors.
(g) Miscellaneous business.
(4) Special Meetings: Special meetings of the shareholders for any
purpose may be called at any time by the President, Board of Directors, or the
holders of not less than on-tenth of all shares entitled to vote at the meeting.
(5) Notice:
(a Notice of the time and place of the annual meeting of
shareholders shall be given by delivering personally or by mailing a written or
printed notice of the same, at least ten days, and not more than fifty days,
prior to the meeting to each shareholder of record entitled to vote at such
meeting.
(b) At least ten days and not more than fifty days prior to
the meeting, written or printed notice of each special meeting of shareholders,
stating the place, day and hour of such meeting, and the purpose or purposes for
which the meeting is called, shall be delivered personally, or mailed to each
shareholder of record entitled to vote at such meeting.
(6) Voting Record: At least ten days before each meeting of
shareholders, a complete record of the shareholders entitled to vote at such
meeting, or any adjournment thereof, shall be made, arranged in alphabetical
order, with the address of and number of shares held by each, which record shall
be kept on file at the registered office of the corporation for a period of ten
days prior to such meeting. The record shall be kept open at the time and place
of such meeting for the inspection of any shareholder.
2
<PAGE>
(7) Quorum: Except as otherwise required by law:
(a) A quorum at any annual or special meeting of shareholders
shall consist of shareholders representing, either in person or by proxy, a
majority of the outstanding capital stock of the corporation, entitled to vote
at such meeting.
(b) The votes of a majority in interest of those present at
any properly called meeting or adjourned meeting of shareholders at which a
quorum as in this paragraph defined is present, shall be sufficient to transact
business.
(8) Closing of Transfer Books and Fixing Record Date: For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders, or any adjournment thereof, or entitled to receive
payment of any dividend, the Board of Directors may provide that the stock
transfer books shall be closed for a stated period not to exceed fifty days nor
be less than ten days preceding such meeting. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a record date for any
such determination of shareholders, such date to be not more than fifty days
and, in case of a meeting of shareholders, not less than ten days prior to the
date on which the particular action requiring such determination of shareholders
is to be taken.
(9) Proxies: A shareholder may vote either in person or by proxy
executed in writing by the shareholder, or his duly authorized attorney-in-fact.
No proxy shall be valid after eleven months from the date of its execution,
unless otherwise provided in the proxy.
(10) Action by Shareholders without a Meeting: Any action required
or which may be taken at a meeting of shareholders of the corporation, may be
taken at a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof. Such consent shall have the same force and effect as a
unanimous vote of shareholders.
(11) Waiver of Notice: A waiver of any notice required to be given
any shareholder, signed by the person or persons entitled to such notice,
whether before or after
3
<PAGE>
the time stated therein for the meeting, shall be equivalent
to the giving of such notice.
(12) Action of Shareholders by Communications Equipment:
Shareholders may participate in a meeting of shareholders by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other at the same time, and
participation by such means shall constitute presence in person at a meeting.
ARTICLE III
Stock
(1) Certificates: Certificates of stock shall be issued in numerical
order, and each shareholder shall be entitled to a certificate signed by the
President, or a Vice President, and the Secretary or an Assistant Secretary, and
may be sealed with the seal of the corporation or a facsimile thereof. The
signatures of such officers may be facsimiles if the certificate is manually
signed on behalf of a transfer agent, or registered by a registrar, other than
the corporation itself or an employee of the corporation. If an officer who has
signed or whose facsimile signature has been placed upon such certificate ceases
to be an officer before the certificate is issued, it may be issued by the
corporation with the same effect as if the person were an officer on the date of
issue.
(2) Transfers: Transfers of stock shall be made only upon the stock
transfer books of the corporation, kept at the registered office of the
corporation or at its principal place of business, or at the office of its
transfer agent or registrar, and before a new certificate is issued the old
certificate shall be surrendered for cancellation. The Board of Directors may,
by resolution, open a share register in any state of the United States, and may
employ an agent or agents to keep such register, and to record transfers of
shares therein.
(3) Registered Owner: Registered shareholders shall be treated by
the corporation as the holders in fact of the stock standing in their respective
names and the corporation shall not be bound to recognize any equitable or other
claim to or interest in any share on the part of any-other person, whether or
not it shall have express or other
4
<PAGE>
notice thereof, except as expressly provided below or by the laws of the State
of Washington. The Board of Directors may adopt by resolution a procedure
whereby a shareholder of the corporation may certify in writing to the
corporation that all or a portion of the shares registered in the name of such
shareholder are held for the account of a specified person or persons. The
resolution shall set forth:
(a) The classification of shareholder who may certify;
(b) The purpose or purposes for which the certification may be
made;
(c) The form of certification and information to be contained
therein;
(d) If the certification is with respect to a record date or
closing of the stock transfer books, the date within which the certification
must be received by the corporation; and
(e) Such other provisions with respect to the procedure as are
deemed necessary or desirable.
Upon receipt by the corporation of a certification complying with
the procedure, the persons specified in the certification shall be deemed, for
the purpose or purposes set forth in the certification, to be the holders of
record of the number of shares specified in place of the shareholder making the
certification.
(4) Mutilated, Lost or Destroyed Certificates: In case of any
mutilation, loss or destruction of any certificate of stock, another may be
issued in its place on proof of such mutilation, loss or destruction. The Board
of Directors may impose conditions on such issuance and may require the giving
of a satisfactory bond or indemnity to the corporation in such sum as they might
determine or establish such other procedures as they deem necessary.
(5) Fractional Shares: Only whole shares of stock may be issued, and
the corporation may not issue fractions of a share.
(6) Shares of Another Corporation: Shares owned by the corporation
in and her corporations, domestic or for-
5
<PAGE>
eign, may be voted by such officer, agent or proxy as the Board of Directors may
determine or, in the absence of such determination, by the President of the
corporation.
ARTICLE IV
Board of Directors
(1) Number and Powers: The management of all the affairs, property
and interest of the corporation shall be vested in a Board of Directors,
consisting of six persons, who shall be elected for a term of one year, and
shall hold office until their successors are elected and qualify. Directors need
not be shareholders or residents of the State of Washington. In addition to the
powers and authorities by these Bylaws and the Articles of Incorporation
expressly conferred upon it, the Board of Directors may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the Articles of Incorporation or by these Bylaws directed or required to
be executed or done by the shareholders.
(2) Change of Number: The number of directors may at any time be
increased or decreased by amendment of these Bylaws, but no decrease shall have
the effect of shortening the term of any incumbent director.
(3) Vacancies: All vacancies in the Board of Directors, whether
caused by resignation, death or otherwise, may be filled by the affirmative vote
of a majority of the remaining directors though less than a quorum of the Board
of Directors. A director elected to fill any vacancy shall hold office for the
unexpired term of his predecessor and until his successor is elected and
qualified. Any directorship to be filled by reason of an increase in the number
of directors may be filled by the Board of Directors for a term of office
continuing only until the next election of directors by the shareholders.
(4) Removal of Directors: At a meeting of shareholders called
expressly for that purpose, the entire Board of Directors, or any member
thereof, may be removed by a vote of the holders of a majority of shares then
entitled to vote at an election of such directors.
6
<PAGE>
(5) Regular Meetings: Regular meetings of the Board of Directors or
any committee may be held without notice at the registered office of the
corporation or at such other place or places, either within or without the State
of Washington, as the Board of Directors or such committee, as the case may be,
may from time to time designate. The annual meeting of the Board of Directors
shall be held without notice immediately after the adjournment of the annual
meeting of shareholders.
(6) Special Meetings:
(a) Special meetings of the Board of Directors may be called
at any time by the President or by any two directors, to be held at the
registered office of the corporation or at such other place or places as the
Board of Directors or the person or persons calling such meeting may from time
to time designate. Notice of all special meetings of the Board of Directors
shall be given to each director by one day's service of the same by telegram by
letter, or personally. Such notice need not specify the business to be
transacted at, nor the purpose of, the meeting.
(b) Special meetings of any committee may be called at any
time by such person or persons and with such notice as shall be specified for
such committee by the Board of Directors, or in the absence of such
specification in the manner and with the notice required for special meetings of
the Board of Directors.
(7) Quorum: A majority of the whole Board of Directors shall be
necessary at all meetings to constitute a quorum for the transaction of
business.
(8) Waiver of Notice: Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. A waiver of notice signed by the
director or directors, whether before or after the time stated for the meeting,
shall be equivalent to the giving of notice.
(9) Registering Dissent: A director who is present at a meeting of
the Board of Directors at which action on a corporate matter is taken shall be
presumed to have assented to such action unless his dissent shall be entered in
7
<PAGE>
the minutes of the meeting, or unless he shall file his written dissent to such
action with the person acting as the secretary of the meeting, before the
adjournment thereof or shall forward such dissent by registered mail to the
Secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.
(10) Executive and Other Committees: The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members an Executive Committee and one or more other standing or
special committees. The Executive Committee shall have and may exercise all the
authority of the Board of Directors, and other standing or special committees
may be invested with such powers, subject to such conditions, as the Board of
Directors shall see fit; provided that, notwithstanding the above, no committee
of the Board of Directors shall have the authority to: (1) Declare dividends or
distributions except at a rate or in periodic amount determined by the Board of
Directors, (2) approve or recommend to shareholders actions or proposals
required by law to be approved by shareholders; (3) fill vacancies on the Board
of Directors or any committee thereof; (4) amend the Bylaws; (5) authorize or
approve the reacquisition of shares unless pursuant to general formula or method
specified by the Board of Directors; (6) fix compensation of any director for
serving on the Board of Directors or on any committee thereof; (7) approve a
plan of merger, consolidation, or exchange of shares not requiring shareholder
approval; (8) reduce earned or capital surplus; or (9) appoint other committees
of the Board of Directors or the members thereof. All committees so appointed
shall keep regular minutes of their meetings and shall cause them to be recorded
in books kept for that purpose in the office of the corporation. The designation
of any such committee and the delegation of authority thereto shall not relieve
the Board of Directors or any member thereof, of any responsibility imposed by
law.
(11) Remuneration: No stated salary shall be paid directors, as
such, for their service, but by resolution of the Board of Directors, a fixed
sum and expenses of attendance, if any, may be allowed for attendance at each
regular or special meeting of such Board; provided, that nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefore of
members of standing
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or special committees may be allowed like compensation for attending committee
meetings.
(12) Loans: No loans shall be made by the corporation to the
directors, unless first approved by the holders of two-thirds of the voting
shares. No loans shall be made by the corporation secured by its own shares.
(13) Action by Directors Without a Meeting: Any action required or
which may be taken at a meeting of the directors, or of a committee thereof, may
be taken without a meeting if a consent in writing, setting forth the action so
taken or to be taken, shall be signed by all of the directors or all of the
members of the committee, as the case may be. Such consent shall have the same
effect as a unanimous vote.
(14) Action of Directors by Communications Equipment: Any action
required or which may be taken at a meeting of directors, or of a committee
thereof may be taken by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time.
ARTICLE V
Officers
(1) Designations: The officers of the corporation shall be a
President, one or more Vice-Presidents (one or more of whom may be Executive
vice-Presidents), a Secretary and a Treasurer, and such Assistant Secretaries
and Assistant Treasurers as the Board may designate, who shall be elected for
one year by the directors at their first meeting after the annual meeting of
shareholders, and who shall hold office until their successors are elected and
qualify. Any two or more offices may be held by the same person, except the
offices of President and Secretary.
(2) The President: The President shall preside at all meetings of
shareholders and directors, shall have general supervision of the affairs of the
corporation, and shall perform all such other duties as are incident to his
office or are properly required of him by the Board of Directors.
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(3) Vice-Presidents: During the absence or disability of the
President, the Executive Vice-Presidents, if any, and the Vice-Presidents in the
order designated by the Board of Directors shall exercise all the functions of
the President. Each Vice-President shall have such powers and discharge such
duties as may be assigned to him from time to time by the Board of Directors.
(4) Secretary and Assistant Secretaries: The Secretary shall issue
notices for all meetings, except for notices for special meetings of the
shareholders and special meetings of the directors which are called by the
requisite number of shareholders or directors, shall keep minutes of all
meetings, shall have charge of the seal and the corporate books, and shall make
such reports and perform such other duties as are incident to his office, or are
properly required of him by the Board of Directors. The Assistant Secretary, or
Assistant Secretaries in the order designated by the Board of Directors, shall
perform all of the duties of the Secretary during the absence or disability of
the Secretary, and at other times may perform such duties as are directed by the
President or the Board of Directors.
(5) The Treasurer: The Treasurer shall have the custody of all
moneys and securities of the corporation and shall keep regular books of
account. He shall disburse the funds of the corporation in payment of the just
demands against the corporation or as may be ordered by the Board of Directors
taking proper vouchers for such disbursements, and shall render to the Board of
Directors from time to time as may be required of him an account of all his
transactions as Treasurer and of the financial condition of the corporation.
They shall perform such other duties incident to his office or that are properly
required of him by the Board of Directors. The Assistant Treasurer, or Assistant
Treasurers in the order designated by the Board of Directors, shall perform all
of the duties of the Treasurer in the absence or disability of the Treasurer,
and at other times may perform such other duties as are directed by the
President or the Board of Directors.
(6) Delegation: In the case of absence or inability to act of any
officer of the corporation and of any person herein authorized to act in his
place, the Board of Directors may from time to time delegate the powers or
duties of such officer to any other officer or any director or other person whom
it may select.
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(7) Vacancies: Vacancies in any office arising from any cause may be
filled by the Board of Directors at any regular or special meeting of the Board.
(8) Other Officers: Directors may appoint such other officers and
agents as it shall deem necessary or expedient, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
(9) Loans: No loans shall be made by the corporation to any officer,
unless first approved by the holders of two-thirds of the voting shares.
(10) Term - Removal: The officers of the corporation shall hold
office until their successors are chosen and qualify. Any officer or agent
elected or appointed by the Board of Directors may be removed at any time, with
or without cause, by the affirmative vote of a majority of the whole Board of
Directors, but such removal shall be without prejudice to the contract rights,
if any, of the person so removed.
(11) Bonds: The Board of Directors may, by resolution, require any
and all of the officers to give bonds to the corporation, with sufficient surety
or sureties, conditioned for the faithful performance of the duties of their
respective offices, and to comply with such other conditions as may from time to
time be required by the Board of Directors.
ARTICLE VI
Dividends and Finance
(1) Dividends: Dividends may be declared by the Board of Directors
and paid by the corporation out of the unreserved and unrestricted earned
surplus of the corporation or out of the unreserved and unrestricted net
earnings of the current fiscal year and the next preceding fiscal year, or in
treasury shares of the corporation, subject to the conditions and limitations
imposed by the State of Washington. The stock transfer books may be closed for
the payment of dividends during such periods of not exceeding fifty days as from
time to time may be fixed by the Board of Directors. The Board of Directors,
however, without closing
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the books of the corporation, may declare dividends payable only to the holders
of record at the close of business, on any business day not more than fifty days
prior to the date on which the dividend is paid.
(2) Reserves: Before making any distribution of earned surplus,
there may be set aside out of the earned surplus of the corporation such sum or
sums as the directors from time to time in their absolute discretion deem
expedient as a reserve fund to meet contingencies, or for equalizing dividends,
or for maintaining any property of the corporation, or for any other purpose,
any earned surplus of any year not distributed as dividends shall be deemed to
have been thus set apart until otherwise disposed of by the Board of Directors.
(3) Depositories: The moneys of the corporation shall be deposited
in the name of the corporation in such bank or banks or trust company or trust
companies as the Board of Directors shall designate, and shall be drawn out only
by check or other order for payment of money signed by such persons and in such
manner as may be determined by resolution of the Board of Directors.
ARTICLE VII
Notices
Except as may otherwise be required by law, any notice to any
shareholder or director may be delivered personally or by mail. If mailed, the
notice shall be deemed to have been delivered when deposited in the United
States mail, addressed to the addressee at his last known address in the records
of the corporation, with postage thereon prepaid.
ARTICLE VIII
Seal
The corporate seal of the corporation shall be in such form and bear
such inscription as may be adopted by resolution of the Board of Directors, or
by usage of the officers on behalf of the corporation.
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ARTICLE IX
Indemnification of Officers Directors,
Employees and Agents
(1) As used in this Article
(a) "Director" means any person who is or was a director of
the corporation and any person who, while a director of the corporation, is or
wait serving at the request of the corporation as a director officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan.
(b) "Corporation" includes any domestic or foreign predecessor
entity of the corporation in a merger, consolidation, or other transaction in
which the predecessor's existence ceased upon consummation of such transaction.
(c) "expenses" includes attorneys' fees.
(d) "Official capacity' means: (i) When used with respect to a
director, the office of director in the corporation, and (ii) when used with
respect to a person other than a director as contemplated in subsection (10) of
this Article, the elective or appointive office in the corporation held by the
officer or the employment or agency relationship undertaken by the employee or
agent in behalf of the corporation, but in each case does not include service
for any other foreign or domestic corporation or any partnership, joint venture,
trust, other enterprise, or employee benefit plan.
(e) "Party" includes a person who was, is, or is threatened to
be, made a named defendant or respondent in a proceeding.
(f) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding whether civil, criminal, administrative, or
investigative.
(2) The corporation shall indemnify any person made a party to any
proceeding (other than a proceeding referred to in subsection (3) of this
Article) by reason of the fact that he is or was a director against judgments
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penalties, fines, settlements and reasonable expenses actually incurred by him
in connection with such proceeding if:
(a) He conducted himself in good faith, and: (i) In the case
of conduct in his own official capacity with the corporation, he reasonably
believed his conduct to be in the corporation's best interests, or (ii) in all
other cases, he reasonably believed his conduct to be at least not opposed to
the corporation's best interests; and
(b) In the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.
The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contenders or its equivalent, shall not, of
itself be determi-native that the person did not meet the requisite standard of
conduct set forth in this subsection.
(3) The corporation shall indemnify any person made a party to any
proceeding by or in the right of the corporation by reason of the fact that he
is or was a director against reasonable expenses actually incurred by him in
connection with such proceeding if he conducted himself in good faith, and:
(a) In the case of conduct in his official capacity with the
corporation, he reasonably believed his conduct to be in its best interests; or
(b) in all other cases, he reasonably believed his conduct to
be at least not opposed to its best interests; provided that no indemnification
shall be made pursuant to this subsection in respect of any proceeding in which
such person shall have been adjudged to be liable to the corporation.
(4) A director shall not be indemnified under subsection (2) or (3)
of this Article in respect of any proceeding charging improper personal benefit
to him, whether or not involving action in his official capacity, in which he
shall have been adjudged to be liable on the basis that personal benefit was
improperly received by him.
(5) Unless otherwise limited by the Articles of Incorporation, a
director who has been wholly successful, on
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the merits or otherwise, in the defense of any proceeding referred to in
subsection (2) or (3) of this Article shall be indemnified against reasonable
expenses incurred by him in connection with the proceeding.
(6) No indemnification under subsection (2) or (3) of this Article
shall be made by the corporation unless authorized in the specific case after a
determination that indemnification of the director is permissible in the
circumstances because he has met the standard of conduct set forth in the
applicable subsection. Such determination shall be made:
(a) By the Board of Directors by a majority vote of a quorum
consisting of directors not at the time parties to such proceeding; or
(b) if such a quorum cannot be obtained, then by a majority
vote of a committee of the Board, duly designated to act in the matter by a
majority vote of the full Board (in which designation directors who are parties
may participate), consisting solely of two or more directors not at the time
parties to such proceeding; or
(c) In a written opinion by legal counsel other than an
attorney or a firm having associated with it an attorney, who has been retained
by or who has performed services within the past three years for the corporation
or any party to be indemnified, selected by the Board of Directors or a
committee thereof by vote as set forth in (a) or (b) of this subsection, of if
the requisite quorum of the full Board cannot be obtained therefor and such
committee cannot be established, by a majority vote of the full Board (in which
selection directors who are parties may participate); or
(d) By the shareholders.
Authorization of indemnification and determination as to
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible, except that if the determination that
indemnification is permissible is made by such legal counsel, authorization of
indemnification and determination as to reasonableness of expenses shall be made
in a manner specified in (c) of this subsection for the selection of such
counsel. Shares held
15
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by directors who are parties in the proceeding shall not be voted on the subject
matter under this subsection.
(7) Reasonable expenses incurred by a director who is party to a
proceeding may be paid or reimbursed by the corporation in advance of the final
disposition of such proceeding:
(a) After a determination, made in the manner specified by
subsection (6) of this Article, that the information then known to those making
the determination (without undertaking further investigation for purposes
thereof) does not establish that indemnification would not be permissible under
subsection (2) or (3) of this Article; and
(b) Upon receipt by the corporation of:
(i) A written affirmation by the director of his good
faith belief that he has met the standard of conduct necessary for
indemnification by the corporation as authorized in this Article; and
(ii) A written undertaking by or on behalf of the
director to repay such amount if it shall ultimately be determined that he has
not met such standard of conduct.
The undertaking required by (b) (ii) of this subsection shall be an
unlimited general obligation of the director but need not be secured and may be
accepted without reference to financial ability to make the repayment. Payments
under this subsection may be authorized in the manner specified in subsection
(6) of this Article.
(8) No provision for the corporation to indemnify a director who is
made a party to a proceeding, whether contained in the Articles of
Incorporation, these Bylaws, a resolution of shareholders or directors, an
agreement, or otherwise (except as contemplated by subsection (11) of this
Article), shall be valid unless consistent with this Article, or to the extent
that indemnity hereunder is limited by the Articles of Incorporation, consistent
therewith. Nothing contained in this Article shall limit the corporation's
ability to reimburse expenses incurred by a director in connection with his
appearance as a witness in a proceeding
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at a time when he has not been made a named defendant or respondent in the
proceeding.
(9) For purposes of this Article: the corporation shall be deemed to
have requested a director to serve an employee benefit plan where the
performance by him of his duties to the corporation also imposes duties on, or
otherwise involves services by, him to the plan or participants or beneficiaries
of the plan; excise taxes assessed on a director with respect to an employee
benefit plan pursuant to applicable law shall be deemed "fines"; and action
taken or omitted by him with respect to an employee benefit plan in the
performance of his duties for a purpose reasonably believed by him to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be
for a purpose which is not opposed to the best interests of the corporation.
(10) Unless otherwise limited by the Articles of Incorporation:
(a) An officer of the corporation shall be indemnified as and
to the extent provided in subsection (5) of this Article for a director;
(b) The corporation shall provide indemnification, including
advances of expenses, to an officer, employee, or agent of the corporation to
the same extent that it may indemnify directors pursuant to this Article except
that subsection (12) of this Article shall not apply to any person other than a
director; and
(c) The corporation, in addition, shall have the power to
indemnify an officer who is not a director, as well as employees and agents of
the corporation who are not directors, to such further extent, consistent with
law, as may be provided by the Articles of Incorporation, these Bylaws, general
or specific action of the Board of Directors or contract.
(11) The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the corporation or is or was serving at the request of the
corporation as an officer, employee or agent of another corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan
against any liability asserted against him and
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incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article.
(12) Any indemnification of a director in accordance with this
Article, including any payment or reimbursement of expenses, shall be reported
to the shareholders with the notice of the next shareholders' meeting or prior
thereto in a written report containing a brief description of the proceedings
involving the director being indemnified and the nature and extent of such
indemnification.
ARTICLE X
Books and Records
The corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders and Board
of Directors; and shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of its
shareholders, giving the names and addresses of all shareholders and the number
and class of the shares held by each. Any books, records, and minutes may be in
written form or any other form capable of being converted into written form
within a reasonable time.
ARTICLE XI
Amendments
(1) By Shareholders: These Bylaws may be altered amended or replaced
by the affirmative vote of a majority of the voting stock issued and outstanding
at any regular or special meeting of the shareholders.
(2) By Directors: The Board of Directors shall have power to makes,
alter, amend and repeal the Bylaws of this corporation. However any such Bylaws,
or any alteration, amendment or repeal of the Bylaws, may be changed or repealed
by the holders of a majority of the stock entitled to vote at any shareholders'
meeting.
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(3) Emergency Bylaws: The Board of Directors may adopt emergency
Bylaws, subject to repeal or change by action of the shareholders, which shall
be operative during any emergency in the conduct of the business of the
corporation resulting from an attack on the United States or any nuclear or
atomic disaster.
Adopted by resolution of the corporation's Board of Directors on
9-3, 1980.
-------------------------
Secretary
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MINUTES OF MEETING OF BOARD OF DIRECTORS
of
KALAMA CHEMICAL, INC.
A regular quarterly meeting of the Board was called to order by the
President at 10:10 a.m., current local time, on February 10, 1981, at the office
headquarters of the Corporation in Suite 1110, Bank of California Center,
Seattle, Washington. All members of the Board were present except for James H.
Lopeman. The Minutes of the quarterly meeting of November 11, 1980, were read
and approved.
Upon motions duly made, seconded and unanimously carried, the following
Resolutions were adopted:
1. Purchase of Nonene
RESOLVED that the Corporation enter into a contract for a term of
12 calendar months for the purchase of nonene from Exxon Chemical
Company, U.S.A., the contract being on file in the office of the
corporate Secretary.
2. Purchase of Toluene
RESOLVED that a contract with JAIA for the purchase of 5,000 tons
of toluene be, and is hereby, approved, a copy of said contract
being on file with the corporate Secretary.
3. Ratification of Guarantees
RESOLVED that the Board does hereby ratify and approve the
guarantees given by L.C. Macomber, on behalf of the Corporation, for
the benefit of Kalama International, a partnership, to Colanese
Chemical Corporation Inc. for the purchase of methanol and to Allied
Chemical, Inc., for the purchase of acetone.
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4. Resignation of James H. Lopeman
RESOLVED that the resignation of James H. Lopemn as a director of
the Corporation, which resignation is evidenced by his letter dated
February 6, 1981, a copy of which is attached to these Minutes and
by this reference made a part hereof, be, and is hereby, accepted
effective February 6, 1981.
5. Amendment to Bylaws
RESOLVED that paragraph (b) Section (10) of Article IX of the
Bylaws of the Corporation be, and is hereby, amended to read as
follows:
"(b) The corporation shall provide indemnification,
including advances of expenses, to an officer of the
corporation, and upon authorization in the specific case by
the Board of Directors to an employee or agent of the
corporation, to the same extent that it may indemnify
directors pursuant to this Article except that subsection (12)
of this Article shall not apply to any person other than a
director; and"
6. Lost Stock Certificates
RESOLVED that the transfer agent of the Corporation shall be
authorized and directed to issue a replacement certificate
representing shares of common stock of the Corporation evidenced by
any lost, stolen or destroyed certificate upon the satisfaction of
both of the following:
(a) The transfer agent shall have received from the
holder or holders of the shares a duly signed and sworn
Affidavit of Lost Certificate in the form submitted to this
meeting, and
(b) The transfer agent shall have received a written
direction from the Secretary of the Corporation to issue the
replacement certificate;
RESOLVED FURTHER that any and all prior actions by the transfer
agent in conformity with the foregoing be hereby ratified and
confirmed in all respects; and
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RESOLVED FURTHER that said form of Affidavit of Lost Certificate
be filed with the minutes of this meetings
7. Declaration of Cash Dividend
RESOLVED that a cash dividend of Two and One-Half Cents ($.02 1/2)
per share be paid by the Corporation on March 31, 1981, to all
shareholders of record as of February 10, 1981 including those
holding Voting Trust Certificates.
8. RESOLVED that an account and borrowing relationship be established
with Continental Illinois Bank for the Corporation;
RESOLVED FURTHER that the necessary officers of the Corporation
be, and are hereby authorized to execute such account and borrowing
resolutions as may be submitted by said bank for the purpose of
establishing a $2,000,000.00 working capital line and a
$2,000,000.00 participation with two other banks in a $6,000,000.00
revolving credit.
There being no further business, the meeting was thereupon duly adjourned
at 11:35 a.m.
/s/ L. C. Macomber
--------------------------
Secretary
ATTEST:
/s/ Ted W. Palmer
- --------------------------
President
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MINUTES OF BOARD OF DIRECTORS' MEETING
of
KALAMA CHEMICAL, INC.
The annual meeting of the Board of Directors of the Corporation was called
to order by Ted W. Palmer as Chairman, and L. C. Macomber acted as Secretary.
The Chairman announced that at the just-concluded Shareholders' Meeting
there had been a reference to the creation of new offices of the Corporation and
that this would be the first order of business.
The Secretary noted that all Directors were present.
The President reported that in order to implement the
personnel changes discussed at the Shareholders' Meeting, it would be necessary
to amend the Bylaws, in particular, ARTICLE V thereof to establish the position
of Chairman of the Board and Chief Executive Officer and the position of
President and Chief Operating officer and to prescribe their duties. Thereupon
the following amendments to the Bylaws of the Corporation were proposed:
ARTICLE V
officers
(1) Designations: The officers of the corporation shall be a:
Chairman of the Board and Chief Executive officer
President and Chief operating officer
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Vice President - Administration
Vice President - Marketing
Vice President - Manufacturing and Maintenance
Vice President - Engineering and
Technical Services
Secretary
Treasurer
all of whom shall be elected for one year by the directors at their first
meeting after the annual meeting of shareholders, and who shall hold
office until their successors are elected and qualified. Any two or more
offices may be held by the same person, except the offices of Chairman of
the Board and Chief Executive Officer and Secretary. In addition, there
shall be such Assistant Secretaries and Assistant Treasurers as the Board
may from time to time designate and appoint.
(2) Chairman of the Board and Chief Executive Officer: The Chairman
of the Board and Chief Executive officer shall preside at all meetings of
shareholders and directors, shall have general supervision of the affairs
of the Corporation, and shall perform all such other duties as are
incident to his office or are properly required of him by the Board.
(3) President and Chief Operating Officer: During the absence or
disability of the Chairman of the Board and Chief Executive officer, the
President and Chief Operating Officer shall exercise all the functions of
the Chairman of the Board and Chief Executive Officer. The President and
Chief operating Officer shall have such powers and discharge such duties
as may be assigned to him from time to time by the Board.
(4) Vice-Presidents: During the absence or disability of the
Chairman of the Board and Chief Executive officer and the President and
Chief Operating Officer, the Vice-Presidents in the order designated by
the Board, shall exercise all the functions of the Chairman of the Board
and Chief Executive officer and the President and Chief operating officer.
Each Vice-President shall have such powers and discharge such duties as
may be assigned to him from time to time by the Board.
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(5) Secretary and Assistant Secretaries: The Secretary shall issue
notices for all meetings except for notices for special meetings of the
shareholders and special meetings of the directors which are called by the
requisite number of shareholders or directors, shall keep minutes of all
meetings, shall have charge of the seal and the corporate books, and shall
make such reports and perform such other duties as are incident to his
office, or are properly required of him by the Board. The Assistant
Secretary, or Assistant Secretaries in the order designated by the Board,
shall perform all of the duties of the Secretary during the absence or
disability of the Secretary, and at other times may perform such duties as
are directed by the Chairman of the Board and Chief Executive Officer or
the Board.
(6) Treasurer and Assistant Treasurers: The Treasurer shall have the
custody of all moneys and securities of the corporation and shall keep
regular books of account. He shall disburse the funds of the corporation
in payment of the just demands against the corporation or as may be
ordered by the Board taking proper vouchers for such disbursements, and
shall render to the Board from time to time as may be required of him an
account of all his transactions as Treasurer and of the financial
condition of the corporation. He shall perform such other duties incident
to his office or that are properly required of him by the Board. The
Assistant Treasurer, or Assistant Treasurers in the order designated by
the Board, shall perform all of the duties of the Treasurer in the absence
or disability of the Treasurer, and at other times may perform such other
duties as are directed by the Chairman of the Board and Chief Executive
Officer or the Board.
(7) Delegation: In the case of absence or inability to act of any
officer of the corporation and of any person herein authorized to act in
his place, the Board may from time to time delegate the powers or duties
of such officer to any other officer or any director or other person whom
it may select.
(8) Vacancies: Vacancies in any office arising from any cause may be
filled by the Board at any regular or special meeting of the Board.
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(9) Other Officers: The Board may appoint such other officers and
agents as it shall deem necessary or expedient, who shall hold their
offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board.
(10) Loans: No loans shall be made by the corporation to any
officer, unless first approved by the holders of two-thirds of the voting
shares.
(11) Term - Removal: The officers of the corporation shall hold
office until their successors are chosen and qualify. Any officer or agent
elected or appointed by the Board may be removed at any time, with or
without cause, by the affirmative vote of a majority of the whole Board,
but such removal shall be without prejudice to the contract rights, if
any, of the person so removed.
(12) Bonds: The Board may, by resolution, require any and all of the
officers to give bonds to the corporation, with sufficient surety or
sureties, conditioned for the faithful performance of the duties of their
respective offices, and to comply with such other conditions as may from
time to time be required by the Board.
Following discussion of these amendments, upon motion duly made, seconded
and unanimously carried, it was:
RESOLVED, that said amendments be, and are hereby, adopted and
ARTICLE V of the Corporation's Bylaws is hereby amended accordingly.
The Minutes of the meeting of May 12, 1981, of the Board of Directors were
read and approved and a resolution of September 3, 1981, which had been passed
at the Special meeting of the Board of Directors, in regard to the sale of Sound
Refining, Inc., to Crysen Corporation, was read and
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upon motion duly made, seconded and carried, said resolution was approved and
ratified.
The Chairman then declared that the next order of business would be the
election of officers to hold office until the next annual Directors' meeting and
until new officers have been elected and assumed office.
L. C. Macomber thereupon nominated the following persons for the
respective offices set opposite their names:
Chairman of the Board and
Chief Executive officer Ted W. Palmer
President and Chief
Operating Officer Robert A. Kirchner
Vice President - Administration L. C. Macomber
Vice President - Marketing James Harris
Vice President - Manufacturing and
Maintenance Wayne H. Ostermiller
Vice President - Engineering and
Technical Services Jarl Opgrande
Secretary L. C. Macomber
Treasurer Paul H. Hitchcock
The Chairman thereupon called for any further nominations for any of said
offices and, there being none, nominations were declared closed. Upon motion
duly made, seconded and unanimously carried, the Secretary was instructed to
cast a unanimous ballot for each of the nominees for his respective office.
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The Chairman then declared these officers to be duly elected to their
respective offices to hold office until the first Wednesday following Labor Day,
1982, and until their successors have been duly elected and qualified.
Thereupon, each of the elected officers present assumed his respective office.
Upon motion duly made, seconded and unanimous carried, Mike Liles, Jr.,
and W. R. Studley were each appointed as Assistant Secretaries, either being
authorized to perform all duties of the Secretary in his absence.
Upon motion duly made, seconded and unanimously carried, the following
resolution was adopted:
WHEREAS, the Salaried Employees of Sound Refining, Inc. participated
in the Connecticut General Pension Plan sponsored by Kalama Chemical, Inc.
prior to September 3, 1981, and
WHEREAS, Sound Refining, Inc., a wholly owned Subsidiary of Kalama
Chemical, Inc. was sold to Crysen Corporation, effective September 3,
1981, and
WHEREAS, it is the desire of Kalama Chemical, Inc. that the
aforesaid employees maintain all of the benefits accrued to them through
participation in the, Connecticut General Pension Plan.
NOW THEREFORE BE IT RESOLVED, that all Salaried Employees of Sound
Refining, Ind., fully employed by Sound at the date of closing be and are
hereby vested in all Company distributions at the date of closing, with
all rights and privileges attached thereto.
Upon motions duly made, seconded and unanimously carried, the following
resolutions were adopted:
28
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RESOLVED, that the salary of Ted W. Palmer, Chairman of the Board
and Chief Executive Officer of this Corporation, be, and it is hereby,
increased ten percent (10%), with such increase to be retroactive to July
1, 1981. (Action on this Resolution was taken in the absence of the
Chairman of the Board and Chief Executive officer and with the President
and Chief Operating officer presiding.)
RESOLVED, that Edward L. White and Thomas E. Copeland be, and they
are hereby, designated as a Compensation Committee to report at the next
meeting of the Board of Directors.
RESOLVED, that a cash dividend of two and one-half cents
(2-1/2(cent)) per share be paid by the Corporation on September 19, 1981,
to all sharesholders of record as of September 9, 1981, including those
holding Voting Trust Certificates.
RESOLVED, that the compensation for Directors who are not employees
of the Corporation shall be the sum of Six Thousand Dollars ($6,000.00)
per year, plus Two Hundred Fifty Dollars ($250.00) per day while engaged
in working on the affairs of the Corporation, except for the day of the
annual meeting together with an additional one Thousand Dollars
($1,000.00) for each committee assignment and together with all necessary
expenses incurred.
A discussion was then had in regard to the negotiations concerning the
Columbia Bark Project located at Nanaimo, British Columbia. While the Board
expressed a continuing interest in the project, it felt that it had inadequate
information in regard to this proposal to take any action at this time.
L. C. Macomber requested that the Board approve a board resolution
regarding an account at Rainier National Bank Longview Branch, and upon motion
duly made, seconded and
29
<PAGE>
unanimously carried, said resolution, a copy of which is attached to these
Minutest was adopted.
Upon motion duly made, seconded and carried, the next Board Meeting was
set for Thursday, November 5, 1991, in Seattle, Washington.
30
<PAGE>
There being no further business to come before the meeting, the same was
thereupon adjourned at 5:50 p.m.
/s/ L. C. Macomber
---------------------------
Secretary
ATTEST:
/s/ Ted W. Palmer
- ---------------------------
Chairman of the Board
31
<PAGE>
MINUTES OF MEETING OF BOARD OF DIRECTORS
OF
KALAMA CHEMICAL, INC.
A regular quarterly meeting of the Board was called to order by the
Chairman of the Board at 10:00 a.m., current local time, on May 12, 1983, at the
corporate offices, Bank of California Center, Seattle, Washington. All members
of the Board were present. Also present was F. J. Gardner, President of
Lawrason's Chemicals, Limited. The Minutes of the regular quarterly meeting of
February 10, 1983 and the Minutes of the Special Meeting of the Board on April
15, 1983, were, upon motion duly made, seconded and carried, approved as
published.
Upon motions duly made, seconded and unanimously carried, the following
Resolutions were adopted:
1. Amendment to Section 1 of ARTICLE IV of the Bylaws
Pursuant to Section (2) of ARTICLE IV of the Bylaws, it was,
RESOLVED, that Section (1) of said Article be, and is hereby,
amended to read as follows:
1. Number and Powers: The management of all the affairs, property and
interests of the Corporation shall be vested in a Board of Directors,
consisting of seven persons, who shall be elected for a term of one year,
and shall hold office until their successors are elected and qualified.
Directors need not be shareholders or residents of the State of
Washington. In addition to the powers and authorities by these Bylaws and
the
32
<PAGE>
Articles of Incorporation expressly conferred upon it, the Board of
Directors may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Articles of
Incorporation or by the Bylaws directed or required to be exercised or
done by the shareholders.
2. Election of Additional Directors
By virtue of the foregoing amendment to the Bylaws, it was
RESOLVED that an additional Director be forthwith elected to the
Board. The Chairman declares nominations open for such Director. Thereupon
Raymond H. Marks, Senior Vice President of Tenneco, Inc., was duly
nominated. There being no further nominations, upon motion duly made,
seconded and unanimously carried, the Secretary was instructed to cast a
unanimous ballot for Mr. Marks. He thereupon took the necessary oath of
office and assumed his position as one of the Directors of the Corporation
to hold office until the next election of Directors by the shareholders.
3. Adoption of Bank Resolutions
RESOLVED that the RainierBank resolution for origination of
electronic transfer of funds and the resolution of the Mellon Bank, N.A.,
a true and correct copy of each of said resolutions being attached to
these minutes and by this reference made a part hereof.
4. Capital Expenditure - Fossil Fuel Heaters
RESOLVED that a capital expenditure of not to exceed $500,000.00 be
made to improve the efficiency of the existing fossil fuel heaters at the
Kalama plant provided that the Executive Committee determines such
expenditure to be warranted.
33
<PAGE>
There being no further business, the meeting was duly adjourned at 2:40
p.m.
/s/ L. C. Macomber
---------------------------
Secretary
ATTEST:
/s/ Ted W. Palmer
- ---------------------------
Chairman of the Board
34
<PAGE>
MINUTES OF SPECIAL MEETING OF
BOARD OF DIRECTORS
KALAMA CHEMICAL, INC.
In accordance with the bylaws of Kalama Chemical, Inc., a Washington
Corporation, and pursuant to the call of the Chairman, with notice having been
given, a special meeting of the Board of Directors was held at 8:45 A.M. PDT on
September 20, 1984 at the Company offices in Seattle, Washington. Present in
person at the meeting were Ted W. Palmer, Chairman, and L.C. Macomber. Present
by speaker phone so all could hear, were Robert A. Kirchner, Wayne H.
Ostermiller, Thomas E. Copeland, and Edward L. White. Absent was Raymond H.
Marks.
Upon motion duly made, seconded and unanimously passed, the following
resolutions were adopted:
1. Sale of Lawrason's Chemicals, Ltd.
RESOLVED, that the actions of the Executive Committee of the Corporation
in negotiating the sale of 80% of the outstanding stock of Lawrason's Chemicals,
Ltd. to Robert E. Karns and/or a corporation to be formed by him, be, and are
hereby, ratified and approved; and,
RESOLVED FURTHER, that the Chairman or the President of the Corporation
and the Secretary, if necessary, be, and they are hereby, empowered and directed
to do such acts and sign such documents an behalf of the Corporation as may be
necessary or desirable to consummate said sale.
2. Amendment to Bylaws - Creating New Vice Presidential Post.
RESOLVED, that Section (1) of ARTICLE V of the bylaws of the Corporation
be, and is hereby, amended to read as follows:
(1) Designations: The officers of the corporation shall be a:
Chairman of the Board and Chief Executive Officer
President and Chief operating Officer
35
<PAGE>
Vice President - Administration
vice President - Engineering and Technical Services
Vice President - Finance
Vice President - Manufacturing and Maintenance
Vice President - Marketing
Secretary
Treasurer
all of whom shall be elected for one year by the directors at their first
meeting after the annual meeting of shareholders, and who shall hold office
until their successors are elected and qualified. Any two or more offices may be
held by the same person, except the offices of Chairman of the Board and Chief
Executive Officer and Secretary. In addition, there shall be such Assistant
Secretaries and Assistant Treasurers as the Board may from time to time
designate and appoint.
3. Appointment of Vice President - Finance and Treasurer.
RESOLVED, that the Board does hereby accept the resignation of Paul H.
Hitchcock from the position of Treasurer and does hereby elect John P. Fairman
to fill the posts of Vice President - Finance and Treasurer, to hold those
offices until the next annual Director meeting and until new officers have been
elected and assumed office
There being no further business, the meeting was duly adjourned at 9:15 A.M.
PDT.
/s/ L. C. Macomber
---------------------------
Secretary
Attest:
/s/ Ted W. Palmer
- ---------------------------
Chairman
36
<PAGE>
MINUTES OF MEETING OF BOARD OF DIRECTORS
OF
KALAMA CHEMICAL, INC.
A regular quarterly meeting of the Board was called to order by the Chairman of
the Board at 3:00 P.M. current local time, on September 17, 1985 at the Kalama
Plant, Kalama, Washington. All members of the Board were present. Upon motion
duly made, seconded and unanimously carried, the minutes of the regular meeting
of the Board held on July 17, 1985 and the special meeting of the Board held on
August 2, 1985 were approved as published.
The financial results of the Corporation's operations for the months of July and
August, 1985 were reviewed and discussed with the Board.
Upon motions duly made, seconded, and unanimously carried, the following
Resolutions were adopted:
1. RESIGNATION OF EDWARD L. WHITE
RESOLVED, that the Board of Directors of Kalama Chemical, Inc. hereby
accepts with regret the resignation of EDWARD L. WHITE and expresses its
appreciation for his loyal and faithful service and his valuable
contributions to the Company during his many years as a member of the
Board.
2. AMENDMENT TO BYLAWS
Following discussion and pursuant to Section (2) of Article IV of the
bylaws, it was RESOLVED, that Section (1) of said Article be, and is
hereby, amended to read as follows:
1. Numbers and Powers: The management of all the affairs, property and
interests of the Corporation shall be vested in a Board of Directors,
consisting of five persons, who shall be elected for a term of one year,
and shall hold office until their successors are elected and qualified.
Directors need not be shareholders
37
<PAGE>
or residents of the State of Washington. In addition to the powers and
authorities by these Bylaws and the Articles of Incorporation expressly
conferred upon it, the Board of Directors may exercise all such lawful
acts and things as are not by statute or by the Articles of Incorporation
or by the Bylaws directed or required to be exercised or done by the
shareholders.
3. TOLUENE CONTRACT - YUKONG, LTD.
RESOLVED, that the actions of Robert A. Kirchner in negotiating a two year
contract for the purchase of toluene from Yukong, Ltd. , (formerly Korea
Oil Corporation) in quantities of 10,000 to 15,000 tons per year are
hereby confirmed, ratified, and approved.
4. TOLUENE CONTRACT - JAIA/MITSUSISHI CORPORATION
RESOLVED, that Robert A. Kirchner is hereby authorized to negotiate and
sign a contract with JAIA and/or Mitsubishi Corporation for future
purchases of toluene in amounts to be determined.
5. DIVIDEND DECLARATION
RESOLVED, that a cash dividend of two and one-half cents ($0.025) per
share be paid by the Corporation on October 1, 1985 to all shareholders of
record as of September 17, 1985.
Following discussion, the Board rescheduled its November meeting from Tuesday,
November 12 to Thursday, November 14, to be held at the corporate office in
Seattle.
38
<PAGE>
There being no further business, the meeting was duly adjourned at 5:15 P.M.
/s/ L. C. Macomber
---------------------------
Secretary
Attest:
/s/ Ted W. Palmer
- ---------------------------
Chairman of the Board
39
<PAGE>
MINUTES OF MEETING OF BOARD OF DIRECTORS
OF
KALAMA CHEMICAL, INC.
Pursuant to call by the President and to written notice on February 3,
1987, a regular meeting of the Board of Directors of the Corporation was held at
10:25 AM, February 18, 1987 at the headquarters of the Corporation, 1110 Bank of
California Center, Seattle, Washington. All members of the Board were present.
Ted W. Palmer acted as Chairman of the meeting and L. C. Macomber acted as
Secretary.
After calling the meeting to order the Chairman asked that the minutes of
the last 3 meetings be read, which was done. Upon motion duly made, seconded and
unanimously carried, the minutes of the regular Board meeting of November 11,
1986, the special Board meetings of November 14, 1986 and December 15, 1986 were
approved as read.
The Chairman then indicated that the first item of business was
consideration of amending the Bylaws of the Corporation to increase the number
of directors on the Board from five to eight. Following discussion, and upon
motion duly made, seconded and unanimously carried, the following resolution-was
duly adopted:
"RESOLVED: That Section (1) of Article IV of the Bylaws be, and is hereby,
amended to read as follows:
"1. Numbers and Powers: The management of all the affairs, property
and interests of the Corporation shall be vested in a Board of
Directors, consisting of eight persons, who shall be elected for a
term of one year, and shall hold office until their successors are
elected and qualified. Directors need not be shareholders or
residents of the State of Washington. In addition to the powers and
authorities by these Bylaws and the Articles of Incorporation
expressly conferred upon it, the Board of Directors may exercise all
such lawful acts and things as are not statute or by the Bylaws
directed or required to be exercised or done by the shareholders."
40
<PAGE>
The Chairman indicated the next item of business to be consideration of
the appointment of 3 additional Directors to fill the vacancies created by the
amendment to the Bylaws. L. C. Macomber nominated John G. Cochrane, William C.
Brown and Fred Shelton. There being no further nominations, and upon motion duly
made and seconded, said persons were unanimously appointed to fill the vacancies
until their successors be elected and qualified.
The Chairman announced that the next item of business on the agenda was a
report concerning the Corporation's financial affairs. John P. Fairman presented
selected financial highlights reflecting the company's financial position at
12/31/86 compared to 6/30/86. Mr. Fairman also reviewed with the Board the
Consolidated Statement of Income for the first 6 months of the fiscal year
ending 12/31/86 as compared to budget for the period. Discussion ensued on
various tax matters and their potential impact on financial results for the
year. He further informed the Board that with regard to the present status of
negotiations with Gemini Chemical in the disposition of Kalamals 50% interest in
Seville Trading Co., Limited, an agreement has been drawn and furnished to
Gemini for review and comment. Various Directors expressed their desire to have
the matter concluded by March 31, 1987.
The Chairman announced that the next item of business was consideration of
authorizing the establishment of an Institutional Fund account with Merrill
Lynch. Following discussion, and upon motion duly made, seconded and unanimously
carried, the following resolution was adopted:
"RESOLVED, that the Merrill Lynch Pierce Fenner & Smith form of
Corporate authorization for opening and maintaining an account, a
true and correct copy of the same being attached to these minutes
and by reference made a part hereof, be, and is hereby, adopted and
the Secretary of the Corporation is authorized to execute said
resolution for and on behalf of the Corporation, and
"FURTHER RESOLVED, that any two of the following persons: T. W.
Palmer, Chairman, R. A. Kirchner, President, J. P. Fairman, Vice
President Finance and L. C. Macomber, Vice President Administration
are hereby authorized to execute transactions
41
<PAGE>
(limited to investment grade issues) as from time to time may be
appropriate".
The Chairman stated that the next item of business was consideration of a
Resolution amending 401(k) Tax Deferred Savings Plan to permit company matching
contributions on certain voluntary investment plan deposits. After discussion,
and upon motion duly made, seconded and unanimously carried, the following
resolution was duly adopted:
"WHEREAS: The 1986 Tax Act has limited salary deferrals for
participants in 401(k) plans to a maximum of $7,000 per year, and
"WHEREAS: Because of that limitation, some employees could be
precluded from participating to the maximum extent possible in the
company match of 50% of the lst 6% of pay, now therefore, "BE IT
RESOLVED: That employee contributions in excess of the $7,000 salary
deferral limit will be classified as Voluntary Investment Plan
deposits eligible or the company matching contributions as described
above, and "FURTHER RESOLVED, that all other terms and conditions of
the plan remain unchanged."
The Chairman announced that the final item on the agenda was consideration
of the declaration of a quarterly dividend. After discussion, and upon motion
duly made, seconded and unanimously carried the following resolution was duly
adopted:
"RESOLVED, that a cash dividend of ten cents (.10) per share be paid
by the Corporation on March 2, 1987 to shareholders of record as of
February 18, 1987."
42
<PAGE>
There being no further business, the meeting was upon motion adjourned at
2:25 PM.
/s/ L. C. Macomber
---------------------------
Secretary
ATTEST:
/s/ Ted W. Palmer
- ---------------------------
Chairman
43
<PAGE>
MINUTES OF ANNUAL SHAREHOLDERS MEETING
of
KALAMA CHEMICAL, INC.
Pursuant to notice, the Annual Meeting of Shareholders of the above
Corporation was called to order by the Chairman of the Board at 3:30 P.M. local
time on September 9, 1987 at the Meridien Hotel, 845 Burrard St., Vancouver,
B.C., Canada. All Shareholders were mailed a notice of said meeting as
evidenced by the Affidavit of Notice executed by the Secretary of the
Corporation, which Affidavit is attached to these Minutes and by this reference
made a part hereof.
The Chairman of the Board declared a quorum to be present and pronounced
the meeting officially open. Upon motion duly made, seconded, and unanimously
passed, the Minutes of the Last Annual Meeting dated September 17, 1986 were
approved as published.
The Chairman of the Board then delivered his Annual Report for the fiscal
year 1987, a copy of said report having been handed to all shareholders of the
Corporation.
The Chairman then declared the next order of business was the election of
a Board of Directors and called for nominations for Seven (7) directors to serve
for one year and until their successors are elected and qualified. Thereupon,
Robert A. Kirchner, on behalf of management, nominated the following persons:
Ted W. Palmer, Robert A. Kirchner, L. C. Macomber, Wayne H. Ostermiller. John G.
Cochrane, William C. Brown and Frederick J. Shelton. The Chairman of the Board
called for further nominations, but, there being none, it was moved and
seconded that nominations be closed. The question being called for, by voice
vote, all Shareholders present, voted "aye". The Chairman of the Board declared
the motion carried..
Thereupon, a motion was made and seconded, that the Secretary be
instructed to cast a unanimous ballot for the election of said Board of
Directors of the Corporation. The question being called for, all Shareholders
present, voted "aye". The Chairman of the Board thereupon declared the motion
passed and stated that said Board of Directors would
44
<PAGE>
constitute the Board until the next Annual Meeting and until their successors
had been duly elected and qualified.
The Chairman then stated that the next order of business was consideration
of proposed amendments to the Articles of Incorporation and Bylaws of the
Corporation.
Following discussion and upon motions duly made, seconded and unanimously
passed, the following resolutions were adopted:
I.
RESOLVED: That the Articles of Incorporation of the Corporation be
amended to eliminate the liability of each director of the
Corporation to the Corporation or its shareholders for monetary dam-
ages for conduct as a director to the extent authorized by
Washington law; and
BE IT FURTHER RESOLVED: That, to implement the foregoing resolution,
the Articles of Incorporation of the Corporation be hereby amended
by inserting after ARTICLE VII thereof a new ARTICLE VIII to read as
follows:
"ARTICLE VIII
"Limitation on Liability of Directors
"No director of the corporation shall be personally liable to the
corporation or its shareholders for, monetary damages for his or her conduct as
a director on or after the date this Article becomes effective, except for (i)
acts or omissions that involve intentional misconduct or a knowing violation of
law by the director, (ii) approval of certain distributions or loans in
violation of RCW 23A.08.450, or (iii) any transaction from which the director
will personally receive a benefit in money, property or services to which the
director is not legally entitled. If, after approval by shareholders of this
Article, the Washington Business Corporation Act is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Washington Business
Corporation Act, as so amended. Any amendment to or repeal of this
45
<PAGE>
Article shall not adversely affect any right or protection of a director of the
corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment of repeal."
II.
RESOLVED: That the Bylaws of the Corporation be amended to expand
the power of the Corporation to indemnify its directors and officers
to the extent authorized by Washington law; and
BE IT FURTHER RESOLVED: That, to implement the foregoing resolution,
the proposed amendment to the Bylaws of the Corporation presented to
this meeting as Exhibit A be hereby adopted and approved.
III.
RESOLVED: That the form of Indemnity Agreement attached hereto as
Exhibit B be and is hereby accepted and approved;
BE IT FURTHER RESOLVED: That the officers of the Corporation be
hereby authorized and directed (a) to do such further acts and deeds
as may be necessary or desirable to implement the above Amendment to
the Articles of Incorporation, including the filing of appropriate
Article of Amendment with the Secretary of State, and (b) to enter
into Indemnity Agreements on behalf of the Corporation with each of
the Corporation's directors; and
BE IT FURTHER RESOLVED: That the Secretary of this meeting be hereby
directed to file said Exhibits A and B with the official minutes of
this meeting.
46
<PAGE>
There being no further business to come before the meeting, upon
motion made, seconded and unanimously carried, the meeting was adjourned at 4:00
P.M.
/s/ L. C. Macomber
---------------------------
Secretary
ATTEST:
/s/ Ted W. Palmer
- ---------------------------
Chairman
47
<PAGE>
KALAMA CHEMICAL, INC.
Notice of Annual Meeting of Shareholders
September 9, 1987
You are hereby notified that the annual meeting of the Shareholders of
Kalama Chemical, Inc., a Washington Corporation (the "Corporation") will be held
at 1:00 o'clock in the afternoon on Wednesday, September 9, 1987 at the Meridien
Hotel, 845 Burrard Street, Vancouver, B.C. for the purpose of considering and
acting upon the following matters:
1. The election of seven directors of the Corporation to serve for the
ensuing year and until their successors are elected and qualified;
2. The amendment of the articles of incorporation and bylaws of the
Corporation changing the standard of conduct for directors and broadening the
indemnification provisions of the Corporation's bylaws, all in accordance with
new legislation regarding corporations in the State of Washington; and
3. Such other matters, if any, which may properly come before the meeting.
By order of the Board of Directors
/s/ L. C. Macomber
---------------------------
L.C. Macomber, Secretary
DATED: August 24, 1987
48
<PAGE>
EXHIBIT A
AMENDMENT TO THE
BYLAWS
OF
KALAMA CHEMICAL, INC.
The Bylaws of the Corporation are hereby amended by striking out ARTICLE
IX thereof and substituting therefor a new ARTICLE IX to read as follows:
ARTICLE IX
Indemnification of Officers,
Directors, Employees and Agents
(1) Definitions:
As used in this Article:
(a) "Action" means any actual or threatened claim, suit or
proceeding, whether civil, criminal, administrative or investigative.
(b) "Another Enterprise" means a corporation (other than the
Corporation), partnership, joint venturer trusts association, committee,
employee benefit plan or other group or entity.
(c) "Corporation" means KALAMA CHEMICAL, INC. and any
predecessor to it and any constituent corporation (including any constituent of
a constituent) absorbed by the Corporation in a consolidation or merger.
(d) "Director or Officer" means each person who is serving or
who has served as a director or officer of the Corporation or, at the request of
the Corporation, as a director, officer, partners trustee, employee or agent of
Another Enterprise.
(e) "Indemnitee" means each person who was, is or is
threatened to be made a party to or is involved (including without limitation,
as a witness) in an Action
49
<PAGE>
because the person is or was a Director or Officer of the Corporation.
(f) "Loss" means loss, liability, expenses (including
attorneys' fees), judgments, fines, ERISA excise taxes or penalties and amounts
to be paid in settlement, actually and reasonably incurred or suffered by
Indemnitee in connection with an Action.
(2) Right to Indemnification: The Corporation shall indemnify and
hold each Indemnitee harmless against any and all Loss except for Losses arising
out of: (a) the Indemnitee's act or omissions finally adjudged to be intentional
misconduct or a knowing violation of law, (b) the Indemnitee's approval of
certain distributions or loans by such indemnitee which are finally adjudged to
be in violation of RCW 23A.08.450, or (c) any transaction in which it is finally
adjudged that the indemnitee personally received a benefit in money, property or
services to which the Indem-nitee was not legally entitled. Except as provided
in Section 4 of this Article, the Corporation shall not indemnify an Indemnitee
in connection with an Action (or part thereof) initiated by the indemnitee
unless such Action (or part thereof) was authorized by the board of directors of
the Corporation. If, after the effective date of this Article, the Washington
Business Corporation Act is amended to authorize further indemnification of
directors or officers, then Directors and officers of this Corporation shall be
indemnified to the fullest extent permitted by the Wash-ington Business
Corporation Act, as so amended.
(3) Burden of Proof, Procedure for Payment and Notification of
Shareholders:
(a) The Indemnitee shall be presumed to be entitled to
indemnification under this Article upon submission of a written claim (including
a claim for expenses incurred in defending any Action in advance of its final
disposition, where the undertaking in (b) below has been tendered to the
Corporation), and thereafter the Corporation shall have the burden of proof to
overcome the presumption that the Indemnitee is so entitled.
(b) The right to indemnification conferred in this Article
shall include the right to be paid by the Corporation all expenses (including
attorneys' fees) incurred in defending any Action in advance of its final
50
<PAGE>
disposition; provided, however, that the payment of such expenses in advance of
the final disposition of an Action shall be made upon delivery to the
Corporation of an undertaking, by or on behalf of such Director or Officer, to
repay all amounts so advanced if it shall ultimately be determined that such
Director or Officer is not entitled to be indemnified under this Article or
otherwise.
(c) Any indemnification of a director in accordance with this
Article, including any payment or reimbursement of expenses, shall be reported
to the shareholders with the notice of the next shareholders' meeting or prior
thereto in a written report containing a brief description of the proceeding
(4) Right of Indemnitee to Bring Suit: If a claim under this
Articles not paid in full by the Corporation within 60 days after a written
claim has been received by the Corporation, except in the case of a claim for
expenses incurred in defending a proceeding in advance of its final disposition,
in which case the applicable period shall be 20 days, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, to the extent successful in whole or in part, the Indemnitee
shall be entitled to be paid also the expense of prosecuting such claim. Neither
the failure of the Corporation (including its board of directors, its
shareholders or independent legal counsel) to have made a determination prior to
the commencement of such action that indemnification of or reimbursement or
advancement of expenses to the claimant is proper in the circumstances, nor an
actual determination by the Corporation (including its board of directors, its
shareholders or independent legal counsel) that the Indemnitee is not entitled
to indemnification or to the reimbursement or advancement of expenses, shall be
a defense to the action or create a presumption that the Indemnitee is not so
entitled.
(5) Nonexclusivity of Rights: The right to indemnification and the
payment of expenses incurred in defending an Action in advance of its final
disposition conferred in this Article shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Articles of Incorporation, Bylaws, agreement, vote of shareholders or
disinterested directors or otherwise.
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<PAGE>
(6) Insurance, Contracts and Funding: The Corporation may maintain
insurance, at its expenses to protect itself and any Director, Officer, employee
or agent of the Corporation or Another Enterprise against any expenses liability
or loss, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the Washington Business
Corporation Act. The Corporation may, without further corporate action, enter
into contracts with any Director or Officer of the Corporation in furtherance of
the provisions of this Article and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of credit)
to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Article.
(7) Indemnification of Employees and Agents of the Corporation: The
Corporation may by action of its board of directors from time to time, provide
indemnification and pay expenses in advance of the final disposition of an
Action to employees and agents of the Corporation with the same scope and effect
as the provisions of this Article with respect to the indemnification and
advancement of expenses of Directors and Officers of the Corporation or pursuant
to rights granted pursuant to, or provided by, the Washington Business
Corporation Act or otherwise.
(8) Contract Right: Rights of indemnification under this Article
shall continue as to an Indemnitee who has ceased to be a Director or Officer
and shall inure to the benefit of his or her heirs, executors and
administrators. The right to indemnification conferred in this Article shall be
a contract right upon which each Director or Officer shall be presumed to have
relied in determining to serve or to continue to serve as such. Any amendment to
or repeal of this Article shall not adversely affect any right or protection of
a Director or Officer of the Corporation for or with respect to any acts or
omissions of such Director or officer occurring prior to such amendment or
repeal.
(9) Severability: If any provision of this Article or any
application thereof shall be invalid, unenforce-able or contrary to applicable
law, the remainder of this Article, or the application of such provisions to
persons or circumstances other than those as to which it is held invalid,
unenforceable or contrary to applicable law, shall not
52
<PAGE>
be affected thereby and shall continue in full force and effect.
53
<PAGE>
KALAMA CHEMICAL, INC.
MINUTES OF ANNUAL DIRECTORS MEETING
June 19, 1990
The annual meeting of the Board of Directors of the Corporation was called to
order by Chairman William C. Brown at 1:20PM on June 19, 1990 at the offices of
Chatterton Petro-chemical Corporation, Delta, B.C. L.C. Macomber acted as
Secretary.
Present:
William C. Brown
Peter A. Chernizvsky
James W. Hudson
Robert A. Kirchner
L. C. Macomber
Wayne E. Ostermiller
Frederic J. Shelton
Absent: None
Minutes of Previous Meeting
Upon motion made, seconded and unanimously carried, the minutes of the annual
directors meeting of September 18, 1989 were approved is published.
Amendments to Bylaws
The Chairman stated that the first order of business would be consideration of
proposed amendments to the Corporation's bylaws, specifically Sections 1,2,3 and
4 of Article V and the addition of a new Section 5 of Article V.
There followed a brief discussion of the Corporation's officer designations and
the extent to which changes, additions, or modifications would be appropriate to
reflect the current operating structure.
Upon motion duly made, seconded and unanimously, carried, the following
resolutions were adopted.
54
<PAGE>
RESOLVED: that sections (1), (2), (3) and (4) of Article V of the bylaws Of the
Corporation be and they are hereby amended and Section (5) is added to read as
follows:
(1) Designations: the officers of the Corporation shall be a:
Chairman
President
Executive Vice President-Research & Business Development
Vice President-Administration
Vice President-Commercial Operations
Vice President-Engineering and Technical Services
Vice President-Finance
Vice President-Manufacturing & Maintenance
(2) Chairman: the Chairman shall preside at all meetings of
shareholders and directors and still perform all such other duties
as are consistent to his office.
(3) President: the President shall have general supervision of the
Corporation and during the absence or disability of the Chairman
shall exercise all of the functions of the Chairman. The President
shall have such powers and discharge such duties as may be assigned
to him from time to time by the Board.
(4) Executive Vice President: The Executive Vice President shall direct
all research activities and new product and process development. The
Executive Vice President shall have such powers and discharge such
duties as may be assigned to him from time to time by the Board.
(5) Vice Presidents: during the absence or disability of the President
or Executive Vice President, the Vice Presidents in the order
designated by the Board shall exercise all the functions of the
President and Executive Vice President. Each Vice President shall
have such powers and discharge such duties as may be assigned to him
from time to time by the Board.
RESOLVED: Pursuant to Section (9) of Article V of the bylaws of the Corporation,
there is hereby created the office of Executive Vice President with
responsibility for
55
<PAGE>
all research activities, new products and process development for this
Corporation and Chatcercon Petrochemical Corporation, a sister company.
Election of Officers
Following adoption of the amendments to the bylaws, the Chairman stated the next
order of business to be election of officers to hold office until the next
annual meeting of Directors and until new officers have been elected and assumed
office.
Upon motion duly made, seconded and unanimously carried, the following persons
were elected to the respective offices set opposite their names.
56
<PAGE>
Chairman William C. Brown
President Robert A. Kirchner
Executive Vice President-Research &
Business Development Frederic J. Shelton
Vice President-Administration &
Secretary L. C. Macomber
Vice President-Commercial Operations William M. Ashman
Vice President-Engineering & Technical
Services Jarl L. Opgrande
Vice President-Finance & Treasurer John P. Fairman
Vice President-Manufacturing &
Maintenance Wayne H. Ostermille
Vice President-Marketing James H. Harris
Thereupon each of the elected officers assumed his respective office.
Appointment of auditors
Upon motion duly made, seconded and unanimously carried the accounting firm of
Peat Marwick was appointed to furnish audit services to the Corporation for the
fiscal year of 1990.
There being no further business to come before the meeting, upon motion duly
made, seconded and unanimously carried, the meeting was adjourned at 1:30PM.
/s/ L. C. Macomber
- --------------------------- ---------------------------
Chairman Secretary
- ----------------
Date
57
<PAGE>
KALAMA CHEMICAL, INC.
Minutes of Annual Shareholders Meeting
January 18, 1993
Pursuant to notice, the annual meeting of shareholders of the above Corporation
was called to order by Chairman Wil-liam C. Brown at 2:15PM local time on
January 18, 1993 at the offices of B.C. Sugar, 123 Rogers Street, Vancouver,
B.C. Shareholders representing 100% of the outstanding shares of the Corporation
were present.
Upon motion duly made, seconded and unanimously passed, the minutes of the last
annual meeting dated January 15, 1992 were approved as published.
The Chairman declared the first order of business to be consideration of an
amendment to decrease the number of directors on the Board of Directors to
three. Following discussion and upon motion duly made, seconded and unanimously
carried,
IT WAS RESOLVED:
That Section (1) of Article IV of the bylaws be and is hereby amended to
read as follows:
"Numbers and Powers: The management of all the affairs, property and
interests of the Corporation shall be vested in a Board of Directors, consisting
of three persons, who shall be elected for a term of one year, and shall hold
office until their successors are elected and qualified. Directors need not be
shareholders or resident of the State of Washington. In addition to the powers
and authorities by these Bylaws and the Articles of Incorporation expressly
conferred upon it, the Board of Directors may exercise all such lawful acts and
things as are not statute or by the Bylaws directed or required to be exercised
or done by the shareholders."
Upon motion duly made, seconded and unanimously the following persons were
elected to serve as directors of the Corporation until the next annual meeting
and until their successors have been elected and qualified.
58
<PAGE>
William C. Brown
James W. Hudson
Robert A. Kirchner
There being no further business to come before the meeting, upon motion duly
made, seconded and unanimously carried, the meeting was adjourned.
/s/ William C. Brown /s/ L. C. Macomber
- --------------------------- ---------------------------
Chairman Secretary
25/02/93
- ----------------
Date
59
<PAGE>
CERTIFICATE OF INCORPORATION
OF
FREEDOM TEXTILE CHEMICALS CO.
1. NAME. The name of the corporation is Freedom Textile Chemicals
Co. (the "Corporation").
2. REGISTERED OFFICE AND AGENT. The address of the registered office
of the Corporation in the State of Delaware is Corporation Trust Center, 1209
Orange Street, the City of Wilmington, County of New Castle, Delaware 19801. The
name of its registered agent at such address is The Corporation Trust Company.
3. PURPOSE. The nature of the business or purpose to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware (the
"DGCL").
4. AUTHORIZED CAPITAL STOCK. The amount of the total authorized
capital stock of the Corporation is $5,950,000, divided into (a) 480,000 shares
of Common Stock, $1.25 par value per share, (b) 2,800 shares of Series A
Preferred Stock, $1,000.00 par value per share (the "Series A Preferred Stock"),
and (c) 2,550 shares of Series B Preferred Stock, $1,000.00 par value per share
<PAGE>
(the "Series B Preferred Stock") (the Series A Preferred Stock and the Series B
Preferred Stock are sometimes collectively hereinafter referred to as the
"Preferred Stock.")
(a) COMMON STOCK. The preferences, rights, qualifications,
limitations and restrictions of the Common Stock are as follows:
(i) Voting Rights. The voting power shall be vested
exclusively in the Common Stock.
(ii) Dividends. The holders of the Common Stock shall
not be entitled to receive cash dividends until the Series A
Preferred Stock has been redeemed in full as declared in subsection
4(b)(iv) of this Certificate of Incorporation.
(iii) Repurchase or Redemption. In no event shall any
Common Stock be purchased, redeemed or otherwise acquired by the
Corporation until the Series A Preferred Stock has been redeemed in
full as declared in subsection 4(b)(iv) of this Certificate of
Incorporation.
(iv) Prior Rights of Preferred. The Common Stock shall
be subject at all times to
2
<PAGE>
the prior rights of the Preferred Stock as declared in this
Certificate of Incorporation.
(b) SERIES A PREFERRED STOCK. The preferences, rights,
qualifications, limitations and restrictions of the Series A Preferred
Stock are as follows:
(i) Dividends. The holders of shares of the Series A
Preferred Stock shall be entitled to receive, from funds of the
Corporation legally available therefor, cash dividends at the rate
of 8.5% per annum, payable semi-annually on dates to be fixed by the
Board of Directors, with proper adjustment for any dividend period
which is less than a full half. The dividends on the Series A
Preferred Stock shall be cumulative and shall begin to accrue on the
date commencing six months from the date of issuance of a
certificate or certificates for said stock. Dividends not paid when
due shall earn interest at 8.5% compounded semi-annually which
interest shall be due and payable upon payment of such dividend.
(ii) Liquidation Preference. In the event of the
liquidation, dissolution or wind-
3
<PAGE>
ing up (whether voluntary or involuntary) of the Corporation, the
holders of shares of the Series A Preferred Stock shall be entitled
to receive, out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus or
earnings, the par value per share for every share of their holdings
of Series A Preferred Stock, and all unpaid dividends accrued
thereon, before any cash payment is made to the holders of the
Series B Preferred Stock or the Common Stock; and after the payment
to the holders of the Series A Preferred Stock as hereinbefore
provided, the remaining assets and funds of the Corporation shall be
divided and paid to the holders of the Series B Preferred Stock and
the Common Stock as provided herein according to their respective
shares. After payment of the full amount to which they are entitled
as provided by the foregoing provisions, the holders of shares of
the Series A Preferred Stock shall not be entitled to any further
right or claim to any of the remaining assets of the Corporation.
If, upon any liquidation, dissolution or
4
<PAGE>
winding up of the Corporation, the assets distributable among the
holders of the Series A Preferred Stock shall be insufficient to
permit the payment in full to the holders of the Series A Preferred
Stock of all preferential amounts payable to all such holders, then
the entire assets of the Corporation thus distributable shall be
distributed ratably among the holder of the Series A Preferred Stock
in proportion to the respective amounts that would be payable per
share if such assets were sufficient to permit payment in full.
Neither the consolidation nor merger of the Corporation with or into
any other corporation, nor any sale, lease, exchange or conveyance
of all or any part of the property, assets or business of the
Corporation, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this subsection
(ii).
(iii) Optional Redemption. The Corporation may, at any
time and from time to time, at the option and upon resolution of the
Board of Directors, redeem the whole or any
5
<PAGE>
part of the outstanding Series A Preferred Stock on any dividend
payment date after the issuance thereof, by paying $1,000.00 for
each share thereof, together with a sum equivalent to all unpaid
dividends accrued thereon (including compounding thereon). If less
than all the shares of Series A Preferred Stock are to be redeemed,
the shares to be redeemed shall be selected by lot or pro rata in
such manner as the Board of Directors shall determine. The holders
of shares of Series A Preferred Stock called for redemption shall
not, from and after the date fixed for the redemption of such stock,
possess or exercise any rights as stockholders except the right to
receive from the Corporation the redemption price of such shares,
without interest, upon the surrender thereof. A notice of such
redemption shall be mailed by the Corporation, postage prepaid, not
less than 30 nor more than 60 days prior to the date specified in
such notice as the redemption date, addressed to the respective
holders of record of the shares of Series A Preferred Stock to be
redeemed at their respective ad-
6
<PAGE>
dresses as the same shall appear on the stock transfer records of
the Corporation. Series A Preferred Stock called and redeemed shall
not thereafter be reissued but shall be forthwith canceled.
(iv) Mandatory Redemption. Each share of Series A
Preferred Stock shall be redeemed at the price of $1,000.00 per
share, plus all accumulated dividends unpaid to the date of
redemption (including compounding thereon), at the earlier of either
(A) the expiration of 10 years from the date of its issue, (B) any
change in ownership of fifty-one percent (51%) or more of the
outstanding voting stock of the Corporation or (C) the sale of all
or substantially of the assets of the Corporation. Notice shall be
mailed 30 days before the date of redemption to each holder of
record of the Series A Preferred Stock at his address as the same
shall appear on the stock transfer records of the Corporation.
(v) Voting Rights. Except as otherwise required by
law, the holders of shares of the Series A Preferred Stock shall
have no
7
<PAGE>
special voting rights and their consent shall not be required for
the taking of any corporation action.
(vi) Payment Restrictions. Until the Series A Preferred
Stock has been redeemed in full as declared in subsection 4(b)(iv)
of the Certificate of Incorporation, the Corporation shall pay
management fees to stockholders and affiliates only up to an amount
equal to $300,000, which amount may increase by five percent (5%)
annually.
(vii) Appointment Rights. In the event the Corporation
fails to make three consecutive dividend payments to the holders of
the Series A Preferred Stock as declared herein, the holders of the
Series A Preferred Stock shall be entitled to appoint
representatives of the Corporation's board of directors equal to
twenty percent (20%) of the voting membership of the board.
(c) SERIES B PREFERRED STOCK. The preferences, rights,
qualifications, limitations and restrictions of the Series B Preferred
Stock are as follows:
8
<PAGE>
(i) Dividends. Subject to the limitations herein
contained, Series B Preferred Stock shall be entitled to receive,
from funds of the Corporation legally available therefor, cash
dividends at the rate of 10% per annum, payable quarterly on dates
to be fixed by the Board of Directors, with proper adjustment for
any dividend period which is less than a full quarter. The dividends
on the Preferred Stock shall be cumulative and shall begin to accrue
on the date commencing three months from the date of issuance of a
certificate or certificates for said stock. The holders of the
Series B Preferred Stock shall not be entitled to receive cash
dividends until the Series A Preferred Stock has been redeemed in
full as declared in subsection 4(b)(iv) of this Certificate of
Incorporation.
(ii) Liquidation Preference. In the event of the
liquidation, dissolution or winding up (whether voluntary or
involuntary) of the Corporation, the holders of shares of the Series
B Preferred Stock shall be entitled to receive, out of the assets of
the Corporation
9
<PAGE>
available for distribution to its stockholders, whether from
capital, surplus or earnings, the par value per share for every
share of their holdings of Series B Preferred Stock, and all unpaid
dividends accrued thereon, before any payment is made to the holders
of the Common Stock, but after all payments are made to the holders
of the Series A Preferred Stock. After the payment to the holders of
the Preferred Stock as hereinbefore provided, the remaining assets
and funds of the Corporation shall be divided and paid to the
holders of the Common Stock according to their respective shares.
After payment of the full amount to which they are entitled as
provided by the foregoing provisions, the holders of shares of the
Series B Preferred Stock shall not be entitled to any further right
or claim to any of the remaining assets of the Corporation. If, upon
any liquidation, dissolution or winding up of the Corporation, the
assets distributable among the holders of the Series B Preferred
Stock shall be insufficient to permit the payment in full to the
holders of the Series B Preferred Stock
10
<PAGE>
of all preferential amounts payable to all such holders, then the
entire assets of the Corporation thus distributable shall be
distributed ratably among the holders of the Series B Preferred
Stock in proportion to the respective amounts that would be payable
per share if such assets were sufficient to permit payment in full.
Neither the consolidation nor merger of the Corporation with or into
any other corporation, nor any sale, lease, exchange or conveyance
of all or any part of the property, assets or business of the
Corporation, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this subsection
(ii).
(iii) Optional Redemption. The Corporation may, at any
time and from time to time, at the option and upon resolution of the
Board of Directors, redeem the whole or any part of the outstanding
Series B Preferred Stock on any dividend payment date after the
issuance thereof, by paying $1,000.00 for each share thereof,
together with a sum equivalent to all unpaid dividends accrued
thereon. If
11
<PAGE>
less than all the shares of Series B Preferred Stock are to be
redeemed, the shares to be redeemed shall be selected by lot or pro
rata in such manner as the Board of Directors shall determine. The
holders of shares of Series B Preferred Stock called for redemption
shall not, from and after the date fixed for the redemption of such
stock, possess or exercise any rights as stockholders except the
right to receive from the Corporation the redemption price of such
shares, without interest, upon the surrender thereof. A notice of
such redemption shall be mailed by the Corporation, postage prepaid,
not less than 10 nor more than 60 days prior to the date specified
in such notice as the redemption date, addressed to the respective
holders of record of the shares of Series B Preferred Stock to be
redeemed at their respective addresses as the same shall appear on
the stock transfer records of the Corporation. Preferred Stock
called and redeemed shall not thereafter be reissued but shall be
forthwith canceled.
12
<PAGE>
(iv) Voting Rights. Except as otherwise required by law,
the holders of shares of the Series B Preferred Stock shall have no
special voting rights and their consent shall not be required for
the taking of any corporate action.
(v) Prior Rights of Series A Preferred Stock. The
Series B Preferred Stock shall be subject at all times to the prior
rights of the Series A Preferred Stock as declared in this
Certificate of Incorporation. 5. BY-LAWS. In furtherance and not in
limitation of the powers conferred by statute, the Board of
Directors is expressly authorized to adopt, alter or repeal the
by-laws of the Corporation.
6. PERSONAL LIABILITY. A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corpora-
13
<PAGE>
tion Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the DGCL is hereafter amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of the directors of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended DGCL. Any appeal or modification of this paragraph by
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
7. WRITTEN BALLOT. Election of directors need not be by written
ballot unless the by-laws of the Corporation shall so provide.
8. INDEMNIFICATION.
(a) Each person who was or is a party or is threatened to be
made a party to or is involved in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he
or she, or a person of whom he or she is the legal representative, is or
14
<PAGE>
was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official
capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the DGCL, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys'
fees, judgements, fines, ERISA excise taxes or penalties and amounts paid
or to be paid in settlement) actually and reasonably incurred or suffered
by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee
15
<PAGE>
or agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in paragraph
(b) hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the board of directors of the Corporation. The right to
indemnification conferred in this Section shall be a contract right and
shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the DGCL requires, the payment of
such expenses incurred by a director or officer in his or her capacity as
a director or officer (and not in any other capacity in which service was
or is rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in advance of the
final disposition of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or
officer, to repay all amounts so advanced if it shall ultimately be
determined that
16
<PAGE>
such director or officer is not entitled to be indemnified under this
Section or otherwise. The Corporation may, under procedures authorized
from time to time by action of its board of directors, grant rights to
indemnification and to be paid by the Corporation the expenses incurred in
defending any proceeding in advance of its final deposition to employees
and agents of the Corporation to the fullest extent authorized by the
DGCL.
(b) If a claim under paragraph (a) of this Section is not paid
in full by the Corporation within thirty days after a written claim has
been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the
claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall
be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it
17
<PAGE>
permissible under the DGCL for the Corporation to indemnify the claimant
for the amount claimed, but the burden of providing such defense shall be
on the Corporation. Neither the failure of the Corporation (including its
board of directors, independent legal counsel, or its stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in the DGCL,
nor an actual determination by the Corporation (including its board of
directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not
met the applicable standard of conduct.
(c) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this Section shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, provision of
the Certificate of
18
<PAGE>
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
9. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any person who is or was a director, officer or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any such expense, liability or
loss, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the DGCL.
10. INCORPORATOR. The name and mailing address of the incorporator
is:
Donald W. McPhail
Mellon Center, Suite 3905
1735 Market Street
Philadelphia, PA 19103
I, THE UNDERSIGNED, for the purpose of forming a corporation
pursuant to the General Corporation Law of Delaware, do make this certificate,
and do certify that this is my act and deed and the facts herein stated are
true, and accordingly have hereunto set my hand this 27th day of February, 1992.
/s/ Donald W. McPhail
-------------------------
Donald W. McPhail
19
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
BEFORE PAYMENT OF CAPITAL
OF
FREEDOM TEXTILE CHEMICALS CO.
FREEDOM TEXTILE CHEMICALS CO. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
1. The first paragraph of Article 4 of the Certificate of
Incorporation hereby is amended to read in its entirety as follows:
"4. AUTHORIZED CAPITAL STOCK. The amount of the total
authorized capital stock of the Corporation is $5,950,000, divided
into (a) 480,000 shares of Common Stock, $1.25 par value per share,
(b) 2,800 shares of Series A Preferred Stock, $1,000.00 par value
per share (the "Series A Preferred Stock"), and (c) 25,500 shares of
Series B Preferred Stock, $100.00 par value per share (the "Series B
Preferred Stock") (the Series A Preferred Stock and the Series B
Preferred Stock are sometimes collectively hereinafter referred to
as the "Preferred Stock")."
2. The Corporation has not received any payment for any of its
stock.
<PAGE>
3. The amendment was duly adopted in accordance with the provisions
of Section 241 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Freedom Textile Chemicals Co. has caused
this certificate to be executed by its duly authorized officers this 23rd day of
April, 1992.
FREEDOM TEXTILE CHEMICALS CO.
By: /s/ Donald W. McPhail
-------------------------
Vice President
Attest:
/s/ Daniel J. Rink
- ----------------------
Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
BEFORE PAYMENT OF CAPITAL
OF
FREEDOM TEXTILE CHEMICALS CO.
FREEDOM TEXTILE CHEMICALS CO. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
1. The first paragraph of Article 4 of the Certificate of
Incorporation hereby is amended to read in its entirety as follows:
"4. AUTHORIZED CAPITAL STOCK. The amount of the total
authorized capital stock of the Corporation is $3,000,000, divided
into (a) 4,500 shares of Common Stock, $100 par value per share and
(b) 2,800 shares of Series A Preferred Stock, $1,000 par value per
share and (c) 2,550 shares of Series B Preferred Stock, $1,000 par
value per share."
2. The Corporation has not received any payment for any of its
stock.
3. The amendment was duly adopted in accordance with the provisions
of Section 241 of the General Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, said Freedom Textile Chemicals Co. has caused
this certificate to be executed by its duly authorized officers this 30th day of
April, 1992.
Freedom Textile Chemicals Co.
By: /s/ Donald W. McPhail
--------------------------
Vice President
Attest:
/s/ Daniel J. Rink
- -----------------------
Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FREEDOM TEXTILE CHEMICALS CO.
FREEDOM TEXTILE CHEMICALS CO. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
1. The first paragraph of Article 4 of the Certificate of
Incorporation hereby is amended to read in its entirety as follows:
"4. AUTHORIZED CAPITAL STOCK. The amount of the total
authorized capital stock of the Corporation is $6,400,000, divided
into (a) 6,000 shares of Common Stock, $100 par value per share and
(b) 2,800 shares of Series A Preferred Stock, $1,000 par value per
share and (c) 3,000 shares of Series B Preferred Stock, $1,000 par
value per share."
2. The amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, said Freedom Textile Chemicals Co. has caused
this certificate to be executed by its duly authorized officers this 19th day of
October, 1992.
Freedom Textile Chemicals Co.
By: /s/ Fred P. Rullo
-------------------------
Vice President
Attest:
/s/ Daniel J. Rink
- ------------------------
Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FREEDOM TEXTILE CHEMICALS CO.
FREEDOM TEXTILE CHEMICALS CO. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
1. Paragraph (c)(i) of Article 4 of the Certificate of Incorporation
hereby is amended to read in its entirety as follows:
"(i) Dividends. Subject to the limitations herein contained,
the Series B Preferred Stock shall be entitled to receive, from
funds of the Corporation legally available therefor, cash dividends
at the rate of 10% per annum, payable quarterly on dates to be fixed
by the Board of Directors, with proper adjustment for any dividend
period which is less than a full quarter. The dividends on the
Series B Preferred Stock shall be cumulative and shall begin to
accrue on the date commencing three months from the date of issuance
of a certificate or certificates for said stock. The holders of the
Series B Preferred Stock shall only be entitled to receive cash
dividends as long as no dividends payable to the holders of the
Series A Preferred Stock are in arrears."
2. The amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, said Freedom Textile Chemicals Co. has caused
this certificate to be executed by its duly authorized officers this 7th day of
April, 1993.
FREEDOM TEXTILE CHEMICALS CO.
By: /s/ Donald W. McPhail
-------------------------
Vice President
Attest:
/s/ Harry W. Gill Jr.
- ---------------------------
Assistant Secretary
<PAGE>
BY-LAWS
OF
FREEDOM TEXTILE CHEMICALS CO.
ARTICLE I
OFFICES
Section 1. Registered Office.--The registered office shall be
established and maintained at the office of The Corporation Trust Company, in
the City of Wilmington, in the County of New Castle, in the State of Delaware,
and said corporation shall be the registered agent of this Corporation in charge
thereof.
Section 2. Other Offices.--The Corporation may have other offices,
either within or outside the State of Delaware, at such place or places as the
Board of Directors may from time to time appoint or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings.--All meetings of stockholders shall be
held at the principle office of the Corporation or at such other place as shall
be fixed by the Board of Directors or by vote of the stockholders.
<PAGE>
Section 2. Annual Meetings.--The annual meeting of stockholders for
the election of directors and the transaction of other business shall be held
once per calendar year on the second Tuesday of May of such year at 10:00 a.m.
local time or on such other day and at such other time as shall be fixed by the
Board of Directors or by vote of the stockholders.
At each annual meeting, the stockholders entitled to vote shall
elect a Board of Directors and they may transact such other business as may
properly be brought before the meeting.
Section 3. Voting.--Each stockholder entitled to vote in accordance
with the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder, but no
proxy shall be voted after three years from its date unless such proxy provides
for a longer period. All elections for directors shall be decided by plurality
vote; all other questions shall be decided by majority vote except as otherwise
provided by the Certificate of Incorporation or the Delaware General Corporation
Law (the "DGCL").
2
<PAGE>
Section 4. Quorum; Adjournment.--Except as otherwise required by the
Certificate of Incorporation, these By-laws or the DGCL, the presence, in person
or represented by proxy, of stockholders holding a majority of the stock of the
Corporation entitled to vote shall constitute a quorum at all meetings of the
stockholders. In case a quorum shall not be present or represented at any
meeting, the stockholders present may, by majority vote, adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
the requisite amount of stock entitled to vote shall be present or represented.
At any such adjourned meeting at which the requisite amount of stock entitled to
vote shall be present or represented, any business may be transacted which might
have been transacted at the meeting as originally noticed; but only those
stockholders entitled to vote at the meeting as originally noticed shall be
entitled to vote at any adjournment or adjournments thereof. If the adjournment
is for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
3
<PAGE>
Section 5. Special Meetings.--Special meetings of the stockholders
for any purpose or purposes may be called by the Board of Directors, the
Chairman of the Board, if any, the President, any Vice President, the Secretary
or any Assistant Secretary or at the request in writing of stockholders owning a
majority in interest of the capital stock of the Corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Notice of Meetings.--Written Notice of any meeting of the
stockholders, stating the place, date and hour of the meeting, and in the case
of a duly called special meeting, the purpose or purposes for which the meeting
is called, shall be given by the Chairman of the Board, if any, the President,
any Vice President, the Secretary, or any Assistant Secretary by written,
telegraphic, or by any other means of communication to each stockholder entitled
to vote at his address as it appears on the records of the Corporation not less
than ten days nor more than sixty days before the meeting.
Section 7. Stockholder List.--The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders
4
<PAGE>
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 8. Action without Meeting.--Whenever the vote of
stockholders at a meeting thereof is required or permitted to be taken in
connection with any corporate action by any provisions of the Certificate of
Incorporation, these By-Laws of the DGCL, the meeting and vote of stockholders
may be dispensed with, if, subject to the provisions of the DGCL, a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to autho-
5
<PAGE>
rize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
Section 9. Organization.--Meetings of the stockholders shall be
presided over by the Chairman of the Board, if any, the President, any Vice
President, or in their absence, by a chairman to be chosen by a majority of the
stockholders entitled to vote at the meeting who are present in person or
represented by proxy. The Secretary, an Assistant Secretary, or, in their
absence, any person appointed by the chairman of the meeting shall act as
secretary of the meeting.
ARTICLE III
DIRECTORS
Section 1. Number and Term.--The number of directors which shall
constitute the whole board shall be one or more, with the specific number
thereof to be determined from time to time by the Board of Directors or by the
stockholders. The directors shall be elected at the annual meeting of the
stockholders, except as provid-
6
<PAGE>
ed in Section 3 of this Article, and each director elected shall hold office
until his successor is elected and qualified. Directors need not be
stockholders.
Section 2. Resignations.--Any director may resign at any time. Such
resignation shall be made in writing, and shall take effect at the time
specified therein, and, if no time be specified, at the time of its receipt by
the President or the Secretary. The acceptance of a resignation shall not be
necessary to make it effective.
Section 3. Vacancies.--Unless otherwise provided in the Certificate
of Incorporation or these ByLaws, vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, although less than a quorum, or
by a sole remaining director. If at any time, by reason of death or resignation
or other cause, the Corporation should have no directors in office, then any
officer or any stockholder may call a special meeting of stockholders in
accordance with the provisions of the Certificate of Incorporation or these
By-Laws to elect one or more directors.
7
<PAGE>
Section 4. Removal.--Any director or directors may be removed with
or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote at an
election of directors.
Section 5. Powers.--The Board of Directors shall exercise all of the
powers of the Corporation except such as are conferred upon or reserved to the
stockholders by the Certificate of Incorporation, these By-Laws or otherwise by
law.
Section 6. Committees.--The Board of Directors may, by resolution or
resolutions passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. Any such committee, to the extent permitted by law and to the
extent provided in said resolution or resolutions or in these By-Laws, shall
have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board. The committees shall keep regular minutes of
their proceedings and report the same to the Board when required. The Board
shall have
8
<PAGE>
power at any time to fill vacancies in, change the membership of, designate one
or more directors as alternate members of, or discharge any such committee.
Section 7. Meetings.--An annual organizational meeting of the Board
of Directors may be held without notice immediately after the annual meeting of
the stockholders or at such other time and place as may be fixed by consent in
writing of all the directors.
Regular meetings of the Board of Directors may be held without
notice at such places and times as shall be determined from time to time by
resolution of the Board.
Special meetings of the Board of Directors may be called by the
Chairman of the Board, if any, the President, the Secretary or the greater of
one director or one-third of the entire Board on at least two days' notice to
each director and shall be held at such place or places as may be agreed upon by
the directors, or as shall be stated in the notice of the meeting.
Members of the Board of Directors or of any committee thereof may
participate in a meeting of the Board or of such committee, as the case may be,
by conference telephone or similar communications equipment by means of which
all persons participating in the meeting
9
<PAGE>
can hear each other, and participation in a meeting pursuant to this procedure
shall constitute presence in person at such meeting.
Meetings of the Board of Directors shall be presided over by the
Chairman of the Board, if any, or, in his absence, by the President, or, in
their absence, by a chairman chosen at the meeting. The Secretary or an
Assistant Secretary shall act as secretary of the meeting, but, in their
absence, the chairman of the meeting may appoint any person to act as secretary
of the meeting.
Section 8. Action Without Meeting.--Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all the members of the Board or of such
committee, as the case may be, consent thereto in writing and such written
consent is filed with the minutes of the proceedings of the Board or committee.
Section 9. Quorum.--At all meetings of the Board of Directors or of
any committee thereof, one-third of the entire Board or committee shall
constitute a quorum for the transaction of business. However, whenever the Board
or the stockholders shall determine that there be two or less members of the
Board or committee,
10
<PAGE>
then, and only then, one director shall constitute a quorum.
Except as otherwise provided by the Certificate of Incorporation,
these By-Laws or the DGCL, the act of a majority of the directors at a meeting
at which a quorum is present shall be the act of the Board of Directors. If at
any meeting of the Board a quorum shall not be present, the members of the Board
present may adjourn the meeting from time to time until a quorum shall have been
obtained.
Section 10. Compensation.--Directors shall not receive any stated
salary for their services as directors or as members of committees, but, by
resolution of the Board, a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from servicing the Corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
ARTICLE IV
OFFICERS
Section 1. Officers.--The officers of the Corporation shall be a
President, one or more Vice Pre-
11
<PAGE>
sidents, a Treasurer, and a Secretary, and such Assistance Treasurers and
Assistant Secretaries as the Board of Directors may deem proper. In addition,
the Board may elect a Chairman of the Board. All of such officers shall be
elected by the Board. None of the officers, except the Chairman of the Board, if
any, need be directors. The officers shall be elected at the first meeting of
the Board after each annual meeting of stockholders, and each officer elected
shall hold office until his successor is elected and qualified or until his
earlier resignation or removal. Any number of offices may be held by the same
person, except that the President shall not also be the Secretary.
Section 2. Other Officers and Agents.--The Board of Directors may
appoint such other officers and agents as it may deem advisable, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board.
Section 3. Chairman.--The Chairman of the Board, if one be elected,
shall preside at all meetings of the Board of Directors and he shall have and
perform such other duties as from time to time may be assigned to him by the
Board.
12
<PAGE>
Section 4. President.--The President shall be the chief executive
officer of the Corporation and shall have the general powers and duties of
supervision and management and execution usually vested in the office of
President of a corporation. He shall preside, in the absence or non-election of
the Chairman of the Board, at all meetings of the stockholders and of the Board
of Directors, shall have general supervision, direction and control of the
business of the Corporation and shall perform such other duties as from time to
time may be specified by the Board.
Section 5. Treasurer.--The Treasurer shall have the care and custody
of the funds and securities of the Corporation and shall have such powers and
perform such duties as are incident to the office of Treasurer, or as may from
time to time be specified by the Board of Directors. The Treasurer shall be
subject to the control of the Board and to the powers of the President.
Section 6. Secretary.--The Secretary shall attend all meetings of
the Board of Directors and of the stockholders and shall have the care and
custody of the seal and the minute books of the Corporation and shall have such
powers and perform such duties as are incident to the office of the Secretary or
as may from time to
13
<PAGE>
time be specified by the Board. The Secretary shall be subject to the control of
the Board.
Section 7. Assistant Officers.--Unless otherwise provided in these
By-Laws, the Vice Chairman of the Board, any Vice President, any Assistant
Secretary and any Assistant Treasurer, if any, shall, in the order of their
respective seniorities, in the absence or disability of the Chairman of the
Board, President, Secretary or Treasurer, respectively, perform the duties of
such officer and shall generally assist the Chairman of the Board, President,
Secretary or Treasurer, respectively.
Section 8. Resignations.--Any officer may resign at any time upon
written notice to the Corporation. Such resignation shall take effect at the
time specified therein, or if no time be specified, at the time of its receipt
by the President, the Secretary or the Board of Directors.
Section 9. Vacancies.--A vacancy in any office arises from any cause
may be filled by the Board of Directors.
Section 10. Removal.--The Board of Directors may remove any officer
with or without cause at any time.
Section 11. Compensation.--The compensation of all the officers of
the Corporation elected pursuant to
14
<PAGE>
Article IV, Section I of these By-laws shall be fixed by the Board of Directors.
ARTICLE V
STOCK
Section 1. Certificates of Stock.--The shares of the Corporation
shall be represented by certificates, provided that the Board of Directors may
provide, by resolution or resolutions, that some or all of any or all classes or
series of stock shall be uncertificated.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the Corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the DGCL or a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Certificates of stock, numbered and with the seal of the Corporation
affixed, signed by the President
15
<PAGE>
or Vice President, and the Treasurer or an Assistant Treasurer, or Secretary or
an Assistant Secretary, shall be issued to each stockholder certifying the
number of shares owned by him in the Corporation. When such certificates are
signed by a transfer clerk acting on behalf of the Corporation and a registrar,
the signatures of such officers may be facsimiles.
Section 2. Lost Certificate.--A new certificate of stock may be
issued in the place of any certificate, theretofore issued by the Corporation,
alleged to have been lost or destroyed, and the directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the Corporation
against any claim that be made against it on account of the alleged loss of any
such certificate, or the issuance of any such new certificate.
Section 3. Transfer of Shares.--The shares of stock of the
Corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificates shall be surrendered to the Corporation by
the delivery thereof to the
16
<PAGE>
person in charge of the stock and transfer books and ledgers, or to such other
person as the directors may designate, by whom they shall be cancelled, and new
certificates shall thereupon be issued. A record shall be made of each transfer,
and whenever a transfer shall be made for collateral security, and, not
absolutely, it shall be so expressed in the entry of the transfer if, when the
certificates are presented to the Corporation for transfer or uncertificated
shares are requested to be transferred, both the transferor and the transferee
request the Corporation to do so.
Section 4. Closing of Transfer Books.--The Board of Directors shall
have power to close the stock transfer books of the Corporation for a period not
more than five days preceding the date of any meeting of stockholders, the date
for payment of any dividend or other distribution, the date for the allotment of
any rights or the date when any change, conversion or exchange of capital stock
shall go into effect or for the purpose of any other lawful action; provided,
however, that in lieu of closing the stock transfer books as aforesaid, the
Board of Directors may fix in advance a date not more than sixty days, and in
the case of any meeting of stockholders not less than ten days, preceding
17
<PAGE>
the day of any meeting of stockholders or the date for the payment of any
dividend, the date for the allotment of any rights or the date when any change,
conversion or exchange of capital stock shall go into effect, as a record date
for the determination of the stockholders entitled to notice of, and to vote at,
any such meeting, or entitled to receive payment of any such dividends or any
such allotment or rights or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, and in such case such
stockholders only as shall be stockholders of record on the date so fixed shall
be entitled to such notice of, and to vote at, such meeting, or to receive
payment of such dividend or to receive such allotment of rights or to exercise
such rights, as the case may be, notwithstanding any transfer of any stock of
the books of the Corporation after any such record date fixed as aforesaid.
Section 5. Dividends.--Subject to the provisions of the Certificates
of Incorporation and the DGCL, the Board of Directors may, out of funds legally
available therefor, at any regular or special meeting, declare dividends upon
the capital stock of the Corporation as and when they deem expedient. Before
declaring any dividend there may be set apart, out of any funds of the
18
<PAGE>
Corporation available for dividends, such sum or sums as the directors from time
to time in their discretion deem proper for working capital or as a reserve fund
to meet contingencies or for equalizing dividends or for such other purposes as
the directors shall deem conducive to the interests of the Corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
ARTICLE VI
MISCELLANEOUS
Section 1. Seal.--The corporate seal shall be circular in form and
shall contain the name of the Corporation, the year of its creation and the
words "CORPORATE SEAL DELAWARE." Such seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 2. Fiscal Year.--The fiscal year of the Corporation shall be
the calendar year, unless otherwise determined by the Board of Directors.
Section 3. Checks.--All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers,
19
<PAGE>
agent or agents of the Corporation, and in such manner as shall be determined
from time to time by resolution of the Board of Directors.
Section 4. Notice and Waiver of Notice.-Whenever any notice is
required by these By-Laws to be given, personal notice is not meant unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by depositing the same in the United States mail, with postage thereon
prepaid, addressed to the person entitled thereto at his address as it appears
on the records of the Corporation, and such notice shall be deemed to have been
given on the day of such mailing. Stockholders not entitled to vote shall not be
entitled to receive notice of any meetings except as otherwise provided by the
DGCL.
Whenever any notice whatever is required to be given under the
provisions of the Certificate of Incorporation, these By-Laws or the DGCL, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of
20
<PAGE>
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, directors or members of a
committee of directors need to be specified in any written waiver of notice
unless so required by the Certificate of Incorporation or these By-Laws.
Section 5. Voting Other Stocks.--Unless otherwise directed by the
Board of Directors, the Chairman of the Board, if any, the President, any Vice
President, the Treasurer or the Secretary may vote any shares of stock issued by
another corporation and owned by the Corporation at any stockholders' meeting of
such other corporation, and the Chairman of the Board, if any, the President,
any Vice President, the Treasurer or the Secretary shall have the authority on
behalf of the Corporation to execute and deliver a proxy or proxies for any
stockholders' meeting or give any stockholders' consent in respect of the shares
of stock of such other corporation owned by the Corporation.
21
<PAGE>
ARTICLE VII
INDEMNIFICATION
Section 1. Right to Indemnification.--The Corporation shall
indemnify its directors and officers to the extent permitted by the DGCL.
ARTICLE VIII
AMENDMENTS
Section 1. Amendment of By-Laws.--These ByLaws may be altered or
repealed and new By-Laws may be made at any annual or special meeting of the
stockholders, if notice of the proposed alteration or repeal of By-Law or
By-Laws to be made be contained in the notice of such meeting, and by the
affirmative vote of a majority of the Board of Directors, when such power is
conferred upon the Board of Directors by the Certificate of Incorporation, at
any regular meeting of the Board of Directors, or at any special meeting of the
Board of Directors, if notice of the proposed alteration or repeal, or By-Laws
to be made, be contained in the notice of such special meeting.
22
<PAGE>
Articles of Association
of
Freedom Chemical Diamalt GmbH
________________________________________________________________________________
1.
Business Name, Registered Seat
(1) The business name of the company shall be:
Freedom Chemical Diamalt GmbH.
(2) The registered seat of the company shall be Munich.
2.
Objects of the Company
(1) The object of the company shall be the acquisition of the business of
Diamalt GmbH i.K., Munchen (HRB 91647), and of interests in companies
within the Diamalt Group as well as the holding and management of these
interests. The company may also produce and market chemical and
pharmaceutical products, especially on the basis of organic substances for
technological application and for the use in the food, textile and feeding
stuff industries, of delicate chemical substances and substances for the
pharmaceutical industry as well as organic proteins.
(2) The company shall further be entitled to carry on all business directly or
indirectly intended to serve the objects of the company.
<PAGE>
3.
Share Capital
(1) The share capital of the company amounts to DM 2,000,000 (in words: German
Marks two million).
(2) The share capital and a premium of DM 10,000,000 have been fully paid up
in cash.
4.
Directors, Representation
(1) The company shall have one or several directors.
(2) Should only one director be appointed, he shall represent the company
alone. Should several directors be appointed, the company shall be
represented by two directors acting jointly or by one director acting in
conjunction with an authorized representative (Prokurist).
(3) The general meeting may grant directors the right of sole representation
and exempt them from the restrictions of Section 181 BGB (Civil Code). The
general meeting may also grant directors exemption from the ban on
competition.
(4) The directors shall carry on the business of the company with the due
diligence of a businessman in accordance with the law, the articles of
association and resolutions of the general meeting. The general meeting
2
<PAGE>
may impose, change, amend and revoke guidelines for acts requiring its
prior approval.
5.
General Meetings, Shareholders' Resolutions
(1) The general meeting will be called for by the director(s), if required, at
least once a year. Furthermore, a general meeting has to be called upon
the demand of anyone of the shareholders.
(2) The calling of a general meeting shall be in writing, via telefax or telex
with a period of at least four weeks, in cases of urgency of at least one
week. Neither the day of the invitation nor the day of the general meeting
shall be counted. The agenda of the general meeting shall be announced in
the invitation.
(3) The general meeting shall have a quorum if 50% of the share capital are
present or represented. If there is no quorum, a new general meeting has
to be called with the same agenda with a period of 14 days, in urgent
cases of three days; this general meeting has a quorum irrespective of the
amount of the present or representative share capital. In the invitation
to that second general meeting reference has to be made to this fact.
(4) The general meeting is not required, if all shareholders agree in writing
to have written resolutions.
3
<PAGE>
(5) Each shareholder may be represented or accompanied in a general meeting by
another shareholder or a third person belonging to the legal or auditing
professions who is under the obligation of professional secrecy. The
representative of the shareholder must be authorized by a corresponding
power of attorney.
(6) If no other majorities are required by law or by the Articles of
Association, the general meeting shall vote by simple majority of the
votes cast. Each DM 100 of a share grants one vote, provided that each DM
100 of the shares hold by Freedom Chemical Company grants two votes.
6.
Financial Year
(1) The financial year shall be the calendar year.
(2) The first financial year shall be a part financial year; it shall begin
with the entry of the company in the Commercial Register and end on 31st
December thereafter.
7.
Annual Statements of Accounts, Appropriation of Profits
(1) The annual statement of accounts (balance sheet and profit and loss
accounts with notes) and the management report shall be drawn up by the
directors, audited by an auditor appointed by the general meeting, and
4
<PAGE>
presented to the shareholders within the statutory periods together with
the auditors report and the directors' proposed profit appropriation.
(2) The general meeting shall resolve on the appropriation of profits in its
free discretion.
8.
Disposition of Shares
(1) Any disposal of shares of the company or parts hereof, whether by way of
assignment, pledge (except as set forth in subpara. (2) hereof), creation
of usufruct or any other method is prohibited.
(2) Notwithstanding the foregoing, a pledge of shares of the company or parts
hereof to financial institutions for purposes of securing loans granted by
the financial institution or its shareholder and the exercise of the
pledgees' remedies thereunder shall not be prohibited and shall not
require the consent of the general meeting, provided that the pledgees
will not have more than 79% of the total voting rights.
9.
Duration
(1) The duration of the company is indefinite.
(2) The company shall be liquidated, if
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-- bankruptcy or composition proceedings are filed against a
shareholder or the application is denied for lack of assets, or
-- a shareholder terminates his shareholding in the company.
10.
Provision of Competition
The shareholders are not subject to a prohibition of competition. This also
applies for a dominant shareholder. With the approval of a general meeting, the
shareholders will enter into separate differential agreements regarding the
elimination of their business involving the object of the company.
11.
Publication
The publications of the company will be made in the Federal Gazette only.
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CERTIFICATE OF INCORPORATION
OF
FREEDOM TEXTILE CHEMICAL COMPANY
(SOUTH CAROLINA), INC.
The undersigned hereby submits this Certificate of Incorporation for
the purpose of forming a business corporation under the laws of the State of
Delaware:
1. The name of the corporation (the "Corporation") is Freedom
Textile Chemical Company (South Carolina), Inc.
2. The number of shares the corporation is authorized to issue is
One Hundred Thousand (100,000), all of which shall have a par value of $.01.
3. The address of the initial registered office of the Corporation
in the State of Delaware is Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware, New Castle Country, Delaware; and the name of its initial
registered agent at such address is The Corporation Trust Company.
4. The name and address of the Incorporator are John M. Herring, 101
N. Tryon Street, 1900 Independence Center, Charlotte, Mecklenburg County,
North Carolina 28246.
5. The number of directors constituting the initial board of
directors shall be (2), and the name and
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address of the persons who are to serve as directors until the first meeting of
shareholders, or until their successors are elected and qualified, are Robert G.
Kitchen and Fred P. Rullo.
6. The Corporation shall indemnify, to the fullest extent permitted
by Section 145 of the General Corporation Law of Delaware, or any amendment
thereto or successor provision thereto, all Persons who may be indemnified
pursuant thereto.
7. No director shall be personally liable to the Corporation or any
stockholder or stockholders for monetary damages for breach of fiduciary duty as
a director of the Corporation, except for any matter in respect of which such
director shall be liable under Section 174 of the General Corporation Law of
Delaware, or any amendment thereto of successor provision thereto, by reason
that, in addition to any and all other requirement for such liability, he (i)
shall have breached his duty of loyalty to this Corporation or its stockholder,
(ii) shall not have acted in good faith or, in failing to act, shall not have
acted in good faith, (iii) shall have acted in a manner involving intentional
misconduct or a knowing violation of law, or, in failing to act, shall have
acted in a manner involving intentional misconduct
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or a knowing violation of law, or (iv) shall have derived an improper personal
benefit. Neither the amendment nor repeal of this Section 7 nor the adoption of
any provision of this Certificate of Incorporation inconsistent with this
Section 7, shall eliminate or reduce the effect of this Section 7 in respect of
any matter occurring, or any cause of action, suit or claim that but for this
Section 7, would accrue or arise, prior to such amendment or repeal of this
Section 7, or adoption of a provision inconsistent therewith.
The undersigned, being the Incorporator herein-before named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this Certificate hereby declaring and certifying that
this is my act and deed and the facts stated herein as true, and accordingly,
have hereunto set my hand this 13th day of December, 1995.
/s/ John M. Herring
-----------------------------
John M. Herring, Incorporator
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BY-LAWS
OF
Freedom Textile Chemical Company (South Carolina) , Inc.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
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Section 2. Annual Meetings. The Annual Meetings of Stockholders
shall be held on such date and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Written notice of the Annual Meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or
by the Certificate of Incorporation, Special meetings of Stockholders, for any
purpose or purposes, may be called by either (i) the Chairman, if there be one,
or (ii) the President, (iii) any Vice President, if there be one, (iv) the
Secretary or (v) any Assistant Secretary, if there be one, and shall be called
by any such officer at the request in writing of a majority of the Board of
Directors or at the request in writing of stockholders owning a majority of the
capital stock of the Corporation issued and outstanding and entitled to vote.
such request shall state the purpose or
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purposes of the proposed meeting. Written notice of a Special Meeting stating
the place, date and hour of the meeting and the purpose or purposes for which
the meeting is called shall be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to vote at such
meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation,, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned
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meeting, a notice of the adjourned meeting shall be given to each stockholder
entitled to vote at the meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate
of Incorporation or these ByLaws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented at
a meeting of stockholders shall be entitled to cast one vote for each share of
the capital stock entitled to vote thereat held by such stockholder. Such votes
may be cast in person or by proxy but no proxy shall be voted on or after three
years from its date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required or
permitted to be taken at any Annual or Special Meeting of Stockholders of the
Corporation, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing,
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setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list
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shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder of the Corporation
who is present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by Section 7 of this Article II or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors
shall consist of not less than one nor more than fifteen members, the exact
number of which shall initially be fixed by the incorporator and thereafter from
time to time by the Board of Directors. Except as provided in Section 2 of this
Article, directors shall be elected by a plurality of the votes cast at Annual
Meetings of Stockholders, and each director so elected shall hold office until
the next Annual Meeting and until his successor is duly elected and qualified,
or until his earlier resignation or removal. Any director may resign
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at any time upon notice to the Corporation. Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and
qualified, or until their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall
be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. special meetings of the Board of Directors. Special
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meetings of the Board of Directors may be called by the Chairman, if there be
one, the President, or any directors. Notice thereof stating the place, date and
hour of the meeting shall be given to each director either by mail not less than
forty-eight (48) hours before the date of the meeting, by telephone or telegram
on twenty-four (24) hours' notice, or on such shorter notice as the person or
persons calling such meeting may deem necessary or appropriate in the
circumstances.
Section 5. Quorum. Except as may be otherwise specifically provided
by law, the Certificate of Incorporation or these By-Laws, at all meetings of
the Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for-the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 6. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any
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meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all the members of the Board of Directors or committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or committees.
Section 7. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws, members
of the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 7 shall
constitute presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at
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any meeting of any such committee. In the absence or disqualification of a
member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent allowed by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Each committee shall
keep regular minutes and report to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
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Members of special or standing committees may be allowed like compensation for
attending committee meetings.
Section 10. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote
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thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a President, a Secretary and a Treasurer.
The Board of Directors, in its discretion, may also choose a Chairman of the
Board of Directors (who must be a director) and one or more Vice Presidents,
Assistant secretaries, Assistant Treasurers and other officers. Any number of
offices may be held by the same person, unless otherwise prohibited by law, the
Certificate of Incorporation or these By-Laws. The officers of the Corporation
need not be stockholders of the Corporation nor, except in the
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case of the Chairman of the Board of Directors, need such officers be directors
of the Corporation.
Section 2. Election. The Board of Directors at its first meeting
held after each Annual meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President and any
such officer may, in the name of and on behalf of the Corporation, take all
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such action as any such officer may deem advisable to vote in person or by proxy
at any meeting of security holders of any corporation in which the Corporation
may own securities and at any such meeting shall possess and may exercise any
and all rights and power incident to the ownership of such securities and which,
as the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. He shall be the Chief Executive
Officer of the Corporation, and except where by law the signature of the
President is required, the Chairman of the Board of Directors shall possess the
same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may
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exercise such other powers as from time to time may be assigned to him by these
By-Laws or by the Board of Directors.
Section 5. President. The President shall, subject to the control of
the Board of Directors and, if there be one, the Chairman of the Board of
Directors, have general supervision of the business of the Corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. He shall execute all bonds, mortgages, contracts and other instruments
of the Corporation requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except that the other officers of the Corporation may sign and execute documents
when so authorized by these By-Laws, the Board of Directors or the President. In
the absence or disability of the Chairman of the Board of Directors, or if there
be none, the President shall preside at all meetings of the stockholders and the
Board of Directors. if there be no Chairman of the Board of Directors, the
President shall be the Chief Executive officer of the Corporation. The President
shall also perform such other duties and may exercise such other powers as from
time to
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time may be assigned to him by these By-Laws or by the Board of Directors.
Section 6. Vice Presidents. At the request of the President or in
his absence or in the event of his inability or refusal to act (and if there be
no Chairman of the Board of Directors), the Vice President or the Vice
Presidents if there is more than one (in the order designated by the Board of
Directors) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Each Vice President shall perform such other duties and have such
other powers as the Board of Directors from time to time may prescribe. If there
be no Chairman of the Board of Directors and no Vice President, the Board of
Directors shall designate the officer of the Corporation who, in the absence of
the President or in the event of the inability or refusal of the President to
act, shall perform the duties of the President, and when so acting shall have
all the powers of and be subject to all the restrictions upon the President.
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seal of the Corporation and to attest the affixing by his signature. The
Secretary shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept or
filed, as the case may be.
Section 7. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the corporation,
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in case of his death, resignation, retirement or removal I-rom office, of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the Corporation.
Section 8. Assistant Secretaries. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the President, any Vice President, if there be one, or
the Secretary, and in the absence of the Secretary or in the event of his
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 9. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the
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Treasurer. If required by the Board of Directors, an, Assistant Treasurer shall
give the Corporation a bond in Such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 10. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or
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a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by him in the Corporation.
Section 2. Signatures. Any or all of the signatures on a certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise
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the same in such manner as the Board of Directors shall require and/or to give
the corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these By-Laws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to express consent to corporate action
in writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in ad-
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vance, a record date, which shall not be more than sixty days nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a
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committee or stockholder, such notice may be given by mail, addressed to such
director, member of a committee or stockholder, at his address as it appears on
the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Written notice may also be given personally or by telegram,
telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by
law, the Certificate of incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any
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dividend, there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors from time to time, in
its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
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ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings other
than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was a director or officer of the Corporation serving at the request of
the Corporation as a director or officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys, fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
26
<PAGE>
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contenders or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or
in the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the Corporation, or is or was a
director or officer of the Corporation serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or set-
27
<PAGE>
tlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification
under this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in Section 1 or
Section 2 of this Article VIII, as the case may be. Such determination shall be
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or
28
<PAGE>
(ii) if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders. To the extent, however, that a director
or officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
Section 4. Good Faith Defined. For purposes of any determination
under Section 3 of this Article viii, a person shall be deemed to have acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corpo-
29
<PAGE>
ration or another enterprise or on information or records given or reports made
to the Corporation or another enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Corporation or another enterprise. The term "another enterprise" as used in
this Section 4 shall mean any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise of which such person
is or was serving at the request of the Corporation as a director, officer,
employee or agent. The provisions of this Section 4 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in sections 1 or
2 of this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2 of this Article VIII. The basis of such indemnification by a court shall
be a determination by such court
30
<PAGE>
that indemnification of the director or officer is proper in the circumstances
because he has met the applicable standards of conduct set forth in Sections 1
or 2 of this Article VIII, as the case may be. Neither a contrary determination
in the specific case under Section 3 of this Article VIII nor the absence of any
determination thereunder shall be a defense to such application or create a
presumption that the director or officer seeking indemnification has not met any
applicable standard of conduct. Notice of any application for indemnification
pursuant to this Section 5 shall be given to the Corporation promptly upon the
filing of such application. If successful, in whole or in part, the director or
officer seeking indemnification shall also be entitled to be paid the expense of
prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this
31
<PAGE>
Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or granted
pursuant to this Article VIII shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of any
court of competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, it
being the policy of the Corporation that indemnification of the persons
specified in sections 1 and 2 of this Article VIII shall be made to the fullest
extent permitted by law. The provisions of this Article VIII shall not be deemed
to preclude the indemnification of any person who is not specified in Sections 1
or 2 of this Article VIII but whom the Corporation has the power or obligation
to indemnify under the provisions of the General Corporation Law of the State of
Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person
32
<PAGE>
who is or was a director or officer of the Corporation, or is or was a director
or officer of the Corporation serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power or the
obligation to indemnify him against such liability under the provisions of this
Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
Corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee
33
<PAGE>
benefit plan or other enterprise, shall stand in the same position under the
provisions of this Article VIII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued. For purposes of this Article VIII, references
to "fines" shall include any excise taxes assessed on a person with respect to
an employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by, such
director or officer with respect to an employee benefit plan, its participants
or beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
VIII.
Section 10. Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VIII shall, unless otherwise provided when authorized or
ratified, continue as to a person who
34
<PAGE>
has ceased to be a director or officer and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 hereof),
the Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
35
<PAGE>
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, or new By-Laws may be adopted by the stockholders or by the
Board of Directors, provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of such
meeting of stockholders or Board of Directors as the case may be. All such
amendments must be approved by either the holders of a majority of the
outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article IX and
in these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
36
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
KALAMA SPECIALTY CHEMICALS, INC.
Pursuant to RCW 23A.16.020, the undersigned corporation adopts the
following Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is KALAMA SPECIALTY CHEMICALS,
INC.
SECOND: The following amendment to the Articles of Incorporation was
adopted by the shareholders of the corporation by a written consent in lieu of
special meeting of shareholders, in the manner prescribed by the Washington
Business Corporation Act:
The Articles of Incorporation of the corporation be hereby amended
by inserting after the end of ARTICLE XIII thereof a new ARTICLE XIV
to read as follows:
ARTICLE XIV
Limitation on Liability of Directors
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for his or her conduct as a
director on or after the date this Article becomes effective, except for (i)
acts or omissions that involve intentional misconduct or a knowing violation of
law by the director, (ii) approval of certain distributions or loans in
violation of RCW 23A.08.450, or (iii) any transaction from which the director
will personally receive a benefit in money, property or services to which the
director is not legally entitled. If, after approval by shareholders of this
Article, the Washington Business Corporation Act is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Washington Business
Corporation Act, as so amended. Any amendment to or repeal of this Article shall
not
<PAGE>
adversely affect any right or protection of a director of the corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
THIRD: Such written consent in lieu of special meeting of
shareholders of the corporation is dated October 1, 1987.
FOURTH: The number of shares of the corporation outstanding at the
time of such adoption was 62,500 shares of Common Stock, each of which shares
was entitled to vote thereon.
FIFTH: The number of shares voted for and against such amendment
were as follows:
Number of Shares Number of Shares
Class Voted For Voted Against
----- --------- -------------
Common 62,500 -0-
SIXTH: Such amendment does not provide for an exchange,
reclassification or cancellation of issued shares.
DATED: October 1, 1987.
KALAMA SPECIALTY CHEMICALS, INC.
By /s/ Ted W. Palmer
--------------------------------
Its President
-------------------------
2
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
VEGA CHEMICAL, INC.
Pursuant to RCW 23A.16.020, the undersigned corporation adopts the
following Articles of Amendment to its Articles of Incorporation:
First: The name of the corporation is Vega Chemical, Inc. Upon the
effective date of these Articles of Amendment, the name of the corporation will
be changed to Kalama Specialty Chemicals, Inc.
Second: The following resolution was adopted by unanimous written
consent of the shareholder of the corporation in the manner prescribed by the
Washington Business Corporation Act:
"RESOLVED, That the Articles of Incorporation of the Corporation are
hereby amended by striking out Article I thereof and substituting
therefor the following:
'I
The name of this corporation is Kalama Specialty Chemicals, Inc.'"
Third: The date of adoption of the amendment set forth herein by the
shareholder of the corporation was December 15, 1978.
Fourth: The number of shares of the corporation outstanding at the
time of such adoption was 62,500 and the number of shares entitled to vote
thereon was 62,500 shares.
Fifth: The number of shares of the corporation which voted in favor
of the amendment was 62,500. No shares were voted against the amendment.
3
<PAGE>
Sixth: The amendment does not provide for an exchange,
reclassification or cancellation of existing shares.
Seventh: The amendment does not effect a change of stated capital.
VEGA CHEMICAL, INC.
By /s/ Raymon F. Carmody
--------------------------------
Raymond F. Carmody, President
By /s/ L.C. Macomber
--------------------------------
L. C. Macomber, Secretary
4
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I, L. C. Macomber, do hereby certify that I am the Secretary of Vega
Chemical, Inc., the corporation which executed the foregoing instrument, that I
signed the foregoing instrument in my capacity as Secretary, and that the
statements contained therein are true.
/s/ L.C. Macomber
--------------------------------
L. C. Macomber
SUBSCRIBED and SWORN TO before me this 18th day of December, 1978
/s/ Helen M. Rasmussen
--------------------------------
NOTARY PUBLIC in and for the
State of Washington, residing
at Seattle, Washington
-----------------------------
5
<PAGE>
ARTICLES OF MERGER
OF
KALAMA CHEMICAL OF NEW JERSEY, INC.
AND
VEGA, INC.
Pursuant to the provisions of RCW 23A.20.040 and .070, KALAMA
CHEMICAL OF NEW JERSEY, INC., a Washing-ton corporation and VEGA, INC., a
Georgia corporation, hereby execute the following Articles of Merger:
1. The plan of merger of said corporations is set forth in that
Agreement and Plan of Merger attached hereto as Exhibit A.
2. The number of shares outstanding, and the designation and number
of outstanding shares of each class entitled to vote as a class on such Plan
are:
Number of Designa- Number of Shares
Shares Out- tion of Entitled to Vote
standing Class As a Class
-------- ----- ----------
KALAMA CHEMICAL OF 37,500 Common --
NEW JERSEY, INC.
VEGA, INC. 250 Common --
3. The total number of shares voted either for or against such plan
and, as to each class entitled to vote thereon as a class, the number of shares
of such class voted either for or against such plan are:
Total Total Number of Shares
Voted Voted Entitled to Vote
For Against As a Class
--- ------- ----------
KALAMA CHEMICAL OF 37,500 Common --
NEW JERSEY, INC.
VEGA, INC. 250 Common --
DATED: April 3, 1976.
KALAMA CHEMICAL OF NEW JERSEY,
INC.
By /s/ Robert E. Karns
--------------------------------
Its Vice President
By /s/
--------------------------------
Its Assistant Secretary
6
<PAGE>
VEGA, INC.
By /s/ Robert Bennett
--------------------------------
Its /s/ Vice President
--------------------------
By /s/
--------------------------------
Its Secretary
--------------------------
7
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I, Robert E. Karns, the Vice President of KALAMA CHEMICAL OF NEW
JERSEY, INC. verify that I signed the foregoing document as the Vice President
of the corporation and that the statements contained therein are true.
/s/ Robert E. Karns
--------------------------------
SUBSCRIBED AND SWORN to before me this 3rd day of April, 1976.
/s/ Bettie J. Carbo
--------------------------------
Notary Public in and for the State
of Washington, residing at Bellevue
--------
STATE OF SOUTH CAROLINA )
) ss.
COUNTY OF BEAUFORT )
I, Robert Bennett, the Vice President of VEGA, INC. verify that I
signed the foregoing document as the Vice President of the corporation and that
the statements contained therein are true.
/s/ Robert Bennett
--------------------------------
SUBSCRIBED AND SWORN to before me this 5th day of April, 1976.
/s/
--------------------------------
Notary Public in and for the State
of South Carolina, residing at
Hilton Head
8
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into this 5th day of
April, 1976, by and between KALAMA CHEMICAL OF NEW JERSEY, INC., a Washington
corporation ("Kalama NJ"), and VEGA, INC., a Georgia corporation ("Vega").
WITNESSETH:
WHEREAS, Kalama NJ is a corporation organized under the laws of the
State of Washington by KALAMA CHEMICAL, INC., a Washington corporation
("Kalama"), and prior hereto had no issued and outstanding shares of stock;
WHEREAS, Vega is a Georgia corporation and all of the issued and
outstanding shares of Vega are owned by five individuals (the "Vega
Stockholders");
WHEREAS, the combining of the properties, businesses, assets and
liabilities of Kalama NJ and Vega is the subject of that certain Acquisition
Agreement dated March 31, 1976 (the "Acquisition Agreement") by and among KALAMA
CHEMICAL, INC., KALAMA CHEMICAL OF NEW JERSEY, INC., VEGA, INC., ARTHUR HEINEL,
RAYMOND CARMODY, ALBERT CEREGHINO, ROBERT BENNETT and ELRID MOODY; and
WHEREAS, the combining of the properties, businesses, assets and
liabilities of Kalama NJ and Vega is in the interests of Kalama, old Vega and
the Vega Stockholders;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained therein, it is agreed in accordance with the applicable
statutes of the State of Washington and of the State of Georgia, that Vega shall
be and hereby is, upon the filing of appropriate Articles of Merger with the
Secretary of State of the State of Washington (the "Effective Date") and with
the proper superior court in the State of Georgia, merged into Kalama NJ, which
shall be the surviving corporation (the "Surviving Corporation"), but its name
shall be changed to VEGA CHEMICAL, INC., and that the terms and
9
<PAGE>
conditions of such merger and the mode of carrying it into effect shall be as
follows:
1. Merger of Kalama NJ and Vega.
Upon the Effective Date, Vega shall be merged with and into Kalama
NJ and the separate existence of Vega shall cease. Kalama NJ shall continue its
corporate existence as the Surviving Corporation under the laws of the State of
Washington under the name VEGA CHEMICAL, INC.
2. Articles of Incorporation and Bylaws.
The Articles of Incorporation of Kalama NJ in force on the Effective
Date shall continue to be the Articles of Incorporation of the Surviving
Corporation, except that Article I thereof shall be deemed to be amended hereby
to change the name of the Surviving Corporation to VEGA CHEMICAL, INC., and
Article V thereof shall be deemed to be amended hereby to change the authorized
capital stock of the Surviving Corporation to be 62,500 shares, par value $1 per
share, of common stock. With the exceptions mentioned herein, the Articles of
Incorporation of Kalama NJ shall be the Articles of Incorporation of the
Surviving Corporation until the same shall be further altered, amended, or
repealed in the manner provided therein and as prescribed by law, and the terms
and provisions thereof are hereby incorporated in this Agreement with the full
force and effect as though herein set forth in full. The Bylaws of Kalama NJ, as
in force on the Effective Date, shall be the Bylaws of the Surviving Corporation
until altered, amended, or repealed in the manner provided therein and as
prescribed by law. The officers of Kalama NJ shall become the officers of the
Surviving Corporation and shall hold their respective offices until the next
annual meeting of directors of the Surviving Corporation and until their
respective successors are elected and shall have qualified. The directors of the
Surviving Corporation shall become, on the Effective Date, Ted W. Palmer, Robert
A. Kirchner and Raymond Carmody, who shall hold their offices until the next
annual meeting of shareholders of the Surviving Corporation, at which the term
for which they are named expires, and until their respective successors are
elected and shall have qualified.
10
<PAGE>
3. Status of Shares.
(a) Simultaneously with the execution of this Agreement, Kalama NJ
shall issue to Kalama 37,500 shares, par value of $1 per share, of its common
stock, receiving therefor the consideration recited in Section 2 of the
Acquisition Agreement. Each of the said 37,500 shares, par value of $1 per
share, of the common stock of Kalama NJ issued and outstanding pursuant to this
Agreement shall be and continue to be an issued and outstanding share of the
common stock, par value $1 per share, of the Surviving Corporation. Upon the
Effective Date, the Surviving Corporation shall issue to Kalama certificates
representing the said 37,500 shares, which certificates shall bear the name of
the Surviving Corporation;
(b) Upon the Effective Date, all of the issued and outstanding
shares of Vega, consisting of 250 shares, par value $10 per share, of common
stock, shall be delivered to the Surviving Corporation in exchange for 25,000
shares, par value $1 per share, of the common stock of the Surviving
Corporation. The said 25,000 shares shall be divided among the Vega Stockholders
in proportion to the number of shares in Vega held by each of the Vega
Stockholders prior to the exchange of stock, as provided in Section 2 of the
Acquisition Agreement. The Surviving Corporation shall issue certificates
representing the said 25,000 shares to the Vega Shareholders in the respective
amounts held by each, which certificates shall bear the name of the Surviving
Corporation. Following the delivery and exchange of stock as provided for
herein, the certificates representing the shares of Vega stock shall be
cancelled.
4. Shareholder Approval.
This Agreement shall be submitted to the shareholders of Kalama NJ
and Vega for the purpose of considering and acting upon this Agreement, and if
this Agreement be approved and adopted by such shareholders by the votes
required in the Articles of Incorporation of the respective corporations and by
the laws of the States of Georgia and Washington, then this Agreement shall be
executed and the required number of originals of Articles of Merger shall be
executed, verified, and filed for record with the Secretary of State of the
State of Washington pursuant to the laws of Washington and presented
11
<PAGE>
to the superior court of the Georgia county in which Vega's registered office is
located. The merger provided for in this Agreement shall become effective upon
such filing with the Secretary of State of the State of Washington.
5. Effect.
Upon the filing of the Articles of Merger, the separate existence of
Vega shall cease, and it shall be merged into Kalama NJ, the Surviving
Corporation, in accordance with the provisions of this Agreement. The Surviving
Corporation shall possess all the rights, privileges, powers, franchises and
immunities as well of a public as of a private nature and be subject to all the
restrictions, liabilities, disabilities, and duties of Vega, and each of the
rights, privileges, powers, franchises, immunities and all interests of Vega
shall be thereafter as effectually the property of the Surviving Corporation as
they were of Vega, and the title to any real estate, whether by deed or
otherwise vested in either such corporation, shall not revert or be in any way
impaired by reason of this merger; provided, that all rights of creditors and
all liens upon the property of either of said corporations shall be preserved
unimpaired, and all debts, liabilities, and duties of Vega shall henceforth
attach to the Surviving Corporation and may be enforced against it to the same
extent as if the said debts, liabilities and duties had been incurred or
contracted by it.
6. Termination.
This Agreement may be terminated and the merger abandoned any time
before or after approval thereof by the shareholders of Kalama NJ or old Vega,
notwithstanding favorable action on the merger by the shareholders of either or
both said corporations, but not later than the Effective Date, by the mutual
consent by the Boards of Directors of old Vega and Kalama or by the President or
Board of Directors of Kalama if any of the conditions provided in the
Acquisition Agreement have not been met or waived.
IN WITNESS WHEREOF, the parties hereto, pursuant to the authority
given them by their respective Boards of Directors and Shareholders, have called
this
12
<PAGE>
Agreement to be entered into and signed by their respective Presidents or Vice
Presidents and Secretaries or Assistant Secretaries as of the day and year first
above written.
KALAMA CHEMICAL OF NEW JERSEY, INC.
By /s/ Robert E. Karns
--------------------------------
Its Vice President
By /s/
--------------------------------
Its Assistant Secretary
VEGA, INC.
By /s/ Robert Bennett
--------------------------------
Its Vice President
----------------------------
By /s/
Its Secretary
---------------------------
13
<PAGE>
ARTICLES OF INCORPORATION
OF
KALAMA CHEMICAL OF NEW JERSEY, INC.
ARTICLE I
The name of this corporation is Kalama Chemical of New Jersey, Inc.
ARTICLE II
This corporation has perpetual existence.
ARTICLE III
The purpose or purposes for which this corporation is organized are:
(1) To own and operate a chemical processing facility; and
(2) To engage in any other lawful business or activity whatsoever
which may hereafter from time to time be authorized by the Board of Directors.
ARTICLE IV
The address of the registered office of the corporation is 14th
Floor, Norton Building, Seattle, Washington 98104 and the name of the registered
agent at such address is Robert D. Kaplan.
ARTICLE V
14
<PAGE>
The total authorized number of par value shares of the corporation
is fifty thousand shares (50,000) of the par value of One and No/100 Dollars
($1.00) per share, amounting in the aggregate to Fifty Thousand and No/100
Dollars ($50,000.00).
ARTICLE VI
The amount of paid-in capital with which the corporation will begin
business shall be not less than Five Hundred Dollars ($500.00), and the
corporation will not commence business until consideration of that value has
been received for issuance of its shares.
ARTICLE VII
Shareholders of this corporation do not have preemptive rights to
acquire additional shares issued by the corporation.
ARTICLE VIII
The first directors of the corporation are three (3) in number and
their names and addresses are as follows:
Name Address
---- -------
Ted W. Palmer P. 0. Box 427
Kalama, Washington 98625
Robert E. Karns P. 0. Box 427
Kalama, Washington 98625
15
<PAGE>
Robert A. Kirchner P. 0. Box 427
Kalama, Washington 98625
ARTICLE IX
The name and address of the incorporator is as follows:
Name Address
---- -------
Robert D. Kaplan 14th Floor, Norton Building
Seattle, Washington 98104
ARTICLE X
In all elections for directors, every shareholder has the right
to vote in person or by proxy the number of shares of stock held by him for
as many persons as there are directors to be elected. No cumulative voting for
directors shall be permitted.
ARTICLE XI
(1) The directors of this corporation need not be residents of the
State of Washington or shareholders of the corporation.
(2) The Board of Directors has authority to fix the compensation of
the directors.
(3) The Board of Directors is expressly authorized to make, alter,
amend or repeal the Bylaws of this corporation, subject to the power of the
shareholders having voting power to alter, amend or repeal such Bylaws.
16
<PAGE>
ARTICLE XII
No contracts or other transactions between the corporation and any
other corporation shall in any way be affected or invalidated by the fact that
any of the directors of the corporation are pecuniarily or otherwise interested
in, or are directors or officers of, such other corporation. Any director
individually, or any firm of which any director may be a member, may be a party
to, or may be pecuniarily or otherwise interested in, any contracts or
transactions of the corporation, provided that the fact that he or such firm is
so interested shall be disclosed or shall have been known to the Board of
Directors or a majority thereof. Any director of the corporation who is also a
director or officer of such other corporation or who is so interested may be
counted in determining the existence of a quorum at any meeting of the Board of
Directors of the corporation which shall authorize any such contracts or
transactions with like force and effect as if he were not such director or
officer of such other corporation, or not so interested.
ARTICLE XIII
The corporation reserves the right to amend, alter, change or repeal
any provision contained in these
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Articles of Incorporation, in the manner now or hereafter prescribed by law, and
all rights and powers conferred herein on shareholders and directors are subject
to this reserve power.
DATED: September 10, 1974
/s/ Robert D. Kaplan
--------------------------------
Robert D. Kaplan
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BYLAWS
OF
KALAMA CHEMICAL OF NEW JERSEY, INC.
ARTICLE I
Offices
(1) Registered Office and Registered Agent: The registered office of
the corporation shall be located in the State of Washington at such place as may
be fixed from time to time by the Board of Directors upon filing of such notices
may be required by law, and the registered agent shall have a business office
identical with such registered office.
(2) Other Offices: The corporation may have other offices within or
outside the State of Washington at such place or places as the Board of
Directors may from time to time determine.
ARTICLE II
Shareholders' Meetings
(1) Meeting Place: All meetings of the shareholders shall be held at
the registered office of the corporation, or at such other place as shall be
determined from time to time by the Board of Directors, and the place at which
any such meeting shall be held shall be stated in the notice of the meeting.
(2) Annual Meeting Time: The annual meeting of the shareholders for
the election of directors and for the transaction of such other business as may
properly come before the meeting, shall be held each year on the lst day of
August at the hour of 10:00 a.m. if not a legal holiday, and if a legal holiday,
then on the day following, at the same hour.
(3) Annual Meeting - Order of Business: At the annual meeting of
shareholders, the order of business shall be as follows:
<PAGE>
(a) Calling the meeting to order.
(b) Proof of notice of meeting (or filing
waiver).
(c) Reading of minutes of last annual
meeting.
(d) Reports of officers.
(e) Reports of committees.
(f) Election of directors.
(g) Miscellaneous business.
(4) Special Meetings: Special meetings of the holders for any
purpose may be called at any time by the President, Board of Directors, or the
holders of not less than one tenth of all shares entitled to vote at the
meeting.
(5) Notice:
(a) Notice of the time and place of the annual meeting of
shareholders shall be given by delivering personally or by mailing a written or
printed notice of the same, at least ten days, and not more than fifty days,
prior to the meeting.
(b) At least ten days and not more than fifty days prior to
the meeting, written or printed notice of special meeting of shareholders,
stating the place, day and hour of such meeting, and the purpose or purposes for
which the meeting is called, shall be delivered personally, or mailed.
(6) Voting List: At least ten days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting, or any adjournment thereof, shall be made, arranged in alphabetical
order, with the address of and number of shares hold by each, which list shall
be kept on file at the registered office of the corporation for a period of ten
days prior to such meeting. The list shall be kept open at the time and place of
such meeting for the inspection of any shareholder.
(7) Quorum: Except as otherwise required by law:
(a) A quorum at any annual or special meeting of shareholders
shall consist of shareholders
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representing, either in person or by proxy, a majority of the outstanding
capital stock of the corporation, entitled to vote at such meeting.
(b) The votes of a majority in interest of those present at
any properly called meeting or adjourned meeting of shareholders at which a
quorum as in this paragraph defined is present, shall be sufficient to transact
business.
