<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO __________
1-4462
--------------------------
Commission File Number
STEPAN COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 36 1823834
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Edens and Winnetka Road Northfield, Illinois 60093
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(Address of principal executive offices)
Registrant's telephone number (708) 446-7500
----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X__ No _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at July 31, 1995
-------------------------------------- ------------------------------------
<S> <C>
Common Stock, $1 par value 9,985,381 Shares
</TABLE>
<PAGE> 2
Part I FINANCIAL INFORMATION
Item 1 - Financial Statements
STEPAN COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1995 and December 31, 1994
Unaudited
<TABLE>
<CAPTION>
(Dollars in Thousands) 6/30/95 12/31/94
------- --------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 1,702 $ 2,452
Receivables, net 81,979 70,385
Inventories (Note 2) 44,806 45,464
Other current assets 10,672 11,070
---------- ----------
Total current assets 139,159 129,371
---------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Cost 432,567 417,654
Less accumulated depreciation 249,014 233,997
---------- ----------
183,553 183,657
---------- ----------
OTHER ASSETS 15,882 11,920
---------- ----------
Total assets $ 338,594 $ 324,948
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 7,901 $ 8,043
Accounts payable 31,576 37,904
Accrued liabilities 31,841 34,509
---------- ----------
Total current liabilities 71,318 80,456
---------- ----------
DEFERRED INCOME TAXES 33,850 32,976
---------- ----------
LONG-TERM DEBT, less current maturities (Note 3) 102,530 89,795
---------- ----------
DEFERRED REVENUE (Note 6) 9,235 10,419
---------- ----------
STOCKHOLDERS' EQUITY:
5-1/2% convertible preferred stock, cumulative, voting without par value;
authorized 2,000,000 shares; issued 797,400 shares in 1995 and 799,196
shares in 1994 19,935 19,980
Common stock, $1 par value; authorized 15,000,000 shares;
issued 10,046,194 shares in 1995 and 10,028,544 shares in 1994 10,046 10,029
Additional paid-in capital 4,191 3,983
Cumulative translation adjustments (2,692) (3,491)
Retained earnings (approximately $42,692 unrestricted in 1995 and $36,336 in 1994) 91,511 82,445
---------- ----------
122,991 112,946
Less - Treasury stock, at cost (Note 5) 1,330 1,644
---------- ----------
Stockholders' equity 121,661 111,302
---------- ----------
Total liabilities and stockholders' equity $ 338,594 $ 324,948
========== ==========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these condensed consolidated balance sheets.
<PAGE> 3
STEPAN COMPANY
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1995 and 1994
Unaudited
<TABLE>
<CAPTION>
(In Thousands, Three Months Ended Six Months Ended
except per share amounts) June 30 June 30
-------------------- --------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 136,258 $ 112,305 $ 271,044 $ 219,584
---------- ---------- ----------- ------------
COSTS AND EXPENSES:
Cost of Sales 110,451 91,648 218,582 179,784
General and Administrative 5,919 3,301 11,723 8,238
Marketing 4,670 4,118 9,222 8,339
Research, Development 4,584 4,523 9,083 9,163
and Technical Services
Interest, net (Note 3) 2,128 1,803 3,992 3,721
---------- ---------- ----------- ------------
127,752 105,393 252,602 209,245
---------- ---------- ----------- ------------
PRE-TAX INCOME 8,506 6,912 18,442 10,339
PROVISION FOR INCOME TAXES 3,088 2,834 6,915 4,239
---------- ----------- ----------- ------------
NET INCOME $ 5,418 $ 4,078 $ 11,527 $ 6,100
========== =========== =========== =============
NET INCOME PER
COMMON SHARE (Note 4)
Primary $0.52 $0.38 $1.10 $0.56
===== ===== ===== =====
Fully Diluted $0.49 $0.37 $1.05 $0.55
===== ===== ===== =====
DIVIDENDS PER COMMON SHARE $0.110 $0.105 $0.220 $ 0.210
====== ====== ====== =======
AVERAGE COMMON SHARES
OUTSTANDING 9,977 9,914 9,965 9,906
===== ===== ===== =====
</TABLE>
All 1994 share and per share data have been retroactively adjusted for the
stock split effective December 15, 1994.
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
<PAGE> 4
STEPAN COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1995 and 1994
Unaudited
<TABLE>
<CAPTION>
(Dollars In Thousands) 6/30/95 6/30/94
------- -------
<S> <C> <C>
NET CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 11,527 $ 6,100
Depreciation and amortization 15,360 15,117
Deferred income taxes 857 419
Prepaid pension cost (307) (147)
Other non-cash items (150) 365
Deferred revenue (Note 6) (1,184) 5,808
Changes in Working Capital:
Receivables, net (11,594) (9,523)
Inventories 658 6,425
Accounts payable and accrued liabilities (8,728) (5,040)
Other 398 105
-------- ---------
Net Cash Provided by Operating Activities 6,837 19,629
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment (14,304) (20,797)
Investment in joint venture (3,750) (1,000)
Other non-current assets 40 (416)
-------- ---------
Net Cash Used for Investing Activities (18,014) (22,213)
-------- ---------
CASH FLOWS FROM FINANCING AND OTHER RELATED ACTIVITIES
Revolving debt and notes payable to banks, net (18,395) 13,147
Other debt borrowings 40,000 -
Other debt repayments (9,062) (7,349)
Sales (Purchases) of treasury stock, net 314 (108)
Dividends paid (2,729) (2,620)
Other non-cash items 299 456
-------- ---------
Net Cash Provided by Financing and Other Related Activities 10,427 3,526
-------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (750) 942
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $ 2,452 $ 1,515
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,702 $ 2,457
======== =========
CASH PAID DURING THE PERIOD FOR:
Interest $ 4,650 $ 4,234
Income taxes $ 8,440 $ 4,202
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
<PAGE> 5
STEPAN COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and December 31, 1994
Unaudited
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by the company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate and make the
information presented not misleading. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and the notes thereto included in the company's latest Annual
Report to Stockholders and the Annual Report to the Securities and Exchange
Commission on Form 10-K for the year ended December 31, 1994. In the
opinion of management all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the consolidated financial position
of Stepan Company as of June 30, 1995, and the consolidated results of
operations for the three and six months then ended, and cash flows for the
six months then ended, have been included.
Because the inventory determination under the LIFO method can only be made
at the end of each year based on the inventory levels and costs at that
point, interim LIFO determinations must necessarily be based upon
management's estimates of expected year-end inventory levels and costs.
Since future estimates of inventory levels and prices are subject to many
forces beyond the control of management, interim financial results are
subject to final year-end LIFO inventory amounts.
2. INVENTORIES
Inventories include the following amounts:
<TABLE>
<CAPTION>
(Dollars in Thousands) 6/30/95 12/31/94
------- --------
<S> <C> <C>
Inventories valued primarily on LIFO basis -
Finished products $ 27,650 $ 27,632
Raw materials 17,156 17,832
-------- --------
Total inventories $ 44,806 $ 45,464
======== ========
</TABLE>
If the first-in, first-out (FIFO) inventory valuation method had been used for
all inventories, inventory balances would have been approximately $14,500,000
and $13,200,000 higher than reported at June 30, 1995, and December 31, 1994,
respectively.
<PAGE> 6
3. DEBT
During June, 1995, the company entered into unsecured long-term loan
agreements totaling $40 million with interest rates of 7.69 to 7.77 percent
per annum and maturities of 10 to 15 years. The proceeds of the new loans
were used to reduce unsecured bank debt. The terms and conditions of the
new loan agreements are essentially the same as those of previously
existing agreements.
Long-term debt includes unsecured bank debt of $3.8 million and $21.8
million at June 30, 1995, and December 31, 1994, respectively. The
unsecured bank debt is available to the company under a line of credit
based on rates that fluctuate daily. The average interest rate on
unsecured bank debt for the three month period ended June 30 was 6.74
percent and 4.78 percent for 1995 and 1994, respectively. For the six
month period ended June 30, 1995 and 1994, the average interest rate was
6.71 percent and 4.56 percent, respectively.
4. NET INCOME PER COMMON SHARE
Primary net income per common share amounts are computed by dividing net
income less the convertible preferred stock dividend requirement by the
weighted average number of common shares outstanding. Fully diluted net
income per share amounts are based on an increased number of common shares
that would be outstanding assuming the exercise of certain outstanding
stock options and the conversion of the convertible preferred stock, when
such conversion would have the effect of reducing net income per share.
For computation of earnings per share, reference should be made to Exhibit
11.
5. TREASURY STOCK
At June 30, 1995, treasury stock consists of 20,208 shares of preferred
stock and 62,607 shares of common stock. At December 31, 1994, treasury
stock consisted of 20,208 shares of preferred stock and 84,280 shares of
common stock.
6. DEFERRED REVENUE
During 1994, the company received $12.9 million of prepayments on certain
multi-year commitments for future shipments of products. As the
commitments are fulfilled, a proportionate share of the deferred revenue is
taken into income. Deferred revenue of $.6 million and $1.2 million were
recognized as income during the three month and six month periods ended
June 30, 1995, respectively. Related deferred revenue at June 30, 1995, is
$11.6 million of which $2.4 million is included in the "Accrued
liabilities" caption of the Condensed Consolidated Balance Sheets.
<PAGE> 7
7. CONTINGENCIES
There are a variety of legal proceedings pending or threatened against the
company. Some of these proceedings may result in fines, penalties,
judgments or costs being assessed against the company at some future time.
The company's operations are subject to extensive local, state and federal
regulations, including the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("Superfund") and the Superfund
amendments of 1986. The company and others, have been named as potentially
responsible parties at affected geographic sites. As discussed in
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in this filing, the company believes that it has made
adequate provisions for the costs it may incur with respect to these sites.
The company has estimated a range of possible environmental and legal
losses from $6.5 million to $21.3 million at June 30, 1995. At June 30,
1995, the company's reserve was $6.6 million for legal and environmental
matters compared to $6.9 million at December 31, 1994. While the company
has insurance policies that may cover some of its environmental costs, it
does not record those claims until such time as they become probable.
The company has received some insurance recoveries in the past, primarily
related to indemnification of legal costs. Currently, the company has not
recorded any outstanding insurance claims.
At certain of the sites, estimates cannot be made of the total costs of
compliance, or the company's share of such costs; accordingly, the company
is unable to predict the effect thereof on future results of operations.
In the event of one or more adverse determinations in any annual or interim
period, the impact on results of operations for those periods could be
material. However, based upon the company's present belief as to its
relative involvement at these sites, other viable entities'
responsibilities for cleanup and the extended period over which any costs
would be incurred, the company believes that these matters will not have a
material effect on the company's financial position. Certain of these
matters are discussed in Item 3, Legal Proceedings, in the 1994 Form 10-K
Annual Report and in other filings of the company with the Securities and
Exchange Commission, which filings are available upon request from the
company.
<PAGE> 8
STEPAN COMPANY
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is management's discussion and analysis of certain significant
factors which have affected the company's financial condition and results of
operations during the interim period included in the accompanying condensed
consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
For the first half of 1995, cash from operations has totaled $6.8 million,
compared to $19.6 million for the same period in 1994. Cash from operations in
1994 included $5.8 million in customer advances. Increased working capital
requirements accounted for essentially all of the remaining difference in
operating cash flows from year to year.
Increased demands for working capital have totaled $19.3 million for the first
half of 1995 compared to $8.0 million during 1994, an increase of $11.3
million. During 1994, inventories fell by $6.4 million for the first six
months, compared to a decrease of $.6 million for this year. Higher sales
drove receivables up by $11.6 million for the first half of 1995, compared to
$9.5 million for the same period last year.
Capital expenditures have totaled $14.3 million for the first six months of
1995, down from $20.8 million for the same period last year. Capital
expenditures are projected to total $38.4 million for the current year,
compared to $42.9 million during 1994. Included in current year investing
activities is a $3.8 million capital contribution to joint venture operation.
Since December 31, 1994, total company debt has increased by $12.6 million to
close the second quarter at $110.4 million. Since year-end, the ratio of
long-term debt to long-term debt plus shareholders' equity has increased from
44.7 percent to 45.7 percent. For the balance of 1995, total company debt is
expected to decline modestly due primarily to projected decreases in working
capital requirements.
During June, 1995, the company entered into unsecured long-term loan agreements
totaling $40 million with maturities of 10 to 15 years. The proceeds of the
new loans were used to reduce domestic bank debt, which totaled $3.8 million as
of June 30, 1995. The terms and conditions of the new loan agreements are
essentially the same as those of previously existing agreements.
The company maintains contractual relationships with its domestic banks which
provide for $45 million of revolving credit which may be drawn upon as needed
for general corporate purposes. The company also meets short-term liquidity
requirements through uncommitted bank lines of credit and bankers' acceptances.
The company's foreign subsidiaries maintain committed and uncommitted bank
lines of credit in their respective countries to meet working capital
requirements as well as to fund capital expenditure programs.
<PAGE> 9
The company anticipates that cash from operations and from committed credit
facilities will be sufficient to meet anticipated capital expenditure programs,
dividend requirements and other planned financial commitments in 1995 and for
the foreseeable future.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1995 and 1994
Net income for the second quarter ended June 30, 1995 was $5.4 million, or $.52
per share, up 33 percent from $4.1 million, or $.38 per share recorded for the
same quarter a year earlier. Net sales grew 21 percent to $136.3 million, up
from $112.3 million reported last year. Net sales by product group were
<TABLE>
<CAPTION>
(Dollars in Millions) Three Months
Ended June 30
---------------------------------
1995 1994 % Change
----- ---- --------
<S> <C> <C> <C>
Net Sales:
Surfactants $ 95.5 $ 83.7 + 14
Polymers 33.5 18.6 + 80
Specialty Products 7.3 10.0 - 27
------ --------
Total $136.3 $112.3 + 21
====== ========
</TABLE>
Surfactants increase in net sales was due mainly to an 18 percent increase in
sales volume. A large part of the volume gain stemmed from domestic shipments
of concentrated products manufactured utilizing the recent neutralization
capacity expansion. From the broad commercial customer base, higher selling
prices resulting from raw material cost increases also contributed to higher
net sales. Mexico reported higher sales on higher volume and selling prices
which more than offset the impact of the devalued peso. European sales were up
due to a stronger french franc and a pass through of higher raw material costs.
Surfactants gross profit increased 14 percent from $16.2 million to $18.5
million for the second quarter of 1995. Gross profit rose primarily on higher
sales from the larger national customers. The broad commercial customer base
reported a relatively flat gross profit between years. Mexican gross profit
was up on higher sales volume and a better sales mix. European gross profit
declined due to competitive price pressures in the European fabric softener
market which limited our ability to pass along raw material cost increases.
Canadian gross profit declined slightly from a year ago on relatively unchanged
sales volume.
<PAGE> 10
Polymers net sales were up due to significantly higher sales volumes and
selling prices of phthalic anhydride (PA) and polyurethane polyols. Higher
selling prices were triggered by significant raw material price increases.
Shipments of PA are expected to be down due to a planned maintenance shut down
in the third quarter. Sales of polyurethane systems declined on lower sales
volume.
Polymers gross profit for the quarter rose 138 percent to $6.2 million from
$2.6 million in the prior year. Higher PA sales volume and margins generated
the increase. Partially offsetting the increase was the lower polyurethane
polyols gross profit despite higher sales volume due to the inability to pass
along all the material cost increases. Polyurethane systems gross profit
declined on lower sales volume.
Specialty products net sales were down because sales of some lower margin
products were discontinued in the current year. Gross profit for specialty
products decreased by $.7 million to $1.1 million as a result of the
discontinued products and increased manufacturing costs between years.
Operating expenses for the second quarter increased 27 percent over the same
quarter in 1994. Administrative expenses increased 79 percent representing a
majority of the operating expense increase as a result of higher legal and
environmental expenses. The prior year's quarter legal and environmental
expenses included the favorable impact of insurance recoveries related to
previously incurred legal and environmental costs. Marketing expenses rose 13
percent primarily due to higher salaries. Research and development expenses
increased a slight one percent.
Interest expense for the quarter increased 18 percent primarily as a result of
higher borrowings and higher short-term borrowing rates.
Six Months Ended June 30, 1995 and 1994
Net income for the six months ended June 30, 1995 was $11.5 million, or $1.10
per share, up 89 percent from $6.1 million, or $.56 per share recorded for the
same period a year ago. Net sales grew 23 percent to $271.1 million, up from
$219.6 million reported last year. Net sales by product group were
<TABLE>
<CAPTION>
(Dollars in Millions) Six Months
Ended June 30
-------------------------------
1995 1994 % Change
----- ---- --------
Net Sales:
<S> <C> <C> <C>
Surfactants $ 194.3 $ 166.9 + 16
Polymers 60.8 34.9 + 74
Specialty Products 16.0 17.8 - 10
------- -------
Total $ 271.1 $ 219.6 + 23
======= =======
</TABLE>
<PAGE> 11
Surfactants increase in net sales was due in large part to a 14 percent
increase in sales volume. Higher average selling prices resulting from raw
material cost increases also contributed to higher net sales. A large part of
the volume gain was from shipments of new concentrated products this year.
Strong domestic sales volume was also supported by volume increase in Europe,
Canada, and Mexico. Reported sales in Mexico were down despite higher volume
due to the negative impact of the devalued peso.
Surfactants gross profit increased 19 percent from $32.4 million to $38.6
million for the first half of 1995. Gross profit rose sharply on higher
domestic sales volume and favorable mix of higher margin products. Mexico's
gross profit was up because of higher sales volume. Canadian and European
gross profit was relatively unchanged from a year ago.
Polymers net sales were up due to higher sales volumes of phthalic anhydride
(PA) and polyurethane polyols. Higher selling prices also contributed to the
increased sales reflecting the pass through of rising raw material costs along
with some margin improvement for PA. Shipments for P.A. will be down for the
second half due to a planned third quarter maintenance shutdown. Sales of
polyurethane systems declined on lower sales volume.
Polymers gross profit for the first half of 1995 rose 133 percent to $11.5
million from $4.9 million in the prior year. Higher PA sales volume and margins
generated all of the increase. Polyurethane polyols gross profit was relatively
unchanged despite higher selling prices which were offset by the raw material
cost increases. Polyurethane systems gross profit declined on lower sales
volume.
Specialty products net sales were down on reduced volume. Sales of some lower
margin products were discontinued in the current year. Gross profit reported a
slight decline of $.1 million to $2.4 million from $2.5 million recorded a year
ago.
Operating expenses for the first half increased 17 percent over the same period
in 1994. Administrative expenses increased 42 percent representing a majority
of the operating expense increase as a result of higher legal and environmental
expenses. Prior year's first half included the favorable impact of insurance
recoveries related to previously incurred legal and environmental costs.
Marketing expenses rose 11 percent primarily due to higher salaries. Research
and development expenses declined one percent.
Interest expense increased seven percent primarily as a result of higher
short-term borrowing rates.
<PAGE> 12
ENVIRONMENTAL AND LEGAL MATTERS
The company is subject to extensive federal, state and local environmental laws
and regulations. Although the company's environmental policies and practices
are designed to ensure compliance with these laws and regulations, future
developments and increasingly stringent environmental regulation could require
the company to make additional unforeseen environmental expenditures. The
company will continue to invest in the equipment and facilities necessary to
comply with existing and future regulations. During the first six months of
1995, company expenditures for capital projects related to the environment were
$2.4 million and should approximate $9 million to $10 million for the full year
1995. These projects are capitalized and typically depreciated over 10 years.
Capital spending on such projects is likely to be somewhat lower in future
years as 1995 includes some larger projects. Recurring costs associated with
the operation and maintenance of environmental protection facilities in ongoing
operations were $3.4 million for the first six months of 1995. While difficult
to project, it is not anticipated that these recurring expenses will increase
significantly in the future.
The company has been named by the government as a potentially responsible party
at 17 waste disposal sites where cleanup costs have been or may be incurred
under the federal Comprehensive Environmental Response, Compensation and
Liability Act and similar state statutes. In addition, damages are being
claimed against the company in general liability actions for alleged personal
injury or property damage in the case of some disposal and plant sites. The
company believes that it has made adequate provisions for the costs it may
incur with respect to these sites. The company has estimated a range of
possible environmental and legal losses from $6.5 million to $21.3 million at
June 30, 1995. At June 30, 1995 the company's reserve was $6.6 million for
legal and environmental matters compared to $6.9 million at December 31, 1994.
During the first six months of 1995, expenditures related to legal and
environmental matters approximated $3.1 million. The company expects to
receive reimbursement of environmental defense costs from insurers. However,
currently the company has no receivable recorded for such claims. At certain
of the sites, estimates cannot be made of the total costs of compliance or the
company's share of such costs; accordingly, the company is unable to predict
the effect thereof on future results of operations. In the event of one or
more adverse determinations in any annual or interim period, the impact on
results of operations for those periods could be material. However, based upon
the company's present belief as to its relative involvement at these sites,
other viable entities' responsibilities for cleanup and the extended period
over which any costs would be incurred, the company believes that these matters
will not have a material effect on the company's financial position. Certain
of these matters are discussed in Item 3, Legal Proceedings, in the 1994 Form
10-K Annual Report and in other filings of the company with the Securities and
Exchange Commission, which filings are available upon request from the company.
<PAGE> 13
ACCOUNTING STANDARD
In March, 1995, the Financial Accounting Standards Board 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").
This standard must be adopted no later than the 1996 reporting year, but can be
adopted early. SFAS No. 121 requires that operating assets and associated
goodwill be written down to fair value whenever an impairment review indicates
that the carrying value cannot be recovered on an undiscounted cash flow basis.
After any such noncash write-down, results of operations would be favorably
affected by reduced depreciation, depletion and amortization charges. The
Company has initiated a review of SFAS No. 121 and, at this time, cannot
provide an assessment of the impact of adoption. Adoption of the accounting
standard most likely will occur in 1996.
<PAGE> 14
Part II OTHER INFORMATION
-------------------------------------------------------------------------------
Item 1 - Legal Proceedings
Reference is made to the Company's Report on Form 10-K for the year ended
December 31, 1994 concerning the Alvear v. Leonard Electronics Products Co. et.
al., Brownsville, Texas case. The Company has reached a settlement in this
matter and has fully provided reserves to cover the terms of the settlement.
Reference is made to the Company's Report Form 10-K for the year ended
December 31, 1994, regarding the site United States of American v. Jerome
Lightman, et. al. (92 CV 4710 [JBS]). The Company has been informed that the
United State's Government's estimate of past cost has now risen to
approximately $9.1 million from approximately $7.4 million. The Company's
liability, if any, for this amount will depend on what the final determination
of the Company's allocated share is, which is the subject matter of this
lawsuit.
On May 30, 1995, the Company received notification that it might be a
potentially responsible party at a site entitled Batavia Landfill located in
Batavia, New York. The Company has responded that it has no knowledge of this
site or use of the site by the Company. The Company, at this time, does not
believe it has any liability with regard to this site.
On June 13, 1995, the Company's wholly-owned Canadian subsidiary received
notification that Canada Development Corporation, a Canadian entity from which
the Company's Canadian subsidiary had purchased assets, might be a potentially
responsible party at the Chem-Trol Pollution Services Inc. Site, located in
Hamburg, New York. The alleged activities at this site apparently occurred
between 1971 and 1972 which pre- dates the incorporation of the Company's
Canadian subsidiary by approximately twelve years. The Company does not
believe at this time, that it or its wholly-owned Canadian subsidiary has any
liability with regard to this site.
<PAGE> 15
Item 6 - Exhibits and Reports on Form 8-K
(A) Exhibits
(4)h Copy of Loan Agreement dated June 15, 1995, with Aid
Association for Lutherans, the Northwestern Mutual Life
Insurance Company and The Mutual Life Insurance Company
of New York
(11) Statement re computation of Per Share Earnings
(27) Financial Data Schedule
(B) Reports on Form 8-K
None
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STEPAN COMPANY
/s/ Walter J. Klein
Walter J. Klein
Vice President - Finance
Principal Financial and Accounting Officer
Date: 8/11/95
<PAGE> 1
EXHIBIT (4)h
________________________________________________________________________________
STEPAN COMPANY
_____________________________________________
$10,000,000 7.69% Promissory Notes, Series A,
Due June 30, 2005
and
$30,000,000 7.77% Promissory Notes, Series B,
Due June 30, 2010
_____________________________________________
LOAN AGREEMENT
Dated as of June 15, 1995
<PAGE> 2
TABLE OF CONTENTS
(not part of Agreement)
-----------------------
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
LOAN AGREEMENT I
Section 1. The Notes and Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3. Acquisition for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Conditions of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6. Method and Place of Payment of Principal, Premium and Interest . . . . . . . . . . . . . . . . 12
Section 7. Statements, Reports and Certificates to be Delivered by the Company . . . . . . . . . . . . . . 12
Section 8. Registered Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 9. Payments of Certain Expenses by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10. Survival of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 11. No Oral Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 12. Communications and Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 13. Law Governing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 14. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
PROMISSORY NOTES - EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. The Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Payments to Registered Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 4. Prepayment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(A) Required Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(B) Optional Prepayments without Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(C) Optional Prepayment with Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(D) Prepayment on Failure of Holders to Consent to Change of Control . . . . . . . . . . . . . . . 4
Section 5. Partial Prepayments to be Pro Rata where More than One Series A Note Outstanding . . . . . . . 5
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
Section 6. Notice of Prepayment and Other Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(A) Prepayment Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(B) Mailing of Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 7. Notes Due and Interest Ceases on Prepayment Date; Evidence of Partial Prepayment; New Notes . . 6
Section 8. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(A) Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(B) Payment of Principal, Premium and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(C) Maintenance of Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(D) Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(E) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(F) Payment of Taxes, Assessments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(G) Payment of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(H) Keeping of Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(I) Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(J) Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(K) Notice of Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 9. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(A) Limitations on Funded Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(B) Limitations on Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(C) Limitations on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(D) Limitations on Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(E) Limitation on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(F) Limitation on Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(G) Limitations on Dispositions of Stock or Indebtedness of Restricted Subsidiaries . . . . . . . . 16
(H) Maintenance of Consolidated Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(I) Limitations on Mergers, Consolidations and Sales of Assets . . . . . . . . . . . . . . . . . . 17
(J) Limitations on Sale-and-Leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(K) Limitation on Rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(L) Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(M) Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 10. Consents, Waivers and Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 11. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 12. Events of Default and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 14. Loss, Theft, Destruction or Mutilation of Note . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 15. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 16. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 17. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
PROMISSORY NOTES - EXHIBIT B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 1. The Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Payments to Registered Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 4. Prepayment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(A) Required Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(B) Optional Prepayments without Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(C) Optional Prepayment with Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(D) Prepayment on Failure of Holders to Consent to Change of Control . . . . . . . . . . . . . . . 4
Section 5. Partial Prepayments to be Pro Rata where More than One Series B Note Outstanding . . . . . . . 5
Section 6. Notice of Prepayment and Other Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(A) Prepayment Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(B) Mailing of Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 7. Notes Due and Interest Ceases on Prepayment Date; Evidence of Partial Prepayment; New Notes . . 6
Section 8. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(A) Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(B) Payment of Principal, Premium and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(C) Maintenance of Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(D) Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(E) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(F) Payment of Taxes, Assessments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(G) Payment of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(H) Keeping of Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(I) Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(J) Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(K) Notice of Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 9. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(A) Limitations on Funded Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(B) Limitations on Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(C) Limitations on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(D) Limitations on Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(E) Limitation on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(F) Limitation on Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(G) Limitations on Dispositions of Stock or Indebtedness of Restricted Subsidiaries . . . . . . . . 16
(H) Maintenance of Consolidated Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C> <C>
(I) Limitations on Mergers, Consolidations and Sales of Assets . . . . . . . . . . . . . . . . . . 16
(J) Limitations on Sale-and-Leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(K) Limitation on Rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(L) Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(M) Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 10. Consents, Waivers and Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 12. Events of Default and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 13. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 14. Loss, Theft, Destruction or Mutilation of Note . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 15. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 16. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 17. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
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<PAGE> 6
Description of Properties,
Subsidiaries, Pending Litigation, etc.
(Exhibit C to Loan Agreement)
-6-
<PAGE> 7
Stepan Company Loan Agreement
STEPAN COMPANY
Edens at Winnetka Avenue
Northfield, Illinois 60093
LOAN AGREEMENT
Dated as of June 15, 1995
To the Institution Listed
on Schedule I Attached Hereto
Which is a Signatory to This
Agreement
Ladies and Gentlemen:
The undersigned, Stepan Company, a Delaware corporation (herein called
the "Company"), agrees with you as follows:
Section 1. The Notes and Commitment;.
