<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 13, 1997
REGISTRATION NO. 33-84778
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FREEDOM CHEMICAL COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2819 51-0340498
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
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. /x/
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. / /
------------------------
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
- ------------------------------------------------------------------------- ---------------- ---------------- ---------------
<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>
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.
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED JANUARY 13, 1997
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
FREEDOM CHEMICAL COMPANY]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997, 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 September 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 $149.2 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 12 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 , 1997.
<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. The Company's net sales, Adjusted EBITDA
(as defined herein) and net income were $296.9 million, $24.1 million and
$(17.0) million, respectively, for the year ended December 31, 1995, and $229.1
million, $26.5 million and $0.3 million, respectively, for the nine months ended
September 30, 1996. In addition, the Company's net cash provided by (used in)
operating activities, investing activities and financing activities for the year
ended December 31, 1995 were $(3.1) million, $(32.0) million and $33.7 million,
respectively, and $(0.9) million, $(7.1) million and $8.2 million, respectively,
for the nine months ended September 30, 1996. Approximately 41.6% 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.
1
<PAGE>
Organic Pigments and Dyes accounted for approximately $68.7 million, or 23.1%,
of the Company's 1995 net sales.
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, the Company is undertaking the following programs: raw material
sourcing from multiple vendors, yield
2
<PAGE>
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, which are likely to result in additional restructuring and other
charges. See '--The Restructuring Program.'
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, although no specific acquisition is
currently contemplated. 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 the
Company's non-strategic transparent iron oxide coatings business, (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 Adjusted
EBITDA margin improving to 11.6% for the first nine months ended September 30,
1996 as compared to 8.3% for the same period of the prior year. See Notes (e)
and (g) to Selected Consolidated Financial Data. As part of the Company's
business strategy, management is continuing 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. The Company recorded a charge of approximately $5.0 million
in the third quarter of 1996 in connection with the write-off of inventory in
its Organic Pigments and Dyes product line.
3
<PAGE>
In the fourth quarter of 1996, the Company also recorded a charge of
approximately $0.6 million as a result of personnel reductions in both
administrative and manufacturing positions at its Cincinnati, Ohio facility. The
Company currently anticipates that it will record additional restructuring and
other charges ranging from $3.0 million to $7.0 million in the fourth quarter of
1996 in connection with certain cost savings measures, fixed asset write-offs
and potential additional environmental remediation at its Cowpens, South
Carolina facility. The Company will continue to analyze additional opportunities
to increase operating efficiencies and profitability, which may result in
additional restructuring and other charges in the future. Additional matters
have not currently been identified. 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.
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 in Series A Common Stock (the 'Common Stock') of
Freedom (the 'JLL Cash Equity Investment' and, together with a $60,000 cash
equity investment made by an executive officer of Freedom, the 'Cash Equity
Investments') concurrently with the consummation of the offering of Old Notes.
In addition certain other stockholders of Freedom (principally current and
former management), using the proceeds of Company loans, invested an aggregate
of approximately $1.9 million in Common Stock (the 'Additional Equity
Investments' and, together with the Cash Equity Investments, the 'Equity
Investments') following consummation of the offering of Old Notes. See 'Certain
Transactions.' Following consummation of the Equity Investments, the JLL Funds
beneficially own, on a fully diluted basis, approximately 80.8% of Freedom's
issued and outstanding 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. No consideration was paid to Freedom's Preferred Stockholders in
connection with the Preferred Stock Amendment.
The offering of Old Notes, the Equity Investments, 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.' See 'Use of Proceeds' and 'Capitalization' which set forth the
impact of the Transactions on the Company's financial position.
------------------
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').
Expiration Date; Withdrawal Rights........... The Exchange Offer will expire at 5:00 p.m., New York City time,
on , 1997, 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. See 'The Exchange Offer--Terms of the Exchange Offer;
Period for Tendering Old Notes' and '-- Withdrawal Rights.'
Procedures for Tendering Old Notes........... Each Holder of Old Notes wishing to accept the Exchange Offer must
complete, sign and date the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of Transmittal,
or such facsimile, together with either certificates for such Old
Notes or a Book-Entry Confirmation (as defined herein) of such Old
Notes into the Book-Entry Transfer Facility (as defined herein),
if such procedure is available, and any other required
documentation to the exchange agent (the 'Exchange Agent') at the
address set forth herein. By executing the Letter of Transmittal,
each Holder will represent to the Company, among other things,
that (i) the New Notes acquired pursuant to the Exchange Offer by
the Holder and any other person are being obtained in the ordinary
course of business of the person receiving such New Notes, (ii)
neither the Holder nor such other person is participating in,
intends to participate in or has an arrangement or understanding
with any person to participate in the distribution of such New
Notes and (iii) neither the Holder nor such other person is an
'affiliate,' as defined under Rule 405 of the Securities Act, of
the Company. 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 or 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. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker or dealer
will not be deemed to
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
admit that it is an 'underwriter' within the meaning of the
Securities Act. See 'The Exchange Offer--Procedures for Tendering
Old Notes' and 'Plan of Distribution.'
Special Procedures for
Beneficial Owners.......................... Any beneficial owner whose Old Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact such registered Holder
promptly and instruct such registered Holder to tender on such
beneficial owner's behalf. If such beneficial owner wishes to
tender on such owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal and delivering
its Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such owner's name or obtain a
properly completed bond power from the registered Holder. The
transfer of registered ownership may take considerable time. See
'The Exchange Offer--Procedures for Tendering Old Notes.'
Guaranteed Delivery Procedures............... Holders of Old Notes who wish to tender their Old Notes and whose
Old Notes are not immediately available or who can not deliver
their Old Notes or any other documents required by the Letter of
Transmittal to the Exchange Agent must tender their Old Notes
according to the guaranteed delivery procedures set forth in 'The
Exchange Offer--Guaranteed Delivery Procedures.'
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. See 'The Exchange Offer--Exchange Agent.'
</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
6
<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 September 30, 1996,
after giving pro forma effect to the Transactions, the Company
would have had approximately $21.5 million of Senior
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Debt outstanding and approximately $149.2 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>
8
<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.
9
<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 September 30, 1996 and for
the nine months ended September 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 nine months ended September 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 NINE MONTHS
31, ENDED SEPTEMBER 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 $229,340 $229,051
Cost of goods sold............................. 10,695 45,295 144,845 233,533 180,179 178,599
Gross profit(b)................................ 4,089 9,536 42,935 63,355 49,161 50,452
Selling, general and administrative expense.... 3,588 8,292 26,948 50,399 39,406 35,951
Research and development expense............... 173 735 2,331 4,950 3,914 3,584
Restructuring and other charges(b)............. -- -- -- 12,495 3,242 --
Operating income (loss)........................ 328 509 12,741 (4,639) 2,487 10,758
Interest and debt expense...................... 531 1,556 6,682 13,805 10,334 10,339
Income (loss) before income taxes, equity in
income of joint ventures, and extraordinary
loss......................................... (347) (1,261) 6,320 (20,873) (10,289) 731
Net income (loss).............................. (305) (970) 2,186 (16,990) (7,892) 323
Less: preferred dividends...................... 345 1,621 3,694 4,611 3,397 2,949
Net loss applicable to common
shares....................................... (650) (2,591) (1,508) (21,601) (11,289) (2,626)
OTHER GAAP FINANCIAL DATA:
Net cash provided by (used in) operating
activities................................... (750) 412 14,163 (3,130) (7,685) (875)
Net cash used in investing activities.......... (9,780) (30,628) (75,912) (32,015) (28,817) (7,115)
Net cash provided by financing activities...... 12,038 29,497 63,371 33,717 34,528 8,152
Depreciation and amortization.................. 929 2,550 7,969 12,690 9,872 9,555
Capital expenditures........................... 435 953 7,210 15,514 12,638 7,883
Gross margin(c)................................ 27.7% 17.4% 22.9% 21.3% 21.4% 22.0%
OTHER NON-GAAP FINANCIAL DATA:
Adjusted EBITDA(d)............................. $ 1,257 $ 3,894 $ 23,787 $ 24,065 $ 19,082 $ 26,460
Adjusted EBITDA margin(c)(d)................... 8.5% 7.1% 12.7% 8.1% 8.3% 11.6%
Ratio of Adjusted EBITDA to interest and
debt expense(d).............................. 2.4x 2.5x 3.6x 1.7x 1.8x 2.6x
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------
AS
ACTUAL ADJUSTED(E)
-------- ----------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................................... $ 31,851 $ 69,419
Total assets.......................................................................... 254,279 261,831
Total long-term debt (net of current portion)......................................... 116,329 146,509
Mandatory redeemable preferred stock and minority interest............................ 43,910 43,910
Stockholders' equity (deficit)........................................................ (22,875) (14,796)
</TABLE>
(Footnotes on next page)
10
<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 $51,093 to $49,161 and operating income from $7,661 to $2,487
for the nine months ended September 30, 1995. See Note 17 to the Company's
Consolidated Financial Statements included herein. In the nine months ended
September 30, 1996, the Company recorded charges totaling $4,980. These
charges reduced gross profit from $55,432 to $50,452 and were related to the
write-off of inventory in its Organic Pigments and Dyes product line.
(c) Gross margin is defined as gross profit as a percentage of net sales and
Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of net
sales.
(d) Adjusted 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, noncash expense resulting from
acquisitions and nonrecurring charges in 1996. 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 $1,437 for the
nine months ended September 30, 1995, which amounts were included as part of
cost of goods sold related to purchase accounting revaluation of inventory.
In addition, the Company recorded nonrecurring charges totaling $5,988 for
the nine months ended September 30, 1996 relating to (i) severance payments
made to Freedom's former Executive Chairman of $1,008 and (ii) the write-off
of inventory in its Organic Pigments and Dyes product line of $4,980.
Adjusted 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. Adjusted EBITDA is not a measure of
financial performance under generally accepted accounting principles
('GAAP') and may not be comparable to EBITDA measures presented by the
Company's competitors. Adjusted EBITDA should not be considered in isolation
or 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.
(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 $1.9 million related to the Existing Credit Agreements
and (v) the issuance of shares of Common Stock for aggregate cash proceeds
of $10.0 million in connection with the Cash Equity Investments. The
Additional Equity Investments were financed primarily with loans made by
Freedom.
11
<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 September 30, 1996, on a pro forma
basis after giving effect to the Transactions, the Company would have had
outstanding approximately $149.2 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
12
<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.'
DEPENDENCE ON DISTRIBUTIONS FROM SUBSIDIARIES; ENFORCEABILITY OF GUARANTEES
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
13
<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, EXCHANGE RATE FLUCTUATIONS AND COUNTRY RISKS
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 nine months ended September 30, 1996,
approximately 22% of the Company's assets were located outside the United
States, predominantly in Western Europe, and approximately 44% 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
14
<PAGE>
their specialty chemical products and to introduce new products with competitive
price and performance 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 September 30, 1996, the Company had reserves
of approximately $18.7 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 Equity Investments, the JLL Funds own, on a
fully diluted basis, an aggregate of approximately 80.8% 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 nine 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. Pursuant to a stockholders agreement
(the 'Stockholders'
15
<PAGE>
Agreement') among the JLL Funds and certain other stockholders of Freedom
(principally current and former management), the parties thereto agreed to vote
their shares in favor of one another's nominees to the Board of Directors. See
'Management--Directors and Executive Officers' and 'Principal Stockholders.'
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 November 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 November 30, 1996,
approximately 5% of the Company's domestic employees were covered by agreements
which expire, or are subject to renegotiation, at various times during the next
20 months, including the agreement covering approximately 33 employees at the
Company's Charlotte, North Carolina facility which expires in June 1998. 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.
16
<PAGE>
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 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.
REPURCHASE OF THE NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, Freedom will be required to offer to repurchase
the Notes then outstanding at a purchase price in cash equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase. The Amended and Restated Credit Agreement prohibits Freedom from
purchasing any Notes pursuant to a Change of Control offer prior to repayment in
full of Freedom's indebtedness under the Amended and Restated Credit Agreement.
The failure of Freedom following a Change of Control to make or consummate
an offer to repurchase the Notes would constitute an Event of Default under the
Indenture. In such an event, the Trustee or the holders of at least 25% in
aggregate principal amount of the outstanding Notes may accelerate the maturity
of all of the Notes. A Change of Control includes any transaction which results
in any person (other than Permitted Holders (as defined in the Indenture))
beneficially owning or controlling more than 50% of the voting stock of Freedom.
See 'Description of the Notes--Change of Control.'
The occurrence of the events constituting a Change of Control with respect
to the Notes would result in an event of default under the Amended and Restated
Credit Agreement and would give the lenders thereunder the right to require
payments in full of the indebtedness thereunder. If a Change of Control were to
occur, there can be no assurance that Freedom would have adequate funds to first
satisfy its obligations under the Amended and Restated Credit Agreement or other
agreements relating to indebtedness, if accelerated, and then to repurchase the
Notes.
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.
17
<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 Equity
Investments, 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 Equity Investments(c)............................................... 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(d)................ 21.5
Fees and expenses(e).............................................................. 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) Represents aggregate cash proceeds of $10.0 million received by Freedom in
connection with the Cash Equity Investments. Does not include the Additional
Equity Investments of approximately $1.9 million, which were financed almost
entirely with loans made by Freedom. See 'Certain Transactions.'
(d) 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.
(e) 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.
18
<PAGE>
CAPITALIZATION
The following table sets forth the Company's short-term debt and
capitalization as of September 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>
SEPTEMBER 30, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current maturities of long-term debt................................................. $ 9,529 $ 1,085
Short-term borrowings................................................................ 19,624 --
Notes payable........................................................................ 1,570 1,570
-------- -----------
Total short-term debt............................................................. $ 30,723 $ 2,655
-------- -----------
-------- -----------
Long-term debt (excluding current maturities):
Existing Credit Agreements........................................................... $116,320 $ --
Amended and Restated Credit Agreement................................................ -- 21,500
FCD construction loan................................................................ 6 6
Capital lease obligations............................................................ 3 3
Notes................................................................................ -- 125,000
-------- -----------
Total long-term debt (excluding current maturities)............................... 116,329 146,509
Minority interest(a)................................................................... 3,468 3,468
Mandatory redeemable preferred stock................................................... 43,910 43,910
Stockholders' equity (deficit)......................................................... (22,875) (14,796)
-------- -----------
Total capitalization.............................................................. $140,832 $ 179,091
-------- -----------
-------- -----------
</TABLE>
- ------------------
(a) Includes (i) $3,142 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.
19
<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 September 30, 1996 and
for the nine months ended September 30, 1995 and 1996 have been derived from the
Company's unaudited Consolidated Financial Statements included herein. The
selected consolidated financial data as of September 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 nine months ended September 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 NINE MONTHS
31, ENDED SEPTEMBER 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 $229,340 $229,051
Cost of goods sold....................... 10,695 45,295 144,845 233,533 180,179 178,599
------- ------- -------- -------- -------- --------
Gross profit(b).......................... 4,089 9,536 42,935 63,355 49,161 50,452
Selling, general and administrative
expense............................... 3,588 8,292 26,948 50,399 39,406 35,951
Noncash compensation expense(c).......... -- -- 915 150 112 159
Research and development expense......... 173 735 2,331 4,950 3,914 3,584
Restructuring and other charges(b)....... -- -- -- 12,495 3,242 --
------- ------- -------- -------- -------- --------
Operating income (loss).................. 328 509 12,741 (4,639) 2,487 10,758
Registration costs....................... -- -- -- 2,187 2,187 --
Other expense (income), net.............. -- (37) (545) (5) 68 (507)
Interest and debt expense................ 531 1,556 6,682 13,805 10,334 10,339
Minority interest........................ 144 251 284 247 187 195
------- ------- -------- -------- -------- --------
Income (loss) before income taxes, equity
in income of joint ventures and
extraordinary loss.................... (347) (1,261) 6,320 (20,873) (10,289) 731
Provision (benefit) for income taxes..... (42) (291) 2,858 (3,809) (2,361) 935
Equity in income of joint ventures....... -- -- -- 74 36 527
------- ------- -------- -------- -------- --------
Income (loss) before extraordinary
loss.................................. (305) (970) 3,462 (16,990) (7,892) 323
Extraordinary loss, net(d)............... -- -- 1,276 -- -- --
------- ------- -------- -------- -------- --------
Net income (loss)........................ (305) (970) 2,186 (16,990) (7,892) 323
Less: preferred dividends................ 345 1,621 3,694 4,611 3,397 2,949
------- ------- -------- -------- -------- --------
Net loss applicable to common
shares................................ $ (650) $(2,591) $ (1,508) $(21,601) $(11,289) $ (2,626)
------- ------- -------- -------- -------- --------
------- ------- -------- -------- -------- --------
OTHER GAAP FINANCIAL DATA:
Net cash provided by (used in) operating
activities............................ (750) 412 14,163 (3,130) (7,685) (875)
Net cash used in investing activities.... (9,780) (30,628) (75,912) (32,015) (28,817) (7,115)
Net cash provided by financing
activities............................ 12,038 29,497 63,371 33,717 34,528 8,152
Depreciation and amortization............ 929 2,550 7,969 12,690 9,872 9,555
Capital expenditures..................... 435 953 7,210 15,514 12,638 7,883
Gross margin(e).......................... 27.7% 17.4% 22.9% 21.3% 21.4% 22.0%
Ratio of earnings to fixed
charges(f)............................ -- -- 1.9x -- -- 1.1x
(Continued on next page)
</TABLE>
20
<PAGE>
(Continued from previous page)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER FOR THE NINE MONTHS
31, ENDED SEPTEMBER 30,
1992 ------------------------------- --------------------
PERIOD 1993 1994 1995 1995 1996
------- ------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OTHER NON-GAAP FINANCIAL DATA:
Adjusted EBITDA(g)....................... $ 1,257 $ 3,894 $ 23,787 $ 24,065 $ 19,082 $ 26,460
Adjusted EBITDA margin(e)(g)............. 8.5% 7.1% 12.7% 8.1% 8.3% 11.6%
Ratio of Adjusted EBITDA to interest and
debt expense(g)....................... 2.4x 2.5x 3.6x 1.7x 1.8x 2.6x
BALANCE SHEET DATA (AT PERIOD END):
Working capital.......................... $ 2,016 $23,964 $ 38,326 $ 37,455 $ 41,141 $ 31,851
Total assets............................. 18,377 101,234 231,064 243,156 270,828 254,279
Total long-term debt (net of current
portion).............................. 6,175 41,266 93,643 119,520 120,454 116,329
Mandatory redeemable preferred stock and
minority interest..................... 7,517 26,267 39,707 44,132 40,009 43,910
Stockholders' equity (deficit)........... 100 265 1,747 (18,743) 42,783 (22,875)
</TABLE>
- ------------------
(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 $51,093 to $49,161 and operating income from $7,661 to $2,487
for the nine months ended September 30, 1995. See Note 17 to the Company's
Consolidated Financial Statements included herein. In the nine months ended
September 30, 1996, the Company recorded charges totaling $4,980. These
charges reduced gross profit from $55,432 to $50,452 and were related to the
write-off of inventory in its Organic Pigments and Dyes product line.
(c) The Company has recorded noncash compensation expense of $915 and $150 for
the years ended December 31, 1994 and 1995, respectively, and $112 and $159
for the nine months ended September 30, 1995 and 1996, respectively, 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) Gross margin is defined as gross profit as a percentage of net sales and
Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of net
sales.
(f) 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 $21,041 for the 1992
Period and for the years ended December 31, 1993 and 1995, respectively, and
$10,457 for the nine months ended September 30, 1995.
(g) Adjusted 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, noncash expense resulting from
acquisitions and nonrecurring charges in 1996. 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 $1,437 for the
nine months ended September 30, 1995, which amounts are included as part of
cost of goods sold related to purchase accounting revaluation of inventory.
In addition, the Company recorded nonrecurring charges totaling $5,988 for
the nine months ended September 30, 1996 relating to (i) severance payments
made to Freedom's former Executive Chairman of $1,008 and (ii) the write-off
of inventory in its Organic Pigments and Dyes product line of $4,980.
Adjusted 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. Adjusted EBITDA is not a measure of
financial performance under GAAP and may not be comparable to EBITDA
measures presented by the Company's competitors. Adjusted EBITDA should not
be considered in isolation or 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.
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 first nine months 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 Pharmaceutical Intermediates 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 Company markets its products primarily in the United States. In 1995,
approximately 58.4% of the Company's net sales were made in the United States,
28.3% were made in Europe and 13.3% were made in other parts of the world. The
Company's operating profit and assets reflect a similar geographic distribution.
Such distribution has changed since 1993 and 1994 when the Company's net sales
in the United States represented 82.9% and 78.7%, respectively, of net sales.
This change in geographic distribution has occurred primarily as a result of the
Diamalt Acquisition, but also due to increased sales of Specialty Organics and
Intermediates in the Asia-Pacific region. The Company believes that increased
sales outside of the United States will enable the Company to take advantage of
future opportunities in the rapidly expanding economies of certain parts of
Europe and the Asia-Pacific region. See Note 21 to the Company's Consolidated
Financial Statements included herein.
In 1995, the Company revised the net estimated costs for environmental
matters recorded in connection with the Kalama Acquisition, which resulted
principally from changes in facts and circumstances surrounding the ultimate
costs of environmental remediation. Costs for remediating the Kalama, Washington
facility, the Garfield, New Jersey facility and the Beaufort, South Carolina
facility were reduced by approximately $13.1 million, $4.1 million and $1.7
million, respectively. These revisions were based on subsequent negotiations and
settlements with authorities, updates of studies prepared by the Company's
environmental consultants, engineers and/or contractors as of the acquisition
date and other factors which existed as of the acquisition date. Additionally,
the favorable settlement of a legal contingency existing as of the acquisition
date resulted in a reduction of the liabilities established by the Company by
approximately $1.5 million. The aggregate liabilities, indemnification
receivable and deferred tax asset originally recorded by the Company were
reduced by approximately $19.3 million, $5.6 million and $5.1 million,
respectively, which resulted in a reduction of goodwill of approximately $8.6
million.