(8) Closing of Transfer Books and Fixing Record Date: For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders, or any adjournment thereof, or entitled to receive
payment of any dividend, the Board of Directors may provide that the stock
transfer books shall be closed for a stated period not to exceed fifty days nor
be less than ten days preceding such meeting. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a record date for any
such determination of shareholders, such date to be not more than fifty days
and, in case of a meeting of shareholders, not less than ten days prior to the
date on which the particular action requiring such determination of shareholders
is to be taken.
(9) Proxies: A shareholder may vote either in person or by proxy
executed in writing by the shareholder, or his duly authorized attorney-in-fact.
No proxy shall be valid after eleven months from the date of its execution,
unless otherwise provided in the proxy.
(10) Action by Shareholders without a meeting: Any action required
or which may be taken at a meeting of shareholders of the corporation, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the shareholders entitled to vote with respect
to the subject matter thereof. Such consent shall have the same force and effect
as a unanimous vote of shareholders.
(11) Waiver of Notice: A waiver of any notice required to be given
any shareholder, signed by the person or persons entitled to such notice,
whether before or after the time stated therein for the meeting, shall be
equivalent to the giving of such notice.
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ARTICLE III
Stock
(1) Certificates: Certificates of stock shall be issued in numerical
order, and each shareholder shall be entitled to a certificate signed by the
President or a Vice President, and the Secretary or an Assistant Secretary and
may be sealed with the seal of the corporation or a facsimile thereof. The
signatures of such officers may be facsimiles if the certificate is
countersigned by a transfer agent, or registered by a registrar, other than the
corporation itself or an employee of the corporation. If an officer who has
signed or whose facsimile signature has been placed upon such certificate ceases
to be an officer before the certificate is issued, it may be issued by the
corporation with the same effect as if the person were an officer on the date of
issue.
(2) Transfers: Transfers of stock shall be made only upon the stock
transfer books of the corporation, kept at the registered office of the
corporation or at its principal place of business, or at the office of its
transfer agent or registrar, and before a new certificate is issued the old
certificate shall be surrendered for cancellation. The Board of Directors may,
by resolution, open a share register in any state of the United States, and may
employ an agent or agents to keep such register, and to record transfers of
shares therein.
(3) Registered Owner: Registered shareholders only shall be entitled
to be treated by the corporation as the holders in fact of the stock standing in
their respective names and the corporation shall not be bound to recognize any
equitable or other claim to or interest in any share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
expressly provided by the laws of the State of Washington.
(4) Mutilated, Lost or Destroyed Certificates: In case of any
mutilation, loss or destruction of any certificate of stock, another may be
issued in its place on proof of such mutilation, loss or destruction. The Board
of Directors may impose conditions on such issuance and may require the giving
of a satisfactory bond or indemnity to the corporation in such sum as they might
4
<PAGE>
determine or establish such other procedures as they deem necessary.
(5) Fractional Shares or Scrip: The corporation may, but shall not
be obliged to, issue a certificate for a fractional share, which shall entitle
the holder to exercise voting rights, to receive dividends thereon, and to
participate in any of the assets of the corporation in the event of liquidation.
In lieu of fractional shares, the Board of Directors may provide for the
issuance of scrip in registered or bearer form which shall entitle the holder to
receive a certificate for a full share upon the surrender of such scrip
aggregating a full share.
(6) Shares of Another Corporation: Shares owned by the corporation
in another corporation, domestic or foreign, may be voted by such officers agent
or proxy as the Board of Directors may determine or, in the absence of such
determination, by the President of the corporation.
ARTICLE IV
Board of Directors
(1) Number and Powers: The management of all the affairs, property
and interest of the corporation shall be vested in a Board of Directors,
consisting of three (3) persons, who shall be elected for a term of one year,
and shall hold office until their successors are elected and qualify. Directors
need not be shareholders or residents of the State of Washington. In addition to
the powers and authorities by these Bylaws and the Articles of Incorporation
expressly conferred upon it, the Board of Directors may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the Articles of Incorporation or by these Bylaws directed or required to
be exercised or done by the shareholders.
(2) Change of Number: The number of directors may at any time be
increased or decreased by amendment of these Bylaws, but no decrease shall have
the effect of shortening the term of any incumbent director.
5
<PAGE>
(3) Vacancies: All vacancies in the Board of Directors, whether
caused by resignation, death or otherwise, may be filled by the affirmative vote
of a majority of the remaining directors though less than a quorum of the Board
of Directors. A director elected to fill any vacancy shall hold office for the
unexpired term of his predecessor and until his successor is elected and
qualified. Any directorship to be filled by reason of an increase in the number
of directors may be filled by the Board of Directors for a term of office
continuing only until the next election of directors by the shareholders.
(4) Removal of Directors: At a meeting called expressly for that
purpose, the entire Board of Directors, or any member thereof, may be removed in
the following manner:
(a) By a vote of the holders of a majority of shares then
entitled to vote at an election of directors;
(b) In case cumulative voting is permitted, if less than the
entire Board of Directors is to be removed, no one of the directors may be
removed if the votes cast against his removal would be sufficient to elect him
if then cumulatively voted at an election of the entire Board of Directors or if
there be classes of directors, at an election of the class of directors of which
he is a part.
(5) Regular Meetings: Regular meetings of the Board of Directors may
be held without notice at the registered office of the corporation or at such
other place or places, either within or without the State of Washington, as the
Board of Directors may from time to time designate. The annual meeting shall be
held without notice immediately after the adjournment of the annual meeting of
shareholders.
(6) Special meetings: Special meetings of the Board of Directors may
be called at any time by the President, or in his absence, by any two directors,
to be held at the registered office of the corporation or at such other place or
places as the directors may from time to time designate.
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(7) Notice: Notice of all special meetings of the Board of Directors
shall be given to each director by one (1) day's service of the same by
telegram, by letter, or personally. Such notice need not specify the business to
be transacted at, nor the purpose of, the meeting.
(8) Quorum: A majority of the whole Board of Directors shall be
necessary at all meetings to constitute a quorum for the transaction of
business.
(9) Waiver of Notice: Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. A waiver of notice signed by the
director or directors, whether before or after the time stated for the meeting,
shall be equivalent to the giving of notice.
(10) Registering Dissent: A director who is present at a meeting of
the Board of Directors at which action on a corporate matter is taken shall be
presumed to have assented to such action unless his dissent shall be entered in
the minutes of the meeting, or unless he shall file his written dissent to such
action with the person acting as the secretary of the meeting, before the
adjournment thereof, or shall forward such dissent by registered mail to the
Secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.
(11) Executive and Other Committees: Standing or temporary
committees may be appointed from its own number by the Board of Directors from
time to time and the Board of Directors may from time to time invest such
committees with such powers as it may see fit, subject to such conditions as may
be prescribed by such Board. An Executive Committee may be appointed by
resolution passed by a majority of the full Board of Directors. It shall have
and exercise all of the authority of the Board of Directors, except in reference
to amending the Articles of Incorporation, adopting a plan of merger or
consolidation, recommending the sale, lease or exchange or other disposition of
all or substantially all the property and assets of the corporation otherwise
than in the usual and regular course of business, recommending a voluntary
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<PAGE>
dissolution or a revocation thereof, or amending these Bylaws. All committees so
appointed shall keep regular minutes of the transactions of their meetings and
shall cause them to be recorded in books kept for that purpose in the office of
the corporation. The designation of any such committee and the delegation of
authority thereto, shall not relieve the Board of Directors, or any member
thereof, of any responsibility imposed by law.
(12) Remuneration: No stated salary shall be paid directors, as
such, for their service, but by resolution of the Board of Directors, a fixed
sum and expenses of attendance, if any, may be allowed for attendance at each
regular or special meeting of such Board; provided, that nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
(13) Loans: No loans shall be made by the corporation to the
directors, unless first approved by the holders of two thirds of the voting
shares. No loans shall be made by the corporation secured by its own shares.
(14) Action by Directors Without a Meeting: Any action required or
which may be taken at a meeting of the directors, or of a committee thereof, may
be taken without a meeting if a consent in writing, setting forth the action so
to be taken, shall be signed before such action by all of the directors, or all
of the members of the committee, as the case may be. Such consent shall have the
same affect as a unanimous vote.
(15) Action of Directors by Communications Equipment. Any action
required or which may be taken at a meeting of directors or of a committee
thereof, may be taken by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time.
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ARTICLE V
Officers
(1) Designations: The officers of the corporation shall be a
President, one or more Vice-Presidents (one or more of whom may be Executive
Vice-Presidents), a Secretary and a Treasurer, and such Assistant Secretaries
and Assistant Treasurers as the Board may designate, who shall be elected for
one year by the directors at their first meeting after the annual meeting of
shareholders, and who shall hold office until their successors are elected and
qualify. Any two or more offices may be held by the same person, except the
offices of President and Secretary.
(2) The President: The President shall preside at all meetings of
shareholders an directors, shall have general supervision of the affairs of the
corporation, and shall perform all such other duties as are incident to his
office or are properly required of him by the Board of Directors.
(3) Vice-Presidents: During the absence or disability of the
President, the Executive Vice-Presi-dents, if any, and the Vice-Presidents in
the order designated by the Board of Directors, shall exercise all the functions
of the President. Each Vice President shall have such powers and discharge such
duties as may be assigned to him from time to time by the Board of Directors.
(4) Secretary and Assistant Secretaries: The Secretary shall issue
notices for all meetings, except for notices for special meetings of the
shareholders and special meetings of the directors which are called by the
requisite number of shareholders or directors, shall keep minutes of all
meetings, shall have charge of the seal and the corporate books, and shall make
such reports and perform such other duties as are incident to his office, or are
properly required of him by the Board of Directors. The Assistant Secretary, or
Assistant Secretaries in the order designated by the Board of Directors, shall
perform all of the duties of the Secretary during the absence or disability of
the Secretary, and at other times may perform such duties as are directed by the
President or the Board of Directors.
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(5) The Treasurer: The Treasurer shall have the custody of all
moneys and securities of the corporation and shall keep regular books of
account. He shall disburse the funds of the corporation in payment of the just
demands against the corporation or as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the Board of
Directors from time to time as may be required of him, an account of all his
transactions as Treasurer and of the financial condition of the corporation. He
shall perform such other duties incident to his office or that are properly
required of him by the Board of Directors. The Assistant Treasurer, or Assistant
Treasurer, in the order designated by the Board of Directors, shall perform all
of the duties of the Treasurer in the absence or disability of the Treasurer,
and at other times may perform such other duties as are directed by the
President or the Board of Directors.
(6) Delegation: In the case of absence or inability to act of any
officer of the corporation and of any person herein authorized to act in his
place, the Board of Directors may from time to time delegate the powers or
duties of such officer to any other officer or any director or other person whom
it may select.
(7) Vacancies: Vacancies in any office arising from any cause may be
filed by the Board of Directors at any regular or special meeting of the Board.
(8) Other Officers: Directors may appoint such other officers and
agents as it shall deem necessary or expedient, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
(9) Loans: No loans shall be made by the corporation to any officer,
unless first approved by the holders of two thirds of the voting shares.
(10) Term - Removal: The officers of the corporation shall hold
office until their successors are chosen and qualify. Any officer or agent
elected or appointed by the Board of Directors may be removed at any time, with
or without cause, by the affirmative vote of a majority of the whole Board of
Directors, but such remov-
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al shall be without prejudice to the contract rights, if any, of the person so
removed.
(11) Bonds: The Board of Directors may, by resolution, require any
and all of the officers to give bonds to the corporation, with sufficient surety
or sureties, conditioned for the faithful performance of the duties of their
respective office, and to comply with such other conditions as may from time to
time be required by the Board of Directors.
ARTICLE VI
Dividends and Finance
(1) Dividends: Dividends may be declared by the Board of Directors
an paid by the corporation out of the unreserved and unrestricted earned surplus
of the corporation, or out of the unreserved and unrestricted net earnings of
the current fiscal year and the next preceding fiscal year, subject to the
conditions and limitations imposed by the State of Washington. The stock
transfer books may be closed for the payment of dividends during such periods of
not exceeding fifty days, as from time to time may be fixed by the Board of
Directors. The Board of Directors, however, without closing the books of the
corporation may declare dividends payable only to the holders of record at the
close of business, on any business day not more than fifty days prior to the
date on which the dividend is paid.
(2) Reserves: Before making any distribution of earned surplus,
there may be set aside out of the earned surplus of the corporation such sum or
sums as the directors from time to time in their absolute discretion deem
expedient as a reserve fund to meet contingencies, or for equalizing dividends,
or for maintaining any property of the corporation, or for any other purpose,
any earned surplus of any year not distributed as dividends shall be deemed to
have been thus set apart until otherwise disposed of by the Board of Directors.
(3) Depositaries: The moneys of the corporation shall be deposited
in the name of the corporation in such bank or banks or trust company or trust
companies as the Board of Directors shall designate, and shall be
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drawn out only by check or other order for payment of money signed by such
persons and in such manner as may be determined by resolution of the Board of
Directors.
ARTICLE VII
Notices
Except as may otherwise be required by law, any notice to any
shareholder or director may be delivered personally or by mail. If mailed, the
notice shall be deemed to have been delivered when deposited in the United
States mail, addressed to the addressee at his last known address in the records
of the corporation, with postage thereon prepaid.
ARTICLE VIII
Seal
The corporate seal of the corporation shall be in such form and bear
such inscription as may be adopted by resolution of the Board of Directors, or
by usage of the officers on behalf of the corporation.
ARTICLE IX
Indemnification of Officers, Directors,
Employees and Agents
(1) The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, trustee, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterpriser against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he
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acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that the person did not act
in good faith and in a manner in which he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding had reasonable cause to believe that his conduct
was unlawful.
(2) The corporation shall indemnify any person who was or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, trustee, officer, employee or
agent of tho corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect to any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation unless and only to the extent that the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, such person is firmly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
(3) To the extent that a director trustee, officer, employee or
agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections (1) and
(2), or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (in-
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cluding attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(4) Any indemnification under subsections (1) or (2) (unless ordered
by a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, trustee,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (1) or (2). Such
determination shall be made (a) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (b) if such a quorum is not obtainable, or even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (c) by the shareholders.
(5) Expenses (including attorney's fees) incurred in defending a
civil or criminal action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding as
authorized in the manner provided in subsection (4) upon receipt of an
undertaking by or on behalf of the director, trustees officer, employee or agent
to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the corporation as authorized in this section.
(6) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, trustee, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
(7) Upon the majority vote of a quorum of the Board of Directors,
the corporation may purchase and maintain insurance on behalf of any person who
is or was a director, trustee, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
trustee, employee or agent of another corporation, partnership, joint venture,
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trust or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation shall have indemnified him against such liability
under the provisions of this Article.
ARTICLE X
Books and Records
The corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders and Board
of Directors; and shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of its
shareholders, giving the names and addresses of all shareholders and the number
and class of the shares held by each.
ARTICLE XI
Amendments
(1) By Shareholders: These Bylaws may be altered, amended or
repealed by the affirmative vote of a majority of the voting stock issued and
outstanding at any regular or special meeting of the shareholders.
(2) By Directors: If the Articles of Incorporation shall so provide,
the Board of Directors shall have power to make, alter, amend and repeal the
Bylaws of this corporation. However any such Bylaws, or any alteration,
amendment or repeal of the Bylaws, may be changed or repealed by the holders of
a majority of the stock entitled to vote at any shareholders' meeting.
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(3) Emergency Bylaws: The Board of Directors may adopt emergency
Bylaws, subject to repeal or change by action of the shareholders, which shall
be operative during any emergency in the conduct of the business of the
corporation resulting from an attack on the United States or any nuclear or
atomic disaster.
Adopted by resolution of the corporation's Board of Directors as of
March 25, 1976.
/s/ Robert A. Kirchner
--------------------------
Secretary
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CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
The undersigned, being the duly elected President and Secretary, and
a majority of the members of the Board of Directors of KALAMA FOREIGN SALES
CORPORATION (formerly KFS Corporation), a Guam corporation, do hereby certify
that the annexed First Amended Articles of Incorporation were duly approved by
the unanimous consent of the Board of Directors and the written assent of more
than two-thirds (2/3) of the stockholders representing all of the subscribed
capital stock of the Corporation.
The undersigned, do hereby further certify that the same is correct
and that said amendment does not affect adversely or otherwise any rights or
actions which have or might have accrued to others between the time of filing
the original Articles of Incorporation and the filing of these First Amended
Articles of Incorporation.
DATED this 31st day of January, 1989.
/s/ Ted W. Palmer
------------------------------------
TED W. PALMER
President
/s/ William C. Williams
------------------------------------
WILLIAM C. WILLIAMS
Secretary
APPROVED:
/s/ Ted W. Palmer
- ---------------------------
TED W. PALMER
Director
/s/ L.C. Macomber
- ---------------------------
L. C. MACOMBER
Director
/s/ William C. Williams
- ---------------------------
WILLIAM C. WILLIAMS
Director
<PAGE>
ARTICLES OF INCORPORATION
of
KALAMA FOREIGN SALES CORPORATION
(formerly KFS Corporation)
THESE ARTICLES OF INCORPORATION are made among TED W. PALMER, L.C.
MACOMBER and WILLIAM C. WILLIAMS.
The parties hereto, desiring to become incorporated in accordance
with the laws of the Territory of Guam and to obtain the rights and benefits
conferred by said laws upon corporations, do hereby associate themselves
together, unite and form a corporation, and do make and enter into the following
Articles of Incorporation the terms of which shall be equally obligatory upon
the parties signing this instrument and upon all who from time to time may hold
stock in the corporation.
I
NAME
The name of the corporation shall be: KALAMA FOREIGN SALES
CORPORATION.
II
OFFICES
The principal office of the corporation shall be at Agana, Guam or
at such other location within the Territory of Guam as the Board of Directors
shall designate. The corporation may have such other offices within and without
the Territory of Guam as the Board of Directors may designate.
III
PURPOSES AND POWERS
This corporation is organized-for the following purposes and powers:
(a) To import, export, sell and resell at wholesale and
retail, exchange leases, rent and deal in goods and property of
whatever nature;
(b) To perform services of every kind and nature whatsoever
related and subsidiary to any
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sale, exchange, disposition, lease or rental of goods and property;
(c) To conduct any and all business and activities which may
lawfully be conducted by a Foreign Sales Corporation pursuant to all
laws of the United States now and hereafter in force;
(d) To perform managerial services, financial services and
other services for any other person, entity or corporation;
(e) To have succession and corporate existence for the term of
fifty (50) years and as thereafter extended in the manner provided
by law;
(f) To hold, purchase and convey such property as the purposes
of the corporation require, without limit as to amount, and to
mortgage, pledge and hypothecate the same to secure any debt of the
corporation;
(g) To promote or to aid in any manner, financially or
otherwise (including pledging this corporation's property as
security), whenever necessary or advisable in furtherance of the
business of this corporation and in accordance with law:
(1) any person, firm, corporation or other entity ("any
entity") (a) any of whose stock, bonds or other obligations
are held directly or indirectly or in any manner guaranteed by
this corporation, or (b) which holds directly or indirectly or
in any way guarantees the stocks, bonds or other obligations
of this corporation, or
(2) any other entity whose stocks, bonds or other
obligations are held or in any way guaranteed, or in whom an
interest is held, directly or indirectly, by another entity
which also holds directly or indirectly or in any way
guarantees the stocks, bonds or obligations of, or an
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interest in, this corporation, and for this purpose to enter
into plans of reorganization or readjustment and to guarantee
(including the right to pledge security for such guarantee)
the whole or any part of the contracts, indebtedness and
obligations of any such other entities and the payment of
dividends on their stock, and to do any other acts to protect
or enhance the value of such stocks or obligations;
(h) To engage in any lawful act, activity or business for
which a corporation may be organized, and to exercise all rights,
powers and privileges now or hereafter granted to a corporation by
law;
(i) To act as principal, agent, partner joint venturer, or in
any other legal capacity, in any transaction;
(j) To do business anywhere in the world.
The foregoing clauses shall each be construed as separate purposes
and powers. The enumeration of specific purposes and powers shall not limit the
meaning of the general purposes and powers of the corporation, nor shall the
expression of one thing be deemed to exclude another, although of a like nature,
not expressed.
IV
STOCK
The amount of the capital stock of the corporation shall be Ten
Thousand Dollars ($10,000) divided into ten thousand (10,000) shares of One
Dollar ($1.00) par value common stock. The Board of Directors may issue
authorized but unissued shares from time to time for such consideration as it
may approve, and allocate any consideration received by the corporation for the
issuance of said capital stock between capital and paid-in surplus. The
corporation shall not have the power to create or issue any preferred stock, and
shall not at any time have or issue shares to more than twenty-five (25)
stockholders.
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The stockholders shall have the first right (subject to reasonable
adjustment to avoid the issue of fractional shares) to purchase shares of stock
of the corporation that may hereafter be issued (whether or not presently
authorized), including treasury shares of the corporation, in the proportion of
their then current holdings of stock. If any of the stockholders shall fail to
exercise the preemptive right to purchase such newly issued shares, then such
shares shall be offered to the remaining stockholders in the proportion of their
then current holdings of stock prior to being offered for sale to persons not
stockholders in the corporation.
The names and residences of the initial subscribers for the shares
of stock of the corporation, the number of shares subscribed for, the total
subscription price for the shares, and the amount of capital or paid-in surplus
paid in by each subscriber, all of which has been paid in cash, are as follows:
Name and Total
Address of No. of Subscription Paid-In Paid-In
Subscriber Shares Price Capital Surplus
- ---------- ------ ----- ------- -------
Kalama Chemical, Inc. 2,500 $2,500 $2,500 -0-
1110 Bank of California
Ctr.
Seattle, WA 98164
V
BOARD OF DIRECTORS
The corporation shall have a Board of Directors comprised of not
less than three (3) nor more than seven (7) directors. At least one (1) member
of the Board of Directors shall at all times be an individual who is not a
resident of the United States (for purposes of this Article, the Territory of
Guam shall not be considered as part of the United States). The members of the
Board of Directors shall be elected or appointed at such times, in such manner
and for such terms as may be prescribed by the Bylaws. No director need be a
stockholder of the corporation.
The Board of Directors, without the approval of the stockholders, or
of any percentage thereof, may authorize the borrowing of money or the incurring
of debts, even though the amount of the indebtedness may
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exceed the corporation's capital stock. The Board of Directors may create such
committees (including but not limited to an executive committee) and delegate to
and confer upon such committees such duties and responsibilities, as may by
resolution be set forth, for the purpose of carrying on or exercising any of the
powers of the corporation.
VI
CONTRACTS
The Board of Directors may make contracts with any person, firm,
corporation, association or organization to act as agent or employee of the
corporation, to perform duties and services, and to exercise power and authority
on behalf of the corporation, including ministerial, executive and discretionary
powers, subject always to the supervision and control of the Board of Directors.
Any such contract (a) shall contain such terms and provisions with respect to
the duties, services, powers and authority to be performed by such agent or
employee, compensation therefor, and otherwise, as the Board of Directors may
determine, and (b) may permit the agent or employee to deal in his or her own
behalf with the corporation, to hold similar positions for other corporations
with which this corporation may do business, and to receive compensation
therefor.
VII
INTERESTED DIRECTORS AND OFFICERS
(a) No contract or other transaction between the corporation and any
other corporation, firm, association or other organization, and no act of the
corporation, shall be affected or invalidated because any of the directors or
officers of the corporation are parties to such contract, transaction or act, or
are pecuniarily or otherwise interested in the same, or are directors, officers
or members of any such other corporation, firm, association or other
organization, if the interest of such director or officer shall be disclosed or
shall have been known to the Board of Directors authorizing or approving the
same, or to a majority thereof. Any director of the corporation who is
pecuniarily or otherwise interested in, or is a director, officer or member of
such other corporation, firm, association or other organization, may be counted
in determining a quorum of any
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meeting of the Board of Directors which shall authorize or approve any such
contract, transaction or act, and may vote thereon with like force and effect as
if such director were in no way interested therein. Neither any director nor
officer of the corporation, being so interested in any such contract,
transaction or act of the corporation which shall be approved by the Board of
Directors, nor any corporation, firm, association or other organization in which
such director or officer may be interested, shall be liable or accountable to
the corporation, or to any stockholder thereof, for any loss incurred by the
corporation pursuant to or by reason of such contract, transaction or act, or
for any gain received by any such other party pursuant thereto or by reason
thereof.
(b) Any director of the corporation may vote upon any contract or
other transaction between the corporation and any subsidiary or affiliated
corporation, including any corporation which owns all or substantially all of
the shares of the capital stock of the corporation, even though such director
may also be a director, officer, stockholder of, or otherwise interested in or
connected with, such subsidiary or affiliated corporation. No contract or other
transaction entered into by and between the corporation and any such subsidiary
or affiliated corporation shall be affected or invalidated because any director
or officer of the corporation may also be a director, officer, stockholder of,
or otherwise interested in or connected with, such subsidiary or affiliated
corporation, or because said contract or transaction may be entered into by
officers of the corporation or may be authorized or ratified by the vote of
directors who may also be directors, officers or stockholders of or otherwise
interested in or connected with, such subsidiary or affiliated corporation.
VIII
APPOINTMENT OF DIRECTORS
The names and residences of the incorporators, who shall act as
directors of the corporation until their successors are elected as provided for
in the Bylaws, are as follows:
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Name Residence Address
---- -----------------
Ted W. Palmer 6640 S.W. Admiral Way
Seattle, Washington 98116
L.C. Macomber 29063 Beach Drive N.E.
Paulsbo, Washington 98370
William C. Williams 141 Biraden Kamyo
Maina, Guam 96922
IX
OFFICERS
The officers of the corporation shall be a President, one or more
Vice-Presidents, a Treasurer, a Secretary and such other officers as may be
provided for in the Bylaws. One person may hold more than one office so long as
there are at least two (2) persons as officers of the corporation. The officers
shall be appointed at such times, in such manner, and for such terms as may be
prescribed by the Bylaws. No officer need be a stockholder of the corporation.
The Treasurer or the Secretary shall be a resident of Guam.
X
INDEMNIFICATION
(a) No director, officer, employee or agent of the corporation and
no person serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, and no heir, executor or administrator of any such person
shall be liable to this corporation for any loss or damage suffered by it on
account of any action or omission by him or her as such director, officer,
employee or agent if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of this
corporation, unless with respect to an action or suit by or in the right of the
corporation to procure a judgment in its favor such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his or
her duty to this corporation.
(b) The corporation shall indemnify each person who was or is a
party or is threatened to be made
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a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) because such person is or was a director,
officer, employee or agent of the corporation or of any division of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including reasonable
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of this
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of this
corporation, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
(c) The corporation shall indemnify each person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor because such person is or was a director, officer,
employee or agent of the corporation or of any division of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including reasonable attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to.the best
interests of this corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the
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performance of his or her duty to this corporation unless and only to the extent
that the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
(d) To the extent that a director, officer, employee or agent of the
corporation or of any division of the corporation, or a person serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraphs (b) and (c) of this Article, or in defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses (including reasonable attorneys' fees) actually and reasonably incurred
by such person in connection therewith.
(e) Any indemnification under paragraphs (b) and (c) of this Article
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because the person has
met the applicable standard of conduct set forth in paragraphs (b) and (c). Such
determination may be made (1) by the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs or the person who seeks
indemnification so requests, by independent legal counsel in a written opinion
to the corporation, or (3) if a quorum of disinterested directors so directs, by
a majority vote of the stockholders.
(f) Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding as authorized by the Board of Directors in a
particular case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately
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<PAGE>
be determined that the person is entitled to be indemnified by the corporation
as authorized in this Article.
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled, shall
continue as to a person who has ceased to be a director, officer, employee or
agent, and shall inure to the benefit of the heirs, executors, administrators
and personal representatives of such person.
(h) The corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation or of any division of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against or incurred by such person in
any such capacity or arising out of his or her status as such whether or not the
corporation would have the power to indemnify such person against such liability
under the provisions of this Article. Any such insurance may be procured from
any insurance company designated by the Board of Directors, including any
insurance company in which the corporation shall have any equity or other
interest through stock ownership or otherwise.
(i) This Article does not apply to any proceeding against any
trustees investment manager or other fiduciary of an employee benefit plan in
such person's capacity as such, even though such person may also be an agent of
the employer corporation. Nothing contained in this Article shall limit any
right to indemnification to which such a trustee, investment manager or other
fiduciary may be entitled by contract or otherwise.
(j) This Article shall be deemed to be a contract between the
corporation and each director, officer, employee or agent who serves in such
capacity at any time while this Article is in effect, and any repeal or
modification thereof shall not affect any rights or obligations then existing.
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XI
BYLAWS
The initial Bylaws of the corporation shall be adopted by the
affirmative vote of a majority of the stockholders of the corporation. The
Bylaws, and every part thereof, may from time to time and at any time, be
amended, altered, repealed, and new bylaws may be adopted, by the stockholders
as prescribed in the Bylaws. Upon the affirmative vote of the stockholders who
own two-thirds of the paid-up capital stock entitled to vote, the stockholders
may delegate to the Board of Directors the power to adopt, amend, alter or
repeal any Bylaws. Any such power delegated to the Board of Directors shall be
considered as revoked whenever a majority of the stockholders shall so vote at a
regular or special meeting of the stockholders.
XII
CORPORATE LIABILITIES
The corporation and the property thereof shall be liable for its
debts, but no stockholder shall be liable for the debts of the corporation
beyond the amount which may be due and unpaid upon the share, or shares, owned
by such stockholder.
XIII
DEFINITIONS
The word "person" or any pronoun used in place thereof, where the
context so requires or admits, shall include and mean individuals, firms,
corporations, partnerships and associations. The singular shall include and mean
the plural, or vice versa. Masculine, feminine and neuter genders shall include
or interchange each of the other genders as the context shall imply.
DATED: January 19, 1989.
/s/ Ted W. Palmer
-------------------------------
Ted W. Palmer
/s/ L.C. Macomber
-------------------------------
L. C. Macomber
/s/ William C. Williams
-------------------------------
William C. Williams
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STATE OF WASHINGTON )
) ss:
COUNTY OF KING )
On this 19th of January, 1989, before me personally appeared Ted W.
Palmer and L. C. Macomber, to me known to be the individuals who executed the
Articles of Incorporation for KFS CORPORATION and acknowledged the same to be
their free and voluntary act and deed, for the uses and purposes therein
mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal,
the day and year first above written.
/s/ Carolyn L. Anderson
-----------------------------------
NOTARY PUBLIC in and for the State
of Washington, residing at Winslow
TERRITORY OF GUAM )
) ss:
MUNICIPALITY OF AGANA )
On this 24th day of January, 198_, before me personally appear
William C. Williams, to me known to be the individual described in and who
execute the foregoing instrument and acknowledged to me that he executed the
same as his free act and deed.
/s/ Dorothy Lou Peredo
-------------------------------
Notary Public
Territory of Guam
My commission expires
13
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AFFIDAVIT
TERRITORY OF GUAM )
) ss:
MUNICIPALITY OF AGANA )
The undersigned, being duly sworn, states:
1. That he is the secretary elected by the aforesaid subscribers of
the aforesaid corporation.
2. That he is a resident of the Territory of Guam.
DATED this 24th day of January, 1989.
/s/ William C. Williams
-------------------------------
William C. Williams
Secretary
SUBSCRIBED and SWORN to before me this 24th day of January, 1989.
/s/ Dorothy Lou Peredo
-------------------------------
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TREASURER'S CERTIFICATE
STATE OF WASHINGTON )
) ss:
COUNTY OF KING )
The undersigned, being duly sworn, states:
1. That he is the treasurer elected by the aforesaid subscribers of
the aforesaid corporation.
2. At least twenty percent (20%) of the entire capital stock of the
aforesaid corporation has been subscribed.
3. At least twenty-five percent (25%) of the aforesaid subscription
has been paid to him for the benefit and to the credit of the corporation.
/s/ John P. Fairman
-------------------------------
John P. Fairman, Treasurer
SUBSCRIBED and SWORN to before me this 19th day of January, 1989.
/s/ Carolyn L. Anderson
-------------------------------
15
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16
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CERTIFICATE OF AMENDMENT
OF
BYLAWS
The undersigned, being the duly elected President and Secretary, and
a majority of the members of the Board of Directors of KALAMA FOREIGN SALES
CORPORATION (formerly KFS Corporation), a Guam corporation, do hereby certify
that the annexed First Amended Bylaws were duly approved by the unanimous
consent of the Board of Directors and the written assent of more than two-thirds
(2/3) of the stockholders representing all of the subscribed capital stock of
the Corporation.
The undersigned, do hereby further certify that the same is correct
and that said amendment does not affect adversely or otherwise any rights or
actions which have or might have accrued to others between the time of filing
the original Bylaws and the filing of these First Amended Bylaws.
DATED this 31st day of January, 1989.
/s/ Ted W. Palmer
--------------------------------
TED W. PALMER
President
/s/ William C. Williams
--------------------------------
WILLIAM C. WILLIAMS
Secretary
APPROVED:
/s/ Ted W. Palmer
- --------------------------------
TED W. PALMER
Director
/s/ L.C. Macomber
- --------------------------------
L. C. MACOMBER
Director
/s/ William C. Williams
- --------------------------------
WILLIAM C. WILLIAMS
Director
2
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BYLAWS
OF
KALAMA FOREIGN SALES CORPORATION
(formerly KFS Corporation)
ARTICLE I
PRINCIPAL OFFICE; SEAL
SECTION 1.1 Principal Office. The principal office of the
corporation shall be at Agana, Guam, or at such other location within the
Territory of Guam as the Board of Directors shall determine. A set of the
permanent books of account of the corporation shall be at all times maintained
in the principal office of the corporation. The corporation may have such other
offices within or without the Territory of Guam as the Board of Directors shall
determine.
SECTION 1.2 Place of Meetings. All meetings of the stockholders
shall be held at the principal office of the corporation, unless some other
place where such principal office is located is stated in the call or notice for
such meeting. All meetings of the Board of Directors shall be held outside the
United States at such place stated in the call or notice for such meeting (for
purposes of these Bylaws the Territory of Guam shall not be considered as part
of the United States); provided, however, if this corporation makes an election
to be treated as a small ESC pursuant to the applicable provisions of Section
922(b)(1) of the U.S. Internal Revenue Code of 1954, as amended, or any
successor statute, then, so long as such election is in effect, meetings of the
Board of Directors need not be held outside the United States.
SECTION 1.3 Seal. The corporation shall have a corporate seal (and
one or more duplicates thereof) of such form and device as the Board of
Directors shall determine.
ARTICLE II
STOCKHOLDERS
SECTION 2.1 Annual Meetings. The annual meeting of the stockholders
shall be held on such day following the end of the fiscal year of the
corporation as the Board of Directors or the President may determine, or if
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no such day is designated by the end of the third month, on the fourth Thursday
of the fourth month following the close of the fiscal year.
SECTION 2.2 Special Meetings. Special meetings of the stockholders
may be held at any time upon the call of the President, or upon the call of any
two directors, or upon the written request of a stockholder or stockholders
owning not less than one-fourth (25%) of the issued and outstanding capital
stock. Upon receipt of such call or written request, the Secretary shall send
out notices of the meeting to all stockholders. Any meeting, regular or special,
may be held by conference telephone or similar communication equipment, so long
as all stockholders participating in the meeting can hear one another, and all
such stockholders shall be deemed to be present in person at the meeting.
SECTION 2.3 Notice of Meetings. A written or printed notice of every
meeting of stockholders, stating whether it is an annual or a special meeting,
the authority for the call of the meeting, the place, day, and hour thereof, and
the purpose therefor, shall be given by the Secretary or by the person or
persons calling the meeting, at least ten (10) days before the day set for such
meeting. Such notice shall be delivered personally to each stockholder in Guam
and shall be given to each other stockholder in any of the following ways: (a)
by leaving the same with the stockholder personally, (b) by leaving the same at
the residence or usual place of business of such stockholder, or (c) by mailing
the same, registered, postage prepaid and addressed to such stockholder at the
address that appears on the transfer books of the corporation. If notice is
given pursuant to the provisions of this Section, the failure of any stockholder
to receive actual notice of meeting shall in no way invalidate the meeting or
any proceedings thereat. Unless all stockholders are served personally with any
notice of a meeting or other action to which the notice applies, a copy of such
notice shall be posted for not less than three (3) weeks immediately prior to
the day assigned for the meeting or other action in three (3) public places in
the place where the principal office of the corporation is located.
SECTION 2.4 Notice Unnecessary. Any stockholder may, prior to, at
the meeting, or subsequent
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<PAGE>
thereto, waive notice of any meeting in writing, signed by such stockholder or
its duly authorized attorney in fact. At any meeting, the presence of any
stockholder or its representation by proxy shall be equivalent of the waiver of
the giving of notice of said meeting to such stockholder.
SECTION 2.5 Consent of Stockholders in Lieu of Meeting. Whenever the
vote of stockholders at a meeting thereof is required or permitted to be taken
in connection with any corporate action permitted by the laws of the Territory
of Guam, the meeting and vote of stockholders may be dispensed with if all of
the stockholders entitled to vote upon the action if such meeting were held
shall consent in writing to such corporate action being taken.
SECTION 2.6 Quorum and Voting. At any meeting, the presence in
person or by proxy of stockholders owning a majority of all of the shares of
stock issued and outstanding and entitled to vote at said meeting shall
constitute a quorum. The action of the holders of a majority of the shares of
stock present or represented at any meeting at which a quorum is present, shall
be valid and binding upon the corporation and its stockholders, except as
otherwise provided by law, by the Articles of Incorporation, or by these Bylaws.
A quorum, once established, shall not be broken by the absence or withdrawal of
one or more stockholders before the meeting is adjourned.
SECTION 2.7 Voting, Proxies. At any meeting of the stockholders,
each stockholder, except where otherwise provided by the clauses and terms
applicable to the stock held by such stockholder, shall be entitled to vote in
person or by proxy appointed by an instrument in writing subscribed by such
stockholder or its duly authorized attorney and filed with the Secretary, and
shall have one vote for each share of voting stock registered in its name on the
record date.
(a) The record date for determining stockholders entitled to vote at
a meeting of stockholders shall be the close of business on the business day
next preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
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<PAGE>
(b) The record date for determining stockholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the Board has been taken, shall be the day on which the first written
consent is given; or (ii) when prior action of the Board has been taken, shall
be at the close of business on that day on which the Board adopts the resolution
relating to that action.
(c) No proxy shall be valid after the expiration of eleven (11)
months from the date of its execution, unless the person executing it specifies
therein the length of time for which such proxy is to continue in force, which
in no case shall exceed five (5) years from the date of its execution. All
proxies must be executed in accordance with all provisions of the Civil Code of
Guam.
(d) When voting stock is transferred into the name of a pledgee
under a pledge agreement, the pledgor shall have the right to vote such stock
unless prior to the meeting the pledgee or its authorized representative shall
file with the Secretary written authorization from the pledgor authorizing such
pledgee to vote such stock. An executor, administrator, personal representative,
guardian or trustee may vote stock of the corporation held in such capacity at
all meetings, in person or by proxy, whether or not such stock shall have been
transferred into its name on the books of the corporation, but if such stock
shall not have been so transferred, it shall, if requested as a prerequisite to
so voting, file with the Secretary a certified copy of its letters as such
executor, administrator, personal representative or guardian, or evidence of its
appointment or authority as such trustee. If there are two or more executors,
administrators, personal representatives, guardians or trustees, any one of them
may vote the stock in person or by proxy. The instrument appointing a proxy
shall be signed by the appointer, or if such appointer is a corporation, by the
proper officer thereof. Minor variations between such signature and the name of
the appointer as it appears upon the stock books of the corporation (or in the
case of a corporation, failure to affix the corporate seal) shall not invalidate
the proxy. If a proxy is appointed by cable or radiogram, the typewritten
signature of the appointer shall be sufficient.
4
<PAGE>
SECTION 2.8 Adjournment. Any meeting of the stockholders, whether
annual or special, may be adjourned from time to time by the chairman thereof,
whether a quorum be present or not, without notice other than the announcement
at the meeting. Such adjournment may be to such time and to such place as shall
be determined by a majority vote of the shares of stock present or represented
by proxy. At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted by a quorum at the
original meeting as originally called.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1 Number, Qualifications and Election. There shall be a
Board of Directors comprised of not less than three (3) nor more than seven (7)
members. At least one (1) member of the Board of Directors shall at all times be
a person who is not a resident of the United States (for purposes of these
Bylaws, the Territory of Guam shall not be a part of the United States). The
authorized number of directors shall be three (3) until changed by an amendment
by the vote or written assent of the owners of a majority of the paid up voting
capital stock of the corporation. Each director shall hold office until the next
annual meeting and thereafter until a successor is duly elected or appointed and
qualified.
SECTION 3.2 Removal of Directors. Any director may be removed from
office with or without cause at any time and another person may be elected to
serve for the remainder of such director's term at any special meeting of
stockholders, called for that purpose, by the affirmative vote of the holders of
two-thirds of all of the paid up capital stock of the corporation outstanding
and entitled to vote. In case any vacancy so created shall not be filled by the
stockholders at such meeting, such vacancy may be filled by the Board of
Directors.
SECTION 3.3 Chairman. The Board may appoint from among its members a
Chairman who shall preside at all meetings, and serve during the pleasure of the
Board, and perform such other duties as may be assigned to the Chairman by the
Articles of Incorporation, these Bylaws, or by the Board.
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SECTION 3.4 Registration, Meetings, Notice.
(a) Each director shall, upon election to such office, register with
the corporation his or her mailing address.
(b) The Board of Directors shall, without any notice being given,
hold a meeting for the purpose of organization as soon as may be practicable
after each annual meeting of stockholders.
(c) The Board of Directors may schedule regular meetings of the
Board to be held at a stated time and place; no notice, written or otherwise, of
such meeting shall be required. The Board may alter the time and place for such
regular meetings from time to time.
(d) Special meetings of the Board of Directors may be called by
either the Chairman of the Board, or the President, or any two (2) directors.
(e) The Secretary or an Assistant Secretary shall give notice of
every special meeting of the Board of Directors orally or by cabling or
delivering a copy of the same to each director at his or her registered mailing
address, not less than five (5) days prior to any such meeting. Any director
may, orally or in writing, waive notice of any meeting. The presence of a
director at any meeting shall constitute a waiver of notice for such meeting.
(f) Any meeting, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another, and all such directors shall
be deemed to be in person at the meeting.
(g) All meetings, regular or special, shall be held at such place as
the Board of Directors shall determine in the Territory of Guam or otherwise
outside the United States (for purposes of these Bylaws, the Territory of Guam
shall not be considered a part of the United States); provided, however, if this
corporation makes an election to be treated as a small FSC pursuant to the
applicable provisions of Section 922(b)(1) of the U.S. Internal Revenue Code of
1954, as amended, or any successor statute, then, so long as such election is in
effect,
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meetings of the Board of Directors need not be held outside the United States.
SECTION 3.5 Action by Consent. Any action by the Board of Directors
may be taken without a meeting if a written consent thereto is signed by all the
Directors and filed with the records of the meetings of the Board of Directors.
Such consent shall be treated as a vote of the Board of Directors for all
purposes.
SECTION 3.6 Quorum and Voting. A majority of the members of the
Board of Directors shall constitute a quorum for the transaction of any
business. Any act or business must receive the approval of a majority of such
quorum. A quorum, once established, shall not be broken by the absence or
withdrawal of one or more directors before the meeting is adjourned. In the
absence of a quorum, the Chairman or a majority of the directors present may
adjourn the meeting from time to time without further notice until a quorum
shall be had.
SECTION 3.7 Permanent Vacancies; Designated Successor Directors. If
any permanent vacancy shall occur in the Board of Directors through death,
resignation, removal, or other cause, the remaining directors, by the
affirmative vote of a majority of all remaining members of the Board, whether
constituting a majority or a minority of the whole Board, may by the affirmative
vote of a majority of such remaining directors, elect a successor director to
hold office for the unexpired portion of the term of the vacant director. In
order to prevent vacancies in the Board, particularly vacancies in the
directorship held by the United States nonresident, the Board may, by
affirmative vote of a majority of the Board prior to the occurrence of any event
which otherwise would result in a permanent vacancy in the Board, elect one or
more persons to serve as a designated successor director for a specifically
named director who is holding office as of the date of election of the
designated successor director, and the person for whom the designated successor
director shall act as a replacement shall be specified at the time of election
of the designated successor director. The designated successor director shall
not be considered to be a member of the Board for any purpose until the
occurrence of an event which would, but for the prior election of the designated
successor director, have resulted in a permanent vacancy
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and shall contemporaneously with the occurrence of such event assume office and
be for all purposes a member of the Board for the unexpired portion of the term
of the person for whom the successor director replaces.
SECTION 3.8 Temporary Vacancies, Substitute Directors. If any
temporary vacancy shall occur in the Board of Directors through the sickness or
disability of any director, the remaining directors, whether constituting a
majority or a minority of the whole Board, may by the affirmative vote of a
majority of such remaining directors appoint some person as a substitute
director, who shall be a director during such sickness or disability and until
such director shall return to duty or the office of such director shall become
permanently vacant. No temporary vacancy shall be deemed to exist until such
vacancy is specifically declared to exist by the remaining directors.
SECTION 3.9 Expenses and Fees. Directors' fees may be allowed by the
Board for attendance of Board meetings and meetings of any committee created by
the Board. Any director may serve the corporation in any other capacity and
receive compensation therefor.
SECTION 3.10 Executive Committee. The Board of Directors may appoint
an Executive Committee, consisting of such members of the Board of Directors as
it may determine from time to time. The Executive Committee may make its own
rules of procedure and shall have and may exercise any and all of the powers of
the Board of Directors while the Board is not in session in all matters which
specific direction shall not have been given by the Board other than the power
to declare and fix the rate of dividends, and the power to fill vacancies on the
Board, subject to any limitations the Board may prescribe. A Secretary or an
Assistant Secretary (who need not be a member of the Committee) designated by
the Committee shall keep a record of all meetings and proceedings. All action
taken shall be reported to revision or alteration by the Board if no rights of
third parties shall be affected by any such revision or alteration. The
affirmative vote of the majority of said Committee present at the time of the
meeting shall be necessary to any action. The compensation of the members of the
Committee shall be such as shall be fixed from time to time by the Board of
Directors. Regular meetings shall be held at such time
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as shall be determined from time to time by resolution of the Committee. Special
meetings may be held at the call of the Chairman and on the request of any
member of said Committee. Notice of the time and place of all meetings shall be
given by the secretary or an assistant secretary of the Committee to each member
but the failure of any member to receive actual notice of any meeting shall not
invalidate the proceedings of such meeting.
ARTICLE IV
OFFICERS, MANAGEMENT, AND AUDITOR
SECTION 4.1 Appointment, Term, Removal. The officers of the
corporation shall be a President, one or more Vice Presidents, one of whom may
be designated as Executive Vice President and one of whom may be designated as
Financial Vice President, a Secretary, one or more Assistant Secretaries, a
Treasurer, one or more Assistant Treasurers, and such other officers, with such
duties, as the Board of Directors shall from time to time determine. All
officers shall be elected by the Board of Directors to serve until their
respective successors have been elected. Any officer shall be subject to removal
at any time, with or without cause, by the affirmative vote of the majority of
the whole Board. One person may hold more than one office so long as there are
at least two (2) persons as officers of the corporation. The Board of Directors
may appoint acting or temporary officers, and may appoint officers to fill
vacancies occurring for any reason whatsoever, and may, from time to time, limit
or enlarge the duties and powers of any officer appointed by it.
SECTION 4.2 Compensation. Officers shall be compensated as
determined by resolutions of the Board of Directors. Any compensation payment or
portion thereof made to any officer which is finally determined to be a
nondeductible expense of the corporation for federal income tax purposes as not
constituting a reasonable allowance, shall be reimbursed to the corporation by
the officer within thirty (30) days after the corporation has notified such
officer of the finally determined disallowed amount. It shall be the duty of the
directors, as a board, to enforce payment of any amount finally determined to be
disallowed.
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SECTION 4.3 The President. The President shall be the chief
executive officer of the corporation and shall preside at all meetings of the
stockholders. In the absence of the Chairman of the Board of Directors, or if no
Chairman of the Board of Directors shall have been appointed, the President
shall preside at all meetings of the Board of Directors. The President may call
special meetings of stockholders at his or her discretion and shall call annual
meetings of stockholders, as provided by these Bylaws. Subject to the directions
and control of the Board of Directors, the President shall:
(a) have the general management, supervision, and control of all of
the property, business, and affairs of the corporation, prescribe the duties of
the managers of all branch offices, and exercise such other powers as the Board
may from time to time confer upon; and
(b) appoint heads of departments, and generally control the
engagement, government, and discharge of all employees of the corporation, and
fix their duties and compensation.
The President shall at all times keep the Board of Directors fully advised as to
all of the corporation's business.
SECTION 4.4 The Vice President or Vice Presidents. The Vice
President or Vice Presidents shall, in such order as the Board of Directors
shall determine, perform all of the duties and exercise all of the powers of the
President provided by these Bylaws or otherwise, during the absence or
disability of the President or whenever the office of President shall be vacant,
and shall perform all other duties assigned by the Board of Directors or the
President. The Board of Directors may designate one of the Vice Presidents as
Executive Vice President, and the Vice President so designated shall be first in
order to perform the duties and exercise the power of the President in the
absence of that officer.
SECTION 4.5 The Secretary. The Secretary shall attend all meetings
of the stockholders and shall record the proceedings thereof in the minute book
or books of the corporation. The Secretary shall give notice, in conformity with
these Bylaws, of meetings of stockholders and, where acquired, of the Board of
Direc-
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tors. The Secretary shall be responsible for the keeping of the stock books,
stock transfer books and stock ledger of the corporation. The Secretary shall
perform all other duties incident to the office or which may be assigned by the
Board of Directors or the President. Duties of the Secretary may, from time to
time, be delegated by the Board of Directors to one or more Assistant
Secretaries.
SECTION 4.6 The Treasurer. The Treasurer shall have custody of all
of the funds, notes, bonds and other evidences of property of the corporation.
The Treasurer shall deposit or cause to be deposited in the name of the
corporation all monies or other valuable effects in such banks, trust companies
or other depositories as shall from time to time be designated by the Board of
Directors. The Treasurer shall make such disbursements as the regular course of
the business of the corporation may require or the Board of Directors may order.
The Treasurer shall perform all other duties incident to the office or which may
be assigned by the President or the Board of Directors.
SECTION 4.7 Assistant Secretary and Assistant Treasurer. The
Assistant Secretary or Assistant Secretaries and Assistant Treasurer or
Assistant Treasurers, if appointed, shall, in such order as the Board of
Directors may determine, perform all of the duties and exercise all of the
powers of the Secretary and Treasurer, respectively, during the unavailability,
absence or disability of, and in the event of a vacancy in the office of the
Secretary or Treasurer, respectively and shall perform all of the duties
assigned to or them by the President, the Treasurer in the case of Assistant
Treasurers, or the Board of Directors.
SECTION 4.8 Absence of Officers. In the absence or disability of the
President and Vice President, or Vice Presidents if more than one, the duties of
the President (other than the calling of meetings of the stockholders and the
Board of Directors) shall be performed by such persons as may be designated for
such purpose by the Board of Directors. In the absence or disability of the
Secretary and of the Assistant Secretary, or Assistant Secretaries if more than
one, or of the Treasurer and the Assistant Treasurer, or Assistant Treasurers if
more than one, the duties of the Secretary
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or of the Treasurer, as the case may be, shall be performed by such person or
persons as may be designated for such purpose by the Board of Directors.
ARTICLE V
EXECUTION OF INSTRUMENTS
SECTION 5.1 Proper Officers. Except as hereinafter provided, or as
required by law, all checks, drafts, notes, bonds, acceptances, deeds, leases,
contracts, bills of exchange, orders for the payment of money, licenses,
endorsements, stock powers, powers of attorney, proxies, waivers, consents,
returns, reports, applications, notices, mortgages and other instruments or
writings of any nature which require execution on behalf of the corporation,
shall be signed by any one of the following who are duly authorized by the Board
of Directors through proper corporate resolution: the President, a Vice
President, the Secretary, the Treasurer, an Assistant Secretary or an Assistant
Treasurer. The Board of Directors may from time to time authorize any such
documents, instruments or writings to be signed by such officers, agents or
employees of the corporation, or any one of them, in such manner as the Board of
Directors may determine.
SECTION 5.2 Facsimile Signatures. The Board of Directors may, from
time to time, by resolution provide for the execution of any corporate
instrument or document, including, but not limited to checks, warrants, drafts
and other orders for the payment of money, by a mechanical device or machine or
by the use of facsimile signatures under such terms and conditions as shall be
set forth in any such resolution.
ARTICLE VI
VOTING OF STOCK BY THE CORPORATION
Where the corporation owns, holds or represents under power of
attorney, by proxy or in any other representative capacity, shares of capital
stock of any corporation or shares or interests in business trusts, partnerships
or other associations, such shares or interests shall be represented or voted in
person or by proxy by (a) the President, or (b) in the President's absence, by
the Vice President, or if there be more than one Vice President present, then by
such Vice President as the
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Board of Directors shall have designated as Executive Vice President, or failing
any such designation, by any Vice President, or (c) in the absence of any Vice
President, by the Treasurer. But any person specifically appointed by the Board
of Directors for said purpose shall have the right and authority to represent
and vote such shares or interests with precedence over all of the above named.
ARTICLE VII
CAPITAL STOCK
SECTION 7.1 Certificates of Stock. The certificates of stock of each
class shall be in such form and of such device as the Board of Directors may
from time to time determine. They shall be signed by (a) the President or a Vice
President and (b) the Treasurer or the Secretary, or an Assistant Treasurer or
Assistant Secretary, and shall bear the corporate seal; but the Board of
Directors may provide that any certificate which shall be signed by a transfer
agent or by a registrar may be sealed with only the facsimile seal of the
corporation and may be signed with only the facsimile signatures of the officers
above designated. In case any officer who has signed or whose facsimile
signature has been placed upon any certificate shall have ceased to be such
officer before such certificate is issued, such certificate may, nevertheless,
be issued with the same effect as if such officer had not ceased to be such at
the date of its issue. Certificates shall not be issued for, nor shall there be
registered any transfer of any fraction of a share; provided, however, that the
corporation shall agree to purchase such fraction at its fair value, as
determined by the Board of Directors in its sole discretion, and such
determination of fair value shall be conclusive in the absence of fraud. If
fractional parts of or interests in any share shall result in any manner from
any action by the stockholders or directors of the corporation, the Treasurer
may sell the aggregate of such fractional interests under such reasonable terms
and conditions as the Treasurer shall determine, subject to the control of the
Board of Directors, and distribute the proceeds thereof to the person or persons
entitled thereto.
SECTION 7.2 Registered Stockholders. The corporation shall be
entitled to treat the holder of
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record of any share or shares of its capital stock as the absolute owner thereof
for all purposes, and shall not be required to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not the corporation shall have notice of said claim or interest.
SECTION 7.3 Transfer of Stock. Transfer of stock may be made in any
manner permitted by law, but no transfer shall be valid, except between the
parties thereto, until the transfer shall have been recorded on the books of the
corporation, and a new certificate issued. No transfer shall be entered in the
stock books of the corporation, nor shall any new certificate be issued until
the old certificate, properly endorsed, is surrendered and canceled.
SECTION 7.4 Closing of Transfer Books. The Board of Directors shall
have power for any corporate purpose from time to time to close the stock
transfer books of the corporation for a period not exceeding thirty (30)
consecutive business days. But in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix a record date for the payment of any
dividend or for the allotment of rights or for the effective date of any change,
conversion or exchange of capital stock or in connection with obtaining the
consent of stockholders in any matter requiring their consent or for the
determination of the stockholders entitled to notice of or to vote at any
meeting of stockholders, and in any such case, only such stockholders as shall
be stockholders of record on the record date so fixed shall be entitled to the
rights, benefits and privileges incident to ownership of the shares of stock for
which such record date has been fixed, notwithstanding any transfer of stock on
the books of the corporation after such record date.
SECTION 7.5 Lost Certificates. The Board of Directors may, subject
to such rules and regulations as it may adopt from time to time, order a new
certificate or certificates of stock to be issued in the place of any
certificate or certificates of stock alleged to have been lost or destroyed, but
in every such case the owner of the lost or destroyed certificate or
certificates shall be required to file with the Board of Directors sworn
evidence showing the facts connected with such loss or
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destruction. The Board of Directors may further require that a notice or notices
shall be published not less than once each week for three (3) consecutive weeks,
or for such other length of time as the Board of Directors may provide in any
special case in one or more newspapers of general circulation, which notice
shall describe the lost or destroyed certificate, seek its recovery, and warn
all persons against negotiating, transferring or accepting the same. Unless the
Board of Directors shall otherwise direct, the owner of the lost or destroyed
certificate shall be required to give to the corporation a bond or undertaking
in such sum, in such form, and with such surety or sureties as the Board of
Directors may approve, to indemnify the corporation against any loss, damage, or
liability that the corporation may incur by reason of the issuance of a new
certificate or certificates. Nothing contained in this section shall impair the
right of the Board of Directors, in its discretion, to refuse to replace any
allegedly lost or destroyed certificate, save upon order of the court having
jurisdiction in the matter.
SECTION 7.6 Restrictions on Transfer of Shares. When, and only when,
according to the books of the corporation the shares of the capital stock of the
corporation are held by more than one stockholder, the following provisions
shall apply:
(a) Whenever any stockholder desires to sell, transfer or otherwise
dispose of all or any part of the shares of stock of the corporation which the
stockholder then owns, such stockholder shall deliver written notice thereof to
the corporation, specifying the number of shares which such stockholder wishes
to dispose of. Upon delivery of such written notice, the corporation shall have
the first option to buy, and the stockholder shall sell to the corporation, all
of the shares owned by the stockholder which are specified in the said written
notice at a price equal to the aggregate book value of such shares as of the end
of the calendar month preceding the date of delivery to the corporation of said
written notice. The corporation may pay for such shares either in a lump sum
within thirty (30) days following the date said written notice is received by it
or in ten (10) equal monthly installments of principal commencing thirty (30)
days following the date said written notice is received by it, with interest on
the unpaid balance of
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such installments at the rate of seven percent (7%) per annum, all of which
interest shall be payable with the final installment of principal.
(b) Upon the death of any stockholder, the corporation shall have
the first option to buy, and the executor, administrator or personal
representative of the stockholder shall sell to the corporation, all of the
shares of stock of the corporation owned by the stockholder at the time of the
stockholder's death, at a price equal to the aggregate book value of such shares
as of the end of the calendar month preceding the date of death. The corporation
may pay for such shares either in a lump sum within thirty (30) days following
the date of death or in ten (10) equal monthly installments of principal
commencing thirty (30) days after the date of death, with interest from the date
of death on the unpaid balance of such installments at the rate of seven percent
(7%) per annum, all of which interest shall be payable with the final
installment of principal.
(c) If the corporation elects not to buy any of the shares offered
for sale to it by the selling stockholder or by his or her executor,
administrator or personal representative, then the corporation shall notify in
writing the offering stockholder or the executor, administrator or personal
representative of a deceased stockholder and the other stockholders of the
corporation of said election within thirty (30) days following the date said
written notice is received by the corporation. The other stockholders shall
thereupon have the option to buy such shares in proportion to their then current
holdings of common stock of the corporation, and the selling stockholder will
sell to any of the other stockholders who elect to buy any of such shares at the
same price which the corporation would have been required to pay for the shares
pursuant to subsections (a) and (b) of this Section 7.6. The stockholders may
pay for their proportionate portion of the shares either in a lump sum within
thirty (30) days after the date on which the corporation delivers the written
notice to each stockholder or in ten (10) monthly installments of principal
commencing thirty (30) days after the date of delivery of said written notice,
with interest from the date of delivery of said written notice on the unpaid
balance of such installments at the rate of seven percent (7%) per
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annum, all of which interest is payable with the final installment of principal.
(d) For purposes of this Section 7.6, the aggregate book value of
the shares of common stock of the corporation shall be calculated as of the
relevant date specified in subsections (a), (b) and (c) of this Section 7.6, as
the case may be, as follows:
The remainder of the sum of the net book value of all assets
(less treasury stock, if any) less the sum of (i) all determinable
liabilities and (ii) the amount of any dividends paid or payable to
stockholders of record on a date prior to said relevant date but not
included in the liabilities or charged to the surplus account at
said relevant date. The term "net book value" of an asset as used
herein means the cost of the asset less any book reserve for the
depreciation thereof maintained on the books of the corporation.
The book value of each outstanding share of common stock of the corporation
shall for purposes of this Section 7.6 be calculated as of the relevant date
specified in subsections (a), (b) and (c) of this Section 7.6, as the case may
be, as follows:
The aggregate book value of the outstanding shares of common
stock of the corporation as of said relevant date (computed
according to the formula specified in the preceding paragraph of
this subsection (d)) divided by the number of outstanding shares of
common stock of the corporation (exclusive of treasury stock but
inclusive of shares issued or declared as stock dividends payable to
stockholders of record on a date prior to the said relevant date).
(e) In the event of a difference of opinion between the corporation
or the other stockholders, on the one hand, and the stockholder or his or her
executor, administrator or personal representative, on the other hand, with
respect to the determination of the book value of any of the stockholder's
shares to be purchased pursuant to the provisions hereof, such book value shall
be
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computed in accordance with the foregoing subsection of this Section 7.6 by an
independent certified public accountant selected by the corporation; and such
computation shall be final and binding upon the corporation and each of the
stockholders and their executors, administrators or personal representatives.
The fee of such accountant shall be borne equally by the parties unable to reach
agreement hereunder.
(f) Any shares purchased by the corporation pursuant to this Section
7.6 may be resold by the corporation upon such terms as the Board of Directors
may determine, but all remaining stockholders shall be first entitled to
participate in the purchase thereof in the proportion of their then current
holdings of common stock of the corporation; and in the event that any of the
stockholders shall fail or decline to exercise the right to purchase such shares
as heretofore set forth, such shares shall then be offered to the remaining
stockholders in proportion of their then current holdings of common stock of the
corporation. In no case shall the corporation sell or otherwise dispose of
(except by way of retirement) any of said shares until after the offer and
refusal by the stockholders to purchase same.
ARTICLE VIII
PREEMPTIVE RIGHTS
The Articles of Incorporation shall control in reference to
Preemptive Rights.
ARTICLE IX
AMENDMENT
The Bylaws, and every part thereof, may from time to time and at any
time, be amended, altered, repealed and new bylaws may be adopted by the
affirmative vote of the stockholders who own a majority of the paid up capital
stock of the corporation entitled to vote or by the written consent of such
stockholders. Upon the affirmative vote of the stockholders who own two-thirds
of the paid up capital stock entitled to vote, the stockholders may delegate to
the Board of Directors the power to adopt, amend, alter or repeal any Bylaws.
Any such power delegated to the Board of Directors shall be considered as
revoked whenever a majority of the stockhold-
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ers shall so vote at a regular or special meeting of the stockholders.
ARTICLE X
DEFINITIONS
The word "person" or any pronoun used in place thereof, where the
context so requires or admits, shall include and mean individuals, firms,
corporations, partnerships and associations. The singular shall include and mean
the plural, or vice versa. Masculine, feminine and neuter genders shall include
or interchange each of the other genders as the context shall imply.
IN WITNESS WHEREOF, the undersigned being the sole stockholder of
the corporation hereby adopts the foregoing bylaws this 19th day of January,
1989.
KALAMA CHEMICAL, INC.
By /s/ Ted W. Palmer
--------------------------------
Its Chairman
----------------------------
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CERTIFICATE OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, being a majority of the directors of KFS
CORPORATION, hereby certify that the foregoing constitutes a full, true and
correct copy of the bylaws of said corporation, and that these bylaws were duly
adopted by an affirmative vote of the stockholder(s) representing a majority of
all of the subscribed stock in the corporation.
IN WITNESS WHEREOF, we have set our hands this 19th day of January,
1989.
/s/ Ted W. Palmer
--------------------------------
Ted W. Palmer
/s/ L.C. Macomber
--------------------------------
L. C. Macomber
/s/ William C. Williams
--------------------------------
William C. Williams
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CERTIFICATE OF SECRETARY
I certify that:
1. I am the Secretary of KFS CORPORATION.
2. The attached bylaws are the bylaws of the corporation adopted by
affirmative vote of the stockholders representing a majority of all of the
subscribed stock of the corporation at a meeting held on January 24, 1989.
Dated: January 24, 1989.
/s/ William C. Williams
--------------------------------
William C. Williams
Secretary
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CERTIFICATE OF INCORPORATION
OF
FCC ACQUISITION CORP.
FIRST: The name of the Corporation is FCC Acquisition Corp.
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "GCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, each having a par
value of one penny ($.01), and 1,000 shares of Preferred Stock, each having a
par value of one penny ($.01).
The Board of Directors is expressly authorized to provide for the
issuance of all or any shares of the Preferred Stock in one or more classes or
series, and to fix for each such class or series such voting powers, full or
limited, or no voting powers, and such distinctive designations, preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated and
addressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such class or series and as may be permitted by
the General Corporation Law of the State of Delaware, including, without
limitation, the authority to provide that any such class or series may be (i)
subject to redemption at such time or times and at such price or prices; (ii)
entitled to receive dividends (which may be cumulative or non-cumulative) at
such rates, on such conditions, and at such times, and payable in preference to,
or in such relation to, the dividends payable on any other class or classes or
any other series; (iii) entitled to such rights upon the dissolution of, or upon
any distribution of the assets of, the Corporation; or (iv) convertible into, or
exchangeable for, shares of any other class or classes of stock, or of any other
series of the same or any other class or classes of
<PAGE>
stock, of the Corporation at such price or prices or at such rates of exchange
and with such adjustments; all as may be stated in such resolution or
resolutions.
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
Deborah M. Reusch
P.O. Box 636
Wilmington, Delaware 19899
SIXTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders
to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide.
(4) No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from which the
director derived an improper personal benefit. Any repeal or modification
of this Article SIXTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification with respect to acts
or omissions occurring prior to such repeal or modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise
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all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of the
GCL, this Certificate of Incorporation, and any By-Laws adopted by the
stockholders; provided, however, that no By-Laws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would
have been valid if such By-Laws had not been adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and dead and
the facts herein stated are true, and accordingly have hereunto set my hand this
4th day of November, 1994.
/s/ Deborah M. Reusch
--------------------------------
Deborah M. Reusch
Sole Incorporator
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BY-LAWS
OF
FREEDOM CHEMICAL ACQUISITION CORPORATION
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wil-mington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of Stockholders
shall be held on such date and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meet-
<PAGE>
ing, at which meetings the stockholders shall elect by a plurality vote a Board
of Directors, and transact such other business as may properly be brought before
the meeting. Written notice of the Annual Meeting stating the place, date and
hour of the meeting shall be given to each stockholder entitled to vote at such
meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or
by the Certificate of incorporation, Special Meetings of Stockholders, for any
purpose or purposes, may be called by either (i) the Chairman, if there be one,
or (ii) the President, (iii) any Vice President, if there be one, (iv) the
Secretary or (v) any Assistant Secretary, if there be one, and shall be called
by any such officer at the request in writing of a majority of the Board of
Directors or at the request in writing of stockholders owning a majority of the
capital stock of the Corporation issued and outstanding and entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.
Written notice of a Special Meeting stating the place, date and hour of the
meeting and the purpose or purposes for which the meeting is called shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting.
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Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to vote at
the meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate
of Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented at
a meeting of
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stockholders shall be entitled to cast one vote for each share of the capital
stock entitled to vote thereat held by such stockholder. Such votes may be cast
in person or by proxy but no proxy shall be voted on or after three years from
its date, unless such proxy provides for a longer period. The Board of
Directors, in its discretion, or the officer of the Corporation presiding at a
meeting of stockholders, in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required or
permitted to be taken at any Annual or Special Meeting of Stockholders of the
Corporation, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
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Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by Section 7 of this Article II or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
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ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors
shall consist of not less than one nor more than fifteen members, the exact
number of which shall initially be fixed by the Incorporator and thereafter from
time to time by the Board of Directors. Except, as provided in Section 2 of this
Article, directors shall be elected by a plurality of the votes cast at Annual
Meetings of Stockholders, and each director so elected shall hold office until
the next Annual Meeting and until his successor is duly elected and qualified,
or until his earlier resignation or removal. Any director may resign at any time
upon notice to the Corporation. Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and
qualified, or until their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall
be managed by or under the direction of the Board of Directors which may
exercise all
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such powers of the Corporation and do all such lawful acts and things as are not
by statute or by the Certificate of Incorporation or by these By-Laws directed
or required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman, if there be one, the President, or any directors. Notice thereof
stating the place, date and hour of the meeting shall be given to each director
either by mail not less than forty-eight (48) hours before the date of the
meeting, by telephone or telegram on twenty-four (24) hours' notice, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
Section 5. Quorum. Except as may be otherwise specifically provided
by law, the Certificate of Incorporation or these By-Laws, at all meetings of
the Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of
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the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 6. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these ByLaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 7. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws, members
of the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 7 shall
constitute presence in person at such meeting.
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Section 8. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent allowed by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Each committee shall
keep regular minutes and report to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be
paid a fixed sum
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for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Section 10. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or inter-
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est and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee thereof
or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, a Secretary and a
Treasurer. The Board of Directors, in its discretion, may also choose a Chairman
of the Board of Directors (who must be a director) and one or more Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any
number of offices may be held by the same person, unless otherwise prohibited by
law, the Certificate of Incorporation or these By-Laws. The officers of the
Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board of Directors, need such officers be directors of
the Corporation.
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Section 2. Election. The Board of Directors at its first meeting
held after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President and any
such officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and
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may exercise any and all rights and power incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. He shall be the Chief Executive
Officer of the Corporation, and except where by law the signature of the
President is required, the Chairman of the Board of Directors shall possess the
same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him by these By-Laws or by the Board of Directors.
Section 5. President. The President shall, subject to the control of
the Board of Directors and, if there be one, the Chairman of the Board of
Directors,
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have general supervision of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these By-Laws, the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of Directors, or if there be
none, the President shall preside at all meetings of the stockholders and the
Board of Directors. If there be no Chairman of the Board of Directors, the
President shall be the Chief Executive Officer of the Corporation. The President
shall also perform such other duties and may exercise such other powers as from
time to time may be assigned to him by these By-Laws or by the Board of
Directors.
Section 6. Vice Presidents. At the request of the President or in
his absence or in the event of his inability or refusal to act (and if there be
no Chairman of the Board of Directors), the Vice President or the Vice
Presidents if there is more than one (in the order designated by the Board of
Directors) shall perform the duties of the President, and when so acting, shall
have
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all the powers of and be subject to all the restrictions upon the President.
Each Vice President shall perform such other duties and have such other powers
as the Board of Directors from time to time may prescribe. If there be no
Chairman of the Board of Directors and no Vice President, the Board of Directors
shall designate the officer of the Corporation who, in the absence of the
President or in the event of the inability or refusal of the President to act,
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. If the Secretary shall be unable
or shall refuse to cause to be given notice of all meetings of the stockholders
and special meetings of the Board of Directors, and if there be no Assistant
Secre-
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tary, then either the Board of Directors or the President may choose another
officer to cause such notice to be given. The Secretary shall have custody of
the seal of the Corporation and the Secretary or any Assistant Secretary, if
there be one, shall have authority to affix the same to any instrument requiring
it and when so affixed, it may be attested by the signature of the Secretary or
by the signature of any such Assistant Secretary. The Board of Directors may
give general authority to any other officer to affix the seal of the Corporation
and to attest the affixing by his signature. The Secretary shall see that all
books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case may
be.
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
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its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the President, any Vice President, if there be one, or
the Secretary, and in the absence of the Secretary or in the event of his
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned
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to them by the Board of Directors, the President, any Vice President, if there
be one, or the Treasurer, and in the absence of the Treasurer or in the event of
his disability or refusal to act, shall perform the duties of the Treasurer, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Treasurer. If required by the Board of Directors, an
Assistant Treasurer shall give the Corporation a bond in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors for the
faithful performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
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ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation., certifying the number
of shares owned by him in the Corporation.
Section 2. Signatures. Any or all of the signatures on a certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new cer-
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tificate, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to advertise the same in
such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these By-Laws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to express consent to corporate action
in writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other
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lawful action, the Board of Directors may fix, in advance, a record date, which
shall not be more than sixty days nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by
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mail, addressed to such director, member of a committee or stockholder, at his
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may also be given
personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet
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contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings other
Than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or
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proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
is or was a director or officer of the Corporation, or is or was a director or
officer of the Corporation serving at the request of the Corporation as a
director or officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including attorneys, fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contenders or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
24
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Section 2. Power to Indemnify in Actions, Suits or Proceedings by or
in the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the Corporation, or is or was a
director or officer of the Corporation serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
25
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entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification
under this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in Section 1 or
Section 2 of this Article VIII, as the case may be. Such determination shall be
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinions or (iii) by the stockholders. To the extent, however, that a director
or officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
26
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Section 4. Good Faith Defined. For purposes of any determination
under Section 3 of this Article VII, a person shall be deemed to have acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust, employee benefit
plan or other enterprise of which such person is or was serving at the request
of the Corporation as a director, officer, employee or agent. The provisions of
this Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
27
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standard of conduct set forth in Sections 1 or 2 of this Article VIII, as the
case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2 of this Article VIII. The basis of such indemnification by a court shall
be a determination by such court that indemnification of the director or officer
is proper in the circumstances because he has met the applicable standards of
conduct set forth in Sections 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
28
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Section 6. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or granted
pursuant to this Article VIII shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of any
court of competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, it
being the policy of the Corporation that indemnification of the persons
specified in Sections 1 and 2 of this Article VIII shall be made to the fullest
extent permitted by law. The provisions of this Article VIII shall not be deemed
to preclude the indemnification of any
29
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person who is not specified in Sections 1 or 2 of this Article VIII but whom the
Corporation has the power or obligation to indemnify under the provisions of the
General Corporation Law of the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power or the obligation to indemnify him against such
liability under the provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director
30
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or officer of such constituent corporation, or is or was a director or officer
of such constituent corporation serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
shall stand in the same position under the provisions of this Article VIII with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued. For
purposes of this Article VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of Expenses.
The indemnification and ad-
31
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vancement of expenses provided by, or granted pursuant to, this Article VIII
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators of such a person.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 hereof),
the Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
32
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ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, or new By-Laws may be adopted by the stockholders or by the
Board of Directors, provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of such
meeting of stockholders or Board of Directors as the case may be. All such
amendments must be approved by either the holders of a majority of the
outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article IX and
in these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
33
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================================================================================
FREEDOM CHEMICAL COMPANY, as Issuer,
THE BANK OF NEW YORK, as Trustee
and
FREEDOM TEXTILE CHEMICALS CO.,
HILTON DAVIS CHEMICAL CO.,
KALAMA CHEMICAL, INC.,
FREEDOM CHEMICAL DIAMALT GMBH,
KALAMA SPECIALTY CHEMICALS, INC.,
KALAMA FOREIGN SALES CORPORATION,
FREEDOM TEXTILE CHEMICAL COMPANY (SOUTH CAROLINA) INC. and
FCC ACQUISITION CORP., as
Guarantors
INDENTURE
Dated as of October 15, 1996
$125,000,000
10 5/8% Senior Subordinated Notes due 2006
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
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PARTIES ................................................................ 1
RECITALS .............................................................. 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION
Section 1.01. Definitions .......................................... 1
Section 1.02. Other Definitions..................................... 26
Section 1.03. Rules of Construction ............................... 26
Section 1.04. Form of Documents Delivered to Trustee ............... 27
Section 1.05. Acts of Holders ...................................... 29
Section 1.06. Notices, etc., to the Trustee and the
Company ............................................ 30
Section 1.07. Notice to Holders; Waiver ............................ 30
Section 1.08. Conflict with Trust Indenture Act..................... 31
Section 1.09. Effect of Headings and Table of Contents ............. 31
Section 1.10. Successors and Assigns ............................... 31
Section 1.11. Separability Clause .................................. 31
Section 1.12. Benefits of Indenture ................................ 32
Section 1.13. GOVERNING LAW ........................................ 32
Section 1.14. No Recourse Against Others ........................... 32
Section 1.15. Independence of Covenants ............................ 32
Section 1.16. Exhibits and Schedules ............................... 33
Section 1.17. Counterparts ......................................... 33
Section 1.18. Duplicate Originals................................... 33
Section 1.19. Incorporation by Reference of TIA .................... 33
ARTICLE TWO
SECURITY FORMS
Section 2.01. Form and Dating ...................................... 33
Section 2.02. Execution and Authentication; Aggregate
Principal Amount ................................... 34
Section 2.03. Restrictive Legends .................................. 35
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Note: This table of contents shall not, for any purpose, be deemed to be a part
of this Indenture.
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Section 2.04. Book-Entry Provisions for Global
Security ........................................... 37
Section 2.05. Special Transfer Provisions .......................... 39
ARTICLE THREE
THE NOTES
Section 3.01. Title and Terms ...................................... 42
Section 3.02. Denominations ........................................ 42
Section 3.03. Temporary Notes ...................................... 42
Section 3.04. Registration, Registration of Trans-
fer and Exchange ................................... 43
Section 3.05. Mutilated, Destroyed, Lost and Stolen
Notes .............................................. 45
Section 3.06. Payment of Interest; Interest Rights
Preserved .......................................... 46
Section 3.07. Persons Deemed Owners ................................ 47
Section 3.08. Cancellation ......................................... 47
Section 3.09. Computation of Interest .............................. 48
Section 3.10. Legal Holidays ....................................... 48
Section 3.11. CUSIP Number ......................................... 48
Section 3.12. Payment of Additional Interest Under
Registration Rights Agreement ...................... 49
ARTICLE FOUR
DEFEASANCE OR COVENANT DEFEASANCE
Section 4.01. The Company's Option To Effect Defea-
sance or Covenant Defeasance ....................... 49
Section 4.02. Defeasance and Discharge ............................. 49
Section 4.03. Covenant Defeasance .................................. 50
Section 4.04. Conditions to Defeasance or Covenant
Defeasance ......................................... 51
Section 4.05. Deposited Money and U.S. Government
Obligations To Be Held in Trust;
Other Miscellaneous Provisions ..................... 53
Section 4.06. Reinstatement ........................................ 53
Section 4.07. Repayment to Company ................................. 54
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ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default .................................... 54
Section 5.02. Acceleration of Maturity; Rescission
and Annulment ...................................... 57
Section 5.03. Collection of Indebtedness and Suits
for Enforcement by Trustee;
Other Remedies ..................................... 58
Section 5.04. Trustee May File Proofs of Claims .................... 59
Section 5.05. Trustee May Enforce Claims Without
Possession of Notes ................................ 60
Section 5.06. Application of Money Collected ....................... 60
Section 5.07. Limitation on Suits .................................. 61
Section 5.08. Unconditional Right of Holders To
Receive Principal, Premium and
Interest ........................................... 62
Section 5.09. Restoration of Rights and Remedies ................... 62
Section 5.10. Rights and Remedies Cumulative ....................... 62
Section 5.11. Delay or Omission Not Waiver ......................... 63
Section 5.12. Control by Majority .................................. 63
Section 5.13. Waiver of Past Defaults .............................. 63
Section 5.14. Undertaking for Costs ................................ 64
Section 5.15. Waiver of Stay, Extension or Usury
Laws ............................................... 65
ARTICLE SIX
THE TRUSTEE
Section 6.01. Certain Duties and Responsibilities .................. 65
Section 6.02. Notice of Defaults ................................... 66
Section 6.03. Certain Rights of Trustee ............................ 67
Section 6.04. Trustee Not Responsible for Recitals,
Dispositions of Notes or Applica-
tion of Proceeds Thereof ........................... 68
Section 6.05. Trustee and Agents May Hold Notes;
Collections; etc. .................................. 68
Section 6.06. Money Held in Trust .................................. 69
Section 6.07. Compensation and Indemnification of
Trustee and Its Prior Claim ........................ 69
Section 6.08. Conflicting Interests ................................ 70
Section 6.09. Corporate Trustee Required; Eligi-
bility ............................................. 70
Section 6.10. Resignation and Removal; Appointment
of Successor Trustee ............................... 71
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Section 6.11. Acceptance of Appointment by Succes-
sor ................................................ 73
Section 6.12. Successor Trustee by Merger, etc. .................... 74
Section 6.13. Preferential Collection of Claims
Against Issuers .................................... 74
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY
TRUSTEE AND COMPANY
Section 7.01. Preservation of Information; Company
To Furnish Trustee Names and
Addresses of Holders ............................... 75
Section 7.02. Communications of Holders ............................ 75
Section 7.03. Reports by Trustee ................................... 75
Section 7.04. Reports by the Company ............................... 76
ARTICLE EIGHT
SUCCESSOR CORPORATION
Section 8.01. When the Company May Merge, etc. ..................... 76
Section 8.02. Successor Substituted ................................ 77
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01. Without Consent of Holders ........................... 77
Section 9.02. With Consent of Holders .............................. 78
Section 9.03. Compliance with Trust Indenture Act .................. 80
Section 9.04. Revocation and Effect of Consents .................... 80
Section 9.05. Notation on or Exchange of Notes ..................... 81
Section 9.06. Trustee May Sign Amendments, etc. .................... 81
ARTICLE TEN
COVENANTS
Section 10.01. Payment of Principal, Premium and
Interest ........................................... 81
Section 10.02. Maintenance of Office or Agency ...................... 81
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Section 10.03. Money for Note Payments To Be Held in
Trust .............................................. 82
Section 10.04. Existence ............................................ 84
Section 10.05. Payment of Taxes and Other Claims .................... 84
Section 10.06. Maintenance of Properties ............................ 85
Section 10.07. Insurance ............................................ 85
Section 10.08. Compliance Certificate .............................. 85
Section 10.09. Provision of Financial Statements and
Reports ............................................ 87
Section 10.10. Future Guarantors .................................... 87
Section 10.11. Limitation on Incurrence of Indebted-
ness ............................................... 88
Section 10.12. Limitation on Restricted Payments .................... 91
Section 10.13. Limitations on Transactions with
Affiliates ......................................... 95
Section 10.14. Limitation on Asset Sales ............................ 96
Section 10.15. Change of Control .................................... 100
Section 10.16. Limitations on Liens Securing Certain
Debt ............................................... 102
Section 10.17. Limitation on Dividends and Other
Payment Restrictions Affecting Sub-
sidiaries .......................................... 103
Section 10.18. Limitation on Incurrence of Senior
Subordinated Indebtedness .......................... 104
Section 10.19. Designation of Unrestricted Subsid-
iaries ............................................. 104
ARTICLE ELEVEN
REDEMPTION OF NOTES
Section 11.01. Optional and Special Redemption ...................... 106
Section 11.02. Applicability of Article ............................. 107
Section 11.03. Election To Redeem; Notice to
Trustee ............................................ 107
Section 11.04. Selection by Trustee of Notes To Be
Redeemed ........................................... 107
Section 11.05. Notice of Redemption ................................. 108
Section 11.06. Deposit of Redemption Price .......................... 109
Section 11.07. Notes Payable on Redemption
Date ............................................... 109
Section 11.08. Notes Redeemed or Purchased in Part .................. 110
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ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 12.01. Satisfaction and Discharge of Inden-
ture ............................................... 110
Section 12.02. Application of Trust Money ........................... 111
ARTICLE THIRTEEN
GUARANTEE OF NOTES
Section 13.01. Guarantee ............................................ 111
Section 13.02. Execution and Delivery of Guarantee .................. 114
Section 13.03. Additional Guarantors ................................ 114
Section 13.04. Guarantee Obligations Subordinated to
Guarantor Senior Debt .............................. 115
Section 13.05. Payment Over of Proceeds upon Disso-
lution, etc., of a Guarantor ....................... 115
Section 13.06. Suspension of Guarantee Obligations
When Guarantor Senior Debt in
Default ............................................ 117
Section 13.07. Release of a Guarantor ............................... 118
Section 13.08. Waiver of Subrogation ................................ 119
Section 13.09. Guarantee Subordination Provisions
Solely To Define Relative Rights ................... 120
Section 13.10. Trustee To Effectuate Subordination
of Guarantee Obligations ........................... 121
Section 13.11. No Waiver of Guarantee Subordination
Provisions ......................................... 121
Section 13.12. Guarantors To Give Notice to Trustee ................. 122
Section 13.13. Reliance on Judicial Order or Cer-
tificate of Liquidating Agent
Regarding Dissolution, etc., of
Guarantors ......................................... 123
Section 13.14. Rights of Trustee as a Holder of
Guarantor Senior Debt; Preservation of
Trustee's Rights ................................... 124
Section 13.15. Article Thirteen Applicable to Paying
Agents ............................................. 124
Section 13.16. No Suspension of Remedies Subject to
Rights of Holders of Guarantor
Senior Debt ........................................ 124
Section 13.17. Trustee's Relation to Guarantor
Senior Debt ........................................ 124
Section 13.18. Subrogation .......................................... 125
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ARTICLE FOURTEEN
SUBORDINATION OF NOTES
Section 14.01. Notes Subordinate to Senior Debt ..................... 126
Section 14.02. Payment Over of Proceeds upon Disso-
lution, etc. ....................................... 126
Section 14.03. Suspension of Payment When Designated
Senior Debt is in Default .......................... 128
Section 14.04. Trustee's Relation to Senior Debt .................... 129
Section 14.05. Subrogation to Rights of Holders of
Senior Debt ........................................ 130
Section 14.06. Provisions Solely To Define Relative
Rights ............................................. 130
Section 14.07. Trustee To Effectuate Subordination .................. 131
Section 14.08. No Waiver of Subordination
Provisions ......................................... 132
Section 14.09. Notice to Trustee .................................... 132
Section 14.10. Reliance on Judicial Order or Cer-
tificate of Liquidating Agent ...................... 134
Section 14.11. Rights of Trustee as a Holder of
Senior Debt; Preservation of Trust-
ee's Rights ........................................ 134
Section 14.12. Article Applicable to Paying Agents .................. 134
Section 14.13. No Suspension of Remedies ............................ 135
TESTIMONIUM ............................................................ 136
SIGNATURES ............................................................. 136
Exhibit A - Form of Initial Note ................................. A-1
Exhibit B - Form of Exchange Note ................................ B-1
Exhibit C - Form of Certificate To Be Delivered
in Connection with Transfers to Non-
QIB Accredited Investors ............................. C-1
Exhibit D - Form of Certificate To Be Delivered
in Connection with Transfers Pursuant
to Regulation S ...................................... D-1
Exhibit E - Form of Guarantee .................................... E-1
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<PAGE>
INDENTURE, dated as of October 15, 1996, between FREEDOM CHEMICAL
COMPANY, a corporation incorporated under the laws of the State of Delaware (the
"Company" or "Freedom"), as issuer, FREEDOM TEXTILE CHEMICALS CO., a Delaware
corporation, HILTON DAVIS CHEMICAL CO., a Delaware corporation, KALAMA CHEMICAL,
INC., a Washington corporation, FREEDOM CHEMICAL DIAMALT GMBH, a corporation
existing under the laws of the Federal Republic of Germany, KALAMA SPECIALTY
CHEMICALS, INC., a Washington corporation, KALAMA FOREIGN SALES CORPORATION, a
corporation existing under the laws of Guam, FREEDOM TEXTILE CHEMICAL COMPANY
(SOUTH CAROLINA) INC., a Delaware corporation, and FCC ACQUISITION CORP., a
Delaware corporation, as guarantors (each a "Guarantor," and collectively, the
"Guarantors"), and THE BANK OF NEW YORK, a New York banking corporation, as
trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Company's 10
5/8% Senior Subordinated Notes due 2006 (the "Initial Notes") and the Holders of
the 10 5/8% Senior Subordinated Notes due 2006 to be issued in exchange for the
Initial Notes pursuant to the Registration Rights Agreement (the "Exchange
Notes").
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions.
"Acquired Debt" means, with respect to any specified Person,
Indebtedness of any other Person (the "Acquired Person") existing at the time
the Acquired Person merges with or into, or becomes a Subsidiary of, such
specified Person, including Indebtedness incurred in connection with, or in
contemplation of, the Acquired Person merging with or into, or becoming a
Subsidiary of, such specified Person, provided that Indebtedness of such Person
which is redeemed, defeased, retired or otherwise repaid at the time of or
immediately upon consummation of the transactions by which such Person becomes a
Restricted Subsidiary or such Asset Acquisition shall not be Acquired Debt.
"Acquired Person" has the meaning set forth in the definition of
"Acquired Debt."
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For purposes of this
definition, "control" (including,
<PAGE>
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with correlative meanings, the terms "controlling," "controlled by" and "under
common control with") of any Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise.
"Amended and Restated Credit Agreement" means the Company's Amended
and Restated Credit Agreement, dated as of October 11, 1996 among the Company,
Freedom Chemical Diamalt, as co-borrower, Citicorp USA, Inc. as agent, the
financial institutions party thereto in their capacities as lenders and issuing
banks thereunder together with the related documents thereto (including without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended, modified, restated, supplemented, renewed,
refunded, replaced or refinanced from time to time, including (i) any related
notes, letters of credit, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, restated, supplemented, renewed, refunded, replaced or refinanced from
time to time, and (ii) any notes, guarantees, collateral documents, instruments
and agreements executed in connection with any such amendment, modification,
restatement, supplement, renewal, refunding, replacement or refinancing.
"Applicable Premium" means, with respect to a Note, the greater of
(i) 1.0% of the then outstanding principal amount of such Note and (ii) the
excess of (a) the present value of the required interest and principal payments
due on such Note, computed using a discount rate equal to the Treasury Rate plus
75 basis points, over (b) the then outstanding principal amount of such Note;
provided that in no event will the Applicable Premium exceed the amount of the
applicable redemption price upon an optional redemption less 100%, at any time
on or after October 15, 2001.
"Asset Sale" means (i) any sale, lease, conveyance or other
disposition by the Company or any Restricted Subsidiary (other than to the
Company or a Restricted Subsidiary and other than directors' qualifying Shares)
of any assets (including by way of a sale-and-leaseback) other than in the
ordinary course of business (provided that (x) the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company shall
not be an "Asset Sale" but instead shall be governed by Article Eight of this
Indenture and (y) Investments made in compliance with the Restricted Payments
covenant shall not be deemed to be Asset Sales), or (ii) the issuance or sale of
Capital Stock (other than Disqualified Stock) of any Restricted Subsidiary, in
the case of each of (i) and (ii), whether in a single transaction or a series of
related transactions, to any Person
<PAGE>
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(other than to the Company or a Restricted Subsidiary and other than directors'
qualifying shares) for Net Proceeds in excess of $1,000,000; provided, however,
the following transactions shall not be deemed Asset Sales: (i) the Company and
the Restricted Subsidiaries may (x) convey, sell, lease, transfer, assign or
otherwise dispose of assets pursuant to and in accordance with the limitation on
mergers, sales or consolidations provisions in the Indenture and (y) make
Restricted Payments permitted by the Restricted Payment covenant in the
Indenture; (ii) the Company and the Restricted Subsidiaries may create or assume
Liens (or permit any foreclosure thereon) securing Indebtedness to the extent
that such Lien does not violate Section 10.16 of this Indenture; and (iii) the
Company and the Restricted Subsidiaries may consummate any sale or series of
related sales of assets or properties of the Company and the Restricted
Subsidiaries having an aggregate Fair Market Value of less than $2,500,000 in
any fiscal year.
"Bank Agent" means Citicorp USA, Inc. or any successor or
replacement agent under the Amended and Restated Credit Agreement.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of
1978, as amended, or any similar United States Federal or state law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors, or any amendment to, succession to or change in any such law.
"Board of Directors" means, with respect to any Person, the board of
directors, management committee or similar governing body or any authorized
committee thereof responsible for the management of the business and affairs of
such Person.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York,
State of New York, are authorized or obligated by law, regulation or executive
order to close.
"Capital Lease Obligation" of any Person means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease for property leased by such Person that would at such time be
required to be capitalized on the balance sheet of such Person in accordance
with GAAP.
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-4-
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, of
such Person, including any Preferred Stock.
"Cash Equity Investment" means the aggregate of $10 million of new
cash equity to be invested by Joseph Littlejohn & Levy Fund, L.P. and Joseph
Littlejohn & Levy Fund II, L.P. and other stockholders of the Company at or
prior to the initial issuance of the Notes.
"Cash Equivalents" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Rating Services or Moody's Investors
Service, Inc.; (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from Standard & Poor's Rating Services or at least P-1 from Moody's
Investors Service, Inc.; (iv) certificates of deposit or bankers' acceptances
(or, with respect to foreign banks, similar instruments) maturing within one
year from the date of acquisition thereof issued by any bank organized under the
laws of the United States of America or any state thereof or the District of
Columbia or any member of the European Economic Community any U.S. branch of a
foreign bank having at the date of acquisition thereof combined capital and
surplus of not less than $200 million; (v) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications specified
in clause (iv) above; and (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above.
"Cash Flow" means, with respect to any period, the (i) Consolidated
Net Income of the Company and its Restricted Subsidiaries for such period, plus
(ii) provision for taxes based on income or profits, to the extent such
provision for taxes was included in computing such Consolidated Net Income, and
any provision for taxes utilized in computing the net losses under clause (i)
hereof, plus (iii) Consolidated Interest Expense of the
<PAGE>
-5-
Company and its Restricted Subsidiaries for such period, plus (iv) depreciation,
amortization (including deferred financing costs and expenses) and all other
non-cash charges or expenses (including minority interests), to the extent such
depreciation, amortization and other non-cash charges or expenses (including
minority interests) were deducted in computing such Consolidated Net Income
(including amortization of goodwill and other intangibles).
"Change of Control" means the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than the Permitted Holders, is or becomes
(including by merger, consolidation or otherwise) the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person
shall be deemed to have "beneficial ownership" of all shares that such person
has the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of 50% or more of the voting
power of the total outstanding Voting Stock of the Company; (b) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election to such Board of Directors, or whose nomination for
election by the stockholders of the Company, was approved by a vote of 66-2/3%
of all remaining members of the Board of Directors of the Company then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved), cease for any
reason to constitute a majority of such Board of Directors of the Company then
in office; or (c) the sale or other disposition (including by merger,
consolidation or otherwise) of all or substantially all of the Capital Stock or
assets (where the transferee of such assets has assumed the obligation of the
Company under the Notes pursuant to Section 8.02 of this Indenture) of the
Company and its Restricted Subsidiaries to any Person or Group (as defined in
Rule 13d-5 of the Exchange Act) excluding transfers or conveyances to or among
the Company's Restricted Subsidiaries and other than to the Permitted Holders as
an entirety or substantially as an entirety in one transaction or a series of
related transactions.
"Commission" or "SEC" means the Securities and Exchange Commission,
as from time to time constituted, or if at any time after the execution of this
Indenture such Commission is not existing and performing the applicable duties
now assigned to it, then the body or bodies performing such duties at such time.
"Company" means Freedom Chemical Company, a Delaware corporation,
unless and until a successor replaces it in accordance with this Indenture, and
thereafter means such Surviving Person.
<PAGE>
-6-
"Company Request" or "Company Order" means a written request or
order of the Company signed in the name of the Company by an officer of the
Company.
"Consolidated Cash Flow Coverage Ratio" means, with respect to any
date of determination, the ratio of (i) the aggregate amount of Cash Flow for
the period of the most recent four consecutive fiscal quarters for which
financial statements are available, to (ii) Consolidated Interest Expense for
such four fiscal quarters of the Company, determined on a pro forma basis after
giving pro forma effect to (i) the incurrence of such Indebtedness and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred, and the
application of such proceeds occurred, at the beginning of such four-quarter
period; (ii) the incurrence, repayment or retirement of any other Indebtedness
by the Company and its Restricted Subsidiaries since the first day of such
four-quarter period as if such Indebtedness was incurred, repaid or retired at
the beginning of such four-quarter period; (iii) in the case of Acquired Debt,
the related acquisition as if such acquisition had occurred at the beginning of
such four-quarter period; and (iv) any acquisition or disposition by the Company
and its Restricted Subsidiaries of any company or any business or any assets out
of the ordinary course of business (without regard to clause (iii) of the
definition of Consolidated Net Income), or any related repayment of
Indebtedness, in each case since the first day of such four-quarter period,
assuming such acquisition, disposition or related repayment had been consummated
on the first day of such four-quarter period.
"Consolidated Interest Expense" means, with respect to any period,
the sum of (i) the interest expense of the Company and its Restricted
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP consistently applied (except as provided herein), including, without
limitation, (a) amortization of debt discount, (b) the net cash payments, if
any, under interest rate contracts, (c) the interest portion of any deferred
payment obligation, (d) accrued interest, and (e) all commissions, discounts and
other fees and charges owed with respect to letters of credit, bankers'
acceptance financing or similar facilities, plus (ii) the interest component of
the Capital Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by the Company during such period, of the Company and its Restricted
Subsidiaries, plus (iii) all cash dividends paid during such period by the
Company and its Restricted Subsidiaries with respect to any Disqualified Stock
(other than by Restricted Subsidiaries of such Person to such Person or such
Person's Restricted Subsidiaries and other than any dividend paid in Capital
Stock (other than Disqualified Stock)), in each case as determined on a
consolidated basis in accordance with GAAP consistently applied; provided, that
<PAGE>
-7-
Consolidated Interest Expense shall exclude the amortization of fees related to
the issuance of the Notes and fees (other than letters of credit) related to any
bank indebtedness of the Company or any Restricted Subsidiary, including Senior
Bank Debt.
"Consolidated Net Income" means, with respect to any period, the net
income (or loss) of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP consistently applied,
adjusted, to the extent included in calculating such net income (or loss), by
excluding, without duplication, (i) extraordinary gains and losses, (ii) the
portion of net income (or loss) of the Company and its Restricted Subsidiaries
allocable to interests in unconsolidated Persons or Unrestricted Subsidiaries,
except to the extent of the amount of dividends or distributions actually paid
to the Company or its Restricted Subsidiaries by such other Person during such
period, (iii) net income (or loss) of any Person combined with the Company or
any of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (iv) net gain or
loss in respect of sale, transfer or disposition of assets (including, without
limitation, pursuant to sale and leaseback transactions) other than in the
ordinary course of business, (v) the net income of any Restricted Subsidiary to
the extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income to the Company is not at the time
permitted, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders (other than pursuant to the Notes or the Indenture), (vi)
Refinancing Expenses (including any write-off of deferred financing costs
related to the Existing Credit Agreements) to the extent recognized as an
expense prior to December 31, 1996, (vii) the non-recurring cumulative effect of
a change in accounting principles, (viii) non-recurring gains and non-recurring,
non-cash losses and costs, (ix) any non-cash compensation expense in connection
with the exercise of, grant to or repurchase from officers, directors, and
employees of stock, stock options or stock equivalents, or (x) any non-cash
charge or expense arising by reason of the application of APB no. 16.
"consolidation" means, with respect to any Person, the consolidation
of the accounts of its Restricted Subsidiaries with those of such Person, all in
accordance with GAAP; provided, however, that "consolidation" will not include
consolidation of the accounts of any Unrestricted Subsidiary with the accounts
of such Person. The term "consolidated" has a correlative meaning to the
foregoing.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall
<PAGE>
-8-
be principally administered, which office at the date of execution of this
Indenture is located at 101 Barclay Street, Floor 21 West, New York, New York
10286; attention: Corporate Trust Administration.
"Currency Agreement Obligations" means the obligations of any person
under a foreign exchange contract, currency swap agreement or other similar
agreement or arrangement to protect such person against fluctuations in currency
values.
"Default" means any event that is, or after the giving of notice or
passage of time or both would be, an Event of Default.
"Designated Senior Debt" means (i) the Senior Bank Debt, and (ii)
any other Senior Debt of the Company permitted to be incurred under the
Indenture the principal amount of which is $5 million or more at the time of the
designation of such Senior Debt as "Designated Senior Debt" by the Company in a
written instrument delivered to the Trustee.
"Depository" shall mean The Depository Trust Company, New York, New
York, or any successor thereto registered under the Securities Exchange Act or
other applicable statute or regulation.
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"Disqualified Stock" means (i) any Preferred Stock of any Restricted
Subsidiary and (ii) any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof (other than upon the occurrence of an "asset sale" or a change of
control of the Company in circumstances where the holders of the Notes would
have similar rights), in whole or in part on or prior to the Stated Maturity of
the Notes.
"Dollars" or "$" means lawful money of the United States of America.
"Event of Default" shall have the meaning specified in Section 5.01
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
<PAGE>
-9-
"Existing Credit Agreements" shall have the meaning set forth in the
Offering Memorandum.
"Fair Market Value" means, with respect to any asset or property,
the sale value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"Foreign Subsidiary" means a Subsidiary of a Person not organized
under the laws of the United States or any political subdivision thereof and the
operations of which are located substantially outside the United States.
"Freedom Credit Agreement" shall have the meaning set forth in the
Offering Memorandum.
"GAAP" means generally accepted accounting principles in the United
States set forth in the Statements of Financial Accounting Standards and the
Interpretations, Accounting Principles Board Opinions and AICPA Accounting
Research Bulletins which are applicable as of the Issue Date and consistently
applied.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Guarantor" means (i) each of Freedom Textile Chemicals Co., Hilton
Davis Chemical Co., Kalama Chemical, Inc., Freedom Chemical Diamalt GmbH, Kalama
Specialty Chemicals, Inc., Kalama Foreign Sales Corporation, Freedom Textile
Chemical Company (South Carolina) Inc., FCC Acquisition Corp., (ii) each of the
Company's Restricted Subsidiaries who become Restricted Subsidiaries after the
Issue Date and which are not Foreign Subsidiaries and (iii) any other Restricted
Subsidiary of the Company that the Company designates as a Guarantor in a
written instrument delivered to the Trustee.
"Guarantor Senior Debt" means with respect to each Guarantor, the
principal of and interest (including post-petition interest) on, and all other
amounts owing in respect of, (i) Senior Bank Debt, (ii) any other Indebtedness
incurred by such Guarantor (including, but not limited to, reasonable fees and
expenses of counsel and all other charges, fees and expenses incurred in
connection with such Indebtedness), unless the instrument creating or evidencing
such Indebtedness or pursuant to which such Indebtedness is outstanding
expressly provides that such Indebtedness is on a parity with or subordinated in
right of
<PAGE>
-10-
payment to the Notes. Notwithstanding the foregoing, Guarantor Senior Debt shall
not include (i) any Indebtedness for federal, state, local or other taxes, (ii)
any Indebtedness among or between the Company, any Restricted Subsidiary and/or
their Affiliates which is not pledged or otherwise assigned to the agent for the
holders of Senior Bank Debt, (iii) any Indebtedness incurred for the purchase of
goods or materials, or for services obtained, in the ordinary course of business
or any obligations in respect of any such Indebtedness, (iv) any Indebtedness
that is incurred in violation of the Indenture, or (v) Indebtedness of a Person
that is expressly subordinate or junior in right of payment to any other
Indebtedness of such Person.
"Holder" or "Noteholder" means a Person in whose name a Note is
registered in the Note Register.
"Indebtedness" means, with respect to any Person, without
duplication, and whether or not contingent, (i) all indebtedness of such Person
for borrowed money or which is evidenced by a note, bond, debenture or similar
instrument, (ii) all obligations of such Person to pay the deferred or unpaid
purchase price of property or services, which purchase price is due more than
six months after the date of placing such property in service or taking delivery
and title thereto or the completion of such service (other than obligations
related to premiums payable in connection with insurance obtained in the
ordinary course of business), (iii) all Capital Lease Obligations of such
Person, (iv) all obligations of such Person in respect of letters of credit or
bankers' acceptances issued or created for the account of such Person, (v) to
the extent not otherwise included in this definition, all net obligations of
such Person under Interest Rate Agreement Obligations or Currency Agreement
Obligations of such Person, (vi) all liabilities of others of the kind described
in the preceding clause (i), (ii) or (iii) secured by any Lien on any property
owned by such Person even though such Person has not assumed or become liable
for payment of such liabilities; provided, however, the amount of such
Indebtedness for purposes of this definition shall be limited to the lesser of
the amount of Indebtedness secured by such Lien or the value of the property
subject to such Lien, (vii) all Disqualified Stock issued by such Person and all
Preferred Stock issued by a Subsidiary of such Person, and (viii) to the extent
not otherwise included, any guarantee by such Person of any other Person's
indebtedness or other obligations described in clauses (i) through (vii) above.
"Indebtedness" of the Company and the Restricted Subsidiaries shall not include
(i) current trade payables incurred in the ordinary course of business and
payable in accordance with customary practices and (ii) non-interest bearing
installment obligations and accrued liabilities incurred in the ordinary course
of business which are not more than 90 days past due (or, if overdue for more
than 90 days, are being contested in
<PAGE>
-11-
good faith). The principal amount outstanding of any Indebtedness issued with
original issue discount is the accreted value of such Indebtedness and
Indebtedness shall not include any liability for federal, state, local or other
taxes.
"Indenture" means this instrument as originally executed (including
all exhibits and schedules hereto) and as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof.
"Initial Purchasers" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Schroder Wertheim & Co. Incorporated and Smith Barney Inc.
"Insolvency or Liquidation Proceeding" means, with respect to any
Person, any liquidation, dissolution or winding up of such Person, or any
bankruptcy, reorganization, insolvency, receivership or similar proceeding with
respect to such Person, whether voluntary or involuntary.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" means, when used with respect to any Note,
the Stated Maturity of an installment of interest on such Note, as set forth in
such Note.
"Interest Rate Agreement Obligations" means, with respect to any
Person, the Obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Investment" in any Person means any direct or indirect advance,
loan or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement but excluding advances to customers and
employees in the ordinary course of business) to, capital contribution (by means
of any transfer of cash or other property to others or any payment for property
or services for the account or use of others) to, or any purchase or acquisition
of Capital Stock, bonds, notes, debentures or other similar instruments issued
by, such Person and shall include the designation of a Restricted Subsidiary as
an Unrestricted Subsidiary. For purposes of the definition of "Unrestricted
Subsidiary" and Section 10.12 hereof, (i) "Investment" shall include the Fair
Market Value of the assets (net of liabilities) of any Restricted Subsidiary of
the Company at
<PAGE>
-12-
the time that such Restricted Subsidiary of the Company is designated an
Unrestricted Subsidiary and shall exclude the Fair Market Value of the assets
(net of liabilities) of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary of the Company and
(ii) any property transferred to or from an Unrestricted Subsidiary shall be
valued at its Fair Market Value at the time of such transfer, in each case as
determined by the Board of Directors in good faith.
"Issue Date" means the date of first issuance of the Notes under
this Indenture, October 17, 1996.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in any asset and any filing of, or agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Net Proceeds" means, with respect to any Asset Sale by any Person,
the aggregate cash proceeds or Cash Equivalents received by such Person and/or
its Affiliates in respect of such Asset Sale, which amount is equal to the
excess, if any, of (i) the cash or Cash Equivalents received by such Person
and/or its Affiliates (including any cash payments received by way of deferred
payment pursuant to, or monetization of, a note or installment receivable or
otherwise, but only as and when received) in connection with such Asset Sale,
over (ii) the sum of (a) the amount of any Indebtedness that is secured by such
asset and which is required to be repaid by such Person in connection with such
Asset Sale, plus (b) all fees, commissions and other expenses incurred
(including, without limitation, the fees and expenses of legal counsel and
investment banking, underwriting and brokerage fees and expenses) by such Person
in connection with such Asset Sale, plus (c) provision for taxes, including
income taxes, attributable to the Asset Sale or attributable to required
prepayments or repayments of Indebtedness with the proceeds of such Asset Sale,
plus (d) appropriate amounts to be provided by the Company or any Restricted
Subsidiary of the Company as a reserve against any liabilities associated with
such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, plus (e) if such Person is a Restricted Subsidiary, any
dividends or distributions payable to holders of minority interests in such
Restricted Subsidiary from the proceeds of such Asset Sale.
<PAGE>
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"Non-payment Default" means, for purposes of Article Fourteen
hereof, any default (other than a Payment Default) with respect to any
Designated Senior Debt of the Company or any Guarantor pursuant to which the
maturity thereof may be accelerated.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Notes" mean the Initial Notes and the Exchange Notes.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offering" shall have the meaning set forth in the Offering
Memorandum.
"Offering Memorandum" means the offering memorandum dated as of
October 10, 1996 relating to the Offering and sale of the Notes.
"Officer" means, with respect to any Person, the Chairman,
President, Chief Executive Officer, Chief Financial Officer, Chief Operating
Officer, any Vice President, Treasurer or Secretary, or any other officer
designated by the Board of Directors serving in a similar capacity.
"Officers' Certificate" means a certificate signed by two Officers
or by an Officer and an Assistant Treasurer or Assistant Secretary of the
Company or a Guarantor, as the case may be.
"Opinion of Counsel" means a written opinion of counsel, who may be
an employee of or counsel to the Company, and who shall be reasonably acceptable
to the Trustee.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture, except:
(i) Notes theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company or any Affiliate
thereof) in trust for the Holders of such Notes; provided, however, that
if such Notes are to be redeemed, notice of such redemption has been duly
and
<PAGE>
-14-
irrevocably given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(iii) Notes with respect to which the Company has effected
defeasance or covenant defeasance as provided in Article Four, to the
extent provided in Sections 4.02 and 4.03; and
(iv) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture, other than any
such Notes in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Notes are held by a bona fide
purchaser in whose hands the Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any other obligor under the Notes or any Affiliate of the Company
or such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Notes which the Trustee knows to be so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Company or any other obligor under the Notes or any Affiliate
of the Company or such other obligor.
"Pari Passu Indebtedness" means any Indebtedness of the Company or
any Guarantor ranking pari passu in right of payment with the Notes or the
Guarantees, as applicable.
"Paying Agent" means any Person authorized by the Company to pay the
principal, premium, if any, or interest on any Notes on behalf of the Company.
"Payment Blockage Period" shall have the meaning set forth in
Section 14.03.
"Payment Default" means any default in the payment when due (whether
at Stated Maturity, by acceleration or otherwise) of principal or interest on,
or of unreimbursed amounts under drawn letters of credit or fees relating to
letters of credit constituting, any Senior Debt or Guarantor Senior Debt, as
applicable, of the Company or any Guarantor.
"Permitted Holders" means (i) collectively or individually Joseph
Littlejohn & Levy Fund, L.P., Joseph Littlejohn
<PAGE>
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& Levy Fund L.P. II, The Freedom Group Partnership; or (ii) any Affiliate of any
of the Persons described in clause (i) and with respect to Joseph Littlejohn &
Levy Fund, L.P. and Joseph Littlejohn & Levy Fund II, L.P., any partnership or
corporation which is managed or controlled by JLL Associates, L.P. or any
Affiliate thereof. For purposes of this definition, "control," as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through ownership of voting securities or by contract or
otherwise.
"Permitted Investments" means (i) any Investment in the Company or
any Restricted Subsidiary; (ii) any Investment in Cash Equivalents; (iii) any
Investment in a Person (an "Acquired Person") if, as a result of such
Investment, (a) the Acquired Person becomes a Restricted Subsidiary, or (b) the
Acquired Person either (1) is merged, consolidated or amalgamated with or into
the Company or one of its Restricted Subsidiaries and the Company or such
Restricted Subsidiary is the Surviving Person, or (2) transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or one of
its Restricted Subsidiaries; (iv) Investments in accounts and notes receivable
acquired in the ordinary course of business; (v) any securities received in
connection with an Asset Sale that complies with Section 10.14; (vi) Interest
Rate Agreement Obligations and Currency Agreement Obligations permitted pursuant
to Section 10.11(b)(v); (vii) investments in or acquisitions of Capital Stock or
similar interests in Persons (other than Affiliates of the Company) received in
the bankruptcy or reorganization of or by such Person or any exchange of such
investment with the issuer thereof or taken in settlement of or other resolution
of claims or disputes, and, in each case, extensions, modifications and renewals
thereof; (viii) loans or advances to officers, directors and employees made in
the ordinary course of business, not to exceed $1.0 million in the aggregate;
(ix) Investments for which the sole consideration provided is the Capital Stock
of the Company (other than Disqualified Stock); (x) Investments in evidences of
Indebtedness, securities or other property received by the Company or any
Restricted Subsidiary from another Person in connection with any bankruptcy
proceeding or by reason of a composition or readjustment of debt or a
reorganization of such Person or as a result of foreclosure, perfection or
enforcement of any Lien in exchange for evidences of Indebtedness, securities or
other property of such Person held by the Company or any Restricted Subsidiary,
or for other liabilities or obligations of such other Person to the Company or
any Restricted Subsidiary that were created in accordance with the terms of the
Indenture; (xi) any Investments existing in an Acquired Person at the time of
the acquisition of such Acquired Person, provided that such Investment is not
incurred in connection with, or in contemplation of such acquisition; (xii)
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loans or advances to stockholders of the Company solely for the purchase of
Capital Stock of the Company by such stockholders, not to exceed $4.0 million in
the aggregate and (xiii) any other Investments that do not exceed $1.0 million
in amount in the aggregate at any one time outstanding.
"Permitted Liens" means (i) Liens on assets or property of the
Company that secure Senior Debt of the Company and Liens on assets or property
of a Restricted Subsidiary that secure Senior Debt of such Restricted
Subsidiary; (ii) Liens securing Indebtedness of a Person existing at the time
that such Person is merged into or consolidated with the Company or a Restricted
Subsidiary; provided, however, that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of such Person; (iii) Liens on property acquired by the Company
or a Restricted Subsidiary; provided, however, that such Liens were in existence
prior to the contemplation of such acquisition and do not extend to any other
property; (iv) Liens in respect of Interest Rate Obligations and Currency
Agreement Obligations permitted under the Indenture; (v) Liens in favor of the
Company or any Restricted Subsidiary; (vi) Liens incurred, or pledges and
deposits in connection with the performance of tenders, bids, leases, workers'
compensation, bankers' acceptances, unemployment insurance and other social
security benefits, and leases, surety and appeal bonds, government contracts and
other obligations of like nature incurred by the Company or any Restricted
Subsidiary in the ordinary course of business; (vii) Liens imposed by law,
including, without limitation, mechanics', carriers', warehousemen's,
material-men's, suppliers' and vendors' Liens, incurred by the Company or any
Restricted Subsidiary in the ordinary course of business; (viii) Liens for ad
valorem, income or property taxes or assessments and similar charges which
either are not delinquent or are being contested in good faith by appropriate
proceedings for which the Company has set aside on its books reserves to the
extent required by GAAP; (ix) Liens existing on the Issue Date; (x) Liens
securing the Notes or Guarantees; (xi) Liens securing or arising from Purchase
Money Obligations permitted to be incurred under clause (ix) of the definition
of Permitted Indebtedness, provided such Liens relate to the property (and
monetary proceeds thereof) which was acquired or constructed with such Purchase
Money Obligations and the Capital Stock of any Person formed to acquire such
property and that does not own any other material property; (xii) easements,
rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Restricted Subsidiaries; (xiii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries, taken as a whole;
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(xiv) Liens arising from the rendering of a final judgment or order against the
Company or any Restricted Subsidiary of the Company that does not give rise to
an Event of Default; (xv) Liens securing reimbursement obligations with respect
to letters of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof; (xvi) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods; (xvii) Liens
encumbering customary initial deposits and margin deposits, and other Liens that
are either within the general parameters customary in the industry and incurred
in the ordinary course of business, in each case, securing Indebtedness under
Interest Rate Agreement Obligations and Currency Agreement Obligations and
forward contracts, options, future contracts, futures, options or similar
agreements or arrangements designed to protect the Company or any of its
Restricted Subsidiaries from fluctuations in the price of commodities; and
(xviii) Liens on or sales of receivables in the ordinary course of business
(including in connection with the establishment of an accounts receivable
facility).
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock," as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over Capital Stock of any other class of such
Person.
"Private Placement Legend" means the legend initially set forth on
the Notes in the form set forth in Section 2.03.
"Public Equity Offering" means an underwritten public offering of
Capital Stock (other than Disqualified Stock) of the Company pursuant to an
effective registration statement filed under the Securities Act, which public
equity offering results in gross proceeds to the Company of not less than $35.0
million.
"Purchase Money Obligation" means any Indebtedness secured by a Lien
on assets related to the business of the Company or the Restricted Subsidiaries,
and any additions and accessions thereto, which are purchased or constructed by
the Company or any Restricted Subsidiary at any time after the Issue Date;
provided that (i) any security agreement or conditional sales or other title
retention contract pursuant to which the Lien on such assets is created
(collectively a "Security Agreement") shall be entered into
<PAGE>
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within 180 days after the purchase or substantial completion of the construction
of such assets and shall at all times be confined solely to the assets so
purchased or acquired, any additions and accessions thereto and any proceeds
therefrom, (ii) at no time shall the aggregate principal amount of the
outstanding Indebtedness secured thereby be increased, except in connection with
the purchase of additions and accessions thereto and except in respect of fees
and other obligations in respect of such Indebtedness and (iii) (A) the
aggregate outstanding principal amount of Indebtedness secured thereby
(determined on a per asset basis in the case of any additions and accessions)
shall not at the time such Security Agreement is entered into exceed 100% of the
purchase price to the Company or any Restricted Subsidiary of the assets subject
thereto or (B) the Indebtedness secured thereby shall be with recourse solely to
the assets so purchased or acquired, any additions and accessions thereto and
any proceeds therefrom.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Redemption Date" means, with respect to any Note to be redeemed,
any date fixed for such redemption by or pursuant to this Indenture and the
terms of the Notes.
"Redemption Price" means, with respect to any Note to be redeemed,
the price at which it is to be redeemed pursuant to this Indenture and the terms
of the Notes.
"Refinancing Expenses" means (i) legal, accounting, printing,
engraving, registration, blue sky and other fees and expenses incurred by the
Company which are directly attributable to the Offering, the amendment and
restatement of the Freedom Credit Agreement, the initial borrowings under the
Amended and Restated Credit Agreement and the repayment of amounts outstanding
under the Existing Credit Agreements, the Cash Equity Investment and the
Additional Equity Investments and the Exchange Offer, and (ii) fees, discounts
and commissions paid to the Initial Purchasers in connection with the initial
sale of the Notes or to any agent or lender under the Amended and Restated
Credit Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement dated on or about the Issue Date between the Company, the Guarantors
and the Initial Purchasers for the benefit of themselves and the Holders as the
same may be amended from time to time in accordance with the terms thereof.
"Regular Record Date" means the Regular Record Date specified in the
Notes.
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"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer" means, with respect to the Trustee, the
chairman or vice chairman of the board of directors, the chairman or vice
chairman of the executive committee of the board of directors, the president,
any vice president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the controller and any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer of the Trustee to whom
any corporate trust matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Payment" means (i) any dividend or other distribution
declared or paid on any Capital Stock of the Company (other than dividends or
distributions payable solely in Capital Stock (other than Disqualified Stock) of
the Company or dividends or distributions payable to the Company or any
Restricted Subsidiary); (ii) any payment to purchase, redeem or otherwise
acquire or retire for value any Capital Stock of the Company; (iii) any
voluntary or optional payment to purchase, redeem, defease or otherwise acquire
or retire for value any Indebtedness that is subordinated in right of payment to
the Notes other than a purchase, redemption, defeasance or other acquisition or
retirement for value that is paid for with the proceeds of Refinancing
Indebtedness that is permitted under Section 10.11; or (iv) any Restricted
Investment.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
entitled to receive, at its request, and conclusively rely on an Opinion of
Counsel with respect to whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" means each direct or indirect Subsidiary of
the Company other than an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
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"Senior Bank Debt" means (i) the Indebtedness outstanding or arising
under the Amended and Restated Credit Agreement, (ii) all obligations incurred
by or owing to the holders of such Indebtedness outstanding or arising under the
Amended and Restated Credit Agreement (including, but not limited to, all fees
and expenses of counsel and all other charges, fees and expenses), and (iii) all
interest rate agreement obligations arising in connection therewith with any
party to the Amended and Restated Credit Agreement.
"Senior Debt" means with respect to the Company, the principal of
and interest (including post-petition interest) on, and all other amounts owing
in respect of, (i) Senior Bank Debt, (ii) any other Indebtedness incurred by the
Company (including, but not limited to, reasonable fees and expenses of counsel
and all other charges, fees and expenses incurred in connection with such
Indebtedness), unless the instrument creating or evidencing such Indebtedness or
pursuant to which such Indebtedness is outstanding expressly provides that such
Indebtedness is on a parity with or subordinated in right of payment to the
Notes. Notwithstanding the foregoing, Senior Debt shall not include (i) any
Indebtedness for federal, state, local or other taxes, (ii) any Indebtedness
among or between the Company, any Restricted Subsidiary and/or their Affiliates
which is not pledged or otherwise assigned to the holders of Senior Bank Debt,
(iii) any Indebtedness incurred for the purchase of goods or materials, or for
services obtained, in the ordinary course of business or any obligations in
respect of any such Indebtedness, (iv) any Indebtedness that is incurred in
violation of the Indenture, (v) Indebtedness evidenced by the Notes or (vi)
Indebtedness of a Person that is expressly subordinate or junior in right of
payment to any other Indebtedness of such Person.
"Senior Representative" means the Bank Agent or any other
representatives designated in writing to the Trustee of the holders of any class
or issue of Designated Senior Debt; provided that, in the absence of a
representative of the type described above, any holder or holders of a majority
of the principal amount outstanding of any class or issue of Designated Senior
Debt may collectively act as Senior Representative for such class or issue.
"Series A Redeemable Preferred Stock" means the 2,800 shares of
Freedom Textile Chemical Co.'s $1,000 par value Series A Preferred Stock, as the
terms of such Preferred Stock shall be in effect on the Issue Date.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X
promulgated pursuant to the Securities Act, as such Regulation S-X is in effect
on the Issue Date.
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"Special Record Date" means, with respect to the payment of any
Defaulted Interest, a date fixed by the Trustee pursuant to Section 3.06 hereof.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which any principal of such Note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company
subordinated in right of payment to the Notes.
"Subsidiary" of a Person means (i) any corporation more than 50% of
the outstanding voting power of the Voting Stock of which is owned or
controlled, directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person, or by such Person and one or more other
Subsidiaries thereof, or (ii) any limited partnership of which such Person or
any Subsidiary of such Person is a general partner, or (iii) any other Person
(other than a corporation or limited partnership) in which such Person, or one
or more other Subsidiaries of such Person, or such Person and one or more other
Subsidiaries thereof, directly or indirectly, have more than 50% of the
outstanding partnership or similar interests or has the power, by contract or
otherwise, to direct or cause the direction of the policies, management and
affairs thereof.
"Surviving Person" means, with respect to any Person involved in or
that makes any Disposition, the Person formed by or surviving such Disposition
or the Person to which such Disposition is made.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) which has become publicly available at least two business days prior
to the date fixed for prepayment (or, if such Statistical Release is no longer
published, any publicly available source of similar market data)) most nearly
equal to the then remaining term to October 15, 2001; provided, however, that if
the then remaining term to October 15, 2001 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the then remaining term to October 15, 2001 is less than one year,
<PAGE>
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the weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of
1939, as amended, and as in effect from time to time.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture, until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Subsidiary" means Indiamalt and any other Subsidiary
of the Company (other than a Guarantor) designated as such pursuant to and in
compliance with Section 10.19 of this Indenture. Any such designation may be
revoked by a Board Resolution of the Company delivered to the Trustee, subject
to the provisions of such Section.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt; provided, however, that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal of or interest on the U.S. Government Obligation evidenced by such
depository receipt.
"Voting Stock" of a Person means Capital Stock of such Person of the
class or classes pursuant to which the holders thereof have the general voting
power under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time the stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
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"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, with (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
with respect to which all of the outstanding voting securities (other than
directors' qualifying shares) of which are owned, directly or indirectly, by the
Company or a Surviving Person of any Disposition involving the Company, as the
case may be.
Section 1.02. Other Definitions.
Defined in
Term Section
---- -------
"Act" 1.05
"Affiliate Transaction" 10.13
"Agent Members" 2.04
"Asset Sale Offer" 10.14
"Asset Sale Offer Price" 10.14
"Asset Sale Offer Trigger Date" 10.14
"Authenticating Agent" 2.02
"Change of Control Date" 10.15
"Change of Control Offer" 10.15
"Change of Control Purchase Date" 10.15
"Change of Control Purchase Price" 10.15
"covenant defeasance" 4.03
"Defaulted Interest" 3.06
"defeasance" 4.02
"Defeased Guarantees" 4.01
"Defeased Notes" 4.01
"Excess Proceeds" 10.14
"Exchange Notes" Recitals
"Existing Indebtedness" 10.11
"Global Note" 2.01
"incur" 10.11(a)
"Initial Notes" Recitals
"Note Register" 3.04
"Note Registrar" 3.04
"Notice of Default" 5.01
"Offshore Physical Note" 2.01
"Optional Redemption Price" 11.01
"Other Obligations" 1.20
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"Payment Blockage Notice" 14.03
"Permitted Indebtedness" 10.11
"Permitted Payments" 10.12
"Physical Notes" 2.01
"Refinancing Indebtedness" 10.11
"Required Filing Dates" 10.09
"U.S. Physical Notes" 2.01
Section 1.03. Rules of Construction.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(e) all references to "$" or "dollars" shall refer to the lawful
currency of the United States of America;
(f) the words "include," "included" and "including" as used herein
shall be deemed in each case to be followed by the phrase "without
limitation";
(g) words in the singular include the plural, and words in the
plural include the singular; and
(h) any reference to a Section or Article refers to such Section or
Article of this Indenture unless otherwise indicated.
Section 1.04. Form of Documents Delivered to Trustee.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee
(a) an Officers' Certificate in form and substance reasonably satisfactory to
the Trustee stating that, in the opinion of the signers, all conditions
precedent (including any
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covenants compliance with which constitutes a condition precedent), if any,
provided for in this Indenture relating to the proposed action have been
complied with, (b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of counsel, all such
conditions (including any covenants compliance with which constitutes a
condition precedent), have been complied with and (c) where applicable, a
certificate or opinion by an accountant that complies with Section 314(c) of the
Trust Indenture Act.
Each certificate and Opinion of Counsel with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or Opinion
of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements contained in such certificate
or Opinion of Counsel are based;
(c) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect
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to such factual matters is in the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated, with
proper identification of each matter covered therein, and form one instrument.
Section 1.05. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in Person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution (as provided below in
subsection (b) of this Section 1.05) of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01 hereof) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient including, without limitation, by verification from a notary
public or signature guarantee.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Note shall bind every future Holder
of the same Note or the Holder of every Note issued upon the transfer thereof or
in exchange therefor or in lieu thereof to the same extent as the original
Holder, in respect of anything done, suffered or omitted to be done by the
Trustee, any Paying Agent or the Company in reliance thereon, whether or not
notation of such action is made upon such Note.
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Section 1.06. Notices, etc., to the Trustee and the Company.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed, in
writing, to or with the Trustee at its Corporate Trust Office or at any
other address previously furnished in writing to the Holders and the
Company by the Trustee or at the office of any drop agent specified by or
on behalf of the Trustee to the Holders and the Company from time to time;
and
(b) the Company by the Trustee or by any Holder shall be sufficient
for every purpose (except as otherwise expressly provided herein)
hereunder if in writing and mailed, first-class postage prepaid, to the
Company, addressed to it at 1735 Market Street, Philadelphia, Pennsylvania
19103, Attention: Brian F. McNamara, Esq., with a copy to Skadden, Arps,
Slate, Meagher & Flom, 919 Third Avenue, New York, New York 10022,
Attention: Mark C. Smith, Esq., or at any other address previously
furnished in writing to the Trustee by the Company.
Section 1.07. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise expressly provided
herein) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at the address of such Holder as it appears in the Note
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice when mailed
to a Holder in the aforesaid manner shall be conclusively deemed to have been
received by such Holder whether or not actually received by such Holder. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
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In case by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any event
as required by any provision of this Indenture, then any method of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Section 1.08. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such provision or requirement of the Trust Indenture Act shall
control.
If any provision of this Indenture modifies or excludes any
provision of the Trust Indenture Act that may be so modified or excluded, such
provision of the Trust Indenture Act shall be deemed to apply to this Indenture
as so modified or excluded, as the case may be, if this Indenture shall then be
qualified under the TIA.
Section 1.09. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
Section 1.10. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and
Trustee shall bind their respective successors and assigns, whether so expressed
or not.
Section 1.11. Separability Clause.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 1.12. Benefits of Indenture.
Nothing in this Indenture or in the Notes issued pursuant hereto,
express or implied, shall give to any Person (other than the parties hereto and
their successors hereunder, any Paying Agent and the Holders) any benefit or any
legal or equitable right, remedy or claim under this Indenture, except as
provided in Article Thirteen and Article Fourteen.
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Section 1.13. GOVERNING LAW.
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). THE TRUSTEE, THE
COMPANY, EACH GUARANTOR AND ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND THE
HOLDERS AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW
YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR
THE NOTES.
Section 1.14. No Recourse Against Others.
No director, officer, employee or stockholder of the Company or any
Guarantor, as such, shall have any liability for any obligations of the Company
or any Guarantor under the Notes, the Guarantees or this Indenture. Each holder
of Notes by accepting a Note waives and releases all such liability, and such
waiver and release is part of the consideration for the issuance of the Notes.
Section 1.15. Independence of Covenants.
All covenants and agreements in this Indenture shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default if such action is taken or condition exists.
Section 1.16. Exhibits and Schedules.
All exhibits and schedules attached hereto are by this reference
made a part hereof with the same effect as if herein set forth in full.
Section 1.17. Counterparts.
This Indenture may be executed in any number of counterparts, each
of which shall be an original; but such counterparts shall together constitute
but one and the same instrument.
Section 1.18. Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
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Section 1.19. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in, and made a part of, this Indenture.
Any terms incorporated by reference in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
under the TIA have the meanings so assigned to them therein.
ARTICLE TWO
SECURITY FORMS
Section 2.01. Form and Dating.
The Initial Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of Exhibit A hereto. The
Exchange Notes and the Trustee's certificate of authentication relating thereto
shall be substantially in the form of Exhibit B hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
depository rule or usage. The Company shall approve the form of the Notes and
any notation, legend or endorsement on them. Each Note shall be dated the date
of its authentication and shall show the date of its authentication.
The additional terms and provisions contained in the forms of Notes
and Guarantees, annexed hereto as Exhibits A, B and E, respectively, shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more global Notes in registered form,
substantially in the form set forth in Exhibit A (the "Global Note"), deposited
with the Trustee, as custodian for the Depository, duly executed by the Company
and authenticated by the Trustee as hereinafter provided and shall bear the
legend set forth in Section 2.03 hereof. The aggregate principal amount of the
Global Note may from time to time be increased or decreased by adjustments made
on the records of the Trustee, as custodian for the Depository.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be represented upon issuance by a temporary Global Note,
which will be exchangeable for certificated Notes in registered form in
substantially the form set forth in
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Exhibit A (the "Offshore Physical Notes") only upon the expiration of the
"40-day restricted period" within the meaning of Rule 903(c)(3) of Regulation S.
Notes offered and sold in reliance on any other exemption from registration
under the Securities Act other than as described in the preceding paragraph
shall be issued, and Notes offered and sold in reliance on Rule 144A may be
issued, in the form of certificated Notes in registered form, in substantially
the form set forth in Exhibit A (the "U.S. Physical Notes"). The Offshore
Physical Notes and the U.S. Physical Notes are sometimes collectively herein
referred to as the "Physical Notes." Physical Notes may initially be registered
in the name of the Depository or a nominee of such Depository and be delivered
to the Trustee as custodian for such Depository. Beneficial owners of Physical
Notes, however, may request registration of such Physical Notes in their names
or the names of their nominees.
Section 2.02. Execution and Authentication; Aggregate Principal
Amount.
The Notes shall be executed on behalf of the Company by two Officers
of the Company. The signature of any Officer on the Notes may be manual or
facsimile.
If an Officer or Assistant Secretary whose manual or facsimile
signature is on a Note was an Officer or Assistant Secretary at the time of such
execution but no longer holds that office or position at the time the Trustee
authenticates the Note, the Note shall nevertheless be valid.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder.
The Trustee shall authenticate (i) Initial Notes for original issue
in the aggregate principal amount not to exceed $125,000,000 and (ii) Exchange
Notes from time to time for issue only in exchange for a like principal amount
of Initial Notes, in each case upon a written order of the Company in the form
of an Officers' Certificate. The Officers' Certificate shall specify the amount
of Notes to be authenticated and the date on which the Notes are to be
authenticated, whether the Notes are to be Initial Notes or Exchange Notes and
whether the Notes are to be issued as Physical Notes or a Global Note or such
other information as the Trustee may reasonably request. The aggregate principal
amount of Notes outstanding at any time may not exceed $125,000,000, except as
provided in Section 3.05 hereof.
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The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an agent to deal with the
Company or with any Affiliate of the Company.
Section 2.03. Restrictive Legends.
Each Global Note and Physical Note that constitutes a Restricted
Security shall bear the following legend (the "Private Placement Legend") on the
face thereof until the third anniversary of the Issue Date, unless otherwise
agreed by the Company and the Holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION AND SUBJECT TO COMPLIANCE WITH OTHER
APPLICABLE LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS
SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE"), ONLY (A) TO THE
COMPANY; (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
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WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
OTHERWISE IN COMPLIANCE WITH OTHER APPLICABLE LAWS, SUBJECT TO THE
COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY
TO EACH OF THEM. THE LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.
Each Global Note shall also bear a legend on the face thereof in
substantially the following form:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF
THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2.05 OF THE INDENTURE.
Section 2.04. Book-Entry Provisions for Global Security.
This Section 2.04 shall apply only to the Global Note deposited with
the Depository or its custodian.
(1) So long as the Notes are eligible for book-entry settlement with
the Depository, or unless otherwise required by
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law, the Global Note initially shall (i) be registered in the name of the
Depository or the nominee of such Depository, (ii) be delivered to the Trustee
as custodian for such Depository and (iii) bear legends as set forth in Section
2.03.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any Agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a holder of any Note.
(2) Transfers of the Global Note shall be limited to transfers in
whole, but, subject to the immediately succeeding sentence, not in part, to the
Depository, its successors or their respective nominees. Interests of beneficial
owners in the Global Note may be transferred or exchanged for Physical Notes in
accordance with the rules and procedures of the Depository and the provisions of
Section 2.05 hereof. In addition, Physical Notes shall be transferred to all
beneficial owners in exchange for their beneficial interests in the Global Note
if (i) the Depository notifies the Company that it is unwilling or unable to
continue as Depository for the Global Note and a successor depositary is not
appointed by the Company within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the Note Registrar has received a
written request from the Depository to issue Physical Notes.
(3) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (2), the Note Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Physical Notes of like tenor and amount.
(4) In connection with the transfer of the beneficial interests in
the entire Global Note to beneficial owners pursuant to paragraph (2), the
Global Note shall be deemed to be surrendered to the Trustee for cancellation,
and the Company shall execute, and the Trustee shall authenticate and deliver to
each beneficial owner
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identified by the Depository in exchange for its beneficial interest in the
Global Note, an equal aggregate principal amount of Physical Notes of authorized
denominations.
(5) Any Physical Note constituting a Restricted Security delivered
in exchange for a beneficial interest in the Global Note pursuant to paragraph
(2) or (3) shall, except as otherwise provided by paragraphs (1)(a)(x) and (3)
of Section 2.05 hereof, bear the Private Placement Legend.
(6) The owner of a beneficial interest in the Global Note may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Notes.
Section 2.05. Special Transfer Provisions.
(1) Transfers to Non-QIB Institutional Accredited
Investors and Non-U.S. Persons. The following provisions shall
apply with respect to the registration of any proposed transfer of
a Note constituting a Restricted Security to any Institutional
Accredited Investor which is not a QIB or to any Non-U.S. Person:
(a) the Note Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the third
anniversary of the Issue Date or (y) (A) in the case of a transfer to an
Institutional Accredited Investor which is not a QIB (excluding Non-U.S.
Persons), the proposed transferee has delivered to the Note Registrar a
certificate substantially in the form of Exhibit C hereto or (B) in the
case of a transfer to a Non-U.S. Person, the proposed transferor has
delivered to the Note Registrar a certificate substantially in the form of
Exhibit D hereto; and
(b) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Note Registrar
of (x) the certificate, if any, required by paragraph (a) above and (y)
written instructions given in accordance with the Depository's and the
Note Registrar's procedures,
whereupon (i) the Note Registrar shall reflect on its books and records the date
and (if the transfer does not involve a transfer of outstanding Physical Notes)
a decrease in the principal amount of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and (ii) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
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(2) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(a) the Note Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box provided
for on the form of Note stating, or has otherwise advised the Company and
the Note Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or has otherwise
advised the Company and the Note Registrar in writing, that it is
purchasing the Note for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration provided
by Rule 144A; and
(b) if the proposed transferee is an Agent Member, and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Global Note, upon receipt by the Note
Registrar of written instructions given in accordance with the
Depository's and the Note Registrar's procedures, the Note Registrar shall
reflect on its books and records the date and an increase in the principal
amount of the Global Note in an amount equal to the principal amount of
the Physical Notes to be transferred, and the Trustee shall cancel the
Physical Notes so transferred.
(3) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Note
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Note Registrar shall deliver only Notes that bear the
Private Placement Legend unless (i) the requested transfer is after the third
anniversary of the Issue Date, or (ii) there is delivered to the Note Registrar
an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to
the effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
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(4) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Note Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.04 hereof or this
Section 2.05. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
during the Note Registrar's normal business hours upon the giving of reasonable
written notice to the Note Registrar.
In connection with any transfer of the Notes, the Trustee, the Note
Registrar and the Company shall be entitled to receive, shall be under no duty
to inquire into, may conclusively presume the correctness of, and shall be fully
protected in relying upon the certificates, opinions and other information
referred to herein (or in the forms provided herein, attached hereto or to the
Notes, or otherwise) received from any Holder and any transferee of any Note
regarding the validity, legality and due authorization of any such transfer, the
eligibility of the transferee to receive such Note and any other facts and
circumstances related to such transfer.
ARTICLE THREE
THE NOTES
Section 3.01. Title and Terms.
The aggregate principal amount of Notes which may be authenticated
and delivered under this Indenture is limited to $125,000,000, except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Section 3.03, 3.04, 3.05, 9.05,
10.12, 10.14, 10.15 or 11.08.