(A) Authorization and Description of Notes. The Company proposes
to authorize borrowings in the aggregate principal amount of $40,000,000, such
borrowings to be evidenced by two series of Promissory Notes (herein
collectively called "Notes") of the Company as follows:
(a) $10,000,000 aggregate principal amount of 7.69%
Promissory Notes, Series A of the Company (the "Series A Notes"), to
be dated as of the date of issue, to bear interest from such date at
the rate of 7.69% per annum payable semi-annually on the thirtieth day
of each June and December in each year (commencing on the first of
such dates after the date hereof), to be expressed to mature on June
30, 2005 and to have the other terms and provisions and to be
substantially in the form attached to this agreement as Exhibit A; and
(b) $30,000,000 aggregate principal amount of 7.77%
Promissory Notes, Series B of the Company (the "Series B Notes"), to
be dated as of the date of issue, to bear interest from such date at
the rate of 7.77% per annum payable semi-annually on the thirtieth day
of each June and December in each year (commencing on the first of
such dates after the date hereof), to be expressed to mature on June
30, 2010 and to have the other terms and provisions and to be
substantially in the form attached to this agreement as Exhibit B.
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<PAGE> 8
Stepan Company Loan Agreement
The term "Notes" as used in this agreement shall include each
promissory note, regardless of series, delivered under this agreement and the
other agreements referred to in paragraph (C) of this section 1, and each
promissory note delivered in substitution or exchange for any such promissory
note, and, where applicable, shall include the singular number as well as the
plural. The term "Note" shall mean one of the Notes. Each term defined in
Exhibits A and B shall have such defined meaning for the purpose of this
agreement unless this agreement otherwise requires.
(B) The Loans and Closing Dates. Subject to the terms and
conditions of this agreement and on the basis of the representations and
warranties hereinafter set forth, the Company hereby agrees to borrow from you,
and you hereby agree to lend to the Company, on June 30, 1995, or such other
date as shall be mutually agreed upon (the "Closing Date"), the aggregate
principal amounts to be evidenced by Notes of the designated series all as set
forth opposite your name on Schedule I. The loans will be made at the offices
of Chapman and Cutler, 111 W. Monroe Street, Chicago, Illinois 60603, at 11:00
A.M. Chicago time on the Closing Date in Federal or other funds current and
immediately available at The First National Bank of Chicago (ABA No.
071000013), One First National Plaza, Chicago, Illinois 60670, against delivery
of Notes of the respective series indicated on Schedule I in the aggregate
principal amount of the loans then scheduled to be made.
The Notes to be delivered to you on the Closing Date will be in the
form of one Note for each series, in the aggregate principal amount of the loan
specified to be made by you on such Closing Date, registered in your name or in
the name of such nominee all as you may specify at any time prior to the date
fixed for delivery.
(C) Other Agreements. Simultaneously with the execution and
delivery of this agreement, the Company is entering into substantially
identical agreements with the other lenders listed on Schedule I under which
such other lenders agree to lend to the Company the principal amounts set
opposite such lenders' names in Schedule I and your obligations and the
obligations of the Company hereunder are subject to the execution and delivery
of substantially identical agreements by the other lenders. The obligations of
each lender shall be several and not joint and no lender shall be liable or
responsible for the acts of any other.
Section 2. Representations and Warranties;.
The Company represents and warrants that:
(A) Financial Statements. The consolidated balance
sheets of the Company and its subsidiaries for the last five fiscal
years of the Company ending December 31, 1994, and the consolidated
statements of income and changes in financial position or
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<PAGE> 9
Stepan Company Loan Agreement
cash flows of the Company and its subsidiaries for such fiscal years,
including in each case the related schedules and notes, all
accompanied by the opinion of Arthur Andersen & Co., independent
certified public accountants, and the consolidated balance sheet of
the Company and its subsidiaries for the fiscal quarter of the Company
ending March 31, 1995, and the consolidated statements of income and
cash flows of the Company and its subsidiaries for such three month
period, copies of all of which balance sheets and statements have
heretofore been delivered to you, were prepared in accordance with
good accounting practice consistently applied throughout the periods
involved, are correct and complete and fairly present the financial
position and results of operations of the Company and its subsidiaries
for each such fiscal year and, subject to year end audit, for such
quarterly fiscal period. There has been no change in the financial
condition of the Company and its subsidiaries as shown on its latest
audited consolidated balance sheet, other than changes in the ordinary
course of business which have not, in the aggregate, been materially
adverse.
(B) Business. You have heretofore been furnished with
copies of (x) the annual report as filed with the Securities and
Exchange Commission on Form 10-K for year ended December 31, 1994 (the
"10-K") which generally sets forth the business conducted and proposed
to be conducted by the Company and its subsidiaries and (y) the
quarterly report as filed with the Securities and Exchange Commission
on Form 10-Q for the quarterly fiscal period ended March 31, 1995 (the
"10-Q").
(C) Properties and Subsidiaries. Exhibit C to this
agreement correctly sets forth (1) a brief description of the
properties (including material leaseholds) of the Company, (2) the
jurisdiction or jurisdictions in which the Company is incorporated or
owns property or conducts its business, and a statement as to whether
the Company is qualified or licensed as a foreign corporation in each
jurisdiction, other than the jurisdiction of its incorporation, in
which it owns property or conducts business, (3) a list of the
subsidiaries of the Company showing in each case the number of shares
of stock of each class outstanding and the shares of each class as of
the date hereof owned by the Company, and (4) a list of the
subsidiaries of the Company which the Company hereby designates as
restricted subsidiaries pursuant to paragraph (U) of section 11 of the
Notes.
(D) No Material Adverse Changes. Since December 31, 1994
neither the business or operations of the Company or any of its
subsidiaries nor the properties or assets of the Company and its
subsidiaries, taken as a whole, have been materially and adversely
affected in any way as the result of any act or event, including,
without
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<PAGE> 10
Stepan Company Loan Agreement
limitation: fire, explosion, flood, drought, storm, earthquake,
accident or act of God; strike, lockout, combination of workmen or
other disturbance; riot, atomic explosion, activity of armed forces or
of the public enemy; or embargo, nationalization, condemnation,
requisition or taking of property or cancellation or modification of
contracts by any domestic or foreign government.
(E) No Pending Material Litigation or Proceedings. There
are no actions, suits or proceedings pending or, to the best knowledge
and belief of the Company, threatened against or affecting the
Company, at law or in equity or before or by any federal, state,
municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, which may result in
any material adverse change in the business, properties or assets or
in the condition, financial or otherwise, of the Company. The Company
is not (1) in default with respect to any order, writ, injunction or
decree of any court or (2) in default in any material respect under
any order, regulation (including but not limited to any environmental
regulation), permit, license or demand of any federal, state,
municipal or other governmental agency, the consequences of which
would materially and adversely affect the business, properties or
assets or the condition, financial or otherwise, of the Company.
(F) Valid Organization and Good Standing of the Company.
The Company is a duly and validly organized and existing corporation
in good standing under the laws of its jurisdiction of incorporation
and is duly licensed or qualified and in good standing as a foreign
corporation in all other jurisdictions where the ownership or leasing
of property or the nature of business transacted makes such
qualification necessary, and is entitled to own its properties and
assets, and to carry on its business, all as, and in the places where,
such properties and assets are now owned or operated or such business
is now conducted or presently proposed to be conducted. The Company
does not own any real property located outside of its jurisdiction of
incorporation or jurisdictions in which it is duly qualified to do
business as a foreign corporation and is not doing business outside of
such jurisdictions of a character which would require such
qualification. The Company has made payment of all franchise and
similar taxes in its jurisdiction of incorporation, and in all of the
respective jurisdictions in which it is qualified as a foreign
corporation, insofar as such taxes are due and payable at the date of
this agreement, except for any such taxes the validity of which is
being contested in good faith and for which proper reserves have been
set aside on the books of the Company.
(G) Title to Real and Personal Property. The Company has
good and marketable fee title to all the real property, and good and
marketable title to all other
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<PAGE> 11
Stepan Company Loan Agreement
material property and assets, reflected in the consolidated balance
sheet as of December 31, 1994, referred to in paragraph (A) above, or
purported to have been acquired by the Company subsequent to such
date, except property and assets sold or otherwise disposed of
subsequent to such date in the ordinary course of business and except
for title defects permitted by paragraph (C) of section 9 of the
Notes. The real property and other material property and assets of
the Company are free from any liens, security interests or other
encumbrances securing indebtedness which arose through borrowings and
from any other liens, security interests or other encumbrances which
are substantial in amount, or which affect or impair the operations of
the Company, or which have arisen other than in the ordinary course of
the business of the Company, except as may be permitted by paragraph
(C) of section 9 of the Notes. No financing statement under the
Uniform Commercial Code which names the Company or any of its
subsidiaries as debtor has been filed in any jurisdiction, and neither
the Company nor any of such subsidiaries has signed any financing
statement or any security agreement authorizing any secured party
thereunder to file any such financing statement, except as may be
permitted by paragraph (C) of section 9 of the Notes.
(H) Patents and Other Rights. The Company possesses all
patents, patent rights or licenses, trademark rights, trade names,
trade name rights and copyrights which are required to conduct its
business as now conducted without known conflict with the rights of
others.
(I) No Leases or Title Retention Agreements Affecting
Balance Sheet Values; Status of any Other Leases. None of the assets
or property the value of which is reflected in the consolidated
balance sheet as of December 31, 1994, referred to in paragraph (A)
above, is held by the Company as lessee under any lease or as
conditional vendee under any conditional sale contract or other title
retention agreement, other than capitalized leases included on such
consolidated balance sheet and leasehold improvements on leased
property in an aggregate amount (net after subtracting the reserve for
amortization with respect to such leasehold improvements) not
exceeding $200,000. The Company enjoys peaceful and undisturbed
possession of the premises occupied under all of the leases under
which it is operating, none of which contains any unusual or
burdensome provisions that will materially affect or impair the
operations of the Company. All of such leases are valid, subsisting
and in full force and effect.
(J) No Adverse Contracts or Restrictions. The Company is
not a party to, or bound by, any contract or agreement or instrument,
or subject to any charter or
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Stepan Company Loan Agreement
other corporate restriction, materially and adversely affecting its
business, property, assets, operations or condition, financial or
otherwise.
(K) Transaction is Legal and Authorized; No Legal
Restrictions on Performance. The issuance of the Notes and compliance
by the Company with all of the provisions of this agreement and the
Notes _
(i) are within the corporate powers of the
Company; and
(ii) will, on or prior to the Closing Date, have
been duly authorized by proper corporate action on the part of
the Company (no action by the stockholders of the Company
being required by law, by the corporate charter or by-laws of
the Company or otherwise), and the agreement and the Notes
will, upon execution and delivery by the Company on the
Closing Date, constitute the legal, valid and binding
obligations, contracts and agreements of the Company
enforceable in accordance with their respective terms.
Neither the execution and delivery of this agreement, the
consummation of the transactions contemplated hereby, the fulfillment
of its terms, nor compliance with its terms and conditions and with
the terms and provisions of the Notes, will conflict with or result in
a breach of any of the terms, conditions or provisions of any
corporate restriction or of any indenture, mortgage, deed of trust,
pledge, bank loan, credit agreement, corporate charter, by-laws or
other agreement or instrument to which the Company is now a party or
by which it or its properties may be bound or affected, or any
judgment, order, writ, injunction, decree or demand of any court or
any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, or constitute a default under any of the foregoing, or result
in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the property or assets of the
Company under the terms or provisions of any of the foregoing. The
Company is not in default in the performance, observance or
fulfillment of any of the obligations, covenants and conditions
contained in any indenture or other agreement creating, evidencing or
securing indebtedness of the Company or pursuant to which any such
indebtedness is or may be issued, or contained in any other agreement
or instrument to which the Company is a party or by which the Company
or its properties may be bound or affected.
(L) Compliance with Statutes and Regulations. The
Company and its subsidiaries have complied with all applicable
statutes and regulations of the United States of America and of all
foreign countries having jurisdiction, and of any state,
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Stepan Company Loan Agreement
province, municipality, agency or other governmental unit of any
thereof, in respect of the conduct of their respective businesses and
ownership of their respective properties (including, without
limitation, applicable statutes, regulations, orders and restrictions
relating to equal employment opportunities and environmental standards
or controls). No governmental consents, approvals or authorizations
are required to be obtained and no registrations or declarations are
required to be filed in connection with the execution and delivery of
this agreement and the Notes.
(M) Tax Status. All domestic and foreign tax returns and
reports of the Company and its subsidiaries relating to taxes based on
or measured by income or revenues, and all other tax returns and
reports of the Company and its subsidiaries, required to be filed have
been duly filed. The Company and its subsidiaries have paid or
adequately provided for the payment of (i) all taxes shown as due on
the returns and reports filed by any of them or pursuant to any
assessment received by any of them (and the Company knows of no
proposed assessment of additional taxes or any basis therefor) and
(ii) all other taxes, assessments, fees and governmental charges upon
the Company and its subsidiaries and upon their respective properties,
assets, income and franchises, except for such taxes, assessments,
fees and charges, if any, which are being contested in good faith and
as to which adequate reserves have been provided. The United States
income tax liabilities of the Company and its subsidiaries have been
finally determined by the Internal Revenue Service and satisfied for
all fiscal years up to and including the fiscal year ended December
31, 1992. The Internal Revenue Service has reviewed all of the
Federal tax returns of the Company and its subsidiaries for the fiscal
years up to and including the fiscal year ending December 31, 1992.
All agreed-to adjustments and interest thereon have been paid.
No waiver of the applicable statute of limitations has been
given and is in effect with respect to any United States tax return
required to be filed by the Company or any of its subsidiaries.
(N) Absence of Foreign or Enemy Status, Investment
Company Act and Public Utility Holding Company Act. Neither the
issuance of the Notes nor the use of the proceeds of the loans
evidenced thereby as contemplated herein will result in a violation of
any of the foreign assets control regulations of the United States
Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended), or
any ruling issued thereunder or any enabling legislation or
Presidential Executive Order in connection therewith. The Company is
not an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act
of 1940, as amended, and neither the Company, nor any of its
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Stepan Company Loan Agreement
subsidiaries, is a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," as such terms are defined
in the Public Utility Holding Company Act of 1935, as amended.
(O) Federal Reserve Board Regulations. Neither the
Company nor any of its subsidiaries owns any "margin stock" as such
term is defined in Regulation G of the Board of Governors of the
Federal Reserve System (12 CFR Part 207), as amended, except margin
stock owned or which may be acquired by the Company or its
subsidiaries which does not and would not in the aggregate constitute
a substantial part of the consolidated assets of the Company and its
subsidiaries within the meaning of Section 207.2(i) of the aforesaid
Regulation G, and the Company will not use, or permit any of its
subsidiaries to use, any part of the proceeds from the loan to be made
under this agreement, (1) directly or indirectly, to purchase or carry
any such stock (except for shares of the Company acquired by the
Company in connection with its stock option plans, deferred management
compensation plans or other publicly announced stock purchase plans)
or to reduce or retire any indebtedness originally incurred to
purchase any such stock (except as noted above) within the meaning of
such Regulation, (2) so as to involve the Company or any of its
subsidiaries in a violation of Regulation G, T, U or X of such Board
(12 CFR Parts 220, 221 and 224), or (3) for any other purpose not
permitted by Section 7 of the Securities Exchange Act of 1934, as
amended, or any of the rules and regulations respecting the extension
of credit promulgated thereunder.
(P) Exempt Status of Transaction under Securities Act and
Representations of Company Relating Thereto. The Company has not,
either directly or through any agent, offered all or any part of the
loan to be made by you under this agreement or any of the Notes to, or
solicited any offers to make all or any part of such loan or to
acquire any of the Notes from, or otherwise approached or negotiated
or communicated in respect of all or any part of such loan or any of
the Notes with, any person other than you and not more than two other
institutional investors each of whom was offered a portion of the
Notes at a private sale for investment. Neither the Company nor any
agent on its behalf will offer to obtain all or any part of such loan
from, or offer any of the Notes to, or solicit any offers to make all
or any part of such loan or acquire any of the Notes from, or
otherwise approach, negotiate or communicate in respect of any part of
such loan or any of the Notes with, any person or persons so as
thereby to bring the obtaining of such loan by the Company and the
delivery of the Notes within the registration provisions of the
Securities Act of 1933, as amended.
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Stepan Company Loan Agreement
(Q) Disclosure. Neither this agreement, the 10-K, the
10-Q nor the financial statements referred to in paragraph (A) of this
section 2, nor any certificate or statement furnished to you on behalf
of the Company in connection with the transactions contemplated
hereby, contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements
contained therein in light of the circumstances under which they were
made not misleading. There is no fact which materially adversely
affects, or in the future may (so far as the Company can now foresee)
materially adversely affect, the business prospects or financial
condition of the Company or any of its properties or assets which has
not been set forth herein or in a certificate or statement in writing
furnished to you by the Company.
(R) Employee Retirement Income Security Act of 1974. The
consummation of the transactions herein provided for and compliance by
the Company with the provisions of this agreement and the Notes issued
hereunder will not involve any prohibited transaction within the
meaning of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or Section 4975 of the Internal Revenue Code. No
"employee pension benefit plans", as defined in ERISA ("Plans"),
maintained by the Company, nor any trusts created thereunder, have
incurred any "accumulated funding deficiency" as defined in Section
302 of ERISA nor does the present value of all benefits vested under
all Plans exceed, as of January 1, 1995, the last annual valuation
date, the value of the assets of the Plans allocable to such vested
benefits by an amount in excess of $100,000.
(S) Compliance with Environmental Laws. The Company
complies with all applicable Federal, state and local laws, statutes,
rules, regulations and ordinances relating to public health, safety or
the environment including, without limitation, relating to releases,
discharges, emissions or disposals to air, water, land or ground
water, to the withdrawal or use of ground water, to the use, handling
or disposal of polychlorinated biphenyls (PCB's), asbestos or urea
formaldehyde, to the treatment, storage, disposal or management of
hazardous substances (including, without limitation, petroleum, its
derivatives, by-products or other hydrocarbons), to exposure to toxic,
hazardous or other controlled, prohibited or regulated substances, to
the transportation, storage, disposal, management or release of gases
or liquid substances, the failure to comply with which could have a
materially adverse effect on the Company, its subsidiaries, their
business and properties, taken as a whole. The Company does not know
of any liability of the Company or any subsidiary under the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended by the Superfund Amendments and Reauthorization
Act of 1986
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Stepan Company Loan Agreement
(42 U.S.C. Section 9601 et seq.) which could have a material adverse
effect on the Company and its subsidiaries on a consolidated basis.
Section 3. Acquisition for Investment;.
The Company makes this agreement with you in reliance upon your
representation to the Company, which by your acceptance of this agreement you
confirm, that you are acquiring the Notes which are the subject matter of this
agreement for your own account for the purpose of investment and not with a
view to the distribution of such Notes, but subject nevertheless to any
requirement of law that the disposition of your property shall at all times be
and remain within your control. You further represent that (i) you are
acquiring the Notes for your own account and with your general corporate assets
and not with the assets of any separate account in which any employee benefit
plan has any interest, and (ii) as used in this section, the terms "separate
account" and "employee benefit plan" shall have the respective meanings
assigned to them in ERISA.
Section 4. Conditions of Closing;.
Your obligation to make the loans provided for in section 1 above
shall be subject to the performance by the Company prior to or on the Closing
Date of all of its agreements theretofore to be performed under this agreement,
to the accuracy of its representations and warranties contained in this
agreement and to the satisfaction, prior to or concurrently with the making of
such loans on the Closing Date, of the following further conditions:
(A) Opinion of Special Counsel. You shall have received
on the Closing Date from Chapman and Cutler, who are acting as special
counsel for you in connection with this transaction, an opinion, dated
the Closing Date, in form and substance satisfactory to you, to the
effect that:
(1) the Company is a corporation, validly
existing and in good standing under the laws of the State of
Delaware and has the corporate power and the corporate
authority to execute and deliver this Agreement and to issue
the Notes;
(2) this agreement has been duly authorized by
all necessary corporate action on the part of the Company, has
been duly executed and delivered by the Company and
constitutes the legal, valid and binding contract of the
Company enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar laws
affecting creditors' rights generally, and general principles
of equity (regardless of
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<PAGE> 17
Stepan Company Loan Agreement
whether application of such principles is considered in a
proceeding in equity or at law);
(3) the Notes have been duly authorized by all
necessary corporate action on the part of the Company, and the
Notes being delivered on the date hereof have been duly
executed and delivered by the Company and constitute the
legal, valid and binding obligations of the Company
enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar laws
affecting creditors' rights generally, and general principles
of equity (regardless of whether application of such
principles is considered in a proceeding in equity or at law);
(4) it is not necessary, in connection with the
obtaining of such loans from you and the execution and
delivery of the Notes to you under the circumstances
contemplated by this agreement, to register such Notes under
the Securities Act of 1933, as amended, or to qualify an
indenture in respect of such Notes under the Trust Indenture
Act of 1939, as amended;
(5) the legal opinion referred to in paragraph
(B) of this section 4 is satisfactory in form and scope to
such special counsel and, in their opinion, you are justified
in relying thereon; and
(6) such other matters incident to the
transactions contemplated by this agreement as you may request.
(B) Opinion of Counsel to Company. You shall have
received on the Closing Date from Jeffrey W. Bartlett, Esq., General
Counsel for the Company, an opinion, dated the Closing Date, in form
and substance satisfactory to you, as to all matters specified in
clauses (2) to (4), inclusive, of paragraph (A) of this section 4, and
to the effect that:
(1) the Company is a corporation duly organized,
existing and in good standing under the laws of the State of
Delaware, with full power and authority to carry on the
business and to own the properties described in Exhibit C, to
enter into this agreement, to borrow money as contemplated by
it, to issue the Notes and to carry out the provisions of this
agreement and the Notes;
(2) the Company is duly qualified as a foreign
corporation to do business and is in good standing in each of
the jurisdictions in which it is
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<PAGE> 18
Stepan Company Loan Agreement
required to be qualified to do business as a foreign
corporation as stated in Exhibit C;
(3) there is no charter, by-law or preferred or
common stock provision, nor any statute, rule or regulation
binding on the Company, nor (to the best knowledge and belief
of such counsel) any indenture, contract or other agreement to
which the Company is a party or by which the Company or its
properties is or may be bound, which would be contravened by
the execution and delivery of this agreement or of the Notes
or by the performance of any term, provision, condition,
agreement, covenant or obligation of the Company contained
herein or therein;
(4) neither the borrowing pursuant hereto nor the
use by the Company of all or any portion of the proceeds of
the loan in accordance with section 5 hereof will violate
Section 7 of the Securities Exchange Act of 1934, as amended,
or applicable regulations thereunder including, without
limitation, Regulations G, T and X of the Board of Governors
of the Federal Reserve System (12 CFR. Chapter II);
(5) except as set forth in the 10-K or in Exhibit
C attached hereto, there are no actions, suits or proceedings
pending or, to the best knowledge and belief of such counsel,
threatened against or affecting the Company, at law or in
equity or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, an adverse determination
with respect to which may result in any material adverse
change in the business, properties, assets or condition,
financial or otherwise, of the Company;
(6) no order, permission, consent or approval of
any federal or state commission, board or regulatory body is
required as a condition to the lawful execution and delivery
of this agreement or of such Notes; and
(7) such other matters incident to the
transactions contemplated by this agreement as you may request.
(C) Certificate as to Representations and Warranties.
The representations and warranties of the Company contained in section
2 shall be true on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of
the Closing Date; and the Company shall have delivered to
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Stepan Company Loan Agreement
you on the Closing Date a certificate, dated the Closing Date, signed
by the President, a Vice President or the Treasurer of the Company to
such effect.
(D) Related Transactions. Concurrently with the
consummation of the loans and the issuance of the Notes on the Closing
Date, the Company shall consummate all of the loans and the issue of
the Notes in the aggregate principal amount scheduled for such Closing
Date pursuant to this agreement and the other agreements referred to
in paragraph (C) of section 1 hereof.
(E) Legality of Investment. The making of the loans
provided for in section 1 on the Closing Date and the acquisition of
the Notes evidencing the same shall qualify as a legal investment for
you under all laws applicable to investments by you (without resort to
any so-called basket provisions of such laws) and you shall have
received such certificates, or such other evidence as you may
reasonably request, to establish compliance with this condition.
(F) No Material Change in Management or Business. There
shall not have been since December 31, 1994 any material change in the
management, control or nature of the business of the Company and, to
the best knowledge and belief of the Company, no such change shall be
pending and the Company shall have delivered to you on the Closing
Date a certificate, dated such Closing Date, signed by the President,
a Vice President or the Treasurer of the Company to such effect.
(G) Compliance with Certain Provisions and Related
Certificate. The Company shall not have taken or suffered to be taken
any action which it would have been prohibited from taking or
suffering to be taken, and shall not have omitted or permitted the
omission of any action which it would have been required to take or
cause to be taken, if promissory notes in the forms of Exhibits A and
B had at all times since the date of this agreement been binding and
effective instruments; and the Company shall have delivered to you on
the Closing Date a certificate, dated such Closing Date, signed by the
President, a Vice President or the Treasurer of the Company, to such
effect.
(H) Proceedings and Documents. All proceedings to be
taken in connection with the transactions contemplated by this
agreement and all documents incident to such transactions shall be
satisfactory in form and substance to you and your special counsel;
and you shall have received all documents which you and your special
counsel may reasonably have requested in connection with such
transactions, including copies of records of all corporate proceedings
in connection with such
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<PAGE> 20
Stepan Company Loan Agreement
transactions, and compliance with the conditions set forth in this
section 4, satisfactory in form and substance to you and your
special counsel.
Section 5. Use of Proceeds;.
The Company will use the proceeds derived by it from the $40,000,000
aggregate principal amount of the loans obtained by the Company under this
agreement and the agreements similar hereto to repay $40,000,000 aggregate
principal amount of outstanding indebtedness of the Company.
Section 6. Method and Place of Payment of Principal, Premium
and Interest;.
Notwithstanding anything to the contrary in this agreement or the
Notes, in the case of any Note owned by you or your nominee or owned by any
other institutional holder who has given written notice to the Company
requesting that the provisions of this section shall apply, the Company will
promptly and punctually pay when due the principal thereof and premium, if any,
and interest thereon, without any presentment thereof directly to you or such
nominee or subsequent holder at your address set forth in Schedule I or at such
other address as you or such subsequent holder may from time to time designate
in writing to the Company or, if a bank account is designated for you on
Schedule I hereto or in any written notice to the Company from you or any such
subsequent holder, the Company will make such payments in immediately available
funds to such bank account before 12:00 Noon, New York time, marked for
attention as indicated, or in such other manner or to such other account of
yours or such holders in any bank in the United States as you or any such
subsequent holder may from time to time direct in writing. The holder of any
Notes to which this paragraph applies agrees that in the event it shall sell or
transfer any such Notes (i) it will, prior to the delivery of such Notes
(unless it has already done so), make a notation thereon of all principal, if
any, prepaid on such Notes and will also note thereon the date to which
interest has been paid on such Notes, and (ii) it will promptly notify the
Company of the name and address of the transferee of any Notes so transferred.
With respect to Notes to which this paragraph applies, the Company shall be
entitled to presume conclusively that the original or such subsequent
institutional holder as shall have requested the provisions hereof to apply to
its Notes remains the holder of such Notes until (y) the Company shall have
received notice of transfer of such Notes, and of the name and address of the
transferee, or (z) such Notes shall have been presented to the Company as
evidence of the transfer. Payments made in accordance with this Section 6
shall relieve the Company from all liability to make such payments.
Section 7. Statements, Reports and Certificates to be
Delivered by the Company;.
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Stepan Company Loan Agreement
From the date of this agreement to the date on which you first acquire
any Note under this agreement, and thereafter the Company will deliver to you,
so long as you are the holder of any Note, and to each other institutional
holder of then outstanding Notes (in duplicate if so requested) the following:
(A) Quarterly Financial Statements. As soon as
reasonably possible, and in any event within 60 days after the close
of each of the first three fiscal quarters of the Company, (1) the
balance sheet of the Company as of the end of such quarter, setting
forth in comparative form the corresponding figures for the
corresponding quarter of the preceding fiscal year, and (2) the
statements of income, stockholders' equity and cash flows of the
Company for such quarter and for the portion of the fiscal year ended
with such quarter, setting forth in comparative form the corresponding
figures for the corresponding periods of the preceding fiscal year,
all in reasonable detail (and prepared on a consolidated basis under
the circumstances set forth in the first grammatical paragraph
following paragraph (G) of this section 7) and certified as complete
and correct by a principal financial officer of the Company, subject
to year-end audit.
(B) Annual Reports and Financial Statements. As soon as
reasonably possible, and in any event within 90 days after the close
of each fiscal year of the Company, (1) the balance sheet of the
Company as of the end of such fiscal year, setting forth in
comparative form the corresponding figures as of the end of the
preceding fiscal year, and (2) the statements of income, stockholders'
equity and cash flows of the Company for such fiscal year, setting
forth in comparative form the corresponding figures for the preceding
fiscal year. Such balance sheet and statements shall be prepared in
reasonable detail and in accordance with good accounting practice and
shall be prepared on a consolidated basis under the circumstances set
forth in the first grammatical paragraph following paragraph (G) of
this section 7; and such balance sheets and statements shall be
accompanied by an opinion of independent public accountants of
recognized national standing selected by the Company, which opinion
shall state that such financial statements were prepared in accordance
with generally accepted accounting principles. In addition, such
accountants will furnish to you a letter stating that in making their
examination of such financial statements nothing came to their
attention which caused them to believe that there was any default by
the Company in the performance or observance of any covenant,
condition or agreement of the Company contained in sections 8 or 9 of
the Notes insofar as such covenants, conditions or agreements pertain
to accounting matters, provided that if in the course of their regular
auditing procedure such accountants become aware of any other type of
default, they shall disclose the same but such accountants shall have
no responsibility for ascertaining the existence
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<PAGE> 22
Stepan Company Loan Agreement
of any such default. The Company agrees to supply you promptly with a
copy of any letter, certificate or other writing supplied by its
independent public accountants to any other person pertaining to
whether such accountants have cause to believe that there has been any
default by the Company under any other agreement or evidence of
indebtedness.