In December 1995, as a result of the continuing decline in financial
results during the year, a resultant strategic and operational review and the
application of the Company's objective measurement tests to evaluate the
recoverability of intangible assets, the Company recognized an impairment loss
of $7.0 million associated with the closure of the Conshohocken, Pennsylvania
plant acquired in the Reilly Whiteman Acquisition. The impairment loss consisted
of the write-off of all fixed assets, goodwill and other intangibles associated
with such acquisition. The underlying factors contributing to the decline in
financial results included a decline in sales of Textile and Paper Chemicals
attributable primarily to decreased demand in the textile industry and
production inefficiencies resulting from insufficient capacity requirements and
the substandard condition of the building and equipment.
22
<PAGE>
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 the Company's non-strategic
transparent iron oxide coatings business, (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 Adjusted
EBITDA margin improving to 11.6% for the first nine months ended September 30,
1996 as compared to 8.3% for the same period of the prior year. See Notes (e)
and (g) to Selected Consolidated Financial Data. As part of the Company's
business strategy, management is continuing 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. The Company recorded a charge of approximately $5.0 million
in the third quarter of 1996 in connection with the write-off of inventory in
its Organic Pigments and Dyes product line.
In the fourth quarter of 1996, the Company also recorded a charge of
approximately $0.6 million as a result of personnel reductions in both
administrative and manufacturing positions at its Cincinnati, Ohio facility. The
Company currently anticipates that it will record additional restructuring and
other charges ranging from $3.0 million to $7.0 million in the fourth quarter of
1996 in connection with certain cost savings measures, fixed asset write-offs
and potential additional environmental remediation at its Cowpens, South
Carolina facility. The Company will continue to analyze additional opportunities
to increase operating efficiencies and profitability, which may result in
additional restructuring and other charges in the future. Additional matters
have not currently been identified. See 'Business--The Restructuring Program'
and Note 17 to the Company's Consolidated Financial Statements included herein.
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 NINE
FOR THE YEARS ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 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 78.6 78.0
Gross profit.............................................. 17.4 22.9 21.3 21.4 22.0
Selling, general and administrative expense............... 15.1 14.4 17.0 17.2 15.7
Research and development expense.......................... 1.3 1.2 1.7 1.7 1.6
Restructuring and other charges........................... -- -- 4.2 1.4 --
Operating income (loss)................................... 0.9 6.8 (1.6) 1.1 4.7
Interest and debt expense................................. 2.8 3.6 4.6 4.5 4.5
Net income (loss)......................................... (1.8) 1.2 (5.7) (3.4) 0.1
Less: preferred dividends................................. 2.9 2.0 1.6 1.5 1.3
Net loss applicable to common shares...................... (4.7) (0.8) (7.3) (4.9) (1.2)
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
Net Sales. Net sales declined $0.3 million to $229.1 million in the nine
months ended September 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
Organic Pigments and Dyes as a result of decreased demand for inks resulting
from the recent consolidation of the ink industry as well as a loss of
color-former export sales as a result of price pressure and off-shore
competition. The volume of Organic Pigments and Dyes sold declined 24% and the
average price of such
23
<PAGE>
products declined by 2% during the nine months ended September 30, 1996,
compared to the same period in the prior year. This decline in net sales was
partially offset by an increase in net sales of Specialty Organic Chemicals and
Intermediates and Pharmaceutical Intermediates attributable to expanded
production capacity for benzaldehyde. Specifically, the volume of Specialty
Organic Chemicals and Intermediates and Pharmaceutical Intermediates sold
increased 2% and 14%, respectively, and the average prices of products in such
product lines increased 8% and 17%, respectively, during the nine months ended
September 30, 1996 over the same period in the prior year.
Gross Profit. The Company's gross profit increased $1.9 million to $50.5
million in the nine months ended September 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 Specialty Organic Chemicals and Intermediates
attributable to expanded production capacity of benzoates and benzaldehyde
offset by a nonrecurring charge of approximately $5.0 million for the write-off
of inventory in the Company's Organic Pigments and Dyes product line. As a
result of this charge, gross profit for the nine months ended September 30, 1996
was reduced by $5.0 million, or 2.2% of net sales. In addition, significant
factory cost reductions, which were implemented in connection with the
Restructuring Program had a positive effect on the Company's gross profit. This
increase also results from $1.9 million of charges recorded in connection with
the Restructuring Program which were included in the nine months ended September
30, 1995. Excluding the impact of inventory write-offs, gross margins increased
from 21.4% for the nine months ended September 30, 1995 to 24.2% for the same
period of 1996 primarily as a result of a sales mix shift from lower margin
products to relatively higher margin products.
Selling, General and Administrative Expense. Selling, general, and
administrative expense decreased $3.5 million to $36.0 million in the nine
months ended September 30, 1996 as compared to the same period in the prior year
primarily due to personnel reductions and plant closings as a result of the
Restructuring Program. As a percentage of sales, selling, general, and
administrative expense decreased from 17.2% in the first nine months of 1995 to
15.7% for the same period of 1996.
Research and Development Expense. Research and development expense
decreased $0.3 million to $3.6 million in the nine months ended September 30,
1996 as compared to the same period in the prior year. As a percentage of sales,
research and development expense decreased from 1.7% in the first nine months of
1995 to 1.6% for the same period of 1996.
Operating Income. Operating income increased $8.3 million to $10.8 million
in the nine months ended September 30, 1996 as compared to the same period in
the prior year. Operating margins increased to 4.7% in the first nine months of
1996 from 1.1% 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, offset by a nonrecurring charge of approximately $5.0
million for the write-off of inventory. This increase also results from $5.2
million of charges recorded in connection with the Restructuring Program which
were included in the nine months ended September 30, 1995.
Interest and Debt Expense. Interest and debt expense was $10.3 million for
each of the nine months ended September 30, 1996 and 1995. The Company had net
borrowings of $8.7 million for the nine months ended September 30, 1996, as
compared to $37.2 million for the nine months ended September 30, 1995. The
weighted average interest rate and the ending interest rate of the Company's
borrowings were 8.8% and 8.9%, respectively, at September 30, 1996, as compared
to 9.2% and 9.0%, respectively, at September 30, 1995.
Net Income (Loss). Net income increased $8.2 million to $0.3 million in
the nine months ended September 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 Specialty Organic Chemicals and Intermediates
attributable to expanded production capacity of benzoates and benzaldehyde as
well as the reduction in overall costs, resulting from the Restructuring
Program, offset by a nonrecurring charge of approximately $5.0 million for the
write-off of inventory. This increase also results from the charges recorded in
connection with the Restructuring Program which were included in the nine months
ended September 30, 1995.
Preferred Dividends. The accretion of accrued and unpaid dividends on
Series B and Series C Preferred Stock decreased $0.4 million in the nine months
ended September 30, 1996 as compared to the same period in the prior year due
primarily to an adjustment in the accretion calculation.
Net Loss Applicable to Common Shares. Net loss applicable to common shares
decreased by $8.7 million to $2.6 million for the first nine months ended
September 30, 1996 as compared to the same period in the prior year. The
increase resulted from the items referred to above under 'Net Income' and
'Preferred Dividends.'
24
<PAGE>
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 in the Company's Organic Pigments and Dyes
product line and capitalized expenses totaling $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. The Company had net
borrowings of $36.7 million for the year ended December 31, 1995, as compared to
$55.6 million for the year ended December 31, 1994. The weighted average
interest rate and the ending interest rate of the Company's borrowings were both
9.2% at December 31, 1995, as compared to 8.5% at December 31, 1994.
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.'
25
<PAGE>
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. The Company had net borrowings of
$55.6 million for the year ended December 31, 1994, as compared to $11.8 million
for the year ended December 31, 1993. The weighted average interest rate and the
ending interest rate of the Company's borrowings were both 8.5% at December 31,
1994, as compared to 8.3% at December 31, 1993.
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.'
LIQUIDITY AND CAPITAL RESOURCES
Net Cash Used in Operating Activities. Net cash used in operating
activities for the nine months ended September 30, 1996 was $0.9 million, a
decrease of $6.8 million over the same period in the prior year. This decrease
was due primarily to an increase in net income of $11.5 million. Net cash used
in connection with the Restructuring Program in the nine months ended September
30, 1996 was $2.6 million. The Company anticipates that it will expend
approximately $0.8 million in connection with the Restructuring Program in the
fourth quarter of 1996. Of the remaining restructuring accrual, the Company
anticipates that it will expend approximately $2.3 million of cash in 1997 and
the remainder in future periods. Net cash expended in connection with the
Restructuring Program in the nine months ended September 30, 1995 was $0.5
million.
26
<PAGE>
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 nine months ended September 30, 1996 was $7.1 million, a
decrease of $21.7 million over the same period in the prior year. Capital
expenditures in the first nine months of 1996 were $7.9 million compared to
$12.6 million in the first nine months of 1995. Capital expenditures in 1995
included $5.1 million related to an expansion program at the Company's Kalama
facility. The first nine months of 1996 also included proceeds of $1.1 million
generated from the sale of the Company's non-strategic transparent iron oxide
coatings business.
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 nine months ended September 30, 1996 was $8.1 million, a
decrease of $26.4 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 nine 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 nine months ended
September 30, 1996 were $7.9 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%.
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 September 30, 1996 the Company had $31.9 million of
working capital (current assets less current liabilities) and $0.7 million
available under the Freedom Credit Agreement.
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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.'
The Amended and Restated Credit Agreement and the Indenture contain certain
financial covenants that restrict, among other things, the incurrence of
additional indebtedness, the sale of assets, and certain investments,
acquisitions and distributions by the Company. 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.
The Company believes that it was in compliance with such ratios and tests at
December 31, 1996.
Concurrently with the consummation of the offering of the Old Notes, the
JLL Funds and an executive officer of Freedom invested an aggregate of
approximately $10.0 million in the Company in connection with the Cash Equity
Investments. In addition, following consummation of the offering of Old Notes,
certain other stockholders of Freedom (principally current and former
management) invested an aggregate of approximately $1.9 million in the Company
in connection with the Additional Equity Investments, almost all of which were
financed with loans made by Freedom. See 'Certain Transactions.'
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.
Although 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, there can be no assurance that sufficient sources of funds will be
available.
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.
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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 , 1997; 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 , 1997, 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.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal
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and delivering such owner's Old Notes, either make appropriate arrangements to
register ownership of the Old Notes in such owner's name or obtain a properly
completed bond power from the registered Holder. The transfer of registered
ownership may take considerable time.
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 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 and does not intend 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, or 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 meeting the requirements of the Securities Act in connection with any
resale of such New Notes. See 'Plan of Distribution.' The Letter of Transmittal
states that by so
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acknowledging and by delivering such 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 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,
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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.
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
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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 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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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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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. The Company's net sales, Adjusted EBITDA and net income were
$296.9 million, $24.1 million and $(17.0) million, respectively, for the year
ended December 31, 1995, and $229.1 million, $26.5 million and $0.3 million,
respectively, for the nine months ended September 30, 1996. In addition, the
Company's net cash provided by (used in) operating activities, investing
activities and financing activities for the year ended December 31, 1995 was
$(3.1) million, $(32.0) million and $33.7 million, respectively, and $(0.9)
million, $(7.1) million and $8.2 million, respectively, for the nine months
ended September 30, 1996. Approximately 41.6% 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 the Company's non-strategic
transparent iron oxide coatings business, (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 elimination of redundant fixed overhead costs
resulting from the closure of two facilities. Management estimates the
Restructuring Program will
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yield annual cost savings of approximately $4.2 million, some of the benefits of
which are evidenced in the Company's Adjusted EBITDA margin improving to 11.6%
for the first nine months ended September 30, 1996 as compared to 8.3% for the
same period of the prior year. See Notes (e) and (g) to Selected Consolidated
Financial Data. As part of the Company's business strategy, management is
continuing 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. The Company
recorded a charge of approximately $5.0 million in the third quarter of 1996 in
connection with the write-off of inventory in its Organic Pigments and Dyes
product line.
In the fourth quarter of 1996, the Company also recorded a charge of
approximately $0.6 million as a result of personnel reductions in both
administrative and manufacturing positions at its Cincinnati, Ohio facility. The
Company currently anticipates that it will record additional restructuring and
other charges ranging from $3.0 million to $7.0 million in the fourth quarter of
1996 in connection with certain cost savings measures, fixed asset write-offs
and potential additional environmental remediation at its Cowpers, South
Carolina facility. The Company will continue to analyze additional opportunities
to increase operating efficiencies and profitability, which may result in
additional restructuring and other charges in the future. Additional matters
have not currently been identified. 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, which are likely to result in additional restructuring and
other charges. See '--The Restructuring Program.'
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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 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, although no specific
acquisition is currently contemplated. 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>
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.
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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, 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
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<PAGE>
produce almond and cherry flavors. It is also used as a fragrance for soap and
toiletries. The industries that 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. The Company also
manufactures water repellent chemicals used for non-woven fabrics. Management
believes that by offering a broad line of such textile processing products to
textile mills, the Company will be able to take advantage of growth
opportunities that may exist for these products.
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 Freedom Chemical Diamalt has
a 74% interest and Kamlakant Chottalal Exporters Private Limited, a company
registered under the Indian Companies Act, 1956, has a 26% 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.
All of the Company's manufacturing facilities, except its manufacturing
facility in Kalama, Washington, are operating with excess capacity. The
Company's manufacturing facility in Kalama, Washington is currently operating at
a capacity level of approximately 90%.
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 and the Company
plans to implement the ISO 9002 standards in its other facilities. The Company
does not believe that adoption of the ISO 9002 standards by the FDA will have a
material effect on its financial condition or results of operations.
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
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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
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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<PAGE>
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 September 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
September 30, 1996, the Company had reserves of approximately $18.7 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
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
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<PAGE>
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.
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
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<PAGE>
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 and continues to defend Hilton Davis.
In the event of an adverse judgment, the Company expects to be fully indemnified
for all costs, including any remediation costs.
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 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
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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 in the U.S.
District Court of South Carolina, Spartanburg Division (Hilton Davis et al. v.
PMC, Inc. et al., No. 7:96-795-20). 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 September 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 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 September 30, 1996, approximately $5.4 million had been credited against
this limit.
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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, 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 September 30, 1996, the Company had reserves of approximately $16.6
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
50
<PAGE>
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.'
51
<PAGE>
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
Alexander R. Castaldi........................... 46 Director
Timothy J. Clark................................ 32 Director
Peter A. Joseph(1).............................. 44 Director
Vincent P. Langone.............................. 54 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.
52
<PAGE>
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 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.
Alexander R. Castaldi has served as a Director of Freedom since December
1996. Mr. Castaldi has also served as Executive Vice President and Chief
Financial Officer of Remington Products since November 1996. From July 1995 to
August 1996, he served as Vice President and Chief Financial Officer of Uniroyal
Chemicals Co. Prior to that time, he spent six years with Kendall International,
Inc. as Senior Vice President and Chief Financial Officer.
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.
Vincent P. Langone has served as a Director of Freedom since December 1996.
Mr. Langone has served as the President and Chief Executive Officer of
Interbuild International Inc. since 1994. From 1988 to 1995, he served as Chief
Executive Officer of Formica Corporation. From 1989 to 1995, he also served as
Chairman of Formica Corporation. Mr. Langone is also a director of Summit Bank
and United Retail Group, Inc.
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.
53
<PAGE>
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 the Stockholders' Agreement, pursuant to which,
among other things, the parties agreed that Messrs. Sorgenti and Rullo, Rulco,
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
</TABLE>
(Table continues on next page)
54
<PAGE>
(Table continued from previous page)
<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>
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 Freedom 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 such advances was
approximately $1.4 million (including the $350,000 referred to above) as of
December 31, 1993. Freedom forgave the remaining outstanding advances of
approximately $1.1 million effective December 7, 1994. Other than the
$350,000 in 1993 and $350,000 in 1994, advances to The Freedom Group
forgiven by Freedom are not included as compensation to Messrs. Sorgenti and
Rullo in the table above. 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. The exercise price of
options
(Footnotes continued on next page)
55
<PAGE>
(Footnotes continued from previous page)
granted to Messrs. Sorgenti and Rullo in 1992, 1993 and 1994, in each case,
corresponds to the subscription price paid by investors for Common Stock
issued by Freedom to finance the acquisition in connection with which such
options were granted. 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. The
exercise price of the options granted to Messrs. Kitchen and Wolf in 1995
was based on the assumed value of the underlying Series B Common Stock
immediately prior to the consummation of the Company's proposed initial
public offering (which was subsequently abandoned) and the exercise price of
the options granted to Messrs. Kitchen and Kirchner in 1994 was based on the
most recent subscription price paid by investors for Common Stock prior to
the grant of such options.
(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).
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>
INDIVIDUAL OPTION GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE OF ASSUMED
NUMBER OF PERCENT ANNUAL RATES OF
SECURITIES OF TOTAL STOCK PRICE
UNDERLYING OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR OPTION TERM(2)
GRANTED EMPLOYEES BASE PRICE EXPIRATION ----------------------------
NAME (#)(1) IN 1995 ($/SH) DATE 5% 10%
- ------------------------- ---------- ----------- ----------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Kitchen........ 225 16.5% 255 1/31/05 0 $ 4,136
Helmut E. Wolf........... 110 8.1% 255 1/31/05 0 $ 2,022
</TABLE>
(Footnotes on next page)
56
<PAGE>
(Footnotes from previous page)
- ------------------
(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....................... 667/452(1)(2) 0/0
Fred P. Rullo............................ 2,580/1,720(1)(3) 12,101/8,068
Robert G. Kitchen........................ 0/500(4) 0/0
Robert A. Kirchner....................... 0/400(4) 0/0
Helmut E. Wolf........................... 0/300 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.
57
<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
58
<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 January 1, 1997, 3,525 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. Freedom is in the process of negotiating an extension to the Kitchen
Employment Agreement.
Freedom Chemical Diamalt is a party to an employment agreement with Dr.
Wolf (the 'Wolf Employment Agreement') providing for his employment with Freedom
Chemical Diamalt at an annual salarly of DM273,000 (subject to adjustment
annually), plus a performance-based bonus. The Wolf Employment Agreement
continues until Dr. Wolf reaches 65 years of age, subject to prior termination
by either party as set forth therein.
See 'Certain Transactions' for a description of the 1994 Employment
Agreements with Messrs. Rullo and Sorgenti.
COMPENSATION OF DIRECTORS
Independent outside directors receive compensation of $20,000 per annum for
serving on the Board. 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.'
59
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of January 1, 1997, after giving effect
to the Equity Investments, 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) 59.44
Joseph Littlejohn and Levy Fund II, L.P............................. 37,136(4)(5) 24.03
Harold A. Sorgenti.................................................. 21,843(6) 14.00
Fred P. Rullo....................................................... 4,534(7) 2.94
Peter A. Joseph..................................................... 128,961(5) 83.5
Paul S. Levy........................................................ 128,961(5) 83.5
Alexander R. Castaldi............................................... -- --
Timothy J. Clark.................................................... -- --
Angus C. Littlejohn, Jr............................................. -- --
Vincent P. Langone.................................................. -- --
Robert J. Lanigan................................................... -- --
Robert A. Kirchner.................................................. 745(8) *
Robert G. Kitchen................................................... 929(9) *
Helmut E. Wolf...................................................... --(10) --
All directors and executive officers as a group (14 persons)........ 157,289(11) 98.89
</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 154,481 shares of Common Stock
outstanding as of January 1, 1997.
(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 10,784 shares held by Mr. Sorgenti directly, 549 shares held by
The Harold A. Sorgenti 1994 Five Year Grantor Retained Annuity Trust, 1,552
shares held by FIC, 7,828 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 7,828 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) Does not include 400 shares of Series B Common Stock subject to options
held by Mr. Kirchner that are not currently exercisable.
(9) 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.
60
<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, 2000. 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 (Messrs. Sorgenti,
Rullo and McPhail) 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 Mr. Kirchner 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.
Following consummation of the offering of Old Notes, Messrs. Sorgenti and
Kitchen as well as certain other stockholders of Freedom invested an aggregate
of approximately $1.9 million in the Company in connection with the Additional
Equity Investments, almost all of which were financed with loans made by
Freedom. Each loan bears interest at a rate of 10 5/8% per annum, matures on
December 31, 2001 and is secured by a pledge of the Common Stock purchased with
the proceeds of such loan.
61
<PAGE>
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 Company believes that it was in compliance with such covenants and tests as
of December 31, 1996. 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.
62
<PAGE>
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
63
<PAGE>
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 September 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. See 'Risk
Factors--Repurchase of the Notes Upon a Change of Control.'
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.
As used in the definition of Change of Control, the phrase 'all or
substantially all' of the Capital Stock or assets of the Company and its
Restricted Subsidiaries will likely be interpreted under applicable state law
and will be dependent upon particular facts and circumstances. As a result,
there may be a degree of uncertainty in ascertaining whether a sale or
disposition of 'all or substantially all' of the Capital Stock or assets of the
Company and its Restricted Subsidiaries has occurred, in which case a holder's
ability to obtain the benefit of a Change of Control Offer may be impaired.
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;
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(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 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
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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 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;
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(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 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
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an Asset Sale Offer, the Company may use the remaining amount for general
corporate purposes otherwise 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. Holders
of a majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power subject to certain limitations,
including that such direction not conflict with any rule of law or the Indenture
or expose the Trustee to liability, and provided that the Trustee is entitled to
receive indemnification in connection with any such direction. 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
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Guarantors or any successor Person thereof. Each Holder, by accepting the Notes,
waives and releases all such liability.
