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STEPAN COMPANY
_____________________________________________
$30,000,000 6.59% Promissory Notes,
Due October 1, 2013
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LOAN AGREEMENT
Dated as of October 1, 1998
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TABLE OF CONTENTS
(not part of Agreement)
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SECTION HEADING PAGE
LOAN AGREEMENT
Section 1. The Notes and Commitment................................... 1
Section 2. Representations and Warranties............................. 2
Section 3. Acquisition for Investment................................. 8
Section 4. Conditions of Closing...................................... 8
Section 5. Use of Proceeds............................................ 11
Section 6. Method and Place of Payment of Principal,
Premium and Interest.................................... 11
Section 7. Statements, Reports and Certificates to Be Delivered
by the Company.......................................... 12
Section 8. Registered Notes........................................... 15
Section 9. Payments of Certain Expenses by the Company................ 15
Section 10. Survival of Covenants; Successors and Assigns.............. 16
Section 11. No Oral Change............................................. 16
Section 12. Communications and Notices................................. 16
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........................... 2
(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 Note Outstanding.................................... 4
Section 6. Notice of Prepayment and Other Notices..................... 5
(A) Prepayment Notice.......................................... 5
(B) Mailing of Notices......................................... 5
Section 7. Notes Due and Interest Ceases on Prepayment Date;
Evidence of Partial Prepayment; New Notes............... 5
Section 8. Affirmative Covenants...................................... 6
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(A) Maintenance of Office or Agency............................ 6
(B) Payment of Principal, Premium and Interest................. 6
(C) Maintenance of Corporate Existence......................... 6
(D) Properties................................................. 7
(E) Insurance.................................................. 7
(F) Payment of Taxes, Assessments, Etc......................... 7
(G) Payment of Indebtedness.................................... 8
(H) Keeping of Books........................................... 8
(I) Compliance with Law........................................ 8
(J) Notice of Default.......................................... 8
(K) Notice of Change of Control................................ 9
(L) Year 2000 Compliance....................................... 9
Section 9. Negative Covenants......................................... 9
(A) Limitations on Funded Indebtedness......................... 9
(B) Limitations on Restricted Subsidiaries..................... 10
(C) Limitations on Liens....................................... 11
(D) Limitations on Guaranties.................................. 14
(E) Limitation on Investments.................................. 14
(F) Limitation on Dividends.................................... 15
(G) Limitations on Dispositions of Stock or
Indebtedness of Restricted Subsidiaries................. 16
(H) Maintenance of Consolidated Current Assets................. 16
(I) Limitations on Mergers, Consolidations and
Sales of Assets......................................... 16
(J) Limitations on Sale-and-Leasebacks......................... 17
(K) Limitation on Rentals...................................... 17
(L) Transactions with Affiliates............................... 18
(M) Compliance with ERISA...................................... 18
Section 10. Consents, Waivers and Modifications........................ 19
Section 11. Definitions................................................ 19
Section 12. Events of Default and Remedies............................. 26
Section 13. No Waiver.................................................. 29
Section 14. Loss, Theft, Destruction or Mutilation of Note............. 29
Section 15. Governing Law.............................................. 29
Section 16. Successors and Assigns..................................... 29
Section 17. Headings................................................... 29
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Description of Properties,
Subsidiaries, Pending Litigation, etc.
(Exhibit B to Loan Agreement)
Legal Proceedings
(Exhibit C to Loan Agreement)
STEPAN COMPANY
▇▇▇▇▇ at ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
LOAN AGREEMENT
Dated as of October 1, 1998
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 $30,000,000, such
borrowings to be evidenced by the 6.59% Promissory Notes of the Company (the
"Notes"), to be dated as of the date of issue, to bear interest from such date
at the rate of 6.59% per annum payable semi-annually on the first day of each
April and October in each year (commencing on the first of such dates after the
date hereof), to be expressed to mature on October 1, 2013 and to have the other
terms and provisions and to be substantially in the form attached to this
agreement as Exhibit A. The term "Notes" as used in this agreement shall include
each promissory note 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 Exhibit A shall have
such defined meaning for the purpose of this agreement unless this agreement
otherwise requires.