(C) Certificate as to Certain Financial Information.
Within 90 days after the close of each fiscal year of the Company, and
in any event not later than the time of delivery of the statements
furnished pursuant to paragraph (B) of this section 7, a certificate
signed by the principal financial officer of the Company setting forth
(i) the aggregate amount, as of the end of such fiscal year, permitted
to be used for dividends or distributions on any shares of the capital
stock of the Company, or for the redemption, purchase, retirement or
other acquisition of any shares of the capital stock of the Company,
pursuant to the provisions of paragraph (F) of section 9 of the Notes;
(ii) a statement of the rentals paid during such year by the Company
and any restricted subsidiaries showing (A) all rentals so paid and
(B) all rentals so paid under leases of the type described in
paragraph (K) of section 9 of the Notes; (iii) an analysis of changes
in consolidated current assets, consolidated net current assets and
consolidated tangible net worth of the Company and any restricted
subsidiaries from the corresponding figures as of the end of the
preceding fiscal year; (iv) a statement of the amount of additional
unsecured funded indebtedness which the Company is permitted to incur
as of the end of such fiscal year pursuant to the provisions of
paragraph (A) of section 9 of the Notes; and (v) a statement
evidencing that the Company is in compliance with clause (3) of said
paragraph (A); (vi) a statement setting forth the aggregate fair
market value of all properties or assets sold, leased, transferred or
disposed of by the Company and its restricted subsidiaries, other than
in the ordinary course of business, during the same fiscal year of the
Company, and an itemization describing each such property or asset
having a fair market value equal to or greater than $250,000; and
(vii) a listing of all insurance maintained by the Company and its
subsidiaries in compliance with the provisions of paragraph (E) of
section 8 of the Notes; together with a brief description, including
(where applicable) all necessary computations, of the manner in which
the foregoing were determined.
(D) Compliance Certificate. Within 90 days after the
close of each fiscal year of the Company, and in any event not later
than the time of delivery of the statements furnished pursuant to
paragraph (B) of this section 7, a certificate, signed by the
President or a Vice President and the Treasurer or an Assistant
Treasurer of the Company, stating that a review of the activities of
the Company and any subsidiaries during such fiscal year has been made
under their supervision with a view to determining whether during such
fiscal year the Company and such
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Stepan Company Loan Agreement
subsidiaries had kept, observed, performed and fulfilled all of their
respective obligations under this agreement and the Notes, and either
(1) stating that to their best knowledge and belief the Company and
such subsidiaries have during such fiscal year kept, observed,
performed and fulfilled each and every covenant and condition of this
agreement and the Notes, or (2) if the Company and such subsidiaries
shall not so have kept, observed, performed and fulfilled said
covenants and conditions, specifying all such defaults and the nature
and status thereof.
(E) Special Reports of Accountants. Promptly upon
receipt thereof, a copy of all financial statements which are
accompanied by an opinion of the Company's independent public
accountants and prepared in connection with any special audit of the
Company's books or the books of any subsidiary by such accountants.
(F) Other Reports and Statements. Promptly upon the
mailing to its stockholders of each annual report, proxy statement or
other report or communication, a copy of each such report, proxy
statement or communication; and promptly upon any filing by the
Company with the Securities and Exchange Commission or any
governmental agency or agencies substituted therefor, or with any
national securities exchange, of any annual or periodic or special
report or registration statement, a copy of such report or statement.
(G) Additional Information. Such other data and
information as from time to time may be reasonably requested by you or
any such institutional holder.
If, and so long as, the Company has (i) one or more restricted
subsidiaries, the financial statements referred to in paragraphs (A) and (B) of
this section 7 shall be on a consolidated basis prepared in accordance with
good accounting practice, or (ii) one or more unrestricted subsidiaries, the
Company shall deliver to you or any such institutional holder, promptly after
receipt thereof, copies of balance sheets and income and surplus statements of
each such subsidiary which are not included in the financial statements
furnished pursuant to paragraph (B) of this section 7, in the form delivered to
the Company for the fiscal year of each such subsidiary.
For the purpose of the preceding paragraph the Company's French
subsidiary, Stepan Europe S.A., shall be included in the consolidated financial
statements as though it were a restricted subsidiary but the Company shall also
furnish separate financial statements for said French subsidiary.
The Company will furnish, at such address as may be designated by you
or any such institutional holder, and within the applicable time specified in
this section 7, one additional
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Stepan Company Loan Agreement
copy of each of the financial statements, certificates, statements and reports
which the Company is required to furnish pursuant to this section 7.
In the event that any indebtedness of the Company is declared due and
payable before its expressed maturity, or any holder of such indebtedness shall
have the right to declare such indebtedness due and payable before its
expressed maturity, because of the occurrence of any default or event of
default under such indebtedness, the Company will, immediately give you, so
long as you hold any of the Notes, or any such institutional holder written
notice of such declaration or right of declaration.
You, so long as you shall hold any of the Notes, or any such
institutional holder or such person or persons as you or such holder may
designate, may visit and inspect any of the properties of the Company or its
subsidiaries (except for the Company's Natural Products facilities located at
its Maywood, New Jersey, plant), examine (either by your or such holder's
employees or by independent accountants employed by you or such holder) the
books of account of the Company and the books of account of its subsidiaries
and discuss the affairs, finances and accounts of the Company and its
subsidiaries with its and their officers, or with its and their independent
accountants, all at such reasonable times after notice to the Company and as
often as you or such holder may desire. During any period in which an event of
default, or any event which, with the passage of time or giving of notice, or
both would become an event of default, has occurred and is continuing, the
Company shall pay or reimburse you or any such holder for expenses which you or
any such holder may incur in connection with any such visitation or inspection.
Section 8. Registered Notes;.
The Company shall cause to be kept at its principal office a register
for the registration and transfer of the Notes (hereinafter called the "Note
Register"), and the Company will register or transfer or cause to be registered
or transferred, as hereinafter provided and under such reasonable regulations
as it may prescribe, any Note issued pursuant to this agreement.
At any time and from time to time the registered holder of any Note
which has been duly registered as hereinabove provided may transfer such Note
upon surrender thereof at the principal office of the Company accompanied by a
written instrument of transfer duly executed by such registered holder or its
attorney authorized in writing.
The person in whose name any Note shall be registered shall be deemed
and treated as the owner and holder thereof for all purposes of this agreement
and the Company shall not be affected by any notice or knowledge to the
contrary. Payment of or on account of
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<PAGE> 25
Stepan Company Loan Agreement
the principal, premium, if any, and interest on any such Note shall be made to
or upon the written order of such registered holder.
Section 9. Payments of Certain Expenses by the Company;.
Whether or not the loan herein contemplated shall be consummated, the
Company will pay all of your reasonable expenses arising in connection with the
transactions herein contemplated or in connection with any modification,
alteration or amendment of this agreement or the Notes, including, but not
limited to, your out-of-pocket expenses, printing expenses, expenses in
connection with the shipment to you or your agent of the Notes delivered to you
hereunder, expenses in connection with the shipment from and to you or your
agent upon any exchange of notes pursuant to section 2 of the Notes and the
reasonable charges and disbursements of your special counsel for all services
required of them incident to the transactions herein contemplated. The Company
will also pay, and save you and all other holders of the Notes harmless from,
any and all liabilities with respect to, or resulting from any delay in paying,
(i) stamp or other taxes (including issuance taxes but excluding transfer taxes
and interest and penalties on such transfer taxes) which may be determined to
be payable in connection with the execution and delivery of this agreement or
the Notes or in connection with any modification, alteration or amendment of
this agreement or the Notes, (ii) any interest and penalties resulting from
non-payment or delay in payment of such expenses, charges, disbursements,
liabilities or taxes, and (iii) any income taxes in respect of any
reimbursement by the Company for any of such taxes, levies, interest or
penalties paid by you. The obligations of the Company under this section 9
shall survive the payment of the Notes.
Section 10. Survival of Covenants; Successors and Assigns;.
All covenants, agreements, representations and warranties made by the
Company in this agreement and in certificates or other documents delivered
pursuant to it shall survive the making by you of the loan contemplated by this
agreement and the execution and delivery of Notes to you, and shall continue in
full force and effect until all the Notes are paid in full and thereafter to
the extent provided by section 9 hereof. All such covenants, agreements,
representations and warranties shall be binding upon any successors and assigns
of the Company.
Section 11. No Oral Change;.
This agreement may not be changed orally, but only by an agreement in
writing and signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
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<PAGE> 26
Stepan Company Loan Agreement
The Company may not assign any of its rights hereunder without your
written consent, and you shall not be required to lend hereunder except to the
Company as presently existing.
Section 12. Communications and Notices;.
Except as otherwise expressly provided in this agreement, all
communications and notices provided for in this agreement or under the Notes
shall be in writing and, if to the Company, mailed or delivered to it at its
office at Edens and Winnetka Avenue, Northfield, Illinois 60093, attention of
the Secretary, or at any other office that the Company may hereafter designate
by notice to you or, if to you, mailed or delivered to the address shown on
Schedule I to this agreement, or to such other address and for such attention
as you may from time to time designate to the Company in writing.
Section 13. Law Governing;.
This agreement shall be construed in accordance with and governed by
the laws of the State of Illinois.
Section 14. Headings;.
The headings of the sections and paragraphs of this agreement are
inserted for convenience only and shall not be deemed to constitute a part of
this agreement.
-26-
<PAGE> 27
Stepan Company Loan Agreement
If you agree with the foregoing, please sign the enclosed copy of this
letter in the space provided below and return it to the Company, and this
letter shall upon execution become a binding agreement between you and the
Company in accordance with its terms.
Very truly yours,
STEPAN COMPANY
By
Its
The foregoing is hereby
accepted as of the date
first above written.
[VARIATION]
By______________________________
Its
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<PAGE> 28
Stepan Company Loan Agreement
If you agree with the foregoing, please sign the enclosed copy of this
letter in the space provided below and return it to the Company, and this
letter shall upon execution become a binding agreement between you and the
Company in accordance with its terms.
Very truly yours,
STEPAN COMPANY
By
Its
The foregoing is hereby
accepted as of the date
first above written.
AID ASSOCIATION FOR LUTHERANS
By______________________________
Its
-18-
<PAGE> 29
Stepan Company Loan Agreement
If you agree with the foregoing, please sign the enclosed copy of this
letter in the space provided below and return it to the Company, and this
letter shall upon execution become a binding agreement between you and the
Company in accordance with its terms.
Very truly yours,
STEPAN COMPANY
By
Its
The foregoing is hereby
accepted as of the date
first above written.
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By______________________________
Its
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<PAGE> 30
Stepan Company Loan Agreement
If you agree with the foregoing, please sign the enclosed copy of this
letter in the space provided below and return it to the Company, and this
letter shall upon execution become a binding agreement between you and the
Company in accordance with its terms.
Very truly yours,
STEPAN COMPANY
By
Its
The foregoing is hereby
accepted as of the date
first above written.
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
By______________________________
Its
-18-
<PAGE> 31
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF
SERIES A NOTES SERIES B NOTES
NAME AND ADDRESS OF LENDER TO BE PURCHASED TO BE PURCHASED
AID ASSOCIATION FOR LUTHERANS $3,750,000 $11,250,000
4321 North Ballard Road
Appleton, Wisconsin 54919
Attention: Investment Department
Payments
All payments on or in respect of the
Notes to be by bank wire transfer of
Federal or other immediately available
funds (identifying each payment as
principal, premium or interest, as the
case may be, with respect to either
(a) the 7.69% Promissory Notes, Series A,
due June 30, 2005 of Stepan Company,
Private Placement Number 858586 D* 8, or
(b) the 7.77% Promissory Notes, Series B,
due June 30, 2010 of Stepan Company,
Private Placement Number 858586 D@ 6) to:
Harris Trust and Savings Bank, Chicago
ABA #071 000 288
A/C #109-211-3
Attn: Trust Collection/P&I
Notices
All notices and communications, to be addressed
as first provided above, except notices with
respect to payments, and written confirmation
of each such payment, addressed Attention:
Investment Accounting.
with a copy to:
I-31
<PAGE> 32
Harris Trust and Savings Bank
Institutional Custody -5E
111 West Monroe Street
Chicago, Illinois 60690-0755
Name of Nominee in which Notes are to be issued: None
Tax Identification No.: 39-0123480
I-32
<PAGE> 33
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF
SERIES A NOTES SERIES B NOTES
NAME AND ADDRESS OF LENDER TO BE PURCHASED TO BE PURCHASED
THE NORTHWESTERN MUTUAL LIFE $3,750,000 $11,250,000
INSURANCE COMPANY
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Securities Department
Payments
All payments on or in respect of the Notes
to be by bank wire transfer of Federal or
other immediately available funds
(identifying each payment as principal,
premium or interest, as the case may be, with
respect to either (a) the 7.69% Promissory
Notes, Series A, due June 30, 2005 of Stepan
Company, Private Placement Number 858586 D* 8,
or (b) the 7.77% Promissory Notes, Series B,
due June 30, 2010 of Stepan Company, Private
Placement Number 858586 D@ 6) to:
Bankers Trust Company
Insurance Unit, Fourth Floor
16 Wall Street
New York, New York 10015
Attention: Money Transfer Department
for credit to The Northwestern
Mutual Life Insurance Company's
Account No. 000-00-027
Notices
I-33
<PAGE> 34
All notices and communications, to be
addressed as first provided above, except
notices with respect to payments, and
written confirmation of each such payment,
addressed Attention: Treasurer's
Department.
Name of Nominee in which Notes are to be issued: None
Tax Identification No.: 39-0509570
I-34
<PAGE> 35
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF
SERIES A NOTES SERIES B NOTES
NAME AND ADDRESS OF LENDER TO BE PURCHASED TO BE PURCHASED
THE MUTUAL LIFE INSURANCE $2,500,000 $7,500,000
COMPANY OF NEW YORK
1740 Broadway
New York, New York 10019
Attention: MONY Capital Management
Unit
Payments
All payments on or in respect of the
Notes to be by bank wire transfer of
Federal or other immediately available
funds (identifying each payment as
principal, premium or interest, as the
case may be, with respect to either
(a) the 7.69% Promissory Notes, Series A,
due June 30, 2005 of Stepan Company,
Private Placement Number 858586 D* 8, or
(b) the 7.77% Promissory Notes, Series B,
due June 30, 2010 of Stepan Company,
Private Placement Number 858586 D@ 6) to:
Chemical Bank
ABA #021000128
for credit to The Mutual Life
Insurance Company of New York,
Mutual of New York Security
Remittance Account No. 321-023803
Notices
All notices of payment, on or in respect
of the Notes to:
I-35
<PAGE> 36
Telecopy Confirms and Notices:
(201) 907-6979
Attention: Securities Custody
I-36
<PAGE> 37
Mailing Confirms and Notices:
Glenpointe Marketing & Operations
Center - MONY
Glenpointe Center West
500 Frank W. Burr Blvd.
Teaneck, NJ 07666-6888
Attention: Securities Custody
All notices and communications other than
those in respect to payments to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Tax Identification No.: 13-1632487
I-37
<PAGE> 38
No. RA-
PPN: 858586 D* 8
STEPAN COMPANY
7.69% Promissory Note, Series A, Due June 30, 2005
$______________ ______________, ______
STEPAN COMPANY, a corporation duly organized and existing under the
laws of the State of Delaware (hereinafter called the "Company"), for value
received, hereby promises to pay to
or registered assigns, on June 30, 2005
the principal amount of
to the extent not theretofore prepaid pursuant to the terms of this Note, in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, at the
principal office of the Company in Northfield, Illinois, and to pay interest
(computed on the basis of a 360-day year of twelve 30-day months) on the unpaid
principal amount hereof from the date hereof, in like coin or currency, at such
office, semi-annually on the thirtieth day of June and December in each year,
at the rate of 7.69% per annum until the unpaid principal amount hereof shall
have become due and payable and at the default rate thereafter and, so far as
may be lawful, to pay interest on any overdue installment of interest at the
default rate at such principal office in like coin or currency.
Section 1. The Notes;. This Note is one of a number of
promissory notes (hereinafter called the "Notes"), in the aggregate principal
amount of $40,000,000, consisting of $10,000,000 aggregate principal amount of
7.69% Promissory Notes, Series A (the "Series A Notes"), of which this Note is
one, and $30,000,000 aggregate principal amount of 7.77% Promissory Notes,
Series B (the "Series B Notes"), all issued or to be issued pursuant to
separate and several loan agreements each dated as of June 15, 1995 entered
into by the Company with the lenders therein referred to.
A-38
<PAGE> 39
Section 2. Exchanges;. The holder of this Series A Note, or
of any note or Notes substituted therefor pursuant to the provisions of this
section 2, may at its option, in person or by duly authorized attorney,
surrender the same for exchange at the principal office of the Company in
Northfield, Illinois accompanied by a written instrument of transfer duly
executed by the registered holder hereof and, within a reasonable time
thereafter and without expenses (other than transfer taxes, if any), receive in
exchange therefor one or more duly executed printed Note or Notes, each of the
same series, in the principal amount of $100,000 or any integral multiple of
$10,000 in excess thereof, dated as of the date to which interest has been paid
on the Note or Notes so surrendered or, if no interest has yet been so paid,
then dated the date hereof, and payable to such person or persons as may be
designated by such holder, for the same aggregate principal amount as the then
unpaid principal amount of the Note or Notes so surrendered. The Company
covenants and agrees to take and cause to be taken all action necessary to
effect such exchanges.
Section 3. Payments to Registered Holder;. The person in
whose name this Note is registered shall be deemed to be and treated as the
owner and holder hereof for all purposes and payment of or on account of the
principal, premium, if any or interest hereon shall be made to or upon the
written order of the registered holder.
Section 4. Prepayment of Notes;.
(A) Required Prepayments;. In addition to paying the entire
outstanding principal amount and the interest due on the Series A Notes on the
maturity date thereof, on June 30 in each year, commencing June 30, 2001 and
ending June 30, 2004 (herein called "fixed payment dates") both inclusive the
Company will prepay and apply and there shall become due and payable the sum of
$2,000,000 on the principal indebtedness evidenced by the Series A Notes. No
premium shall be payable in connection with any required prepayment made
pursuant to this paragraph 4(A). Any payment of less than all of the Series A
Notes pursuant to the provisions of paragraphs (B), (C) or (D) of this section
4 shall not relieve the Company of the obligation to make the required payments
or prepayments on the Series A Notes in accordance with the terms of this
paragraph 4(A); provided, however, that if and to the extent that any
prepayment of Series A Notes pursuant to the provisions of paragraph 4(D) below
does not result in the prepayment of all of the Series A Notes then
outstanding, the remaining prepayments required to be made pursuant to this
paragraph 4(A) shall, in each case, be reduced in the same proportion that the
principal amount of Series A Notes outstanding immediately prior to such
prepayment pursuant to paragraph 4(D) is reduced by such prepayment.
(B) Optional Prepayments without Premium;.
A-39
<PAGE> 40
(x) On a Fixed Payment Date. Upon compliance with section 6
the Company shall have the privilege (which shall be non cumulative)
of prepaying outstanding Series A Notes on any fixed payment date in
units of $100,000 or an integral multiple of $10,000 in excess
thereof, by payments of the principal amount of the Series A Notes to
be prepaid and accrued interest thereon to the date of such payment
and without premium; provided however that (i) the principal amount of
Series A Notes prepaid pursuant to this subparagraph 4(B)(x) on any
one fixed payment date shall not exceed the principal amount of the
Series A Notes required to be prepaid pursuant to paragraph 4(A) on
such fixed payment date, (ii) the aggregate amount of all Series A
Notes prepaid pursuant to this subparagraph 4(B)(x) shall not exceed
an amount equal to the excess, if any, of $3,333,333 over the
aggregate amount of all Series A Notes prepaid pursuant to
subparagraph 4(B)(y), and (iii) the Company shall have, concurrently
with such prepayment, prepaid the same pro rata portion of the Series
B Notes pursuant to the provisions of subparagraph 4(B)(x) of said
Series B Notes.
(y) Upon Sale of Phthalic Anhydride Assets. In the event
that the Company shall have sold 50% or more of the assets relating to
its phthalic anhydride operations, the Company shall have the
privilege, upon compliance with section 6, of applying all or any
portion of the net cash proceeds from such sale to the prepayment of
outstanding Series A Notes (but if less than all of the Series A Notes
are then to be prepaid pursuant to this subparagraph 4(A)(y), then in
units of $100,000 or an integral multiple of $10,000 in excess
thereof) by payment of the principal amount of the Series A Notes to
be prepaid and accrued interest thereon to the date of such prepayment
and without premium; provided, however, that (a) such prepayment shall
occur on or prior to June 30, 1996, (b) the Company shall have,
concurrently with such prepayment, prepaid the same pro rata portion
of the Series B Notes pursuant to the provisions of subparagraph
4(B)(y) of said Series B Notes and (c) notice of any prepayment
pursuant to this subparagraph 4(B)(y) shall be made within 30 days of
such sale.
(C) Optional Prepayment with Premium;. In addition to the
prepayments required by paragraph 4(A) and the rights of prepayment set forth
in 4(B) the Company shall have the privilege at any time and from time to time
of prepaying the outstanding Series A Notes either in whole or in part (but if
in part then in units of $1,000,000 or an integral multiple of $10,000 in
excess thereof) by payment of the principal amount of the Series A Notes or the
portion thereof to be prepaid and accrued interest thereon to the date of such
prepayment together with the make whole premium amount; provided that the
Company shall have, concurrently with such prepayment, prepaid the same pro
rata portion of the Series B Notes pursuant to the provisions of paragraph 4(C)
of said Series B Notes.
A-40
<PAGE> 41
For purposes of this paragraph 4(C) and section 12 below:
The term "make whole premium amount" shall mean, to the extent
that the adjusted treasury reinvestment yield at such time is lower
than 7.69% per annum, the excess of (a) the present value of the
remaining scheduled principal and interest payments and prepayments to
become due on that portion of the Series A Notes to be prepaid, taking
into account the required application of such prepayment to the
scheduled payments and prepayments on the Series A Notes, all
determined by discounting such payments and prepayments at a rate that
is equal to the adjusted treasury reinvestment yield, over (b) the
aggregate principal amount of the Series A Notes plus accrued interest
to be paid or prepaid. To the extent that the adjusted treasury
reinvestment yield at the time of such prepayment or payment is equal
to or higher than 7.69% per annum, the make whole premium amount is
zero.
The term "adjusted treasury reinvestment yield" shall mean, as
of the date of any determination thereof, the sum of (i) the then
applicable treasury reinvestment yield, plus (ii) 50 basis points.
The term "treasury reinvestment yield" shall be (a) the yield
reported on the third business day preceding the date of prepayment or
payment on page "USD" of the Bloomberg Financial Markets Service
Screen (or, if not available, any other nationally recognized trading
screen reporting on-line intraday trading in United States government
securities) at 10:00 A.M. (New York time) for United States government
securities having a maturity corresponding to the remaining weighted
average life to maturity of the principal of the Series A Notes as of
the date of such prepayment or payment, as the case may be, rounded to
the nearest month, or (b) in the event that no such nationally
recognized trading screen reporting on-line trading in United States
government securities is available, "treasury reinvestment yield"
shall mean the arithmetic mean of the yields published in the weekly
statistical release designated H.15(519) of the Federal Reserve System
under the caption "U.S. Government Securities-Treasury Constant
Maturities" (the "statistical release") or if the statistical release
is not published, the arithmetic mean of such reasonably comparable
index as may be designated by the holders of at least 51% in aggregate
principal amount of the outstanding Series A Notes, for the maturity
corresponding to the remaining weighted average life to maturity of
the Series A Notes as of the date of such prepayment or payment, as
the case may be, rounded to the nearest month. If no maturity exactly
corresponds to such rounded weighted average life to maturity, the
yields for the two most closely corresponding published maturities
shall be calculated pursuant to the immediately preceding sentence and
the treasury reinvestment yield shall be interpolated from such yields
on a straight-line basis,
A-41
<PAGE> 42
rounding in each of such relevant periods to the nearest month. For
purposes of calculating the treasury reinvestment yield, the most
recent statistical release published prior to the third business day
preceding the date of prepayment or payment shall be used.
The term "weighted average life to maturity" shall mean as at
the time of the determination thereof the number of years obtained by
dividing the then remaining dollar-years of the Series A Notes by the
aggregate amount of all remaining scheduled principal and interest
payments (including the payments at final maturity) to be made on the
Series A Notes. The term "remaining dollar-years" of the Series A
Notes means the product obtained by (1) multiplying (A) the amount of
each of the remaining scheduled principal and interest payments
(including the payments at final maturity), by (B) the number of years
(calculated at the nearest one-twelfth) which will elapse between the
date of determination of the weighted average life to maturity of the
Series A Notes and the date of required payment is due and (2)
totaling all the products obtained in (1).
(D) Prepayment on Failure of Holders to Consent to Change of
Control;. In the event that the Company shall request the holders of the
Series A Notes in writing to consent to a change of control and the holder or
holders of any Series A Notes shall, within 30 days following the receipt of
such a request, have refused in writing to consent to such a change of control,
then the Company may, at any time within 5 days after the earlier of (x) the
receipt of a response to such request from the holder or holders of 100% of the
outstanding Series A Notes, or (y) the expiration of such 30 day period, and
upon not less than three business days prior written notice, prepay all (but
not less than all) Series A Notes held by each holder which has refused to
consent to such change of control by prepayment of the principal amount thereof
and accrued interest thereon to the date of such prepayment. Any holder which
has failed to respond to such request prior to the expiration of such 30 day
period shall, for purposes hereof, be deemed to have consented to such change
of control. Any request by the Company made pursuant to this paragraph 4(D)
shall set forth (i) a summary of the transaction or transactions causing the
change of control, (ii) the name and address of the "person" described in
clause (i) or (ii) of the definition of the term "change of control" set forth
below, (iii) such financial or other information as would be reasonably
necessary for each holder to make an informed decision with respect to such
request, and (iv) a statement as to whether, at the time of such change of
control and after giving effect thereto, either any event of default or any
event which, with the passage of time or giving of notice, or both, would
become an event of default, shall have occurred and be continuing. In the
event that the Company shall receive a response to its request from any holder
of a Series A Note, it will promptly advise, in writing, all other holders of
Series A Notes of such response and the source and content thereof.
A-42
<PAGE> 43
For purposes of this paragraph 4(D) and paragraphs 8(K) and 12(H)
below, the term "change of control" shall mean and shall be deemed to have
occurred, (i) upon the acquisition by any "person" (as that term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended)
of beneficial ownership, direct or indirect, of more than 50% of the
outstanding voting stock of the Company, or (ii) upon the acquisition of the
Company, or all or substantially all of its assets by, or the combination of
the Company, or all or substantially all of its assets with, another "person"
(as defined above), unless the acquiring or surviving "person" shall be a
corporation more than 50% of the outstanding voting stock of which is owned,
immediately after such acquisition or combination, by the owners of the voting
stock of the Company immediately prior to such acquisition or combination. The
term "acquisition" shall mean the earlier to occur of (x) the actual possession
of the subject voting stock or assets, and (y) the consummation of any
transaction or series of related transactions which, with the passage of time,
will give such person the actual possession thereof. The term "voting stock"
shall mean securities of any class or classes, the holders of which are
ordinarily, in the absence of contingencies, entitled to elect a majority of
the corporate directors (or persons performing similar functions).
Section 5. Partial Prepayments to be Pro Rata where More than
One Series A Note Outstanding;. In the event of any prepayment of less than
all of the outstanding Series A Notes pursuant to the provisions of paragraphs
4(A), 4(B) or 4(C), at a time when more than one Series A Note is outstanding,
the principal amount of the Series A Notes so to be prepaid shall be allocated
among the respective Series A Notes and holders thereof so that the principal
amount to be prepaid to each holder pursuant to any section hereof shall bear
the same ratio to the aggregate principal amount then to be prepaid pursuant to
such section as the principal amount of Series A Notes then held by such holder
bears to the aggregate principal amount of all Series A Notes then outstanding,
except that if upon any allocation on such basis the amounts so to be prepaid
to any such holder pursuant to any section hereof would not be an exact
multiple of $1,000, then additional or lesser amounts not exceeding $1,000 may
be allocated by the Company to such holder, or if the amount so to be prepaid
to any such holder pursuant to such section would be less than $1,000, then no
amount need be allocated to such holder, in each such case so long as
allocations of prepayments among the respective Notes and holders thereof shall
be appropriate to maintain, from time to time, through successive partial
prepayments as nearly as practicable the ratio above provided. Prepayments of
Series A Notes pursuant to the provisions of paragraph 4(D) shall be allocated
as therein provided.