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 (as
such term is defined in Rule 405 under the Securities Act) 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 who receive New Notes in exchange for Old Notes (where such Old
Notes were acquired as a result of market-making or other trading activities)
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).
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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
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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.
91
<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 Droste, Frankfurt, The
Federal Republic of Germany, and as to matters of Guam law by Carlsmith Ball
Wichman Case & Ichiki ('Carlsmith'), Agana, Guam. William C. Williams, a partner
at Carlsmith, is a director of Kalama Foreign Sales Corporation, a wholly-owned
subsidiary of Freedom.
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 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.
92
<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 September 30, 1996 (unaudited)............ F-3
Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and 1995
and the nine months ended September 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 nine months ended September 30, 1995 and 1996 (unaudited)........................................ F-6
Notes to Consolidated Financial Statements................................................................. F-7
KALAMA CHEMICAL, INC. AND SUBSIDIARIES
Report of KPMG Peat Marwick LLP, Independent Accountants................................................... F-31
Financial Statements:
Consolidated Balance Sheets as of September 30, 1993 and May 26, 1994...................................... F-32
Consolidated Statements of Operations for the year ended September 30, 1993 and for the period October 1,
1993 to May 26, 1994..................................................................................... F-33
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-34
Consolidated Statements of Cash Flows for the year ended September 30, 1993 and for the period October 1,
1993 to May 26, 1994..................................................................................... F-35
Notes to Consolidated Financial Statements................................................................. F-36
</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, SEPTEMBER
--------------------- 30,
1994 1995 1996
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 2,411 $ 1,450 $ 1,544
Accounts receivable, net of allowance for doubtful
accounts of $287, $260 and $342, respectively....... 28,724 39,050 46,407
Refundable income taxes............................... -- 2,742 344
Inventories........................................... 39,382 46,848 55,363
Prepaid expenses and other current assets............. 3,647 4,812 5,675
Environmental indemnification......................... 4,346 780 792
Deferred income taxes................................. 3,240 2,107 1,449
-------- -------- ------------
Total current assets................................ 81,750 97,789 111,574
Property, Plant and Equipment:
Land.................................................. 3,072 3,658 3,918
Buildings and improvements............................ 11,617 14,357 14,540
Machinery and equipment............................... 75,148 97,679 101,623
Other................................................. 4,373 4,506 8,290
-------- -------- ------------
94,210 120,200 128,371
Less accumulated depreciation.......................... 8,854 18,734 26,700
-------- -------- ------------
85,356 101,466 101,671
Other assets:
Intangible assets, net................................ 48,866 34,928 33,374
Environmental indemnification......................... 5,763 1,074 24
Deferred financing costs, net......................... 2,929 3,641 2,997
Investments in joint ventures......................... -- 511 747
Other................................................. 6,400 3,747 3,892
-------- -------- ------------
Total assets........................................ $231,064 $243,156 $254,279
-------- -------- ------------
-------- -------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt.................. $ 7,112 $ 6,142 $ 9,529
Short-term borrowings................................. -- 12,238 19,624
Notes payable......................................... 165 753 1,570
Accounts payable...................................... 18,220 22,928 31,283
Accounts payable--shareholders........................ 273 -- --
Accrued expenses...................................... 8,883 8,985 9,795
Accrued compensation.................................. 4,425 4,618 5,062
Accrued restructuring and other charges............... -- 3,470 1,660
Environmental......................................... 4,346 1,200 1,200
-------- -------- ------------
Total current liabilities.............................. 43,424 60,334 79,723
Long-term debt......................................... 93,643 119,520 116,329
Environmental.......................................... 37,427 18,066 15,379
Deferred income taxes.................................. 9,740 11,058 9.330
Postretirement benefits................................ 3,951 4,211 4,376
Accrued restructuring and other charges................ -- 2,429 2,274
Other.................................................. 1,425 2,151 2,365
Minority interest...................................... 3,095 3,095 3,468
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
$10,425, respectively............................... 26,213 29,514 31,747
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
$2,795, respectively................................ 10,399 11,709 12,425
Less: Treasury stock, at cost (0, 161 and 221 shares
of Series C preferred, respectively)................ -- (188) (262)
-------- -------- ------------
36,612 41,035 43,910
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 1
Series B, $.01 par value, authorized 10,000 shares;
none issued or outstanding.......................... -- -- --
Additional paid-in capital............................. 1,866 -- --
Accumulated deficit.................................... -- (19,735) (22,361)
Cumulative translation adjustment...................... 80 1,281 (212)
-------- -------- ------------
1,947 (18,453) (22,572)
Less: Stockholder note receivable...................... (200) (200) (200)
Treasury stock, at cost (0, 285 and 391 shares of
Series A common, respectively)...................... -- (33) (46)
Minimum pension liability............................. -- (57) (57)
-------- -------- ------------
Total stockholders' equity (deficit)................... 1,747 (18,743) (22,875)
-------- -------- ------------
Total liabilities and stockholders' equity
(deficit)......................................... $231,064 $243,156 $254,279
-------- -------- ------------
-------- -------- ------------
</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, SEPTEMBER 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............................................. $54,831 $187,780 $296,888 $229,340 $229,051
Cost of goods sold.................................... 45,295 144,845 233,533 180,179 178,599
------- -------- -------- -------- --------
Gross profit..................................... 9,536 42,935 63,355 49,161 50,452
Selling, general and administrative expense........... 8,292 26,948 50,399 39,406 35,951
Noncash compensation expense (note 18)................ -- 915 150 112 159
Research and development expense...................... 735 2,331 4,950 3,914 3,584
Restructuring and other charges (note 17)............. -- -- 12,495 3,242 --
------- -------- -------- -------- --------
Operating income (loss).......................... 509 12,741 (4,639) 2,487 10,758
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 10,334 10,339
Registration costs (note 17).......................... -- -- 2,187 2,187 --
Other income.......................................... 37 545 5 (68) 507
------- -------- -------- -------- --------
Income (loss) before minority interest, income
taxes and extraordinary item................... (1,010) 6,604 (20,626) (10,102) 926
Minority interest..................................... 251 284 247 187 195
------- -------- -------- -------- --------
Income (loss) before income taxes and
extraordinary item............................. (1,261) 6,320 (20,873) (10,289) 731
Provision (benefit) for income taxes.................. (291) 2,858 (3,809) (2,361) 935
Equity in income of joint ventures.................... -- -- 74 36 527
------- -------- -------- -------- --------
Net income (loss) before extraordinary item...... (970) 3,462 (16,990) (7,892) 323
Extraordinary loss, net of applicable income tax
benefit of $725..................................... -- (1,276) -- -- --
------- -------- -------- -------- --------
Net income (loss)................................ (970) 2,186 (16,990) (7,892) 323
Less: preferred dividends............................. 1,621 3,694 4,611 3,397 2,949
------- -------- -------- -------- --------
Net loss applicable to common shares............. $(2,591) $ (1,508) $(21,601) $(11,289) $ (2,626)
------- -------- -------- -------- --------
------- -------- -------- -------- --------
</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, SEPTEMBER 30,
----------------------------------- ------------------
1993 1994 1995 1995 1996
--------- --------- --------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)................ $ (970) $ 2,186 $(16,990) $(7,892) $ 323
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization.... 2,735 8,559 13,512 10,460 10,136
Provision for doubtful
accounts....................... 112 142 36 77 65
Gain on sale of fixed assets..... (6) -- (188) (73) (60)
Minority interest................ 251 284 247 187 195
Non-cash compensation expense.... -- 915 150 112 159
Extraordinary loss............... -- 2,001 -- -- --
Restructuring and other charges,
net of payments................ -- -- 13,759 5,174 4,980
Registration costs............... -- -- 2,187 2,187 --
Equity increase of joint
ventures....................... -- -- (74) (35) (528)
Deferred income taxes............ (428) 258 (3,294) 353 621
Other changes that provided
(used) cash:
Accounts receivable............ 150 (2,035) (8,308) (11,081) (7,940)
Inventories.................... 1,824 (438) (1,787) (2,189) (14,138)
Prepaid expenses and other
current assets............... 1,058 (658) 1,385 1,622 (2,620)
Accounts payable, accrued
expenses and other
liabilities.................. (4,314) 2,949 (3,765) (6,587) 7,932
--------- --------- --------- ------- -------
Net cash (used in) operating
activities..................... 412 14,163 (3,130) (7,685) (875)
--------- --------- --------- ------- -------
Cash flows from investing
activities:
Payments for acquisitions, net of
cash acquired.................. (29,890) (68,286) (15,874) (15,874) --
Capital expenditures............. (953) (7,210) (15,514) (12,638) (7,883)
Purchase of subsidiary stock from
minority stockholders.......... -- (142) -- -- --
(Increase) decrease in
investments in joint
ventures....................... -- -- (133) (626) 31
Proceeds from sale of capital
equipment...................... 50 185 762 636 1,651
Payments for environmental
liabilities.................... -- (2,543) (3,943) (2,686) (1,988)
Proceeds from environmental
indemnification................ -- 2,292 2,645 2,379 1,038
Other............................ 165 (208) 42 (8) 36
--------- --------- --------- ------- -------
Net cash used in investing
activities..................... (30,628) (75,912) (32,015) (28,817) (7,115)
--------- --------- --------- ------- -------
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 86,830 72,250 47,000
Revolving repayments under Credit
Agreement...................... -- (28,500) (73,830) (61,250) (41,499)
Term loan borrowings under Credit
Agreement...................... -- 95,500 18,200 18,200 --
Term loan repayments under Credit
Agreement...................... -- (3,000) (7,000) (5,250) (5,166)
Short term borrowings under
European Facility.............. -- -- 16,516 17,176 8,329
Repayments of short term
borrowing under European
Facility....................... -- -- (3,986) (3,974) --
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....... -- -- (221) (221) (87)
Payment of registration costs.... -- -- (1,004) (1,004) (114)
Repayment of capital lease
obligations.................... -- (134) (65) (58) (91)
Payments for financing costs..... (1,861) (3,250) (1,391) (1,021) (50)
Dividends paid to minority
interests...................... (122) (129) (247) (247) (130)
Other............................ (79) (754) (85) (73) (40)
--------- --------- --------- ------- -------
Net cash provided by financing
activities....................... 29,497 63,371 33,717 34,528 8,152
--------- --------- --------- ------- -------
Effect of exchange rate changes on
cash............................. -- -- 467 604 (68)
--------- --------- --------- ------- -------
Net increase (decrease) in cash and
cash equivalents................. (719) 1,622 (961) (1,370) 94
Cash and cash equivalents,
beginning of period.............. 1,508 789 2,411 2,411 1,450
--------- --------- --------- ------- -------
Cash and cash equivalents, end of
period........................... $ 789 $ 2,411 $ 1,450 $ 1,041 $ 1,544
--------- --------- --------- ------- -------
--------- --------- --------- ------- -------
</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, which is concurrent with
shipment. 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--
F-7
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
5 years. Depreciation expense during the years ended December 31, 1993, 1994 and
1995 was $1,895, $6,367 and $10,255, respectively.
Maintenance/Inspection Shutdown Costs
Plant shutdowns are scheduled periodically on an individual plant basis for
the performance of maintenance and inspection of various pieces of equipment.
Estimated costs related to these shutdowns, which include, among others,
supplies, repair parts and outside contract labor, 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 amounts more likely than not 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, which are evaluated separately from related
liabilities, are recorded as assets when their receipt is deemed probable.
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 identifiable
net assets acquired over the purchase price. In connection with the 1994
acquisitions, the excess of the purchase price over identifiable net assets
acquired, net of adjustments, is being amortized on a straight-line basis over
40 years, which approximates the estimated period of benefit. 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, principally deferred
taxes, benefit plan obligations and transaction costs, were established and
$44,199 of liabilities, principally long-term debt, deferred taxes and other
liabilities in the normal course of operations, 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
F-10
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
of current assets plus $41,673 of noncurrent assets acquired less liabilities of
$55,386 equals the cash payment of $29,890.
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, principally for environmental
matters, deferred taxes, benefit plan obligations, and transaction costs, were
established and $82,111 of liabilities, principally for environmental matters,
deferred taxes, benefit plan obligations and other liabilities in the normal
course of operations, 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 based on
negotiations and settlements with authorities, updates of studies prepared by
environmental consultants, engineers and contractors as of the acquisition date
and changes in other factors which existed as of the acquisition date. As a
result, the liability, indemnification receivable, and deferred tax asset
originally recorded were reduced by $19,263, $5,610 and $5,055, respectively.
This resulted in a reduction of goodwill of $8,598. The reduction in the
liability was primarily attributable to matters at the Kalama, Washington
facility ($13,100), the Garfield, New Jersey facility ($4,148) and the Beaufort,
South Carolina facility ($1,720). 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,
principally for transaction costs, were established and $519 of liabilities,
principally for liabilities in the normal course of operations, 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, principally for
transaction costs, were established and $7,853 of liabilities, principally for
liabilities in the normal course of operations and long-term debt, 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.
F-11
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
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>
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.
F-12
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
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 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
F-13
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
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 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
F-14
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
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.
Aggregate maturities of long-term debt as of December 31, 1995 for the next
five years and thereafter are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996.......................................................... $ 6,142
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.
F-18
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
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. 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 order to consolidate its textile 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 of the Cowpens facility prior to HDCC 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 prior to HDCC
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 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
F-19
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
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 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. The Company believes that its current accrual in connection with this
matter is reasonable and any additional amounts that it may be
F-20
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
liable for will be de minimus. The Company has not recorded any indemnification
receivable from PMC in light of PMC's stated intent to contest the Company's
claim.
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 predict at this
time KCI's total liability at these sites. KCI or one of its subsidiaries has
also been named as a PRP
F-21
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
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 primarily lease and
other contract terminations totalling $1.3 million associated with the FCAC
plant closure and environmental remediation costs estimated at $1.9 million
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 in connection with the write-off of inventory in
the Company's Organic Pigments and Dyes product line ($0.6 million in the second
quarter and $1.3 million in the third quarter), 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 a decline in the Company's sales of Textile and Paper
Chemicals attributable primarily to decreased demand in the
F-26
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
textile industry and production inefficiencies resulting from insufficient
capacity requirements and the substandard condition of the building and
equipment.
Additionally, in 1995, the Company recorded a charge of $2,187 for
registration costs associated with an aborted public offering.
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>
F-27
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
21. GEOGRAPHIC INFORMATION
The Company operates in one business segment, specialty chemicals. Prior to
1996, HDCC's export sales were primarily via a distribution agreement with a
subsidiary of the former owner of HDCC. The geographic distribution of the
Company's net sales, operating profit (loss) and total assets is indicated by
the table below:
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales (by origin):
United States (by destination)
Domestic............................................... $ 45,528 $147,861 $174,083
Canada................................................. 1,455 7,928 11,179
South and Latin America................................ 651 4,312 6,702
Europe................................................. 4,106 11,160 15,052
Asia-Pacific........................................... 2,531 14,103 20,904
Africa................................................. -- 66 207
-------- -------- --------
Sub-total........................................... $ 54,271 $185,430 $228,127
Europe................................................... 660 2,350 69,089
Asia-Pacific............................................. -- -- 684
Elimination of intercompany sales........................ -- -- (1,012)
-------- -------- --------
Total............................................... $ 54,931 $187,780 $296,888
-------- -------- --------
-------- -------- --------
Operating profit (loss):
United States.......................................... $ 437 $ 12,568 $ (3,372)
Europe................................................. 72 173 (1,235)
Asia-Pacific........................................... -- -- (39)
Eliminations........................................... -- -- 7
-------- -------- --------
Total............................................... $ 509 $ 12,741 $ (4,639)
-------- -------- --------
-------- -------- --------
Total assets:
United States.......................................... $ 99,782 $229,865 $222,414
Europe................................................. 1,452 1,199 46,197
Asia-Pacific........................................... -- -- 5,185
Eliminations........................................... -- -- (30,640)
-------- -------- --------
Total............................................... $101,234 $231,064 $243,156
-------- -------- --------
-------- -------- --------
</TABLE>
22. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying consolidated balance sheet as of September 30, 1996 and
the related consolidated statements of operations and cash flows for the nine
month periods ended September 30, 1995 and 1996 have been prepared in accordance
with generally accepted accounting 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 nine month
period ended September 30, 1996 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996.
F-28
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
Inventories
A summary of the major classifications of inventories is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
-------------
<S> <C>
Raw materials, work in process and intermediates........... $30,376
Finished goods............................................. 30,482
Less: Reserves............................................. 5,495
-------------
$55,363
-------------
-------------
</TABLE>
It is estimated that inventories would have been $1,135 lower than reported
at September 30, 1996, if quantities valued on the LIFO basis were instead
valued on the FIFO basis. During September, the Company recorded charges of
$4,980 in connection with the write-off of inventory in its Organic Pigments and
Dyes product line.
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.
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
On November 27, 1995, KCI was 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 claims unspecified damages
and 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. However, BC Sugar and Tenneco Polymers have not
accepted responsibility for defending this claim. Based on the facts of the
case, the Company does not believe that this lawsuit is likely to be material to
the Company's financial position or results of operations.
F-29
<PAGE>
FREEDOM CHEMICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
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. 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.
Debt Refinancing
On October 17, 1996, the Company completed 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 filed 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 were used 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 amended and
restated its existing credit agreement ('Amended and Restated Credit
Agreement'). The Amended and Restated Credit Agreement provides 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 is 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 are guaranteed by the Company.
Prior to the consummation of the Offering, three of the Company's
stockholders, including the Company's majority stockholder, invested an
aggregate of $10 million of new cash equity in the Company (the 'Cash Equity
Investment'). Following consummation of the Offering, certain other stockholders
of the Company invested an aggregate of approximately $1.9 million in the
Company, almost all of which was financed with loans made by the Company (the
'Additional Equity Investments').
Additionally, concurrent with the consummation of the Offering, the Series
B Preferred Stock and the Series C Preferred Stock of the Company was amended
(the 'Preferred Stock Amendment') to extend the mandatory redemption dates of
such Preferred Stock to April 2007 and May 2007, respectively.
Other Events
During October, and after the consummation of the Offering, the Company
recorded restructuring and other charges of $560 related to personnel reductions
in both administrative and manufacturing positions at its Cincinnati, Ohio
facility.
F-30
<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-31
<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-32
<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-33
<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-34
<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-35
<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-36
<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-37
<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-38
<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-39
<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-40
<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-41
<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-42
<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-43
<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-44
<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-45
<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-46
<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.................................... 12
Use of Proceeds................................. 18
Capitalization.................................. 19
Selected Consolidated Financial Data............ 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 22
The Exchange Offer.............................. 29
Business........................................ 35
Management...................................... 52
Principal Stockholders.......................... 60
Certain Transactions............................ 61
Description of Amended and Restated Credit
Agreement..................................... 62
Description of the Notes........................ 63
Exchange Offer; Registration Rights............. 89
Certain United States Federal Income Tax
Considerations................................ 90
Plan of Distribution............................ 92
Legal Matters................................... 92
Experts......................................... 92
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
---------------------------------------
, 1997
- ------------------------------------------------------
- ------------------------------------------------------
<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.
20. On December 2, 1996, Freedom issued 4,828.22 shares of Series A Common
Stock to the Sorgenti Family Partnership, L.P. for an aggregate purchase price
of $603,527.50.
21. On December 2, 1996, Freedom issued 8,643.64 shares of Series A Common
Stock to Harold A. Sorgenti for an aggregate purchase price of $1,080,455.00.
22. On December 2, 1996, Freedom issued 217.27 shares of Series A Common
Stock to James Trecek for an aggregate purchase price of $27,158.75.
23. On December 2, 1996, Freedom issued 1,082.94 shares of Series A Common
Stock to Donald W. McPhail for an aggregate purchase price of $135,367.50.
24. On December 2, 1996, Freedom issued 171.79 shares of Series A Common
Stock to Dale E. Smith for an aggregate purchase price of $21,473.75.
25. On December 2, 1996, Freedom issued 572.79 shares of Series A Common
Stock to Robert G. Kitchen for an aggregate purchase price of $71,598.75.
II-4
<PAGE>
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.*
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 Droste 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>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- --------------------------------------------------------------------------------------------------
<S> <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.*
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.**
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 Droste (included in their opinion filed as Exhibit 5.3 to this Registration
Statement).***
23.6 Consent 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).*
24.2 Powers of Attorney of Alexander R. Castaldi authorizing Fred P. Rullo and Brian F. McNamara to
sign the Registration Statement and amendments thereto on his behalf.**
24.3 Powers of Attorney of Vincent P. Langone authorizing Fred P. Rullo and Brian F. McNamara to sign
the Registration Statement and amendments thereto on his behalf.**
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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20% change in the maximum aggregate offering
price set forth in the 'Calculation of Registration Fee' table in the
effective 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.
(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 January 13, 1997.
FREEDOM CHEMICAL COMPANY
(Registrant)
/s/ BRIAN F. MCNAMARA
------------------------------------
Brian F. McNamara
Attorney-in-Fact
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>
* Chairman, Chief Executive Officer and
- ------------------------------------------ President (Principal Executive Officer)
Fred P. Rullo
* Chief Financial Officer (Principal Financial
- ------------------------------------------ Officer and Principal Accounting Officer)
Dennis M. Monahan
* Director
- ------------------------------------------
Alexander R. Castaldi
* Director
- ------------------------------------------
Timothy J. Clark
* Director
- ------------------------------------------
Peter A. Joseph
* Director
- ------------------------------------------
Vincent P. Langone
* Director
- ------------------------------------------
Robert J. Lanigan
* Director
- ------------------------------------------
Paul S. Levy
* Director
- ------------------------------------------
Angus C. Littlejohn
* Director
- ------------------------------------------
Harold A. Sorgenti
*By: /s/ BRIAN F. MCNAMARA Attorney-in-Fact January 13, 1997
- -----------------------------------------
Brian F. McNamara
</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 January 13, 1997.