The Notes shall be known and designated as the "10 5/8% Senior
Subordinated Notes due 2006" of the Company. The final Stated Maturity of the
Notes shall be October 15, 2006. Interest on the Notes will accrue at the rate
of 10 5/8% per annum and will be payable semi-annually in arrears on April 15
and October 15 in each year, commencing on April 15, 1997, to holders of record
on the immediately preceding April 1 and October 1, respectively. Interest on
the Notes will accrue from the most recent date to which interest has been paid
or duly provided for or, if no interest has been paid, from the Issue Date.
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The additional terms and provisions contained in the forms of Notes
and the Guarantees, annexed hereto as Exhibits A and E, respectively, shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
Section 3.02. Denominations.
The Notes shall be issuable only in fully registered form without
coupons and in denominations of $1,000 and any integral multiple thereof.
Section 3.03. Temporary Notes.
Pending the preparation and delivery of definitive Notes, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Notes. Temporary Notes may be printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Notes in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the Officers executing such Notes may consider appropriate, as
conclusively evidenced by their execution of such Notes.
If temporary Notes are issued, the Company will cause definitive
Notes to be prepared without unreasonable delay. After the preparation of
definitive Notes, the temporary Notes shall be exchangeable for definitive Notes
upon surrender of the temporary Notes at the office or agency of the Company
designated for such purpose pursuant to Section 10.02, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
Section 3.04. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office a
register (the register maintained in such office and in any other office or
agency designated pursuant to Section 10.02 being herein sometimes referred to
as the "Note Register") in which, subject to such reasonable regulations as the
Person appointed as being responsible for the keeping of the Note Register (the
"Note Registrar") may prescribe, the Company shall provide for
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the registration of Notes and of transfers of Notes. The Note Register shall be
in written form or in any form capable of being converted into written form
within a reasonable period of time. The Trustee is hereby initially appointed
Note Registrar for the purpose of registering Notes and transfers of Notes as
herein provided. The Company may appoint one or more co-registrars.
Upon surrender for registration of transfer of any Note at the
office or agency of the Company designated pursuant to Section 10.02, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Notes of any
authorized denomination or denominations, of a like aggregate principal amount
and bearing such restrictive legends as may be required by Section 2.03.
At the option of the Holder, Notes in certificated form may be
exchanged for other Notes of any authorized denomination or denominations, of a
like aggregate principal amount, upon surrender of the Notes to be exchanged at
such office or agency. Whenever any Notes are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the Notes
which the Holder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same
indebtedness, and entitled to the same benefits under this Indenture, as the
Notes surrendered upon such registration of transfer or exchange and no such
transfer or exchange shall constitute a repayment of any obligation nor create
any new obligations of the Company.
Every Note presented or surrendered for registration of transfer, or
for exchange or redemption, shall (if so required by the Company, the Trustee,
the Note Registrar or any co-registrar) be duly endorsed or be accompanied by a
written instrument of transfer in form satisfactory to the Company, the Trustee,
and the Note Registrar or any co-registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange or redemption of Notes, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section 3.03, 9.05, 10.14, 10.15 or 11.08 not
involving any transfer.
None of the Company, the Trustee, the Note Registrar or any
co-registrar shall be required (a) to issue, register the
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transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of the Notes
selected for redemption and ending at the close of business on the day of such
mailing, (b) to register the transfer of or exchange any Note so selected for
redemption in whole or in part, except the unredeemed portion of Notes being
redeemed in part or (c) to issue, register, transfer or exchange any Note during
a Change of Control Offer or an Asset Sale Offer, if such note is tendered
pursuant to such Change of Control Offer or Asset Sale Offer.
When Notes are presented to the Note Registrar with a request to
register the transfer or to exchange them for an equal principal amount of Notes
of other authorized denominations, the Note Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transactions are met. To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Notes at the Note
Registrar's request.
Section 3.05. Mutilated, Destroyed, Lost and Stolen Notes.
If (a) any mutilated Note is surrendered to the Trustee, or (b) the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, and there is delivered to the Company
and the Trustee, such security or indemnity, in each case, as may be required by
them to save each of them harmless from any loss which either of them may suffer
if a Note is replaced, then, in the absence of notice to the Company or the
Trustee that such Note has been acquired by a bona fide purchaser, the Company
shall execute and the Trustee shall authenticate and deliver, in exchange for
any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a
replacement Note of like tenor and principal amount, bearing a number not
contemporaneously outstanding.
Upon the issuance of any replacement Notes under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in lieu of
any destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
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The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Section 3.06. Payment of Interest; Interest Rights Preserved.
Interest on any Note which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid by check or wire
transfer to the Person in whose name that Note (or one or more Predecessor
Notes) is registered at the close of business on the Regular Record Date for
such interest.
Any interest on any Note which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date and interest on such
defaulted interest at the then applicable interest rate borne by the Notes, to
the extent lawful (such defaulted interest and interest thereon herein
collectively called "Defaulted Interest"), shall forthwith cease to be payable
to the Holder on the Regular Record Date and such Defaulted Interest may be paid
by the Company, at its election in each case, as provided in subsection (a) or
(b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Note and the date
of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest
as in this subsection (a) provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company in writing of such Special Record Date. In the name and
at the expense of the Company, the Trustee shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder at its
address as it appears in the Note Register, not
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less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so mailed, such Defaulted Interest shall be paid to
the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered on such Special Record Date and shall no longer be
payable pursuant to the following subsection (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, if, after written notice given by the
Company to the Trustee of the proposed payment pursuant to this subsection
(b), such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
Section 3.07. Persons Deemed Owners.
Prior to and at the time of due presentment for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name any Note is registered in the Note Register
as the owner of such Note for the purpose of receiving payment of principal of,
premium, if any, and (subject to Section 3.06) interest on such Note and for all
other purposes whatsoever, whether or not such Note shall be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
Section 3.08. Cancellation.
All Notes surrendered for payment, redemption, registration of
transfer or exchange shall be delivered to the Trustee and, if not already
cancelled, shall be promptly cancelled by it. The Company may at any time
deliver to the Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, as evidenced by a Company Order instructing the Trustee that all
Notes so delivered shall be promptly cancelled by the Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes cancelled as provided in
this Section 3.08, except as expressly permitted by this Indenture. Cancelled
Notes held by the Trustee shall be disposed of as directed by a Company Order;
provided, however, that the Trustee shall not be required to destroy such
cancelled Notes. The Trustee shall provide the
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Company with a list of all Notes that have been cancelled from time to time as
requested by the Company.
Section 3.09. Computation of Interest.
Interest on the Notes shall be computed on the basis of a 360-day
year of twelve 30-day months.
Section 3.10. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, date
established for the payment of Defaulted Interest or Stated Maturity of any Note
shall not be a Business Day, then (notwithstanding any other provision of this
Indenture or of the Notes) payment of principal, premium, if any, or interest
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the Interest Payment Date,
Redemption Date, date established for the payment of Defaulted Interest or at
the Stated Maturity, as the case may be, and no interest shall accrue with
respect to such payment for the period from and after such Interest Payment
Date, Redemption Date, date established for the payment of Defaulted Interest or
Stated Maturity, as the case may be, to the next succeeding Business Day.
Section 3.11. CUSIP Number.
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and if so, the Trustee may use the CUSIP numbers in notices
of redemption or exchange as a convenience to Holders; provided, however, that
any such notice may state that no representation is made as to the correctness
or accuracy of the CUSIP number printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers printed on the
Notes. All Notes shall bear identical CUSIP numbers. The Company shall promptly
notify the Trustee in writing of any change in the CUSIP number of the Notes.
Section 3.12. Payment of Additional Interest Under Registration
Rights Agreement.
Under certain circumstances the Company will be obligated to pay
certain additional amounts of interest to the Holders, as more particularly set
forth in section 2(e) of the Registration Rights Agreement. The terms of Section
2(e) the Registration Rights Agreement are hereby incorporated herein by
reference and the Company shall be obligated to provide a copy of such
Registration Rights Agreement to the Trustee.
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ARTICLE FOUR
DEFEASANCE OR COVENANT DEFEASANCE
Section 4.01. The Company's Option To Effect Defeasance or Covenant
Defeasance.
The Company may, at its option, at any time, elect to have
terminated the obligations of the Company with respect to Outstanding Notes and
to have terminated the obligations of the Guarantors, with respect to the
Guarantees, in each case, as set forth in this Article, and elect to have either
Section 4.02 or Section 4.03 be applied to all of the Outstanding Notes (the
"Defeased Notes") and the Guarantees (the "Defeased Guarantees"), upon
compliance with the conditions set forth below in Section 4.04.
Section 4.02. Defeasance and Discharge.
Upon the Company's exercise under Section 4.01 of the option
applicable to this Section 4.02, the Company shall be deemed to have been
released and discharged from its obligations with respect to the Defeased Notes
and each of the Guarantors shall be deemed to have been released from its
obligations with respect to the Defeased Guarantees on the date the conditions
set forth below are satisfied (hereinafter, "defeasance"). For this purpose,
such defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the Defeased Notes, which
shall thereafter be deemed to be "Outstanding" only for the purposes of Section
4.05 and the other Sections of this Indenture referred to in (a) and (b) below,
and the Company and each of the Guarantors to have satisfied all other
obligations under such Notes and this Indenture insofar as such Notes are
concerned (and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following, which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of Defeased Notes to receive, solely from the trust fund described in
Section 4.04 and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest on such Notes when such payments
are due, (b) the Company's obligations with respect to such Defeased Notes under
Sections 3.03, 3.04, 3.05 and 10.02, (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder, including, without limitation, the
Trustee's rights under Section 6.07, and (d) this Article Four. Subject to
compliance with this Article Four, the Company may, at its option and at any
time, exercise its option under this Section 4.02 notwithstanding the prior
exercise of its option under Section 4.03 with respect to the Notes.
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Section 4.03. Covenant Defeasance.
Upon the Company's exercise under Section 4.01 of the option
applicable to this Section 4.03, the Company and the Guarantors shall be
released from their respective obligations under any covenant or provision
contained in Sections 10.05 through 10.19 and the provisions of Article Eight
shall not apply, with respect to the Defeased Notes on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant defeasance"),
and the Notes shall thereafter be deemed not to be "Outstanding" for the
purposes of any direction, waiver, consent or declaration or Act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the Outstanding
Notes, the Company and the Guarantors may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section
5.01(c), but, except as specified above, the remainder of this Indenture and
such Outstanding Notes shall be unaffected thereby.
Section 4.04. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 4.02 or Section 4.03 to the Outstanding Notes:
(1) The Company shall have irrevocably deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 6.09 who shall agree to comply with the provisions of this
Article Four applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes, (a) cash,
in United States dollars, in an amount, or (b) U.S. Government Obligations
maturing as to principal, premium, if any, and interest in such amounts of
money and at such times as are sufficient without consideration of any
reinvestment of such interest, to pay principal of and interest on
Defeased Notes not later than one day before the due date of any payment,
or (c) a combination thereof, in amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public accountants
or a nationally recognized investment banking firm expressed in a written
certification thereof delivered to the Trustee, to pay and discharge and
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which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, the principal of, premium, if any, and interest on the
Defeased Notes on the Stated Maturity or Redemption Date in accordance
with the terms of this Indenture and the Notes; provided, however, that
the Trustee (or other qualifying trustee) shall have received an
irrevocable written order from the Company instructing the Trustee (or
other qualifying trustee) to apply such money or the proceeds of such U.S.
Government Obligations to said payments with respect to the Notes;
provided, further, however, that from and after the time of deposit, the
money or U.S. Government Obligations deposited shall not be subject to the
rights of the holders of other Indebtedness of the Company;
(2) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as Section 5.01(e) is
concerned, at any time during the period ending on the ninety-first day
after the date of such deposit;
(3) Such defeasance or covenant defeasance shall not cause the
Trustee for the Notes to have a conflicting interest with respect to any
securities of the Company;
(4) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default or Event of Default under,
this Indenture or any other material agreement or instrument to which the
Company is a party or by which it is bound;
(5) In the case of an election under Section 4.02, the Company shall
have delivered to the Trustee an Opinion of Counsel recognized in the
United States stating that (x) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (y) since the
date hereof, there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such opinion
shall confirm that, the Holders of the Outstanding Notes will not
recognize income, gain or loss for Federal income tax purposes as a result
of such defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such defeasance had not occurred;
(6) In the case of an election under Section 4.03, the Company shall
have delivered to the Trustee an Opinion of Counsel recognized in the
United States to the effect that the Holders of the Outstanding Notes will
not recognize income, gain or loss for Federal income tax purposes as a
result of such covenant defeasance and will be subject to Federal income
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tax on the same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred; and
(7) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (i) all
conditions precedent provided for relating to either the defeasance under
Section 4.02 or the covenant defeasance under Section 4.03, as the case
may be, have been complied with and (ii) if any other Indebtedness of the
Company shall then be outstanding or committed, such defeasance or
covenant defeasance will not violate the provisions of the agreements or
instruments evidencing such Indebtedness.
Opinions and certificates required to be delivered under this
Section shall be in compliance with the requirements set forth in Section 1.04
and this Section 4.04.
Section 4.05. Deposited Money and U.S. Government Obligations To Be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 10.03,
all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or such other Person that would qualify to act as
successor trustee under Article Six, collectively for purposes of this Section
4.05, the "Trustee") pursuant to Section 4.04 in respect of the Defeased Notes
and Defeased Guarantees shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (other than the Company or any
Affiliate of the Company) as the Trustee may determine, to the Holders of such
Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee and its agents and
hold them harmless against any tax, fee or other charge imposed on or assessed
against the U.S. Government Obligations deposited pursuant to Section 4.04 or
the principal, premium, if any, and interest received in respect thereof other
than any such tax, fee or other charge which by law is for the account of the
Holders of the Defeased Notes.
Anything in this Article Four to the contrary notwithstanding, the
Trustee shall deliver to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 4.04
hereof which, in the opinion of a nationally-recognized firm of independent
public
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accountants expressed in a written certification thereof to the Trustee, are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent defeasance or covenant defeasance.
Section 4.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 4.02 or 4.03, as the case may
be, by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
obligations of the Company and each of the Guarantors under this Indenture, the
Notes and the Guarantees shall be revived and reinstated as though no deposit
had occurred pursuant to Section 4.02 or 4.03, as the case may be, until such
time as the Trustee or Paying Agent is permitted to apply all such money and
U.S. Government Obligations in accordance with Section 4.02 or 4.03, as the case
may be; provided, however, that if the Company or the Guarantors make any
payment of principal, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company or the Guarantors, as the case may
be, shall be subrogated to the rights of the Holders of such Notes to receive
such payment from the money and U.S. Government Obligations held by the Trustee
or Paying Agent.
Section 4.07. Repayment to Company.
The Trustee shall pay to the Company (or, if appropriate, the
Guarantors) upon Company Request any money held by it for the payment of
principal or interest that remains unclaimed for two years. After payment to the
Company or the Guarantors, Noteholders entitled to money must look to the
Company and the Guarantors for payment as general creditors unless an applicable
abandoned property law designates another person and all liability of the
Trustee or Paying Agent with respect to such money shall thereupon cease.
ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or
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order of any court or any order, rule or regulation of any administrative or
governmental body):
(a) the Company shall fail to pay interest on the Notes (including
any Additional Interest as defined in the Registration Rights Agreement)
when the same becomes due and payable (whether or not prohibited by the
subordination provisions of Article Fourteen) and such failure shall
continue for 30 days or more; or
(b) the Company shall fail to pay principal on the Notes (whether or
not prohibited by the subordination provisions of Article Fourteen) when
and as the same shall become due and payable at maturity, upon
acceleration, optional or mandatory redemption, required repurchase, or
otherwise; or
(c) the Company shall fail to perform or comply with any of its
other covenants, agreements or warranties in this Indenture (other than
the defaults specified in clauses (a) and (b) above or clause (h) below),
which failure continues for a period of 60 days after written notice
thereof has been given to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least 25.0% in aggregate principal amount
of the Notes then Outstanding; or
(d) the occurrence of one or more defaults under any agreements,
indentures or instruments under which the Company or any Significant
Subsidiary then has outstanding Indebtedness in excess of $5.0 million in
the aggregate and, if not already matured at its final maturity in
accordance with its terms, such Indebtedness shall have been accelerated
and such Indebtedness shall not have been repaid or such acceleration
rescinded within 30 days; or
(e) one or more judgments, orders or decrees for the payment of
money in excess of $5.0 million, either individually or in the aggregate,
shall be entered against the Company or any Significant Subsidiary or any
of their respective properties and which judgments, orders or decrees are
not paid, discharged, bonded or stayed or stayed pending appeal for a
period of 60 days after their entry; or
(f) there shall have been entered by a court of competent
jurisdiction (a) a decree or order for relief in respect of the Company or
any Significant Subsidiary in an involuntary case or proceeding under any
applicable Bankruptcy Law or (b) a decree or order adjudging the Company
or any Significant Subsidiary bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company or any Significant Subsidiary under
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any applicable Federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or any Significant Subsidiary or of any substantial part of
their respective properties, or ordering the winding up or liquidation of
their affairs, and any such decree or order for relief shall continue to
be in effect, or any such other decree or order shall be unstayed and in
effect, for a period of 60 days; or
(g) (i) the Company or any Significant Subsidiary commences a
voluntary case or proceeding under any applicable Bankruptcy Law or any
other case or proceeding to be adjudicated bankrupt or insolvent, (ii) the
Company or any Significant Subsidiary consents to the entry of a decree or
order for relief in respect of the Company or such Significant Subsidiary
in an involuntary case or proceeding under any applicable Bankruptcy Law
or to the commencement of any bankruptcy or insolvency case or proceeding
against it, (iii) the Company or any Significant Subsidiary files a
petition or answer or consent seeking reorganization or relief under any
applicable Federal or state law, (iv) the Company or any Significant
Subsidiary (x) consents to the filing of such petition or the appointment
of or taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or such
Significant Subsidiary or of any substantial part of their respective
property, (y) makes an assignment for the benefit of creditors or (z)
admits in writing its inability to pay its debts generally as they become
due or (v) the Company or any Significant Subsidiary takes any corporate
action in furtherance of any such actions in this paragraph (g); or
(h) the Company shall fail to comply with its obligations in Section
8.01 or 8.02; or
(i) any Guarantee of a Significant Subsidiary ceases to be in full
force and effect (other than as expressly provided for in this Indenture)
or is declared null and void, or any Guarantor which is a Significant
Subsidiary denies that it has any further liability under any Guarantee,
or gives notice to such effect (other than by reason of the termination of
this Indenture or the release of any such Guarantee in accordance with
this Indenture).
The Company shall provide an Officers' Certificate to the Trustee
promptly upon any officer of the Company obtaining knowledge of any Default or
Event of Default that has occurred and, if applicable, describe such Default or
Event of Default and the status thereof.
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Section 5.02. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.01(f) or (g) with respect to the Company) occurs and is continuing,
the Trustee or the Holders of not less than 25.0% in aggregate principal amount
of the Notes then Outstanding may, and the Trustee upon the request of the
Holders of not less than 25.0% in aggregate principal amount of the Notes then
Outstanding shall, declare all the Notes due and payable, in an amount equal to
the principal amount of the Notes, together with accrued and unpaid interest to
the date the Notes become due and payable immediately by notice in writing to
the Company, and to the Company and the Trustee, if by the Holders, specifying
the respective Event of Default and that such notice is a "notice of
acceleration," and the Notes and all accrued and unpaid interest thereon shall
thereupon become immediately due and payable. If an Event of Default specified
in Section 5.01(f) or (g) with respect to the Company above occurs and is
continuing, then the principal of, premium if any, and any accrued interest on
all the Outstanding Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder of the Notes.
At any time after such declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article, the Holders of not less
than a majority in aggregate principal amount of the Notes Outstanding, by
written notice to the Company and the Trustee, may rescind such declaration of
acceleration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(i) all amounts paid or advanced by the Trustee under Section
6.07, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel;
(ii) all overdue interest on all Outstanding Notes;
(iii) the principal of and premium, if any, on any Outstanding
Notes which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate then borne by the
Notes; and
(iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate then borne by the Notes;
and
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(b) all Events of Default, other than the non-payment of principal
of the Outstanding Notes that has become due solely by such declaration of
acceleration, have been cured or waived.
Section 5.03. Collection of Indebtedness and Suits for Enforcement
by Trustee; Other Remedies.
The Company covenants that if an Event of Default in payment of
principal, premium or interest specified in Section 5.01(a) or 5.01(b) hereof
occurs and is continuing, the Company will, upon demand of the Trustee, pay to
the Trustee, for the benefit of the Holders of such Notes, the whole amount then
due and payable on such Notes for principal, premium, if any, and interest, with
interest upon the overdue principal, premium, if any, and, to the extent that
payment of such interest shall be legally enforceable, upon overdue installments
of interest, at the rate then borne by the Notes; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may, but is not
obligated under this paragraph to, institute a judicial proceeding for the
collection of the sums so due and unpaid and may, but is not obligated under
this paragraph to, prosecute such proceeding to judgment or final decree, and
may, but is not obligated under this paragraph to, enforce the same against the
Company, the Guarantors or any other obligor upon the Notes and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Notes, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion, but is not obligated under this paragraph to, (i) proceed to
protect and enforce its rights and the rights of the Holders under this
Indenture and the Notes by such appropriate private or judicial proceedings as
the Trustee shall deem most effectual to protect and enforce such rights,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or the Notes or in aid of the exercise of any power granted
herein or therein, or (ii) proceed to protect and enforce any other proper
remedy. No recovery of any such judgment upon any property of the Company shall
affect or impair any rights, powers or remedies of the Trustee or the Holders.
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Section 5.04. Trustee May File Proofs of Claims.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company, the Guarantors or any other
obligor upon the Notes, or the property of the Company, the Guarantors or of
such other obligor or their creditors, the Trustee (irrespective of whether the
principal of the Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company for the payment of overdue principal or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise, but is not obligated under this paragraph
(a) to file and prove a claim for the whole amount of principal,
premium, if any, and interest owing and unpaid in respect of the Notes and
to file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any Custodian, in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
Section 5.05. Trustee May Enforce Claims Without Possession of
Notes.
All rights of action and claims under this Indenture or the Notes
may be prosecuted and enforced by the Trustee without the possession of any of
the Notes or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by
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the Trustee shall be brought in its own name and as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Holders of the Notes
in respect of which such judgment has been recovered.
Section 5.06. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal, premium, if
any, or interest, upon presentation of the Notes and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
First: to the Trustee for amounts due under Section 6.07;
Second: to Holders for interest accrued on the Notes, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Notes for interest;
Third: to Holders for principal amounts owing under the Notes,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal and premium; and
Fourth: to the Company or, to the extent the Trustee collects any
amount from any Guarantor, to such Guarantor.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Noteholders pursuant to this
Section 5.06.
Section 5.07. Limitation on Suits.
No Holder of any Notes shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(b) the Holder or Holders of not less than 25.0% in principal amount
of the Outstanding Notes shall have made written request(s) to the Trustee
to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
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(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture or any Note to affect, disturb or prejudice the rights of any
other Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture or any Note except in
the manner provided in this Indenture and for the equal and ratable benefit of
all the Holders.
Section 5.08. Unconditional Right of Holders To Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
cash payment, in United States dollars, of the principal of, premium, if any,
and (subject to Section 3.06 hereof) interest on such Note on the respective
Stated Maturities expressed in such Note (or, in the case of redemption or
repurchase, on the respective Redemption Dates or date fixed for repurchase) and
to institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the express consent of such Holder.
Section 5.09. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture or any Note and such proceeding
has been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case the
Company, the Trustee and the Holders shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
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Section 5.10. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article Five or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
Section 5.12. Control by Majority.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Notes shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee; provided, however,
that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture or any Note or expose the Trustee to liability; and
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
In the event the Trustee takes any action or follows any direction
pursuant to this Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against any loss or expense caused by
taking such action or following such direction. This Section 5.12 shall be in
lieu of ss. 316(a)(1)(A) of the TIA, and such ss. 316(a)(1)(A) of the TIA is
hereby expressly excluded from this Indenture and the Notes, as permitted by the
TIA.
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Section 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Notes may on behalf of the Holders of all the Notes
waive any past Default hereunder and its consequences, except a Default:
(a) in the payment of the principal of, premium, if any, or interest
on any Note (which may only be waived with the consent of each holder of
Notes affected); or
(b) in respect of a covenant or provision under this Indenture which
cannot be modified or amended without the consent of the Holder of each
Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon. In
case of any such waiver, the Company, the Trustee and the Holders shall be
restored to their former positions and rights hereunder and under the Notes,
respectively. This paragraph of this Section 5.13 shall be in lieu of ss.
316(a)(1)(B) of the TIA and such ss. 316(a)(1)(B) of the TIA is hereby expressly
excluded from this Indenture and the Notes, as permitted by the TIA.
Section 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Note by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture or the Notes, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Notes or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of, premium, if any, or interest on any Note on or after the
respective Stated Maturities expressed in such Note (or, in the case of
redemption or repurchase, on or after the respective Redemption Dates or dates
fixed for repurchase).
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Section 5.15. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury or other law wherever enacted, now or at any time hereafter in force,
which would prohibit or forgive the Company from paying all or any portion of
the principal of, premium, if any, or interest on the Notes contemplated herein
or in the Notes or which may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
Section 6.01. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture; but
in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
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(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that (i) this paragraph does not
limit the effect of paragraph (a) of this Section 6.01; (ii) the Trustee shall
not be liable for any error of judgment made in good faith by an officer of the
Trustee, unless it is proved that the Trustee was negligent in ascertaining the
pertinent facts; and (iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.12.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive an indemnity satisfactory to it in
its sole discretion against such risk, liability, loss, fee or expense which
might be incurred by it in compliance with such request or direction.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.01.
Section 6.02. Notice of Defaults.
Within 90 days after the occurrence of any Default, the Trustee
shall transmit by mail to all Holders, as their names and addresses appear in
the Note Register, notice of such Default hereunder known to the Trustee;
provided, however, that, except in the case of a Default in the payment of the
principal of, premium, if any, or interest on any Note, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interest of the Holders.
Section 6.03. Certain Rights of Trustee.
Subject to Section 6.01 hereof and the provisions of ss. 315 of the
TIA:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
approval, appraisal, bond,
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debenture, note, coupon, security, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors of the Company may be sufficiently
evidenced by a Board Resolution of the Company thereof;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate of the Company;
(d) the Trustee and its agents may consult, at the expense of the
Company, with counsel and any written advice of such counsel or any
Opinion of Counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon in accordance with such advice or
Opinion of Counsel;
(e) the Trustee and its agents shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, approval, appraisal, bond, debenture, note,
coupon, security, other evidence of indebtedness or other paper or
document but the Trustee in its discretion may make such further inquiry
or investigation into such facts or matters as it may deem fit, and, if
the Trustee shall determine to make such further inquiry or investigation,
it shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney during the reasonable business
hours of the Company;
(f) the Trustee and its agents may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent (other than an agent
who is an employee of the Trustee) or attorney appointed with due care by
it hereunder; or
(g) the Trustee shall not be charged with knowledge of any Default
or Event of Default, as the case may be, with
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respect to the Notes unless either (1) a Responsible Officer of the
Trustee shall have actual knowledge of the Default or Event of Default, as
the case may be, or (2) written notice of such Default or Event of
Default, as the case may be, shall have been given to the Trustee by the
Company, any other obligor on the Notes or by any Holder of the Notes.
Section 6.04. Trustee Not Responsible for Recitals, Dispositions of
Notes or Application of Proceeds Thereof.
The recitals contained herein and in the Notes, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company
and the Guarantors, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or the Notes, except that the Trustee represents
that it is duly authorized to execute and deliver this Indenture, authenticate
the Notes and perform its obligations hereunder and that the statements made by
it in a Statement of Eligibility and Qualification on Form T-1 supplied to the
Company and the Guarantors in connection with the registration of any Notes and
Guarantees issued hereunder are true and accurate subject to the qualifications
set forth therein. The Trustee shall not be accountable for the use or
application by the Company of Notes or the proceeds thereof.
Section 6.05. Trustee and Agents May Hold Notes; Collections; etc.
The Trustee, any Paying Agent, Note Registrar or any other agent of
the Company or the Guarantors, in its individual or any other capacity, may
become the owner or pledgee of Notes, with the same rights it would have if it
were not the Trustee, Paying Agent, Note Registrar or such other agent and,
subject to Sections 6.08 and 6.13 hereof and ss.ss. 310 and 311 of the Trust
Indenture Act, may otherwise deal with the Company or the Guarantors and
receive, collect, hold and retain collections from the Company or the Guarantors
with the same rights it would have if it were not the Trustee, Paying Agent,
Note Registrar or such other agent.
Section 6.06. Money Held in Trust.
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required herein
or by law. The Trustee shall not be under any liability for interest on any
moneys received by it hereunder.
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Section 6.07. Compensation and Indemnification of Trustee and Its
Prior Claim.
The Company and the Guarantors covenant and agree: (a) to pay to the
Trustee from time to time, and the Trustee shall be entitled to, reasonable
compensation for all services rendered by it hereunder (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust); (b) to reimburse the Trustee and each predecessor Trustee upon
its request for all reasonable expenses, disbursements and advances incurred or
made by or on behalf of it in accordance with any of the provisions of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its counsel and of all agents and other Persons not regularly
in its employ), except any such reasonable expense, disbursement or advance as
may arise from its negligence or bad faith; and (c) to indemnify the Trustee and
each predecessor Trustee for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of this
Indenture or the trusts hereunder and the exercise or performance of any of its
powers or duties hereunder, including enforcement of this Section 6.07. The
Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. The obligations of the Company and the
Guarantors under this Section to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, disbursements and advances shall constitute an additional
obligation hereunder and shall survive the satisfaction and discharge of this
Indenture. To secure the obligations of the Company and the Guarantors to the
Trustee under this Section 6.07, the Trustee shall have a Lien prior to the
Notes upon all property and funds held or collected by the Trustee as such,
except funds and property paid by the Company or the Guarantors and held in
trust for the benefit of the Holders of particular Notes under this Indenture.
All such payments and reimbursements shall be made with interest at a rate
reasonably acceptable to the Trustee, the Company and the Guarantors. The
Trustee shall be entitled to file a proof of claim in any bankruptcy proceeding
as a secured creditor for its reasonable compensation, fees and expenses under
this Section 6.07.
When the Trustee incurs expenses under Article Five hereof, the
expenses (including reasonable fees and expenses of its counsel) and the
compensation for the service in connection therewith are intended to constitute
expense of administration under any applicable bankruptcy law.
To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and
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counsel, and any other amounts due the Trustee under this Section 6.07 out of
the estate in any such proceeding, shall be denied for any reason, other than
solely because of the misconduct of the Trustee or its agents, payment of the
same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise.
Section 6.08. Conflicting Interests.
The Trustee shall be subject to and comply with the provisions of
ss. 310(b) of the TIA.
Section 6.09. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA ss.ss. 310(a)(1) and 310(a)(5) and which
shall have a combined capital, surplus and undivided profits of at least
$100,000,000, and have an office or agency at which Notes may be presented for
transfer and redemption and at which demands may be made in The City of New
York. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of United States Federal, state,
territorial or District of Columbia supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
the Trustee shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 6.10. Resignation and Removal; Appointment of Successor
Trustee.
No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
The Trustee, or any trustee or trustees hereinafter appointed, may
at any time resign by giving written notice thereof to the Company and the
Guarantors at least 20 Business Days prior to the date of such proposed
resignation. Upon receiving such notice of resignation, the Company and the
Guarantors shall promptly appoint a successor trustee by written instrument, a
copy of which shall be delivered to the resigning Trustee and a copy to the
successor trustee. If an instrument of acceptance by a
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successor Trustee shall not have been delivered to the Trustee within 20
Business Days after the giving of such notice of resignation, the resigning
Trustee may, or any Holder who has been a bona fide Holder of a Note for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee. Such court may thereupon, after such notice, if any, as it may deem
proper, appoint a successor trustee.
The Trustee may be removed at any time by an Act of the Holders of a
majority in principal amount of the Outstanding Notes, delivered to the Trustee,
the Company and the Guarantors.
If at any time:
(1) the Trustee shall fail to comply with the provisions of ss.
310(b) of the TIA in accordance with Section 6.08 hereof after written
request therefor by the Company, the Guarantors or by any Holder who has
been a bona fide Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.09 hereof
and shall fail to resign after written request therefor by the Company,
the Guarantors or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose or
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company or the Guarantors may remove the
Trustee, or (ii) subject to Section 5.14, the Holder of any Note who has been a
bona fide Holder of a Note for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company or the Guarantors shall promptly appoint a successor Trustee. If, within
one year after such resignation, removal or incapability, or the occurrence of
such vacancy, and the Company or the Guarantors have not appointed a successor
Trustee, a successor Trustee shall be appointed by act of the Holders of a
majority in principal amount of the Outstanding
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Notes delivered to the Company, the Guarantors and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company and the Guarantors. If no successor Trustee shall have
been so appointed by the Company or the Holders of the Notes and accepted
appointment in the manner hereinafter provided, the Holder of any Note who has
been a bona fide Holder for at least six months may, subject to Section 5.14, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company and the Guarantors shall give notice of each
resignation and each removal of the Trustee and each appointment of a successor
Trustee by mailing written notice of such event by first-class mail, postage
prepaid, to the Holders of Notes as their names and addresses appear in the Note
Register. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
Section 6.11. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company, the Guarantors and to the retiring
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee as if
originally named as Trustee hereunder; but, nevertheless, on the written request
of the Company, the Guarantors or the successor Trustee, upon payment of amounts
due it pursuant to Section 6.07, such retiring Trustee shall duly assign,
transfer and deliver to the successor Trustee all moneys and property at the
time held by it hereunder and shall execute and deliver an instrument
transferring to such successor Trustee all the rights, powers, duties and
obligations of the retiring Trustee. Upon request of any such successor Trustee,
the Company and the Guarantors shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a
prior claim upon all property or funds held or collected by such Trustee to
secure any amounts then due it pursuant to the provisions of Section 6.07.
No successor Trustee with respect to the Notes shall accept
appointment as provided in this Section 6.11 unless at the time of such
acceptance such successor Trustee shall be eligible to act as Trustee under this
Article.
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Upon acceptance of appointment by any successor Trustee as provided
in this Section 6.11, the Company and the Guarantors shall give notice thereof
to the Holders of the Notes, by mailing such notice to such Holders at their
addresses as they shall appear on the Note Register. If the acceptance of
appointment is substantially contemporaneous with the resignation, then the
notice called for by the preceding sentence may be combined with the notice
called for by Section 6.10(f). If the Company or the Guarantors fail to give
such notice within 10 days after acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be given at the
expense of the Company.
Section 6.12. Successor Trustee by Merger, etc.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion, or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, provided such corporation shall be eligible under this
Article to serve as Trustee hereunder.
In case at the time such successor to the Trustee under this Section
6.12 shall succeed to the trusts created by this Indenture any of the Notes
shall have been authenticated but not delivered, any such successor to the
Trustee may adopt the certificate of authentication of any predecessor Trustee
and deliver such Notes so authenticated; and, in case at that time any of the
Notes shall not have been authenticated, any successor to the Trustee under this
Section 6.12 may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor Trustee; and in all such cases such
certificate shall have the full force which it is anywhere in the Notes or in
this Indenture provided that the certificate of the Trustee shall have.
Section 6.13. Preferential Collection of Claims Against Issuers.
The Trustee shall comply with Section 311(a) of the TIA, excluding
any creditor relationship listed in ss. 311(b) of the TIA. If the present or any
future Trustee shall resign or be removed, it shall be subject to ss. 311(a) of
the TIA to the extent provided therein.
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.01. Preservation of Information; Company To Furnish
Trustee Names and Addresses of Holders.
(a) The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders; provided, however, that if and for so long as the Trustee shall be
the Note Registrar, the Note Register shall satisfy the requirements relating to
such list. Neither the Company, the Guarantors or the Trustee shall be under any
responsibility with regard to the accuracy of such list.
(b) The Company will furnish or cause to be furnished to the Trustee
(i) semiannually, not more than 10 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date; and
(ii) at such other times as the Trustee may request in writing,
within 30 days after receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Note
Registrar, no such list need be furnished pursuant to this Section 7.01(b).
Section 7.02. Communications of Holders.
Holders may communicate with other Holders with respect to their
rights under this Indenture or under the Notes pursuant to ss. 312(b) of the
TIA. The Trustee shall comply with ss. 312(b) of the TIA. The Company, the
Guarantors and the Trustee and any and all other Persons benefited by this
Indenture shall have the protection afforded by ss. 312(c) of the TIA.
Section 7.03. Reports by Trustee.
Within 60 days after June 15 of each year commencing with the first
June 15 following the date of this Indenture, the Trustee shall mail to all
Holders, as their names and addresses appear in the Note Register, a brief
report dated as of such June 15 that complies with ss. 313(a) of the TIA;
provided, however, that if no such event as described in ss. 313(a) of the TIA
has occurred within
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such period then no such report need be transmitted. The Trustee shall also
comply with ss.ss. 313(b), 313(c) and 313(d) of the TIA. At the time of its
mailing to Holders, a copy of each report shall be filed with the Company, the
Guarantors, the Commission and with each national securities exchange on which
the Notes are listed. The Company shall notify the Trustee when the Notes are
listed on any stock exchange or any delisting thereof.
Section 7.04. Reports by Company.
The Company shall file with the Trustee copies of the reports and of
the information and documents which the Company is required to provide to any
Person under Section 10.09 and 10.10.
ARTICLE EIGHT
SUCCESSOR CORPORATION
Section 8.01. When Company May Merge, etc.
The Company shall not, in any single transaction or series of
related transactions, consolidate or merge with or into (whether or not the
Company is the Surviving Person), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions (other than a consolidation or merger with or into
a Wholly-Owned Restricted Subsidiary; provided that, in connection with any such
merger or consolidation, no consideration (other than Common Stock in the
Surviving Person or the Company) shall be issued or distributed to the
shareholders of the Company) to, another Person, and the Company will not permit
any Restricted Subsidiary to enter into any such transaction or series of
related transactions if such transaction or series of related transactions, in
the aggregate, would result in a sale, assignment, transfer, lease, conveyance
or other disposition of all or substantially all of the properties and assets of
the Company and the Restricted Subsidiaries, taken as a whole, to another
Person, unless (i) the Surviving Person is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the Surviving Person (if other than the Company) assumes all the
obligations of the Company under the Notes (and the Guarantees of the Guarantors
shall be confirmed as applying to such Surviving Person's obligations) and this
Indenture and, if then in effect, the Registration Rights Agreement pursuant to
a supplemental indenture or other written agreement, as the case may be, in a
form reasonably satisfactory to the Trustee; (iii) at the time of and
immediately after such transaction, no Default or Event of Default shall have
occurred and be continuing; and (iv) the Surviving Person will have at the time
of such transaction and
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after giving pro forma effect thereto, would be permitted to incur at least
$1.00 of additional Indebtedness pursuant to paragraph (a) of Section 10.11.
Section 8.02. Successor Substituted.
Upon any transaction (other than a lease) involving the Company in
accordance with Section 8.01 hereof, in which the Company is not the Surviving
Person, the Surviving Person or Persons shall succeed to, and be substituted
for, and may exercise every right and power of, and shall assume all of the
liabilities and obligations of, the Company under this Indenture, the Notes and,
if then in effect, the Registration Rights Agreement pursuant to a supplemental
indenture or other written agreement with the same effect as if such successor
had been named as the Company in this Indenture, the Notes and the Registration
Rights Agreement. When a successor assumes all the obligations of its
predecessor under this Indenture, the Notes and the Registration Rights
Agreement, the predecessor shall be released from those obligations, other than
its obligations under Section 6.07 hereof, which shall continue in full force
and effect notwithstanding any such assumption.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01. Without Consent of Holders.
The Company, the Guarantors and the Trustee may amend, waive or
supplement this Indenture or the Notes without notice to or consent of any
Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Article Eight;
(c) to provide for uncertificated Notes in addition to certificated
Notes;
(d) to comply with any requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA;
(e) to provide for additional Guarantors of the Notes;
(f) to evidence the release of any Guarantor in accordance with
Article Thirteen hereof;
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(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes;
(h) to amend this Indenture to delete Section 13.07(a) in its
entirety; or
(i) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder.
Notwithstanding the above, the Trustee and the Company may not make
any change that adversely affects the legal rights of any Holders hereunder. The
Company shall be required to deliver to the Trustee an Officers' Certificate
stating that any such change under Section 9.01(a) or (i) of the preceding
sentence does not adversely affect the rights of any Holder.
Section 9.02. With Consent of Holders.
Subject to Section 5.08, the Company, when authorized by its Board
of Directors, and the Trustee may amend or supplement this Indenture or the
Notes with the written consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Notes (including consents obtained
in connection with a tender offer or exchange offer for the Notes), and the
Holders of not less than a majority in aggregate principal amount of the
Outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for the Notes) by written notice to the Trustee may waive any
Existing Default or Event of Default or compliance by the Company with any
provision of this Indenture or the Notes.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 5.13, may not:
(i) reduce the principal amount of the Notes whose Holders must
consent to an amendment, supplement or waiver;
(ii) reduce the principal or change the fixed maturity of any Note,
or alter the provisions with respect to the redemption or repurchase of
the Notes in a manner adverse to the Holders of the Notes;
(iii) reduce the rate of or change the time for payment of interest
on any Notes;
(iv) waive a Default or Event of Default in the payment of principal
of, premium, if any, or interest on the Notes
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(except that Holders of at least a majority in aggregate principal amount
of the then outstanding Notes may (a) rescind an acceleration of the Notes
that resulted from a non-payment default, and (b) waive the payment
default that resulted from such acceleration);
(v) make any Note payable in money other than that stated in the
Notes;
(vi) modify any of the provisions of Section 5.08 or 5.13;
(vii) modify or change any of the provisions relating to
subordination of the Notes in Article Fourteen in a manner adverse to the
Holders of the Notes; or
(viii) waive a redemption payment with respect to any Note.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders of each Note affected
thereby, with a copy to the Trustee, a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any supplemental indenture.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment of or supplement to this Indenture or the Notes
shall comply with the TIA as then in effect if this Indenture shall then be
qualified under the TIA.
Section 9.04. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of that
Note or portion of that Note that evidences the same debt as the consenting
Holder's Note, even if notation of the consent is not made on any note. Subject
to the following paragraph, any such Holder or subsequent Holder may revoke the
consent as to such Holder's Note or portion of such Note by notice to the
Trustee or the Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Notes have
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consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
sentence of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to consent to such amendment, supplement or waiver or to
revoke any consent previously given, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder of Notes, unless it makes a change described in any of clauses
(i) through (ix) of Section 9.02. In that case the amendment, supplement or
waiver shall bind each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note.
Section 9.05. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note,
the Trustee shall (in accordance with the specific direction of the Company)
request the Holder of the Note to deliver it to the Trustee. The Trustee shall
(in accordance with the specific direction of the Company) place an appropriate
notation on the Note about the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for the Note shall issue and the Trustee shall authenticate a new Note
that reflects the changed terms. Failure to make the appropriate notation or
issue a new Note shall not affect the validity and effect of such amendment,
supplement or waiver.
Section 9.06. Trustee May Sign Amendments, etc.
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article Nine if the amendment, supplement or waiver
does not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may, but need not, sign it. In signing or
refusing to sign such amendment, supplement or waiver, the Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver is authorized or permitted by this Indenture,
that it is not inconsistent herewith and that it
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will be valid and binding upon the Company in accordance with its terms.
ARTICLE TEN
COVENANTS
Section 10.01. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of, premium,
if any, and interest on the Notes in accordance with the terms of the Notes and
this Indenture.
Section 10.02. Maintenance of Office or Agency.
The Company will maintain in The City of New York, an office or
agency where Notes may be presented or surrendered for payment, where Notes and
the Guarantees may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Company or any Guarantor in respect of
the Notes, the Guarantees and this Indenture may be served. The office of the
Trustee shall be such office or agency of the Company, unless the Company shall
designate and maintain some other office or agency for one or more of such
purposes. The Company will give prompt written notice to the Trustee of any
change in the location of any such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Notes and
the Guarantees may be presented or surrendered for any or all such purposes, and
may from time to time rescind such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan in The
City of New York for such purposes. The Company will give prompt written notice
to the Trustee of any such designation or rescission and any change in the
location of any such other office or agency.
Section 10.03. Money for Note Payments To Be Held in Trust.
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If the Company shall at any time act as its own Paying Agent, the
Company will, on or before each due date of the principal of, premium, if any,
or interest on any of the Notes, segregate and hold in trust for the benefit of
the Holders entitled thereto a sum sufficient to pay the principal, premium, if
any, or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided, and will promptly notify the
Trustee of its action or failure so to act.
If the Company is not acting as Paying Agent, the Company will, on
or before each due date of the principal of, premium, if any, or interest on any
Notes, deposit with a Paying Agent a sum in same day funds sufficient to pay the
principal, premium, if any, or interest so becoming due, such sum to be held in
trust for the benefit of the Holders entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of such action or any failure so to act.
If the Company is not acting as Paying Agent, the Company will cause
each Paying Agent other than the Trustee to execute and deliver to the Trustee
an instrument in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this Section 10.03, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Notes in trust for the benefit of the
Holders entitled thereto until such sums shall be paid to such Holders or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company (or any
other obligor upon the Notes) in the making of any payment of principal
of, premium, if any, or interest on the Notes;
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture relating to the duties, rights and
liabilities of such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which
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such sums were held by the Company or such Paying Agent; and, upon such payment
by any Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Note and remaining unclaimed for two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company upon receipt of a Company Request therefor, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such Note
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, shall at the
expense of the Company cause to be published once, in The New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
Section 10.04. Existence.
Subject to Article Eight, each of the Company and each Guarantor
will do or cause to be done all things necessary to and will cause each of its
Restricted Subsidiaries to preserve and keep in full force and effect its
corporate existence and the corporate existence of each of the Restricted
Subsidiaries, and the rights (charter and statutory), licenses and franchises of
the Company and each of the Restricted Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company, the Guarantors
and their respective Restricted Subsidiaries as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders; provided,
further, however, that the foregoing shall not prohibit a sale, transfer or
conveyance of a Restricted Subsidiary of the Company or any of its assets or
Capital Stock in compliance with the terms of this Indenture.
Section 10.05. Payment of Taxes and Other Claims.
The Company and each Guarantor shall pay or discharge or cause to be
paid or discharged, before the same shall become delinquent, (a) all taxes,
assessments and governmental charges
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levied or imposed (i) upon such person or any of its Subsidiaries or (ii) upon
the income, profits or property of such person or any of its Subsidiaries and
(b) all lawful claims for labor, materials and supplies, which, if unpaid, might
by law become a Lien upon the property of such person or any of its
Subsidiaries; provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings properly instituted and diligently conducted.
Section 10.06. Maintenance of Properties.
The Company and each Guarantor shall, and shall cause each of their
respective Restricted Subsidiaries to, cause all properties owned by the Company
or the Restricted Subsidiaries or used or held for use in the conduct of its
business or the business of the Restricted Subsidiaries to be maintained and
kept in good condition, repair and working order (reasonable wear and tear
excepted) and supplied with all necessary equipment and will cause to be made
all repairs, renewals, replacements, betterments and improvements thereof, all
as shall be reasonably necessary so that the business carried on in connection
therewith may be conducted at all times in the ordinary course; provided,
however, that nothing in this Section 10.06 shall prevent the Company, any
Guarantor or any of their respective Subsidiaries from discontinuing the
operation and maintenance of any of such properties if (x) such discontinuance
is, in the judgment of the Company, the Guarantor, or the Restricted Subsidiary,
desirable in the conduct of its businesses or (y) if such discontinuance or
disposal is not materially adverse to either the Company, the Guarantors and
their respective Restricted Subsidiaries taken as a whole or the ability of the
Company and the Guarantors taken as a whole to otherwise satisfy its obligations
hereunder.
Section 10.07. Insurance.
The Company will at all times keep all of its and the Restricted
Subsidiaries' properties which are of an insurable nature insured with insurers,
believed by the Company in good faith to be financially sound and responsible,
against loss or damage to the extent that property of similar character is
usually so insured by corporations similarly situated and owning like properties
(which may include self-insurance, if reasonable and in comparable form to that
maintained by companies similarly situated).
Section 10.08. Compliance Certificate.
(a) The Company will deliver to the Trustee within 60 days after the
end of each of the Company's first three fiscal
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quarters and within 90 days after the end of each of the Company's fiscal years
an Officers' Certificate stating whether or not the signers know of any Default
or Event of Default by the Company, the Guarantors, or any Restricted Subsidiary
that occurred during such fiscal period. If they do know of such a Default or
Event of Default, the certificate shall describe any such Default or Event of
Default and its status. The first certificate to be delivered pursuant to this
Section 10.08(a) shall be for the first full fiscal quarter of the Company
beginning after the Issue Date. The Company shall also deliver a certificate to
the Trustee at least annually from the chief financial officer (or if the
Company does not have a chief financial officer, the Company's principal
executive, financial or accounting officer) of the Company as to his or her
knowledge of the compliance of the Company, the Guarantors and the Restricted
Subsidiaries with all conditions and covenants under this Indenture and whether
any Default or Event of Default has occurred, such compliance to be determined
without regard to any period of grace or requirement of notice provided herein.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the Company shall use
its reasonable best efforts to deliver to the Trustee within 90 days after the
end of each fiscal year a written statement by the Company's independent
certified public accountants (who shall be a firm of established national
reputation) stating (A) that nothing has come to their attention which would
lead them to believe that the Company has violated any provisions of this
Article 10 or Article 8 of this Indenture, or if any such violation has
occurred, specifying the nature and period of existence thereof, and (B)
whether, in connection with their audit examination, any Default or Event of
Default under this Indenture has come to their attention and, if such a Default
or Event of Default has come to their attention, specifying the nature and
period of existence thereof; provided, however, that, without any restriction as
to the scope of the audit examination, such independent certified public
accountants shall not be liable by reason of any failure to obtain knowledge of
any such Default or Event of Default that would not be disclosed in the course
of an audit examination conducted in accordance with GAAP.
(c) The Company will deliver to the Trustee as soon as possible, and
in any event within 10 days after the Company becomes aware of the occurrence of
any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company or the applicable
Guarantor, as the case may be, is taking or proposes to take with respect
thereto.
Section 10.09. Provision of Financial Statements and Reports.
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Whether or not the Company is then subject to Section 13(a) or 15(d)
of the Exchange Act, the Company will file with the Commission (unless such
filing is not permitted under the Exchange Act), so long as the Notes are
outstanding, the annual reports, quarterly reports and other periodic reports
which the Company would have been required to file with the Commission pursuant
to such Section 13(a) or 15(d) if the Company were so subject, and such
documents shall be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Company would have been required so
to file such documents if the Company were so subject. The Company will also in
any event (i) within 15 days of each Required Filing Date, (a) transmit or cause
to be transmitted by mail to all Holders of Notes, as their names and addresses
appear in the Note register, without cost to such Holders, and (b) file with the
Trustee copies of the annual reports, quarterly reports and other periodic
reports which the Company would have been required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act if the Company were
subject to such Sections and (ii) if filing such documents by the Company with
the Commission is prohibited under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective holder at the Company's cost. The
Company also shall comply with the other provisions of TIA ss. 314(a). In
addition, to the extent applicable, the Company shall cause its annual reports
to stockholders and any quarterly or other financial reports furnished to
stockholders generally to be filed with the Trustee and mailed, no later than
the date such materials are mailed or made available to the Company's
stockholders, to the Holders at their addresses as set forth in the register of
securities maintained by the Note Registrar. Additionally, the Company shall
deliver to the Trustee, on March 31 of each year during which the Notes are
outstanding a statement regarding compliance with the terms of this Indenture.
In addition, the Company, upon becoming aware of any Default or Event of
Default, shall deliver to the Trustee a statement specifying such Default or
Event of Default.
Section 10.10. Future Guarantors.
The Company and each Guarantor shall cause each Restricted
Subsidiary of the Company (other than any Foreign Subsidiary) which, after the
date of this Indenture (if not then a Guarantor), becomes a Restricted
Subsidiary to execute and deliver an indenture supplemental to this Indenture
and thereby become a Guarantor which shall be bound by the Guarantee of the
Notes in the form set forth in Exhibit E to this Indenture (without such future
Guarantor being required to execute and deliver the Guarantee endorsed on the
Notes).
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Section 10.11. Limitation on Incurrence of Indebtedness.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, create, incur, assume or directly or indirectly guarantee or in
any other manner become directly or indirectly liable for (collectively, to
"incur") any Indebtedness (including any Acquired Debt), except that the Company
and any Guarantor may incur Indebtedness if, at the time of, and immediately
after giving pro forma effect to, such incurrence of Indebtedness, the
Consolidated Cash Flow Coverage Ratio of the Company for the most recently ended
four fiscal quarters for which financial statements are available would be at
least (i) 2.0 to 1.0 until October 15, 1999 and (ii) 2.25 to 1.0 thereafter.
(b) The foregoing limitations will not apply to the incurrence of
any of the following (collectively, "Permitted Indebtedness"), each of which
shall be given independent effect:
(i) Indebtedness of the Company and the Guarantors arising under
the Amended and Restated Credit Agreement not to exceed in
outstanding principal amount the greater of (a) $90.0 million
at any time outstanding or (b) the sum of (x) 80% of the
consolidated book value of the net accounts receivable of the
Person Incurring such Indebtedness and its Restricted
Subsidiaries and (y) 50% of the consolidated book value of the
inventory of the Person Incurring such Indebtedness and its
Restricted Subsidiaries, in each case determined in accordance
with GAAP;
(ii) Indebtedness of the Company and the Guarantors represented by
the Notes and the Guarantees;
(iii) Indebtedness of the Company and the Guarantors represented by
the Exchange Notes;
(iv) Indebtedness of the Company or any Restricted Subsidiaries
which is outstanding on the Issue Date ("Existing
Indebtedness");
(v) Indebtedness owed by any Restricted Subsidiary to the Company
or to another Restricted Subsidiary or owed by the Company to
any Restricted Subsidiary; provided, however, that any such
Indebtedness shall be at all times held by a Person which is
either the Company or a Restricted Subsidiary of the Company
(provided that such Indebtedness may be pledged or otherwise
assigned to the holders of Senior Bank Debt); provided,
further, however, that
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upon either (a) the transfer or other disposition of any such
Indebtedness to a Person other than the Company or another
Restricted Subsidiary or (b) the sale, lease, transfer or
other disposition of shares of Capital Stock (including by
consolidation or merger) of any such Restricted Subsidiary to
a Person other than the Company or another Restricted
Subsidiary, the incurrence of such Indebtedness shall be
deemed to be an incurrence that is not permitted by this
clause (v);
(vi) Indebtedness of the Company or any Restricted Subsidiary
arising with respect to Interest Rate Agreement Obligations
and Currency Agreement Obligations incurred for the purpose of
fixing or hedging interest rate risk or currency risk with
respect to any fixed or floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding or
any receivable or liability the payment of which is determined
by reference to a foreign currency; provided in no event shall
any Restricted Subsidiary incur Indebtedness under any
Interest Rate Agreement Obligations or any Currency Agreement
Obligations under this clause (vi) relating to Indebtedness or
obligations of the Company;
(vii) Indebtedness represented by performance, completion,
guarantee, surety and similar bonds provided by the Company or
any Restricted Subsidiary in the ordinary course of business
consistent with past practice;
(viii) any Indebtedness incurred in connection with or given in
exchange for the renewal, extension, substitution, refunding,
defeasance, refinancing or replacement (a "refinancing") of
any Existing Indebtedness or any Indebtedness described in
clauses (ii) and (iii) above or any Indebtedness issued after
the Issue Date and not incurred in violation of the Indenture
("Refinancing Indebtedness"); provided, however, that (a) the
principal amount of such Refinancing Indebtedness shall not
exceed the principal amount (or accrued amount, if less) of
the Indebtedness so refinanced (plus the premiums paid in
connection therewith and the reasonable expenses incurred in
connection therewith); (b) with respect to Refinancing
Indebtedness of any Indebtedness other than Senior Debt, if
the Weighted Average Life to Maturity of
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the Indebtedness being refinanced is equal to or greater than
the Weighted Average Life to Maturity of the Notes the
Refinancing Indebtedness shall have a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to
Maturity of the Notes; (c) with respect to Refinancing
Indebtedness other than Senior Debt incurred by the Company,
such Refinancing Indebtedness shall rank no more senior than,
and shall be at least as subordinated in right of payment to
the Notes as, the Indebtedness being refinanced; and (d) the
obligor on such Refinancing Indebtedness shall be the obligor
on the Indebtedness being refinanced or the Company;
(ix) Indebtedness of the Company or any Restricted Subsidiary (a)
representing Capitalized Lease Obligations and (b) in respect
of Purchase Money Obligations for property acquired in the
ordinary course of business, which taken together do not
exceed $10.0 million in aggregate amount at any time
outstanding;
(x) Indebtedness of Foreign Subsidiaries of the Company not to
exceed a principal amount outstanding at any time of $20.0
million in the aggregate for all Foreign Subsidiaries, to be
used for working capital, capital expenditures, joint
ventures, acquisitions and other general corporate purposes;
and
(xi) Indebtedness (including Acquired Debt) of the Company or any
Restricted Subsidiary in addition to that described in clauses
(i) through (x) above, and any renewals, extensions,
substitutions, refinancings or replacements of such
Indebtedness, so long as the aggregate principal amount of all
such Indebtedness incurred pursuant to this clause (xi) does
not exceed $10.0 million at any one time outstanding.
(c) Indebtedness of any Person which is outstanding at the time such
Person becomes a Restricted Subsidiary or is merged with or into or consolidated
with the Company or a Restricted Subsidiary shall be deemed to have been
incurred at the time such Person becomes a Restricted Subsidiary or is merged
with or into or consolidated with the Company or a Restricted Subsidiary, and
Indebtedness which is assumed at the time of the acquisition of any asset shall
be deemed to have been incurred at the time of such acquisition.
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Section 10.12. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, make any Restricted Payment, unless at
the time of and immediately after giving effect to the proposed Restricted
Payment (with the value of any such Restricted Payment, if other than cash, to
be determined reasonably and in good faith by the Board of Directors of the
Company),
(i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(ii) the Company could incur at least $1.00 of additional
Indebtedness pursuant to Section 10.11(a); and
(iii) the aggregate amount of all Restricted Payments made after the
Issue Date shall not exceed the sum of (a) an amount equal to
50% of the Company's aggregate cumulative Consolidated Net
Income accrued on a cumulative basis during the period
(treated as one accounting period) beginning on October 1,
1996 and ending on the last day of the fiscal quarter of the
Company immediately preceding the date of such proposed
Restricted Payment (or if such aggregate cumulative
Consolidated Net Income for such period shall be a deficit,
minus 100% of such deficit) (treating such period as a single
accounting period), plus (b) the aggregate amount ---- of all
net cash proceeds (other than proceeds from the Cash Equity
Investment) received since the Issue Date by the Company from
(x) the issuance and sale (other than to a Restricted
Subsidiary) of Capital Stock (other than Disqualified Stock),
(y) the issuance to a Person who is not a Subsidiary of the
Company of any options, warrants or other rights to acquire
Capital Stock of the Company (in each case, exclusive of any
Disqualified Stock or any options, warrants or other rights
that are redeemable at the option of the holder, or are
required to be redeemed, prior to the Stated Maturity of the
Notes) and (z) the issuance and sale by the Company after the
Issue Date of Disqualified Stock or debt securities that have
been converted into or exchanged for Capital Stock of the
Company (other than Disqualified Stock), in each case to the
extent that such proceeds are not used to redeem, repurchase,
retire
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or otherwise acquire Capital Stock or any Indebtedness of the
Company or make any Restricted Investment, pursuant to clauses
(ii) or (iv) of Section 10.12(b) below, plus (c) the amount of
the net reduction in Investments by the Company in
Unrestricted Subsidiaries resulting from (x) the payment of
dividends or the repayment in cash of the principal of loans
or the cash return on any Investment, in each case to the
extent received by the Company or any Restricted Subsidiary of
the Company from Unrestricted Subsidiaries, (y) the release or
extinguishment of any guarantee of Indebtedness of any
Unrestricted Subsidiary, and (z) the redesignation of
Unrestricted Subsidiaries as Restricted Subsidiaries of the
Company (valued as provided in the definition of
"Investment"), such aggregate amount of the net reduction in
Investments not to exceed in the case of any Unrestricted
Subsidiaries the amount of Restricted Investments previously
made by the Company or any Restricted Subsidiary of the
Company in such Unrestricted Subsidiary, which amount was
included in the calculation of the amount of Restricted
Payments, plus (d) to the extent that any Restricted
Investment that was made after the Issue Date is sold for cash
or otherwise liquidated or repaid for cash, the amount of cash
proceeds received with respect to such Restricted Investment,
net of taxes and the cost of disposition, not to exceed the
amount of Restricted Investments made after the Issue Date.
For purposes of this covenant, the aggregate amount of Restricted
Investments made by the Company and its Restricted Subsidiaries after the date
of the Indenture shall equal the aggregate gross amount of such Restricted
Investments, less reductions in connection with the write-down of any portion of
such Restricted Investments to the extent deducted from the Consolidated Net
Income of the Company.
(b) The provisions of Section 10.12(a) will not prohibit, so long as
there is no Default or Event of Default continuing, the following actions
(collectively, "Permitted Payments"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such declaration date such payment
would have been permitted under this Indenture and such
payment shall be deemed to have been paid on such date of
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declaration for purposes of clause (iii) of the preceding
paragraph;
(ii) the redemption, repurchase, retirement or other acquisition of
any Capital Stock or any Indebtedness of the Company that is
subordinated in right of payment to the Notes in exchange for,
or out of the proceeds of, the substantially concurrent sale
(other than to a Restricted Subsidiary) of Capital Stock of
the Company (other than any Disqualified Stock);
(iii) any purchase or defeasance of Subordinated Indebtedness to the
extent required upon a Change of Control or Asset Sale by this
Indenture or other agreement or instrument pursuant to which
such Subordinated Indebtedness was issued, but only if the
Company (x) in the case of a Change of Control, has complied
with its obligations under the provisions described under
Section 10.15 or (y) in the case of an Asset Sale has applied
the Net Cash Proceeds from such Asset Sale in accordance with
the provisions of Section 10.14;
(iv) any Restricted Investment made with the proceeds of the
substantially concurrent sale of Capital Stock (other than
Disqualified Stock);
(v) Restricted Investments in an amount such that the sum of the
aggregate amount of Restricted Investments made pursuant to
this clause (v) after the Issue Date and outstanding (net of
any returns in cash thereof or cash received in liquidation or
on disposition thereof) made pursuant to this clause (v) does
not exceed at any time $15.0 million;
(vi) the repurchase of Capital Stock of the Company (including
options, warrants or other rights to acquire such Capital
Stock) from departing or deceased directors, officers or
employees of the Company or its Subsidiaries pursuant to the
terms of an employee benefit plan or employee agreement;
provided that the aggregate amount of all such repurchases
shall not exceed $1.5 million in any fiscal year, provided
that the Company may carry forward up to $1.0 million of the
unused portion in any fiscal year to the next fiscal year, and
provided, further, that such payments shall not
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exceed $2.5 million per annum in any subsequent fiscal year.
(vii) the payment of cash dividends required to be made on the
Series A Redeemable Preferred Stock outstanding as of the
Issue Date and the repurchase or redemption of such stock at a
price not to exceed 100% of the liquidation value plus accrued
dividends; and
(viii) Restricted Payments (other than a dividend or distribution
declared on any Capital Stock of the Company or a payment to
purchase, redeem or otherwise acquire or retire for value
Capital Stock of the Company) not to exceed $2.5 million in
the aggregate.
For purposes of clause (iii) of Section 10.12(a) above, Permitted
Payments made pursuant to clauses (i), (v), (vi) and (vii) (only with respect to
cash dividends paid with respect to Series A Redeemable Preferred Stock) of the
immediately preceding paragraph shall be included (only with respect to clause
(i), as of the date of declaration) as Restricted Payments made since the Issue
Date.
Section 10.13. Limitations on Transactions with Affiliates.
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services) with any Affiliate
of the Company (other than the Company or a Restricted Subsidiary) (each an
"Affiliate Transaction"), unless (1) such transaction or series of transactions
is on terms that are no less favorable to the Company or such Restricted
Subsidiary, as the case may be, than would be available in a comparable
transaction in arm's-length dealings with an unrelated third party and (2) the
Company delivers to the Trustee (a) with respect to any transaction or series of
transactions involving aggregate payments in excess of $1.0 million, an
Officers' Certificate certifying that such transaction or series of related
transactions complies with clause (1) above and (b) with respect to any
transaction or series of transactions involving aggregate payments in excess of
$5 million, an Officer's Certificate certifying that such transaction or series
of related transactions has been approved by a majority of the members of the
Board of Directors of the Company and evidenced by a resolution of the Board of
Directors set forth in an Officer's Certificate, and (c) with respect to any
transaction or series of transactions
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involving aggregate payments in excess of $10.0 million, an opinion as to the
fairness to the Company from a financial point of view issued by an investment
banking firm, accounting firm or appraisal firm of national standing.
Notwithstanding the foregoing, this covenant will not apply to (A)
employment agreements or compensation or employee benefit arrangements with any
officer, director or employee of the Company entered into in the ordinary course
of business (including customary benefits thereunder and including reimbursement
or advancement of out of pocket expenses, loans to officers, directors and
employees in the ordinary course of business and director's and officer's
liability insurance), (ii) any transaction entered into by or among the Company
or one of its Restricted Subsidiaries with one or more Restricted Subsidiaries
of the Company, (iii) any Restricted Payment not prohibited by Section 10.12
hereof, (iv) transactions permitted by, and complying with, the provisions of
Section 8.01, (v) any sale or issuance of Capital Stock (other than Disqualified
Stock) of the Company and (vi) the grant or performance of registration rights
with respect to securities of the Company.
Section 10.14. Limitation on Asset Sales.
The Company will not, and will not permit any Restricted Subsidiary
to, make any Asset Sale unless (a) the Company or such Restricted Subsidiary, as
the case may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets or other property sold or disposed
of in the Asset Sale and (ii) at least 75% of such consideration consists of
either cash or Cash Equivalents; provided, however, that, at the option of the
Company, clause (ii) shall not be applicable to Asset Sales (or portions of
Asset Sales) that, in the aggregate from the Issue Date, do not involve assets
representing less than 5% of the Consolidated Total Assets of the Company as of
the last fiscal quarter prior to the execution of the agreement for such Asset
Sale. For purposes of this Section 10.14 "cash" shall include the amount of any
Indebtedness (other than any Indebtedness that is by its terms subordinated to
the Notes) of the Company or such Restricted Subsidiary as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto that is assumed by the transferee of any such assets or other
property in such Asset Sale or is no longer the liability of the Company or any
Restricted Subsidiary (and excluding any liabilities that are incurred in
connection with or in anticipation of such Asset Sale), but only to the extent
that such assumption is effected on a basis under which there is no further
recourse to the Company or any of the Restricted Subsidiaries with respect to
such liabilities, and (y) any securities, notes or other obligations received by
the Company or any such Restricted Subsidiary in connection with such
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Asset Sale that are converted by the Company or such Restricted Subsidiary into
cash within 60 days of receipt shall be deemed to be cash for purposes of this
provision.
Within 365 days after any Asset Sale, the Company may elect to apply
the Net Proceeds from such Asset Sale to (a) permanently reduce any Senior Debt
of the Company and/or (b) make an investment in, or acquire assets and
properties that will be used in the business of the Company and the Restricted
Subsidiaries existing on the Issue Date or in businesses reasonably related
thereto. Pending the final application of any such Net Proceeds, the Company may
temporarily reduce Indebtedness or temporarily invest such Net Proceeds in cash
or Cash Equivalents. Any Net Proceeds from an Asset Sale not applied or invested
as provided in the first sentence of this paragraph within 365 days of such
Asset Sale will be deemed to constitute "Excess Proceeds."
Each date on which the aggregate amount of Excess Proceeds in
respect of which an Asset Sale Offer has not been made exceeds $10,000,000 shall
be deemed an "Asset Sale Offer Trigger Date". As soon as practicable, but in no
event later than 20 business days after each Asset Sale Offer Trigger Date the
Company shall commence an offer (an "Asset Sale Offer") to purchase the maximum
principal amount of Notes and other Indebtedness of the Company that ranks pari
passu in right of payment with the Notes (to the extent required by the
instrument governing such other Indebtedness) that may be purchased out of the
Excess Proceeds. Any Notes and other Indebtedness to be purchased pursuant to an
Asset Sale Offer shall be purchased pro rata based on the aggregate principal
amount of Notes and all such other Indebtedness outstanding; and all such Notes
shall be purchased at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase. To the extent that any Excess Proceeds remain after completion of
an Asset Sale Offer, the Company may use the remaining amount for general
corporate purposes otherwise permitted by this Indenture. Upon the consummation
of any Asset Sale Offer, the amount of Excess Proceeds shall be deemed to be
reset to zero.
Notice of an Asset Sale Offer shall be prepared and mailed by the
Company with a copy to the Trustee not later than the 20th business day after
the related Asset Sale Offer Trigger Date to each Holder of Notes at such
Holder's registered address, stating:
(i) that an Asset Sale Offer Trigger Date has occurred and that the
Company is offering to purchase the maximum principal amount of Notes that
may be purchased out of the Excess Proceeds to the extent to be applied to
an offer to purchase Notes (as provided in the immediately preceding
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paragraph), at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
date of the purchase (the "Asset Sale Offer Purchase Date"), which shall
be a Business Day, specified in such notice, that is not earlier than 30
days or later than 60 days from the date such notice is mailed;
(ii) the amount of accrued and unpaid interest, if any, as of the
Asset Sale Offer Purchase Date;
(iii) that any Note not tendered will continue to accrue interest in
accordance with the terms thereof;
(iv) that, unless the Company defaults in the payment of the
purchase price for the Notes payable pursuant to the Asset Sale Offer, any
Notes accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest after the Asset Sale Offer Purchase Date;
(v) that Holders electing to have Notes purchased pursuant to an
Asset Sale Offer will be required to surrender their Notes to the Paying
Agent at the address specified in the notice prior to 5:00 p.m., New York
City time, on the third Business Day prior to the Asset Sale Purchase Date
with the "Option of Holder to Elect Purchase" on the reverse thereof
completed and must complete any form letter of transmittal proposed by the
Company (which letter must be completed correctly by such Holder) and
which is acceptable to the Trustee and the Paying Agent;
(vi) that Holders of Notes will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York
City time, on the third Business Day prior to the Asset Sale Offer
Purchase Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of Notes the Holder
delivered for purchase, the Note certificate number (if any) and a
statement that such Holder is withdrawing its election to have such Notes
purchased;
(vii) that Holders whose Notes are purchased only in part will be
issued Notes equal in principal amount to the unpurchased portion of the
Notes surrendered;
(viii) the instructions that Holders must follow in order to tender
their Notes; and
(ix) information concerning the business of the Company, the most
recent annual and quarterly reports of the Company filed with the SEC
pursuant to the Exchange Act (or, if the
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Company is not then required to file any such reports with the SEC, the
comparable reports prepared pursuant to Section 10.09), a description of
material developments in the Company's business, information with respect
to pro forma historical financial information after giving effect to such
Asset Sale and such other information concerning the circumstances and
relevant facts regarding such Asset Sale and Asset Sale Offer as would be
material to a Holder of Notes in connection with the decision of such
Holder as to whether or not it should tender Notes pursuant to the Asset
Sale Offer.
On the Asset Sale Offer Purchase Date, the Company will (i) accept
for payment the maximum principal amount of Notes or portions thereof tendered
pursuant to the Asset Sale Offer that can be purchased out of Excess Proceeds
from such Asset Sale that are to be applied to an Asset Sale Offer (to the
extent provided in the second preceding paragraph), (ii) deposit with the Paying
Agent an amount in cash equal to the aggregate purchase price of all Notes or
portions thereof accepted for payment and any accrued and unpaid interest on
such Notes as of the Asset Sale Offer Purchase Date, and (iii) deliver or cause
to be delivered to the Trustee all Notes tendered pursuant to the Asset Sale
Offer. If less than all Notes tendered pursuant to the Asset Sale Offer are
accepted for payment by the Company for any reason consistent with this
Indenture, selection of the Notes to be purchased by the Company shall be in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
pro rata basis or by lot; provided, however, that Notes accepted for payment in
part shall only be purchased in integral multiples of $1,000. The Paying Agent
shall as promptly as practicable after the Asset Sale Offer Purchase Date mail
to each Holder of Notes or portions thereof accepted for payment an amount in
cash equal to the purchase price for such Notes plus any accrued and unpaid
interest thereon, and the Trustee shall promptly authenticate and mail to such
Holder of Notes accepted for payment in part a new Note equal in principal
amount to any unpurchased portion of the Notes, and any Note not accepted for
payment in whole or in part shall be promptly returned to the Holder of such
Note.
On and after an Asset Sale Offer Purchase Date, interest will cease
to accrue on the Notes or portions thereof accepted for payment, unless the
Company defaults in the payment of the purchase price therefor. The Company will
announce the results of the Asset Sale Offer on or as soon as practicable after
the Asset Sale Offer Purchase Date.
The Company will comply with the applicable tender offer rules,
including the requirements of Section 14(e) and Rule 14e-1 under the Exchange
Act, and all other applicable securities laws
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and regulations in connection with any Asset Sale Offer and will be deemed not
to be in violation of any of its covenants herein to the extent such compliance
is in conflict with such covenants.
Section 10.15. Change of Control.
Upon the occurrence of a Change of Control (the date of such
occurrence, the "Change of Control Date"), the Company shall make an offer to
purchase (a "Change of Control Offer"), and shall, subject to the provisions
described below, purchase, all or any portion (equal to $1,000 or an integral
multiple thereof) of the then outstanding Notes validly tendered at a purchase
price in cash (the "Change of Control Purchase Price") equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
Change of Control Purchase Date. The Company shall be required to purchase all
Notes properly tendered in the Change of Control Offer and not withdrawn.
Notice of a Change of Control Offer shall be prepared and mailed by
the Company not later than the 30th day after the Change of Control Date to the
Holders of Notes at their last registered addresses appearing on the Note
Register with a copy to the Trustee and the Paying Agent. The Offer shall remain
open from the time of mailing for at least 20 Business Days or such longer
period as may be required by law. The notice, which shall govern the terms of
the Change of Control Offer, shall include such disclosures as are required by
law and shall state:
(a) that the Change of Control has occurred and that such Holder has
the right to require the Company to purchase all or a portion (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes at a
purchase price in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any, to the date of
purchase, which shall be a Business Day, specified in such notice, that is
not earlier than 30 days or later than 60 days from the date such notice
is mailed (the "Change of Control Purchase Date");
(b) the amount of accrued and unpaid interest, if any, as of the
Change Control Purchase Date;
(c) that any Note not tendered for payment will continue to accrue
interest in accordance with the terms thereof;
(d) that, unless the Company defaults in the payment of the purchase
price for the Notes payable pursuant to the Change of Control Offer, any
Notes accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Purchase Date;
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(e) that Holders electing to have Notes purchased pursuant to a
Change of Control Offer will be required to surrender their Notes to the
Paying Agent at the address specified in the notice prior to 5:00 p.m.,
New York City time, on the third Business Day prior to the Change of
Control Purchase Date with the "Option of Holder to Elect Purchase" on the
reverse thereof completed and must complete any form letter of transmittal
proposed by the Company and be completed correctly by such Holder and be
acceptable to the Trustee and the Paying Agent;
(f) that Holders of Notes will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York
City time, on the third Business Day prior to the Change of Control
Purchase Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of Notes the Holder
delivered for purchase, the Note certificate number (if any) and a
statement that such Holder is withdrawing its election to have such Notes
purchased;
(g) that Holders whose Notes are purchased only in part will be
issued Notes equal in principal amount to the unpurchased portion of the
Notes surrendered;
(h) the instructions that Holders must follow in order to tender
their Notes; and
(i) such other information concerning the circumstances and relevant
facts regarding such Change of Control and Change of Control Offer.
On the Change of Control Purchase Date, the Company will (i) accept
for payment all Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent an amount in cash equal to the
aggregate purchase price of all Notes or portions thereof accepted for payment,
plus any accrued and unpaid interest on such Notes as of the Change of Control
Purchase Date, and (iii) deliver or cause to be delivered to the Trustee all
Notes tendered pursuant to the Change of Control Offer. The Paying Agent shall
as promptly as practicable after the Change of Control Purchase Date mail to
each Holder of Notes or portions thereof accepted for payment an amount in cash
equal to the purchase price for such Notes, plus any accrued and unpaid interest
thereon, and the Trustee shall promptly authenticate and mail to such Holders of
Notes accepted for payment in part a new Note equal in principal amount to any
unpurchased portion of the Note surrendered. Any Notes not so accepted in whole
or in part shall be promptly returned to the Holder thereof.
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On and after a Change of Control Purchase Date, interest will cease
to accrue on the Notes or portions thereof accepted for payment unless the
Company defaults in the payment of the purchase price therefor. The Company will
publicly announce the results of the Change of Control Offer as soon as
practicable after the Change of Control Purchase Date.
The Company will comply with the applicable tender offer rules,
including the requirements of Section 14(e) and Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable, in the event that a Change of Control
occurs and the Company is required to purchase Notes as described above and will
be deemed not to be in violation of any of its covenants herein to the extent
such compliance is in conflict with such covenants.
Section 10.16. Limitations on Liens Securing Certain Debt.
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Indebtedness that is pari passu with or subordinated in right of
payment to the Notes (other than Permitted Liens) on any asset of the Company or
any Restricted Subsidiary now owned or hereafter acquired, or any income or
profits therefrom, or assign or convey any right to receive income therefrom to
secure any Indebtedness, unless the Notes are equally and ratably secured
thereby.
Section 10.17. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause to suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distribution to the Company or any Restricted Subsidiary on its Capital Stock or
with respect to any other interest or participation in, or measured by, its
profits, or pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (b) make loans or advances to the Company or any other Restricted
Subsidiary, or (c) transfer any of its properties or assets to the Company or
any other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of (i) the Amended and Restated Credit Agreement or
any other Indebtedness as in effect on the Issue Date, and any amendments,
restatements, renewals, replacements or refinancings thereof; provided, however,
that such amendments, restatements, renewals, replacements or refinancings are
no more restrictive with respect to such dividend and other payment restrictions
than those
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contained in the Amended and Restated Credit Agreement (or, if more restrictive,
than those contained in this Indenture) immediately prior to any such amendment,
restatement, renewal, replacement or refinancing, (ii) applicable law, (iii) any
instrument governing Indebtedness or Capital Stock of an Acquired Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition); provided,
however, that such restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Acquired Person, (iv) by
reason of customary non-assignment provisions in leases entered into the
ordinary course of business and consistent with past practices, (v) Purchase
Money Indebtedness for property acquired in the ordinary course of business that
only impose restrictions on the property so acquired, (vi) an agreement for the
sale or disposition of the Capital Stock or assets of such Restricted
Subsidiary; provided, however, that such restriction is only applicable to such
Restricted Subsidiary or assets, as applicable, and such sale or disposition
otherwise is permitted under Section 10.14, (vii) Refinancing Indebtedness
permitted under this Indenture; provided, however, that the restrictions
contained in the agreements governing such Refinancing Indebtedness are no more
restrictive in the aggregate than those contained in the agreements governing
the Indebtedness being refinanced immediately prior to such refinancing, (viii)
this Indenture, the Notes and the Guarantees, (ix) arising or agreed to in the
ordinary course of business, not relating to any Indebtedness, and that do not
individually or in the aggregate, detract from the value of property or assets
of the Company or any Restricted Subsidiary in any manner material to the
Company or any Restricted Subsidiary, or (x) any instrument governing
Indebtedness of a Foreign Subsidiary permitted by the terms of the Indenture.
Nothing contained in this Section 10.17 shall prevent the Company or
any Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in Section 10.16 or (2) restricting the sale
or other disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Indebtedness of the Company or any of its
Restricted Subsidiaries.
Section 10.18. Limitation on Incurrence of Senior Subordinated
Indebtedness.
The Company will not, directly or indirectly, incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinated or junior in right of payment to any Senior Debt of the Company and
senior in any respect in right of payment to the Notes. For purposes of this
Section 10.18, no Indebtedness shall be deemed to be subordinated in right of
payment
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to any other Indebtedness by reason of the fact that such other Indebtedness is
secured by any Lien or is subject to a Guarantee.
Section 10.19. Designation of Unrestricted Subsidiaries.
The Company will not designate any Subsidiary of the Company (other
than a newly created Subsidiary in which no Investment has previously been made)
as an Unrestricted Subsidiary (a "Designation") unless:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(b) immediately after giving effect to such Designation the Company
would be able to incur $1.00 of Indebtedness pursuant to Section
10.11(a); and
(c) the Company would not be prohibited pursuant to the terms of this
Indenture from making an Investment at the time of Designation in an
amount (the "Designation Amount") equal to the Fair Market Value of
such Restricted Subsidiary on such date.
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section
10.12 for all purposes of this Indenture in the Designation Amount. Neither the
Company nor any Restricted Subsidiary shall at any time (x) provide credit
support for, or a guarantee of, any Indebtedness of any Unrestricted Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness); provided that the Company and its Restricted Subsidiaries may
pledge Capital Stock or Indebtedness of any Unrestricted Subsidiary on a
nonrecourse basis such that the pledgee has no claim whatsoever against the
Company other than to obtain such pledged property, (y) be directly or
indirectly liable for any Indebtedness of any Unrestricted Subsidiary.
The Company may not revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation"), unless:
(a) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation shall be deemed to
have been incurred at such time and shall have been permitted to be
incurred pursuant to this Indenture.
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All Designations and Revocations must be evidenced by Board
Resolutions delivered to the Trustee certifying compliance with the foregoing
provisions.
ARTICLE ELEVEN
REDEMPTION OF NOTES
Section 11.01. Optional and Special Redemption.
Optional Redemption. Except as provided below, the Notes are not
redeemable prior to October 15, 2001. Subject to earlier redemption in the
manner described in the next two succeeding paragraphs, the Notes will be
redeemable at the option of the Company, in whole at any time or in part, at any
time on or after October 15, 2001 at the Redemption Prices (expressed as
percentages of principal amount of the Notes) set forth below, plus in each case
accrued and unpaid interest, if any, to the Redemption Date, if redeemed during
the 12-month period beginning October 15 of the years indicated below:
Redemption
Year Price
---- -----
2001 105.312%
2002 103.541
2003 101.771
2004 and thereafter 100.000
In addition, at any time prior to October 15, 1999, the Company may,
at its option, redeem up to 35% of the aggregate principal amount of Notes
originally issued with the net proceeds of one or more Public Equity Offerings,
at 109.625% of the aggregate principal amount thereof plus accrued and unpaid
interest, if any, to the date of redemption; provided, however, that not less
than $81.25 million principal amount of the Notes is outstanding immediately
after giving effect to such redemption (other than any Notes owned by the
Company or any of its Affiliates) and such redemption is effected within 60 days
of such issuance or investment.
In addition, at any time prior to October 15, 2001, upon the
occurrence of a Change of Control, the Company may, at its option, redeem, all
but not less than all of the Notes, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium plus accrued and unpaid
interest, if any, to the date of redemption. Applicable Premium shall be set
forth in an Officer's Certificate of the Company furnished to the Trustee, upon
which the Trustee shall be entitled to conclusively rely and
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shall not be required to verify any calculations in respect thereof. Notice of
redemption of the Notes pursuant to this paragraph shall be mailed to holders of
the Notes not more than 60 days and not less than 30 days following the
occurrence of a Change of Control.
Section 11.02. Applicability of Article.
Redemption of Notes at the election of the Company as permitted or
required by any provision of this Indenture, shall be made in accordance with
such provision and this Article.
Section 11.03. Election To Redeem; Notice to Trustee.
The election of the Company to redeem any Notes pursuant to Section
11.01(a) shall be evidenced by a Board Resolution of the Company and an
Officers' Certificate. In case of any redemption at the election of the Company,
the Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice period shall be satisfactory to the Trustee),
notify the Trustee in writing of such Redemption Date and of the principal
amount of Notes to be redeemed.
Section 11.04. Selection of Notes To Be Redeemed.
In the event that less than all of the Notes are to be redeemed at
any time, selection of such Notes for redemption will be made by the Company in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not then listed on a
national securities exchange, on a pro rata basis or by lot or any other method
as the Trustee shall deem fair and appropriate; provided, however, that Notes
redeemed in part shall only be redeemed in integral multiples of $1,000;
provided, further, however, that any such redemption pursuant to the provisions
relating to a Public Equity Offering by the Company shall be made on a pro rata
basis or on as nearly a pro rata basis as practicable (subject to any procedures
of The Depository Trust Company or any other Depository). If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed and the Trustee
shall authenticate and mail to the holder of the original Note a new Note in
principal amount equal to the unredeemed portion of the original Note promptly
after the original Note has been canceled. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Notes shall relate, in the
case of any Note redeemed or to be redeemed
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only in part, to the portion of the principal amount of such Note which has been
or is to be redeemed.
Section 11.05. Notice of Redemption.
Notice of any optional or mandatory redemption shall be mailed by
first-class mail, postage prepaid, mailed at least 30 but not more than 60 days
before the Redemption Date, to each Holder of Notes to be redeemed at its
registered address.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if fewer than all outstanding Notes are to be redeemed, the
identification of the particular Notes to be redeemed;
(d) in the case of a Note to be redeemed in part, the principal
amount of such Note to be redeemed and that after the Redemption Date upon
surrender of such Note, a new Note or Notes in the aggregate principal
amount equal to the unredeemed portion thereof will be issued;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(f) that on the Redemption Date the Redemption Price will become due
and payable upon each such Note or portion thereof, and that (unless the
Company shall default in payment of the Redemption Price) interest thereon
shall cease to accrue on and after said date;
(g) the place or places where such Notes are to be surrendered for
payment of the Redemption Price;
(h) the CUSIP number, if any, relating to such Notes; and
(i) the paragraph of the Notes pursuant to which the Notes are being
redeemed.
Notice of redemption of Notes to be redeemed shall be given by the
Company or, at the Company's written request, by the Trustee in the name and at
the expense of the Company.
The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the
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Holder receives such notice. In any case, failure to give such notice by mail or
any defect in the notice to the Holder of any Note designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Note.
Section 11.06. Deposit of Redemption Price.
On or prior to 10:00 a.m., New York City time, on each Redemption
Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if
the Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 10.03) an amount of money in same day funds sufficient to
pay the Redemption Price of, and accrued interest on, all the Notes or portions
thereof which are to be redeemed on that date.
Section 11.07. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company shall default in the payment of the Redemption Price) such Notes shall
cease to bear interest. Upon surrender of any such Note for redemption in
accordance with said notice, such Note shall be paid by the Company at the
Redemption Price; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Notes, or one or more Predecessor Notes, registered as such on the
relevant Regular Record Dates according to the terms and the provisions of
Section 3.06.
On and after any Redemption Date, if money sufficient to pay the
Redemption Price of and accrued interest on Notes called for redemption shall
have been made available in accordance with Section 11.06, the Notes called for
redemption will cease to accrue interest and the only right of the Holders of
such Notes will be to receive payment of the Redemption Price of and subject to
the provision in the preceding paragraph, accrued and unpaid interest on such
Notes to the Redemption Date. If any Note called for redemption shall not be so
paid upon surrender thereof for redemption, the principal and premium, if any,
shall, until paid, bear interest from the Redemption Date at the rate then borne
by such Note.
Section 11.08. Notes Redeemed or Purchased in Part.
Any Note which is to be redeemed or purchased only in part shall be
surrendered to the Paying Agent at the office or agency maintained for such
purpose pursuant to Section 10.02 (with, if the Company, the Note Registrar or
the Trustee so requires, due
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endorsement by, or a written instrument of transfer in form satisfactory to, the
Company, the Note Registrar or the Trustee duly executed by the Holder thereof
or such Holder's attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Note without service charge, a new Note or Notes, of any authorized denomination
as requested by such Holder in aggregate principal amount equal to, and in
exchange for, the portion of the principal of the Note so surrendered that is
not redeemed or purchased.
ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 12.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of Notes herein
expressly provided for, the Company's obligations under Section 6.07 hereof, and
the Trustee's and Paying Agent's obligations under Section 4.06 hereof) and the
Trustee, on written demand of and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture,
when
(a) either
(i) all Notes theretofore authenticated and delivered (other than
Notes which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 3.05 hereof) have been delivered
to the Trustee for cancellation; or
(ii) all such Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee in trust for the
purpose an amount in United States dollars sufficient to pay and discharge
the entire Indebtedness on such Notes not theretofore delivered to the
Trustee for cancellation, for the principal of, premium, if any, and
interest to the date of such deposit;
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions precedent
herein provided for relating to the
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satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 6.07 and, if money
shall have been deposited with the Trustee pursuant to subclause (a)(ii) of this
Section 12.01 the obligations of the Trustee under Section 12.02, shall survive.
Section 12.02. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.03,
all money deposited with the Trustee pursuant to Section 12.01 shall be held in
trust and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal of, premium, if
any, and interest on the Notes for whose payment such money has been deposited
with the Trustee.
ARTICLE THIRTEEN
GUARANTEE OF NOTES
Section 13.01. Guarantee.
Subject to the provisions of this Article Thirteen, each Guarantor
hereby jointly and severally and fully and unconditionally guarantees to each
Holder of a Note authenticated and delivered by the Trustee and to the Trustee
and its successors and assigns, irrespective of (i) the validity and
enforceability of this Indenture, the Notes or the obligations of the Company or
any other Guarantors to the Holders or the Trustee hereunder or thereunder or
(ii) the absence of any action to enforce the same or any other circumstances
which might otherwise constitute a legal or equitable discharge or default of a
Guarantor, that: (a) the principal of, premium, if any, and interest on the
Notes will be duly and punctually paid in full when due, whether at maturity, by
acceleration or otherwise, and interest on the overdue principal and (to the
extent permitted by law) interest, if any, on the Notes and all other
obligations of the Company or the Guarantors to the Holders or the Trustee
hereunder or thereunder (including fees, expenses or other) and all other
Obligations on the Notes will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (b) in case of any extension
of time of payment or renewal of any Notes or any of such other Obligations with
respect to the Notes, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension
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or renewal, whether at Stated Maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed, or failing performance of any
other obligation of the Company to the Holders, for whatever reason, each
Guarantor will be obligated to pay, or to perform or cause the performance of,
the same immediately. An Event of Default under this Indenture or the Notes
shall constitute an event of default under this Guarantee, and shall entitle the
Holders of Notes to accelerate the obligations of the Guarantors hereunder in
the same manner and to the same extent as the obligations of the Company.
Each of the Guarantors hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any holder of the Notes with respect
to any provisions hereof or thereof, any release of any other Guarantor, the
recovery of any judgment against the Company, any action to enforce the same,
whether or not a Guarantee is affixed to any particular Note, or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each of the Guarantors hereby waives the benefit of
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenants that its Guarantee will not be discharged except by complete
performance of the obligations contained in the Notes, this Indenture and this
Guarantee. If any Holder or the Trustee is required by any court or otherwise to
return to the Company or to any Guarantor, or any custodian, trustee, liquidator
or other similar official acting in relation to the Company or such Guarantor,
any amount paid by the Company or such Guarantor to the Trustee or such Holder,
this Guarantee, to the extent theretofore discharged, shall be reinstated in
full force and effect. Each Guarantor further agrees that, as between it, on the
one hand, and the Holders of Notes and the Trustee, on the other hand, (a)
subject to this Article Thirteen, the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article Five hereof for the purposes of
this Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (b) in the event of any acceleration of such obligations as provided in
Article Five hereof, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the purpose of this
Guarantee.
This Guarantee shall remain in full force and effect and continue to
be effective should any petition be filed by or against the Company for
liquidation or reorganization, should the Company become insolvent or make an
assignment for the benefit of creditors
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or should a receiver or trustee be appointed for all or any significant part of
the Company's assets, and shall, to the fullest extent permitted by law,
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Notes are, pursuant to applicable law, rescinded
or reduced in amount, or must otherwise be restored or returned by any obligee
on the Notes, whether as a "voidable preference," "fraudulent transfer" or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Notes shall, to the fullest extent permitted by law, be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
No stockholder, officer, director, employer or incorporator, past,
present or future, or any Guarantor, as such, shall have any personal liability
under this Guarantee by reason of his, her or its status as such stockholder,
officer, director, employer or incorporator.
The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under this Guarantee.
Notwithstanding any of the foregoing, each Guarantor's liability
under this Section 13.01 shall be limited to the maximum amount that would not
result in such Guarantor's Guarantee under this Section 13.01 constituting a
fraudulent conveyance or fraudulent transfer under applicable law and, in the
case of Freedom Chemical Diamalt GmbH, the liability of the Guarantor shall be
limited at any time to the then maximum amount that would not result in a
depletion of such Guarantor's stated share capital ("Stammkapital") as stated in
the commercial register relating to such Guarantor.
Section 13.02. Execution and Delivery of Guarantee.
To further evidence the Guarantee set forth in Section 13.01, each
Guarantor hereby agrees that a notation of such Guarantee, substantially in the
form included in Exhibit E hereto, shall be endorsed on each Note authenticated
and delivered by the Trustee after such Guarantee is executed and executed by
either manual or facsimile signature of an Officer of each Guarantor. The
validity and enforceability of any Guarantee shall not be affected by the fact
that it is not affixed to any particular Note.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 13.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Guarantee.
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If an Officer of a Guarantor whose signature is on this Indenture or
a Note no longer holds that office at the time the Trustee authenticates such
Note or at any time thereafter, such Guarantor's Guarantee of such Note shall be
valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of the Guarantor.
Section 13.03. Additional Guarantors.
Any person may become a Guarantor by executing and delivering to the
Trustee (a) a supplemental indenture in form and substance satisfactory to the
Trustee, which subjects such person to the provisions of this Indenture as a
Guarantor, and (b) an Opinion of Counsel to the effect that such supplemental
indenture has been duly authorized and executed by such person and constitutes
the legal, valid, binding and enforceable obligation of such person (subject to
such customary exceptions concerning fraudulent conveyance laws, creditors'
rights and equitable principles as may be acceptable to the Trustee in its
discretion).
Section 13.04. Guarantee Obligations Subordinated to Guarantor
Senior Debt.
Each Guarantor covenants and agrees, and each Holder of a Note, by
its acceptance thereof, likewise covenants and agrees, that all payments
pursuant to the Guarantee made by or on behalf of such Guarantor are hereby
expressly made subordinate and subject in right of payment as provided in this
Article Thirteen to the prior payment in full in cash of all amounts payable
under all existing and future Guarantor Senior Debt of such Guarantor including
such Guarantor's guarantees of the Company's Obligations under the Amended and
Restated Credit Agreement.
This Section 13.04 and the following Sections 13.05 through 13.17 of
this Article Thirteen shall constitute a continuing offer to all persons who, in
reliance upon such provisions, become holders of, or continue to hold Guarantor
Senior Debt of any Guarantor and, to the extent set forth in Section 13.06(b),
holders of Designated Senior Debt; and such provisions are made for the benefit
of the holders of Guarantor Senior Debt of each Guarantor and, to the extent set
forth in Section 13.06(b), holders of Designated Senior Debt; and such holders
(to such extent) are made obligees hereunder and they or each of them may
enforce such provisions.
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Section 13.05. Payment Over of Proceeds upon Dissolution, etc., of a
Guarantor.
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to any Guarantor or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding-up of any Guarantor, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any assignment for the benefit
of creditors or any other marshalling of assets or liabilities of any Guarantor,
then and in any such event:
(1) the holders of all Guarantor Senior Debt of such Guarantor shall
be entitled to receive payment in full in cash or, as acceptable to the
holders of such Guarantor Senior Debt, in any other manner of all amounts
due on or in respect of all such Guarantor Senior Debt (including, in the
case of Obligations under the Amended and Restated Credit Agreement, and
related Currency and Interest Rate Agreement Obligations of such
Guarantor, any interest accruing subsequent to the filing of a petition
for bankruptcy at the rate provided for in the documentation governing
such Obligations under the Amended and Restated Credit Agreement, and
Interest Rate Agreement Obligations of such Guarantor, as the case may be,
whether or not such interest is an allowed claim under applicable law), or
provision shall be made for such payment, before the Holders of the Notes
are entitled to receive, pursuant to this Guarantee, any payment or
distribution of any kind or character by or on behalf of such Guarantor on
account of the Guarantor's Obligations under the Notes; and
(2) any payment or distribution of assets of such Guarantor of any
kind or character, whether in cash, property or securities, by set-off or
otherwise, to which the Holders or the Trustee would be entitled but for
the subordination provisions of this Article Thirteen shall be paid by the
liquidating trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of Guarantor Senior Debt of
such Guarantor or their representative or representatives or to the
trustee or trustees under any indenture under which any instruments
evidencing any of such Guarantor Senior Debt may have been issued, ratably
according to the aggregate amounts remaining unpaid on account of such
Guarantor Senior Debt held or represented by each, to the extent necessary
to make payment in full in cash of all such Guarantor Senior Debt
remaining
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unpaid, after giving effect to any concurrent payment or distribution to
the holders of such Guarantor Senior Debt; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section 13.05, the Trustee or the Holder of any Note shall have
received any payment or distribution of assets of such Guarantor of any
kind or character, whether in cash, property or securities, in respect of
any Obligations of such Guarantor under this Guarantee before all
Guarantor Senior Debt of such Guarantor is paid in full in cash or payment
thereof provided for, then and in such event such payment or distribution
shall be paid over or delivered forthwith to the Senior Representative for
application to the payment of all such Guarantor Senior Debt remaining
unpaid, to the extent necessary to pay all of such Guarantor Senior Debt
in full in cash, after giving effect to any concurrent payment or
distribution to or for the holders of such Guarantor Senior Debt. Any such
payment or distribution of assets received by the Trustee, which is
required to be paid over to the Senior Representative, will be held in
trust by the Trustee for the benefit of the holders of the Guarantor
Senior Debt.
Section 13.06. Suspension of Guarantee Obligations When Guarantor
Senior Debt in Default.
(a) Unless Section 13.05 shall be applicable, after the occurrence
of a Payment Default with respect to any Guarantor Senior Debt no payment or
distribution of any assets of such Guarantor of any kind or character shall be
made by or on behalf of such Guarantor on account of the Guarantor's Obligations
pursuant to the Notes or on account of the purchase, redemption, defeasance or
other acquisition of the Obligations pursuant to the Notes or on account of any
other Obligations of such Guarantor under this Guarantee unless and until such
Payment Default shall have been cured or waived or shall have ceased to exist or
the Guarantor Senior Debt as to which such Payment Default relates shall have
been discharged or paid in full in cash, after which, subject to Section 13.05
(if applicable), such Guarantor shall resume making any and all required
payments in respect of its Obligations under this Guarantee.
(b) Unless Section 13.05 shall be applicable, during any Payment
Blockage Period with respect to any Guarantor Senior Debt, no payment or
distribution of any assets of a Guarantor of any kind or character shall be made
by or on behalf of a Guarantor on account of the Guarantor's Obligations on the
Notes or on account of the purchase, redemption, defeasance or other acquisition
of the Guarantor's Obligations on the Notes or on account of any of the other
Obligations of such Guarantor under this Guarantee; provided that the foregoing
prohibition shall not apply unless such Payment
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Blockage Period has been instituted under Section 14.03(b) by a Senior
Representative acting for holders of Designated Senior Debt which also
constitutes Guarantor Senior Debt. Upon the termination of any Payment Blockage
Period, subject to Section 13.05 (if applicable), such Guarantor shall resume
making any and all required payments in respect of its Obligations under this
Guarantee.
(c) In the event that, notwithstanding the foregoing, the Trustee or
the Holder of any Note shall have received any payment from a Guarantor
prohibited by the foregoing provisions of this Section 13.06, then and in such
event such payment shall be paid over and delivered forthwith to the Senior
Representative initiating the Payment Blockage Period, in trust for distribution
to the holders of Guarantor Senior Debt or, if no amounts are then due in
respect of Guarantor Senior Debt, prompt return to the Guarantor, or as a court
of competent jurisdiction shall direct.
Section 13.07. Release of a Guarantor.
(a) Anything to the contrary notwithstanding, in the event that the
articles of incorporation of Freedom Chemical Diamalt are amended with the
result that Freedom Chemical Diamalt becomes classified as a controlled foreign
corporation under U.S. federal tax law, at the option of the Company, upon
written notice to the Trustee the Guarantee of Freedom Chemical Diamalt may be
amended to eliminate the guarantee of Freedom Chemical Diamalt in the form
existing on the Issue Date and to provide instead for the full and unconditional
guarantee by Freedom Chemical Diamalt of the Obligations of the other Guarantors
under their respective Guarantees.
(b) So long as no Event of Default shall have occurred and be
continuing upon the sale or disposition (whether by merger, stock purchase,
asset sale or otherwise) of a Guarantor (or all or substantially all of the
assets of any such Guarantor or 50% or more of the Capital Stock of any such
Guarantor) to an entity which is not a Subsidiary of the Company, which
transaction is otherwise in compliance with this Indenture, such Guarantor shall
be deemed released from all its Obligations under its Guarantee of the Notes;
provided, however, that any such termination shall occur only to the extent that
all Obligations of such Guarantor under all its Guarantees of, and under all of
its pledges of assets or other security interests which secure, any Indebtedness
of the Company shall also terminate upon such release, sale or transfer. Upon
the release of any Guarantor from its Guarantee pursuant to the provisions of
the Indenture, each other Guarantor not so released shall remain liable for the
full amount of principal of, and interest on, the Notes as and to the extent
provided in the Indenture.
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(c) The Trustee shall deliver an appropriate instrument evidencing
the release of a Guarantor upon receipt of a request of the Company accompanied
by an Officers' Certificate certifying as to the compliance with this Section
13.07. Any Guarantor not so released or the entity surviving such Guarantor, as
applicable, will remain or be liable under its Guarantee as provided in this
Article Thirteen.
The Trustee shall execute any documents reasonably requested by the
Company or a Guarantor in order to evidence the release of such Guarantor from
its obligations under its Guarantee endorsed on the Notes and under this Article
Thirteen.
Except as set forth in Articles Eight and Ten and this Section
13.07, nothing contained in this Indenture or in any of the Notes shall prevent
any consolidation or merger of a Guarantor with or into the Company or another
Guarantor or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety to the Company or another
Guarantor.
Section 13.08. Waiver of Subrogation.
Each Guarantor hereby irrevocably waives any claim or other rights
which it may now or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of such Guarantor's obligations
under this Guarantee and this Indenture, including, without limitation, any
right of subrogation, reimbursement, exoneration, indemnification, and any right
to participate in any claim or remedy of any Holder of Notes against the
Company, whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Company, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim or other rights. If any amount shall be paid to any Guarantor in
violation of the preceding sentence and the Notes shall not have been paid in
full, such amount shall have been deemed to have been paid to such Guarantor for
the benefit of, and held in trust for the benefit of, the Holders of the Notes,
and shall, subject to the subordination provisions of this Article Thirteen and
to Article Fourteen, forthwith be paid to the Trustee for the benefit of such
Holders to be credited and applied upon the Notes, whether matured or unmatured,
in accordance with the terms of this Indenture. Each Guarantor acknowledges that
it will receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
13.08 is knowingly made in contemplation of such benefits.
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Section 13.09. Guarantee Subordination Provisions Solely To Define
Relative Rights.
The subordination provisions of this Article are and are intended
solely for the purpose of defining the relative rights of the Holders of the
Notes on the one hand and the holders of Guarantor Senior Debt of each Guarantor
and, to the extent set forth in Section 13.06, holders of Designated Senior Debt
on the other hand. Nothing contained in this Article Thirteen (other than a
release pursuant to Section 13.07) or elsewhere in this Indenture or in the
Notes is intended to or shall (a) impair, as among each Guarantor, its creditors
other than holders of its Guarantor Senior Debt and the Holders of the Notes,
the obligation of such Guarantor, which is absolute and unconditional, to make
payments to the Holders in respect of its obligations under this Guarantee as
and when the same shall become due and payable in accordance with their terms;
or (b) affect the relative rights against such Guarantor of the Holders of the
Notes and creditors of such Guarantor other than the holders of the Guarantor
Senior Debt of such Guarantor; or (c) prevent the Trustee or the Holder of any
Note from exercising all remedies otherwise permitted by applicable law upon
Default or an Event of Default under this Indenture, subject to the rights, if
any, under the subordination provisions of this Article Thirteen of the holders
of Guarantor Senior Debt of the Guarantors hereunder and, to the extent set
forth in Section 13.06, holders of Designated Senior Debt (1) in any case,
proceeding, dissolution, liquidation or other winding-up, assignment for the
benefit of creditors or other marshaling of assets and liabilities of the
Guarantor referred to in Section 13.05, to receive, pursuant to and in
accordance with such Section, cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder, or (2) under the conditions specified
in Section 13.06, to prevent any payment prohibited by such Section or enforce
their rights pursuant to Section 13.06(c).
The failure by any Guarantor to make a payment in respect of its
obligations under this Guarantee by reason of any provision of this Article
Thirteen shall not be construed as preventing the occurrence of a Default or an
Event of Default hereunder.
Section 13.10. Trustee To Effectuate Subordination of Guarantee
Obligations.
Each Holder of a Note by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article Thirteen
and appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of any Guarantor whether in bankruptcy,
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insolvency, receivership proceedings, or otherwise, the timely filing of a claim
for the unpaid balance of the indebtedness of such Guarantor owing to such
Holder in the form required in such proceedings and the causing of such claim to
be approved. If the Trustee does not file such a claim prior to 30 days before
the expiration of the time to file such a claim, the holders of Guarantor Senior
Debt, or any representative, may file such a claim on behalf of Holders of the
Notes.
Section 13.11. No Waiver of Guarantee Subordination Provisions.
(a) No right of any present or future holder of any Guarantor Senior
Debt of any Guarantor or Designated Senior Debt to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or any Guarantor or by any act
or failure to act, in good faith, by any such holder, or by any non-compliance
by the Company or any Guarantor with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
(b) Without limiting the generality of subsection (a) of this
Section 13.11, the holders of Guarantor Senior Debt of any Guarantor may, at any
time and from time to time, without the consent of or notice to the Trustee or
the Holders of the Notes, without incurring responsibility to the Holders of the
Notes and without impairing or releasing the subordination provided in this
Article Thirteen or the obligations hereunder of the Holders of the Notes to the
holders of such Guarantor Senior Debt, do any one or more of the following: (1)
change the manner, place or terms of payment or extend the time of payment of,
or renew or alter, such Guarantor Senior Debt or any Senior Debt as to which
such Guarantor Senior Debt relates or any instrument evidencing the same or any
agreement under which such Guarantor Senior Debt or such Senior Debt is
outstanding; (2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing such Guarantor Senior Debt or any
Senior Debt as to which such Guarantor Senior Debt relates; (3) release any
person liable in any manner for the collection or payment of such Guarantor
Senior Debt or any Senior Debt as to which such Guarantor Senior Debt relates;
and (4) exercise or refrain from exercising any rights against such Guarantor
and any other person; provided that in no event shall any such actions limit the
right of the Holders of the Notes to take any action to accelerate the maturity
of the Notes pursuant to Article Five hereof or to pursue any rights or remedies
hereunder or under applicable laws if the taking of such action does not
otherwise violate the terms of this Indenture.
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Section 13.12. Guarantors To Give Notice to Trustee.
(a) The Company and each Guarantor shall give prompt written notice
to the Trustee of any fact known to such Guarantor which would prohibit the
making of any payment to or by the Trustee in respect of the Notes.
Notwithstanding the subordination provisions of this Article or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any payment to or
by the Trustee in respect of the Notes, unless and until the Trustee shall have
received written notice thereof at its Corporate Trust Office from the Company,
such Guarantor or a holder of its Guarantor Senior Debt or from any trustee,
fiduciary or agent therefor; and, prior to the receipt of any such written
notice, the Trustee, subject to the provisions of this Section 13.12, shall be
entitled in all respects to assume that no such facts exist; provided that if
the Trustee shall not have received the notice provided for in this Section
13.12 at least two Business Days prior to the date upon which by the terms
hereof any money may become payable for any purpose under this Indenture
(including, without limitation, the payment of the principal of or interest on
any Note), then, anything herein contained to the contrary notwithstanding but
without limiting the rights and remedies of the holders of such Guarantor Senior
Debt or any trustee, fiduciary or agent thereof, the Trustee shall have full
power and authority to receive such money and to apply the same to the purpose
for which such money was received and shall not be affected by any notice to the
contrary which may be received by it within two Business Days prior to such
date; nor shall the Trustee be charged with knowledge of the curing of any such
default or the elimination of the act or condition preventing any such payment
unless and until the Trustee shall have received an Officers' Certificate from
such Guarantor to such effect.
(b) Subject to the provisions of Section 6.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice to the Trustee, by a
person representing himself to be a holder of Guarantor Senior Debt of any
Guarantor (or a trustee, fiduciary or agent therefor). In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any person as a holder of Guarantor Senior Debt of any Guarantor
to participate in any payment or distribution pursuant to this Article Thirteen,
the Trustee may request such person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Guarantor Senior Debt of each
Guarantor held by such person, the extent to which such person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such person under this Article Thirteen, and if such evidence is not
furnished, the Trustee may defer any payment to such person pending
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judicial determination as to the right of such person to receive such payment.
Section 13.13. Reliance on Judicial Order or Certificate
of Liquidating Agent Regarding Dissolution, etc., of Guarantors.
Upon any payment or distribution of assets of any Guarantor referred
to in this Article Thirteen, the Trustee, subject to the provisions of Section
6.01, and the Holders shall be entitled to rely upon any order or decree entered
by any court of competent jurisdiction in which such insolvency, bankruptcy,
receivership, liquidation, reorganization, dissolution, winding-up or similar
case or proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of creditors,
agent or other person making such payment or distribution, delivered to the
Trustee or to the Holders, for the purpose of ascertaining the persons entitled
to participate in such payment or distribution, the holders of Guarantor Senior
Debt of such Guarantor and other Indebtedness of such Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article Thirteen; provided that
the foregoing shall apply only if such court has been fully apprised of the
provisions of this Article Thirteen.
Section 13.14. Rights of Trustee as a Holder of Guarantor Senior
Debt; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Thirteen with respect to any Guarantor Senior
Debt of any Guarantor which may at any time be held by the Trustee, to the same
extent as any other holder of such Guarantor Senior Debt, and nothing in this
Indenture shall deprive the Trustee of any of its rights as such holder. Nothing
in this Article Thirteen shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 6.07.
Section 13.15. Article Thirteen Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article Thirteen shall in such case (unless the
context otherwise requires) be construed as extending to and including such
Paying Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article Thirteen in addition to or in place of
the Trustee; provided that Section 13.14 shall not apply to the Company or any
Affiliate of the Company if it or such Affiliate acts as Paying Agent.
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Section 13.16. No Suspension of Remedies Subject to Rights of
Holders of Guarantor Senior Debt.
Nothing contained in this Article Thirteen shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article Five or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any, under
this Article Thirteen of the holders, from time to time, of Guarantor Senior
Debt of the Guarantors.
Section 13.17. Trustee's Relation to Guarantor Senior Debt.
With respect to the holders of Guarantor Senior Debt of any
Guarantor, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article Thirteen
(and in Article Fourteen with respect to Senior Debt), and no implied covenants
or obligations with respect to the holders of Guarantor Senior Debt of any
Guarantor shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior
Debt of any Guarantor and the Trustee shall not be liable to any holder of
Guarantor Senior Debt of any Guarantor if it shall mistakenly pay over or
deliver to Holders, the Company or any other person moneys or assets to which
any holder of Guarantor Senior Debt of any Guarantor shall be entitled by virtue
of this Article Thirteen or otherwise.
Section 13.18. Subrogation.
Upon the payment in full in cash of all amounts payable under or in
respect of Guarantor Senior Debt of the Guarantors and of all Senior Debt of the
Company, the Holders shall be subrogated to the rights of the holders of such
Guarantor Senior Debt of the Guarantors to receive payments or distributions of
assets of any Guarantor made on such Guarantor Senior Debt of the Guarantors
until all amounts due under the Guarantee shall be paid in full; and for the
purposes of such subrogation, no payments or distributions to holders of such
Guarantor Senior Debt of the Guarantors of any cash, property or securities to
which Holders of the Notes would be entitled except for the provisions of this
Article Thirteen, and no payment pursuant to the provisions of this Article
Thirteen to holders of such Guarantor Senior Debt of the Guarantors by the
Holders, shall, as between each Guarantor, its creditors other than holders of
such Guarantor Senior Debt of the Guarantors and the Holders, be deemed to be a
payment by such Guarantor to or on account of such Guarantor Senior Debt of the
Guarantors, its being understood that the provisions of this Article Thirteen
are solely for the purpose of defining the
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relative rights of the holders of such Guarantor Senior Debt of the Guarantors,
on the one hand, and the Holders, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Thirteen shall have
been applied, pursuant to the provisions of this Article Thirteen, to the
payment of all amounts payable under the Guarantor Senior Debt of the
Guarantors, then and in such case, the Holders shall be entitled to receive from
the holders of such Guarantor Senior Debt of the Guarantors at the time
outstanding any payments or distributions received by such holders of Guarantor
Senior Debt of the Guarantors in excess of the amount sufficient to pay all
amounts payable under or in respect of such Guarantor Senior Debt of the
Guarantors in full.
ARTICLE FOURTEEN
SUBORDINATION OF NOTES
Section 14.01. Notes Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of a Note, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article Fourteen, the Indebtedness
represented by the Notes are hereby expressly made subordinate and subject in
right of payment as provided in this Article to the prior payment in full in
cash of all amounts payable under all existing and future Senior Debt (including
the indebtedness under the Amended and Restated Credit Agreement).
This Article Fourteen shall constitute a continuing offer to all
persons who, in reliance upon such provisions, become holders of, or continue to
hold Senior Debt (including the indebtedness under the Amended and Restated
Credit Agreement); and such provisions are made for the benefit of the holders
of Senior Debt (including the indebtedness under the Amended and Restated Credit
Agreement); and such holders are made obligees hereunder and they or each of
them individually or through their representative may enforce such provisions.
Section 14.02. Payment Over of Proceeds upon Dissolution, etc.
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relating to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other
winding-up of the
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Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, then and in any such event:
(1) the holders of all Senior Debt shall be entitled to receive
payment in full in cash of all Obligations due in respect of such Senior
Debt (including, in the case of obligations under the Amended and Restated
Credit Agreement and Interest Rate Agreement Obligations, any interest
accruing subsequent to the filing of any such proceedings at the rate
specified in the agreements governing such Senior Debt whether or not
interest is an allowed claim under applicable law) before the Holders of
the Notes are entitled to receive any payment or distribution of any kind
or character on account of the Notes; and
(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, by set-off or
otherwise, to which the Holders or the Trustee would be entitled but for
the provisions of this Article shall be paid by the liquidating trustee or
agent or other person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or otherwise,
directly to the holders of Senior Debt or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Senior Debt may have been
issued, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Debt held or represented by each, to the extent
necessary to make payment in full in cash of all Senior Debt remaining
unpaid, after giving effect to any concurrent payment or distribution to
the holders of such Senior Debt; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section 14.02, the Trustee or the Holder of any Note shall have
received any payment or distribution of properties or assets of the
Company of any kind or character, whether in cash, property or securities,
by set off or otherwise in respect of the Notes before all Senior Debt is
paid or provided for in full in cash, then and in such event such payment
or distribution shall be paid over or delivered forthwith to the trustee
in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent
or other person making payment or distribution of assets of the Company
for application to the payment of all Senior Debt remaining unpaid, to the
extent necessary to pay all Senior Debt in full in cash, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Debt. Any such payment or distribution of the assets received by
the Trustee, which is required to be paid over to the Senior
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Representative, will be held in trust by the Trustee for the benefit of
the holders of the Senior Debt.
The consolidation of the Company with, or the merger of the Company
with or into, another person or the liquidation or dissolution of the Company
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another person upon the terms and conditions set
forth in Article Eight hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshalling of assets and liabilities of the Company for the purposes of this
Article if the person formed by such consolidation or the surviving entity of
such merger or the person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in such Article Eight.
Section 14.03. Suspension of Payment When Designated Senior Debt is
in Default.
(a) Unless Section 14.02 shall be applicable, upon the occurrence of
a Payment Default, no direct or indirect payment or distribution of any assets
of the Company of any kind or character shall be made by or on behalf of the
Company on account of the Notes unless and until such Payment Default shall have
been cured or waived or shall have otherwise ceased to exist or such Senior Debt
shall have been discharged or paid in full in cash, after which, subject to
Section 14.02 (if applicable), the Company shall resume making any and all
required payments in respect of the Notes, including any missed payments.
(b) Unless Section 14.02 shall be applicable, upon (1) the
occurrence of a Non-payment Default and (2) receipt by the Trustee from the
representatives of any holders of Designated Senior Debt of written notice of
such occurrence (a "Payment Blockage Notice") stating that a Non-Payment Default
has occurred and is continuing pursuant to Section 14.03(b) of this Indenture,
no payment or distribution of any assets of the Company of any kind or character
shall be made by or on behalf of the Company on account of the Notes for a
period ("Payment Blockage Period") commencing on the date of receipt by the
Trustee of such notice unless and until the earlier to occur of the following
events (subject to any blockage of payments that may then be in effect under
Section 14.02 or subsection (a) of this Section 14.03) (x) 179 days shall have
elapsed since the Payment Blockage Notice was received by the Trustee, (y) such
Non-payment Default shall have been cured or waived or shall have ceased to
exist (provided that no other Payment Default or Non-payment Default has
occurred and is then continuing after giving effect to such cure or waiver)
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or (z) such Payment Blockage Period shall have been terminated by written notice
to the Company or the Trustee from the representatives initiating such Payment
Blockage Period, after which, subject to Section 14.02 (if applicable), the
Company shall promptly resume making any and all required payments in respect of
the Notes, including any missed payments. Notwithstanding any other provision of
this Indenture, during any consecutive 365-day period, the aggregate number of
days in which payments due on the Notes may not be made as a result of
nonpayment defaults on Designated Senior Debt shall not exceed 179 days, and
there shall be a period of at least 186 consecutive days in each consecutive
365-day period when such payments are not prohibited. No event or circumstance
that creates a default under any Designated Senior Debt that (i) gives rise to
the commencement of a Payment Blockage Period or (ii) exists at the commencement
of or during any Payment Blockage Period shall be made the basis for the
commencement of any subsequent Payment Blockage Period unless such default has
been cured or waived for a period of not less than 90 consecutive days following
the commencement of the initial Payment Blockage Period.
(c) In the event that, notwithstanding the foregoing, the Trustee or
the Holder of any Note shall have received any payment or distribution
prohibited by the foregoing provisions of this Section 14.03, then and in such
event such payment or distribution shall be paid over and delivered forthwith to
representatives of the Holders or as a court of competent jurisdiction shall
direct for application to the payment of any due and unpaid Senior Debt, to the
extent necessary to pay all such due and unpaid Senior Debt in cash, after
giving effect to any concurrent payment to or for the holders of Senior Debt.
Section 14.04. Trustee's Relation to Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Fourteen (and in Article Thirteen with
respect to existing and future Guarantor Senior Debt of the respective
Guarantors, including obligations under the Amended and Restated Credit
Agreement), and no implied covenants or obligations with respect to the holders
of Senior Debt shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Debt and the Trustee shall not be liable to any holder of Senior Debt if it
shall mistakenly pay over or deliver to Holders, the Company, the Guarantors or
any other person moneys or assets to which any holder of Senior Debt shall be
entitled by virtue of this Article Fourteen or otherwise.
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Section 14.05. Subrogation to Rights of Holders of Senior Debt.
Upon the payment in full in cash of all Senior Debt, the Holders of
the Notes shall be subrogated to the rights of the holders of such Senior Debt
to receive payments and distributions of cash, property and securities
applicable to the Senior Debt until the principal of and interest on the Notes
shall be paid in full in cash or cash equivalents. For purposes of such
subrogation, no payments or distributions to the holders of Senior Debt of any
cash, property or securities to which the Holders of the Notes or the Trustee
would be entitled except for the provisions of this Article, and no payments
over pursuant to the provisions of this Article to the holders of Senior Debt by
Holders of the Notes or the Trustee shall, as among the Company, its creditors
other than holders of Senior Debt, and the Holders of the Notes, be deemed to be
a payment or distribution by the Company to or on account of the Senior Debt.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Fourteen shall have
been applied, pursuant to the provisions of this Article Fourteen, to the
payment of all amounts payable under the Senior Debt of the Company, then and in
such case the Holders shall be entitled to receive from the holders of such
Senior Debt at the time outstanding any payments or distributions received by
such holders of such Senior Debt in excess of the amount sufficient to pay all
amounts payable under or in respect of such Senior Debt in full in cash or cash
equivalents.
Section 14.06. Provisions Solely To Define Relative Rights.
The provisions of this Article Fourteen are and are intended solely
for the purpose of defining the relative rights of the Holders of the Notes on
the one hand and the holders of Senior Debt on the other hand. Nothing contained
in this Article Fourteen or elsewhere in this Indenture or in the Notes is
intended to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Debt and the Holders of the Notes, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders of the Notes
the principal of, premium, if any, and interest on the Notes as and when the
same shall become due and payable in accordance with their terms; or (b) affect
the relative rights against the Company of the Holders of the Notes and
creditors of the Company other than the holders of Senior Debt; or (c) prevent
the Trustee or the Holder of any Note from exercising all remedies otherwise
permitted by applicable law upon a Default or an Event of Default under this
Indenture, subject to the rights, if any, under this Article Fourteen of the
holders of Senior Debt
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(1) in any case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshalling of assets and
liabilities of the Company referred to in Section 14.02, to receive, pursuant to
and in accordance with such Section, cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder, or (2) under the
conditions specified in Section 14.03, to prevent any payment prohibited by such
Section or enforce their rights pursuant to Section 14.03(c).
The failure to make a payment on the Notes by reason of any
provision of this Article Fourteen shall not be construed as preventing the
occurrence of a Default or an Event of Default hereunder.
Section 14.07. Trustee To Effectuate Subordination.
Each Holder of a Note by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article Fourteen
and appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the Indebtedness of the Company owing to such Holder in the form required in
such proceedings and the causing of such claim to be approved. If the Trustee
does not file such a claim prior to 30 days before the expiration of the time to
file such a claim, the holders of Senior Debt, or any Senior Representative, may
file such a claim on behalf of Holders of the Notes.
Section 14.08. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior Debt to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
(b) Without limiting the generality of subsection (a) of this
Section 14.08, the holders of Senior Debt may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article Fourteen or
the obligations
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hereunder of the Holders of the Notes to the holders of Senior Debt, do any one
or more of the following: (1) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, Senior Debt or any instrument
evidencing the same or any agreement under which Senior Debt is outstanding; (2)
sell, exchange, release or otherwise deal with any property pledged, mortgaged
or otherwise securing Senior Debt; (3) release any person liable in any manner
for the collection or payment of Senior Debt; and (4) exercise or refrain from
exercising any rights against the Company and any other person; provided that in
no event shall any such actions limit the right of the Holders of the Notes to
take any action to accelerate the maturity of the Notes pursuant to Article Five
hereof or to pursue any rights or remedies hereunder or under applicable laws if
the taking of such action does not otherwise violate the terms of this
Indenture.
Section 14.09. Notice to Trustee.
(a) The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Notes. Notwithstanding the provisions of
this Article Fourteen or any other provision of this Indenture, the Trustee
shall not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee in respect of the Notes,
unless and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Debt or from any trustee, fiduciary or agent
therefor; and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of this Section 14.09, shall be entitled in all
respects to assume that no such facts exist; provided that if the Trustee shall
not have received the notice provided for in this Section 14.09 at least two
Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose under this Indenture (including, without
limitation, the payment of the principal of or interest on any Note), then,
anything herein contained to the contrary notwithstanding but without limiting
the rights and remedies of the holders of Senior Debt or any trustee, fiduciary
or agent thereof, the Trustee shall have full power and authority to receive
such money and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary which may be
received by it within two Business Days prior to such date; nor shall the
Trustee be charged with knowledge of the curing of any such default or the
elimination of the act or condition preventing any such payment unless and until
the Trustee shall have received an Officers' Certificate to such effect.
(b) Subject to the provisions of Section 6.01, the Trustee shall be
entitled to rely on the delivery to it of a
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written notice to the Trustee by a person representing himself to be a holder of
Senior Debt (or a trustee, fiduciary or agent therefor) to establish that such
notice has been given by a holder of Senior Debt (or a trustee, fiduciary or
agent therefor). In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any person as a holder
of Senior Debt to participate in any payment or distribution pursuant to this
Article Fourteen, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Article Fourteen, and if such evidence is not furnished, the
Trustee may defer any payment to such person pending judicial determination as
to the right of such person to receive such payment.
Section 14.10. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company referred
to in this Article Fourteen, the Trustee, subject to the provisions of Section
6.01, and the Holders, shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other person making such payment or distribution,
delivered to the Trustee or to the Holders, for the purpose of ascertaining the
persons entitled to participate in such payment or distribution, the holders of
Senior Debt and other Indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article; provided that the foregoing shall apply
only if such court has been fully apprised of the provisions of this Article
Fourteen.
Section 14.11. Rights of Trustee as a Holder of Senior Debt;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Fourteen with respect to any Senior Debt which
may at any time be held by it, to the same extent as any other holder of Senior
Debt, and nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article Fourteen shall apply to claims
of, or payments to, the Trustee under or pursuant to Section 6.07.
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Section 14.12. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article Fourteen in addition to or in place of the Trustee;
provided that Section 12.11 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
Section 14.13. No Suspension of Remedies.
Nothing contained in this Article Fourteen shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article Five or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any, under
this Article Fourteen of the holders, from time to time, of Senior Debt.
<PAGE>
-122-
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
FREEDOM CHEMICAL COMPANY
By: /s/ Brian F. McNamara
------------------------------
Name: Brian F. McNamara
Title: Secretary
THE BANK OF NEW YORK,
as Trustee
By: /s/ Lucille Firrincieli
------------------------------
Name: Lucille Firrincieli
Title: Asst. Vice President
FREEDOM TEXTILE CHEMICAL CO.,
as Guarantor
By: /s/ Brian F. McNamara
------------------------------
Name: Brian F. McNamara
Title: Secretary
HILTON DAVIS CHEMICAL CO.,
as Guarantor
By: /s/ Brian F. McNamara
------------------------------
Name: Brian F. McNamara
Title: Secretary
KALAMA CHEMICAL, INC.,
as Guarantor
By: /s/ Robert A. Kirchner
------------------------------
Name: Robert A. Kirchner
Title: President
<PAGE>
-123-
FREEDOM CHEMICAL DIAMALT GMBH,
as Guarantor
By: /s/ Helmut Wolf
------------------------------
Name: Helmut Wolf
Title: Managing Director
KALAMA SPECIALTY CHEMICALS, INC.
as Guarantor
By: /s/ Robert A Kirchner
------------------------------
Name: Robert A. Kirchner
Title: President
KALAMA FOREIGN SALES CORPORATION
By: /s/ Robert A. Kirchner
------------------------------
Name: Robert A. Kirchner
Title: President
FCC ACQUISITION CORP.
By: /s/ Brian F. McNamara
------------------------------
Name: Brian F. McNamara
Title: Secretary
FREEDOM TEXTILE CHEMICAL COMPANY
(SOUTH CAROLINA) INC.
By: /s/ Brian F. McNamara
------------------------------
Name: Brian F. McNamara
Title: Secretary
<PAGE>
EXHIBIT A
FREEDOM CHEMICAL COMPANY
10 5/8% SENIOR SUBORDINATED NOTE DUE 2006
CUSIP No._________
No._________ $_________
FREEDOM CHEMICAL COMPANY, a Delaware corporation (the "Company,"
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to _________ or registered assigns, the
principal sum of _________ United States Dollars on October 15, 2006, at the
office or agency of the Company referred to below, and to pay interest thereon
on April 15, and October 15, in each year, commencing on April 15, 1997 (each an
"Interest Payment Date"), accruing from the Issue Date or from the most recent
Interest Payment Date to which interest has been paid or duly provided for, at
the rate of 10 5/8% per annum, until the principal hereof is paid or duly
provided for. Interest shall be computed on the basis of a 360-day year of
twelve 30-day months.
The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in the Indenture referred to on
the reverse hereof, be paid to the Person in whose name this Note (or one or
more Predecessor Notes) is registered at the close of business on the April 1 or
October 1 (each a "Regular Record Date"), whether or not a Business Day, as the
case may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid, or duly provided for, and interest on such defaulted interest
at the then applicable interest rate borne by the Notes, to the extent lawful,
shall forthwith cease to be payable to the Holder on such Regular Record Date,
and may be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such defaulted interest to be fixed by the Trustee,
notice of which shall be given to Holders of Notes not less than 10 days prior
to such Special Record Date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in such Indenture.
Payment of the principal of, premium, if any, and interest on this
Note will be made at the Corporate Trust office or
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<PAGE>
agency of the Trustee maintained for that purpose in The City of New York, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however, that
payment of interest may be made at the option of the Company by check (which may
be a check of the Company) mailed to the address of the Person entitled thereto
as such address shall appear on the Note Register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Notes referred to in the within-mentioned
Indenture.
Dated:
THE BANK OF NEW YORK,
as Trustee
By:___________________________________
Authorized Signatory
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.
FREEDOM CHEMICAL COMPANY
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
A-3
<PAGE>
(REVERSE OF NOTE)
10 5/8% Senior Subordinated Note due 2006
1. Indenture. This Note is one of a duly authorized issue of Notes
of the Company designated as its 10 5/8% Senior Subordinated Notes due 2006 (the
"Notes"), limited (except as otherwise provided in the Indenture referred to
below) in aggregate principal amount to $125,000,000, which may be issued under
an indenture (the "Indenture") dated as of October 15, 1996, by and among the
Company, as Issuer, Freedom Textile Chemicals Co., a Delaware corporation,
Hilton Davis Chemical Co., a Delaware corporation, Kalama Chemical, Inc., a
Washington corporation, Freedom Chemical Diamalt GmbH, a corporation organized
under the laws of the Federal Republic of Germany, Kalama Foreign Sales
Corporation, a corporation existing under the laws of Guam, Kalama Specialty
Chemicals, Inc., a Washington corporation, FCC Acquisition Corp., a Delaware
corporation, and Freedom Textile Chemical Company (South Carolina) Inc., a
Delaware corporation, as guarantors (each a "Guarantor," and collectively, the
"Guarantors") and The Bank of New York, as trustee (the "Trustee," which term
includes any successor Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Guarantors, the Trustee and the Holders of the
Notes, and of the terms upon which the Notes are, and are to be, authenticated
and delivered.
All capitalized terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
No reference herein to the Indenture and no provisions of this Note
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Note at the times, place, and rate, and in the coin or
currency, herein prescribed.
2. Guarantees. This Note is entitled to certain senior subordinated
Guarantees made for the benefit of the Holders. Reference is hereby made to
Article Fourteen of the Indenture for terms relating to the Guarantees.
3. Subordination. The Indebtedness evidenced by the Notes is, to the
extent and in the manner provided in the Indenture, subordinate and subject in
right of payment to the prior payment in full in cash of all existing and future
Senior Debt (including the Indebtedness under the Amended and Restated Credit
Agreement). Each Holder of this Note, by accepting the same, (a)
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<PAGE>
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee, on behalf of such Holder, to take such action as may be necessary or
appropriate to effectuate the subordination as provided in the Indenture and (c)
appoints the Trustee attorney-in-fact of such Holder for such purpose; provided
that the Indebtedness evidenced by this Note shall cease to be so subordinate
and subject in right of payment upon any defeasance of this Note referred to in
Paragraph 7 below.
4. Redemption.
(a) Optional Redemption. Except as set forth below, the Notes are
not redeemable prior to October 15, 2001. Subject to earlier redemption in the
manner described in the next two succeeding paragraphs, the Notes will be
redeemable at the option of the Company, in whole or in part, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest, if any, to the redemption date, if redeemed during
the 12-month period beginning October 15 of the years indicated below:
Year Redemption Price
---- ----------------
2001 105.312%
2002 103.541
2003 101.771
2004 and thereafter 100.000
In addition, at any time on or prior to October 15, 1999, the
Company may, at its option, redeem up to 35% of the aggregate principal amount
of Notes originally issued with the net proceeds of one or more Public Equity
Offerings, at 109.625% of the aggregate principal amount thereof plus accrued
and unpaid interest, if any, to the date of redemption; provided, however, that
not less than $81.25 million principal amount of the Notes is outstanding
immediately after giving effect to such redemption (other than any Notes owned
by the Company or any of its Affiliates) and such redemption is effected within
60 days of such issuance or investment.
In addition, at any time on or prior to October 15, 2001, upon the
occurrence of a Change of Control, the Company may, at its option, redeem all
but not less than all of the Notes at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium plus accrued and unpaid
interest, if any, to the date of redemption. Notice of redemption of the Notes
pursuant to this paragraph shall be mailed to holders of the Notes not more than
60 days and not less than 30 days following the occurrence of a Change of
Control.
(b) Sinking Fund. The Company will not be required to make any
mandatory sinking fund payments in respect of the Notes.
A-5
<PAGE>
(c) Interest Payments. In the case of any redemption of the Notes,
interest installments whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holders of such Notes, or one or more Predecessor
Notes, of record at the close of business on the relevant Record Date referred
to on the face hereof. Notes (or portions thereof) for whose redemption and
payment provision is made in accordance with the Indenture shall cease to bear
interest from and after the Redemption Date.
(d) Partial Redemption. In the event of redemption of the Note in
part only, a new Note or Notes for the unredeemed portion hereof shall be issued
in the name of the Holder hereof upon the cancellation hereof.
5. Offers to Purchase. Sections 10.14 and 10.15 of the Indenture
provide that following certain Asset Sales (with respect to Section 10.14) and
upon the occurrence of a Change of Control (with respect to Section 10.15) and
subject to further limitations contained therein, the Company shall make an
offer to purchase certain amounts of the Notes in accordance with the procedures
set forth in the Indenture.
6. Defaults and Remedies. If an Event of Default shall occur and be
continuing, the principal of all of the outstanding Notes, plus all accrued and
unpaid interest, if any, to the date the Notes become due and payable, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
7. Defeasance. The Indenture contains provisions (which provisions
apply to this Note) for defeasance at any time of (a) the entire indebtedness of
the Company on this Note and (b) certain restrictive covenants and related
Defaults and Events of Default, in each case upon compliance by the Company with
certain conditions set forth therein.
8. Amendments and Waivers. The Company and the Trustee (if a party
thereto) may, without the consent of the Holders of any Outstanding Notes,
amend, waive or supplement the Indenture or the Notes for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies, maintaining the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended, and making any change that does not adversely
affect the rights of any Holder. Other amendments and modifications of the
Indenture or the Notes may be made by the Company and the Trustee with the
consent of the Holders of not less than a majority of the aggregate principal
amount of the Outstanding Notes, subject to certain exceptions requiring the
consent of the Holders of the particular Notes to be affected. Any such consent
or waiver by or on behalf of the Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange herefor or
in lieu
A-6
<PAGE>
hereof whether or not notation of such consent or waiver is made upon this Note.
9. Denominations, Transfer and Exchange. The Notes are issuable only
in registered form without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes of the authorized denomination, as requested by the
Holder surrendering the same.
The transfer of this Note is registrable on the Note Register of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company maintained for such purpose in the Borough of Manhattan
in The City of New York or at such other office or agency of the Company as may
be maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Note
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes, of authorized denominations and
for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
10. Persons Deemed Owners. Prior to and at the time of due
presentment of this Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name
this Note is registered as the owner hereof for all purposes, whether or not
this Note shall be overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
11. Registration Rights. Pursuant to the Registration Rights
Agreement among the Company, the Guarantors and the Initial Purchasers for
themselves and on behalf of the Holders of the Initial Notes, the Company will
be obligated to consummate an exchange offer pursuant to which the Holder of
this Note shall have the right to exchange this Note for the Company's 10 5/8%
Senior Subordinated Notes due 2006 (the "Exchange Notes"), which will have been
registered under the Securities Act, in like principal amount and having terms
identical in all material respects as the Initial Notes. The Holders of the
Initial Notes shall be entitled to receive certain additional interest payments
in the event such exchange offer is not consummated and upon certain other
conditions, all pursuant to and in accordance with the terms of the Registration
Rights Agreement.
12. No Recourse Against Others. No director, officer, employee or
stockholder of the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company, or any Guarantor under the Notes, the
Guarantees or this Indenture. Each Holder of Notes by accepting a Note waives
and releases all such
A-7
<PAGE>
liability, and such waiver and release is part of the consideration for the
issuance of the Notes.
13. GOVERNING LAW. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). THE TRUSTEE,
THE COMPANY, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND THE HOLDERS AGREE TO
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE
COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THIS NOTE.
A-8
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Note, fill in the form below and have your
signature guaranteed:
I or we assign and transfer this Note to
________________________________________________________________________________
(Insert assignee's social security or tax ID number)____________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
________________________________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for such agent.
Date:___________________ Your signature:______________________________
(Sign exactly as your
name appears on the other
side of this Note)
By:___________________________
NOTICE: To be
executed by an
executive officer
NOTICE: Signature(s) must be guaranteed by an institution which is
a participant in the Securities Transfer Agent Medallion Program
("STAMP") or similar program.
A-9
<PAGE>
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) the third anniversary of the Issue Date, the undersigned
confirms that it has not utilized any general solicitation or general
advertising in connection with and that such transfer is:
[Check One]
(1) ____ to the Company or a subsidiary thereof; or
(2) ____ pursuant to and in compliance with Rule 144A under the
Securities Act of 1933, as amended; or
(3) ____ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter
containing certain representations and agreements (the form of which
letter can be obtained from the Trustee); or
(4) ____ outside the United States to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as
amended; or
(5) ____ pursuant to the exemption from registration provided by Rule 144
under the Securities Act of 1933, as amended; or
(6) ____ pursuant to an effective registration statement under the
Securities Act of 1933, as amended; or
(7) ____ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof, provided, that if box (3), (4), (5) or (7) is
checked, the Company or the Trustee may require, prior to registering any such
transfer of the Notes, in its sole discretion, such written legal opinions,
certifications (including an investment letter in the case of box (3) or (4),
and other information as the Trustee, Note Registrar or the Company has
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, as amended.
A-10
<PAGE>
If none of the foregoing boxes are checked, the Trustee or Note
Registrar shall not be obligated to register this Note in the name of any person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 2.05 of the Indenture
shall have been satisfied.