Section 6. Notice of Prepayment and Other Notices;.
(A) Prepayment Notice;. If the Company shall elect to
prepay this Note or any portion hereof pursuant to paragraph 4(B) or 4(C), the
Company shall give notice of such
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<PAGE> 44
prepayment in writing not less than 30 nor more than 60 days prior to the date
fixed for such prepayment, specifying (i) the prepayment date, (ii) the
principal amount to be prepaid on this Note and on all the other outstanding
Notes, (iii) an estimate of the make whole premium amount, if any, applicable
to the prepayment of this Note, and (iv) accrued interest applicable to such
prepayment. A computation of the amount, if any, of any make whole premium
amount payable in connection with a prepayment of this Note shall be furnished
to the holder hereof as soon as practicable after determination of such premium
and, in all events, not less than three business days prior to the date of such
prepayment.
(B) Mailing of Notices;. Such notice of prepayment, and all other
notices to be given to any holder of this Note, shall be sent by prepaid
overnight courier to the payee herein named, irrespective of whether the payee
is the holder of this Note; provided, however, that if any subsequent holder of
this Note shall have presented it to the Company for inspection at the office
of the Company maintained as provided in paragraph (A) of section 8, and shall
have delivered to the Company at such office a written notice of the
acquisition by such holder of this Note and designated in writing an address to
which notices in respect of this Note shall be mailed, such notices shall be
sent to such holder at such designated address instead of to the payee herein
named. All notices to be given to any holder of this Note shall be deemed to
have been given only upon actual receipt thereof by such holder. In the case
of a properly addressed notice, the Company shall not be required to determine
the authority of any person signing or initialing a confirmation of receipt.
Section 7. Notes Due and Interest Ceases on Prepayment Date;
Evidence of Partial Prepayment; New Notes. Upon notice of prepayment being
given as in this Note provided, the Company shall be obligated to prepay, at
the principal office of the Company in Northfield, Illinois, on the date
specified in such notice, this Note or such portion hereof to be prepaid as is
specified in such notice at the principal amount thereof, plus accrued interest
thereon to the date so specified and the applicable make whole premium amount,
if any. If this Note is designated for prepayment in whole or in part as
hereinbefore provided, then this Note or such portion hereof as is designated
for prepayment, as the case may be, shall cease to bear interest on and after
the date fixed for such prepayment provided such prepayment is duly made. Upon
the due prepayment in part of this Note, the holder hereof shall surrender it
to the Company, which shall thereupon issue and deliver, without charge to such
holder, a new Note for the unpaid balance of this Note; provided, however, that
instead of surrendering this Note as aforesaid, the holder of this Note may, at
its option, present this Note to the Company for notation hereon of the payment
of the portion of the principal of this Note so prepaid and this Note shall
thereupon be returned to or on the order of the holder hereof. To the extent
that any of the Notes are fully prepaid they shall be cancelled and may not be
redelivered. Any new Note made and delivered in accordance
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with the provisions of this section 7 shall be dated as of the date to which
interest has been paid on the indebtedness to be evidenced by such new Note, or
if no interest has yet been so paid, then dated the date hereof.
Section 8. Affirmative Covenants;. The Company covenants and
agrees that so long as this Note shall be outstanding:
(A) Maintenance of Office or Agency;. The Company will
maintain an office in Northfield, Illinois or at such other place
hereafter designated in writing by the Company by notice to the holder
of this Note, where notices, presentations and demands to or upon the
Company in respect of this Note may be given or made.
(B) Payment of Principal, Premium and Interest;. The
Company will punctually pay or cause to be paid the principal and
interest, and premium, if any, to become due in respect of all the
Notes according to the terms thereof.
(C) Maintenance of Corporate Existence;. The Company
will at all times do or cause to be done all things necessary to
maintain, preserve and renew its corporate existence and the corporate
existence of each of its subsidiaries and its and their rights,
patents and franchises, and comply with and cause each subsidiary to
comply with, all related laws applicable to the Company or its
subsidiaries in such manner as counsel shall advise; provided,
however, that nothing contained in this paragraph (C) shall (1)
require the Company or any subsidiary to comply with any law so long
as the validity or applicability thereof shall be contested in good
faith, (2) require the Company or any subsidiary to maintain, preserve
or renew any right or franchise not necessary or desirable in the
conduct of the business of the Company or of such subsidiary, as the
case may be, (3) prevent the termination of the corporate existence of
any subsidiary if in the opinion of the Board of Directors of the
Company such termination is in the best interest of the Company and
not disadvantageous to the holders of the Notes, or (4) prevent any
transaction by a subsidiary permitted by the provisions of clause (4)
or (5) of paragraph (B) of section 9, or any transaction by the
Company permitted by the provisions of paragraph (I) of section 9.
(D) Properties;. The Company will, in so far as it is
not prevented by causes beyond its control, at all times maintain,
preserve, protect and keep, or cause to be maintained, preserved,
protected and kept, its property and the property of its subsidiaries
in good repair, working order and condition and, from time to time,
will, in so far as it is not prevented by causes beyond its control,
make or cause to be made all repairs, renewals, replacements,
extensions, additions, betterments and
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improvements to its property and the property of its subsidiaries as
are needful and proper, so that the business carried on in connection
therewith may be conducted properly and efficiently at all times;
provided, however, that nothing in this paragraph (D) shall prevent
the Company or any subsidiary from selling, abandoning or otherwise
disposing of any property if such property is no longer of use in the
business of the Company or the subsidiary owning the same, and if, in
the opinion of the Company, such sale, abandonment or other
disposition is in the best interest of the Company or such subsidiary
and not disadvantageous to the holders of the Notes.
(E) Insurance;. The Company will provide or cause to be
provided for itself and its subsidiaries such insurance against loss
or damage of the kinds customarily insured against by corporations
similarly situated, with reputable insurers, in such amounts and by
such methods as shall be adequate, and will at all times maintain or
cause to be maintained in full force and effect, with reputable
insurers and in such amounts and by such methods as shall be adequate,
public liability insurance against loss or damage to it or its
subsidiaries for bodily injury or death in or about any premises
occupied by it or its subsidiaries, and liability insurance against
loss or damage to it or its subsidiaries for bodily injury or death or
injury to property occurring by reason of the operation by it or its
subsidiaries of any motor vehicle.
(F) Payment of Taxes, Assessments, Etc;. The Company
will duly pay and discharge, and cause each of its subsidiaries to
duly pay and discharge, as the same become due and payable, all taxes,
assessments and governmental and other charges and claims levied or
imposed, or which if unpaid might become a lien or charge, upon the
franchises, assets, earnings or business of the Company or such
subsidiary, as the case may be, as well as all lawful claims for
labor, materials and supplies which, if unpaid, might become a lien or
charge upon such properties or any part thereof; provided, however,
that nothing contained in this paragraph (F) shall require the Company
or any such subsidiary to pay any such tax, assessment, charge or
claim so long as the Company or such subsidiary in good faith shall
contest the validity thereof and shall set aside on its books adequate
reserves with respect thereto.
(G) Payment of Indebtedness;. The Company will, and will
cause each of its subsidiaries to, pay punctually and discharge when
due, or renew or extend (except as otherwise prohibited by this Note),
any indebtedness heretofore or hereafter incurred by it or any of
them, as the case may be, and discharge, perform and observe the
covenants, provisions and conditions to be performed, discharged and
observed on the part of the Company or such subsidiary, as the case
may be, in connection therewith, or in connection with any agreement
or other instrument
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relating thereto, or in connection with any mortgage, pledge, security
interest or other lien existing at any time upon any of the property
or assets of the Company or such subsidiary, as the case may be;
provided, however, that nothing contained in this paragraph (G) shall
require the Company or any such subsidiary to pay or discharge or
renew or extend any such indebtedness or to discharge, perform or
observe any such covenants, provisions and conditions so long as the
Company or such subsidiary in good faith shall contest any claim which
may be asserted against it in respect of any such indebtedness or of
any such covenants, provisions and conditions and shall set aside on
its books adequate reserves with respect thereto.
(H) Keeping of Books;. The Company will, and will cause
each subsidiary to, (1) at all times keep proper books of record and
account in which full, true and correct entries will be made of its
transactions in accordance with good accounting practice; and (2) set
aside on its books from its earnings, for the fiscal year ending
December 31, 1995, and each fiscal year thereafter, reserves for
depreciation, obsolescence and/or amortization of its properties
during such year and all other proper reserves which, in accordance
with good accounting practice, should be set aside from such earnings
in connection with its business.
(I) Compliance with Law;. The Company will, and will
cause each of its subsidiaries to, use its best efforts to comply with
all applicable statutes, regulations, orders and restrictions of the
United States of America, foreign countries, states, provinces,
municipalities and agencies and instrumentalities of the foregoing, in
respect of the conduct of its respective business and the ownership of
its respective property (including, without limitation, applicable
statutes, regulations, orders and restrictions relating to equal
employment opportunities and environmental standards and controls),
except such as are being contested in good faith or with respect to
which compliance shall have been waived or extended by the applicable
governmental authority.
(J) Notice of Default;. If any one or more of the events
of default specified in section 12 shall occur, or if the holder of
any Note shall demand payment or take any other action permitted upon
the occurrence of any such event of default, the Company will at once
give notice to all holders of the Notes, specifying the nature of the
event of default or of such demand or other action, as the case may
be. In the event any indebtedness of the Company (other than the
Notes) is declared due and payable before its expressed maturity
because of the occurrence of an event of default thereunder, or under
any instrument or agreement pursuant to which such indebtedness is
issued or securing such indebtedness, the Company will at once give
notice in writing of such happening to all holders of the Notes.
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(K) Notice of Change of Control;. The Company will,
within two business days of becoming aware of a change of control (as
defined in paragraph 4(D)), give notice thereof to all holders of the
Notes.
Section 9. Negative Covenants;. The Company covenants and
agrees that so long as this Note shall be outstanding:
(A) Limitations on Funded Indebtedness;. The Company
will not create, incur, issue, assume or become or be liable,
contingently or otherwise, in respect of any funded indebtedness other
than
(1) funded indebtedness outstanding on June 15,
1995 and reflected on Schedule C to the loan agreements and
funded indebtedness represented by the Notes;
(2) secured funded indebtedness incurred or
assumed subsequent to June 15, 1995 solely for the purpose of
financing the acquisition of property and secured only as
permitted under clauses (2), (3) and (4) of paragraph (C) of
this section 9, but only in an amount not exceeding the
maximum amount of additional unsecured funded indebtedness
which the Company could then incur under clause (3) of this
paragraph (A), provided that for purposes of this Note,
secured funded indebtedness shall not include indebtedness for
money borrowed by the Company against or secured by the cash
surrender value of life insurance maintained by the Company on
officers or directors of the Company, which indebtedness shall
constitute unsecured funded indebtedness for all purposes of
this Note;
(3) unsecured funded indebtedness incurred or
assumed subsequent to June 15, 1995 if, and to the extent
that, immediately after giving effect thereto and the
application of the proceeds thereof, consolidated funded
indebtedness does not exceed an amount equal to 55% of
consolidated capitalization, it being understood that the test
of this clause (3) is one of incurrence only;
(4) indebtedness taking the form of a guaranty of
indebtedness of any other person permitted by clause (3) of
paragraph (D) of this section 9, but only if, and to the
extent that, immediately after giving effect thereto, the
limitations set forth in clause (3) of this paragraph (A)
shall be satisfied, all such guaranties being treated as
funded indebtedness for the purpose of clause (3) of this
paragraph (A); and
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(5) funded indebtedness of the Company incurred
solely for the purpose of extending, renewing or refunding any
funded indebtedness of the Company then outstanding and
permitted by this paragraph (A), but only if, and to the
extent that, immediately after giving effect thereto, the
limitations set forth in clause (3) of this paragraph (A)
shall be satisfied.
(B) Limitations on Restricted Subsidiaries;. The Company
will not cause, suffer or permit any restricted subsidiary to
(1) create, incur, issue, assume or become or be
liable, contingently or otherwise, in respect of any
indebtedness except (a) indebtedness to the Company or to a
wholly-owned restricted subsidiary, (b) unsecured accounts
payable and other unsecured obligations (other than as a
result of borrowing) incurred in the ordinary course of
business of such subsidiary, and (c) indebtedness in addition
to that described in subclauses (a) and (b) above; provided
that the aggregate principal amount of all such indebtedness
permitted by this subclause (c) shall not at any time exceed
10% of consolidated capitalization of the Company and its
restricted subsidiaries; and provided further that the sum,
without duplication, of (x) the aggregate unpaid principal
amount of all such indebtedness permitted by this subclause
(c), (y) the aggregate unpaid principal amount of all
indebtedness of the Company secured pursuant to the provisions
of clauses (2), (3) and (4) of paragraph (C) of this section
9, and (z) the aggregate amount of liabilities of the Company
and its restricted subsidiaries secured by liens permitted
pursuant to the provisions of clause (11) of paragraph (C) of
this section (9), shall not at any time exceed 20% of
consolidated capitalization of the Company and its restricted
subsidiaries; or
(2) issue or sell any shares of its capital stock
or securities convertible into such capital stock except (a)
issuance or sale of directors' qualifying shares, (b) issuance
or sale to the Company or to any wholly-owned restricted
subsidiary, and (c) issuance or sale of additional shares of
stock of any such subsidiary to any holders thereof entitled
to receive or purchase such additional shares through the
declaration of a stock dividend or through the exercise of
preemptive rights; or
(3) sell, assign, transfer or otherwise dispose
of any shares of capital stock of any class of any other
restricted subsidiary, or any other security of, or any
indebtedness owing to it by, any other restricted subsidiary
(except in each case to the Company or to a wholly-owned
restricted subsidiary) unless
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such sale, assignment, transfer or other disposition shall
meet all the conditions set forth in paragraph (G) of this
section 9 which would be applicable to a similar disposition
made by the Company; or
(4) consolidate with or merge into any other
corporation or permit any other corporation to merge into it,
except a merger into or consolidation with (a) the Company,
(b) any wholly-owned restricted subsidiary or (c) any other
corporation if, immediately thereafter, (x) the surviving
corporation shall be a restricted subsidiary, (y) the Company
shall be in full compliance with all the terms and provisions
of the Notes, and (z) the surviving corporation would be
permitted to incur at least $1.00 of additional unsecured
funded indebtedness pursuant to the provisions of section
9(A)(3) hereof; or
(5) sell, lease, transfer or otherwise dispose of
all or any substantial part of its property and assets except
(a) to the Company or any wholly-owned restricted subsidiary
or (b) in the case of a sale to any other person, in
compliance with all applicable requirements of paragraphs (G)
and (I) of this section 9; or
(6) make any investments or commitments to make
investments except as expressly permitted by paragraph (E) of
this section 9.
Any corporation which becomes a restricted subsidiary after the date
hereof shall for all purposes of this paragraph (B) be deemed to have
created, assumed or incurred, at the time it becomes a restricted
subsidiary, all indebtedness of such corporation existing immediately
after it becomes a restricted subsidiary.
(C) Limitations on Liens;. The Company will not itself,
and will not permit or suffer any restricted subsidiary to, create or
incur or suffer to be created or incurred or to exist any mortgage,
lien, security interest, charge or encumbrance of any kind on, or
pledge of, any property or assets of any kind, real or personal,
tangible or intangible, of the Company or any such subsidiary, whether
owned on the date of original issue of the Notes or thereafter
acquired, or acquire or agree to acquire any property or assets of any
kind under a conditional sale agreement or other title retention
agreement or file or permit the filing of any financing statement
under the Uniform Commercial Code or other similar notice under any
other similar statute without equally and ratably securing the Series
A Notes with all other obligations secured thereby and which security
shall be created and conveyed by documentation satisfactory in scope,
form and substance to the holders of at least 66-2/3% in aggregate
principal amount of the outstanding Series A Notes and which
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security shall continue in full force and effect until either (x) the
same is released by the holders of at least 66-2/3% in aggregate
principal amount of outstanding Series A Notes, (y) all other
obligations secured thereby are discharged, or (z) the security is
released by the holders of all such other obligations, and in any case
the Series A Notes shall have the benefit, to the full extent that the
holders may be entitled thereto under applicable law, of an equitable
lien on such property or assets equally and ratably securing the
Series A Notes; provided, however, that the provisions of this
paragraph (C) shall not prevent or restrict the creation, incurring or
existence of any of the following:
(1) any mortgage, lien, security interest, charge
or encumbrance on, or pledge of, any property or assets of any
such subsidiary to secure indebtedness owing by it to the
Company or a wholly-owned restricted subsidiary;
(2) purchase money mortgages or other liens on
real property (including leaseholds) and fixtures thereon,
acquired by the Company or any such subsidiary, to secure the
purchase price of such property (or to secure indebtedness
incurred solely for the purpose of financing the acquisition
of any such property to be subject to such mortgage or other
lien) and created contemporaneously with such acquisition or
within 180 days thereafter, or mortgages or other liens
existing on any such property at the time of acquisition of
such property by the Company or by such subsidiary, whether or
not assumed, or any mortgage or lien on real property of such
subsidiary existing at the time of acquisition of such
subsidiary, provided that at the time of the acquisition of
the property by the Company or a restricted subsidiary, or at
the time of the acquisition of the restricted subsidiary by
the Company, as the case may be, (a) the principal amount of
the indebtedness secured by each such mortgage or lien, plus
the principal amount of all other indebtedness secured by
mortgages or liens on the same property, shall not exceed 75%
(100% in the case of capitalized leases) of the cost (which
shall be deemed to include the amount of all indebtedness
secured by mortgages or other liens, including existing liens,
on such property) of such property to the Company or any such
subsidiary, or 75% (100% in the case of capitalized leases) of
the fair value thereof (without deduction of the indebtedness
secured by mortgages or liens on such property) at the time of
the acquisition thereof by the Company or such subsidiary,
whichever is the lesser, and (b) every mortgage or lien shall
apply only to the property originally subject thereto and
fixed improvements constructed thereon;
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(3) refundings or extensions of the mortgages or
liens permitted in the foregoing clause (2) for amounts not
exceeding the principal amounts of the indebtedness so
refunded or extended at the time of the refunding or extension
thereof, and applying only to the same property theretofore
subject to the same and fixed improvements constructed
thereon;
(4) the owning or acquiring or agreeing to
acquire machinery or equipment useful for the business of the
Company or any such subsidiary subject to or upon chattel
mortgages or conditional sale agreements or other title
retention agreements, provided that the principal amounts of
the indebtedness secured by such chattel mortgages, plus the
aggregate amounts payable under such conditional sale
agreements and other title retention agreements, shall not
exceed the limitations set forth in clause (2) of paragraph
(A) of this section 9;
(5) deposits, liens or pledges to enable the
Company or any such subsidiary to exercise any privilege or
license, or to secure payments of workmen's compensation,
unemployment insurance, old age pensions or other social
security, or to secure the performance of bids, tenders,
contracts (other than for the payment of money) or leases to
which the Company or any such subsidiary is a party, or to
secure public or statutory obligations of the Company or any
such subsidiary, or to secure surety, stay or appeal bonds to
which the Company or any such subsidiary is a party, but, as
to all of the foregoing, only if the same shall arise and
continue in the ordinary course of business; or other similar
deposits or pledges made and continued in the ordinary course
of business;
(6) mechanic's, workmen's, repairmen's or
carriers' liens, but only if arising, and only so long as
continuing, in the ordinary course of business; or other
similar liens arising and continuing in the ordinary course of
business; or deposits or pledges in the ordinary course of
business to obtain the release of any such liens;
(7) liens arising out of judgments or awards
against the Company or any such subsidiary with respect to
which the Company or such subsidiary shall in good faith be
prosecuting an appeal or proceedings for review; or liens
incurred by the Company or any such subsidiary for the purpose
of obtaining a stay or discharge in the course of any legal
proceeding to which the Company or such subsidiary is a party;
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(8) liens for taxes not yet subject to penalties
for non-payment or contested as permitted by paragraph (F) of
section 8, or minor survey exceptions, or minor encumbrances,
easements or reservations of, or rights of others for, rights
of way, sewers, electric lines, telegraph and telephone lines
and other similar purposes, or zoning or other restrictions as
to the use of real properties, which encumbrances, easements,
reservations, rights and restrictions do not in the aggregate
materially detract from the value of said properties or
materially impair their use in the operation of the business
of the Company or of such subsidiary owning the same;
(9) liens: (i) in favor of the United States of
America or any department or agency thereof or in favor of a
prime contractor under a United States Government contract,
and (ii) resulting from the acceptance of progress or partial
payments under United States Government contracts or
subcontracts thereunder;
(10) any arrangement permitted by paragraph (J) of
this section 9;
(11) inchoate liens arising under the Employee
Retirement Income Security Act of 1974, as amended, to secure
contingent liabilities under said Act;
(12) security interest evidenced by a UCC-1
financing statement to secure an obligation not exceeding
$1,000,000 in favor of Millmaster/Onyx Chemical Company as
vendor of certain chemical inventories located in Northfield,
Illinois; or
(13) liens on accounts receivable and ancillary
rights sold (or in which participating interests are sold) in
compliance with all applicable requirements of paragraph (I)
of this section 9
provided however that:
(x) the aggregate unpaid principal amount of all
indebtedness of the Company and its restricted subsidiaries
secured by the mortgages or liens permitted by clauses (2),
(3) and (4) of this paragraph (C) shall not at any time exceed
an amount equal to 10% of consolidated capitalization; and
(y) the sum, without duplication, of
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(i) the aggregate unpaid principal
amount of all indebtedness of the Company secured by
the mortgages or liens permitted by clauses (2), (3)
and (4) of this paragraph (C);
(ii) the aggregate unpaid principal
amount of all indebtedness of restricted subsidiaries
permitted by subclause (c) of clause (1) of paragraph
(B) of this section 9; and
(iii) the aggregate amount of liabilities
of the Company and its restricted subsidiaries
secured by liens permitted pursuant to the provisions
of clause (11) of this paragraph (C)
shall not at any time exceed an amount equal to 20% of
consolidated capitalization.
For purposes of this Series A Note, the Company or a
restricted subsidiary shall be deemed to be the owner of any property
which it has acquired or holds subject to a conditional sale
agreement, capitalized lease or other arrangement pursuant to which
the property has been retained by or vested in some other person for
security purposes and such retention or vesting shall constitute a
lien hereunder.
(D) Limitations on Guaranties;. The Company will not
itself, and will not permit any restricted subsidiary to, guarantee
any dividend, or guarantee any obligation or indebtedness, of any
other person other than (1) guarantees by the Company of obligations
or indebtedness of a restricted subsidiary which such subsidiary shall
be authorized to incur pursuant to the provisions of this Note, (2)
guaranties incurred in the ordinary course of business of the Company
or of a restricted subsidiary, and (3) guarantees by the Company of
indebtedness of persons other than restricted subsidiaries to the
extent permitted by clause (4) of paragraph (A) of this section 9.
(E) Limitation on Investments;. The Company will not
itself, and will not permit any restricted subsidiary to, make any
investment, or any commitment to make any investment, if, immediately
after giving effect to any such proposed investment, (1) the aggregate
amount of all investments, including investments made prior to the
date of original issue of the Notes (all such investments to be taken
at the cost thereof at the time of making such investment without
allowance for any subsequent write-offs or appreciation or
depreciation thereof, but less any amount repaid or recovered on
account of capital or principal), shall exceed 30% of the
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consolidated tangible net worth of the Company and its restricted
subsidiaries, or (2) consolidated funded indebtedness shall exceed 55%
of consolidated capitalization.
(F) Limitation on Dividends;. The Company will not
declare or pay, or set apart any funds for the payment of, any
dividends (other than dividends payable in common stock of the
Company) on any shares of capital stock of any class of the Company,
or apply any of its funds, property or assets to, or set apart any
funds, property or assets for, the purchase, redemption or other
retirement of, or make any other distribution, by reduction of capital
or otherwise, in respect of, any shares of capital stock of any class
of the Company, unless, immediately after giving effect to such action
(a) the Company would be permitted to incur at least $1.00 of
additional unsecured funded indebtedness pursuant to the provisions of
section 9(A)(3) hereof, and (b) the sum of
(1) the amounts declared and paid or payable as,
or set apart for, dividends (other than dividends paid or
payable in common stock of the Company) on, or distributions
(taken at cost to the Company or fair value at time of
distribution, whichever is higher) in respect of, all shares
of capital stock of all classes of the Company subsequent to
December 31, 1994, and
(2) the excess, if any, of the amounts applied
to, or set apart for, the purchase, redemption or retirement
of all shares of capital stock of all classes of the Company
subsequent to December 31, 1994, over the sum of (i) such
amounts as shall have been received as the net cash proceeds
of sales of shares of capital stock of all classes of the
Company subsequent to December 31, 1994, plus (ii) the
aggregate principal amount of all indebtedness of the Company
and its subsidiaries converted into or exchanged for shares of
capital stock of the Company subsequent to December 31, 1994,
would not be in excess of (x) $30,000,000 plus (or minus in the case
of a deficit) (y) the consolidated net income of the Company and its
restricted subsidiaries accrued subsequent to December 31, 1994. The
foregoing provisions of this paragraph (F) to the contrary
notwithstanding (i) the Company may pay any dividend within 90 days of
the date of its declaration if, on the date of declaration, such
dividend could properly have been paid within the limitations of this
paragraph (F), and (ii) the Company may pay regular dividends on or
make payments or purchases required to be made at the time when made
by the terms of any sinking fund, purchase fund or mandatory
redemption requirement in respect of any outstanding shares of
preferred stock of the Company originally issued for cash but all
amounts so paid or applied pursuant to clauses (i) and (ii) above
shall be included in any subsequent computation
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of restricted payments under this paragraph (F). The Company will not
declare any dividend payable more than 90 days after the date of
declaration thereof. The Company will not declare any dividend if an
event of default under section 12 shall have occurred and be
continuing.
(G) Limitations on Dispositions of Stock or Indebtedness
of Restricted Subsidiaries;. The Company will not sell, assign,
transfer or otherwise dispose of (except to a wholly-owned restricted
subsidiary) any shares of capital stock of any class of any restricted
subsidiary, or any other security of, or any indebtedness owing to it
by, any such subsidiary, unless (1) all of the capital stock and other
securities and the entire indebtedness of such subsidiary at the time
owned by the Company and by all its other restricted subsidiaries
shall be sold, assigned, transferred or otherwise disposed of, at the
same time, for cash, (2) such subsidiary shall not, at the time of
such sale, assignment, transfer or other disposition, own either (a)
any shares of capital stock of any class or any other security or any
indebtedness of any other restricted subsidiary of the Company which
is not being simultaneously disposed of as permitted by this paragraph
(G) or (b) any indebtedness of the Company, and (3) such sale,
assignment or transfer is permitted by paragraph (I) of this section
9.
(H) Maintenance of Consolidated Current Assets;. The
Company will not permit the consolidated current assets of the Company
and its restricted subsidiaries to be at any time less than 140% of
consolidated current indebtedness.
(I) Limitations on Mergers, Consolidations and Sales of
Assets;. The Company will not (1) consolidate with or merge into any
other corporation, or permit any other corporation to merge into the
Company, unless (a) the surviving or continuing corporation shall be
the Company, and (b) no event of default under section 12 shall exist
at the time of, or result from, such merger or consolidation, and (c)
after giving effect to such consolidation or merger the Company would
be permitted to incur at least $1.00 of additional funded indebtedness
under the provisions of paragraph (A)(3) of this section 9; or (2)
sell, lease, transfer or otherwise dispose of all or any substantial
part of its property and assets.
For the purposes of this paragraph (I) and clause (5) of
paragraph (B) of this section 9, a sale, lease, transfer or
disposition of properties or assets of the Company or a restricted
subsidiary shall be deemed to be of a "substantial part" thereof only
if the fair market value of such properties or assets, when added to
the fair market value of all other properties or assets sold, leased,
transferred or disposed of by the Company and its restricted
subsidiaries, other than (x) in the ordinary course of business, or
(y) in an approved transaction, during the 365 day period ending on
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the date of such sale, lease, transfer or disposition exceeds 15% of
the consolidated assets of the Company and its restricted subsidiaries
determined as of the end of the Company's immediately preceding fiscal
year.
As used herein, the term "approved transaction" shall mean any
sale, lease, transfer or disposition of properties or assets to the
extent that the Company shall, within 5 business days of such sale,
lease, transfer or disposition, certify in writing to each holder of
outstanding Series A Notes that such transaction shall constitute an
"approved transaction" for all purposes hereof.