HILTON DAVIS CHEMICAL CO.
(Registrant)
/s/ BRIAN F. MCNAMARA
--------------------------------------
Brian F. McNamara
Attorney-in-Fact
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>
* President, Chief Executive Officer and
- ------------------------------------------ Director (Principal Executive Officer)
Robert G. Kitchen
* Chief Financial Officer (Principal Financial
- ------------------------------------------ Officer and Principal Accounting Officer)
Gary Sommer
* Chairman of the Board of Directors
- ------------------------------------------
Fred P. Rullo
*By: /s/ BRIAN F. MCNAMARA Attorney-in-Fact January 13, 1997
- ------------------------------------------
Brian F. McNamara
</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 January 13, 1997.
KALAMA CHEMICAL, INC.
(Registrant)
/s/ BRIAN F. MCNAMARA
-----------------------------------
Brian F. McNamara
Attorney-in-Fact
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>
* President and Director (Principal Executive
- ------------------------------------------ Officer)
Robert A. Kirchner
* Controller (Principal Financial Officer and
- ------------------------------------------ Principal Accounting Officer)
John W. Hagen
* Director
- ------------------------------------------
Fred P. Rullo
* Director
- ------------------------------------------
Mark A. Fleischauer
*By: /s/ BRIAN F. MCNAMARA Attorney-in-Fact January 13, 1997
- -------------------------------------------
Brian F. McNamara
</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 January 13, 1997.
FREEDOM TEXTILE CHEMICALS CO.
(Registrant)
/s/ BRIAN F. MCNAMARA
-------------------------------------
Brian F. McNamara
Attorney-in-Fact
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>
* President, Chief Executive Officer and
- ------------------------------------------ Director (Principal Executive Officer,
Fred P. Rullo Principal Financial Officer and Principal
Accounting Officer)
/s/ BRIAN F. MCNAMARA Director January 13, 1997
- ------------------------------------------
Brian F. McNamara
*By: /s/ BRIAN F. MCNAMARA Attorney-in-Fact January 13, 1997
- -------------------------------------------
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 January 13, 1997.
FREEDOM CHEMICAL DIAMALT GMBH
(Registrant)
/s/ BRIAN F. MCNAMARA
-----------------------------------
Brian F. McNamara
Attorney-in-Fact
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>
* Managing Director (Principal Executive
- --------------------------------------------- Officer)
Helmut Wolf
* Executive Vice President (Principal Financial
- --------------------------------------------- Officer and Principal Accounting Officer)
S. Kurt Holderer
*By: /s/ BRIAN F. MCNAMARA Attorney-in-Fact
- ----------------------------------------------
Brian F. McNamara January 13, 1997
</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 January 13, 1997.
FREEDOM TEXTILE CHEMICAL COMPANY
(SOUTH CAROLINA), INC.
(Registrant)
/s/ BRIAN F. MCNAMARA
---------------------------------------
Brian F. McNamara
Attorney-in-Fact
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>
* Chief Executive Officer and Director
- ------------------------------------------ (Principal Executive Officer, Principal
Fred P. Rullo Financial Officer and Principal Accounting
Officer)
/s/ BRIAN F. MCNAMARA Director January 13, 1997
- ------------------------------------------
Brian F. McNamara
*By: /s/ BRIAN F. MCNAMARA Attorney-in-Fact January 13, 1997
-------------------------------------
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 January 13, 1997.
KALAMA SPECIALTY CHEMICALS, INC.
(Registrant)
/s/ BRIAN F. MCNAMARA
-------------------------------------
Brian F. McNamara
Attorney-in-Fact
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>
* President and Director (Principal Executive
- ------------------------------------------ Officer)
Robert A. Kirchner
* Controller (Principal Financial Officer and
- ------------------------------------------ Principal Accounting Officer)
John W. Hagen
* Director
- ------------------------------------------
Thomas J. Lobue
* Director
- ------------------------------------------
John P. Fairman
*By: /s/ BRIAN F. MCNAMARA Attorney-in-Fact January 13, 1997
- ------------------------------------------
Brian F. McNamara
</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 January 13, 1997.
KALAMA FOREIGN SALES CORPORATION
(Registrant)
/s/ BRIAN F. MCNAMARA
-------------------------------------
Brian F. McNamara
Attorney-in-Fact
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>
* President and Director
- --------------------------------------------- (Principal Executive Officer)
Robert A. Kirchner
* Controller and Director
- --------------------------------------------- (Principal Financial Officer and Principal
John W. Hagen Accounting Officer)
* Director
- ---------------------------------------------
William C. Williams
*By: /s/ BRIAN F. MCNAMARA Attorney-in-Fact January 13, 1997
----------------------------------------
Brian F. McNamara
</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 January 13, 1997.
FCC ACQUISITION CORP.
(Registrant)
/s/ BRIAN F. MCNAMARA
-------------------------------------
Brian F. McNamara
Attorney-in-Fact
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>
* President, Chief Executive Officer and
- ---------------------------------------- Director (Principal Executive Officer,
Fred P. Rullo Principal Financial Officer and Principal
Accounting Officer)
/s/ BRIAN F. MCNAMARA Director January 13, 1997
- ----------------------------------------
Brian F. McNamara
*By: /s/ BRIAN F. MCNAMARA Attorney-in-Fact January 13, 1997
- -----------------------------------------
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 Droste, 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>
<CAPTION>
EXHIBIT PAGE
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.*
10.35 Amended and Restated Stock Option Agreement, dated as of November 15, 1994, between Freedom
Chemical Company and The Freedom Group Partnership.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NUMBER
- ------- ----------------------------------------------------------------------------------------------- ------
<S> <C> <C>
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.**
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 Consent 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).*
24.2 Powers of Attorney of Alexander R. Castaldi authorizing Fred P. Rullo and Brian F. McNamara to
sign the Registration Statement and amendments thereto on his behalf.**
24.3 Powers of Attorney of Vincent P. Langone authorizing Fred P. Rullo and Brian F. McNamara to
sign the Registration Statement and amendments thereto on his behalf.**
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>
================================================================================
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 chairman 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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<PAGE>
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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EXHIBIT A
to
Amended and Restated Credit Agreement
dated as of October 11, 1996
- --------------------------------------------------------------------------------
FORM OF ASSIGNMENT AND ACCEPTANCE
ASSIGNMENT AND ACCEPTANCE dated as of ________, 19__, between (the
"Assignor") and __________________ (the "Assignee").
PRELIMINARY STATEMENT
A. Reference is made to the Amended and Restated Credit Agreement
dated as of October 11, 1996 (as the same may be amended, supplemented, restated
or otherwise modified from time to time, the "Credit Agreement") among Freedom
Chemical Company (the "U.S. Borrower"), Freedom Chemical Diamalt GmbH (the
"European Borrower", and together with the U.S. Borrower, collectively, the
"Borrowers"), the institutions from time to time party thereto as Lenders and
Issuing Banks and Citicorp USA, Inc., as Agent for the Lenders and Issuing
Banks. Capitalized terms used herein and not otherwise defined herein are used
as defined in the Credit Agreement.
B. The Assignor is a Lender under the Credit Agreement and desires
to sell and assign to the Assignee, and the Assignee desires to purchase and
assume from the Assignor, on terms and conditions set forth below, a $_________
interest in the Assignor's Revolving Credit Commitment and related outstanding
Revolving Loans made thereunder (the "Assigned Interest") from the Assignor,
together with the Assignor's rights and obligations under the Credit Agreement
with respect to the Assigned Interest.
NOW, THEREFORE, the Assignor and the Assignee hereby agree as
follows:
1. In consideration of the Assignee's payment of $______________,
the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby
purchases and assumes from the Assignor, the Assigned Interest, together with
the Assignor's rights and obligations under the Credit Agreement and all of the
other Loan Documents with respect to the Assigned Interest as of the date hereof
(after giving effect to any other assignments thereof made prior to the date
hereof, whether or not such assignments have become effective, but without
giving effect to any other assignments thereof also made on the date hereof)
including, without limitation, the obligation to make Revolving Loans and the
obligation to participate in Letters of Credit.
<PAGE>
2. The Assignor (i) represents and warrants that as of the date
hereof its Revolving Credit Commitment is $___________ and its Pro Rata Share is
___ percent (___%)(after giving effect to any other assignments thereof made
prior to the date hereof, whether or not such assignments have become effective,
but without giving effect to any other assignments thereof made as of the date
hereof); (ii) represents and warrants that it is the legal and beneficial owner
of the interest being assigned by it hereunder and that such interest is free
and clear of any adverse claim; (iii) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or any of the
other Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any of the other
Loan Documents or any other instrument or document furnished pursuant thereto;
and (iv) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrowers or the Guarantors or the
performance or observance by either Borrower or any Guarantor of any obligations
under the Credit Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant thereto or in connection therewith.
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) confirms that it
has received a copy of the Credit Agreement, together with copies of such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (iii) agrees
that it shall have no recourse against the Assignor with respect to any matter
relating to the Credit Agreement, any of the other Loan Documents, or this
Assignment and Acceptance (except with respect to the representations and
warranties made by the Assignor in clauses (i) and (ii) of paragraph 2 above);
(iv) agrees that it will, independently and without reliance upon the Agent, the
Assignor or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement; (v) confirms that it is
an Eligible Assignee; (vi) appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under the Credit Agreement
and the other Loan Documents as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; (vii) agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of the Credit Agreement are required to be performed by it as a
Lender; [and] (viii) specifies as its Domestic Lending Office (and address for
notices) and Eurocurrency Lending Office(s) the offices set forth beneath its
name on the signature pages hereof [and (ix) attaches the forms prescribed by
the Internal Revenue Service of the United States certifying as to
A-2
<PAGE>
the Assignee's status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to the Assignee under
the Credit Agreement and the Notes or such other documents as are necessary to
indicate that all such payments are subject to such rates at a rate reduced by
an applicable tax treaty]. (1)
4. Following the execution of this Assignment and Acceptance by the
Assignor and the Assignee, it will be delivered to the Agent for acceptance and
recording by the Agent. The effective date of this Assignment and Acceptance
shall be the date of acceptance thereof by the Agent specified on the signature
page hereof (the "Effective Date").
5. As of the Effective Date, (i) the Assignee shall be a party to
the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights (other than those specifically surviving the termination
of the Credit Agreement) and be released from its obligations under the Credit
Agreement with respect to the Assigned Interest.
6. From and after the Effective Date, the Agent shall make all
payments under the Credit Agreement and the Notes in respect of the Assigned
Interest (including, without limitation, all payments of principal, interest and
fees with respect thereto) to the Assignee. The Assignor and Assignee shall make
all appropriate adjustments in payments under the Credit Agreement and the Notes
for periods prior to the Effective Date directly between themselves.
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE INTERPRETED, AND THE
RIGHTS AND LIABILITIES HEREUNDER DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
8. This Assignment and Acceptance may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
- ----------
(1) If the Assignee is organized under the laws of a jurisdiction outside the
United States.
A-3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
and Acceptance to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
[NAME OF ASSIGNOR], as a Lender
[and an Issuing Bank]
By ________________________________
Name:
Title:
Adjusted
Pro Rata Share: __________%
Adjusted Revolving Credit
Commitment: $__________
[NAME OF ASSIGNEE]
By _________________________________
Name:
Title:
Notice Address
and Domestic Lending Office:
[Address]
Eurocurrency Lending Office
or Eurocurrency Affiliate:
[Address]
Assigned Pro Rata Share: __________%
Assigned Revolving Credit
Commitment: $__________
A-4
<PAGE>
Accepted this day
of __________, ____
CITICORP USA, INC., as Agent
By____________________________
Name:
Title:
[Consented to this ______ day
of ___________, ____
FREEDOM CHEMICAL COMPANY
By _____________________
Name:
Title:]
A-5
<PAGE>
EXHIBIT B
to
Amended and Restated Credit Agreement
dated as of October 11, 1996
FORM OF COLLECTION ACCOUNT AGREEMENT
- --------------------------------------------------------------------------------
(Attached)
<PAGE>
COLLECTION ACCOUNT AGREEMENT
(With Lock Box)
TO: Citicorp USA, Inc. ("Citicorp"), acting as agent ("Agent") under that
certain Amended and Restated Credit Agreement dated as of October 11,
1996, (as amended, restated, modified or supplemented from time to time,
the "Credit Agreement") among Freedom Chemical Company ("FCC"), Freedom
Chemical Diamalt GmbH ("Diamalt"), the Agent and the financial
institutions from time to time parties thereto as "Lenders" and/or
"Issuing Banks".
399 Park Avenue
New York, New York 10043
Attention: Charles Foster
Telecopier No. (212) 758-6278
RE: Deposit Account[s] No[s]. ____________
maintained with ____________________________________
This will confirm that [Relevant Guarantor (the "Company")][FCC] and the
undersigned collection bank (the "Bank") have agreed as follows with respect to
the above-referenced deposit account (the "Account").
1. [The Company][FCC] and the Bank acknowledge and confirm that all funds
now or at any time hereafter deposited to the Account and all of [the
Company's][FCC's] rights regarding such Account constitute part of the
collateral granted by [the Company][FCC] to [(i)] the Agent to secure certain
obligations of [the Company][FCC] to financial institutions for which the Agent
acts as agent [and (ii) FCC to secure the obligations of the Company under that
certain Intercompany Note dated as of [_____________, ____] (the "Intercompany
Note")] and that the Agent [and FCC] hold[s] a security interest in such funds.
2. A post box (the "Lock Box") has been rented in the name of [the
Company][FCC] at the ____________________________ Post Office and the respective
address to be used for such box is:
[Relevant Guarantor][FCC]
[Address]
3. Checks from [the Company's][FCC's] customers will be mailed to the
foregoing address. The Bank's authorized representatives will have access to the
Lock Box under the authority given by [the Company][FCC] to the Post Office and
will make regular pick-ups from the Lock Box timed to gain the maximum benefit
of early presentation and availability of funds. Checks so received will be
processed and, where possible, started on
B-2
<PAGE>
their way through the regular channels for payment upon receipt by the Bank.
Credit for such items will be given in total on the Bank's books relating to the
Account. The Bank will present checks so received for payment through the
customary collection procedures and subject to the terms of the Bank's by-laws
covering the handling of items deposited with it. Collected funds on deposit in
the Account are to be electronically transferred on the date of deposit directly
to Citibank, N.A., Funding Account, Ref. Freedom Chemical Company, Citibank,
N.A., 399 Park Avenue, New York, New York, Account Number CUSA SAO Freedom
Chemical 40646594, attention: Marva Swaby, or to such other account as the Agent
may designate in writing from time to time.
4. The Bank may charge the amounts of deposited customer checks that are
returned for any reason to the Account.
5. All monies in the Account will become the property of the Agent upon
deposit therein and [the Company][FCC] will have no interest therein or any
control thereover. The Account will not be subject to any deductions, setoff,
banker's liens, or any other right in favor of any person other than the Agent,
except for the amount of returned checks as provided in paragraph 4 above. All
charges incurred in connection with the administration of the Account will be
payable by [the Company] [FCC]. [The Company][FCC] and the Bank agree that
neither will close the Account without giving the Agent at least 60 days' prior
written notice.
6. At the end of each month, the Bank's regular statement covering the
deposits to and withdrawals from the Account is to be sent to [the Company][FCC]
at [Address of Relevant Guarantor or FCC], with a copy to the Agent, 399 Park
Avenue, 6th Floor, Zone 4, New York, New York 10043, attention: Charles Foster.
7. This letter agreement is binding upon the Bank and [the Company][FCC]
and their successors and assigns and is enforceable by the Agent and its
successors and assigns. This letter agreement may not be modified except upon
the mutual consent of the Agent, the Bank, [and the Company][and FCC]. The Bank
and [the Company][FCC] waive notice of acceptance hereof by the Agent and of any
action taken or omitted in reliance hereon.
8. 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.
9. Counterparts. This Collection Account Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
shall together constitute one and the same agreement.
B-3
<PAGE>
DATE: ____________, _____
[RELEVANT GUARANTOR]
[FREEDOM CHEMICAL COMPANY]
By_________________________________
Name:
Title:
[NAME OF BANK]
By_________________________________
Name:
Title:
Address: __________________________
CITICORP USA, INC.
as Agent
By_________________________________
Name:
Title:
B-4
<PAGE>
COLLECTION ACCOUNT AGREEMENT
(without Lock Box)
TO: Citicorp USA, Inc. ("Citicorp"), acting as agent ("Agent") under that
certain Amended and Restated Credit Agreement dated as of October 11,
1996, (as amended, restated, modified or supplemented from time to time,
the "Credit Agreement") among Freedom Chemical Company ("FCC"), Freedom
Chemical Diamalt GmbH ("Diamalt"), the Agent and the financial
institutions from time to time parties thereto as "Lenders" and/or
"Issuing Banks".
399 Park Avenue
New York, New York 10043
Attention: Charles Foster
Telecopier No. (212) 758-6278
RE: Deposit Account[s] No[s]. ____________
maintained with ____________________________________
This will confirm that [Relevant Guarantor (the "Company")][FCC] and the
undersigned collection bank (the "Bank") have agreed as follows with respect to
the above-referenced deposit account (the "Account").
1. [The Company][FCC] and the Bank acknowledge and confirm that all funds
now or at any time hereafter deposited to the Account and all of [the
Company's][FCC's] rights regarding such Account constitute part of the
collateral granted by [the Company][FCC] to [(i)] the Agent to secure certain
obligations of [the Company][FCC] to financial institutions for which the Agent
acts as agent [and (ii) FCC to secure the obligations of the Company under that
certain Intercompany Note dated as of [_____________, _____] (the "Intercompany
Note")] and that the Agent [and FCC] hold[s] a security interest in such funds.
2. Checks from [the Company's][FCC's] customers will be deposited by [the
Company][FCC] from time to time in the Account. Checks so received will be
processed and, where possible, started on their way through the regular channels
for payment upon receipt by the Bank. Credit for such items will be given in
total on the Bank's books relating to the Account. The Bank will present checks
so received for payment through the customary collection procedures and subject
to the terms of the Bank's by-laws covering the handling of items deposited with
it. Collected funds on deposit in the Account are to be electronically
transferred on the date of deposit after one business day directly to Freedom
Chemical Company, Citibank, N.A., 399 Park Avenue, New York, New York, ABA No.
021000089, Account Number CUSA SAO Freedom Chemical 40646594, attention: Marva
Swaby, or to such other account as the Agent may designate in writing from time
to time.
B-5
<PAGE>
3. The Bank may charge the amounts of deposited customer checks that are
returned for any reason to the Account.
4. All monies in the Account will become the property of the Agent upon
deposit therein and [the Company][FCC] will have no interest therein or any
control thereover. The Account will not be subject to any deductions, setoff,
banker's liens, or any other right in favor of any person other than the Agent,
except for the amount of returned checks as provided in paragraph 3 above. All
charges incurred in connection with the administration of the Account will be
payable by [the Company][FCC]. [The Company][FCC] and the Bank agree that
neither will close the Account without giving the Agent at least 60 days' prior
written notice.
5. At the end of each month, the Bank's regular statement covering the
deposits to and withdrawals from the Account is to be sent to [the Company][FCC]
at [Address of Relevant Guarantor or FCC], with a copy to the Agent, 399 Park
Avenue, 6th Floor, Zone 4, New York, New York 10043, attention: Charles Foster.
6. This letter agreement is binding upon the Bank and [the Company][FCC]
and their successors and assigns and is enforceable by the Agent and its
successors and assigns. This letter agreement may not be modified or terminated
except upon the mutual consent of the Agent, the Bank, [and the Company][and
FCC]. The Bank and [the Company][FCC] waive notice of acceptance hereof by the
Agent and of any action taken or omitted in reliance hereon.
7. 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.
8. Counterparts. This Collection Account Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
shall together constitute one and the same agreement.
B-6
<PAGE>
DATE: ___________, _____
[RELEVANT GUARANTOR]
[FREEDOM CHEMICAL COMPANY]
By________________________________
Name:
Title:
[NAME OF BANK]
By________________________________
Name:
Title:
Address:__________________________
CITICORP USA, INC.
as Agent
By________________________________
Name:
Title:
B-7
<PAGE>
EXHIBIT C-1
to
Amended and Restated Credit Agreement
dated as of October 11, 1996
FORM OF REVOLVING NOTE
- --------------------------------------------------------------------------------
PROMISSORY NOTE
(Revolving Loans)
[Date]
FOR VALUE RECEIVED, the undersigned, [FREEDOM CHEMICAL COMPANY, a
Delaware corporation] [FREEDOM CHEMICAL DIAMALT GmbH, a corporation formed under
the laws of The Federal Republic of Germany] (the "Borrower"), HEREBY PROMISES
TO PAY to the order of _______________________ (the "Lender"), on the Revolving
Credit Termination Date, the aggregate principal amount of the Revolving Loans
made by the Lender to the Borrower pursuant to that certain Amended and Restated
Credit Agreement dated as of October 11, 1996 among the Borrower, [Freedom
Chemical Diamalt GmbH][Freedom Chemical Company], the Lender, the other
financial institutions from time to time a party thereto as Lenders and Issuing
Banks, and Citicorp USA, Inc., a Delaware corporation, as Agent for the Lenders
and Issuing Banks (as the same may be amended, restated, supplemented, or
otherwise modified from time to time, the "Credit Agreement") then outstanding.