Dated:_____________________ Signed:_____________________________________
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee:____________________________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date:______________________ ____________________________________________
NOTICE: To be executed by an
an executive officer
A-11
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 10.14 or 10.15 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 10.14 or 10.15 of the Indenture, state the amount:
$____________________
Date:_____________ Your Signature: ___________________________________________
(Sign exactly as your name
appears on the other side
of this Note)
By:________________________________________
NOTICE: To be signed
by an executive officer
NOTICE: Signature(s) must be guaranteed by an institution which is
a participant in the Securities Transfer Agent Medallion Program
("STAMP") or similar program.
A-12
<PAGE>
EXHIBIT B
FREEDOM CHEMICAL COMPANY
10 5/8% SENIOR SUBORDINATED NOTE DUE 2006
CUSIP No._________
No._________ $_________
FREEDOM CHEMICAL COMPANY, a Delaware corporation (the "Company,"
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to ___________, or registered assigns, the
principal sum of _________ United States Dollars on October 15, 2006, at the
office or agency of the Company referred to below, and to pay interest thereon
on April 15 and October 15 in each year, commencing on April 15, 1997 (each an
"Interest Payment Date"), accruing from the Issue Date or from the most recent
Interest Payment Date to which interest has been paid or duly provided for, at
the rate of 10 5/8% per annum, until the principal hereof is paid or duly
provided for. Interest shall be computed on the basis of a 360-day year of
twelve 30-day months.
The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in the Indenture referred to on
the reverse hereof, be paid to the Person in whose name this Note (or one or
more Predecessor Notes) is registered at the close of business on the April 1 or
October 1 (each a "Regular Record Date"), whether or not a Business Day, as the
case may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid, or duly provided for, and interest on such defaulted interest
at the then applicable interest rate borne by the Notes, to the extent lawful,
shall forthwith cease to be payable to the Holder on such Regular Record Date,
and may be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such defaulted interest to be fixed by the Trustee,
notice of which shall be given to Holders of Notes not less than 10 days prior
to such Special Record Date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in such Indenture.
Payment of the principal of, premium, if any, and interest on this
Note will be made at the corporate trust office or agency of the Trustee
maintained for that purpose in The City of
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<PAGE>
New York, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts:
provided, however, that payment of interest may be made at the option of the
Company by check (which may be a check of the Company) mailed to the address of
the Person entitled thereto as such address shall appear on the Note Register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Notes referred to in the within-mentioned
Indenture.
Dated:
THE BANK OF NEW YORK,
as Trustee
By:______________________________________
Authorized Signatory
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.
FREEDOM CHEMICAL COMPANY
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
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<PAGE>
(REVERSE OF NOTE)
10 5/8% Senior Subordinated Note due 2006
1. Indenture. This Note is one of a duly authorized issue of Notes
of the Company designated as its 10 5/8% Senior Subordinated Notes due 2006 (the
"Notes"), limited (except as otherwise provided in the Indenture referred to
below) in aggregate principal amount to $125,000,000, which may be issued under
an indenture (the "Indenture") dated as of October 15, 1996, by and among the
Company, as Issuer, Freedom Textile Chemicals Co., a Delaware corporation,
Hilton Davis Chemical Co., a Delaware corporation, Kalama Chemical, Inc., a
Washington corporation, Freedom Chemical Diamalt GmbH, a corporation organized
under the laws of the Federal Republic of Germany, Kalama Foreign Sales
Corporation, a corporation existing under the laws of Guam, Kalama Specialty
Chemicals, Inc., a Washington corporation, FCC Acquisition Corp., a Delaware
corporation and Freedom Textile Chemical Company (South Carolina) Inc., a
Delaware corporation, as guarantors (each a "Guarantor," and collectively, the
"Guarantors"), and The Bank of New York, as trustee (the "Trustee," which term
includes any successor Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Guarantors, the Trustee and the Holders of the
Notes, and of the terms upon which the Notes are, and are to be, authenticated
and delivered.
All capitalized terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
No reference herein to the Indenture and no provisions of this Note
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Note at the times, place, and rate, and in the coin or
currency, herein prescribed.
2. Guarantees. This Note is entitled to certain senior subordinated
Guarantees made for the benefit of the Holders. Reference is hereby made to
Article Fourteen of the Indenture for terms relating to the Guarantees.
3. Subordination. The Indebtedness evidenced by the Notes is, to the
extent and in the manner provided in the Indenture, subordinate and subject in
right of payment to the prior payment in full in cash of all existing and future
Senior Debt (including the Indebtedness under the Amended and Restated Credit
Agreement). Each Holder of this Note, by accepting the same, (a)
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<PAGE>
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee, on behalf of such Holder, to take such action as may be necessary or
appropriate to effectuate the subordination as provided in the Indenture and (c)
appoints the Trustee attorney-in-fact of such Holder for such purpose; provided
that the Indebtedness evidenced by this Note shall cease to be so subordinate
and subject in right of payment upon any defeasance of this Note referred to in
Paragraph 7 below.
4. Redemption.
(a) Optional Redemption. Except as set forth below, the Notes are
not redeemable prior to October 15, 2001. Subject to earlier redemption in the
manner described in the next two succeeding paragraphs, the Notes will be
redeemable at the option of the Company, in whole or in part, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest, if any, to the redemption date, if redeemed during
the 12-month period beginning October 15 of the years indicated below:
Year Redemption Price
---- ----------------
2001 105.312%
2002 103.541
2003 101.771
2004 and thereafter 100.000
In addition, at any time on or prior to October 15, 1999, the
Company may, at its option, redeem up to 35% of the aggregate principal amount
of Notes originally issued with the net proceeds of one or more Public Equity
Offerings, at 109.625% of the aggregate principal amount thereof plus accrued
and unpaid interest, if any, to the date of redemption; provided, however, that
not less than $81.25 million principal amount of the Notes is outstanding
immediately after giving effect to such redemption (other than any Notes owned
by the Company or any of its Affiliates) and such redemption is effected within
60 days of such issuance or investment.
In addition, at any time on or prior to October 15, 2001, upon the
occurrence of a Change of Control, the Company may, at its option, redeem, all
but not less than all of the Notes, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium plus accrued and unpaid
interest, if any, to the date of redemption. Notice of redemption of the Notes
pursuant to this paragraph shall be mailed to holders of the Notes not more than
60 days and not less than 30 days following the occurrence of a Change of
Control.
(b) Sinking Fund. The Company will not be required to make any
mandatory sinking fund payments in respect of the Notes.
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<PAGE>
(c) Interest Payments. In the case of any redemption of the Notes,
interest installments whose Stated Maturity is on or prior to the Redemption
Date will be payable to the Holders of such Notes, or one or more Predecessor
Notes, of record at the close of business on the relevant Record Date referred
to on the face hereof. Notes (or portions thereof) for whose redemption and
payment provision is made in accordance with the Indenture shall cease to bear
interest from and after the Redemption Date.
(d) Partial Redemption. In the event of redemption of the Note in
part only, a new Note or Notes for the unredeemed portion hereof shall be issued
in the name of the Holder hereof upon the cancellation hereof.
5. Offers to Purchase. Sections 10.14 and 10.15 of the Indenture
provide that following certain Asset Sales (with respect to Section 10.14) and
upon the occurrence of a Change of Control (with respect to Section 10.15) and
subject to further limitations contained therein, the Company shall make an
offer to purchase certain amounts of the Notes in accordance with the procedures
set forth in the Indenture.
6. Defaults and Remedies. If an Event of Default shall occur and be
continuing, the principal of all of the outstanding Notes, plus all accrued and
unpaid interest, if any, to the date the Notes become due and payable, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
7. Defeasance. The Indenture contains provisions (which provisions
apply to this Note) for defeasance at any time of (a) the entire indebtedness of
the Company on this Note and (b) certain restrictive covenants and related
Defaults and Events of Default, in each case upon compliance by the Company with
certain conditions set forth therein.
8. Amendments and Waivers. The Company and the Trustee (if a party
thereto) may, without the consent of the Holders of any Outstanding Notes,
amend, waive or supplement the Indenture or the Notes for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies, maintaining the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended, and making any change that does not adversely
affect the rights of any Holder. Other amendments and modifications of the
Indenture or the Notes may be made by the Company and the Trustee with the
consent of the Holders of not less than a majority of the aggregate principal
amount of the Outstanding Notes, subject to certain exceptions requiring the
consent of the Holders of the particular Notes to be affected. Any such consent
or waiver by or on behalf of the Holder of this Note shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange herefor or
in lieu
B-6
<PAGE>
hereof whether or not notation of such consent or waiver is made upon this Note.
9. Denominations, Transfer and Exchange. The Notes are issuable only
in registered form without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Notes are exchangeable for a like aggregate
principal amount of Notes of the authorized denomination, as requested by the
Holder surrendering the same.
The transfer of this Note is registrable on the Note Register of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company maintained for such purpose in the Borough of Manhattan
in The City of New York or at such other office or agency of the Company as may
be maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Note
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes, of authorized denominations and
for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
10. Persons Deemed Owners. Prior to and at the time of due
presentment of this Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name
this Note is registered as the owner hereof for all purposes, whether or not
this Note shall be overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
11. No Recourse Against Others. No director, officer or employee or
stockholder of the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company, or any Guarantor under the Notes, the
Guarantees or the Indenture. Each Holder of Notes by accepting a Note waives and
releases all such liability, and such waiver and release is part of the
consideration for the issuance of the Notes.
12. GOVERNING LAW. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). THE TRUSTEE,
THE COMPANY, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND THE HOLDERS AGREE TO
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE
COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THIS NOTE.
B-7
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Note, fill in the form below and have your
signature guaranteed:
I or we assign and transfer this Note to
________________________________________________________________________________
(Insert assignee's social security or tax ID number)____________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
________________________________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for such agent.
Date:__________________ Your signature:__________________________________
(Sign exactly as your
name appears on the other
side of this Note)
By:_____________________________
NOTICE: To be
executed by an
executive officer
NOTICE: Signature(s) must be guaranteed by an institution which is
a participant in the Securities Transfer Agent Medallion Program
("STAMP") or similar program.
B-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 10.14 or 10.15 of the Indenture, check the Box:
[ ]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 10.14 or 10.15 of the Indenture, state the amount:
$__________
Date:_____________ Your Signature:______________________________________
(Sign exactly as your name
appears on the other side
of this Note)
By:_______________________________
NOTICE: To be signed
by an executive officer
NOTICE: Signature(s) must be guaranteed by an institution which is
a participant in the Securities Transfer Agent Medallion Program
("STAMP") or similar program.
B-9
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
__________, ____
THE BANK OF NEW YORK
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Department
Re: Freedom Chemical Company (the "Company")
10 5/8% Senior Subordinated Notes
due 2006 (the "Notes")
----------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $ aggregate principal
amount of the Notes, we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated October 10, 1996, relating to the Notes and such other
information as we deem necessary in order to make our investment decision.
We acknowledge that we have read and agreed to the matters stated in the
section entitled "Notice to Investors" of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
dated as of October 15, 1996 relating to the Notes (the "Indenture") and
the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Notes except in compliance with, such restrictions
and conditions and the Securities Act of 1933, as amended (the "Securities
Act").
3. We understand that the Notes have not been registered under the
Securities Act, and that the Notes may not be offered or sold except as
permitted in the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter stated, that
C-1
<PAGE>
if we should sell any Notes within three years after the original issuance
of the Notes, we will do so only (A) to the Company or any subsidiary
thereof, (B) inside the United States in accordance with Rule 144A under
the Securities Act to a "qualified institutional buyer" (as defined
therein), (C) inside the United States to an "institutional accredited
investor" (as defined below) that, prior to such transfer, furnishes (or
has furnished on its behalf by a U.S. broker-dealer) to you a signed
letter substantially in the form of this letter, (D) outside the United
States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available), or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to
provide to any person purchasing any of the Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein.
4. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Company such certification, written
legal opinions and other information as you and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment, as the case may be.
6. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
C-2
<PAGE>
You, the Company and counsel for the Company are entitled to rely
upon this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:_________________________________________
Authorized Signature
C-3
<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
_________,_____
THE BANK OF NEW YORK
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Department
Re: Freedom Chemical Company (the "Company")
10 5/8% Senior Subordinated Notes
due 2006 (the "Notes")
----------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $ aggregate principal amount
of the Notes, we confirm that such sale has been effected pursuant to and in
accordance with Regulation S under the U.S. Securities Act of 1933, as amended
(the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
D-1
<PAGE>
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You, the Company and counsel for the Company are entitled to rely
upon this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:_________________________________________
Authorized Signature
D-2
<PAGE>
EXHIBIT E
SENIOR SUBORDINATED GUARANTEE
For value received, the undersigned hereby unconditionally
guarantees to the Holder of this Note the payments of principal of, premium, if
any, and interest on this Note in the amounts and at the time when due and
interest on the overdue principal, premium, if any, and interest, if any, of
this Note, if lawful, and the payment or performance of all other obligations of
the Company under the Indenture or the Notes, to the Holder of this Note and the
Trustee, all in accordance with and subject to the terms and limitations of this
Note, Article Thirteen of the Indenture and this Guarantee. This Guarantee will
become effective in accordance with Article Eleven of the Indenture and its
terms shall be evidenced therein. The validity and enforceability of any
Guarantee shall not be affected by the fact that it is not affixed to any
particular Note.
The obligations of the undersigned to the Holders of Notes and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth
in Article Thirteen of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Guarantee and all of the other provisions
of the Indenture to which this Guarantee relates. The Indebtedness evidenced by
this Guarantee is, to the extent and in the manner provided in the Indenture,
subordinate and subject in right of payment to the prior payment in full in cash
of all Guarantor Senior Debt as defined in the Indenture, and this Guarantee is
issued subject to such provisions. Each Holder of a Note, by accepting the same,
(a) agrees to and shall be bound by such provisions, (b) authorizes and directs
the Trustee, on behalf of such Holder, to take such action as may be necessary
or appropriate to effectuate the subordination as provided in the Indenture and
(c) appoints the Trustee attorney-in-fact of such Holder for such purpose;
provided that such subordination provisions shall cease to affect amounts
deposited in accordance with the defeasance provisions of the Indenture upon the
terms and conditions set forth therein.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
FREEDOM TEXTILE CHEMICALS CO.
By:___________________________________
Name:
Title:
E-1
<PAGE>
HILTON DAVIS CHEMICAL CO.
By:___________________________________
Name:
Title:
E-2
<PAGE>
KALAMA CHEMICAL, INC.
By:___________________________________
Name:
Title:
E-3
<PAGE>
FREEDOM CHEMICAL DIAMALT GmbH
By:___________________________________
Name:
Title:
E-4
<PAGE>
KALAMA SPECIALTY CHEMICALS, INC.
By:___________________________________
Name:
Title:
E-5
<PAGE>
KALAMA FOREIGN SALES CORPORATION
By:___________________________________
Name:
Title:
E-6
<PAGE>
FCC ACQUISITION CORP.
By:___________________________________
Name:
Title:
E-7
<PAGE>
FREEDOM TEXTILE CHEMICAL COMPANY
(SOUTH CAROLINA) INC.
By:___________________________________
Name:
Title:
E-8
<PAGE>
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated October 17, 1996
between
FREEDOM CHEMICAL COMPANY
and
THE GUARANTORS
named herein
and
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
SCHRODER WERTHEIM & CO. INCORPORATED
and
SMITH BARNEY INC.,
as Purchasers
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into October 17, 1996 among FREEDOM CHEMICAL COMPANY, a Delaware
corporation (the "Company"), Freedom Textile Chemicals Co., a Delaware
corporation, Hilton Davis Chemicals Co., a Delaware corporation, Kalama Chemical
Inc., a Washington corporation, Freedom Chemical Diamalt Gmbh, a corporation
organized under the laws of the Federal Republic of Germany, Kalama Specialty
Chemical, Inc., a Washington corporation, Kalama Foreign Sales Corporation, a
corporation organized under the laws of Guam, FCC Acquisition Corp., a Delaware
corporation, Freedom Textile Chemical (South Carolina) Inc., a Delaware
corporation (each a "Guarantor" and collectively, the "Guarantors"), and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Schroder Wertheim & Co. Incorporated
and Smith Barney Inc. (collectively the "Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated
October 10, 1996 (the "Purchase Agreement"), among the Company, the Guarantors
and the Purchasers which provides for, among other things, the sale by the
Company to the Purchasers of an aggregate of $125,000,000 principal amount of
the Company's 10 5/8% Senior Subordinated Notes due 2006 (the "Securities"). In
order to induce the Purchasers to enter into the Purchase Agreement, the Company
has agreed to provide to the Purchasers and their direct and indirect
transferees the registration rights set forth in this Agreement. The execution
and delivery of this Agreement is a condition to the closing under the Purchase
Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"Additional Interest" shall have the meaning set forth in Section 2(e)
hereof.
"Advice" shall have the meaning set forth in the last paragraph of Section
3 hereof.
"Applicable Period" shall have the meaning set forth in Section 3(t)
hereof.
2
<PAGE>
"Business Day" shall mean a day that is not a Saturday, a Sunday, or a day
on which banking institutions in New York, New York are authorized to be closed.
"Closing Time" shall mean the Closing Time as defined in the Purchase
Agreement.
"Company" shall have the meaning set forth in the preamble to this
Agreement and also includes the Company's successors and permitted assigns.
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Company; provided, however, that such depositary
must have an address in the Borough of Manhattan, in The City of New York.
"Effectiveness Period" shall have the meaning set forth in Section 2(b)
hereof.
"Event Date" shall have the meaning set forth in Section 2(e) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Exchange Offer" shall mean the offer by the Company to the Holders to
exchange all of the Registrable Securities (other than Private Exchange
Securities) for a like principal amount of Exchange Securities pursuant to
Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
Securities Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form), and all amendments and supplements to such registration statement, in
each case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section 2(a) hereof.
"Exchange Securities" shall mean the 10 5/8% Senior Subordinated Notes due
2006, issued by the Company under the Indenture containing terms identical to
the Securities (except that (i) interest thereon shall accrue from the last date
on which interest was paid on the Securities or, if no such interest has been
paid, from October 17, 1996 and (ii) the transfer restrictions thereon shall be
eliminated) to be offered to Holders of Securities in exchange for Securities
pursuant to the Exchange Offer.
3
<PAGE>
"Holder" shall mean any Purchasers, for so long as it owns any Registrable
Securities, and each of their respective successors, assigns and direct and
indirect transferees who become registered owners of Registrable Securities
under the Indenture.
"Indenture" shall mean the Indenture relating to the Securities dated as
of October 15, 1996 among the Company, as issuer, the Guarantors and The Bank of
New York, as trustee, as the same may be amended from time to time in accordance
with the terms thereof.
"Inspectors" shall have the meaning set forth in Section 3(n) hereof.
"Majority Holders" shall mean the Holders of a majority of the aggregate
principal amount of outstanding (as determined under the Indenture) Registrable
Securities.
"Participating Broker-Dealer" shall have the meaning set forth in Section
3(t) hereof.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Private Exchange" shall have the meaning set forth in Section 2(a)
hereof.
"Private Exchange Securities" shall have the meaning set forth in Section
2(a) hereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Shelf Registration Statement, and by all
other amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Purchase Agreement" shall have the meaning set forth in the preamble to
this Agreement.
"Purchasers" shall have the meaning set forth in the preamble to this
Agreement.
"Records" shall have the meaning set forth in Section 3(n) hereof.
"Registrable Securities" shall mean the Securities and, if issued, the
Private Exchange Securities; provided, however, that
4
<PAGE>
Securities or Private Exchange Securities, as the case may be, shall cease to be
Registrable Securities when (i) a Registration Statement with respect to such
Securities or Private Exchange Securities for the exchange or resale thereof, as
the case may be, shall have been declared effective under the Securities Act and
such Securities or Private Exchange Securities, as the case may be, shall have
been disposed of pursuant to such Registration Statement, (ii) such Securities
or Private Exchange Securities, as the case may be, shall have been sold to the
public pursuant to Rule 144(k) (or any similar provision then in force, but not
Rule 144A) under the Securities Act, (iii) such Securities or Private Exchange
Securities, as the case may be, shall have ceased to be outstanding or (iv) with
respect to the Securities, such Securities have been exchanged for Exchange
Securities upon consummation of the Exchange Offer and are thereafter freely
tradeable by the holder thereof not an affiliate of the Company.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC or National Association of Securities Dealers,
Inc. (the "NASD") registration and filing fees, including, if applicable, the
fees and expenses of any "qualified independent underwriter" (and its counsel)
that is required to be retained by any Holder of Registrable Securities in
accordance with the rules and regulations of the NASD, (ii) all fees and
expenses incurred in connection with compliance with state securities or blue
sky laws (including reasonable fees and disbursements of counsel for any
underwriters or Holders in connection with blue sky qualification of any of the
Exchange Securities or Registrable Securities) and compliance with the rules of
the NASD, (iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus and any amendments or supplements thereto, and in
preparing or assisting in preparing, printing and distributing any underwriting
agreements, securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) all rating agency fees,
(v) the fees and disbursements of counsel for the Company and of the independent
certified public accountants of the Company, including the expenses of any "cold
comfort" letters required by or incident to such performance and compliance,
(vi) the fees and expenses of the Trustee, and any exchange agent or custodian,
(vii) all fees and expenses incurred in connection with the listing, if any, of
any of the Registrable Securities on any securities exchange or exchanges, and
(viii) any fees and disbursements of any underwriter customarily required to be
paid by issuers or sellers of securities and the reasonable fees and expenses of
any special experts retained by the Company in connection with any Registration
Statement, but excluding fees of counsel to the underwriters and underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by a Holder.
5
<PAGE>
"Registration Statement" shall mean any registration statement of the
Company which covers any of the Exchange Securities or Registrable Securities
pursuant to the provisions of this Agreement, and all amendments and supplements
to any such Registration Statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall have the meaning set forth in the preamble to this
Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2(b) hereof.
"Shelf Registration Event" shall have the meaning set forth in Section
2(b) hereof.
"Shelf Registration Event Date" shall have the meaning set forth in
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration statement
of the Company pursuant to the provisions of Section 2(b) hereof which covers
all of the Registrable Securities or all of the Private Exchange Securities, as
the case may be, on an appropriate form under Rule 415 under the Securities Act,
or any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"TIA" shall have the meaning set forth in Section 3(l) hereof.
"Trustee" shall mean the trustee with respect to the Securities under the
Indenture.
2. Registration Under the Securities Act.
(a) Exchange Offer. To the extent not prohibited by any applicable
law or applicable interpretation of the staff of the SEC, the Company shall, for
the benefit of the Holders, at the Company's cost, use its best efforts to (i)
cause to be filed with the SEC within 60 days after the Closing Time an Exchange
Offer Registration Statement on an appropriate form under the Securities Act
covering the Exchange Offer, (ii) cause such Exchange Offer Registration
Statement to be declared effective
6
<PAGE>
under the Securities Act by the SEC not later than the date which is 120 days
after the Closing Time, (iii) keep such Exchange Offer Registration Statement
effective until the consummation of the Exchange Offer and (iv) cause the
Exchange Offer to be consummated not later than 150 days after the Closing Time.
The Exchange Securities will be issued under the Indenture. Upon the
effectiveness of the Exchange Offer Registration Statement, the Company shall
promptly commence the Exchange Offer, it being the objective of such Exchange
Offer to enable each Holder eligible and electing to exchange Registrable
Securities for a like principal amount of Exchange Securities (assuming that
such Holder is not an affiliate of the Company within the meaning of Rule 405
under the Securities Act and is not a broker-dealer tendering Registrable
Securities acquired directly from the Company for its own account, acquires the
Exchange Securities in the ordinary course of such Holder's business and has no
arrangements or understandings with any Person to participate in the Exchange
Offer for the purpose of distributing the Exchange Securities) to transfer such
Exchange Securities from and after their receipt without any limitations or
restrictions under the Securities Act and under state securities or blue sky
laws.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(ii)(1) keep the Exchange Offer open for acceptance for a period of not
less than 30 days after the date notice thereof is mailed to the Holders (or
longer if required by applicable law) (such period referred to herein as the
"Exchange Period");
(iii)(1) utilize the services of the Depositary for the Exchange Offer;
(iv) permit Holders to withdraw tendered Securities at any time prior to
the close of business, New York time, on the last Business Day of the Exchange
Period, by sending to the institution specified in the notice, a telegram,
telex, facsimile transmission or letter setting forth the name of such Holder,
the principal amount of Securities delivered for exchange, and a statement that
such Holder is withdrawing his election to have such Securities exchanged;
(v) notify each Holder that any Security not tendered by such Holder in
the Exchange Offer will remain outstanding and continue to accrue interest, but
will not retain any rights under
7
<PAGE>
this Agreement (except in the case of the Purchasers and Participating
Broker-Dealers as provided herein); and
(vi) otherwise comply in all respects with all applicable laws relating to
the Exchange Offer.
If any Purchaser determines upon advice of its outside counsel that
it is not eligible to participate in the Exchange Offer with respect to the
exchange of Securities constituting any portion of an unsold allotment in the
initial distribution, as soon as practicable upon receipt by the Company of a
written request from such Purchaser and an opinion of outside counsel for such
Purchaser, reasonably satisfactory in form and substance to outside counsel of
the Company, to the effect that such exchange does not require compliance with
the registration requirements under the Securities Act, the Company shall issue
and deliver to such Purchaser in exchange (the "Private Exchange") for the
Securities held by such Purchaser, a like principal amount of debt securities of
the Company that are identical (except that such securities shall bear
appropriate transfer restrictions) to the Exchange Securities (the "Private
Exchange Securities") and which are issued pursuant to the Indenture (which will
provide that the Exchange Securities will not be subject to the transfer
restrictions set forth in the Indenture and that the Exchange Securities, the
Private Exchange Securities and the Securities will vote and consent together on
all matters as one class and that neither the Exchange Securities, the Private
Exchange Securities nor the Securities will have the right to vote or consent as
a separate class on any matter). The Private Exchange Securities shall be of the
same series as the Exchange Securities and the Company will seek to cause the
CUSIP Service Bureau to issue the same CUSIP Number for the Private Exchange
Securities as for the Exchange Securities issued pursuant to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Securities or portions thereof tendered and
not validly withdrawn pursuant to the Exchange Offer or the Private Exchange;
(ii) deliver, or cause to be delivered, to the Trustee for cancellation
all Securities or portions thereof so accepted for exchange by the Company; and
(iii) issue, and cause the Trustee under the Indenture to promptly
authenticate and deliver to each Holder, a new Exchange Security or Private
Exchange Security, as the case may be, equal
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<PAGE>
in principal amount to the principal amount of the Securities surrendered by
such Holder.
Interest on each Exchange Security and Private Exchange Security issued pursuant
to the Registered Exchange Offer and in the Private Exchange will accrue from
the last interest payment date on which interest was paid on the Securities
surrendered in exchange therefor or, if no interest has been paid on the
Securities, from the date of original issue of the Securities. To the extent not
prohibited by any law or applicable interpretation of the staff of the SEC, the
Company shall use its best efforts to complete the Exchange Offer as provided
above, and shall comply with the applicable requirements of the Securities Act,
the Exchange Act and other applicable laws in connection with the Exchange
Offer. The Exchange Offer shall not be subject to any conditions, other than
that the Exchange Offer does not violate applicable law or any applicable
interpretation of the staff of the SEC. Each Holder of Registrable Securities
who wishes to exchange such Registrable Securities for Exchange Securities in
the Exchange Offer and each Purchaser who holds and wishes to exchange
Registrable Securities for Exchange Securities in the Private Exchange will be
required to make certain customary representations in connection therewith,
including, in the case of any Holder, representations that such Holder is not an
affiliate of the Company within the meaning of Rule 405 under the Securities Act
or, if it is an affiliate, that such Holder will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable, that any Exchange Securities to be received by it will be acquired
in the ordinary course of business and that at the time of the commencement of
the Exchange Offer it has no arrangement with any Person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange
Securities. The Company shall inform the Purchasers, after consultation with the
Trustee and the Purchasers, of the names and addresses of the Holders to whom
the Exchange Offer is made, and the Purchasers shall have the right to contact
such Holders and otherwise facilitate the tender of Registrable Securities in
the Exchange Offer.
Upon consummation of the Exchange Offer in accordance with this
Section 2(a), the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Registrable Securities that are Private
Exchange Securities and Exchange Securities held by Participating
Broker-Dealers, and the Company shall have no further obligation to register
Registrable Securities (other than Private Exchange Securities) pursuant to
Section 2(b) of this Agreement.
(b) Shelf Registration. In the event that (i) the Company or the
Majority Holders reasonably determine, after conferring with counsel (which may
be in-house counsel), that the Exchange Offer Registration provided in Section
2(a) above is not available or may not be consummated as soon as practicable
after
9
<PAGE>
the last day of the Exchange Period because it would violate applicable
securities laws or because the applicable interpretations of the staff of the
SEC would not permit the Company to effect the Exchange Offer, or (ii) the
Exchange Offer is not for any other reason consummated within 150 days of the
Closing Time, or (iii) the Company or the Majority Holders reasonably determine,
after conferring with counsel (which may be in-house counsel), that the Exchange
Securities would not, upon receipt, be freely tradeable by such Holders which
are not affiliates of the Company without restriction under the Securities Act
and without restrictions under applicable blue sky or state securities laws, or
a Holder is not permitted by applicable law to participate in the Exchange Offer
or (iv) upon the request of any Purchaser with respect to any Registrable
Securities which it acquired directly from the Company and, with respect to
other Registrable Securities held by it, if such Purchaser is not permitted, in
the opinion of counsel to such Purchaser, pursuant to applicable law or
applicable interpretations of the Staff of the SEC, to participate in the
Exchange Offer and thereby receive securities that are freely tradeable without
restriction under the Securities Act and applicable blue sky or state securities
laws (any of the events specified in (i)-(iv) being a "Shelf Registration Event"
and the date of occurrence thereof, the "Shelf Registration Event Date"), the
Company shall, at its cost, use its best efforts to cause to be filed as
promptly as practicable after such Shelf Registration Event Date, as the case
may be, and, in any event, within 30 days after such Shelf Registration Event
Date (which shall be no earlier than 60 days after the Closing Time), a Shelf
Registration Statement providing for the sale by the Holders of all of the
Registrable Securities, and shall use its best efforts to have such Shelf
Registration Statement declared effective by the SEC as soon as practicable. No
Holder of Registrable Securities shall be entitled to include any of its
Registrable Securities in any Shelf Registration pursuant to this Agreement
unless and until such Holder agrees in writing to be bound by all of the
provisions of this Agreement applicable to such Holder and furnishes to the
Company in writing, within 15 days after receipt of a request therefor, such
information as the Company may, after conferring with counsel with regard to
information relating to Holders that would be required by the SEC to be included
in such Shelf Registration Statement or Prospectus included therein, reasonably
request for inclusion in any Shelf Registration Statement or Prospectus included
therein. Each Holder as to which any Shelf Registration is being effected agrees
to furnish to the Company all information with respect to such Holder necessary
to make the information previously furnished to the Company by such Holder not
materially misleading.
The Company agrees to use its best efforts to keep the Shelf
Registration Statement continuously effective for a period of three years from
the date of issuance of the Securities
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<PAGE>
(subject to extension pursuant to the last paragraph of Section 3 hereof) or for
such shorter period which will terminate when all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement or cease to be outstanding (the "Effectiveness Period").
The Company shall not permit any securities other than Registrable Securities to
be included in the Shelf Registration. The Company will, in the event a Shelf
Registration Statement is declared effective, provide to each Holder a
reasonable number of copies of the Prospectus which is a part of the Shelf
Registration Statement, notify each such Holder when the Shelf Registration has
become effective and use its best efforts to take certain other actions as are
required to permit certain unrestricted resales of the Registrable Securities.
The Company further agrees, if necessary, to supplement or amend the Shelf
Registration Statement, if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Shelf
Registration Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registrations, and the Company agrees to
furnish to the Holders of Registrable Securities copies of any such supplement
or amendment promptly after its being used or filed with the SEC.
(c) Expenses. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) or 2(b) hereof and
will reimburse the Purchasers for the reasonable fees and disbursements of
Cahill Gordon & Reindel, counsel for the Purchasers, incurred in connection with
the Exchange Offer and any one counsel designated in writing by the Majority
Holders to act as counsel for the Holders of the Registrable Securities in
connection with a Shelf Registration Statement, which counsel shall be
reasonably satisfactory to the Company. Except as provided herein, each Holder
shall pay all expenses of its counsel, underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. An Exchange Offer Registration
Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement
pursuant to Section 2(b) hereof will not be deemed to have become effective
unless it has been declared effective by the SEC; provided, however, that if,
after it has been declared effective, the offering of Registrable Securities
pursuant to a Shelf Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, such Registration Statement will be deemed not to have been
effective during the period of such interference, until the offering of
Registrable Securities pursuant to such Registration Statement may legally
resume. The Company will be deemed not to have used its best efforts to cause
the Exchange Offer Registration State-
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<PAGE>
ment or the Shelf Registration Statement, as the case may be, to become, or to
remain, effective during the requisite period if it voluntarily takes any action
that would result in any such Registration Statement not being declared
effective or in the Holders of Registrable Securities covered thereby not being
able to exchange or offer and sell such Registrable Securities during that
period unless such action is required by applicable law.
(e) Additional Interest. In the event that (i) the Exchange Offer
Registration Statement is not filed with the SEC on or prior to the 60th
calendar day following the Closing Time, (ii) the Exchange Offer Registration
Statement is not declared effective on or prior to the 120th calendar day
following the Closing Time, (iii) the Exchange Offer is not consummated on or
prior to the 150th calendar day following the Closing Time or (iv) if a Shelf
Registration Event shall have occurred and if by 180 days after the Closing Time
a Shelf Registration Statement is not declared effective, in each case (i)-(iv)
the interest rate borne by the Securities shall be increased (the "Additional
Interest") by one-half of one percent (0.50%) per annum from and including the
61st day following the Closing Time until, but excluding, the date the Exchange
Offer Registration Statement is filed in the case of (i) above, from and
including the 121st day following the Closing Time until, but excluding, the
date the Exchange Offer Registration Statement is declared effective in the case
of clause (ii) above, from and including the 151st day following the Closing
Time until, but excluding, the consummation of the Exchange Offer in the case of
(iii) above or, solely with respect to Securities which could not be exchanged
as set forth above, Exchange Securities that are not freely tradeable and
Private Exchange Securities, from and including the 181st day after the Closing
Time in the case of clause (iv) above. In addition, such interest rate shall be
increased by an additional one-quarter of one percent (0.25%) per annum for each
90-day period that any such Additional Interest continues to accrue pursuant to
this Section 2(e); provided, however, that the aggregate maximum increase in
such interest rate pursuant to this Section 2(e) will in no event exceed one
percent (1.00%) per annum. Upon (w) the filing of the Exchange Offer
Registration Statement in the case of clause (i) above, (x) the effectiveness of
the Exchange Offer Registration Statement in the case of clause (ii) above, (y)
the date of the consummation of the Exchange Offer in the case of clause (iii)
above or (z) the effectiveness of a Shelf Registration Statement in the case of
clause (iv) above, provided that none of the conditions set forth in clauses
(i), (ii), (iii) and (iv) above continues to exist, the interest rate borne by
the Securities from the date of such filing, effectiveness or consummation, as
the case may be, will be reduced to the original interest rate.
In the event that the Shelf Registration Statement has been declared
effective and subsequently ceases to be effective
12
<PAGE>
prior to the end of the Effectiveness Period (subject to extension pursuant to
the last paragraph of Section 3 hereof), for a period in excess of 45 days,
whether or not consecutive, in any given year, then, the interest rate borne by
the Securities, or the Private Exchange Securities, as the case may be, shall be
increased by an additional one-half of one percent (0.50%) per annum on the 46th
day in the applicable year such Shelf Registration Statement ceases to be
effective. Such interest rate shall be increased by an additional one-quarter of
one percent (0.25%) per annum for each additional 90 days that such Shelf
Registration Statement is not effective, subject to the same aggregate maximum
increase in the interest rate per annum of one percent (1.00%) per annum
referred to above. Upon the effectiveness of a Shelf Registration Statement, the
interest rate borne by the Securities, or the Private Exchange Securities, as
the case may be, shall be reduced to their original interest rate unless and
until increased as described in this paragraph.
The Company shall notify the Trustee within three Business Days
after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Additional
Interest shall be paid by depositing with the Trustee, in trust, for the benefit
of the Holders of Securities or of Private Exchange Securities, as the case may
be, on or before the applicable semiannual interest payment date, immediately
available funds in sums sufficient to pay the Additional Interest then due. The
Additional Interest due shall be payable on each interest payment date to the
record Holder of Securities entitled to receive the interest payment to be paid
on such date as set forth in the Indenture. Each obligation to pay Additional
Interest shall be deemed to accrue from and including the day following the
applicable Event Date.
(f) Specific Enforcement. Without limiting the remedies available to
the Purchasers and the Holders, the Company acknowledges that any failure by the
Company to comply with its obligations under Section 2(a) and Section 2(b)
hereof may result in material irreparable injury to the Purchasers or the
Holders for which there is no adequate remedy at law, that it would not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Purchasers or any Holder may obtain such relief as may
be required to specifically enforce the Company's obligations under Section 2(a)
and Section 2(b) hereof.
3. Registration Procedures. In connection with the obligations of
the Company with respect to the Registration Statements pursuant to Sections
2(a) and 2(b) hereof, the Company shall use its best efforts to:
(a) prepare and file with the SEC a Registration Statement or
Registration Statements as prescribed by Sec-
13
<PAGE>
tions 2(a) and 2(b) hereof within the relevant time period specified in
Section 2 hereof on the appropriate form under the Securities Act, which
form (i) shall be selected by the Company, (ii) shall, in the case of a
Shelf Registration, be available for the sale of the Registrable
Securities by the selling Holders thereof and (iii) shall comply as to
form in all material respects with the requirements of the applicable form
and include all financial statements required by the SEC to be filed
therewith; and use its best efforts to cause such Registration Statement
to become effective and remain effective in accordance with Section 2
hereof; provided, however, that if (1) such filing is pursuant to Section
2(b), or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2(a) is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities, before filing any Registration Statement or
Prospectus or any amendments or supplements thereto, the Company shall
furnish to and afford the Holders of the Registrable Securities and each
such Participating Broker-Dealer, as the case may be, covered by such
Registration Statement, their counsel and the managing underwriters, if
any, a reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference therein
and all exhibits thereto) proposed to be filed (at least 10 Business Days
prior to such filing). The Company shall not file any Registration
Statement or Prospectus or any amendments or supplements thereto in
respect of which the Holders must be afforded an opportunity to review
prior to the filing of such document if the Majority Holders or such
Participating Broker-Dealer, as the case may be, their counsel or the
managing underwriters, if any, shall reasonably object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the Effectiveness Period or the
Applicable Period, as the case may be; and cause each Prospectus to be
supplemented, if so determined by the Company or requested by the SEC, by
any required prospectus supplement and as so supplemented to be filed
pursuant to Rule 424 (or any similar provision then in force) under the
Securities Act, and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations promulgated thereunder
applicable to it with respect to the disposition of all securities covered
by each Registration Statement during the Effectiveness Period or the
Applicable Period, as the case may be, in accordance with the intended
method or methods of distribution by the selling Holders thereof described
in this Agreement (including sales by any Participating Broker-Dealer);
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<PAGE>
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Securities included in the Shelf Registration Statement, at
least three Business Days prior to filing, that a Shelf Registration
Statement with respect to the Registrable Securities is being filed and
advising such Holder that the distribution of Registrable Securities will
be made in accordance with the method selected by the Majority Holders;
and (ii) furnish to each Holder of Registrable Securities included in the
Shelf Registration Statement and to each underwriter of an underwritten
offering of Registrable Securities, if any, without charge, as many copies
of each Prospectus, including each preliminary Prospectus, and any
amendment or supplement thereto and such other documents as such Holder or
underwriter may reasonably request, in order to facilitate the public sale
or other disposition of the Registrable Securities; and (iii) consent to
the use of the Prospectus or any amendment or supplement thereto by each
of the selling Holders of Registrable Securities included in the Shelf
Registration Statement in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or
supplement thereto;
(d) in the case of a Shelf Registration, use its best efforts to
register or qualify the Registrable Securities under all applicable state
securities or "blue sky" laws of such jurisdictions by the time the
applicable Registration Statement is declared effective by the SEC as any
Holder of Registrable Securities covered by a Registration Statement and
each underwriter of an underwritten offering of Registrable Securities
shall reasonably request in writing in advance of such date of
effectiveness, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder and underwriter to
consummate the disposition in each such jurisdiction of such Registrable
Securities owned by such Holder; provided, however, that the Company shall
not be required to (i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (ii) file any general consent to
service of process in any jurisdiction where it would not otherwise be
subject to such service of process or (iii) subject itself to taxation in
any such jurisdiction if it is not then so subject;
(e) in the case of (1) a Shelf Registration or (2) Participating
Broker-Dealers from whom the company has received prior written notice
that they will be utilizing the Prospectus contained in the Exchange Offer
Registration Statement as provided in Section 3(t) hereof, are seeking to
sell Exchange Securities and are required to deliver Prospectuses, notify
each Holder of Registrable Securities, or
15
<PAGE>
such Participating Broker-Dealers, as the case may be, their counsel and
the managing underwriters, if any, promptly and promptly confirm such
notice in writing (i) when a Registration Statement has become effective
and when any post-effective amendments and supplements thereto become
effective, (ii) of any request by the SEC or any state securities
authority for amendments and supplements to a Registration Statement or
Prospectus or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the effectiveness of a
Registration Statement or the qualification of the Registrable Securities
or the Exchange Securities to be offered or sold by any Participating
Broker-Dealer in any jurisdiction described in paragraph 3(d) hereof or
the initiation of any proceedings for that purpose, (iv) in the case of a
Shelf Registration, if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Securities covered
thereby, the representations and warranties of the Company contained in
any underwriting agreement, securities sales agreement or other similar
agreement, if any cease to be true and correct in all material respects,
and (v) of the happening of any event or the failure of any event to occur
or the discovery of any facts or otherwise, during the Effectiveness
Period which makes any statement made in such Registration Statement or
the related Prospectus untrue in any material respect or which causes such
Registration Statement or Prospectus to omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (vi) the
Company's reasonable determination that a post-effective amendment to the
Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the
earliest possible moment;
(g) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities included within the coverage of such Shelf
Registration Statement, without charge, at least one conformed copy of
each Registration Statement relating to such Shelf Registration and any
post-effective amendment thereto (without documents incorporated therein
by reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Securities to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold
and not bearing any restrictive legends and in such denominations
16
<PAGE>
(consistent with the provisions of the Indenture) and registered in such
names as the selling Holders or the underwriters may reasonably request at
least two Business Days prior to the closing of any sale of Registrable
Securities pursuant to such Shelf Registration Statement;
(i) in the case of a Shelf Registration or an Exchange Offer
Registration, upon the occurrence of any circumstance contemplated by
Section 3(e)(ii), 3(e)(iii), 3(e)(v) or 3(e)(vi) hereof, use its best
efforts to prepare a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; and to notify each Holder to suspend use of the
Prospectus as promptly as practicable after the occurrence of such an
event, and each Holder hereby agrees to suspend use of the Prospectus
until the Company has amended or supplemented the Prospectus to correct
such misstatement or omission;
(j) in the case of a Shelf Registration, a reasonable time prior to
the filing of any document which is to be incorporated by reference into a
Registration Statement or a Prospectus after the initial filing of a
Registration Statement, provide a reasonable number of copies of such
document to the Holders; and make such of the representatives of the
Company as shall be reasonably requested by the Holders of Registrable
Securities or the Purchasers on behalf of such Holders available for
discussion of such document;
(k) obtain a CUSIP number for all Exchange Securities or Registrable
Securities, as the case may be, not later than the effective date of a
Registration Statement, and provide the Trustee with printed certificates
for the Exchange Securities or the Registrable Securities, as the case may
be, in a form eligible for deposit with the Depositary;
(l) cause the Indenture to be qualified under the Trust Indenture
Act of 1939 (the "TIA") in connection with the registration of the
Exchange Securities or Registrable Securities, as the case may be, and
effect such changes to the Indenture as may be required for the Indenture
to be so qualified in accordance with the terms of the TIA and execute,
and use its best efforts to cause the Trustee to execute, all documents as
may be required to effect such changes, and all other forms and documents
required to be
17
<PAGE>
filed with the SEC to enable the Indenture to be so qualified in a
timely manner;
(m) in the case of a Shelf Registration, enter into such agreements
(including underwriting agreements) as are customary in underwritten
offerings and take all such other appropriate actions as are reasonably
requested in order to expedite or facilitate the registration or the
disposition of such Registrable Securities, and in such connection,
whether or not an underwriting agreement is entered into and whether or
not the registration is an underwritten registration, if requested by (x)
any Purchaser, in the case where a Purchaser holds Securities acquired by
it as part of its initial distribution or (y) Holders of Securities
covered thereby, in the case where no Purchaser holds any such Securities:
(i) make such representations and warranties to Holders of such
Registrable Securities and the underwriters (if any), with respect to the
business of the Company and its subsidiaries as then conducted and the
Registration Statement, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, as are
customarily made by issuers to underwriters in underwritten offerings, and
confirm the same if and when requested; (ii) obtain opinions of counsel to
the Company and updates thereof (which may be in the form of a reliance
letter) in form and substance reasonably satisfactory to the managing
underwriters (if any) and the Holders of a majority in principal amount of
the Registrable Securities being sold, addressed to each selling Holder
and the underwriters (if any) covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may
be reasonably requested by such Holders and underwriters (it being agreed
that the matters to be covered by such opinion should be subject to
customary qualifications and exceptions); (iii) obtain "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory
to the managing underwriters from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each of the underwriters with copies thereof to
the selling Holders of Registrable Securities, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings and such
other matters as reasonably requested by such underwriters in accordance
with Statement on Accounting Standards No. 72; and (iv) if an underwriting
agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable than those set forth in
Section 4 hereof
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<PAGE>
(or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Registrable Securities covered
by such Registration Statement and the managing underwriters or agents)
with respect to all parties to be indemnified pursuant to said Section
(including, without limitation, such underwriters and selling Holders).
The above shall be done at each closing under such underwriting agreement,
or as and to the extent required thereunder;
(n) if (1) a Shelf Registration is filed pursuant to Section 2(b) or
(2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2(a) is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, make reasonably
available for inspection by any selling Holder of such Registrable
Securities being sold, or each such Participating Broker-Dealer, as the
case may be, any underwriter participating in any such disposition of
Registrable Securities, if any, and any attorney, accountant or other
agent retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries
(collectively, the "Records") as shall be reasonably necessary to enable
them to exercise any applicable due diligence responsibilities, and cause
the officers, directors and employees of the Company and its subsidiaries
to supply all relevant information in each case reasonably requested by
any such Inspector in connection with such Registration Statement
provided, however, that the foregoing inspection and information gathering
shall be coordinated on behalf of the Purchasers by you and on behalf of
the other parties, by one counsel designated by you and on behalf of such
other parties as described in Section 2(c) hereof. Records which the
Company determines, in good faith, to be confidential and any records
which it notifies the Inspectors are confidential shall not be disclosed
by the Inspectors unless (i) the disclosure of such Records is necessary
to avoid or correct a material misstatement or omission in such
Registration Statement, (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction or is necessary in connection with any action, suit or
proceeding or (iii) the information in such Records has been made
generally available to the public. Each selling Holder of such Registrable
Securities and each such Participating Broker-Dealer will be required to
agree in writing that information obtained by it as a result of such
inspections shall be deemed confidential and shall not
19
<PAGE>
be used by it as the basis for any market transactions in the securities
of the Company unless and until such is made generally available to the
public. Each selling Holder of such Registrable Securities and each such
Participating Broker-Dealer will be required to further agree in writing
that it will, upon learning that disclosure of such Records is sought in a
court of competent jurisdiction, give notice to the Company and allow the
Company at its expense to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
(o) comply with all applicable rules and regulations of the SEC so
long as any provision of this Agreement shall be applicable and make
generally available to its securityholders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no
later than 45 days after the end of any 12-month period (or 90 days after
the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which
statements shall cover said 12-month periods;
(p) upon consummation of an Exchange Offer or a Private Exchange, if
requested by the Trustee, obtain an opinion of counsel to the Company
addressed to the Trustee for the benefit of all Holders of Registrable
Securities participating in the Exchange Offer or the Private Exchange, as
the case may be, and which includes an opinion that (i) the Company has
duly authorized, executed and delivered the Exchange Securities and
Private Exchange Securities, and (ii) each of the Exchange Securities or
the Private Exchange Securities, as the case may be, constitute a legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its respective terms (in each case, with
customary exceptions);
(q) if an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Securities by Holders to the Company (or
to such other Person as directed by the Company) in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may
be, the Company shall mark, or cause to be marked, on such Registrable
Securities delivered by such Holders that such Registrable Securities are
being cancelled in exchange for the Exchange Securities or the Private
Exchange Securities,
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<PAGE>
as the case may be; in no event shall such Registrable Securities be
marked as paid or otherwise satisfied;
(r) cooperate with each seller of Registrable Securities covered by
any Registration Statement and each underwriter, if any, participating in
the disposition of such Registrable Securities and their respective
counsel in connection with any filings required to be made with the NASD;
(s) use its best efforts to take all other steps necessary to effect
the registration of the Registrable Securities covered by a Registration
Statement contemplated hereby;
(t) (A) in the case of the Exchange Offer Registration Statement (i)
include in the Exchange Offer Registration Statement a section entitled
"Plan of Distribution," which section shall be reasonably acceptable to
the Purchasers or another representative of the Participating
Broker-Dealers, and which shall contain a summary statement of the
positions taken or policies made by the staff of the SEC with respect to
the potential "underwriter" status of any broker-dealer (a "Participating
Broker-Dealer") that holds Registrable Securities acquired for its own
account as a result of market-making activities or other trading
activities and that will be the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of Exchange Securities to be received by such
broker-dealer in the Exchange Offer, whether such positions or policies
have been publicly disseminated by the staff of the SEC or such positions
or policies, in the reasonable judgment of the Purchasers or such other
representative, represent the prevailing views of the staff of the SEC,
including a statement that any such broker-dealer who receives Exchange
Securities for Registrable Securities pursuant to the Exchange Offer may
be deemed a statutory underwriter and must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of
such Exchange Securities, (ii) furnish to each Participating Broker-Dealer
who has delivered to the Company the notice referred to in Section 3(e),
without charge, as many copies of each Prospectus included in the Exchange
Offer Registration Statement, including any preliminary prospectus, and
any amendment or supplement thereto, as such Participating Broker-Dealer
may reasonably request, (iii) hereby consents to the use of the Prospectus
forming part of the Exchange Offer Registration Statement or any amendment
or supplement thereto, by any Person subject to the prospectus delivery
requirements of the SEC, including all Participating Broker-Dealers, in
connection with the sale or transfer of the Exchange Securities covered by
the
21
<PAGE>
Prospectus or any amendment or supplement thereto), (iv) use its best
efforts to keep the Exchange Offer Registration Statement effective and to
amend and supplement the Prospectus contained therein in order to permit
such Prospectus to be lawfully delivered by all Persons subject to the
prospectus delivery requirements of the Securities Act for such period of
time as such Persons must comply with such requirements under the
Securities Act and applicable rules and regulations in order to resell the
Exchange Securities; provided, however, that such period shall not be
required to exceed 180 days (or such longer period if extended pursuant to
the last sentence of Section 3 hereof) (the "Applicable Period"), and (iv)
include in the transmittal letter or similar documentation to be executed
by an exchange offeree in order to participate in the Exchange Offer (x)
the following provision:
"If the exchange offeree is a broker-dealer holding Registrable
Securities acquired for its own account as a result of market-making
activities or other trading activities, it will deliver a prospectus
meeting the requirements of the Securities Act in connection with
any resale of Exchange Securities received in respect of such
Registrable Securities pursuant to the Exchange Offer";
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in clause (x) and by delivering a Prospectus in
connection with the exchange of Registrable Securities, the broker-dealer will
not be deemed to admit that it is an underwriter within the meaning of the
Securities Act; and
(B) in the case of any Exchange Offer Registration Statement, the
Company agrees to deliver to the Purchasers or to another representative
of the Participating Broker-Dealers, if requested by any such Purchasers
or such other representative of the Participating Broker-Dealers, on
behalf of the Participating Broker-Dealers upon consummation of the
Exchange Offer (i) an opinion of counsel in form and substance reasonably
satisfactory to the Purchasers or such other representative of the
Participating Broker-Dealers, covering the matters customarily covered in
opinions requested in connection with Exchange Offer Registration
Statements and such other matters as may be reasonably requested (it being
agreed that the matters to be covered by such opinion should be subject to
customary qualifications and exceptions), (ii) an officers' certificate
containing certifications substantially similar to those set forth in
Section 5(d) of the Purchase Agreement and such additional certifications
as are customarily delivered in a public offering of debt securities and
(iii) as well as upon the
22
<PAGE>
effectiveness of the Exchange Offer Registration Statement, a comfort
letter, in each case, in customary form if permitted by Statement on
Auditing Standards No. 72 of the American Institute of Certified Public
Accountants.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the proposed distribution of such
Registrable Securities, as the Company may from time to time reasonably request
in writing. The Company may exclude from such registration the Registrable
Securities of any seller who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
In the case of (1) a Shelf Registration Statement or (2)
Participating Broker-Dealers who have notified the Company that they will be
utilizing the Prospectus contained in the Exchange Offer Registration Statement
as provided in Section 3(t) hereof, are seeking to sell Exchange Securities and
are required to deliver Prospectuses each Holder agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 3(e)(ii), 3(e)(iii), 3(e)(v) or 3(e)(vi) hereof, such Holder will
forthwith discontinue disposition of Registrable Securities pursuant to a
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof or until
it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all copies in such
Holder's possession, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registrable Securities or Exchange
Securities, as the case may be, current at the time of receipt of such notice.
If the Company shall give any such notice to suspend the disposition of
Registrable Securities or Exchange Securities, as the case may be, pursuant to a
Registration Statement, the Company shall use its best efforts to file and have
declared effective (if an amendment) as soon as practicable an amendment or
supplement to the Registration Statement and shall extend the period during
which such Registration Statement shall be maintained effective pursuant to this
Agreement by the number of days in the period from and including the date of the
giving of such notice to and including the date when the Company shall have made
available to the Holders (x) copies of the supplemented or amended Prospectus
necessary to resume such dispositions or (y) the Advice.
4. Indemnification and Contribution. A.In connection with any
Registration Statement, the Company and the Guarantors shall, jointly and
severally, indemnify and hold harmless, each Holder, each Participating
Broker-Dealer, each Person, if any,
23
<PAGE>
who controls any of such parties within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act and each of their respective
directors, officers, employees and agents, as follows:
(i) from and against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, as incurred, arising out of any
untrue statement or alleged untrue statement of a material fact contained
in any Registration Statement (or any amendment thereto), covering
Registrable Securities or Exchange Securities, including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) from and against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any court or governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the prior written consent of
the Company; and
(iii) from and against any and all expenses whatsoever, as incurred
(including reasonable fees and disbursements of counsel chosen by such
Holder or such Participating Broker-Dealer (except to the extent otherwise
expressly provided in Section 4(c) hereof)), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any court or governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
sub-paragraph (i) or (ii) of this Section 4(a);
provided, however, that (i) this indemnity does not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished in writing to the
Company by such Holder or such Participating Broker-Dealer with respect to such
Holder or Participating Broker-Dealer, as the case may be,
24
<PAGE>
expressly for use in the Registration Statement (or any amendment thereto) or
any Prospectus (or any amendment or supplement thereto) and (ii) the Company and
the Guarantors shall not be liable to any such Holder, Participating
Broker-Dealer or controlling person, with respect to any untrue statement or
alleged untrue statement or omission or alleged omission in any preliminary
Prospectus to the extent that any such loss, liability, claim, damage or expense
of any Holder, Participating Broker-Dealer or controlling person results from
the fact that such Holder or Participarting Broker-Dealer sold Securities to a
person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the final Prospectus as then amended or
supplemented if the Company had previously furnished copies thereof to such
Holder or Participating Broker-Dealer and the loss, liability, claim, damage or
expense of such Holder, Participating Broker-Dealer or controlling person
results from an untrue statement or omission of a material fact contained in the
preliminary Prospectus which was corrected in the final Prospectus. Any amounts
advanced by the Company to an indemnified party pursuant to this Section 4 as a
result of such losses shall be returned to the Company if it shall be finally
determined by such a court in a judgment not subject to appeal or final review
that such indemnified party was not entitled to indemnification by the Company.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company and the other selling Holders and each of their
respective directors, officers (including each officer of the Company who signed
the Registration Statement), employees and agents and each Person, if any, who
controls the Company or any other selling Holder within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, from and against any
and all loss, liability, claim, damage and expense whatsoever described in the
indemnity contained in Section 4(a) hereof, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Registration Statement (or any amendment thereto) or any Prospectus
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such selling Holder with respect
to such Holder expressly for use in the Registration Statement (or any amendment
thereto), or any such Prospectus (or any amendment or supplement thereto);
provided, however, that, in the case of Shelf Registration Statement, no such
Holder shall be liable for any claims hereunder in excess of the amount of net
proceeds received by such Holder from the sale of Registrable Securities
pursuant to such Shelf Registration Statement.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, enclosing a
25
<PAGE>
copy of all papers properly served on such indemnified party, but failure to so
notify an indemnifying party shall not relieve such indemnifying party from any
liability which it may have under this Section 4, except to the extent that it
is materially prejudiced by such failure. An indemnifying party may participate
at its own expense in the defense of such action. If an indemnifying party so
elects within a reasonable time after receipt of such notice, an indemnifying
party, severally or jointly with any other indemnifying parties receiving such
notice, may assume the defense of such action with counsel chosen by it and
reasonably acceptable to the indemnified parties defendant in such action,
provided, however, that if (i) representation of such indemnified party by the
same counsel would present a conflict of interest or (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and any such indemnified party
reasonably determines that there may be legal defenses available to such
indemnified party which are different from or in addition to those available to
such indemnifying party, then in the case of clauses (i) and (ii) of this
Section 4(c) such indemnifying party and counsel for each indemnifying party or
parties shall not be entitled to assume such defense. If an indemnifying party
is not entitled to assume the defense of such action as a result of the proviso
to the preceding sentence, counsel for such indemnifying party and counsel for
each indemnified party or parties shall be entitled to conduct the defense of
such indemnified party or parties. If an indemnifying party assumes the defense
of such action, in accordance with and as permitted by the provisions of this
paragraph, such indemnifying parties shall not be liable for any fees and
expenses of counsel for the indemnified parties incurred thereafter in
connection with such action. In no event shall the indemnifying parties be
liable for the fees and expenses of more than one counsel (in addition to local
counsel), separate from its own counsel, for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 4 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional written release in form and substance satisfactory to
the indemnified parties of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
26
<PAGE>
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for reasonable fees and
expenses of counsel pursuant to Section 4(a)(iii) above, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 4(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement. Notwithstanding the immediately preceding sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by Section 4(a)(ii)
effected without its consent if such indemnifying party (i) reimburses such
indemnified party in accordance with such request to the extent it considers
such request to be reasonable and (ii) provides written notice to the
indemnified party substantiating the unpaid balance as unreasonable, in each
case prior to the date of such settlement.
(e) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 4 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Company, the Guarantors
and the Holders shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company, the Guarantors and the Holders, as incurred; provided
that no Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person
that was not guilty of such fraudulent misrepresentation. As between the
Company, the Guarantors and the Holders, such parties shall contribute to such
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement in such proportion as shall be
appropriate to reflect the relative fault of the Company and any Guarantor, on
the one hand, and the Holders, on the other hand, with respect to the statements
or omissions which resulted in such loss, liability, claim, damage or expense,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors, on the one
hand, and of the Holders, on the other hand, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Guarantors, on the one
hand, or by or on behalf of the Holders, on the other, and the parties' relative
27
<PAGE>
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company, the Guarantors and the Holders of the
Registrable Securities agree that it would not be just and equitable if
contribution pursuant to this Section 4 were to be determined by pro rata
allocation or by any other method of allocation that does not take into account
the relevant equitable considerations. For purposes of this Section 4, each
affiliate of a Holder, and each director, officer, employee, agent and Person,
if any, who controls a Holder or such affiliate within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as such Holder, and each director of each of the Company
or any Guarantor, each officer of each of the Company or any Guarantor who
signed the Registration Statement, and each Person, if any, who controls each of
the Company and any Guarantor within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as each of the Company or any Guarantor.
5. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents reasonably required under the terms of such underwriting
arrangements.
6. Selection of Underwriters. The Holders of Registrable Securities
covered by the Shelf Registration Statement who desire to do so may sell the
securities covered by such Shelf Registration in an underwritten offering. In
any such underwritten offering, the underwriter or underwriters and manager or
managers that will administer the offering will be selected by the Holders of a
majority in aggregate principal amount of the Registrable Securities included in
such offering; provided, however, that such underwriters and managers must be
reasonably satisfactory to the Company.
7. Miscellaneous.
(a) Rule 144 and Rule 144A. For so long as the Company is subject to
the reporting requirements of Section 13 or 15 of the Exchange Act and any
Registrable Securities remain outstanding, the Company will use its best efforts
to file the reports required to be filed by it under the Securities Act and
Section 13(a) or 15(d) of the Exchange Act and the rules and regulations adopted
by the SEC thereunder, that if it ceases to be so required to file such reports,
it will, upon the request of any Holder of Registrable Securities (a) make
publicly available such information as is necessary to permit sales of their
securi-
28
<PAGE>
ties pursuant to Rule 144 under the Securities Act, (b) deliver such information
to a prospective purchaser as is necessary to permit sales of their securities
pursuant to Rule 144A under the Securities Act and it will take such further
action as any Holder of Registrable Securities may reasonably request, and (c)
take such further action that is reasonable in the circumstances, in each case,
to the extent required from time to time to enable such Holder to sell its
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
as such rule may be amended from time to time, (ii) Rule 144A under the
Securities Act, as such rule may be amended from time to time, or (iii) any
similar rules or regulations hereafter adopted by the SEC. Upon the request of
any Holder of Registrable Securities, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
(b) No Inconsistent Agreements. The Company has not entered into nor
will the Company on or after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
other issued and outstanding securities under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or departure; provided no amendment, modification or supplement or waiver
or consent to the departure with respect to the provisions of Section 4 hereof
shall be effective as against any Holder of Registrable Securities unless
consented to in writing by such Holder of Registrable Securities.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 7(d), which address initially is, with respect to the Purchasers, the
address set forth in the Purchase Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Purchase Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 7(d).
29
<PAGE>
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall
be concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of the
Purchasers, including, without limitation and without the need for an express
assignment, subsequent Holders; provided, however, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Purchase Agreement or the Indenture.
If any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities, such Person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement and such Person shall be entitled to receive the benefits hereof.
(f) Third Party Beneficiary. Each of the Purchasers shall be a third
party beneficiary of the agreements made hereunder between the Company, on the
one hand, and the Holders, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the 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.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO
HAVE BEEN MADE IN THE STATE OF NEW YORK. THE VALIDITY AND
INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS
SET FORTH HEREIN, SHALL BE GOVERNED BY AND CONSTRUED IN ACCOR-
DANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
30
<PAGE>
EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Securities Held by the Company or Its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities Act)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.
31
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
FREEDOM CHEMICAL COMPANY
By: /s/ Brian F. McNamara
-------------------------------
Name: Brian F. McNamara
Title: Secretary
HILTON DAVIS CHEMICAL CO.
By: /s/ Brian F. McNamara
-------------------------------
Name: Brian F. McNamara
Title: Secretary
KALAMA CHEMICAL, INC.
By: /s/ Robert A. Kirchner
-------------------------------
Name: Robert A. Kirchner
Title: President
FREEDOM CHEMICAL DIAMALT GMBH
By: /s/ Helmut Wolf
-------------------------------
Name: Helmut Wolf
Title: Managing Director
KALAMA SPECIALITY CHEMICALS, INC.
By: /s/ Robert A. Kirchner
-------------------------------
Name: Robert A. Kirchner
Title: President
KALAMA FOREIGN SALES CORPORATION
By: /s/ Robert A. Kirchner
-------------------------------
32
<PAGE>
Name: Robert A. Kirchner
Title: President
FCC ACQUISITION CORP.
By: /s/ Brian F. McNamara
-------------------------------
Name: Brian F. McNamara
Title: Secretary
FREEDOM TEXTILE CHEMICAL INC.
By: /s/ Brian F. McNamara
-------------------------------
Name: Brian F. McNamara
Title: Secretary
FREEDOM TEXTILE CHEMICAL
(SOUTH CAROLINA), INC.
By: /s/ Brian F. McNamara
-------------------------------
Name: Brian F. McNamara
Title: Secretary
33
<PAGE>
Confirmed and accepted as of
the date first above
written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Chantal D. Simon
----------------------------------
Name: Chantal D. Simon
Title: Vice President
SCHRODER WERTHEIM & CO. INCORPORATED
By: /s/ R. Douglas Carleton
----------------------------------
Name: R. Douglas Carleton
Title: Managing Director
SMITH BARNEY INC.
By: /s/ Peter M. Phelan
----------------------------------
Name: Peter M. Phelan
Title: Director
34
<PAGE>
================================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of October 11, 1996
among
FREEDOM CHEMICAL COMPANY
as U.S. Borrower
and
FREEDOM CHEMICAL DIAMALT GmbH
as European Borrower
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS LENDERS
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS ISSUING BANKS
and
CITICORP USA, INC.
as Agent
================================================================================
<PAGE>
ARTICLE I DEFINITIONS
1.01. Certain Defined ................................................2
1.02. Computation of Time Periods....................................34
1.03. Accounting Terms...............................................34
1.04. Other Terms....................................................35
ARTICLE II AMOUNTS AND TERMS OF LOANS
2.01. Revolving Credit Facility......................................36
2.02. Swing Loans. ..................................................39
2.03. Authorized Officers and Agents.................................40
2.04. Use of Proceeds of Loans.......................................41
2.05. Currency Equivalents...........................................41
2.06. Currency Exchanges.............................................42
ARTICLE III LETTERS OF CREDIT
3.01. Letters of Credit .............................................43
3.02 Transitional Provisions........................................50
3.03. Obligations Several............................................50
ARTICLE IV PAYMENTS AND PREPAYMENTS
4.01. Prepayments; Reductions in Commitments ........................51
4.02. Payments.......................................................54
4.03. Promise to Repay; Evidence of Indebtedness.....................59
4.04. Proceeds of Collateral; Concentration
Account Arrangements.........................................59
4.05. Cash Collateral Accounts.......................................61
4.06. Post-Default Withdrawals from the Concentration
Accounts and Cash Collateral Accounts. .....................62
ARTICLE V INTEREST AND FEES
5.01. Interest on the Loans and other Obligations ...................64
5.02. Special Provisions Governing Eurocurrency
Rate Loans...................................................67
5.03. Fees...........................................................69
-i-
<PAGE>
ARTICLE VI CONDITIONS TO LOANS AND LETTERS OF CREDIT
6.01. Conditions Precedent to the Effectiveness of Agreement .........72
6.02. Conditions Precedent to All Loans and Letters
of Credit....................................................74
ARTICLE VII REPRESENTATIONS AND WARRANTIES
7.01. Representations and Warranties of the Borrowers ...............76
ARTICLE VIII REPORTING COVENANTS
8.01. Financial Statements ..........................................89
8.02. Operations Reports.............................................92
8.03. Events of Default..............................................92
8.04. Lawsuits.......................................................93
8.05. Insurance .....................................................93
8.06. ERISA Notices..................................................94
8.07. Environmental Notices..........................................95
8.08. Labor Matters..................................................97
8.09. Subordinated Debt..............................................97
8.10. Other Reports..................................................97
8.11. Other Information..............................................97
ARTICLE IX AFFIRMATIVE COVENANTS
9.01. Corporate Existence, Etc. .....................................99
9.02. Corporate Powers; Conduct of Business..........................99
9.03. Compliance with Laws, Etc......................................99
9.04. Payment of Taxes and Claims; Tax Consolidation.................99
9.05. Insurance.....................................................100
9.06. Inspection of Property; Books and Records;
Discussions................................................100
9.07. Insurance and Condemnation Proceeds...........................101
9.08. ERISA Compliance..............................................102
9.09. Foreign Employee Benefit Plan Compliance......................102
9.10. Deposit Accounts..............................................102
9.11. Maintenance of Property.......................................102
9.12. Condemnation..................................................102
9.13. Future Liens on Real Property.................................102
9.14. Consignee/Bailee Letters; Filings.............................103
9.15. Future Pledges of Equity Securities;
Other Loan Documents........................................103
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ARTICLE X NEGATIVE COVENANTS
10.01. Indebtedness ................................................105
10.02. Sales of Assets..............................................107
10.03. Liens........................................................108
10.04. Investments..................................................109
10.05. Restricted Junior Payments...................................110
10.06. Conduct of Business..........................................111
10.07. Transactions with Shareholders and Affiliates................111
10.08. Restriction on Fundamental Changes...........................112
10.09. Sales and Leasebacks.........................................112
10.10. Margin Regulations; Securities Laws..........................112
10.11. ERISA........................................................112
10.12. Issuance of Equity Securities................................113
10.13. Organizational Documents; Subordinated Debt
Documents..................................................114
10.14. Bank Accounts................................................114
10.15. Fiscal Year..................................................114
10.17. Negative Pledge..............................................114
ARTICLE XI FINANCIAL COVENANTS
11.01. Leverage Ratio ..............................................116
11.02. Interest Coverage Ratio......................................116
11.03. Fixed Charge Coverage Ratio..................................117
11.04. Capital Expenditures.........................................117
11.05. Financial Covenant Calculations..............................118
ARTICLE XII EVENTS OF DEFAULT; RIGHTS AND REMEDIES
12.01. Events of Default ...........................................119
12.02. Rights and Remedies..........................................122
ARTICLE XIII THE AGENT
13.01. Appointment. ................................................124
13.02. Nature of Duties.............................................124
13.03. Rights, Exculpation, Etc.....................................125
13.04. Reliance.....................................................126
13.05. Indemnification..............................................126
13.06. Citicorp Individually........................................126
13.07. Successor Agents.............................................126
13.08. Relations Among Lenders......................................127
13.09. Concerning the Collateral and the Loan Documents.............127
ARTICLE XIV YIELD PROTECTION
14.01. Taxes .......................................................130
14.02. Increased Capital............................................133
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14.03. Changes; Legal Restrictions. ................................133
14.04. Illegality...................................................134
14.05. Compensation.................................................135
14.06. Limitation on Additional Amounts Payable
by the Borrowers...........................................135
14.07. Change in Lending Office.....................................136
ARTICLE XV MISCELLANEOUS
15.01. Assignments and Participations...............................137
15.02. Expenses.....................................................139
15.03. Indemnity....................................................140
15.04. Change in Accounting Principles..............................142
15.05. Setoff.......................................................142
15.06. Ratable Sharing..............................................143
15.07. Amendments and Waivers.......................................143
15.08. Notices......................................................145
15.09. Survival of Warranties and Agreements........................145
15.10. Failure or Indulgence Not Waiver; Remedies
Cumulative................................................146
15.11. Marshalling; Payments Set Aside..............................146
15.12. Severability.................................................146
15.13. Headings.....................................................146
15.14. Governing Law................................................147
15.15. Limitation of Liability......................................147
15.16. Successors and Assigns.......................................147
15.17. Certain Consents and Waivers of the Borrowers................147
15.18. Counterparts; Effectiveness; Inconsistencies.................149
15.19. Limitation on Agreements.....................................149
15.20. Confidentiality..............................................149
15.21. Entire Agreement; No Novation................................150
15.22. Advice of Counsel. .........................................150
15.23. Replacement of Lenders and Issuing Banks.....................150
15.24. Limitation on Liability of European Borrower.................151
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AMENDED AND RESTATED CREDIT AGREEMENT
This Amended and Restated Credit Agreement dated as of October 11,
1996 (as amended, supplemented or modified from time to time, the "Agreement")
is entered into among Freedom Chemical Company, a Delaware corporation (the
"U.S. Borrower"), Freedom Chemical Diamalt GmbH, a corporation formed under the
laws of The Federal Republic of Germany (the "European Borrower"), the
institutions from time to time a party hereto as Lenders, whether by execution
of this Agreement or an Assignment and Acceptance, the institutions from time to
time a party hereto as Issuing Banks, whether by execution of this Agreement or
an Assignment and Acceptance, and Citicorp USA, Inc., a Delaware corporation
("Citicorp"), in its capacity as agent for the Lenders and the Issuing Banks
hereunder (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the U.S. Borrower entered into that certain Amended and
Restated Credit Agreement dated as of May 26, 1994, as amended (the "1994 Credit
Agreement") with Citicorp, Bank of America Illinois, The Bank of New York,
Caisse Nationale de Credit Agricole, Crescent/Mach I Partners, L.P., Senior Debt
Portfolio, The First National Bank of Boston, Heller Financial, Inc., The
Long-Term Credit Bank of Japan, Limited, New York Branch, Mitsui Leasing (USA)
Inc., United States National Bank of Oregon, Merrill Lynch Senior Floating Rate
Fund, Inc., Merrill Lynch Prime Rate Portfolio, Senior Strategic Income Fund,
Inc., and Van Kampen American Capital Prime Rate Income Trust, as lenders,
Citicorp, as agent, and Citibank, N.A., as issuing bank, pursuant to which the
aforesaid lenders and issuing bank have made certain extensions of credit and
other financial accommodations to or for the benefit of the U.S. Borrower;
WHEREAS, the European Borrower, a subsidiary of the U.S. Borrower,
is desirous of refinancing certain indebtedness it has incurred under extensions
of credit made by BHF-Bank Aktiengesellschaft and the U.S. Borrower has
requested that such refinancing be made available to the European Borrower by
lenders to the U.S. Borrower under a common credit facility;
WHEREAS, the U.S. Borrower intends to issue senior subordinated
notes due 2006 in the amount of $125,000,000 concurrently with this Agreement
becoming effective, the proceeds of which will be used, in part, to repay
certain of the indebtedness of the U.S. Borrower under the 1994 Credit
Agreement;
WHEREAS, certain shareholders of the U.S. Borrower will purchase
$10,000,000 of common equity of the U.S. Borrower concurrently with this
Agreement becoming effective, the proceeds of which will be used, in part, to
repay certain of the
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indebtedness of the U.S. Borrower under the 1994 Credit Agreement; and
WHEREAS, in connection with the foregoing, the U.S. Borrower has
requested that the credit facilities made available to it under the 1994 Credit
Agreement be restructured and that the 1994 Credit Agreement be further amended
and restated and the Agent, Lenders and Issuing Banks have agreed to such
requests;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms. The following terms used in this
Agreement shall have the following meanings, applicable both to the singular and
the plural forms of the terms defined:
"Accommodation Obligation" means any Contractual Obligation,
contingent or otherwise, of one Person with respect to any Indebtedness,
obligation or liability of another, if the primary purpose or intent thereof by
the Person incurring the Accommodation Obligation is to provide assurance to the
obligee of such Indebtedness, obligation or liability of another that such
Indebtedness, obligation or liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders thereof
will be protected (in whole or in part) against loss in respect thereof
including, without limitation, direct and indirect guarantees, endorsements
(except for collection or deposit in the ordinary course of business), notes
co-made or discounted, recourse agreements, take-or-pay agreements, keep-well
agreements, agreements to purchase or repurchase such Indebtedness, obligation
or liability or any security therefor or to provide funds for the payment or
discharge thereof, agreements to maintain solvency, assets, level of income, or
other financial condition, and agreements to make payment other than for value
received. The amount of any Accommodation Obligation shall be equal to the
amount of the Indebtedness, obligation or liability so guaranteed or otherwise
supported; provided, that (i) if the liability of the Person extending such
guaranty or support is limited with respect thereto to an amount less than the
Indebtedness, obligation or liability guaranteed or supported, or is limited to
recourse against a particular asset or assets of such Person, the amount of the
corresponding Accommodation Obligation shall be limited (in the case of a
guaranty or other support limited by amount) to such lesser amount or (in the
case of a guaranty or other support limited by recourse to a particular asset or
assets) to the higher of the Fair Market Value of such asset or assets at the
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date for determination of the amount of the Accommodation Obligation or the
value at which such asset or assets would, in conformity with GAAP, be reflected
on or valued for the purposes of preparing a consolidated balance sheet of such
Person as at such determination date; and (ii) if any obligation or liability is
guaranteed or otherwise supported jointly and severally by a Person and others,
then the amount of the obligation or liability of such Person with respect to
such guaranty or other support to be included in the amount of such Person's
Accommodation Obligation shall be the whole principal amount so guaranteed or
otherwise supported.
"Affected Lender" is defined in Section 14.05.
"Affiliate", as applied to any Person, means any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, that Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to vote five percent (5.0%) or more of the Securities
having voting power for the election of directors of that Person or otherwise to
direct or cause the direction of the management and policies of that Person,
whether through the ownership of voting Securities or by contract or otherwise.
"Agent" means Citicorp and each successor agent appointed pursuant
to the terms of Article XIII.
"Agreement" is defined in the preamble hereto.
"Alternative Currency" means the lawful currency of the United
Kingdom, France, or The Federal Republic of Germany; provided that the same is
freely transferable and convertible into Dollars.
"AMCY Preferred Stock" means the 2,800 shares of 11 7/8% Redeemable
Preferred Stock, Series A, issued by Textile to American Cyanamid Company on May
4, 1992 and maturing on May 4, 2002 for a total aggregate amount of $2,919,000.
"Applicable Lending Office" means, with respect to a particular
Lender, its Eurocurrency Lending Office in respect of provisions relating to
Eurocurrency Rate Loans and its Domestic Lending Office in respect of provisions
relating to Base Rate Loans.
"Applicable Payment Office" means, with respect to Obligations
payable in Dollars, the principal office of Citibank in New York, New York, and,
with respect to Obligations payable in any Alternative Currency, the principal
office of Citibank London in London, England or such other office or offices as
determined by the Agent from time to time of which notice is
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given to the Borrowers, Lenders and Issuing Banks in accordance with the
provisions of Section 15.08.
"Assignment and Acceptance" means an Assignment and Acceptance in
substantially the form of Exhibit A attached hereto and made a part hereof (with
blanks appropriately completed) delivered to the Agent in connection with an
assignment of a Lender's interest under this Agreement in accordance with the
provisions of Section 15.01.
"Bankruptcy Code" means Title 11 of the United States
Code (11 U.S.C. ss.ss. 101 et seq.), as amended from time to time,
and any successor statute.
"Base Eurocurrency Rate" means, with respect to any Eurocurrency
Rate Interest Period applicable to a Borrowing of Eurocurrency Rate Loans, an
interest rate per annum determined by the Agent to be the average (rounded
upward to the nearest whole multiple of one sixteenth of one percent (0.0625%)
per annum, if such average is not such a multiple) of the rates per annum
specified by notice to the Agent by Citibank as 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 approximately 11:00 a.m. (London time) on the Eurocurrency
Interest Rate Determination Date for such Eurocurrency Rate Interest Period for
a period equal to such Eurocurrency Rate Interest Period and in an amount
substantially equal to the amount of the Eurocurrency Rate Loan to be
outstanding to Citicorp for such Eurocurrency Interest Period.
"Base Rate" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum shall at all
times be equal to the highest of:
(i) the rate of interest announced publicly by Citibank in New York,
New York from time to time, as Citibank's base rate; and
(ii) the sum (adjusted to the nearest one-quarter of one percent
(0.25%) or, if there is no nearest one-quarter of one percent (0.25%), to
the next higher one-quarter of one percent (0.25%)) of (A) one-half of one
percent (0.50%) per annum plus (B) the rate per annum obtained by dividing
(I) 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
average (adjusted to the basis of a year of 360 days) being determined
weekly on each Monday (or, if any such day is not a Business Day, on the
next succeeding Business Day) for the three-week period ending on the
previous Friday (or, if such day is not a Business Day, on the next
preceding Business Day) by
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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 (3) New York
certificate of deposit dealers of recognized standing selected by
Citibank, by (II) a percentage equal to 100% minus the average of the
daily percentages specified during such three-week period by the Federal
Reserve Board (or any successor) for determining the maximum reserve
requirement (including, but not limited to, any emergency, supplemental or
other marginal reserve requirement) for Citibank in respect of liabilities
consisting of or including (among other liabilities) three-month Dollar
nonpersonal time deposits in the United States plus (C) 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 Dollar deposits of Citibank in the United States; and
(iii) the sum of (A) one-half of one percent (0.50%) per annum plus
(B) the Federal Funds Rate in effect from time to time during such period.
"Base Rate Loans" means all Loans denominated in Dollars which bear
interest at a rate determined by reference to the Base Rate as provided in
Section 5.01(a).
"Base Rate Margin" means, as of any date of determination, a per
annum rate equal to the rate set forth below opposite the then applicable
Performance Level set forth below:
Performance Level Base Rate Margin
----------------- ----------------
1 0.50%
2 1.00%
3 1.25%
4 1.50%
"Benefit Plan" means a "defined benefit plan" as defined in Section
3(35) of ERISA (other than a Multiemployer Plan or Foreign Employee Benefit
Plan) in respect of which the U.S. Borrower or any ERISA Affiliate is, or within
the immediately preceding six (6) years was, an "employer" as defined in Section
3(5) of ERISA.
"Borrower" means either the U.S. Borrower or the
European Borrower; "Borrowers" means, collectively, the U.S.
Borrower and the European Borrower.
"Borrowing" means a borrowing consisting of Loans of
the same type made, continued or converted on the same day and,
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in the case of Eurocurrency Rate Loans, for the same Eurocurrency
Rate Interest Period.
"Business Activity Report" means (A) a Notice of Business Activities
Report from the State of New Jersey Division of Taxation or (B) a Minnesota
Business Activity Report from the Minnesota Department of Revenue.
"Business Day" means a day, in the applicable local time, which is
not a Saturday or Sunday or a legal holiday and on which banks are not required
or permitted by law or other governmental action to close (i) in New York, New
York and (ii) in the case of Eurocurrency Rate Loans, in London, England and in
the country of issue of the currency of such Eurocurrency Rate Loans, and (iii)
in the case of Letter of Credit transactions for a particular Issuing Bank, in
the place where its office for issuance or administration of the pertinent
Letter of Credit is located.
"Capital Expenditures" means, for any period, the aggregate of all
expenditures (whether payable in cash or other Property or accrued as a
liability (but without duplication)) during such period that, in conformity with
GAAP, are required to be included in or reflected by the U.S. Borrower's or any
of its Subsidiaries' fixed asset accounts as reflected in any of their
respective balance sheets.
"Capital Lease" means any lease of any property (whether real,
personal or mixed) by a Person as lessee which, in conformity with GAAP, is
accounted for as a capital lease on the balance sheet of that Person.
"Capital Stock" means, with respect to any Person, any capital stock
of such Person, regardless of class or designation, and all warrants, options,
purchase rights, conversion or exchange rights, voting rights, calls or claims
of any character with respect thereto.
"Cash Collateral" means cash or Cash Equivalents held by the Agent,
any of the Issuing Banks or any of the Lenders as security for the Obligations.
"Cash Collateral Account" means an interest bearing account at
Citibank's offices in New York, New York designated by the Agent into which Cash
Collateral shall be deposited. The Cash Collateral Account shall be under the
sole dominion and control of the Agent, provided that all amounts deposited
therein shall be held by the Agent for the benefit of the Holders and shall be
subject to the terms of Sections 4.05 and 4.06.
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government; and (ii) domestic and
Eurodollar
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certificates of deposit and time deposits, bankers' acceptances and floating
rate certificates of deposit issued by any commercial bank organized under the
laws of the United States, any state thereof, the District of Columbia, any
foreign bank, or its branches or agencies (fully protected against currency
fluctuations); provided, that (x) the maturities of such Cash Equivalents shall
not exceed one year, (y) such Cash Equivalents shall be maintained in investment
and other accounts of the Agent at Citibank or any of the Lenders, and (z) if
the aggregate amount of Cash Equivalents described in clause (ii) exceeds
$1,000,000 at the time of acquisition, the issuer of such Cash Equivalents shall
be rated A-1 (or better) by Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., or P-1 (or better) by Moody's Investors
Service, Inc.
"Cash Interest Expense" means, for any period, total interest
expense, whether paid or accrued but without duplication, (including the
interest component of Capital Leases but net of the difference between payments
received by a Borrower on all Hedge Agreements and payments made by it on all
Hedge Agreements other than the initial payments made to enter into such Hedge
Agreements and excluding deferred financing costs and fees) of the U.S. Borrower
and its Subsidiaries, which is payable in cash, all as determined on a
consolidated basis in conformity with GAAP.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss.ss. 9601 et seq., any
amendments thereto, any successor statutes, and any regulations promulgated
thereunder.
"Change of Control" means any of (i) JLL or any partnership or
corporation which is controlled by JLL Associates, L.P. ceasing to directly or
indirectly own an aggregate of twenty percent (20%) of the common stock of the
U.S. Borrower or (ii) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act), other than Permitted
Holders, is or becomes (including by merger, consolidation or otherwise) the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities
Exchange Act, except that a Person shall be deemed to have beneficial ownership
of all shares that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of 50% or more of the voting power of the total outstanding Voting
Stock of the U.S. Borrower or (iii) during any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors of the U.S. Borrower (together with any new directors whose election
to such Board of Directors, or whose nomination for election by the stockholders
of the U.S. Borrower, was approved by a vote of 66 2/3% of the directors then
still in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason to constitute a majority of such
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Board of Directors of the U.S. Borrower then in office or (iv) the sale or other
disposition (including by merger, consolidation or otherwise) of all or
substantially all of the Capital Stock or assets of the U.S. Borrower and/or
substantially all of the Subsidiaries of the U.S. Borrower to any Person or
"Group" (as defined in Rule 13d-5 under the Securities Exchange Act), other than
to the Permitted Holders, as an entirety or substantially as an entirety in one
transaction or a series of related transactions, but excluding transfers or
conveyances of Capital Stock or assets of Subsidiaries of the U.S. Borrower to
or among the U.S. Borrower's Wholly-Owned Subsidiaries, as permitted by this
Agreement or otherwise consented to, in writing, by the Requisite Lenders.
"Citibank" means Citibank, N.A., a national banking
association.
"Citibank London" means Citibank International, plc, an
Affiliate of Citibank and Citicorp.
"Citicorp" is defined in the preamble of this
Agreement.
"Claim" means any claim or demand, by any Person, of whatsoever kind
or nature for any alleged Liabilities and Costs, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute,
Permit, ordinance or regulation, common law or otherwise.
"Closing Date" means October 11, 1996.
"Collateral" means all Property and interests in Property now owned
or hereafter acquired by the U.S. Borrower or any of its Subsidiaries upon which
a Lien is granted under any of the Loan Documents.
"Collection Account" means each lock-box and blocked depository
account maintained by the U.S. Borrower or any of its Subsidiaries subject to a
Collection Account Agreement for the collection of Receivables and other
proceeds of Collateral.
"Collection Account Agreement" means a written agreement,
substantially in the form attached hereto as Exhibit B with such modifications
as the Agent and the U.S. Borrower, from time to time, deem acceptable, among
the U.S. Borrower or a Subsidiary of the U.S. Borrower, the Agent, and, as
applicable, each of the banks at which the U.S. Borrower or a Subsidiary of the
U.S. Borrower maintains a Collection Account.
"Commercial Letter of Credit" means any documentary letter of credit
issued by an Issuing Bank pursuant to Section 3.01 for the account of a Borrower
or for the account of any of a Borrower's Subsidiaries if such Borrower is
jointly and severally liable for reimbursement of amounts drawn under such
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letter of credit, which is drawable upon presentation of documents evidencing
the sale or shipment of goods purchased by such Borrower or such Subsidiary in
the ordinary course of its business.
"Commission" means the Securities and Exchange Commission and any
Person succeeding to the functions thereof.
"Commitment" means, with respect to any Lender at the time of
determination thereof, the aggregate amount of such Lender's Revolving Credit
Commitment; and "Commitments" means the aggregate amount of all Revolving Credit
Commitments.
"Commitment Letter" means that certain commitment
letter dated August 26, 1996, addressed to the U.S. Borrower from
Citicorp and Fleet and accepted by the U.S. Borrower on September
6, 1996.
"Compliance Certificate" is defined in Section 8.01(c).
"Concentration Account" means a depository account maintained at
Citibank in New York, New York, Citibank London in London, England, or such
other financial institutions designated for such purpose by the Agent into which
collections of Receivables, other proceeds of Collateral and other amounts are
transferred pursuant to the terms of the Collection Account Agreements or
otherwise as described in Section 4.04.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, radioactive materials, asbestos (in any form or condition),
polychlorinated biphenyls (PCBs), or any constituent of any such substance or
waste, and includes, but is not limited to, these terms as defined in
Environmental, Health or Safety Requirements of Law.
"Contractual Obligation", as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, security agreement, pledge agreement, guaranty, contract,
undertaking, agreement or instrument to which that Person is a party or by which
it or any of its properties is bound, or to which it or any of its properties is
subject.
"Cowpens Plant" means that certain Real Property of
Textile SC located in Cowpens, South Carolina.
"Cure Loans" is defined in Section 4.02(b)(v)(C).
"Customary Permitted Liens" means
(i) Liens (other than Environmental Liens and Liens in favor of the
PBGC) with respect to the payment of taxes, assessments or governmental
charges in all
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cases which are not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with GAAP;
(ii) statutory Liens of landlords and Liens of suppliers, mechanics,
carriers, materialmen, warehousemen or workmen and other Liens imposed by
law created in the ordinary course of business for amounts not yet due or
which are being contested in good faith by appropriate proceedings and
with respect to which adequate reserves or other appropriate provisions
are being maintained in accordance with GAAP;
(iii) Liens (other than any Lien in favor of the PBGC) incurred or
deposits made in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other types of social
security benefits or to secure the performance of bids, tenders, sales,
contracts (other than for the repayment of borrowed money), and surety,
appeal and performance bonds; provided that (A) all such Liens do not in
the aggregate materially detract from the value of a Borrower's or any of
its Subsidiaries' assets or Property or materially impair the use thereof
in the operation of their respective businesses, and (B) all Liens of
attachment or judgment and Liens securing bonds to stay judgments or in
connection with appeals which do not secure at any time an aggregate
amount exceeding $1,000,000; and
(iv) Liens arising with respect to zoning restrictions, easements,
licenses, reservations, covenants, rights-of-way, utility easements,
building restrictions and other similar charges or encumbrances on the use
of Real Property which do not interfere with the ordinary conduct of the
business of a Borrower or any of its Subsidiaries.
"Designated Prepayment" means each mandatory prepayment
required by Section 4.01(b).
"DM" means the lawful money of The Federal Republic of
Germany.
"DOL" means the United States Department of Labor and any Person
succeeding to the functions thereof.
"Dollars" and "$" mean the lawful money of the United
States.
"Domestic Lending Office" means, with respect to any
Lender, such Lender's office, located in the United States,
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specified as the "Domestic Lending Office" under its name on the signature pages
hereof or on the Assignment and Acceptance by which it became a Lender or such
other United States office of such Lender as it may from time to time specify by
written notice to the U.S. Borrower and the Agent.
"Domestic Subsidiary" means, each of Hilton, KCI, Textile, Textile
SC and each other Subsidiary of a Borrower domiciled in the U.S., one of its
states, districts or possessions.
"EBITDA" means, for any period, the amount calculated on a
consolidated basis for the U.S. Borrower in accordance with GAAP, without
duplication, for such period as (i) Net Income, plus (ii) depreciation and
amortization expense, plus (iii) interest expense, plus (iv) federal, state, and
local income taxes deducted from Net Income, plus (v) extraordinary and
non-recurring losses or costs (and any unusual losses or costs arising in or
outside of the ordinary course of business of the U.S. Borrower and its
Subsidiaries not included in extraordinary losses) which have been included in
the determination of Net Income, plus (vi) non-cash restructuring charges and
costs and other non-cash items decreasing Net Income for such period (including
such items accounting for minority interests in any Person in the calculation of
Net Income, except to the extent of the amount of cash dividends or
distributions actually paid to the U.S. Borrower or any of its Subsidiaries by
such Person during such period, plus (vii) any non-cash compensation expense
incurred minus (viii) extraordinary and non-recurring gains (and any unusual
gains arising in or outside of the ordinary course of business of the U.S.
Borrower and its Subsidiaries not included in extraordinary gains) which have
been included in the determination of Net Income, minus (ix) cash used to reduce
the reserve or liability for the non-cash restructuring charges and costs
referenced in clause (vi) above, minus (x) any other non-cash items increasing
Net Income for such period, minus (or plus) (xi) net gain (or loss) in respect
of any sale, transfer or other disposition of assets (including, without
limitation, pursuant to sale and leaseback transactions) other than in the
ordinary course of business of the U.S. Borrower and its Subsidiaries.
"Effective Date" is defined in Section 6.01.
"Eligible Assignee" means (i) a Lender or any Affiliate thereof,
(ii) a commercial bank having total assets in excess of $2,500,000,000, (iii)
the central bank of any country which is a member of the Organization for
Economic Cooperation and Development, or (iv) a finance company, insurance
company, other financial institution or fund; in each instance, which is (a)
acceptable to the Agent, (b) regularly engaged in making, purchasing or
investing in loans, and (c) having total assets in excess of $250,000,000.
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"Environmental, Health or Safety Requirements of Law" means all
Requirements of Law relating to, imposing liability or standards concerning, or
otherwise addressing, the environment, health and/or safety, including, but not
limited to the Clean Air Act, the Clean Water Act, CERCLA, RCRA, any so-called
"Superfund" or "Superlien" law, the Toxic Substances Control Act and OSHA, and
public health codes, each as from time to time in effect.
"Environmental Lien" means a Lien in favor of any Governmental
Authority for any (i) liabilities under any Environmental, Health or Safety
Requirement of Law, or (ii) damages arising from, or costs incurred by such
Governmental Authority in response to, a Release or threatened Release of a
Contaminant.
"Environmental Property Transfer Acts" means any applicable
Requirement of Law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the transfer, sale, lease or closure of
any Property or deed or title for any Property for environmental reasons,
including, but not limited to, any so-called "Industrial Site Recovery Acts" or
"Responsible Property Transfer Acts" or "Environmental Clean-up Responsibility
Acts".
"Equipment" means, with respect to any Person, all of such Person's
present and future (i) equipment, including, without limitation, machinery,
manufacturing, distribution, selling, data processing and office equipment,
assembly systems, tools, molds, dies, fixtures, appliances, furniture,
furnishings, vehicles, vessels, aircraft, aircraft engines, and trade fixtures,
(ii) other tangible personal property (other than such Person's Inventory), and
(iii) any and all accessions, parts and appurtenances attached to any of the
foregoing or used in connection therewith, and any substitutions therefor and
replacements, products and proceeds thereof.
"Equity Infusion" means that certain $10,000,000 received by the
U.S. Borrower, in cash, from Joseph Littlejohn and Levy Fund, L.P., Joseph
Littlejohn and Levy Fund II, L.P., and, if applicable, other holders of common
stock of the U.S. Borrower in consideration of the issuance thereto of common
equity of the U.S. Borrower on the Effective Date.
"ERISA" means the Employee Retirement Income Security Act of 1974,
29 U.S.C. ss.ss. 1000 et seq., any amendments thereto, any successor statutes,
and any regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (i) any corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as the U.S. Borrower; (ii) a partnership or other
trade or business (whether or not incorporated) which is under common control
(within the meaning of Section 414(c) of the Internal Revenue
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Code) with the U.S. Borrower; and (iii) a member of the same affiliated service
group (within the meaning of Section 414(m) of the Internal Revenue Code) as the
U.S. Borrower, any corporation described in clause (i) above or any partnership
or trade or business described in clause (ii) above.
"Eurocurrency Affiliate" means, with respect to each Lender, the
Affiliate of such Lender (if any) set forth below such Lender's name under the
heading "Eurocurrency Affiliate" on the signature pages hereof or on the
Assignment and Acceptance by which it became a Lender or such Affiliate of a
Lender as it may from time to time specify by written notice to the U.S.
Borrower and the Agent.
"Eurocurrency Interest Rate Determination Date" is defined in
Section 5.02(c).
"Eurocurrency Lending Office" means, with respect to any Lender, the
office or offices of such Lender (if any) set forth below such Lender's name
under the heading "Eurocurrency Lending Office" on the signature pages hereof or
on the Assignment and Acceptance by which it became a Lender (or, if no such
office is so specified, its Domestic Lending Office) or such office or offices
of such Lender as it may from time to time specify by written notice to the U.S.
Borrower and the Agent.
"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.
"Eurocurrency Rate" means, with respect to any Eurocurrency Interest
Period applicable to a Eurocurrency Rate Loan comprising part of the same
Borrowing, an interest rate per annum obtained by dividing (i) the Base
Eurocurrency Rate applicable to that Eurocurrency Interest Period by (ii) a
percentage equal to 100% minus the Eurocurrency Reserve Percentage in effect on
the relevant Eurocurrency Interest Rate Determination Date.
"Eurocurrency Rate Interest Payment Date" means (i) with respect to
any Eurocurrency Rate Loan, the last day of each Eurocurrency Rate Interest
Period applicable to such Loan and (ii) with respect to any Eurocurrency Rate
Loan having a Eurocurrency Rate Interest Period in excess of three (3) calendar
months, the last day of each three (3) calendar month interval during such
Eurocurrency Rate Interest Period.
"Eurocurrency Rate Interest Period" means, for each Eurocurrency
Rate Loan comprising part of the same Borrowing, the period commencing on the
date of such Loan or the date of the conversion of any Loan into such a Loan and
ending on the last day of the period selected by the U.S. Borrower pursuant to
the provisions of this Agreement and, thereafter, each subsequent period
commencing on the last day of the immediately preceding
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Eurocurrency Rate Interest Period and ending on the last day of the period
selected by the U.S. Borrower pursuant to the provisions of this Agreement.
"Eurocurrency Rate Loans" means those Loans denominated in Dollars
or in an Alternative Currency which bear interest at a rate determined by
reference to the Eurocurrency Rate and the Eurocurrency Rate Margin as provided
in Section 5.01(a).
"Eurocurrency Rate Margin" means, as of any date of determination, a
per annum rate equal to the rate set forth below opposite the then applicable
Performance Level set forth below:
Performance Level Eurocurrency Rate Margin
----------------- ------------------------
1 1.50%
2 2.00%
3 2.25%
4 2.50%
"Eurocurrency Reserve Percentage" means, for any day, that
percentage which is in effect on such day, as prescribed by the Federal Reserve
Board 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, New York with
deposits exceeding Five Billion Dollars ($5,000,000,000) in respect of
"Eurocurrency Liabilities" (or in respect of any other category of liabilities
which includes deposits by reference to which the interest rate on Eurocurrency
Rate Loans is determined or any category of extensions of credit or other assets
which includes loans by a non-United States office of any bank to United States
residents).
"European Borrower" is defined in the preamble of this
Agreement.
"Event of Default" means any of the occurrences set forth in Section
12.01 after the expiration of any applicable grace period, as expressly provided
in Section 12.01.
"Fair Market Value" means, with respect to any asset, the value of
the consideration obtainable in a sale of such asset in the open market,
assuming a sale by a willing seller to a willing purchaser dealing at arm's
length and arranged in an orderly manner over a reasonable period of time, each
having reasonable knowledge of the nature and characteristics of such asset,
neither being under any compulsion to act, and, if in excess of $250,000, as
determined (a) in good faith by the Board of Directors of the U.S. Borrower or
(b) in an appraisal of such asset performed relatively contemporaneously with
such sale by an independent third party appraiser, provided that the basic
assumptions underlying such appraisal have not materially changed since the date
thereof.
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"FCCAC" means FCC Acquisition Corp., a Delaware corporation.
"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 in New York, New York, for the next preceding
Business Day) in New York, New York by the Federal Reserve Bank of New York, or
if such rate is not so published for any day which is a Business Day in New
York, New York, 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 the Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any Governmental Authority succeeding to its functions.
"Fee Letter" means that certain fee letter addressed to Citicorp and
Fleet from the U.S. Borrower dated September 6, 1996.
"Financial Statements" means (i) statements of income and retained
earnings, statements of cash flow, and balance sheets and (ii) such other
financial statements as the U.S. Borrower and its Subsidiaries shall routinely
and regularly prepare.
"Fiscal Year" means the fiscal year of the U.S. Borrower and its
Subsidiaries for accounting and tax purposes, which shall be the 12-month period
ending on December 31 of each calendar year.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of
(i) the sum of (a) EBITDA minus (b) the aggregate amount of Capital Expenditures
made in cash during such period to (ii) the sum of (a) the aggregate amount of
Cash Interest Expense paid on Indebtedness during such period (net of amounts
under Hedge Agreements and interest income, in each case actually received,
without duplication) plus (b) the aggregate amount of cash dividends paid by the
U.S. Borrower during such period (other than dividends paid on the AMCY
Preferred Stock); provided, however, that, for purposes of calculation of the
Fixed Charge Coverage Ratio for the four-quarter periods ending December 31,
1996 through September 30, 1998, Capital Expenditures made in cash shall be
reduced (A) for each of the four-quarter periods ending December 31, 1996, March
31, 1997, June 30, 1997, September 30, 1997, and December 31, 1997 by
$6,500,000, (B) for the four-quarter period ending March 31, 1998 by $4,900,000,
(C) for the four-quarter period ending June 30, 1998 by $3,300,000, and (D) for
the four-quarter period ending September 30, 1998 by $1,600,000.
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"Fleet" means Fleet National Bank, a national banking association.
"Foreign Employee Benefit Plan" means any employee benefit plan as
defined in Section 3(3) of ERISA which is maintained or contributed to for the
benefit of the employees of the U.S. Borrower, any of its Subsidiaries or any of
its ERISA Affiliates and is not subject to Title I of ERISA pursuant to Section
4(b)(4) of ERISA.
"Foreign Pension Plan" means any employee benefit plan as defined in
Section 3(3) of ERISA which (i) is maintained or contributed to for the benefit
of employees of the U.S. Borrower, any of its Subsidiaries or any of its ERISA
Affiliates, (ii) is not subject to Title I of ERISA pursuant to Section 4(b)(4)
of ERISA, and (iii) under applicable local law, is required to be funded through
a trust or other funding vehicle.
"Fronting Fee" is defined in Section 5.03(a).
"Funded Debt" means Indebtedness of the U.S. Borrower and its
Subsidiaries for borrowed money (determined on a consolidated basis in
accordance with GAAP), including, without limitation, Indebtedness under Capital
Leases.
"Funding Date" means, with respect to any Loan, the date of funding
of such Loan.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the American Institute of Certified Public
Accountants' Accounting Principles Board and Financial Accounting Standards
Board or in such other statements by such other entity as may be in general use
by significant segments of the accounting profession as in effect on the date
hereof (unless otherwise specified herein as in effect on another date or
dates).
"General Intangibles" means, with respect to any Person, all of such
Person's present and future (i) general intangibles, (ii) rights, interests,
choses in action, causes of action, claims and other intangible Property of
every kind and nature (other than Receivables), (iii) corporate and other
business records, (iv) loans, royalties, and other obligations receivable, (v)
trademarks, registered trademarks, trademark applications, service marks,
registered service marks, service mark applications, patents, registered
patents, patent applications, trade names, rights of use of any name, labels,
fictitious names, inventions, designs, trade secrets, computer programs,
software, printouts and other computer materials, goodwill, registrations,
copyrights, copyright applications, permits, licenses, franchises, customer
lists, credit files, correspondence, and advertising materials, (vi) customer
and supplier contracts, firm sale orders, rights under license and franchise
agreements, rights under tax sharing agreements, and
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other contracts and contract rights, (vii) interests in partnerships and joint
ventures, (viii) tax refunds and tax refund claims, (ix) right, title and
interest under leases, subleases, licenses and concessions and other agreements
relating to property, (x) deposit accounts (general or special) with any bank or
other financial institution, (xi) credits with and other claims against third
parties (including carriers and shippers), (xii) rights to indemnification and
with respect to support and keep-well agreements, (xiii) reversionary interests
in pension and profit sharing plans and reversionary, beneficial and residual
interests in trusts, (xiv) proceeds of insurance of which such Person is
beneficiary, (xv) letters of credit, guarantees, Liens, security interests and
other security held by or granted to such Person, (xvi) uncertificated
securities, and (xvii) dividends and distributions and claims with respect to
dividends and distributions.
"Governmental Authority" means any nation or government, any
federal, state, local or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guarantor" means each of those Persons identified on Schedule
1.01.1 attached hereto and made a part hereof and any other Person executing and
delivering a guaranty of payment and performance of all or any portion of the
Obligations; "Guarantors" means, collectively, all of such Persons.
"Hedge Agreement" means any agreement, including, without
limitation, interest rate exchange, swap, collar or cap agreement, interest rate
future or option contract, currency swap agreement, currency future or option
contract, and other similar agreement, evidencing an agreement or arrangement
intended to protect against fluctuation in interest rates and/or foreign
exchange rates or conversion rates for conversion of foreign currencies to
Dollars or Dollars to foreign currencies.
"Hilton" means Hilton Davis Chemical Co., a Delaware
corporation.
"Holder" means any Person entitled to enforce any of the
Obligations, whether or not such Person holds any evidence of Indebtedness,
including, without limitation, the Agent, each Lender and each Issuing Bank.
"Indebtedness", as applied to any Person, means, at any time,
without duplication, (a) all indebtedness, obligations or other liabilities
(contingent or otherwise) of such Person (i) for borrowed money or evidenced by
debt Securities, debentures, acceptances, bonds, notes or other similar
instruments, and any accrued interest, fees and charges relating thereto, (ii)
under profit payment agreements or in respect of obligations to redeem,
repurchase or exchange any Securities of such Person or to pay
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dividends in respect of any Capital Stock (other than redemptions, repurchases,
exchanges or dividends permitted in Section 10.05), (iii) with respect to
letters of credit issued for such Person's account or upon the request or
application of such Person, (iv) to pay the deferred purchase price of property
or services, except accounts payable and accrued expenses arising in the
ordinary course of business, (v) in respect of Capital Leases, or (vi) which are
Accommodation Obligations or (vii) under warranties and indemnities; (b) all
indebtedness, obligations or other liabilities of other Persons secured by a
Lien on any property of such Person, whether or not such indebtedness,
obligations or liabilities are assumed by such Person, all as of such time; (c)
all indebtedness, obligations or other liabilities of such Person in respect of
Hedge Agreements, net of liabilities owed to such Person by the counterparties
thereon; (d) the AMCY Preferred Stock and all other preferred stock subject
(upon the occurrence of any contingency or otherwise) to mandatory redemption
within the term of this Agreement; and (e) all Accommodation Obligations with
respect to any of the foregoing.
"Indemnified Matters" is defined in Section 15.03.
"Indemnitees" is defined in Section 15.03.
"Indiamalt" means Indiamalt Private Ltd., an Indian company.
"Intercompany Security Documents" means all instruments, agreements,
security agreements, pledge agreements, guaranties, mortgages, deeds of trust,
and other written Contractual Obligations between a Subsidiary of the U.S.
Borrower and a Borrower or other Subsidiary of the U.S. Borrower creating or
purporting to create a Lien on such Subsidiary's Property for the benefit of
such Borrower or other Subsidiary party.
"Interest Coverage Ratio" means, for any period, the ratio of (i)
EBITDA to (ii) Cash Interest Expense.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, any successor
statute and any regulations or guidance promulgated thereunder.
"Inventory" means, with respect to any Person, all of such Person's
present and future (i) inventory, (ii) goods, merchandise and other personal
property furnished or to be furnished under any contract of service or intended
for sale or lease, and all consigned goods and all other items which have
previously constituted Equipment of such Person but are then currently being
held for sale or lease in the ordinary course of such Person's business, (iii)
raw materials, work-in-process and finished goods, (iv) materials and supplies
of any kind, nature or description used or consumed in such Person's business or
in
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connection with the manufacture, production, packing, shipping, advertising,
finishing or sale of any of the property described in clauses (i) through (iii)
above, (v) goods in which such Person has a joint or other interest or right of
any kind (including, without limitation, goods in which such Person has an
interest or right as consignee), and (vi) goods which are returned to or
repossessed by such Person; in each case whether in the possession of such
Person, a bailee, a consignee, or any other Person for sale, storage, transit,
processing, use or otherwise, and any and all documents for or relating to any
of the foregoing.
"Investment" means, with respect to any Person, (i) any purchase or
other acquisition by that Person of Securities, or of a beneficial interest in
Securities, issued by any other Person, (ii) any purchase by that Person of all
or substantially all of the assets of a business conducted by another Person,
and (iii) any loan, advance (other than deposits with financial institutions
available for withdrawal on demand, prepaid expenses, accounts receivable,
advances to employees and similar items made or incurred in the ordinary course
of business) or capital contribution by that Person to any other Person,
including all Indebtedness to that Person arising from a sale of property by
that Person other than in the ordinary course of its business. The amount of any
Investment shall be the original cost of such Investment, plus the cost of all
additions thereto less the amount of any return of capital or principal to the
extent such return is in cash with respect to such Investment without any
adjustments for increases or decreases in value or write-ups, write-downs or
write-offs with respect to such Investment.
"IRS" means the Internal Revenue Service and any Person succeeding
to the functions thereof.
"Issuing Banks" means Citibank, Fleet, and each other Lender
designated as an "Issuing Bank" on the signature pages hereof or the signature
page of the Assignment and Acceptance by which it became a Lender and each other
Lender approved by the Agent and the U.S. Borrower who has agreed to become an
Issuing Bank for the purpose of issuing Letters of Credit pursuant to Section
3.01.
"JLL" means, collectively, Joseph Littlejohn & Levy Fund, L.P., a
Delaware limited partnership, and Joseph Littlejohn & Levy Fund II, L.P., a
Delaware limited partnership.
"Joint Venture" means (i) Indiamalt and (ii) any joint venture to
which the U.S. Borrower or a Subsidiary of the U.S. Borrower is a party under a
joint venture agreement and of which less than sixty-five percent (65%) of the
Securities having ordinary voting power or sixty-five percent (65%) of the
interests in its profits and losses is owned or controlled by the U.S. Borrower
or a Subsidiary of the U.S. Borrower; the Persons identified on Schedule 1.01.2
attached hereto and made a part
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hereof are the only Joint Ventures existing as of the Closing
Date.
"KCI" means Kalama Chemical, Inc., a Washington corporation.
"Lender" means, as of the Closing Date, each financial institution a
signatory hereto as a Lender and, at any other given time, each financial
institution which is a party hereto as a Lender, whether as a signatory hereto
or pursuant to an Assignment and Acceptance.
"Letter of Credit" means any Commercial Letter of Credit or Standby
Letter of Credit.
"Letter of Credit Fee" is defined in Section 5.03(a).
"Letter of Credit Obligations" means, at any particular time, the
sum (calculated in Dollars) of (i) all outstanding Reimbursement Obligations,
plus (ii) the aggregate undrawn face amount of all outstanding Letters of
Credit, plus (iii) the aggregate face amount of all Letters of Credit requested
by the Borrowers but not yet issued (unless the request for an unissued Letter
of Credit has been denied by the designated Issuing Bank as referenced in
Section 3.01(c)(i)).
"Letter of Credit Reimbursement Agreement" means, with respect to a
Letter of Credit, such form of application therefor and form of reimbursement
agreement therefor (whether in a single or several documents, taken together) as
the Issuing Bank from which such Letter of Credit is requested may employ in the
ordinary course of business for its own account, with such modifications thereto
as may be agreed upon by such Issuing Bank and the Borrower applicant and as are
not materially adverse (in the judgment of such Issuing Bank and the Agent) to
the interests of the Lenders; provided, however, in the event of any conflict
between the terms of any Letter of Credit Reimbursement Agreement and this
Agreement, the terms of this Agreement shall control.
"Leverage Ratio" means, for any period, the ratio of Funded Debt as
of the end of such period to EBITDA for such period; provided, however, that for
purposes of this definition, Funded Debt shall be determined excluding
$3,000,000 of Indebtedness to insurers relating to prepaid insurance premiums.
"Liabilities and Costs" means all liabilities, obligations,
responsibilities, losses, damages, personal injury, death, punitive damages,
economic damages, consequential damages, treble damages, intentional, willful or
wanton injury, damage or threat to the environment, natural resources or public
health or welfare, costs and expenses (including, without limitation, attorney,
expert and consulting fees and costs and fees and costs associated with any
investigation, feasibility or Remedial Action studies), fines, penalties and
monetary sanctions, interest,
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direct or indirect, known or unknown, absolute or contingent, past,
present or future.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other and including, without limitation, any
Environmental Lien), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever in respect of any
property of a Person, whether granted voluntarily or imposed by law, and
includes the interest of a lessor under a Capital Lease or under any financing
lease having substantially the same economic effect as any of the foregoing and
the filing of any financing statement or similar notice (other than a financing
statement filed by a "true" lessor pursuant to ss. 9-408 of the Uniform
Commercial Code), naming the owner of such property as debtor, under the Uniform
Commercial Code or other comparable law of any jurisdiction.
"Loan Account" is defined in Section 4.03(b).
"Loan Documents" means this Agreement, the Notes, Hedge Agreements
to which any Lender or any Affiliate of a Lender is a party, foreign exchange
contracts to which any Lender or any Affiliate of a Lender is a party, and all
other instruments, agreements and written Contractual Obligations between the
U.S. Borrower, the European Borrower, or any Subsidiary of either Borrower and
any of the Agent, any Lender or any Issuing Bank delivered to either the Agent,
such Lender or such Issuing Bank pursuant to or in connection with the
transactions contemplated hereby.
"Loans" means all Revolving Loans and Swing Loans, whether Base Rate
Loans or Eurocurrency Rate Loans.
"Margin Stock" means "margin stock" as such term is defined in
Regulation U and Regulation G.
"Material Adverse Effect" means a material adverse effect upon (i)
the financial condition, operations, assets or prospects of the U.S. Borrower
and its Subsidiaries, taken as a whole, (ii) the ability of either Borrower to
perform its respective obligations under the Loan Documents, or (iii) the
ability of the Lenders, the Issuing Banks or the Agent to enforce any of the
Loan Documents.
"MIS" means computerized management information system for recording
and maintenance of information regarding purchases, sales, aging,
categorization, and locations of Inventory, creation and aging of Receivables,
and accounts payable (including agings thereof).
"Multicurrency Sublimit" means $50,000,000.
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"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA (other than a Foreign Employee Benefit Plan) which
(i) is, or within the immediately preceding six (6) years was, contributed to by
either the U.S. Borrower or any ERISA Affiliate or in respect of which the U.S.
Borrower or any ERISA Affiliate has assumed any liability and (ii) is not a
Foreign Employee Benefit Plan.
"Net Cash Proceeds of Issuance of Indebtedness" means net cash
proceeds (including cash, equivalents readily convertible into cash, and such
proceeds of any notes or any other non-cash consideration received as
consideration) received by the U.S. Borrower or any of its Subsidiaries at any
time after the Closing Date on account of the issuance of Indebtedness (other
than Indebtedness permitted under Section 10.01) of the U.S. Borrower or any of
its Subsidiaries, in each case net of all transaction costs and underwriters'
discounts with respect thereto.
"Net Cash Proceeds of Sale" means (i) proceeds received by the U.S.
Borrower or any Subsidiary of the U.S. Borrower, in cash (including cash,
equivalents readily convertible into cash, and such proceeds of any notes or any
other non-cash consideration received as consideration), from the sale,
assignment or other disposition of (but not the lease or license of) any
Property, other than sales permitted under clauses (b), (c), and (f) of Section
10.02, net of (a) the costs of sale, assignment or other disposition, (b) any
income, franchise, transfer or other tax liability arising from such transaction
and (c) amounts applied to the repayment of Indebtedness (other than the
Obligations) secured by a Lien permitted by Section 10.03 on the asset disposed
of, if such net proceeds arise from any individual sale, assignment or other
disposition or from any group of related sales, assignments or other
dispositions; and (ii) to the extent provided in Section 9.07(b), proceeds of
insurance on account of the loss of or damage to any Property or Properties, and
payments of compensation for any Property or Properties taken by condemnation or
eminent domain.
"Net Income" means, for any period, the net earnings (or loss) after
taxes of the U.S. Borrower and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with GAAP.
Net Insurance and Condemnation Proceeds" means proceeds (including
cash, equivalents readily convertible into cash, and such proceeds of any notes
received in lieu of cash) of insurance policies described in Section 9.07 and
proceeds of condemnation awards described in Section 9.07 required to be
remitted to the Agent as provided in Section 9.07(b).
"New FCC Common Stock" means 14,231.5 shares of common Capital Stock
of the U.S. Borrower issued to Joseph Littlejohn & Levy Fund II, L.P., a
Delaware limited partnership, on May 26,
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1994 in exchange for a cash capital contribution in the amount of $1,500,000.
"1994 Credit Agreement" is defined in the premises to this
Agreement.
"1994 Preferred Stock" means the 8,064.52 shares of 11 7/8%
Redeemable Preferred Stock, Series B, issued by the U.S. Borrower to Joseph
Littlejohn & Levy Fund II, L.P., a Delaware corporation, on May 26, 1994 and
maturing on April 30, 2003, for a total aggregate amount of $8,500,000.
"Non Pro Rata Loan" is defined in Section 4.02(b)(v).
"Note" means a promissory note in the form attached hereto as
Exhibit C payable to a Lender, evidencing certain of the Obligations of a
Borrower to such Lender and executed by a Borrower as required by Section
4.03(a), as the same may be amended, supplemented, modified or restated from
time to time, and any promissory note issued in substitution therefor; "Notes"
means, collectively, all of such promissory notes outstanding at any given time.
"Notice of Borrowing" means a notice substantially in the form of
Exhibit D attached hereto and made a part hereof.
"Notice of Conversion/Continuation" means a notice substantially in
the form of Exhibit E attached hereto and made a part hereof with respect to a
proposed conversion or continuation of a Loan pursuant to Section 5.01(c).
"Obligations" means all Loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Borrowers to the Agent, any
Lender, any Issuing Bank, any Affiliate of the Agent, any Lender or any Issuing
Bank, or any Person entitled to indemnification pursuant to Section 15.03, of
any kind or nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, arising under this Agreement, the Notes or any
other Loan Document, whether or not for the payment of money, whether arising by
reason of an extension of credit, opening or amendment of a Letter of Credit or
payment of any draft drawn thereunder, loan, guaranty, indemnification, Hedge
Agreement or in any other manner, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term includes, without
limitation, all interest, charges, expenses, fees, attorneys' fees and
disbursements and any other sum chargeable to the Borrowers, or either of them,
under this Agreement or any other Loan Document.
"Officer's Certificate" means, as to a corporation, a
certificate executed on behalf of such corporation by the chair-
man or vice-chairman of its board of directors (if an officer of
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such corporation) or its president, any of its vice presidents, its chief
financial officer, or its treasurer.
"Operating Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which is not
a Capital Lease.
"Organizational Documents" means, with respect to any corporation,
limited liability company, or partnership (i) the articles/certificate of
incorporation (or the equivalent organizational documents) of such corporation
or limited liability company, (ii) the partnership agreement executed by the
partners in the partnership, (iii) the by-laws (or the equivalent governing
documents) of the corporation, limited liability company or partnership, and
(iv) any document setting forth the designation, amount and/or relative rights,
limitations and preferences of any class or series of such corporation's Capital
Stock or such limited liability company's or partnership's equity or ownership
interests.
"OSHA" means the Occupational Safety and Health Act of 1970, 29
U.S.C. ss.ss. 651 et seq., any amendments thereto, any successor statutes and
any regulations or guidance promulgated thereunder.
"PBGC" means the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
"Performance Level" means any of Performance Level 1, Performance
Level 2, Performance Level 3 or Performance Level 4.
"Performance Level 1" means that level of financial performance of
the U.S. Borrower and its Subsidiaries, on a consolidated basis, measured as of
the end of a fiscal quarter of the U.S. Borrower, at which the ratio of Funded
Debt as of the end of such fiscal quarter to EBITDA for the then most recently
ended four (4) fiscal quarter period of the U.S. Borrower is less than or equal
to 3.00 to 1.00.
"Performance Level 2" means that level of financial performance of
the U.S. Borrower and its Subsidiaries, on a consolidated basis, measured as of
the end of a fiscal quarter of the U.S. Borrower, at which the ratio of Funded
Debt as of the end of such fiscal quarter to EBITDA for the then most recently
ended four (4) fiscal quarter period of the U.S. Borrower is greater than 3.00
to 1.00 and less than or equal to 3.50 to 1.00.
"Performance Level 3" means that level of financial performance of
the U.S. Borrower and its Subsidiaries, on a consolidated basis, measured as of
the end of a fiscal quarter of the U.S. Borrower, at which the ratio of Funded
Debt as of the end of such fiscal quarter to EBITDA for the then most recently
ended four (4) fiscal quarter period of the U.S. Borrower is greater than 3.50
to 1.00 and less than or equal to 4.00 to 1.00.
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"Performance Level 4" means that level of financial performance of
the U.S. Borrower and its Subsidiaries, on a consolidated basis, measured as of
the end of a fiscal quarter of the U.S. Borrower, at which the ratio of Funded
Debt as of the end of such fiscal quarter to EBITDA for the then most recently
ended four (4) fiscal quarter period of the U.S. Borrower is greater than 4.00
to 1.00.
"Permit" means any permit, approval, authorization license,
variance, or permission required from a Governmental Authority or other Person
under an applicable Requirement of Law.
"Permitted Equity Securities Options" means the subscriptions,
options, warrants, rights, convertible securities and other agreements or
commitments relating to the issuance of equity Securities of the U.S. Borrower
or any Subsidiary of the U.S. Borrower identified as such on Schedule 1.01.3
attached hereto and made a part hereof.
"Permitted Existing Indebtedness" means the Indebtedness of the U.S.
Borrower and its Subsidiaries, including, without limitation, Accommodation
Obligations of the U.S. Borrower and its Subsidiaries, identified as such on
Schedule 1.01.4 attached hereto and made a part hereof.
"Permitted Existing Investments" means those Investments identified
as such on Schedule 1.01.5 attached hereto and made a part hereof.
"Permitted Existing Liens" means the Liens on assets of the U.S.
Borrower or any of its Subsidiaries identified as such on Schedule 1.01.6
attached hereto and made a part hereof.
"Permitted Holders" means (i) collectively or individually, Joseph
Littlejohn & Levy Fund, L.P., Joseph Littlejohn & Levy Fund II, L.P., The
Freedom Group Partnership, or (ii) any Affiliate of any of the Persons described
in clause (i) above and, with respect to JLL, any partnership or corporation
which is managed or controlled by JLL Associates, L.P. or any Affiliate thereof.
For purposes of this definition, "control", as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through ownership of voting securities or by contract or otherwise.
"Person" means any natural person, corporation, limited liability
company, limited partnership, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust, business
trust or other organization, whether or not a legal entity, and any Governmental
Authority.
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"Plan" means an employee benefit plan defined in Section 3(3) of
ERISA (other than a Foreign Employee Benefit Plan) (i) in respect of which the
U.S. Borrower or any ERISA Affiliate is, or within the immediately preceding six
(6) years was, an "employer" as defined in Section 3(5) of ERISA or the U.S.
Borrower or any ERISA Affiliate has assumed any liability and (ii) which is not
a Foreign Employee Benefit Plan.
"Potential Event of Default" means an event which, with the giving
of notice or the lapse of time, or both, would constitute an Event of Default.
"Preferred Stock" means, collectively, (i) the 17,000 shares of 11
7/8% Redeemable Preferred Stock, Series B, issued by Freedom Chemical
Acquisition Corporation, a Delaware corporation, to the U.S. Borrower on
September 9, 1993 and maturing on April 30, 2003, for a total aggregate amount
of $17,000,000 which converted to 17,000 shares of 11 7/8% Redeemable Preferred
Stock, Series B, issued by Hilton to the U.S. Borrower on May 26, 1994 and (ii)
the 8,064.52 shares of 11 7/8% Redeemable Preferred Stock, Series B, issued by
the U.S. Borrower to Joseph Littlejohn & Levy Fund II, L.P. on May 26, 1994 and
maturing on April 30, 2003, for a total aggregate amount of $8,500,000.
"President's Letter" is defined in Section 8.02.
"Process Agent" is defined in Section 15.17(a)(i).
"Pro Forma" means the unaudited pro forma opening balance sheet of
the U.S. Borrower and its Subsidiaries attached hereto as Exhibit F, prepared in
accordance with GAAP, dated the Effective Date, derived from the Financial
Statements of the U.S. Borrower and its Subsidiaries as of June 30, 1996 and
giving effect to the extensions of credit contemplated hereby, the funding of
the Subordinated Debt, and the making of the Equity Infusion.
"Projections" means the financial projections (including, without
limitation, capital expenditure budget) for the five-year period commencing on
the Effective Date and assumptions made in connection therewith prepared by the
U.S. Borrower dated as of the Closing Date and attached hereto as Exhibit G.
"Property" means any Real Property or personal property, plant,
building, facility, structure, underground storage tank or unit, Equipment,
Inventory, General Intangible, Receivable, or other asset owned, leased or
operated by either Borrower or any Subsidiary of either Borrower, as applicable,
(including any surface water thereon, and soil and groundwater thereunder).
"Pro Rata Share" means, with respect to any Lender, the
percentage obtained by dividing (i) the amount of such Lender's
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Revolving Credit Commitment (in each case, as adjusted from time to time in
accordance with the provisions of this Agreement or any Assignment and
Acceptance to which such Lender is a party) by (ii) the Revolving Credit
Commitments (notwithstanding the termination of any such Commitments).
"Protective Advance" is defined in Section 13.09(a).
"Purchase Agreement" means that certain Stock Purchase Agreement
among BC Sugar Refinery, Limited, a corporation organized under the laws of
Canada, Chatterton Petrochemical Corporation, a corporation formed under the
laws of the Province of British Columbia, Canada, and the U.S. Borrower, dated
as of May 11, 1994, as amended by Amendment No. 1 to Stock Purchase Agreement
dated as of May 26, 1994.
"RCRA" means the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. ss.ss. 6901 et seq., any amendments thereto, any
successor statutes, and any regulations promulgated thereunder.
"Real Property" means, with respect to any Person, all of such
Person's present and future right, title and interest (including, without
limitation, any leasehold estate) in (i) any plots, pieces or parcels of land,
(ii) any improvements, buildings, structures and fixtures now or hereafter
located or erected thereon or attached thereto of every nature whatsoever (the
rights and interests described in clauses (i) and (ii) above being the
"Premises"), (iii) all easements, rights of way, gores of land or lands occupied
by streets, ways, alleys, passages, sewer rights, water courses, water rights
and powers, and public places adjoining such land, and any other interests in
property constituting appurtenances to the Premises, or which hereafter shall in
any way belong, relate or be appurtenant thereto, (iv) all hereditaments, gas,
oil, minerals (with the right to extract, sever and remove such gas, oil and
minerals), and easements, of every nature whatsoever, located in or on the
Premises and (v) all other rights and privileges thereunto belonging or
appertaining and all extensions, additions, improvements, betterments, renewals,
substitutions and replacements to or of any of the rights and interests
described in clauses (iii) and (iv) above.
"Receivables" means, with respect to any Person, all of such
Person's present and future (i) accounts, (ii) contract rights, chattel paper,
instruments, documents, deposit accounts, and other rights to payment of any
kind, whether or not arising out of or in connection with the sale or lease of
goods or the rendering of services, and whether or not earned by performance,
(iii) any of the foregoing which are not evidenced by instruments or chattel
paper, (iv) intercompany receivables, and any security documents executed in
connection therewith, (v) proceeds of any letters of credit or insurance
policies on which such Person is named as beneficiary, (vi) claims against third
parties for advances and other financial accommodations and any other
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obligations whatsoever owing to such Person, (vii) rights in and to all security
agreements, leases, guarantees, instruments, securities, documents of title and
other contracts securing, evidencing, supporting or otherwise relating to any of
the foregoing, together with all rights in any goods, merchandise or Inventory
which any of the foregoing may represent, and (viii) rights in returned and
repossessed goods, merchandise and Inventory which any of the same may
represent, including, without limitation, any right of stoppage in transit.
"Refinanced Indebtedness" means the Indebtedness of the European
Borrower which is to be repaid or defeased out of the proceeds of the Loans made
on the Effective Date and identified as such on Schedule 1.01.7 attached hereto
and made a part hereof.
"Register" is defined in Section 15.01(c).
"Regulation A" means Regulation A of the Federal Reserve Board as in
effect from time to time.
"Regulation G" means Regulation G of the Federal Reserve Board as in
effect from time to time.
"Regulation T" means Regulation T of the Federal Reserve Board as in
effect from time to time.
"Regulation U" means Regulation U of the Federal Reserve Board as in
effect from time to time.
"Regulation X" means Regulation X of the Federal Reserve Board as in
effect from time to time.
"Reimbursement Date" is defined in Section 3.01(d)(i)(A).
"Reimbursement Obligations" means the aggregate non-contingent
reimbursement or repayment obligations of the Borrowers with respect to amounts
drawn under Letters of Credit.
"Release" means any release, spill, emission, leaking, pumping,
pouring, dumping, injection, deposit, disposal, abandonment, or discarding of
barrels, containers or other receptacles, discharge, emptying, escape,
dispersal, leaching or migration into the indoor or outdoor environment or into
or out of any Property, including the movement of Contaminants through or in the
air, soil, surface water, groundwater or Property.
"Remedial Action" means actions required to (i) clean up, remove,
treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants; or (iii) investigate and determine if a
remedial response is needed
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and to design such a response and post-remedial investigation, monitoring,
operation and maintenance and care.
"Replacement Proceeds" means the amount of (i) proceeds of insurance
paid on account of the loss of or damage to any Property and awards of
compensation for Property taken by condemnation or eminent domain to the extent
actually used to replace, rebuild or restore the Property so lost, damaged or
taken, provided that (a) the U.S. Borrower shall have delivered written notice
to the Agent that it or its applicable Subsidiary intends to so replace, rebuild
or restore such Property and (b) the U.S. Borrower or such applicable Subsidiary
of the U.S. Borrower replaces or commences the restoration or rebuilding of such
Property within 180 days after the Agent's receipt of the proceeds of such
insurance payment or condemnation award and (ii) insurance paid on account of a
business interruption occurrence to the extent actually used in the restoration
or conduct of the business interrupted.
"Reportable Event" means any of the events described in Section
4043(b) of ERISA and the regulations promulgated thereunder as in effect from
time to time other than an event for which the thirty (30) day notice
requirement has been waived by the PBGC.
"Requirements of Law" means, as to any Person, the charter and
by-laws or other organizational or governing documents of such Person, and any
law, rule or regulation, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its Property or to which such Person or any of its Property is subject
including, without limitation, the Securities Act, the Securities Exchange Act,
Regulations G, T, U and X, ERISA, the Fair Labor Standards Act, the Worker
Adjustment and Retraining Notification Act, the Americans with Disabilities Act
of 1990, and any certificate of occupancy, zoning ordinance, building,
environmental or land use requirement or Permit or any Environmental, Health or
Safety Requirement of Law.
"Requisite Lenders" means Lenders whose Pro Rata Shares, in the
aggregate, are greater than fifty percent (50%); provided, however, that, in the
event any of the Lenders shall have failed to fund its Pro Rata Share of any
Revolving Loan requested by a Borrower which such Lenders are obligated to fund
under the terms of this Agreement and any such failure has not been cured, then
for so long as such failure continues, "Requisite Lenders" means Lenders
(excluding all Lenders whose failure to fund their respective Pro Rata Shares of
such Revolving Loans have not been so cured) whose Pro Rata Shares represent
more than fifty percent (50%) of the aggregate Pro Rata Shares of such Lenders;
provided, further, however, that, in the event that the Commitments have been
terminated pursuant to the terms of this Agreement, "Requisite Lenders" means
Lenders (without regard to such Lenders' performance of their respective
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obligations hereunder) whose aggregate ratable shares (stated as a percentage)
of the aggregate outstanding principal balance of all Loans are greater than
fifty percent (50%).
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of a Borrower or any of its Subsidiaries now or hereafter
outstanding, except a dividend payable solely in shares of that class of stock
or in any junior class of stock to the holders of that class, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of equity
Securities of a Borrower or any of its Subsidiaries now or hereafter
outstanding, (iii) any payment or prepayment of principal of, premium, if any,
or interest, fees or other charges on or with respect to, and any redemption,
purchase, retirement, defeasance, sinking fund or similar payment and any claim
for rescission with respect to, the Subordinated Debt and any guarantee thereof,
or any other Indebtedness for borrowed money and (iv) any payment made to
redeem, purchase, repurchase or retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any class of
Capital Stock of a Borrower or any of its Subsidiaries now or hereafter
outstanding.
"Revolving Credit Availability" means, at any time of determination
thereof, the amount (calculated in Dollars or the equivalent thereof in the
applicable Alternative Currency) by which the Revolving Credit Commitments then
in effect exceeds the Revolving Credit Obligations at such time.
"Revolving Credit Commitment" means, with respect to any Lender, the
obligation of such Lender to make Revolving Loans and to participate in Letters
of Credit pursuant to the terms and conditions of this Agreement, in an
aggregate amount at any time outstanding which shall not exceed the principal
amount set forth opposite such Lender's name under the heading "Revolving Credit
Commitment" on the signature pages hereof or the signature page of the
Assignment and Acceptance by which it became a Lender, as modified from time to
time pursuant to the terms of this Agreement or to give effect to any applicable
Assignment and Acceptance, and "Revolving Credit Commitments" means the
aggregate principal amount of the Revolving Credit Commitments of all the
Lenders, the maximum amount of which shall be $85,000,000, as reduced from time
to time pursuant to Section 4.01.
"Revolving Credit Obligations" means, at any particular time, the
sum (calculated in Dollars) of (i) the outstanding principal amount of the
Revolving Loans at such time, plus (ii) the Letter of Credit Obligations at such
time, plus (iii) the outstanding principal amount of the Swing Loans at such
time plus (iv) the outstanding amount of Protective Advances at such time.
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"Revolving Credit Termination Date" means the earliest to occur of
(i) October 10, 2001 (or, if not a Business Day, the next preceding Business
Day), (ii) the date of termination of the Revolving Credit Commitments pursuant
to the terms of this Agreement, and (iii) the date of acceleration of the
Obligations pursuant to Section 12.02.
"Revolving Loan" is defined in Section 2.01(b).
"Revolving Note" means a promissory note executed by a Borrower and
delivered to a Lender evidencing the Revolving Loans made to such Borrower by
such Lender, as the same may be amended, supplemented, modified or restated from
time to time, and any promissory note issued in substitution therefor,
substantially in the form attached hereto as Exhibit C-1; and "Revolving Notes"
means, collectively, all of the Revolving Notes executed by the Borrowers.
"Securities" means any Capital Stock, shares, voting trust
certificates, limited partnership certificates, bonds, debentures, notes or
other evidences of indebtedness, secured or unsecured, convertible, subordinated
or otherwise, or in general any instruments commonly known as "securities",
including, without limitation, any "security" as such term is defined in Section
8-102 of the Uniform Commercial Code, or any certificates of interest, shares,
or participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing, but shall not include the Notes or any other evidence of the
Obligations.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, and any successor statute.
"Solvent", when used with respect to any Person, means that at the
time of determination:
(i) the Fair Market Value of its assets is in excess of the total
amount of its liabilities (including, without limitation, contingent
liabilities); and
(ii) the present fair saleable value of its assets is greater than its
probable liability on its existing debts as such debts become absolute and
matured; and
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as
they mature; and
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(iv) it has capital sufficient to carry on its business
as conducted and as proposed to be conducted.
"Standby Letter of Credit" means any letter of credit issued by an
Issuing Bank pursuant to Section 3.01 for the account of a Borrower or for the
account of any of a Borrower's Subsidiaries if such Borrower is jointly and
severally liable for reimbursement of amounts drawn under such letter of credit,
which is not a Commercial Letter of Credit.
"Sterling" means the lawful money of the United
Kingdom.
"Subordinated Debt" means the Indebtedness of the U.S.
Borrower issued pursuant to, and evidenced by, the Subordinated
Debt Documents.
"Subordinated Debt Documents" means the Indenture dated as of
October 17, 1996, between the U.S. Borrower and The Bank of New York, as Trustee
relating to the U.S. Borrower's 10 5/8% Senior Subordinated Notes due 2006, the
notes from time to time issued thereunder, and the guarantees executed in
connection therewith, in each case as amended, modified or supplemented from
time to time in accordance with the terms hereof.
"Subsidiary" of a Person means any corporation, limited liability
company, general or limited partnership, or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar functions with
respect to such entity are at the time directly or indirectly owned or
controlled by such Person, one or more of the other subsidiaries of such Person
or any combination thereof; provided, however, that no Joint Venture shall be
considered to be a Subsidiary for purposes of Articles IV, X, or XII or Sections
8.02, 8.03, 8.05 - 8.09, 9.07 - 9.12, and 9.14.
"Swing Loan Availability" is defined in Section
2.02(a).
"Swing Loan Reserve" means, at any time, a reserve in an amount
equal to the then outstanding balance of the Swing Loans.
"Swing Loans" is defined in Section 2.02(a).
"Swing Loan Subfacility" means, at any time, an amount equal to
$5,000,000 (or the equivalent thereof in Alternative Currencies).
"Swing Note" means a promissory note in the form attached hereto as
Exhibit C-2 evidencing the Swing Loans, as the same may be amended,
supplemented, modified, or restated from time to time.
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"Tax Sharing Agreement" means, collectively, that certain that
certain Tax Sharing Agreement dated as of December 31, 1995 between the U.S.
Borrower and KCI, as in effect on the Closing Date, and that certain Tax Sharing
Agreement dated as of December 31, 1995 among the U.S. Borrower, Textile and
Hilton, as in effect on the Closing Date.
"Taxes" is defined in Section 14.01(a).