The company will, on a date not later than the 365th day after
the occurrence of any approved transaction, apply the net after tax
proceeds of each approved transaction to either
(i) the purchase, acquisition or construction of
capital assets which are useful and to be used in the
surfactant, polymer, or specialty chemical business of the
Company or a restricted subsidiary, or
(ii) the prepayment of unsecured funded
indebtedness of the Company, including the concurrent
prepayment of Series A Notes pursuant to the provisions of
paragraph 4(C) hereof pro rata with all other unsecured funded
indebtedness then being prepaid;
provided, however, that to the extent that, at any time, the fair
market value of all properties or assets which were the subject of
approved transactions (the net after tax proceeds of which have not
theretofore been applied as contemplated in clause (i) or clause (ii)
above) exceeds 10% of the consolidated assets of the Company and its
restricted subsidiaries, determined as of the end of the fiscal year
of the Company immediately preceding any determination hereunder, the
Company will, on a date not later than the 30th day after such
determination, apply the net after tax proceeds of such excess
approved transactions in the manner contemplated in clause (i) or
clause (ii) above.
(J) Limitations on Sale-and-Leasebacks;. The Company
will not itself, and will not permit any restricted subsidiary to,
enter into any arrangement, directly or indirectly, with any person
whereby the Company or such subsidiary shall sell or transfer any
manufacturing plant or equipment owned or acquired by the Company or
such subsidiary and then or thereafter rent or lease, as lessee, such
property or any part thereof, or other property which the Company or
such subsidiary, as the case may be, intends to use for substantially
the same purpose or purposes as the property
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being sold or transferred, unless (1) the lease covering such property
or other property shall be for a term of not less than three years,
and (2) the Company could then incur unsecured funded indebtedness
under clause (3) of paragraph (A) of this section 9 in an amount not
less than the capitalized value of the rentals payable by the Company
or such subsidiary, as the case may be, under such lease determined in
accordance with good accounting practice.
(K) Limitation on Rentals;. The Company will not itself,
and will not permit any restricted subsidiary to, enter into, as
lessee, or be a party to, any lease of property if, immediately after
giving effect to such lease, the aggregate amount of rentals
(excluding up to $2,500,000 of tank car rentals incurred during such
fiscal year and any rentals payable under capitalized leases or under
leases between the Company and any wholly-owned restricted subsidiary
or between wholly-owned restricted subsidiaries) for any fiscal year
of the Company payable by the Company and its restricted subsidiaries
with respect to all such leases shall exceed 5% of consolidated
tangible net worth of the Company and its restricted subsidiaries.
For the purposes of this paragraph (K), the term "rentals," with
respect to any lease and for any period, shall mean the aggregate
amount payable by the lessee under such lease for such period to the
lessor.
(L) Transactions with Affiliates;. Notwithstanding any
other provision hereof, the Company will not, and will not permit any
restricted subsidiary to, directly or indirectly, enter into any
transaction with any affiliate of the Company (other than a
wholly-owned restricted subsidiary) unless such transaction is in the
ordinary course of, and pursuant to the reasonable requirements of,
the Company's or such restricted subsidiary's business and is
determined by the Board of Directors of the Company to be at least as
favorable to the Company or such restricted subsidiary as generally
obtainable at the time from persons other than affiliates of the
Company in a similar transaction.
(M) Compliance with ERISA;.
(1) The Company will not, and will not permit any
restricted subsidiary to, permit the aggregate value of all
vested benefits under all its employee benefit plans which are
employee pension benefit plans to exceed on any valuation date
the then current value of the assets of such employee benefit
plans allocable to such vested benefits unless the Company
could issue additional unsecured funded indebtedness pursuant
to section 9(A)(3) in an amount at least equal to the amount
by which such vested benefits exceed the current value of the
assets of such plans allocable to such vested benefits. All
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actuarial assumptions and methods used to make each
determination required by the preceding sentence shall be
reasonable in the aggregate, and shall comply with all
requirements of law. All such employee benefit plans shall
have annual or more frequent valuation dates.
If, on any valuation date, after giving effect to any
increase in vested benefits, the value of vested benefits
under all employee pension benefit plans maintained by the
Company and its restricted subsidiaries exceeds the value of
plan assets, the amount of any deficit resulting from an
increase in vested benefits subsequent to the immediately
preceding valuation date shall be amortized and made up during
the twelve-month period following the valuation date as of
which such deficit was determined, or on such other basis as
is agreed to by the Company and the holder or holders of 51%
in aggregate principal amount of all outstanding Notes and the
holder or holders of the Notes agree that their approval of
any such other basis proposed by the Company shall not be
unreasonably withheld. In addition, the Company will make
annual contributions in the aggregate sufficient to comply
with the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") standards as to the funding of employee
pension benefit plans. The Company will make an evaluation at
least once a year and also after the occurrence of an event
resulting in an extension of pension benefits to additional
employees or negotiation of labor contracts increasing pension
benefits or any other event which the Company should
reasonably expect to increase vested benefits.
(2) The Company will not, and will not permit any
subsidiary to, (a) terminate any of its employee benefit plans
so as to result in any material liability to the Pension
Benefit Guaranty Corporation established pursuant to ERISA,
(b) allow or suffer to exist any material prohibited
transaction involving any of such employee benefit plans, (c)
incur or suffer to exist any material accumulated funding
deficiency, whether or not waived, involving any of such
employee benefit plans, or (d) allow or suffer to exist any
occurrence of any reportable event, or any other event or
condition, which presents a material risk of termination of
such employee benefit plans by such Pension Benefit Guaranty
Corporation so as to result in a material liability to the
Pension Benefit Guaranty Corporation.
(3) As used in this paragraph (M), the terms
"vested benefits," "employee pension benefit plans,"
"accumulated funding deficiency" and "reportable event" shall
have the respective meanings assigned to them in
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ERISA, and the term "prohibited transaction" shall have the
meaning assigned to it in Internal Revenue Code Section 4975
and ERISA.
Section 10. Consents, Waivers and Modifications;. Any term,
covenant, agreement or condition of this Series A Note may be amended, or
compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), if the Company shall have
obtained the agreement or consent in writing of the holders of at least 51% in
aggregate principal amount of all outstanding Series A Notes and 51% in
aggregate principal amount of all outstanding Series B Notes; provided,
however, that without the agreement or consent in writing of the holders of all
outstanding Notes of each series no such amendment or waiver shall (i) change
the amount or maturity of any principal of the Notes of either series or any
installment or fixed prepayment thereof or change the rate or extend the time
of payment of interest on the Notes of either series or reduce the amount of
principal thereof or premium with respect thereto or modify any of the
provisions of the Notes of either series with respect to the payment or
prepayment thereof, (ii) give to any Note of either series any preference over
any other Note of either series, (iii) reduce the percentage of holders of
Notes of either series required to approve any such amendment or effectuate any
such waiver or (iv) change the definition of "change of control" set forth in
paragraph 4(D). Any such amendment or waiver shall apply equally to all
holders of the Series A Notes and shall be binding upon them, upon each future
holder of any Series A Note and upon the Company, whether or not such Note
shall have been marked to indicate such amendment or waiver. No such amendment
or waiver shall extend to or affect any obligation not expressly amended or
waived or impair any right consequent thereon.
Section 11. Definitions;. For the purposes of this Note, the
following terms shall have the following respective meanings, and any
accounting terms not defined in this Note shall have the respective meanings
given to them in accordance with good accounting practice:
(A) The term "affiliate" of any corporation shall mean
any person which, directly or indirectly, controls or is controlled by
or is under common control with such corporation. For the purposes of
this definition, "control" (including the correlative meanings of
"controlling," "controlled by" and "under common control with") 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 the ownership of voting securities, by contract or
otherwise.
(B) The term "assets" of any corporation shall mean, at
any date, the gross book value as shown by the books of such
corporation in accordance with good
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accounting practice of all its property, whether real, personal or
mixed (exclusive of franchises, licenses, permits, patents, patent
applications, copyrights, trademarks, trade names, good will,
experimental or organizational expense, leasehold improvements not
recoverable at the expiration of a lease, unamortized debt discount
and expense, deferred charges and other intangibles and treasury
stock), less the sum (without duplication) of (1) all reserves for
depreciation, depletion, obsolescence and amortization of its
properties (other than properties excluded as hereinabove provided) as
shown by the books of such corporation and all other proper reserves
which in accordance with good accounting practice should be set aside
in connection with the business conducted by such corporation, other
than reserves for contingencies not allocated to any particular
purpose; and (2) the amount of any write-up subsequent to December 31,
1986 in the book value of any asset owned by such corporation on such
date resulting from the revaluation thereof subsequent to such date,
or any write-up in excess of the cost of any asset acquired by such
corporation subsequent to such date.
(C) The term "capitalized lease" shall mean any lease
which, in accordance with good accounting practice, is of such a
nature that payment obligations of the lessee thereunder shall have
been or should be capitalized and shown as liabilities (other than
current indebtedness) upon the balance sheet of such lessee.
(D) The term "consolidated," when used in respect of the
assets, current assets, current indebtedness and funded indebtedness
of the Company and its restricted subsidiaries shall mean the
aggregate of the assets, current assets, current indebtedness, funded
indebtedness, respectively, of the Company and its restricted
subsidiaries, after eliminating all intercompany items and all other
items which should be eliminated in accordance with good accounting
practice; provided, however, in determining consolidated assets, there
shall not be included therein any amount on account of the excess of
(i) the cost of acquisition of shares of any subsidiary over the book
value of the assets of such subsidiary attributable to such shares on
the books of such subsidiary at the date of acquisition of such
shares, or (ii) the book value of the assets of such subsidiary
attributable to such shares at the date of such acquisition over the
cost of acquisition of such shares.
(E) The term "consolidated capitalization" shall mean the
sum of (i) consolidated funded indebtedness, plus (ii) consolidated
tangible net worth.
(F) The term "consolidated balance sheet" shall mean a
balance sheet consolidating the accounts of the Company and its
restricted subsidiaries prepared, subject to any applicable provisions
hereof, in accordance with good accounting
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practice and after eliminating all intercompany items and all other
items which should be eliminated in accordance with good accounting
practice.
(G) The term "consolidated net current assets" shall mean
the amount by which consolidated current assets exceeds consolidated
current indebtedness.
(H) The term "consolidated net income" shall mean the
aggregate of the net income of the Company and its restricted
subsidiaries, after eliminating all intercompany items and portions of
income properly attributable to minority interest in the stock of such
subsidiaries, all computed in accordance with good accounting
practice.
(I) The term "consolidated tangible net worth" shall mean
the aggregate of the tangible net worth of the Company and its
restricted subsidiaries, consolidated in accordance with good
accounting practice.
(J) The term "corporation" shall include corporations,
joint stock companies and business trusts.
(K) The term "current assets", to the extent permitted by
and in all cases as determined in accordance with, good accounting
practice, shall include (1) cash on hand or in transit or on deposit
in any bank or trust company which has not suspended business; (2)
readily marketable securities issued by the United States of America
and other readily marketable securities maturing within one year from
the date of issuance, taken in total at not more than cost or current
market value, whichever is lower; (3) customers' accounts and bills
and notes receivable; (4) inventories of raw materials and supplies,
of work or materials in process and of finished products, taken in
total at not more than cost or current market value, whichever is
less; and (5) such other assets including prepaid expenses but not
deferred charges as, in accordance with good accounting practice,
would be included in "current assets"; all after deduction of
adequate reserves in each case where a reserve is proper under good
accounting practice; provided, however, that in computing current
assets there shall be excluded any assets which are pledged or
deposited as security for or for the purpose of paying any obligation
which is not included in current indebtedness.
(L) The term "current indebtedness" shall mean all
indebtedness other than funded indebtedness, and, without limitation,
shall include (1) all indebtedness maturing on demand or within one
year after the date as of which such determination is made, (2) final
maturities and prepayments of indebtedness and sinking fund
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payments (including, with respect to the Notes, not only (a) fixed
prepayments, but also (b) other prepayments on and after the date of
notice of prepayment thereof pursuant to section 6) required to be
made in respect of any indebtedness within one year after said date,
and (3) all other items (including taxes accrued as estimated) which
in accordance with good accounting practice would be included as
current liabilities.
(M) The term "default rate" shall mean the greater of (1)
8.69% per annum, or (2) the prime rate of interest as announced from
time to time by The First National Bank of Chicago (or if not so
announced by said bank then the prime rate as reported from time to
time in the money rate section of The Wall Street Journal).
(N) The term "events of default" shall have the meaning
specified in section 12.
(O) The term "funded indebtedness" shall mean all
indebtedness (including capitalized payment obligations under
capitalized leases) which by its terms matures more than one year from
the date as of which any calculation of funded indebtedness is made.
Funded indebtedness shall also include the amount by which vested
benefits under employee pension benefit plans exceeds the value of
assets of such plans allocable to such vested benefit, if any.
(P) The term "good accounting practice" shall mean, as to
a particular corporation, such accounting practices as, in the opinion
of the independent accountants regularly retained by such corporation,
conforms at the time to generally accepted accounting principles.
(Q) The term "indebtedness" of any corporation shall mean
and include (1) all items which, in accordance with good accounting
practice, would be included on the liability side of a balance sheet
of such corporation as of the date as of which indebtedness is to be
determined, including all capitalized payment obligations created or
arising under any capitalized lease, but excluding capital stock,
capital, paid-in and earned surplus, surplus reserves which in effect
are appropriations of surplus or offsets to asset values (other than
all reserves in respect of obligations, the amount, applicability or
validity of which is at such date being contested in good faith by
such corporation) and deferred credits, (2) indebtedness secured by
any mortgage, pledge, security interest or lien existing on property
owned subject to such mortgage, pledge, security interest or lien
whether or not the indebtedness secured thereby shall have been
assumed, (3) all proper accruals for federal and other taxes based on
or measured by income or profits, and (4) except for guaranties
referred to in clauses
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(1) and (2) of paragraph (D) of section 9, all indebtedness
guaranteed, directly or indirectly, in any manner by such corporation,
or in effect guaranteed or supported, directly or indirectly, by such
corporation through an agreement, contingent or otherwise, (a) to
purchase the indebtedness, (b) to purchase, sell, transport or lease
(as lessee or lessor) property or to purchase or sell services at
prices or in amounts designed to enable the debtor to make payment of
the indebtedness or to assure the owner of the indebtedness against
loss, or (c) to supply funds to or in any other manner invest in the
debtor; provided, however, that such term shall not mean and include
any indebtedness in respect of which moneys sufficient to pay and
discharge the same in full (either on the expressed date of maturity
thereof or on such earlier date as such indebtedness may be duly
called for redemption and payment) shall be deposited with a
depositary, agency or trustee in trust for the payment thereof, but
only if, in the case of indebtedness to be redeemed prior to the
maturity thereof, any notice of redemption required by the terms
thereof shall have been duly given or provision satisfactory to the
depositary, agent or trustee, as the case may be, shall have been made
for the giving of such notice.
(R) The term "investment" shall include any investment,
in cash or by the delivery of other property (except against receipt
of the fair value thereof in cash or in the ordinary course of
business), whether by acquisition of stock, securities or other
indebtedness, or by loan, advance, capital contribution, transfer of
property or otherwise; provided, however, that (1) the acquisition of
stock, securities or other indebtedness of, or a loan, advance capital
contribution or transfer of property to, a restricted subsidiary (or a
corporation which by reason of such transaction will become a
restricted subsidiary) by the Company or one of its restricted
subsidiaries, or (2) the purchase, acquisition or ownership by the
Company or a restricted subsidiary of (a) readily marketable
securities issued by states or municipalities within the United States
of America or agencies or subdivisions thereof rated "A" or better by
any recognized rating agency, (b) direct obligations of, or
obligations unconditionally guaranteed by, the United States of
America or any agency thereof, (c) commercial paper maturing within
not more than 270 days from the date of issuance thereof which is
issued by any corporation organized and doing business under the laws
of the United States of America or any state thereof and which is
rated "Prime 1" by Moody's Investors Service, Inc. or "A-1" by
Standard and Poor's Corporation (or comparably rated by such
organizations or any successors thereto if the rating system is
changed or there are such successors), (d) certificates of deposit
issued by any commercial bank organized and doing business under the
laws of the United States of America or any state thereof and having
(x) capital, surplus and undivided profits aggregating more than
$50,000,000, and (y) outstanding commercial paper which, at the time
of acquisition of such certificates of deposit by
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the Company or any restricted subsidiary is rated "Prime 1" by Moody's
Investors Service, Inc. or "A-1" by Standard and Poor's Corporation
(or comparably rated by such organizations or any successors thereto
if the rating system is changed or there are any successors), and (e)
trade accounts payable to the Company or a restricted subsidiary
within six months from the date such liability arose, shall not be
deemed an "investment."
(S) The term "net income" of any corporation for any
fiscal period shall mean the net income (or the net deficit, if
expenses and charges exceed revenues and other proper income credits)
of such corporation for such period, determined in the following
manner:
(1) The gross revenues and other proper income
credits of such corporation shall be computed for such period
in accordance with good accounting practice; provided that in
any event there shall not be included in such gross revenues
and income credits any write up in the book value of any asset
resulting from the revaluation thereof;
(2) From the amount of such gross revenues and
other proper income credits for such period determined as
provided in the preceding clause (1), there shall be deducted
an amount equal to the aggregate of all expenses and other
proper income charges for such period, determined in
accordance with good accounting practice but in any event
deducting (without in any respect limiting the generality of
the foregoing) the following items: (a) all interest charges;
(b) amortization of debt discount and expense and any other
amortization of deferred charges properly subject to
amortization; (c) provision for all taxes whether in respect
of property, income, excess profits or otherwise; (d)
provisions for all contingency and other reserves whether
general or special; and (e) provision for depreciation,
depletion, obsolescence and amortization of the properties of
such corporation (including depreciation and amortization of
leasehold improvements) in amounts not less than the aggregate
amount actually deducted on its books and not less than the
aggregate amount claimed (but adjusted for any disallowance)
or to be claimed by such corporation for federal income tax
purposes for such period; provided, however, that in lieu of
accelerated depreciation permitted under the Internal Revenue
Code of 1986, as amended, the corporation may at its option
provide for depreciation and amortization in amounts based on
the normal rates customarily employed by the corporation for
identical or similar types of property in the preparation of
its audited financial statements, and in such event the
corporation shall establish and shall maintain in accordance
with
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good accounting practice an appropriate reserve in respect of
any tax savings as a result of charging for tax purposes such
accelerated depreciation or accelerated amortization;
provided that, in determining the amount to be included in clauses (1)
and (2) above, (i) any federal tax adjustments for any period prior to
January 1, 1995 shall not be a proper charge or credit to income for
any period subsequent to that date, and any federal tax adjustment for
any period subsequent to December 31, 1994 shall be included as a
proper charge or credit to income for the year in which actually
received or paid, except to the extent, if any, to which the amount of
such latter adjustment is charged to a proper reserve for federal
taxes set up out of income for any period subsequent to December 31,
1994; (ii) any adjustments for any period prior to January 1, 1995
resulting from any renegotiation or price redetermination in respect
of any Government prime contract, or any subcontract under any
Government prime contract, shall not be included as a proper charge or
credit to income for any period subsequent to that date, and any such
renegotiation or price redetermination adjustment for any period
subsequent to December 31, 1994 shall be included as a proper charge
or credit to income for the year in which actually received or paid,
except to the extent, if any, to which the amount of such adjustment
is charged to a proper reserve for renegotiation or price
redetermination set up out of income for any period subsequent to
December 31, 1994; (iii) any earnings of, and dividends payable to,
such corporation in currencies which at the time are blocked against
conversion into United States currency shall not be included as a
proper charge or credit to income for any period subsequent to
December 31, 1994; (iv) any undistributed earnings of, and dividends
payable by, unconsolidated subsidiaries or any other person (other
than a restricted subsidiary) shall not be included as a proper charge
or credit to income for any period subsequent to December 31, 1994;
(v) any gains on the sale or other disposition of capital assets and
taxes on such excluded gains shall not be included as a proper charge
or credit to income for any period subsequent to December 31, 1994;
(vi) net earnings and losses of any corporation (other than a
subsidiary) substantially all the assets of which have been acquired
in any manner, realized by such other corporation prior to the date of
acquisition shall not be included as a proper charge or credit to
income for any period subsequent to December 31, 1994; (vii) net
earnings or losses of any corporation (other than a restricted
subsidiary) with which the Company or a restricted subsidiary shall
have consolidated or which shall have merged into or with the Company
or a restricted subsidiary prior to the date of such consolidation or
merger shall not be included as a proper charge or credit to income
for any period subsequent to December 31, 1994; and (viii) any portion
of the net earnings of any restricted subsidiary which for any reason
is unavailable for the payment of dividends to the Company or any
other
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restricted subsidiary shall not be included as a proper credit to
income for any period subsequent to December 31, 1994. The term
"capital assets" of any corporation as used herein shall include all
fixed assets, both tangible (such as land, buildings, machinery and
equipment) and intangible (such as patents, copyrights, trademarks,
trade names, formulae and good will), and securities.
(T) The term "person" shall include any individual, a
corporation, a partnership or a government, foreign or domestic, or
any agency or political subdivision thereof.
(U) The term "restricted subsidiary" shall mean any
subsidiary of the Company which (i) is organized under the laws of any
state of the United States of America or under the laws of Canada or
any province thereof, (ii) has substantially all of its assets located
within, and operates substantially within, the United States of
America or Canada, (iii) at least 50% of the outstanding voting stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (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) is at the
time directly or indirectly owned by the Company, by one or more of
its wholly-owned restricted subsidiaries or by the Company and one or
more of its wholly-owned restricted subsidiaries, and (iv) which the
Company designates as a restricted subsidiary, by notice to the
holders of the Notes in the manner in section 6 provided, at the date
on which the Notes shall be originally issued or subsequent to the
acquisition of any such subsidiary by the Company; provided, however,
that the Company may not designate any subsidiary as a restricted
subsidiary unless at the time of such designation, and after giving
effect thereto, (a) the Company could become liable for at least $1.00
of additional unsecured funded indebtedness pursuant to clause (3) of
paragraph (A) of section 9, and (b) no default or event which the
passage of time or giving of notice, or both, would constitute an
event of default would exist; and provided further that the Company
may not subsequently change the designation of any such subsidiary
from restricted subsidiary to unrestricted subsidiary.
(V) The term "subsidiary" shall mean, as to a particular
parent corporation, any corporation of which more than 50% of the
outstanding stock having ordinary voting power to elect a majority of
the Board of Directors of such corporation (irrespective of whether or
not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly
owned by such parent corporation,
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by one or more of its subsidiaries or by such parent corporation
and one or more of its subsidiaries.
(W) The term "tangible net worth" of any corporation
shall mean the sum of the amounts set forth on the balance sheet of
such corporation, prepared in accordance with good accounting practice
and as of any date selected by such corporation not more than 45 days
prior to the taking of any action for the purpose of which the
determination is being made, which appears as (1) the par or stated
value of all outstanding stock, (2) capital, paid-in and earned
surplus and (3) deferred taxes and investment tax credits, less the
sum of (a) any surplus resulting from any write-up of assets
subsequent to December 31, 1994, (b) good will, including any amounts
(however designated on such balance sheet) representing the cost of
acquisitions of restricted subsidiaries in excess of underlying
tangible assets, unless an appraisal of such assets made by a
reputable firm of appraisers at the time of acquisition shall indicate
sufficient value to cover such excess, (c) any amounts by which
investments in persons appearing on the asset side of such balance
sheet exceed the lesser of cost or the proportionate share of such
corporation in the book value of the assets of such persons, provided
that such book value shall be reduced by any amounts representing
restrictions on the payment of dividends by such persons pursuant to
any law, charter provision, mortgage or indenture or, in lieu of the
foregoing, any investment may be carried at its market value if the
securities representing such investment are publicly traded, (d)
patents, trademarks, copyrights, leasehold improvements not
recoverable at the expiration of a lease and deferred charges
(including, but not limited to, unamortized debt discount and expense,
organization expenses, experimental and development expenses, but
excluding prepaid expenses), (e) any amounts at which shares of
capital stock of such corporation appear on the asset side of such
balance sheet, and (f) any amount of indebtedness not included on the
liability side of such balance sheet.
(X) The term "unrestricted subsidiary" shall mean any
subsidiary other than a restricted subsidiary.
(Y) The term "wholly-owned restricted subsidiary" shall
mean any restricted subsidiary all of whose outstanding stock of all
classes (other than directors' qualifying shares) at the time is owned
directly or indirectly by the Company, or by one or more of its
wholly-owned restricted subsidiaries or by the Company and one or more
of its wholly-owned restricted subsidiaries.
Section 12. Events of Default and Remedies;. When any event of
default (hereafter defined) described in paragraph (A) below has happened and
is continuing, the
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holder or holders of 25% or more of the principal amount of Series A
Notes at the time outstanding may, and when any event of default described in
paragraph (B), (C), (F), (G) or (H) below has happened and is continuing, the
holder or holders of 51% or more of the principal amount of Series A Notes at
the time outstanding may, by written notice to the Company, declare the entire
principal and all interest accrued on all Series A Notes to be, and all such
Notes shall thereupon become, forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived; provided, however, when any event of default described
in paragraph (A) below has happened and is continuing with respect to any
Series A Note, the holder of such Series A Note may, by written notice to the
Company, declare the entire principal and all interest accrued on such Series A
Note to be, and such Series A Note shall thereupon become, forthwith due and
payable, without any presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived. When any event of default described
in paragraph (D) or (E) below has occurred, then all outstanding Series A Notes
shall immediately become due and payable without presentment, demand or notice
of any kind. If the event of default on which any such acceleration or
declaration is based is an event of default other than an event of default
described in paragraph (D) or (E) below, then in such event, in addition to the
amounts required to be paid by the Company in accordance with the foregoing
provisions of this section 12, the Company shall also pay, to the extent
permitted by law, an amount (as liquidated damages for the loss of the bargain
evidenced hereby and not as a penalty) equal to the make whole premium amount
described in section 4 above.
The provisions of this section 12 are subject to the condition that if
the principal of and accrued interest on all or any outstanding Series A Notes
have been declared or become immediately due and payable by reason of the
occurrence of any event of default described in paragraphs (A) through (H),
below, the holders of 66-2/3% in aggregate principal amount of the Series A
Notes then outstanding may, by written instrument filed with the Company,
rescind and annul such acceleration and the consequences thereof, provided that
at the time such acceleration is annulled and rescinded:
(a) no judgment or decree has been entered for the
payment of any monies due pursuant to the Series A Notes;
(b) all arrears of interest upon all the Series A Notes
and all other sums payable under the Series A Notes (except any
principal, interest or premium on the Series A Notes which has become
due and payable solely by reason of such acceleration under this
section 12) shall have been duly paid; and
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(c) each and every other event of default shall have been
made good, cured or waived pursuant to section 10 hereof;
and provided further, that no such rescission and annulment shall extend to
or affect any subsequent event of default or impair any right consequent
thereto.
The events listed in paragraph (A) through (H) below are called
"events of default":
(A) default shall be made by the Company (1) in the
payment of principal of, or premium, if any, on, any Note when and as
the same shall become due and payable, whether at maturity thereof, on
a date fixed for prepayment (in this Note or in any notice of
prepayment), by acceleration or otherwise, or (2) in the payment of
interest on any Note when and as the same shall become due and payable
and such default in the payment of interest shall continue for a
period of 5 days; or
(B) default shall be made in the performance or
observance of any covenant, condition or agreement contained in
section 9 and such default shall continue for a period of 30 days; or
(C) default shall be made in the performance or
observance of any other of the covenants, conditions or agreements in
this Note set forth or in the Loan Agreement dated as of June 15, 1995
pursuant to which this Note was initially issued and such default
shall continue for a period of 30 days after the earlier of (1) the
Company becoming aware of such default, and (2) written notice to the
Company from the holder of any Note stating the specific default or
defaults; or any representation or warranty made by the Company herein
or in said Loan Agreement, or furnished in writing in connection with
or pursuant to this Note or said Loan Agreement shall be false in any
material respect on the date as of which such representation or
warranty is made; or
(D) a decree or order by a court having jurisdiction in
the premises shall have been entered adjudging the Company or any
restricted subsidiary a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, readjustment,
arrangement, composition or similar relief for the Company or any such
subsidiary under the federal bankruptcy laws, or any other similar
applicable federal or state law, and such decree or order shall have
continued undischarged or unstayed for a period of 60 days; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of the Company or any restricted subsidiary
or a substantial part of its property, or for the winding up or
liquidation of its affairs, shall have been
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entered, and such decree or order shall have remained in force
undischarged and unstayed for a period of 60 days; or any substantial
part of the property of the Company or any restricted subsidiary shall
be sequestered or attached and shall not be returned to the possession
of the Company or such subsidiary or released from such attachment
within 60 days thereafter; or
(E) the Company or any restricted subsidiary shall
institute proceedings to be adjudged a voluntary bankrupt, or shall
consent to the filing of a bankruptcy proceeding against it, or shall
file a petition or answer or consent seeking reorganization,
readjustment, arrangement, composition or similar relief under the
federal bankruptcy laws, or any other similar applicable federal or
state law, or shall consent to the filing of any such petition, or
shall consent to the appointment of a receiver or liquidator or
trustee or assignee in bankruptcy or insolvency of it or of a
substantial part of its property, or shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay
its debts generally as they become due, or shall voluntarily suspend
transaction of its usual business, or corporate action shall be taken
by the Company or any such subsidiary in furtherance of any of the
aforesaid purposes; or
(F) the Company or any restricted subsidiary fails to
make any payment due on any indebtedness having a principal amount
greater than $2,500,000 or any event shall occur (other than the mere
passage of time) or any condition shall exist in respect of any
indebtedness of the Company or any restricted subsidiary, or under any
agreement securing or relating to such indebtedness and any such event
or condition continues beyond any applicable period of grace, if any,
the effect of which is to cause (or permit any holder of such
indebtedness or other Security or a trustee to cause) such
indebtedness or other Security, or a portion thereof, to become due
prior to its stated maturity or prior to its regularly scheduled dates
of payment; or
(G) final judgment for the payment of money in excess of
$250,000 shall be rendered against the Company or any restricted
subsidiary and the same shall remain undischarged for a period of 30
days during which execution shall not be effectively stayed; or
(H) a change of control (as defined in paragraph 4(D))
shall occur and continue for more than 40 days or a default shall
occur in giving notice of any change of control pursuant to the
provisions of paragraph 8(K).