The Borrower further promises to pay interest on the unpaid
principal amount of each Revolving Loan made to the Borrower from the date
advanced until such principal amount is paid in full, at such interest rates
(which shall not exceed the maximum rate permitted by applicable law), and at
such times, as are specified in the Credit Agreement.
All payments of principal and interest in respect of each Revolving
Loan made by the Lender to the Borrower (i) if denominated in Dollars, shall be
made in lawful money of the United States of America and (ii) if denominated in
an Alternative Currency, shall be made in such Alternative Currency, in either
case, to the Agent at the Applicable Payment Office in same day funds for the
account of the Lender in accordance with the terms of the Credit Agreement. Each
Revolving Loan made by the Lender to the Borrower pursuant to the Credit
Agreement, and all payments made on account of principal thereof, shall be
recorded by the Lender on its books and records.
<PAGE>
This Promissory Note is issued pursuant to the Credit Agreement, and
is entitled to the benefit of and security granted pursuant to the Loan
Documents referenced therein. Capitalized terms used herein, and not otherwise
defined herein, shall have the meanings ascribed to such terms in the Credit
Agreement.
This Promissory Note is one of the Notes referred to in, is executed
and delivered by the Borrower pursuant to the terms of, and is entitled to the
benefits of, the Credit Agreement, to which reference is hereby made for a more
complete statement of the terms and conditions under which the Revolving Loans
evidenced hereby are made and are to be repaid, including, without limitation,
provisions for prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified. [This Promissory Note is
issued in substitution for certain Promissory Notes (Revolving Loan) executed
and delivered by the Borrower (the "Original Revolving Notes") and is not in
repayment of the Original Revolving Notes, and is in no way intended to
constitute a novation of the Original Revolving Notes.] (1)
Upon the occurrence of certain Events of Default as more
particularly described in the Credit Agreement, the unpaid principal amount
evidenced by this Promissory Note shall become, and upon the occurrence and
during the continuance of certain other Events of Default, such unpaid principal
amount may be declared to be, due and payable in the manner, upon the
conditions, and with the effect provided in the Credit Agreement.
Demand, presentment, diligence, protest and notice of nonpayment are
hereby waived by the Borrower.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the Borrower has caused this Promissory Note to
be executed and delivered by its duly authorized officer as of the day and year
first above written.
[FREEDOM CHEMICAL COMPANY]
[FREEDOM CHEMICAL DIAMALT GmbH]
By__________________________________________
Name:
Title:
- ----------
(1) To be included in the Revolving Notes executed and delivered by the U.S.
Borrower on the Effective Date.
C-1-2
<PAGE>
EXHIBIT C-2
to
Amended and Restated Credit Agreement
dated as of October 11, 1996
FORM OF SWING NOTE
- --------------------------------------------------------------------------------
SWING LOAN NOTE
[Date]
FOR VALUE RECEIVED, the undersigned, [FREEDOM CHEMICAL COMPANY, a
Delaware Corporation][FREEDOM CHEMICAL DIAMALT GmbH, a corporation formed under
the laws of The Federal Republic of Germany] ("Borrower"), hereby PROMISES TO
PAY to the order of Citicorp USA, Inc., a Delaware corporation ("Lender"), the
aggregate outstanding principal amount of the Swing Loans made by Lender to the
Borrower pursuant to that certain Amended and Restated Credit Agreement dated as
of October 11, 1996 among the Borrower, [Freedom Chemical Company][Freedom
Chemical Diamalt GmbH], the Lender, the other financial institutions from time
to time a party thereto as Lenders and Issuing Banks, and Citicorp USA, Inc., a
Delaware corporation, as Agent for the Lenders and Issuing Banks (as the same
may be amended, restated, supplemented, or otherwise modified from time to time,
the "Credit Agreement"), if denominated in Dollars, on the earlier of Lender'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 Borrower further promises to pay interest on the unpaid
principal amount of each Swing Loan made to the Borrower from the date advanced
until such principal amount is paid in full, at such interest rates (which shall
not exceed the maximum rate permitted by applicable law), and at such times, as
are specified in the Credit Agreement.
All payments of principal and interest in respect of this Swing Loan
Note (i) if denominated in Dollars, shall be made in lawful money of the United
States of America to the Agent at its office in New York, New York and (ii) if
denominated in an Alternative Currency, shall be made in such Alternative
Currency, to Citibank London at its office in London, England, in each case, in
same day funds for the account of the Lender in accordance with the terms of the
Credit Agreement. Each Swing Loan made by the Lender to the Borrower pursuant to
the Credit Agreement, and all payments made on account of principal thereof,
shall be recorded by the Lender on its books and records.
This Swing Loan Note is issued pursuant to the Credit Agreement, and
is entitled to the benefit of and security granted
<PAGE>
pursuant to the Loan Documents referenced therein. Capitalized terms used
herein, and not otherwise defined herein, shall have the meanings ascribed to
such terms in the Credit Agreement.
This Swing Loan Note is one of the Notes referred to in, is executed
and delivered by the Borrower pursuant to the terms of, evidences Swing Loans
made by Lender to Borrower pursuant to, and is entitled to the benefits of, the
Credit Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Swing Loans evidenced
hereby are made and are to be repaid, including, without limitation, provisions
for prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions, therein specified. [This Swing Loan Note is issued in
substitution for that certain Swing Loan Note dated November 4, 1994, executed
and delivered by the Borrower (the "Original Swing Loan Note") and is not in
repayment of the Original Swing Loan Note, and is in no way intended to
constitute a novation of the Original Swing Loan Note.] (1)
Upon the occurrence of certain Events of Default as more
particularly described in the Credit Agreement, the unpaid principal amount
evidenced by this Swing Loan Note shall become, and upon the occurrence and
during the continuance of certain other Events of Default, such unpaid principal
amount may be declared to be, due and payable in the manner, upon the conditions
and with the effect provided in the Credit Agreement.
Demand, presentment, diligence, protest and notice of nonpayment are
hereby waived by the Borrower.
THIS SWING LOAN NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the Borrower has caused this Promissory Note to
be executed and delivered by its duly authorized officer as of the day and year
first above written.
[FREEDOM CHEMICAL COMPANY]
[FREEDOM CHEMICAL DIAMALT GmbH]
By: _______________________________
Name:
Title:
- ----------
(1) To be included in the Swing Loan Note executed and delivered by the U.S.
Borrower on the Effective Date.
C-2-2
<PAGE>
EXHIBIT D
to
Amended and Restated Credit Agreement
dated as of October 11, 1996
FORM OF NOTICE OF BORROWING
- --------------------------------------------------------------------------------
[Date]
Citicorp USA, Inc., as Agent
for the Lenders and Issuing Banks
party to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
Attention: Charles Foster
Gentlemen:
Reference is hereby made to that certain Amended and Restated Credit
Agreement dated as of October 11, 1996 (as the same may be amended,
supplemented, restated or otherwise modified from time to time, the "Credit
Agreement", the terms defined therein being used herein as therein defined),
among Freedom Chemical Company, a Delaware corporation (the "U.S. Borrower"),
Freedom Chemical Diamalt GmbH, a corporation organized under the laws of The
Federal Republic of Germany (the "European Borrower"), the institutions from
time to time party thereto as Lenders and Issuing Banks, and Citicorp USA, Inc.,
as Agent for the Lenders and Issuing Banks.
The U.S. Borrower hereby gives you notice, irrevocably, pursuant to
[Section 2.01(c)][Section 2.02(b)] of the Credit Agreement that the
[U.S.][European] Borrower hereby requests a Borrowing of [Revolving Loans][Swing
Loans] under the Credit Agreement and, in that connection, sets forth below the
information relating to such Borrowing (the "Proposed Borrowing") as required
pursuant to the terms of the Credit Agreement:
The Business Day of the Proposed Borrowing is _______, ____.
The principal amount of the Proposed Borrowing is ______________.
The Proposed Borrowing will be denominated in [Dollars][Pounds
Sterling][French Francs][DM].
<PAGE>
The [Revolving Credit] [Swing Loan] Availability, in the applicable
currency of the Proposed Borrowing, as of the date of this Notice of
Borrowing is ___________.
[The unfunded portion of the Multicurrency Sublimit as
of the date of this Notice of Borrowing is $__________.]
The Proposed Borrowing will consist of [Base Rate Loans]
[Eurocurrency Rate Loans].
[The initial Eurocurrency Interest Period for each Eurocurrency Rate
Loan made as part of the Proposed Borrowing is _____ month[s][one week].]
The Proposed Borrowing will be made by the [U.S.][European]
Borrower.
The instructions for disbursement of the proceeds of the Proposed
Borrowing are as set forth in the attached Disbursement Authorization of
even date herewith.
The U.S. Borrower hereby certifies that the conditions precedent
contained in Section 6.02 are satisfied on the date hereof and will be satisfied
on the date of the Proposed Borrowing.
FREEDOM CHEMICAL COMPANY
By___________________________________
Title:
[Attach Disbursement Instructions]
D-2
<PAGE>
EXHIBIT E
to
Amended and Restated Credit Agreement
dated as of October 11, 1996
FORM OF NOTICE OF CONVERSION/CONTINUATION
- --------------------------------------------------------------------------------
[Date]
Citicorp USA, Inc., as Agent
for the Lenders and Issuing Banks
party to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
Attention: Charles Foster
Gentlemen:
Reference is made to that certain Amended and Restated Credit
Agreement dated as of October 11, 1996 (as the same may be amended,
supplemented, restated or otherwise modified from time to time, the "Credit
Agreement", terms defined therein being used herein as therein defined), among
Freedom Chemical Company, a Delaware corporation (the "U.S. Borrower"), Freedom
Chemical Diamalt GmbH, a corporation organized under the laws of The Federal
Republic of Germany (the "European Borrower"), the institutions from time to
time party thereto as Lenders and Issuing Banks and Citicorp USA, Inc., as Agent
for the Lenders and Issuing Banks.
The U.S. Borrower hereby gives you notice pursuant to Section
5.01(c)(ii) of the Credit Agreement that the [U.S.][European] Borrower hereby
elects to(1):
1. Convert $__________ in aggregate principal amount of Revolving
Loans which are Base Rate Loans from Base Rate Loans to Eurocurrency Rate Loans
denominated in Dollars on ____________, _____(2). The initial Interest Period
for such Eurocurrency Rate Loans is requested to be _____ month[s].
- ----------
(1) Include those items that are applicable, completed appropriately for the
circumstances.
(2) Date of conversion must be a Business Day.
<PAGE>
2. Convert ____________ in aggregate principal amount of Revolving
Loans which are Eurocurrency Rate Loans denominated in Dollars with a current
Interest Period ending ____________, _____, to Base Rate Loans. (3)
3. Continue as Eurocurrency Rate Loans __________ in aggregate
principal amount of Eurocurrency Rate Loans with a current Interest Period
ending ____________, _____. The succeeding Interest Period for such Eurocurrency
Rate Loans is requested to be _____ month[s].
The U.S. Borrower hereby certifies that on the date hereof there are
no prohibitions under the Credit Agreement to the requested
conversion/continuation, and no such prohibitions will exist on the date of the
requested conversion/continuation.
FREEDOM CHEMICAL COMPANY
By______________________________
Title:
- ----------
(3) The Conversion of Eurocurrency Rate Loans to Base Rate Loans shall be made
on, and only on, the last day of the Interest Period for such Eurocurrency Rate
Loans.
E-2
<PAGE>
EXHIBIT F
to
Amended and Restated Credit Agreement
dated as of October 11, 1996
PRO FORMA FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(Attached)
<PAGE>
================================================================================
SECTION I FREEDOM CHEMICAL COMPANY
EXECUTIVE SUMMARY CONFIDENTIAL INFORMATION MEMORANDUM
================================================================================
D. PRO FORMA CAPITALIZATION
The following table sets forth Freedom's estimated pro forma capitalization as
of June 30, 1996, adjusted to reflect the consummation of the Transactions.
- ------------------------------------------------------------------------------
PRO FORMA CAPITALIZATION
($ millions)
- ------------------------------------------------------------------------------
Debt: Amount Percentage
- ----- ------ ----------
Revolving Credit Facility $12.0 7.1%
Other Debt(1) 3.1 1.8%
Subordinated Notes 125.0 73.5%
----- -----
Total Debt $140.1 82.3%
Book Equity:
Preferred Stock 42.9 25.2%
Common Equity(2) (12.8) (7.5)%
------ ------
Total Book Equity $30.1 17.7%
Total Book Capitalization(3) $170.1 100.0%
- ------------------------------------------------------------------------------
(1) Includes Notes Payable, Capitalized Leases and the FCD Construction loan.
(2) Excludes tax benefit from the write off of existing deferred financing fees
and assumes $2.5 million of new deferred financing fees are written off.
(3) Excludes Minority Interest.
- ------------------------------------------------------------------------------
F-2
<PAGE>
EXHIBIT G
to
Amended and Restated Credit Agreement
dated as of October 11, 1996
PROJECTIONS
- --------------------------------------------------------------------------------
(Not included)
<PAGE>
EXHIBIT H
to
Amended and Restated Credit Agreement
dated as of October 11, 1996
LIST OF CLOSING DOCUMENTS
- --------------------------------------------------------------------------------
(Attached)
<PAGE>
Senior Secured Revolving Credit Facility
to
Freedom Chemical Company
and
Freedom Chemical Diamalt GmbH
October 11, 1996
LIST OF CLOSING DOCUMENTS
Capitalized terms used in this List of Closing Documents which are not defined
herein are used as defined in the Credit Agreement. When used herein, the
following names shall refer to the entities set forth opposite such names:
A-Chem A-Chem (U.K.), Limited, a company organized under the
laws of England.
Agent Citicorp, in its capacity as agent under the Credit
Agreement
Agricole Caisse Nationale de Credit Agricole
BHF BHF-Bank Aktiengesellschaft
BONY The Bank of New York, a New York banking corporation
Borrowers Freedom and Diamalt
Citibank Citibank, N.A., a national banking
association
Citicorp Citicorp USA, Inc., a Delaware corporation
Closing Date October 11, 1996
Credit Agreement Amended and Restated Credit Agreement dated as of the
Closing Date among the Borrowers, the Agent, the
Lenders and the Issuing Bank
Diamalt Freedom Chemical Diamalt GmbH, a corporation
organized under the laws of The Federal Republic of
Germany
Effective Date October 17, 1996
FCCAC FCC Acquisition Corp., a Delaware corporation
H-2
<PAGE>
Fleet Fleet National Bank, a national banking association
Freedom Freedom Chemical Company, a Delaware corporation
Freedom Europe Freedom Europe B.V., a corporation organized under
the laws of The Netherlands
Hilton Hilton Davis Chemical Co., a Delaware corporation
Issuing Banks Citibank and Fleet
Kalama Kalama Chemical, Inc., a Washington corporation
KFSC Kalama Foreign Sales Corporation, a corporation
organized under the laws of Guam
KSCI Kalama Specialty Chemicals, Inc., a Washington
corporation
Lenders Citicorp, Fleet, Agricole, BONY, and BHF, as
signatories to the Credit Agreement on the Closing
Date and those financial institutions which become
parties to the Credit Agreement pursuant to an
Assignment and Acceptance Agreement after the Closing
Date
1994 Credit
Agreement Amended and Restated Credit Agreement dated as of May
26, 1994 among Freedom, Citicorp, as agent, the
lender parties thereto and the issuing bank
thereunder
H-3
<PAGE>
Subsidiary
Guarantors FCCAC, Hilton, Kalama, KFSC, KSCI, Textile, Textile
SC and Diamalt (each individually a "Subsidiary
Guarantor")
Textile Freedom Textile Chemicals Co., a Delaware corporation
Textile SC Freedom Textile Chemical Company (South Carolina),
Inc., a Delaware corporation
A. Loan Documents
1. Amended and Restated Credit Agreement pursuant to which the 1994
Credit Agreement is amended and restated, together with exhibits and schedules
attached thereto and described on Schedule A attached hereto.
2. Promissory Notes executed by Freedom and made payable to (a) the
Lenders evidencing the Revolving Loans made to Freedom and (b) Citicorp
evidencing the Swing Loans made to Freedom.
3. Promissory Notes executed by Diamalt and made payable to (a) the
Lenders evidencing the Revolving Loans made to Diamalt and (b) Citicorp
evidencing the Swing Loans made to Diamalt.
4. Copies of Letters of Credit continuing outstanding as of the
Effecitve Date issued by Citibank as more particularly described on Schedule B
attached hereto.
5. Notice of Conversion/Continuation dated the Closing Date executed
by Freedom.
6. Notice of Borrowing dated the Closing Date executed by Freedom on
behalf of Diamalt.
7. Funding Indemnity Agreement dated the Closing Date executed by
Freedom and acknowledged by the Agent on behalf of the Lenders.
8. Officer's Certificate dated the Closing Date executed by the
Chief Financial Officer of Freedom certifying the authorization of certain
officers of the Borrowers required under Section 2.03 of the Credit Agreement.
9. Disbursement Authorization dated the Effective Date with respect
to disbursements of proceeds of Loans made on the Effective Date.
H-4
<PAGE>
10. Officer's Certificate dated the Effective Date executed by the
Chief Financial Officer of Freedom certifying that the conditions precedent to
the Credit Agreement becoming effective have been satisfied.
11. Guaranties executed by Freedom and Diamalt, respectively,
pursuant to which each guaranties the payment and performance of the Obligations
of the other.
12. Guaranties executed by KFSC and KSCI, respectively, pursuant to
which each guaranties the payment and performance of the Obligations.
13. Amended and Restated Contribution Agreement dated as of the
Effective Date executed by the Subsidiary Guarantors and Diamalt.
B. Reaffirmation Documents
14. Reaffirmation Agreement dated as of the Effective Date executed
by Freedom and accepted by the Agent.
15. Reaffirmation Agreement dated as of the Effective Date executed
by Hilton and accepted by the Agent.
16. Reaffirmation Agreement dated as of the Effective Date executed
by Kalama and accepted by the Agent.
17. Reaffirmation Agreement dated as of the Effective Date executed
by Textile and accepted by the Agent.
18. Reaffirmation Agreement dated as of the Effective Date executed
by FCCAC and accepted by the Agent.
19. Reaffirmation Agreement dated as of the Effective Date executed
by Textile SC and accepted by the Agent.
C. UCC Financing Statements/PPSA Filing & Fixture Filings
20. UCC Financing Statements naming the Borrower and the respective
Subsidiary Guarantors as debtors and the Agent as the secured party filed in the
offices listed on Schedule C attached hereto.
21. UCC Fixture Filings naming the Borrower and the respective
Subsidiary Guarantors as debtors and the Agent as the secured party filed in the
offices listed on Schedule C.
22. UCC Financing Statements naming the respective Subsidiary
Guarantors as debtors, the Borrower as the secured party and the Agent as
assignee in the offices listed on Schedule C.
H-5
<PAGE>
23. UCC Fixture Filings naming the respective Subsidiary Guarantors
as debtors, the Borrower as the secured party and the Agent as assignee filed in
the offices listed on Schedule C.
24. Bailee UCC Financing Statement naming Dyna-Bulk, Inc., a bailee
of Kalama, as debtor filed in the office listed on Schedule C.
25. PPSA Financing Statement naming Hilton as debtor and filed in
the office of the Personal Property Security Act Registry of Ontario, Canada.
D. Security Documents
26. Release of Share Pledge Agreement made by each of the agent,
lenders and issuing bank party to the l994 Credit Agreement.
27. Share Pledge Agreement dated as of the Effective Date and
executed by Freedom and Hilton evidencing the pledge of the capital stock of
Diamalt and Ratification executed by the Agent, Lenders, and Issuing Banks.
28. Release of equitable charge executed and delivered by Citicorp,
as agent under the l994 Credit Agreement pursuant to which the Lien on the
A-Chem (U.K.), Limited capital stock is released.
29. Deed of Charge dated as of the Effective Date executed by
Textile and the Agent for the benefit of the Holders, together with share
certificates representing the same and an executed undated share transfer form
in blank.
30. Evidence of submission of the Deed of Charge for registration in
the Slavenburg Register maintained by Companies House and confirmation that it
is not registrable.
31. Application for a stop order from the Chancery Division of the
High Court of Justice and evidence of the granting and notice thereof.
32. Global Assignment Agreement dated as of the Effective Date
executed by Diamalt and the Agent.
33. Security Transfer Agreement dated as of the Effective Date
executed by Diamalt and the Agent.
34. Grundschuld dated as of the Effective Date made by Diamalt in
favor of the Agent and Ratification by Dr. Helmut Wolf as Managing Director of
Diamalt.
H-6
<PAGE>
35. Account Pledge Agreement dated as of the Effective Date executed
by Diamalt and ratified by each of the Agent, Lenders and Issuing Banks together
with acknowledgement letters from each of the following Collection Account
Banks:
a. BHF, Munich;
b. Hypobank, Haar; and
c. Citibank AG (European Concentration Account).
36. Security Agreement executed by KFSC in favor of the Agent for
the benefit of the Holders evidencing KFSC's grant of a security interest in all
of its personal property as security for the Obligations and its obligations
under its Guaranty.
37. Security Agreement executed by KSCI in favor of the Agent for
the benefit of the Holders evidencing KSCI's grant of a security interest in all
of its personal property as security for the Obligations and its obligations
under its Guaranty.
38. Demand Promissory Note (" KFSC Intercompany Note") executed by
KFSC, payable to Freedom, and endorsed to the Agent.
39. Demand Promissory Note ("KSCI Intercompany Note") executed by
KSCI, payable to Freedom, and endorsed to the Agent.
40. Security Agreement executed by KSFC in favor of Freedom
evidencing KSFC's grant of a security interest in all of its personal property
as security for its obligations under the KSFC Intercompany Note.
41. Security Agreement executed by KSCI in favor of Freedom
evidencing KSFC's grant of a security interest in all of its personal property
as security for its obligations under the KSCI Intercompany Note.