(B) The Loans and Closing Date. 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 October 1, 1998, or such other date as
shall be mutually agreed upon (the "Closing Date"), the aggregate principal
amounts to be evidenced by Notes as set forth opposite your name on Schedule I.
The loans will be made at the offices of ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, 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. ▇▇▇▇▇▇▇▇▇), ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, against delivery of Notes in the aggregate principal amount of
the loans then scheduled to be made by you.
Stepan Company Loan Agreement
The Notes to be delivered to you on the Closing Date will be in the form of
one Note in the aggregate principal amount of the loan specified to be made by
you on the 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, 1997, and the consolidated statements of income and
changes in financial position or 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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
Co., independent certified public accountants, and the consolidated balance
sheet of the Company and its subsidiaries for the fiscal quarter of the
Company ending June 30, 1998, 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, 1997 (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 June 30, 1998 (the "10-Q").
(C) Properties and Subsidiaries. Exhibit B 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
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Stepan Company Loan Agreement
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, 1997 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 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. Except as
disclosed in Exhibit C attached to this agreement, 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
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Stepan Company Loan Agreement
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 material property and assets, reflected in the
consolidated balance sheet as of December 31, 1997, 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, 1997, 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 other corporate restriction, materially and adversely affecting
its business, property, assets, operations or condition, financial or
otherwise.
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Stepan Company Loan Agreement
(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, 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
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Stepan Company Loan Agreement
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, 1994. 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, 1994. 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 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 U of the Board of Governors of the Federal Reserve System (12
CFR Part 221), 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 221.2 of the
aforesaid Regulation U, 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
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Stepan Company Loan Agreement
subsidiaries in a violation of Regulation 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 one other institutional investor 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.
(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, 1998, 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
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Stepan Company Loan Agreement
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 (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,
except as disclosed in Exhibit C attached to this agreement.
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 ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, 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
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Stepan Company Loan Agreement
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 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 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, 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 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
-9-
Stepan Company Loan Agreement
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 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 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.
-10-
Stepan Company Loan Agreement
(F) No Material Change in Management or Business. There shall not
have been since December 31, 1997 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
form of Exhibit A 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) Private Placement Number. On or prior to the Closing Date,
special counsel to the Purchasers shall have duly made the appropriate
filings with Standard & Poor's CUSIP Service Bureau, as agent for the
National Association of Insurance Commissioners, in order to obtain a
private placement number for the Notes.
(I) Special Counsel Fees. Concurrently with the delivery of the Notes
to you on the Closing Date, the fees, charges and disbursements of ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇, your special counsel, shall have been paid by the Company to
the extent reflected in a statement of such counsel rendered to the Company
at least one day prior to the Closing Date.
(J) 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 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 $30,000,000
aggregate principal amount of the loans obtained by the Company under this
agreement and the agreements similar hereto to repay outstanding Indebtedness of
the Company, to fund capital expenditures and for other corporate purposes.
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
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Stepan Company Loan Agreement
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.
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
-12-
Stepan Company Loan Agreement
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 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.
-13-
Stepan Company Loan Agreement
(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
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 copy
-14-
Stepan Company Loan Agreement
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, 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 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,
-15-
Stepan Company Loan Agreement
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.
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 ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, 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.
-16-
Stepan Company Loan Agreement
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.
-17-
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 /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Its V.P. Finance
The foregoing is hereby
accepted as of the date
first above written.
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By: CIGNA Investments, Inc. (authorized agent)
By______________________________
Its
-18-
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.