In case any one or more of the events of default specified above in
this section 12 shall have happened and be continuing, the holder of this Note
may proceed to protect and
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enforce its rights either by suit in equity and/or by action at law, or by
other appropriate proceedings, whether for the specific performance (to the
extent permitted by law) of any covenant or agreement contained in this Note or
in aid of the exercise of any power granted in this Note, or, subject to the
first paragraph of this section 12, may proceed to enforce the payment of this
Note or to enforce any other legal or equitable right of the holder of this
Note.
In case of a default in the payment of any principal of, premium, if
any, or interest on, any Note, the Company will pay to the holder thereof such
further amount as shall be sufficient to cover the cost and expense of
collection, including (without limitation) reasonable attorneys' fees.
Section 13. No Waiver. No course of dealing between the
Company and the holder hereof or any delay on the part of the holder hereof in
exercising any rights hereunder shall operate as a waiver of any rights of any
holder hereof, except to the extent expressly waived in writing by the holder
hereof.
Section 14. Loss, Theft, Destruction or Mutilation of Note;.
Upon receipt by the Company of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Note, and of indemnity or
security reasonably satisfactory to the Company (or, if this Note shall then be
held by an institutional investor, an indemnity agreement therefrom), and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Note if mutilated, the Company will
make and deliver a new Note of like tenor in lieu of this Note. Any Note made
and delivered in accordance with the provisions of this section 14 shall be
dated as of the date to which interest has been paid on this Note or, if no
interest has theretofore been paid on this Note, then dated the date hereof.
Section 15. Governing Law;. This Note shall be construed in
accordance with and governed by the laws of the State of Illinois.
Section 16. Successors and Assigns;. All the covenants,
stipulations, promises and agreements in this Note contained by or on behalf of
the Company shall bind its successors and assigns, whether so expressed or not.
Section 17. Headings;. The headings of the sections of
this Note are inserted for convenience only and shall not be deemed to
constitute a part hereof.
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In Witness Whereof, STEPAN COMPANY has caused this Note to be signed
in its corporate name by a duly authorized officer and to be dated as of the
day and year first above written.
STEPAN COMPANY
By
Its
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No. RB-
PPN: 858586 D@ 6
STEPAN COMPANY
7.77% Promissory Note, Series B, Due June 30, 2010
$______________ ______________, ______
STEPAN COMPANY, a corporation duly organized and existing under the
laws of the State of Delaware (hereinafter called the "Company"), for value
received, hereby promises to pay to
or registered assigns, on June 30, 2010,
the principal amount of
to the extent not theretofore prepaid pursuant to the terms of this Note, in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, at the
principal office of the Company in Northfield, Illinois, and to pay interest
(computed on the basis of a 360-day year of twelve 30-day months) on the unpaid
principal amount hereof from the date hereof, in like coin or currency, at such
office, semi-annually on the thirtieth day of June and December in each year,
at the rate of 7.77% per annum until the unpaid principal amount hereof shall
have become due and payable and at the default rate thereafter and, so far as
may be lawful, to pay interest on any overdue installment of interest at the
default rate at such principal office in like coin or currency.
Section 1. The Notes;. This Note is one of a number of
promissory notes (hereinafter called the "Notes"), in the aggregate principal
amount of $40,000,000, consisting of $10,000,000 aggregate principal amount of
7.69% Promissory Notes, Series A (the "Series A Notes") and $30,000,000
aggregate principal amount of 7.77% Promissory Notes, Series B (the "Series B
Notes"), of which this Note is one, all issued or to be issued pursuant to
separate and several loan agreements each dated as of June 15, 1995 entered
into by the Company with the lenders therein referred to.
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Section 2. Exchanges;. The holder of this Series B Note, or
of any note or Notes substituted therefor pursuant to the provisions of this
section 2, may at its option, in person or by duly authorized attorney,
surrender the same for exchange at the principal office of the Company in
Northfield, Illinois accompanied by a written instrument of transfer duly
executed by the registered holder hereof and, within a reasonable time
thereafter and without expenses (other than transfer taxes, if any), receive in
exchange therefor one or more duly executed printed Note or Notes, each of the
same series, in the principal amount of $100,000 or any integral multiple of
$10,000 in excess thereof, dated as of the date to which interest has been paid
on the Note or Notes so surrendered or, if no interest has yet been so paid,
then dated the date hereof, and payable to such person or persons as may be
designated by such holder, for the same aggregate principal amount as the then
unpaid principal amount of the Note or Notes so surrendered. The Company
covenants and agrees to take and cause to be taken all action necessary to
effect such exchanges.
Section 3. Payments to Registered Holder;. The person in
whose name this Note is registered shall be deemed to be and treated as the
owner and holder hereof for all purposes and payment of or on account of the
principal, premium, if any or interest hereon shall be made to or upon the
written order of the registered holder.
Section 4. Prepayment of Notes;.
(A) Required Prepayments;. In addition to paying the entire
outstanding principal amount and the interest due on the Series B Notes on the
maturity date thereof, on June 30 in each year, commencing June 30, 2000 and
ending June 30, 2009 (herein called "fixed payment dates") both inclusive the
Company will prepay and apply and there shall become due and payable the sum of
$2,727,273 on the principal indebtedness evidenced by the Series B Notes. No
premium shall be payable in connection with any required prepayment made
pursuant to this paragraph 4(A). Any payment of less than all of the Series B
Notes pursuant to the provisions of paragraphs (B), (C) or (D) of this section
4 shall not relieve the Company of the obligation to make the required payments
or prepayments on the Series B Notes in accordance with the terms of this
paragraph 4(A); provided, however, that if and to the extent that any
prepayment of Series B Notes pursuant to the provisions of paragraph 4(D) below
does not result in the prepayment of all of the prepayment of all of the Series
B Notes then outstanding, the remaining prepayments required to be made
pursuant to this paragraph 4(A) shall, in each case, be reduced in the same
proportion that the principal amount of Series B Notes outstanding immediately
prior to such prepayment pursuant to paragraph 4(D) is reduced by such
prepayment.
(B) Optional Prepayments without Premium;.
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(x) On a Fixed Payment Date. Upon compliance with
section 6 the Company shall have the privilege (which shall be non
cumulative) of prepaying outstanding Series B Notes on any fixed
payment date in units of $100,000 or an integral multiple of $10,000
in excess thereof, by payments of the principal amount of the Series B
Notes to be prepaid and accrued interest thereon to the date of such
payment and without premium; provided however that (i) the principal
amount of Series B Notes prepaid pursuant to this subparagraph 4(B)(x)
on any one fixed payment date shall not exceed the principal amount of
the Series B Notes required to be prepaid pursuant to paragraph 4(A)
on such fixed payment date, (ii) the aggregate amount of all Series B
Notes prepaid pursuant to this subparagraph 4(B)(x) shall not exceed
an amount equal to the excess, if any, of $10,000,000 over the
aggregate amount of all Series A Notes prepaid pursuant to
subparagraph 4(B)(y), and (iii) the Company shall have, concurrently
with such prepayment, prepaid the same pro rata portion of the Series
A Notes pursuant to the provisions of subparagraph 4(B)(x) of said
Series A Notes.
(y) Upon Sale of Phthalic Anhydride Assets. In the event
that the Company shall have sold 50% or more of the assets relating to
its phthalic anhydride operations, the Company shall have the
privilege, upon compliance with section 6, of applying all or any
portion of the net cash proceeds from such sale to the prepayment of
outstanding Series B Notes (but if less than all of the Series B Notes
are then to be prepaid pursuant to this subparagraph 4(A)(y), then in
units of $100,000 or an integral multiple of $10,000 in excess
thereof) by payment of the principal amount of the Series B Notes to
be prepaid and accrued interest thereon to the date of such prepayment
and without premium; provided, however, that (a) such prepayment shall
occur on or prior to June 30, 1996, (b) the Company shall have,
concurrently with such prepayment, prepaid the same pro rata portion
of the Series A Notes pursuant to the provisions of subparagraph
4(B)(y) of said Series A Notes and (c) that notice of any prepayment
pursuant to this subparagraph 4(B)(y) shall be made within 30 days of
such sale.
(C) Optional Prepayment with Premium;. In addition to the
prepayments required by paragraph 4(A) and the rights of prepayment set forth
in 4(B) the Company shall have the privilege at any time and from time to time
of prepaying the outstanding Series B Notes either in whole or in part (but if
in part then in units of $1,000,000 or an integral multiple of $10,000 in
excess thereof) by payment of the principal amount of the Series B Notes or the
portion thereof to be prepaid and accrued interest thereon to the date of such
prepayment together with the make whole premium amount; provided that the
Company shall have, concurrently with such prepayment, prepaid the same pro
rata portion of the Series A Notes pursuant to the provisions of paragraph 4(C)
of said Series A Notes.
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For purposes of this paragraph 4(C) and section 12 below:
The term "make whole premium amount" shall mean, to the extent
that the adjusted treasury reinvestment yield at such time is lower
than 7.77% per annum, the excess of (a) the present value of the
remaining scheduled principal and interest payments and prepayments to
become due on that portion of the Series B Notes to be prepaid, taking
into account the required application of such prepayment to the
scheduled payments and prepayments on the Series B Notes, all
determined by discounting such payments and prepayments at a rate that
is equal to the adjusted treasury reinvestment yield, over (b) the
aggregate principal amount of the Series B Notes plus accrued interest
to be paid or prepaid. To the extent that the adjusted treasury
reinvestment yield at the time of such prepayment or payment is equal
to or higher than 7.77% per annum, the make whole premium amount is
zero.
The term "adjusted treasury reinvestment yield" shall mean, as
of the date of any determination thereof, the sum of (i) the then
applicable treasury reinvestment yield, plus (ii) 50 basis points.
The term "treasury reinvestment yield" shall be (a) the yield
reported on the third business day preceding the date of prepayment or
payment on page "USD" of the Bloomberg Financial Markets Service
Screen (or, if not available, any other nationally recognized trading
screen reporting on-line intraday trading in United States government
securities) at 10:00 A.M. (New York time) for United States government
securities having a maturity corresponding to the remaining weighted
average life to maturity of the principal of the Series B Notes as of
the date of such prepayment or payment, as the case may be, rounded to
the nearest month, or (b) in the event that no such nationally
recognized trading screen reporting on-line trading in United States
government securities is available, "treasury reinvestment yield"
shall mean the arithmetic mean of the yields published in the weekly
statistical release designated H.15(519) of the Federal Reserve System
under the caption "U.S. Government Securities-Treasury Constant
Maturities" (the "statistical release") or if the statistical release
is not published, the arithmetic mean of such reasonably comparable
index as may be designated by the holders of at least 51% in aggregate
principal amount of the outstanding Series B Notes, for the maturity
corresponding to the remaining weighted average life to maturity of
the Series B Notes as of the date of such prepayment or payment, as
the case may be, rounded to the nearest month. If no maturity exactly
corresponds to such rounded weighted average life to maturity, the
yields for the two most closely corresponding published maturities
shall be calculated pursuant to the immediately preceding sentence and
the treasury reinvestment yield shall be interpolated from such yields
on a straight-line basis,
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rounding in each of such relevant periods to the nearest month. For
purposes of calculating the treasury reinvestment yield, the most
recent statistical release published prior to the third business day
preceding the date of prepayment or payment shall be used.
The term "weighted average life to maturity" shall mean as at
the time of the determination thereof the number of years obtained by
dividing the then remaining dollar-years of the Series B Notes by the
aggregate amount of all remaining scheduled principal and interest
payments (including the payments at final maturity) to be made on the
Series B Notes. The term "remaining dollar-years" of the Series B
Notes means the product obtained by (1) multiplying (A) the amount of
each of the remaining scheduled principal and interest payments
(including the payments at final maturity), by (B) the number of years
(calculated at the nearest one-twelfth) which will elapse between the
date of determination of the weighted average life to maturity of the
Series B Notes and the date of required payment is due and (2)
totaling all the products obtained in (1).
(D) Prepayment on Failure of Holders to Consent to Change of
Control;. In the event that the Company shall request the holders of the
Series B Notes in writing to consent to a change of control and the holder or
holders of any Series B Notes shall, within 30 days following the receipt of
such a request, have refused in writing to consent to a change of control, then
the Company may, at any time within 5 days after the earlier of (x) the receipt
of a response to such request from the holder or holders of 100% of the
outstanding Series B Notes, or (y) the expiration of such 30 day period, and
upon not less than three business days prior written notice, prepay all (but
not less than all) Series B Notes held by each holder which has refused to
consent to such change of control by prepayment of the principal amount thereof
and accrued interest thereon to the date of such prepayment. Any holder which
has failed to respond to such request prior to the expiration of such 30 day
period shall, for purposes hereof, be deemed to have consented to such change
of control. Any request by the Company made pursuant to this paragraph 4(D)
shall set forth (i) a summary of the transaction or transactions causing the
change of control, (ii) the name and address of the "person" described in
clause (i) or (ii) of the definition of the term "change of control" set forth
below, (iii) such financial or other information as would be reasonably
necessary for each holder to make an informed decision with respect to such
request, and (iv) a statement as to whether, at the time of such change of
control and after giving effect thereto, either any event of default or any
event which, with the passage of time or giving of notice, or both, would
become an event of default, shall have occurred and be continuing. In the
event that the Company shall receive a response to its request from any holder
of a Series B Note, it will promptly advise, in writing, all other holders of
Series B Notes of such response and the source and content thereof.
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For purposes of this paragraph 4(D) and paragraphs 8(K) and 12(H)
below, the term "change of control" shall mean and shall be deemed to have
occurred, (i) upon the acquisition by any "person" (as that term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended)
of beneficial ownership, direct or indirect, of more than 50% of the
outstanding voting stock of the Company, or (ii) upon the acquisition of the
Company, or all or substantially all of its assets by, or the combination of
the Company, or all or substantially all of its assets with, another "person"
(as defined above), unless the acquiring or surviving "person" shall be a
corporation more than 50% of the outstanding voting stock of which is owned,
immediately after such acquisition or combination, by the owners of the voting
stock of the Company immediately prior to such acquisition or combination. The
term "acquisition" shall mean the earlier to occur of (x) the actual possession
of the subject voting stock or assets, and (y) the consummation of any
transaction or series of related transactions which, with the passage of time,
will give such person the actual possession thereof. The term "voting stock"
shall mean securities of any class or classes, the holders of which are
ordinarily, in the absence of contingencies, entitled to elect a majority of
the corporate directors (or persons performing similar functions).
Section 5. Partial Prepayments to be Pro Rata where More than
One Series B Note Outstanding;. In the event of any prepayment of less than
all of the outstanding Series B Notes pursuant to the provisions of paragraphs
4(A), 4(B) or 4(C), at a time when more than one Series B Note is outstanding,
the principal amount of the Series B Notes so to be prepaid shall be allocated
among the respective Series B Notes and holders thereof so that the principal
amount to be prepaid to each holder pursuant to any section hereof shall bear
the same ratio to the aggregate principal amount then to be prepaid pursuant to
such section as the principal amount of Series B Notes then held by such holder
bears to the aggregate principal amount of all Series B Notes then outstanding,
except that if upon any allocation on such basis the amounts so to be prepaid
to any such holder pursuant to any section hereof would not be an exact
multiple of $1,000, then additional or lesser amounts not exceeding $1,000 may
be allocated by the Company to such holder, or if the amount so to be prepaid
to any such holder pursuant to such section would be less than $1,000, then no
amount need be allocated to such holder, in each such case so long as
allocations of prepayments among the respective Notes and holders thereof shall
be appropriate to maintain, from time to time, through successive partial
prepayments as nearly as practicable the ratio above provided. Prepayments of
Series B Notes pursuant to the provisions of paragraph 4(D) shall be allocated
as therein provided.
Section 6. Notice of Prepayment and Other Notices;.
(A) Prepayment Notice;. If the Company shall elect to
prepay this Note or any portion hereof pursuant to paragraph 4(B) or 4(C), the
Company shall give notice of such
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prepayment in writing not less than 30 nor more than 60 days prior to the date
fixed for such prepayment, specifying (i) the prepayment date, (ii) the
principal amount to be prepaid on this Note and on all the other outstanding
Notes, (iii) an estimate of the make whole premium amount, if any, applicable
to the prepayment of this Note, and (iv) accrued interest applicable to such
prepayment. A computation of the amount, if any, of any make whole premium
amount payable in connection with a prepayment of this Note shall be furnished
to the holder hereof as soon as practicable after determination of such premium
and, in all events, not less than three business days prior to the date of such
prepayment.
(B) Mailing of Notices;. Such notice of prepayment, and all other
notices to be given to any holder of this Note, shall be sent by prepaid
overnight courier to the payee herein named, irrespective of whether the payee
is the holder of this Note; provided, however, that if any subsequent holder of
this Note shall have presented it to the Company for inspection at the office
of the Company maintained as provided in paragraph (A) of section 8, and shall
have delivered to the Company at such office a written notice of the
acquisition by such holder of this Note and designated in writing an address to
which notices in respect of this Note shall be mailed, such notices shall be
sent to such holder at such designated address instead of to the payee herein
named. All notices to be given to any holder of this Note shall be deemed to
have been given only upon actual receipt by such holder. In the case of a
properly addressed notice, the Company shall not be required to determine the
authority of any person signing or initialling a confirmation of receipt.
Section 7. Notes Due and Interest Ceases on Prepayment Date;
Evidence of Partial Prepayment; New Notes. Upon notice of prepayment being
given as in this Note provided, the Company shall be obligated to prepay, at
the principal office of the Company in Northfield, Illinois, on the date
specified in such notice, this Note or such portion hereof to be prepaid as is
specified in such notice at the principal amount thereof, plus accrued interest
thereon to the date so specified and the applicable make whole premium amount,
if any. If this Note is designated for prepayment in whole or in part as
hereinbefore provided, then this Note or such portion hereof as is designated
for prepayment, as the case may be, shall cease to bear interest on and after
the date fixed for such prepayment provided such prepayment is duly made. Upon
the due prepayment in part of this Note, the holder hereof shall surrender it
to the Company, which shall thereupon issue and deliver, without charge to such
holder, a new Note for the unpaid balance of this Note; provided, however, that
instead of surrendering this Note as aforesaid, the holder of this Note may, at
its option, present this Note to the Company for notation hereon of the payment
of the portion of the principal of this Note so prepaid and this Note shall
thereupon be returned to or on the order of the holder hereof. To the extent
that any of the Notes are fully prepaid they shall be cancelled and may not be
redelivered. Any new Note made and delivered in accordance with the provisions
of this section 7 shall be dated as of the date to which interest has been
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paid on the indebtedness to be evidenced by such new Note, or if no interest
has yet been so paid, then dated the date hereof.
Section 8. Affirmative Covenants;. The Company covenants and
agrees that so long as this Note shall be outstanding:
(A) Maintenance of Office or Agency;. The Company will
maintain an office in Northfield, Illinois or at such other place
hereafter designated in writing by the Company by notice to the holder
of this Note, where notices, presentations and demands to or upon the
Company in respect of this Note may be given or made.
(B) Payment of Principal, Premium and Interest;. The
Company will punctually pay or cause to be paid the principal and
interest, and premium, if any, to become due in respect of all the
Notes according to the terms thereof.
(C) Maintenance of Corporate Existence;. The Company
will at all times do or cause to be done all things necessary to
maintain, preserve and renew its corporate existence and the corporate
existence of each of its subsidiaries and its and their rights,
patents and franchises, and comply with and cause each subsidiary to
comply with, all related laws applicable to the Company or its
subsidiaries in such manner as counsel shall advise; provided,
however, that nothing contained in this paragraph (C) shall (1)
require the Company or any subsidiary to comply with any law so long
as the validity or applicability thereof shall be contested in good
faith, (2) require the Company or any subsidiary to maintain, preserve
or renew any right or franchise not necessary or desirable in the
conduct of the business of the Company or of such subsidiary, as the
case may be, (3) prevent the termination of the corporate existence of
any subsidiary if in the opinion of the Board of Directors of the
Company such termination is in the best interest of the Company and
not disadvantageous to the holders of the Notes, or (4) prevent any
transaction by a subsidiary permitted by the provisions of clause (4)
or (5) of paragraph (B) of section 9, or any transaction by the
Company permitted by the provisions of paragraph (I) of section 9.
(D) Properties;. The Company will, in so far as it is
not prevented by causes beyond its control, at all times maintain,
preserve, protect and keep, or cause to be maintained, preserved,
protected and kept, its property and the property of its subsidiaries
in good repair, working order and condition and, from time to time,
will, in so far as it is not prevented by causes beyond its control,
make or cause to be made all repairs, renewals, replacements,
extensions, additions, betterments and improvements to its property
and the property of its subsidiaries as are needful and
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proper, so that the business carried on in connection therewith may be
conducted properly and efficiently at all times; provided, however,
that nothing in this paragraph (D) shall prevent the Company or any
subsidiary from selling, abandoning or otherwise disposing of any
property if such property is no longer of use in the business of the
Company or the subsidiary owning the same, and if, in the opinion of
the Company, such sale, abandonment or other disposition is in the
best interest of the Company or such subsidiary and not
disadvantageous to the holders of the Notes.
(E) Insurance;. The Company will provide or cause to be
provided for itself and its subsidiaries such insurance against loss
or damage of the kinds customarily insured against by corporations
similarly situated, with reputable insurers, in such amounts and by
such methods as shall be adequate, and will at all times maintain or
cause to be maintained in full force and effect, with reputable
insurers and in such amounts and by such methods as shall be adequate,
public liability insurance against loss or damage to it or its
subsidiaries for bodily injury or death in or about any premises
occupied by it or its subsidiaries, and liability insurance against
loss or damage to it or its subsidiaries for bodily injury or death or
injury to property occurring by reason of the operation by it or its
subsidiaries of any motor vehicle.
(F) Payment of Taxes, Assessments, Etc;. The Company
will duly pay and discharge, and cause each of its subsidiaries to
duly pay and discharge, as the same become due and payable, all taxes,
assessments and governmental and other charges and claims levied or
imposed, or which if unpaid might become a lien or charge, upon the
franchises, assets, earnings or business of the Company or such
subsidiary, as the case may be, as well as all lawful claims for
labor, materials and supplies which, if unpaid, might become a lien or
charge upon such properties or any part thereof; provided, however,
that nothing contained in this paragraph (F) shall require the Company
or any such subsidiary to pay any such tax, assessment, charge or
claim so long as the Company or such subsidiary in good faith shall
contest the validity thereof and shall set aside on its books adequate
reserves with respect thereto.
(G) Payment of Indebtedness;. The Company will, and will
cause each of its subsidiaries to, pay punctually and discharge when
due, or renew or extend (except as otherwise prohibited by this Note),
any indebtedness heretofore or hereafter incurred by it or any of
them, as the case may be, and discharge, perform and observe the
covenants, provisions and conditions to be performed, discharged and
observed on the part of the Company or such subsidiary, as the case
may be, in connection therewith, or in connection with any agreement
or other instrument relating thereto, or in connection with any
mortgage, pledge, security interest or other
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lien existing at any time upon any of the property or assets of the
Company or such subsidiary, as the case may be; provided, however,
that nothing contained in this paragraph (G) shall require the Company
or any such subsidiary to pay or discharge or renew or extend any such
indebtedness or to discharge, perform or observe any such covenants,
provisions and conditions so long as the Company or such subsidiary in
good faith shall contest any claim which may be asserted against it in
respect of any such indebtedness or of any such covenants, provisions
and conditions and shall set aside on its books adequate reserves with
respect thereto.
(H) Keeping of Books;. The Company will, and will cause
each subsidiary to, (1) at all times keep proper books of record and
account in which full, true and correct entries will be made of its
transactions in accordance with good accounting practice; and (2) set
aside on its books from its earnings, for the fiscal year ending
December 31, 1995, and each fiscal year thereafter, reserves for
depreciation, obsolescence and/or amortization of its properties
during such year and all other proper reserves which, in accordance
with good accounting practice, should be set aside from such earnings
in connection with its business.
(I) Compliance with Law;. The Company will, and will
cause each of its subsidiaries to, use its best efforts to comply with
all applicable statutes, regulations, orders and restrictions of the
United States of America, foreign countries, states, provinces,
municipalities and agencies and instrumentalities of the foregoing, in
respect of the conduct of its respective business and the ownership of
its respective property (including, without limitation, applicable
statutes, regulations, orders and restrictions relating to equal
employment opportunities and environmental standards and controls),
except such as are being contested in good faith or with respect to
which compliance shall have been waived or extended by the applicable
governmental authority.
(J) Notice of Default;. If any one or more of the events
of default specified in section 12 shall occur, or if the holder of
any Note shall demand payment or take any other action permitted upon
the occurrence of any such event of default, the Company will at once
give notice to all holders of the Notes, specifying the nature of the
event of default or of such demand or other action, as the case may
be. In the event any indebtedness of the Company (other than the
Notes) is declared due and payable before its expressed maturity
because of the occurrence of an event of default thereunder, or under
any instrument or agreement pursuant to which such indebtedness is
issued or securing such indebtedness, the Company will at once give
notice in writing of such happening to all holders of the Notes.
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(K) Notice of Change of Control;. The Company will,
within two business days of becoming aware of a change of control (as
defined in paragraph 4(D)), give notice thereof to all holders of the
Notes.
Section 9. Negative Covenants;. The Company covenants and
agrees that so long as this Note shall be outstanding:
(A) Limitations on Funded Indebtedness;. The Company
will not create, incur, issue, assume or become or be liable,
contingently or otherwise, in respect of any funded indebtedness other
than
(1) funded indebtedness outstanding as of June
15, 1995 and reflected on Schedule C to the loan agreements
and funded indebtedness represented by the Notes;
(2) secured funded indebtedness incurred or
assumed subsequent to June 15, 1995 solely for the purpose of
financing the acquisition of property and secured only as
permitted under clauses (2), (3) and (4) of paragraph (C) of
this section 9, but only in an amount not exceeding the
maximum amount of additional unsecured funded indebtedness
which the Company could then incur under clause (3) of this
paragraph (A), provided that for purposes of this Note,
secured funded indebtedness shall not include indebtedness for
money borrowed by the Company against or secured by the cash
surrender value of life insurance maintained by the Company on
officers or directors of the Company, which indebtedness shall
constitute unsecured funded indebtedness for all purposes of
this Note;
(3) unsecured funded indebtedness incurred or
assumed subsequent to June 15, 1995 if, and to the extent
that, immediately after giving effect thereto and the
application of the proceeds thereof, consolidated funded
indebtedness does not exceed an amount equal to 55% of
consolidated capitalization, it being understood that the test
of this clause (3) is one of incurrence only;
(4) indebtedness taking the form of a guaranty of
indebtedness of any other person permitted by clause (3) of
paragraph (D) of this section 9, but only if, and to the
extent that, immediately after giving effect thereto, the
limitations set forth in clause (3) of this paragraph (A)
shall be satisfied, all such guaranties being treated as
funded indebtedness for the purpose of clause (3) of this
paragraph (A); and
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(5) funded indebtedness of the Company incurred
solely for the purpose of extending, renewing or refunding any
funded indebtedness of the Company then outstanding and
permitted by this paragraph (A), but only if, and to the
extent that, immediately after giving effect thereto, the
limitations set forth in clause (3) of this paragraph (A)
shall be satisfied.