42. Mortgage Modification Agreements dated as of the Effective Date
and executed by the mortgagors of Real Property under the documents described on
Schedule D attached hereto.
43. Reaffirmation of Collateral Assignment Agreements dated as of
the Effective Date executed by Freedom in favor of the Agent with respect to the
Real Property locations described on Schedule D attached hereto.
E. Corporate Documents
44. Certificate of the Secretary of Freedom certifying (i) the names
and signatures of the officers of Freedom authorized to sign the Credit
Agreement, Notes, Reaffirmation Agreement, and all other Loan Documents executed
by Freedom, and all reports, certificates and other documents required under the
Credit Agreement, (ii) that attached thereto is a true and
H-7
<PAGE>
complete copy of the Certificate of Incorporation and the By-Laws of Freedom as
in efffect on the date of such certificate, (iii) that attached thereto is a
true and complete copy of the resolutions of Freedom's Board of Directors
approving and authorizing the execution, delivery and performance of the Credit
Agreement, Notes, Reaffirmation Agreement, and all other Loan Documents executed
by Freedom, and (iv) that the Agent, each Lender and the Issuing Bank may
conclusively rely on such certificate until the Agent, each Lender and the
Issuing Bank shall receive a further certificate of the Secretary of Freedom
amending the prior such certificate to change the names of authorized officers
and submitting the signatures of the officers named in such further certificate.
45. Certificate of an Officer of Diamalt certifying (i) the names
and signatures of the officers of Diamalt authorized to sign the Credit
Agreement, Notes, Guaranty, and all other Loan Documents executed by Diamalt,
and all reports, certificates and other documents required under the Credit
Agreement, (ii) that attached thereto is a true and complete copy of the
Articles of Assocation of Diamalt as in efffect on the date of such certificate,
(iii) that attached thereto is a true and complete copy of the resolutions of
Diamalt's shareholders approving and authorizing the execution, delivery and
performance of the Credit Agreement, Notes, Guaranty, and all other Loan
Documents executed by Diamalt, and (iv) that the Agent, each Lender and the
Issuing Bank may conclusively rely on such certificate until the Agent, each
Lender and the Issuing Bank shall receive a further certificate of the Secretary
of Freedom amending the prior such certificate to change the names of authorized
officers and submitting the signatures of the officers named in such further
certificate.
46. Power of Attorney authorizing certain officers of Freedom as
signatories on behalf of Diamalt for purpose of executing various Loan
Documents.
47. Certificates of the Secretaries of the respective Subsidiary
Guarantors certifying (i) the names and signatures of the officers of the
respective Subsidiary Guarantor authorized to sign the Reaffirmation Agreement
executed and delivered on behalf of such Subsidiary Guarantor and all other Loan
Documents executed by such Subsidiary Guarantor, and all reports, certificates
and other documents required thereunder, (ii) that attached thereto is a true
and complete copy of the Certificate/Articles of Incorporation and the By-Laws
of such Subsidiary Guarantor as in efffect on the date of such certificate,
(iii) that attached thereto is a true and complete copy of the resolutions of
such Subsidiary Guarantor's Board of Directors approving and authorizing the
execution, delivery and performance of the Reaffirmation Agreement and other
Loan Documents executed by such Subsidiary Guarantor, and (iv) that the Agent,
each Lender and the Issuing Bank may conclusively rely on such certificate until
the Agent, each Lender and the Issuing
H-8
<PAGE>
Bank shall receive a further certificate of the Secretary of such Subsidiary
Guarantor amending the prior such certificate to change the names of authorized
officers and submitting the signatures of the officers named in such further
certificate.
48. Certificates/Articles of Incorporation, together with all
amendments thereto, for Freedom and each Subsidiary Guarantor certified by the
Secretary of State of the State in which such Person is incorporated.
49. Good Standing Certificates for Freedom and each Subsidiary
Guarantor designated on Schedule E attached hereto.
50. Articles of Association of Diamalt duly notorized under the laws
of the Federal Republic of Germany.
51. Notorized extract from the Commercial Register of Diamalt.
52. Agreements of CT Corporation Systems, Inc. to act as Process
Agent for the Borrowers.
F. Legal Opinions
53. Opinion of counsel to Freedom and the Subsidiary Guarantors:
Skadden, Arps, Slate, Meagher & Flom.
54. Opinion of counsel to Diamalt: Boesebeck, Barz & Partner.
55. Opinion of General Counsel to the Borrowers: Brian F. McNamara.
56. Opinion of counsel to Kalama: Bogle & Gates P.L.L.C.
57. Opinions of counsel to the Agent: Sidley & Austin and Clifford
Chance.
G. Other Documents
58. Assignment and Acceptance Agreement dated as of the Effective
Date executed by certain of the lenders under the 1994 Credit Agreement and
Fleet.
59. Notes issued under the 1994 Credit Agreement returned to the
Borrower evidencing Indebtedness paid in full on the Effective Date or in
exchange for Notes issued under the Credit Agreement:
H-9
<PAGE>
Citicorp USA, Inc. Term A Note $ 8,823,529
Term B Note $ 4,200,000
Acquisition Note $ 1,882,352.80
Revolving Credit Note
Swing Note
Bank of America Illinois Term A Note $ 3,099,125
Acquisition Note $ 661,146.80
Revolving Credit Note
The Bank of New York Term A Note $ 4,132,167
Term B Note $ 5,000,000
Acquisition Note $ 881,528.80
Revolving Credit Note
Caisse Nationale de Credit Agricole Term A Note $ 2,066,083
Acquisition Note $ 440,764.40
Revolving Credit Note
Crescent/Mach I Partners, L.P. Term B Note $ 9,000,000
Senior Debt Portfolio Term B Note $ 9,000,000
The First National Bank of Boston Term A Note $ 3,099,125
Acquisition Note $ 661,146.80
Revolving Credit Note
Heller Financial, Inc. Term A Note $ 4,132,167
Acquisition Note $ 881,528.80
Revolving Credit Note
The Long-Term Credit Bank of Japan, Term A Note $ 3,099,125
Limited New York Branch Acquisition Note $ 661,146.80
Revolving Credit Note
Mitsui Leasing (USA) Inc. Term A Note $ 1,549,562
Acquisition Note $ 330,573.20
Revolving Credit Note
United States National Bank Term A Note $ 2,066,083
of Oregon
H-10
<PAGE>
Acquisition Note $ 440,764.40
Revolving Credit Note
Van Kampen American Capital Prime Term B Note $ 9,000,000
Rate Income Trust
Merrill Lynch Senior Floating Rate Term B Note $27,000,000
Fund, Inc.
Merrill Lynch Prime Rate Portfolio Term B Note $ 3,500,000
Senior Strategic Income Fund, Inc. Term B Note $ 1,500,000
60. Publication Consent dated the Effective Date executed by the
Borrowers, Lenders and Issuing Banks.
61. Summary of UCC and tax lien and judgment searches conducted
against Freedom in the jurisdictions set forth on Schedules F and G attached
hereto.
62. Summary of UCC and tax lien and judgment searches conducted
against the Subsidiary Guarantors in the jurisdictions set forth on Schedules F
and G.
63. Commitments for Title Insurance (mortgagee's policies) to date
down or supplement the policies identified on Schedule H attached hereto.
64. Release Agreement between BHF, Munich and Diamalt and letter of
direction executed by Citibank.
65. Standby Letter of Credit issued by Citibank in favor of BHF,
Munich.
H. Senior Note and Equity Documents
66. Offering Memorandum dated October 10, 1996 prepared in
connection with the issuance of $125,000,000 Freedom Chemical Company 10 5/8%
Senior Subordinated Notes due 2006.
67. Purchase Agreement dated as of October 10, l996 by and among
Freedom as issuer, Textile, Hilton, Kalama, Diamalt, KSCI, KFSC, and FCCAC as
guarantors and the initial purchasers.
68. Indenture dated as of October 15, 1996 among Freedom, as issuer,
Textile, Hilton, Kalama, Diamalt, KSCI, KFSC, and FCCAC, as guarantors, and
BONY, a New York banking company, as trustee.
H-11
<PAGE>
69. Registration Rights Agreement dated as of October 17, 1996 among
Freedom, Diamalt, Subsidiary Guarantors and the initial purchasers identified
therein.
70. 10 5/8% Senior Subordinated Note due 2006 dated October 17, l996
in the amount $121,350,000 executed by Freedom payable to Cede & Co. (the
"Global Security").
71. Eight 10 5/8% Senior Subordinated Notes due 2006, each dated
October 17, l996 and excuted by Freedom, in the amount and payable to the party
identified therein (the "Physical Securities").
72. Senior Subordinated Guarantees executed by each of the
Subsidiary Guarantors and Diamalt pursuant to which each guaranties the Senior
Notes.
73. Trustee's certificate executed by BONY.
74. Acknowledgment of the delivery of the Global Security to the
initial purchasers on October 17, l996.
75. Acknowledgment by Freedom on October 17, l996 of full payment of
the Senior Notes.
76. Opinion of Counsel to the initial purchasers: Cahill Gordon &
Reindel.
77. Opinion of Counsel to the issuer and guarantors: Skadden, Arps,
Slate, Meagher & Flom.
I. 1993 - 1996 Documents -- See Schedules I through O attached hereto.
SCHEDULE A
TO
LIST OF CLOSING DOCUMENTS
Credit Agreement Exhibits and Schedules
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
H-12
<PAGE>
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
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
Schedule7.01-AA Insurance Policies
Schedule 7.01-DD German Filing and Tax Requirements
Schedule 10.14 Collection Accounts
H-13
<PAGE>
SCHEDULE B
TO
LIST OF CLOSING DOCUMENTS
Existing Letters of Credit
Applicant: Kalama
L/C Reference: NY 20512-30016750
Amount: $222,416.00
Originating Date: 12/29/94
Expiration Date: 12/29/96
Beneficiary: US EPA Third-Party Liability
Applicant: Textile
L/C Reference: NY 20512-30018283
Amount: Belgian Francs 500,000
Originating Date: 11/24/95
Expiration Date: 12/31/96
Beneficiary: Belgium Ministry of Finance
Applicant: Textile
L/C Reference: NY 08683-30018555
Amount: $77,155.59
Originating Date: 01/18/96
Expiration Date: 01/18/97
Beneficiary: N.C. Dept. of Environ., Health & Natural
Resources
H-14
<PAGE>
SCHEDULE C
TO
LIST OF CLOSING DOCUMENTS
UCC Financing Statement and Fixture Filing Offices
UCC Financing Statement Offices
Debtor: Freedom Chemical Company
a. Secretary of the Commonwealth of Pennsylvania; and
b. Prothonotary of Philadelphia County, Pennsylvania.
Debtor: FCC Acquisition Corp.
a. Secretaries of State of Massachusetts, North Carolina, Texas and
Wisconsin;
b. Secretary of the Commonwealth of Pennsylvania;
c. Town/City of Peabody, Massachusetts;
d. Registers of Deeds of Guilford and Mecklenburg Counties, North
Carolina; and
e. Prothonotary of Montgomery County, Pennsylvania.
Debtor: Hilton Davis Chemical Co.
a. Secretaries of State of Alabama, California, Illinois, Indiana,
Kansas, Kentucky, New Jersey, Ohio, South Carolina, and Texas;
b. Department of Assessments and Taxation of Maryland;
c. Superior Court Clerks of DeKalb and Monroe Counties, Georgia;
d. Recorders of Elkhart County, Indiana and Hamilton and Portage
Counties, Ohio; and
e. Clerk of Jefferson County, Kentucky.
Debtor: Kalama Chemical, Inc.
a. Secretaries of State of Illinois, Indiana, New Jersey and Texas;
b. Department of Licensing of Washington; and
H-15
<PAGE>
c. Recorder of Deeds of Lake County, Indiana.
Debtor: Freedom Textile Chemicals Co.
a. Secretaries of State of Alabama, California, Massachusetts, New
Jersey, North Carolina, South Carolina, Texas and Wisconsin;
b. Secretary of the Commonwealth of Pennsylvania;
c. Superior Court Clerk of Monroe County, Georgia;
d. Town/City Clerk of Peabody, Massachusetts;
e. Registers of Deeds of Guilford and Mecklenburg Counties, North
Carolina; and
f. Prothonotary of Montgomery County, Pennsylvania.
Debtor: Freedom Textile Chemical Company (South Carolina), Inc.
a. Secretaries of State of Alabama, California, North Carolina and
South Carolina;
b. Superior Court Clerk of Monroe County, Georgia; and
c. Register of Deeds of Mecklenburg County, North Carolina.
Debtor: Kalama Foreign Sales Corporation
a. Treasurer of Guam; and
b. Department of Licensing of Washington.
Debtor: Kalama Specialty Chemicals, Inc.
a. Secretary of State of South Carolina; and
b. Department of Licensing of Washington.
Fixture Filing Offices
Debtor: FCC Acquisition Corp.
a. Register of Deeds of Guilford County, North Carolina; and
b. Recorder of Deeds of Montgomery County, Pennsylvania.
Debtor: Hilton Davis Chemical Co.
H-16
<PAGE>
a. Register of Deeds and Mortgages of Essex County, New Jersey;
b. Recorder of Hamilton County, Ohio; and
c. Register of Mesne Conveyances of Spartanburg County, South
Carolina.
Debtor: Kalama Chemical, Inc.
a. Clerk of Court of Bergen County, New Jersey; and
b. Auditor of Cowlitz County, Washington.
Debtor: Freedom Textile Chemicals Co.
a. Registers of Deeds of Guilford and Mecklenburg Counties, North
Carolina;
b. Recorder of Deeds of Montgomery County, Pennsylvania; and
c. Register of Mesne Conveyances of Spartanburg County, South
Carolina.
Debtor: Freedom Textile Chemical Company (South Carolina), Inc.
a. Register of Mesne Conveyances of Spartanburg County, South
Carolina.
Bailee UCC Financing Statement Filing Office
Bailor: Kalama Chemical, Inc.
Bailee: Dyna Bulk Inc., Summit, Illinois
a. Secretary of State of Illinois.
H-17
<PAGE>
SCHEDULE D
TO
LIST OF CLOSING DOCUMENTS
Mortgages
Mortgage Reaffirmations
1. Mortgage, Security Agreement, Financing Statement and Assignments
of Rents and Leases, delivered in connection with the closing of the 1993 Credit
Agreement, relating to Hilton's owned real property located in:
a. Newark, New Jersey; and
b. Cowpens, South Carolina.
in each case, as reaffirmed and modified as of the Closing Date and January 9,
1995.
2. Open-End Fee and Leasehold Mortgage, Security Agreement,
Financing Statement and Assignment of Rents relating to Hilton's leased real
property located in Cincinnati, Ohio, as reaffirmed and modified as of the
Closing Date and January 9, 1995.
3. Deed of Trust, Security Agreement, Financing Statement and
Assignment of Rents and Leases relating to Kalama's owned real property located
in Kalama, Washington, as reaffirmed and modified as of January 9, 1995.
4. Deed of Trust, Security Agreement, Financing Statement and
Assignment of Rents and Leases relating to Textile's owned real property located
in Charlotte, North Carolina, as reaffirmed and modified as of January 9, 1995.
5. Leasehold Mortgage, Security Agreement, Financing Statement and
Assignment of Rents relating to FCCAC's leased real property located in
Conshohocken, Pennsylvania, as reaffirmed and modified as of January 9, 1995.
6. Mortgage, Security Agreement, Financing Statement and Assignment
of Rents and Leases dated as of December 15, 1995, executed and delivered by
Textile South Carolina pursuant to which Textile South Carolina grants a
mortgage of its right, title and interest in and to certain real property and
fixtures located in Cowpens, South Carolina, together with exhibits and
schedules thereto.(4)
- ----------
(4) Awaiting recorded deed to record this mortgage.
H-18
<PAGE>
Collateral Assignment Reaffirmations
1. Collateral Assignments of Mortgage/Deed of Trust pursuant to which
Freedom assigns its interest in the respective Hilton Intercompany Mortgages to
the Agent with respect to Hilton's owned real property located in:
a. Newark, New Jersey; and
b. Cowpens, South Carolina.
2. Collateral Assignment of Junior Deed of Trust pursuant to which Freedom
assigns to the Agent its interest in Kalama Intercompany Mortgage.
3. Collateral Assignment of Junior Deed of Trust pursuant to which Freedom
assigns to the Agent its interest in the Textile Intercompany Mortgage.
4. Collateral Assignment of Junior Leasehold Mortgage pursuant to which
Freedom assigns to the Agent its interest in the FCCAC Intercompany Mortgage.(5)
- ----------
(5) Awaiting recorded copy.
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<PAGE>
SCHEDULE E
TO
LIST OF CLOSING DOCUMENTS
Good Standing Certificate Jurisdictions
Freedom Delaware
Hilton Delaware
California
New Jersey
Ohio
South Carolina
Kalama Washington
Illinois
New Jersey
Texas
KFSC Guam
KSCI Washington
South Carolina
Textile Delaware
North Carolina
FCCAC Delaware
Pennsylvania
North Carolina
Textile SC Delaware
South Carolina
H-20
<PAGE>
SCHEDULE F
TO
LIST OF CLOSING DOCUMENTS
UCC Lien Search Offices
Debtor: Freedom Chemical Company
a. Secretary of the Commonwealth of Pennsylvania; and
b. Prothonotary of Philadelphia County, Pennsylvania.
Debtor: FCC Acquisition Corp.
a. Secretaries of State of Massachusetts, North Carolina, Texas and
Wisconsin;
b. Secretary of the Commonwealth of Pennsylvania;
c. Town/City Clerk of Peabody, Massachusetts;
d. Registers of Deeds of Guilford (to include fixture filings) and
Mecklenburg Counties, North Carolina;
e. Prothonotary of Montgomery County, Pennsylvania; and
f. Recorder of Deeds of Montgomery County, Pennsylvania (fixture
filings).
Debtor: Hilton Davis Chemical Co.
a. Secretaries of State of Alabama, California, Illinois, Indiana,
Kansas, New Jersey, Ohio, South Carolina and Texas;
b. Deparment of Assessments and Taxation of Maryland;
c. Superior Court Clerks' Cooperative Authority of Georgia;
d. Superior Court Clerks of DeKalb and Monroe Counties, Georgia;
e. Recorders of Elkhart County, Indiana and Hamilton County (to
include fixture filings) and Portage County, Ohio;
f. Register of Deeds and Mortgages of Essex County, New Jersey
(fixture filings);
H-21
<PAGE>
g. Register of Mesne Conveyances of Spartanburg County, South
Carolina (fixture filings); and
h. Personal Property Security Act Registry in Ontario, Canada.
Debtor: Kalama Chemical, Inc.
a. Secretaries of State of Illinois, Indiana, New Jersey and Texas;
b. Department of Licensing of Washington;
c. Recorder of Lake County, Indiana;
d. Clerk of Court of Bergen County, New Jersey (fixture filings);
and
e. Auditor of Cowlitz County, Washington (fixture filings).
Debtor: Freedom Textile Chemicals Co.
a. Secretaries of State of Alabama, California, Massachusetts, New
Jersey, North Carolina, South Carolina, Texas and Wisconsin;
b. Secretary of the Commonwealth of Pennsylvania:
c. Superior Court Clerks' Cooperative Authority of Georgia;
d. Superior Court Clerk of Monroe County, Georgia;
e. Town/City Clerk of Peabody, Massachusetts;
f. Registers of Deeds of Guilford and Mecklenburg Counties, North
Carolina (to include fixture filings);
g. Prothonotary of Montgomery County, Pennsylvania;
h. Recorder of Deeds of Montgomery County, Pennsylvania (fixture
filings); and
i. Register of Mesne Conveyances of Spartanburg County, South
Carolina (fixture filings).
Debtor: Freedom Textile Chemical Company (South Carolina), Inc.
a. Secretaries of State of Alabama, California, North Carolina and
South Carolina;
H-22
<PAGE>
b. Superior Court Clerks' Cooperative Authority of Georgia;
c. Superior Court Clerk of Monroe County, Georgia;
d. Register of Deeds of Mecklenburg County, North Carolina; and
e. Register of Mesne Conveyances of Spartanburg County, South
Carolina (fixture filings).
Debtor: Kalama Foreign Sales Corporation
a. Treasurer of Guam; and
b. Department of Licensing of Washington.
Debtor: Kalama Specialty Chemicals, Inc.
a. Secretary of State of South Carolina;
b. Department of Licensing of Washington; and
c. Register of Mesne Conveyances of Beaufort County, South Carolina
(fixture filings).
H-23
<PAGE>
SCHEDULE G
TO
LIST OF CLOSING DOCUMENTS
Tax Lien and Judgment Search Offices
Debtor: Freedom Chemical Company
a. Secretary of the Commonwealth of Pennsylvania; and
b. Prothonotary of Philadelphia County, Pennsylvania.
Debtor: FCC Acquistion Corp.
a. Secretary of State of North Carolina;
b. Secretary of the Commonwealth of Pennsylvania;
c. Superior Court Clerks of Guilford and Mecklenburg Counties, North
Carolina; and
d. Prothonotary of Montgomery County, Pennsylvania.
Debtor: Hilton Davis Chemical Co.
a. Secretary of State of New Jersey;
b. Recorder of Hamilton County, Ohio;
c. Register of Deeds and Mortgages of Essex County, New Jersey; and
d. Register of Mesne Conveyances of Spartanburg County, South
Carolina.
Debtor: Kalama Chemical, Inc.
a. Secretary of State of New Jersey;
b. Department of Licensing of Washington;
c. Clerk of Court of Bergen County, New Jersey; and
d. Auditors of Cowlitz and King Counties, Washington.