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By: CIGNA Investments, Inc. (authorized agent)
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------
Its Vice President
-19-
Schedule I
(to Loan Agreement)
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF LENDER NOTES TO BE PURCHASED
THE NORTHWESTERN MUTUAL LIFE $20,000,000
INSURANCE COMPANY
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Securities Department
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
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
"Stepan Company, 6.59% Promissory Notes due October 1, 2013, PPN 858586 E*7,
principal, premium or interest") to:
Bankers Trust Company (ABA #0210-01033)
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Insurance ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
for credit to: The Northwestern Mutual Life Insurance Company
Account Number ▇▇-▇▇▇-▇▇▇
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
to be addressed, Attention: Investment Operations, Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: ▇▇-▇▇▇▇▇▇▇
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF LENDER NOTES TO BE PURCHASED
CONNECTICUT GENERAL LIFE INSURANCE COMPANY $5,000,000
c/o CIGNA Investments, Inc. $5,000,000
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Private Securities Division - S-307
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Payments
All payments on or in respect of the Notes to be by Federal Funds Wire Transfer
to:
Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
ABA #▇▇▇▇▇▇▇▇▇
OBI=[Stepan Company; Promissory Notes; 6.59%; due 2013; PPN 858586 E*7; due
date and application (as among principal, premium and interest of the
payment being made); contact name and phone.]
Address for Notices Related to Payments:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing S-309
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities - S-307
Operations Group
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
-2-
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P. O. Box ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: CIGNA Private Placements
Fax: ▇▇▇-▇▇▇-▇▇▇▇/1005
Address for All Other Notices:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Name of Nominee in which Notes are to be issued: CIG & CO.
Taxpayer I.D. Number for CIG & CO.: ▇▇-▇▇▇▇▇▇▇
-3-
EXHIBIT A
(to Loan Agreement)
No. R-
PPN: 858586 E* 7
STEPAN COMPANY
6.59% Promissory Notes Due October 1, 2013
$______________ ______________, ______
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 October 1, 2013
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 first day of April and October in each year, at the
rate of 6.59% 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"), evidenced by the $30,000,000 aggregate
principal amount of 6.59% Promissory Notes Due October 1, 2013 issued or to be
issued pursuant to separate and several loan agreements, each dated as of
October 1, 1998 entered into by the Company with the lenders therein referred
to.
Section 2. Exchanges. The holder of this 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 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 Notes on the maturity date thereof,
on October 1 in each year, commencing October 1, 2003 and ending October 1, 2012
(herein called "fixed payment dates"), both inclusive, the Company will prepay
and apply and there shall become due and payable the sum of $2,727,272 on the
principal indebtedness evidenced by the 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 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 Notes in
accordance with the terms of this paragraph 4(A); provided, however, that if and
to the extent that any prepayment of Notes pursuant to the provisions of
paragraph 4(D) below does not result in the prepayment of all of the 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 Notes outstanding immediately prior to such prepayment
pursuant to paragraph 4(D) is reduced by such prepayment.
(B) Optional Prepayments without Premium. Upon compliance with section 6,
the Company shall have the privilege (which shall be non cumulative) of
prepaying outstanding 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 Notes to be prepaid and accrued interest thereon to the date of
such payment and without premium; provided however that the principal amount of
Notes prepaid pursuant to this subparagraph 4(B) on any one fixed payment date
shall not exceed the principal amount of the Notes required to be prepaid
pursuant to paragraph 4(A) on such fixed payment date and (ii) the aggregate
amount of all Notes prepaid pursuant to this subparagraph 4(B) shall not exceed
an amount equal to $10,000,000.
(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 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 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.
For purposes of this paragraph 4(C) and section 12 below:
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The term "make whole premium amount" shall mean, to the extent that the
adjusted treasury reinvestment yield at such time is lower than 6.59% 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 Notes to
be prepaid, taking into account the required application of such prepayment to
the scheduled payments and prepayments on the 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 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 6.59% 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 "PX-
1" 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 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 Notes, for the maturity corresponding to the remaining weighted
average life to maturity of the 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, 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 Notes by the aggregate amount of all remaining
scheduled principal and interest payments (including the payments at final
maturity) to be made on the Notes. The term "remaining dollar-years" of the
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-
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twelfth) which will elapse between the date of determination of the
weighted average life to maturity of the 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 Notes in writing to
consent to a change of control and the holder or holders of any 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 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) 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 Note,
it will promptly advise, in writing, all other holders of Notes of such response
and the source and content thereof.