"Termination Event" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the U.S. Borrower or any ERISA Affiliate
from a Benefit Plan during a plan year in which the U.S. Borrower or such ERISA
Affiliate was a "substantial employer" as defined in Section 4001(a)(2) of ERISA
or the cessation of operations which results in the termination of employment of
20% of Benefit Plan participants who are employees of the U.S. Borrower or any
ERISA Affiliate; (iii) the imposition of an obligation on the U.S. Borrower or
any ERISA Affiliate under Section 4041 of ERISA to provide affected parties
written notice of intent to terminate a Benefit Plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the institution by the PBGC or any
similar foreign Governmental Authority of proceedings to terminate a Benefit
Plan or a Foreign Pension Plan; (v) any event or condition which could
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Benefit Plan;
(vi) the appointment by a foreign Governmental Authority of, or the institution
of proceedings by a foreign Governmental Authority to appoint, a trustee to
administer any Foreign Pension Plan; or (vii) the partial or complete withdrawal
of the Borrower or any ERISA Affiliate from a Multiemployer Plan or a Foreign
Pension Plan.
"Textile" means Freedom Textile Chemicals Co., a Delaware
corporation.
"Textile SC" means Freedom Textile Chemical Company (South
Carolina), Inc., a Delaware corporation.
"Transaction Costs" means the fees, costs and expenses payable by
the Borrowers in connection with the execution, delivery and performance of the
Loan Documents and other Transaction Documents.
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"Transaction Documents" means the Loan Documents, the the
Subordinated Debt Documents, and the agreements and documents executed in
connection with the Equity Infusion.
"Uniform Commercial Code" means the Uniform Commercial Code as
enacted in the State of New York, as it may be amended from time to time.
"U.S." means the United States of America.
"U.S. Borrower" is defined in the preamble of this Agreement.
"Unused Commitment Fee" is defined in Section 5.03(b)(i).
"Voting Stock" means, with respect to any Person, the Capital Stock
of such Person of the class or classes pursuant to which the holders thereof
have the general voting power under ordinary circumstances to elect at least a
majority of the Board of Directors, managers or trustees of such Person
(irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency).
"Wholly-Owned Subsidiary" means a corporation (i) one hundred
percent (100%) of the Capital Stock of which is owned by the U.S. Borrower
and/or any Subsidiary of the U.S. Borrower or (ii) greater than ninety-eight
percent (98%) of the Capital Stock of which is owned by the U.S. Borrower and/or
a Subsidiary of the U.S. Borrower and the remainder of which Capital Stock is
owned by a nominee of the U.S. Borrower or such Subsidiary solely to comply with
the Requirements of Law of the jurisdiction governing such corporation's
organization and existence.
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". Periods of days referred to in this Agreement shall be
counted in calendar days unless Business Days are expressly prescribed. Any
period determined hereunder by reference to a month or months or year or years
shall end on the day in the relevant calendar month in the relevant year, if
applicable, immediately preceding the date numerically corresponding to the
first day of such period; provided that if such period commences on the last day
of a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month during which such period is to end), such period
shall, unless otherwise expressly required by the other provisions of this
Agreement, end on the last day of the calendar month.
1.03. Accounting Terms. Subject to Section 15.04, for purposes of
this Agreement, all accounting terms not otherwise
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defined herein shall have the meanings assigned to them in conformity with GAAP.
1.04. Other Terms. All other terms contained in this Agreement
shall, unless the context indicates otherwise, have the meanings assigned to
such terms by the Uniform Commercial Code to the extent the same are defined
therein.
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ARTICLE II
AMOUNTS AND TERMS OF LOANS
2.01. Revolving Credit Facility. (a) Intentionally omitted.
(b) Availability. (i) Subject to the terms and conditions set forth
in this Agreement, each Lender hereby severally and not jointly agrees to make
revolving loans, in Dollars or an Alternative Currency (each individually, a
"Revolving Loan" and, collectively, the "Revolving Loans") to the Borrowers,
collectively, from time to time during the period from the Effective Date to the
Business Day next preceding the Revolving Credit Termination Date, in an amount
not to exceed such Lender's Pro Rata Share of the Revolving Credit Availability
in the applicable currency at such time. If such Revolving Loans are made in one
or more Alternative Currencies, the amount thereof, when aggregated with all
other Revolving Credit Obligations denominated in Alternative Currencies, shall
not exceed the equivalent of the Multicurrency Sublimit.
(ii) All Revolving Loans comprising the same Borrowing under this
Agreement shall be made by the Lenders simultaneously and proportionately to
their then respective Pro Rata Shares, it being understood that no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make a Revolving Loan hereunder nor shall the Revolving Credit Commitment of any
Lender be increased or decreased as a result of any such failure.
(iii) Subject to the provisions of this Agreement, the Borrower
obligated therefor may repay any outstanding Revolving Loan made to it on any
day which is a Business Day and any amounts so repaid may be reborrowed, up to
the amount available under this Section 2.01(b) at the time of such Borrowing,
until the Business Day next preceding the Revolving Credit Termination Date.
(iv) Each requested respective Borrowing of Revolving Loans funded
on any Funding Date shall consist of Loans made in the same currency and shall
be (i) if Base Rate Loans, in a principal amount of at least $250,000 and in
integral multiples of $250,000 in excess of that amount and (ii) if Eurocurrency
Rate Loans, in a principal amount of at least $1,000,000 (or the equivalent
thereof in any Alternative Currency) and in integral multiples of $250,000 (or
the equivalent thereof in any Alternative Currency) in excess of that amount.
(c) Notice of Borrowing. When either Borrower desires to borrow
under this Section 2.01, the U.S. Borrower shall deliver to the Agent a Notice
of Borrowing, signed by it, (i) on the Closing Date, in the case of the
Borrowings on the Effective Date, (ii) no later than 11:30 a.m. (New York time)
on the
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Business Day immediately preceding the proposed Funding Date therefor, in the
case of a Borrowing of Base Rate Loans after the Effective Date, and (iii) no
later than 9:00 a.m. (New York time) at least three (3) Business Days in advance
of the proposed Funding Date therefor, in the case of a Borrowing of
Eurocurrency Rate Loans after the Effective Date. Such Notice of Borrowing shall
specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the
amount and currency of the proposed Borrowing, (iii) the Revolving Credit
Availability in the applicable currency as of the date of such Notice of
Borrowing and, if such Borrowing is requested in an Alternative Currency, the
unfunded portion of the Multicurrency Sublimit as of the date of such Notice of
Borrowing, (iv) whether the proposed Borrowing will be of Base Rate Loans or
Eurocurrency Rate Loans, (v) in the case of Eurocurrency Rate Loans, the
requested Eurocurrency Rate Interest Period, (vi) which Borrower is making the
subject Borrowing, and (vii) instructions for the disbursement of the proceeds
of the proposed Borrowing. In lieu of delivering such a Notice of Borrowing
(except with respect to a Borrowing of Revolving Loans on the Effective Date),
the U.S. Borrower may give the Agent telephonic notice of any proposed Borrowing
by the time required under this Section 2.01(c), if the U.S. Borrower confirms
such notice by delivery of the required Notice of Borrowing to the Agent by
facsimile transmission promptly, but in no event later than 5:00 p.m. (New York
time) on the same day, the original of which facsimile copy shall be delivered
to the Agent within three (3) days after the date of such transmission. Any
Notice of Borrowing (or telephonic notice in lieu thereof) given pursuant to
this Section 2.01(c) shall be irrevocable, except as specifically provided in
Section 2.01(d)(i).
(d) Making of Revolving Loans. (i) Promptly after receipt of a
Notice of Borrowing under Section 2.01(c) (or telephonic notice in lieu
thereof), the Agent shall notify each Lender by telex or telecopy, or other
similar form of transmission, of the proposed Borrowing. Each Lender shall
deposit an amount equal to its Pro Rata Share of the amount requested by the
U.S. Borrower to be made as Revolving Loans, (A) in the case of a Borrowing in
Dollars, with the Agent at its office in New York, New York, in immediately
available funds, and (B) in the case of a Borrowing in an Alternative Currency,
with Citibank London at its office in London, England in immediately available
funds, in either instance, (1) on the Effective Date with respect to the
Borrowing of Revolving Loans on such date specified in the initial Notice of
Borrowing and (2) not later than 11:00 a.m. (New York time) on any other Funding
Date for Revolving Loans. Subject to the fulfillment of the conditions precedent
set forth in Section 6.01 or Section 6.02, as applicable, the Agent or Citibank
London, as applicable, shall make the proceeds of such amounts received by it
available to the applicable Borrower at the respective aforesaid office of the
Agent or Citibank London on such Funding Date (or on the date received if later
than such Funding Date) and shall disburse such proceeds in accordance with the
U.S. Borrower's disbursement instructions set forth in the
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applicable Notice of Borrowing. The failure of any Lender to deposit the amount
described above with the Agent on the applicable Funding Date shall not relieve
any other Lender of its obligations hereunder to make its Revolving Loan on such
Funding Date. In the event the conditions precedent set forth in Section 6.01 or
6.02, as applicable, are not fulfilled as of the proposed Funding Date for any
Borrowing, the Agent shall promptly return, by wire transfer of immediately
available funds, the amount deposited by each Lender to such Lender.
(ii) Unless the Agent shall have been notified by any Lender on the
Business Day immediately preceding the applicable Funding Date in respect of any
Borrowing of Revolving Loans that such Lender does not intend to fund its
Revolving Loan requested to be made on such Funding Date, the Agent may assume
that such Lender has funded its Revolving Loan and is depositing the proceeds
thereof with the Agent or Citibank London, as applicable, on the Funding Date
therefor, and the Agent or Citibank London, as applicable, in its sole
discretion may, but shall not be obligated to, disburse a corresponding amount
to the applicable Borrower on the applicable Funding Date. If the Revolving Loan
proceeds corresponding to that amount are advanced to a Borrower by the Agent or
Citibank London, as applicable, but are not in fact deposited with the Agent or
Citibank London, as applicable, by such Lender on or prior to the applicable
Funding Date, such Lender agrees to pay, and in addition the Borrower to which
such Loan was disbursed agrees to repay, to the Agent or Citibank London, as
applicable, forthwith on demand such corresponding amount, together with
interest thereon, for each day from the date such amount is disbursed to or for
the benefit of such Borrower until the date such amount is paid or repaid to the
Agent or Citibank London, as applicable, (A) in the case of such Borrower, at
the interest rate applicable to such Borrowing and (B) in the case of such
Lender, at the higher of (1) the Federal Funds Rate and (2) the cost of funds
incurred by the Agent in respect of such amount for the first three (3) Business
Days, and thereafter at the interest rate applicable to such Borrowing. If such
Lender shall pay to the Agent or Citibank London the corresponding amount, the
amount so paid shall constitute such Lender's Revolving Loan, and if both such
Lender and such Borrower shall pay and repay such corresponding amount, the
Agent shall promptly pay to such Borrower such corresponding amount. This
Section 2.01(d)(ii) does not relieve any Lender of its obligation to make its
Revolving Loan on any applicable Funding Date.
(iii) In the case of any Borrowing to be comprised of Eurocurrency
Rate Loans, the Borrowers hereby agree to 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 Borrowing for such
Borrowing the applicable conditions set forth in Article VI, including, without
limitation, any loss (including loss of anticipated profits), cost or expense
incurred by reason of the liquidation or
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reemployment of deposits or other funds acquired by any Lender to fund the Loan
to be made by such Lender as part of such Borrowing when such Loan, as a result
of such failure, is not made on such date.
(e) Revolving Credit Termination Date. The Revolving Credit
Commitments shall terminate on the Revolving Credit Termination Date. Each
Lender's obligation to make Revolving Loans shall terminate on the Business Day
next preceding the Revolving Credit Termination Date. All outstanding Revolving
Credit Obligations shall be paid in full (or, in the case of unmatured Letter of
Credit Obligations, provision for payment in cash shall be made to the
satisfaction of the Issuing Banks and the Requisite Lenders) on the Revolving
Credit Termination Date.
(f) Maximum Revolving Credit Facility; Multicurrency Sublimit.
Notwithstanding anything in this Agreement to the contrary, in no event shall
(i) the aggregate principal Revolving Credit Obligations exceed the Revolving
Credit Commitments or (ii) the aggregate principal Revolving Credit Obligations
denominated in Alternative Currencies exceed the Multicurrency Sublimit.
2.02. Swing Loans. (a) Amount. Subject to the terms and conditions
set forth in this Agreement, Citicorp, in its sole discretion, may from time to
time after the Closing Date make loans to the Borrowers solely for Citicorp's
own account in Dollars and/or Alternative Currencies (the "Swing Loans") up to
an aggregate principal amount at any one time outstanding equal to the lesser of
(i) the Swing Loan Subfacility calculated in Dollars and (ii) Citicorp's Pro
Rata Share of the Revolving Credit Commitments then in effect minus the
Revolving Credit Obligations (such lesser amount being referred to as the "Swing
Loan Availability"); provided that, after giving effect to such Swing Loans, the
Revolving Credit Availability is no less than zero (0) and the outstanding
balance of the Swing Loans is no greater than the Swing Loan Subfacility.
(b) Notice of Borrowing. When a Borrower desires to borrow under
this Section 2.02, the U.S. Borrower shall make a telephonic request to the
Agent (which shall be confirmed by a Notice of Borrowing, signed on its behalf,
delivered to the Agent on the same day by facsimile transmission) no later than
(i) 9:00 a.m. (New York time) on the Business Day immediately preceding the
proposed Funding Date therefor, if such Borrowing is to be denominated in an
Alternative Currency, and (ii) 11:30 a.m. (New York time) on the proposed
Funding Date therefor, if such Borrowing is to be denominated in Dollars. The
Notice of Borrowing with respect to any Swing Loan shall specify (i) the amount
and currency of the proposed Borrowing, (ii) the Swing Loan Availability in the
applicable currency as of the date of such Notice of Borrowing, (iii) which
Borrower is making the subject Borrowing, and (iv) the Funding Date for such
Borrowing and instructions for the disbursement of the proceeds of such
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proposed Borrowing. Swing Loans which are Eurocurrency Rate Loans shall have
Eurocurrency Rate Interest Periods of one (1) week.
(c) Making of Swing Loans. Citicorp shall have no duty to make or to
continue to make Swing Loans at any time. In the event Citicorp determines to
make any Swing Loan after the U.S. Borrower's request therefor, Citicorp shall
make the proceeds of such Swing Loan available to the applicable Borrower at the
Agent's office in New York, New York or at Citibank London in London, England
and shall disburse such proceeds in accordance with the disbursement
instructions set forth in the applicable Notice of Borrowing. Citicorp shall not
make any Swing Loan at any time if Citicorp shall have received a written notice
from any Lender or shall otherwise have actual knowledge before funding such
Swing Loan that one or more of the conditions precedent set forth in Section
6.02 will not be satisfied on the proposed Funding Date for such Swing Loan, but
Citicorp shall not otherwise be required to take any action to determine that
the conditions precedent set forth in Section 6.02 have been satisfied prior to
making any Swing Loan.
(d) Repayment of Swing Loans. All Swing Loans shall be payable,
together with accrued interest thereon, if denominated in Dollars, on the
earlier to occur of Citicorp's demand therefor or the Friday next succeeding the
Funding Date therefor and, if denominated in an Alternative Currency, one week
after the Funding Date therefor. The applicable Borrower shall be deemed to have
requested Revolving Loans to be made on the date on which repayment of Swing
Loans is due in the amount of Swing Loans then outstanding to it and the
proceeds of such Revolving Loans shall be applied to the repayment of such Swing
Loans. The Agent shall notify the Lenders of the outstanding balance of Swing
Loans prior to 9:00 a.m. (New York time) on the Business Day immediately
preceding the Funding Date for such Revolving Loans and each Lender other than
Citicorp shall deposit an amount, in the appropriate currency, equal to its Pro
Rata Share of the amount of Revolving Loans deemed requested with the Agent at
its office in New York, New York, if such Revolving Loans are denominated in
Dollars, or the office of Citibank London in London, England, if such Revolving
Loans are denominated in an Alternative Currency, in immediately available funds
not later than 11:00 a.m. (New York time) on such Funding Date. Swing Loans
denominated in Dollars shall be paid by Base Rate Loans; Swing Loans denominated
in an Alternative Currency shall be paid by Eurocurrency Rate Loans having a
Eurocurrency Rate Interest Period of one (1) month.
(e) Use of Proceeds of Swing Loans. The proceeds of the Swing Loans
may be used solely for the purposes set forth in Section 2.04.
2.03. Authorized Officers and Agents. On the Closing Date the U.S.
Borrower shall deliver, and from time to time thereafter the U.S. Borrower may
deliver, to the Agent an
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Officer's Certificate setting forth the names of the officers, employees and
agents authorized to request, on behalf of the respective Borrowers, Loans and
Letters of Credit and a conversion/continuation of any Loan, in each instance
containing a specimen signature of each such officer, employee or agent. The
officers, employees and agents so authorized shall also be authorized to act for
the respective Borrowers in respect of all other matters relating to the Loan
Documents. The Agent, Lenders and Issuing Banks shall be entitled to rely
conclusively on such officer's, employee's, or agent's authority to request such
Loan or Letter of Credit or such conversion/continuation until the Agent,
Lenders and Issuing Banks receive written notice to the contrary. None of the
Agent, the Lenders, or the Issuing Banks shall have any duty to verify the
authenticity of the signature appearing on any such Officer's Certificate,
written Notice of Borrowing, Notice of Conversion/Continuation, or any other
document, and, with respect to an oral request for such a Loan or Letter of
Credit or such conversion/continuation, the Agent shall have no duty to verify
the identity of any person representing himself or herself as one of the
officers, employees or agents authorized to make such request or otherwise to
act on behalf of the respective Borrowers. None of the Agent, any Lender or any
Issuing Bank shall incur any liability to either Borrower or any other Person in
acting upon any telephonic or facsimile notice referred to above which the
Agent, such Lender, or such Issuing Bank believes to have been given by a duly
authorized officer or other person authorized to borrow on behalf of such
Borrower.
2.04. Use of Proceeds of Loans. The proceeds of the Revolving Loans
made on the Effective Date shall be used to repay in full the Refinanced
Indebtedness and the Transactions Costs and the proceeds of all other Loans
shall be used for the lawful general corporate purposes of the Borrowers and
their Subsidiaries.
2.05. Currency Equivalents. The equivalent in Dollars of any
Alternative Currency shall be determined by using the quoted spot rate at which
Citibank offers to exchange Dollars for such Alternative Currency in New York,
New York at 9:00 a.m. (New York time) two (2) Business Days prior to the date on
which such equivalent is to be determined. The equivalent in any Alternative
Currency (i) of any other Alternative Currency shall be determined by using the
quoted spot rate at which Citibank offers to exchange such Alternative Currency
for the equivalent in such other Alternative Currency in New York, New York at
9:00 a.m. (New York time) two (2) Business Days prior to the date on which such
equivalent is to be determined and (ii) of Dollars shall be determined by using
the quoted spot rate at which Citibank offers to exchange such Alternative
Currency for Dollars in New York, New York at 9:00 a.m. (New York time) two (2)
Business Days prior the date on which such equivalent is to be determined. The
equivalent in Dollars of each Eurocurrency Rate Loan made in an Alternative
Currency shall be recalculated hereunder on each date that it shall be necessary
to determine the unused portion of
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each Lender's Revolving Credit Commitment, the Revolving Credit Availability,
and any or all Revolving Credit Obligations outstanding on such date and on each
date of a conversion or continuation of a Eurocurrency Rate Loan.
2.06. Currency Exchanges. At any time Eurocurrency Rate Loans
denominated in an Alternative Currency are required to be converted to Base Rate
Loans, the Borrowers shall indemnify the Lenders against any loss or liability
arising out of or as a result of the conversion of such Alternative Currency to
Dollars and exchange costs and taxes payable in connection with such conversion
and the Borrower to which such Loan was made shall forthwith on written demand
therefor pay to the Agent, for the benefit of the applicable Lenders, the amount
of such loss, liability, costs and taxes.
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ARTICLE III
LETTERS OF CREDIT
3.01. Letters of Credit. Subject to the terms and conditions set
forth in this Agreement, each Issuing Bank hereby severally agrees to issue for
the account of a Borrower, or for the account of any of a Borrower's
Subsidiaries if such Borrower is jointly and severally liable for reimbursement
of amounts drawn under such Letter of Credit, one or more Letters of Credit,
subject to the following provisions:
(a) Types and Amounts. An Issuing Bank shall not have any obligation
to issue, amend or extend, and shall not issue, amend or extend, any Letter of
Credit at any time:
(i) if the aggregate Letter of Credit Obligations with respect to
such Issuing Bank, after giving effect to the issuance, amendment or
extension of the Letter of Credit requested hereunder, shall exceed any
limit imposed by law or regulation upon such Issuing Bank;
(ii) if such Issuing Bank receives written notice from the Agent at
or before 11:00 a.m. (New York time) on the date of the proposed issuance,
amendment or extension of such Letter of Credit that (A) immediately after
giving effect to the issuance, amendment or extension of such Letter of
Credit, (I) the Letter of Credit Obligations at such time would exceed
$25,000,000, or (II) the Revolving Credit Obligations at such time would
exceed the Commitments at such time, or (III) the undrawn face amount of
the Letter of Credit Obligations denominated in Alternative Currencies,
when aggregated with all other Revolving Credit Obligations denominated in
Alternative Currencies, would exceed the equivalent of the Multicurrency
Sublimit, or (B) one or more of the conditions precedent contained in
Section 6.01 or 6.02, as applicable, would not on such date be satisfied,
unless such conditions are thereafter satisfied and written notice of such
satisfaction is given to such Issuing Bank by the Agent (and an Issuing
Bank shall not otherwise be required to determine that, or take notice
whether, the conditions precedent set forth in Section 6.01 or 6.02, as
applicable, have been satisfied);
(iii) which has an expiration date later than the earlier of (A) the
date one (1) year after the date of issuance (without regard to any
automatic renewal provisions thereof) or (B) the Business Day next
preceding the scheduled Revolving Credit Termination Date; or
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(iv) which is in a currency other than Dollars or an Alternative
Currency in which such Issuing Bank is then issuing letters of credit.
(b) Conditions. In addition to being subject to the satisfaction of
the conditions precedent contained in Sections 6.01 and 6.02, as applicable, the
obligation of an Issuing Bank to issue, amend or extend any Letter of Credit is
subject to the satisfaction in full of the following conditions:
(i) if such Issuing Bank so requests, the Borrower applicant or, in
the case of Letters of Credit issued for the account of any of a
Borrower's Subsidiaries, such Borrower and such Subsidiary shall have
executed and delivered to such Issuing Bank and the Agent a Letter of
Credit Reimbursement Agreement and such other documents and materials as
may be required pursuant to the terms thereof; and
(ii) the terms of the proposed Letter of Credit shall be
satisfactory to such Issuing Bank in its sole discretion.
(c) Issuance of Letters of Credit. (i) The Borrower applicant shall
give an Issuing Bank and the Agent written notice that it has selected such
Issuing Bank to issue a Letter of Credit not later than 11:00 a.m. (New York
time) on the third (3rd) Business Day preceding the requested date for issuance
thereof under this Agreement, or such shorter notice as may be acceptable to
such Issuing Bank and the Agent. Such notice shall be irrevocable unless and
until such request is denied by the applicable Issuing Bank and shall specify
(A) that the requested Letter of Credit is either a Commercial Letter of Credit
or a Standby Letter of Credit, (B) that such Letter of Credit is solely for the
account of the Borrower applicant or the name of the Subsidiary of such Borrower
which is jointly and severally applying for such Letter of Credit, (C) the
stated amount and currency of the Letter of Credit requested, (D) the effective
date (which shall be a Business Day) of issuance of such Letter of Credit, (E)
the date on which such Letter of Credit is to expire (which shall be a Business
Day and no later than the earlier of one (1) year after the date of issuance
(without regard to any automatic renewal provisions thereof) and the Business
Day immediately preceding the scheduled Revolving Credit Termination Date), (F)
the Person for whose benefit such Letter of Credit is to be issued, (G) other
relevant terms of such Letter of Credit, (H) the Revolving Credit Availability
(calculated in the applicable currency) at such time, (I) the amount of the then
outstanding Letter of Credit Obligations, and (J) if such Letter of Credit is to
be denominated in an Alternative Currency, the amount by which the Multicurrency
Sublimit exceeds the aggregate Revolving Credit Obligations denominated in
Alternative Currencies (calculated in Dollars). Such Issuing Bank shall notify
the Agent immediately upon receipt
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of a written notice from a Borrower requesting that a Letter of Credit be
issued, or that an existing Letter of Credit be extended or amended and, upon
the Agent's request therefor, send a copy of such notice to the Agent.
(ii) The applicable Issuing Bank shall give (A) the Agent written
notice, or telephonic notice confirmed promptly thereafter in writing, of the
issuance, amendment or extension of a Letter of Credit and (B) promptly after
issuance thereof, provide the Agent with a copy of each Letter of Credit issued
and each amendment thereto.
(d) Reimbursement Obligations; Duties of Issuing Banks. (i)
Notwithstanding any provisions to the contrary in any Letter of Credit
Reimbursement Agreement:
(A) the Borrower applicant shall reimburse, or cause its Subsidiary
for whose account a Letter of Credit is issued to reimburse, the
applicable Issuing Bank for amounts drawn under such Letter of Credit, in
the currency in which such Letter of Credit is denominated, no later than
the date (the "Reimbursement Date") which is the earlier of (I) the time
specified in the applicable Letter of Credit Reimbursement Agreement and
(II) one (1) Business Day after such Borrower receives written notice from
such Issuing Bank that payment has been made under such Letter of Credit
by such Issuing Bank; and
(B) all Reimbursement Obligations with respect to any Letter of
Credit shall bear interest at the rate applicable to Base Rate Loans, if
such Letter of Credit is denominated in Dollars, or Eurocurrency Rate
Loans with Eurocurrency Rate Interest Periods of one week, if such Letter
of Credit is denominated in an Alternative Currency, in accordance with
Section 5.01(a) from the date of the relevant drawing under such Letter of
Credit until the Reimbursement Date and thereafter at the rate applicable
to Base Rate Loans or Eurocurrency Rate Loans with Eurocurrency Rate
Interest Periods of one week, as applicable, in accordance with Section
5.01(d).
(ii) The applicable Issuing Bank shall give the Agent written
notice, or telephonic notice confirmed promptly thereafter in writing, of all
drawings under a Letter of Credit and the payment (or the failure to pay when
due) by the Borrower applicant or its applicable Subsidiary on account of a
Reimbursement Obligation (which notice the Agent shall promptly transmit by
telegram, telex, telecopy or similar transmission to each Lender).
(iii) No action taken or omitted in good faith by an Issuing Bank
under or in connection with any Letter of Credit
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shall put such Issuing Bank under any resulting liability to any Lender, the
Borrower applicant or any of its Subsidiaries or, so long as it is not issued in
violation of Section 3.01(a), relieve any Lender of its obligations hereunder to
such Issuing Bank. Solely as between the Issuing Banks and the Lenders, in
determining whether to pay under any Letter of Credit, the respective Issuing
Bank shall have no obligation to the Lenders other than to confirm that any
documents required to be delivered under a respective Letter of Credit appear to
have been delivered and that they appear on their face to comply with the
requirements of such Letter of Credit.
(e) Participations. (i) Immediately upon issuance by an Issuing Bank
of any Letter of Credit in accordance with the procedures set forth in this
Section 3.01 and immediately upon conversion of a letter of credit of an Issuing
Bank to a Letter of Credit pursuant to Section 3.02, each Lender shall be deemed
to have irrevocably and unconditionally purchased and received from that Issuing
Bank, without recourse or warranty, an undivided interest and participation in
such Letter of Credit to the extent of such Lender's Pro Rata Share, including,
without limitation, all obligations of the Borrower applicant with respect
thereto (other than amounts owing to that Issuing Bank under Section 3.01(g))
and any security therefor and guaranty pertaining thereto.
(ii) If any Issuing Bank makes any payment under any Letter of
Credit and the Borrower or the Subsidiary of a Borrower for whose account such
Letter of Credit was issued does not repay such amount to such Issuing Bank on
the Reimbursement Date, such Issuing Bank shall promptly notify the Agent, which
shall promptly notify each Lender, and each Lender shall promptly and
unconditionally pay to the Agent for the account of such Issuing Bank, in
immediately available funds in the applicable currency, the amount of such
Lender's Pro Rata Share of such payment (net of that portion of such payment, if
any, made by such Lender in its capacity as an Issuing Bank), and the Agent
shall promptly pay to such Issuing Bank such amounts received by it, and any
other amounts received by the Agent for such Issuing Bank's account, pursuant to
this Section 3.01(e). All amounts so paid to such Issuing Bank shall be deemed
to constitute Revolving Loans and, (A) if in Dollars, shall be Base Rate Loans
or (B) if in an Alternative Currency, shall be Eurocurrency Rate Loans with an
Eurocurrency Rate Interest Period of one (1) month. If a Lender does not make
its Pro Rata Share of the amount of such payment available to the Agent, such
Lender agrees to pay to the Agent for the account of such Issuing Bank,
forthwith on demand, such amount together with interest thereon, for the first
three (3) Business Days after the date such payment was first due at the Federal
Funds Rate (in the case of Revolving Loans in Dollars) or the rate per annum at
which call deposits in the respective Alternative Currency are offered by
Citibank London to prime banks in the London interbank market for such day (in
the case of Revolving Loans in an Alternative Currency), and thereafter at
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the interest rate then applicable to Base Rate Loans, if such Letter of Credit
is denominated in Dollars, or Eurocurrency Rate Loans with Eurocurrency Rate
Interest Periods of one week, if such Letter of Credit is denominated in an
Alternative Currency, in each instance in accordance with Section 5.01(a). The
failure of any Lender to make available to the Agent for the account of an
Issuing Bank its Pro Rata Share of any such payment shall neither relieve any
other Lender of its obligation hereunder to make available to the Agent for the
account of such Issuing Bank such other Lender's Pro Rata Share of any payment
on the date such payment is to be made nor increase the obligation of any other
Lender to make such payment to the Agent.
(iii) Whenever an Issuing Bank receives a payment on account of a
Reimbursement Obligation, including any interest thereon, as to which the Agent
has previously received payments from any Lender for the account of such Issuing
Bank pursuant to this Section 3.01(e), such Issuing Bank shall promptly pay to
the Agent and the Agent shall promptly pay to such Lender an amount equal to
such Lender's Pro Rata Share thereof. Each such payment shall be made by such
Issuing Bank or the Agent, as the case may be, on the Business Day on which such
Person receives the funds paid to such Person pursuant to the preceding
sentence, if received prior to 11:00 a.m. (New York time) on such Business Day,
and otherwise on the next succeeding Business Day.
(iv) Upon the request of any Lender, an Issuing Bank shall furnish
such Lender copies of any Letter of Credit or Letter of Credit Reimbursement
Agreement to which such Issuing Bank is party and such other documentation as
reasonably may be requested by such Lender.
(v) The obligations of a Lender to make payments to the Agent for
the account of any Issuing Bank with respect to a Letter of Credit shall be
irrevocable, shall not be subject to any qualification or exception whatsoever
except willful misconduct or gross negligence of such Issuing Bank or such
Issuing Bank's failure to comply with the provisions of Section 3.01(a)(ii) or
(iii), and shall be honored in accordance with this Article III (irrespective of
the satisfaction of the conditions described in Sections 6.01 and 6.02, as
applicable) under all circumstances, including, without limitation, any of the
following circumstances:
(A) any lack of validity or enforceability of this Agreement or any
of the other Loan Documents;
(B) the existence of any claim, setoff, defense or other right which
the Borrower applicant may have at any time against a beneficiary named in
a Letter of Credit or any transferee of a beneficiary named in a Letter of
Credit (or any Person for whom any such transferee may be acting), the
Agent, such Issuing Bank, any Lender, or any other Person, whether in
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connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any
underlying transactions between the account party and beneficiary named in
any Letter of Credit);
(C) any draft, certificate or any other document presented under
such Letter of Credit having been determined to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(D) the surrender or impairment of any security
for the performance or observance of any of the terms
of any of the Loan Documents;
(E) any failure by that Issuing Bank to make any reports required
pursuant to Section 3.01(h) or the inaccuracy of any such report; or
(F) the occurrence of any Event of Default or Potential Event of
Default.
(f) Payment of Reimbursement Obligations. (i) The Borrower applicant
with respect to any Letter of Credit unconditionally agrees to pay, or cause its
Subsidiary for whose account a Letter of Credit is issued to pay, to each
Issuing Bank, in the currency in which such Letter of Credit is denominated, the
amount of all Reimbursement Obligations, interest and other amounts payable to
such Issuing Bank under or in connection with the Letters of Credit when such
amounts are due and payable, irrespective of any claim, setoff, defense or other
right which such Borrower may have at any time against any Issuing Bank or any
other Person.
(ii) In the event any payment by a Borrower applicant or such
Subsidiary received by an Issuing Bank with respect to a Letter of Credit and
distributed by the Agent to the Lenders on account of their participations is
thereafter set aside, avoided or recovered from such Issuing Bank in connection
with any receivership, liquidation or bankruptcy proceeding, each Lender which
received such distribution shall, upon demand by such Issuing Bank, contribute
such Lender's Pro Rata Share of the amount set aside, avoided or recovered
together with interest at the rate required to be paid by such Issuing Bank upon
the amount required to be repaid by it.
(g) Issuing Bank Charges. The Borrower applicant shall pay, or cause
its Subsidiary for whose account a Letter of Credit is issued to pay, to each
Issuing Bank, solely for its own account, the standard charges assessed by such
Issuing Bank in connection with the issuance, administration, amendment and
payment or cancellation of Letters of Credit and such compensation in respect of
such Letters of Credit for such
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Borrower's or such Subsidiary's account, as applicable, as may be agreed upon by
such Borrower and such Issuing Bank from time to time.
(h) Issuing Bank Reporting Requirements. Each Issuing Bank shall, no
later than the last day of each calendar month, provide to the Agent, the U.S.
Borrower, and each Lender separate schedules for Commercial Letters of Credit
and Standby Letters of Credit issued as Letters of Credit, in form and substance
reasonably satisfactory to the Agent, setting forth the aggregate Letter of
Credit Obligations outstanding to it as of such date and, to the extent not
otherwise provided in accordance with the provisions of Section 3.01(c)(ii), any
information requested by the Agent or the U.S. Borrower relating to the date of
issue, account party, amount, expiration date and reference number of each
Letter of Credit issued by it.
(i) Indemnification; Exoneration. (i) In addition to all other
amounts payable to an Issuing Bank, each Borrower hereby agrees to defend,
indemnify, and save harmless the Agent, each Issuing Bank and each Lender from
and against any and all claims, demands, liabilities, penalties, damages, losses
(other than loss of profits), costs, charges and expenses (including reasonable
attorneys' fees but excluding taxes) which the Agent, such Issuing Bank or such
Lender may incur or be subject to as a consequence, direct or indirect, of (A)
the issuance of any Letter of Credit for the account of such Borrower or a
Subsidiary of such Borrower other than, in respect of an Issuing Bank, as a
result of the gross negligence or willful misconduct of such Issuing Bank, as
determined by a court of competent jurisdiction, or (B) the failure of the
Issuing Bank issuing a Letter of Credit to honor a drawing under such Letter of
Credit as a result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or Governmental Authority.
(ii) As between a Borrower and any of its Subsidiaries for whose
account a Letter of Credit is issued on the one hand and the Agent, the Lenders
and the Issuing Banks on the other hand, such Borrower assumes all risks of the
acts and omissions of, or misuse of Letters of Credit by, the respective
beneficiaries of the Letters of Credit. In furtherance and not in limitation of
the foregoing, subject to the provisions of the Letter of Credit Reimbursement
Agreements, the Issuing Banks and the Lenders shall not be responsible for and
the Reimbursement Obligations shall not be affected by: (A) the form, validity,
legality, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
the Letters of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the
validity, legality or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective
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for any reason; (C) failure of the beneficiary of a Letter of Credit to comply
duly with conditions required in order to draw upon such Letter of Credit; (D)
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher; (E) errors in interpretation of technical terms; (F) any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing under any Letter of Credit or of the proceeds thereof; (G) the
misapplication by the beneficiary of a Letter of Credit of the proceeds of any
drawing under such Letter of Credit; and (H) any consequences arising from
causes beyond the control of the Agent, the Issuing Banks or the Lenders.
3.02 Transitional Provisions. Schedule 3.02 attached hereto and made
a part hereof contains a schedule of certain letters of credit issued prior to
the Effective Date by Citibank for the account of the U.S. Borrower or for the
account of a Subsidiary of the U.S. Borrower. Subject to the satisfaction of the
conditions precedent contained in Section 6.01, on the Effective Date (i) such
letters of credit, to the extent still outstanding, shall automatically and
without further action of the parties hereto be converted into Letters of Credit
issued pursuant to this Article III and subject to the provisions hereof, (ii)
the face amount of such letters of credit shall be included in the calculation
of Letter of Credit Obligations, and (iii) all liabilities of the U.S. Borrower
with respect to such letters of credit shall constitute Obligations.
3.03. Obligations Several. The obligations of each Issuing Bank and
each Lender under this Article III are several and not joint, and no Issuing
Bank or Lender shall be responsible for the obligation to issue Letters of
Credit or participation obligations hereunder, respectively, of any other
Issuing Bank or Lender.
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ARTICLE IV
PAYMENTS AND PREPAYMENTS
4.01. Prepayments; Reductions in Commitments.
(a) Voluntary Prepayments/Reductions. (i) Notice. The Borrowers
may, at any time and from time to time, prepay the Revolving Loans, in whole or
in part; provided that (A) if such prepayment is of Revolving Loans denominated
in an Alternative Currency, at least one (1) Business Day's prior written notice
of such prepayment is delivered to the Agent (which the Agent shall promptly
transmit to each Lender) and (B) Eurocurrency Rate Loans which are so prepaid
shall be prepaid (1) on the expiration date of the then applicable Eurocurrency
Rate Interest Period therefor or (2) on any other date upon payment of the
amounts described in Article XIV. Unless the aggregate outstanding principal
balance of the Revolving Loans is to be prepaid in full, voluntary prepayments
thereof shall be in an aggregate minimum amount of $250,000 (or the equivalent
in an Alternative Currency determined on the date of the aforesaid notice) and
integral multiples of $250,000 (or the equivalent in an Alternative Currency
determined on the date of the aforesaid notice) in excess of that amount. Any
notice of prepayment given to the Agent under this Section 4.01(a)(i) shall
specify the date (which shall be a Business Day) of prepayment, the aggregate
principal amount and currency of the prepayment, any allocation of such amount
between Revolving Loans outstanding to the U.S. Borrower and the European
Borrower, respectively, and any allocation of such amount among Base Rate Loans
and respective Eurocurrency Rate Loans. When notice of prepayment is delivered
as provided herein, the principal amount of the Revolving Loans specified in the
notice shall become due and payable on the prepayment date specified in such
notice, subject to the right to reborrow the same in accordance with Section
2.01. The Borrowers may repay Swing Loans, without prior written notice to the
Agent or Citicorp, at any time and from time to time.
(ii) Voluntary Revolving Credit Commitment Reductions. The U.S.
Borrower, upon at least three (3) Business Days' prior written notice to the
Agent (which the Agent shall promptly transmit to each Lender), shall have the
right, at any time and from time to time, to terminate in whole or permanently
reduce in part the Revolving Credit Commitments; provided that the Borrowers
shall have made whatever payment may be required to reduce the Revolving Credit
Obligations to an amount less than or equal to the Revolving Credit Commitments
as reduced or terminated. Any partial reduction of the Revolving Credit
Commitments shall be in an aggregate minimum amount of $250,000 and integral
multiples of $250,000 in excess of that amount, and shall reduce the Revolving
Credit Commitment of each Lender proportionately in accordance with its Pro Rata
Share. Any notice of termination or reduction given to the Agent under this
Section 4.01(a)(ii) shall specify the date (which shall be a
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Business Day) of such termination or reduction and, with respect to a partial
reduction, the aggregate principal amount thereof. When notice of termination or
reduction is delivered as provided herein, the principal amount of the Revolving
Loans required to be prepaid as a result thereof shall become due and payable on
the date specified in such notice.
(iii) No Prepayment Fee. The prepayments and payments in respect of
reductions and terminations described in clauses (i) and (ii) of this Section
4.01(a) may be made without premium or penalty (except as provided in Article
XIV).
(b) Mandatory Prepayments/Reductions.
(i) Net Cash Proceeds of Sale. In the event a Borrower or any
Subsidiary of a Borrower receives, in any Fiscal Year, Net Cash Proceeds of Sale
which, when aggregated with all other Net Cash Proceeds of Sale received by the
Borrowers and Subsidiaries of the Borrowers in such Fiscal Year, exceed
$2,500,000, such Borrower shall, immediately upon its or such Subsidiary's
receipt of such Net Cash Proceeds of Sale, make or cause to be made a mandatory
prepayment of the Obligations in an amount equal to one hundred percent (100%)
of such Net Cash Proceeds of Sale until such time as the Revolving Credit
Commitments are less than $60,000,000. Notwithstanding the foregoing, in the
event such Net Cash Proceeds of Sale otherwise required to be applied as a
mandatory prepayment of the Obligations are proceeds received from the sale,
transfer, assignment or other disposition of assets of
(A) a Borrower or Guarantor (and not otherwise subject to the
provisions of clause (C) below) or other Subsidiary of the U.S. Borrower
which is a Domestic Subsidiary, such Subsidiary may use such Net Cash
Proceeds of Sale within two hundred seventy (270) days after its receipt
thereof to make an investment in, or acquire assets and properties (or a
Person or entity owning such assets or properties) that will be used in
the business of the U.S. Borrower and its Subsidiaries existing on the
Effective Date or in a business reasonably related thereto and, to the
extent such Net Cash Proceeds of Sale are so used within such period, the
same shall not be required to be applied as a mandatory prepayment of the
Obligations and an amount equal to that portion of the Net Cash Proceeds
of Sale not so used, shall be delivered to the Agent as a mandatory
prepayment for application on the Obligations on the 271st day after
receipt thereof;
(B) a direct Subsidiary of the U.S. Borrower (other than the
European Borrower) which is not a Domestic Subsidiary, no prepayment shall
be required if repatriation of such Net Cash Proceeds of Sale would
require the U.S.
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Borrower to incur liabilities for U.S. federal income taxes
which would not be incurred absent such repatriation; or
(C) a Borrower or Guarantor and such sale, transfer, assignment or
other disposition is a sale, transfer, assignment of all or substantially
all of the assets of a Borrower or Guarantor or any of the Capital Stock
of the European Borrower or a Guarantor, a mandatory prepayment of the
Obligations shall be required as aforesaid regardless of the amount of the
Revolving Credit Commitments at the time of such sale, transfer,
assignment or other disposition.
(ii) Net Cash Proceeds of Issuance of Indebtedness. In the event a
Borrower or any Subsidiary of a Borrower receives Net Cash Proceeds of Issuance
of Indebtedness, such Borrower shall, immediately upon its or its Subsidiary's
receipt of such Net Cash Proceeds of Issuance of Indebtedness, make or cause to
be made a mandatory prepayment in an amount equal to one hundred percent (100%)
of such Net Cash Proceeds of Issuance of Indebtedness until such time as the
Revolving Credit Commitments are less than $60,000,000.
(iii) No Waiver or Consent. Nothing in this Section 4.01(b) shall be
construed to constitute the Lenders' consent to any transaction referenced
hereinabove which is not expressly permitted by Article X or affect any of the
Lenders' rights and remedies hereunder as a result of any non-compliance with
Article X.
(iv) Notice. The U.S. Borrower shall give the Agent prior written
notice or telephonic notice promptly confirmed in writing (each of which the
Agent shall promptly transmit to each Lender), when a Designated Prepayment will
be made (which date of prepayment shall be no later than the date on which such
Designated Prepayment becomes due and payable pursuant to this Section 4.01(b)).
(v) Application of Designated Prepayments. Designated
Prepayments shall be allocated and applied to the Obligations as
follows:
(A) the amount of each Designated Prepayment shall be applied
ratably to the outstanding Revolving Loans, each application being made
first to the Revolving Loans which are Base Rate Loans until paid in full
and then to Revolving Loans which are Eurocurrency Rate Loans, with those
which have earlier expiring Eurocurrency Rate Interest Periods being
repaid prior to those which have later expiring Eurocurrency Rate Interest
Periods, until paid in full; provided that the U.S. Borrower may elect to
deposit with the Agent, as Cash Collateral and subject to the provisions
of Section 4.05, amounts that would otherwise be required
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to be applied to Eurocurrency Rate Loans hereunder until the end of the
Eurocurrency Rate Interest Period applicable to such Eurocurrency Rate
Loans, at which time the required application shall be made by the Agent;
(B) following the payment in full of the Revolving Loans, the
remaining balance of each Designated Prepayment shall be applied to the
Reimbursement Obligations until paid in full; and
(C) thereafter, the remaining balance of each Designated Prepayment
shall be applied to the Swing Loans then outstanding until paid in full.
(vi) Mandatory Revolving Loan Payments. The Borrowers shall, without
notice or demand of any kind, immediately make such repayments of the Revolving
Loans to the extent necessary to reduce the aggregate outstanding principal
amount of the (A) Revolving Loans to an amount no greater than the difference
between the then effective Revolving Credit Commitments and the sum of the
Letter of Credit Obligations as of such time plus the Swing Loans outstanding as
of such time; and (B) Revolving Loans denominated in Alternative Currencies to
an aggregate amount no greater than the difference between the Multicurrency
Sublimit and the Letter of Credit Obligations denominated in Alternative
Currencies as of such time.
(vii) Mandatory Revolving Credit Commitment Reductions. The
Revolving Credit Commitments shall be permanently reduced by the amount of each
Designated Prepayment required to be made on the date such Designated Prepayment
is required to be made, and the respective Revolving Credit Commitment of each
Lender shall be permanently reduced proportionately in accordance with its Pro
Rata Share.
4.02. Payments. (a) Manner and Time of Payment. All payments of
principal of and interest on the Loans and Reimbursement Obligations and other
Obligations (including, without limitation, fees and expenses) which are payable
to the Agent, the Lenders or any Issuing Bank shall be made without condition or
reservation of right, and, with respect to payments made other than from
application of deposits in a Concentration Account, in immediately available
funds in the applicable currency, delivered to the Agent (or, in the case of
Reimbursement Obligations, to the applicable Issuing Bank) not later than 11:30
a.m. (in the location of the Applicable Payment Office) on the date and at the
place due, to such account of the Agent (or such Issuing Bank) as it may
designate, for the account of the Agent, the Lenders or such Issuing Bank, as
the case may be; and funds received by the Agent, including, without limitation,
funds in respect of any Revolving Loans to be made on that date, not later than
11:30 a.m. (in the location of the Applicable Payment Office) on any given
Business Day shall be credited against payment to be
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made that day and funds received by the Agent after that time shall be deemed to
have been paid on the next succeeding Business Day. Payments actually received
by the Agent for the account of the Lenders or the Issuing Banks, or any of
them, shall be paid by the Agent promptly after its receipt thereof to them for
the account of their respective Applicable Lending Offices.
(b) Apportionment of Payments. (i) Subject to the provisions of
Section 4.01 and Section 4.02(b)(v), all payments of principal and interest in
respect of Loans outstanding to a respective Borrower, all payments in respect
of Reimbursement Obligations of such Borrower, all payments of fees and all
other payments in respect of any other Obligations of such Borrower, shall be
allocated among such of the Lenders and Issuing Banks as are entitled thereto,
in proportion to their respective Pro Rata Shares or otherwise as provided
herein. Except as provided in Section 4.02(b)(ii) with respect to payments by or
for the benefit of a respective Borrower and proceeds of Collateral for such
respective Borrower's Obligations received after the occurrence and during the
continuance of an Event of Default and except as provided in Section 4.04(b),
all such payments and any other amounts received by the Agent from or for the
benefit of such Borrower shall be applied
(A) first, to pay principal of and interest on any portion of the
Revolving Loans made to such Borrower which the Agent may have advanced on
behalf of any Lender other than Citicorp for which the Agent has not then been
reimbursed by such Lender or such Borrower,
(B) second, to pay principal of and interest on any Protective Advance in
respect of such Borrower's Obligations for which the Agent has not then been
paid by such Borrower or reimbursed by the Lenders,
(C) third, to pay principal of and accrued interest on any Swing Loans
then outstanding,
(D) fourth, to pay the principal of the Revolving Loans made to such
Borrower and then due and payable in the order described hereinbelow and
interest on such Loans then due and payable, ratably, based on the then
outstanding balances of the such Loans,
(E) fifth, to pay all other Obligations of such Borrower then due and
payable, ratably, and
(F) sixth, as such Borrower so designates.
All such principal and interest payments in respect of Revolving Loans to a
respective Borrower shall be applied to the Revolving Loans outstanding to such
Borrower and accrued interest thereon, first, to repay outstanding Base Rate
Loans and then to repay outstanding Eurocurrency Rate Loans with those
Eurocurrency Rate
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Loans which have earlier expiring Eurocurrency Rate Interest Periods being
repaid prior to those which have later expiring Eurocurrency Rate Interest
Periods.
(ii) After the occurrence of an Event of Default and while the same is
continuing, the Agent shall apply all payments in respect of any Obligations of
a respective Borrower and, subject to the provisions of Section 4.06, all
proceeds of Collateral securing the Obligations of such Borrower in the
following order:
(A) first, to pay principal of and interest on any portion of the
Revolving Loans made to such Borrower which the Agent may have advanced on
behalf of any Lender other than Citicorp for which the Agent has not then been
reimbursed by such Lender or such Borrower;
(B) second, to pay principal of and interest on any Protective Advance in
respect of such Borrower's Obligations for which the Agent has not then been
paid by such Borrower or reimbursed by the Lenders;
(C) third, to pay principal of and interest on any Swing Loans then
outstanding;
(D) fourth, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Agent by such Borrower;
(E) fifth, to pay principal of and interest on Letter of Credit
Obligations of such Borrower (or, to the extent such Obligations are contingent,
deposited in the Cash Collateral Account to provide Cash Collateral in respect
of such Obligations);
(F) sixth, to pay Obligations of such Borrower in respect of any fees,
expense reimbursements or indemnities then due to the Lenders and the Issuing
Banks;
(G) seventh, to pay interest due in respect of the Revolving Loans made to
such Borrower, ratably, in accordance with the Lenders' respective Pro Rata
Shares;
(H) eighth, to the ratable payment or prepayment of principal outstanding
on all Revolving Loans made to such Borrower;
(I) ninth, to the ratable payment of Hedge Agreements to which any of the
Lenders or any Affiliate of any of the Lenders and such Borrower is a party; and
(J) tenth, to the ratable payment of all other Obligations.
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The order of priority set forth in this Section 4.02(b) and the related
provisions of this Agreement are set forth solely to determine the rights and
priorities of the Agent, the Lenders, the Issuing Banks and other Holders as
among themselves.
(iii) The Agent, in its sole discretion subject only to the terms of
this Section 4.02(b)(iii), may pay from the proceeds of Revolving Loans made to
a respective Borrower hereunder, whether made following a request by such
Borrower pursuant to Section 2.01 or a deemed request as provided in this
Section 4.02(b)(iii), all amounts then due and payable by such Borrower
hereunder, including, without limitation, amounts payable with respect to
payments of principal, interest, Reimbursement Obligations and fees and all
reimbursements for expenses pursuant to Section 15.02. Each Borrower hereby
irrevocably authorizes the Lenders to make Revolving Loans in the applicable
currency upon notice from the Agent as described in the following sentence for
the purpose of paying principal, interest, Reimbursement Obligations and fees
due and payable from such Borrower, reimbursing expenses pursuant to Section
15.02 and paying any and all other amounts due and payable by such Borrower
hereunder or under the Notes, and agrees that all such Revolving Loans so made
shall be deemed to have been requested by it pursuant to Section 2.01 as of the
date of the aforementioned notice. The Agent may request Revolving Loans on
behalf of a Borrower as described in the preceding sentence by notifying the
Lenders by telecopy, telegram or other similar form of transmission (which
notice the Agent shall thereafter promptly transmit to the U.S. Borrower), of
the applicable currency, amount, applicable interest rate, and Funding Date of
the proposed Borrowing and that such Borrowing is being requested on such
Borrower's behalf pursuant to this Section 4.02(b)(iii). Such Revolving Loans
requested in Dollars shall be Base Rate Loans and such Revolving Loans requested
in an Alternative Currency shall be Eurocurrency Rate Loans with an initial
Eurocurrency Rate Interest Period of one (1) month. On the proposed Funding Date
for such Revolving Loan, the Lenders shall make the requested Revolving Loans in
accordance with the procedures and subject to the conditions specified in
Section 2.01.
(iv) Subject to Section 4.02(b)(v), the Agent shall promptly
distribute to each Lender and Issuing Bank at its primary address set forth on
the appropriate signature page hereof or the signature page to the Assignment
and Acceptance by which it became a Lender or Issuing Bank, or at such other
address as a Lender, an Issuing Bank or other Holder may request in writing,
such funds as such Person may be entitled to receive, subject to the provisions
of Article XIV; provided that the Agent shall under no circumstances be bound to
inquire into or determine the validity, scope or priority of any interest or
entitlement of any Holder and may suspend all payments or seek appropriate
relief (including, without limitation, instructions from the Requisite Lenders
or an action in the nature of
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interpleader) in the event of any doubt or dispute as to any apportionment or
distribution contemplated hereby.
(v) In the event that any Lender fails to fund its Pro Rata Share of
any Revolving Loan requested for a Borrower which such Lender is obligated to
fund under the terms of this Agreement (the funded portion of such Revolving
Loan being hereinafter referred to as a "Non Pro Rata Loan"), until the earlier
of such Lender's cure of such failure and the termination of the Revolving
Credit Commitments, the proceeds of all amounts thereafter repaid to the Agent
by such Borrower and otherwise required to be applied to such Lender's share of
all other Obligations pursuant to the terms of this Agreement shall be advanced
to such Borrower by the Agent on behalf of such Lender to cure, in full or in
part, such failure by such Lender, but shall nevertheless be deemed to have been
paid to such Lender in satisfaction of such other Obligations. Notwithstanding
anything in this Agreement to the contrary:
(A) the foregoing provisions of this Section 4.02(b)(v) shall apply
only with respect to the proceeds of payments of Obligations and shall not
affect the conversion or continuation of Loans pursuant to Section
5.01(c);
(B) a Lender shall be deemed to have cured its failure to fund its
Pro Rata Share of any Revolving Loan at such time as an amount equal to
such Lender's original Pro Rata Share of the requested principal portion
of such Revolving Loan is fully funded to the applicable Borrower, whether
made by such Lender itself or by operation of the terms of this Section
4.02(b)(v), and whether or not the Non Pro Rata Loan with respect thereto
has been repaid, converted or continued;
(C) amounts advanced to a Borrower to cure, in full or in part, any
such Lender's failure to fund its Pro Rata Share of any Revolving Loan to
that Borrower ("Cure Loans") shall bear interest at the rate in effect
from time to time pursuant to Section 5.01; and
(D) regardless of whether or not an Event of Default has occurred or
is continuing, and notwithstanding the instructions of a Borrower as to
its desired application, all repayments of principal which, in accordance
with the other terms of this Section 4.02, would be applied to such
outstanding Revolving Loans shall be applied first, ratably to all such
Loans constituting Non Pro Rata Loans, second, ratably to such Loans other
than those constituting Non Pro Rata Loans or Cure Loans and, third,
ratably to such Loans constituting Cure Loans.
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(c) Payments on Non-Business Days. Whenever any payment to be made
by the Borrower hereunder or under the Notes is stated to be due on a day which
is not a Business Day, the payment shall instead be due on the next succeeding
Business Day (except as set forth in Section 5.02(b)(iii) with respect to
payments due on the next preceding Business Day), and any such extension of time
shall be included in the computation of the payment of interest and fees
hereunder.
4.03. Promise to Repay; Evidence of Indebtedness.
(a) Promise to Repay. Each Borrower hereby severally agrees to pay
when due the principal amount of each Loan which is made to it, and further
agrees to pay all unpaid interest accrued thereon, in accordance with the terms
of this Agreement and the Notes. Each Borrower shall execute and deliver to each
Lender on the Effective Date a Note or Notes, evidencing the Loans made to it
hereunder and thereafter shall execute and deliver such other Notes as are
necessary to evidence Loans owing by it to other Lenders after giving effect to
any assignment thereof pursuant to Section 15.01.
(b) Loan Account. Each Lender shall maintain in accordance with its
usual practice an account or accounts (a "Loan Account") evidencing the
Indebtedness of each of the Borrowers to such Lender resulting from each Loan
owing to such Lender from time to time, including the amount of principal and
interest payable and paid to such Lender from time to time hereunder and under
the Notes.
(c) Control Account. The Register maintained by the Agent pursuant
to Section 15.01(c) shall include a control account, and a subsidiary account
for each Lender, in which accounts (taken together) shall be recorded (i) the
date, amount and currency of each Borrowing made hereunder, the type of Loan
comprising such Borrowing and any Eurocurrency Rate Interest Period applicable
thereto, (ii) the effective date and amount of each Assignment and Acceptance
delivered to and accepted by it and the parties thereto, (iii) the amount of any
principal or interest due and payable or to become due and payable from the
respective Borrowers to each Lender hereunder or under the Notes, and (iv) the
amount of any sum received by the Agent from the respective Borrowers hereunder
and each Lender's share thereof.
(d) Entries Binding. The entries made in the Register and each Loan
Account shall be conclusive and binding for all purposes, absent manifest error.
4.04. Proceeds of Collateral; Concentration Account Arrangements.
(a) Establishment. The European Borrower shall establish within sixty (60) days
after the Closing Date and thereafter maintain, and the U.S. Borrower shall
maintain its Collection Accounts which exist as of the Closing Date and shall
cause each Guarantor to establish and maintain, Collection
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Accounts into which all collections of Receivables shall be deposited and
promptly transferred directly to the applicable Concentration Account. The
Borrowers shall cause all proceeds of Collateral to be deposited in Collection
Accounts or the Concentration Account or pursuant to other similar arrangements
for the collection of such amounts established by the Borrowers and the Agent.
All collections of Receivables and proceeds of Collateral which are received
directly by a Borrower or any Guarantor shall be deemed to have been received by
such Borrower or Guarantor as the Agent's trustee and, upon such Borrower's or
such Guarantor's receipt thereof, such Borrower shall immediately transfer, or
cause to be transferred, all such amounts into the Concentration Account in
their original form. Such amounts will be deemed received by the Agent, will be
the sole property of the Agent, and will be held by the Agent, for the benefit
of the Holders (i) for application to the Obligations pursuant to Section 4.02
and (ii) thereafter, as Cash Collateral for the Obligations, subject to the
rights of the applicable Borrower set forth in Section 4.04(b) and the rights of
the Agent set forth in Section 4.06.
(b) Pre-Default Withdrawals from Concentration Account. So long as
(i) no Event of Default described in Section 12.01(a) shall have occurred and be
continuing or unwaived or (ii) the Commitments have not been terminated and the
Obligations accelerated as provided in Section 12.02(a), if requested by the
U.S. Borrower, the Agent shall, from time to time, (A) apply funds in that
Borrower's Concentration Account (1) promptly after deposit therein to payment
of the Loans made to such Borrower and (2) to payment of other Obligations of
such Borrower as they become due and payable and (B) transfer funds to such
Borrower's or its Subsidiaries' designated accounts, invest funds on deposit in
such Concentration Account and accrued interest thereon, reinvest proceeds of
any such investments which may mature or be sold, and invest interest or other
income received from such investments, in such Cash Equivalents as the U.S.
Borrower may select. Such funds, interest, proceeds, or income which are not so
disbursed, invested or reinvested shall be deposited and held in the
Concentration Account for the benefit of the Holders as provided in Section
4.04(a). None of the Agent, any Lender or any Issuing Bank shall be liable to
either Borrower or any Subsidiary of a Borrower for, or with respect to, any
decline in value of amounts on deposit in the Concentration Account which shall
have been invested pursuant to this Section 4.04(b). Cash Equivalents from time
to time purchased and held pursuant to this Section 4.04(b) shall constitute
Cash Collateral and shall, for purposes of this Agreement, be deemed to be part
of the funds held in the respective Concentration Account in amounts equal to
their respective outstanding principal amounts.
(c) Reasonable Care. The Agent shall exercise reasonable care in the
custody and preservation of any funds held in a Concentration Account and shall
be deemed to have exercised such care if such funds are accorded treatment
substantially
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equivalent to that which the Agent accords its own like property, it being
understood that the Agent shall not have any responsibility for taking any steps
necessary to preserve rights against any parties with respect to any such funds
but may do so at its option. All reasonable expenses incurred in connection
therewith shall be for the sole account of the Borrower for which such
Concentration Account is designated and shall constitute Obligations of such
Borrower hereunder.
4.05. Cash Collateral Accounts. (a) Investments. If requested by the
U.S. Borrower, the Agent shall, so long as no Event of Default shall have
occurred and be continuing, from time to time invest funds on deposit in the
Cash Collateral Accounts and accrued interest thereon, reinvest proceeds of any
such investments which may mature or be sold, and invest interest or other
income received from any such Investments, in each case in such Cash Equivalents
as the U.S. Borrower may select. Such funds, interest, proceeds or income which
are not so invested or reinvested in Cash Equivalents shall, except as otherwise
provided in Section 4.05(b) and Section 4.06, be deposited and held by the Agent
in the related Cash Collateral Account. None of the Agent, any Lender or any
Issuing Bank shall be liable to either Borrower for, or with respect to, any
decline in value of amounts on deposit in the Cash Collateral Accounts which
shall have been invested pursuant to this Section 4.05(a) at the direction of
the U.S. Borrower. Cash Equivalents from time to time purchased and held
pursuant to this Section 4.05(a) shall constitute Cash Collateral and shall, for
purposes of this Agreement, be deemed to be part of the funds held in the
related Cash Collateral Account in amounts equal to their respective outstanding
principal amounts.
(b) Withdrawal Rights. Neither of the Borrowers nor any Person or
entity claiming on behalf of or through a Borrower shall have any right to
withdraw any of the funds held in the Cash Collateral Accounts with respect to
Obligations of such Borrower, provided that, (i) at any time that the balance on
deposit in a Cash Collateral Account exceeds one hundred percent (100%) of the
sum of the Letter of Credit Obligations at such time plus the amount of the
Designated Prepayment(s) being held by the Agent as Cash Collateral as provided
in Section 4.01(b)(v)(A) at such time, the amount of such excess shall, upon the
written request of the U.S. Borrower, be remitted to, or disbursed at the
direction of, the Borrower for which such Cash Collateral Account is established
and (ii) upon the later to occur of (A) the expiration or termination of all of
the Letters of Credit for which such Borrower is an applicant in accordance with
their respective terms and (B) the payment in full in cash of the Obligations of
such Borrower, any funds of such Borrower remaining in the Cash Collateral
Accounts shall be returned by the Agent to the Borrower for which such Cash
Collateral Account is established or paid to whomever may be legally entitled
thereto.
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(c) Additional Deposits. If at any time the Agent determines that
any funds held in a Cash Collateral Account are subject to any interest, right,
claim or Lien of any Person other than the Agent, the applicable Borrower will,
forthwith upon demand by the Agent, pay to the Agent, as additional funds to be
deposited and held in the Cash Collateral Account established for it, an amount
equal to the amount of funds subject to such interest, right, claim or Lien.
(d) Reasonable Care. The Agent shall exercise reasonable care in the
custody and preservation of any funds held in the Cash Collateral Accounts and
shall be deemed to have exercised such care if such funds are accorded treatment
substantially equivalent to that which the Agent accords its own like property,
it being understood that the Agent shall not have any responsibility for taking
any necessary steps to preserve rights against any parties with respect to any
such funds but may do so at its option. All expenses incurred in connection
therewith shall be for the sole account of the applicable Borrower and shall
constitute Obligations hereunder.
4.06. Post-Default Withdrawals from the Concentration Accounts and
Cash Collateral Accounts. (a) Agent's Rights. The Agent may, at any time after
(i) the occurrence and during the continuance of an Event of Default described
in Section 12.01(a) or (ii) the Commitments have been terminated and the
Obligations accelerated as provided in Section 12.02(a), sell or cause to be
sold any Cash Equivalents being held by the Agent in the Concentration Accounts
or as Cash Collateral at any broker's board or at public or private sale, in one
or more sales or lots, at such price as the Agent may deem best, without
assumption of any credit risk, and the purchaser of any or all such Cash
Equivalents so sold shall thereafter own the same, absolutely free from any
claim, encumbrance or right of any kind whatsoever. The Agent or any Holder may,
in its own name or in the name of a designee or nominee, buy such Cash
Equivalents at any public sale and, if permitted by applicable law, buy such
Cash Equivalents at any private sale. The Agent shall apply the proceeds of any
such sale, net of any reasonable expenses incurred in connection therewith, and
any other funds deposited in the Concentration Accounts or Cash Collateral
Accounts to the payment of the Obligations in accordance with Section
4.02(b)(ii), other than amounts which are being held as Cash Collateral for
Reimbursement Obligations, which shall be applied to such Reimbursement
Obligations without regard to Section 4.02(b)(ii). The Borrowers each agree that
any sale of Cash Equivalents conducted in conformity with reasonable commercial
practices of banks, commercial finance companies, insurance companies or other
financial institutions disposing of property similar to such Cash Equivalents
shall be deemed to be commercially reasonable and any requirements of reasonable
notice shall be met if such notice is given by the Agent within a commercially
reasonable time prior to such disposition, the time of delivery of which notice
the parties hereto agree shall in no event be required to be greater
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than five (5) Business Days before the date of the intended sale or disposition.
Any other requirement of notice, demand or advertisement for sale is waived to
the extent permitted by law. The Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor and such
sale may, without further notice, be made at the time and place to which it was
so adjourned.
(b) Termination of Borrowers' Rights. Notwithstanding any other
provision of this Agreement, (i) upon the occurrence and during the continuance
of an Event of Default described in Section 12.01(a) and (ii) from and after the
termination of the Commitments pursuant to Section 12.02(a), neither of the
Borrowers nor any Person or entity claiming on behalf of or through a Borrower
shall have any right to withdraw any of the funds held in a Concentration
Account.
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ARTICLE V
INTEREST AND FEES
5.01. Interest on the Loans and other Obligations. (a) Rate of
Interest. (i) All Loans shall bear interest on the unpaid principal amount
thereof from the date such Loans are made until paid in full and the outstanding
principal balance of all other Obligations (other than Obligations under Section
15.02(a)) shall bear interest on the unpaid principal amount thereof from the
date such other Obligations are due until paid in full, except as otherwise
provided in Section 5.01(d) or Section 14.04, as follows:
(A) If a Base Rate Loan or such other Obligation, at a rate per
annum equal to the sum of (1) the Base Rate, as in effect from time to
time as interest accrues plus (2) the applicable Base Rate Margin; and
(B) If a Eurocurrency Rate Loan, at a rate per annum equal to the
sum of (1) the Eurocurrency Rate determined for the applicable
Eurocurrency Rate Interest Period, plus (2) the applicable Eurocurrency
Rate Margin.
(ii) The applicable basis for determining the rate of interest on
the Revolving Loans shall be selected by the U.S. Borrower at the time a Notice
of Borrowing or a Notice of Conversion/Continuation is delivered by the U.S.
Borrower to the Agent; provided, however, the U.S. Borrower may not select the
Eurocurrency Rate as the applicable basis for determining the rate of interest
on such a Loan if, at the time of such selection, an Event of Default or a
Potential Event of Default would occur or has occurred and is continuing. If on
any day any Revolving Loan is outstanding with respect to which notice has not
been timely delivered to the Agent in accordance with the terms of this
Agreement specifying the basis for determining the rate of interest on that day,
then for that day interest on that Revolving Loan shall be determined by
reference to the Base Rate.
(iii) Notwithstanding anything to the contrary in this Agreement,
during the period commencing on the Effective Date and ending on the date on
which the Agent receives the Financial Statements of the U.S. Borrower for the
fiscal quarter ending on September 30, 1996 accompanied by the U.S. Borrower's
calculation of the Performance Level achieved with respect to such fiscal
quarter, for purposes of calculating interest chargeable under Section
5.01(a)(i) during such period, the applicable Base Rate Margin shall be deemed
to equal one and one-half percent (1.50%) per annum and the applicable
Eurocurrency Rate Margin shall be deemed to equal two and one-half percent
(2.50%) per annum. Thereafter, the Base Rate Margin and the Eurocurrency Rate
Margin applicable from time to time shall be determined for (A) the
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remainder of the fiscal quarter of the U.S. Borrower ending on December 31, 1996
based on the Financial Statements of the U.S. Borrower for the fiscal quarter
ending on September 30, 1996 and its calculation of the Performance Level
achieved with respect to such fiscal quarter as aforesaid, and (B) each fiscal
quarter of the U.S. Borrower ending thereafter, based on the Financial
Statements delivered with respect to the immediately preceding fiscal quarter of
the U.S. Borrower as required under the provisions of Section 8.01(b). All
interest rate adjustments made on the basis of the foregoing shall commence on
the date on which the Agent receives the Financial Statements for the applicable
preceding fiscal quarter of the U.S. Borrower accompanied by the U.S. Borrower's
calculation of the Performance Level achieved with respect to such preceding
fiscal quarter.
(b) Interest Payments. (i) Interest accrued on each Base Rate Loan
shall be payable in arrears in Dollars (A) on the first day of each calendar
quarter for the immediately preceding calendar quarter, commencing on the first
such day following the making of such Base Rate Loan, (B) upon conversion
thereof to a Eurocurrency Rate Loan, and (C) if not theretofore paid in full, at
maturity (whether by acceleration or otherwise) of such Base Rate Loan.
(ii) Interest accrued on each Eurocurrency Rate Loan shall be
payable in arrears in the currency in which the respective Eurocurrency Rate
Loan is denominated (A) on each Eurocurrency Rate Interest Payment Date
applicable to such Loan, (B) upon the payment or prepayment thereof in full or
in part, and (C) if not theretofore paid in full, at maturity (whether by
acceleration or otherwise) of such Eurocurrency Rate Loan.
(iii) Interest accrued on the principal balance of all other
Obligations shall be payable on demand.
(c) Conversion or Continuation. (i) The Borrowers shall have the
option (A) to convert at any time all or any part of outstanding Base Rate Loans
to Eurocurrency Rate Loans denominated in Dollars; (B) to convert all or any
part of outstanding Eurocurrency Rate Loans denominated in Dollars having
Eurocurrency Rate Interest Periods which expire on the same date to Base Rate
Loans on such expiration date; or (C) to continue all or any part of outstanding
Eurocurrency Rate Loans having Eurocurrency Interest Periods which expire on the
same date as Eurocurrency Rate Loans, and the succeeding Eurocurrency Interest
Period of such continued Loans shall commence on such expiration date; provided,
however, no such outstanding Loan may be continued as, or be converted into, a
Eurocurrency Rate Loan (i) if the continuation of, or the conversion into, such
Eurocurrency Rate Loan would violate any of the provisions of Section 5.02 or
(ii) if an Event of Default or a Potential Event of Default would occur as a
result thereof or has occurred and is continuing. Any conversion into or
continuation of Eurocurrency Rate Loans under this Section 5.01(c) shall be in a
minimum amount of $1,000,000
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(or the equivalent thereof in the applicable Alternative Currency) and in
integral multiples of $250,000 (or the equivalent thereof in the applicable
Alternative Currency) in excess of that amount except in the case of a
conversion into or a continuation of an entire Borrowing of Non Pro Rata Loans.
(ii) To convert or continue a Loan under Section 5.01(c)(i), the
U.S. Borrower shall deliver a Notice of Conversion/Continuation to the Agent no
later than 9:00 a.m. (New York time) at least (A) three (3) Business Days in
advance of the proposed conversion/continuation date with respect to conversions
to or continuations as Eurocurrency Rate Loans and (B) one (1) Business Day in
advance of the proposed conversion date with respect to conversions to Base Rate
Loans. A Notice of Conversion/Continuation shall specify (A) the proposed
conversion/continuation date (which shall be a Business Day), (B) the principal
amount and currency of the Loan to be converted/continued, (C) whether such Loan
shall be converted and/or continued, and (D) in the case of a conversion to, or
continuation of, a Eurocurrency Rate Loan, the requested Eurocurrency Rate
Interest Period. In lieu of delivering a Notice of Conversion/Continuation, the
U.S. Borrower may give the Agent telephonic notice of any proposed
conversion/continuation by the time required under this Section 5.01(c)(ii), and
such notice shall be confirmed in writing delivered to the Agent by facsimile
transmission promptly (but in no event later than 5:00 p.m. (New York time) on
the same day), the original of which facsimile copy shall be delivered to the
Agent within three (3) days after the date of such transmission. Promptly after
receipt of a Notice of Conversion/Continuation under this Section 5.01(c)(ii)
(or telephonic notice in lieu thereof), the Agent shall notify each Lender by
telex or telecopy, or other similar form of transmission, of the proposed
conversion/continuation. Any Notice of Conversion/Continuation for conversion
to, or continuation of, a Loan (or telephonic notice in lieu thereof) shall be
irrevocable, and the Borrowers shall be bound to convert or continue in
accordance therewith.
(d) Default Interest. Notwithstanding the rates of interest
specified in Section 5.01(a), effective immediately upon the occurrence of an
Event of Default described in Section 12.01(a) or the occurrence of any other
Event of Default and notice from the Requisite Lenders of the effectiveness of
this Section 5.01(d), and for as long thereafter as such Event of Default shall
be continuing unwaived, the principal balance of all Loans and other Obligations
on which interest is accruing shall bear interest at a rate which is two percent
(2.0%) per annum plus the rate of interest specified in Section 5.01(a)(i);
provided, however, that for purposes of determining the rate of interest under
Section 5.01(a)(i), the applicable Base Rate Margin and Eurocurrency Rate Margin
shall be calculated based on Performance Level 4.
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(e) Computation of Interest. Interest on all Base Rate Loans and
Obligations other than Eurocurrency Rate Loans shall be computed on the basis of
the actual number of days elapsed in the period during which interest accrues
and a year of 365/366 days. Interest on all Eurocurrency Rate Loans shall be
computed on the basis of the actual number of days elapsed in the period during
which interest accrues and a year of 360 days. In computing interest on any
Loan, the date of the making of such Loan or the first day of a Eurocurrency
Rate Interest Period, as the case may be, shall be included and the date of
payment or the expiration date of a Eurocurrency Rate Interest Period, as the
case may be, shall be excluded; provided, however, if a Loan is repaid on the
same day on which it is made, one (1) day's interest shall be paid on such Loan.
5.02. Special Provisions Governing Eurocurrency Rate Loans. With
respect to Eurocurrency Rate Loans requested or continuing or as a result of the
conversion of Base Rate Loans thereto:
(a) Amount of Eurocurrency Rate Loans. Each Eurocurrency Rate Loan
shall be for a minimum amount of $1,000,000 (or the equivalent thereof in the
applicable Alternative Currency) and in integral multiples of $250,000 (or the
equivalent thereof in the applicable Alternative Currency) in excess of that
amount.
(b) Determination of Eurocurrency Rate Interest Period. By giving
notice as set forth in Section 2.01(c) (with respect to a Borrowing of
Eurocurrency Rate Loans) or Section 5.01(c) (with respect to a conversion into
or continuation of Eurocurrency Rate Loans), the U.S. Borrower shall have the
option, subject to the other provisions of this Section 5.02, to select a
Eurocurrency Rate Interest Period to apply to the Revolving Loans to be made to
either Borrower described in such notice, subject to the following provisions:
(i) The U.S. Borrower may only select, as to a particular Borrowing
of Eurocurrency Rate Loans (A) which are Revolving Loans, a Eurocurrency
Rate Interest Period of one, two, three or six months in duration and (B)
which are Swing Loans, a Eurocurrency Rate Interest Period of one week in
duration;
(ii) In the case of immediately successive Eurocurrency Rate
Interest Periods applicable to a Borrowing of Eurocurrency Rate Loans,
each successive Eurocurrency Rate Interest Period shall commence on the
day on which the next preceding Eurocurrency Rate Interest Period expires;
(iii) If any Eurocurrency Rate Interest Period would otherwise
expire on a day which is not a Business Day, such Eurocurrency Rate
Interest Period shall be
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extended to expire on the next succeeding Business Day if the next
succeeding Business Day occurs in the same calendar month, and if there
will be no succeeding Business Day in such calendar month, such
Eurocurrency Rate Interest Period shall expire on the immediately
preceding Business Day;
(iv) The U.S. Borrower may not select a Eurocurrency Rate Interest
Period as to any Revolving Loan or Swing Loan if such Eurocurrency Rate
Interest Period terminates later than the scheduled Revolving Credit
Termination Date; and
(v) There shall be no more than ten (10) Eurocurrency Rate Interest
Periods in effect at any one time.
(c) Determination of Interest Rate. As soon as practicable on the
second Business Day prior to the first day of each Eurocurrency Rate Interest
Period (the "Eurocurrency Interest Rate Determination Date"), the Agent shall
determine (pursuant to the procedures set forth in the definition of
"Eurocurrency Rate") the interest rate which shall apply to the Eurocurrency
Rate Loans for which an interest rate is then being determined for the
applicable currency and Eurocurrency Rate Interest Period and shall promptly
give notice thereof (in writing or by telephone confirmed in writing) to the
U.S. Borrower and to each Lender. The Agent's determination shall be presumed to
be correct, absent manifest error, and shall be binding upon the Borrowers.
(d) Reference Bank. The Agent agrees to obtain from Citibank timely
information for the purpose of determining the Eurocurrency Rate. Upon the
reasonable request of the U.S. Borrower from time to time, the Agent shall
promptly provide to the U.S. Borrower such information with respect to the
applicable Eurocurrency Rate as may be so requested.
(e) Interest Rate Unascertainable, Inadequate or Unfair. In the
event that at least one (1) Business Day before any Eurocurrency Interest Rate
Determination Date:
(i) the Agent is advised by Citibank that deposits in the applicable
currency (in the applicable amounts) are not being offered by Citibank in
the London interbank market for such Eurocurrency Rate Interest Period; or
(ii) the Agent determines that adequate and fair means do not exist
for ascertaining the applicable interest rates by reference to which the
Eurocurrency Rate then being determined is to be fixed; or
(iii) the Requisite Lenders advise the Agent that the Eurocurrency
Rate for Eurocurrency Rate Loans
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comprising such Borrowing will not adequately reflect the cost to such
Requisite Lenders of obtaining funds in such applicable currency in the
London interbank market in the amount substantially equal to such Lenders'
Eurocurrency Rate Loans in such currency and for a period equal to such
Eurocurrency Rate Interest Period;
then the Agent shall forthwith give notice thereof to the U.S. Borrower and the
Lenders, whereupon (until the Agent notifies the U.S. Borrower that the
circumstances giving rise to such suspension no longer exist) the right of the
Borrower to elect to have Loans bear interest based upon the Eurocurrency Rate
shall be suspended and each outstanding Eurocurrency Rate Loan shall be
converted into a Base Rate Loan on the last day of the then current Eurocurrency
Rate Interest Period therefor, notwithstanding any prior election by the U.S.
Borrower to the contrary.
(f) Booking of Eurocurrency Rate Loans. Any Lender may make, carry
or transfer Eurocurrency Rate Loans at, to, or for the account of, its
Eurocurrency Lending Office or Eurocurrency Affiliate or its other offices or
Affiliates. No Lender shall be entitled, however, to receive any greater amount
under Section 4.03, 4.04, 5.01(g) or 14.05 as a result of the transfer of any
such Eurocurrency Rate Loan to any office (other than such Eurocurrency Lending
Office) or any Affiliate (other than such Eurocurrency Affiliate) than such
Lender would have been entitled to receive immediately prior thereto, unless (i)
the transfer occurred at a time when circumstances giving rise to the claim for
such greater amount did not exist and (ii) such claim would have arisen even if
such transfer had not occurred.
(g) Affiliates Not Obligated. No Eurocurrency Affiliate or other
Affiliate of any Lender shall be deemed a party to this Agreement or shall have
any liability or obligation under this Agreement.
5.03. Fees. (a) Letter of Credit Fees. In addition to any charges
paid pursuant to Section 3.01(g), the U.S. Borrower shall pay (i) to the
applicable Issuing Bank, a fee (the "Fronting Fee") equal to (A) one-quarter of
one percent (0.25%) on the face amount of each Standby Letter of Credit issued
by such Issuing Bank, upon issuance of such Standby Letter of Credit, and (B)
one-eighth of one percent (0.125%) on the face amount of each Commercial Letter
of Credit issued by such Issuing Bank, upon issuance of such Commercial Letter
of Credit, and (ii) to the Agent, for the account of the Lenders based on their
respective Pro Rata Shares, a fee (the "Letter of Credit Fee") accruing at the
Eurocurrency Rate Margin applicable from time to time on the undrawn face amount
of each outstanding Letter of Credit, payable quarterly, in arrears, on the
first day of each calendar quarter for the then immediately preceding calendar
quarter; provided, however, upon (A) the occurrence of an Event
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of Default described in Section 12.01(a) or (B) the occurrence of any other
Event of Default and notice from the Requisite Lenders of the effectiveness of
Section 5.01(d), and for so long thereafter as such Event of Default shall be
continuing, the rate at which the Letter of Credit Fees shall accrue and be
payable shall be equal to two percent (2.00%) per annum plus the Eurocurrency
Rate Margin determined based on Performance Level 4.
(b) Unused Commitment Fee. (i) The U.S. Borrower shall pay to the
Agent, for the account of the Lenders in accordance with their respective Pro
Rata Shares, a fee (the "Unused Commitment Fee"), accruing at the rate of
one-half of one percent (0.50%) per annum on the average daily amount by which
the Revolving Credit Commitments exceed the sum of (A) the outstanding principal
balance of the Revolving Loans (calculated in Dollars as described in Section
1.05), plus (B) the outstanding Reimbursement Obligations (calculated in Dollars
as described in Section 1.05), plus (C) the aggregate undrawn face amount of all
outstanding Letters of Credit (calculated in Dollars as described in Section
1.05), plus (D) the outstanding principal amount of the Swing Loans (calculated
in Dollars), for the period commencing on the Effective Date and ending on the
Revolving Credit Termination Date, such Unused Commitment Fee being payable (1)
quarterly, in arrears, commencing on the first day of the calendar quarter next
succeeding the Closing Date and (2) on the Revolving Credit Termination Date.
For purposes of determining the Pro Rata Share of the Unused Commitment Fee of
each Lender other than Citicorp, the Unused Commitment Fee shall be calculated
excluding the outstanding principal amount of the Swing Loans.
(ii) Notwithstanding the foregoing, in the event that any Lender
fails to fund its Pro Rata Share of any Revolving Loan requested for a Borrower
which such Lender is obligated to fund under the terms of this Agreement, (A)
such Lender shall not be entitled to any Unused Commitment Fees with respect to
its Revolving Credit Commitment until such failure has been cured in accordance
with Section 4.02(b)(v)(B) and (B) until such time, the Unused Commitment Fee
shall accrue in favor of the Lenders which have funded their respective Pro Rata
Shares of such requested Revolving Loan, shall be allocated among such
performing Lenders ratably based upon their relative Revolving Credit
Commitments, and shall be calculated based upon the average amount by which the
aggregate Revolving Credit Commitments of such performing Lenders exceed the sum
of (1) the outstanding principal amount of the Revolving Loans and Swing Loans
owing to such performing Lenders, plus (2) the outstanding Reimbursement
Obligations owing to such performing Lenders, plus (3) the aggregate
participation interests of such performing Lenders arising pursuant to Section
3.01(e) with respect to undrawn and outstanding Letters of Credit.
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(c) Agent's Fee. The U.S. Borrower shall pay to the Agent, solely
for the account of the Agent, a fee in the amount and on the dates set forth in
the Fee Letter.
(d) Calculation and Payment of Fees. All of the above fees shall be
calculated on the basis of the actual number of days elapsed in a 360-day year.
All such fees shall be payable in addition to, and not in lieu of, interest,
compensation, expense reimbursements, indemnification and other Obligations, to
the Agent at its Applicable Payment Office in immediately available funds. All
fees shall be fully earned and nonrefundable when paid. All fees specified or
referred to in this Agreement due to the Agent, any Issuing Bank or any Lender,
including, without limitation, those referred to in this Section 5.03, shall
bear interest, if not paid when due, at the interest rate for Base Rate Loans
set forth in Section 5.01(d), shall constitute Obligations and shall be secured
by all of the Collateral.
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ARTICLE VI
CONDITIONS TO LOANS AND LETTERS OF CREDIT
6.01. Conditions Precedent to the Effectiveness of Agreement. This
Agreement shall become effective upon and be subject to the satisfaction by 5:00
p.m. (New York time) on October 17, 1996 (the "Effective Date") of all of the
following conditions precedent:
(a) Documents. The Agent shall have received on or before the
Effective Date all of the following:
(i) this Agreement, the Notes and all other agreements, documents
and instruments relating to the loan and other credit transactions
contemplated by this Agreement and described in the List of Closing
Documents attached hereto as Exhibit H and made a part hereof, each duly
executed where appropriate and in form and substance satisfactory to the
Agent; without limiting the foregoing, the U.S. Borrower hereby directs
its counsel, Skadden, Arps, Slate, Meagher & Flom, Brian F. McNamara and
Bogle & Gates, and the European Borrower hereby directs its counsel,
Boesebeck, Barz & Partner, to prepare and deliver to the Agent, the
Lenders, the Issuing Banks and Sidley & Austin, the opinions referred to
in such List of Closing Documents;
(ii) a written status memorandum of Sidley & Austin, counsel to the
Agent, with respect to certain environmental investigations conducted by
independent consultants to the U.S. Borrower and the Agent in connection
with the 1994 Credit Agreement and the predecessor credit agreement
thereto addressing any significant environmental, health and safety
violations, hazards or Liabilities and Costs to which the U.S. Borrower or
any of its Subsidiaries may be subject, in form and substance satisfactory
to the Agent;
(iii) an Officer's Certificate executed and delivered by the
president or vice president of the U.S. Borrower certifying that all
conditions precedent have been met and no Potential Event of Default or
Event of Default has occurred or is continuing; and
(iv) such additional documentation as the Agent may reasonably
request.
(b) Perfection of Liens; Title Insurance. Evidence
that (i) all financing statements filed in connection with the
1994 Credit Agreement and predecessor agreements thereto continue
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filed and of record, and (ii) title commitments for title insurance policies in
form and substance satisfactory to the Agent with respect to mortgages and
leasehold mortgages of Real Property and/or interests in Real Property which are
part of the Collateral have been issued to the Agent, for the benefit of the
Agent, the Issuing Banks and the Lenders, and all title charges, recording fees
and filing taxes have been paid.
(c) Equity Infusion; Subordinated Debt. The Lenders shall be
satisfied in all material respects (i) with the terms of the Equity Infusion,
Subordinated Debt, and guarantees thereof, and (ii) that all conditions
precedent to the issuance of the notes evidencing the Subordinated Debt have
been satisfied (or waived with the prior written consent of the Agent); cash
proceeds of the Equity Infusion in the aggregate amount of $10,000,000 and gross
cash proceeds of the Subordinated Debt in the amount of $125,000,000 shall have
been received by the U.S. Borrower; and the Subordinated Debt Documents shall
have been executed and delivered and become effective in accordance with their
terms. Copies of the Subordinated Debt Documents certified by the secretary of
the U.S. Borrower shall have been delivered to the Agent.
(d) No Legal Impediments. No law, regulation, order, judgment or
decree of any Governmental Authority shall, and the Agent shall not have
received any notice that litigation is pending or threatened which is likely to,
(i) enjoin, prohibit or restrain (A) the making of the Loans and/or the issuance
of Letters of Credit under this Agreement or (B) the issuance of the
Subordinated Debt or making of the Equity Infusion or (ii) result in a Material
Adverse Effect.
(e) No Change in Condition. No change in the business, assets,
management, operations, financial condition or prospects of the U.S. Borrower
and its Subsidiaries, taken as a whole, shall have occurred since December 31,
1995, which change, in the judgment of the Agent, will, or is reasonably likely
to, result in a Material Adverse Effect.
(f) Interim Liabilities and Equity. Since December 31, 1995, neither
the U.S. Borrower nor any of its Subsidiaries shall have (i) entered into any
material (as determined in good faith by the Agent) commitment or transaction,
including, without limitation, transactions for borrowings and capital
expenditures, which are not in the ordinary course of the U.S. Borrower's or its
Subsidiaries' respective businesses except with respect to the transactions
contemplated hereby or otherwise permitted by the 1994 Credit Agreement, (ii)
declared or paid any dividends or distributions not permitted by the 1994 Credit
Agreement, (iii) established or assumed any obligations with respect to
compensation or employee benefit plans other than the Plans in effect on
December 31, 1995 or (iv) redeemed or repurchased Capital Stock other than the
repurchase of the 60.48 shares of preferred stock which was issued on terms
substantially similar
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to the 1994 Preferred Stock held by Leslie Schenk and the 106.74 shares of
common stock of the U.S. Borrower held by Leslie Schenk or (v) issued any
Capital Stock other than in connection with the Equity Infusion.
(g) No Loss of Material Agreements and Licenses. Since December 31,
1995, no agreement or license which, in the judgment of the Requisite Lenders,
is material to the business, operations or employee relations of the Borrowers
or any of their Subsidiaries shall have been terminated, modified, revoked,
breached or declared to be in default.
(h) No Market Changes. Since September 6, 1996, no material adverse
change shall have occurred in the conditions in the capital markets or the
market for loan syndications generally that, in Citicorp Securities, Inc.'s or
Fleet's judgment, would materially impair syndication of the Commitments.
(i) No Default. No Event of Default or Potential Event of Default
shall have occurred and be continuing under the 1994 Credit Agreement or would
result under this Agreement from the making of the Loans or the issuance of the
Subordinated Debt.
(j) Representations and Warranties. All of the representations and
warranties contained in Section 7.01 and in any of the other Loan Documents
shall be true and correct in all material respects on and as of the Effective
Date.
(k) Fees and Expenses Paid. There shall have been paid to the Agent,
for the accounts of the Lenders, the Issuing Banks, and the Agent, as
applicable, (i) all fees and expenses due and payable on or before the Effective
Date in connection with this Agreement and all fees and expenses due and payable
on or before the Effective Date pursuant to the Commitment Letter and the Fee
Letter and (ii) all fees and expenses due and payable on or before the Effective
Date under the terms of the 1994 Credit Agreement.
6.02. Conditions Precedent to All Loans and Letters of Credit. The
obligation of each Lender to make any Loan requested to be made by it on any
Funding Date and the agreement of each Issuing Bank to issue any Letter of
Credit on any date is subject to the following conditions precedent as of each
such date, both before and after giving effect to the Loans to be made and/or
the Letter of Credit to be issued on such date:
(a) Representations and Warranties. All of the representations and
warranties of the Borrowers contained in Section 7.01 and of the Borrowers and
Guarantors contained in any other Loan Document (other than representations and
warranties which expressly speak as of a different date) shall be true and
correct in all material respects as of such Funding Date.
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(b) No Defaults. No Event of Default or Potential Event of Default
shall have occurred and be continuing or would result from the making of the
requested Loan or issuance of the requested Letter of Credit.
(c) No Legal Impediments. No law, regulation, order, judgment or
decree of any Governmental Authority shall, and the Agent shall not have
received from any Lender or Issuing Bank notice that, in the judgment of such
Lender or Issuing Bank, litigation is pending or threatened which is likely to,
enjoin, prohibit or restrain, or impose or result in the imposition of any
material adverse condition upon, (i) such Lender's making of the requested Loan
or participation in the requested Letter of Credit or (ii) such Issuing Bank's
issuance of the requested Letter of Credit.
(d) No Material Adverse Effect. No event shall have occurred since
December 31, 1995 which has resulted, or is reasonably likely to result, in a
Material Adverse Effect.
Each submission by the U.S. Borrower to the Agent of a Notice of Borrowing with
respect to any Loan or a Notice of Conversion/Continuation with respect to any
conversion to or continuation as a Eurocurrency Rate Loan, each acceptance by a
Borrower of the proceeds of each Loan made to it or converted to a Eurocurrency
Rate Loan or continued as a Eurocurrency Rate Loan hereunder, each submission by
a Borrower to an Issuing Bank of a request for issuance of a Letter of Credit
and the issuance of such Letter of Credit, shall constitute a representation and
warranty by the Borrowers as of the Funding Date in respect of such Loan, the
date of conversion or continuation and the date of issuance of such Letter of
Credit, that all the conditions contained in this Section 6.02 have been
satisfied or waived in accordance with Section 15.07.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.01. Representations and Warranties of the Borrowers. In order to
induce the Lenders and the Issuing Banks to enter into this Agreement and to
make the Loans and the other financial accommodations to the Borrowers and to
issue the Letters of Credit described herein, the Borrowers hereby represent and
warrant to each Lender, each Issuing Bank and the Agent that the following
statements are true, correct and complete:
(a) Organization; Corporate Powers. (i) The U.S. Borrower and each
of its Subsidiaries (A) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (B) is
duly qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction in which failure to be so qualified and in
good standing will have or is reasonably likely to have a Material Adverse
Effect, (C) has filed and maintained effective (unless exempt from the
requirements for filing) a current Business Activity Report with the appropriate
Governmental Authority in the states of Minnesota and New Jersey, and (D) has
all requisite corporate power and authority to own, operate and encumber its
Property and to conduct its business as presently conducted and as proposed to
be conducted in connection with and following the consummation of the
transactions contemplated by the Transaction Documents.
(ii) True, correct and complete copies of the Organizational
Documents identified on Schedule 7.01-A attached hereto and made a part hereof
have been delivered to the Agent, each of which is in full force and effect, has
not been modified or amended except to the extent indicated therein and, to the
best of each Borrower's knowledge, there are no defaults under such
Organizational Documents and no events which, with the passage of time or giving
of notice or both, would constitute a default under such Organizational
Documents.
(b) Authority. (i) The U.S. Borrower and each of its Subsidiaries
have the requisite corporate power and authority (A) to execute, deliver and
perform each of the Transaction Documents which have been or are to be executed
by them as required by this Agreement on or prior to the Effective Date and (B)
to file or record the Transaction Documents which are required to be filed or
recorded by them in connection with the Subordinated Debt, and guarantees
thereof, or which have been filed or recorded by them as required by this
Agreement on or prior to the Effective Date, with any Governmental Authority.
(ii) The execution, delivery, performance and filing or recording,
as the case may be, of each of the Transaction Documents which have been or are
required to be executed, filed or recorded as required by this Agreement or the
Subordinated Debt Documents on or prior to the Effective Date and to which
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either Borrower or any Subsidiary of either Borrower is party and the
consummation of the transactions contemplated thereby, have been duly approved
by the respective boards of directors and, if necessary, the shareholders of
such Borrower and its Subsidiaries and such approvals have not been rescinded.
No other corporate action or proceedings on the part of either Borrower or any
Subsidiary of either Borrower are necessary to consummate such transactions.
(iii) Each of the Transaction Documents to which a Borrower or any
of its Subsidiaries is a party (A) has been duly executed, delivered, filed or
recorded, as the case may be, by it, (B) where applicable, creates valid and
perfected first Liens in the Collateral covered thereby securing the payment of
all of the Obligations purported to be secured thereby, (C) constitutes such
Borrower's or such Subsidiary's legal, valid and binding obligation, enforceable
against it in accordance with its terms, and (D) is in full force and effect and
no material term or condition thereof has been amended, modified or waived from
the terms and conditions contained therein as delivered to the Agent pursuant to
Section 6.01(a) without the prior written consent of the Requisite Lenders or
all Lenders, as applicable. All parties to the Transaction Documents have
performed and complied with all the terms, provisions, agreements and conditions
set forth therein and required to be performed or complied with by such parties
on or before the Effective Date, all filings and recordings and other actions
which are necessary or desirable to perfect and protect the Liens granted
pursuant to the Loan Documents and preserve their required priority have been
duly taken or all documents necessary therefor have been delivered to the Agent
for filing, and no Potential Event of Default, Event of Default or breach of any
covenant by any such party exists thereunder.
(c) Subsidiaries; Ownership of Equity Securities. Schedule 7.01-C
attached hereto and made a part hereof (i) contains a diagram indicating the
corporate structure of the U.S. Borrower, its Subsidiaries and any other Person
in which either Borrower or any of its Subsidiaries holds a direct or indirect
partnership, joint venture or other equity interest and indicates the nature of
such interest with respect to each Person included in such diagram; and (ii)
accurately sets forth (A) the correct legal name of such Person, the
jurisdiction of its incorporation or organization and the jurisdictions in which
it is qualified to transact business as a foreign corporation or otherwise and
(B) the authorized, issued and outstanding shares or interests of each class of
equity Securities of each Borrower and each of its Subsidiaries and the owners
of such shares or interests. Except as set forth on Schedule 7.01-C, none of
such issued and outstanding equity Securities is subject to any vesting,
redemption, or repurchase agreement, and there are no warrants or options (other
than Permitted Equity Securities Options) outstanding with respect to such
equity Securities. The outstanding equity Securities of the U.S. Borrower and
each of
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its Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable, and free and clear of any Liens, except for the Liens granted
pursuant to the Loan Documents and are not Margin Stock.
(d) No Conflict. The execution, delivery and performance of each of
the Transaction Documents to which either Borrower or any of its Subsidiaries is
a party do not and will not (i) conflict with the Organizational Documents of
such Person, (ii) constitute a tortious interference with any Contractual
Obligation of any Person or conflict with, result in a breach of or constitute
(with or without notice or lapse of time or both) a default under any
Requirement of Law or Contractual Obligation of such Person, or require
termination of any Contractual Obligation, (iii) result in or require the
creation or imposition of any Lien whatsoever upon any of the Property or assets
of either Borrower or any such Subsidiary, other than Liens contemplated by the
Loan Documents, or (iv) require any approval of either Borrower's or any such
Subsidiary's shareholders, which has not been obtained.
(e) Governmental Consents. The execution, delivery and performance
of each of the Transaction Documents to which either Borrower or any of its
Subsidiaries is a party do not and will not require any registration with,
consent or approval of, or notice to, or other action to, with or by any
Governmental Authority, except (i) filings, consents or notices which have been
made, obtained or given, (ii) filings necessary to create or perfect security
interests in the Collateral, and (iii) as otherwise set forth on Schedule 7.01-E
attached hereto and made a part hereof.
(f) Governmental Regulation. Neither of the Borrowers, nor any
Subsidiary of a Borrower, is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act,
or the Investment Company Act of 1940, or any other Requirement of Law which
limits its ability to incur indebtedness or its ability to consummate the
transactions contemplated hereby or by the other Transaction Documents.
(g) Restricted Junior Payments. Since December 31, 1995, neither
Borrower nor any Subsidiary of either Borrower has directly or indirectly
declared, ordered, paid or made or set apart any sum or Property for any
Restricted Junior Payment or agreed to do so, except (i) prior to the Effective
Date, as permitted pursuant to Section 10.06 of the 1994 Credit Agreement and
(ii) from and after the Effective Date, as permitted pursuant to Section 10.05
of this Agreement.
(h) Financial Position. Complete and accurate copies of the
following Financial Statements, materials and other information have been
delivered to the Agent: (i) the Pro Forma and Projections, (ii) the U.S.
Borrower's audited Financial
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Statements for the Fiscal Year ended December 31, 1995, and (iii) the Offering
Memorandum with respect to the Subordinated Debt dated October 10, 1996. All
Financial Statements included in such materials were prepared in all material
respects in conformity with GAAP, except as otherwise noted therein, and fairly
present in all material respects the respective consolidated financial
positions, and the consolidated results of operations and cash flows for each of
the periods covered thereby of the U.S. Borrower and its Subsidiaries as at the
respective dates thereof. Neither Borrower and no Subsidiary of either Borrower
has any Accommodation Obligation, contingent liability or liability for any
taxes, long-term leases or commitments, not reflected in the audited Financial
Statements delivered to the Agent on or prior to the Closing Date as aforesaid
or otherwise disclosed to the Agent and the Lenders in writing, which will have
or is reasonably likely to have a Material Adverse Effect.
(i) Pro Forma Financials. The Pro Forma, copies of which have been
furnished to the Lenders, fairly presents on a pro forma basis the financial
position of the U.S. Borrower and its Subsidiaries as of June 30, 1996, and
reflects on a pro forma basis those liabilities reflected in the notes thereto
and resulting from consummation of the transactions contemplated by the
Transaction Documents. The Projections and the assumptions expressed therein are
reasonable based on the information available to the Borrower at the time so
furnished.
(j) Indebtedness; Refinanced Indebtedness. Schedule 1.01.3 sets
forth all Funded Debt of the respective Borrowers and their Subsidiaries and
there are no defaults in the payment of principal or interest on any such
Indebtedness and no payments thereunder have been deferred or extended beyond
their stated maturity (except as disclosed on such Schedule). The Refinanced
Indebtedness and all accrued and unpaid interest thereon has been paid in full
or provision for payment has been made such that, in accordance with the express
provisions of the instruments governing such Indebtedness, the European Borrower
has been or will be, upon payment in full of the Refinanced Indebtedness owing
by it, irrevocably released from all liability and Contractual Obligations with
respect thereto. Any and all Liens securing the Refinanced Indebtedness owing by
the European Borrower have been released or provision for release of such Liens
satisfactory to the Agent has been made.
(k) Litigation; Adverse Effects. Except as set forth in Schedule
7.01-K attached hereto and made a part hereof, there is no action, suit,
proceeding, Claim, investigation or arbitration before or by any Governmental
Authority or private arbitrator pending or, to the knowledge of the Borrowers or
any of their Subsidiaries, threatened against either Borrower or any Subsidiary
of either Borrower or any of their respective Property (i) challenging the
validity or the enforceability of any of the Transaction Documents, (ii) which
will, or is reasonably likely to, result in any Material Adverse Effect, or
(iii) under the
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Racketeering Influenced and Corrupt Organizations Act or any similar federal or
state statute where such Person is a defendant in a criminal indictment that
provides for the forfeiture of assets to any Governmental Authority as a
criminal penalty. There is no material loss contingency within the meaning of
GAAP which has not been reflected in the consolidated Financial Statements of
the U.S. Borrower. Neither Borrower and no Subsidiary of either Borrower is (A)
in violation of any applicable Requirements of Law which violation will result,
or is reasonably likely to result, in a Material Adverse Effect, or (B) subject
to or in default with respect to any final judgment, writ, injunction,
restraining order or order of any nature, decree, rule or regulation of any
court or Governmental Authority which will, or is reasonably likely to, result
in a Material Adverse Effect.
(l) Compensation. Except (i) as disclosed in documents filed with
the Commission, (ii) as set forth on Schedule 7.01-L attached hereto and made a
part hereof, and (iii) for increases in the ordinary course of business and in
accordance with past practices, during the period commencing on September 9,
1993 and ending on the Closing Date, neither Borrower and no Subsidiary of
either Borrower has increased or agreed to increase the aggregate compensation
or benefits (including severance benefits) payable or accruing to any past or
present officer of any of such Persons.
(m) No Material Adverse Effect. Since December 31, 1995, there has
occurred no event with respect to either Borrower, Hilton, Textile, KCI, FCCAC
or Textile SC which has resulted, or is reasonably likely to result, in a
Material Adverse Effect.
(n) Tax Examinations. (i) The IRS is foreclosed from examining by
applicable statutes KCI's federal income tax returns for all tax periods other
than the period commencing on Setpember 1, 1993 through May 31, 1994. All
deficiencies which have been asserted against the U.S. Borrower or any of its
Subsidiaries as a result of any federal, state, local or foreign tax examination
for each taxable year in respect of which an examination has been conducted have
been fully paid or finally settled or are being contested in good faith, and no
issue has been raised in any such examination which, by application of similar
principles, reasonably can be expected to result in assertion of a material
deficiency for any other year not so examined which has not been reserved for in
the U.S. Borrower's consolidated Financial Statements to the extent, if any,
required by GAAP. Neither Borrower and no Subsidiary of either Borrower has
taken any reporting positions for which it does not have a reasonable basis.
(ii) There are no investigations by the German fiscal authorities
pending against the European Borrower.
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(o) Payment of Taxes. All tax returns and reports of each Borrower
and its Subsidiaries required to be filed with respect to Real Property, income,
withholding, and payroll taxes have been timely filed, and all taxes,
assessments, fees and other charges of Governmental Authorities thereupon and
upon or relating to their respective Property, assets, income and franchises
which are shown in such returns or reports to be due and payable have been paid.
Neither Borrower has any knowledge of any proposed tax assessment against either
Borrower or any Subsidiary of either Borrower that will, or is reasonably likely
to, result in a Material Adverse Effect.
(p) Performance. Neither Borrower and no Subsidiary of either
Borrower has received any notice or citation, or has actual knowledge, that (i)
it is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Contractual Obligation
applicable to it, (ii) any of its Property is in violation of any Requirement of
Law, or (iii) any condition exists which, with the giving of notice or the lapse
of time or both, would constitute a default with respect to any such Contractual
Obligation, in each case, except where such default or defaults, if any, will
not, or is not reasonably likely to, result in a Material Adverse Effect.
(q) Disclosure. The representations and warranties of the Borrowers
and Guarantors contained in the Transaction Documents, and all certificates and
other documents delivered to the Agent pursuant to the terms thereof, do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading. The Borrower
has not intentionally withheld any fact from the Agent, the Issuing Banks or the
Lenders in regard to any matter which will, or is reasonably likely to, result
in a Material Adverse Effect.
(r) Requirements of Law. Each Borrower and each Subsidiary of a
Borrower is in compliance with all Requirements of Law applicable to it and its
respective business, in each case where the failure to so comply individually or
in the aggregate will, or is reasonably likely to, result in a Material Adverse
Effect.
(s) Environmental Matters. (i) Except as disclosed on Schedule
7.01-S attached hereto and made a part hereof:
(A) each Borrower and Subsidiary of a Borrower, their respective
operations, and their respective Properties comply in all material respects with
all applicable Environmental, Health or Safety Requirements of Law;
(B) each Borrower and Subsidiary of a Borrower has obtained all
environmental, health and safety Permits necessary for its respective operations
and Properties, and all such
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Permits are in good standing and each Borrower and Subsidiary of a Borrower is
currently in material compliance with all terms and conditions of such Permits;
(C) neither of the Borrowers and none of their respective
Subsidiaries, and none of their respective present Property or operations, or to
the knowledge of either Borrower any past Property, are subject to or the
subject of any judicial or administrative proceeding, order, judgment, decree,
dispute, negotiation, agreement, or settlement, or to the knowledge of either
Borrower, any investigation respecting (I) any Remedial Action, (II) any Claims
or Liabilities and Costs arising from the Release or threatened Release of a
Contaminant, or (III) any violation of or liability under any Environmental,
Health or Safety Requirement of Law that either Borrower or any Subsidiary of
either Borrower reasonably believes will result in an expenditure over $500,000
where such violation has not been corrected to the satisfaction of the
appropriate Governmental Authority and any penalty requested by such
Governmental Authority has not yet been paid;
(D) neither of the Borrowers and no Subsidiary of either Borrower
has filed any notice under any applicable Requirement of Law (I) reporting a
Release of a Contaminant where Remedial Action has not been conducted to the
satisfaction of the appropriate Governmental Authority; (II) under Section
103(c) of CERCLA, indicating past or present treatment, storage or disposal of a
hazardous waste, as that term is defined under 40 C.F.R. Part 261 or any state
equivalent; or (III) reporting a violation of any applicable Environmental,
Health or Safety Requirement of Law where such violation has not been corrected
to the satisfaction of the appropriate Governmental Authority and any penalty
requested by such Governmental Authority has not yet been paid;
(E) to the knowledge of either Borrower, none of the present or past
Property is listed or proposed for listing on the National Priorities List
("NPL") pursuant to CERCLA or on the Comprehensive Environmental Response
Compensation Liability Information System List ("CERCLIS") or any similar state
list of sites requiring Remedial Action;
(F) to the knowledge of either Borrower, neither the U.S. Borrower
nor any Domestic Subsidiary has sent or directly arranged for the transport of
any waste to any current or proposed NPL site, CERCLIS or any similar state list
of sites requiring Remedial Action;
(G) there is not now in connection with or resulting from the
operations of either Borrower or any Subsidiary of either Borrower, nor, to
either Borrower's knowledge, has there ever been on or in any of the Property
(I) any treatment, recycling, storage or disposal of any hazardous waste
requiring a permit under 40 C.F.R. Parts 264 and 265 or any state equivalent
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or (II) any landfill, waste pile, underground storage tank or surface
impoundment, as each of those terms is defined under RCRA;
(H) neither of the Borrowers and no Subsidiary of either Borrower
has received any notice or Claim to the effect that any of such Persons is or
may be liable to any Person as a result of the Release or threatened Release of
a Contaminant, which notice or Claim has not been resolved to the satisfaction
of the Person asserting it;
(I) to neither Borrower's knowledge, have there been any Releases of
any Contaminants from any past or present Property, except in compliance with
Environmental, Health or Safety Requirements of Law, or which have not been
corrected to the satisfaction of the appropriate Governmental Authorities;
(J) to the knowledge of each Borrower after reasonable inquiry, no
Environmental Lien has attached to any Property;
(K) to the knowledge of each Borrower the Property does not contain
any asbestos-containing material; and
(L) none of the Property is subject to any Environmental Property
Transfer Act, or to the extent any such act is applicable to any Property, the
applicable Borrower or Subsidiary of a Borrower has fully complied with the
requirements of such acts.
(ii) Each of the Borrowers and their respective Subsidiaries is
conducting and will continue to conduct its respective business and operations
in an environmentally responsible manner, and the U.S. Borrower and its
Subsidiaries, taken as a whole, have not been, and the U.S. Borrower has no
reason to believe that it and its Subsidiaries, taken as a whole, will be,
subject to Liabilities and Costs arising out of or relating to environmental,
health or safety matters that have or will result in cash expenditures by the
U.S. Borrower and its Subsidiaries in excess of $500,000 in the aggregate, in
addition to any amounts included in the operating and Capital Expenditures
budgets of the U.S. Borrower and its Subsidiaries, for any calendar year ending
after the Closing Date.
(t) ERISA. Neither the U.S. Borrower nor any ERISA Affiliate
maintains or contributes to any Benefit Plan, Multiemployer Plan or Foreign
Pension Plan other than those listed on Schedule 7.01-T attached hereto and made
a part hereof. Each Plan which is intended to be qualified under Section 401(b)
of the Internal Revenue Code as currently in effect either (i) has received a
favorable determination letter from the IRS that such Plan is so qualified or
(ii) an application for determination of such tax-qualified status will be made
to the IRS as soon as practicable and the U.S. Borrower or an ERISA Affiliate
shall diligently seek to obtain a determination letter
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with respect to such application. Except as identified on Schedule 7.01-T,
neither the U.S. Borrower nor any of its Subsidiaries maintains or contributes
to any employee welfare benefit plan within the meaning of Section 3(1) of ERISA
which provides benefits to employees after termination of employment other than
as required by Section 601 of ERISA. The U.S. Borrower and all of its
Subsidiaries are in compliance in all material respects with the
responsibilities, obligations and duties imposed on them by ERISA and the
Internal Revenue Code with respect to all Plans. No Benefit Plan has incurred
any accumulated funding deficiency (as defined in Sections 302(a)(2) of ERISA
and 412(a) of the Internal Revenue Code) whether or not waived. Neither the U.S.
Borrower nor any ERISA Affiliate nor any fiduciary of any Plan which is not a
Multiemployer Plan (i) has engaged in a nonexempt prohibited transaction
described in Section 406 of ERISA or 4975 of the Internal Revenue Code or (ii)
has taken or failed to take any action which would constitute or result in a
Termination Event, which, in either event, will result in an obligation to pay a
material amount of money. Neither the U.S. Borrower nor any ERISA Affiliate is
subject to any liability under Section 4063, 4064, 4069, 4204 or 4212(c) of
ERISA which, singly or in the aggregate, will result in an obligation to pay a
material amount of money. Neither the U.S. Borrower nor any ERISA Affiliate has
incurred any liability to the PBGC which remains outstanding other than the
payment of premiums, and there are no premium payments which have become due
which are unpaid. Schedule B to the most recent annual report filed with the IRS
with respect to each Benefit Plan and furnished to the Agent is complete and
accurate in all material respects. Except as provided on Schedule 7.01-T, since
the date of each such Schedule B, there has been no material adverse change in
the funding status or financial condition of the Benefit Plan relating to such
Schedule B. Neither the U.S. Borrower nor any ERISA Affiliate has (i) failed to
make a required contribution or payment to a Multiemployer Plan or (ii) made a
complete or partial withdrawal under Section 4203 or 4205 of ERISA from a
Multiemployer Plan. Neither the U.S. Borrower nor any ERISA Affiliate has failed
to make a required installment or any other required payment under Section 412
of the Internal Revenue Code on or before the due date for such installment or
other payment. Neither the U.S. Borrower nor any ERISA Affiliate is required to
provide security to a Benefit Plan under Section 401(a)(29) of the Internal
Revenue Code due to a Benefit Plan amendment that results in an increase in
current liability for the plan year. Neither the U.S. Borrower nor any of its
Subsidiaries has, by reason of the transactions contemplated hereby, any
obligation to make any payment to any employee pursuant to any Plan or existing
contract or arrangement. The U.S. Borrower has given to the Agent copies of all
of the following: each Benefit Plan (including all amendments to such Plan) in
existence or committed to as of the Closing Date and in respect of which the
U.S. Borrower or any ERISA Affiliate is currently an "employer" as defined in
Section 3(5) of ERISA, and the most recent summary plan description, actuarial
report,
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determination letter issued by the IRS and Form 5500 filed in respect of each
such Benefit Plan in existence; a listing of all of the Multiemployer Plans
currently contributed to by the U.S. Borrower or any ERISA Affiliate with the
aggregate amount of the most recent annual contributions required to be made by
the U.S. Borrower and all ERISA Affiliates to each such Multiemployer Plan, any
information which has been provided to the U.S. Borrower or an ERISA Affiliate
regarding withdrawal liability under any Multiemployer Plan and the collective
bargaining agreement pursuant to which such contribution is required to be made;
and as to each employee welfare benefit plan within the meaning of Section 3(1)
of ERISA which provides benefits to employees of the U.S. Borrower or any of its
Subsidiaries after termination of employment other than as required by Section
601 of ERISA, the most recent summary plan description for such plan and the
aggregate amount of the most recent annual payments made to terminated employees
under each such plan.
(u) Foreign Employee Benefit Matters. Each Foreign Employee Benefit
Plan is in compliance in all material respects with all laws, regulations and
rules applicable thereto and the respective requirements of the governing
documents for such Plan. The aggregate liabilities with respect to accrued
benefits under any Foreign Pension Plan does not exceed the current fair market
value of the assets held in the trust or other funding vehicle for such Plan.
With respect to any Foreign Employee Benefit Plan maintained or contributed to
by the U.S. Borrower, any of its Subsidiaries or any ERISA Affiliate (other than
a Foreign Pension Plan), reasonable reserves have been established in accordance
with prudent business practice or where required by ordinary accounting
practices in the jurisdiction in which such Plan is maintained. The aggregate
unfunded liabilities, after giving effect to any reserves for such liabilities,
with respect to such Plans will not result in an obligation to pay a material
amount of money. There are no actions, suits or claims (other than routine
claims for benefits) pending or, to the best knowledge of the U.S. Borrower,
threatened against the U.S. Borrower, any of its Subsidiaries or any ERISA
Affiliate with respect to any Foreign Employee Benefit Plan.
(v) Labor Matters. Schedule 7.01-V attached hereto and made a part
hereof accurately sets forth all labor contracts to which either Borrower or any
Subsidiary of either Borrower is a party on the date hereof and the expiration
date of each such contract. There are no strikes, lockouts or other grievances
relating to any collective bargaining or similar agreement to which either
Borrower or any Subsidiary of a Borrower is a party.
(w) Securities Activities. Neither Borrower and no Subsidiary of
either Borrower is engaged in the business of extending credit for the purpose
of purchasing or carrying Margin Stock.
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(x) Solvency. After giving effect to the Obligations outstanding on
the Effective Date, the Subordinated Debt, the Equity Infusion, the redemption
of the AMCY Preferred Stock, and the Loans to be made and Letters of Credit to
be issued or continued on the Effective Date or such other date as Loans
requested hereunder are made or Letters of Credit requested hereunder are
issued, and the disbursement of the proceeds of such Loans and Equity Infusion
pursuant to the Borrowers' instructions, each Borrower and each Subsidiary of a
Borrower is Solvent.
(y) Patents, Trademarks, Permits, Etc.; Government Approvals. (i)
The Borrowers and each of their Subsidiaries own, are licensed or otherwise have
the lawful right to use, or have all Permits and other governmental approvals,
patents, trademarks, service marks, trade names, copyrights, technology,
know-how, and processes used in or necessary for the conduct of their respective
businesses as currently conducted which are material to its condition (financial
or otherwise), operations, performance and prospects, taken as a whole. Except
as set forth on Schedule 7.01-Y attached hereto and made a part hereof, no
claims are pending or, to the best of Borrowers' knowledge following diligent
inquiry, threatened that a Borrower or any of its Subsidiaries is infringing or
otherwise adversely affecting the rights of any Person with respect to such
Permits and other governmental approvals, patents, trademarks, service marks,
trade names, copyrights, technology, know-how, and processes, except for such
claims and infringements as do not, in the aggregate, give rise to any liability
on the part of a Borrower or any of its Subsidiaries which will, or is
reasonably likely to, result in a Material Adverse Effect.
(ii) The consummation of the transactions contemplated by the
Transaction Documents will not impair the ownership of or rights under (or the
license or other right to use, as the case may be) any Permits and governmental
approvals, patents, trademarks, service marks, trade names, copyrights,
technology, know-how, or processes by either Borrower or any Subsidiary of
either Borrower in any manner which will, or is reasonably likely to, result in
a Material Adverse Effect.
(z) Assets and Properties. The Borrowers and each of their
Subsidiaries have good and marketable title to all of the assets and Property
(tangible and intangible) owned by them, respectively, (except insofar as
marketability may be limited by any laws or regulations of any Governmental
Authority affecting such assets), and all such assets and Property are free and
clear of all Liens except Liens securing the Obligations and Liens permitted
under Section 10.03. Substantially all of the assets and Property owned by,
leased to, or used by the Borrowers and/or each such Subsidiary is in adequate
operating condition and repair, ordinary wear and tear excepted, is free and
clear of any known defects except such defects as do not substantially interfere
with the continued use thereof in the conduct of normal
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operations, and is able to serve the function for which they are currently being
used, except in each case where the failure of such asset to meet such
requirements would not, or is not reasonably likely to, result in a Material
Adverse Effect. Neither this Agreement nor any other Transaction Document, nor
any transaction contemplated under any such agreement, will affect any right,
title or interest of either Borrower or any Subsidiary of either Borrower in and
to any of such assets in a manner that would, or is reasonably likely to, result
in a Material Adverse Effect.
(aa) Insurance. Schedule 7.01-AA attached hereto and made a part
hereof accurately sets forth as of the Closing Date all insurance policies and
programs currently in effect with respect to the respective Property and assets
and business of the Borrowers and their Subsidiaries, specifying for each such
policy and program, (i) the amount thereof, (ii) the risks insured against
thereby, (iii) the name of the insurer and each insured party thereunder, (iv)
the policy or other identification number thereof, (v) the expiration date
thereof, and (vi) the annual premium with respect thereto. Such insurance
policies and programs are in compliance with the requirements of Section 9.05
and are in amounts sufficient to cover the replacement value of the respective
Property and assets of the Borrowers and their Subsidiaries.
(bb) The Subordinated Debt; Equity Infusion. (i) Each of the
Transaction Documents filed with the Commission or any other securities
authority complied in all material respects with the provisions of the
Securities Act, the Securities Exchange Act, any other federal securities law,
state securities or "Blue Sky" law, foreign securities law or applicable general
corporation law and the rules and regulations thereunder;
(ii) All conditions precedent to, and all consents necessary to
permit, the making of the Equity Infusion pursuant to the related Transaction
Documents have been satisfied or delivered, or waived with the prior written
consent of the Agent, and no material breach of any term or provision of any
Transaction Document related thereto has occurred and no action has been taken
by any competent authority which restrains, prevents or imposes material adverse
conditions upon, or seeks to restrain, prevent or impose material adverse
conditions upon, the making of the Equity Infusion or the funding of any Loans
and issuance of any Letters of Credit hereunder.
(iii) All conditions precedent to, and all consents necessary to
permit, the Subordinated Debt Documents to become effective and the Subordinated
Debt to be funded, have been satisfied or delivered, or waived with the prior
written consent of the Agent, and no material breach of any term or provision of
the Subordinated Debt Documents has occurred and no action has been taken by any
competent authority which restrains, prevents or imposes material adverse
conditions upon, or seeks to
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restrain, prevent or impose material adverse conditions upon, the effectiveness
of the Subordinated Debt Documents or the funding of the Subordinated Debt.
(cc) Pledge of Capital Stock. The grant and perfection of the
security interest in the Capital Stock of the Subsidiaries of the Borrowers
constituting a portion of the Collateral for the benefit of the Holders, as
contemplated by the terms of the Loan Documents, is not made in violation of the
registration provisions of the Securities Act, any applicable provisions of
other federal securities laws, state securities or "Blue Sky" law, foreign
securities law, or applicable general corporation law or in violation of any
other Requirement of Law.
(dd) Immunity, Levies, Etc. Neither the European Borrower nor its
Property has any immunity from jurisdiction of any court or from set-off or any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) under the laws of The
Federal Republic of Germany and there is no tax, levy, impost, deduction, charge
or withholding imposed by The Federal Republic of Germany or any political
subdivision thereof either (i) on or by virtue of the execution or delivery of
this Agreement or any of the other Loan Documents or (ii) on any payment to be
made by the European Borrower pursuant to this Agreement or any of the other
Loan Documents. Except as set forth on Schedule 7.01-DD attached hereto and made
a part hereof, it is not necessary that this Agreement or any of the other Loan
Documents be filed or recorded with any court or other authority in The Federal
Republic of Germany or that any stamp or similar tax be paid on or in respect of
this Agreement or any of the other Loan Documents.
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ARTICLE VIII
REPORTING COVENANTS
Each Borrower covenants and agrees that so long as any Commitments
are outstanding and thereafter until payment in full of all of the Obligations
(other than indemnities not yet due), unless the Requisite Lenders shall
otherwise give their prior written consent thereto:
8.01. Financial Statements. The Borrowers shall maintain, and cause
each of their Subsidiaries to maintain, a system of accounting established and
administered in accordance with sound business practices to permit preparation
of consolidated and consolidating Financial Statements in conformity with GAAP
(as in effect from time to time) and each of the Financial Statements described
below shall be prepared from such system and records. The U.S. Borrower shall
deliver or cause to be delivered to the Agent and the Lenders:
(a) Monthly/Quarterly Reports. During the period (i) commencing on
the Effective Date and ending December 31, 1997, as soon as practicable, and in
any event within thirty (30) days after the end of each calendar month (other
than calendar months which are the last month of a fiscal quarter, in which case
the aforesaid thirty (30) day period shall be extended to forty-five (45) days)
and (ii) from and after December 31, 1997, as soon as practicable, and in any
event within forty-five (45) days after the end of each fiscal quarter in each
Fiscal Year, the consolidated and consolidating balance sheets of the U.S.
Borrower and its Subsidiaries as at the end of the subject period and the
related consolidated statements of income, stockholders' equity and cash flow,
and consolidating statements of income and cash flow, of the U.S. Borrower and
its Subsidiaries for such subject period, setting forth in each case in
comparative form the corresponding figures as of the end of, and for, the
corresponding period of the previous Fiscal Year and the corresponding figures
from the consolidated financial forecast for the current Fiscal Year delivered
on the Effective Date or pursuant to Section 8.01(e), as applicable, certified
by the Chief Executive Officer or Chief Financial Officer of the U.S. Borrower
as fairly presenting the consolidated and consolidating financial position of
the U.S. Borrower and its Subsidiaries as at the dates indicated and the results
of their operations and cash flow for the periods indicated in accordance with
GAAP, subject to normal year end adjustments.
(b) Annual Reports. As soon as practicable, and in any event within
ninety (90) days after the end of each Fiscal Year, (i) the audited consolidated
balance sheets of the U.S. Borrower and its Subsidiaries as at the end of such
Fiscal Year and the related consolidated statements of income, stockholders'
equity and cash flow of the U.S. Borrower and its Subsidiaries for such Fiscal
Year, setting forth in each case in comparative
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form the corresponding figures as of the end of, and for, the previous Fiscal
Year and the corresponding figures from the consolidated financial forecast for
the current Fiscal Year delivered on the Effective Date or pursuant to Section
8.01(e), as applicable, (ii) a report thereon of Coopers & Lybrand or other
independent certified public accountants acceptable to the Agent, which report
shall be unqualified and shall state that such Financial Statements fairly
present the consolidated financial position of the U.S. Borrower and its
Subsidiaries as at the dates indicated and the results of their operations and
cash flow for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except for changes with which Coopers & Lybrand or
any such other independent certified public accountants, if applicable, shall
concur and which shall have been disclosed in the notes to the Financial
Statements) and that the examination by such accountants in connection with such
consolidated Financial Statements has been made in accordance with generally
accepted auditing standards, and (iii) the unaudited consolidating balance
sheets of the U.S. Borrower and its Subsidiaries as at the end of such Fiscal
Year and the related consolidating statements of income and cash flow of the
U.S. Borrower and its Subsidiaries for such Fiscal Year, certified by the Chief
Executive Officer or Chief Financial Officer of the U.S. Borrower as fairly
presenting the consolidating financial position of the U.S. Borrower and its
Subsidiaries as at the dates indicated and the results of their operations and
cash flow for the periods indicated in conformity with GAAP and setting forth in
each case in comparative form the corresponding figures as of the end of, and
for, the previous Fiscal Year and the corresponding figures from the
consolidating financial forecast for the current Fiscal Year delivered on the
Closing Date or pursuant to Section 8.01(e), as applicable.
(c) Officer's Certificate. Together with each delivery of any
Financial Statement pursuant to clauses (a) and (b) of this Section 8.01, (i) an
Officer's Certificate of the Chief Executive Officer or Chief Financial Officer
of the U.S. Borrower substantially in the form of Exhibit I attached hereto and
made a part hereof, stating that the officer signatory thereto has reviewed the
terms of the Loan Documents, and has made, or caused to be made under his/her
supervision, a review in reasonable detail of the transactions and consolidated
and consolidating financial condition of the U.S. Borrower and its Subsidiaries
during the accounting period covered by such Financial Statements, that such
review has not disclosed the existence during or at the end of such accounting
period, and that such Person does not have knowledge of the existence as at the
date of such Officer's Certificate, of any condition or event which constitutes
an Event of Default or Potential Event of Default, or, if any such condition or
event existed or exists, specifying the nature and period of existence thereof
and what action the U.S. Borrower or any of its Subsidiaries has taken, is
taking and proposes to take with respect thereto; and (ii) a certificate (the
"Compliance Certificate"), signed by the U.S.
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Borrower's Chief Executive Officer or Chief Financial Officer, setting forth
calculations (with such specificity as the Agent may reasonably request) for the
period then ended which demonstrate compliance, when applicable, with the
provisions of Article XI and the Performance Level attainment required by
Section 5.01(a)(iii).
(d) Accountant's Statement and Privity Letter. Together with each
delivery of the Financial Statements referred to in Section 8.01(b), a written
statement of the firm of independent certified public accountants giving the
report thereon (i) stating that their audit examination has included a review of
the terms of this Agreement as it relates to accounting matters, (ii) stating
whether, in connection with their audit examination, any condition or event
which constitutes an Event of Default or Potential Event of Default has come to
their attention, and if such condition or event has come to their attention,
specifying the nature and period of existence thereof; provided that such
accountants shall not be liable by reason of any failure to obtain knowledge of
any such condition or event that would not be disclosed in the course of their
audit examination, and (iii) stating that based on their audit examination
nothing has come to their attention which causes them to believe that the
information contained in either or both of the certificates delivered therewith
pursuant to Section 8.01(c) (as the information contained in such certificates
relates to the covenants set forth in Article XI) is not correct or that the
matters set forth in the Compliance Certificate delivered therewith pursuant to
Section 8.01(c)(ii) for the applicable Fiscal Year are not stated in accordance
with the terms of this Agreement. The statement referred to above shall be
accompanied by (x) a copy of the management letter or any similar report
delivered to the U.S. Borrower or to any officer or employee thereof by such
accountants in connection with such Financial Statements and (y) a letter in
substantially the form of Exhibit J attached hereto and made a part hereof from
the U.S. Borrower to such accountants informing such accountants that the
Lenders are relying upon the Financial Statements audited by such accountants
and delivered to the Agent and the Lenders pursuant to Section 8.01(b) and that
a primary intent of the Borrower in having such Financial Statements audited is
to induce the Lenders to continue to make Loans to, and issue and participate in
Letters of Credit for the account of, the Borrowers under this Agreement. The
Agent and each Lender may, with the written consent of the U.S. Borrower (which
consent shall not be unreasonably withheld or delayed), communicate directly
with such accountants.
(e) Budgets; Business Plans; Financial Projections. As soon as
practicable and in any event not later than sixty (60) days after the
commencement of each Fiscal Year (beginning with the Fiscal Year ending in
1997), (i) a monthly budget for such Fiscal Year; (ii) an annual business plan
for such Fiscal Year,
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substantially in the form of the business plan heretofore delivered to the Agent
and the Lenders, accompanied by a report reconciling all changes and departures
from the business plan delivered to the Agent and the Lenders for the preceding
Fiscal Year; and (iii) a consolidated plan and financial forecast, prepared in
accordance with the U.S. Borrower's normal accounting procedures applied on a
consistent basis, for each succeeding Fiscal Year of the U.S. Borrower and its
Subsidiaries until the scheduled Revolving Credit Termination Date, including,
without limitation, (A) a forecasted consolidated balance sheet and statement of
cash flow of the U.S. Borrower for each Fiscal Year, (B) forecasted consolidated
and consolidating balance sheets, statements of earnings and retained earnings,
and cash flow of the U.S. Borrower and its Subsidiaries for and as of the end of
each fiscal quarter of such Fiscal Year, (C) the amount of forecasted Capital
Expenditures for such Fiscal Year, and (D) forecasted compliance with the
provisions of Article XI.
8.02. Operations Reports. The U.S. Borrower shall deliver to the
Agent and the Lenders, as and when Financial Statements are required to be
delivered as described in Section 8.01(a), a report detailing the operations of
the U.S. Borrower and its Subsidiaries which report shall include a management
commentary with respect to the respective Borrowers' and their Subsidiaries'
financial performance during such month, together with an explanation of any
material changes in the consolidated and consolidating statements of income,
stockholders' equity and cash flow of the U.S. Borrower and its Subsidiaries for
the applicable period from such statements for the corresponding period of the
previous Fiscal Year and the corresponding figures from the consolidated
financial forecast for the current Fiscal Year delivered by the Effective Date
or pursuant to Section 8.01(e) (the "President's Letter").
8.03. Events of Default. Promptly upon any of the chief executive
officer, chief operating officer, chief financial officer, treasurer, controller
or secretary of the U.S. Borrower obtaining knowledge (a) of any condition or
event which constitutes an Event of Default or Potential Event of Default, or
becoming aware that any Lender or the Agent has given any notice with respect to
a claimed Event of Default or Potential Event of Default under this Agreement,
(b) that any Person has given any notice to a Borrower or any Subsidiary of a
Borrower or taken any other action with respect to a claimed default or event or
condition of the type referred to in Section 12.01(e), or (c) of any condition
or event which has resulted, or is reasonably likely to result, in a Material
Adverse Effect or affect the value of, or the Agent's interest in, the
Collateral in any material respect, the U.S. Borrower shall deliver to the Agent
and the Lenders an Officer's Certificate specifying (i) the nature and period of
existence of any such claimed default, Event of Default, Potential Event of
Default, condition or event, (ii) the notice given or action taken by such
Person in connection therewith, and (iii) what action the U.S. Borrower or
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any of its Subsidiaries has taken, is taking and proposes to take with respect
thereto.
8.04. Lawsuits. (a) Institution of Proceedings. Promptly upon the
U.S. Borrower obtaining knowledge of the institution of, or written threat of,
any action, suit, proceeding, governmental investigation or arbitration against
or affecting either Borrower or any of their Subsidiaries or any of the Property
not previously disclosed pursuant to Section 7.01(k), which action, suit,
proceeding, governmental investigation or arbitration exposes, or in the case of
multiple actions, suits, proceedings, governmental investigations or
arbitrations arising out of the same general allegations or circumstances which
(i) could reasonably be expected to result, in the U.S. Borrower's reasonable
judgment, in either Borrower and/or any Subsidiary of either Borrower incurring
liability in an amount aggregating $1,000,000 or more (exclusive of claims
covered by insurance policies of the U.S. Borrower and its Subsidiaries unless
the insurers of such claims have disclaimed coverage or reserved the right to
disclaim coverage on such claims) or (ii) challenges the validity or
enforceability of any of the Transaction Documents, the U.S. Borrower shall give
written notice thereof to the Agent and the Lenders and provide such other
information as may be reasonably available to enable the each Lender and the
Agent and its counsel to evaluate such matters.
(b) Quarterly Litigation Reports. As soon as practicable and in any
event within forty-five (45) days after the end of each fiscal quarter of the
U.S. Borrower, the U.S. Borrower shall provide a written quarterly report to the
Agent and the Lenders covering the institution of, or written threat of, any
action, suit, proceeding, governmental investigation or arbitration (not
previously reported) against or affecting the U.S. Borrower or any of its
Subsidiaries or any Property not previously disclosed by the U.S. Borrower to
the Agent and the Lenders, and shall provide such other information at such time
as may be reasonably available to enable each Lender and the Agent and its
counsel to evaluate such matters.
(c) Additional Information Upon Request. In addition to the
requirements set forth in clauses (a) and (b) of this Section 8.04, the U.S.
Borrower upon request of the Agent or the Requisite Lenders shall promptly give
written notice of the status of any action, suit, proceeding, governmental
investigation or arbitration covered by a report delivered pursuant to either of
such clauses (a) or (b) and provide such other information as may be reasonably
available to it to enable each Lender and the Agent and its counsel to evaluate
such matters.
8.05. Insurance. As soon as practicable and in any event by the last
day of January in each Fiscal Year, the U.S. Borrower shall deliver to the Agent
(a) a report in form and
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substance reasonably satisfactory to the Agent and the Lenders outlining all
material insurance coverage maintained as of the date of such report by the U.S.
Borrower and its Subsidiaries and the duration of such coverage and (b) evidence
that all premiums with respect to such coverage have been paid when due.
8.06. ERISA Notices. The U.S. Borrower shall deliver or cause to be
delivered to the Agent and the Lenders, at the Borrower's expense, the following
information and notices as soon as reasonably possible, and in any event:
(a) within ten (10) Business Days after the U.S. Borrower or any
ERISA Affiliate knows or has reason to know that a Termination Event has
occurred, a written statement of the Chief Financial Officer of the U.S.
Borrower describing such Termination Event and the action, if any, which
the U.S. Borrower or any ERISA Affiliate has taken, is taking or proposes
to take with respect thereto, and when known, any action taken or
threatened by the IRS, DOL or PBGC with respect thereto;
(b) within ten (10) Business Days after the U.S. Borrower or any of
its Subsidiaries knows or has reason to know that an assessment of a
prohibited transaction excise tax under Section 4975 of the Internal
Revenue Code has occurred, a statement of the Chief Financial Officer of
the U.S. Borrower describing such transaction and the action which the
U.S. Borrower or any ERISA Affiliate has taken, is taking or proposes to
take with respect thereto;
(c) within three (3) Business Days after the U.S. Borrower receives
written notice from the Agent requesting the same, a copy of the annual
report (Form 5500 series), including Schedule B thereto, filed with
respect to each Benefit Plan;
(d) within three (3) Business Days after the U.S. Borrower receives
written notice from the Agent requesting the same, a copy of the actuarial
report for any Benefit Plan or Multiemployer Plan and annual report for
any Multiemployer Plan;
(e) within three (3) Business Days after the filing of the same with
the IRS, a copy of each funding waiver request filed with respect to any
Benefit Plan and all communications received by the U.S. Borrower or any
ERISA Affiliate with respect to such request;
(f) within three (3) Business Days after the occurrence any material
increase in the benefits of any existing Benefit Plan or the establishment
of any new Benefit Plan or the commencement of contributions to
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any Benefit Plan to which the U.S. Borrower or any ERISA Affiliate was not
previously contributing, notification of such increase, establishment or
commencement;
(g) within three (3) Business Days after the U.S. Borrower or any
ERISA Affiliate receives notice of the PBGC's intention to terminate a
Benefit Plan or to have a trustee appointed to administer a Benefit Plan,
copies of each such notice;
(h) within three (3) Business Days after the U.S. Borrower or any of
its Subsidiaries receives notice of any unfavorable determination letter
from the IRS regarding the qualification of a Plan under Section 401(a) of
the Internal Revenue Code, copies of each such notice and letter;
(i) within three (3) Business Days after the U.S. Borrower or any
ERISA Affiliate receives notice from a Multiemployer Plan regarding the
imposition of withdrawal liability, copies of each such notice;
(j) within three (3) Business Days after the U.S. Borrower or any
ERISA Affiliate fails to make a required installment or any other required
payment under Section 412 of the Internal Revenue Code on or before the
due date for such installment or payment, a notification of such failure;
(k) within three (3) Business Days after the U.S. Borrower or any
ERISA Affiliate knows (1) a Multiemployer Plan has been terminated, (2)
the administrator or plan sponsor of a Multiemployer Plan intends to
terminate a Multiemployer Plan, or (3) the PBGC has instituted or will
institute proceedings under Section 4042 of ERISA to terminate a
Multiemployer Plan, notice thereof; and
(l) within ten (10) Business Days after the U.S. Borrower receives
written notice from the Agent requesting the same, copies of any Foreign
Employee Benefit Plan and related documents, reports and correspondence
specified in such notice.
For purposes of this Section 8.06, the U.S. Borrower and any ERISA Affiliate
shall be deemed to know all facts known by the administrator of any Plan of
which the U.S. Borrower or any ERISA Affiliate is the plan sponsor.
8.07. Environmental Notices. (a) The U.S. Borrower
shall notify the Agent and the Lenders in writing, promptly upon
either Borrower's learning thereof, of any:
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(i) notice or claim to the effect that the U.S. Borrower or any of
its Subsidiaries is or may be liable to any Person as a result of the
Release or threatened Release of any Contaminant which could reasonably be
expected by the U.S. Borrower to result in an expenditure over $500,000;
(ii) notice that the U.S. Borrower or any of its Subsidiaries is
subject to investigation by any Governmental Authority evaluating whether
any Remedial Action is needed to respond to the Release or threatened
Release of any Contaminant which could reasonably be expected by the U.S.