Debtor: Freedom Textile Chemicals Co.
a. Secretary of State of North Carolina;
b. Secretary of the Commonwealth of Pennsylvania;
H-24
<PAGE>
c. Superior Court Clerks of Guilford and Mecklenburg Counties, North
Carolina; and
d. Prothonotary of Montgomery County, Pennsylvania.
Debtor: Freedom Textile Chemical Company (South Carolina), Inc.
a. Register of Mesne Conveyances of Spartanburg County, South
Carolina.
Debtor: Kalama Foreign Sales Corporation
a. Department of Licensing of Washington; and
b. Auditors of Cowlitz and King Counties.
Debtor: Kalama Specialty Chemicals, Inc.
a. Register of Mesne Conveyances of Beaufort County, South Carolina;
b. Department of Licensing of Washington; and
c. Auditors of Cowlitz and King Counties.
H-25
<PAGE>
SCHEDULE H
TO
LIST OF CLOSING DOCUMENTS
Title Insurance Policies
1. Title Insurance Policies relating to Hilton's real property and
interests in real property located in Newark, New Jersey, Cincinnati, Ohio and
Cowpens, South Carolina.
2. Title Insurance Policy relating to Kalama's real property located
in Kalama, Washington.
3. Title Insurance Policy relating to Textile's real property
located in Charlotte, North Carolina.
4. Title Insurance Policy relating to the real property and
interests in FCCAC's real property located in Conshohocken, Pennsylvania.
H-26
<PAGE>
SCHEDULE I
TO
LIST OF CLOSING DOCUMENTS
Freedom Security Documents
1. Security Agreement executed by the Borrower in favor of the Agent
for the benefit of the Holders evidencing the Borrower's grant of a security
interest in all of the Borrower's personal property including, without
limitation, the Demand Promissory Notes described in items 2-8 below.
2. Demand Promissory Note executed by Hilton, payable to the
Borrower, and endorsed to the Agent.
3. Promissory Note executed by Diamalt, payable to the Borrower in
the principal amount of $6,847 000 and endorsed to the Agent.
4. Promissory Note executed by Freedom Europe, payable to the
Borrower in the principal amount of $1,152,650 and endorsed to Agent.
5. Demand Promissory Note executed by Kalama, payable to the
Borrower, and endorsed to the Agent.
6. Demand Promissory Note executed by Textile, payable to the
Borrower, and endorsed to the Agent.
7. Demand Promissory Note executed by FCCAC, payable to the
Borrower, and endorsed to the Agent.
8. Demand Promissory Note dated as of December 15, 1995, executed by
Textile SC, payable to the Borrower, and endorsed to the Agent.
9. Pledge Agreement executed by the Borrower and the Agent and
acknowledged by each of Hilton, Kalama and Textile, evidencing the Borrower's
pledge of 100% of the capital stock of each of Hilton, Kalama and Textile as
security for the Obligations, together with the stock certificates (and powers
executed in blank) evidencing the capital stock pledged pursuant thereto, as
supplemented.
10. Pledge Agreement executed by the Borrower and the Agent and
acknowledged by FCCAC, evidencing the Borrower's pledge of 100% of the capital
stock of FCCAC as security for the Obligations, together with the stock
certificates (and powers executed in blank) evidencing the capital stock pledged
pursuant thereto.
H-27
<PAGE>
11. Security Assignment Agreement executed by the Borrower
evidencing the grant of a security interest in the intellectual property
purchased under the terms of the German Acquisition Agreement (as defined
below).
12. Collateral Assignment of Rights executed by the Borrower as
assignor, and the Agent, as assignee, for the benefit of the Holders pursuant to
which the Borrower assigns its rights and remedies under the Kalama Purchase
Agreement (as defined below) and the Kalama Trust Agreement (as defined below)
to the Agent as security for the Obligations.
13. Concentration Account Agreement dated as of the Closing Date
between the Borrower and Citibank (Account No. 4064-6594).
14. Instrument of Pledge dated as of August 10, 1995 among the
Agent, the Borrower and Freedom Europe together with authenticated copy thereof.
H-28
<PAGE>
SCHEDULE J
TO
LIST OF CLOSING DOCUMENTS
Hilton Documents
Guaranty and Security Documents
1. Guaranty ("Hilton Guaranty") executed by Hilton evidencing
Hilton's continuing, unconditional guaranty of payment and performance of the
Obligations.
2. Amended and Restated Security Agreement executed by Hilton in
favor of the Agent for the benefit of the Holders evidencing Hilton's grant of a
security interest in all of its personal property, including without limitation,
(i) that certain Promissory Note executed by Rulco, Inc., and guaranteed by Fred
P. Rullo, in the principal amount of $200,000 payable to Hilton and (ii) that
certain Demand Note executed by A-Chem in the principal amount of $900,000
payable to Hilton, as security for the Obligations and the its obligations under
the Hilton Guaranty.
3. Promissory Note executed by Rulco, Inc., and guaranteed by Fred
P. Rullo, in the principal amount of $200,000 payable to Hilton, together with
stock certificates C5 and P5 issued by the Borrower in favor of Rulco, Inc. as
security for such note, representing 300 shares of common stock and 170 shares
of Senior B Preferred Stock of the Borrower, respectively.
4. Demand Note executed by A-Chem in the principal amount of
$900,000 payable to Hilton.
5. Promissory Note in the principal amount of $6,578,000 executed
by Diamalt, payable to Hilton and endorsed to the Agent.
6. Security Agreement executed by Hilton in favor of the Borrower
evidencing Hilton's grant of a security interest in all of the its personal
property as security for its obligations under the Hilton Intercompany Note.
7. Patent Security Agreement executed by Hilton in favor of the
Agent for the benefit of the Holders evidencing Hilton's grant of a security
interest in all of the Hilton's patents, patent applications and licenses as
security for its obligations under the 1993 Credit Agreement, as amended as of
the Closing Date.
8. Patent Security Agreement executed Hilton in favor of the
Borrower evidencing Hilton's grant of a security interest in all of its patents,
patent applications and patent licenses as security for its obligations under
the Hilton Intercompany Note.
H-29
<PAGE>
9. Trademark Security Agreement executed by Hilton in favor of the
Lender evidencing Hilton's grant of a security interest in all of the Hilton's
trademarks, trademark applications and licenses as security for its obligations
under the 1993 Credit Agreement, as amended as of the Closing Date.
10. Trademark Security Agreement executed by Hilton in favor of the
Borrower evidencing Hilton's grant of a security interest in all of its
trademarks, trademark applications and trademark licenses as security for its
obligations under the Hilton Intercompany Note.
11. Junior Mortgage/Deed of Trust, Security Agreement, Financing
Statement and Assignment of Rents and Leases ("Hilton Intercompany Mortgages")
relating to Hilton's owned real property located in:
a. Newark, New Jersey; and
b. Cowpens, South Carolina.
12. Collateral Assignment of Rights executed by Hilton as assignor,
and the Agent, as assignee, for the benefit of the Holders pursuant to which
Hilton assigns its rights and remedies under certain agreements among Freedom
Chemical Acquisition Corporation, a Delaware corporation ("FCAC"),
Sterling-Winthrop Inc., and Hilton to the Agent as security for its obligations
under the 1993 Credit Agreement.
13. Collateral Assignment of Rights executed by Hilton as assignor,
and the Agent, as assignee, for the benefit of the Holders pursuant to which
Hilton assigns its rights and remedies under that certain Stock Purchase
Agreement dated as of May 21, 1993 between PMC, Inc. and FCAC to the Agent as
security for its obligations under the 1993 Credit Agreement.
14. Collection Account Agreement executed by The Fifth Third Bank,
Hilton, the Borrower and the Agent (Account No. 727-91040).
Other Document
15. Ground Lease dated as of September 9, 1993 between SDI and
Hilton covering SDI's real property located in Cincinnati, Ohio along with
Amendment to Lease Provisions dated as of September 9, 1993 among SDI, Hilton
and the Agent.
H-30
<PAGE>
SCHEDULE K
TO
LIST OF CLOSING DOCUMENTS
Kalama Documents
Guaranty and Security Documents
1. Guaranty ("Kalama Guaranty") executed by Kalama evidencing
Kalama's continuing, unconditional guaranty of payment and performance of the
Obligations.
2. Security Agreement executed by Kalama in favor of the Agent for
the benefit of the Holders evidencing Kalama's grant of a security interest in
all of its personal property as security for the Obligations and its obligations
under the Kalama Guaranty.
3. Security Agreement executed by Kalama in favor of the Borrower
evidencing Kalama's grant of a security interest in all of the its personal
property as security for its obligations under the Kalama Intercompany Note.
4. Pledge Agreement executed by Kalama and the Agent for the benefit
of the Holders and acknowledged by each of KFSC and KSCI, evidencing Kalama's
pledge of 100% of the capital stock of each of KFSC and KSCI as security for the
Obligations and its obligations under the Kalama Guaranty together with the
stock certificates (and powers executed in blank) evidencing the capital stock
pledged pursuant thereto.
5. Junior Deed of Trust, Security Agreement, Financing Statement and
Assignment of Rents and Leases ("Kalama Intercompany Mortgage") relating to
Kalama's owned real property located in Kalama, Washington.
6. Collateral Assignment of Rights executed by Kalama as assignor,
and the Agent, as assignee for the benefit of the Holders, pursuant to which
Kalama assigns its rights and remedies under the Tenneco Agreement as security
for the Obligations and its obligations under the Kalama Guaranty.
7. Collection Account Agreement executed by Citibank,
Kalama, the Borrower and the Agent (Account No. 4065-4762).
Other Documents
8. Settlement Agreement, dated as of April 28, 1994, between Kalama
and Tenneco Polymers, Inc., including a guaranty executed by Tenneco Corporation
(the "Tenneco Agreement"), together with copies of exhibits and schedules
thereto.
H-31
<PAGE>
9. Assignment Agreement dated as of May 26, 1994 between Kalama, as
assignor, and the Trustee, as assignee, pursuant to which Kalama assigns its
rights to certain property to the Trustee.
10. Agreement dated as of the Closing Date among the Agent, BC Sugar
and CPC.
11. Trust Agreement dated as of May 26, 1994 (the "Kalama Trust
Agreement") among CPC, the Borrower, Kalama and United States Trust Company of
New York, a New York corporation (the "Trustee"), pursuant to which the Trustee
holds various funds, rights to insurance and other proceeds to be distributed to
either CPC or the Borrower pursuant to the terms of the Purchase Agreement.
H-32
<PAGE>
SCHEDULE L
TO
LIST OF CLOSING DOCUMENTS
Textile Guaranty and Security Documents
1. Guaranty ("Textile Guaranty") executed by Textile evidencing
Textile's continuing, unconditional guaranty of payment and performance of the
Obligations.
2. Security Agreement executed by Textile in favor of the Agent for
the benefit of the Holders evidencing Textile's grant of a security interest in
all of its personal property as security for the Obligations and its obligations
under the Textile Guaranty.
3. Security Agreement executed by Textile in favor of the Borrower
evidencing Textile's grant of a security interest in all of the its personal
property as security for its obligations under the Textile Intercompany Note.
4. Pledge Agreement dated as of December 15, 1995 between Textile
and the Agent evidencing the pledge to the Agent for the benefit of the Holders
of the capital stock of FCCAC and Textile SC, together with stock certificates
representing the capital stock of FCCAC and Textile SC, and undated stock powers
executed in blank with respect thereto.
5. Patent Security Agreement executed by Textile in favor of the
Agent for the benefit of the Holders evidencing Textile's grant of a security
interest in all of Textile's patents, patent applications and patent licenses as
security for the Obligations and its obligations under the Textile Guaranty.
6. Patent Security Agreement executed by Textile in favor of the
Borrower evidencing Textile's grant of a security interest in all of its
patents, patent applications and patent licenses as security for its obligations
under the Textile Intercompany Note.
7. Trademark Security Agreement executed by Textile in favor of the
Agent for the benefit of the Holders evidencing Textile's grant of a security
interest in all of Textile's trademarks, trademark applications and trademark
licenses as security for the Obligations and its obligations under the Textile
Guaranty.
8. Trademark Security Agreement executed by Textile in favor of the
Borrower evidencing Textile's grant of a security interest in all of its
trademarks, trademark applications and trademark licenses as security for its
obligations under the Textile Intercompany Note.
H-33
<PAGE>
9. Junior Deed of Trust, Security Agreement, Financing Statement and
Assignment of Rents and Leases ("Textile Intercompany Mortgage") relating to
Textile's owned real property located in Charlotte, North Carolina.
10. Collection Account Agreement executed by Citibank, Textile, the
Borrower and the Agent (Account No. 4065-4789).
H-34
<PAGE>
SCHEDULE M
TO
LIST OF CLOSING DOCUMENTS
FCCAC Guaranty and Security Documents
1. Guaranty ("FCCAC Guaranty") executed by FCCAC evidencing FCCAC's
continuing, unconditional guaranty of payment and performance of the
Obligations.
2. Security Agreement executed by FCCAC in favor of the Agent for
the benefit of the Holders evidencing FCCAC's grant of a security interest in
all of its personal property as security for the Obligations and its obligations
under the FCCAC Guaranty.
3. Security Agreement executed by FCCAC in favor of the Borrower
evidencing FCCAC's grant of a security interest in all of the its personal
property as security for its obligations under the FCCAC Intercompany Note.
4. Trademark Security Agreement executed by FCCAC in favor of the
Agent for the benefit of the Holders evidencing FCCAC's grant of a security
interest in all of FCCAC's trademarks, trademark applications and trademark
licenses as security for the Obligations and its obligations under the FCCAC
Guaranty.
5. Trademark Security Agreement executed by FCCAC in favor of the
Borrower evidencing FCCAC's grant of a security interest in all of its
trademarks, trademark applications and trademark licenses as security for its
obligations under the FCCAC Intercompany Note.
6. Collateral Assignment of Rights executed by FCCAC as assignor,
and the Agent, as assignee, for the benefit of the Holders evidencing FCCAC's
assignment of its rights and remedies under that certain Asset Purchase
Agreement dated as of November 8, 1994 among FCCAC, The Reilly Corp. and
Reilly-Whiteman Inc. ("FCCAC Purchase Agreement") and certain other documents,
agreements and instruments executed in connection therewith, to the Agent as
security for the Obligations and its obligations under the FCCAC Guaranty.
7. Open-End Junior Leasehold Mortgage, Security Agreement, Financing
Statement and Assignment of Rents and Leases ("FCCAC Intercompany Mortgage")
relating to FCCAC's leased real property located in Conshohocken, Pennsylvania.
8. Collection Account Agreement executed by Citibank, FCCAC, the
Borrower and the Agent (Account No. 4066-1903), as amended.
H-35
<PAGE>
SCHEDULE N
TO
LIST OF CLOSING DOCUMENTS
Textile SC Guaranty and Security Documents
1. Guaranty dated as of December 15, 1995 ("Textile SC Guaranty"),
executed and delivered by Textile SC pursuant to which Textile SC guarantees
payment and performance of the Obligations.
2. Security Agreement dated as of December 15, 1995, executed and
delivered by Textile SC pursuant to which Textile SC grants Liens against all of
its personal property and interests in property to the Agent for the benefit of
the Holders, as security for the Obligations and its obligations under the
Textile SC Guaranty.
3. Security Agreement dated as of December 15, 1995, executed by
Textile SC in favor of the Borrower evidencing Textile SC's grant of a security
interest in all of its personal property as security for its obligations under
the Textile SC Intercompany Note.
4. Trademark Security Agreement dated as of December 15, 1995,
executed and delivered by Textile SC pursuant to which Textile SC grants Liens
against all of its trademarks and interests in such trademarks for the benefit
of the Holders, as security for the Obligations and its obligations under the
Textile SC Guaranty.
5. Trademark Security Agreement dated as of December 15, 1995,
executed and delivered by Textile SC pursuant to which Textile SC grants Liens
against all of its trademarks and interests in such trademarks in favor of the
Borrower as security for its obligations under the Textile SC Intercompany Note.
H-36
<PAGE>
SCHEDULE O
TO
LIST OF CLOSING DOCUMENTS
Bailee Agreements and Landlord Waivers
1. Bailee Letters executed by the following bailees of Hilton:
Delta Warehouse, Santa Fe Springs, California
Atlas Printing Ink Inc., Dallas, Texas
Dion Chemical, Elkhart, Indiana
Quaker Oats, Lawrence, Kansas
Russell Corp., Alexander City, Alabama
Sethness-Greenleaf, Inc., Chicago, Illinois
BDP Warehouse, El Sequndo, California
2. Bailee Letter executed by the following bailee of Kalama:
Dyna Bulk Inc., Summit, Illinois
3. Landlord's Waiver executed by The SDI Divestiture Corp. relating
to Hilton's leased property located in Cincinnati, Ohio.
4. Landlord's Waiver executed by Ninety-three Larchwood Partners
relating to FCCAC's leased warehouse space located in Conshohocken,
Pennsylvania.
5. Bailee Letter executed by the following bailee of Textile SC:
BDP Warehouse, Edison, New Jersey
6. Bailee Letter executed by the following bailee of Textile:
BDP Warehouse, Edison, New Jersey
H-37
<PAGE>
EXHIBIT I
to
Amended and Restated Credit Agreement
dated as of October 11, 1996
FORM OF OFFICER'S CERTIFICATE TO
ACCOMPANY REPORTS
- --------------------------------------------------------------------------------
[Date]
Citicorp USA, Inc., as Agent
for the Lenders and Issuing Banks
party to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
Attention: Charles Foster
Gentlemen:
Pursuant to Section 8.01(c) of that certain Amended and Restated
Credit Agreement dated as of October 11, 1996 (as the same may be amended,
supplemented, restated or otherwise modified from time to time, the "Credit
Agreement", terms defined therein being used herein as therein defined) among
Freedom Chemical Company, a Delaware corporation ("U.S. Borrower"), Freedom
Chemical Diamalt GmbH, a corporation organized under the laws of The Federal
Republic of Germany, the institutions from time to time party thereto as Lenders
and Issuing Banks, and Citicorp USA, Inc., as Agent for the Lenders and Issuing
Banks, the undersigned, __________________, the [Chief Executive Officer][Chief
Financial Officer] of the U.S. Borrower, hereby certifies that:
1. The undersigned 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 the Financial Statements identified below. Such
review has not disclosed the existence during or at the end of such accounting
period, and as of the date hereof the undersigned does not have knowledge, of
the existence of any condition or
<PAGE>
event which constitutes an Event of Default or Potential Event of Default.(1)
2. The financial statements, reports and copies of certain
instruments and documents attached hereto, namely,
A. [Compliance Certificate], dated ________________(2)
B. ______________________, dated ________________
C. ______________________, dated ________________
D. ______________________, dated ________________
are true and complete copies of the aforesaid which constitute part of [or are
based upon](3) the customary books and records of the U.S. Borrower, and, to the
best of the undersigned's knowledge and belief, there exist no facts or
circumstances which would materially and adversely affect or vary the
information contained in any of the aforesaid.
_______________________________________
[Name]
[Chief Executive Officer]
[Chief Financial Officer]
- ----------
(1) If such condition or event exists or existed, specify (i) the nature and
period of such condition or event and (ii) the action taken, being taken or
proposed to be taken with respect thereto.
(2) Attach if applicable for the period covered by this Officer's Certificate.
(3) To be included if a Compliance Certificate is attached.
I-2
<PAGE>
EXHIBIT J
to
Amended and Restated Credit Agreement
dated as of October 11, 1996
FORM OF LETTER TO ACCOUNTANTS
- --------------------------------------------------------------------------------
[Freedom Chemical Company Stationery]
[Date]
[Insert Name and Address of
Accounting Firm]
Re: Freedom Chemical Company
Ladies and Gentlemen:
Reference is hereby made to that certain Amended and Restated Credit
Agreement dated as of October 11, 1996 (as the same may be amended,
supplemented, restated or otherwise modified from time to time, the "Credit
Agreement", the terms defined therein being used herein as therein defined),
among Freedom Chemical Company, a Delaware corporation (the "U.S. Borrower"),
Freedom Chemical Diamalt GmbH, a corporation organized under The laws of the
Federal Republic of Germany (the "European Borrower", and together with the U.S.
Borrower, collectively, the "Borrowers"), the institutions from time to time
party thereto as Lenders and Issuing Banks and Citicorp USA, Inc., as Agent for
the Lenders and Issuing Banks.
This letter is to inform you that the Credit Agreement requires
that, as a condition to the willingness of the Lenders and the Issuing Banks to
continue to extend financing to the Borrowers thereunder, annual audited
financial statements be prepared and delivered to the Agent, the Lenders and the
Issuing Banks accompanied by, among other things, an opinion from the
independent accountants who prepared such financial statements. The Lenders are
relying upon the financial statements audited by you.
Accordingly, it is a primary intention of the U.S. Borrower in
engaging your services in connection with your audit and preparation of
financial statements with respect to the U.S. Borrower's currently ended fiscal
year, to satisfy the
<PAGE>
requirement of the Credit Agreement mentioned above and to induce the Lenders
and the Issuing Banks, who are relying on the financial statements audited by
you, to continue provision of their financing accommodations under the Credit
Agreement.
Very truly yours,
FREEDOM CHEMICAL COMPANY
By_____________________
Title:
J-2
<PAGE>
EXHIBIT K
to
Amended and Restated Credit Agreement
dated as of October 11, 1996
FORMS OF CONSIGNEE/BAILEE LETTERS
- --------------------------------------------------------------------------------
(Attached)
<PAGE>
FORM OF CONSIGNEE LETTER(1)
[LETTERHEAD OF
RELEVANT GUARANTOR]
_______ ___, ____
VIA FEDERAL EXPRESS
[NAME AND ADDRESS OF CONSIGNEE]
Re: [Relevant Guarantor]
Ladies and Gentlemen:
This letter is to confirm that we, from time to time, deliver
merchandise to you for processing or on consignment (such merchandise heretofore
or hereafter delivered to you being referred to as "Consigned Inventory") and
that title to the Consigned Inventory remains with us at all times.