(B) Limitations on Restricted Subsidiaries;. The Company
will not cause, suffer or permit any restricted subsidiary to
(1) create, incur, issue, assume or become or be
liable, contingently or otherwise, in respect of any
indebtedness except (a) indebtedness to the Company or to a
wholly-owned restricted subsidiary, (b) unsecured accounts
payable and other unsecured obligations (other than as a
result of borrowing) incurred in the ordinary course of
business of such subsidiary, and (c) indebtedness in addition
to that described in subclauses (a) and (b) above; provided
that the aggregate principal amount of all such indebtedness
permitted by this subclause (c) shall not at any time exceed
10% of consolidated capitalization of the Company and its
restricted subsidiaries; and provided further that the sum,
without duplication, of (x) the aggregate unpaid principal
amount of all such indebtedness permitted by this subclause
(c), (y) the aggregate unpaid principal amount of all
indebtedness of the Company secured pursuant to the provisions
of clauses (2), (3) and (4) of paragraph (C) of this section
9, and (z) the aggregate amount of liabilities of the Company
and its restricted subsidiaries secured by liens permitted
pursuant to the provisions of clause (11) of paragraph (C) of
this section 9, shall not at any time exceed 20% of
consolidated capitalization of the Company and its restricted
subsidiaries; or
(2) issue or sell any shares of its capital stock
or securities convertible into such capital stock except (a)
issuance or sale of directors' qualifying shares, (b) issuance
or sale to the Company or to any wholly-owned restricted
subsidiary, and (c) issuance or sale of additional shares of
stock of any such subsidiary to any holders thereof entitled
to receive or purchase such additional shares through the
declaration of a stock dividend or through the exercise of
preemptive rights; or
(3) sell, assign, transfer or otherwise dispose
of any shares of capital stock of any class of any other
restricted subsidiary, or any other security of, or any
indebtedness owing to it by, any other restricted subsidiary
(except in each case to the Company or to a wholly-owned
restricted subsidiary) unless
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such sale, assignment, transfer or other disposition shall
meet all the conditions set forth in paragraph (G) of this
section 9 which would be applicable to a similar disposition
made by the Company; or
(4) consolidate with or merge into any other
corporation or permit any other corporation to merge into it,
except a merger into or consolidation with (a) the Company,
(b) any wholly-owned restricted subsidiary or (c) any other
corporation if, immediately thereafter, (x) the surviving
corporation shall be a restricted subsidiary, (y) the Company
shall be in full compliance with all the terms and provisions
of the Notes, and (z) the surviving corporation would be
permitted to incur at least $1.00 of additional unsecured
funded indebtedness pursuant to the provisions of section
9(A)(3) hereof; or
(5) sell, lease, transfer or otherwise dispose of
all or any substantial part of its property and assets except
(a) to the Company or any wholly-owned restricted subsidiary
or (b) in the case of a sale to any other person, in
compliance with all applicable requirements of paragraphs (G)
and (I) of this section 9; or
(6) make any investments or commitments to make
investments except as expressly permitted by paragraph (E) of
this section 9.
Any corporation which becomes a restricted subsidiary after
the date hereof shall for all purposes of this paragraph (B) be deemed
to have created, assumed or incurred, at the time it becomes a
restricted subsidiary, all indebtedness of such corporation existing
immediately after it becomes a restricted subsidiary.
(C) Limitations on Liens;. The Company will not itself,
and will not permit or suffer any restricted subsidiary to, create or
incur or suffer to be created or incurred or to exist any mortgage,
lien, security interest, charge or encumbrance of any kind on, or
pledge of, any property or assets of any kind, real or personal,
tangible or intangible, of the Company or any such subsidiary, whether
owned on the date of original issue of the Notes or thereafter
acquired, or acquire or agree to acquire any property or assets of any
kind under a conditional sale agreement or other title retention
agreement or file or permit the filing of any financing statement
under the Uniform Commercial Code or other similar notice under any
other similar statute without equally and ratably securing the Series
B Notes with all other obligations secured thereby and which security
shall be created and conveyed by documentation satisfactory in scope,
form and substance to the holders of at least 66-2/3% in aggregate
principal amount of the outstanding Series B Notes and which
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security shall continue in full force and effect until either (x) the
same is released by the holders of at least 66-2/3% in aggregate
principal amount of outstanding Series B Notes, (y) all other
obligations secured thereby are discharged, or (z) the security is
released by the holders of all such other obligations, and in any case
the Series B Notes shall have the benefit, to the full extent that the
holders may be entitled thereto under applicable law, of an equitable
lien on such property or assets equally and ratably securing the
Series B Notes; provided, however, that the provisions of this
paragraph (C) shall not prevent or restrict the creation, incurring or
existence of any of the following:
(1) any mortgage, lien, security interest, charge
or encumbrance on, or pledge of, any property or assets of any
such subsidiary to secure indebtedness owing by it to the
Company or a wholly-owned restricted subsidiary;
(2) purchase money mortgages or other liens on
real property (including leaseholds) and fixtures thereon,
acquired by the Company or any such subsidiary, to secure the
purchase price of such property (or to secure indebtedness
incurred solely for the purpose of financing the acquisition
of any such property to be subject to such mortgage or other
lien) and created contemporaneously with such acquisition or
within 180 days thereafter, or mortgages or other liens
existing on any such property at the time of acquisition of
such property by the Company or by such subsidiary, whether or
not assumed, or any mortgage or lien on real property of such
subsidiary existing at the time of acquisition of such
subsidiary, provided that at the time of the acquisition of
the property by the Company or a restricted subsidiary, or at
the time of the acquisition of the restricted subsidiary by
the Company, as the case may be, (a) the principal amount of
the indebtedness secured by each such mortgage or lien, plus
the principal amount of all other indebtedness secured by
mortgages or liens on the same property, shall not exceed 75%
(100% in the case of capitalized leases) of the cost (which
shall be deemed to include the amount of all indebtedness
secured by mortgages or other liens, including existing liens,
on such property) of such property to the Company or any such
subsidiary, or 75% (100% in the case of capitalized leases) of
the fair value thereof (without deduction of the indebtedness
secured by mortgages or liens on such property) at the time of
the acquisition thereof by the Company or such subsidiary,
whichever is the lesser, and (b) every mortgage or lien shall
apply only to the property originally subject thereto and
fixed improvements constructed thereon;
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(3) refundings or extensions of the mortgages or
liens permitted in the foregoing clause (2) for amounts not
exceeding the principal amounts of the indebtedness so
refunded or extended at the time of the refunding or extension
thereof, and applying only to the same property theretofore
subject to the same and fixed improvements constructed
thereon;
(4) the owning or acquiring or agreeing to
acquire machinery or equipment useful for the business of the
Company or any such subsidiary subject to or upon chattel
mortgages or conditional sale agreements or other title
retention agreements, provided that the principal amounts of
the indebtedness secured by such chattel mortgages, plus the
aggregate amounts payable under such conditional sale
agreements and other title retention agreements, shall not
exceed the limitations set forth in clause (2) of paragraph
(A) of this section 9;
(5) deposits, liens or pledges to enable the Company or
any such subsidiary to exercise any privilege or license, or to secure
payments of workmen's compensation, unemployment insurance, old age
pensions or other social security, or to secure the performance of
bids, tenders, contracts (other than for the payment of money) or
leases to which the Company or any such subsidiary is a party, or to
secure public or statutory obligations of the Company or any such
subsidiary, or to secure surety, stay or appeal bonds to which the
Company or any such subsidiary is a party, but, as to all of the
foregoing, only if the same shall arise and continue in the ordinary
course of business; or other similar deposits or pledges made and
continued in the ordinary course of business;
(6) mechanic's, workmen's, repairmen's or carriers'
liens, but only if arising, and only so long as continuing, in the
ordinary course of business; or other similar liens arising and
continuing in the ordinary course of business; or deposits or pledges
in the ordinary course of business to obtain the release of any such
liens;
(7) liens arising out of judgments or awards against the
Company or any such subsidiary with respect to which the Company or
such subsidiary shall in good faith be prosecuting an appeal or
proceedings for review; or liens incurred by the Company or any such
subsidiary for the purpose of obtaining a stay or discharge in the
course of any legal proceeding to which the Company or such subsidiary
is a party;
(8) liens for taxes not yet subject to penalties for
non-payment or contested as permitted by paragraph (F) of section 8,
or minor survey exceptions, or minor
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encumbrances, easements or reservations of, or rights of others for,
rights of way, sewers, electric lines, telegraph and telephone lines
and other similar purposes, or zoning or other restrictions as to the
use of real properties, which encumbrances, easements, reservations,
rights and restrictions do not in the aggregate materially detract
from the value of said properties or materially impair their use in
the operation of the business of the Company or of such subsidiary
owning the same;
(9) liens: (i) in favor of the United States of America
or any department or agency thereof or in favor of a prime contractor
under a United States Government contract, and (ii) resulting from the
acceptance of progress or partial payments under United States
Government contracts or subcontracts thereunder;
(10) any arrangement permitted by paragraph (J) of this
section 9;
(11) inchoate liens arising under the Employee Retirement
Income Security Act of 1974, as amended, to secure contingent
liabilities under said Act;
(12) security interest evidenced by a UCC-1 financing
statement to secure an obligation not exceeding $1,000,000 in favor of
Millmaster/Onyx Chemical Company as vendor of certain chemical
inventories located in Northfield, Illinois; or
(13) liens on accounts receivable and ancillary rights
sold (or in which participating interests are sold) in compliance with
all applicable requirements of paragraph (I) of this section 9
provided however that
(x) the aggregate unpaid principal amount of all
indebtedness of the Company and its restricted subsidiaries
secured by the mortgages or liens permitted by clauses (2),
(3) and (4) of this paragraph (C) shall not at any time exceed
an amount equal to 10% of consolidated capitalization; and
(y) the sum, without duplication, of
(i) the aggregate unpaid principal amount of all
indebtedness of the Company secured by the mortgages or liens
permitted by clauses (2), (3) and (4) of this paragraph (C);
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(ii) the aggregate unpaid principal amount of all
indebtedness of restricted subsidiaries permitted by subclause
(c) of clause (1) of paragraph (B) of this section 9; and
(iii) the aggregate amount of liabilities of the
Company and its restricted subsidiaries secured by liens
permitted pursuant to the provisions of clause (11) of this
paragraph (C)
shall not at any time exceed an amount equal to 20% of consolidated
capitalization.
For purposes of this Series B Note, the Company or a
restricted subsidiary shall be deemed to be the owner of any property
which it has acquired or holds subject to a conditional sale
agreement, capitalized lease or other arrangement pursuant to which
title to the property has been retained by or vested in some other
person for security purposes and such retention or vesting shall
constitute a lien hereunder.
(D) Limitations on Guaranties;. The Company will not
itself, and will not permit any restricted subsidiary to, guarantee
any dividend, or guarantee any obligation or indebtedness, of any
other person other than (1) guarantees by the Company of obligations
or indebtedness of a restricted subsidiary which such subsidiary shall
be authorized to incur pursuant to the provisions of this Note, (2)
guaranties incurred in the ordinary course of business of the Company
or of a restricted subsidiary, and (3) guarantees by the Company of
indebtedness of persons other than restricted subsidiaries to the
extent permitted by clause (4) of paragraph (A) of this section 9.
(E) Limitation on Investments;. The Company will not
itself, and will not permit any restricted subsidiary to, make any
investment, or any commitment to make any investment, if, immediately
after giving effect to any such proposed investment, (1) the aggregate
amount of all investments, including investments made prior to the
date of original issue of the Notes (all such investments to be taken
at the cost thereof at the time of making such investment without
allowance for any subsequent write-offs or appreciation or
depreciation thereof, but less any amount repaid or recovered on
account of capital or principal), shall exceed 30% of the consolidated
tangible net worth of the Company and its restricted subsidiaries, or
(2) consolidated funded indebtedness shall exceed 55% of consolidated
capitalization.
(F) Limitation on Dividends;. The Company will not
declare or pay, or set apart any funds for the payment of, any
dividends (other than dividends payable in
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common stock of the Company) on any shares of capital stock of any
class of the Company, or apply any of its funds, property or assets
to, or set apart any funds, property or assets for, the purchase,
redemption or other retirement of, or make any other distribution, by
reduction of capital or otherwise, in respect of, any shares of
capital stock of any class of the Company, unless, immediately after
giving effect to such action (a) the Company would be permitted to
incur at least $1.00 of additional unsecured funded indebtedness
pursuant to the provisions of section 9(A)(3) hereof, and (b) the sum
of
(1) the amounts declared and paid or payable as,
or set apart for, dividends (other than dividends paid or
payable in common stock of the Company) on, or distributions
(taken at cost to the Company or fair value at time of
distribution, whichever is higher) in respect of, all shares
of capital stock of all classes of the Company subsequent to
December 31, 1994, and
(2) the excess, if any, of the amounts applied
to, or set apart for, the purchase, redemption or retirement
of all shares of capital stock of all classes of the Company
subsequent to December 31, 1994, over the sum of (i) such
amounts as shall have been received as the net cash proceeds
of sales of shares of capital stock of all classes of the
Company subsequent to December 31, 1994, plus (ii) the
aggregate principal amount of all indebtedness of the Company
and its subsidiaries converted into or exchanged for shares of
capital stock of the Company subsequent to December 31, 1994,
would not be in excess of (x) $30,000,000 plus (or minus in the case
of a deficit) (y) the consolidated net income of the Company and its
restricted subsidiaries accrued subsequent to December 31, 1994. The
foregoing provisions of this paragraph (F) to the contrary
notwithstanding (i) the Company may pay any dividend within 90 days of
the date of its declaration if, on the date of declaration, such
dividend could properly have been paid within the limitations of this
paragraph (F), and (ii) the Company may pay regular dividends on or
make payments or purchases required to be made at the time when made
by the terms of any sinking fund, purchase fund or mandatory
redemption requirement in respect of any outstanding shares of
preferred stock of the Company originally issued for cash but all
amounts so paid or applied pursuant to clauses (i) and (ii) above
shall be included in any subsequent computation of restricted payments
under this paragraph (F). The Company will not declare any dividend
payable more than 90 days after the date of declaration thereof. The
Company will not declare any dividend if an event of default under
section 12 shall have occurred and be continuing.
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(G) Limitations on Dispositions of Stock or Indebtedness
of Restricted Subsidiaries;. The Company will not sell, assign,
transfer or otherwise dispose of (except to a wholly-owned restricted
subsidiary) any shares of capital stock of any class of any restricted
subsidiary, or any other security of, or any indebtedness owing to it
by, any such subsidiary, unless (1) all of the capital stock and other
securities and the entire indebtedness of such subsidiary at the time
owned by the Company and by all its other restricted subsidiaries
shall be sold, assigned, transferred or otherwise disposed of, at the
same time, for cash, (2) such subsidiary shall not, at the time of
such sale, assignment, transfer or other disposition, own either (a)
any shares of capital stock of any class or any other security or any
indebtedness of any other restricted subsidiary of the Company which
is not being simultaneously disposed of as permitted by this paragraph
(G) or (b) any indebtedness of the Company, and (3) such sale,
assignment or transfer is permitted by paragraph (I) of this section
9.
(H) Maintenance of Consolidated Current Assets;. The
Company will not permit the consolidated current assets of the Company
and its restricted subsidiaries to be at any time less than 140% of
consolidated current indebtedness.
(I) Limitations on Mergers, Consolidations and Sales of
Assets;. The Company will not (1) consolidate with or merge into any
other corporation, or permit any other corporation to merge into the
Company, unless (a) the surviving or continuing corporation shall be
the Company, and (b) no event of default under section 12 shall exist
at the time of, or result from, such merger or consolidation, and (c)
after giving effect to such consolidation or merger the Company would
be permitted to incur at least $1.00 of additional funded indebtedness
under the provisions of paragraph (A)(3) of this section 9; or (2)
sell, lease, transfer or otherwise dispose of all or any substantial
part of its property and assets.
For the purposes of this paragraph (I) and clause (5) of
paragraph (B) of this section 9, a sale, lease, transfer or
disposition of properties or assets of the Company or a restricted
subsidiary shall be deemed to be of a "substantial part" thereof only
if the fair market value of such properties or assets, when added to
the fair market value of all other properties or assets sold, leased,
transferred or disposed of by the Company and its restricted
subsidiaries, other than (x) in the ordinary course of business, or
(y) in an approved transaction, during the 365 day period ending on
the date of such sale, lease, transfer or disposition exceeds 15% of
the consolidated assets of the Company and its restricted subsidiaries
determined as of the end of the Company's immediately preceding fiscal
year.
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As used herein, the term "approved transaction" shall mean any
sale, lease, transfer or disposition of properties or assets to the
extent that the Company shall, within 5 business days of such sale,
lease, transfer or disposition, certify in writing to each holder of
outstanding Series B Notes that such transaction shall constitute an
"approved transaction" for all purposes hereof.
The company will, on a date not later than the 365th day after
the occurrence of any approved transaction, apply the net after tax
proceeds of each approved transaction to either
(i) the purchase, acquisition or construction of
capital assets which are useful and to be used in the
surfactant, polymer, or specialty chemical business of the
Company or a restricted subsidiary, or
(ii) the prepayment of unsecured funded
indebtedness of the Company, including the concurrent
prepayment of Series B Notes pursuant to the provisions of
paragraph 4(C) hereof pro rata with all other unsecured funded
indebtedness then being prepaid;
provided, however, that to the extent that, at any time, the fair
market value of all properties or assets which were the subject of
approved transactions (the net after tax proceeds of which have not
theretofore been applied as contemplated in clause (i) or clause (ii)
above) exceeds 10% of the consolidated assets of the Company and its
restricted subsidiaries, determined as of the end of the fiscal year
of the Company immediately preceding any determination hereunder, the
Company will, on a date not later than the 30th day after such
determination, apply the net after tax proceeds of such excess
approved transactions in the manner contemplated in clause (i) or
clause (ii) above.
(J) Limitations on Sale-and-Leasebacks;. The Company
will not itself, and will not permit any restricted subsidiary to,
enter into any arrangement, directly or indirectly, with any person
whereby the Company or such subsidiary shall sell or transfer any
manufacturing plant or equipment owned or acquired by the Company or
such subsidiary and then or thereafter rent or lease, as lessee, such
property or any part thereof, or other property which the Company or
such subsidiary, as the case may be, intends to use for substantially
the same purpose or purposes as the property being sold or
transferred, unless (1) the lease covering such property or other
property shall be for a term of not less than three years, and (2) the
Company could then incur unsecured funded indebtedness under clause
(3) of paragraph (A) of this section 9 in an amount not less than the
capitalized value of the rentals payable by
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the Company or such subsidiary, as the case may be, under such lease
determined in accordance with good accounting practice.
(K) Limitation on Rentals;. The Company will not itself,
and will not permit any restricted subsidiary to, enter into, as
lessee, or be a party to, any lease of property if, immediately after
giving effect to such lease, the aggregate amount of rentals
(excluding up to $2,500,000 of tank car rentals incurred during such
fiscal year and any rentals payable under capitalized leases or under
leases between the Company and any wholly-owned restricted subsidiary
or between wholly-owned restricted subsidiaries) for any fiscal year
of the Company payable by the Company and its restricted subsidiaries
with respect to all such leases shall exceed 5% of consolidated
tangible net worth of the Company and its restricted subsidiaries.
For the purposes of this paragraph (K), the term "rentals," with
respect to any lease and for any period, shall mean the aggregate
amount payable by the lessee under such lease for such period to the
lessor.
(L) Transactions with Affiliates;. Notwithstanding any
other provision hereof, the Company will not, and will not permit any
restricted subsidiary to, directly or indirectly, enter into any
transaction with any affiliate of the Company (other than a
wholly-owned restricted subsidiary) unless such transaction is in the
ordinary course of, and pursuant to the reasonable requirements of,
the Company's or such restricted subsidiary's business and is
determined by the Board of Directors of the Company to be at least as
favorable to the Company or such restricted subsidiary as generally
obtainable at the time from persons other than affiliates of the
Company in a similar transaction.
(M) Compliance with ERISA;.
(1) The Company will not, and will not permit any
restricted subsidiary to, permit the aggregate value of all
vested benefits under all its employee benefit plans which are
employee pension benefit plans to exceed on any valuation date
the then current value of the assets of such employee benefit
plans allocable to such vested benefits unless the Company
could issue additional unsecured funded indebtedness pursuant
to section 9(A)(3) in an amount at least equal to the amount
by which such vested benefits exceed the current value of the
assets of such plans allocable to such vested benefits. All
actuarial assumptions and methods used to make each
determination required by the preceding sentence shall be
reasonable in the aggregate, and shall comply with all
requirements of law. All such employee benefit plans shall
have annual or more frequent valuation dates.
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If, on any valuation date, after giving effect to any
increase in vested benefits, the value of vested benefits
under all employee pension benefit plans maintained by the
Company and its restricted subsidiaries exceeds the value of
plan assets, the amount of any deficit resulting from an
increase in vested benefits subsequent to the immediately
preceding valuation date shall be amortized and made up during
the twelve-month period following the valuation date as of
which such deficit was determined, or on such other basis as
is agreed to by the Company and the holder or holders of 51%
in aggregate principal amount of all outstanding Notes and the
holder or holders of the Notes agree that their approval of
any such other basis proposed by the Company shall not be
unreasonably withheld. In addition, the Company will make
annual contributions in the aggregate sufficient to comply
with the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") standards as to the funding of employee
pension benefit plans. The Company will make an evaluation at
least once a year and also after the occurrence of an event
resulting in an extension of pension benefits to additional
employees or negotiation of labor contracts increasing pension
benefits or any other event which the Company should
reasonably expect to increase vested benefits.
(2) The Company will not, and will not permit any
subsidiary to, (a) terminate any of its employee benefit plans
so as to result in any material liability to the Pension
Benefit Guaranty Corporation established pursuant to ERISA,
(b) allow or suffer to exist any material prohibited
transaction involving any of such employee benefit plans, (c)
incur or suffer to exist any material accumulated funding
deficiency, whether or not waived, involving any of such
employee benefit plans, or (d) allow or suffer to exist any
occurrence of any reportable event, or any other event or
condition, which presents a material risk of termination of
such employee benefit plans by such Pension Benefit Guaranty
Corporation so as to result in a material liability to the
Pension Benefit Guaranty Corporation.
(3) As used in this paragraph (M), the terms
"vested benefits," "employee pension benefit plans,"
"accumulated funding deficiency" and "reportable event" shall
have the respective meanings assigned to them in ERISA, and
the term "prohibited transaction" shall have the meaning
assigned to it in Internal Revenue Code Section 4975 and
ERISA.
Section 10. Consents, Waivers and Modifications;. Any term,
covenant, agreement or condition of this Series B Note may be amended, or
compliance therewith may be waived (either generally or in a particular
instance and either retroactively or
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prospectively), if the Company shall have obtained the agreement or consent in
writing of the holders of at least 51% in aggregate principal amount of all
outstanding Series B Notes and 51% in aggregate principal amount of all
outstanding Series A Notes; provided, however, that without the agreement or
consent in writing of the holders of all outstanding Notes of each series no
such amendment or waiver shall (i) change the amount or maturity of any
principal of the Notes of either series or any installment or fixed prepayment
thereof or change the rate or extend the time of payment of interest on the
Notes of either series or reduce the amount of principal thereof or premium
with respect thereto or modify any of the provisions of the Notes of either
series with respect to the payment or prepayment thereof, (ii) give to any Note
of either series any preference over any other Note of either series, (iii)
reduce the percentage of holders of Notes of either series required to approve
any such amendment or effectuate any such waiver or (iv) change the definition
of "change of control" set forth in paragraph 4(D). Any such amendment or
waiver shall apply equally to all holders of the Series B Notes and shall be
binding upon them, upon each future holder of any Series B Note and upon the
Company, whether or not such Note shall have been marked to indicate such
amendment or waiver. No such amendment or waiver shall extend to or affect any
obligation not expressly amended or waived or impair any right consequent
thereon.
Section 11. Definitions;. For the purposes of this Note, the
following terms shall have the following respective meanings, and any
accounting terms not defined in this Note shall have the respective meanings
given to them in accordance with good accounting practice:
(A) The term "affiliate" of any corporation shall mean
any person which, directly or indirectly, controls or is controlled by
or is under common control with such corporation. For the purposes of
this definition, "control" (including the correlative meanings of
"controlling," "controlled by" and "under common control with") 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 the ownership of voting securities, by contract or
otherwise.
(B) The term "assets" of any corporation shall mean, at
any date, the gross book value as shown by the books of such
corporation in accordance with good accounting practice of all its
property, whether real, personal or mixed (exclusive of franchises,
licenses, permits, patents, patent applications, copyrights,
trademarks, trade names, good will, experimental or organizational
expense, leasehold improvements not recoverable at the expiration of a
lease, unamortized debt discount and expense, deferred charges and
other intangibles and treasury stock), less the sum (without
duplication) of (1) all reserves for depreciation, depletion,
obsolescence and
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amortization of its properties (other than properties excluded as
hereinabove provided) as shown by the books of such corporation and
all other proper reserves which in accordance with good accounting
practice should be set aside in connection with the business conducted
by such corporation, other than reserves for contingencies not
allocated to any particular purpose; and (2) the amount of any
write-up subsequent to December 31, 1986 in the book value of any
asset owned by such corporation on such date resulting from the
revaluation thereof subsequent to such date, or any write-up in excess
of the cost of any asset acquired by such corporation subsequent to
such date.
(C) The term "capitalized lease" shall mean any lease
which, in accordance with good accounting practice, is of such a
nature that payment obligations of the lessee thereunder shall have
been or should be capitalized and shown as liabilities (other than
current indebtedness) upon the balance sheet of such lessee.
(D) The term "consolidated," when used in respect of the
assets, current assets, current indebtedness and funded indebtedness
of the Company and its restricted subsidiaries shall mean the
aggregate of the assets, current assets, current indebtedness, funded
indebtedness, respectively, of the Company and its restricted
subsidiaries, after eliminating all intercompany items and all other
items which should be eliminated in accordance with good accounting
practice; provided, however, in determining consolidated assets, there
shall not be included therein any amount on account of the excess of
(i) the cost of acquisition of shares of any subsidiary over the book
value of the assets of such subsidiary attributable to such shares on
the books of such subsidiary at the date of acquisition of such
shares, or (ii) the book value of the assets of such subsidiary
attributable to such shares at the date of such acquisition over the
cost of acquisition of such shares.
(E) The term "consolidated capitalization" shall mean the
sum of (i) consolidated funded indebtedness, plus (ii) consolidated
tangible net worth.
(F) The term "consolidated balance sheet" shall mean a
balance sheet consolidating the accounts of the Company and its
restricted subsidiaries prepared, subject to any applicable provisions
hereof, in accordance with good accounting practice and after
eliminating all intercompany items and all other items which should be
eliminated in accordance with good accounting practice.
(G) The term "consolidated net current assets" shall mean
the amount by which consolidated current assets exceeds consolidated
current indebtedness.
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(H) The term "consolidated net income" shall mean the
aggregate of the net income of the Company and its restricted
subsidiaries, after eliminating all intercompany items and portions of
income properly attributable to minority interest in the stock of such
subsidiaries, all computed in accordance with good accounting
practice.
(I) The term "consolidated tangible net worth" shall mean
the aggregate of the tangible net worth of the Company and its
restricted subsidiaries, consolidated in accordance with good
accounting practice.
(J) The term "corporation" shall include corporations,
joint stock companies and business trusts.
(K) The term "current assets", to the extent permitted by
and in all cases as determined in accordance with, good accounting
practice, shall include (1) cash on hand or in transit or on deposit
in any bank or trust company which has not suspended business; (2)
readily marketable securities issued by the United States of America
and other readily marketable securities maturing within one year from
the date of issuance, taken in total at not more than cost or current
market value, whichever is lower; (3) customers' accounts and bills
and notes receivable; (4) inventories of raw materials and supplies,
of work or materials in process and of finished products, taken in
total at not more than cost or current market value, whichever is
less; and (5) such other assets including prepaid expenses but not
deferred charges as, in accordance with good accounting practice,
would be included in "current assets"; all after deduction of
adequate reserves in each case where a reserve is proper under good
accounting practice; provided, however, that in computing current
assets there shall be excluded any assets which are pledged or
deposited as security for or for the purpose of paying any obligation
which is not included in current indebtedness.
(L) The term "current indebtedness" shall mean all
indebtedness other than funded indebtedness, and, without limitation,
shall include (1) all indebtedness maturing on demand or within one
year after the date as of which such determination is made, (2) final
maturities and prepayments of indebtedness and sinking fund payments
(including, with respect to the Notes, not only (a) fixed prepayments,
but also (b) other prepayments on and after the date of notice of
prepayment thereof pursuant to section 6) required to be made in
respect of any indebtedness within one year after said date, and (3)
all other items (including taxes accrued as estimated) which in
accordance with good accounting practice would be included as current
liabilities.
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(M) The term "default rate" shall mean the greater of (1)
8.77% per annum, or (2) the prime rate of interest as announced from
time to time by The First National Bank of Chicago (or if not so
announced by said bank then the prime rate as reported from time to
time in the money rate section of The Wall Street Journal).
(N) The term "events of default" shall have the meaning
specified in section 12.
(O) The term "funded indebtedness" shall mean all
indebtedness (including capitalized payment obligations under
capitalized leases) which by its terms matures more than one year from
the date as of which any calculation of funded indebtedness is made.
Funded indebtedness shall also include the amount by which vested
benefits under employee pension benefit plans exceeds the value of
assets of such plans allocable to such vested benefit, if any.
(P) The term "good accounting practice" shall mean, as to
a particular corporation, such accounting practices as, in the opinion
of the independent accountants regularly retained by such corporation,
conforms at the time to generally accepted accounting principles.