Borrower to result in an expenditure over $500,000;
(iii) notice that any Property is subject to an Environmental Lien;
(iv) notice to the U.S. Borrower or any of its Subsidiaries of any
material violation of any Environmental, Health or Safety Requirement of
Law;
(v) condition or occurrence of which the U.S. Borrower or any of its
Subsidiaries has knowledge and which might reasonably be expected by the
U.S. Borrower to result in a material violation of any Environmental,
Health or Safety Requirement of Law;
(vi) commencement or threat of any judicial or administrative
proceeding alleging a material violation by the U.S. Borrower or any of
its Subsidiaries of any Environmental, Health or Safety Requirement of
Law;
(vii) new or proposed changes to any existing Environmental, Health
or Safety Requirement of Law that could result in a Material Adverse
Effect;
(viii) any proposed acquisition of stock, assets, real estate, or
leasing of property, or any other action by the U.S. Borrower or any of
its Subsidiaries that could subject the U.S. Borrower or any of its
Subsidiaries to environmental, health or safety Liabilities and Costs
which could reasonably be expected by the U.S. Borrower to result in an
expenditure over $500,000; or
(ix) any filing or report made by the U.S. Borrower or any of its
Subsidiaries with any Governmental Authority with respect to any
unpermitted Release or threatened Release of a Contaminant which could
reasonably be expected by the U.S. Borrower to result in an expenditure
over $500,000.
(b) Within forty-five (45) days after the end of each Fiscal Year,
the U.S. Borrower shall submit to the Agent and the
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Lenders a report summarizing the status of environmental, health or safety
compliance, hazard or liability issues identified in notices required pursuant
to Section 8.07(a), disclosed on Schedule 7.01-S or identified in any notice or
report required herein. In the event the Agent requests, after its and the
Lenders' review of the foregoing status report, a review of such environmental,
health or safety compliance, hazard or liability issues by an independent
environmental consultant, the U.S. Borrower shall engage such a consultant as is
reasonably satisfactory to the Agent to prepare such a review, the cost of which
shall be for the account of the U.S. Borrower.
8.08. Labor Matters. The U.S. Borrower shall notify the Agent and
the Lenders in writing, promptly upon the U.S. Borrower's learning thereof, of
(i) any material labor dispute to which the U.S. Borrower reasonably believes it
or any of its Subsidiaries may become a party, including, without limitation,
any strikes, lockouts or other grievances relating to such Persons' plants and
other facilities and (ii) any liability relating to its employees incurred with
respect to the closing of any plant or other facility of the U.S. Borrower or
any of its Subsidiaries.
8.09. Subordinated Debt. The U.S. Borrower shall deliver a copy to
the Agent and the Lenders of (a) any notice or other communication delivered by
or on behalf of the U.S. Borrower to any Person in connection with any
Subordinated Debt Document at the same time and by the same means as such notice
or other communication is delivered to such Person and (b) any material notice
or other material communication received by the U.S. Borrower from any Person in
connection with any Subordinated Debt Document promptly after such notice or
other communication is received by the U.S. Borrower.
8.10. Other Reports. The U.S. Borrower shall deliver or cause to be
delivered to the Agent and the Lenders copies of all Financial Statements,
reports and notices, if any, sent or made available generally by the U.S.
Borrower to its Securities holders or filed with the Commission and all press
releases made available generally by the U.S. Borrower or any of its
Subsidiaries to the public concerning material developments in the business of
the U.S. Borrower or any such Subsidiary, and all notifications received by the
U.S. Borrower or any such Subsidiary pursuant to the Securities Exchange Act and
the rules promulgated thereunder.
8.11. Other Information. Promptly upon receiving a request therefor
from the Agent or the Requisite Lenders, the U.S. Borrower shall prepare and
deliver to the Agent and the Lenders such other information with respect to
either Borrower, any of their respective Subsidiaries, or the Collateral,
including, without limitation, schedules identifying and describing the
Collateral and any dispositions thereof, as from
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time to time may be reasonably requested by the Agent or the Requisite Lenders.
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ARTICLE IX
AFFIRMATIVE COVENANTS
Each of the Borrowers covenants and agrees that so long as any
Commitments are outstanding and thereafter until payment in full of all of the
Obligations (other than indemnities not yet due), unless the Requisite Lenders
shall otherwise give prior written consent:
9.01. Corporate Existence, Etc. The Borrowers shall, and shall cause
each of their Subsidiaries to, at all times maintain their corporate existence
and preserve and keep, or cause to be preserved and kept, in full force and
effect their rights and franchises material to their businesses, except where
the loss or termination of such rights and franchises is not likely to result in
a Material Adverse Effect.
9.02. Corporate Powers; Conduct of Business. The Borrowers shall,
and shall cause each of their Subsidiaries to, qualify and remain qualified to
do business and maintain their good standing in each jurisdiction in which the
nature of their business and the ownership of their Property requires them to be
so qualified and in good standing and a failure to qualify and remain qualified
renders Contractual Obligations of Persons in such jurisdictions unenforceable
by a Borrower or a Subsidiary of the U.S. Borrower without cure.
9.03. Compliance with Laws, Etc. The Borrowers shall, and shall
cause each of their Subsidiaries to, (a) comply with all Requirements of Law and
all restrictive covenants and material Contractual Obligations affecting them or
their respective businesses, Property, assets or operations and (b) obtain as
needed all Permits necessary for their respective operations and maintain such
Permits in good standing, except in the case where noncompliance with either
clause (a) or (b) above is not reasonably likely to result in a Material Adverse
Effect.
9.04. Payment of Taxes and Claims; Tax Consolidation. The Borrowers
shall, and shall cause each of their Subsidiaries to, pay (a) all taxes,
assessments and other governmental charges imposed upon them or on any of their
Property or assets or in respect of any of their franchises, business, income or
Property before any penalty or interest accrues thereon, and (b) all Claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have or
may become a Lien (other than a Lien permitted by Section 10.03) upon any of
such Person's Property or assets, prior to the time when any penalty shall be
incurred with respect thereto; provided, however, that no such taxes,
assessments and governmental charges referred to in clause (a) above or Claims
referred to in clause (b) above need be paid if being contested in good faith by
appropriate proceedings diligently instituted and conducted and if such reserve
or other
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appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor. The Borrowers will not, nor will they permit any
of their Subsidiaries to, file or consent to the filing of any consolidated
income tax return with any Person (other than the U.S. Borrower and its
Subsidiaries).
9.05. Insurance. The U.S. Borrower shall maintain for itself and its
Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force
and effect the insurance policies and programs listed on Schedule 7.01-AA or
substantially similar policies and programs or other policies and programs as
are acceptable to the Agent. All such policies and programs shall be maintained
with responsible and reputable insurance companies or associations in such
amounts and covering such risks as are usual for companies engaged in similar
businesses and owning similar property in the same general geographic areas in
which the U.S. Borrower and/or its Subsidiaries operate. Each certificate and
policy relating to property damage, boiler and machinery and/or business
interruption coverage shall contain an endorsement, in form and substance
acceptable to the Agent, showing loss payable to the Agent, for the benefit of
the Holders, and, if required by the Agent, naming the Agent as an additional
insured under such policy. Each certificate and policy relating to coverage
other than the foregoing shall, if required by the Agent, contain an endorsement
naming the Agent as an additional insured under such policy. Such endorsement or
an independent instrument furnished to the Agent shall provide that the
insurance companies will give the Agent at least thirty (30) days' written
notice before any such policy or policies of insurance shall be altered
adversely to the interests of the Holders or canceled and that no act, whether
willful or negligent, or default of the U.S. Borrower, any of its Subsidiaries,
or any other Person shall affect the right of the Agent to recover under such
policy or policies of insurance in case of loss or damage. In the event the U.S.
Borrower or any of its Subsidiaries, at any time or times hereafter shall fail
to obtain or maintain any of the policies or insurance required herein or to pay
any premium in whole or in part relating thereto, then the Agent, without
waiving or releasing any obligations or resulting Event of Default hereunder,
may at any time or times thereafter (but shall be under no obligation to do so)
obtain and maintain such policies of insurance and pay such premiums and take
any other action with respect thereto which the Agent deems advisable. All sums
so disbursed by the Agent shall constitute Protective Advances hereunder and be
part of the Obligations, payable as provided in this Agreement.
9.06. Inspection of Property; Books and Records; Discussions. Each
Borrower shall, and shall cause each of its Subsidiaries to, permit any
authorized representative(s) designated by the Agent to visit and inspect,
whether by access to such Borrower's and its Subsidiaries' MIS or otherwise, any
of the Property, to examine, audit, check and make copies of its respective
financial and accounting records, books, journals,
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orders, receipts and any correspondence (other than privileged correspondence
with legal counsel) and other data relating to their respective businesses or
the transactions contemplated hereby or referenced herein (including, without
limitation, in connection with environmental compliance, hazard or liability),
and to discuss their affairs, finances and accounts with their officers,
management personnel, and independent certified public accountants (with the
U.S. Borrower having the right to be present at any meeting with such
accountants), all upon reasonable written notice and at such reasonable times
during normal business hours, as often as may be reasonably requested. Each
Lender (or representatives designated by it) shall have the access and rights
described in the preceding sentence from and after the occurrence and during the
continuance of an Event of Default. Each such visitation and inspection (i) by
or on behalf of any Lender shall be at such Lender's expense and (ii) by or on
behalf of the Agent shall be at the U.S. Borrower's expense. Each Borrower shall
keep and maintain, and cause each of its Subsidiaries to keep and maintain, in
all material respects on its MIS and otherwise proper books of record and
account in which entries in conformity with GAAP shall be made of all dealings
and transactions in relation to its respective businesses and activities,
including, without limitation, transactions and other dealings with respect to
the Collateral. If an Event of Default has occurred and is continuing, the
Borrowers, upon the Agent's request, shall, and shall cause each of their
Subsidiaries to, turn over any such records to the Agent or its representatives;
provided, however, that the Borrowers may, in their discretion, retain copies of
such records. Notwithstanding the foregoing, the Agent and Lenders shall not
have such rights to make the aforesaid visits and inspections with respect to
Joint Ventures if the joint venture agreement between or among the joint venture
parties does not permit the U.S. Borrower or its Subsidiary which is a joint
venture party with respect to a given Joint Venture to have such access to such
Joint Venture's Property.
9.07. Insurance and Condemnation Proceeds. (a) Direction to
Insurers. The Borrowers hereby direct (and, if applicable, shall cause their
Subsidiaries to direct) all insurers under policies of property damage, boiler
and machinery and business interruption insurance and payors of any condemnation
claim or award relating to the Property to pay all proceeds payable under such
policies or with respect to such claim or award directly to the Agent, for the
benefit of the Holders. In no case shall such proceeds be payable to either
Borrower or one or more of their Subsidiaries and the Agent.
(b) Application of Proceeds. In the event proceeds of insurance
received by the Agent under property damage or boiler and machinery policies, or
business interruption insurance policies, or with respect to a condemnation
claim or award, exceed $500,000 and do not constitute Replacement Proceeds, the
Agent shall, upon receipt of such proceeds, apply all of the proceeds so
received in repayment of the Obligations in the
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manner set forth in Section 4.02(b)(i). Notwithstanding the foregoing, in the
event proceeds of insurance received by the Agent under property damage, boiler
and machinery policies or business interruption insurance policies (i) is less
than $500,000 or (ii) constitutes Replacement Proceeds, Agent shall, upon
receipt of such proceeds, remit the amount so received to the applicable
Borrower or such Subsidiary.
9.08. ERISA Compliance. The U.S. Borrower shall, and shall cause
each of its Subsidiaries and ERISA Affiliates to, establish, maintain and
operate all Plans to comply in all material respects with the provisions of
ERISA, the Internal Revenue Code, all other applicable laws, and the regulations
and interpretations thereunder and the respective requirements of the governing
documents for such Plans.
9.09. Foreign Employee Benefit Plan Compliance. The U.S. Borrower
shall, and shall cause each of its Subsidiaries and ERISA Affiliates to,
establish, maintain and operate all Foreign Employee Benefit Plans to comply in
all material respects with all laws, regulations and rules applicable thereto
and the respective requirements of the governing documents for such Plans.
9.10. Deposit Accounts. Within ninety (90) days after the Effective
Date, the European Borrower shall, and shall cause each of its Subsidiaries to,
enter into Collection Account Agreements with respect to each of their
respective depository accounts into which collections of Receivables and other
proceeds of Collateral are deposited.
9.11. Maintenance of Property. Each Borrower shall, and shall cause
each of its Subsidiaries to, maintain in all material respects all of its
respective owned and leased Property in good, safe and insurable condition and
repair, and not permit, commit or suffer any waste or abandonment of any such
Property in any material respect and from time to time shall make or cause to be
made all material repairs, renewal and replacements thereof, including, without
limitation, any capital improvements which may be required; provided, however,
that such Property may be altered or renovated in the ordinary course of such
Borrower's or its Subsidiaries' business.
9.12. Condemnation. Immediately upon learning of the institution of
any proceeding for the condemnation or other taking of any of the owned or
leased Real Property of either Borrower or any Subsidiary of either Borrower,
such Borrower shall notify the Agent of the pendency of such proceeding, and
permit the Agent to participate in any such proceeding, and from time to time
will deliver to the Agent all instruments reasonably requested by the Agent to
permit such participation.
9.13. Future Liens on Real Property. Upon the request of the Agent,
each Borrower shall, and shall cause its
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Subsidiaries to, execute and deliver to the Agent, for the benefit of the
Holders, immediately upon the acquisition of any Real Property having an
appraised value in excess of $5,000,000 on which material operations of a
Borrower or Subsidiary of a Borrower are located or leasing any Real Property on
which material operations of a Borrower or any Subsidiary of a Borrower are
located, a mortgage, deed of trust, assignment or other appropriate instrument
evidencing a Lien upon any such Real Property, lease or interest, together with
such title insurance policies (mortgagee's form), certified surveys, appraisals
(to the extent required by, and which meet or exceed the minimum appraisal
standards set forth in, the Financial Institutions Reform, Recovery and
Enforcement Act (12 C.F.R. ss.4 (1990)), as amended), and local counsel opinions
with respect thereto and such other agreements, documents and instruments which
the Agent deems necessary or desirable, the same to be in form and substance
acceptable to the Agent and to be subject only to (a) Liens permitted under
Section 10.03 and (b) such other Liens as the Agent and the Requisite Lenders
may reasonably approve, it being understood that the granting of such additional
security for the Obligations is a material inducement to the execution and
delivery of this Agreement by each Lender. Notwithstanding the foregoing, (a)
the Agent shall make such requests with respect to Subsidiaries of the U.S.
Borrower which are not Domestic Subsidiaries only where the Property or
operations of such Subsidiary are deemed by the Agent, in its reasonable
discretion, to be material to the recovery of the Obligations and (b) Liens
against the Securities and Property of any Joint Venture shall not be required
if there is a prohibition against the pledging of the same in the joint venture
agreements relating thereto.
9.14. Consignee/Bailee Letters; Filings. The U.S. Borrower shall
obtain consignee or bailee letters (as applicable) substantially in the form
attached hereto as Exhibit K from each consignee or bailee of Inventory of any
operating Subsidiary of the U.S. Borrower (separately or in the aggregate)
having a minimum value (at the lower of cost or market) of $500,000, promptly
upon delivery of such Inventory to such consignee or bailee, and (ii) cause to
be executed and delivered to the Agent concurrently with execution and delivery
of such consignee or bailee letter, UCC financing statements in form and
substance satisfactory to the Agent with respect to Inventory located on the
premises of such consignee or bailee.
9.15. Future Pledges of Equity Securities; Other Loan Documents. (a)
The U.S. Borrower shall, and shall cause each of its Subsidiaries to, execute
and deliver to the Agent concurrently with the issuance of any equity Securities
to the U.S. Borrower or any Subsidiary of the U.S. Borrower in connection with
any Investment made by such Person, or formation or acquisition of a Subsidiary,
a pledge of (i) all of the equity Securities issued to or acquired by such
Person, if the Person formed, acquired or in which such Investment is made is a
Domestic Subsidiary, (ii) 65% of the equity Securities of such
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Person (or such lesser percentage as is owned by the pledgor) to secure the
Obligations of the U.S. Borrower, if such Person is not a Domestic Subsidiary
and is a direct Subsidiary of the U.S. Borrower, and (iii) all of the equity
Securities of such Person to secure the Obligations of the European Borrower, if
such Person is not a Domestic Subsidiary and is a direct Subsidiary of the
European Borrower.
(b) The U.S. Borrower shall cause each Subsidiary of the U.S.
Borrower to execute and deliver to the Agent, upon the Agent's request therefor,
such agreements as the Agent may reasonably request to effect such Subsidiary's
becoming a Guarantor and granting Liens on its Property to secure the
Obligations; provided, however, that no such Subsidiary shall be required to
become a Guarantor or grant Liens on its Property to secure the Obligations if
the same would result in the U.S. Borrower incurring liabilities for U.S.
federal income taxes which would not otherwise be incurred.
(c) Notwithstanding the foregoing, (i) nothing in this Section 9.15
shall permit the U.S. Borrower or any Subsidiary of the U.S. Borrower to make
any Investment not otherwise permitted by Section 10.04 and (ii) Liens against
the Securities of any Joint Venture shall not be required if there is a
prohibition against the pledging of the same in the joint venture agreements
relating thereto.
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ARTICLE X
NEGATIVE COVENANTS
Each of the Borrowers covenants and agrees that it shall comply with
the following covenants so long as any Commitments are outstanding and
thereafter until payment in full of all of the Obligations (other than
indemnities not yet due), unless the Requisite Lenders shall otherwise give
prior written consent:
10.01. Indebtedness. Neither Borrower shall, nor
shall either Borrower permit any of its Subsidiaries to, directly
or indirectly create, incur, assume or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness,
except:
(a) the Obligations;
(b) Permitted Existing Indebtedness and any extensions, renewals,
refundings or replacements thereof, provided that any such extension,
renewal, refunding or replacement is in an aggregate principal amount not
greater than the principal amount of, and is on terms determined by the
Agent to be no less favorable to the Borrower or Subsidiary obligor than
the terms of, the Permitted Existing Indebtedness so extended, renewed,
refunded or replaced;
(c) to the extent permitted by Article XI and in any event in an
aggregate amount not to exceed a principal amount of $5,000,000 at any
time outstanding, Capital Leases and purchase money Indebtedness incurred
to finance the acquisition of fixed assets, and Indebtedness incurred to
refinance such Capital Leases and purchase money Indebtedness;
(d) Indebtedness arising from intercompany loans from a Borrower to
any of its respective Subsidiaries which is a Guarantor or from any such
Subsidiary to the Borrower or to any other such Subsidiary;
(e) the Subordinated Debt;
(f) Indebtedness in respect of profit sharing plans to the extent
permitted under Section 10.04;
(g) Indebtedness in respect of Hedge Agreements entered into to
hedge against fluctuations in interest rates or foreign exchange rates
incurred in the ordinary course of business and consistent with prudent
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business practices and not entered into for speculative purposes;
(h) Indebtedness with respect to reasonable warranties and
indemnities made under (i) any agreements for asset sales permitted under
Section 10.02, and (ii) Contractual Obligations of a Borrower or any
Subsidiary of a Borrower entered into in the ordinary course of its
business;
(i) Indebtedness under appeal bonds in connection with judgments
which do not result in an Event of Default or a Potential Event of Default
or any other breach hereunder, provided that the aggregate amount of all
such Indebtedness does not exceed $5,000,000;
(j) recourse obligations resulting from endorsement of negotiable
instruments for collection in the ordinary course of its business;
(k) Accommodation Obligations included in Permitted Existing
Indebtedness, and any extensions, renewals or replacements thereof,
provided that the aggregate Indebtedness under any such extension, renewal
or replacement is not greater than the Indebtedness under, and shall be on
terms determined by the Agent to be no less favorable to the Borrower or
Subsidiary obligor than the terms of, such Accommodation Obligation so
extended, renewed or replaced;
(l) Indebtedness in an aggregate amount not to exceed $5,000,000 at
any time outstanding to insurers with respect to premiums for insurance
coverage obtained in the ordinary course of business, including, without
limitation, such Indebtedness which is Permitted Existing Indebtedness;
(m) Accommodation Obligations in an aggregate amount not to exceed
$5,000,000 at any time outstanding with respect to obligations of Joint
Ventures; provided, however, that in the event any such Accommodation
Obligation is extinguished by payment thereof, the aforesaid $5,000,000
shall be reduced by the amount of such payment;
(n) Accommodation Obligations arising under Section 11.2(d) of the
Purchase Agreement;
(o) Indebtedness of Subsidiaries of the U.S. Borrower which are
neither Domestic Subsidiaries nor the European Borrower arising from loans
from a Borrower or a Domestic Subsidiary not to exceed, at any time
outstanding, the amount equal to $5,000,000 minus the amount of
Investments made after the Closing Date in such Persons by a Borrower or
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a Domestic Subsidiary other than by means of loans or advances to such
Persons;
(p) Indebtedness of Subsidiaries of the U.S. Borrower which are
neither Domestic Subsidiaries nor the European Borrower owing to a Person
other than a Borrower or Domestic Subsidiary or other such Subsidiary in
an aggregate amount outstanding not to exceed either (i) $2,500,000 at any
time outstanding for any individual such Subsidiary or (ii) when
aggregated with such Indebtedness of all other such Subsidiaries,
$5,000,000 at any time outstanding;
(q) Indebtedness of Subsidiaries of the U.S. Borrower which are
neither Domestic Subsidiaries nor the European Borrower owing to a Person
which is another such Subsidiary;
(r) Indebtedness issued as consideration for acquisitions of Capital
Stock or other Property permitted under Section 10.04(k) not to exceed
twenty-five percent (25%) of the purchase price therefor; and
(s) in addition to the Indebtedness permitted hereinabove, other
unsecured Indebtedness in an aggregate amount not to exceed $5,000,000 at
any time outstanding.
In the event any Indebtedness is permitted under this Section 10.01,
Indebtedness for accrued interest, fees and charges in connection therewith also
shall be deemed to be permitted.
10.02. Sales of Assets. Neither Borrower shall, nor shall either
Borrower permit any of its Subsidiaries to, sell, assign, transfer, lease,
convey or otherwise dispose of any Property, whether now owned or hereafter
acquired, or any income or profits therefrom, or enter into any agreement to do
so, except:
(a) the sale of Property for consideration not less than the Fair
Market Value thereof so long as (i) any non-cash consideration resulting
from such sale shall be pledged or assigned to the Agent, for the benefit
of the Holders, pursuant to an instrument in form and substance acceptable
to the Agent and (ii) the Borrowers comply with the mandatory prepayment
provisions set forth in Section 4.01(b) and the conditions to the release
of Collateral described in Section 13.09(c);
(b) the transfer of Property (i) from a Subsidiary of a Borrower to
such Borrower or (ii) from a Subsidiary of a Borrower to another
Subsidiary of such Borrower, provided that the Subsidiary transferee is,
or simultaneous with such transfer becomes, a Guarantor;
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(c) the sale of Inventory in the ordinary course of such Person's
respective business;
(d) the disposition of Equipment constituting less than
substantially all of the assets of such Person, if the consideration
received therefor is not less than the Fair Market Value thereof;
(e) the licensing of General Intangibles as permitted by the Loan
Documents;
(f) the sale of Investments in Cash Equivalents permitted pursuant
to Section 10.04(a); and
(g) the sale of the Cowpens Plant.
10.03. Liens. Neither Borrower shall, nor shall either Borrower
permit any of its Subsidiaries to, directly or indirectly create, incur, assume
or permit to exist any Lien on or with respect to any of their respective
Property or assets except:
(a) Liens created pursuant to the Loan Documents or Intercompany
Security Documents;
(b) Permitted Existing Liens;
(c) Customary Permitted Liens;
(d) purchase money Liens (including the interest of a lessor under a
Capital Lease and Liens to which any Property is subject at the time of
such Person's purchase thereof) and Liens securing refinancings of
purchase money Liens permitted under Section 10.01(c) which secure an
amount not to exceed $5,000,000 in the aggregate at any time outstanding,
provided that such Liens shall not apply to any Property other than that
purchased or subject to such Capital Lease or pre-existing Liens;
(e) extensions, renewals, refundings and replacements of Liens
referred to in clauses (a) and (b) of this Section 10.03; provided that
any such extension, renewal, refunding or replacement of a Lien referred
to in clause (b) shall be limited to the Property covered by the Lien
extended, renewed, refunded or replaced and that the obligations secured
by any such extension, renewal, refunding or replacement Lien shall be in
an amount not greater than the amount of the obligations then secured by
the Lien extended, renewed, refunded or replaced; and
(f) Liens securing the Indebtedness described in Section 10.01(p) or
(q).
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10.04. Investments. Neither Borrower shall, nor shall
either Borrower permit any of its Subsidiaries to, directly or
indirectly make or own any Investment except:
(a) Investments in Cash Equivalents;
(b) Permitted Existing Investments;
(c) Investments in the form of advances to employees in the ordinary
course of business for moving, relocation and travel expenses, and other
loans to employees for any lawful purpose; provided that each loan
permitted under this clause (c) shall be evidenced by a promissory note
and that the aggregate principal amount of all such advances and loans at
any time outstanding shall not exceed $500,000;
(d) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising
in the ordinary course of business;
(e) Investments by a Borrower or Domestic Subsidiary in equity
Securities of any of its respective Subsidiaries which is a Guarantor;
(f) Investments by a Borrower or a Domestic Subsidiary in a
Subsidiary of the U.S. Borrower which is neither a Domestic Subsidiary nor
the European Borrower which do not exceed $5,000,000 in the aggregate at
any time;
(g) Investments in Joint Ventures and newly created Subsidiaries
formed for the purpose of making Investments in Joint Ventures in an
aggregate amount (without duplication) not to exceed $5,000,000 at any
time plus Investments in Joint Ventures resulting from subrogation to the
rights of a creditor which is the beneficiary of an Accommodation
Obligation of the U.S. Borrower or Subsidiary of the U.S. Borrower
permitted under Section 10.01(m), which Accommodation Obligation is
extinguished by payment as referenced in Section 10.01(m);
(h) Investments permitted under Section 10.02(a)(i);
(i) Investments in no more than ten (10) newly created Domestic
Subsidiaries (in addition to the newly created Domestic Subsidiaries
described in Section 10.04(g)), which shall not exceed $10,000 per such
Domestic Subsidiary;
(j) to the extent they constitute Investments, contributions to and
payments of benefits under any Plan in existence as of the Closing Date as
required by
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the benefit commitments in such Plan as of the Closing Date;
(k) Investments made in connection with acquisitions of the Capital
Stock or substantially all of the Property of one or more Persons which
are not an Affiliate of the U.S. Borrower in an aggregate amount not to
exceed $15,000,000;
(l) Investments by way of issuance of Capital Stock of the U.S.
Borrower made in connection with acquisitions of the Capital Stock or
substantially all of the Property of one or more Persons which are not an
Affiliate of the U.S. Borrower;
(m) Investments in promissory notes issued to the U.S. Borrower by
holders (other than JLL) of the common Capital Stock of the U.S. Borrower
in connection with such holders' making of additional investments in the
common Capital Stock of the U.S. Borrower in an amount sufficient to
maintain such holders' ownership percentage as of the Closing Date; and
(n) Investments by Subsidiaries of the U.S. Borrower which are
neither Domestic Subsidiaries nor the European Borrower in a Person which
is another such Subsidiary.
10.05. Restricted Junior Payments. Neither Borrower shall, nor shall
either Borrower permit any of its Subsidiaries to, declare or make any
Restricted Junior Payment, except:
(a) dividends or distributions to a Borrower or to Wholly-Owned
Subsidiaries;
(b) dividends on the Capital Stock of the U.S. Borrower declared
during any fiscal quarter of the U.S. Borrower; provided that (i) only one
such dividend may be declared during any such fiscal quarter, (ii) any
such dividend declared during any such fiscal quarter must be paid within
one (1) year after the date of declaration, (iii) the amount of such
dividend declared may not exceed the lesser of (A) the amount of the
retained earnings of the U.S. Borrower as of the last day of the
immediately preceding fiscal quarter and (B) thirty percent (30%) of the
Net Income for the immediately preceding fiscal quarter, (iv) no such
dividend may be declared or paid during any fiscal quarter unless (A) the
Fixed Charge Coverage Ratio for the twelve-month period ending as of the
last day of the immediately preceding fiscal quarter is no less than 1.30
to 1.00 and (B) the Agent has received the certified reports described in
Section 8.01(a) confirming that, after giving effect to such dividend, the
condition described in the foregoing clause (A) has been met;
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(c) redemption of the AMCY Preferred Stock provided that such
redemption occurs within sixty (60) days after the Effective Date;
(d) dividends on the AMCY Preferred Stock in the event the same is
not redeemed as permitted in Section 10.05(c);
(e) redemption of the Preferred Stock from proceeds of an initial
public offering of Capital Stock of the U.S. Borrower;
(f) scheduled interest payments in respect of the Subordinated Debt
when required to be made under the Subordinated Debt Documents but subject
to the subordination provisions relating thereto in the Subordinated Debt
Documents;
(g) payments in respect of Funded Debt which is permitted under
Section 10.01; and
(h) repurchase of Capital Stock of the U.S. Borrower (including
options, warrants or other rights to acquire such Capital Stock) from
departing or deceased directors, officers or employees of the U.S.
Borrower or its Subsidiaries pursuant to the terms of a Benefit Plan or
employee agreement; provided that the aggregate amount of all such
repurchases in any Fiscal Year shall not exceed $1,500,000; and provided
further that in the event such repurchases aggregate less than $1,500,000
in any Fiscal Year, such repurchases permitted in the next succeeding
Fiscal Year may aggregate $1,500,000 plus the amount of such deficiency
for the preceding Fiscal Year up to a maximum of $1,000,000
provided, however, the Restricted Junior Payments described in clauses (a)
through (e), (g) and (h) above shall not be permitted after the occurrence and
during the continuance of an Event of Default or a Potential Event of Default or
if an Event of Default or a Potential Event of Default would result therefrom.
10.06. Conduct of Business. Neither Borrower shall, nor shall either
Borrower permit any of its Subsidiaries or any Joint Venture to, engage in any
business other than (a) the businesses engaged in by the U.S. Borrower and its
Subsidiaries on the date hereof and (b) any business or activities which are
substantially similar, related or incidental thereto.
10.07. Transactions with Shareholders and Affiliates. Neither
Borrower shall, nor shall either Borrower permit any of its Subsidiaries to,
directly or indirectly enter into or permit to exist any transaction (including,
without limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any holder or holders of more than five percent
(5%) of any class of equity Securities of the U.S.
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Borrower, or with any other Affiliate of the U.S. Borrower which is not its
Subsidiary, on terms that are less favorable to such Borrower or such Subsidiary
of such Borrower, as applicable, than those that might be obtained in an arm's
length transaction at the time from Persons who are not such a holder or
Affiliate. Nothing contained in this Section 10.07 shall prohibit (a) any
transaction expressly permitted by Sections 10.01, 10.04 and 10.05; (b)
management fees paid by the European Borrower to the U.S. Borrower; (c) payment
of customary directors' fees and indemnities; or (d) performance of any
obligations arising under the Transaction Documents.
10.08. Restriction on Fundamental Changes. Neither Borrower shall,
nor shall either Borrower permit any of its Subsidiaries to, enter into any
merger or consolidation, or liquidate, wind-up or dissolve (or suffer any
liquidation or dissolution), or convey, lease, sell, transfer or otherwise
dispose of, in one transaction or series of transactions, all or substantially
all of such Person's business or Property, whether now or hereafter acquired.
10.09. Sales and Leasebacks. Neither Borrower shall, nor shall
either Borrower permit any of its Subsidiaries to, become liable, directly, by
assumption or by Accommodation Obligation, with respect to any lease, whether an
Operating Lease or a Capital Lease, of any Property (whether real or personal or
mixed) which it or one of its Subsidiaries (a) sold or transferred or is to sell
or transfer to any other Person, or (b) intends to use for substantially the
same purposes as any other Property which has been or is to be sold or
transferred by it or one of its Subsidiaries to any other Person, in either
instance, in connection with such lease.
10.10. Margin Regulations; Securities Laws. Neither
Borrower shall, nor shall either Borrower permit any of its
Subsidiaries to, use all or any portion of the proceeds of any
credit extended under this Agreement to purchase or carry Margin
Stock.
10.11. ERISA. The U.S. Borrower shall not:
(a) engage, or permit any of its Subsidiaries to engage, in any
prohibited transaction described in Section 406 of ERISA or 4975 of the
Internal Revenue Code for which a statutory or class exemption is not
available or a private exemption has not been previously obtained from the
DOL;
(b) permit to exist any accumulated funding deficiency (as defined
in Sections 302 of ERISA and 412 of the Internal Revenue Code), with
respect to any Benefit Plan, whether or not waived;
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(c) fail, or permit any ERISA Affiliate to fail, to pay timely
required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any ERISA Affiliate to terminate, any
Benefit Plan which would result in any liability of the U.S. Borrower or
any ERISA Affiliate under Title IV of ERISA;
(e) fail to make any contribution or payment to any Multiemployer
Plan which the U.S. Borrower or any ERISA Affiliate may be required to
make under any agreement relating to such Multiemployer Plan, or any law
pertaining thereto;
(f) fail, or permit any ERISA Affiliate to fail, to pay any required
installment or any other payment required under Section 412 of the
Internal Revenue Code on or before the due date for such installment or
other payment;
(g) amend, or permit any ERISA Affiliate to amend, a Benefit Plan
resulting in an increase in current liability for the plan year such that
the U.S. Borrower or any ERISA Affiliate is required to provide security
to such Plan under Section 401(a)(29) of the Internal Revenue Code;
(h) permit any unfunded liabilities with respect to any Foreign
Pension Plan; or
(i) fail, or permit any of its Subsidiaries or ERISA Affiliates to
fail, to pay any required contributions or payments to a Foreign Pension
Plan on or before the due date for such required installment or payment;
if such event results, either singly or in the aggregate, after taking into
account all other such events and any liabilities associated therewith, in an
aggregate liability in excess of $250,000.
10.12. Issuance of Equity Securities. Neither Borrower shall, nor
shall either Borrower permit any of its Subsidiaries to, issue any equity
Securities except equity Securities of the U.S. Borrower (a) pursuant to
Permitted Equity Securities Options, (b) which are common stock and issued under
an initial public offering made at a time when neither an Event of Default nor a
Potential Event of Default exists and continues unwaived, (c) which are
preferred stock, on terms and conditions substantially similar to, and in no
event less favorable to the U.S. Borrower than, those of the 1994 Preferred
Stock, to members of the management of the U.S. Borrower and its Subsidiaries,
(d)
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which are common stock, on terms and conditions substantially similar to, and in
no event less favorable to the U.S. Borrower than, those of the New FCC Common
Stock, to members of the management of the U.S. Borrower and its Subsidiaries,
(e) which are common stock, on terms and conditions substantially similar to
those of the common stock issued in connection with the Equity Infusion to
holders (other than JLL) of common stock of the U.S. Borrower on the Closing
Date and (f) issued in connection with Investments permitted under Section
10.04(l).
10.13. Organizational Documents; Subordinated Debt Documents.
Neither Borrower shall, nor shall either Borrower permit any of its Subsidiaries
to, amend, modify or otherwise change any of the terms or provisions in any of
(a) its respective Organizational Documents as in effect on the Closing Date
(or, in the case of any Subsidiary of the U.S. Borrower which is acquired or
formed after the Effective Date, as in effect on the date of such acquisition or
formation), except amendments to effect a change of name of such Person, written
notice of which change of name the U.S. Borrower shall have provided the Agent
within thirty (30) days prior to the effective date of any such name change or
(b) the Subordinated Debt Documents as in effect on the Effective Date.
10.14. Bank Accounts. The Borrowers shall not and shall not permit
any of their respective Subsidiaries to establish or maintain any deposit
account into which collections of Receivables and proceeds of other Collateral
are deposited other than those identified as existing on the Closing Date and
disclosed on Schedule 10.14 attached hereto and made a part hereof, unless the
U.S. Borrower gives the Agent prior written notice of such establishment and
delivers to the Agent, if the Agent so requests, an executed Collection Account
Agreement concurrently with such deposit account being established.
10.15. Fiscal Year. The U.S. Borrower shall not and shall not permit
any of its Subsidiaries to change its Fiscal Year for accounting or tax purposes
from a period consisting of the 12-month period ending on December 31 of each
calendar year.
10.17. Negative Pledge. Neither Borrower shall, nor shall either
Borrower permit any of its Subsidiaries to, covenant with any third party to
keep any of its Property (other than Property subject to Capital Leases or
purchase money Indebtedness permitted pursuant to the terms of this Agreement)
free and clear of Liens in favor of, or for the benefit of, the Holders, other
than pursuant to customary non-assignment provisions in Contractual Obligations
to the extent such provisions restrict the transfer or assignment of a lease or
a license or a purchase order issued by such Person relating to Inventory or
Equipment which is either (a) not material to the Agent's completion of work in
process or the Agent's recovery on the Collateral or (b) not readily obtainable
on terms and conditions no less favorable
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to the Agent than pertain to the terms and conditions available to the issuer of
such purchase order.
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ARTICLE XI
FINANCIAL COVENANTS
The U.S. Borrower covenants and agrees that so long as any
Commitments are outstanding and thereafter until payment in full of all of the
Obligations (other than indemnities not yet due):
11.01. Leverage Ratio. The U.S. Borrower shall
maintain a Leverage Ratio, as determined as of the last day of
each fiscal quarter of the U.S. Borrower set forth below for the
four-fiscal-quarter period then ending, of not more than the
ratio set forth below opposite such determination date:
Fiscal Quarter Ending Ratio
--------------------- -----
December 31, 1996 5.25 to 1.00
March 31, 1997 5.25 to 1.00
June 30, 1997 5.15 to 1.00
September 30, 1997 5.15 to 1.00
December 31, 1997 5.00 to 1.00
March 31, 1998 5.00 to 1.00
June 30, 1998 5.00 to 1.00
September 30, 1998 5.00 to 1.00
December 31, 1998 4.75 to 1.00
March 31, 1999 4.75 to 1.00
June 30, 1999 4.50 to 1.00
September 30, 1999 4.50 to 1.00
December 31, 1999 4.50 to 1.00
March 31, 2000 4.25 to 1.00
June 30, 2000 4.00 to 1.00
September 30, 2000 4.00 to 1.00
December 31, 2000 4.00 to 1.00
March 31, 2001 4.00 to 1.00
June 30, 2001 4.00 to 1.00
September 30, 2001 4.00 to 1.00
11.02. Interest Coverage Ratio. The U.S. Borrower
shall maintain an Interest Coverage Ratio as determined as of the
last day of each fiscal quarter of the U.S. Borrower set forth
below for the four-fiscal-quarter period then ending of at least
the ratio set forth below opposite such determination date:
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Fiscal Quarter Ending Ratio
--------------------- -----
December 31, 1996 1.70 to 1.00
March 31, 1997 1.70 to 1.00
June 30, 1997 1.70 to 1.00
September 30, 1997 1.70 to 1.00
December 31, 1997 1.75 to 1.00
March 31, 1998 1.75 to 1.00
June 30, 1998 1.75 to 1.00
September 30, 1998 1.80 to 1.00
December 31, 1998 1.80 to 1.00
March 31, 1999 1.80 to 1.00
June 30, 1999 1.85 to 1.00
September 30, 1999 1.90 to 1.00
December 31, 1999 2.00 to 1.00
and each fiscal quarter
thereafter through
September 30, 2001
11.03. Fixed Charge Coverage Ratio. The U.S. Borrower
shall maintain a Fixed Charge Coverage Ratio as determined as of
the last day of each fiscal quarter of the U.S. Borrower set
forth below for the four-fiscal-quarter period then ending of at
least the ratio set forth below opposite such determination date:
Fiscal Quarter Ending Ratio
--------------------- -----
December 31, 1996 1.00 to 1.00
and each fiscal quarter
thereafter through
September 30, 1999
December 31, 1999 1.10 to 1.00
and each fiscal quarter
thereafter through
June 30, 2000
September 30, 2000 1.15 to 1.00
and each fiscal quarter
thereafter through
September 30, 2001
11.04. Capital Expenditures. Capital Expenditures of the U.S.
Borrower and its Subsidiaries shall not exceed $20,000,000 during any Fiscal
Year; provided, however, that to the extent the U.S. Borrower and its
Subsidiaries have not made Capital Expenditures in the amount permitted above
for any given Fiscal Year, Capital Expenditures in an amount equal to fifty
percent (50%) of the amount permitted but not expended in such Fiscal Year may
be made in the Fiscal Year next succeeding such
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Fiscal Year in addition to the amount otherwise permitted for such succeeding
Fiscal Year.
11.05. Financial Covenant Calculations. Notwithstanding any
requirements under GAAP, calculations made (a) with respect to (i) the
definitions of "EBITDA", "Fixed Charge Coverage Ratio", "Interest Coverage
Ratio", and "Leverage Ratio" and (ii) determination of compliance with the
financial covenants set forth in this Article XI, each shall be made without
regard to the requirements of Accounting Principles Board Opinion 16 or changes
in requirements under GAAP which become effective after the Closing Date, (b)
with respect to any of the covenants set forth in Sections 11.01 through 11.04
shall be made without regard to the results of operations or Capital
Expenditures of Indiamalt, and (c) with respect to the definition of "EBITDA"
for any period shall be made without regard to clause (ix) thereof unless cash
restructuring charges and costs for the four-fiscal-quarter period then ending
exceed $5,000,000, whereupon the amount included for purposes of clause (ix)
shall equal the amount by which $5,000,000 is exceeded.
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ARTICLE XII
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
12.01. Events of Default. Each of the following
occurrences shall constitute an Event of Default under this
Agreement:
(a) Failure to Make Payments When Due. Either Borrower shall fail to
pay (i) any of the Obligations (other than interest) when due or (ii) any of the
Obligations constituting interest within two (2) Business Days after the date
such Obligations are due.
(b) Breach of Certain Covenants. Either Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on such Person under Sections 8.08, 9.01, 9.02, 9.03, 9.04, and 9.06, Article X
or Article XI.
(c) Breach of Representation or Warranty. Any representation or
warranty made or deemed made by a Borrower to the Agent, any Lender or any
Issuing Bank herein or by a Borrower or any of its Subsidiaries in any of the
other Loan Documents or in any written statement or certificate at any time
given by any such Person pursuant to any of the Loan Documents shall be false or
misleading in any material respect on the date as of which made (or deemed
made).
(d) Other Defaults. Either Borrower shall default in the performance
of or compliance with any term contained in this Agreement (other than as
identified in clause (a), (b) or (c) of this Section 12.01) or any default or
event of default shall occur under any of the other Loan Documents, and such
default or event of default shall continue for fifteen (15) days after the
occurrence thereof.
(e) Default as to Other Indebtedness; Operating Leases. Either
Borrower or any Subsidiary of either Borrower shall fail to make any payment
when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) with respect to the Subordinated Debt or any other
Indebtedness (other than an Obligation) in excess of $3,000,000; or any breach,
default or event of default shall occur, or any other condition shall exist
under any instrument, agreement or indenture pertaining to any such
Indebtedness, if the effect thereof is to cause an acceleration, mandatory
redemption or other required repurchase of such Indebtedness, or permit the
holder(s) of such Indebtedness to accelerate the maturity of any such
Indebtedness or require a redemption or other repurchase of such Indebtedness;
or any such Indebtedness shall be otherwise declared to be due and payable (by
acceleration or otherwise) or required to be prepaid, redeemed or otherwise
repurchased by either Borrower or any Subsidiary of either Borrower (other than
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by a regularly scheduled required prepayment) prior to the stated maturity
thereof.
(f) Involuntary Bankruptcy; Appointment of Receiver, Etc. (i) An
involuntary case shall be commenced against either Borrower or any Subsidiary of
either Borrower and the petition shall not be dismissed, stayed, bonded or
discharged within thirty (30) days after commencement of the case; or a court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of such Borrower or Subsidiary in an involuntary case, under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or any other similar relief shall be granted under any applicable
federal, state, local or foreign law.
(ii) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over either Borrower or any
Subsidiary of either Borrower or over all or a substantial part of the Property
of such Borrower or Subsidiary shall be entered; or an interim receiver, trustee
or other custodian of either Borrower or any Subsidiary of either Borrower or of
all or a substantial part of the Property of such Borrower or Subsidiary shall
be appointed or a warrant of attachment, execution or similar process against
any substantial part of the Property of such Borrower or Subsidiary shall be
issued and any such event shall not be stayed, dismissed, bonded or discharged
within thirty (30) days after entry, appointment or issuance.
(g) Voluntary Bankruptcy; Appointment of Receiver, Etc. Either
Borrower or any Subsidiary of either Borrower shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its Property; or either Borrower or any Subsidiary of either Borrower
shall make any assignment for the benefit of creditors or shall be unable or
fail, or admit in writing its inability, to pay its debts as such debts become
due; or the board of directors (or equivalent) of either Borrower or any
Subsidiary of either Borrower (or any committee thereof) adopts any resolution
or otherwise authorizes any action to approve any of the foregoing.
(h) Dissolution. Any order, judgment or decree shall be entered
against either Borrower or any Subsidiary of either Borrower decreeing its
involuntary dissolution or split up and such order shall remain undischarged and
unstayed for a period in excess of thirty (30) days; or either Borrower or any
Subsidiary of either Borrower shall otherwise dissolve, be dissolved, or
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cease to exist except as specifically permitted by this Agreement.
(i) Loan Documents; Failure of Security. At any time, for any
reason, (i) any Loan Document ceases to be in full force and effect or either
Borrower or any Subsidiary of either Borrower party thereto seeks to repudiate
its obligations thereunder and the Liens intended to be created thereby are, or
either Borrower or any such Subsidiary seeks to render such Liens, invalid or
unperfected, or (ii) Liens in favor of the Agent for the benefit of the Holders
contemplated by the Loan Documents shall, at any time, for any reason, be
invalidated or otherwise cease to be in full force and effect, or such Liens
shall be subordinated or shall not have the priority contemplated by this
Agreement or the other Loan Documents.
(j) Judgments and Attachments. (i) Any money judgment (other than a
money judgment covered by insurance as to which the insurance company has
acknowledged coverage), writ or warrant of attachment, or similar process
against either Borrower or any Subsidiary of either Borrower or any of their
respective assets involving in any case an amount in excess of $250,000 is
entered and shall remain undischarged, unvacated, unbonded or unstayed for a
period of thirty (30) days or in any event later than five (5) days prior to the
date of any proposed sale thereunder; provided, however, if any such judgment,
writ or warrant of attachment or similar process is in excess of $1,000,000, the
entry thereof shall immediately constitute an Event of Default hereunder.
(ii) A federal tax Lien is filed against the U.S. Borrower or any of
its Property which is not discharged of record, bonded over or otherwise secured
to the satisfaction of the Agent within forty-five (45) days after the filing
thereof or the date upon which the Agent receives actual knowledge of the filing
thereof for an amount which, either separately or when aggregated with the
amount of any judgments described in clause (i) above and/or the amount of any
Environmental Lien Claims described in clause (iii) below, equals or exceeds
$1,000,000.
(iii) An Environmental Lien is filed (and is not discharged of
record, bonded over or otherwise secured to the satisfaction of the Agent within
forty-five (45) days after the filing thereof) against any Property of the U.S.
Borrower or its Subsidiaries with respect to Claims in an amount which, when
aggregated with the amount of judgments set forth in clause (i) above and/or the
federal tax Lien Claims described in clause (ii) above, equals or exceeds
$1,000,000.
(k) Termination Event. Any Termination Event occurs which could
reasonably be expected to subject either the U.S. Borrower or any ERISA
Affiliate to liability in excess of $250,000.
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(l) Waiver Application. The plan administrator of any Benefit Plan
applies under Section 412(d) of the Code for a waiver of the minimum funding
standards of Section 412(a) of the Internal Revenue Code and the Agent believes
that the substantial business hardship upon which the application for the waiver
is based could subject either the U.S. Borrower or any ERISA Affiliate to an
obligation to pay a material amount of money.
(m) Change in Control. A Change of Control shall occur.
(n) Material Adverse Effect. An event shall occur which results in a
Material Adverse Effect.
An Event of Default shall be deemed "continuing" until cured or
waived in writing in accordance with Section 15.07.
12.02. Rights and Remedies.
(a) Acceleration and Termination. Upon the occurrence of any Event
of Default described in Section 12.01(f) or 12.01(g) with respect to a Borrower
or a Guarantor, the Lenders' respective obligations to make Revolving Loans
under the Revolving Credit Commitments or issue or participate in additional
Letters of Credit shall automatically and immediately terminate and the unpaid
principal amount of, and any and all accrued interest on, the Obligations and
all accrued fees shall automatically become immediately due and payable, without
presentment, demand, or protest or other requirements of any kind (including,
without limitation, valuation and appraisement, diligence, presentment, notice
of intent to demand or accelerate and of acceleration), all of which are hereby
expressly waived by the Borrowers; and upon the occurrence and during the
continuance of any other Event of Default, the Agent shall at the request, or
may with the consent, of the Requisite Lenders, by written notice to the U.S.
Borrower, (i) declare that the Lenders' respective obligations to make Revolving
Loans under the Revolving Credit Commitments are terminated, whereupon such
obligation of each Lender to make any Revolving Loan hereunder and of each
Lender or Issuing Bank to issue or participate in any Letter of Credit not then
issued shall immediately terminate, and/or (ii) declare the unpaid principal
amount of and any and all accrued and unpaid interest on the Obligations to be,
and the same shall thereupon be, immediately due and payable, without
presentment, demand, or protest or other requirements of any kind (including,
without limitation, valuation and appraisement, diligence, presentment, notice
of intent to demand or accelerate and of acceleration), all of which are hereby
expressly waived by the Borrowers.
(b) Deposit for Letters of Credit. In addition, after the occurrence
and during the continuance of an Event of Default described in Section 12.01(a)
or the termination of the Commitments and the acceleration of the Obligations as
provided in Section 12.02(a), each Borrower shall, promptly upon demand by
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the Agent, deliver to the Agent Cash Collateral in such form as requested by the
Agent for deposit in the Cash Collateral Account, together with such
endorsements, and execution and delivery of such documents and instruments, as
the Agent may request in order to perfect or protect the Agent's Lien for the
benefit of the Holders with respect thereto, in an aggregate principal amount
equal to the then outstanding Letter of Credit Obligations of such Borrower.
(c) Rescission. If at any time after termination of the Lenders'
obligations to make Revolving Loans under the Revolving Credit Commitments and
issue or participate in additional Letters of Credit and/or acceleration of the
maturity of the Loans, the respective Borrowers shall pay all arrears of
interest and all payments on account of principal of the Loans outstanding to
them, respectively, and their respective Reimbursement Obligations which shall
have become due otherwise than by acceleration (with interest on principal and,
to the extent permitted by law, on overdue interest, at the rates specified in
this Agreement) and all Events of Default and Potential Events of Default (other
than nonpayment of principal of and accrued interest on the Loans due and
payable solely by virtue of acceleration) shall be remedied or waived pursuant
to Section 15.07, then upon the written consent of the Requisite Lenders and
written notice to the U.S. Borrower, the termination of Lenders' respective
obligations to make Revolving Loans under the Revolving Credit Commitments and
the respective Lenders' and Issuing Banks' obligations to participate in or
issue Letters of Credit and/or the aforesaid acceleration and its consequences
may be rescinded and annulled; but such action shall not affect any subsequent
Event of Default or Potential Event of Default or impair any right or remedy
consequent thereon. The provisions of the preceding sentence are intended merely
to bind the Lenders and the Issuing Banks to a decision which may be made at the
election of the Requisite Lenders; they are not intended to benefit the
Borrowers and do not give either Borrower the right to require the Lenders to
rescind or annul any termination of the aforesaid obligations of the Lenders or
Issuing Banks or any acceleration hereunder, even if the conditions set forth
herein are met.
(d) Enforcement. Each Borrower acknowledges that in the event either
Borrower or any Subsidiary of either Borrower fails to perform, observe or
discharge any of their respective obligations or liabilities under this
Agreement or any other Loan Document, any remedy of law may prove to be
inadequate relief to the Agent, the Issuing Banks and the Lenders; therefore,
each Borrower agrees that the Agent, the Issuing Banks and the Lenders shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
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ARTICLE XIII
THE AGENT
13.01. Appointment. (a) Each Lender and each Issuing Bank hereby
designates and appoints Citicorp as the Agent of such Lender or such Issuing
Bank under this Agreement, and each Lender and each Issuing Bank hereby
irrevocably authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and the other Loan Documents and to exercise such
powers as are set forth herein or therein together with such other powers as are
reasonably incidental thereto. The Agent agrees to act as such on the express
conditions contained in this Article XIII.
(b) The provisions of this Article XIII are solely for the benefit
of the Agent, the Lenders and the Issuing Banks, and neither any Borrower nor
any Subsidiary of either Borrower shall have any rights to rely on or enforce
any of the provisions hereof (other than as expressly set forth in Section
13.07). In performing its functions and duties under this Agreement, the Agent
shall act solely as agent of the Lenders and the Issuing Banks and does not
assume and shall not be deemed to have assumed any obligation or relationship of
agency, trustee or fiduciary with or for either Borrower or any Affiliate of
either Borrower. The Agent may perform any of its duties hereunder, or under the
other Loan Documents, by or through its agents or employees.
13.02. Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in the
other Loan Documents. The duties of the Agent shall be mechanical and
administrative in nature. The Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Holder. Nothing in this Agreement or
any of the other Loan Documents, expressed or implied, is intended to or shall
be construed to impose upon the Agent any obligations in respect of this
Agreement or any of the other Loan Documents except as expressly set forth
herein or therein. Each Lender and each Issuing Bank shall make its own
independent investigation of the financial condition and affairs of each
Borrower and its Affiliates in connection with the making and the continuance of
the Loans hereunder and with the issuance of the Letters of Credit and shall
make its own appraisal of the creditworthiness of each Borrower and Guarantor
initially and on a continuing basis, and the Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to provide any Holder
with any credit or other information with respect thereto (except for reports
required to be delivered by the Agent under the terms of this Agreement). If the
Agent seeks the consent or approval of the Lenders to the taking or refraining
from taking of any action hereunder, the Agent shall send notice thereof to each
Lender. The Agent shall promptly notify each Lender at any time that the Lenders
so required hereunder have instructed the Agent to act or refrain from acting
pursuant hereto. As to any matters not expressly provided for by
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this Agreement (including, without limitation, enforcement or collection of the
Notes or any amount payable under any provision of Article IV when due) or the
other Loan Documents, the Agent shall not be required to exercise any discretion
or take any action. Notwithstanding the foregoing, the Agent shall be required
to act or refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Requisite Lenders (unless
the instructions or consent of all of the Lenders is required hereunder or
thereunder) and such instructions shall be binding upon all Lenders, Issuing
Banks and Holders; provided, however, the Agent shall not be required to take
any action which (i) the Agent reasonably believes will expose it to personal
liability unless the Agent receives an indemnification satisfactory to it from
the Lenders with respect to such action or (ii) is contrary to this Agreement,
the other Loan Documents or applicable law.
13.03. Rights, Exculpation, Etc. (a) Liabilities; Responsibilities.
None of the Agent, any Affiliate of the Agent, or any of their respective
officers, directors, employees or agents shall be liable to any Holder for any
action taken or omitted by them hereunder or under any of the other Transaction
Documents, or in connection therewith, except that no Person shall be relieved
of any liability for gross negligence or willful misconduct. The Agent shall not
be liable for any apportionment or distribution of payments made by it in good
faith pursuant to Section 4.02(b), and if any such apportionment or distribution
is subsequently determined to have been made in error the sole recourse of any
Holder to whom payment was due, but not made, shall be to recover from other
Holders any payment in excess of the amount to which they are determined to have
been entitled. The Agent shall not be responsible to any Holder for any
recitals, statements, representations or warranties herein or for the execution,
effectiveness, genuineness, validity, legality, enforceability, collectibility,
or sufficiency of this Agreement or any of the other Transaction Documents or
the transactions contemplated thereby, or for the financial condition of the
Borrower or any of its Affiliates or any Guarantor. The Agent shall not be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement, any of the other
Loan Documents or the Subordinated Debt Documents, or the financial condition of
the Borrower or any of its Affiliates or any Guarantor, or the existence or
possible existence of any Potential Event of Default or Event of Default.
(b) Right to Request Instructions. The Agent may at any time request
instructions from the Lenders with respect to any actions or approvals which by
the terms of any of the Loan Documents the Agent is permitted or required to
take or to grant, and the Agent shall be absolutely entitled to refrain from
taking any action or to withhold any approval and shall not be under any
liability whatsoever to any Person for refraining from any action or withholding
any approval under any of the Loan Documents until
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it shall have received such instructions from those Lenders from whom the Agent
is required to obtain such instructions for the pertinent matter in accordance
with the Loan Documents. Without limiting the generality of the foregoing, no
Holder shall have any right of action whatsoever against the Agent as a result
of the Agent acting or refraining from acting under the Loan Documents in
accordance with the instructions of the Requisite Lenders or, where required by
the express terms of this Agreement, a greater proportion of the Lenders.
13.04. Reliance. The Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the other Loan Documents and its
duties hereunder or thereunder, upon advice of legal counsel (including counsel
for the Borrowers), independent public accountants and other experts selected by
it.
13.05. Indemnification. To the extent that the Agent is required to
be reimbursed and indemnified by the Borrowers but is not reimbursed and
indemnified by the Borrowers, the Lenders will reimburse and indemnify the Agent
for 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 it in any way relating to or arising out of the Loan Documents or any
action taken or omitted by the Agent under the Loan Documents, in proportion to
each Lender's Pro Rata Share. The obligations of the Lenders under this Section
13.05 shall survive the payment in full of the Loans, the Reimbursement
Obligations and all other Obligations and the termination of this Agreement.
13.06. Citicorp Individually. With respect to its Pro Rata Share of
the Commitments hereunder, if any, and the Loans made by it, if any, Citicorp
shall have and may exercise the same rights and powers hereunder and is subject
to the same obligations and liabilities as and to the extent set forth herein
for any other Lender. The terms "Lenders" or "Requisite Lenders" or any similar
terms shall, unless the context clearly otherwise indicates, include Citicorp in
its individual capacity as a Lender or one of the Requisite Lenders. Citicorp
and its Affiliates may accept deposits from, lend money to, and generally engage
in any kind of banking, trust or other business with the Borrowers or any of
their Affiliates as if it were not acting as the Agent pursuant hereto.
13.07. Successor Agents. (a) Resignation. The Agent
may resign from the performance of all its functions and duties
hereunder at any time by giving at least thirty (30) Business
Days' prior written notice to the U.S. Borrower and the Lenders.
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Such resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to this Section 13.07.
(b) Appointment by Requisite Lenders. Upon any such notice of
resignation, the Requisite Lenders shall have the right to appoint a successor
Agent selected from among the Lenders which appointment shall be subject to the
prior written approval of the U.S. Borrower (which may not be unreasonably
withheld, and shall not be required upon the occurrence and during the
continuance of an Event of Default).
(c) Appointment by Retiring Agent. If a successor Agent shall not
have been appointed within the thirty (30) Business Day period provided in
clause (a) of this Section 13.07, the retiring Agent, with the consent of the
U.S. Borrower (which may not be unreasonably withheld, and shall not be required
upon the occurrence and during the continuance of an Event of Default), shall
then appoint a successor Agent who shall serve as Agent until such time, if any,
as the Requisite Lenders appoint a successor Agent as provided above.
(d) Rights of the Successor and Retiring Agents. 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
XIII shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was the Agent under this Agreement.
13.08. Relations Among Lenders. Each Lender and each Issuing Bank
agrees (except as provided in Section 15.05) that it will not take any legal
action, or institute any actions or proceedings, against either Borrower or any
Guarantor or other obligor hereunder or with respect to any Collateral, without
the prior written consent of the Requisite Lenders. Without limiting the
generality of the foregoing, no Lender may accelerate or otherwise enforce its
portion of the Obligations, or unilaterally terminate its Commitments except in
accordance with Section 12.02(a).
13.09. Concerning the Collateral and the Loan Documents. (a)
Protective Advances. The Agent may from time to time, before or after the
occurrence of an Event of Default, make such disbursements and advances pursuant
to the Loan Documents in an amount not to exceed the lesser of (i) the Revolving
Credit Availability (calculated in Dollars) at such time and (ii) $5,000,000,
which the Agent, in its sole discretion, deems necessary or desirable to
preserve or protect the Collateral or any portion thereof or to enhance the
likelihood or maximize the amount of repayment of the Loans and other
Obligations ("Protective Advances"). The Agent shall notify the U.S.
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Borrower and each Lender in writing of each such Protective Advance, which
notice shall include a description of the purpose of such Protective Advance.
The U.S. Borrower agrees to pay the Agent, upon demand, the principal amount of
all outstanding Protective Advances, together with interest thereon at the rate
from time to time applicable to Base Rate Loans from the date of such Protective
Advance until the outstanding principal balance thereof is paid in full. If the
U.S. Borrower fails to make payment in respect of any Protective Advance within
one (1) Business Day after the date the U.S. Borrower receives written demand
therefor from the Agent, the Agent shall promptly notify each Lender and each
Lender agrees that it shall thereupon make available to the Agent, in Dollars in
immediately available funds, an amount equal to such Lender's Pro Rata Share of
such Protective Advance. If such funds are not made available to the Agent by
such Lender within one (1) Business Day after the Agent's demand therefor, the
Agent will be entitled to recover any such amount from such Lender together with
interest thereon at the Federal Funds Rate for each day during the period
commencing on the date of such demand and ending on the date such amount is
received. The failure of any Lender to make available to the Agent its Pro Rata
Share of any such Protective Advance shall neither relieve any other Lender of
its obligation hereunder to make available to the Agent such other Lender's Pro
Rata Share of such Protective Advance on the date such payment is to be made nor
increase the obligation of any other Lender to make such payment to the Agent.
All outstanding principal of, and interest on, Protective Advances shall
constitute Obligations bearing interest at the rate applicable to Base Rate
Loans and secured by the Collateral until paid in full by the U.S.
Borrower.
(b) Authority. Each Lender and each Issuing Bank authorizes and
directs the Agent to enter into the Loan Documents relating to the Collateral
for the benefit of the Lenders and the Issuing Banks. Each Lender and each
Issuing Bank agrees that any action taken by the Agent or the Requisite Lenders
(or, where required by the express terms of this Agreement, a greater proportion
of the Lenders) in accordance with the provisions of this Agreement or the other
Loan Documents, and the exercise by the Agent or the Requisite Lenders (or,
where so required, such greater proportion) of the powers set forth herein or
therein, together with such other powers as are reasonably incidental thereto,
shall be authorized and binding upon all of the Lenders and Issuing Banks.
Without limiting the generality of the foregoing, the Agent shall have the sole
and exclusive right and authority to (i) act as the disbursing and collecting
agent for the Lenders and the Issuing Banks with respect to all payments and
collections arising in connection with this Agreement and the other Loan
Documents relating to the Collateral; (ii) execute and deliver each Loan
Document relating to the Collateral and accept delivery of each such agreement
delivered by a Borrower, any Subsidiary of a Borrower or Guarantor a party
thereto; (iii) act as collateral agent for the Lenders and the Issuing Banks for
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purposes of the perfection of all security interests and Liens created by such
agreements and all other purposes stated therein; provided, however, the Agent
hereby appoints, authorizes and directs the Lenders and the Issuing Banks to act
as collateral sub-agent for the Agent, the Lenders and the Issuing Banks for
purposes of the perfection of all security interests and Liens with respect to
the Property at any time in the possession of such Lender or such Issuing Bank,
including, without limitation, deposit accounts maintained with, and cash and
Cash Equivalents held by, such Lender or such Issuing Bank; (iv) manage,
supervise and otherwise deal with the Collateral; (v) take such action as is
necessary or desirable to maintain the perfection and priority of the security
interests and liens created or purported to be created by the Loan Documents;
and (vi) except as may be otherwise specifically restricted by the terms of this
Agreement or any other Loan Document, exercise all remedies given to the Agent,
the Lenders or the Issuing Banks with respect to the Collateral under the Loan
Documents relating thereto, applicable law or otherwise.
(c) Release of Collateral; Guarantors. (i) Each Lender and each
Issuing Bank hereby directs, in accordance with the terms of this Agreement, the
Agent to release any Lien held by the Agent for the benefit of the Holders:
(A) against all of the Collateral, upon final and indefeasible
payment in full of the Obligations and termination of this Agreement;
(B) against any part of the Collateral sold or disposed of by a
Borrower or any Guarantor, if such sale or disposition is permitted by
Section 10.02 or is otherwise consented to by the Requisite Lenders, as
certified to the Agent by the U.S. Borrower in an Officer's Certificate;
and/or
(C) against any part of the Collateral consisting of a promissory
note, upon final and indefeasible payment in full of the Indebtedness
evidenced thereby
and to release any Guarantor from its obligations under the Loan Documents
executed and delivered by it in the event the Capital Stock of such Guarantor or
of the Subsidiary of the U.S. Borrower which owns all of the Capital Stock of
such Guarantor is transferred, with the prior written consent of the Requisite
Lenders, to a Person which is not the U.S. Borrower or a Subsidiary thereof.
(ii) Each Lender and each Issuing Bank hereby directs the Agent to
execute and deliver or file such termination and partial release statements and
do such other things as are necessary to release Liens to be released pursuant
to this Section 13.09(c) promptly upon the effectiveness of any such release.
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ARTICLE XIV
YIELD PROTECTION
14.01. Taxes. (a) Payment of Taxes. Any and all payments by a
Borrower hereunder or under any Note or other document evidencing any
Obligations shall be made, in accordance with Section 4.02, free and clear of
and without reduction for any and all present or future taxes, levies, imposts,
deductions, charges, withholdings, and all other liabilities with respect
thereto excluding, in the case of each Lender, each Issuing Bank and the Agent,
taxes imposed on or measured by net income or overall gross receipts, capital
and franchise taxes and branch profits taxes imposed on it by (i) the United
States or any political subdivision thereof, (ii) the Governmental Authority of
the jurisdiction in which such Lender's Applicable Lending Office is located or
any political subdivision thereof or (iii) the Governmental Authority of the
jurisdiction in which such Person is organized, managed and controlled, or such
Person has an office or other fixed place of business or is otherwise engaged in
business, or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges and withholdings being hereinafter referred
to as "Taxes" and all such excluded taxes shall be referred to as "Excluded
Taxes"). If a Borrower shall be required by law to withhold or deduct any Taxes
from or in respect of any sum payable hereunder or under any such Note or
document to any Lender, any Issuing Bank or the Agent, (x) the sum payable to
such Lender, such Issuing Bank, or the Agent shall be increased as may be
necessary so that after making all required withholding or deductions (including
withholding or deductions applicable to additional sums payable under this
Section 14.01) such Lender, such Issuing Bank or the Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
withholding or deductions been made, (y) such Borrower shall make such
withholding or deductions, and (z) such Borrower shall pay the full amount
withheld or deducted to the relevant taxation authority or other authority in
accordance with applicable law. In addition, each Borrower agrees to pay any
present and future stamp and documentary taxes and any other excise and property
taxes, charges and 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 ("Other Taxes").
(b) Indemnification. The Borrowers will indemnify each Lender, each
Issuing Bank and the Agent against, and reimburse each on demand for, the full
amount of all Taxes and Other Taxes (including, without limitation, any Taxes
imposed by any Governmental Authority on amounts payable under this Section
14.01 and any additional income or franchise taxes resulting therefrom) incurred
or paid in good faith by such Lender, such Issuing Bank or the Agent (as the
case may be) or any of their
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respective Affiliates and any liability (including penalties, interest, and
reasonable out-of-pocket expenses paid to third parties) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were lawfully
payable; provided, however, that the Borrowers shall not indemnify any Lender,
any Issuing Bank or the Agent under this Section 14.01 for any liability arising
as a result of such Lender's, such Issuing Bank's or the Agent's willful
misconduct or gross negligence. Demand under this Section 14.01(b) shall be
deemed made on the date of delivery by such Lender, Issuing Bank, or Agent (as
the case may be) to the U.S. Borrower of a certificate as to any Taxes or Other
Taxes (together with amounts thereof) payable to any Person under this Section
14.01, which certificate shall, absent manifest error, be final, conclusive and
binding upon all parties hereto. Each Lender and each Issuing Bank agrees,
within a reasonable time after receiving a written request from the U.S.
Borrower, to provide the U.S. Borrower and the Agent with such certificates as
are reasonably required, and take such other actions as are reasonably necessary
to claim such exemptions as such Lender or such Issuing Bank may be entitled to
claim in respect of all or a portion of any Taxes or Other Taxes which are
otherwise required to be paid or deducted or withheld pursuant to this Section
14.01 in respect of any payments under this Agreement or under the Notes.
(c) Receipts. Within thirty (30) days after the date of any payment
of Taxes by the Borrowers, the U.S. Borrower will furnish to the Agent, at its
address referred to in Section 15.08, the original or a certified copy of a
receipt evidencing payment thereof.
(d) Foreign Bank Certifications. (i) Each Lender or Issuing Bank
that is not created or organized under the laws of the United States or a
political subdivision thereof shall deliver to the U.S. Borrower and the Agent
on the Closing Date or the date on which such Lender or Issuing Bank becomes a
Lender pursuant to Section 15.01 or an Issuing Bank a true and accurate
certificate executed in duplicate by a duly authorized officer of such Lender or
Issuing Bank to the effect that such Lender or Issuing Bank is eligible to
receive payments hereunder and under the Notes without deduction or withholding
of United States federal income tax (I) under the provisions of an applicable
tax treaty concluded by the United States (in which case the certificate shall
be accompanied by two duly completed copies of IRS Form 1001 (or any successor
or substitute form or forms)), (II) because such payments are effectively
connected with the conduct of a U.S. trade or business of such Lender or Issuing
Bank (in which case the certificate shall be accompanied by two duly completed
copies of IRS Form 4224 (or any successor or substitute form or forms)), or
(III) under Section 871(h) or Section 881(c) of the Internal Revenue Code with
respect to "portfolio interest" payments (in which case, the certificate shall
be accompanied by two accurate and complete original signed copies of IRS Form
W-8 (or any successor or substitute form or
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forms) and a certificate representing that such Lender or Issuing Bank is not a
bank for purposes of Section 881(c) of the Internal Revenue Code, is not a 10
percent shareholder of either of the Borrowers (within the meaning of Section
871(h)(3)(B) of the Internal Revenue Code) and is not a "controlled foreigh
corporation" related to either of the Borrowers (within the meaning of Section
864(d)(4) of the Internal Revenue Code).
(ii) Each Lender and Issuing Bank referred to in Section 14.01(d)(i)
further agrees to deliver to the U.S. Borrower and the Agent from time to time,
a true and accurate certificate executed in duplicate by a duly authorized
officer of such Lender or Issuing Bank before or promptly upon the occurrence of
any event requiring a change in the most recent certificate previously delivered
by it to the U.S. Borrower and the Agent pursuant to this Section 14.01(d). Each
certificate required to be delivered pursuant to this Section 14.01(d)(ii) shall
certify as to one of the following:
(A) that such Lender or Issuing Bank can continue to receive
payments hereunder and under the Notes without deduction or withholding of
United States federal income tax;
(B) that such Lender or Issuing Bank cannot continue to receive
payments hereunder or under some or all of the Notes without deduction or
withholding of United States federal income tax as specified therein but
does not require additional payments pursuant to Section 14.01(a) because
it is entitled to recover the full amount of any such deduction or
withholding from a source other than the applicable Borrower; or
(C) that such Lender or Issuing Bank is no longer capable of
receiving payments hereunder or under some or all of the Notes without
deduction or withholding of United States federal income tax as specified
therein and that it is not capable of recovering the full amount of the
same from a source other than the applicable Borrower.
Each Lender and Issuing Bank referred to in Section 14.01(d)(i) agrees to
deliver to the U.S. Borrower and the Agent further duly completed copies of the
above-mentioned IRS forms on or before the earlier of (x) the date that any such
form expires or becomes obsolete or otherwise is required to be resubmitted as a
condition to obtaining an exemption from withholding from United States federal
income tax and (y) fifteen (15) days after the occurrence of any event requiring
a change in the most recent form previously delivered by such Lender or Issuing
Bank to the U.S. Borrower and Agent, unless any change in treaty, law,
regulation, or official interpretation thereof which would render such form
inapplicable or which would prevent such Lender or Issuing Bank from duly
completing and delivering such form has
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occurred prior to the date on which any such delivery would otherwise be
required and such Lender or Issuing Bank promptly advises the U.S. Borrower that
it is not capable of receiving payments hereunder or under some or all of the
Notes without any deduction or withholding of United States federal income tax.
14.02. Increased Capital. If after the date hereof any Lender or
Issuing Bank determines that (i) the adoption or implementation of or any change
in or in the interpretation or administration of any law or regulation or any
guideline or request from any central bank or other Governmental Authority or
quasi-governmental authority exercising jurisdiction, power or control over any
Lender, any Issuing Bank or banks or financial institutions generally (whether
or not having the force of law), compliance with which affects or would affect
the amount of capital required or expected to be maintained by such Lender or
Issuing Bank or any corporation controlling such Lender or Issuing Bank and (ii)
the amount of such capital is increased by or based upon (A) the making or
maintenance by any Lender of its Loans, any Lender's participation in or
obligation to participate in the Loans, Letters of Credit or other advances made
hereunder or the existence of any Lender's obligation to make Loans or (B) the
issuance or maintenance by any Issuing Bank of, or the existence of any Issuing
Bank's obligation to issue, Letters of Credit, then, in any such case, upon
written demand by such Lender or Issuing Bank (with a copy of such demand to the
Agent), the Borrowers shall immediately pay to the Agent for the account of such
Lender or Issuing Bank, from time to time as specified by such Lender or Issuing
Bank, additional amounts sufficient to compensate such Lender or Issuing Bank or
such corporation therefor. Such demand shall be accompanied by a statement as to
the amount of such compensation and include a brief summary of the basis for
such demand. Such statement shall be conclusive and binding for all purposes,
absent manifest error.
14.03. Changes; Legal Restrictions. If after the date hereof any
Lender or Issuing Bank determines that the adoption or implementation of or any
change in or in the interpretation or administration of any law or regulation or
any guideline or request from any central bank or other Governmental Authority
or quasi-governmental authority exercising jurisdiction, power or control over
any Lender, any Issuing Bank or over banks or financial institutions generally
(whether or not having the force of law), compliance with which:
(a) does or will subject a Lender or an Issuing Bank (or its
Applicable Lending Office or Eurocurrency Affiliate) to charges (other
than taxes) of any kind which such Lender or Issuing Bank reasonably
determines to be applicable to the Commitments of the Lenders and/or the
Issuing Banks to make Eurocurrency Rate Loans or issue and/or participate
in Letters of Credit or change the basis of taxation of payments to that
Lender or Issuing Bank of principal, fees, interest, or
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any other amount payable hereunder with respect to Eurocurrency Rate Loans
or Letters of Credit; or
(b) does or will impose, modify, or hold applicable, in the
determination of a Lender or an Issuing Bank, any reserve (other than
reserves to the extent taken into account in calculating the Eurocurrency
Rate), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities
(including those pertaining to Letters of Credit) in or for the account
of, advances or loans by, commitments made by, or other credit extended
by, or any other acquisition of funds by, a Lender or an Issuing Bank or
any Applicable Lending Office or Eurocurrency Affiliate of that Lender or
Issuing Bank;
and the result of any of the foregoing is to increase the cost to that Lender or
Issuing Bank of making, renewing or maintaining the Loans or its Commitments
with respect to, or issuing or participating in, the Letters of Credit or to
reduce any amount receivable thereunder; then, in any such case, upon written
demand by such Lender or Issuing Bank (with a copy of such demand to the Agent),
the Borrowers shall immediately pay to the Agent for the account of such Lender
or Issuing Bank, from time to time as specified by such Lender or Issuing Bank,
such amount or amounts as may be necessary to compensate such Lender or Issuing
Bank or its Eurocurrency Affiliate for any such additional cost incurred or
reduced amount received. Such demand shall be accompanied by a statement as to
the amount of such compensation and include a brief summary of the basis for
such demand. Such statement shall be conclusive and binding for all purposes,
absent manifest error.
14.04. Illegality. (a) If at any time any Lender determines (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties) that the making or continuation of any Eurocurrency Rate Loan
has become unlawful or impermissible by compliance by that Lender with any law,
governmental rule, regulation or order of any Governmental Authority (whether or
not having the force of law and whether or not failure to comply therewith would
be unlawful or would result in costs or penalties), then, and in any such event,
such Lender may give notice of that determination, in writing, to the U.S.
Borrower and the Agent, and the Agent shall promptly transmit the notice to each
other Lender.
(b) When notice is given by a Lender under Section 14.04(a), (i) the
Borrowers' right to request from such Lender and such Lender's obligation, if
any, to make, or to continue or convert Loans into, Eurocurrency Rate Loans
shall be immediately suspended, and such Lender shall make a Base Rate Loan as
part of any requested Borrowing of Eurocurrency Rate Loans and (ii) if the
affected Eurocurrency Rate Loan or Loans are then outstand-
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ing, the Borrowers shall immediately, or if permitted by applicable law, no
later than the date permitted thereby, upon at least one (1) Business Day's
prior written notice to the Agent and the affected Lender, convert each such
Loan into a Base Rate Loan.
(c) If at any time after a Lender gives notice under Section
14.04(a) such Lender determines that it may lawfully make Eurocurrency Rate
Loans, such Lender shall promptly give notice of that determination, in writing,
to the U.S. Borrower and the Agent, and the Agent shall promptly transmit such
notice to each other Lender. The Borrowers' right to request, and such Lender's
obligation, if any, to make, or to continue or convert Loans into, Eurocurrency
Rate Loans shall thereupon be restored.
14.05. Compensation. In addition to all amounts required to be paid
by the Borrowers pursuant to Section 5.01, the Borrowers shall compensate each
Lender, upon written demand therefor, for all losses, expenses and liabilities
(including, without limitation, any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to fund or maintain such Lender's Eurocurrency Rate Loans to the Borrowers but
excluding any loss of Applicable Eurocurrency Rate Margin on the relevant Loans)
which that Lender may sustain (i) if for any reason, other than a default by
such Lender, a Borrowing, conversion into or continuation of Eurocurrency Rate
Loans does not occur on a date specified therefor in a Notice of Borrowing or a
Notice of Conversion/Continuation given by the U.S. Borrower or in a telephonic
request by it for borrowing or conversion/continuation or a successive
Eurocurrency Rate Interest Period does not commence after notice therefor is
given pursuant to Section 5.01(c), including, without limitation, pursuant to
Section 5.02(f), (ii) if for any reason any Eurocurrency Rate Loan is prepaid
(including, without limitation, mandatorily pursuant to Section 4.01) on a date
which is not the last day of the applicable Eurocurrency Rate Interest Period,
(iii) as a consequence of a required conversion of a Eurocurrency Rate Loan to a
Base Rate Loan as a result of any of the events indicated in Section 5.02(e), or
(iv) as a consequence of any failure by the Borrowers, or either of them, to
repay Eurocurrency Rate Loans when required by the terms of this Agreement. The
Lender making demand for such compensation shall deliver to the U.S. Borrower
concurrently with such demand a written statement in reasonable detail as to
such losses, expenses and liabilities, and this statement shall be conclusive as
to the amount of compensation due to that Lender, absent manifest error.
14.06. Limitation on Additional Amounts Payable by the Borrowers.
Notwithstanding the provisions of Section 14.01(a), the Borrowers shall not be
required to pay any additional amounts hereunder to a Lender or Issuing Bank if
(a) the obligation to pay such additional amounts would not have arisen but for
a failure by such Lender or Issuing Bank to comply with the
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requirements described in Section 14.01 applicable to it, (b) such Lender or
Issuing Bank shall not have furnished the U.S. Borrower with such forms or shall
not have taken such other action as reasonably may be available to it under
applicable tax laws and any applicable tax treaty to obtain an exemption from,
or reduction (to the lowest applicable rate) of withholding of such United
States federal income tax, or (c) any representation or certification on any IRS
form or other documentation required to be furnished pursuant to Section 14.01
by a Lender or an Issuing Bank is, or proves to be, incorrect, false or
misleading when so made; provided, however, the Borrowers' obligations to pay
such additional amounts shall be reinstated upon receipt of such forms or
evidence that action with respect to obtaining such exemption or reduction has
been taken, but only to the extent such Lender or Issuing Bank is entitled to
such exemption or reduction.
14.07. Change in Lending Office. Any Lender claiming any additional
amounts payable pursuant to Section 14.01 shall use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
change the Domestic Lending Office designated by it for purposes of this
Agreement to a Domestic Lending Office in another jurisdiction, if the making of
such a change would avoid the need for, or reduce the amount of, any such
additional amounts which may thereafter accrue and would not, in the judgment of
such Lender, be otherwise disadvantageous to such Lender.
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ARTICLE XV
MISCELLANEOUS
15.01. Assignments and Participations. (a) Assignments. No
assignments or participations of any Lender's rights or obligations under this
Agreement shall be made except in accordance with this Section 15.01. Each
Lender may assign to one or more Eligible Assignees all or a portion of its
rights and obligations under this Agreement (including all of its rights and
obligations with respect to the Revolving Loans and the Letters of Credit) in
accordance with the provisions of this Section 15.01.
(b) Limitations on Assignments. Each assignment shall be subject to
the following conditions: (i) each such assignment shall be of a constant, and
not a varying, ratable percentage of all of the assigning Lender's rights and
obligations under this Agreement which are subject to such assignment and, in
the case of a partial assignment, shall be in a minimum principal amount of
$10,000,000, (ii) each such assignment shall be to an Eligible Assignee, (iii)
the U.S. Borrower shall have the right to approve each such Eligible Assignee
which is not an U.S. Affiliate of a Lender, which approval shall not be
unreasonably withheld or delayed and (iv) 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. Upon such execution, delivery,
acceptance and recording in the Register, from and after the effective date
specified in each Assignment and Acceptance and agreed to by the Agent, (A) the
assignee thereunder shall, in addition to any rights and obligations hereunder
held by it immediately prior to such effective date, if any, have the rights and
obligations hereunder that have been assigned to it pursuant to such Assignment
and Acceptance and shall, to the fullest extent permitted by law, have the same
rights and benefits hereunder as if it were an original Lender hereunder, (B)
the assigning Lender shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights (other than those specifically surviving termination of this
Agreement) 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 such assigning Lender's rights and obligations under this Agreement, the
assigning Lender shall cease to be a party hereto), and (C) the Borrowers shall
execute and deliver to the assignee thereunder one or more Notes, as applicable,
evidencing their respective obligations to such assignee with respect to the
Loans.
(c) The Register. The Agent shall maintain at its address referred
to in Section 15.08 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register (the "Register") for the recordation of the names
and addresses of the Lenders and the Commitment of, and principal amount of the
Loans owing to, each Lender from time to time and whether such
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Lender is an original Lender or the assignee of another Lender pursuant to an
Assignment and Acceptance. The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrowers and each of
their Subsidiaries, 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 Borrowers or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) Fee. Upon its receipt of an Assignment and Acceptance executed
by the assigning Lender and an Eligible Assignee and a processing and
recordation fee of $3,500 (payable by the assigning Lender or the assignee, as
shall be agreed between them), the Agent shall, if such Assignment and
Acceptance has been completed and is in compliance with this Agreement and in
substantially the form of Exhibit A, (i) accept such Assignment and Acceptance,
(ii) record the information contained therein in the Register and (iii) give
prompt notice thereof to the U.S.
Borrower and the Lenders.
(e) Participations. Each Lender may sell participations to one or
more other financial institutions in or to all or a portion of its rights and
obligations under and in respect of any and all facilities under this Agreement
(including, without limitation, all or a portion of any or all of its Commitment
hereunder and the Loans owing to it and its undivided interest in the Letters of
Credit); provided, however, that (i) such Lender's obligations under this
Agreement (including, without limitation, its Commitment hereunder) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the Borrowers, 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 (iv) such participant's rights to agree or to restrict such
Lender's ability to agree to the modification, waiver or release of any of the
terms of the Loan Documents or to the release of any Collateral covered by the
Loan Documents, to consent to any action or failure to act by any party to any
of the Loan Documents or any of their respective Affiliates, or to exercise or
refrain from exercising any powers or rights which any Lender may have under or
in respect of the Loan Documents or any Collateral, shall be limited to the
right to consent to (A) increase in the Commitment of the Lender from whom such
participant purchased a participation, (B) reduction of the principal of, or
rate or amount of interest on the Loans(s) subject to such participation (other
than by the payment or prepayment thereof), (C) postponement of any date fixed
for any payment of principal of, or interest on, the Loan(s) subject to such
participation amount or any date fixed for payment of fees and (D) release of
any guarantor of the Obligations or all or a substantial portion of the
Collateral except as provided in Section 13.09(c).
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(f) Information Regarding the Borrowers. Any Lender may, in
connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 15.01, disclose to the assignee or
participant or proposed assignee or participant, any information relating to the
Borrowers or their Subsidiaries furnished to such Lender by the Agent or by or
on behalf of the Borrowers or either of them; provided that, prior to any such
disclosure, such assignee or participant, or proposed assignee or participant,
shall agree to preserve in accordance with Section 15.20 the confidentiality of
any confidential information described therein.
(g) Payment to Participants. Anything in this Agreement to the
contrary notwithstanding, in the case of any participation, all amounts payable
by the Borrowers under the Loan Documents shall be calculated and made in the
manner and to the parties required hereby as if no such participation had been
sold.
(h) Lenders' Creation of Security Interests. 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, Obligations owing to it and any Notes held by
it) in favor of any Federal Reserve bank in accordance with Regulation A of the
Federal Reserve Board.
(i) Assignments by Citicorp and/or Fleet. If Citicorp or Fleet
ceases to be a Lender under this Agreement by virtue of any assignment made
pursuant to this Section 15.01, then, as of the effective date of such
cessation, Citibank's and Fleet's (as applicable) obligations to issue Letters
of Credit pursuant to Section 3.01 shall terminate and Citibank and Fleet (as
applicable) shall be an Issuing Bank hereunder only with respect to outstanding
Letters of Credit issued prior to such date.
15.02. Expenses.
(a) Generally. The Borrowers jointly and severally agree upon demand
to pay, or reimburse the Agent for, all of the Agent's reasonable internal and
external audit, legal, appraisal, valuation, filing, document duplication and
reproduction and investigation expenses and for all other out-of-pocket costs
and expenses of every type and nature (including, without limitation, the
reasonable fees, expenses and disbursements of Sidley & Austin, local legal
counsel, auditors, accountants, appraisers, printers, insurance and
environmental advisers, and other consultants and agents) incurred by the Agent
in connection with (i) the Agent's review and investigation of the Borrowers and
their Affiliates and the Collateral in connection with the preparation,
negotiation, and execution of the Loan Documents and the Agent's periodic
reviews and audits of the Borrowers; (ii) the preparation, negotiation,
execution and interpretation
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of this Agreement (including, without limitation, the satisfaction or attempted
satisfaction of any of the conditions set forth in Article VI) and the other
Loan Documents and the making of the Loans and issuance of Letters of Credit
hereunder; (iii) the creation, perfection or protection of the Liens under the
Loan Documents (including, without limitation, any reasonable fees and expenses
for local counsel in various jurisdictions); (iv) the ongoing administration of
this Agreement, the other Loan Documents and the Loans, including consultation
with attorneys in connection therewith and with respect to the Agent's rights
and responsibilities under this Agreement and the other Loan Documents; (v) the
protection, collection or enforcement of any of the Obligations or the
enforcement of any of the Loan Documents; (vi) the commencement, defense or
intervention in any court proceeding relating in any way to the Obligations, the
Property, the Borrowers, any of their Subsidiaries, this Agreement or any of the
other Loan Documents; (vii) the response to, and preparation for, any subpoena
or request for document production with which the Agent is served or deposition
or other proceeding in which the Agent is called to testify, in each case,
relating in any way to the Obligations, the Property, the Borrowers, any of
their Subsidiaries, this Agreement or any of the other Loan Documents; and
(viii) any amendments, consents, waivers, assignments, restatements, or
supplements to any of the Loan Documents and the preparation, negotiation, and
execution of the same.
(b) After Default. The Borrowers further jointly and severally agree
to pay or reimburse the Agent, the Issuing Banks and the Lenders upon demand for
all out-of-pocket costs and expenses, including, without limitation, reasonable
attorneys' fees (including allocated costs of internal counsel and costs of
settlement) incurred by the Agent, any Issuing Bank or any Lender after the
occurrence of an Event of Default (i) in enforcing any Loan Document or
Obligation or any security therefor or exercising or enforcing any other right
or remedy available by reason of such Event of Default; (ii) in connection with
any refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or in any insolvency or bankruptcy
proceeding; (iii) in commencing, defending or intervening in any litigation or
in filing a petition, complaint, answer, motion or other pleadings in any legal
proceeding relating to the Obligations, the Property, the Borrowers or any of
their Subsidiaries and related to or arising out of the transactions
contemplated hereby or by any of the other Transaction Documents; and (iv) in
taking any other action in or with respect to any suit or proceeding (bankruptcy
or otherwise) described in clauses (i) through (iii) above.
15.03. Indemnity. The Borrowers further jointly and severally agree
(a) to defend, protect, indemnify, and hold harmless the Agent and each and all
of the Lenders and Issuing Banks and each of their respective officers,
directors, employees, attorneys and agents (including, without limitation,
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those retained in connection with the satisfaction or attempted satisfaction of
any of the conditions set forth in Article VI) (collectively, the "Indemnitees")
from and against any and all liabilities, obligations, losses (other than loss
of profits), damages, penalties, actions, judgments, suits, claims, costs,
expenses and disbursements of any kind or nature whatsoever (excluding any taxes
and including, without limitation, the fees and disbursements of counsel for
such Indemnitees in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnitees shall be designated a party
thereto), imposed on, incurred by, or asserted against such Indemnitees in any
manner relating to or arising out of (i) this Agreement or the other Loan
Documents, or any act, event or transaction related or attendant thereto or to
the Subordinated Debt, the making of the Loans and the issuance of and
participation in Letters of Credit hereunder, the management of such Loans or
Letters of Credit, the use or intended use of the proceeds of the Loans or
Letters of Credit hereunder, or any of the other transactions contemplated by
any of the Transaction Documents, or (ii) any Liabilities and Costs relating to
any violation by either Borrower, any Subsidiary of either Borrower, or any
Guarantor, or their respective predecessors-in-interest of any Environmental,
Health or Safety Requirements of Law, the past, present or future operations of
the Borrowers, their Subsidiaries, any Guarantor, or any of their respective
predecessors in interest, or the past, present or future environmental, health
or safety condition (including, without limitation, the presence of
asbestos-containing material) of any respective past, present or future Property
of a Borrower, any Subsidiary of a Borrower, or a Guarantor, or the Release or
threatened Release of any Contaminant by a Borrower, any Subsidiary of a
Borrower, a Guarantor, or their respective predecessors-in-interest, or the
Release or threatened Release of any Contaminant from or at any facility to
which a Borrower, any Subsidiary of a Borrower, or a Guarantor, or their
respective predecessors-in-interest sent or directly arranged for the transport
of any Contaminant (collectively, the "Indemnified Matters"); provided, however,
the Borrowers shall have no obligation to an Indemnitee hereunder with respect
to Indemnified Matters caused by or resulting from the willful misconduct or
gross negligence of such Indemnitee, as determined by a court of competent
jurisdiction and (b) not to assert any claim against any of the Indemnified
Parties on any theory of liability for special, indirect, consequential or
punitive damages arising out of, or in any way in connection with, the
Commitments, the Obligations or any other matters governed by this Agreement
and/or the other Loan Documents. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Borrowers
shall contribute the maximum portion which they are permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified Matters
incurred by the Indemnitees.
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15.04. Change in Accounting Principles. If any change in the
accounting principles used in the preparation of the most recent Financial
Statements referred to in Section 8.01 are hereafter required or permitted by
the rules, regulations, pronouncements and 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
U.S. Borrower with the agreement of its independent certified public accountants
and such changes result in a change in the method of calculation of any of the
covenants, standards or terms found in Article IX, Article X, and Article XI,
the parties hereto agree to enter into negotiations in order to amend such
provisions so as to equitably reflect such changes with the desired result that
the criteria for evaluating compliance with such covenants, standards and terms
by the U.S. Borrower shall be the same after such changes as if such changes had
not been made; provided, however, no change in GAAP that would affect the method
of calculation of any of the covenants, standards or terms shall be given effect
in such calculations until such provisions are amended, in a manner satisfactory
to the Requisite Lenders and the Borrower, to so reflect such change in
accounting principles.
15.05. Setoff. In addition to any Liens granted under the Loan
Documents and any rights now or hereafter granted under applicable law, upon the
occurrence and during the continuance of any Event of Default, each Lender, each
Issuing Bank and any Affiliate of any Lender or Issuing Bank is hereby
authorized by each Borrower at any time or from time to time, without notice to
any Person (any such notice being hereby expressly waived) to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, indebtedness evidenced by certificates of deposit, whether
matured or unmatured (but not including trust accounts)) and any other
Indebtedness at any time held or owing by such Lender, Issuing Bank or any of
their Affiliates to or for the credit or the account of such Borrower against
and on account of the Obligations of such Borrower to such Lender, Issuing Bank
or any of their Affiliates, including, but not limited to, all Loans and Letters
of Credit and all claims of any nature or description arising out of or in
connection with this Agreement, irrespective of whether or not (i) such Lender
or Issuing Bank shall have made any demand hereunder or (ii) the Agent, at the
request or with the consent of the Requisite Lenders, shall have declared the
principal of and interest on the Loans and other amounts due hereunder to be due
and payable as permitted by Article XII and even though such Obligations may be
contingent or unmatured. Each Lender and each Issuing Bank agrees that it shall
not, without the express consent of the Requisite Lenders, and that it shall, to
the extent it is lawfully entitled to do so, upon the request of the Requisite
Lenders, exercise its setoff rights hereunder against any accounts of a
Borrower, any of its Subsidiaries, or any Guarantor now or hereafter maintained
with such Lender, Issuing Bank or any Affiliate of such Lender or Issuing Bank.
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15.06. Ratable Sharing. The Lenders agree among themselves that (i)
with respect to all amounts received by them which are applicable to the payment
of the Obligations (including, without limitation, amounts applied to the
Obligations under Section 15.05, but excluding the fees described in Section
5.03 and Article XIV), equitable adjustment will be made so that, in effect, all
such amounts will be shared among them ratably in accordance with their Pro Rata
Shares, whether received by voluntary payment, by the exercise of the right of
setoff or banker's lien, by counterclaim or cross-action or by the enforcement
of any or all of the Obligations (excluding the fees described in Section 5.03
and Article XIV) or the Collateral, (ii) if any of them shall by voluntary
payment or by the exercise of any right of counterclaim, setoff, banker's lien
or otherwise, receive payment of a proportion of the aggregate amount of the
Obligations held by it, which is greater than the amount which such Lender is
entitled to receive hereunder, the Lender receiving such excess payment shall
purchase, without recourse or warranty, an undivided interest and participation
(which it shall be deemed to have done simultaneously upon the receipt of such
payment) in such Obligations owed to the others so that all such recoveries with
respect to such Obligations shall be applied ratably in accordance with their
Pro Rata Shares; provided, however, that if all or part of such excess payment
received by the purchasing party is thereafter recovered from it, those
purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such party to the extent necessary to adjust
for such recovery, but without interest except to the extent the purchasing
party is required to pay interest in connection with such recovery. Each
Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 15.06 may, to the fullest extent permitted by
law, exercise all its rights of payment (including, subject to Section 15.05,
the right of setoff) with respect to such participation as fully as if such
Lender were the direct creditor of such Borrower in the amount of such
participation.
15.07. Amendments and Waivers. (a) General Provisions. Unless
otherwise provided for or required in this Agreement, no amendment or
modification of any provision of this Agreement or any of the other Loan
Documents shall be effective without the written agreement of the Requisite
Lenders (which the Requisite Lenders shall have the right to grant or withhold
in their sole discretion) and the Borrowers or Guarantors party thereto. No
termination or waiver of any provision of this Agreement or any of the other
Loan Documents, or consent to any departure by either Borrower therefrom, shall
be effective without the written concurrence of the Requisite Lenders, which the
Requisite Lenders shall have the right to grant or withhold in their sole
discretion. All amendments, modifications, waivers and consents not specifically
reserved to Lenders, Issuing Banks, and the Agent in Section 15.07(b), Section
15.07(c) and in other provisions of this Agreement or any other Loan Document
shall
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require only the approval of the Requisite Lenders. Any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on either Borrower in any case shall
entitle such Borrower or the other Borrower to any other or further notice or
demand in similar or other circumstances.
(b) Amendments, Consents and Waivers by Affected Lenders. Any
amendment, modification, termination, waiver or consent with respect to any of
the following provisions of this Agreement shall be effective only by a written
agreement, signed by each Lender or Issuing Bank affected thereby as described
below:
(i) waiver of any of the conditions specified in Sections 6.01 and 6.02
(except with respect to a condition based upon another provision of this
Agreement, the waiver of which requires only the concurrence of the
Requisite Lenders),
(ii) increase in the amount of the Commitment of such Lender,
(iii) reduction of the principal of, or rate or amount of interest on, the
Loans, the Reimbursement Obligations, or any fees or other amounts payable
to such Lender (other than by the payment or prepayment thereof),
(iv) postponement of the Revolving Credit Termination Date or any date
fixed for any payment of principal of, or interest on, the Loans, the
Reimbursement Obligations or any fees or other amounts payable to such
Lender,
(v) the orders of priority set forth in Section 4.01, in Section
4.02(b)(i), or in clauses (D) through (I) of Section 4.02(b)(ii), and
(vi) change in the definition of Revolving Credit Commitments.
(c) Amendments, Consents and Waivers by All Lenders. Any amendment,
modification, termination, waiver or consent with respect to any of the
following provisions of this Agreement shall be effective only by a written
agreement, signed by each Lender:
(i) release of any Guarantor or all or a substantial portion of the
Collateral (except as provided in Section 13.09(c)),
(ii) change in the (A) definition of Requisite Lenders or (B) the
aggregate Pro Rata Shares of the Lenders which shall be required for the
Lenders or any of them to take action under this Agreement or the other
Loan Documents,
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(iii) amendment of Section 15.01, Section 15.05 or this Section 15.07, and
(iv) assignment of any right or interest in or under this Agreement or any
of the other Loan Documents by a Borrower or a Guarantor.
(d) Agent Authority. The Agent may, but shall have no obligation to,
with the written concurrence of any Lender, execute amendments, modifications,
waivers or consents on behalf of that Lender. Notwithstanding anything to the
contrary contained in this Section 15.07, no amendment, modification, waiver or
consent shall affect the rights or duties of the Agent under this Agreement or
the other Loan Documents, unless made in writing and signed by the Agent in
addition to the Lenders required above to take such action; and the order of
priority set forth in clauses (A) through (C) of Section 4.02(b)(ii) may be
changed only with the prior written consent of the Agent. Notwithstanding
anything herein to the contrary, in the event that the Borrowers shall have
requested, in writing, that any Lender agree to an amendment, modification,
waiver or consent with respect to any particular provision or provisions of this
Agreement or the other Loan Documents, and such Lender shall have failed to
state, in writing, that it either agrees or disagrees (in full or in part) with
all such requests (in the case of its statement of agreement, subject to
satisfactory documentation and such other conditions it may specify) within
thirty (30) days after such request, then such Lender shall be deemed to not
have approved such amendment, modification, waiver or consent and the Agent
shall thereupon determine whether the Lenders required above to take the
requested action have approved the same within the required time and communicate
such determination to the U.S.
Borrower and the Lenders.
15.08. Notices. Unless otherwise specifically provided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, sent facsimile transmission or courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a facsimile
transmission, or four (4) Business Days after deposit in the United States mail
with postage prepaid and properly addressed. Notices to the Agent pursuant to
Article II, IV or XIII shall not be effective until received by the Agent. For
the purposes hereof, the addresses of the parties hereto (until notice of a
change thereof is delivered as provided in this Section 15.08) shall be as set
forth below each party's name on the signature pages hereof or the signature
page of any applicable Assignment and Acceptance, or, as to each party, at such
other address as may be designated by such party in a written notice to all of
the other parties to this Agreement.
15.09. Survival of Warranties and Agreements. All representations
and warranties made herein shall survive
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execution and delivery of this Agreement and the other Loan Documents and all
obligations of the Borrowers in respect of Taxes, indemnification and expense
reimbursement shall survive the execution and delivery of this Agreement and the
other Loan Documents, the making and repayment of the Loans, the issuance and
discharge of Letters of Credit hereunder and the termination of this Agreement
and shall not be limited in any way by the passage of time or occurrence of any
event and shall expressly cover time periods when the Agent, any of the Issuing
Banks or any of the Lenders may have come into possession or control of any of
the Borrowers' or their Subsidiaries' Property.
15.10. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of the Agent, any Lender or any Issuing Bank in the
exercise of any power, right or privilege under any of the Loan Documents shall
impair such power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial exercise of any
such power, right or privilege preclude any other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing under
the Loan Documents are cumulative to and not exclusive of any rights or remedies
otherwise available.
15.11. Marshalling; Payments Set Aside. None of the Agent, any
Lender or any Issuing Bank shall be under any obligation to marshall any assets
in favor of either Borrower or any other Person or against or in payment of any
or all of the Obligations. To the extent that either Borrower or a Guarantor
makes a payment or payments to the Agent, the Lenders or the Issuing Banks or
any of such Persons receives payment from the proceeds of the Collateral or
exercises its rights of setoff, and such payment or payments or the proceeds of
such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, receiver or any other party, then to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied, and all Liens,
rights and remedies therefor, shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff had
not occurred.
15.12. Severability. In case any provision in or obligation under
this Agreement or the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
15.13. Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement or be given any substantive effect.
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15.14. Governing Law. THIS AGREEMENT SHALL BE INTERPRETED, AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
15.15. Limitation of Liability. No claim may be made by either
Borrower, any Lender, any Issuing Bank, the Agent or any other Person against
the Agent, any other Issuing Bank or any other Lender or the Affiliates,
directors, officers, employees, attorneys or agents of any of them for any
special, consequential or punitive damages in respect of any claim for breach of
contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement, or any act, omission or event
occurring in connection therewith; and each Borrower, each Lender, each Issuing
Bank and the Agent hereby waives, releases and agrees not to sue upon any such
claim for any such damages, whether or not accrued and whether or not known or
suspected to exist in its favor.
15.16. Successors and Assigns. This Agreement and the other Loan
Documents shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and permitted assigns of the Lenders and the Issuing Banks.
Neither Borrower's rights or obligations hereunder, nor any interest therein,
may be assigned without the written consent of all Lenders.
15.17. Certain Consents and Waivers of the Borrowers.
(a) Personal Jurisdiction. (i) EACH OF THE AGENT, THE LENDERS, THE
ISSUING BANKS AND THE BORROWERS IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE
COURT OR FEDERAL COURT SITTING IN NEW YORK, NEW YORK, AND ANY COURT HAVING
JURISDICTION OVER APPEALS OF MATTERS HEARD IN SUCH COURTS, IN ANY ACTION OR
PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR
FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE
EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH BORROWER IRREVOCABLY
DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, INC., 1633 BROADWAY, NEW YORK,
NEW YORK 10019, AS ITS AGENT (THE "PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN
ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO
BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. EACH OF THE AGENT, THE
LENDERS, THE ISSUING BANKS AND THE BORROWERS 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.
EACH BORROWER WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
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(ii) EACH BORROWER AGREES THAT THE AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST SUCH BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE THE AGENT, THE ISSUING BANKS AND THE LENDERS TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF THE AGENT, ANY ISSUING BANK OR ANY LENDER. EACH
BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY
PROCEEDING BROUGHT BY THE AGENT, ANY LENDER OR ANY ISSUING BANK TO REALIZE ON
THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE AGENT, ANY LENDER OR ANY ISSUING
BANK. EACH BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE
COURT IN WHICH THE AGENT, ANY ISSUING BANK OR ANY LENDER MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
(b) Service of Process. EACH BORROWER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR SUCH BORROWER'S NOTICE ADDRESS
SPECIFIED BELOW, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH
MAILING. EACH BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWERS IN
THE COURTS OF ANY OTHER JURISDICTION.
(c) Waiver of Jury Trial. EACH OF THE AGENT, LENDERS, ISSUING BANKS,
AND BORROWERS IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. ANY OF THE BORROWERS, THE
AGENT, THE LENDERS, OR THE ISSUING BANKS MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(d) Judgment Currency. If for the purposes of obtaining judgment in
any court it is necessary to convert a sum due under this Agreement or any Note
in any currency (the "first currency") into another currency (the "second
currency"), the parties hereto agree, to the fullest extent permitted by law,
that the exchange rate used shall be that determined on the Business Day
preceding that on which final judgment is given. To the fullest extent permitted
by applicable law, the Obligation in respect of any sum due in a first currency
shall, notwithstanding any judgment in a second currency, be discharged only to
the extent that on the Business Day following receipt by any of the Agent,
Citibank London, any Lender or any Issuing Bank of any sum
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adjudged to be so due in the second currency, such Person may purchase the first
currency with the second currency at the exchange rate determined on the date of
such purchase; if the amount of the first currency so purchased is less than the
sum originally due to such Person in the first currency, each Borrower agrees,
as a separate obligation and notwithstanding any such judgment, to indemnify
such Person against such loss, and if the amount of the first currency so
purchases exceeds the sum originally due to such Person in the first currency,
such Person agrees to remit to the relevant Borrower such excess.
(e) Waiver of Immunity. To the extent that the European Borrower has
or hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its Property, the European Borrower hereby irrevocably waives such immunity
in respect of its Obligations and, without limiting the generality of the
foregoing, agrees that the waivers set forth in this Section 15.17(e) shall have
the fullest scope permitted under the Foreign Sovereign Immunities Act of 1976
of the United States and all other applicable Requirements of Law and are
intended to be irrevocable for purposes of such Act and other Requirements of
Law.
15.18. Counterparts; Effectiveness; Inconsistencies. This Agreement
and any amendments, waivers, consents, or supplements hereto may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective against each Borrower,
each Lender, each Issuing Bank and the Agent on the Effective Date. This
Agreement and each of the other Loan Documents shall be construed to the extent
reasonable to be consistent one with the other, but to the extent that the terms
and conditions of this Agreement are actually inconsistent with the terms and
conditions of any other Loan Document, this Agreement shall govern.
15.19. Limitation on Agreements. All agreements between each
Borrower, the Agent, each Lender and each Issuing Bank in the Loan Documents are
hereby expressly limited so that in no event shall any of the Loans or other
amounts payable by the Borrowers under any of the Loan Documents be directly or
indirectly secured (within the meaning of Regulation U) by Margin Stock.
15.20. Confidentiality. Subject to Section 15.01(f), the Lenders and
the Issuing Banks shall hold all nonpublic information obtained pursuant to the
requirements of this Agreement and identified as such by the U.S. Borrower in
accordance with such Lender's or such Issuing Bank's customary procedures for
handling confidential information of this nature and in accordance with safe and
sound banking practices and in
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any event may make disclosure reasonably required by a bona fide offeree,
transferee or participant in connection with the contemplated transfer or
participation or as required or requested by any Governmental Authority or
representative thereof or pursuant to legal process and shall require any such
offeree, transferee or participant to agree (and require any of its offerees,
transferees or participants to agree) to comply with this Section 15.20. In no
event shall any Lender or any Issuing Bank be obligated or required to return
any materials furnished by the Borrowers; provided, however, each offeree shall
be required to agree that if it does not become a transferee or participant it
shall return all materials furnished to it by the Borrowers in connection with
this Agreement. Any and all confidentiality agreements entered into between any
Lender or any Issuing Bank and the Borrowers shall survive the execution of this
Agreement.
15.21. Entire Agreement; No Novation. This Agreement, taken together
with all of the other Loan Documents, embodies the entire agreement and
understanding among the parties hereto with respect to the subject matter hereof
and thereof and supersedes the Commitment Letter (except for provisions therein
specifically referred to herein). Upon this Agreement becoming effective, the
terms and provisions of the 1994 Credit Agreement and all prior agreements and
understandings, written and oral, relating to the subject matter hereof shall be
and hereby are amended, superseded and restated in their entirety by the terms
and provisions of this Agreement, except any provisions which survive
termination thereof. This Agreement shall not constitute a novation.
15.22. Advice of Counsel. The Borrowers and each Lender and Issuing
Bank understand that the Agent's counsel represents only the Agent's and its
Affiliates' interests and that the Borrowers, Lenders and Issuing Banks are
advised to obtain their own counsel. Each Borrower represents and warrants to
the Agent and the other Holders that it has discussed this Agreement with its
counsel.
15.23. Replacement of Lenders and Issuing Banks. (a) Lenders. In the
event a Lender has delivered to the U.S. Borrower a notice described in, or made
demand for additional amounts pursuant to, Section 14.01, 14.02 or 14.03, unless
the circumstances described in such notice or the conditions creating the cause
for such demand for such additional amounts, as the case may be, have been
cured, the U.S. Borrower may designate an Eligible Assignee to purchase the
Commitment of, and Notes issued to, such Lender and such Lender's rights and
obligations as a Lender hereunder subject to an Assignment and Acceptance for a
purchase price equal to the outstanding principal amount of the Notes issued to
such Lender plus accrued but unpaid interest thereon and accrued but unpaid fees
payable to such Lender under this Agreement and, upon execution and delivery of
an Assignment and Acceptance by such Lender, such Eligible Assignee, and the
Agent and the U.S. Borrower's payment to the Agent of the fee otherwise required
under Section 15.01(d) and
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payment to such Lender of amounts payable pursuant to Section 14.01, 14.02, and
14.03, such Lender shall cease to be a Lender and such Eligible Assignee shall
become a Lender in its stead.
(b) Issuing Banks. In the event an Issuing Bank is unable at any
time to issue Letters of Credit as and when required by the terms of this
Agreement, the U.S. Borrower and Agent may designate a financial institution
which is also a Lender as an Issuing Bank and, upon the execution and delivery
by such financial institution of its written agreement, in form and substance
satisfactory to the U.S. Borrower and Agent, to act as an Issuing Bank, such
financial institution shall thereupon become an Issuing Bank.
(c) Swing Loan Lender. In the event Citicorp is unwilling to
continue to provide Swing Loans in accordance with the provisions of Section
2.03, the U.S. Borrower and Agent may designate another Lender to make Swing
Loans hereunder and, upon the execution and delivery by such financial
institution of its written agreement, in form and substance satisfactory to the
U.S. Borrower and Agent, to so provide Swing Loans hereunder, such Lender shall
thereupon be substituted for Citicorp with respect to the provisions of Section
2.03 and all other terms of this Agreement relating to the making and repayment
of Swing Loans.
15.24. Limitation on Liability of European Borrower. Notwithstanding
anything to the contrary contained in this Agreement or in any other Loan
Document, the obligation of the European Borrower to make any payments under
this Agreement (other than in respect of Borrowings by the European Borrower
directly) is limited at any time to the then maximum amount that would not
result in a depletion of the European Borrower's stated share capital
(Stammkapital) as stated in the commercial register relating to the European
Borrower.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first above written.
BORROWERS: FREEDOM CHEMICAL COMPANY
By/s/ Brian F. McNamara
--------------------------------
Name: Brian F. McNamara
Title: Secretary
FREEDOM CHEMICAL DIAMALT GmbH
By/s/ Brian F. McNamara
--------------------------------
Name: Brian F. McNamara
Title: Attorney-in-Fact
Notice Address:
Mellon Center, Suite 3500
1735 Market Street
Philadelphia, Pennsylvania 19103
Attn: Chief Financial Officer
Telecopier No. (215) 979-3733
with a copy to:
Joseph Littlejohn & Levy Fund, L.P.
450 Lexington Avenue, Suite 3350
New York, New York 10017
Attn: Timothy Clark
Telecopier No. (212) 286-8626
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AGENT: CITICORP USA, INC., as Agent
By/s/ Charles S. Foster
--------------------------------
Charles S. Foster
Attorney-in-Fact
Notice Address:
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Attn: Charles S. Foster
Telecopier No. (212) 758-6278
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attn: DeVerille A. Huston
Telecopier No. (312) 853-7036
CITIBANK LONDON: CITIBANK INTERNATIONAL, plc
By/s/ Stewart Holmes
--------------------------------
Stewart Holmes
Vice President
Notice Address:
3rd Floor Riverdale House
68 Molesworth Street
Levisham SE13 7EU
Attn: Stewart Holmes
Telecopier: 011-441-715004482
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ISSUING BANKS: CITIBANK, N.A.
By/s/ Charles S. Foster
--------------------------------
Charles S. Foster
Attorney-in-Fact
Notice Address:
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Attn: Charles S. Foster
Telecopier No. (212) 758-6278
FLEET NATIONAL BANK
By/s/ Paul R. Trefry
--------------------------------
Paul R. Trefry
Managing Director
Notice Address:
Fleet National Bank
One Federal Street
3rd Floor, Mail Stop MAOF 0324
Boston, Massachusetts 02211
Attn: Peter M. Hoffman
Telecopier No. (617) 346-5901
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LENDER: CITICORP USA, INC.
By/s/ Charles S. Foster
--------------------------------
Charles S. Foster
Attorney-in-Fact
Notice Address, Domestic Lending Office and
Eurocurrency Lending Office:
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Attn: Charles S. Foster
Telecopier No. (212) 758-6278
Pro Rata Share: 25.88235294118%
Revolving Credit Commitment: $22,000,000
FLEET NATIONAL BANK
By/s/ Paul R. Trefry
--------------------------------
Paul R. Trefry
Managing Director
Notice Address, Domestic Lending Office and
Eurocurrency Lending Office:
Fleet National Bank
One Federal Street
3rd Floor
Mail Stop MAOF 0324
Boston, Massachusetts 02211
Attn: Peter M. Hoffman
Telecopier No. (617) 346-5901
Pro Rata Share: 21.17647058824%
Revolving Credit Commitment: $18,000,000
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CAISSE NATIONALE DE CREDIT AGRICOLE
By/s/ Dean Balice
--------------------------------
Dean Balice
Senior Vice President
Notice Address, Domestic Lending Office
and Eurocurrency Lending Office:
Caisse Nationale de Credit Agricole
55 East Monroe Street
Suite 3600
Chicago, Illinois 60603-5702
Attn: Gregory A. Molter
Telecopier No. (312) 372-2830
Pro Rata Share: 17.64705882353%
Revolving Credit Commitment: $15,000,000
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BHF-BANK AKTIENGESELLSCHAFT
By/s/ Linda M. Pace
--------------------------------
Linda M. Pace
Assistant Vice President
By/s/ Evon M. Contos
--------------------------------
Evon M. Contos
Vice President
Notice Address, Domestic Lending Office
and Eurocurrency Lending Office:
590 Madison Avenue
30th Floor
New York, New York 10022
Attn: Linda M. Pace
Telecopier No. (212) 756-5536
Pro Rata Share: 17.64705882353%
Revolving Credit Commitment: $15,000,000
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THE BANK OF NEW YORK
By/s/ Peter H. Abdill
--------------------------------
Peter H. Abdill
Vice President
Notice Address, Domestic Lending Office
and Eurocurrency Lending Office:
The Bank of New York
One Wall Street
Northeast Division
22nd Floor
New York, New York 10286
Attn: Peter H. Abdill
Telecopier No. (212) 635-6999
Pro Rata Share: 17.64705882353%
Revolving Credit Commitment: $15,000,000
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EXHIBITS
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Collection Account Agreement
Exhibit C -- Forms of Notes
Exhibit D -- Form of Notice of Borrowing
Exhibit E -- Form of Notice of Conversion/Continuation
Exhibit F -- Pro Forma Financial Statements
Exhibit G -- Projections
Exhibit H -- List of Closing Documents
Exhibit I -- Form of Officer's Certificate to Accompany Reports
Exhibit J -- Form of Letter to Accountants
Exhibit K -- Form of Consignee/Bailee Letters
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SCHEDULES
Schedule 1.01.1 -- Guarantors
Schedule 1.01.2 -- Existing Joint Ventures
Schedule 1.01.3 -- Permitted Equity Securities Options
Schedule 1.01.4 -- Permitted Existing Indebtedness
Schedule 1.01.5 -- Permitted Existing Investments
Schedule 1.01.6 -- Permitted Existing Liens
Schedule 1.01.7 -- Refinanced Indebtedness
Schedule 3.02 -- Existing Letters of Credit
Schedule 7.01-A -- Organizational Documents
Schedule 7.01-C -- Organizational Structure
Schedule 7.01-E -- Governmental Consents
Schedule 7.01-K -- Pending Actions
Schedule 7.01-L -- Compensation Matters
Schedule 7.01-S -- Environmental Matters
Schedule 7.01-T -- ERISA Matters
Schedule 7.01-V -- Labor Contracts
Schedule 7.01-Y -- Patent, Trademark & Permit Claims Pending
Schedule 7.01-AA -- Insurance Policies
Schedule 7.01-DD -- German Filing and Tax Requirements
Schedule 10.14 -- Collection Accounts
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SHARE PLEDGE AGREEMENT
WHEREAS:
A. The Pledgees have made available to Freedom a USD 27,500,000 million
revolving credit facility dated 26 May 1994 and certain term loan
facilities aggregating USD 84,500,000.
B. By an amendment to the aftersaid amended and restated revolving credit
and term loan agreement dated as of 9 January 1995 (such agreement as
from time to time amended, varied, cancelled, restated, supplemented or
novated being herein referred to as the "Agreement") Freedom and the
Pledgees have extended the facilities to a USD 42,500,000 million revolv-
ing credit and a USD 85,500,000 term loan facility to enable Freedom and
Hilton to form a German subsidiary to purchase certain assets in Germa-
ny.
C. Freedom and Hilton have agreed in return to grant certain security as more
detailed herein in respect of their respective obligations under and with
respect to the Agreement.
NOW IT IS AGREED as follows:
1. Pledged Share(s)
(a) The Pledgors are the sole shareholders of Freedom Chemical Diamalt
GmbH - before change of name Vilicius Vier Vermogensverwaltung GmbH
- (the "Company"), a German company with limited liability with
business address at Georg-Reismuller-Str. 32, 80999 Munchen,
Federal Republic of Germany, which is registered in the Commercial
Register of the Local Court of Frankfurt am Main under No. HRB
37781.
(b) The total stated share capital of the Company amounts to DM 50,000
(in words: fifty thousand), consisting of two shares in the nominal
amount of DM 25,000 and DM 500 (the "Freedom Shares") held by
Freedom and one share in the nominal amount of DM 24,500 held by
Hilton (the "Hilton Share"). By shareholders' resolution of 11
January 1995, notarized before the notary public Dr. Richard
Sterzinger, Frankfurt am Main, a resolution was
<PAGE>
passed to increase the Company's nominal share capital by DM
1,950,000 to DM 2,000,000 of which one share in the nominal amount
of DM 994,500 was subscribed for (fully paid in cash) by Freedom
(the "Subscribed Freedom Share") and one share in the nominal amount
of DM 955,500 was subscribed for (fully paid in cash) by Hilton (the
"Subscribed Hilton Share"). The parties acknowledge that the capital
increase has not yet been registered and that it will only become
effective with its registration in the Commercial Register.
(c) Each of the Freedom Shares and the Hilton Share is fully paid in.
There is no obligation for Freedom or Hilton to make additional
contributions.
2. Secured Obligations
The pledges and undertakings to pledge hereunder are constituted in
order to secure the prompt and complete satisfaction of any and all
present and future, actual or contingent obligations and liabilities
whatsoever of the Pledgors to the Pledgees, whether for principal,
interest, fees, expenses or otherwise under the Agreement,
guarantees thereof, and under this Share Pledge Agreement, as
amended, varied or supplemented from time to time (together the
"Secured Obligations").
3. Pledge
(a) Freedom hereby pledges to each of the Pledgees for their ratable
benefit the Freedom Shares (the "Pledged Share") together with all
ancillary rights and claims associated with the Pledged Share (the
"Freedom Pledge").
(b) Hilton hereby pledges to each of the Pledgees for their ratable
benefit by way of partial pledge (Teilverpfandung) an amount equal
to approximately 15 per cent. of the Hilton Share, i.e. of
DM 3,600 (in words: three thousand six hundred Deutschmarks)
and an amount equal to approximately 15 per cent. of the Sub-
scribed Hilton Share, i.e. of DM 143,300 (in words: one hundred
forty three thousand three hundred Deutschmarks) (the "Pledged
2
<PAGE>
Part of the Share"), in each case together with all ancillary rights
and claims, associated with the Pledged Part of the Share (the
"Hilton Pledge").
(c) The Pledged Share and the Pledged Part of the Share (together with
in each case any future share(s) or parts of future share(s) held or
acquired by Freedom or Hilton respectively) are together hereinafter
referred to as the "Pledged Shares". The Freedom Pledge and the
Hilton Pledge (and in each case the Future Freedom Pledge and the
Future Hilton Pledge respectively) are together hereinafter referred
to as the "Pledges".
(d) Each Pledgee hereby accepts the Pledges to it, including the pledg-
es under lit. (f) below. The Pledges are in addition, and without
prejudice, to any other security any of the Pledgees may now or
hereafter hold in respect of the Secured Obligations.
(e) The Pledges shall rank equally with each other. The Pledges shall
rank ahead of any other security interest or third party right now
in existence or created in future in or over any of the Pledged
Shares. The validity and effect of each of the Pledges shall be
independent from the validity and the effect of the other Pledges
created hereunder.
(f) Freedom hereby pledges to each of the Pledgees for their ratable
and equally ranking benefit as aforesaid any and all additional
shares in the capital of the Company, including the Subscribed
Freedom Share, in whatever nominal value which Freedom may
acquire in future in the event of an increase in the capital of the
Company or otherwise, together with all ancillary rights and claims
associated with such future share(s) (the "Future Freedom
Pledge").
(g) Hilton hereby undertakes to grant to the Pledgees a partial pledge
over any and all additional shares in the capital of the Company in
whatever nominal value which Hilton may acquire in future in the
event of an increase of the capital of the Company or otherwise,
together with all ancillary rights and claims associated with the
pledged part of the future share(s) (the "Future Hilton Pledge").
The Future Hilton Pledge shall cover at least an amount equal to
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<PAGE>
15 per cent. of the nominal value of the future share(s) or such
greater percentage permitted or lesser percentage required from time
to time which shall not cause the earnings of the Company to be
deemed to be distributed to Hilton for purposes of United States
Federal Income Taxation (rounded down in each case to the nearest DM
100).
4. Dividends
(a) The Pledges, the Future Freedom Pledge and the Future Hilton Pledge
that are or are to be constituted pursuant to this Share Pledge
Agreement include the present and future rights to receive
-- dividends payable on the Pledged Shares, if any; and
-- liquidation proceeds, consideration for redemption
(Einziehungsentgelt), repaid capital in case of a capital de-
crease, any compensation in case of termination (Kundigung)
and/or withdrawal (Austritt) of a shareholder of the Company,
the surplus in case of surrender (Preisgabe) and all other
pecuniary claims associated with the Pledged Shares as well as
any other substitute received by the pledgors in lieu of the
Pledged Shares.
(b) Notwithstanding that the dividends are pledged hereunder to the
extent mentioned under Clause 4(a), the Pledgors shall be entitled
to receive and retain all dividend payments in respect of their
Pledged Shares until such time as the Pledgees are entitled to
enforce the Pledges constituted hereunder.
5. Exercise of Voting Rights
(a) The voting rights resulting from the Pledged Shares shall remain
with the Pledgors. Each Pledgor shall, however, at all times until
the full satisfaction of au Secured Obligations, be required in
exercising its voting rights to act in good faith to ensure that the
Pledgees are not in any way adversely affected. Each Pledgor
undertakes to exercise its voting rights from time to time in such a
way that, without the prior consent of the Pledgee, which consent
may not unreasonably be withheld, no resolutions are passed which
4
<PAGE>
adversely affect the value of the Pledged Shares, in particular but
not limited to, resolutions with respect to the reduction of the
Company's share capital, its liquidation, dissolution or the
termination of its existence or its business.
(b) No Pledgor shall take, or participate in, any action which results
or might result in the Pledgors' loss of ownership of the Pledged
Shares, and any other transaction which would have. the same result
as a sale, transfer, encumbrance or other disposal of the Pledged
Shares or any ancillary rights and claims associated with the
Pledged Shares or which would for any other reason be inconsistent
with the security interest of the Pledgees or the security purpose
(as described in Clause 2 hereof without the prior written consent
of the Pledgee, which consent may not unreasonably be withheld.
(c) Each Pledgor shall inform the Pledgees without undue delay of all
other actions concerning the Company which might materially affect
the security interest of the Pledgees.
6. Enforcement of Pledges
(a) If the requirements set forth inss. 1294 et. seq. of the German
Civil Code (Burgerliches Gesetzbuch) with regard to the enforcement
of the Pledges are met (Pfandreife), in particular, if the Pledgors
or either of them have failed to pay any sum due and payable under
the Secured Obligations and the Secured Obligations have become due
and payable, and the Pledgee has given written notice tot he
relevant Pledgor that the Pledgees will enforce their rights under
the Pledges, then in order to enforce the Pledges, the Pledgees may
at any time hereafter avail themselves of all rights and remedies
that a pledgee has upon default of a pledgor under the laws of the
Federal Republic of Germany. The Pledgees shall be entitled to have
the Pledged Shares sold at public auction without a prior court
ruling to the extent they are pledged. The Pledgors hereby ex-
pressly agree that five (5) days prior written notice to the
Pledgors of the place and time of any such public auction shall be
sufficient. The public auction may take place at any place in the
Federal Republic of Germany.
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<PAGE>
(b) In case the Pledgees should seek to enforce the Pledges pursuant to,
and in accordance with Clause 6(a) above, the Pledgors shall, at
their own expense, render forthwith all necessary assistance in
order to facilitate the prompt sale of the Pledged Shares and/or the
exercise by the Pledgees of any other right they may have as
pledgee.
(c) In case of enforcement of the Pledges, no rights of the Pledgees
shall pass to the Pledgors by subrogation or otherwise unless and
until all of the Secured Obligations have been satisfied and
discharged in full. Until then, the Pledgees shall be entitled to
treat all enforcement proceeds as additional collateral for the
Secured Obligations, notwithstanding their right to seek
satisfaction from such proceeds at any time.
(d) Provided that the requirements for enforcement referred to under
Clause 6 (a) above are met, all subsequent dividend payments in
relation to the Pledged Shares, if any, which will be made to the
Pledgors and, as the case may be, all payments based on similar
ancillary rights attributed to the Pledged Shares may be applied by
the Pledgees in satisfaction in whole or in part of the Secured
Obligations; notwithstanding the Pledgees' right to treat such
payments as additional collateral.
(e) Even if the requirements for enforcement referred to under Clause 6
(a) above are met, the Pledgees shall not, whether as proxy or
otherwise, be entitled to exercise the voting right attached to the
Pledged Shares. However, the Pledgors shall, upon occurrence of an
event which allows the Pledgees to enforce the Pledges, inform the
Pledgees or, as the case may be, their proxy or any other person
designated by the Pledgees, of any ordinary and extraordinary
meeting of the shareholders of the Company; the Pledgors shall allow
the Pledgees or, as the case may be, their proxy or any other person
designated by the Pledgees to participate in all shareholders'
meetings of the Company, but in no event shall the provisions
contained in Clause 5 hereof be affected or overruled by this
Clause. Save for the provision contained in Clause 9 (a) hereof, the
Pledgees' right to attend the shareholders' meeting shall lapse
immediately upon complete satisfaction and discharge of the Secured
Obligations.
6
<PAGE>
(f) The proceeds from the enforcement of the Pledges shall be applied
in the following order:
(i) expenses incurred by the enforcement of the Pledges
and/or in the realization of other securities provided
in respect of the Secured Obligations (including, but
not limited to, taxes, legal fees and other costs);
(ii) payment of any sums due as part or in respect of the
Secured Obligations as interest, late or penalty
interest, commission, fees and ancillary expenses;
(iii) repayment of any sums due as part or in respect of the
Secured Obligations as principal; and
(iv) payment of any other sums due under the Agreement, any
guarantees thereof or hereunder.
The balance of such proceeds attributable to each of the Pledged Shares, if any,
will be paid to the relevant Pledgor unless the Pledgees are required by law to
pay such balance to a third party.
(g) The Pledgees may, in their sole discretion, determine which of
several securities they may hold, if applicable, shall be used to
satisfy the Secured Obligations.
7. Undertakings of the Pledgors
During the term of this Share Pledge Agreement, the Pledgors undertake to
the Pledgees:
(i) not to create or agree or attempt to create any other security
interest or third party right in or over the Pledged Shares;
(ii) to effect promptly any payments to be made in respect of
the Pledged Shares;
(iii) to notify the Pledgees promptly of any change in the
shareholding in or in the capital of the Company;
7
<PAGE>
(iv) to increase the capital of the Company only with the prior
written consent of the Pledgee which consent shall not
unreasonably be withheld; and
(v) in the event of any increase of the capital of the Company,
not to allow, without the prior written consent of the
Pledgee, which consent shall not unreasonably be withheld, any
other party to subscribe to any future share(s), and not, by
modification of the Articles of Association of the Company or
otherwise, to defeat or impair the rights of the Pledgees
created hereunder.
8. Representations and Warranties
Each of the Pledgors represents and warrants to the Pledgees that:
(a) at the date hereof the Company is validly existing and neither
overindebted nor insolvent nor subject to any composition or
bankruptcy proceedings;
(b) the Freedom Shares and the Hilton Share are the only shares in the
Company in existence at the date hereof;
(c) all necessary corporate action has been taken and all necessary
consents for the execution and performance of this Share Pledge
Agreement have been obtained; and
(d) it is the legal and beneficial owner, free from encumbrances of the
Freedom Shares or the Hilton Share (as the case may be), and that it
will in future be the legal and beneficial owner, free from
encumbrances, of the Freedom Shares or the Hilton Share (as the case
may be).
9. Duration and Independence
(a) This Share Pledge Agreement shall remain in full force and effect
until complete satisfaction of the Secured Obligations. The Pledges
shall not cause to exist, if the Pledgors or any of them have only
temporarily discharged the Secured Obligations.
8
<PAGE>
(b) This Share Pledge Agreement shall create a continuing security and
no change or amendment whatsoever in the Agreement or in any
document or agreement related to the Agreement shall affect the
validity or the scope of this Share Pledge Agreement nor the
obligations which are imposed on the Pledgors pursuant to it. The
Pledges continue irrespective of any transfer of ownership in the
Pledged Shares or of the change of legal form of the Company.
(c) This Share Pledge Agreement is independent from any other security
or guarantee which may have been given to the Pledgees with respect
to any obligation of the Pledgors. None of such other securities
shall prejudice, or shall be prejudiced by, or shall be merged in
any way with, this Share Pledge Agreement.
10. Costs and Expenses
All costs, charges, fees and expenses triggered by this Share Pledge
Agreement or incurred in connection with its preparation, execution and
enforcement (including the fees of legal advisers and notarial fees) shall
be borne by the Pledgors. The Acting Notary advises the Deponents that his
notarial fees are owed by all Parties as joint debtors.
11. Partial Invalidity
If any provision of this Share Pledge Agreement should be or become
invalid or unenforceable, this shall not affect the validity of the
remaining provisions hereof The invalid or unenforceable provision shall
be replaced by that provision which best meets the intent of the replaced
provision.
12. Amendments
Changes and amendments of this Share Pledge Agreement including this
Clause must be made in writing unless notarial form is required. The
waiving of this requirement must also be made in writing, unless mandatory
law requires notarization.
13. Notices and their Language
(a) Any notice or other communication under or in connection with this
Share Pledge Agreement shall be in writing and shall be
9
<PAGE>
delivered personally, or sent by post, telex (with answerback
received), or facsimile transmission (to be confirmed in writing) to
the following addresses:
to Freedom: Freedom Chemical Company
Mellon Center, Suite 3905
1735 Market Street
Philadelphia, Pennsylvania 19103
USA
Attn.: Harold A. Sorgenti
fax: 215 979 3733
to Hilton: c/o Freedom as above
to Pledgees: Citicorp USA, Inc.
399 Park Avenue
6th Floor, Zone 4
New York, New York 10043
USA
Attn.: Townsend U. Weekes, Jr.
fax: 212 - 758 - 6278
or to such other address as the recipient may have notified to the
other parties in writing before receiving such notice or other
communication.
(b) Any notices or other communications under or in connection with
this Share Pledge Agreement to any party hereto shall be deemed
to have been given when delivered by hand, when sent by telex or
facsimile transmission, two (2) days after being delivered to any
overnight delivery service freight pre-paid or five (5) days after
deposit in the mail, postage prepaid, and addressed to such party at
the address given under Clause 13 (a) of this Share Pledge Agree-
ment or at any other address specified in writing.
(c) Save for the notice pursuant to ss. 16 of the German Limited
Liability Companies Act (GmbHG) any notice or other communication
under or in connection with this Share Pledge Agreement shall be
10
<PAGE>
in the English language or, if in any other language, accompanied by
a translation into English. In the event of any conflict between the
English text and the text in any other language, the English text
shall prevail.
14. Applicable Law; Jurisdiction; Service of Process
(a) This Share Pledge Agreement shall be governed by and construed in
accordance with the laws of the Federal Republic of Germany.
(b) The place of jurisdiction for all parties shall be Frankfurt am
Main. The Pledgees, however, shall also be entitled to take legal
action against either of the Pledgors before any other court of law
having jurisdiction over such Pledgor or any of its assets. The
Acting Notary advised the Deponents about the consequences of this
clause.
(c) For any service of process in any court in the Federal Republic of
Germany the Pledgors hereby appoint:
Mr. Oliver Felsenstein, Rechtsanwalt,
c/o Boesebeck, Barz & Partner,
Darmstadter Landstrasse 125,
60598 Frankfurt am Main,
Federal Republic of Germany
as agent for the receipt of service of process and acknowledges its obligation
to retain this process agent for the whole duration of this Share Pledge
Agreement, unless otherwise agreed with the Pledgees.
(d) The Pledgors and the Pledgees hereby instruct and authorize the
undersigned Notary Public to notify the Company of the pledge of the
Pledged Shares pursuant to, and in accordance with, ss.16 GmbHG by
means of forwarding a certified copy of this Share Pledge Agreement
to the Company, Georg-Reismullerstrasse 32, 80999 Munchen,
Federal Republic of Germany, by registered mail (return receipt
requested).
11
<PAGE>
Annex I
Lenders
- -------
Citicorp USA, Inc.
The Bank- of New York
Caisse Nationale De Credit Agricole
Bank of America Illinois
Crescent/Mach I Partners, L.P.
Eaton Vance Prime Rate Reserves
The First National Bank of Boston
Heller Financial, Inc.
The Long-Term Credit Bank of Japan, Limited, New York Branch Merrill Lynch
Senior Floating Rate Fund, Inc.
Mitsui Leasing (USA) Inc.
United States National Bank of Oregon
Van Kampen Merritt Prime Rate Income Trust
Issuing Banks
- -------------
Citibank, N.A.
12
<PAGE>
AMENDMENT TO THE SHARE PLEDGE AGREEMENT
WHEREAS:
A. Today the parties, represented by Mr. Oliver Felsenstein, Rechtsanwalt,
Darmstadter Landstrasse 12-5, 60598 Frankfurt am Main and the Deponent
No. 1, each acting as proxy without power of representation, have entered
into a share pledge agreement which was recorded as Roll of Deeds Nr. 4
for 1995 by the Acting Notary (hereinafter the "Share Pledge Agreement").
B. Section 3 (b), (c) and (g) of the Share Pledge Agreement does not entirely
reflect the parties' wish that Hilton pledge 15% of the Company's nominal
share capital from time to time.
NOW IT IS AGREED as follows:
1. Section 3 (b) of the Share Pledge Agreement shall be changed and be
replaced by the following wording:
"(b) Hilton hereby pledges to each of the Pledgees for their ratable
benefit by way of partial pledge (Teilverpfandung) a part of the
Hilton Share in an amount equal to approximately 15 per cent. of
the Company's nominal share capital, i.e. DM 7,500 (in words:
seven thousand five hundred Deutschmarks) and a part of the
Subscribed Hilton Share in an amount equal to approximately 15
per cent of the Company's additional nominal share capital that
will be created by registration of the Subscribed Hilton Share and
the Subscribed Freedom Share, i.e. DM 292,500 (in words: two
hundred and ninety two thousand five hundred Deutschmarks) (the
"Pledged Part of the Shares"), in each case together with all
ancillary rights and claims, associated with the Pledged Part of the
Shares (the "Hilton Pledge")".
2. Section 3 (c) of the Share Pledge Agreement shall be changed and be
replaced by the following wording:
"(c) The Pledged Shares and the Pledged Part of the Shares (together with
in each case any future share(s) or parts of future share(s)
<PAGE>
held or acquired by Freedom or Hilton respectively) are together
hereinafter referred to as the "Pledged Shares". The Freedom Pledge
and the Hilton Pledge (and in each case the Future Freedom Pledge
and the Future Hilton Pledge respectively) are together hereinafter
referred to as the "Pledges"."
3. Section 3 (g) of the Share Pledge Agreement shall be changed and be
replaced by the following wording:
"(g) Hilton hereby undertakes to grant to the Pledgees a partial pledge
over any and all additional shares in the capital of the Company in
whatever nominal value which Hilton may acquire in future in the
event of an increase of the capital of the Company or otherwise,
together with all ancillary rights and claims associated with the
pledged part of the future share(s) (the "Future Hilton Pledge").
The Future Hilton Pledge shall cover at least an amount equal to
15 per cent. of the additional nominal share capital of the Company
created by such capital increase or such greater percentage permit-
ted or lesser percentage required from time to time which shall not
cause the earnings of the Company to be deemed to be distributed
to Hilton for purposes of United States Federal Income Taxation
(rounded down in each case to the nearest DM 100)."
2
<PAGE>
Annex I
Lenders
- -------
Citicorp USA., Inc.
The Bank of New York
Caisse Nationale De Credit Agricole
Bank of America Illinois
Crescent/Mach I Partners, L.P.
Eaton Vance Prime Rate Reserves
The First National Bank of Boston
Heller Financial, Inc.
The Long-Term Credit Bank of Japan, Limited, New York Branch Merrill Lynch
Senior Floating Rate Fund, Inc.
Mitsui Leasing (USA) Inc.