This letter is also to advise you that, pursuant to a certain
[Amended and Restated](2) Security Agreement (the "Security Agreement") executed
by us, we have granted to Citicorp USA, Inc. as agent (the "Agent") for certain
financial institutions, a security interest in, without limitation, all of our
inventory, including the Consigned Inventory, to secure our obligations under a
certain Guaranty in favor of the financial institutions for which the Agent is
acting (as the same may be amended, modified, restated or supplemented from time
to time, the "Guaranty"). In order to protect our ownership interest and the
Agent's security interest in the Consigned Inventory, the Agent has required
that we file a UCC financing statement covering the Consigned Inventory in
accordance with Section 9-114 of the Uniform Commercial Code. Such a financing
statement, naming you as Debtor-Consignee, us as Secured Party-Consignor and the
Agent as Assignee of Secured Party is enclosed herewith. We ask that you sign
the enclosed financing statement, and return it directly to the Agent's
attorneys, Sidley & Austin, One First National Plaza, Chicago, 60603, Attention:
DeVerille A. Huston, Esquire.
- ----------
(1) The Company, Citicorp and the bailee will have to execute three copies of
this document.
(2) For Hilton only.
K-2
<PAGE>
We also ask that you sign and return to the Agent's attorneys one of
the enclosed copies of this letter (i) to acknowledge and confirm that you are
holding the Consigned Inventory for processing or on consignment, that such
Consigned Inventory is our property and is subject to the Agent's security
interest, that such security interest in the Consigned Inventory shall be senior
to all liens, claims and interests, including fees charged by you for the actual
processing of the Consigned Inventory and that you will notify all of your
successors and assigns of the existence of the agreements contained herein and
(ii) to evidence your agreement that if, at any time hereafter, the Agent shall
notify you in writing that we have defaulted on our obligations under the
Guaranty, you will comply with the Agent's written instructions as to the
disposition of the Consigned Inventory and that until the Guaranty has been
terminated and the Agent has been paid in full, you shall not deduct from or
offset against any amounts due and owing by us to you at any time hereafter by
applying any of the Consigned Inventory in payment for processing services
provided by you to us. We agree that you shall have no liability to us if you
comply with the Agent's written directions and we agree to reimburse you for all
reasonable costs and expenses incurred by you as a direct result of such
compliance.
Please return the second copy of this letter to the Company's
attorneys (Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, NY
10022, Attention: Charles M. Fox, Esquire) after it has been signed, so that the
Company may complete its file. The third copy is for your records.
Very truly yours,
[RELEVANT GUARANTOR]
By__________________________________
Title:
CITICORP USA, INC., as Agent
By__________________________________
Title:
Acknowledged and agreed to this ____ day of _______, ____.
CONSIGNEE:
By________________________
Name:
Title:
K-3
<PAGE>
FORM OF BAILEE LETTER(1)
[LETTERHEAD OF
RELEVANT GUARANTOR]
________ __, 1994
VIA FEDERAL EXPRESS
[NAME AND ADDRESS OF BAILEE]
Re: [Relevant Guarantor]
Ladies and Gentlemen:
This letter is to confirm that [Relevant Guarantor] (the "Company"),
from time to time, delivers merchandise to you for processing or warehousing
storage (such merchandise heretofore or hereafter delivered to you being
referred to as "Bailed Goods") and that title to the Bailed Goods remains with
the Company at all times.
This letter is also to advise you that, pursuant to a certain
[Amended and Restated](2) Security Agreement (the "Security Agreement") executed
by the Company, the Company has granted to Citicorp USA, Inc. as agent for
certain financial institutions ("Agent"), a security interest in, among other
things, all of the Company's inventory, including, without limitation, the
Bailed Goods, to secure obligations of the Company under a certain Guaranty in
favor of the financial institutions for which the Agent is acting (as the same
may be amended, modified, restated or supplemented from time to time, the
"Guaranty").
This letter serves as notice to you pursuant to Section 9-304(3) of
the Uniform Commercial Code of the Agent's interest in the Bailed Goods. In
order to protect the Company's ownership interest and the Agent's security
interest in the Bailed Goods, the Company asks that you sign and return to the
Agent's attorneys (Sidley & Austin, One First National Plaza, Chicago, 60603,
Attention: DeVerille A. Huston, Esquire) one of the three enclosed copies of
this letter (i) to acknowledge and confirm that you are holding the Bailed Goods
on bailment for processing or warehousing, that such Bailed Goods are the
Company's property and subject to the Agent's security interest, that such
security interest in the Bailed Goods shall be senior to all liens, claims
- ----------
(1) The Company, Citicorp and the bailee will have to execute three copies of
this document.
(2) For Hilton only
K-4
<PAGE>
and interests, including fees charged by you for the actual processing or
storage of the Bailed Goods and that you will notify all of your successors and
assigns of the existence of the agreements contained herein and (ii) to evidence
your agreement that if, at any time hereafter, the Agent shall notify you in
writing that the Company has defaulted on its obligations under the Guaranty,
you will comply with the Agent's written instructions as to the disposition of
the Bailed Goods and that until the Guaranty has been terminated and the Agent
and the Lenders have been paid in full, you shall not deduct from or offset
against any amounts due and owing by the Company to you at any time hereafter by
applying any of the Bailed Goods in payment for processing or storage services
provided by you to the Company. We agree that you shall have no liability to the
Company if you comply with the Agent's written directions and the Company agrees
to reimburse you for all reasonable costs and expenses incurred by you as a
direct result of such compliance.
Please return the second copy of this letter to the Company's
attorneys (Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, NY
10022, Attention: Charles M. Fox, Esquire) after it has been signed, so that the
Company may complete its file. The third copy is for your records.
Very truly yours,
[RELEVANT GUARANTOR]
By__________________________________
Title:
CITICORP USA, INC., as Agent
By__________________________________
Title:
Acknowledged and agreed to this _____ day of _______________, ____.
BAILEE:
By:_____________________________
Name:
Title:
K-5
<PAGE>
Form of Processor's/Warehouse Keeper's Acknowledgement
[Letterhead of Freedom Chemical Diamalt GmbH]
[Date]
[Name and address of relevant Processor/Warehouse Keeper]
Freedom Chemical Diamalt GmbH
Ladies and Gentlemen:
1. This letter is to confirm that we (the "Company"), from time to time,
deliver merchandise to you for processing or warehouse storage (such goods
heretofore or hereafter delivered to you being referred to as the "Stored
Goods"). Following a Security Transfer Agreement dated 17 October 1996 (as
the same may be amended, restated, supplemented or otherwise modified from
time to time, the "Security Transfer Agreement") and made between
ourselves and Citicorp USA, Inc. as agent (the "Agent") for and on behalf
of the Lenders and Issuing Banks under a credit agreement dated 11 October
1996 (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement") and made between
Freedom Chemical Company and ourselves as Borrowers and certain financial
institutions we have transferred to the Agent title to the fixtures,
fittings, furniture, equipment, machinery and inventory as more
particularly described in the Security Transfer Agreement.
2. This letter is also to advise you that all of the Stored Goods have been
transferred to the Agent under the Security Transfer Agreement as security
for certain obligations arising under the Credit Agreement. In order to
protect the Agent's title in the Stored Goods, the Agent has required that
we notify you of the Agent's title in the Stored Goods and that you
acknowledge receipt of this notice and your agreement to the terms hereof
by signing the enclosed copy and returning the same to
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Attn: Charles Foster
Facsimile 212 758-6278
with copy to:
Sidley & Austin
One First National Plaza
Chicago 60603
Attn: DeVerille A. Huston.
3. May we kindly ask you:
(i) to acknowledge and confirm that you are holding the Stored Goods for
processing or warehousing, that such Stored Goods are the Agent's
property, that its title therein shall be senior to all liens,
claims and interests including fees charged by you for your actual
processing or storage of the Stored Goods (which remain owing by
ourselves and are under no circumstances owing by the Agent) and
that you will notify all of your successors and assignees of the
existence of the agreements contained herein; and
K-6
<PAGE>
(ii) to evidence your agreement that if, at any time hereafter, the Agent
shall notify you in writing that the Company has defaulted on its
obligations arising under (a) the Credit Agreement or (b) under a
guaranty dated as of 17 October 1996 made by ourselves in favour of
the Agent, the Lenders and the Issuing Banks under the Credit
Agreement (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "Guaranty"), you will
comply with the Agent's written instructions as to the disposition
of the Stored Goods and that until the Guaranty and the Credit
Agreement have been terminated and the Agent and the Lenders and the
Issuing Banks have been paid in full, you shall not deduct from or
offset against any amounts due and owing by ourselves to you at any
time hereafter by applying any of the Stored Goods in payment for
processing or storage services provided by you to ourselves.
4. We agree that you shall have no liability towards ourselves if you comply
with the Agent's written directions and we agree to reimburse you for all
reasonable costs and expenses incurred by you as a direct result of such
compliance.
5. This letter shall be subject to and construed in accordance with the laws
of the Federal Republic of Germany.
Very truly yours,
________________________________ __________________________
Freedom Chemical Diamalt GmbH Date
________________________________ __________________________
Citicorp USA, Inc. as Agent Date
acknowledged and agreed
________________________________ __________________________
[Processor/Warehouse Keeper] Date
K-7
<PAGE>
Freedom Chemical Diamalt
Translation of the Employment Contract of Dr. Wolf as President of the Company
Between: Freedom Chemical Diamalt GmbH
Georg-Reismuller-Strasse 32
80999 Munchen
hereinafter called "the company"
and Dr. Helmut Wolf
Am Herrenholz 61
85830 Neukeferloh
hereinafter called "the President"
the following
Employment Contract as President
is concluded:
1 Tasks and Duties
1.1 Dr. Wolf is the President of the company with sole power of representation
and with the responsibility for the operating business in agreement with
the management and financial policy and the budget of the company. He
represents the company and leads the business according to the directions
of the shareholders and the legal provisions.
1.2 The shareholders can appoint also additional Presidents and can regulate
the duties and responsibilities between them.
1.3 The President will look after his compulsory duties in exercising the due
diligence of a qualified businessman, protecting the interests of the
company.
1.4 The President will exclusively dedicate his full working power and his
knowledge and experience to
<PAGE>
the company. Side-activities, paid or unpaid, require the written approval
of the company.
At present, the President holds leading positions for some other closely
connected companies, but without the right for a special or additional
remuneration for these. These positions are connected to the continuance
of this employment contract with the exception of the Presidentship of
Lyomark GmbH.
1.5 Apart from ordinary passed resolutions by the shareholders for the
distribution of profits, the President is not authorized to withdraw
profits or to give away money or other advantages to his own benefit or to
the benefit of shareholders, other Presidents/Vice Presidents or closely
connected persons or companies.
1.6 If and when required, the President will also be available for special
tasks and assistance for the strategic development of the FCC Group.
2 Beginning of the contract and termination
2.1 This contract begins on January 1, 1996, and is concluded for an
indefinite time. Notice period is 6 months to the end of a calendar
quarter.
2.2 The Termination requires written form for both parties. Termination by the
company requires in addition the written submittal of a corresponding
decision of the shareholders.
2.3 A removal from office by a decision of the shareholders is possible at any
time. In this case the contract is terminated to the next possible date
(see 2.1).
2.4 The contract ends at the latest without giving notice at the end of the
year in which the President completes his 65th year of age.
2.5 The right of the company to terminate the contract without notice for
reasons of serious personal lapse is not affected by the above. The
contract also ends at the date when the company discontinues its
activities.
2
<PAGE>
2.6 In the case of an end of this contract, the former employment contract of
the President as Head of the Business Unit Pharmorganics, dated February
21, 1995, will not revive.
3 Remuneration
3.1 For his activities according to paragraph 1. of this contract, the
President will get an annual base gross salary of DM 255.008, - and of DM
273.000, - as from September 1, 1996. It will be paid out, after the
deduction of taxes etc., 13 times per year at the end of each calendar
month, whereby the 13th rate is paid at the end of November. This annual
gross salary is subject to a review every year.
3.2 In addition, a bonus will be paid to the President according to the
Incentive Program of the company and depending from the company's Profit
(EBITDA). The bonus also depends from the achievement of the yearly agreed
personal goals and objectives of the President. The Incentive Target is
50%.
If the President leaves the company during the run of a calendar year, the
bonus is only paid on a pro-rata basis.
4 Payments in cases of sickness, accident or death
4.1 In the case of a temporary disablement of the President, the salary will
continue to be paid for 3 months, deducted by the amount which will be
paid by the health insurance.
However, the payment of the salary will only be paid until the end of this
contract. If the disablement is longer than 3 months, the bonus will not
be paid for the time thereafter.
4.2 If the President dies during the validity of this contract, his widow and
his legitimate children, who are not older than 25 years and still in
training, will get altogether the salary according to paragraph 3.1. of
this contract for the month of death and the following 3 months.
3
<PAGE>
5 Vacation
The President is entitled to 30 working days of vacation. The intended
holidays have to meet with the interests of the company and should be
taken only in agreement with other (Vice) Presidents or the shareholders.
6 Other Benefits
6.1 For his activities in the framework of this contract, a company car is
provided for the President also for private use according to the company's
Car Policy, a company car contract and the legal/tax provisions.
6.2 Expenses and costs which accrue from the activities of the President for
the company will be reimbursed by the company according to the tax
regulations. These costs have to be supported by documentary evidence.
6.3 The President participates in the company's Pension Scheme according to
the collective bargaining agreement of the Diamalt GmbH of December 12,
1988 and the legal provisions. The pension accrued until November 30, 1994
will be paid by the insolvency insurance company, as from December 1, 1995
the company is responsible.
7 Obligation to Secrecy
The President is obliged to maintain secrecy to all affairs concerning the
business, i.e., suppliers, clients, calculations, book-closing reports,
balance sheets and patents. He will take care that confidential papers and
documents of the company do not become public. This obligation also
continues after his retirement from office.
8 Records
When retiring from office, the President is obligated to hand over to the
company immediately all papers, correspondence, writings, drafts, etc.,
concerning the business and still being in his
4
<PAGE>
possession. The President has no right of detention of such documents.
9 Final Provisions
9.1 If one of the provisions of this contract should be or become invalid, the
validity of the other contractual provisions is not affected by this. The
parties are obligated to replace the invalid provision by a valid one with
the goal to achieve the intended economical aim as far as possible.
9.2 All changes and additions to this contract must be drawn up in writing.
This is also the case for a change of this provision itself.
Munich, November 20, 1996
For the Shareholders of FCD: President
signed: Dale Smith Signed: Helmut Wolf
5
<PAGE>
Freedom Chemical Company and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands, except ratio)
<TABLE>
<CAPTION>
Nine months ended
Years Ended December 31, September 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) ($10,289) $ 731
-------------------------------------------------------------
Interest and debt expense 531 1,556 6,682 13,805 10,334 10,339
Minority interest 144 251 284 247 187 195
Capitalized interest -- -- -- 168 168 --
One third of rental expense 52 106 323 794 677 742
-------------------------------------------------------------
Total fixed charges 727 1,913 7,289 15,014 11,366 11,276
-------------------------------------------------------------
Distributions from joint ventures -- -- -- -- -- 41
Capitalized interest -- -- -- (168) (168) --
-------------------------------------------------------------
Sub-total $380 $ 652 $13,609 ($ 6,027) $ 909 $12,048
-------------------------------------------------------------
Ratio of earnings to fixed charges 0.5 0.3 1.9 (0.4) 0.1 1.1
=============================================================
Surplus (deficiency) of earnings ($347) ($1,261) $ 6,320 ($21,041) ($10,457) $ 5,752
=============================================================
Rental expense $156 $ 318 $ 970 $ 2,383 $ 2,031 $ 2,226
=============================================================
</TABLE>
<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
statement schedule of Freedom Chemical Company and Subsidiaries. We also consent
to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Wayne, Pennsylvania
January 10, 1997
<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. 3 to the Registration Statement on Form S-1 of Freedom
Chemical Company and the reference to our firm under the heading "Experts" in
the Registration Statement.
Our repord dated August 22, 1994 contains an explanatory paragraph that states
that the Company is involved in variour environmental matters. The ultimate
outcome of certain contingencies cannot presently be determined. Accordingly,
the provision for the total liability that 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
January 9, 1997
<PAGE>
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Freedom
Chemical Company (the "Company") hereby severally constitutes and appoints Fred
P. Rullo and Brian F. McNamara, and each of them singly, his true and lawful
attorneys with full power to them, and each of them singly, to sign for him and
in his name in his capacity as a director of the Company, the Registration
Statement on Form S-1 (No. 33-84778) and any and all pre-effective and
post-effective amendments to the Registration Statement, and generally to do all
such things in his name and on his behalf in his capacity as director to enable
the Company to comply with the provisions of the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission, hereby
ratifying and confirming his signature as it may be signed by said attorneys or
any of them, to the Registration Statement and any and all amendments thereto.
IN WITNESS WHEREOF, the undersigned has signed these presents this 6th day
of January, 1997.
/s/ Alexander R. Castaldi
---------------------------------
Alexander R. Castaldi
<PAGE>
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Freedom
Chemical Company (the "Company") hereby severally constitutes and appoints Fred
P. Rullo and Brian F. McNamara, and each of them singly, his true and lawful
attorneys with full power to them, and each of them singly, to sign for him and
in his name in his capacity as a director of the Company, the Registration
Statement on Form S-1 (No. 33-84778) and any and all pre-effective and
post-effective amendments to the Registration Statement, and generally to do all
such things in his name and on his behalf in his capacity as director to enable
the Company to comply with the provisions of the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission, hereby
ratifying and confirming his signature as it may be signed by said attorneys or
any of them, to the Registration Statement and any and all amendments thereto.
IN WITNESS WHEREOF, the undersigned has signed these presents this 3rd day
of January, 1997.
/s/ Vincent P. Langone
-----------------------------------
Vincent P. Langone
<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 _______,
_______, 1997, 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 Transmission:
(for Eligible Institutions Only)
(212) 571-3080
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 10 5/8% 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 Company's issued and outstanding 10 5/8% Senior
Subordinated Notes due 2006 (the "Old Notes") from the registered holders
thereof (the "Holders").
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.
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.
<PAGE>
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> <C> <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 meeting the requirements of the Securities Act of
1993, as amended, in connection with any resale of such New Notes;
however, by so acknowledging and by delivering such 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. If the undersigned is a
broker-dealer that will receive New Notes, it represents that the Old Notes to
be exchanged for the New Notes were acquired as a result of market-making
activities or other trading activities.
2
<PAGE>
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 irrevocably constitutes and appoints the Exchange
Agent as the undersigned's true and lawful agent and attorney-in-fact with
respect to such tendered Old Notes, with full power of substitution, among other
things, to cause the Old Notes to be assigned, transferred and exchanged. The
undersigned hereby represents and warrants that the undersigned has full power
and authority to tender, sell, assign and transfer the Old Notes, and to acquire
Exchange Notes issuable upon the exchange of such tendered Old Notes, and that,
when the same are accepted for exchange, 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 is participating in, intends to participate in or 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 meeting the
requirements of the Securities Act in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus meeting the
requirements of the Securities Act, 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."
3
<PAGE>
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.
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4)
- --------------------------------------------------------------------------------
To be completed ONLY if certificates for Old Notes not exchanged and/or
New Notes are to be issued in the name of and sent to someone other than the
person or persons whose signature(s) appear(s) on this Letter above, or if Old
Notes delivered by book-entry transfer which are not accepted for exchange are
to be returned by credit to an account maintained at the Book-Entry Transfer
Facility other than the account indicated above.
Issue: New Notes and/or Old Notes to:
Name(s)_________________________________________________________________________
(Please Type or Print)
________________________________________________________________________________
(Please Type or Print)
Address_________________________________________________________________________
________________________________________________________________________________
(Zip Code)
(Complete Substitute Form W-9)
|_| Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below.
________________________________________________________________________________
(Book-Entry Transfer Facility
Account Number, if applicable)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
- --------------------------------------------------------------------------------
To be completed ONLY if certificates for Old Notes not exchanged and/or
New Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter above or to such person or persons at an
address other than shown in the box entitled "Description of Old Notes" on this
Letter above.
Mail: New Notes and/or Old Notes to:
Name(s)_________________________________________________________________________
(Please Type or Print)
________________________________________________________________________________
(Please Type or Print)
Address_________________________________________________________________________
________________________________________________________________________________
(Zip Code)
- --------------------------------------------------------------------------------
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:____________________________________________________________________, 199_
x _______________________________________ ____________________________, 199_
x _______________________________________ ____________________________, 199_
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: ______________________________________________________________, 199_
- --------------------------------------------------------------------------------
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 (each 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 of a tender of Old Notes to be effective, a written 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 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
8
<PAGE>
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 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>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
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 |_|
---------------------------------------------------------------------------------------------------
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 Bank of New York, as exchange agent (the
"Exchange Agent") 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 facsimile
transmission, mail or hand delivery to 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) 571-3080
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.
Principal Amount of Old Notes
Tendered:*
$_____________________________________
Certificate Nos. (if available):
______________________________________
Total Principal Amount Represented by
Old Notes Certificate(s):
$_____________________________________
If Old Notes will be delivered by book-entry
transfer to The Depository Trust Company,
provide account number.
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
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.
_____________________________________ ________________________________________
Name of Firm Authorized Signature
_____________________________________ ________________________________________
Address Title
_____________________________________ Name:___________________________________
Zip Code (Please Type or Print)
Area Code and Tel. No._______________ Dated:__________________________________
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED
LETTER OF TRANSMITTAL.