(Q) The term "indebtedness" of any corporation shall mean
and include (1) all items which, in accordance with good accounting
practice, would be included on the liability side of a balance sheet
of such corporation as of the date as of which indebtedness is to be
determined, including all capitalized payment obligations created or
arising under any capitalized lease, but excluding capital stock,
capital, paid-in and earned surplus, surplus reserves which in effect
are appropriations of surplus or offsets to asset values (other than
all reserves in respect of obligations, the amount, applicability or
validity of which is at such date being contested in good faith by
such corporation) and deferred credits, (2) indebtedness secured by
any mortgage, pledge, security interest or lien existing on property
owned subject to such mortgage, pledge, security interest or lien
whether or not the indebtedness secured thereby shall have been
assumed, (3) all proper accruals for federal and other taxes based on
or measured by income or profits, and (4) except for guaranties
referred to in clauses (1) and (2) of paragraph (D) of section 9, all
indebtedness guaranteed, directly or indirectly, in any manner by such
corporation, or in effect guaranteed or supported, directly or
indirectly, by such corporation through an agreement, contingent or
otherwise, (a) to purchase the indebtedness, (b) to purchase, sell,
transport or lease (as lessee or lessor) property or to purchase or
sell services at prices or in amounts designed to enable the debtor to
make payment of the indebtedness or to assure the owner of the
indebtedness against loss, or (c) to supply funds to or in any other
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manner invest in the debtor; provided, however, that such term shall
not mean and include any indebtedness in respect of which moneys
sufficient to pay and discharge the same in full (either on the
expressed date of maturity thereof or on such earlier date as such
indebtedness may be duly called for redemption and payment) shall be
deposited with a depositary, agency or trustee in trust for the
payment thereof, but only if, in the case of indebtedness to be
redeemed prior to the maturity thereof, any notice of redemption
required by the terms thereof shall have been duly given or provision
satisfactory to the depositary, agent or trustee, as the case may be,
shall have been made for the giving of such notice.
(R) The term "investment" shall include any investment,
in cash or by the delivery of other property (except against receipt
of the fair value thereof in cash or in the ordinary course of
business), whether by acquisition of stock, securities or other
indebtedness, or by loan, advance, capital contribution, transfer of
property or otherwise; provided, however, that (1) the acquisition of
stock, securities or other indebtedness of, or a loan, advance capital
contribution or transfer of property to, a restricted subsidiary (or a
corporation which by reason of such transaction will become a
restricted subsidiary) by the Company or one of its restricted
subsidiaries, or (2) the purchase, acquisition or ownership by the
Company or a restricted subsidiary of (a) readily marketable
securities issued by states or municipalities within the United States
of America or agencies or subdivisions thereof rated "A" or better by
any recognized rating agency, (b) direct obligations of, or
obligations unconditionally guaranteed by, the United States of
America or any agency thereof, (c) commercial paper maturing within
not more than 270 days from the date of issuance thereof which is
issued by any corporation organized and doing business under the laws
of the United States of America or any state thereof and which is
rated "Prime 1" by Moody's Investors Service, Inc. or "A-1" by
Standard and Poor's Corporation (or comparably rated by such
organizations or any successors thereto if the rating system is
changed or there are such successors), (d) certificates of deposit
issued by any commercial bank organized and doing business under the
laws of the United States of America or any state thereof and having
(x) capital, surplus and undivided profits aggregating more than
$50,000,000, and (y) outstanding commercial paper which, at the time
of acquisition of such certificates of deposit by the Company or any
restricted subsidiary is rated "Prime 1" by Moody's Investors Service,
Inc. or "A-1" by Standard and Poor's Corporation (or comparably rated
by such organizations or any successors thereto if the rating system
is changed or there are any successors), and (e) trade accounts
payable to the Company or a restricted subsidiary within six months
from the date such liability arose, shall not be deemed an
"investment."
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(S) The term "net income" of any corporation for any
fiscal period shall mean the net income (or the net deficit, if
expenses and charges exceed revenues and other proper income credits)
of such corporation for such period, determined in the following
manner:
(1) The gross revenues and other proper income
credits of such corporation shall be computed for such period
in accordance with good accounting practice; provided that in
any event there shall not be included in such gross revenues
and income credits any write up in the book value of any asset
resulting from the revaluation thereof;
(2) From the amount of such gross revenues and
other proper income credits for such period determined as
provided in the preceding clause (1), there shall be deducted
an amount equal to the aggregate of all expenses and other
proper income charges for such period, determined in
accordance with good accounting practice but in any event
deducting (without in any respect limiting the generality of
the foregoing) the following items: (a) all interest charges;
(b) amortization of debt discount and expense and any other
amortization of deferred charges properly subject to
amortization; (c) provision for all taxes whether in respect
of property, income, excess profits or otherwise; (d)
provisions for all contingency and other reserves whether
general or special; and (e) provision for depreciation,
depletion, obsolescence and amortization of the properties of
such corporation (including depreciation and amortization of
leasehold improvements) in amounts not less than the aggregate
amount actually deducted on its books and not less than the
aggregate amount claimed (but adjusted for any disallowance)
or to be claimed by such corporation for federal income tax
purposes for such period; provided, however, that in lieu of
accelerated depreciation permitted under the Internal Revenue
Code of 1986, as amended, the corporation may at its option
provide for depreciation and amortization in amounts based on
the normal rates customarily employed by the corporation for
identical or similar types of property in the preparation of
its audited financial statements, and in such event the
corporation shall establish and shall maintain in accordance
with good accounting practice an appropriate reserve in
respect of any tax savings as a result of charging for tax
purposes such accelerated depreciation or accelerated
amortization;
provided that, in determining the amount to be included in clauses (1)
and (2) above, (i) any federal tax adjustments for any period prior to
January 1, 1995 shall not be a proper charge or credit to income for
any period subsequent to that date, and any
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federal tax adjustment for any period subsequent to December 31, 1994
shall be included as a proper charge or credit to income for the year
in which actually received or paid, except to the extent, if any, to
which the amount of such latter adjustment is charged to a proper
reserve for federal taxes set up out of income for any period
subsequent to December 31, 1994; (ii) any adjustments for any period
prior to January 1, 1995 resulting from any renegotiation or price
redetermination in respect of any Government prime contract, or any
subcontract under any Government prime contract, shall not be included
as a proper charge or credit to income for any period subsequent to
that date, and any such renegotiation or price redetermination
adjustment for any period subsequent to December 31, 1994 shall be
included as a proper charge or credit to income for the year in which
actually received or paid, except to the extent, if any, to which the
amount of such adjustment is charged to a proper reserve for
renegotiation or price redetermination set up out of income for any
period subsequent to December 31, 1994; (iii) any earnings of, and
dividends payable to, such corporation in currencies which at the time
are blocked against conversion into United States currency shall not
be included as a proper charge or credit to income for any period
subsequent to December 31, 1994; (iv) any undistributed earnings of,
and dividends payable by, unconsolidated subsidiaries or any other
person (other than a restricted subsidiary) shall not be included as a
proper charge or credit to income for any period subsequent to
December 31, 1994; (v) any gains on the sale or other disposition of
capital assets and taxes on such excluded gains shall not be included
as a proper charge or credit to income for any period subsequent to
December 31, 1994; (vi) net earnings and losses of any corporation
(other than a subsidiary) substantially all the assets of which have
been acquired in any manner, realized by such other corporation prior
to the date of acquisition shall not be included as a proper charge or
credit to income for any period subsequent to December 31, 1994; (vii)
net earnings or losses of any corporation (other than a restricted
subsidiary) with which the Company or a restricted subsidiary shall
have consolidated or which shall have merged into or with the Company
or a restricted subsidiary prior to the date of such consolidation or
merger shall not be included as a proper charge or credit to income
for any period subsequent to December 31, 1994; and (viii) any portion
of the net earnings of any restricted subsidiary which for any reason
is unavailable for the payment of dividends to the Company or any
other restricted subsidiary shall not be included as a proper credit
to income for any period subsequent to December 31, 1994. The term
"capital assets" of any corporation as used herein shall include all
fixed assets, both tangible (such as land, buildings, machinery and
equipment) and intangible (such as patents, copyrights, trademarks,
trade names, formulae and good will), and securities.
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(T) The term "person" shall include any individual, a
corporation, a partnership or a government, foreign or domestic, or
any agency or political subdivision thereof.
(U) The term "restricted subsidiary" shall mean any
subsidiary of the Company which (i) is organized under the laws of any
state of the United States of America or under the laws of Canada or
any province thereof, (ii) has substantially all of its assets located
within, and operates substantially within, the United States of
America or Canada, (iii) at least 50% of the outstanding voting stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (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) is at the
time directly or indirectly owned by the Company, by one or more of
its wholly-owned restricted subsidiaries or by the Company and one or
more of its wholly-owned restricted subsidiaries, and (iv) which the
Company designates as a restricted subsidiary, by notice to the
holders of the Notes in the manner in section 6 provided, at the date
on which the Notes shall be originally issued or subsequent to the
acquisition of any such subsidiary by the Company; provided, however,
that the Company may not designate any subsidiary as a restricted
subsidiary unless at the time of such designation, and after giving
effect thereto, (a) the Company could become liable for at least $1.00
of additional unsecured funded indebtedness pursuant to clause (3) of
paragraph (A) of section 9, and (b) no event of default or event which
with the passage of time or giving of notice, or both, would
constitute an event of default would exist; and provided further that
the Company may not subsequently change the designation of any such
subsidiary from restricted subsidiary to unrestricted subsidiary.
(V) The term "subsidiary" shall mean, as to a particular
parent corporation, any corporation of which more than 50% of the
outstanding stock having ordinary voting power to elect a majority of
the Board of Directors of such corporation (irrespective of whether or
not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly
owned by such parent corporation, by one or more of its subsidiaries
or by such parent corporation and one or more of its subsidiaries.
(W) The term "tangible net worth" of any corporation
shall mean the sum of the amounts set forth on the balance sheet of
such corporation, prepared in accordance with good accounting practice
and as of any date selected by such corporation not more than 45 days
prior to the taking of any action for the purpose of
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which the determination is being made, which appears as (1) the par or
stated value of all outstanding stock, (2) capital, paid-in and earned
surplus and (3) deferred taxes and investment tax credits, less the
sum of (a) any surplus resulting from any write-up of assets
subsequent to December 31, 1994, (b) good will, including any amounts
(however designated on such balance sheet) representing the cost of
acquisitions of restricted subsidiaries in excess of underlying
tangible assets, unless an appraisal of such assets made by a
reputable firm of appraisers at the time of acquisition shall indicate
sufficient value to cover such excess, (c) any amounts by which
investments in persons appearing on the asset side of such balance
sheet exceed the lesser of cost or the proportionate share of such
corporation in the book value of the assets of such persons, provided
that such book value shall be reduced by any amounts representing
restrictions on the payment of dividends by such persons pursuant to
any law, charter provision, mortgage or indenture or, in lieu of the
foregoing, any investment may be carried at its market value if the
securities representing such investment are publicly traded, (d)
patents, trademarks, copyrights, leasehold improvements not
recoverable at the expiration of a lease and deferred charges
(including, but not limited to, unamortized debt discount and expense,
organization expenses, experimental and development expenses, but
excluding prepaid expenses), (e) any amounts at which shares of
capital stock of such corporation appear on the asset side of such
balance sheet, and (f) any amount of indebtedness not included on the
liability side of such balance sheet.
(X) The term "unrestricted subsidiary" shall mean any
subsidiary other than a restricted subsidiary.
(Y) The term "wholly-owned restricted subsidiary" shall
mean any restricted subsidiary all of whose outstanding stock of all
classes (other than directors' qualifying shares) at the time is owned
directly or indirectly by the Company, or by one or more of its
wholly-owned restricted subsidiaries or by the Company and one or more
of its wholly-owned restricted subsidiaries.
Section 12. Events of Default and Remedies;. When any event of
default (hereinafter defined) described in paragraph (A) below has happened and
is continuing, the holder or holders of 25% or more of the principal amount of
Series B Notes at the time outstanding may, and when any event of default
described in paragraph (B), (C), (F), (G) or (H) below has happened and is
continuing, the holder or holders of 51% or more of the principal amount of
Series B Notes at the time outstanding may, by written notice to the Company,
declare the entire principal and all interest accrued on all Series B Notes to
be, and all such Notes shall thereupon become, forthwith due and payable,
without any presentment, demand, protest or other notice of any kind, all of
which are hereby expressly
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waived; provided, however, when any event of default described in paragraph (A)
below has happened and is continuing with respect to any Series B Note, the
holder of such Series B Note may, by written notice to the Company, declare the
entire principal and all interest accrued on such Series B Note to be, and such
Series B Note shall thereupon become, forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. When any event of default described in paragraph (D)
or (E) below has occurred, then all outstanding Series B Notes shall
immediately become due and payable without presentment, demand or notice of any
kind. If the event of default on which any such acceleration or declaration is
based is an event of default other than an event of default described in
paragraph (D) or (E) below, then in such event, in addition to the amounts
required to be paid by the Company in accordance with the foregoing provisions
of this section 12, the Company shall also pay, to the extent permitted by law,
an amount (as liquidated damages for the loss of the bargain evidenced hereby
and not as a penalty) equal to the make whole premium amount described in
section 4 above.
The provisions of this section 12 are subject to the condition that if
the principal of, and accrued interest on, all or any outstanding Series B
Notes have been declared or become immediately due and payable by reason of the
occurrence of any event of default described in paragraphs (A) through (H),
below the holders of 66-2/3% in aggregate principal amount of the Series B
Notes then outstanding may, by written instrument filed with the Company,
rescind and annul such acceleration and the consequences thereof, provided that
at the time such acceleration is annulled and rescinded:
(a) no judgment or decree has been entered for the
payment of any monies due pursuant to the Series B Notes;
(b) all arrears of interest upon all the Series B Notes
and all other sums payable under the Series B Notes (except any
principal, interest or premium on the Series B Notes which has become
due and payable solely by reason of such acceleration under this
section 12) shall have been duly paid; and
(c) each and every other event of default shall have been
made good, cured or waived pursuant to section 10 hereof;
and provided further, that no such rescission and annulment shall extend to
or affect any subsequent event of default or impair any right consequent
thereto.
The events listed in paragraph (A) through (H) below are called
"events of default":
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(A) default shall be made by the Company (1) in the
payment of principal of, or premium, if any, on, any Note when and as
the same shall become due and payable, whether at maturity thereof, on
a date fixed for prepayment (in this Note or in any notice of
prepayment), by acceleration or otherwise, or (2) in the payment of
interest on any Note when and as the same shall become due and payable
and such default in the payment of interest shall continue for a
period of 5 days; or
(B) default shall be made in the performance or
observance of any covenant, condition or agreement contained in
section 9 and such default shall continue for a period of 30 days; or
(C) default shall be made in the performance or
observance of any other of the covenants, conditions or agreements in
this Note set forth or in the Loan Agreement dated as of June 15, 1995
pursuant to which this Note was initially issued and such default
shall continue for a period of 30 days after the earlier of (1) the
Company becoming aware of such default, and (2) written notice to the
Company from the holder of any Note stating the specific default or
defaults; or any representation or warranty made by the Company herein
or in said Loan Agreement, or furnished in writing in connection with
or pursuant to this Note or said Loan Agreement shall be false in any
material respect on the date as of which such representation or
warranty is made; or
(D) a decree or order by a court having jurisdiction in
the premises shall have been entered adjudging the Company or any
restricted subsidiary a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, readjustment,
arrangement, composition or similar relief for the Company or any such
subsidiary under the federal bankruptcy laws, or any other similar
applicable federal or state law, and such decree or order shall have
continued undischarged or unstayed for a period of 60 days; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of the Company or any restricted subsidiary
or a substantial part of its property, or for the winding up or
liquidation of its affairs, shall have been entered, and such decree
or order shall have remained in force undischarged and unstayed for a
period of 60 days; or any substantial part of the property of the
Company or any restricted subsidiary shall be sequestered or attached
and shall not be returned to the possession of the Company or such
subsidiary or released from such attachment within 60 days thereafter;
or
(E) the Company or any restricted subsidiary shall
institute proceedings to be adjudged a voluntary bankrupt, or shall
consent to the filing of a bankruptcy
B-106
<PAGE> 107
proceeding against it, or shall file a petition or answer or consent
seeking reorganization, readjustment, arrangement, composition or
similar relief under the federal bankruptcy laws, or any other similar
applicable federal or state law, or shall consent to the filing of any
such petition, or shall consent to the appointment of a receiver or
liquidator or trustee or assignee in bankruptcy or insolvency of it or
of a substantial part of its property, or shall make an assignment for
the benefit of creditors, or shall admit in writing its inability to
pay its debts generally as they become due, or shall voluntarily
suspend transaction of its usual business, or corporate action shall
be taken by the Company or any such subsidiary in furtherance of any
of the aforesaid purposes; or
(F) the Company or any restricted subsidiary fails to
make any payment due on any indebtedness having a principal amount
greater than $2,500,000 or any event shall occur (other than the mere
passage of time) or any condition shall exist in respect of any
indebtedness of the Company or any restricted subsidiary, or under any
agreement securing or relating to such indebtedness and any such event
or condition continues beyond any applicable period of grace, if any,
the effect of which is to cause (or permit any holder of such
indebtedness or other Security or a trustee to cause) such
indebtedness or other Security, or a portion thereof, to become due
prior to its stated maturity or prior to its regularly scheduled dates
of payment; or
(G) final judgment for the payment of money in excess of
$250,000 shall be rendered against the Company or any restricted
subsidiary and the same shall remain undischarged for a period of 30
days during which execution shall not be effectively stayed; or
(H) a change of control (as defined in paragraph 4(D))
shall occur and continue for more than 40 days or a default shall
occur in giving notice of any change of control pursuant to the
provisions of paragraph 8(K).
In case any one or more of the events of default specified above in
this section 12 shall have happened and be continuing, the holder of this Note
may proceed to protect and enforce its rights either by suit in equity and/or
by action at law, or by other appropriate proceedings, whether for the specific
performance (to the extent permitted by law) of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note, or, subject to the first paragraph of this section 12, may proceed to
enforce the payment of this Note or to enforce any other legal or equitable
right of the holder of this Note.
B-107
<PAGE> 108
In case of a default in the payment of any principal of, premium, if
any, or interest on, any Note, the Company will pay to the holder thereof such
further amount as shall be sufficient to cover the cost and expense of
collection, including (without limitation) reasonable attorneys' fees.
Section 13. No Waiver;. No course of dealing between the
Company and the holder hereof or any delay on the part of the holder hereof in
exercising any rights hereunder shall operate as a waiver of any rights of any
holder hereof, except to the extent expressly waived in writing by the holder
hereof.
Section 14. Loss, Theft, Destruction or Mutilation of Note;.
Upon receipt by the Company of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Note, and of indemnity or
security reasonably satisfactory to the Company (or, if this Note shall then be
held by an institutional investor, an indemnity agreement therefrom), and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Note if mutilated, the Company will
make and deliver a new Note of like tenor in lieu of this Note. Any Note made
and delivered in accordance with the provisions of this section 14 shall be
dated as of the date to which interest has been paid on this Note or, if no
interest has theretofore been paid on this Note, then dated the date hereof.
Section 15. Governing Law;. This Note shall be construed in
accordance with and governed by the laws of the State of Illinois.
Section 16. Successors and Assigns;. All the covenants,
stipulations, promises and agreements in this Note contained by or on behalf of
the Company shall bind its successors and assigns, whether so expressed or not.
Section 17. Headings;. The headings of the sections of this
Note are inserted for convenience only and shall not be deemed to constitute a
part hereof.
In Witness Whereof, STEPAN COMPANY has caused this Note to be signed
in its corporate name by a duly authorized officer and to be dated as of the
day and year first above written.
STEPAN COMPANY
By
B-108
<PAGE> 109
Its
B-109
<PAGE> 110
1. Qualification to do Business:
The Company was incorporated in Illinois on January 14, 1940. On March 31,
1959, the Company's state of incorporation was changed from Illinois to
Delaware. The Company is duly licensed or qualified and in good standing as a
foreign corporation to do business in the states of California, Georgia,
Illinois, Massachusetts, Pennsylvania, New York and New Jersey. Such states
are the only jurisdictions where the ownership or leasing of property or the
nature of business transacted makes such licensing or qualification necessary.
2. Brief Description of Properties Owned by the Company as of
June 15, 1995:
(A) NORTHFIELD, ILLINOIS
The Company's administrative and research center is located on eight-acres
located in Northbrook, Illinois, 20 miles northwest of downtown Chicago.
(B) MILLSDALE (JOLIET), ILLINOIS
The Company's midwest manufacturing facilities are located at Millsdale,
Illinois, on 626 acres of land situated on the Illinois Deep Waterway and is
served by the main lines of the Santa Fe Railroad and the Illinois Central Gulf
Railroad. A high pressure, natural gas pipeline passes through the property
immediately adjacent to the Company's property. This plant produces
surfactants, phthalic anhydride and urethane foam systems and is the Company's
principal production facility.
The surfactant plant has ethoxylation, esterification, sulfation and
sulfonation facilities which, together with numerous reaction and mixing
vessels, produce a wide range of products for the surfactant and polymer
departments.
(C) FIELDSBORO, NEW JERSEY
This facility occupies approximately 39 acres of land with 700 feet of water
frontage on the Delaware River and is served by the Camden and Amboy Railroad.
This plant manufactures surfactants.
(D) ANAHEIM, CALIFORNIA
This plant produces surfactant products and occupies approximately eight acres.
The plant is served by the Atchison, Topeka and Santa Fe Railroad.
(E) WINDER, GEORGIA
This plant site occupies approximately 162 acres of land. This plant
manufactures surfactants. The plant is served by the CSX Railroad.
(F) MAYWOOD, NEW JERSEY
C-110
<PAGE> 111
The Company's specialty chemicals and flavor products are produced at this
plant which is 15 miles west of New York City. The plant, which compromises 19
acres, is served by the New York, Susquehanna and Western Railroad.
(G) VOREPPE, FRANCE
The Company owns a 20-acre specialty chemical plant site at this location.
(H) MATAMOROS, MEXICO
The Company owns a 13 acre specialty chemical plant at this location.
3. Subsidiaries as of June 15, 1995:
The following sets forth all subsidiaries of the Company as of June 15, 1995,
the capital stock outstanding and the amount thereof owned by the Company and
whether such subsidiaries are consolidated for financial reporting purposes.
<TABLE>
<CAPTION>
SHARES
SHARES OWNED BY
OUTSTANDING COMPANY CONSOLIDATED
<S> <C> <C> <C>
Stepan Mexico, S.A. de C.V. 10,571,000 10,570,014 Yes
Stepan Canada Inc. 1 1 Yes
Common stock, no par value
Stepan Europe S.A., 5,400 5,400 Yes
Common Stock, par value 100FF
</TABLE>
4. Designation of Unrestricted Subsidiaries.
The Company hereby designates, pursuant to paragraph (U) of Section 11 of the
Notes, for all purposes of the Notes and of the Loan Agreement dated as of June
15, 1995, that no subsidiary shall be a restricted subsidiary.
5. Pending and Threatened Litigation Not Reflected in 10-K.
None.
6. Funded Indebtedness Outstanding on June 15, 1995.
<TABLE>
<CAPTION>
CURRENT FUNDED
LENDER - NOTE PRINCIPAL PORTION INDEBTEDNESS
<S> <C> <C> <C>
</TABLE>
C-111
<PAGE> 112
<TABLE>
<S> <C> <C> <C>
Aid Association For Lutherans
10.54% Notes due 5/1/99 $2,975,500 $1,786,000 $1,189,500
The Mutual Life Insurance
Company of New York 2,261,380 1,357,360 904,020
10.54% Notes due 5/1/99
MONY Life Insurance Company of America
10.54% Notes due 5/1/99 714,120 428,640 285,480
Aid Association For Lutherans
9.40% Notes due 8/20/97 955,000 955,000 -0-
The Northwestern Mutual Life Insurance Company
9.70% Notes due 8/20/02 6,000,000 1,000,000 5,000,000
Aid Association for Lutherans
9.52% Notes due 4/1/2001 3,571,428 714,286 2,857,142
The Mutual Life Insurance Company of New York
9.52% Notes due 4/1/2001 4,285,714 857,143 3,428,571
MONY Life Insurance Company of America
9.52% Notes due 4/1/2001 1,428,572 285,714 1,142,858
The Mutual Life Insurance Company of New York
(GIPEN & Co.) 1,428,572 285,714 1,142,858
9.52% Notes due 4/1/2001
The Northwestern Mutual Life Insurance Company
9.70% Notes due 4/1/2006 10,000,000 0 10,000,000
Aid Association for Lutherans
7.22% Notes due 4/1/08 5,000,000 0 5,000,000
</TABLE>
C-112
<PAGE> 113
<TABLE>
<S> <C> <C> <C>
The Mutual Life Insurance
Company of New York 5,000,000 0 5,000,000
7.22% Notes due 4/1/08
The Northwestern Mutual
Life Insurance Company 5,000,000 0 5,000,000
7.22% Notes due 4/1/08
Aid Association for Lutherans
7.22% Notes due 8/1/08 5,000,000 0 5,000,000
The Mutual Life Insurance
Company of New York 5,000,000 0 5,000,000
7.22% Notes due 8/1/08
The Northwestern Mutual
Life Insurance Company 5,000,000 0 5,000,000
7.22% Notes due 8/1/08
Unsecured bank debt
Various maturities 42,700,000 0 42,700,000
------------ ---------- -----------
TOTALS $106,320,286 $7,699,857 $98,650,429
============ ========== ===========
</TABLE>
C-113
<PAGE> 1
EXHIBIT (11)
STEPAN COMPANY
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
For the Three and Six Months Ended June 30, 1995 and 1994
Unaudited
<TABLE>
<CAPTION>
(In Thousands, except per share amounts) Three Months Ended Six Months Ended
June 30 June 30
-------------------------------------------------------------------
1995 1994 1995 1994
---- ---- ---- ----
Computation of per Share Earnings
---------------------------------
<S> <C> <C> <C> <C>
Net income $5,418 $4,078 $11,527 $6,100
Deduct dividends on preferred stock 267 268 535 539
------- ------- --------- -------
Income applicable to common stock $5,151 $3,810 $10,992 $5,561
======= ======= ========= =======
Weighted average number of shares outstanding 9,977 9,914 9,965 9,906
Per share earnings* $0.516 $0.384 $1.103 $0.561
======= ======= ========= =======
Computation of Per Share Primary Earnings
-----------------------------------------
Income applicable to common stock $5,151 $3,810 $10,992 $5,561
======= ======= ========= =======
Weighted average number of shares outstanding 9,977 9,914 9,965 9,906
Add net shares issuable from assumed exercise
of options (under treasury stock method) 177 142 177 150
-------- -------- -------- --------
Shares applicable to primary earnings 10,154 10,056 10,142 10,056
====== ====== ====== ======
Per share primary earnings* $0.507 $0.379 $1.084 $0.553
====== ====== ====== ======
Dilutive effect 1.7% 1.4% 1.7% 1.4%
Computation of Per Share Fully Diluted Earnings
-----------------------------------------------
Net income (See Note A) $5,418 $4,078 $11,527 $5,561
====== ====== ======= ======
Weighted average number of shares outstanding 9,977 9,914 9,965 9,906
Add net shares issuable from assumed exercise
of options (under treasury stock method) 177 142 177 150
Add weighted average shares issuable from
assumed conversion of convertible preferred
stock (See Note A) 889 894 889 -
-------- -------- -------- ------
Shares applicable to fully diluted earnings 11,043 10,950 11,031 10,056
====== ====== ====== ======
Per share fully diluted earnings* $0.491 $0.372 $1.045 $0.553
====== ====== ====== ======
Dilutive effect 4.8% 3.2% 5.3% 1.4%
</TABLE>
(A) For the six months ended June 30, 1994, the assumed conversion of
convertible preferred stock would have been antidilutive.
Accordingly, the dividends and shares issuable from assumed
conversion have been excluded pursuant to APB No. 15.
__________
* Rounded
This calculation is submitted in accordance with Regulation S-K, item
601(b)(11).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1995 AND CONSOLIDATED STATEMENT OF
INCOME FOR THE SIX MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,702
<SECURITIES> 0
<RECEIVABLES> 81,979
<ALLOWANCES> 0
<INVENTORY> 44,806
<CURRENT-ASSETS> 139,159
<PP&E> 432,567
<DEPRECIATION> 249,014
<TOTAL-ASSETS> 338,594
<CURRENT-LIABILITIES> 71,318
<BONDS> 102,530
<COMMON> 10,046
0
19,935
<OTHER-SE> 91,680
<TOTAL-LIABILITY-AND-EQUITY> 338,594
<SALES> 271,044
<TOTAL-REVENUES> 271,044
<CGS> 218,582
<TOTAL-COSTS> 248,610
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,992
<INCOME-PRETAX> 18,442
<INCOME-TAX> 6,915
<INCOME-CONTINUING> 11,527
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,527
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.05
</TABLE>