United States National Bank of Oregon
Van Kampen Merritt Prime Rate Income Trust
Issuing Banks
- -------------
Citibank, N.A.
3
<PAGE>
SECURITY ASSIGNMENT AGREEMENT
THIS SECURITY ASSIGNMENT AGREEMENT is made on 16 January 1995 between:
1. Freedom Chemical Company, a corporation organized under the laws of
Delaware, USA, having its principal place of business at 1735 Market
Street, Philadelphia, Pennsylvania 19103, USA; (hereinafter referred
to as the "Assignor").
2. Citicorp USA, Inc., a corporation, organized under the laws of
Dela-ware, USA, having an office at 399 Park Ave., New York, New
York, USA, for itself and on behalf of the Lenders and Issuing Banks
referred to in Annex I; (hereinafter referred to as the "Assignee"
and together with such Lenders and Issuing Banks, the "Assignees").
WHEREAS:
A. he Assignees have made available to the Assignor a USD 27,500,000
million revolving credit facility dated 26 May 1994 and certain term
loan facilities aggregating USD 84,500,000.
B. By an amendment to the aftersaid amended and restated revolving
credit and term loan agreement dated as of 9 January 1995 (such
agreement as from time to time amended, varied, cancelled, restated,
supplemented or novated being herein referred to as the "Agreement")
the Assignor and the Assignees have extended the facility to a USD
42,500,000 million revolving credit and USD 85,500,000 term loan
facility to enable Freedom and some of its subsidiaries to purchase
certain assets in Germany.
C. The Assignor has agreed in return to grant certain security as more
detailed herein in respect of its obligations under and with respect
to the Agreement.
<PAGE>
NOW IT IS AGREED as follows:
1. Definitions
Capitalised words and expressions defined in the Agreement and used
and not otherwise defined herein bear the respective meaning as
ascribed to them in the Agreement. For purposes of this Security
Assignment Agreement the Assignee shall mean the Assignee as Trustee
for the Assignees.
2. Acquired Intellectual Property Rights
Pursuant to section 3 paragraph 4 of an acquisition agreement dated
5 January 1995, role of deeds No. 3/ 1995 of the notary public
Reinhart Densch, Frankfurt, the Assignor has acquired from Diamalt
GmbH, Georg-Reismuller-Str. 32, 80999 Munich, registered in the
Commercial Register of the Local Court Munich under HRB 91647, all
of the intangible assets of Diamalt GmbH, except its accounts
receivable, including, without limitation, all intellectual property
rights, belonging or used in the business of Diamalt GmbH as
described in more detail in said acquisition agreement and in annex
2 attached to this Security Assignment Agreement (such intangible
assets hereinafter referred to as the "Intellectual Property
Rights").
3. Secured Obligations
This Security Assignment Agreement is entered into in order to
secure the prompt and complete satisfaction of any and all present
and future, actual or contingent obligations and liabilities
whatsoever of the Assignor to the Assignees, whether for principal,
interest, fees, expenses or otherwise under the Agreement,
guarantees thereof, and under this Security Assignment Agreement, as
amended, varied or supplemented from time to time (together the
"Secured Obligations").
4. Assignment for Security Purposes
(a) The Assignor hereby assigns to the Assignee the Intellectual
Property Rights together with all present and future rights,
ancillary rights and claims associated with the Intellectual
Property Rights, including, without limitation, any claims to
fees, charges or royalties arising from the Intellectual
Property Rights (together the "Assigned Rights ").
2
<PAGE>
(b) The Assignee hereby accepts the assignment. The assignment is
in addition, and without prejudice, to any other security any
of the Assignees may now or hereafter hold in respect of the
Secured Obligations. The validity and effect of the assignment
of any of the Assigned Rights shall be independent from the
validity and the effect of the assignment of any other of the
Assigned Rights made hereunder.
(c) Notwithstanding that all rights for payments are assigned
hereunder as mentioned under Clause 4(a), the Assignor shall
be entitled to collect, receive and retain all such payments
in respect of the Assigned Rights until such time as the
Assignees are entitled to realize their security from the
Assigned Rights. For this purpose the Assignee hereby
authorizes and appoints the Assignor to exercise all rights
assigned and transferred to it under this Security
Assignment Agreement in its own name and the Assignor may deal
solely with third parties, unless otherwise expressed in this
Agreement. This authorization and appointment may be revoked
or suspended if an event as specified in Clause 5(a) has
occurred, is continuing or has been declared.
5. Realization of Security
(a) If the Assignor failed to satisfy any of the Secured
Obligations, and the Assignee has given written notice to the
Assignor that the Assignees will realize their security, the
Assignee shall have the right to sell and transfer any of the
Assigned Rights and/or collect any payments due under any of
the Assigned Rights or take any other step that may be
appropriate and economically reasonable to satisfy outstanding
claims arising from or in connection with the Secured
Obligations.
(b) In case the Assignees should seek to realize their security
pursuant to, and in accordance with Clause 5(a) above, the
Assignor shall, at its own expense, render forthwith all
necessary assistance in order to facilitate the prompt sale
and assignment or other realization of the Assigned Rights
and/or the exercise by the Assignees of any other right they
may have. The Assignor shall in particular supply the
Assignees with all data, including but not limited to
customers' names and accounts, required for the collection of
any payments that are or will become due under or in
3
<PAGE>
respect of the Assigned Rights and, upon the Assignee's
request, assist in the collection of all such payments.
(c) The proceeds from the realization of the Assigned Rights shall
be applied in the following order:
(i) expenses incurred in the realization of securities
provided in respect of the Secured Obligations
(including, but not limited to, taxes, legal fees and
other costs);
(ii) payment of any sums due as part or in respect of the
Secured Obligations as interest, late or penalty
interest, commission, fees and ancillary expenses;
(iii) repayment of any sums due as part or in respect of the
Secured Obligations as principal; and
(iv) payment of any other sums due under the Agreement, any
guarantees thereof or hereunder.
The balance of such proceeds attributable to each of the
Assigned Rights, if any, will be paid to the Assignor unless
the Assignees are required by law to pay such balance to a
third party.
(d) The Assignees may, in their sole discretion, determine which
of several securities shall be used to satisfy the Secured
Obligations.
(e) Upon complete satisfaction and settlement of the Secured
Obligations the Assignee undertakes to retransfer to the
Assignor all Assigned Rights received as security under this
agreement as well as any excess proceeds arising from the
realization of the security.
6. Duration and Independence
(a) This Security Assignment Agreement shall remain in full force
and effect until complete satisfaction of the Secured
Obligations. No obligation for release of the Assigned Rights
shall arise, if the Assignors or any of them have only
temporarily discharged the Secured Obligations.
(b) This Security Assignment Agreement shall create a continuing
security and no change or amendment whatsoever in the Agree-
4
<PAGE>
ment or in any document or agreement related to the Agreement
shall affect the validity or the scope of this Security
Assignment Agreement nor the obligations which are imposed on
the Assignor pursuant to it.
(c) This Security Assignment Agreement is independent from any
other security or guarantee which may have been given to the
Assignees with respect to any obligation of the Assignor. None
of such other securities shall prejudice, or shall be
prejudiced by, or shall be merged in any way with, this
Agreement.
7. Undertakings of the Assignor
(a) The Assignor undertakes to provide for the protection and
maintenance of the Assigned Rights, in particular pay annual
charges and/or other expenses necessary for the protection and
maintenance of the Intellectual Property Rights, and to take
any action required to ensure the validity of the Assigned
Rights. Upon the Assignee's request the Assignor shall prove
payment of the aforementioned annual charges and/or other
expenses to the Assignees. The Assignees shall be entitled,
although not obliged, to effect payment of such annual charges
or other expenses themselves on behalf and for the account of
the Assignor. The Assignor shall notify the Assignees
immediately, if the Assignor knows or has reason to believe,
that any or all of the Assigned Rights are impaired or
endangered by any act or any party or third party.
(b) The Assignee shall be entitled, although not obliged, to have
the Intellectual Property Rights assigned to it under this
Agreement registered under its name or the name of a third
party appointed by it, at the Assignor's expense. Therefore
the Assignor undertakes to declare upon the Assignee's request
in each case its consent, attested by a public notary, to the
reregistration of the Intellectual Property Rights.
(c) The Assignor grants to the Assignees the right to inspect at
any time its books and other documents and data in order to
inspect the Assigned Rights.
8. Costs and Expenses
All costs, charges, fees and expenses triggered by this Security
Assignment Agreement or incurred in connection with its preparation,
execution
5
<PAGE>
and enforcement (including the fees of legal advisers and notarial
fees) shall be bome by the Assignor.
9. Partial Invalidity
If any provision of this Agreement should be or become invalid or
unenforceable, this shall not affect the validity of the remaining
provisions hereof. The invalid or unenforceable provision shall be
replaced by that provision which best meets the intent of the
replaced provision.
10. Amendments
Changes and amendments of this Agreement including this Clause must
be made in writing unless notarial form is required. The waiving of
this requirement must also be made in writing, unless mandatory law
requires notarization.
11. Notices and their Language
(a) Any notice or other communication under or in connection with
this Security Assignment Agreement shall be in writing and
shall be delivered personally, or sent by post, telex (with
answerback received), or facsimile transmission (to be
confirmed in writing) to the following addresses:
to Freedom: Freedom Chemical Company
Donald W. McPhail
Mellon Center, Suite 3905
1735 Market Street
Philadelphia, Pennsylvania 19103
USA
Attn.: Harold A. Sorgenti
fax: 215 979 3733
to Assignees: Citicorp USA, Inc.
399 Park Avenue
6th Floor, Zone 4
New York, New York 10043
USA
6
<PAGE>
Attn.: Townsend U. Weekes, Jr.
fax: 212 -758 -6278
or to such other address as the recipient may notify or may
have notified to the other parties in writing.
(b) Any notices or other communications under or in connection
with this Security Assignment Agreement to any party hereto
shall be deemed to have been given when delivered by hand,
when sent by telex or facsimile transmission, two (2) days
after being delivered to any overnight delivery service
freight pre-paid or five (5) days after deposit in the mail,
postage prepaid, and addressed to such party at the address
given under Clause 14 (a) of this Security Assignment
Agreement or at any other address specified in writing.
(c) Any notice or other communication under or in connection with
this Security Assignment Agreement shall be in the English
language or, if in any other language accompanied by a
translation into English. In the event of any conflict between
the English text and the text in any other language, the
English text shall prevail.
12. Applicable Law; Jurisdiction; Service of Process
(a) This Security Assignment Agreement shall be governed by and
construed in accordance with the laws of the Federal Republic
of Germany.
(b) The place of jurisdiction for all parties shall for the
benefit of the Assignees be Frankfurt am Main. The Assignees,
however, shall also be entitled to take legal action against
the Assignor before any other court of law having jurisdiction
over such Assignor or any of its assets.
(c) For any service of process in any court in the Federal
Republic of Germany the Assignor hereby appoints
Mr. Oliver Felsenstein, Rechtsanwalt,
c/o Boesebeck, Barz & Partner,
Darmstadter Landstrasse 125,
60598 Frankfurt am Main,
Federal Republic of Germany
7
<PAGE>
as agent for the receipt of service of process and acknowledges its obligation
to retain this process agent for the whole duration of this Security Assignment
Agreement, unless otherwise agreed with the Assignees.
Munchen, den 16.01.1995
----------------------- -----------------------
Place/Date Place/Date
/s/ Brian McNamara
----------------------- -----------------------
Freedom Chemical Company Citicorp USA, Inc.
8
<PAGE>
AGREEMENT FOR THE PURCHASE
AND SALE OF ASSETS
BETWEEN
FREEDOM TEXTILE CHEMICALS CO.
AND
AMERICAN CYANAMID COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. CLOSING.......................................................................... 2
SECTION 2. PURCHASE AND SALE OF ASSETS: GRANT Of LICENSE TO
SELLER........................................................................... 2
2.1 Purchased Assets......................................................................... 2
2.2 Excluded Assets.......................................................................... 3
2.3 Transfer of Title to the Assets.......................................................... 3
2.4 Non-Assignable Contracts................................................................. 4
2.5 Grant of License to Seller............................................................... 5
2.6 Option to Purchase Real Estate........................................................... 8
SECTION 3. PURCHASE PRICE................................................................... 8
3.1 Purchase Price........................................................................... 8
3.2 Adjustment of Inventory Purchase Price................................................... 10
3.3 Payment of Adjustment.................................................................... 12
3.4 Liabilities.............................................................................. 13
3.5 Liabilities Not Assumed by Buyer......................................................... 13
3.6 Allocation of Purchase Price............................................................. 13
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER......................................... 14
4.1 Organization, Good Standing and Corporate Power.......................................... 14
4.2 Authorization for Agreement.............................................................. 15
4.3 Validity of Contemplated Transaction, etc................................................ 15
4.4 Financial Information.................................................................... 16
4.5 Tax Matters.............................................................................. 18
4.6 Litigation............................................................................... 19
4.7 Title to the Assets...................................................................... 20
4.8 Compliance with Law...................................................................... 21
4.9 Permits and Licenses..................................................................... 22
4.10 Contracts................................................................................ 23
4.11 Contract Observance...................................................................... 24
4.12 Patents, Trademarks and Copyrights....................................................... 24
4.13 Employee Benefit Plans................................................................... 25
4.14 Conduct of the Assets and Operations Relating
Thereto.................................................................................. 27
4.15 Inventory................................................................................ 29
4.16 Employee Relations....................................................................... 29
4.17 All Assets Transferred................................................................... 30
4.18 Investment Representations............................................................... 30
4.19 Knowledge of Seller...................................................................... 30
4.20 Status of Real Property.................................................................. 31
4.21 Seller's Status.......................................................................... 31
4.22 Restrictions on Real Property............................................................ 31
4.23 Accuracy of Plans........................................................................ 31
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
4.24 Undisclosed Facts........................................................................ 32
4.25 Required Work............................................................................ 32
4.26 Use of Real Property..................................................................... 32
4.27 Access to Real Property.................................................................. 33
4.28 Condition of the Assets.................................................................. 33
4.29 Certain Environmental Matters............................................................ 33
4.30 Utilities................................................................................ 33
4.31 Accuracy of Schedules.................................................................... 34
SECTION 5. BUYER'S REPRESENTATIONS AND WARRANTIES........................................... 34
5.1 Organization, Good Standing and Corporate Power.......................................... 34
5.2 Authorization for Agreement.............................................................. 35
5.3 Validity of Contemplated Transaction, etc................................................ 35
5.4 Litigation............................................................................... 36
SECTION 6. NO BROKERS....................................................................... 36
SECTION 7. FURTHER AGREEMENTS............................................................... 37
7.1 Buyer's Access to Information and Records Prior to
Closing.................................................................................. 37
7.2 Parties' Access to Records After Closing................................................. 39
7.3 Reservation of Name...................................................................... 40
7.4 Pro Ration............................................................................... 41
7.5 Related Agreements....................................................................... 42
7.6 Packaged Products and Packaging Material................................................. 43
7.7 Tax Treatment of Intangibles............................................................. 44
SECTION 8. OBLIGATIONS OF SELLER UNTIL CLOSING.............................................. 44
8.1 Operation of Business.................................................................... 44
SECTION 9. CONDITIONS OF CLOSING............................................................ 47
9.1 Conditions of Buyer's Obligations........................................................ 47
9.2 Conditions of Seller's Obligations....................................................... 50
SECTION 10. CLOSING DOCUMENTS................................................................ 52
10.1 Seller's Obligations..................................................................... 52
10.2 Buyer's Obligations...................................................................... 54
SECTION 11. HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT
OF 1976.......................................................................... 56
SECTION 12. EMPLOYEE AND EMPLOYEE BENEFIT MATTERS............................................ 56
12.1 Employees................................................................................ 56
12.2 Compensation; Benefits................................................................... 58
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
12.3 Employee Benefit Plans................................................................... 59
SECTION 13. CLOSING EXPENSES AND TAXES....................................................... 62
SECTION 14. INDEMNIFICATIONS................................................................. 62
14.1 Seller Indemnity......................................................................... 62
14.2 Buyer Indemnity.......................................................................... 63
14.3 Limitations.............................................................................. 64
14.4 Procedure for Indemnification............................................................ 65
14.5 Sole Remedy.............................................................................. 66
14.6 Survival and Term of Indemnification..................................................... 67
SECTION 14A INDEMNIFICATION FOR ENVIRONMENTAL CLAIMS......................................... 67
SECTION 15. BULK SALES LAW................................................................... 79
SECTION 16. TERMINATION...................................................................... 79
SECTION 17. OTHER PROVISIONS................................................................. 81
17.1 Public Announcements..................................................................... 81
17.2 Costs and Expense........................................................................ 81
17.3 Passage of Title and Risk of Loss........................................................ 81
17.4 Notices.................................................................................. 82
17.5 Assignment............................................................................... 82
17.6 Schedules and Exhibits................................................................... 83
17.7 Integration, Amendment and Modification.................................................. 83
17.8 Waiver and Discharge..................................................................... 83
17.9 Captions................................................................................. 84
17.10 Law Governing............................................................................ 84
17.11 Benefit of Parties....................................................................... 84
17.12 Counterparts............................................................................. 84
17.13 Indirect or Consequential Damages........................................................ 85
17.14 Severability............................................................................. 85
17.15 Parties in Interest...................................................................... 85
17.16 References to Laws....................................................................... 85
</TABLE>
iii
<PAGE>
AGREEMENT FOR THE PURCHASE
AND SALE OF ASSETS
(Textile Chemicals)
THIS AGREEMENT is made this 28th day of February, 1992,
between FREEDOM TEXTILE CHEMICALS CO. ("Buyer"), a Delaware
corporation, and AMERICAN CYANAMID COMPANY ("Seller"), a Maine
corporation.
Seller owns a manufacturing facility in Mecklenburg
County, North Carolina (the "Facility") and Seller manufactures,
sells, and distributes glyoxal, glyoxal-based reactants, and
other specialty chemicals useful in the textile industry (collec-
tively the "Products"). The Products are defined for this
Agreement as those products listed and described in SCHEDULE 4.15
(the "Products List").
Buyer desires to purchase from Seller, and Seller
desires to sell, transfer, and assign to Buyer, certain assets
relating to Seller's business of manufacturing, selling and
distributing the Products (the "Assets"), all upon the terms and
conditions of this Agreement. The Assets, including, without
limitation, any and all rights, privileges, permits, customer
lists, goodwill and Confidential Information (as hereinafter
defined) associated with the use of the Assets in connection with
the manufacture, sale and distribution of Products are hereinaf-
ter referred to as the "Business." Accordingly the parties agree
as follows:
<PAGE>
SECTION 1. CLOSING
The closing of the purchase and sale of the Assets (the
"Closing") shall take place at the offices of Seller, One Cyana-
mid Plaza, Wayne, New Jersey 07470, U.S.A., at 11:00 A.M., local
time, on May 29, 1992, or a date which is not more than five (5)
business days after the date on which all of the conditions to
Closing contained in this Agreement have been satisfied as
provided herein, whichever occurs sooner, or at such other place,
time and date as shall be fixed by agreement between the parties.
The date of Closing is referred to herein as the "Closing Date."
The Closing shall be effective at 12:01 A.M. on the Closing Date.
SECTION 2. PURCHASE AND SALE OF ASSETS: GRANT Of LICENSE TO
SELLER
2.1 Purchased Assets. Subject to the terms and
conditions of this Agreement, and on the basis of the within
representations and warranties, at the Closing, Seller will (a)
sell, transfer, assign, convey and deliver to Buyer, and Buyer
agrees to purchase from Seller the Assets. The Assets are
defined to be those which are described in SCHEDULE 2.1, the
annexes to SCHEDULE 2.1, including the real property described on
ANNEX 1 of SCHEDULE 2.1 (the "Real Property") and the schedules
referenced in SCHEDULE 2.1, all attached hereto (the defined
terms in which have the same meaning as such terms have in this
text). The Assets will be sold free and clear of all mortgages,
liens, encumbrances, equities, claims and obligations to other
persons of every kind and character, including, with respect to
2
<PAGE>
the Real Property, any lease, tenancy, occupancy, or option or
other right to purchase any part of the Real Property, as well as
any easement, covenant or restriction burdening or otherwise
restricting the use of the Real Property, except those which are
specifically disclosed on SCHEDULE 4.7 and (b) grant to Buyer a
royalty-free, exclusive right and license to use the trademarks
listed in EXHIBIT A TO EXHIBIT XIV hereto for a period of eigh-
teen (18) months from the Closing Date (the "Trademark License")
in and only in connection with the relevant Products listed in
SCHEDULE 4.15.
2.2 Excluded Assets. The parties expressly acknowl-
edge and agree that there shall be excluded from the Assets, all
assets, rights and properties specifically described on SCHEDULE
2.2 annexed hereto (collectively the "Excluded Assets").
2.3 Transfer of Title to the Assets. The sale,
assignment, conveyance, transfer and delivery by Seller of the
Assets shall be made at the Closing by a bill of sale substan-
tially in the form of EXHIBIT I hereto (the "Bill of Sale"); a
deed substantially in the form of EXHIBIT II hereto (the "Deed");
and other appropriate instruments of transfer and assignment as
Buyer may reasonably require. All assignments of patents shall
be implemented by the delivery to Buyer of an executed master
assignment document (the "Patent Assignment"), in the form
attached hereto as EXHIBIT III. Assignment of contracts shall be
implemented by the delivery to Buyer of an assignment in the form
of EXHIBIT XI hereto (the "Contract Assignment"). Assignment of
3
<PAGE>
United States trademark registrations shall be implemented by the
delivery to Buyer of an assignment in the form of EXHIBIT XII
hereto (the "U.S. Trademark Assignment"). Assignment of foreign
trademarks and assignment of copyrights shall be implemented by
means of delivery to Buyer of an assignment in the form of
EXHIBIT XIII hereto (the "General Assignment and Bill of Sale")
and delivery to Buyer, subsequent to Closing, of executed docu-
ments (to be supplied at Seller's expense as expeditiously as
possible after Closing) suitable for recording at Buyer's ex-
pense. The Assignment of all permits and licenses in any way
relating to the Assets shall be implemented by the delivery to
Buyer of an assignment in the form of EXHIBIT IX hereto (the
"Permit Assignment"). The assignment of the lease for the
storage tank presently leased by the Business in Antwerp, Belgium
will be implemented by the delivery to Buyer or a subsidiary of
Buyer as designated by Buyer of an assignment in the form of
EXHIBIT XV hereto (the "Tank Lease Assignment"). Seller cove-
nants and agrees to execute and deliver, without additional
consideration, such other and further instruments of assignment,
transfer or conveyance of any of the Assets as Buyer may reason-
ably require, whether on or after the Closing Date, to evidence
or perfect Buyer's right, title and interest in and to the
Assets.
2.4 Non-Assignable Contracts. To the extent that
any of the Contracts (as hereinafter defined) are not assignable
without the consent of another party, this Agreement shall not
4
<PAGE>
constitute an assignment or an attempted assignment if such
assignment or attempted assignment would constitute a breach.
All Contracts which are not assignable are listed in SCHEDULE
2.4. Seller agrees to use its best efforts to obtain the consent
of each other party to any Contract to the assignment thereof to
Buyer in all cases in which such consent is required for assign-
ment or transfer. If such consent is not obtained at or prior to
the Closing, Seller agrees to cooperate with Buyer in subsequent-
ly seeking such consent and in any reasonable arrangements
designed to provide for Buyer the benefits under any such Con-
tract, including enforcement at the cost of Seller and for the
benefit of Buyer of any and all rights of Seller against each
other party thereto arising out of the cancellation by such other
party or otherwise. If and to the extent that such arrangements
cannot be made, Buyer shall have no obligation with respect to
any such Contract, and Seller shall faithfully fulfill its
obligations under such Contract.
2.5 Grant of License to Seller. From and after the
Closing, Buyer hereby grants to Seller a royalty-free, world-wide
non-exclusive license in perpetuity to hold and use all of
Buyer's manufacturing technology pertaining to the manufacture of
the Products AEROTEX 802, AEROTEX 900 and CYANATEX TSI (the
"License Technology") made available hereunder as of the Closing
Date or thereafter, including, but not limited to, all computer
programs, processes, operating procedures, methods, techniques,
product formulae, specifications, designs, research and develop-
5
<PAGE>
ment data, patents, inventions, invention records, patent appli-
cations, process drawings, process flow-sheets, operating manuals
and reports, toxicology reports, material safety data sheets,
technical bulletins, and all other technology and records per-
taining solely and exclusively to the License Technology, for the
sole and exclusive purpose of Seller's manufacturing, or having
manufactured for it, using and selling chemicals made using the
License Technology to markets outside the textile trade. In the
event Seller determines to contract with third parties to manu-
facture products using the License Technology in the United
States pursuant to the preceding sentence, Seller shall notify
Buyer and afford Buyer a reasonable period of time to submit a
proposal to Seller for such manufacturing. Seller will have the
right, in its sole discretion, to accept or reject such proposal
or to negotiate such proposal with Buyer.
Buyer shall make existing License Technology available
to Seller as of the Closing Date. In addition, to the extent
Buyer makes technology discoveries or developments within twelve
months after the Closing Date relating to the License Technology
that, in Buyer's judgment, may become or is commercially valu-
able, Buyer shall make such technology available to Seller at no
additional cost as License Technology. Buyer shall notify Seller
of such discoveries or developments semi-annually by providing a
review of such discoveries or developments during the prior six
(6) months. Buyer shall further make additional License Technol-
ogy discovered or developed more than twelve (12) months after
6
<PAGE>
the Closing Date available to Seller after Closing at reasonable
royalties to be negotiated. Buyer shall notify Seller of such
discoveries or developments semi-annually by providing a review
of such discoveries and developments during the prior six (6)
months. Seller acknowledges and agrees that all information
related to the License Technology (including any improvements
thereto or thereon made by Buyer at any time) belong exclusively
to Buyer, and Seller hereby relinquishes and assigns to Buyer any
and all rights it may have thereto, subject to its rights to use
the License Technology hereunder. Seller agrees to keep the
License Technology secret and not disclose the License Technology
and any of the Confidential Information (as defined in subsection
7.2) transferred to Seller pursuant to this subsection to any
third party, except in connection with its rights hereunder to
manufacture, have manufactured, use and sell chemicals using the
License Technology. Upon Buyer's consent, which shall not be
unreasonably withheld, Seller shall have the right to sublicense
the License Technology solely for purposes consistent with the
rights granted to Seller in this subsection 2.5. Such sublicens-
ee shall not have the right to sublicense the License Technology
without the prior consent of Buyer, which shall not be unreason-
ably withheld. In the event Seller shall need to disclose the
License Technology to a third party, then Seller shall take
appropriate measures to safeguard the secrecy of the License
Technology and Seller shall be responsible for and liable to
Buyer for any such disclosure and shall indemnify Buyer for any
7
<PAGE>
and all damages resulting from such disclosure. In addition,
Buyer shall have the right independently to safeguard the secrecy
of the License Technology.
2.6 Option to Purchase Real Estate. Seller hereby
grants to Buyer an option to purchase during a period of twelve
months following the Closing certain land adjacent to the Facili-
ty as more specifically described on SCHEDULE 2.6 for a price of
Nine Hundred Ten Thousand Dollars ($910,000) under and subject to
other terms and conditions to be agreed upon by the parties.
SECTION 3. PURCHASE PRICE
3.1 Purchase Price. The purchase price (the "Pur-
chase Price") for the Assets, including the distribution center,
office and warehouse buildings and certain other related property
shall be the sum of Ten Million Eight Hundred Thousand dollars
(U.S. $10,800,000) less an amount payable under a separate cove-
nant not to compete plus an amount determined pursuant to subsec-
tion 3.2 hereof in respect of the Inventory (as defined in
subsection 4.15) as of the Closing Date. Buyer shall pay the
Purchase Price in the following manner:
(a) Buyer shall pay to Seller at Closing the
sum of Eight Million Dollars (U.S. $8,000,000) in cash reduced by
the amount paid for a separate covenant not to compete;
(b) Buyer will also pay to Seller Preferred
Stock (as hereinafter defined) with an aggregate par value of
$2,800,000;
8
<PAGE>
(c) Buyer will also pay to Seller at Closing in
cash the Estimated Inventory Amount (as hereinafter defined)
payable to Seller for the Inventory (as defined in subsection
4.15) included in the Assets as of the Closing as determined by
Seller not less than 10 days prior to the Closing Date in accor-
dance with the valuation standards presented in subsection 3.2.
The cash delivered for the Estimated Inventory Amount shall be
reduced by the amount of a promissory note which shall be deliv-
ered to Seller by Buyer at Closing in an amount equal to the cost
of the portion of the Inventory composed of all of the catalyst
in Seller's Inventory at the Closing, determined in accordance
with subsection 3.2. Such note will be in the form acceptable to
Seller including the following terms and conditions: the note
will be payable not more than one (1) year after the Closing with
interest payable monthly at the same rate as on the "Term Loan"
from the Bank of New York or such other credit source selected by
Buyer for the purchase of the Assets; the note shall be subordi-
nated to such Term Loan and secured by a security interest on
such catalyst Inventory, and subordinated only to the Term Loan's
first security interest; Buyer agrees that it will not acquire,
purchase or reclaim for the purposes of utilizing a replacement
charge any other catalyst charge unless and until the principal
of this note has been repaid in its entirety with any interest
accrued during the portion of the month in which this note is
repaid;
9
<PAGE>
(d) Preferred Stock shall be Series A Preferred
Stock with an aggregate par value of $2,800,000 issued by Buyer
which shall pay cumulative dividends semi-annually at a rate of
8.5% per annum. The Preferred Stock shall be redeemed ten (10)
years after the date of its issue at a price equal to par value
plus accrued unpaid dividends and the compounding thereon. Buyer
shall have the right, however, to redeem the Preferred Stock at
any time from time to time at a price of par value plus accrued
unpaid dividends and the compounding thereon. Other terms and
conditions of the Preferred Stock are more specifically set forth
in SCHEDULE 3.1 hereto; and
(e) All cash payments shall be made by the
transfer of immediately available federal funds for credit to
Seller's Account No. 160-30-282 at Morgan Guaranty Trust Company
of New York, 23 Wall Street, New York, N.Y. ABA No. 02100023.
3.2 Adjustment of Inventory Purchase Price. Within
ten (10) days prior to the Closing, Seller and Buyer, each at its
own expense, shall jointly take a physical count of the Invento-
ry, using the practices and procedures customarily employed by
Seller in its taking of physical counts of the Inventory. The
date on which such physical count shall be completed shall be the
"Initial Determination Date."
Inventory will be valued by both parties, at total
standard cost plus or minus raw material price variances only.
In valuation of the inventory all quantities on hand will be
traced back to the most recent purchase to determine the price
10
<PAGE>
variances, if any, to apply to the standard cost. For example,
based upon the most recent purchase cost of raw materials con-
tained in finished goods in the Inventory on hand at the date of
Closing and assuming that the total raw material cost variances
were five percent (5%) higher than raw material standard costs,
such Inventory would be valued at one hundred five percent (105%)
of raw material standard cost plus the standard costs of all
other components carried in inventory as of the date of Closing.
Buyer and Seller will endeavor to agree on the value of
the Inventory as of the Initial Determination Date prior to the
Closing. Such value shall be the "Estimated Inventory Amount."
Should Buyer and Seller fail to agree on the Estimated Inventory
Amount then they shall attempt during a ten (10) day period from
and after the Initial Determination Date to resolve their differ-
ences. If following this time period Buyer and Seller are still
in disagreement, then Seller may elect not to close this transac-
tion unless Buyer pays the Estimated Inventory Amount determined
by Seller. If Buyer makes such payment, it will not prejudice
Buyer's right to seek an adjustment of this valuation as provided
in the following paragraph.
Following the Closing, Buyer and Seller shall measure
any changes in the Inventory between the Inventory Determination
Date and the Closing, and attempt to mutually determine any
adjustments whether arising from changes in the Inventory in the
period from the Initial Determination Date to the Closing or from
the differing calculations of the Estimated Inventory Amount. In
11
<PAGE>
the event they are unable to do so, they shall each submit their
respective valuations to a mutually acceptable, nationally recog-
nized public accounting firm (the "Arbiter Firm") who shall
determine such value within 90 days after the Closing Date in
accordance with the valuation method hereinabove described. For
purposes of this Agreement, the value of the Inventory shall be
equal to the value determined by the Arbiter Firm. The fees of
the Arbiter Firm shall be shared equally by Buyer and Seller.
3.3 Payment of Adjustment. Within ten (10) business
days after the final determination of the value of the Inventory
pursuant to subsection 3.2, a final cash adjustment in respect of
the amount paid by Buyer to Seller at Closing in respect of the
portion of Purchase Price attributable to the Inventory shall be
made. In the event that the value of the Inventory is less than
the amount paid by Buyer to Seller at Closing pursuant to subsec-
tion 3.1(c), then Seller shall pay to Buyer the full amount of
such excess in immediately available federal funds pursuant to
subsection 3.1, together with interest thereon at the prime rate
announced by The Chase Manhattan Bank (N.A.) on the Closing Date
at the principal office of such bank in New York City, New York,
U.S.A. (the "Prime Rate") from the Closing Date until the date on
which such payment is made. In the event that the value of the
Inventory is greater than the estimated amount for Inventory paid
by Buyer to Seller at Closing pursuant to subsection 3.1(c), then
Buyer shall pay to Seller such additional amount in immediately
available federal funds, together with interest thereon at the
12
<PAGE>
Prime Rate from the Closing Date until the date on which such
payment is made pursuant to subsection 3.1.
3.4 Liabilities. In further consideration of the
purchase of the Assets, Buyer shall execute and deliver to Seller
at the Closing an assumption agreement substantially in the form
of EXHIBIT IV hereto (the "Assumption Agreement") with respect to
the obligations and liabilities of Seller set forth in SCHEDULE
3.4 which shall be assumed from and after the Closing by Buyer.
3.5 Liabilities Not Assumed by Buyer. Except as set
forth in subsection 3.4, Buyer shall not assume or incur, and
Seller shall remain liable to pay, perform and discharge, all
liabilities and obligations of Seller (i) arising from Seller's
conduct of its business prior to the Closing Date, or (ii) as set
forth in this Agreement.
3.6 Allocation of Purchase Price. For all income
tax purposes, Buyer and Seller shall report the transactions
contemplated by this Agreement in accordance with a mutually
agreed allocation of the consideration therefor, as calculated in
accordance with Section 1060 of the Internal Revenue Code of
1986, as amended, among the Assets and the Non-competition
Agreement (as hereinafter defined). Buyer and Seller shall
endeavor to agree on an allocation of the Purchase Price by
December 31, 1992. To the extent that Buyer must make an elec-
tion described in subsection 7.7, which requires an allocation of
the Purchase Price in whole or in part in connection therewith,
then the latest date for agreement on the allocation of the
13
<PAGE>
Purchase Price shall be the earlier of (1) December 31, 1992 or
(2) ten (10) business days prior to the last date on which such
election must be made. In the event Buyer and Seller are unable
to reach agreement by the applicable date, they shall each submit
their respective allocations as required on their appropriate
income tax returns.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer and agrees with
Buyer that the following representations and warranties are true
and correct on the date of this Agreement and shall survive the
Closing to the extent provided in Section 5 and subsections 14.1
and 14.3 hereof:
4.1 Organization, Good Standing and Corporate Power.
Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maine, and has the
corporate power and authority to own the Assets and to conduct
its operations to the extent it uses such Assets as they are
presently being used. Seller has full corporate power and
authority to assign, convey, transfer and deliver the Assets to
Buyer and to perform the other covenants of Seller under this
Agreement, the Non-competition Agreement, the Deed, the Bill of
Sale, the Patent Assignment, the U.S. Trademark Assignment, the
General Assignment and Bill of Sale, the Permit Assignment, the
Contract Assignment, the Tank Lease Assignment, the Real Estate
Option Agreement, the Assumption Agreement, the Seller Services
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Agreement (as defined in subsection 7.5), the Requirements
Manufacturing Agreement, the Lease, the Foreign Supply Agreement
(as defined in subsection 7.5), the Trademark License and such
other documents as reasonably are required to consummate this
transaction (collectively the "Sale Documents"). Complete and
correct copies of the Certificate of Incorporation of Seller as
amended to the date hereof (certified by its Secretary or an
Assistant Secretary) have been or will be delivered to Buyer.
4.2 Authorization for Agreement. All corporate
approvals necessary to the execution, delivery and performance of
the Sale Documents by Seller have been obtained; there are no
charter, by-law or other corporate restrictions which would
prevent Seller from performing fully its obligations under the
Sale Documents and each of the Sale Documents constitutes the
legal, valid and binding obligation of Seller and is enforceable
against Seller in accordance with its terms, except to the extent
limited by general principles of equity and by bankruptcy,
insolvency or other similar laws and general equitable principles
affecting the rights of creditors generally.
4.3 Validity of Contemplated Transaction, etc.
Neither the execution and delivery of the Sale Documents by
Seller nor the consummation of the transactions contemplated
therein will contravene or violate (a) any law, ordinance, or
governmental rule or regulation to which Seller is subject, (b)
any judgment, order, writ, injunction or decree of any court or
of any governmental official, agency or instrumentality which is
15
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applicable to Seller, or the Assets, (c) the Certificate of
Incorporation or By-Laws of Seller or any amendments thereto or
restatements thereof; or be in conflict with or result in the
breach (with or without the giving of notice or lapse of time, or
both) or accelerate the performance required on the part of
Seller of any term, condition or provision of any notes agree-
ment, instrument, indenture, contract, lease, agreement or other
document or understanding to which Seller is a party or by which
Seller is otherwise bound or affected or by which any of Seller's
properties or assets may be bound or affected, or result in the
creation or imposition of any mortgage, lien, charge or encum-
brance against any of the Assets; or give rise to any right of
rescission or similar remedy.
4.4 Financial Information. Attached hereto as
SCHEDULE 4.4 Subschedule A is the unaudited asset balances of the
Assets at March 31, 1991 (the "Asset Statement"). Also attached
hereto as SCHEDULE 4.4 Subschedule B is the estimated, unaudited
Proforma income statements relating to the Assets for the years
ended December 31, 1988, 1989 and 1990 and the first nine months
of 1991 (the "Proforma Statements"). The Asset Statement and the
Proforma Statements collectively are herein referred to as the
"Financial Statements."
The Asset Statement is believed to be a reasonable
presentation of the asset balances at March 31, 1991, without
material distortion except as indicated in the notes to the Asset
Statement. The Proforma Statements for the years ended December
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31, 1988, 1989 and 1990 and the first nine (9) months of 1991 are
part of the consolidated financial statements of American Cyana-
mid Company and subsidiaries included in the American Cyanamid
Company Annual Reports for the applicable periods, except as
indicated herein. The Proforma Statements are not consistent
with generally accepted accounting principles (GAAP) or Seller's
internal accounting standards and principles in the following
ways: (a) transfers to Seller's paper chemicals business have
been stated as sales and with costs adjusted to approximate break
even gross profit; (b) special manufacturing charges, commercial
and divisional expenses and international costs and profits have
been estimated by Seller; (c) certain corporate, group and
divisional overhead have been excluded. The presentations are
believed reasonable and without material distortion except as
indicated in the notes to the Proforma Statements.
Also attached hereto as SCHEDULE 4.4 Subschedules C, D,
E and F for the years ended December 31, 1988, 1989 and 1990 and
the first nine months of 1991 are respectively (i) Detail of
Proforma Statements Relating to U.S. Merchant Sales, Costs and
Profits (the "U.S. Detail Statement"); (ii) Detail of Proforma
Statements Relating to International Sales (the "International
Detail Statement"); (iii) Charlotte Plant Period Cost Summary
(the "Period Cost Statement"); (iv) U.S. Expense Summary - Seller
Basis (the "U.S. Expense Statement"); all four of which subsched-
ules are referred to herein as the "Detail Statements." The
Detail Statements include data extracted or consolidated from
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computer-based financial reporting systems of Seller, in accor-
dance with Seller's internal accounting policies. They are part
of the consolidated financial statements of American Cyanamid Co.
and subsidiaries included in the American Cyanamid Company Annual
Reports for the applicable periods. The Detail Statements are
believed accurate and without material distortion, and fairly
present the results contained therein, except as indicated in the
notes to each of the Detail Statements.
The Financial Statements and the Detail Statements
collectively are referred to herein as the Financial Information.
Seller makes no representation, warranty or agreement that the
Financial Information represents the results which may be expect-
ed from the operation of the Assets by Buyer subsequent to the
Closing.
4.5 Tax Matters. As of the Closing, Seller will
have discharged any tax liens on the Real Property and other
Assets arising from nonpayment of taxes payable prior to Closing.
All state and local and other tax returns and reports required to
be filed by Seller with appropriate governmental taxing authori-
ties in respect of the Business have been filed, and all such
returns and reports are true, correct and complete and reflect
accurately all liability for taxes of Seller for the period
covered thereby and all taxes and other charges shown by such
returns and reports to be due and payable, or which are otherwise
due and payable, have been paid or appropriate reserves or other
provision for payment thereof has been made. Except as disclosed
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in SCHEDULE 4.5 to this Agreement, Seller is not, in respect of
the Assets or Business, a party to any pending action, suit,
proceeding, investigation or audit, nor is any such action, suit,
proceeding, investigation or audit threatened by any governmental
taxing authority for the assessment or collection of taxes,
interest, penalties, assessments or deficiencies, and no claim
for assessment or collection of taxes, interest, penalties,
assessments or deficiencies has been asserted against Seller in
respect of the Assets or Business. Except as disclosed in
SCHEDULE 4.5 to this Agreement, Seller has not received any
notice of, or is not aware of any information of, any increases
or intention to seek increases in the assessed value of any of
the Assets, or to the knowledge of Seller, any basis therefor.
4.6 Litigation. Except as disclosed in SCHEDULE 4.6
to this Agreement, there is no suit, action, arbitration or
legal, administrative or other proceeding in which Seller is a
party or governmental investigation pending or, to the knowledge
of Seller, threatened against Seller or the Assets which has or
might reasonably be expected to have a material adverse effect on
the condition (financial or otherwise), of the Business or which
might affect or restrict the ability of Seller to consummate the
transactions contemplated hereby, except (i) worker's compensa-
tion claims, (ii) automobile accident claims in which the amount
involved is less than $50,000, (iii) claims solely for benefits
under any benefit plan which can be satisfied from the separate
assets of such plan, (iv) invocations of grievance procedures
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under any collective bargaining agreement, and (v) product
complaints not alleging personal injury or property damage in
excess of $50,000. Seller is not subject to, in violation of, or
in default with respect to, any judgment, order, writ, injunction
or decree of any court or any governmental official, department,
commission, authority, board, bureau, agency or other instrumen-
tality to which it or the Assets is subject, which has or might
reasonably be expected to have a material impact on the condition
(financial or otherwise) of the Business.
4.7 Title to the Assets. Seller has good and mar-
ketable title to the Assets, free and clear of any and all
mortgages, liens, pledges, security interests, restrictions,
encumbrances, adverse claims or other defects in title of any
nature whatsoever, except (a) those referred to in SCHEDULE 4.7
to this Agreement, (b) liens for current taxes not yet due and
payable, and (c) such imperfections of title, easements and
encumbrances as, alone, or in the aggregate, do not materially
detract from the value of the Assets subject thereto or affected
thereby or otherwise do not materially interfere with their
present use. Title to the Real Property shall be such as to be
insurable at regular rates by a title insurance company satisfac-
tory to Buyer on an ALTA Owner's Policy of Title Insurance (Form
1970-B) in an amount equal to $4.5 million dollars free and clear
of all liens except as set forth in the preceding sentence and
with such endorsements as Buyer shall reasonably require, includ-
ing, but not limited to an endorsement insuring Buyer's right to
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use all sewer lines currently in working operation connected to
the Real Property, limited to easement rights granted to Buyer by
the Deed and subject to all exceptions referred to in Exhibit B
to the Deed that apply to such easement rights.
In the event title to the Real Property in accordance
with this Agreement cannot be conveyed by Seller, Buyer shall
have the option of taking such title as Seller can give, without
abatement of price except as to monetary lien or liens, or, in
the alternative, of electing not to close pursuant to subsection
9.1 of this Agreement, in which later event, Seller shall pay
Buyer all reasonable expenses incurred by Buyer in connection
with this Agreement for title search, engineering studies and
legal counsel up to a maximum aggregate amount of $200,000,
whereupon neither party shall have any further rights, duties or
obligations under this Agreement.
4.8 Compliance with Law. Except as disclosed in
SCHEDULE 4.6 and SCHEDULE 4.8 to this Agreement, (a) to Seller's
knowledge, Seller is in compliance with all federal, state and
local environmental laws, ordinances, regulations, rules and
orders relating to the Assets or its operations to the extent it
uses the Assets; (b) Seller has not received any notice of, and
Seller does not know of any violation of, any applicable zoning,
health or safety law, regulation, rule or order or other law,
regulation, rule or order (except environmental laws, regula-
tions, rules or orders which are subject to clause (a) of this
subsection) relating to the Assets or its operations to the
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extent it uses such Assets, except as set forth in SCHEDULE 4.6
and SCHEDULE 4.8. Based upon the review of the Matthew Lucas
Survey of the property dated February 4, 1992, Seller represents
that if such survey accurately depicts the locations of the
buildings shown thereon, then there are no violations of applica-
ble zoning setback requirements. Each environmental concern or
problem which will cost more than $50,000 to remedy will be
listed in SCHEDULE 4.8.
No consent, authorization or waiver by, or filing with,
any governmental agency or any other person not a party to this
Agreement is required in connection with the execution or perfor-
mance of this Agreement by Seller or the consummation by Seller
of the transactions contemplated herein.
4.9 Permits and Licenses. There is set forth in
SCHEDULE 4.9 to this Agreement a list of all qualifications and
registrations and all permits and licenses of governmental
authorities in effect on the date hereof applicable to any of the
Assets or required for the operations of the Business. No such
permits or licenses are subject to any appeals or further pro-
ceedings or to any material unsatisfied conditions other than
those unsatisfied conditions relating to the ordinary course of
compliance or except as set forth in SCHEDULE 4.6. Except as set
forth in SCHEDULE 4.9, no consent of any governmental authority
is required for the assignment by Seller to Buyer of any of the
permits and licenses or is required for the operation of the
Business. The operation of the Business is and has been conduct-
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ed by Seller in all material respects in accordance with the
requirements of all permits and licenses and in accordance with
the requirements of all governmental authorities having jurisdic-
tion over the Assets included in the Business. No proceeding is
pending or threatened, looking toward the revocation, suspension
or limitation of any of the permits and licenses, nor has Seller
received any notice of noncompliance thereunder or any notice
asserting a violation in respect of any of the permits and
licenses which remains unremedied or unresolved, nor, except as
set forth in SCHEDULE 4.6, is Seller aware of any basis which
could give rise to the delivery of such notice. No federal,
state or local governmental authority has threatened to terminate
or not to renew any of the permits and licenses. Seller has
obtained all licenses, permits, easements, approvals and rights
of way, including, without limitation, proof of dedication,
required from all governmental authorities having jurisdiction
over the Real Property or from private parties for the normal use
and operation of the Real Property and to insure vehicular and
pedestrian ingress to and egress from the Real Property.
4.10 Contracts. All contracts necessary to the
conduct of the Business involving more than $50,000 are listed
and described in SCHEDULE 4.10 to this Agreement (the "Con-
tracts"), are in full force and effect, except as shown on such
schedule and, unless such contracts are also listed on SCHEDULE
2.4, will be assigned to Buyer by the Contract Assignment. True
and complete copies of all Contracts with a term of more than
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three years or involving more than $50,000 described in SCHEDULE
4.10 have been delivered to Buyer.
4.11 Contract Observance. Except as disclosed in
SCHEDULE 4.10, Seller has complied, and currently is in compli-
ance with, the provisions of all Contracts, and neither Seller
nor, to the knowledge of Seller, any other party thereto is in
default in the performance, observance or fulfillment of any
obligation, covenant or condition contained therein, and no event
has occurred which, with or without the giving of notice or lapse
of time, or both, would constitute a default thereunder by Seller
or, to the knowledge of Seller, by any other party.
4.12 Patents, Trademarks and Copyrights. Seller
owns, co-owns, or has the right to use, free and clear of any
payment or encumbrance, all patents and trademarks listed or
described in SCHEDULES 2.1 and 4.12 and EXHIBIT A to EXHIBIT XIV
hereto. Except as disclosed in such schedules and exhibit, none
of them is (a) to the knowledge of Seller, being infringed by any
third party or, except as specified in such schedules and exhib-
it, used by others, or (b) subject to any outstanding order,
decree, judgment or stipulation not recited in such schedules and
exhibit. Except as indicated on such schedules or exhibit, all
such patents and trademarks have been duly registered in, filed
in or issued by all appropriate governmental offices; and the
transfer thereof by Seller to Buyer does not require the consent
of any third party. To the knowledge of Seller, the operations
of the Business as currently conducted do not infringe any
24
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trademark, service mark, trade name, patent, copyright or any
other industrial property right of any third party. Seller has
not received any written claim of such infringement, nor has any
such claim been asserted against Seller during the five (5) years
preceding the date hereof, except as may be described in SCHEDULE
4.6. Certain other matters relating to trademarks are set forth
in that part of SCHEDULE 4.12 pertaining to trademarks. Even
though Seller may not have officially registered under applicable
copyright laws any of the materials used in the Business which
are eligible for such copyright registration, Buyer may continue
to use such materials after Closing, whether or not a copyright
notice is indicated thereon, subject to any other provisions in
this Agreement and the exhibits hereto relating to the use of
Seller's trademarks.
4.13 Employee Benefit Plans. All employee benefit
plans, as that term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), as
well as all other written or formal plans, programs, or contracts
involving direct or indirect compensation either qualified or
non-qualified for federal income tax purposes and whether or not
funded (including, without limitation, all employment agreements,
stock option, stock bonus, stock purchase or deferred compen-
sation arrangements entered into between Seller and each Trans-
ferred Employee (as hereinafter defined in subsection 12.1 of
this Agreement) but excluding worker's compensation, unemployment
compensation and other government mandated programs) currently
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sponsored, maintained, contributed to, participated in or entered
into by Seller for the benefit of any employee listed or de-
scribed in SCHEDULE 12.1 or his dependents and/or beneficiaries,
under which Seller has any present or future obligation or
liability including any written or formal plans, programs, or
contracts for retirees and former employees (the "Benefit Plans")
are listed in SCHEDULE 4.13 to this Agreement, and true and
complete up-to-date copies thereof have been, or prior to Closing
will be, made available to Buyer. There are no written or oral
modifications to any of such plans or agreements. Except as
disclosed in such schedule, the written terms of the Benefit
Plans are, and have been administered in compliance with the
requirements of ERISA and applicable provisions of the Internal
Revenue Code of 1986, as amended (the "Code"). The American
Cyanamid Company Employees Retirement Plan (the "Cyanamid Retire-
ment Plan") has received a favorable determination letter from
the Internal Revenue Service confirming that it is a qualified
plan under Section 401(a) of the Code and a copy of the most
recent such determination letter has been or will be provided by
Seller to Buyer prior to the Closing Date. Except as disclosed
in SCHEDULE 4.13 to this Agreement, there are no pending or, to
the knowledge of Seller, threatened claims by or on behalf of the
Benefit Plans or by any participant, beneficiary, or fiduciary or
the Secretary of Labor alleging a breach or breaches of any of
the provisions of any of such plans, or fiduciary duties thereun-
der, or violations of other applicable federal or state law with
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respect to the Benefit Plans or arising out of events relating to
the employment of the Transferred Employees which could result in
liability on the part of Seller under ERISA or any other law,
nor, to the knowledge of Seller, is there any basis for such a
claim. No such qualified plan is the subject of a pending
Internal Revenue Service audit or investigation that involves
Section 401(a) qualification issues or is the subject of any
proceeding under ERISA Section 4041, 4041A, or 4042. All liabil-
ities of Seller for premiums to the Pension Benefit Guaranty
Corporation pursuant to Section 4007 of ERISA have been fully
paid. No prohibited transaction (as defined in Section 406 of
ERISA) has occurred within three years prior to the date hereof
or as of the date of Closing with respect to any Benefit Plan,
nor is there any accumulated funding deficiency (as defined in
Section 302(a)(2) of ERISA). Seller does not now contribute to
or participate in and has no obligation to contribute to, nor has
it within the six (6) year period immediately preceding the
Closing Date contributed to or been under any obligations to
contribute to or participated in any "multiemployer plan", within
the meaning of Section 3(37) or Section 4001(a)(3) of ERISA,
under which any of the Transferred Employees are or have been
participants.
4.14 Conduct of the Assets and Operations Relating
Thereto. Except as set forth in any schedule or exhibit hereto,
since the date of the Asset Statement, Seller has not:
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(a) permitted or allowed any of the Assets to
be subjected to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind;
(b) cancelled or waived any claims or rights of
material value relating to the Assets;
(c) sold, leased or otherwise disposed of or
distributed any of the Assets having a value in excess of fifty
thousand dollars ($50,000) in the aggregate, except sales of
inventories in the ordinary course of business;
(d) conducted its operations relating to the
Assets other than in the ordinary and usual course;
(e) agreed, whether in writing or not, to do
any of the foregoing;
(f) entered into any employment agreement or
collective bargaining agreement covering employees engaged in the
Business other than those involving hiring of employees in the
ordinary course of business;
(g) failed to adequately maintain any Equipment
used in the Business;
(h) failed to make any capital investments
necessary to maintain the Assets in proper, lawful working order
and as required for the operation of the Business as it has
heretofore been conducted by Seller;
(i) changed any management compensation or
other compensation policy affecting employees in the Business,
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other than changes made in the ordinary course of business and
changes affecting Seller's employees generally;
(j) experienced any material adverse change
relating to the Assets or Seller's operations relating thereto;
or
(k) purchased any inventory other than in the
ordinary course of the Business consistent with past practices.
4.15 Inventory. The Inventory shall be defined as
only (a) finished products that on the Closing Date are not
obsolete, are properly packaged and labeled, meet Seller's
specifications for such finished products extant on the Closing
Date and are saleable at customary prices in the ordinary course
of the Business; (b) raw materials and work in process of a
quality usable in a manner consistent with Seller's operation of
the Assets prior to the Closing; and (c) catalyst (excluding
precious metal and that catalyst included in Fixed Assets on
Schedule 2.1) and packaging material. The Inventory in the
aggregate shall not exceed on the Closing Date the level of
inventory customarily maintained by Seller in the ordinary course
of its operations. The Inventory shall be delivered to Buyer on
the Closing Date at the Facility and such public warehouses,
consignment locations and other places where it may be located.
4.16 Employee Relations. There is no unfair labor
practice complaint against Seller pending before the National
Labor Relations Board or any comparable state or local agency in
which any of the Transferred Employees (as hereinafter defined in
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subsection 12.1) are involved. There is no labor strike, dis-
pute, slow down, stoppage or work action pending or threatened
against or involving the Facility or any of the Transferred
Employees. No grievance which might have an adverse affect on
the Business or proceeding alleging discriminatory practices is
pending and no claim therefore has been asserted and no labor
arbitration relating to the Business or Facility is pending.
4.17 All Assets Transferred. SCHEDULE 2.1, including
all its annexes, and SCHEDULE 4.17 contain all the assets,
rights, privileges, permits, licenses, customer lists, and
goodwill associated with the Business which the Buyer needs to
operate the Business as it was conducted by Seller prior to the
Closing. Seller hereby grants to Buyer a non-exclusive license
to use the assets listed or described in SCHEDULE 4.17.
4.18 Investment Representations. Seller is acquiring
the Preferred Stock for investment and not for public distribu-
tion or resale. Since the Preferred Stock is not registered
under the Securities Act of 1933 (the "Act"), Seller will contin-
ue to own the Preferred Stock until redemption unless the Pre-
ferred Stock is subsequently registered under the Act, or regis-
tration under the Act is not necessary by reason of an exemption
therefrom.
4.19 Knowledge of Seller. Seller has used reasonable
efforts and exercised due care to ensure that all information has
been obtained as to matters that Seller represents herein as "to
the knowledge of Seller."
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4.20 Status of Real Property. Except as set forth on
SCHEDULE 4.20, there has been no taking or condemnation by any
governmental or quasi-governmental authorities of the Real
Property or any part thereof filed prior to the date of this
Agreement, or, to the knowledge of Seller, threatened, reducing
the area, interfering with the access or affecting the use of
improvements on the Real Property as presently visible or used.
There are no proceedings for special assessments pending. Seller
has no knowledge of any proposed or contemplated special assess-
ment, or any work of a nature such that a special assessment
therefor may hereafter be levied with respect to the Real Proper-
ty.
4.21 Seller's Status. Seller is not a "foreign
person" within the meaning of Section 1445 of the Internal Reve-
nue Code of 1986, as amended.
4.22 Restrictions on Real Property. There are no
private agreements or private restrictions that affect the uses
which may be made of the Real Property, including, but not
limited to, size or cost of buildings, limitations on use or
restrictions in regard to heights of buildings, agreements to
submit architectural plans to an association, community organiza-
tion, or other group, provisions requiring improvements, or
provisions requiring the joining with others in group actions.
4.23 Accuracy of Plans. The survey, mechanical and
structural plans and specifications, leases, contracts, certifi-
cates and all other documents, agreements, books and records
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relating to the Assets, delivered to Buyer by or on behalf of
Seller pursuant to this Agreement or in connection with the
execution hereof are true, complete and correct copies that
accurately portray the Assets.
4.24 Undisclosed Facts. Except as disclosed on
SCHEDULE 4.24, there are no facts known to Seller which might
have a material or adverse effect on the condition, repair,
value, extent of operation or income potential of the Real
Property or any of the improvements thereof.
4.25 Required Work. Seller has no knowledge or
notice of any work being done or about to be done, or of any
assessment, violation or other notice issued or about to be
issued by any federal, state, municipal or public body or author-
ity, relating to, or with respect to or otherwise affecting the
Real Property or abutting streets. Seller agrees to pay for all
work done or ordered to be done by or required in order to comply
with the requirements of any federal, state, municipal or public
body or authority prior to the Closing Date, of which Seller then
has notice, whether or not presently assessed or ordered to be
done, on or with respect to or otherwise affecting the Real
Property or abutting streets, or required in order to comply with
any existing assessment, violation or similar notice.
4.26 Use of Real Property. Except as disclosed in
SCHEDULE 4.26, no portion of the Real Property necessary to
enable the Assets to be used for the purposes for which they are
now used is in an area that is designated as flood prone under
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the Federal Flood Protection Act of 1973, on any United States
Department of Housing and Urban Development Flood Hazard Boundary
Map or any flood hazard map published by the Federal Emergency
Management Agency.
4.27 Access to Real Property. The Real Property is
bordered by two public roads which provide adequate vehicular and
pedestrian access to and from the Real Property.
4.28 Condition of the Assets. Except as set forth in
SCHEDULE 4.28, the Assets are in proper, lawful working order and
may be used in their present condition to operate the Business as
it has heretofore been conducted by Seller.
4.29 Certain Environmental Matters. Except as dis-
closed on SCHEDULE 4.29, Seller knows of no contamination of the
Real Property which contamination is such that appropriate
government agencies could require remediation in accordance with
applicable laws, rules, regulations and ordinances of governmen-
tal agencies having jurisdiction existing as of the Closing Date.
Except as disclosed on SCHEDULE 4.29, Seller knows of no action
taken by a governmental entity in response to contamination or
threatened contamination of the Real Property which would be
likely to constitute a legitimate basis for cost recovery under
applicable laws, rules, regulations and ordinances in effect as
of the Closing Date.
4.30 Utilities. All utility services necessary for
the use of the Assets are connected to the improvements located
on the Real Property and available in sufficient amounts for the
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present use and operation of the Real Property. All such utility
services enter the Real Property through adjoining public streets
or from adjoining private land by way of valid and enforceable
easements; provided, however, that an easement for the sewer line
serving the Real Property shall be granted at the Closing as
provided in subsection 10.1.
4.31 Accuracy of Schedules. All schedules to this
Agreement prepared by Seller are true and correct as of the date
of this Agreement. Seller shall revise any such schedule so that
all such schedules shall be true and correct as of Closing and
shall notify Buyer from time to time of such revisions which will
become part of this Agreement.
SECTION 5. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller and agrees with
Seller that the following representations and warranties are true and correct on
the date of this Agreement and shall survive the Closing to the extent provided
in subsection 14.3 hereof:
5.1 Organization, Good Standing and Corporate
Power. Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware; is or at
closing will be adequately funded to consummate this transaction;
has the corporate power to own the Assets and to conduct the
operations of the Business as they are presently being conducted;
and has full corporate power and authority to purchase, or cause
the purchase of, the Assets from Seller and perform the other
34
<PAGE>
covenants of Buyer under this Agreement, the Assumption Agree-
ment, and such other documents as reasonably are required to
consummate this transaction (collectively, the "Purchase Docu-
ments"). Complete and correct copies of (a) the Certificate of
Incorporation of Buyer as amended to the date hereof (certified
by its Secretary or an Assistant Secretary); and (b) the By-Laws
of Buyer as amended to the date hereof (certified by its Secre-
tary or an Assistant Secretary) have been or will be delivered to
Seller.
5.2 Authorization for Agreement. All corporate
approvals necessary to the execution, delivery and performance of
the Purchase Documents by Buyer, have been obtained; there are no
charter, by-law or other corporate restrictions which would
prevent Buyer from performing fully its obligations under the
Purchase Documents and each of the Purchase Documents constitutes
the valid and binding obligation of Buyer and is enforceable
against Buyer in accordance with its terms, except to the extent
limited by general principles of equity and by bankruptcy,
insolvency or other similar laws and general equitable principles
affecting the rights of creditors generally.
5.3 Validity of Contemplated Transaction, etc.
Neither the execution and delivery of the Purchase Documents by
Buyer nor the consummation of the transactions contemplated
therein will contravene or violate (a) any law, ordinance, or
governmental rule or regulation to which Buyer is subject, (b)
any judgment, order, writ, injunction or decree of any court or
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of any governmental official, agency or instrumentality which is
applicable to Buyer, or (c) the Certificate of Incorporation or
By-Laws of Buyer or any amendments thereto or restatements
thereof; nor will such execution, delivery and consummation
violate, be in conflict with or result in the breach (with or
without the giving of notice or the lapse of time, or both) or
accelerate the performance required on the part of Buyer of any
term, condition or provision of any note, agreement, instrument,
indenture, contract, lease, agreement or other document or
understanding to which Buyer is a party or by which Buyer is
otherwise bound or affected or by which any of Buyer's properties
or assets may be bound or affected.
5.4 Litigation. There is no suit, action, dispute,
claim, arbitration or legal, administrative or other proceeding
or governmental investigation pending or, to the knowledge of
Buyer, threatened against or related to Buyer, its properties or
business which might reasonably be expected to affect adversely
or restrict the ability of Buyer to consummate the transactions
contemplated by the Purchase Documents.
SECTION 6. NO BROKERS
Seller and Buyer each represents and warrants to the
other that all negotiations relative to this transaction have
been carried on by it directly without the intervention of any
person, firm, corporation or entity who or which may be entitled
to any brokerage fee or other commission in respect of the
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consummation of the transactions contemplated hereby with the
exception of Stamford-Atlanta Capital Corporation, whose fees
will be paid by the Buyer, and Buyer and Seller each agrees to
indemnify and hold the other harmless against any and all claims,
losses, liabilities or expenses which may be asserted against the
other as a result of either of their dealings, arrangements or
agreements with any other such person, firm, corporation or
entity in contravention of the foregoing representation and
warranty.
SECTION 7. FURTHER AGREEMENTS
7.1 Buyer's Access to Information and Records Prior
to Closing.
(a) Buyer shall have the right to make or cause
to be made prior to the Closing Date such investigation of the
Business as Buyer deems necessary or advisable to familiarize
itself with such matters. Such investigation shall be conducted
by Buyer so as not to interfere unreasonably with Seller's normal
conduct of business or operation of the Facility and shall be
undertaken only in accordance with such limitations and proce-
dures as may be established by agreement among the designated
representatives of Seller and Buyer. Subject to the foregoing,
Seller agrees to permit Buyer and its authorized representatives,
including legal counsel and independent accountants, upon reason-
able notice, to have full access during normal business hours to
the properties, records, contracts and documents relating to the
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Assets and Seller's operations to the extent the Assets are used
in such operations. Seller will furnish to Buyer such financial
and operating data and other information relating to the Assets
and such operations as Buyer shall from time to time reasonably
request. In the event of the termination of this Agreement,
Buyer will deliver to Seller all documents, work papers and other
materials obtained from Seller relating to Seller or the transac-
tions contemplated hereby, whether so obtained before or after
the execution hereof, directly or by its authorized representa-
tives; except, however, that Buyer's counsel may retain one copy
of all such documents, work papers and materials solely for
record purposes and determination of Buyer's obligations under
this Agreement.
(b) Buyer will not use any information so ob-
tained from Seller and will use its best efforts to have any
information so obtained kept confidential and not used in any
way, except in connection with the purchase or sale of the
Assets, by it or its authorized representatives, except that such
restrictions shall not apply to any information (i) which is in
or comes into the public domain through no fault of Buyer in
breach hereof, (ii) which was in the lawful possession of Buyer
or such authorized representative before the commencement of
negotiations with Seller relating to this Agreement, (iii) which
pertains to the Assets if the transactions contemplated hereby
shall have been consummated, (iv) which at any time lawfully
comes into the possession of Buyer or such authorized representa-
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tive from third parties who have a right to disclose such infor-
mation, (v) which may be required to be disclosed to any govern-
mental authority in connection with obtaining any approval
required in connection with the transactions contemplated hereby
or (vi) which may be required to be disclosed pursuant to law or
court order.
7.2 Parties' Access to Records After Closing.
Except as provided in subsection 7.3 hereof, Buyer and Seller
each agrees to preserve for a period of seven years from the
Closing Date, all records in its custody, possession or control
relating to any of the Assets or the transactions contemplated
hereby. In the event that any party needs access to records in
the custody, possession or control of the other party relating to
any of the Assets or to the transactions contemplated hereby for
purposes of verifying any of the representations and warranties
contained in this Agreement, preparing income tax returns or for
complying with any audit request, subpoena or other investigative
demand by any governmental authority or for any civil litigation
or any other legitimate purpose not injurious to the other party,
each party shall allow representatives of the other party access
to such records during normal business hours at such party's
place of business for the sole purpose of obtaining information
for use as aforesaid and will permit such other party to make
extracts and copies thereof as may be necessary or convenient
and, if required for such purpose, to have access to and posses-
sion of original documents. Seller and Buyer shall each cooper-
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ate with the other, and make available personnel, on a reasonable
basis with respect to any pending or future third-party litiga-
tion. Seller shall authorize its accountants and counsel to
cooperate with Buyer for any legitimate business purpose.
Seller recognizes and agrees that all information of a
confidential or proprietary nature and Trade Secrets (as herein-
after defined), including, without limiting the foregoing,
production methods, systems, designs, know-how, technology,
financial and business information, information concerning
suppliers and customers and relating exclusively to the Business
as it was conducted by Seller prior to the Closing as well as
Buyer's information relating to the transactions contemplated
hereby including, without limitation, information disclosed at
semi-annual technology reviews under subsection 2.5 ("Confiden-
tial Information"), are highly valuable and confidential informa-
tion whether such information is sold or transferred to Buyer
prior or subsequent to Closing and that, upon Closing, shall
belong solely to Buyer.
"Trade Secrets" shall include, unless otherwise public-
ly known or available, all ideas and information the development
of which required the expenditure of money, time or effort and
that have been maintained as confidential by Seller, without
regard to whether such ideas or information are novel, inventive
or patentable.
7.3 Reservation of Name. Nothing in this Agreement
shall be construed as granting to Buyer any rights, either at
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common law or otherwise, to the names "American Cyanamid",
"Cyanamid", or any trade name of Seller, as trademarks or trade
names, all rights in and to any such trademarks and trade names
being reserved exclusively to Seller and specifically excluded
from this Agreement except to the extent, if any, such trademarks
or tradenames may be affected by the non-compete provisions
contemplated by this Agreement or to the extent such trademarks
or trade names are used by Buyer as provided by subsection 4.17
of this Agreement. Buyer may use the names "American Cyanamid"
and "Cyanamid" on all machinery, signs, vehicles or other fixed
assets associated with the Assets for a period of one hundred
eighty (180) days after the Closing Date, provided that at the
expiration of such use-period, all such use shall cease and such
names shall be removed from the Assets.
7.4 Pro Ration. Credits and charges, including, but
not limited to, those for real estate taxes, water rents, sewer
rents and similar annual charges, whether discovered prior to or
after the Closing, which relate to a period both prior to and
subsequent to the Closing and which cannot be measured otherwise,
or which may be represented by invoices or statements, shall be
prorated between Buyer and Seller according to the number of days
in the period during which Buyer and Seller, respectively, owned
the Assets, and each shall pay or receive, as the case may be,
its allocable share thereof, either directly or by way of reim-
bursement if the other party shall have paid or received the
same, upon receipt of an invoice or statement therefor or evi-
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dence of such payments or receipts, as applicable. Whenever
practicable, utility readings at the Real Property will be taken
after 12:00 noon on the day prior to Closing or before 12:00 noon
on the Closing Date and Seller shall pay the charges for utility
services of the Real Property based on such reading. When
readings are not so obtained, apportionment can be based on the
last available bills. Buyer shall pay all such charges for
utility services thereafter. Any utility adjustments required to
be made will be made promptly between Buyer and Seller.
7.5 Related Agreements. At the Closing the parties
shall exchange signed counterparts of the agreements for the
following subject matters:
(a) Supply of glyoxal and other chemicals by
Buyer to Seller in the form of EXHIBIT VI hereto (the "Require-
ments Manufacturing Agreement");
(b) Supply of services by Seller to Buyer in
the form of EXHIBIT VIII hereto (the "Seller Services Agree-
ment");
(c) Lease Agreement covering space in the
Distribution Center Warehouse and the Distribution Center office
building in the form of EXHIBIT XVI hereto ("Lease");
(d) Non-competition Agreement between Buyer and
Seller in the form of EXHIBIT X hereto (the "Non-competition
Agreement");
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(e) Supply by Seller's foreign affiliates of
certain textile chemicals to Buyer for overseas markets in the
form of Exhibit XVII hereto (the "Foreign Supply Agreement"); and
(f) Assumption of certain liabilities by Buyer
as set forth in the Assumption Agreement.
7.6 Packaged Products and Packaging Material. To
the extent the Inventory acquired by Buyer on the Closing Date
consists of finished material packaged in drums, bags or other
containers bearing the trade names mentioned in subsection 7.3,
Buyer may ship such packaged material until the supply thereof
has been exhausted or one hundred eighty (180) days after the
Closing Date, whichever is sooner. To the extent that the
Inventory consists of packaging material, Buyer has the right to
use same with Seller's name on it, for a period not to exceed 180
days after the Closing Date, on the understanding (1) a Product
manufacturing date and lot or batch number identification system
is utilized, so that Product produced by Seller can be differen-
tiated from Product produced by Buyer, and (2) Buyer assumes
responsibility for and will indemnify and hold Seller harmless
against all claims asserted against Seller arising out of Prod-
ucts packaged by Buyer in such packaging material and sold after
the Closing. In addition, Buyer shall mark all material sold
subsequent to Closing which bear such names or labels in such a
way as to make it obvious that such Products are in fact being
sold by Buyer and not by Seller, and Buyer shall keep accurate
records as to the lot numbers, quantities and destinations of
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such Products, which shall be made available to Seller at its
request. Buyer shall also mark all commercial and technical
bulletins, including without limitation all price technical
bulletins, including without limitation all price lists, product
specification sheets, and material safety data sheets, distribut-
ed subsequent to a date which is no more than thirty (30) days
after the Closing to make it obvious that the responsibility for
such bulletins is Buyer's and not Seller's.
7.7 Tax Treatment of Intangibles. In its sole and
absolute discretion and to the extent permitted by law, Buyer may
elect prior or subsequent to Closing to have the provisions of
any future legislation enacted with respect to the amortization
of goodwill and other intangibles for federal income tax purposes
apply to Assets acquired pursuant to this Agreement. Upon
reasonable notice by Buyer, Seller shall cooperate with Buyer in
the preparation, execution and filing of any documents that Buyer
may request in order to effect such an election. It is under-
stood that the preceding sentence shall not abrogate the rights
of either Buyer or Seller under any provision of this Agreement,
including subsection 3.6.
SECTION 8. OBLIGATIONS OF SELLER UNTIL CLOSING
8.1 Operation of Business. Except for such actions
as may be taken with the prior written consent of Buyer or as
otherwise contemplated by this Agreement, from the date of this
Agreement until the Closing, Seller will conduct its operations
44
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relating to the Business in accordance with the same business
practices previously followed by it, and during that period
Seller shall:
(a) conduct such operations only in the ordi-
nary and usual course;
(b) refrain from transferring or in any way
encumbering any of the Assets, except that the Inventory may be
transferred or sold in the ordinary course of business;
(c) refrain from entering into any licenses,
contracts, leases or other commitments other than in the ordinary
course of business and refrain from amending or terminating any
existing licenses, contracts or other commitments disclosed in a
schedule attached hereto;
(d) refrain from entering into any compromise
or settlement of any litigation, proceeding or governmental
investigation relating to the Assets, except any tax litigation
described in paragraph 4.5 and disclosed in SCHEDULE 4.6 herein
or any environmental proceedings as described in SCHEDULE 4.8, or
from instituting any litigation with respect to the Assets except
to the extent necessary to prevent any action from being barred
by the running of a statute of limitations;
(e) continue to moot contractual obligations
and to pay its obligations relating to the Business as they
mature in the ordinary course of business;
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(f) use its reasonable efforts to maintain the
Assets intact, and to preserve the good relations of suppliers
and customers;
(g) consistent with and to the extent required
by its customary maintenance procedures (including all shutdowns
required prior to the Closing Date), maintain equipment, in as
good condition and repair as it is on the date hereof, ordinary
wear and tear excepted;
(h) account for, make appropriate filings with
respect to, and pay all taxes, assessments and other governmental
charges against the Assets or in respect of the Business, income
and profits relating thereto, including all withholding and other
employment taxes on compensation paid to its employees from the
date hereof to the Closing;
(i) use its reasonable efforts to retain, and
maintain good relations with, all employees currently associated
with the Business;
(j) continue to make any capital investments
necessary to maintain the Assets in proper, lawful working order
and as required for the operation of the Business as it has
heretofore been conducted by Seller;
(k) refrain from using or disclosing to any
other party (except Buyer) any Confidential Information, except
as is necessary to continue to conduct its operations relating to
the Assets in the ordinary course through the Closing Date;
except to the extent Confidential Information is or becomes
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public knowledge through no fault of Seller in breach hereof; or
except as is required to be disclosed to any governmental author-
ity or pursuant to law or court order;
(l) maintain in effect all existing insurance
policies covering the Assets and related to the operation of the
Business;
(m) maintain in effect all existing permits or
operating licenses necessary to conduct the Business as it is
presently being conducted;
(n) comply with its obligations under this
Agreement; and
(o) refrain from changing any management com-
pensation or other compensation policy affecting employees in the
Business, other than changes made in the ordinary course of
business or changes affecting Seller's employees generally.
SECTION 9. CONDITIONS OF CLOSING
9.1 Conditions of Buyer's Obligations. The obliga-
tions of Buyer under this Agreement are subject to the satisfac-
tion of all of the following conditions as of the Closing Date,
any of which may be waived by Buyer in writing:
(a) all representations and warranties of
Seller contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date with the same
effect although given on and as of the Closing Date and all
revisions to schedules pursuant to subsection 4.31 do not either
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materially detract from the value of the assets or materially
alter the substance of this Agreement;
(b) Seller shall have fully performed and ob-
served, in all material respects, its obligations and covenants
set forth in this Agreement which are to be performed or observed
by it on or prior to the Closing Date and shall tender the
required documents, instruments, certificates and opinions at the
Closing as set forth in subsection 10.1;
(c) Any applicable waiting period which may be
required by the Hart-Scott-Rodino ("HSR") Act shall have expired
or been terminated, the consummation of the transactions contem-
plated by this Agreement shall not then be subject to an injunc-
tion or temporary restraining order, nor shall any law or regula-
tion be in existence which would otherwise prohibit or materially
restrict Buyer from performing its obligations under this Agree-
ment, nor shall any action or proceeding seeking to restrain or
prohibit this Agreement or the consummation of the transactions
contemplated hereby have been instituted or threatened by any
federal, state, local or foreign governmental, regulatory or
administrative agency or authority or have been instituted by any
other party which, in the reasonable opinion of Buyer, makes it
undesirable to proceed with such transaction;
(d) there shall not have been any loss by fire
or other casualty to the Assets, whether or not covered by insur-
ance, or any other event, occurrence or condition affecting the
Business which at Closing Buyer and Seller mutually estimate in
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their reasonable judgment will take more than six (6) weeks from
the date of such loss, event, occurrence or condition to repair
or replace such damaged or affected Assets to their condition
prior to such loss or other casualty, or otherwise remedy or
correct such occurrence or condition, or if such estimated period
is less than six (6) weeks, Seller gives notice to Buyer that it
does not elect to repair, replace, remedy or correct such damaged
or affected Assets or occurrence or condition as aforesaid within
the period estimated at its sole cost and expense or Seller does
not give such notice and does not so repair, replace, remedy or
correct within such period;
(e) Seller shall have executed and delivered to
Buyer the related agreements described in subsection 7.5 hereof;
(f) Seller's obligations under Section 8 of
this Agreement have been and continue to be fulfilled up to the
Closing;
(g) Buyer shall have obtained all financing
necessary to consummate this transaction;
(h) Title to the Real Property can be conveyed
by Seller and insured by Buyer at Closing as provided in subsec-
tion 4.7;
(i) All permits or licenses applicable to any
of the Assets or required for the operations of the Business
shall be obtained by Buyer on or prior to the Closing Date as
necessary to authorize Buyer's lawful ownership of the Assets and
lawful operation of the Business as of the Closing Date; and
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(j) There shall not have been any other materi-
al change in the Assets or the Business.
9.2 Conditions of Seller's Obligations. The obliga-
tions of Seller under this Agreement are subject to the satisfac-
tion of all of the following conditions as of the Closing Date,
except for conditions contained in subsections 9.2(e) and (f),
which are subject to the time periods contained therein, any of
which may be waived by Seller in writing:
(a) all representations and warranties of Buyer
contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date with the same
effect as though given on and as of the Closing Date;
(b) Buyer shall have fully performed and ob-
served in all material respects, its obligations and covenants
set forth in this Agreement which are to be performed or observed
by it on or prior to the Closing Date and shall tender the
required documents, certificates, instruments and opinions at the
Closing as set forth in subsection 10.2;
(c) Buyer shall tender to Seller at Closing the
Purchase Price referred to in subsection 3.1;
(d) Any applicable waiting period which may be
required by the HSR Act shall have expired or been terminated,
the consummation of the transactions contemplated by this Agree-
ment shall not then be subject to an injunction or temporary
restraining order, nor shall any law or regulation be in exis-
tence which would otherwise prohibit or materially restrict
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Seller from performing its obligations under this Agreement, nor
shall any action or proceeding seeking to restrain or prohibit
this Agreement or the consummation of the transactions contem-
plated hereby have been instituted or threatened by any federal,
state, local, or foreign governmental, regulatory or administra-
tive agency or authority or have been instituted by any other
party which, in the reasonable opinion of Seller, makes it
undesirable to proceed with such transactions;
(e) Within thirty (30) days after the signing
of this Agreement, Buyer shall have obtained all the necessary
funding to purchase the Assets and shall have provided Seller
with the following: (i) copies of definitive letters of commit-
ment from third party equity investors and/or creditors providing
all such funding containing no non-customary or special contin-
gencies or qualifications of any kind, except that such letters
may contain a contingency which provides that such equity inves-
tors and creditors shall not be obligated to provide the commit-
ted funds unless the conditions contained in subsection 9.2(f)
have been satisfied; and (ii) a binding waiver of Buyer's rights
to cancel Closing under subsection 9.1(g); and
(f) Within 90 days after the signing of this
Agreement, Buyer shall have obtained all permits or licenses
applicable to any of the Assets or required for the operation of
the Business as necessary to authorize Buyer's lawful ownership
of the Assets or lawful operation of the Business.
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SECTION 10. CLOSING DOCUMENTS
10.1 Seller's Obligations. At the Closing, Seller
shall deliver to Buyer the following, in such form, where appli-
cable, as is set forth in the respective EXHIBITS annexed hereto:
(a) a certificate of the President or Vice
President and Treasurer or Assistant Treasurer of Seller that the
representations and warranties of Seller set forth in this
Agreement are true and correct in all material respects as of the
Closing Date with the same effect as though given on and as of
the Closing Date;
(b) an executed Bill of Sale;
(c) Executed assignments, including the Patent
Assignment, the U.S. Trademark Assignment, the General Assignment
and Bill of Sale, the Permit Assignment, the Contract Assignment,
and the Tank Lease Assignment in the form attached hereto;
(d) an executed Deed in recordable form and
keys to all portions of the Real Property;
(e) an executed copy of the Assumption Agree-
ment; the Non-competition Agreement; the Seller Services Agree-
ment; the Requirements Manufacturing Agreement; the Lease; the
Foreign Supply Agreement; the Trademark License; and
(f) a written opinion of Seller's Vice Presi-
dent and General Counsel, addressed to Buyer, dated the Closing
Date and satisfactory in scope and substance to counsel of Buyer,
to the effect that (i) Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State
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of Maine; (ii) Seller has full corporate power and authority to
sell, assign, convey, transfer and deliver the Assets to Buyer in
accordance with the terms of this Agreement; and (iii) the
execution and delivery by the Seller of this Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on
the part of Seller, and this Agreement and each agreement and
commitment of Seller pursuant to this Agreement are legal, valid
and binding obligations of Seller enforceable against Seller in
accordance with their respective terms, except to the extent
limited by general principles of equity and by bankruptcy,
insolvency or other similar laws and general equitable principles
affecting the rights of creditors generally. In rendering the
foregoing opinion, such counsel shall be entitled to rely, as to
matters of law of any jurisdiction, upon the written opinion of
local counsel.
Seller shall also deliver to Buyer at or before Clos-
ing:
(g) a certificate of occupancy dated no earlier
than ton (10) days prior to Closing, if such certificate is
available from or customarily deliverable by the municipality,
from the municipality in which the Real Property is located
providing that the existing use of the Real Property is not in
violation of the applicable zoning laws and ordinances and that
there are no outstanding notices of any uncorrected violations of
the applicable zoning, housing, building, safety or fire ordi-
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nances, if such certificates are provided under applicable laws
or ordinances;
(h) such affidavits as Buyer's title company
shall reasonably and/or customarily require with respect to
mechanics liens; and
(i) an executed, recordable easement, in form
and substance satisfactory to Buyer, granting Buyer the right to
maintain, repair, patrol, use, replace, inspect and operate the
sanitary sewer line that currently serves the Real Property and
crosses land to be retained by Seller. Seller shall cause all
entities with 1iens on the property subject to such easement,
other than government entities with tax liens on the property, to
subordinate of record their liens to such easement.
10.2 Buyer's Obligations. At the Closing, Buyer
shall deliver to Seller the following, in such form as counsel
for Seller may reasonably request:
(a) a certificate of the President, a Vice
President or a Group Vice President of Buyer that the representa-
tions and warranties of Buyer set forth in this Agreement are
true and correct in all material respects as of the Closing Date
with the same effect an though given on and as of the Closing
Date;
(b) the Purchase Price referred to in subsec-
tion 3.1 hereof and the consideration set forth in the Non-
competition Agreement;
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(c) an executed copy of the Assumption Agree-
ment; the Non-competition Agreement; the Requirements Manufactur-
ing Agreement; the Seller Services Agreement; the Lease; the
Foreign Supply Agreement; and the Trademark License; and
(d) a written opinion of counsel for Buyer,
addressed to Seller, dated the Closing Date and satisfactory in
scope and substance to counsel of Seller, to the effect that (i)
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware; (ii) Buyer
has full corporate power and authority to purchase, or cause the
purchase of the Assets from Seller and perform its covenants
under this Agreement; (iii) the Preferred Stock is validly
issued, fully paid and non-assessable; and (iv) the execution and
delivery of this Agreement and the consummation of the transac-
tions contemplated hereby have been duly and validly authorized
by all necessary corporate action on the part of Buyer, and this
Agreement and each agreement and commitment of Buyer pursuant to
this Agreement are legal, valid and binding obligations of Buyer
enforceable against Buyer in accordance with their respective
terms, except to the extent limited by general principles of
equity and by bankruptcy, insolvency or other similar laws and
general equitable principles affecting the rights of creditors
generally.
In rendering the foregoing opinions, such counsel shall
be entitled to rely, as to matters of law of any jurisdiction,
upon the written opinion of local counsel.
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SECTION 11. HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT
OF 1976
If applicable, Buyer and Seller, as soon as practicable
following the execution and delivery of this Agreement, shall
file the required notification with the Federal Trade Commission
(the "FTC") and the Antitrust Division of the Department of
Justice (the "Justice Department") pursuant to and in compliance
with the HSR Act. Buyer and Seller shall comply fully with all
applicable notification, reporting and other requirements of the
HSR Act, shall not intentionally or negligently delay submission
of information requested by the FTC or the Justice Department
thereunder and shall use reasonable efforts to supply such
information promptly. Seller and Buyer shall similarly cooperate
in complying with any analogous requirements of any other juris-
diction.
SECTION 12. EMPLOYEE AND EMPLOYEE BENEFIT MATTERS
12.1 Employees. All employees listed on SCHEDULE
12.1 (other than those employees who, as of the Closing Date, may
be receiving coverage payments pursuant to Cyanamid's Short and
Long Term Disability Plan provisions) will continue their employ-
ment with the Business after the Closing Date; and all employment
contracts with individual employees listed on SCHEDULE 12.1 to
this Agreement shall at the Closing be assigned to Buyer without
any further writing or action being necessary to be taken by any
party to this Agreement. In the event any employees receiving
coverage payments pursuant to Cyanamid's Short- and Long-Term
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Disability Plans on the Closing Date thereafter return to work,
they will continue their employment with the Business as if they
had been employed by Buyer after the Closing Date. Notwithstand-
ing any other provision of this subsection 12.1 or of subsection
12.2, all such absent salaried and hourly employees shall, to the
extent provided under the Benefit Plans, continue to be treated
as Seller's employees and continue to be entitled to accrue and
receive benefits as provided for in the Benefit Plans until such
time as they have recovered from illness or injury or completed
their periods of authorized leaves of absence. Seller shall be
solely responsible for the payment of any such benefits. Seller
shall provide Buyer prior to the Closing Date with a list of the
names and status of each such absent employee. Seller shall not
offer to employ or offer to continue to employ on and after the
Closing Date any salaried or hourly employee listed on SCHEDULE
12.1 until and unless such employee fails to commence employment
with Buyer within a reasonable time. All such salaried and
hourly employees who accept and commence employment with Buyer
are referred to herein as "Transferred Employees." Subject to
any applicable collective bargaining agreement, all offers of
employment and the actual employment of Transferred Employees
shall be subject to Buyer's right in its sole discretion to
establish and modify from time to time the terms and conditions
of such employment and to terminate any such employee at any
time, provided, however, that Seller shall have no liability
whatsoever for any such modification of the terms of or the
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termination of the employment of Transferred Employees by Buyer.
Except as Buyer may expressly provide, all such employees shall
be treated as new employees of Buyer from their date of employ-
ment with Buyer.
12.2 Compensation; Benefits. Buyer agrees to (i)
recognize entitlements to vacation days under the Cyanamid Plan
existing in the calendar year in which the Closing takes place,
for all Transferred Employees, (ii) extend to all such Trans-
ferred Employees employee benefits as described in SCHEDULE 12.3
that are substantially equal in the aggregate to those which such
Transferred Employees currently enjoy, (iii) to offer employment
to each Transferred Employee at a rate of base salary or wages,
respectively, which is not less than the Transferred Employee's
rate of base salary or wages, respectively, on the Closing Date
as shown for that Transferred Employee on SCHEDULE 12.2, (iv) to
grant all Transferred Employees covered under all employee
benefit plans established by the Buyer (including severance plans
if applicable) credit for vesting and participation purposes (but
not for benefit accrual) for service so recognized under similar
plans for Cyanamid; for example, if a Transferred Employee has
three (3) years of service and participation in the Cyanamid
plan, prior to the Closing Date, and two (2) years of service
with Buyer subsequent to the closing Date, such Transferred
Employee shall actually have five (5) years of service only for
purposes of vesting and participation in Buyer's plans; i.e. the
three (3) years of vesting credit earned prior to the Closing
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Date by such Transferred Employee pursuant to the Cyanamid Plan
plus the two (2) years of vesting credit earned subsequent to the
Closing Date by such Transferred Employee pursuant to Buyer's
plans. Buyer shall provide for any of the Transferred Employees
who are laid off (but not if discharged for cause) within four
(4) months after the Closing Date a severance benefit equal to
that which would have been payable under the severance plan
maintained by Seller. Seller shall be responsible for and remain
liable to pay any and all pay in lieu of carryover vacation from
previous years.
12.3 Employee Benefit Plans. Coverage, if any, under
all Cyanamid Employee Benefit Plans for all Transferred Employees
will terminate as of the Closing Date, and Seller shall not have
any further obligations or liabilities (other than those speci-
fied herein) to such Transferred Employees under the Cyanamid
Employee Benefit Plans. Buyer shall have no responsibility with
respect to any costs, payments or expenses relating to Cyanamid
Employee Benefit Plans. All Transferred Employees shall be
vested in their accrued benefits, if any, under Cyanamid Employee
Benefit Plans as of the Closing Date arising out of all service
prior to such date, and contributions made or to be made on their
behalf with respect to such benefits or service. Benefits which
will be received by Transferred Employees in respect of all such
Cyanamid Employee Benefit Plans thereafter shall be in accordance
with the applicable provisions of such Cyanamid plans as from
time to time in effect.
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Seller shall deliver to Buyer, within ninety (90) days
following the Closing Date, with respect to each Transferred
Employee, a schedule which has been certified as true and correct
by an appropriate officer of Seller setting forth the date of
birth, date of employment, sex, marital status, and, with respect
to the Cyanamid Employees Retirement Plan, the number of years
and months of "Past Service," "Service" and "Future Service" with
which the employee is credited as of the Closing, his accrued
benefit, and his annual rate of retirement annuity which is
accrued as of the Closing under the greater of the career average
pay formula or the final average pay formula, in each case
determined in accordance with the provisions of the Cyanamid
Retirement Plan in effect as of the Closing, and his current rate
of compensation.
Seller also shall deliver to Buyer within ninety (90)
days following the Closing Date all personnel, benefit and other
employment records respecting the Transferred Employees, the most
current summary plan description for each of the Benefit Plans,
and records of all actuarial assumptions used to determine
equivalence under the Cyanamid Retirement Plan as of the Closing.
Seller shall be responsible for and shall indemnify and
hold Buyer harmless from and against all liabilities and obliga-
tions of any kind in connection with the provision of retiree
medical benefits to employees who have retired or who are eligi-
ble for retiree medical benefits under the Seller's medical plan
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as of the Closing Date, regardless of whether such employees
actually retire from employment prior to the Closing Date.
Seller shall be responsible for and shall indemnify and
hold Buyer harmless from and against all claims of the Trans-
ferred Employees for worker's compensation, unemployment compen-
sation and other government mandated benefits, and for weekly
indemnity, life, pension, profit sharing, hospital/medical
/surgical, disability, major medical, dental and other welfare
benefits which arise by reason of events that occur prior to the
Closing and are payable under the terms and conditions of any
existing benefit program or plan maintained by Seller for the
Transferred Employees. Buyer shall be responsible for and
indemnify and hold Seller harmless from and against all claims
for such benefits which arise by reason of events that occur
after the Closing and which are payable under the terms and
conditions of any benefit program which in similar to a plan or
program described in the preceding sentence and which is adopted
or maintained by Buyer for the Transferred Employees, whether
through assumption of the existing collective bargaining agree-
ment or otherwise. Anything in this subsection 12.3 to the
contrary notwithstanding, any amount payable in respect of any
claim which is determined by a final decision of a court of
competent jurisdiction or of a duly constituted arbitral tribunal
to be wholly or partly the joint responsibility of Buyer and
Seller shall be paid by Buyer and Seller on the basis determined
by such court or tribunal.
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SECTION 13. CLOSING EXPENSES AND TAXES
All expenses of Closing incurred by any party shall be
borne by the party incurring such expense. Each party shall also
pay any income taxes incurred by such party as a result of this
transaction. All sales, value added, registration, or similar
taxes, whether domestic or foreign, which arise or may be payable
upon the transfer of the Assets to Buyer shall be borne by Buyer,
except transfer taxes which shall be shared equally by Buyer and
Seller.
SECTION 14. INDEMNIFICATIONS
14.1 Seller Indemnity. Seller shall indemnify and
hold harmless Buyer from and against any and all claims, losses,
liabilities, costs and expenses, whether or not relating to
litigation or threatened litigation, arising out of:
(a) any failure by Seller to perform any of its
obligations hereunder;
(b) the sale of product manufactured and pack-
aged by Seller prior to the Closing Date (provided however that
Buyer shall bear the burden of proof with regard to any claim
that product was made by Seller and such product caused the
damage for which indemnification is sought);
(c) the conduct of the Business by Seller prior
to the Closing Date;
(d) any debt or other liability of Seller not
specifically assumed by Buyer in the Assumption Agreement;
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(e) any claim by an employee or former employee
of the Seller to the extent it arises as a result of either (i)
the sale of the Assets or the Business (if such employee is not
on the Transferred Employee list), (ii) the conduct of the Seller
prior to or at closing or (iii) the cessation of employee's em-
ployment by the Seller prior to Closing (whether or not employee
commences employment with Buyer) including without limitation any
payments made pursuant to the Worker Adjustment and Retraining
Notification Act, P.L. 100-39 ("WARN") or any other applicable
law, contract or agreement; or
(f) any misrepresentation or breach of warranty
contained in this Agreement by Seller other than a misrepresenta-
tion or breach of warranty relating to liability asserted pursu-
ant to the preceding subsections of this subsection 14.1 or
assorted pursuant to subsection 14A.
Except for indemnification arising under subsec-
tion 14.1(f), no indemnification shall be available under this
subsection 14.1 for claims, losses, liabilities, costs and
expenses relating to remediation or compliance for which indemni-
fication was sought or could have been sought under subsection
14A(e).
14.2 Buyer Indemnity. Buyer shall indemnify and hold
harmless Seller from and against any and all claims, losses,
liabilities, costs and expenses, whether or not relating to
litigation or threatened litigation, and arising out of:
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(a) any misrepresentation or breach of warranty
by Buyer;
(b) any failure by Buyer to perform any of its
obligations hereunder;
(c) sale of Product by Buyer after Closing
other than with respect to which Seller is obligated to indemnify
Buyer pursuant to subsection 14.1;
(d) the conduct of the Business by Buyer on and
after the Closing Date;
(e) any claims by any Transferred Employee
arising from the termination of such person's employment by Buyer
on and after the Closing Date; and
(f) any claim by any Transferred Employee
arising under WARN or any similar law in any other jurisdiction
arising out of the actions of Buyer or any of its affiliates on
and after the Closing Date.
14.3 Limitations.
(a) Seller and Buyer shall have no liability
under subsection 14.1(f) and subsection 14.2(a), respectively,
with respect to breaches of representations and warranties until
the aggregate amount of loss to Seller or Buyer as a result of
all matters covered by such sections exceeds fifty thousand
dollars ($50,000).
(b) No claim shall be brought against Seller or
Buyer under subsection 14.1 or subsection 14.2, respectively,
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with respect to breaches of representations or warranties more
than two years after the Closing Date.
(c) The liability of Seller and Buyer to indem-
nify under subsection 14.1(f) or subsection 14.2(a) respectively
shall not exceed two million eight hundred thousand dollars
($2,800,000) in the aggregate for all claims. Seller may satisfy
its obligations hereunder, to the extent such obligation exceeds
$1,000,000, by returning Preferred Stock to Buyer in an amount
having an aggregate par value plus accrued, unpaid dividends and
compounding thereon equal to the amount of Seller's indemnifica-
tion obligations hereunder in excess of $1,000,000.
(d) The liability of Seller to indemnify Buyer
under subsection 14.1 shall be limited to a maximum aggregate
amount of ten million eight hundred thousand dollars
($10,800,000).
(e) The liability of Buyer to indemnify Seller
under subsection 14.2 shall be limited to a maximum aggregate
amount of ten million eight hundred thousand dollars
($10,800,000).
14.4 Procedure for Indemnification. With respect to
any claim for which indemnification is sought pursuant to this
Agreement, the party seeking indemnification ("Indemnitee") shall
promptly after knowledge of such claim, notify in writing the
party from whom indemnification is sought ("Indemnitor") in as
much detail as is feasible, of the existence and nature of the
claim. At its sole cost and expense, and with counsel of its
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choosing, Indemnitor shall defend against any claim of a third
party and shall pay any resulting settlements, judgments or
decrees, provided that Indemnitee has taken reasonable steps to
mitigate any damages resulting from any such claim and has
granted by such notice to the Indemnitor the full power, authori-
ty and right on Indemnitee's behalf to control the defense or
settlement of any such claim, so long as Indemnitor shall keep
Indemnitee informed at all times as to the status of the claim,
and Indemnitee may, at its own election and expense, participate
in the defense of any such claim. Should the Indemnitor, after
the Indemnitee has fulfilled its obligations under this Section,
fail to defend or to prosecute diligently the defense of any
claim of a third party, the Indemnitee, without waiving any
rights against the Indemnitor, may defend or settle any such
claim and shall be entitled to recover from the Indemnitor the
amount of any settlement or judgment or decree and all costs and
expenses, including without limitation, reasonable attorneys'
fees. Each of the parties hereto shall extend reasonable cooper-
ation to the other parties in connection with such defense or
settlement. The right of the Indemnitor to defend against any
such claim shall be limited by the right of an insurance company
to defend against the claim if the claim involves an insured
risk.
14.5 Sole Remedy. The sole and exclusive obligation
of Buyer or Seller or any of Buyer's or Seller's parent, subsid-
iary and affiliated companies or any of their respective direc-
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tors, officers, agents, servants and employees for any misrepre-
sentation herein or breach of warranty hereunder, or for any
failure by Seller or Buyer or any of Seller's or Buyer's subsid-
iary and affiliated companies to perform any of its covenants, or
for any act or omission of Seller or Buyer, shall be the liabili-
ties and obligations of Seller or Buyer under, and subject to the
conditions and limitations of, this Section 14 or, where applica-
ble subsection 14A(e). Seller and Buyer, on their own behalf and
on behalf of their respective parent, subsidiary and affiliated
companies, waive any and all other claims arising hereunder
against the other party (including its parent, subsidiary and
affiliated companies) and the directors, officers, agents,
servants and employees of such other party and its parent,
subsidiary and affiliated companies.
14.6 Survival and Term of Indemnification. Unless
otherwise expressly provided in this Agreement, any right of
either party to indemnification under this Agreement and any duty
on the part of either party to this Agreement to indemnify the
other party to this Agreement shall survive the Closing Date and
continue indefinitely.
SECTION 14A INDEMNIFICATION FOR ENVIRONMENTAL CLAIMS
(a) (i) In addition to the indemnities provid-
ed in subsection 14.1(f), this Section 14A sets forth the full
and exclusive rights and obligations of the parties respecting
claims, losses, liabilities, costs or expenses, relating to
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remediation or compliance, which arise out of the environmental
condition of the Real Property and any and all claims, losses,
liabilities, costs or expenses, relating to remediation or
compliance, which relate to or arise out of the handling, use,
discharge, storage, disposal, treatment or release (as those last
three terms are defined in the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA")) of any
Hazardous Substance (as hereinafter defined) on or prior to the
Closing Date by, or attributable to, Seller or any Seller affili-
ate or their predecessors, or which relate to any Hazardous
Substance which originated or otherwise came from operations con-
ducted on or prior to the Closing Date by, or attributable to,
Seller or any Seller affiliate or their predecessors, including
without limitation, all claims, losses, liabilities, costs or
expenses involving the investigation, monitoring or cleanup of
sites (whether or waste disposal sites, former plant sites or
other sites or properties) on which any Hazardous Substance may
be found. The claims, losses, liabilities, costs and expenses
relating to remediation or compliance referred to in the forego-
ing sentence shall collectively be referred to as "Environmental
Claims." The term "Environmental Claim" shall apply without
regard to whether the activity or condition giving rise to the
claim, loss, liability, cost or expense was lawful or unlawful at
the time of occurrence.
(ii)"Hazardous Substance" as used herein
means any substance, chemical or waste that is listed, defined,
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designated, or classified as hazardous, toxic, radioactive, or
dangerous or otherwise regulated as a pollutant or contaminant
under any applicable local, state, or federal environmental law
or regulation; any asbestos or asbestos-containing material,
petroleum, petroleum product or by-product, crude oil or any
fraction thereof, natural gas, natural gas liquids, liquefied
natural gas, synthetic gas usable as fuel, or polychlorinated
biphenyls.
(iii) The term "remediation," as used in this
Section 14A, includes removal or remedial action as those terms
are defined in CERCLA subject to such limitations as are set
forth in this Agreement.
(b) (i) Buyer shall have six (6) months after
the Closing Date to investigate, inspect, review records, take
samples and conduct tests to determine the extent of any condi-
tions or activities which have given or may give rise to any
Environmental Claims under laws or regulations in effect at the
time of Closing in respect of the Real Property exclusive of
purchased vacant land, including ground water and soil (all of
the preceding being the "Plant Area Site Assessment") and to
provide Seller the notice specified in subsection 14A(c) below
with respect to such portion of the Real Property. Buyer shall
have an additional six (6) months to conduct similar activities
(the "Undeveloped Area Site Assessment") with respect to the
remainder of the Real Property and to provide Seller the notice
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specified in subsection 14A(c) below with respect to such remain-
der of the Real Property.
(ii) The cost of the Plant Area Site Assess-
ment and the Undeveloped Area Site Assessment ("Site Assess-
ments") shall be borne entirely by Buyer. Buyer shall notify
Seller of, and allow Seller or Seller's properly-trained repre-
sentatives a reasonable opportunity to be present at all physical
inspections, employee interviews and sampling activities related
to the Site Assessments and to obtain splits of all samples taken
in the course of the Site Assessments. Buyer shall indemnify
Seller, its directors, officers, employees, affiliates, succes-
sors and assigns for all claims, costs, damages or liabilities
arising from the release of Hazardous Substances caused by or
related to Buyer's Site Assessments.
(iii) Until completion of the Site Assess-
ments, Seller shall have the right to conduct, at Seller's
expense, such additional site assessments ("Seller's Site Assess-
ments") as may be appropriate to document conditions or activi-
ties which have given or may give rise to Environmental Claims on
the Real Property. For that purpose, Buyer agrees to provide
Seller and its agents and representatives with access to the Real
Property after the Closing Date consistent with normal plant
operations. Seller shall indemnify Buyer, its directors, offi-
cers, employees, affiliates, successors and assigns for any
claims, costs, damages or liabilities caused by or related to
Seller's Site Assessments, including the cost of restoring the
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Real Property to its condition prior to Seller's Site Assess-
ments. Seller will notify and allow Buyer and its agents and
representatives to be present at all physical inspections, em-
ployee interviews and sampling activities related to Seller's
Site Assessments and to obtain splits of samples taken in the
course of Seller's Site Assessments. Buyer and Seller will
supply each other with copies of their respective Site Assess-
ments.
(c) No later than sixty (60) days after comple-
tion of each of the six month periods provided in subsection
14A(b)(i) for the respective Site Assessments, Buyer shall notify
Seller in writing of activities or conditions which have given or
may give rise to Environmental Claims related to the Real Proper-
ty identified in the respective Site Assessments. Thereafter,
Buyer and Seller shall undertake to agree on the minimum remedial
measures necessary to remedy the conditions which have given or
may give rise to any Environmental Claims related to the Real
Property ("Appropriate Remedial Measures") which shall be the
subject of indemnity as prescribed in subsection 14A(e). For
purposes of this Section 14A, Appropriate Remedial Measures shall
mean the minimum actions necessary in order to investigate and
conform to remediation criteria identified in, and bring the Real
Property, the Facility and its operations into compliance with
applicable laws, rules, regulations and ordinances of governmen-
tal agencies having jurisdiction existing as of the Closing Date,
including, without limitation, bringing into conformance with
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applicable legal requirements any underground storage tanks found
in or under the Real Property; the removal and proper disposal or
treatment of any Hazardous Substance stored on the Real Property
unlawfully as of the Closing Date; and, as appropriate, the
removal, proper disposal or treatment of, contaminated soil or
ground water; and in all cases, the restoration of the Real
Property, the Facility and its operations to a condition which
permits their continued use in the manner used by Seller on the
date of this Agreement to the extent permitted by law with
exceptions not material in the aggregate. Appropriate Remedial
Measures also shall include the payment of any penalties or fines
imposed as the result of activities or conditions which have
given rise to an Environmental Claim, except to the extent such
fines or penalties are imposed with respect to continuation of an
activity or condition after Buyer has had a reasonable opportuni-
ty to remedy. In no event, however, need action be taken pursu-
ant to this Section 14A nor shall Seller be liable, pursuant to
this Section 14A for (i) Environmental claims of which Buyer does
not inform Seller within the respective six (6) month periods
provided for in subsection 14A(b) or for which no Remedial
Measures are required, except for Seller's obligation under
subsection 14A(j); (ii) contamination caused by normal applica-
tion of pesticides, fungicides, or other agricultural products
for agricultural purposes; (iii) with respect to ground water or
surface water, if such ground water or surface water contamina-
tion is below levels which would be capable of giving rise to
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liability for investigation or remediation costs under applicable
law; (iv) site conditions or contamination caused by Buyer's
actions or to the extent resulting from Buyer's continuation of
existing disposal practices after the Closing Date after Buyer
has had a reasonable opportunity to change such practices; (v)
costs resulting from changes in laws, regulations, ordinances,
permits or orders after the Closing Date, except as identified in
SCHEDULE 14A; and (vi) remedial measures necessary to remedy
Environmental Claims which result solely from any commercial
operations after Closing which are not a continuation of Seller's
practices and remedial measures necessary to address the in-
creased magnitude of any Environmental Claim caused by Buyer's
commercial operations after Closing which are not a continuation
of Seller's practices and directly cause an increase in the
magnitude of any Environmental Claim existing at Closing. Buyer
may proceed to implement remedial measures prior to obtaining
Seller's agreement to those measures; however, Seller will only
be responsible for indemnifying Buyer under subsection 14A(e) for
Appropriate Remedial Measures. Buyer will cooperate with Seller
with regard to the provision of access to the Real Property and
making Buyer's employees available for consultation for implemen-
tation of Appropriate Remedial Measures.
(d) In the event the parties, having negotiated
in good faith for no less than forty-five (45) days (which shall
begin on the day of the first in-person negotiating meeting), are
unable to agree upon the existence of an Environmental Claim or
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upon Appropriate Remedial Measures, Seller or Buyer may request
that the existence or non-existence of such Environmental Claim
be determined or Appropriate Remedial Measures therefor be
designed by an arbitrator or third party expert acceptable to the
parties. Any such determination or designation by an arbitrator
or third party expert shall be binding upon the parties.
(e) Seller shall indemnify Buyer, its Affili-
ates, and their directors, officers, employees, successors and
assigns for all costs and expenses of Appropriate Remedial
Measures. After Seller has discharged such obligations, Seller
shall have no further obligation to Buyer with respect to condi-
tions which have given or may give rise to Environmental Claims
on or under the Real Property which have been addressed through
Appropriate Remedial Measures, and Buyer thereupon waives,
releases and indemnifies Seller from any and all claims relating
to remediation or compliance and pertaining to activities or
conditions which have given or may give rise to Environmental
Claims on or under the Real Property which have been addressed
through Appropriate Remedial Measures, including those arising
under federal, state, or local laws, except with respect to such
activities or conditions which serve as a basis for Buyer's
rights to indemnity for claims arising under Section 14. In no
event shall Seller have any liability or obligation to provide
indemnification to Buyer arising from changes in applicable laws,
rules, regulations or ordinances which occur after the Closing
Date, except for compliance costs identified in SCHEDULE 14A, for
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which Seller also shall indemnify Buyer, but only to the extent
incurred by Buyer to comply with minimum legal requirements once
those requirements take full force and effect. Buyer and Seller
shall cooperate on developing appropriate measures and associated
costs to comply with the requirements identified in SCHEDULE 14A.
Buyer may proceed at its own risk to implement compliance mea-
sures prior to Seller's agreement to those measures; however,
Seller will only be responsible for indemnifying Buyer for the
costs of complying with the minimum legal requirements once those
requirements take full force and effect. To the extent that
Buyer and Seller are unable to agree on appropriate measures and
associated costs for a requirement identified in SCHEDULE 14A, or
on a plan for determining such appropriate measures and costs,
within nine months after the Closing Date, Buyer or Seller may
request that such measures and costs be determined by an arbitra-
tor or third-party acceptable to the parties. Any such determi-
nation shall be binding upon the parties.
(f) The foregoing provisions relate solely to
activities or conditions which have given or may give rise to
Environmental Claims at, on or under the Real Property. Seller
agrees to indemnify, defend and hold harmless Buyer, its direc-
tors, officers, employees, successors and assigns for all claims,
losses, liabilities, costs and expenses relating to remediation
or compliance resulting from any other activities or conditions
(e.g., off-site disposal of hazardous substances) which have
given or may give rise to Environmental Claims as provided
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herein. In the event that the actions or the operations, of
Seller or any Seller affiliate and/or their predecessors prior to
the Closing Date are only partially responsible for losses
relating to remediation or compliance and arising from activities
or conditions which have given or may give rise to an Environmen-
tal Claim, Seller shall indemnify Buyer only for that portion of
the losses which arises out of actions taken or events occurring
prior to the Closing Date.
(g) Buyer shall indemnify, defend and hold
harmless Seller and their respective directors, officers, employ-
ees, successors and assigns, and releases Seller from any liabil-
ity for the portion of any losses which arise out of the actions
or are attributable to the operations of the Buyer after the
Closing Date.
(h) The parties expressly agree to select and
implement the Appropriate Remedial Measures in the most cost-
effective manner consistent with the standards set forth in this
Agreement. The parties shall each have the right to participate
in any negotiations with any governmental authorities with
respect to Appropriate Remedial Measures and any other Environ-
mental Claims which affect the obligations of the parties under
this Agreement.
(i) Until completion of the Site Assessments,
Buyer shall report promptly in writing to Seller full particulars
regarding any material leak, spill or other releases, presence or
discharge ("Release") of any hazardous substance, raw material,
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intermediate or product used in the production of Products into
the water, groundwater, soil, or air in such quantities as to be
reportable to federal, state or local authorities, unless that
release is authorized by an environmental permit in full force
and effect or is a continuation of releases in comparable rate
and frequency to releases occurring prior to the Closing Date.
(j) If Buyer discovers, subsequent to comple-
tion of the respective Site Assessments, an activity or condition
which could have given rise to an Environmental Claim on or under
the Real Property, but which was not addressed through Appropri-
ate Remedial Measures, and Buyer gives Seller notice of such
claim within the four (4) year period from one (1) year after the
Closing Date, until five (5) years after the Closing Date Seller
will lend to Buyer, in the form of a revolving credit facility
(the "Environmental Credit Facility") sufficient funds to imple-
ment appropriate remedial measures subject to the following terms
and conditions:
(i) Buyer shall bear the burden of proof
that such activities or conditions giving rise to an environmen-
tal claim occurred prior to the Closing Date and would have
resulted in non-compliance on the Closing Date;
(ii) Seller will provide the Environmental
Credit Facility only to the extent Buyer is unable to fund such
measures from existing internal funds within the ordinary course
of business;
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(iii) Seller may verify Buyer's inability to
fund such measures by reviewing Buyer's appropriate books and
records. Buyer will use the Environmental Credit Facility only
to fund designated environmental remediation projects to
remediate Environmental Claims existing at Closing; providing the
credit facility described above is Seller's sole obligation with
respect to such Environmental Claims under this subsection
14A(j);
(iv) Seller may identify a financial inter-
mediary to fund such remediation after Buyer has failed to do so,
provided however, such election of Seller's identifying an
intermediary shall be at Buyer's sole discretion and Seller shall
not initiate any activities in this regard;
(v) All claims by Buyer for the Environmen-
tal Credit Facility shall be in writing and shall be made within
the four (4) year period from one (1) year after the Closing
Date. Buyer must request loan disbursements with respect to any
claim for credit hereunder within three years of the submission
of a claim. Disbursements under the Environmental Credit Facili-
ty shall be made in a timely fashion after request therefor, but
shall occur no more frequently than every six (6) months and each
drawing by Buyer must be repaid within three (3) years. The
aggregate outstanding principal amount of each drawing shall bear
interest at a rate which shall be no greater than either (i) the
rate paid to the Bank of New York Commercial Corp. or such other
credit source selected by Buyer for the term loan made to Buyer
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to finance the purchase of the Assets or (ii) in the event the
term loan is no longer in effect, the Prime Rate plus one and
one-half percent (1.5%); and
(vi) Seller's right to the repayment of funds
advanced to Buyer under the Environmental Credit Facility shall
be subordinated in all respects to the rights of any and all
banks or financial institutions that have advanced credit relat-
ing to the Business through revolving credit, term loan or
similar facilities to Buyer.
(k) Indemnification under this section shall be
subject to the requirements of subsection 14.4.
SECTION 15. BULK SALES LAW
Buyer hereby waives compliance by Seller with the
provisions of any applicable Bulk Sales Law. Seller hereby
agrees to indemnify and hold Buyer harmless against and in
respect of any claims, losses, liabilities, damages or expenses
(including reasonable attorney's fees) incurred by or asserted
against Buyer as a result of such non-compliance; provided that
nothing herein shall prevent Seller from contesting any such
liability in good faith.
SECTION 16. TERMINATION
The obligation of the parties hereto to consummate the
purchase and sale contemplated hereby may be terminated:
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(a) at any time by the mutual consent of Buyer
and Seller;
(b) by Buyer, if the conditions set forth in
subsection 9.1 of this Agreement shall not have been satisfied on
or before the Closing Date, and by Seller, if the conditions set
forth in subsection 9.2 of this Agreement shall not have been
satisfied on or before the Closing Date or the time periods
contained in subsections 9.2(e) and (f), as the case may be;
(c) by either Buyer or Seller, if, without
fault on the part of the party declaring termination, the Closing
shall not have occurred on or before ninety (90) days after the
signing of this Agreement; or
(d) by either Buyer or Seller, if on or before
the Closing Date, a third party, including, but not limited to,
any governmental agency such as the Justice Department or the
FTC, initiates or threatens to initiate an investigation or
litigation in respect of the transactions contemplated by this
Agreement and either Seller or Buyer, as the case may be, reason-
ably and in good faith deems it impractical or inadvisable to
proceed in view of such legal proceeding or threat.
In the event of the termination of this Agreement
pursuant to this Section, this Agreement shall become void and
have no effect, without any liability on the part of any party or
its directors, officers, employees or stockholders, except as
provided in subsection 7.1(b) and subsection 14.3(b) hereof, or
except for breach of this Agreement.
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SECTION 17. OTHER PROVISIONS
17.1 Public Announcements. Any announcements or
similar publicity with respect to this Agreement or the transac-
tions contemplated hereby shall be at such time and in such
manner as Seller and Buyer shall agree in writing, provided that
nothing herein shall prevent either party upon notice to the
other from making such public announcements as such party's
counsel may consider necessary or advisable in order to satisfy
that party's legal or contractual obligations in such regard. In
no event, however, shall either party make any public announce-
ment without prior written notification of the content and timing
of such announcement to the other party.
17.2 Costs and Expense. Except as expressly other-
wise provided in this Agreement, each party hereto shall bear its
own costs and expenses in connection with this Agreement and the
transactions contemplated hereby.
17.3 Passage of Title and Risk of Loss. Legal title
and risk of loss with respect to the property and rights to be
transferred hereunder shall not pass to Buyer until the property
or right is transferred at Closing hereunder; provided, however,
that if any loss of any of the Assets between the date hereof and
the Closing occurs without reduction of the Purchase Price on
account of such loss, Buyer shall be entitled to the proceeds of
any insurance payable with respect to the loss of such Assets
and, except as otherwise provided in subsection 8.1(g), Seller
shall have no obligation to repair or replace such Assets.
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17.4 Notices. All notices, requests, demands and
other communications required or permitted hereunder shall be in
writing and shall be deemed to be duly given if delivered by hand
or mailed certified or registered first class mail, postage
prepaid, properly addressed to the party entitled to receive such
notice at the address stated below:
If to Buyer: Freedom Textile Chemicals Co.
c/o The Freedom Group Partnership
Mellon Center, Suite 3905
1735 Market Street
Philadelphia, PA 19103
Copy to: Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Attn: Harry W. Gill, Jr.
If to Seller: American Cyanamid Company
One Cyanamid Plaza
Wayne, NJ 07470, U.S.A.
Attn: Secretary
17.5 Assignment. Neither this Agreement nor any
right hereunder shall be assigned by any party hereto without the
prior consent of the other party, and if any such party shall
attempt to assign this Agreement or any right hereunder without
the prior consent of such other party, then this Agreement shall,
at the option of such other party, immediately become null and
void and without legal effect and all rights and obligations
hereunder shall cease and terminate. Notwithstanding the forego-
ing, Buyer may assign, without the consent of Seller, the bene-
fits and rights set forth in subsection 14A to any purchaser,
lessee or operator of all or part of the Assets or Business.
Subject to the provisions of this subsection 17.5, this Agreement
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shall be binding upon and enure to the benefit of the parties
hereto and their successors and assigns. Notwithstanding any
such assignment, the assigning party shall continue to be primar-
ily liable hereunder.
17.6 Schedules and Exhibits. The schedules, exhib-
its, annexes and other papers attached to this Agreement are made
a part of this Agreement, and reference to a document or agree-
ment in any schedule, exhibit, annex or other paper shall be
deemed a reference for all purposes of this Agreement.
17.7 Integration, Amendment and Modification. This
Agreement, including the schedules and exhibits attached hereto,
represents the entire agreement between the parties hereto with
respect to the subject matter hereof and shall supersede all
previous negotiations, commitments and writings with respect to
such subject matter. Except as specifically set forth in this
Agreement, neither party makes to the other any representation or
warranty, whether express or implied, of any kind whatsoever.
This Agreement may not be amended, modified, supplemented or
changed in any respect except by a writing duly executed by
Seller and Buyer.
17.8 Waiver and Discharge. The failure of any party
hereto to enforce at any time any of the provisions of this
Agreement shall in no way be construed to be a waiver of any such
provision, nor in any way to affect the validity of this ,Agree-
ment or any part hereof or the right of any party thereafter to
enforce each and every provision. No waiver of any breach of
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this Agreement shall be held to be a waiver of any other or
subsequent breach.
17.9 Captions. The captions appearing in this Agree-
ment are inserted only as a matter of convenience and as a
reference and in no way define, limit or describe the scope or
intent of this Agreement or any of the provisions hereof.
17.10 Law Governing. Except for any legal issues
arising with respect to the Real Property, which shall be gov-
erned by, construed, interpreted and enforced according to the
laws of the State of North Carolina, without giving effect to its
choice of laws or conflict of laws provisions, this Agreement
shall be deemed a contract made under the laws of the State of
New Jersey, U.S.A., and for all purposes shall be governed by,
construed, interpreted and enforced according to the laws of the
State of New Jersey, U.S.A., without giving effect to its choice
of laws or conflict of laws provisions.
17.11 Benefit of Parties. Nothing in this Agreement
shall be construed to give any person or entity other than the
parties hereto any legal or equitable right, remedy or claim
under this Agreement, but this Agreement shall be for the sole
and exclusive benefit of the parties hereto, except as provided
in subsection 17.5.
17.12 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same instrument.
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17.13 Indirect or Consequential Damages. Except for
liability to third parties pursuant to the indemnifications in
Section 14, neither party shall be liable to the other party for
any special, indirect, incidental, punitive or consequential
damages arising out of a breach of this Agreement. No direct
damage suffered or incurred by any third party shall be deemed to
be included within such specified and disclaimed damages and such
third-party damage shall be determined according to applicable
law.
17.14 Severability. In case any provision of this
Agreement shall be held invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
hereof will not in any way be affected or impaired thereby.
17.15 Parties in Interest. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
17.16 References to Laws. References to statutes,
laws, codes of laws, sections thereof or provisions therein are
also deemed to refer to any successor laws or provisions.
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The parties have duly executed this Agreement as of the
day and year first above written.
FREEDOM TEXTILE CHEMICALS CO.
(Corporate Seal)
ATTEST: By /s/
---------------------------------------
Name:
Title:
/s/
- --------------------------------
Name:
Title:
AMERICAN CYANAMID COMPANY
(Corporate Seal)
ATTEST: By /s/
---------------------------------------
Name:
/s/ Title:
- --------------------------------
Name:
Title:
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EMPLOYMENT AGREEMENT
AGREEMENT made on November 15, 1994, by and between Freedom Chemical
Company, a Delaware corporation (the "Company") and Fred P. Rullo (the
"Executive").
WHEREAS, the Company has filed a Registration Statement on Form S-1
with the Securities and Exchange Commission relating to a public offering of
3,000,000 shares of the Company's Common Stock (the "Public Offering");
WHEREAS, the Executive is the President of the Company and has held
such position since May 4, 1992 under an Employment Agreement dated as of such
date (the "1992 Employment Agreement") between the Company and the Executive;
and
WHEREAS, the Company desires that the Executive continue to serve as
the President of the Company and the Executive desires to continue to hold such
position, under the terms and conditions of this Agreement, which shall
supersede and replace in all respects the 1992 Employment Agreement, effective
upon the consummation of the Public Offering; and
WHEREAS, the Board of Directors of the Company (the "Company Board")
has approved and authorized the Company to enter into this Agreement with the
Executive.
WHEREAS, the Company has entered into agreements with The Freedom
Group Partnership (the "Option Agreements") pursuant to which the Company
granted The Freedom Group Partnership options to purchase an aggregate of 11,318
shares of the Company's Common Stock (the "Options").
NOW, THEREFORE, intending to be legally bound hereby, the parties
agree as follows:
1. Employment. The Company hereby employs the Executive, and the
Executive hereby accepts employ-
<PAGE>
ment with the Company upon the terms and subject to the conditions set forth
herein.
2. Term.
(a) Subject to Section 14 hereof, the term of this Agreement
(the "Term") is for an initial period commencing on the date the Public Offering
is consummated and terminating on May 4, 1997.
(b) Commencing on May 4, 1997 and each anniversary of such
date thereafter, the Term shall automatically be extended for one additional
year unless, not later than sixty (60) days prior to such date or any such
anniversary, as the case may be, either party hereto shall have notified the
other party hereto in writing that such extension shall not take effect.
3. Position. During the Term, the Executive shall serve as the
President and Chief Executive Officer of the Company, supervising the conduct of
the business and affairs of Company and its subsidiaries and performing such
other duties as the Company Board shall determine.
4. Duties and Reporting Relationship. During the Term, the Executive
shall, on a full time basis, use his skills and render services to the best of
his abilities in supervising the management and promoting the products, services
and business of the Company, provided, however, the foregoing shall not prevent
the Executive from devoting a portion of his time and efforts to his personal
business affairs or serving on the boards of other for profit and not for profit
corporations so long as such activities do not materially interfere with the
performance of his duties hereunder. The Executive shall report to, and be
subject to supervision by, the Company Board.
5. Place of Performance. The Executive shall perform his duties and
conduct his business at the principal executive offices of the Company, which
shall be in Philadelphia, Pennsylvania, except for required travel on the
Company's business.
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<PAGE>
6. Salary and Bonus.
(a) In consideration of Executive's services to be rendered
pursuant hereto, the Company shall pay to the Executive a base salary (the "Base
Salary") of $400,000 per year. The Company Board or a committee thereof shall
review the Base Salary at least annually and shall make such adjustments from
time to time as it may deem advisable. In no event shall there be a reduction in
the Executive's Base Salary. The Base Salary shall be payable to the Executive
in substantially equally installments in accordance with the Company's normal
payroll practices.
(b) Commencing with the Company's fiscal year ended December
31, 1995, the Executive shall be eligible to receive an annual bonus of up to
one hundred and fifty percent (150%) of his Base Salary which shall be awarded
by the Company Board or a committee thereof based upon the Company's annual
performance as measured against a written set of reasonable performance criteria
to be established by the Company Board or a committee thereof, after reviewing
with the Executive the Company's operating budget for the relevant fiscal year
and the proposed performance criteria. Each such bonus shall be paid on or
before the March 31 of the year following the year to which the bonus relates.
The annual bonus may be awarded as part of a bonus plan or other incentive
compensation plan established by the Company Board for the Company's senior
management officers.
7. Vacation, Holidays and Sick Leave. During the Term, the Executive
shall be entitled to paid vacation, paid holidays and sick leave in accordance
with the Company's standard policies for its senior executive officers, which
policies shall provide the Executive with benefits no less favorable than those
provided to any other senior executive officer of the Company.
8. Business Expenses. The Executive will be reimbursed for all
ordinary and necessary business expenses incurred by him in connection with his
employment (including without limitation, expenses for travel and entertainment
incurred in conducting or promoting business for the Company) upon timely
submission by the Executive of receipts and other documentation as required
3
<PAGE>
by the Internal Revenue Code (the "Code") and in accordance with the Company's
normal procedures.
9. Pension and Welfare Benefits. During the Term, the Executive
shall be eligible to participate in the pension and retirement plans described
on Schedule A, attached hereto, and participate fully in all other health
benefits, insurance programs, retirement plans and other employee benefit
arrangements available to officers of the Company generally.
10. Automobile; Membership Dues. During the Executive's employment
under this Agreement, the Company shall (i) provide the Executive with the use
of an automobile appropriate for his position with the Company, and shall pay
for all repairs and maintenance, insurance coverage and operating expenses
associated therewith and (ii) reimburse the Executive for membership dues in
business or athletic clubs and dues for business and professional associations
provided, however, that the cost of all such expenses, shall not be reimbursed
by the Company to the extent that they exceed, in the aggregate, $25,000 per
year.
11. Disability Benefits. In the event that this Agreement is
terminated by the Company pursuant to Section 14(c) hereof, (i) the Company
shall pay to the Executive, within ninety (90) days of such termination, a lump
sum amount equal to the product of two (2) multiplied by the amount of the
Executive's Average Final Compensation , and (ii) the Options shall become
exercisable with respect to the Rullo Shares (as defined in the Option
Agreements) and shall remain exercisable for a period of one year following such
termination of employment. As used in this Agreement, the Executive's "Average
Final Compensation" shall mean, at the time of termination, the average of the
Executive's annual compensation for the three (3) calendar years ended prior to
the date of such termination. For this purpose, the Executive's annual
compensation for any year shall be the sum of his base salary for such year plus
any bonus earned by him pursuant to Section 6(b) hereof or otherwise in respect
of such year.
12. Death Benefits. In the event the Executive dies at any time
during the Term hereof, (i) the Company shall pay a death benefit to the
Executive's
4
<PAGE>
spouse or, if no spouse is living, to the heirs of the Executive, within ninety
(90) days of the Executive's death, in a lump sum payment equal to the product
of two (2) multiplied by the amount of the Executive's Average Final
Compensation, and (ii) the Options shall become exercisable with respect to the
Rullo Shares and shall remain exercisable for a period of one year following
such termination of employment.
13. Severance Benefits.
(a) In the event that this Agreement is terminated by the
Company without Cause pursuant to Section 14(e) hereof or by the Executive for
Good Reason pursuant to Section 14(f) hereof, (i) the Executive shall be
entitled to the severance benefits set forth below, and (ii) the Option shall
become exercisable with respect to the Rullo Shares and shall remain exercisable
for a period of one year following such termination of employment.
(i) At the time of such termination, the Executive shall
become entitled to receive a severance benefit equal to the product of two (2)
multiplied by the amount of the Executive's Average Final Compensation, payable
in substantially equal monthly installments over a period of two years.
(ii) In addition, the Company shall continue to maintain
and pay for all health care benefits for the Executive that were in effect at
the time of termination until the later of (A) the end of the then current Term
of this Agreement, and (B) eighteen (18) months after the date of termination.
At the request of the Executive, and at the Executive's sole cost and expense,
the Company shall thereafter maintain such health care benefits for the
Executive.
(b) Notwithstanding anything to the contrary contained herein,
if any severance payments (including benefits) made by the Company hereunder to
or for the benefit of the Executive would not be deductible by the Company as a
result of Section 280G of the Code, then the Executive may elect, by giving
written notice of such
5
<PAGE>
election to the Company promptly after his termination, to reduce his severance
benefits to the maximum amount of severance benefits that can be paid to or for
his benefit without making any part thereof not deductible by reason of Section
280G.
14. Termination of Agreement. This Agreement shall not be terminated
prior to the end of the then current Term hereof except as set forth in this
Section 14. In the event of such early termination, the Executive shall be
entitled to receive (i) all compensation and benefits to be paid or provided to
the Executive under this Agreement through the date of such termination, and
(ii) such additional compensation and benefits as are expressly set forth in
this Agreement.
(a) By Mutual Consent. This Agreement may be terminated at any
time by the mutual written agreement of the Company and the Executive.
(b) Death. This Agreement shall be terminated upon the death
of the Executive, in which event the Executive's spouse or heirs shall receive
the death benefits set forth in Section 12 hereof.
(c) Disability. This Agreement may be terminated at the option
of the Company in the event that (i) the Executive becomes unable to perform his
normal duties by reason of physical or mental illness or accident for any six
(6) consecutive month period, or (ii) the Company receives written opinions from
both a physician for the Company and a physician for the Executive that the
Executive will be so disabled, in which event the Executive and his spouse or
heirs shall receive the disability benefits set forth in Section 11 hereof.
(d) By the Company for Cause. This Agreement may be terminated
by the Company upon the occurrence of any of the following events (each of which
shall constitute "Cause" for termination): (i) the Executive commits any act of
fraud or dishonesty causing material harm to the Company; (ii) the conviction of
the Executive of a felony; (iii) habitual drunkenness or narcotic drug use by
the Executive; or (iv) any material breach by the Executive of his duties
hereunder, which breach remains uncorrected for a period of thirty (30) days
after receipt by the Executive of written notice
6
<PAGE>
from the Company setting forth the breach, if the Company suffers a material
loss as a result of such material breach.
(e) By the Company Without Cause. This Agreement may be
terminated by the Company at any time without Cause (as defined in Section 14(d)
hereof) upon written notice to the Executive, in which event the Executive shall
receive the severance benefits set forth in Section 13 hereof.
(f) By the Executive for Good Reason. This Agreement may be
terminated by the Executive at any time within twelve (12) months after (unless
otherwise agreed to in writing by the Executive) any of the following events
(each of which shall constitute "Good Reason" for termination): (i) there is a
Change in Control of the Company (as hereinafter defined); (ii) the Company
sells, leases or otherwise transfers all or substantially all of its assets to
an entity which has not entered into an employment contract which is mutually
satisfactory to the Executive and such entity; (iii) a material change occurs in
the duties or responsibilities of the Executive (e.g., the Executive is placed
in a reporting relationship to anyone other than the Company Board); (iv) the
Executive is employed by the Company in a capacity other than as President; (v)
the Executive is not elected or appointed continually as a director of the
Company; (vi) the principal executive offices of the Company are moved to a
location other than the general Philadelphia, Pennsylvania vicinity; or (vii) a
liquidation or dissolution of the Company occurs. In the event of termination
for Good Reason, the Executive shall receive the severance benefits set forth in
Section 13 hereof.
(g) By the Executive Without Good Reason. This Agreement may
be terminated by the Executive at any time without Good Reason (as defined in
Section 14(f) hereof) upon the Executive's giving the Company sixty (60) days
prior written notice of his resignation.
(h) Change in Control. For purposes of this Agreement, a
"Change in Control" shall be deemed to have occurred if:
(i) (x) any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange
7
<PAGE>
Act (other than (1) the Company, (2) any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of
its subsidiaries, (3) any corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as
their ownership of common stock of the Company, (4) Joseph Littlejohn &
Levy or any affiliate thereof ("JLL"), (5) The Freedom Group Partnership
or any affiliate thereof, or (6) the officers, directors or employees of
the Company and its Subsidiaries (collectively, the "Permitted Holders")),
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing more than 30% of the combined voting power of the Company's
then outstanding voting securities, (y) the Permitted Holders
"beneficially own" (as so defined), directly or indirectly, in the
aggregate a lesser percentage of the combined voting power of the
Company's then outstanding voting securities than such other person and
(z) a majority of the members of the Company Board are no longer nominees
or designees of the Permitted Holders, or
(ii) during any period of 24 consecutive months,
individuals who at the beginning of such period constituted the Company
Board (together with any new directors whose election by such Board or
whose nomination for election by the shareholders of the Company was
approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved or who were nominated
and elected by the Permitted Holders) cease for any reason to constitute a
majority of the Company Board then in office.
15. Representations.
(a) The Company represents and warrants that this Agreement
has been authorized by all necessary corporate action of the Company and is a
valid and binding agreement of the Company enforceable against it in accordance
with its terms.
8
<PAGE>
(b) The Executive represents and warrants that he is not a
party to any agreement or instrument which would prevent him from entering into
or performing his duties in any way under this Agreement.
16. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
has taken place.
(b) This Agreement is a personal contract and the rights and
interests of the Executive hereunder may not be sold, transferred, assigned,
pledged, encumbered, or hypothecated by him, except as otherwise expressly
permitted by the provisions of this Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Executive and his personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount would still
be payable to him hereunder had the Executive continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to his devisee, legatee or other designee or, if there
is no such designee, to his estate.
17. No-Competition Covenants. (a) During the Term, the Executive
shall not be permitted to invest, directly or indirectly, in any business or
entity which operates within the chemical industry without the express written
consent of the Company Board. Notwithstanding anything herein to the contrary,
this Section 17(a) shall not prevent the Executive from acquiring securities
representing not more than 10% of the outstanding equity of any business
enterprise, provided that the Executive does not take an active role in the
management of such business enterprise.
(b) The Executive agrees that he will not at any time during
the Term and, if this Agreement is terminated by the Company for Cause pursuant
to Section
9
<PAGE>
14(d) hereof or by the Executive without Good Reason pursuant to Section 14(g)
hereof, for a period of two (2) years following such termination (i) induce any
employee of the Company or it subsidiaries to terminate his or her employment by
the Company or its subsidiaries in order to obtain employment by any person,
firm or corporation affiliated with the Executive, or (ii) directly or
indirectly, own any interest in, operate, join, control or participate as a
partner, director, principal, officer, or agent of, enter into the employment
of, act as a consultant to, or perform any services for any entity which has
material operations which directly compete with the Company in the sale of any
products sold by the Company at the time of the Executive's termination of
employment. Notwithstanding anything herein to the contrary, this Section 17(b)
shall not prevent the Executive from acquiring securities representing not more
than 5% of the outstanding voting securities of any publicly held corporation.
18. Confidentiality Covenant. The Executive agrees that he will not
at any time during the Term at any time thereafter, directly or indirectly, use
for his own account, or disclose to any person, firm or corporation, other than
authorized officers, directors and employees of the Company or its subsidiaries,
Confidential Information (as hereinafter defined) of the Company. As used
herein, "Confidential Information" of the Company means information of any kind,
nature or description which is disclosed to or otherwise known to the Executive
as a direct or indirect consequence of his association with the Company, which
information is not generally known to the public or in the businesses in which
the Company is engaged or which information relates to specific investment
opportunities within the scope of the Company's business which were considered
by the Company during the term of this Agreement.
19. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and
supersedes the 1992 Employment Agreement and any other undertakings and
agreements, whether oral or in writing, previously entered into by them with
respect thereto. The Executive represents that, in executing this Agreement, he
does not rely and has not relied upon any representation or statement not set
forth herein made by the Company with regard
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<PAGE>
to the subject matter or effect of this Agreement or otherwise.
20. Amendment or Modification, Waiver. No provision of this
Agreement may be amended, or waived unless such amendment or waiver is agreed to
in writing, signed by the Executive and by a duly authorized officer of the
Company. No waiver by any party hereto of any breach by another party hereto of
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
21. Notices. Any notice to be given hereunder shall be in writing
and shall be deemed given when delivered personally, sent by courier or telecopy
or registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice hereunder in writing:
To the Executive at:
Fred P. Rullo
907 Sorrel Lane
Bryn Mawr, PA 19010
To the Company at:
Freedom Chemical Company
Mellon Center
1735 Market Street
Philadelphia, PA 19103
Attn: Chairman
Telecopy: (215) 979-3733
With a copy to:
Joseph Littlejohn & Levy
450 Lexington Avenue
Suite 3350
New York, NY 10017
Attn: Yvonne V. Cliff
Telecopy: (212) 286-8626
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Any notice delivered personally or by courier under this Section 21
shall be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
22. Effectiveness Conditioned Upon Public Offering. This Agreement
shall become effective upon the consummation of the Public Offering. In the
event the Public Offering is not consummated by March 31, 1995, this Agreement
shall terminate, be null and void and of no further force or effect.
23. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law.
24. Survivorship. The respective rights and obligations or the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
25. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York, without regard to its
conflicts of laws principles.
26. Headings. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
27. Obligations Absolute; Withholding.
(a) The obligations of the Company hereunder shall be absolute
and unconditional and shall not be affected by any circumstances, including
without limitation (i) the Executive's receipt of compensation
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<PAGE>
and benefits from another employer in the event that the Executive accepts new
employment following the termination of his employment under this Agreement, or
(ii) any set-off, counterclaim, recoupment, defense or other right which the
Company may have against the Executive or anyone else.
(b) All payments to the Executive under this Agreement shall
be reduced by all applicable withholding required by federal, state or local
law.
28. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
FREEDOM CHEMICAL COMPANY
By:/s/ Harold A. Sorgenti
------------------------
Name: Harold A. Sorgenti
----------------------
Title: Executive Chairman
---------------------
/s/ Fred P. Rullo
---------------------------
Fred P. Rullo
13
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made on November 15, 1994, by and between Freedom Chemical
Company, a Delaware corporation (the "Company") and Harold A. Sorgenti (the
"Executive").