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 Note
Outstanding. In the event of any prepayment of less than all of the outstanding
Notes pursuant to the provisions of paragraphs 4(A), 4(B) or 4(C), at a time
when more than one Note is outstanding, the principal amount of the Notes so to
be prepaid shall be allocated among the respective Notes and holders
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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 Notes
then held by such holder bears to the aggregate principal amount of all 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
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 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
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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 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
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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 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 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
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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, 1998, 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.
(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.
(L) Year 2000 Compliance. The Company will, and will cause each
restricted subsidiary to, comply with all applicable disclosure
requirements and rules, regulations and orders promulgated by the
Securities and Exchange Commission (the "SEC") relating to the Year 2000
Problem. The "Year 2000 Problem" means any significant risk that computer
hardware or software used in the Company's or its restricted subsidiaries'
businesses or operations may be unable to recognize and perform properly
date-sensitive functions involving dates or time periods occurring after
December 31, 1999, including the making of accurate leap year calculations.
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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 September 15, 1998 and
reflected on Schedule B to the loan agreements and funded indebtedness
represented by the Notes;
(2) secured funded indebtedness incurred or assumed subsequent
to September 15, 1998 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 September 15, 1998 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
(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
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(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 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
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(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 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 Notes and which 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 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 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 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%
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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;
(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
(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
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(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 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
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
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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.
(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.
A-15
(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.
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 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 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
A-16
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 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
A-17
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.
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 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 Notes; provided, however, that without the agreement or consent in
writing of the holders of all outstanding Notes no such amendment or waiver
shall (i) change the
A-18
amount or maturity of any principal of the Notes or any installment or fixed
prepayment thereof or change the rate or extend the time of payment of interest
on the Notes or reduce the amount of principal thereof or premium with respect
thereto or modify any of the provisions of the Notes with respect to the payment
or prepayment thereof, (ii) give to any Note any preference over any other Note,
(iii) reduce the percentage of holders of Notes 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 Notes and shall be binding upon them, upon
each future holder of any 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 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.
A-19
(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.
(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
A-20
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.
(M) The term "default rate" shall mean the greater of (1) 8.59% 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
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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 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 ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇ 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."
A-22
(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 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
A-23
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.
(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
A-24
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, 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.
A-25
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 holder or holders of 25% or more of the principal amount of
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 Notes at the time
outstanding may, by written notice to the Company, declare the entire principal
and all interest accrued on all 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 Note, the holder of such Note may, by
written notice to the Company, declare the entire principal and all interest
accrued on such Note to be, and such 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 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 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 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 Notes;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes (except any principal, interest or premium on the
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":
A-26
(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 October 1, 1998 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 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
A-27
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.
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
A-28
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.
A-29
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
A-30
Exhibit B
(to Loan Agreement)
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 October 1,
1998:
(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 ▇▇▇▇▇▇▇▇, 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
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.
(I) MANIZALES, COLOMBIA
The Company owns a 5 acre specialty chemical plant at this location.
3. Subsidiaries as of October 1, 1998:
The following sets forth all subsidiaries of the Company as of October 1,
1998, the capital stock outstanding and the amount thereof owned by the Company
and whether such subsidiaries are consolidated for financial reporting purposes.
SHARES
SHARES OWNED BY
OUTSTANDING COMPANY CONSOLIDATED
Stepan Mexico, S.A. de C.V. 10,571,000 10,570,014 Yes
Stepan Canada Inc.
Common stock, no par value 1 1 Yes
Stepan Europe S.A.,
Common Stock, par value 100FF 5,400 5,400 Yes
Stepan Colombiana de Quimicos, Ltda.
Common Stock, par value 40COP 93,216,310 88,089,413 Yes
Stepan Quimica Ltda.
Common Stock, par value 1BRL 245,538 245,538 Yes
4. Designation of Unrestricted Subsidiaries.
B-2
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
October 1, 1998, that no subsidiary shall be a restricted subsidiary.