WHEREAS, the Company has filed a Registration Statement on Form S-1
with the Securities and Exchange Commission relating to a public offering of
3,000,000 shares of the Company's Common Stock (the "Public Offering");
WHEREAS, the Executive is the Executive Chairman of the Company (the
"Executive Chairman") and has held such position since May 4, 1992 under an
Employment Agreement dated as of such date (the "1992 Employment Agreement")
between the Company and the Executive; and
WHEREAS, the Company desires that the Executive continue to serve as
the Executive Chairman and the Executive desires to continue to hold such
position, under the terms and conditions of this Agreement, which shall
supersede and replace in all respects the 1992 Employment Agreement, effective
upon the consummation of the Public Offering; and
WHEREAS, the Board of Directors of the Company (the "Company Board")
has approved and authorized the Company to enter into this Agreement with the
Executive.
WHEREAS, the Company has entered into agreements with The Freedom
Group Partnership (the "Option Agreements") pursuant to which the Company
granted The Freedom Group Partnership options to purchase an aggregate of 11,318
shares of the Company's Common Stock (the "Options").
NOW, THEREFORE, intending to be legally bound hereby, the parties
agree as follows:
1. Employment. The Company hereby employs the Executive, and the
Executive hereby accepts employ-
<PAGE>
ment with the Company upon the terms and subject to the conditions set forth
herein.
2. Term.
(a) Subject to Section 14 hereof, the term of this Agreement
(the "Term") is for an initial period commencing on the date the Public Offering
is consummated and terminating on May 4, 1997.
(b) Commencing on May 4, 1997 and each anniversary of such
date thereafter, the Term shall automatically be extended for one additional
year unless, not later than sixty (60) days prior to such date or any such
anniversary, as the case may be, either party hereto shall have notified the
other party hereto in writing that such extension shall not take effect.
3. Position. During the Term, the Executive shall serve as the
Executive Chairman of the Company, supervising the conduct of the business and
affairs of Company and its subsidiaries and performing such other duties as the
Company Board shall determine.
4. Duties and Reporting Relationship. During the Term, the Executive
shall, on a full time basis, use his skills and render services to the best of
his abilities in supervising the management and promoting the products, services
and business of the Company, provided, however, the foregoing shall not prevent
the Executive from devoting a portion of his time and efforts to his personal
business affairs or serving on the boards of other for profit and not for profit
corporations so long as such activities do not materially interfere with the
performance of his duties hereunder. The Executive shall report to, and be
subject to supervision by, the Company Board.
5. Place of Performance. The Executive shall perform his duties and
conduct his business at the principal executive offices of the Company, which
shall be in Philadelphia, Pennsylvania, except for required travel on the
Company's business.
6. Salary and Bonus.
2
<PAGE>
(a) In consideration of Executive's services to be rendered
pursuant hereto, the Company shall pay to the Executive a base salary (the "Base
Salary") of $400,000 per year. The Company Board or a committee thereof shall
review the Base Salary at least annually and shall make such adjustments from
time to time as it may deem advisable. In no event shall there be a reduction in
the Executive's Base Salary. The Base Salary shall be payable to the Executive
in substantially equally installments in accordance with the Company's normal
payroll practices.
(b) Commencing with the Company's fiscal year ended December
31, 1995, the Executive shall be eligible to receive an annual bonus of up to
one hundred and fifty percent (150%) of his Base Salary which shall be awarded
by the Company Board or a committee thereof based upon the Company's annual
performance as measured against a written set of reasonable performance criteria
to be established by the Company Board or a committee thereof, after reviewing
with the Executive the Company's operating budget for the relevant fiscal year
and the proposed performance criteria. Each such bonus shall be paid on or
before the March 31 of the year following the year to which the bonus relates.
The annual bonus may be awarded as part of a bonus plan or other incentive
compensation plan established by the Company Board for the Company's senior
management officers.
7. Vacation, Holidays and Sick Leave. During the Term, the Executive
shall be entitled to paid vacation, paid holidays and sick leave in accordance
with the Company's standard policies for its senior executive officers, which
policies shall provide the Executive with benefits no less favorable than those
provided to any other senior executive officer of the Company.
8. Business Expenses. The Executive will be reimbursed for all
ordinary and necessary business expenses incurred by him in connection with his
employment (including without limitation, expenses for travel and entertainment
incurred in conducting or promoting business for the Company) upon timely
submission by the Executive of receipts and other documentation as required by
the Internal Revenue Code (the "Code") and in accordance with the Company's
normal procedures.
3
<PAGE>
9. Pension and Welfare Benefits. During the Term, the Executive
shall be eligible to participate in the pension and retirement plans described
on Schedule A, attached hereto, and participate fully in all other health
benefits, insurance programs, retirement plans and other employee benefit
arrangements available to officers of the Company generally.
10. Automobile; Membership Dues. During the Executive's employment
under this Agreement, the Company shall (i) provide the Executive with the use
of an automobile appropriate for his position with the Company, and shall pay
for all repairs and maintenance, insurance coverage and operating expenses
associated therewith and (ii) reimburse the Executive for membership dues in
business or athletic clubs and dues for business and professional associations
provided, however, that the cost of all such expenses shall not be reimbursed by
the Company to the extent that they exceed, in the aggregate, $25,000 per year.
11. Disability Benefits. In the event that this Agreement is
terminated by the Company pursuant to Section 14(c) hereof, (i) the Company
shall pay to the Executive, within ninety (90) days of such termination, a lump
sum amount equal to the product of two (2) multiplied by the amount of the
Executive's Average Final Compensation , and (ii) the Options shall become
exercisable with respect to the Sorgenti Shares (as defined in the Option
Agreements) and shall remain exercisable for a period of one year following such
termination of employment. As used in this Agreement, the Executive's "Average
Final Compensation" shall mean, at the time of termination, the average of the
Executive's annual compensation for the three (3) calendar years ended prior to
the date of such termination. For this purpose, the Executive's annual
compensation for any year shall be the sum of his base salary for such year plus
any bonus earned by him pursuant to Section 6(b) hereof or otherwise in respect
of such year.
12. Death Benefits. In the event the Executive dies at any time
during the Term hereof, (i) the Company shall pay a death benefit to the
Executive's spouse or, if no spouse is living, to the heirs of the Executive,
within ninety (90) days of the Executive's death, in a lump sum payment equal to
the product of two
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<PAGE>
(2) multiplied by the amount of the Executive's Average Final Compensation, and
(ii) the Options shall become exercisable with respect to the Sorgenti Shares
and shall remain exercisable for a period of one year following such termination
of employment.
13. Severance Benefits.
(a) In the event that this Agreement is terminated by the
Company without Cause pursuant to Section 14(e) hereof or by the Executive for
Good Reason pursuant to Section 14(f) hereof, (i) the Executive shall be
entitled to the severance benefits set forth below, and (ii) the Option shall
become exercisable with respect to the Sorgenti Shares and shall remain
exercisable for a period of one year following such termination of employment.
(i) At the time of such termination,
the Executive shall become entitled to receive a severance benefit equal to the
product of two (2) multiplied by the amount of the Executive's Average Final
Compensation, payable in substantially equal monthly installments over a period
of two years.
(ii) In addition, the Company shall
continue to maintain and pay for all health care benefits for the Executive that
were in effect at the time of termination until the later of (A) the end of the
then current Term of this Agreement, and (B) eighteen (18) months after the date
of termination. At the request of the Executive, and at the Executive's sole
cost and expense, the Company shall thereafter maintain such health care
benefits for the Executive.
(b) Notwithstanding anything to the contrary contained herein,
if any severance payments (including benefits) made by the Company hereunder to
or for the benefit of the Executive would not be deductible by the Company as a
result of Section 280G of the Code, then the Executive may elect, by giving
written notice of such election to the Company promptly after his termination,
to reduce his severance benefits to the maximum amount of severance benefits
that can be paid to or for his benefit
5
<PAGE>
without making any part thereof not deductible by reason of Section 280G.
14. Termination of Agreement. This Agreement shall not be terminated
prior to the end of the then current Term hereof except as set forth in this
Section 14. In the event of such early termination, the Executive shall be
entitled to receive (i) all compensation and benefits to be paid or provided to
the Executive under this Agreement through the date of such termination, and
(ii) such additional compensation and benefits as are expressly set forth in
this Agreement.
(a) By Mutual Consent. This Agreement may be terminated at any
time by the mutual written agreement of the Company and the Executive.
(b) Death. This Agreement shall be terminated upon the death
of the Executive, in which event the Executive's spouse or heirs shall receive
the death benefits set forth in Section 12 hereof.
(c) Disability. This Agreement may be terminated at the option
of the Company in the event that (i) the Executive becomes unable to perform his
normal duties by reason of physical or mental illness or accident for any six
(6) consecutive month period, or (ii) the Company receives written opinions from
both a physician for the Company and a physician for the Executive that the
Executive will be so disabled, in which event the Executive and his spouse or
heirs shall receive the disability benefits set forth in Section 11 hereof.
(d) By the Company for Cause. This Agreement may be terminated
by the Company upon the occurrence of any of the following events (each of which
shall constitute "Cause" for termination): (i) the Executive commits any act of
fraud or dishonesty causing material harm to the Company; (ii) the conviction of
the Executive of a felony; (iii) habitual drunkenness or narcotic drug use by
the Executive; or (iv) any material breach by the Executive of his duties
hereunder, which breach remains uncorrected for a period of thirty (30) days
after receipt by the Executive of written notice from the Company setting forth
the breach, if the Company suffers a material loss as a result of such material
breach.
6
<PAGE>
(e) By the Company Without Cause. This Agreement may be
terminated by the Company at any time without Cause (as defined in Section 14(d)
hereof) upon written notice to the Executive, in which event the Executive shall
receive the severance benefits set forth in Section 13 hereof.
(f) By the Executive for Good Reason. This Agreement may be
terminated by the Executive at any time within twelve (12) months after (unless
otherwise agreed to in writing by the Executive) any of the following events
(each of which shall constitute "Good Reason" for termination): (i) there is a
Change in Control of the Company (as hereinafter defined); (ii) the Company
sells, leases or otherwise transfers all or substantially all of its assets to
an entity which has not entered into an employment contract which is mutually
satisfactory to the Executive and such entity; (iii) a material change occurs in
the duties or responsibilities of the Executive (e.g., the Executive is placed
in a reporting relationship to anyone other than the Company Board); (iv) the
Executive is employed by the Company in a capacity other than as Chairman; (v)
the Executive is not elected or appointed continually as a director of the
Company; (vi) the principal executive offices of the Company are moved to a
location other than the general Philadelphia, Pennsylvania vicinity; or (vii) a
liquidation or dissolution of the Company occurs. In the event of termination
for Good Reason, the Executive shall receive the severance benefits set forth in
Section 13 hereof.
(g) By the Executive Without Good Reason. This Agreement may
be terminated by the Executive at any time without Good Reason (as defined in
Section 14(f) hereof) upon the Executive's giving the Company sixty (60) days
prior written notice of his resignation.
(h) Change in Control. For purposes of this Agreement, a
"Change in Control" shall be deemed to have occurred if:
(i) (x) any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than (1) the Company, (2) any
trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its subsidiaries, (3) any corporation owned,
directly or indi-
7
<PAGE>
rectly, by the stockholders of the Company in substantially the same
proportions as their ownership of common stock of the Company, (4) Joseph
Littlejohn & Levy or any affiliate thereof ("JLL"), (5) The Freedom Group
Partnership or any affiliate thereof, or (6) the officers, directors or
employees of the Company and its Subsidiaries (collectively, the
"Permitted Holders")), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing more than 30% of the combined voting power of
the Company's then outstanding voting securities, (y) the Permitted
Holders "beneficially own" (as so defined), directly or indirectly, in the
aggregate a lesser percentage of the combined voting power of the
Company's then outstanding voting securities than such other person and
(z) a majority of the members of the Company Board are no longer nominees
or designees of the Permitted Holders, or
(ii) during any period of 24 consecutive months,
individuals who at the beginning of such period constituted the Company
Board (together with any new directors whose election by such Board or
whose nomination for election by the shareholders of the Company was
approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved or who were nominated
and elected by the Permitted Holders) cease for any reason to constitute a
majority of the Company Board then in office.
15. Representations.
(a) The Company represents and warrants that this Agreement
has been authorized by all necessary corporate action of the Company and is a
valid and binding agreement of the Company enforceable against it in accordance
with its terms.
(b) The Executive represents and warrants that he is not a
party to any agreement or instrument which would prevent him from entering into
or performing his duties in any way under this Agreement.
8
<PAGE>
16. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
has taken place.
(b) This Agreement is a personal contract and the rights and
interests of the Executive hereunder may not be sold, transferred, assigned,
pledged, encumbered, or hypothecated by him, except as otherwise expressly
permitted by the provisions of this Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Executive and his personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount would still
be payable to him hereunder had the Executive continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to his devisee, legatee or other designee or, if there
is no such designee, to his estate.
17. No-Competition Covenants. (a) During the Term, the Executive
shall not be permitted to invest, directly or indirectly, in any business or
entity which operates within the chemical industry without the express written
consent of the Company Board. Notwithstanding anything herein to the contrary,
this Section 17(a) shall not prevent the Executive from acquiring securities
representing not more than 10% of the outstanding equity of any business
enterprise, provided that the Executive does not take an active role in the
management of such business enterprise.
(b) The Executive agrees that he will not at any time during
the Term and, if this Agreement is terminated by the Company for Cause pursuant
to Section 14(d) hereof or by the Executive without Good Reason pursuant to
Section 14(g) hereof, for a period of two (2) years following such termination
(i) induce any employee of the Company or it subsidiaries to terminate his or
her employment by the Company or its subsidiaries in order to
9
<PAGE>
obtain employment by any person, firm or corporation affiliated with the
Executive, or (ii) directly or indirectly, own any interest in, operate, join,
control or participate as a partner, director, principal, officer, or agent of,
enter into the employment of, act as a consultant to, or perform any services
for any entity which has material operations which directly compete with the
Company in the sale of any products sold by the Company at the time of the
Executive's termination of employment. Notwithstanding anything herein to the
contrary, this Section 17(b) shall not prevent the Executive from acquiring
securities representing not more than 5% of the outstanding voting securities of
any publicly held corporation.
18. Confidentiality Covenant. The Executive agrees that he will not
at any time during the Term at any time thereafter, directly or indirectly, use
for his own account, or disclose to any person, firm or corporation, other than
authorized officers, directors and employees of the Company or its subsidiaries,
Confidential Information (as hereinafter defined) of the Company. As used
herein, "Confidential Information" of the Company means information of any kind,
nature or description which is disclosed to or otherwise known to the Executive
as a direct or indirect consequence of his association with the Company, which
information is not generally known to the public or in the businesses in which
the Company is engaged or which information relates to specific investment
opportunities within the scope of the Company's business which were considered
by the Company during the term of this Agreement.
19. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and
supersedes the 1992 Employment Agreement and any other undertakings and
agreements, whether oral or in writing, previously entered into by them with
respect thereto. The Executive represents that, in executing this Agreement, he
does not rely and has not relied upon any representation or statement not set
forth herein made by the Company with regard to the subject matter or effect of
this Agreement or otherwise.
20. Amendment or Modification, Waiver. No provision of this
Agreement may be amended, or waived
10
<PAGE>
unless such amendment or waiver is agreed to in writing, signed by the Executive
and by a duly authorized officer of the Company. No waiver by any party hereto
of any breach by another party hereto of any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same time, any prior time or
any subsequent time.
21. Effectiveness Conditioned Upon Public Offering. This Agreement
shall become effective upon the consummation of the Public Offering. In the
event the Public Offering is not consummated by March 31, 1995, this Agreement
shall terminate, be null and void and of no further force or effect.
22. Notices. Any notice to be given hereunder shall be in writing
and shall be deemed given when delivered personally, sent by courier or telecopy
or registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice hereunder in writing:
To the Executive at:
Harold A. Sorgenti
Cooperstown and Blakely Roads
Haverford, PA 19041
To the Company at:
Freedom Chemical Company
Mellon Center
1735 Market Street
Philadelphia, PA 19103
Attn: President
Telecopy: (215) 979-3733
With a copy to:
Joseph Littlejohn & Levy
450 Lexington Avenue
Suite 3350
New York, NY 10017
Attn: Yvonne V. Cliff
11
<PAGE>
Telecopy: (212) 286-8626
Any notice delivered personally or by courier under this Section 21
shall be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
23. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law.
24. Survivorship. The respective rights and obligations or the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
25. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York, without regard to its
conflicts of laws principles.
26. Headings. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
27. Obligations Absolute; Withholding.
(a) The obligations of the Company hereunder shall be absolute
and unconditional and shall not be affected by any circumstances, including
without limitation (i) the Executive's receipt of compensation and benefits from
another employer in the event that the Executive accepts new employment
following the termination of his employment under this Agreement, or (ii) any
set-off, counterclaim, recoupment, defense or other right
12
<PAGE>
which the Company may have against the Executive or anyone else.
(b) All payments to the Executive under this Agreement shall
be reduced by all applicable withholding required by federal, state or local
law.
28. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
FREEDOM CHEMICAL COMPANY
By:/s/ Fred P. Rullo
-------------------------
Name: Fred P. Rullo
-----------------------
Title: President
----------------------
/s/ Harold A. Sorgenti
----------------------------
Harold A. Sorgenti
13
<PAGE>
October 18, 1993
Robert A. Kirchner
President
Kalama Chemical, Inc.
Dear Bob:
This is to confirm that the terms of the Employment Agreement dated
June 1, 1991, between you as Employee and Kalama Chemical, Inc., has been
extended through December 31, 1996. All terms and conditions shall otherwise
remain the same.
If you agree with the above, please sign in the space indicated
below on the enclosed copy of this letter and return the same to me.
Very truly yours,
/s/ James W. Hudson
------------------------------
James W. Hudson, V.P. Finance
and Secretary B.C. Sugar, LTD.
I agree to the above.
/s/ Robert A. Kirchner 10/20/93
- ------------------------- ------------------------------
(Employee) (Date)
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of this 1st
day of June, 1991 by and between Kalama Chemical Inc., a Washington corporation,
(the "Company") and the following key employee of the Company: ROBERT A.
KIRCHNER (the "Employee");
WITNESSETH, that in and for consideration of the Employee's continuing to
be employed by the Company and the mutual covenants herein contained, the
parties hereto do hereby agree as follows:
1. The Company shall employ the Employee, and the Employee shall work for
the Company in such capacity, on a full-time basis at substantially the same or
equivalent duties as those which the Employee now has. The Employee shall
undertake such additional or different duties as the Employee and the Company,
acting through the Board of Directors or senior officers, may mutually agree
upon from time to time. The Employee shall not be required to relocate without
his consent. The Employee shall in good faith use his best efforts to perform
his duties to the best of his ability and for the best interests of the Company.
2. The Employee shall be paid such salary and bonus as may from time to
time be fixed by the Board of Directors or senior officers, provided that at no
time shall the salary of the Employee be fixed at a rate that is less than the
rate at which the salary is currently being paid. The Employee shall also be
eligible for and shall receive all health insurance, retirement benefits and
other employee benefits which the Employee now receives or is eligible for and
any other benefits to which he may become eligible under the policies of the
Company relating to employees as they may from time to time be in effect.
3. The term of this Agreement shall commence on the date hereof and shall
continue until the earlier of (a) the date of ordinary retirement for the
Employee under the Company's present retirement policies, (b) the date the
Employee is terminated for "cause" as defined in Section 4 hereof by action of
the Board of Directors or by a senior officer, or (c) three years from the date
hereof. If during the term of this Agreement the Employ-
1
<PAGE>
ee is terminated for any reason other than for "cause" within the meaning of
Section 4, the Employee's only right to payment shall be to receive the payments
under Section 4 hereof. For purposes of this Agreement, the term "senior
officer" shall mean the President, a Vice President, the Secretary or Treasurer,
except that there shall be no "senior officer" with respect to an Employee that
himself holds one of such positions, so that as to him action by the Board of
Directors is required.
4. Prior to the expiry of the term of this Agreement, in the event the
Employee is terminated for any reason other than for "cause", the Company shall
thereafter continue to pay to the Employee monthly at the salary rate that
exists on the date of termination an amount equal to the Employee's then monthly
salary times one month for every year or part of a year that the Employee has
been employed by the Company or an affiliate of the Company, but in any event
times no fewer than 12 months, until such amount is paid to the Employee in
full. The payments due under this Section 4 shall not be reduced by any claim or
offset whatsoever and are absolute, except that the Company may make ordinary
deductions for income tax withholding and the like. For purposes of this
Agreement, "cause" shall mean either (a) failure to report for work for six
consecutive months for any reason, including disability, or (b) the conviction
of a felony against the Company by the taking of Company property for himself or
otherwise depriving the Company of a substantial benefit and converting it to
himself.
5. This Agreement contains all of the understanding of the parties with
respect to the subject matter hereof and may not be waived, modified or amended
except in writing signed by the party to be bound. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Washington. In the event of any legal action brought to enforce any provisions
hereof, the prevailing party shall be awarded cost and expenses, including
reasonable attorney's fees. This Agreement shall be binding upon the parties and
their successors and assigns, including any successors or assigns arising out of
an acquisition of the Company or its business or assets. In the event the
Company proposes to sell all or substantially all of its assets as a going
concern, it will not enter into such a transaction unless the Purchaser enters
into an agreement with the
2
<PAGE>
Employee on terms and conditions substantially the same as those set out herein.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the day
and date first above written.
KALAMA CHEMICAL, INC.
By /s/ James W. Hudson
----------------------------------
Its Director-Secretary, B.C. Sugar
------------------------------
/s/ Robert A. Kirchner
------------------------------------
Employee
3
<PAGE>
AMENDED and RESTATED
EMPLOYMENT AGREEMENT
This amended and restated Agreement, made as of the 17th day of January
1996, between Freedom Chemical Company, a corporation organized and existing
under the laws of the State of Delaware, with its executive offices at 1735
Market Street, Suite 3500, Philadelphia, PA, (hereinafter referred to as the
"Company"), and ROBERT G. KITCHEN, (hereinafter called the "Employee").
W I T N E S S E T H:
WHEREAS, the parties entered into an Employment Agreement dated as of the
31st day of May 1995; and
WHEREAS, the parties have agreed to amend and restate such Agreement to
incorporate certain changes;
NOW THEREFORE, in consideration of the Employee's continuing employment by
the Company at Cincinnati, Ohio, as Executive Vice President of the Company and
as President of Hilton Davis Chemical Co., and of the covenants hereinafter set
forth, it is mutually agreed as follows:
1. Employee's Services.
(a) General. The Employee shall faithfully and to the best of his
ability devote all of his working time exclusively to the performance of such
services for
<PAGE>
the Company as may be assigned to him. The Employee shall make his assigned
headquarters at such place as the Company from time to time may direct. The
Employee shall not, for renumeration or profit, directly or indirectly, render
any service to, undertake any employment for, any other person, firm or
corporation, whether in an advisory or consulting capacity or otherwise, without
first obtaining the written consent of the Company.
(b) Hilton Davis. The assignment as President of Hilton Davis
Chemical Co. commences upon the date hereof and terminates upon notice by the
Company to the Employee, but in no event later than December 31, 1996. Upon
conclusion of such assignment, Employee, subject to the provisions of Section 4,
will be offered a position with the Company with duties and compensation
commensurate with or better than those described in this Agreement.
2. Compensation.
(a) Annual Base Salary. The Company shall pay to the Employee, in
full payment for the services performed by the Employee, a base salary of
$210,000 per annum. Performance and salary reviews will be undertaken in January
of each subsequent year.
2
<PAGE>
(b) Annual Management Bonus. Upon the achievement of predetermined
targets by the Company, the Company shall pay to the Employee an annual
management bonus. The incentive target and goals will he established for each
fiscal year. The payout range will be from 0-150% of target. The target shall be
no less than 50% of annual base compensation.
(c) Vacation. The Employee shall be entitled to a vacation with pay
of five (5) calendar weeks among each twelve months period of service. There
shall be no carry-over nor accumulation of unused vacation.
(d) Signing Bonus. The Employee shall be entitled to receive a one
time signing bonus in the amount of $40,000. This bonus shall be payable in
equal installments on March 1, 1996 and June 1, 1996.
3. Expenses
(a) Reimbursement of Expenses. The Company shall reimburse the
Employee, in accordance with policies and practices of the Company then in
effect, for (i) expense of moving in connection with a Company-directed change
of the Employee's headquarters under circumstances reasonably requiring a change
of residence, and (ii) travel, entertainment and other business expenses.
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(b) Car Allowance. The Company will provide a monthly allowance of
$800.00.
(c) During the term of the assignment set forth in Section l(b),
Employee will be reimbursed for the cost of renting an apartment in the
Cincinnati area, normal living expenses while in Cincinnati, including a rental
car, as well as weekly transportation expenses incurred by the Employee and
Employee's spouse for travel between Cincinnati and Charlotte.
4. Employment
(a) Duration of Agreement. The duration of this Agreement shall be
through December 31, 1996. After that date, this Agreement may be terminated by
either party with 60 days written notice, subject to the provisions of Section
4b.
(b) Termination of Employment.
I. The Company may terminate the Employee's employment for
Cause, as defined below, at any time and with no notice.
Cause shall mean:
A. Conviction of the Employee of a felony; or
B. Willful failure to substantially perform your duties,
other than any
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failure resulting from incapacity due to disability or
physical or mental illness; or
C. Default or non-performance by the Employee of any of
the provisions of this Agreement; or
D. Insubordination, provided, however, that the Employee
shall not be required to perform or cause to be per-
formed by others, any actions which are illegal,
unethical, unsafe or environmentally unsound. The
Employee shall not be terminated for refusing or
failing to perform any such actions.
II. The Company may terminate the Employee's employment
hereunder for reasons other than for Cause by giving
written notice to the Employee as stated in 4a. In the
event of such notice of termination, the Employee shall
receive the Employee's base salary in effect at the
time, which shall not be less than $210,000 per
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annum, and medical insurance benefits for a period of
twelve months, commencing with the date of the Company's
notice to the Employee. A prorated portion of the Annual
Management Bonus, based upon the amount of time the
Employee has worked since the last Annual Management
Bonus and management's assessment of performance against
targets, shall be paid to the Employee within 30 days of
notice of termination.
III. "Termination" shall also be deemed to have occurred with
any of the following events:
A. Reduction, without the prior consent of the Employee, of
the Employee's salary, or
B. Reduction without the prior consent of the Employee of
any benefit under any of the company's employee benefit
programs in which the Employee shall participate, other
than a reduction
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that affects all senior executives of the Company; or
C. Default or non-performance by the Company of any of the
provisions of this Agreement; or
D. If, at the conclusion of the assignment set forth in
Section 1 (b), (i) Employee is not offered a position
with the Company, or (ii) the position offered is
unacceptable.
In the event of such termination, the Employee shall receive the
Employee's base salary in effect at the time, which shall not be
less than $210,000 per annum, and medical insurance benefits for a
period of twelve months, commencing with the date of the Company's
notice to the Employee. A prorated portion of the Annual Management
Bonus, based upon the amount of time the Employee has worked since
the last Annual Management Bonus, shall be paid to the Employee
within 30 days of notice of termination.
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IV. "Termination" shall also be deemed to have occurred with
the following event:
A. The current Chairman and President of the Company cease
to be employed in senior management positions of the
Company; or
B. A Change of Control (as hereafter defined) occurs after
which (i) Employee is terminated for any reason other
than Cause, or (ii) there is a reduction in Employee's
salary in effect immediately prior to the Change in
Control, or there is a material reduction in the
responsibilities of the Employee, and as a result of
either, resigns his employment with the Company.
In the event of such termination, the Employee shall receive one
hundred fifty percent (150%) of the Employee's base salary in effect
at the time, which shall not be less than $210,000 per annum, and
medical insurance benefits for a period of twelve months, commencing
with the
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date of the Company's notice to the Employee. A prorated portion of
the Annual Management Bonus, based upon the amount of time the
Employee has worked since the last Annual Management Bonus, shall be
paid to the Employee within 30 days of notice of termination.
5. Confidentiality - Non Compete. Employee will sign the Company's
Confidentiality Non-Compete Letter as part of this employment agreement. See
Attachment B.
6. Employee Benefits. The Employee shall be eligible to participate in
FCC's standard benefit program as well as the Company's Executive Benefits
Program, plus paid life insurance at four times the salary of the employee's
annual base salary. Where applicable, the Employee shall be deemed vested for
benefits as of the Employee's first day of employment.
7. Indemnification. In recognition of the Employee's need for substantial
protection against personal liability in his role as an officer of the Company,
the Company shall provide indemnification to the fullest extent permitted by law
and to the extent insurance is maintained for the continued coverage of the
Employee under an officer's liability insurance policy.
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8. Special Pension Adjustment Payment. The Employee has completed
approximately eighteen (18) years of service with his former employer. In
recognition of this tenure and the Employee's resignation, the Company agrees to
make a special annual cash payment to the Employee in the amount of five percent
(5%) of base pay. The intent of this financial adjustment is to partially
recognize the break in service and its impact on the current pension benefits of
the Employee. This financial adjustment will continue for the next five years or
until any part of the Employee's equity position in the Company is redeemed. Tn
addition to this pension adjustment payment, the Employee will be enrolled with
full immediate vesting in the pension plan of the Freedom Textile Chemicals Co.
and the Freedom Chemical Company Supplemental Executive Retirement Plan.
9. Assignability. This Agreement shall enure to the benefit of any
assignee of the Company, and the Employee specifically agrees on demand to
execute any and all necessary documents in connection therewith.
10. Notices. Any notice expressly provided for under this Agreement shall
be in writing, shall be given either manually or by mail, telegram, radiogram or
cable, and shall be deemed sufficiently given if and when re-
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ceived by the party to be notified at its address first set forth above or if
and when mailed by registered mail, postage prepaid, addressed to such party at
such address. Either party may, by notice to the other, change its address for
receiving such notices.
11. Equity Participation.
(a) The Company believes that it is important for the Employee to
own equity in the Company. The Employee as of the date of this agreement owns
355.90 shares of Freedom Chemical Company stock.
(b) The Employee is a participant in the Company's 1994 Management
Incentive Equity Plan which currently provides the employee with 400 options.
See Agreement Attachment C. Employee will be granted options for one hundred
(100) additional Series B shares pursuant to such Plan. Company management
agrees to make its best effort to the Company's board of directors that all
options under the Plan become fully vested in the event of a Change of Control.
For purposes of this Agreement a "Change of Control" shall have the same meaning
as set forth in such Plan.
(c) Entire Agreement. This Agreement supersedes all previous
contracts for personal services between the Company and the Employee, provided
that neither
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<PAGE>
party is relieved from any obligations to the other arising under any such
previous contract while it was in force. This Agreement constitutes the entire
understanding between the parties hereto with reference to the subject matter
hereof and shall not be changed or modified except by written instrument signed
by both parties.
IN WITNESS WHEREOF the Company has caused this Agreement to be executed by
duplicate by a proper and duly authorized representative thereof, and the
Employee has signed this Agreement in duplicate, as of the day and year first
above written.
FREEDOM CHEMICAL COMPANY
/s/ Fred P. Rullo /s/ Robert G. Kitchen
- ------------------------- -------------------------------
Fred P. Rulio Robert G. Kitchen
President & CEO Employee
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Agreement made on December 7, 1994, by and among Freedom Chemical
Company, a Delaware corporation (the "Company"), The Freedom Group Partnership,
a Pennsylvania limited partnership (the "Freedom Group"), Joseph, Littlejohn &
Levy Fund, L.P. (the "Fund"), Joseph Littlejohn & Levy Fund II, L.P. ("Fund
II"), Harold A. Sorgenti ("Sorgenti") and Fred P. Rullo ("Rullo").
WHEREAS, the Company has entered into employment agreements, dated
as of November 15, 1994, with each of Sorgenti (the "Sorgenti Employment
Agreement") and Rullo (the "Rullo Employment Agreement");
WHEREAS, the Company has entered into three amended and restated
option agreements, each dated as of November 15, 1994, with the Freedom Group
pursuant to which the Company has granted to the Freedom Group options to
purchase an aggregate of 11,318 shares of the Company's Common Stock (the
"Amended Option Agreements");
WHEREAS, the Fund, Fund II and the Freedom Group entered into an
agreement, dated as of November 15, 1994, amending certain prior contractual
arrangements among themselves (the "Fund Agreement");
WHEREAS, the Company and the Freedom Group entered into an
agreement, dated as of November 15, 1994, relating, among other things, to the
treatment of certain advances (the "Advance Agreement");
WHEREAS, the effectiveness of the Rullo and Sorgenti Employment
Agreements, the Amended Option Agreements, the Fund Agreement and the Advance
Agreement was conditioned upon consummation of a public offering of the
Company's Common Stock; and
WHEREAS, the parties hereto desire to make the foregoing agreements
effective on the date hereof and the Company and each of Messrs. Rullo and
Sorgenti desire to amend the Employment Agreements in certain respects.
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
SECTION 1. Effectiveness of Agreements.
The parties hereto agree that notwithstanding anything therein to
the contrary, each of the Rullo Employment Agreement, the Sorgenti Employment
Agreement, the Amended Option Agreements, the Fund Agreement and the Advance
Agreement shall become effective as of the date hereof.
Section 2. Term of Employment Agreements.
(a) The Company and Mr. Rullo agree that the Term of the Rullo
Employment Agreement shall commence with date hereof and terminate
on May 4, 1997; provided that if the Company consummates a public
offering of its Common Stock on or prior to December 31, 1995, the
Term of the Rullo Employment Agreement shall be extended to the date
which is two years and six months after the date such public
offering is consummated.
(b) The Company and Mr. Sorgenti agree that the Term of the Sorgenti
Employment Agreement shall commence with date hereof and terminate
on May 4, 1997; provided that if the Company consummates a public
offering of its Common Stock on or prior to December 31, 1995, the
Term of the Sorgenti Employment Agreement shall be extended to the
date which is two years and six months after the date such public
offering is consummated.
FREEDOM CHEMICAL COMPANY
By: /s/ Leslie E. Schenk
-------------------------
Name: LESLIE E. SCHENK
Title: VP & CFO
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THE FREEDOM GROUP PARTNERSHIP
By: FREEDOM INVESTMENT CORP.
a General Partner
By: /s/ Harold A. Sorgenti
-------------------------
Name: Harold A. Sorgenti
Title: President
By: RULCO, INC.
a General Partner
By: /s/ Fred P. Rullo
-------------------------
Name: Fred P. Rullo
Title: President
JOSEPH LITTLEJOHN & LEVY
FUND, L.P.
By: JLL ASSOCIATES, L.P.
General Partner
By: /s/ General Partner
-------------------------
JOSEPH LITTLEJOHN & LEVY
FUND II, L.P.
By: JLL ASSOCIATES, L.P.
General Partner
By: /s/ General Partner
-------------------------
/s/ Harold A. Sorgenti
-----------------------------
Harold A. Sorgenti
/s/ Fred P. Rullo
-----------------------------
Fred P. Rullo
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<PAGE>
FREEDOM CHEMICAL COMPANY
1994 MANAGEMENT EQUITY PLAN
1. Purpose; Types of Awards; Construction.
The purpose of the Freedom Chemical Company 1994 Management Equity
Plan (the "Plan") is to afford an incentive to executive officers, other key
employees and consultants of Freedom Chemical Company (the "Company"), or any
Subsidiary of the Company which now exists or hereafter is organized or acquired
by the Company, to acquire a proprietary interest in the Company, to continue as
employees or consultants, to increase their efforts on behalf of the Company and
to promote the success of the Company's business. The provisions of the Plan are
intended to satisfy the requirements of Section 16(b) of the Securities Exchange
Act of 1934 (the "Exchange Act"), and shall be interpreted in a manner
consistent with the requirements thereof, as now or hereafter construed,
interpreted and applied by regulations, rulings and cases.
2. Definitions.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "Acceleration Date" shall have the meaning set forth in
Section 8.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Cause" shall mean the termination of employment of a
Grantee by the Company or a Subsidiary due to (i) the failure to render services
to the Company or a Subsidiary in accordance with the terms of such Grantee's
employment, which failure amounts to a material neglect of such Grantee's duties
to the Company or a Subsidiary, (ii) the commission by the Grantee of an act of
fraud, misappropriation (including the unauthorized disclosure of confidential
or proprietary information) or embezzlement, or (iii) a conviction of or guilty
plea or confession to any felony.
<PAGE>
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Committee" shall mean the Compensation Committee of the
Board or if no such Committee has been established, the Board.
(f) "Common Stock" shall mean shares of Series A Common Stock
or Series B Common Stock, as the case may be.
(g) "Company" shall mean Freedom Chemical Company, a
corporation organized under the laws of the State of Delaware, or any successor
corporation.
(h) "Disability" shall mean the inability to perform with
reasonable continuity on a full time basis, all of the material and substantial
duties of his or her own, or any other occupation for which the employee is, or
can become, reasonably suited or "fitted" by training, education, experience,
age and physical and mental capacity.
(i) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time, and as now or hereafter construed,
interpreted and applied by regulations, rulings and cases.
(j) "Fair Market Value" per share of Series A Common Stock, as
of a particular date, shall mean (i) the closing sales price per share of Series
A Common Stock on the national securities exchange on which such stock is
principally traded for the last preceding date on which there was a sale of such
stock on such exchange, or (ii) if the shares of Series A Common Stock are then
traded in an over-the-counter market, the average of the closing bid and asked
prices for the shares of Series A Common Stock in such over-the-counter market
for the last preceding date on which there was a sale of such stock in such
market, or (iii) if the shares of Series A Common Stock are not then listed on a
national securities exchange or traded in an over-the-counter market, such value
as the Committee, acting in good faith and in its sole discretion, shall
determine (taking into account, to the extent the Committee deems appropriate,
the value of the Series B Common Stock). The Fair Market Value per share of
Series B Common Stock, as of a particular date
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<PAGE>
(the "Valuation Date"), shall be deemed to equal five (5) percent of the Fair
Market Value of that number of shares of Series A Common Stock which were
outstanding as of the Effective Date (as such term is defined in Section 18
hereof) as such value is determined as of the Valuation Date pursuant to this
Section 2(j) divided by the number of shares of Series B Common Stock authorized
to be issued hereunder pursuant to Section 5, as adjusted from time to time, as
of the Valuation Date. Notwithstanding the foregoing, if the Committee in its
sole discretion determines that such Fair Market Value per share of Series A
Common Stock does not appropriately reflect the dilutive effect of any
outstanding options, warrants or other rights to acquire such shares, the
Committee may make such adjustments to such Fair Market Value in respect of such
dilution as it deems appropriate.
(k) "Grantee" shall mean a person who receives a grant of
Options or Stock Appreciation Rights under the Plan.
(l) "Initial Public Offering" shall mean a public offering of
Common Stock pursuant to a registration statement under the Securities Act.
(m) "Insider" shall mean a Grantee who is subject to the
reporting requirements of Section 16(a) of the Exchange Act.
(n) "Non-qualified Stock Option" shall mean any Option not
intended to be an "incentive stock option", as such term is defined in Section
422 of the Code.
(o) "Option" shall mean a grant to a Grantee of an option to
purchase shares of Common Stock. Options granted by the Committee pursuant to
the Plan shall constitute Non-qualified Stock Options.
(p) "Option Agreement" shall mean an agreement entered into
between the Company and a Grantee in connection with a grant under the Plan.
(q) "Option Price" shall mean the exercise price of the shares
of Common Stock covered by an Option.
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<PAGE>
(r) "Plan" means this Freedom Chemical Company 1994 Management
Equity Plan, as amended from time to time.
(s) "Retirement" means the retirement from the Company with a
minimum of five years of full time service with the Company and or one of its
Subsidiaries and the attainment of age 55.
(t) "Rule 16b-3" shall mean Rule 16b-3, as from time to time
in effect, promulgated under Section 16 of the Exchange Act, including any
successor to such Rule.
(u) "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.
(v) "Series A Common Stock" means shares of Series A common
stock, par value $.01 per share of the Company.
(w) "Series B Common Stock" means shares of Series B common
stock, par value $.01 per share of the Company.
(x) "Stockholder Agreement" shall mean an agreement entered
into among the Company, Joseph Littlejohn & Levy Fund, L.P., a Delaware limited
partnership, and a Grantee in connection with a grant under the Plan.
(y) "Stock Appreciation Right" shall mean the right, granted
to a Grantee under Section 7, to be paid an amount measured by the appreciation
in the Fair Market Value of Common Stock from the date of grant to the date of
exercise of the right, with payment to be made in cash or Common Stock as
specified in the award or determined by the Committee.
(z) "Subsidiary" shall mean any company (other than the
Company) in an unbroken chain of companies beginning with the Company if, at the
time of granting an Option, each of the companies other than the last company in
the unbroken chain owns stock possessing fifty percent (50%) or more of the
total combined voting power
4
<PAGE>
of all classes of stock in one of the other companies in such chain.
(aa) "Termination" shall mean any event pursuant to which the
Grantee shall not be in the employ of or maintaining a consultant relationship
with the Company or a Subsidiary thereof and pursuant to which the Grantee shall
not have remained continuously so employed or in the consultant relationship
since the date of grant of the Option.
3. Administration.
The Plan shall be administered by the Committee. The Committee shall
consist of two or more persons, each of whom is a "disinterested person" within
the meaning of Rule 16b-3 of the Exchange Act. The Committee shall have the
authority in its discretion, subject to and not inconsistent with the express
provisions of the Plan, to administer the Plan and to exercise all the powers
and authorities either specifically granted to it under the Plan or necessary or
advisable in the administration of the Plan, including, without limitation, the
authority to grant Options or Stock Appreciation Rights; to determine the Option
Price of each Option; to determine the persons to whom, and the time or times at
which awards shall be granted; to determine the number of shares and the series
of Common Stock to be covered by each award; to interpret the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the Option Agreements (which need not be
identical); to make adjustments in the performance goals in recognition of
unusual or non-recurring events affecting the Company or the financial
statements of the Company, or in response to changes in applicable laws,
regulations, or accounting principles; to make adjustments to the number of
shares of Common Stock outstanding or covered by awards to reflect certain
corporate transactions and preserve and maintain the value of such outstanding
awards; to cancel or suspend awards, as necessary; and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The Committee may delegate to one or more of its members or to one
or more agents such administrative duties as it may deem advisable, and the
Committee or any
5
<PAGE>
person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on all Grantees of
any awards under this Plan.
The Board shall fill all vacancies, however caused, in the
Committee. The Board may from time to time appoint additional members to the
Committee, and may at any time remove one or more Committee members and
substitute others. One member of the Committee shall be selected by the Board as
chairman. The Committee shall hold its meetings at such times and places as it
shall deem advisable. All determinations of the Committee shall be made by a
majority of its members either present in person or participating by conference
telephone at a meeting or by written consent. The Committee may appoint a
secretary and make such rules and regulations for the conduct of its business as
it shall deem advisable, and shall keep minutes of its meetings.
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any award
granted hereunder.
4. Eligibility.
Awards may be granted to officers and other key employees and
consultants of the Company or its Subsidiaries. In determining the persons to
whom awards shall be granted and the number of shares to be covered by each
award, the Committee shall take into account the duties of the respective
persons, their present and potential contributions to the success of the Company
and such other factors as the Committee shall deem relevant in connection with
accomplishing the purpose of the Plan.
5. Stock.
The maximum number of shares of Series A Common Stock reserved for
the grant of awards under the Plan shall be 4,185 subject to adjustment as
provided in Section 8 hereof. The maximum number of shares of Series B Common
Stock reserved for the grant of awards under the Plan shall be 4,185, subject to
adjustment as provided in
6
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Section 8 hereof. Such shares may, in whole or in part, be authorized but
unissued shares or shares that shall have been or may be reacquired by the
Company.
If any outstanding award under the Plan should, for any reason
expire, be cancelled or be forfeited (other than in connection with the exercise
of a Stock Appreciation Right), without having been exercised in full, the
shares of Common Stock allocable to the unexercised, cancelled or terminated
portion of such award shall become available for subsequent grants of awards
under the Plan, subject to the requirements of Rule 16b-3 of the Exchange Act.
6. Terms and Conditions of Options.
Each Option granted pursuant to the Plan shall be evidenced by an
Option Agreement, in such form and containing such terms and conditions as the
Committee shall from time to time approve. Each Option shall be subject to the
following terms and conditions, except to the extent otherwise specifically
provided in such Option Agreement:
(a) NUMBER AND SERIES OF SHARES. Each Option Agreement shall
state the number and series of shares of Common Stock to which the Option
relates. The Committee may at any time, in its sole discretion, convert any
option to acquire shares of Series B Common Stock into an option of equal value
to acquire shares of Series A Common Stock.
(b) OPTION PRICE. Each Option Agreement shall state the Option
Price. The Option Price shall be subject to adjustment as provided in Section 8
hereof. The date as of which the Committee adopts a resolution expressly
granting an Option shall be considered the day on which such Option is granted.
(c) MEDIUM AND TIME OF PAYMENT. The Option Price shall be paid
in full, at the time of exercise, in cash or, at the discretion of the
Committee, in shares of Series A or Series B Common Stock having a Fair Market
Value equal to such Option Price or in a combination of cash and Common Stock or
in such other manner as the Committee shall determine. To the extent that the
Option Price is paid in shares of Common Stock, the
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<PAGE>
Committee may, in its sole discretion, require that such shares meet any holding
period requirements that the Committee may establish.
(d) TERM AND EXERCISABILITY OF OPTIONS. Each Option Agreement
shall provide the exercise schedule for the Option as determined by the
Committee, provided that the Committee shall have the authority to accelerate
the exercisability of any outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. The exercise
period will be ten (10) years and one month from the date of the grant of the
Option unless otherwise determined by the Committee. The exercise period shall
be subject to earlier termination as provided in Section 6(e) hereof.
Unless the applicable Option Agreement otherwise provides, each
Option granted under the Plan shall become fully vested and exercisable on the
tenth anniversary of the date of the grant thereof, unless otherwise provided in
the Option Agreement.
Notwithstanding any other provision of this Section 6, the Committee
may provide for acceleration and early exercise of Options upon (1) the
attainment of certain annual and cumulative performance goals which relate to
the successful management of the Company, and (2) the continuous employment or
consulting relationship with the Company for five years from the date of the
initial grant.
Unless otherwise determined by the Committee, an Option Agreement
shall establish appropriate performance goals in each of the first five
consecutive fiscal years during which the Plan is in effect as well as a
separate, cumulative performance goal over the first five year period during
which the Plan is in effect. Such performance goals shall be based on the annual
earnings before interest, taxes, depreciation and amortization ("EBITDA") of the
Company during a fiscal year (or over a five year cumulative period), or any
other performance measurement that the Committee deems appropriate.
The attainment of each or any performance goal, with respect to each
or any of the five consecutive fiscal year periods, shall cause the Option to
become vested and exercisable after five years, rather than ten
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<PAGE>
years, with respect to twenty percent of the shares of Common Stock subject to
such Option. Each of the five performance periods shall be measured
independently and each such performance goal which is attained will cause an
incremental twenty percent of the shares subject to the Option to vest and
become exercisable after five years from grant. No accelerated vesting or
exercisability will occur for any year in which such performance goal is not
attained. Notwithstanding the failure to attain a performance goal with respect
to any fiscal year, all shares of Common Stock subject to an Option shall
immediately vest and become exercisable upon the attainment of the five year
cumulative performance goal. Except as provided in Sections 6(e) and 8(b) hereof
(or unless otherwise provided for by the Committee), no Option shall become
vested or exercisable prior to 5 years from the date of the initial grant. All
shares for which applicable annual and cumulative performance goals are not
attained shall not vest or become exercisable until ten years from the date of
the initial grant.
All annual and cumulative performance goals shall be set by the
Committee in its sole discretion and the determination of whether any such goal
has been attained shall be made by the Committee in its sole discretion.
Notwithstanding any other provisions of this Section 6, such performance goals
may be adjusted, in the sole discretion of the Committee, pursuant to Section 8
hereof.
An Option may be exercised, as to any or all full shares of Common
Stock as to which the Option has become exercisable, by written notice delivered
in person or by mail to the Secretary of the Company, specifying the number of
shares of Common Stock with respect to which the Option is being exercised.
(e) TERMINATION. Except as provided in this Section 6(e), an
Option may not be exercised unless the Grantee is then in the employ of or
maintaining a consultant relationship with the Company or a Subsidiary thereof,
and unless the Grantee has remained continuously so employed or in the
consultant relationship since the date of grant of the Option. In the event that
the employment or consultant relationship of a Grantee shall terminate other
than for reason of death, Disability,
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<PAGE>
Retirement or termination by the Company or a Subsidiary without Cause, (such
event being referred to as a "Termination"), all Options of such Grantee that
are vested and exercisable at the time of such Termination may, unless earlier
terminated in accordance with their terms, be exercised within thirty (30) days
after the date of such Termination (or such longer period as the Committee shall
prescribe but not beyond the original term of the Option) and all Options that
are not vested and exercisable at the time of such Termination shall terminate
at such time. In the event of a termination of employment or consulting
relationship for reason of death, Disability, Retirement or termination by the
Company or a Subsidiary without Cause, all shares of Common Stock covered by an
Option for which annual performance goals have been attained shall become
immediately vested and exercisable, notwithstanding the failure to maintain a
five year continuous employment or consulting relationship, at the time of such
termination. Such Options may be exercised within thirty (30) days after the
date of such termination (or such longer period as the Committee shall prescribe
but not beyond the original term of the Option).
(f) NONTRANSFERABILITY OF COMMON STOCK. Upon receipt of an
Option prior to an Initial Public Offering, the Grantee may be required to
execute a Stockholder Agreement with respect to the shares of Common Stock to
which such Option relates, in such form and containing such terms and conditions
as the Committee shall from time to time approve.
(g) OTHER PROVISIONS. The Option Agreements evidencing awards
under the Plan shall contain such other terms and conditions not inconsistent
with the Plan as the Committee may determine.
7. Stock Appreciation Rights.
The Committee shall have authority to grant a Stock Appreciation
Right to the Grantee of any Option under the Plan with respect to all or some of
the shares of Common Stock covered by such related Option. A Stock Appreciation
Right shall, except as provided in this Section 7, be subject to the same terms
and conditions as the related Option. Each Stock Appreciation Right granted
pursuant to the Plan shall be evidenced by a written
10
<PAGE>
Agreement between the Company and the Grantee in such form as the Committee
shall from time to time approve.
(a) TIME OF GRANT. A Stock Appreciation Right may be granted
either at the time of grant, or at any time thereafter during the term of the
Option.
(b) PAYMENT. A Stock Appreciation Right shall entitle the
holder thereof, upon exercise of the Stock Appreciation Right or any portion
thereof, to receive payment of an amount computed pursuant to Section 7(d).
(c) EXERCISE. A Stock Appreciation Right shall be exercisable
at such time or times and only to the extent that the related Option is
exercisable, and will not be transferable except to the extent the related
Option may be transferable.
(d) AMOUNT PAYABLE. Upon the exercise of a Stock Appreciation
Right, the Optionee shall be entitled to receive an amount determined by
multiplying (i) the excess of the Fair Market Value of a share of Common Stock
on the date of exercise of such Stock Appreciation Right over the Option Price
under the related Option, by (ii) the number of shares of Common Stock as to
which such Stock Appreciation Right is being exercised. Notwithstanding the
foregoing, the Committee may limit in any manner the amount payable with respect
to any Stock Appreciation Right by including such a limit at the time it is
granted.
(e) TREATMENT OF RELATED OPTIONS AND STOCK APPRECIATION RIGHTS
UPON EXERCISE. Upon the exercise of a Stock Appreciation Right, the related
Option shall be cancelled to the extent of the number of shares of Common Stock
as to which the Stock Appreciation Right is exercised and upon the exercise of
an Option granted in connection with a Stock Appreciation Right, the Stock
Appreciation Right shall be cancelled to the extent of the number of shares of
Common Stock as to which the Option is exercised or surrendered.
(f) METHOD OF EXERCISE. Stock Appreciation Rights shall be
exercised by a Grantee only by a written notice delivered in person or by mail
to the Secretary of the Company, specifying the number of shares
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<PAGE>
of Common Stock with respect to which the Stock Appreciation Right is being
exercised. If requested by the Committee, the Grantee shall deliver the
Agreement evidencing the Stock Appreciation Right being exercised and the Option
Agreement evidencing any related Option to the Secretary of the Company who
shall endorse thereon a notation of such exercise and return such Agreements to
the Grantee.
(g) FORM OF PAYMENT. Payment of the amount determined under
Section 7(d), may be made solely in whole shares of Common Stock in a number
determined based upon their Fair Market Value on the date of exercise of the
Stock Appreciation Right or, alternatively, at the sole discretion of the
Committee, solely in cash, or in a combination of cash and shares of Common
Stock as the Committee deems advisable. If the Committee decides to make full
payment in shares of Common Stock, and the amount payable results in a
fractional share, payment for the fractional share will be made in cash.
Notwithstanding the foregoing, to the extent required by Rule 16b-3 no payment
in the form of cash may be made upon the exercise of a Stock Appreciation Right
pursuant to Section 7(d) to an Insider, unless the exercise of such Stock
Appreciation Right is made during the period beginning on the third business day
and ending on the twelfth business day following the date of release for
publication of the Company's quarterly or annual statements of earnings.
8. Effect of Certain Changes.
(a) In the event of any extraordinary dividend, stock
dividend, recapitalization, reclassification, merger, acquisition,
consolidation, stock split, warrant or rights issuance, or combination or
exchange of such shares, or other similar transactions (a "Transaction"), the
number and kind of shares of Common Stock available for awards, the number and
kind of such shares covered by outstanding awards, and the Option Price or the
applicable market value of Stock Appreciation Rights may be equitably adjusted
by the Committee, in its sole discretion, to reflect such event and preserve the
value of each share of Common Stock and the value of each award. In the event of
a Transaction or such other event which alters the underlying value of Series A
Common Stock or which has the effect of increasing or decreasing
12
<PAGE>
the value of an outstanding award, the Committee may, in its sole discretion,
take such steps as it deems necessary and appropriate to reflect such event.
Such steps may include adjusting the performance goals related to outstanding
options and increasing the number of shares of Series B Common Stock issued and
outstanding or available for grant of awards under this Plan (without increasing
the number of shares subject to such Option) in order to preserve or limit the
value of such awards and maintain the value and proportionality of Series B
Common Stock with respect to Series A Common Stock.
(b) If, subsequent to an Initial Public Offering, while any
awards remain outstanding under the Plan, any of the following events shall
occur (which events shall constitute a "Change in Control of the Company") --
(i) any "person," as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than (1) the Company, (2) any trustee
or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Subsidiaries, (3) any corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of Common Stock, (4)
Joseph Littlejohn & Levy or any affiliate thereof, or (5) Freedom Group
Partnership or any affiliate thereof), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than 50% of the
combined voting power of the Company's then outstanding voting securities;
(ii) during any period of not more than two consecutive
years, not including any period prior to the adoption of this Plan,
individuals who at the beginning of such period constitute the Board, and
any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction
described in clause (i), (iii), or (iv) of this Section 8(b)) whose
election by the Board or nomination
13
<PAGE>
for election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason
to constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation, other than (A)
a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving or parent entity) 50% or more of the combined
voting power of the voting securities of the Company or such surviving or
parent entity outstanding immediately after such merger or consolidation
or (B) a merger or consolidation in which no "person" (as herein-above
defined) acquired 50% or more of the combined voting power of the
Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets (or any transaction having a similar effect)--
then from and after the date on which any such Change in Control shall have
occurred (the "Acceleration Date"), such award shall be exercisable or otherwise
nonforfeitable in full, whether or not otherwise exercisable or forfeitable.
(c) In the event of a change in the Common Stock of the
Company as presently constituted that is limited to a change of all of its
authorized shares of Common Stock into the same number of shares with a
different par value or without par value, the shares resulting from any such
change shall be deemed to be the Common Stock within the meaning of the Plan.
14
<PAGE>
9. Period During Which Awards May Be Granted.
Awards may be granted pursuant to the Plan from time to time within
a period of ten (10) years from the date the Plan is adopted by the Board.
10. Nontransferability of Awards.
Awards granted under the Plan shall not be transferable otherwise
than by will or by the laws of descent and distribution, and awards may be
exercised or otherwise realized, during the lifetime of the Grantee, only by the
Grantee or by his guardian or legal representative.
11. Approval of Shareholders.
The Plan shall take effect upon its adoption by the Board but the
Plan (and any grants of awards made prior to the shareholder approval mentioned
herein) shall be subject to the approval of the holder(s) of a majority of the
issued and outstanding shares of voting securities of the company entitled to
vote, which approval must occur within twelve months of the date the Plan is
adopted by the Board.
12. Agreement by Grantee Regarding Withholding Taxes.
If the Committee shall so require, as a condition of exercise of an
Option or Stock Appreciation Right (each a "Tax Event"), each Grantee shall
agree that no later than the date of the Tax Event, the Grantee will pay to the
Company or make arrangements satisfactory to the Committee regarding payment of
any federal, state or local taxes of any kind required by law to be withheld
upon the Tax Event. Alternatively, the Committee may provide, in its sole
discretion, that a Grantee may elect, to the extent permitted or required by
law, to have the Company deduct federal, state and local taxes of any kind
required by law to be withheld upon the Tax Event from any payment of any kind
due to the Grantee.
13. Amendment and Termination of the Plan.
The Board at any time and from time to time may suspend, terminate,
modify or amend the Plan; provided, however, that an amendment which requires
stockholder
15
<PAGE>
approval in order for the Plan to continue to comply with Rule 16b-3 or any
other law, regulation or stock exchange requirement shall not be effective
unless approved by the requisite vote of stockholders. Except as provided in
Section 8(a) hereof, no suspension, termination, modification or amendment of
the Plan may adversely affect any award previously granted without the written
consent of the Grantee.
14. Rights as a Shareholder.
A Grantee or a transferee of an award shall have no rights as a
shareholder with respect to any shares covered by the award until the date of
the issuance of a stock certificate to him for such shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distribution of other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 8(a) hereof.
15. No Rights to Employment.
Nothing in the Plan or in any award granted or Agreement entered
into pursuant hereto shall confer upon any Grantee the right to continue in the
employ of, or in a consultant relationship with, the Company or any Subsidiary
or to be entitled to any remuneration or benefits not set forth in the Plan or
such Agreement or to interfere with or limit in any way the right of the Company
or any such Subsidiary to terminate such Grantee's employment. Awards granted
under the Plan shall not be affected by any change in duties or position of a
Grantee as long as such Grantee continues to be employed by, or in a consultant
relationship with, the Company or any Subsidiary.
16. Beneficiary.
A Grantee may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Grantee, the executor or administrator of the Grantee's estate
shall be deemed to be the Grantee's beneficiary.
16
<PAGE>
17. Governing Law.
The Plan and all determinations made and actions taken pursuant
hereto shall be governed by the laws of the State of New York.
18. Effective Date and Duration of the Plan.
This Plan shall be effective as of the date it is ratified by the
shareholders of the Company (the "Effective Date"), and shall terminate on the
later of (a) the tenth anniversary of such date or (b) the last expiration of
awards granted hereunder.
17
<PAGE>
AMENDED AND RESTATED STOCK OPTION AGREEMENT
AGREEMENT made on November 15, 1994, by and between FREEDOM CHEMICAL
COMPANY, a Delaware corporation (the "Company") and THE FREEDOM GROUP
PARTNERSHIP, a Pennsylvania limited partnership ("Freedom"), the general and
limited partners of which are Freedom Investment Corp., a corporation controlled
by Harold A. Sorgenti ("Sorgenti") and RULCO, Inc., a corporation controlled by
Fred P. Rullo ("Rullo"). Sorgenti and Rullo are hereinafter referred to as the
"Executives".
WHEREAS, pursuant to an agreement entered into on May 4, 1992 (the
"FTCC Option Agreement"), the Company granted to Freedom a non-qualified stock
option to acquire an aggregate of 1,837 shares of the Company's Common Stock,
par value $100.00 per share (the "Common Stock") on the terms set forth therein;
WHEREAS, the Company has filed a Registration Statement on Form S-1
with the Securities and Exchange Commission relating to a public offering of
3,000,000 shares of the Company's Common Stock (the "Public Offering");
WHEREAS, the Company has entered into an employment agreement with
Sorgenti dated as of November 15, 1994 (such agreement together with any
agreement replacing or amending such agreement being herein referred to as the
"Sorgenti Employment Agreement");
WHEREAS, the Company has entered into an employment agreement with
Rullo dated as of November 15, 1994 (such agreement together with any agreement
replacing or amending such agreement being herein referred to as the "Rullo
Employment Agreement"; the Rullo Employment Agreement and the Sorgenti
Employment Agreement are sometimes collectively referred to as the "Employment
Agreements");
WHEREAS, the Company and Freedom desire to amend and restate the
FTCC Option Agreement in its entirety, such amendment and restatement to be
contingent upon and effective with the consummation of the Public Offering;
<PAGE>
NOW, THEREFORE, the parties agree that, subject to the terms
and conditions hereof, the FTCC Option Agreement shall be amended and restated
in its entirety as follows:
1. Definitions. Capitalized terms not otherwise defined herein
shall have the meaning set forth in the Employment Agreements.
2. Grant of Option. Freedom is hereby granted a non-qualified stock
option (the "Option") to purchase an aggregate of 1,837 shares (the "Option
Shares") of Common Stock, pursuant to the terms of this Agreement. 1,102 of the
shares subject to the Option are herein referred to as the "Sorgenti Shares" and
735 of the shares subject to the Option are herein referred to as the "Rullo
Shares". Notwithstanding the foregoing, the parties hereto acknowledge that on
January 18, 1994, Freedom exercised the Option with respect to 1,047 of the
Sorgenti Shares.
3. Option Price. The exercise price of the Option shall be $100.00
per share of Common Stock issuable thereunder.
4. Conditions to Exercisability.
(a) The Option is immediately exercisable with respect to
forty percent (40%) of the Option Shares covered hereby. The Option will become
exercisable with respect to (i) an additional twenty percent (20%) of the
Sorgenti Shares subject hereto on each of May 4, 1995, May 4, 1996, and May 4,
1997; provided that Sorgenti is employed by the Company on such date and (ii) an
additional twenty percent (20%) of the Rullo Shares subject hereto on each of
May 4, 1995, May 4, 1996 and May 4, 1997; provided that Rullo is employed by the
Company on such date.
(b) Notwithstanding the foregoing, this Option shall become
immediately exercisable with respect to (i) one hundred percent (100%) of the
Sorgenti Shares then unvested in the event the Sorgenti Employment Agreement is
terminated by reason of the death or disability of Sorgenti or by the Company
without Cause or by Sorgenti for Good Reason (in each case pursuant to and as
defined in the Sorgenti Employment Agreement), (ii) one
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<PAGE>
hundred percent (100%) of the Rullo Shares then unvested in the event the Rullo
Employment Agreement is terminated by reason of the death or disability of Rullo
or by the Company without Cause or by Rullo for Good Reason (in each case
pursuant to and as defined in the Rullo Employment Agreement) and (iii) one
hundred percent (100%) of the Option Shares then unvested in the event of a
Change of Control of the Company (as defined in the Employment Agreements).
(c) Notwithstanding the foregoing, in the event JLL offers
Common Stock to the public in an offering registered under the Securities Act of
1933 (the "Securities Act"), prior to May 4, 1997, and JLL participates in such
offering by selling all or part of its holdings of Common Stock, this Option
shall become immediately exercisable on the date of such offering to the extent
and only to the extent necessary to enable Freedom to sell (if permitted by the
underwriters) such number of Option Shares in the aggregate as would equal 25%
of the shares sold by JLL. Freedom acknowledges and agrees that this Section
4(c) does not entitle Freedom to participate in any such public offering.
5. Period of Option. The Option shall expire (i) with respect to one
hundred percent (100%) of the Sorgenti Shares on the date six months following
termination of Sorgenti's employment by the Company for any reason and (ii) with
respect to one hundred percent (100%) of the Rullo Shares on the date six months
following termination of Rullo's employment by the Company for any reason; in
each such case this Option may be exercised (to the extent it has become
exercisable pursuant to Section 4 above), in whole or in part (other than with
respect to any fractional share), at any time prior to such expiration;
provided, however, that if (i) Sorgenti's employment with the Company is
terminated by reason of the death or disability of Sorgenti or by the Company
without Cause or by Sorgenti for Good Reason, Freedom shall be entitled, for a
period of one year following such termination, to exercise the Option with
respect to one hundred percent (100%) of the Sorgenti Shares and if (ii) Rullo's
employment with the Company is terminated by reason of the death or disability
of Rullo or by the Company without Cause or by Rullo for Good Reason, Freedom
shall be entitled, for a period of one year following such termination, to
exercise the Option with
3
<PAGE>
respect to one hundred percent (100%) of the Rullo Shares.
6. Exercise of Option.
(a) The Option shall be exercised in the following manner:
Freedom, or the person or persons having the right to exercise the Option on
behalf of Freedom, shall deliver to the Company written notice specifying the
number of shares of Common Stock which it elects to purchase. Freedom (or such
other person) must include with such notice full payment of the exercise price
for the Common Stock being purchased pursuant to such notice. Payment of the
exercise price must be made in cash or by certified or cashier's check.
(b) The Company may, if in its reasonable judgment determines
it to be required under any applicable law, require that Freedom pay to the
Company, at the time of exercise of any portion of the Option, any such
additional amount as the Company deems necessary to satisfy its liability to
withhold federal, state or local income tax or any other taxes incurred by
reasons of the exercise or the transfer of shares of Common Stock thereupon.
(c) If any law, regulation or interpretation requires the
Company to take any action regarding the Common Stock, before the Company issues
certificates for the Common Stock being purchased, the Company may delay
delivering the certificates for the Common Stock for the period necessary to
take such action. The certificate or certificates representing the Common Stock
acquired pursuant to the Option may bear a legend restricting the transfer of
such Common Stock, and the Company may impose stop transfer instructions to
implement such restrictions, if applicable.
(d) Freedom will not be deemed to be a holder of any shares
pursuant to exercise of the Option until the date of the issuance of a stock
certificate to it for such shares of Common Stock and until the shares of Common
Stock are paid in full.
4
<PAGE>
7. Representations and Covenants
(a) The Company represents and warrants and covenants that (i)
this Agreement has been authorized by all necessary corporate action of the
Company and is a valid and binding agreement of the Company enforceable against
it in accordance with its terms and (ii) the Company shall at all times during
the term of this Agreement reserve and keep available such number of shares of
Common Stock as will be sufficient to satisfy the obligations of the Company
under this Agreement.
(b) Freedom represents and warrants that it is not a party to
any agreement or instrument which would prevent it from entering into or
performing its duties in any way under this Agreement.
(c) Freedom understands that the Option Shares have not been
registered under the Securities Act and that it cannot offer for sale, sell or
transfer such Option Shares unless such offer, sale or transfer has been
registered under the Securities Act or unless an exemption from such
registration is available.
8. Transferability. Prior to vesting pursuant to Section 4 above,
the Option may not be transferred other than to Sorgenti, Rullo, Freedom
Investment Corp., RULCO, Inc. or pursuant to the laws of descent and
distribution; provided, however, that to the extent the Option has become
exercisable pursuant to Section 4 above, the Option may be transferred to a
Permitted Transferee, provided that such Permitted Transferee agrees to be bound
by all the terms and conditions of any stockholders agreement then in effect
among Freedom, the Company and/or JLL. For purposes of this Agreement, a
"Permitted Transferee" shall be (i) Freedom Investment Corp.; (ii) RULCO, Inc.;
(iii) an Executive; (iv) an Executive's spouse; (v) an Executive's children or
stepchildren or their lineal descendants; (vi) any trust the beneficiary of
which is an Executive's spouse, children, step-children or their lineal
descendants and which is controlled by such Executive; or (vii) any affiliate of
any of the foregoing. For purposes of clause (vi) above, a trust shall be deemed
to be controlled by an Executive if that Executive has the power to direct the
disposition of the assets transferred to such trust. In addition, Freedom shall
be entitled to transfer to Donald W.
5
<PAGE>
McPhail an interest in not more than 5% of the Option, provided that Mr. McPhail
agrees to be bound by all of the terms and conditions of any stockholders
agreement then in effect among Freedom, the Company and/or JLL.
9. Adjustments. In the event of any increase, reduction, change or
exchange of Option Shares for a different number or kind of shares or other
securities of the Company by reasons of a reclassification, recapitalization,
merger, consolidation, stock dividend or other similar event, the Board of
Directors of the Company shall, in the exercise of its good faith judgment,
conclusively determine the number and class of Option Shares subject hereto and
the exercise price thereof to the extent it determines such adjustment to be
appropriate to prevent any unfair change in Freedom's rights hereunder.
10. Entire Agreement. This Agreement and the Employment Agreements
contain all the understandings between the parties hereto pertaining to the
matters referred to herein and therein, and supersede all undertakings and
agreements, whether oral or in writing, previously entered into by them with
respect thereto. Freedom represents that, in executing this Agreement, it does
not rely and has not relied upon any representation or statement not set forth
herein made by the Company with regard to the subject matter or effect of this
Agreement or otherwise.
11. Amendment or Modification, Waiver. No provision of this
Agreement may be amended or waived unless such amendment or waiver is agreed to
in writing, signed by Freedom and by a duly authorized officer of the Company.
No waiver by any party hereto of any breach by another party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
12. Effectiveness Conditioned Upon Public Offering. The amendments
to the FTCC Option Agreement made by this Agreement are contingent upon and
shall become effective upon the consummation of the Public Offering. In the
event the Public Offering is not consummated by March 31, 1995, this Agreement
shall termi-
6
<PAGE>
nate, be null and void and of no further force or effect and the Options shall
be governed by the terms of the FTCC Option Agreement.
13. Notices. Any notice to be given hereunder shall be in writing
and shall be deemed given when delivered personally, sent by courier or telecopy
or registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
To Freedom at:
The Freedom Group
Mellon Center
1735 Market Street
Philadelphia, Pennsylvania 19103
Attention: Partner
Telecopy: (215) 979-3733
To the Company at:
Freedom Chemical Company
Mellon Center
1735 Market Street
Philadelphia, Pennsylvania 19103
Attention: President
Telecopy: (215) 979-3733
With a copy to:
Joseph Littlejohn & Levy
450 Lexington Avenue
New York, New York 10017
Attention: Yvonne V. Cliff
Telecopy: (212) 286-8626
Any notice delivered personally or by courier under this Section 12
shall be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
7
<PAGE>
14. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law.
15. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
16. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York, without regard to its
conflicts of laws principles.
17. Headings. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
18. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
FREEDOM CHEMICAL COMPANY
By: /s/ Fred P. Rullo
--------------------------------
Name: Fred P. Rullo
Title: President
THE FREEDOM GROUP PARTNERSHIP
By: FREEDOM INVESTMENT CORP.,
a General Partner
By: /s/ Harold A. Sorgenti
--------------------------------
Name: Harold A. Sorgenti
Title: President
By: RULCO, Inc.,
a General Partner
By: /s/ Fred P. Rullo
--------------------------------
Name: Fred P. Rullo
Title: President
9
<PAGE>
AMENDED AND RESTATED STOCK OPTION AGREEMENT
AGREEMENT made on November 15, 1994, by and between FREEDOM CHEMICAL
COMPANY, a Delaware corporation (the "Company") and THE FREEDOM GROUP
PARTNERSHIP, a Pennsylvania limited partnership ("Freedom"), the general and
limited partners of which are Freedom Investment Corp., a corporation controlled
by Harold A. Sorgenti ("Sorgenti") and RULCO, Inc., a corporation controlled by
Fred P. Rullo ("Rullo"). Sorgenti and Rullo are hereinafter referred to as the
"Executives".
WHEREAS, pursuant to an agreement entered into on September 9, 1993
(the "Hilton Davis Option Agreement"), the Company granted to Freedom a
non-qualified stock option to acquire an aggregate of 7,500 shares of the
Company's Common Stock, par value $100.00 per share (the "Common Stock") on the
terms set forth therein;
WHEREAS, the Company has filed a Registration Statement on Form S-1
with the Securities and Exchange Commission relating to a public offering of
3,000,000 shares of the Company's Common Stock (the "Public Offering");
WHEREAS, the Company has entered into an employment agreement with
Sorgenti dated as of November 15, 1994 (such agreement together with any
agreement replacing or amending such agreement being herein referred to as the
"Sorgenti Employment Agreement");
WHEREAS, the Company has entered into an employment agreement with
Rullo dated as of November 15, 1994 (such agreement together with any agreement
replacing or amending such agreement being herein referred to as the "Rullo
Employment Agreement"; the Rullo Employment Agreement and the Sorgenti
Employment Agreement are sometimes collectively referred to as the "Employment
Agreements");
WHEREAS, the Company and Freedom desire to amend and restate the
Hilton Davis Option Agreement in its entirety, such amendment and restatement to
be contingent upon and effective with the consummation of the Public Offering;
<PAGE>
NOW, THEREFORE, the parties agree that, subject to the terms
and conditions hereof, the Hilton Davis Option Agreement shall be amended and
restated in its entirety as follows:
1. Definitions. Capitalized terms not other wise defined herein
shall have the meaning set forth in the Employment Agreements.
2. Grant of Option. Freedom is hereby granted a non-qualified stock
option (the "Option") to purchase an aggregate of 7,500 shares (the "Option
Shares") of Common Stock, pursuant to the terms of this Agreement. 4,500 of the
shares subject to the Option are herein referred to as the "Sorgenti Shares" and
3,000 of the shares subject to the Option are herein referred to as the "Rullo
Shares". Notwithstanding the foregoing, the parties hereto acknowledge that on
January 18, 1994, Freedom exercised the Option with respect to 4,275 of the
Sorgenti Shares.
3. Option Price. The exercise price of the Option shall be $100.00
per share of Common Stock issuable thereunder.
4. Conditions to Exercisability.
(a) The Option is immediately exercisable with respect to
forty percent (40%) of the Option Shares covered hereby. The Option will become
exercisable with respect to (i) an additional twenty percent (20%) of the
Sorgenti Shares subject hereto on each of May 4, 1995, May 4, 1996, and May 4,
1997; provided that Sorgenti is employed by the Company on such date and (ii) an
additional twenty percent (20%) of the Rullo Shares subject hereto on each of
May 4, 1995, May 4, 1996 and May 4, 1997; provided that Rullo is employed by the
Company on such date.
(b) Notwithstanding the foregoing, this Option shall become
immediately exercisable with respect to (i) one hundred percent (100%) of the
Sorgenti Shares then unvested in the event the Sorgenti Employment Agreement is
terminated by reason of the death or disability of Sorgenti or by the Company
without Cause or by Sorgenti for Good Reason (in each case pursuant to and as
defined in the Sorgenti Employment Agreement), (ii) one
2
<PAGE>
hundred percent (100%) of the Rullo Shares then unvested in the event the Rullo
Employment Agreement is terminated by reason of the death or disability of Rullo
or by the Company without Cause or by Rullo for Good Reason (in each case
pursuant to and as defined in the Rullo Employment Agreement) and (iii) one
hundred percent (100%) of the Option Shares then unvested in the event of a
Change of Control of the Company (as defined in the Employment Agreements).
(c) Notwithstanding the foregoing, in the event JLL offers
Common Stock to the public in an offering registered under the Securities Act of
1933 (the "Securities Act"), prior to May 4, 1997, and JLL participates in such
offering by selling all or part of its holdings of Common Stock, this Option
shall become immediately exercisable on the date of such offering to the extent
and only to the extent necessary to enable Freedom to sell (if permitted by the
underwriters) such number of Option Shares in the aggregate as would equal 25%
of the shares sold by JLL. Freedom acknowledges and agrees that this Section
4(c) does not entitle Freedom to participate in any such public offering.
5. Period of Option. The Option shall expire (i) with respect to one
hundred percent (100%) of the Sorgenti Shares on the date six months following
termination of Sorgenti's employment by the Company for any reason and (ii) with
respect to one hundred percent (100%) of the Rullo Shares on the date six months
following termination of Rullo's employment by the Company for any reason; in
each such case this Option may be exercised (to the extent it has become
exercisable pursuant to Section 4 above), in whole or in part (other than with
respect to any fractional share), at any time prior to such expiration;
provided, however, that if (i) Sorgenti's employment with the Company is
terminated by reason of the death or disability of Sorgenti or by the Company
without Cause or by Sorgenti for Good Reason, Freedom shall be entitled, for a
period of one year following such termination, to exercise the Option with
respect to one hundred percent (100%) of the Sorgenti Shares and if (ii) Rullo's
employment with the Company is terminated by reason of the death or disability
of Rullo or by the Company without Cause or by Rullo for Good Reason, Freedom
shall be entitled, for a period of one year following such termination, to
exercise the Option with
3
<PAGE>
respect to one hundred percent (100%) of the Rullo Shares.
6. Exercise of Option.
(a) The Option shall be exercised in the following manner:
Freedom, or the person or persons having the right to exercise the Option on
behalf of Freedom, shall deliver to the Company written notice specifying the
number of shares of Common Stock which it elects to purchase. Freedom (or such
other person) must include with such notice full payment of the exercise price
for the Common Stock being purchased pursuant to such notice. Payment of the
exercise price must be made in cash or by certified or cashier's check.
(b) The Company may, if in its reasonable judgment determines
it to be required under any applicable law, require that Freedom pay to the
Company, at the time of exercise of any portion of the Option, any such
additional amount as the Company deems necessary to satisfy its liability to
withhold federal, state or local income tax or any other taxes incurred by
reasons of the exercise or the transfer of shares of Common Stock thereupon.
(c) If any law, regulation or interpretation requires the
Company to take any action regarding the Common Stock, before the Company issues
certificates for the Common Stock being purchased, the Company may delay
delivering the certificates for the Common Stock for the period necessary to
take such action. The certificate or certificates representing the Common Stock
acquired pursuant to the Option may bear a legend restricting the transfer of
such Common Stock, and the Company may impose stop transfer instructions to
implement such restrictions, if applicable.
(d) Freedom will not be deemed to be a holder of any shares
pursuant to exercise of the Option until the date of the issuance of a stock
certificate to it for such shares of Common Stock and until the shares of Common
Stock are paid in full.
4
<PAGE>
7. Representations and Covenants
(a) The Company represents and warrants and covenants that (i)
this Agreement has been authorized by all necessary corporate action of the
Company and is a valid and binding agreement of the Company enforceable against
it in accordance with its terms and (ii) the Company shall at all times during
the term of this Agreement reserve and keep available such number of shares of
Common Stock as will be sufficient to satisfy the obligations of the Company
under this Agreement.
(b) Freedom represents and warrants that it is not a party to
any agreement or instrument which would prevent it from entering into or
performing its duties in any way under this Agreement.
(c) Freedom understands that the Option Shares have not been
registered under the Securities Act and that it cannot offer for sale, sell or
transfer such Option Shares unless such offer, sale or transfer has been
registered under the Securities Act or unless an exemption from such
registration is available.
8. Transferability. Prior to vesting pursuant to Section 4 above,
the Option may not be transferred other than to Sorgenti, Rullo, Freedom
Investment Corp. or pursuant to the laws of descent and distribution; provided,
however, that to the extent the Option has become exercisable pursuant to
Section 4 above, the Option may be transferred to a Permitted Transferee,
provided that such Permitted Transferee agrees to be bound by all the terms and
conditions of any stockholders agreement then in effect among Freedom, the
Company and/or JLL. For purposes of this Agreement, a "Permitted Transferee"
shall be (i) Freedom Investment Corp.; (ii) RULCO, Inc.; (iii) an Executive;
(iv) an Executive's spouse; (v) an Executive's children or step-children or
their lineal descendants; (vi) any trust the beneficiary of which is an
Executive's spouse, children, step-children or their lineal descendants and
which is controlled by such Executive; or (vii) any affiliate of any of the
foregoing. For purposes of clause (vi) above, a trust shall be deemed to be
controlled by an Executive if that Executive has the power to direct the
disposition of the assets transferred to such trust. In addition, Freedom shall
be entitled to transfer to Donald W. McPhail a beneficial
5
<PAGE>
interest in not more than 5% of the Option, provided that Mr. McPhail agrees to
be bound by all of the terms and conditions of any stockholders agreement then
in effect among Freedom, the Company and/or JLL.
9. Adjustments. In the event of any increase, reduction, change or
exchange of Option Shares for a different number or kind of shares or other
securities of the Company by reasons of a reclassification, recapitalization,
merger, consolidation, stock dividend or other similar event, the Board of
Directors of the Company shall, in the exercise of its good faith judgment,
conclusively determine the number and class of Option Shares subject hereto and
the exercise price thereof to the extent it determines such adjustment to be
appropriate to prevent any unfair change in Freedom's rights hereunder.
10. Entire Agreement. This Agreement and the Employment Agreements
contain all the understandings between the parties hereto pertaining to the
matters referred to herein and therein, and supersede all undertakings and
agreements, whether oral or in writing, previously entered into by them with
respect thereto. Freedom represents that, in executing this Agreement, it does
not rely and has not relied upon any representation or statement not set forth
herein made by the Company with regard to the subject matter or effect of this
Agreement or otherwise.
11. Amendment or Modification, Waiver. No provision of this
Agreement may be amended or waived unless such amendment or waiver is agreed to
in writing, signed by Freedom and by a duly authorized officer of the Company.
No waiver by any party hereto of any breach by another party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
12. Effectiveness Conditioned Upon Public Offering. The amendments
to the Hilton Davis Option Agreement made by this Agreement are contingent upon
and shall become effective upon the consummation of the Public Offering. In the
event the Public Offering is not consummated by March 31, 1995, this Agreement
shall
6
<PAGE>
terminate, be null and void and of no further force or effect and the Options
shall be governed by the terms of the Hilton Davis Option Agreement.
13. Notices. Any notice to be given hereunder shall be in writing
and shall be deemed given when delivered personally, sent by courier or telecopy
or registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
To Freedom at:
The Freedom Group
Mellon Center
1735 Market Street
Philadelphia, Pennsylvania 19103
Attention: Partner
Telecopy: (215) 979-3733
To the Company at:
Freedom Chemical Company
Mellon Center
1735 Market Street
Philadelphia, Pennsylvania 19103
Attention: President
Telecopy: (215) 979-3733
With a copy to:
Joseph Littlejohn & Levy
450 Lexington Avenue
New York, New York 10017
Attention: Yvonne V. Cliff
Telecopy: (212) 286-8626
Any notice delivered personally or by courier under this Section 12
shall be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
7
<PAGE>
14. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law.
15. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
16. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York, without regard to its
conflicts of laws principles.
17. Headings. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
18. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
FREEDOM CHEMICAL COMPANY
By: /s/ Fred P. Rullo
----------------------------
Name: Fred P. Rullo
Title: President
THE FREEDOM GROUP PARTNERSHIP
By: FREEDOM INVESTMENT CORP.,
a General Partner
By: /s/ Harold A. Sorgenti
----------------------------
Name: Harold A. Sorgenti
Title: President
By: RULCO, Inc.,
a General Partner
By: /s/ Fred P. Rullo
----------------------------
Name: Fred P. Rullo
Title: President
9
<PAGE>
AMENDED AND RESTATED STOCK OPTION AGREEMENT
AGREEMENT made on November 15, 1994, by and between FREEDOM CHEMICAL
COMPANY, a Delaware corporation (the "Company") and THE FREEDOM GROUP
PARTNERSHIP, a Pennsylvania limited partnership ("Freedom"), the general and
limited partners of which are Freedom Investment Corp., a corporation controlled
by Harold A. Sorgenti ("Sorgenti") and RULCO, Inc., a corporation controlled by
Fred P. Rullo ("Rullo"). Sorgenti and Rullo are hereinafter referred to as the
"Executives".
WHEREAS, pursuant to an agreement entered into on May 26, 1994 (the
"Kalama Option Agreement"), the Company granted to Freedom a non-qualified stock
option to acquire an aggregate of 1,981 shares of the Company's Common Stock,
par value $100.00 per share (the "Common Stock") on the terms set forth therein;
WHEREAS, the Company has filed a Registration Statement on Form S-1
with the Securities and Exchange Commission relating to a public offering of
3,000,000 shares of the Company's Common Stock (the "Public Offering");
WHEREAS, the Company has entered into an employment agreement with
Sorgenti dated as of November 15, 1994 (such agreement together with any
agreement replacing or amending such agreement being herein referred to as the
"Sorgenti Employment Agreement");
WHEREAS, the Company has entered into an employment agreement with
Rullo dated as of November 15, 1994 (such agreement together with any agreement
replacing or amending such agreement being herein referred to as the "Rullo
Employment Agreement"; the Rullo Employment Agreement and the Sorgenti
Employment Agreement are sometimes collectively referred to as the "Employment
Agreements");
WHEREAS, the Company and Freedom desire to amend and restate the
Kalama Option Agreement in its entirety, such amendment and restatement to be
contingent upon and effective with the consummation of the Public Offering;
<PAGE>
NOW, THEREFORE, the parties agree that, subject to the terms
and conditions hereof, the Kalama Option Agreement shall be amended and restated
in its entirety as follows:
1. Definitions. Capitalized terms not otherwise defined herein
shall have the meaning set forth in the Employment Agreements.
2. Grant of Option. Freedom is hereby granted a non-qualified stock
option (the "Option") to purchase an aggregate of 1,981 shares (the "Option
Shares") of Common Stock, pursuant to the terms of this Agreement. 1,188 of the
shares subject to the Option are herein referred to as the "Sorgenti Shares" and
793 of the shares subject to the Option are herein referred to as the "Rullo
Shares".
3. Option Price. The exercise price of the Option shall be $105.40
per share of Common Stock issuable thereunder.
4. Conditions to Exercisability.
(a) The Option is immediately exercisable with respect to
forty percent (40%) of the Option Shares covered hereby. The Option will become
exercisable with respect to (i) an additional twenty percent (20%) of the
Sorgenti Shares subject hereto on each of May 4, 1995, May 4, 1996, and May 4,
1997; provided that Sorgenti is employed by the Company on such date and (ii) an
additional twenty percent (20%) of the Rullo Shares subject hereto on each of
May 4, 1995, May 4, 1996 and May 4, 1997; provided that Rullo is employed by the
Company on such date.
(b) Notwithstanding the foregoing, this Option shall become
immediately exercisable with respect to (i) one hundred percent (100%) of the
Sorgenti Shares then unvested in the event the Sorgenti Employment Agreement is
terminated by reason of the death or disability of Sorgenti or by the Company
without Cause or by Sorgenti for Good Reason (in each case pursuant to and as
defined in the Sorgenti Employment Agreement), (ii) one hundred percent (100%)
of the Rullo Shares then unvested in the event the Rullo Employment Agreement is
terminated by reason of the death or disability of Rullo or by the
2
<PAGE>
Company without Cause or by Rullo for Good Reason (in each case pursuant to and
as defined in the Rullo Employment Agreement) and (iii) one hundred percent
(100%) of the Option Shares then unvested in the event of a Change of Control of
the Company (as defined in the Employment Agreements).
(c) Notwithstanding the foregoing, in the event JLL offers
Common Stock to the public in an offering registered under the Securities Act of
1933 (the "Securities Act"), prior to May 4, 1997, and JLL participates in such
offering by selling all or part of its holdings of Common Stock, this Option
shall become immediately exercisable on the date of such offering to the extent
and only to the extent necessary to enable Freedom to sell (if permitted by the
underwriters) such number of Option Shares in the aggregate as would equal 25%
of the shares sold by JLL. Freedom acknowledges and agrees that this Section
4(c) does not entitle Freedom to participate in any such public offering.
5. Period of Option. The Option shall expire (i) with respect to one
hundred percent (100%) of the Sorgenti Shares on the date six months following
termination of Sorgenti's employment by the Company for any reason and (ii) with
respect to one hundred percent (100%) of the Rullo Shares on the date six months
following termination of Rullo's employment by the Company for any reason; in
each such case this Option may be exercised (to the extent it has become
exercisable pursuant to Section 4 above), in whole or in part (other than with
respect to any fractional share), at any time prior to such expiration;
provided, however, that if (i) Sorgenti's employment with the Company is
terminated by reason of the death or disability of Sorgenti or by the Company
without Cause or by Sorgenti for Good Reason, Freedom shall be entitled, for a
period of one year following such termination, to exercise the Option with
respect to one hundred percent (100%) of the Sorgenti Shares and if (ii) Rullo's
employment with the Company is terminated by reason of the death or disability
of Rullo or by the Company without Cause or by Rullo for Good Reason, Freedom
shall be entitled, for a period of one year following such termination, to
exercise the Option with respect to one hundred percent (100%) of the Rullo
Shares.
3
<PAGE>
6. Exercise of Option.
(a) The Option shall be exercised in the following manner:
Freedom, or the person or persons having the right to exercise the Option on
behalf of Freedom, shall deliver to the Company written notice specifying the
number of shares of Common Stock which it elects to purchase. Freedom (or such
other person) must include with such notice full payment of the exercise price
for the Common Stock being purchased pursuant to such notice. Payment of the
exercise price must be made in cash or by certified or cashier's check.
(b) The Company may, if in its reasonable judgment determines
it to be required under any applicable law, require that Freedom pay to the
Company, at the time of exercise of any portion of the Option, any such
additional amount as the Company deems necessary to satisfy its liability to
withhold federal, state or local income tax or any other taxes incurred by
reasons of the exercise or the transfer of shares of Common Stock thereupon.
(c) If any law, regulation or interpretation requires the
Company to take any action regarding the Common Stock, before the Company issues
certificates for the Common Stock being purchased, the Company may delay
delivering the certificates for the Common Stock for the period necessary to
take such action. The certificate or certificates representing the Common Stock
acquired pursuant to the Option may bear a legend restricting the transfer of
such Common Stock, and the Company may impose stop transfer instructions to
implement such restrictions, if applicable.
(d) Freedom will not be deemed to be a holder of any shares
pursuant to exercise of the Option until the date of the issuance of a stock
certificate to it for such shares of Common Stock and until the shares of Common
Stock are paid in full.
7. Representations and Covenants
(a) The Company represents and warrants and covenants that (i)
this Agreement has been authorized by all necessary corporate action of the
Company and is a valid and binding agreement of the Company enforceable
4
<PAGE>
against it in accordance with its terms and (ii) the Company shall at all times
during the term of this Agreement reserve and keep available such number of
shares of Common Stock as will be sufficient to satisfy the obligations of the
Company under this Agreement.
(b) Freedom represents and warrants that it is not a party to
any agreement or instrument which would prevent it from entering into or
performing its duties in any way under this Agreement.
(c) Freedom understands that the Option Shares have not been
registered under the Securities Act and that it cannot offer for sale, sell or
transfer such Option Shares unless such offer, sale or transfer has been
registered under the Securities Act or unless an exemption from such
registration is available.
8. Transferability. Prior to vesting pursuant to Section 4 above,
the Option may not be transferred other than to Sorgenti, Rullo, Freedom
Investment Corp., RULCO, Inc. or pursuant to the laws of descent and
distribution; provided, however, that to the extent the Option has become
exercisable pursuant to Section 4 above, the Option may be transferred to a
Permitted Transferee, provided that such Permitted Transferee agrees to be bound
by all the terms and conditions of any stockholders agreement then in effect
among Freedom, the Company and/or JLL. For purposes of this Agreement, a
"Permitted Transferee" shall be (i) Freedom Investment Corp.; (ii) RULCO, Inc.;
(iii) an Executive; (iv) an Executive's spouse; (v) an Executive's children or
stepchildren or their lineal descendants; (vi) any trust the beneficiary of
which is an Executive's spouse, children, step-children or their lineal
descendants and which is controlled by such Executive; or (vii) any affiliate of
any of the foregoing. For purposes of clause (vi) above, a trust shall be deemed
to be controlled by an Executive if that Executive has the power to direct the
disposition of the assets transferred to such trust. In addition, Freedom shall
be entitled to transfer to Donald W. McPhail an interest in not more than 5% of
the Option, provided that Mr. McPhail agrees to be bound by all of the terms and
conditions of any stockholders agreement then in effect among Freedom, the
Company and/or JLL.
5
<PAGE>
9. Adjustments. In the event of any increase, reduction, change or
exchange of Option Shares for a different number or kind of shares or other
securities of the Company by reasons of a reclassification, recapitalization,
merger, consolidation, stock dividend or other similar event, the Board of
Directors of the Company shall, in the exercise of its good faith judgment,
conclusively determine the number and class of Option Shares subject hereto and
the exercise price thereof to the extent it determines such adjustment to be
appropriate to prevent any unfair change in Freedom's rights hereunder.
10. Entire Agreement. This Agreement and the Employment Agreements
contain all the understandings between the parties hereto pertaining to the
matters referred to herein and therein, and supersede all undertakings and
agreements, whether oral or in writing, previously entered into by them with
respect thereto. Freedom represents that, in executing this Agreement, it does
not rely and has not relied upon any representation or statement not set forth
herein made by the Company with regard to the subject matter or effect of this
Agreement or otherwise.
11. Amendment or Modification, Waiver. No provision of this
Agreement may be amended or waived unless such amendment or waiver is agreed to
in writing, signed by Freedom and by a duly authorized officer of the Company.
No waiver by any party hereto of any breach by another party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
12. Effectiveness Conditioned Upon Public Offering. The amendments
to the Kalama Option Agreement made by this Agreement are contingent upon and
shall become effective upon the consummation of the Public Offering. In the
event the Public Offering is not consummated by March 31, 1995, this Agreement
shall terminate, be null and void and of no further force or effect and the
Options shall be governed by the terms of the Kalama Option Agreement.
6
<PAGE>
13. Notices. Any notice to be given hereunder shall be in writing
and shall be deemed given when delivered personally, sent by courier or telecopy
or registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
To Freedom at:
The Freedom Group
Mellon Center
1735 Market Street
Philadelphia, Pennsylvania 19103
Attention: Partner
Telecopy: (215) 979-3733
To the Company at:
Freedom Chemical Company
Mellon Center
1735 Market Street
Philadelphia, Pennsylvania 19103
Attention: President
Telecopy: (215) 979-3733
With a copy to:
Joseph Littlejohn & Levy
450 Lexington Avenue
New York, New York 10017
Attention: Yvonne V. Cliff
Telecopy: (212) 286-8626
Any notice delivered personally or by courier under this Section 12
shall be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
14. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the
7
<PAGE>
application of such provision to such person or circumstances other than those
to which it is so determined to be invalid and unenforceable, shall not be
affected thereby, and each provision hereof shall be validated and shall be
enforced to the fullest extent permitted by law.
15. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
16. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York, without regard to its
conflicts of laws principles.
17. Headings. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
18. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
FREEDOM CHEMICAL COMPANY
By: /s/ Fred P. Rullo
-------------------------
Name: Fred P. Rullo
Title: President
THE FREEDOM GROUP PARTNERSHIP
By: FREEDOM INVESTMENT CORP.,
a General Partner
By: /s/ Harold A. Sorgenti
-------------------------
Name: Harold A. Sorgenti
Title: President
By: RULCO, Inc.,
a General Partner
By: /s/ Fred P. Rullo
-------------------------
Name: Fred P. Rullo
Title: President
9
<PAGE>
October 17, 1996
Freedom Chemical Company
c/o The Freedom Group
Mellon Center
1735 Market Street
Philadelphia, PA 19103
Re: Subscription Agreement
Dear Sir or Madam:
Subject to the conditions set forth herein, Joseph Littlejohn & Levy
Fund, L.P. ("Stockholder"), hereby subscribes for 56,635 shares of Series A
common stock, par value $.01 per share (the "Common Stock"), of Freedom Chemical
Company (the "Company"), at a price of $125 per share, for an aggregate purchase
price of $7,079,375.
Stockholder understands that:
(a) the Common Stock is not registered under the Securities Act of
1933 and the rules and regulations thereunder (collectively hereinafter called
the "Act"), or under any applicable state securities law and must be held by
Stockholder indefinitely unless they are subsequently so registered or unless an
exemption from such registration is available;
(b) the Company is under no obligation whatsoever and has no
intention to register the Common Stock under the Act or to comply with any
exemption under the Act;
(c) each certificate representing shares of Common Stock will bear
the following legend drawing attention to the restrictions on its
transferability:
"The securities evidenced by this certificate have not been
registered under the Securities Act of 1933 or under any applicable
state securities law and may not be transferred except
<PAGE>
Freedom Chemical Company
c/o The Freedom Group
October 17, 1996
Page 2
upon delivery to the Corporation of an opinion of counsel
satisfactory in form and substance to it that such transfer will not
violate the Securities Act of 1933, as amended, or any applicable
state securities law."
Stockholder hereby represents and warrants to you that:
(a) The Company has given Stockholder opportunity to ask questions
concerning the business activities of the Company and Stockholder has received
to its satisfaction such information as Stockholder has requested concerning the
anticipated business and financial condition of the Company and Stockholder's
proposed investment.
(b) Stockholder is aware of the very high degree of risk involved in
making an investment in the Company and recognizes that there is no sure return
on this investment, and Stockholder has such knowledge and experience that it is
capable of evaluating the risks, as well as the merits, of an investment in the
Company and can bear the economic risk of whatever investment it makes.
(c) The Common Stock is being acquired for investment for
Stockholder's own account and not with a view to resale or distribution within
the meaning of the Act. Stockholder will not distribute any of the Common Stock
in violation of the Act, without prejudice, however, to its right to sell,
pledge, hypothecate, transfer or otherwise dispose of any Shares of Common Stock
pursuant to (i) a Registration Statement that has become effective under the
Act, (ii) a no-action letter from the Securities and Exchange Commission, or
(iii) an opinion of counsel satisfactory to the Company and its counsel that
registration under the Act is not required in connection with such sale, pledge,
hypothecation, transfer or other disposition.
<PAGE>
Freedom Chemical Company
c/o The Freedom Group
October 17, 1996
Page 3
(d) This Subscription Agreement has been authorized by all necessary
action of Stockholder and duly and validly executed by and on behalf of
Stockholder and, upon delivery to you, constitutes a valid and binding
obligation of Stockholder with regard to the purchase and ownership of the
Common Stock.
Stockholder agrees that the Common Stock being acquired hereby will
be subject to the terms and conditions of the following stockholders'
agreements: (i) the Stockholders' Agreement, dated as of May 4, 1992, by and
among the Company, the Stockholder, Joseph Littlejohn & Levy Fund II, L.P. ("JLL
Fund II"), Harold A. Sorgenti and Frederick P. Rullo, as amended by Amendment
No. 1 thereto, dated as of September 9, 1993 and Amendment No. 2 thereto dated
as of June 30, 1994, (ii) the Stockholders' Agreement, dated as of June 30,
1993, by and among the Company, the Stockholder, JLL Fund II, Donald W. McPhail
and Stamford-Atlanta Capital Corporation, as amended by Amendment No. 1 thereto
dated as of June 30, 1994, (iii) the Stockholders' Agreement, dated as of June
30, 1994, by and among the Company, the Stockholder, JLL Fund II and the
individual stockholders party thereto and (iv) the Stockholders' Agreement,
dated as of June 30, 1994, by and among the Company, the Stockholder and Richard
A. Gilleland.
This Subscription Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
choice of law principles.
This Subscription Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound, the
undersigned has executed this subscription agreement on behalf of Stockholder as
of the date first above written.
JOSEPH LITTLEJOHN & LEVY FUND, L.P.
By: JLL Associates, L.P.
General Partner
By: /s/ Peter Joseph
-----------------------------
Name: Peter Joseph
Title: General Partner
ACCEPTED:
THE FREEDOM CHEMICAL COMPANY
By: /s/ Brian F. McNamara
------------------------------
Name: Brian F. McNamara
Title: Secretary
<PAGE>
October 17, 1996
Freedom Chemical Company
c/o The Freedom Group
Mellon Center
1735 Market Street
Philadelphia, PA 19103
Re: Subscription Agreement
Dear Sir or Madam:
Subject to the conditions set forth herein, Joseph Littlejohn & Levy
Fund II, L.P. ("Stockholder"), hereby subscribes for 22,904.26 shares of Series
A common stock, par value $.01 per share (the "Common Stock"), of Freedom
Chemical Company (the "Company"), at a price of $125 per share, for an aggregate
purchase price of $2,863,032.50.
Stockholder understands that:
(a) the Common Stock is not registered under the Securities Act of
1933 and the rules and regulations thereunder (collectively hereinafter called
the "Act"), or under any applicable state securities law and must be held by
Stockholder indefinitely unless they are subsequently so registered or unless an
exemption from such registration is available;
(b) the Company is under no obligation whatsoever and has no
intention to register the Common Stock under the Act or to comply with any
exemption under the Act;
(c) each certificate representing shares of Common Stock will bear
the following legend drawing attention to the restrictions on its
transferability:
"The securities evidenced by this certificate have not been
registered under the Securities Act of 1933 or under any applicable
state securities law and may not be transferred except
<PAGE>
Freedom Chemical Company
c/o The Freedom Group
October 17, 1996
Page 2
upon delivery to the Corporation of an opinion of counsel
satisfactory in form and substance to it that such transfer will not
violate the Securities Act of 1933, as amended, or any applicable
state securities law."
Stockholder hereby represents and warrants to you that:
(a) The Company has given Stockholder opportunity to ask questions
concerning the business activities of the Company and Stockholder has received
to its satisfaction such information as Stockholder has requested concerning the
anticipated business and financial condition of the Company and Stockholder's
proposed investment.
(b) Stockholder is aware of the very high degree of risk involved in
making an investment in the Company and recognizes that there is no sure return
on this investment, and Stockholder has such knowledge and experience that it is
capable of evaluating the risks, as well as the merits, of an investment in the
Company and can bear the economic risk of whatever investment it makes.
(c) The Common Stock is being acquired for investment for
Stockholder's own account and not with a view to resale or distribution within
the meaning of the Act. Stockholder will not distribute any of the Common Stock
in violation of the Act, without prejudice, however, to its right to sell,
pledge, hypothecate, transfer or otherwise dispose of any Shares of Common Stock
pursuant to (i) a Registration Statement that has become effective under the
Act, (ii) a no-action letter from the Securities and Exchange Commission, or
(iii) an opinion of counsel satisfactory to the Company and its counsel that
registration under the Act is not required in connection with such sale, pledge,
hypothecation, transfer or other disposition.
<PAGE>
Freedom Chemical Company
c/o The Freedom Group
October 17, 1996
Page 3
(d) This Subscription Agreement has been authorized by all necessary
action of Stockholder and duly and validly executed by and on behalf of
Stockholder and, upon delivery to you, constitutes a valid and binding
obligation of Stockholder with regard to the purchase and ownership of the
Common Stock.
Stockholder agrees that the Common Stock being acquired hereby will
be subject to the terms and conditions of the following stockholders'
agreements: (i) the Stockholders' Agreement, dated as of May 4, 1992, by and
among the Company, Joseph Littlejohn & Levy Fund, L.P. ("JLL Fund I"), the
Stockholder, Harold A. Sorgenti and Frederick P. Rullo, as amended by Amendment
No. 1 thereto, dated as of September 9, 1993 and Amendment No. 2 thereto dated
as of June 30, 1994, (ii) the Stockholders' Agreement, dated as of June 30,
1993, by and among the Company, JLL Fund I, the Stockholder, Donald W. McPhail
and Stamford-Atlanta Capital Corporation, as amended by Amendment No. 1 thereto
dated as of June 30, 1994, and (iii) the Stockholders' Agreement, dated as of
June 30, 1994, by and among the Company, JLL Fund I, the Stockholder and the
individual stockholders party thereto.
This Subscription Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
choice of law principles.
This Subscription Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound, the
undersigned has executed this subscription agreement on behalf of Stockholder as
of the date first above written.
JOSEPH LITTLEJOHN & LEVY FUND II, L.P.
By: JLL Associates II, L.P.
General Partner
By: /s/ Peter Joseph
--------------------------
Name: Peter Joseph
Title: General Partner
ACCEPTED:
THE FREEDOM CHEMICAL COMPANY
By: /s/ Brian F. McNamara
--------------------------
Name: Brian F. McNamara
Title: Secretary
<PAGE>
Freedom Chemical Company and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands, except ratio)
<TABLE>
<CAPTION>
Six months ended
Years Ended December 31, June 30,
---------------------------------------------------------------------
1992 1993 1994 1995 1995 1996
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before taxes ($347) ($1,261) $6,320 ($20,873) ($817) $5,884
---------------------------------------------------------------------
Interest and debt expense 531 1,556 6,682 13,805 6,992 6,789
Minority interest 144 251 284 247 126 126
Capitalized interest -- -- -- 168 111 --
One third of rental expense 52 106 323 794 392 459
---------------------------------------------------------------------
Total fixed charges 727 1,913 7,289 15,014 7,621 7,374
---------------------------------------------------------------------
Income (loss) before taxes
and fixed charges $380 $652 $13,609 ($5,859) $6,804 $13,258
---------------------------------------------------------------------
Ratio of earnings to fixed
charges 0.5x 0.3x 1.9x 0.4x 0.9x 1.8x
=====================================================================
Surplus (deficiency) of earnings ($347) ($1,261) $6,320 ($20,873) ($817) $5,884
=====================================================================
Rental expense $156 $318 $970 $2,383 $1,175 $1,378
=====================================================================
</TABLE>
<PAGE>
Hilton Davis Chemical Co.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands, except ratio)
January 1, 1993
Years Ended December 31, to September 9,
--------------------------------------------
1991 1992 1993
--------------------------------------------
Income before taxes $2,129 $4,071 $2,811
Interest and debt expense 4,258 3,247 1,998
One third of rental expense 123 109 161
------------------------- ----------------
Income before taxes and fixed 4,381 3,356 2,159
charges
------------------------- ----------------
Earnings before income taxes $6,510 $7,427 $4,970
and fixed charges
------------------------- ----------------
Ratio of earnings to fixed charges 1.5x 2.2x 2.3x
========================= ================
Surplus (deficiency) of earnings $2,129 $4,071 $2,811
========================= ================
Rental Expense $370 $328 $483
========================= ================
2
<PAGE>
Exhibit 21.1
Jurisdiction
Subsidiaries of Freedom Chemical Company of Incorporation
- ---------------------------------------- ----------------
Hilton Davis Chemical Co. Delaware
Freedom Chemical Diamalt GmbH Germany
Diamalt Pharmorganica PM Limited India
Diamalt S.r.l. Italy
HackerMalt Proteine Verwaltungs GmbH Germany
Diamo Handels GmbH Germany
Prince Chemicals Co. Ltd. China
Indiamalt Private Limited India
Freedom Textile Chemicals Co. Delaware
A-Chem (U.K.) Limited England
FCC Acquisition Corp. Delaware
Freedom Textile Chemical Company (South Delaware
Carolina), Inc.
Kalama Chemical, Inc. Washington
Kalama Foreign Sales Corporation Guam
Kalama Specialty Chemicals, Inc. Washington
Freedom Europe B.V. Netherlands
Societe Francaise des Colloides S.A. France
<PAGE>
Exhibit 21.2
Jurisdiction
Subsidiaries of Hilton Davis Chemical Co. of Incorporation
- ----------------------------------------- ----------------
None
<PAGE>
Exhibit 21.3
Jurisdiction
Subsidiaries of Kalama Chemical, Inc. of Incorporation
- ------------------------------------- -----------------
Kalama Foreign Sales Corporation Guam
Kalama Specialty Chemicals, Inc. Washington
<PAGE>
Exhibit 21.4
Jurisdiction
Subsidiaries of Freedom Textile Chemicals Co. of Incorporation
- --------------------------------------------- ----------------
A-Chem (U.K.) Limited England
FCC Acquisition Corp. Delaware
Freedom Textile Chemical Company (South Delaware
Carolina), Inc.
<PAGE>
Exhibit 21.5
Jurisdiction
Subsidiaries of Freedom Chemical Diamalt GmbH of Incorporation
- --------------------------------------------- ----------------
Diamalt Pharmorganica PM Limited India
Diamalt S.r.l. Italy
HackerMalt Proteine Verwaltungs GmbH Germany
Diamo Handels GmbH Germany
Prince Chemicals Co. Ltd. China
Indiamalt Private Limited India
<PAGE>
Exhibit 21.6
Subsidiaries of Freedom Textile Chemical Jurisdiction
(South Carolina), Inc. of Incorporation
- --------------------------------------- ----------------
None
<PAGE>
Exhibit 21.7
Subsidiaries of Kalama Specialty Jurisdiction
Chemicals, Inc. of Incorporation
- ------------------------------- ----------------
None
<PAGE>
Exhibit 21.8
Subsidiaries of Kalama Foreign Jurisdiction
Sales Corporation of Incorporation
- ----------------------------- ----------------
None
<PAGE>
Exhibit 21.9
Jurisdiction
Subsidiaries of FCC Acquisition Corp. of Incorporation
- ------------------------------------- -----------------
None
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File No.
33-84778) of our report dated March 26, 1996, on our audits of the financial
statements and financial statement schedule of Freedom Chemical Company and
Subsidiaries. We also consent to the reference to our firm under the caption
"Experts."
We also consent to the inclusion in this registration statement on Form S-1
(File No. 33-84778) of our report, which includes and explanatory paragraph
regarding the change in accounting for income taxes and maintenance parts, dated
September 9, 1994, on our audit of the financial statements of Hilton Davis
Chemical Co. and Subsidiary. We also consent to the reference to our firm under
the caption "Experts."
COOPERS & LYBRAND L.L.P.
Wayne, Pennsylvania
October 31, 1996
<PAGE>
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
- ------------------------------------------------------------------------------
The Board of Directors
Freedom Chemical Company:
We consent to the inclusion of our report dated August 22, 1994, with respect to
the consolidated balance sheets of Kalama Chemical, Inc. and subsidiaries as of
May 26, 1994 and September 30, 1993, and the related consolidated statements of
operations, stockholder's equity, and cash flows for the period from October 1,
1993 to May 26, 1994, and the year ended September 30, 1993, which report
appears in Amendment No. 2 to the Registration Statement on Form S-1 of Freedom
Chemical Company and to the reference to our firm under the heading "Experts" in
the Registration Statement.
Our report dated August 22, 1994 contains an explanatory paragraph that states
that the Company is involved in various environmental matters. The ultimate
outcome of certain contingencies cannot presently be determined. Accordingly,
the provision for the total liability that may result has not been recognized in
the consolidated financial statements.
Our report dated August 22, 1994 also refers to a change in the method of
accounting for income taxes, effective October 1, 1993.
KPMG Peat Marwick LLP
Seattle, Washington
October 31, 1996
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)_______
-------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(Jurisdiction of incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
48 Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip code)
-------------
FREEDOM CHEMICAL COMPANY
(Exact name of obligor as specified in its charter)
Delaware 51-0340498
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Mellon Center, Suite 3500
1735 Market Street
Philadelphia, PA 19103
(Address of principal executive offices) (Zip code)
-------------
1
<PAGE>
HILTON DAVIS CHEMICAL CO.
(Exact name of obligor as specified in its charter)
Delaware 97-4071292
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2235 Langdon Farm Road
Cincinnati, Ohio 45327
(Address of principal executive offices) (Zip code)
-------------
KALAMA CHEMICAL, INC.
(Exact name of obligor as specified in its charter)
Washington 91-0862423
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1296 Third Street, N.W.
Kalama, Washington 98625
(Address of principal executive offices) (Zip code)
-------------
FREEDOM TEXTILE CHEMICALS CO.
(Exact name of obligor as specified in its charter)
Delaware 56-1767462
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8309 Wilkinson Boulevard
Charlotte, North Carolina
(704) 393-0089 28214
(Address of principal executive offices) (Zip code)
-------------
2
<PAGE>
FREEDOM CHEMICAL DIAMALT GMBH
(Exact name of obliger as specified in its charter)
Germany N/A
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Postfach 50 02 70
Munchen, Germany D-80972
(Address of principal executive offices) (Zip code)
-------------
FREEDOM TEXTILE CHEMICAL COMPANY (SOUTH CAROLINA), INC.
(Exact name of obligor as specified in its charter)
Delaware 56-194931
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5025 South Main Street
Cowpens, South Carolina
(803) 463-4393 29330
(Address of principal executive offices) (Zip code)
-------------
KALAMA SPECIALTY CHEMICALS, INC.
(Exact name of obligor as specified in its charter)
Washington 91-0971783
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1296 Third Street, N.W.
Kalama, Washington 98625
(Address of principal executive offices) (Zip code)
-------------
<PAGE>
KALAMA FOREIGN SALES CORPORATION
(Exact name of obligor as specified in its charter)
Guam 98-0102014
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1296 Third Street, N.W.
Kalama, Washington 98625
(Address of principal executive offices) (Zip code)
-------------
FCC ACQUISITION CORP.
(Exact name of obliger as specified in its charter)
Delaware 23-2791891
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Mellon Center, Suite 3500
1735 Market Street
Philadelphia, PA 19103
(Address of principal executive offices) (Zip code)
-------------
10-5/8% Senior Subordinated Notes Due 2006
(Title of the indenture securities)
Item 1. General Information.*
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006
State of New York and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington,
New York Clearing House Association D.C. 20429
New York, N.Y.
(b) Whether it is authorized to exercise corporate trust powers.
- -------------
*Pursuant to General Instruction B, the Trustee has responded only to
Items 1, 2 and 16 of this form since to the best of the knowledge of the Trustee
the obligor is not in default under any indenture under which the Trustee is a
trustee.
4
<PAGE>
Yes.
Item 2. Affiliations with Obligor.
If the obliger is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 6.)
Item 16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the
Commission's Rules of Practice.
1. - A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1
to Form T-1 filed with Registration Statement No. 33-6215,
Exhibits la and lb to Form T-1 filed with Registration Statement
No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. - A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. - The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T- 1 filed with Registration Statement
No. 33-44051.)
7. - A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its supervising
or examining authority. (Exhibit 7 of Exhibit 25(a) filed with
Registration Statement Nos. 333-14369 and 333-14369-01).
5
<PAGE>
NOTE
Inasmuch as this Form T-1 is being filed prior to the ascertainment by
the Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 28th day of October, 1996.
THE BANK OF NEW YORK
By: /s/ LUCILLE FIRRINCIELI
Lucille Firrincieli
Assistant Vice President
6
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from
balance sheets and income statements of Freedom Chemical Company and
Subsidiaries and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000931075
<NAME> FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 1,450 1,853
<SECURITIES> 0 0
<RECEIVABLES> 39,310 50,124
<ALLOWANCES> 260 374
<INVENTORY> 46,848 53,913
<CURRENT-ASSETS> 97,789 112,843
<PP&E> 120,200 124,020
<DEPRECIATION> 18,734 24,013
<TOTAL-ASSETS> 243,156 254,447
<CURRENT-LIABILITIES> 60,334 73,511
<BONDS> 0 0
41,035 42,897
0 0
<COMMON> 1 1
<OTHER-SE> (18,744) (17,099)
<TOTAL-LIABILITY-AND-EQUITY> 243,156 254,447
<SALES> 296,888 155,787
<TOTAL-REVENUES> 296,888 155,787
<CGS> 233,533 116,482
<TOTAL-COSTS> 233,533 116,482
<OTHER-EXPENSES> (5) (226)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 13,805 6,789
<INCOME-PRETAX> (20,873) 5,884
<INCOME-TAX> (3,809) 1,443
<INCOME-CONTINUING> (16,990) 4,896
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (16,990) 4,896
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
FREEDOM CHEMICAL COMPANY
Offer for all Outstanding
10 5/8% Senior Subordinated Notes due 2006
in Exchange for
10 5/8% Senior Subordinated Notes due 2006
which Have Been Registered Under
the Securities Act of 1933, As Amended,
Pursuant to the Prospectus, dated _______ __, 1996
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON _______,
_______, 1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
Delivery To: The Bank of New York, Exchange Agent
By Mail or Hand Delivery:
The Bank of New York
Reorganization Section
101 Barclay Street - 7E
New York, New York 10286
Attention: Ms. Jodi Smith
By Facsimile Transmittal:
(for Eligible Institutions Only)
(212) 815-3080
Attention: Ms. Jodi Smith
Confirm by Telephone:
(212) 815-2791
Delivery of this instrument to an address other than as set forth above,
or transmission of instructions via facsimile other than as set forth above,
will not constitute a valid delivery.
The undersigned acknowledges that he or she has received and reviewed
the Prospectus, dated _______ __, 1996 (the "Prospectus"), of Freedom Chemical
Company, a Delaware corporation (the "Company"), and this Letter of Transmittal
(the "Letter"), which together constitute the Company's offer (the "Exchange
Offer") to exchange an aggregate principal amount of up to $125,000,000 of the
Company's 105/8% Senior Subordinated Notes due 2006 which have been registered
under the Securities Act of 1933, as amended (the "New Notes"), for a like
principal amount of the issued and outstanding 105/8% Senior Subordinated Notes
due 2006 (the "Old Notes") of the Company from the registered holders (the
"Holders") thereof.
For each Old Note accepted for exchange, the Holder of such Old Note
will receive a New Note having a principal amount equal to that of the
surrendered Old Note. The New Notes will bear interest from the most recent
date to which interest has been paid on the Old Notes or, if no interest has
been paid on the Old Notes, from October 17, 1996. Accordingly, registered
Holders of New Notes on the relevant record date for the first interest payment
date following the consummation of the Exchange Offer will receive interest
accruing from the most recent date to which interest has been paid or, if no
interest has been paid, from October 17, 1996. Old Notes accepted for exchange
will cease to accrue interest from and after the date of consummation of the
Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange
will not receive any payment in respect of accrued interest on such Old Notes
otherwise payable on any interest payment date the record date for which occurs
on or after consummation of the Exchange Offer.
This Letter is to be completed by a holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for
Old Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer--Book-Entry Transfer" section of the Prospectus. Holders of Old
Notes whose certificates are not immediately available, or who are unable to
deliver their certificates or confirmation of the book-entry tender of their
Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility
(a "Book-Entry Confirmation") and all other documents required by this Letter
to the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
<PAGE>
The undersigned has completed the appropriate boxes below and signed
this Letter to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES 1 2 3
- ------------------------------------------------------------------------------------------------------------------------------------
Aggregate
Principal Principal
Name(s) and Address(es) of Registered Holder(s) Certificate Amount of Amount
(Please fill in, if blank) Number(s)* Old Note(s) Tendered**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have
tendered ALL of the Old Notes represented by the Old Notes indicated in
column 2. See Instruction 2. Old Notes tendered hereby must be in
denominations of principal amount of $1,000 and any integral multiple
thereof. See Instruction 1.
- --------------------------------------------------------------------------------
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
Account Number Transaction Code Number
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s)
Window Ticket Number (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution Which Guaranteed Delivery
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number Transaction Code Number
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so
2
<PAGE>
acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933, as amended.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Company all right, title
and interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim when the same are accepted by the Company.
The undersigned hereby further represents that any New Notes acquired in
exchange for Old Notes tendered hereby will have been acquired in the ordinary
course of business of the person receiving such New Notes, whether or not such
person is the undersigned, that neither the Holder of such Old Notes nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes and that neither the Holder
of such Old Notes nor any such other person is an "affiliate," as defined in
Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"),
of the Company.
The undersigned acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Notes issued pursuant to the Exchange Offer in exchange
for the Old Notes may be offered for resale, resold and otherwise transferred
by Holders thereof (other than any such Holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such Holders' business and such holders have no arrangement with any
person to participate in the distribution of such New Notes. However, the SEC
has not considered the Exchange Offer in the context of a no-action letter and
there can be no assurance that the staff of the SEC would make a similar
determination with respect to the Exchange Offer as in other circumstances. If
the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of New Notes
and has no arrangement or understanding to participate in a distribution of New
Notes. If any Holder is an affiliate of the Company, is engaged in or intends
to engage in or has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such Holder (i) could not rely on the applicable interpretations of the staff
of the SEC and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
If the undersigned is a broker-dealer that will receive New Notes for its own
account in exchange for Old Notes, it represents that the Old Notes to be
exchanged for the New Notes were acquired by it as a result of market-making
activities or other trading activities and acknowledges that it will deliver a
prospectus in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights"
section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, please send the New Notes (and, if
applicable, substitute certificates representing Old Notes for any Old Notes
not exchanged) to the undersigned at the address shown above in the box
entitled "Description of Old Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
3
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------- --------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4) (See Instructions 3 and 4)
- ------------------------------------------------------------- --------------------------------------------------------------
<S> <C>
To be completed ONLY if certificates for Old Notes not
exchanged and/or New Notes are to be issued in the name of To be completed ONLY if certificates for Old Notes not
and sent to someone other than the person or persons whose exchanged and/or New Notes are to be sent to someone other
signature(s) appear(s) on this Letter above, or if Old Notes than the person or persons whose signature(s) appear(s) on
delivered by book-entry transfer which are not accepted for this Letter above or to such person or persons at an address
exchange are to be returned by credit to an account other than shown in the box entitled "Description of Old
maintained at the Book-Entry Transfer Facility other than Notes" on this Letter above.
the account indicated above.
Issue: New Notes and/or Old Notes to:
Name(s) ...................................................
(Please Type or Print)
Mail: New Notes and/or Old Notes to:
...........................................................
(Please Type or Print)
Address ................................................... Name(s).....................................................
(Please Type or Print)
...........................................................
(Zip Code)
(Complete Substitute Form W-9)
...........................................................
|_| Credit unexchanged Old Notes delivered by book-entry (Please Type or Print)
transfer to the Book-Entry Transfer Facility account
set forth below.
Address ..................................................
(Book-Entry Transfer Facility
Account Number, if applicable) ..........................................................
(Zip Code)
- ------------------------------------------------------------- --------------------------------------------------------------
</TABLE>
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR
OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE
NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
4
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete Accompanying Substitute Form W-9 on reverse side)
Dated:......................................................., 1996
x ........................................................., 1996
x ........................................................., 1996
Signature(s) of Owner Date
Area Code and Telephone Number..........................
If a holder is tendering any Old Notes, this Letter must be signed by the
registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old
Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a
fiduciary or representative capacity, please set forth full title. See
Instruction 3.
Name(s):.................................................................
.........................................................................
(Please Type or Print)
Capacity:................................................................
Address:.................................................................
.........................................................................
(Including Zip Code)
SIGNATURE GUARANTEE
(If required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution: ................................................
(Authorized Signature)
.........................................................................
(Title)
.........................................................................
(Name and Firm)
Dated: ............................................................, 1996
5
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the
Exchange Offer for the 10 5/8% Senior Subordinated Notes due
2006 of Freedom Chemical Company in Exchange for the
10 5/8% Senior Subordinated Notes due 2006 of Freedom Chemical Company,
which Have Been Registered Under the
Securities Act of 1933, As Amended
1. Delivery of this Letter and Notes; Guaranteed Delivery Procedures.
This letter is to be completed by holders of Old Notes either if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The
Exchange Offer--Book-Entry Transfer" section of the Prospectus. Certificates
for all physically tendered Old Notes, or Book-Entry Confirmation, as the case
may be, as well as a properly completed and duly executed Letter (or manually
signed facsimile hereof) and any other documents required by this Letter, must
be received by the Exchange Agent at the address set forth herein on or prior
to the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Old Notes tendered hereby must be in
denominations of principal amount of $1,000 and any integral multiple thereof.
Holders whose certificates for Old Notes are not immediately available or
who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution,
(ii) prior to 5:00 P.M., New York City time, on the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of Old Notes and the amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange ("NYSE") trading days after the Expiration Date, the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by this
Letter will be deposited by the Eligible Institution with the Exchange Agent,
and (iii) the certificates for all physically tendered Old Notes, in proper
form for transfer, or a Book-Entry Confirmation, as the case may be, and all
other documents required by this Letter, are received by the Exchange Agent
within three NYSE trading days after the Expiration Date.
The method of delivery of this Letter, the Old Notes and all other
required documents is at the election and risk of the tendering holders, but
the delivery will be deemed made only when actually received or confirmed by
the Exchange Agent. If Old Notes are sent by mail, it is suggested that the
mailing be registered mail, properly insured, with return receipt requested,
made sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. Partial Tenders (not applicable to noteholders who tender by book-entry
transfer).
If less than all of the Old Notes evidenced by a submitted certificate are
to be tendered, the tendering holder(s) should fill in the aggregate principal
amount of Old Notes to be tendered in the box above entitled "Description of
Old Notes--Principal Amount Tendered." A reissued certificate representing the
balance of nontendered Old Notes will be sent to such tendering holder, unless
otherwise provided in the appropriate box on this Letter, promptly after the
Expiration Date. All of the Old Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
3. Signatures on this Letter; Bond Powers and Endorsements; Guarantee of
Signatures.
If this Letter is signed by the registered holder of the Old Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
6
<PAGE>
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Notes are to be issued,
or any untendered Old Notes are to be reissued, to a person other than the
registered holder, then endorsements of any certificates transmitted hereby or
separate bond powers are required. Signatures on such certificate(s) must be
guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must
be submitted.
Endorsements on certificates for Old Notes or signatures on bond powers
required by this Instruction 3 must be guaranteed by a firm which is a
financial institution (including most banks, savings and loan associations and
brokerage houses) that is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchanges Medallion Program (an "Eligible Institution").
Signatures on this Letter need not be guaranteed by an Eligible
Institution, provided the Old Notes are tendered: (i) by a registered holder of
Old Notes (which term, for purposes of the Exchange Offer, includes any
participant in the Book-Entry Transfer Facility system whose name appears on a
security position listing as the holder of such Old Notes) who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter, or (ii) for the account of an Eligible
Institution.
4. Special Issuance and Delivery Instructions
Tendering holders of Old Notes should indicate in the applicable box the
name and address to which New Notes issued pursuant to the Exchange Offer and
or substitute certificates evidencing Old Notes not exchanged are to be issued
or sent, if different from the name or address of the person signing this
Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. Noteholders tendering Old Notes by book-entry transfer may request
that Old Notes not exchanged be credited to such account maintained at the
Book-Entry Transfer Facility as such noteholder may designate hereon. If no
such instructions are given, such Old Notes not exchanged will be returned to
the name and address of the person signing this Letter.
5. Taxpayer Identification Number.
Federal income tax law generally requires that a tendering holder whose
Old Notes are accepted for exchange must provide the Company (as payor) with
such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form
W-9 below, which in the case of a tendering holder who is an individual, is his
or her social security number. If the Company is not provided with the current
TIN or an adequate basis for an exemption, such tendering holder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery
to such tendering holder of New Notes may be subject to backup withholding in
an amount equal to 31% of all reportable payments made after the exchange. If
withholding results in an overpayment of taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines")
for additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the Substitute Form W-9 set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, or (ii) the
holder has not been notified by the Internal Revenue Service that such holder
is subject to backup withholding as a result of a failure to report all
interest or dividends or (iii) the Internal Revenue Service has notified the
holder that such holder is no longer subject to backup withholding. If the
tendering holder of Old Notes is a nonresident alien or foreign entity not
subject to backup withholding, such holder must give the Company a completed
Form W-8, Certificate of Foreign Status. These forms may be obtained from the
Exchange Agent. If the Old
7
<PAGE>
Notes are in more than one name or are not in the name of the actual owner,
such holder should consult the W-9 Guidelines for information on which TIN to
report. If such holder does not have a TIN, such holder should consult the W-9
Guidelines for instructions on applying for a TIN, check the box in Part 2 of
the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note:
Checking this box and writing "applied for" on the form means that such holder
has already applied for a TIN or that such holder intends to apply for one in
the near future. If such holder does not provide its TIN to the Company within
60 days, backup withholding will begin and continue until such holder furnishes
its TIN to the Company.
6. Transfer Taxes.
The Company will pay all transfer taxes, if any, applicable to the
transfer of Old Notes to it or its order pursuant to the Exchange Offer. If,
however, New Notes and/or substitute Old Notes not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Old Notes tendered hereby, or if
tendered Old Notes are registered in the name of any person other than the
person signing this Letter, or if a transfer tax is imposed for any reason
other than the transfer of Old Notes to the Company or its order pursuant to
the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter.
7. Waiver of Conditions.
The Company reserves the absolute right to waive satisfaction of any or
all conditions enumerated in the Prospectus.
8. No Conditional Tenders.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter,
shall waive any right to receive notice of the acceptance of their Old Notes
for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
9. Mutilated, Lost, Stolen or Destroyed Old Notes.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
10. Withdrawal Rights
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal to be effective, a wriiten notice of withdrawal must be
received by the Exchange Agent at the address set forth above prior to 5:00
p.m., New York City time, on the Expiration Date. Any such notice of withdrawal
must (i) specify the name of the person having tendered the Old Notes to be
withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn
(including certificate number or numbers and the principal amount of such Old
Notes), (iii) contain a statement that such holder is withdrawing his election
to have such Old Notes exchanged, (iv) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer to have the Trustee with respect to the
Old Notes register the transfer of such Old Notes in the name of the person
withdrawing the tender and (v) specify the name in which such Old Notes are
registered, if different from that of the Depositor. If Old Notes have been
tendered pursuant to the procedure for book-entry transfer set forth in "The
Exchange Offer--Book-Entry Transfer" section of the Prospectus, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Old Notes and otherwise
comply with the procedures of such facility. All questions as to the validity,
form and eligibility (including time of receipt) of such notices will be
determined by the Company, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes
8
<PAGE>
so withdrawn are validly retendered. Any Old Notes that have been tendered for
exchange but which are not exchanged for any reason will be returned to the
Holder thereof without cost to such Holder (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures set
forth in "The Exchange Offer--Book-Entry Transfer" section of the Prospectus,
such Old Notes will be credited to an account maintained with the Book-Entry
Transfer Facility for the Old Notes) as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Old Notes may be retendered by following the procedures described above at any
time on or prior to 5:00 p.m., New York City time, on the Expiration Date.
11. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, and requests for Notices
of Guaranteed Delivery and other related documents may be directed to the
Exchange Agent, at the address and telephone number indicated above.
9
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
PAYOR'S NAME: THE BANK OF NEW YORK
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TIN
IN THE BOX AT RIGHT AND CERTIFY TIN: _____________________________________
BY SIGNING AND DATING BELOW. Social Security Number or
SUBSTITUTE Employer Identification Number
---------------------------------------------------------------------------------------------------
Form W-9 Part 2--TIN Applied For |_|
---------------------------------------------------------------------------------------------------
<S> <C>
Department of the Treasury CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
Internal Revenue Service
(1) the number shown on this form is my correct Taxpayer Identification Number (or I
Payor's Request for am waiting for a number to be issued to me).
Taxpayer (2) I am not subject to backup withholding either because: (a) I am exempt from
Identification Number backup withholding, or (b) I have not been notified by the Internal Revenue Service
("TIN") and (the "IRS") that I am subject to backup withholding as a result of a failure to report
Certification all interest or dividends, or (c) the IRS has notified me that I am no longer subject
to backup withholding, and
(3) any other information provided on this form is true and correct.
SIGNATURE ............................................... DATE ..........................
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
You must cross out item (2) of the above certification if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting of interest or dividends on your tax return and you have not
been notified by the IRS that you are no longer subject to backup withholding.
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide a number.
- ------------------------------------ ------------------------------------
Signature Date
10
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR
FREEDOM CHEMICAL COMPANY
This form or one substantially equivalent hereto must be used to accept
the Exchange Offer of Freedom Chemical Company (the "Company") made pursuant to
the Prospectus, dated _______ __, 1996 (the "Prospectus"), if certificates for
the outstanding 10 5/8% Senior Subordinated Notes due 2006 of the Company (the
"Old Notes") are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach the Company prior to 5:00 p.m., New York City time,
on the Expiration Date of the Exchange Offer. Such form may be delivered or
transmitted by telegram, telex, facsimile transmission, mail or hand delivery
to The Bank of New York (the "Exchange Agent") as set forth below. In addition,
in order to utilize the guaranteed delivery procedure to tender Old Notes
pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal (or facsimile thereof) must also be received by the Exchange Agent
prior to 5:00 p.m., New York City time, on the Expiration Date. Capitalized
terms not defined herein are defined in the Prospectus.
Delivery To: The Bank of New York, Exchange Agent
By Mail or Hand Delivery:
The Bank of New York
Reorganization Section
101 Barclay Street - 7E
New York, New York 10286
Attention: Ms. Jodi Smith
By Facsimile Transmission:
(for Eligible Institutions only)
(212) 815-3080
Attn: Ms. Jodi Smith
Confirm by Telephone:
(212) 815-2791
Delivery of this instrument to an address other than as set forth above,
or transmission of instructions via facsimile other than as set forth above,
will not constitute a valid delivery.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Old Notes set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus.
<TABLE>
<S> <C>
Principal Amount of Old Notes
Tendered:*
$
-------------------------------------
Certificate Nos. (if available):
If Old Notes will be delivered by
------------------------------------- book-entry transfer to The Depository
Trust Company, provide account number.
</TABLE>
Total Principal Amount Represented by
Old Notes Certificate(s):
$
-------------------------------------
- ------------------------------------- Account Number
--------------------
*Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
<PAGE>
- --------------------------------------------------------------------------------
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
X
-------------------------------- ----------------
X
-------------------------------- ----------------
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:
---------------------------
Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
Please print name(s) and address(es)
Name(s):
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
Capacity:
------------------------------------------------------------------
Address(es):
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a financial institution (including most banks, savings
and loan associations and brokerage houses) that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchanges Medallion Program, hereby
guarantees that the certificates representing the principal amount of Old Notes
tendered hereby in proper form for transfer, or timely confirmation of the
book-entry transfer of such Old Notes into the Exchange Agent's account at The
Depository Trust Company pursuant to the procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus, together with
a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) with any required signature guarantee and any other
documents required by the Letter of Transmittal, will be received by the
Exchange Agent at the address set forth above, no later than three New York
Stock Exchange trading days after the Expiration Date.
<TABLE>
<S> <C>
- ----------------------------------------------- --------------------------------------------------
Name of Firm Authorized Signature
- ----------------------------------------------- --------------------------------------------------
Address Title
Name:
- ----------------------------------------------- --------------------------------------------
Zip Code (Please Type or Print)
Area Code and Tel. No. Dated:
------------------------ --------------------------------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES
FOR OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
FREEDOM CHEMICAL COMPANY
Offer for all Outstanding
10 5/8% Senior Subordinated Notes due 2006
in Exchange for
10 5/8% Senior Subordinated Notes due 2006,
which Have Been Registered Under
the Securities Act of 1933,
As Amended
To Our Clients:
Enclosed for your consideration is a Prospectus, dated _________, 1996
(the "Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of Freedom Chemical
Company (the "Company") to exchange its 10 5/8% Senior Subordinated Notes due
2006, which have been registered under the Securities Act of 1933, as amended
(the "New Notes"), for its outstanding 10 5/8% Senior Subordinated Notes due
2006 (the "Old Notes"), upon the terms and subject to the conditions described
in the Prospectus and the Letter of Transmittal. The Exchange Offer is being
made in order to satisfy certain obligations of the Company contained in the
Registration Rights Agreement dated October 17, 1996, by and among the Company
and the initial purchasers referred to therein.
This material is being forwarded to you as the beneficial owner of the
Old Notes carried by us in your account but not registered in your name. A
tender of such Old Notes may only be made by us as the holder of record and
pursuant to your instructions.
Accordingly, we request instructions as to whether you wish us to
tender on your behalf the Old Notes held by us for your account, pursuant to
the terms and conditions set forth in the enclosed Prospectus and Letter of
Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with
the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00
p.m., New York City time, on ________, ________, 1996, unless extended by the
Company. Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in
the Prospectus in the section captioned "The Exchange Offer--Certain Conditions
to the Exchange Offer."
3. Any transfer taxes incident to the transfer of Old Notes from the
holder to the Company will be paid by the Company, except as otherwise provided
in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time,
on __________, ____________, 1996, unless extended by the Company.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. The Letter of Transmittal is furnished to you for information only
and may not be used directly by you to tender Old Notes.
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Freedom
Chemical Company with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the
account of the undersigned, upon and subject to the terms and conditions set
forth in the Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated
below:
<TABLE>
<S> <C>
Aggregate Principal Amount of Old Notes
---------------------------------------
10 5/8% Senior Subordinated Notes due 2006.................
------------------------------------------------------
|_| Please do not tender any Old Notes held
by you for my account.
Dated: , 1996
--------------------------- ------------------------------------------------------
------------------------------------------------------
Signature(s)
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Please print name(s) here
------------------------------------------------------
------------------------------------------------------
Address(es)
------------------------------------------------------
Area Code and Telephone Number
------------------------------------------------------
Tax Identification or Social Security No(s).
</TABLE>
None of the Old Notes held by us for your account will be tendered
unless we receive written instructions from you to do so. Unless a specific
contrary instruction is given in the space provided, your signature(s) hereon
shall constitute an instruction to us to tender all the Old Notes held by us
for your account.
<PAGE>
FREEDOM CHEMICAL COMPANY
Offer for all Outstanding
10 5/8% Senior Subordinated Notes due 2006
in Exchange for
10 5/8% Senior Subordinated Notes due 2006,
which Have Been Registered Under
the Securities Act of 1933,
As Amended
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Freedom Chemical Company (the "Company") is offering, upon and subject
to the terms and conditions set forth in the Prospectus, dated __________, 1996
(the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of
Transmittal"), to exchange (the "Exchange Offer") its 10 5/8% Senior
Subordinated Notes due 2006, which have been registered under the Securities
Act of 1933, as amended, for its outstanding 10 5/8% Senior Subordinated Notes
due 2006 (the "Old Notes"). The Exchange Offer is being made in order to
satisfy certain obligations of the Company contained in the Registration Rights
Agreement dated October 17, 1996, by and among the Company and the initial
purchasers referred to therein.
We are requesting that you contact your clients for whom you hold Old
Notes regarding the Exchange Offer. For your information and for forwarding to
your clients for whom you hold Old Notes registered in your name or in the name
of your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated __________, 1996;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available or time will
not permit all required documents to reach the Exchange Agent prior to the
Expiration Date (as defined below) or if the procedure for book-entry transfer
cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account
you hold Old Notes registered in your name or the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
<PAGE>
6. Return envelopes addressed to The Bank of New York, the Exchange
Agent for the Old Notes.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., New York City time, on ____, _____, 1996, unless extended by the Company
(the "Expiration Date"). Old Notes tendered pursuant to the Exchange Offer may
be withdrawn at any time before the Expiration Date.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Old Notes should be delivered
to the Exchange Agent, all in accordance with the instructions set forth in the
Letter of Transmittal and the Prospectus.
If holders of Old Notes wish to tender, but it is impracticable for them
to forward their certificates for Old Notes prior to the expiration of the
Exchange Offer or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
described in the Prospectus under "The Exchange Offer--Guaranteed Delivery
Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Notes pursuant to the Exchange Offer, except
as set forth in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or
requests for additional copies of the enclosed materials, should be directed to
The Bank of New York, the Exchange Agent for the Old Notes, at its address and
telephone number set forth on the front of the Letter of Transmittal.
Very truly yours,
FREEDOM CHEMICAL COMPANY
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER
OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY
MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
2