5. Pending and Threatened Litigation Not Reflected in 10-K.
None.
6. Funded Indebtedness Outstanding on September 15, 1998.
CURRENT FUNDED
LENDER - NOTE PRINCIPAL PORTION INDEBTEDNESS
The Northwestern Mutual
Life Insurance Company
9.70% Notes due 8/20/02 $667,000 $667,000 $ 0
Aid Association for Lutherans
9.52% Notes due 4/1/01 476,189 476,189 0
The Mutual Life Insurance
Company of New York
9.52% Notes due 4/1/01 571,427 571,427 0
MONY Life Insurance
Company of America
9.52% Notes due 4/1/01 190,478 190,478 0
The Mutual Life Insurance
Company of New York (GIPEN
& Co.)
9.52% Notes due 4/1/01 190,478 190,478 0
The Northwestern Mutual Life
Insurance Company
9.70% Notes due 4/1/06 6,000,000 1,000,000 5,000,000
Aid Association for Lutherans
7.22% Notes due 4/1/08 5,000,000 500,000 4,500,000
The Mutual Life Insurance
Company of New York
7.22% Notes due 4/1/08 5,000,000 500,000 4,500,000
B-3
CURRENT FUNDED
LENDER - NOTE PRINCIPAL PORTION INDEBTEDNESS
The Northwestern Mutual
Life Insurance Company
7.22% Notes due 4/1/08 5,000,000 500,000 4,500,000
Aid Association for Lutherans
7.22% Notes due 8/1/08 5,000,000 500,000 4,500,000
The Mutual Life Insurance
Company of New York
7.22% Notes due 8/1/08 5,000,000 500,000 4,500,000
The Northwestern Mutual
Life Insurance Company
7.22% Notes due 8/1/08 5,000,000 500,000 4,500,000
Aid Association for Lutherans
7.69% Notes due 6/30/05 3,750,000 0 3,750,000
The Mutual Life Insurance
Company of New York
7.69% Notes due 6/30/05 2,500,000 0 2,500,000
The Northwestern Mutual Life
Insurance Company
7.69% Notes due 6/30/05 3,750,000 0 3,750,000
Aid Association for Lutherans
7.77% Notes due 6/30/10 11,250,000 0 11,250,000
The Mutual Life Insurance
Company of New York
7.77% Notes due 6/30/10 7,500,000 0 7,500,000
The Northwestern Mutual
Life Insurance Company
7.77% Notes due 6/30/10 11,250,000 0 11,250,000
Unsecured bank debt
Various maturities 28,300,000 0 28,300,000
---------- ------- ----------
B-4
CURRENT FUNDED
LENDER - NOTE PRINCIPAL PORTION INDEBTEDNESS
TOTALS $106,395,572 $6,095,572 $100,300,000
============ ========== ============
B-5
Exhibit C
(to Loan Agreement)
LEGAL PROCEEDINGS
[DESCRIPTIONS EXCERPTED FROM THE COMPANY'S SEC FILINGS AS INDICATED]
DECEMBER 31, 1992 AMENDED FORM 10-K
Maywood Site. The Company was named as a potentially responsible party ("PRP")
for the Company's Maywood, New Jersey property and the property adjacent thereto
("Sites"). The Company previously reported that it agreed to perform a Remedial
Investigation/Feasibility Study ("RI/FS") with respect to the Sites. The
Company has completed the Remedial Investigation portion of the study and will
file its report with the United States Environmental Protection Agency ("USEPA")
by March 28, 1993. As disclosed in the 1991 Form 10-K, the Company believed
that the cost of the RI/FS would be in the area of $3,000,000. The Company
expended and charged against the environmental reserve $2,349,000 during the
1991 and 1992. While it is probable that the Company will incur some site
cleanup costs, until the RI/FS is completed it is not possible to estimate what
the Company's future liability, if any, will be.
State of New York and Town of Tusten v. SCA Services Inc. The suit alleged that
SCA Services transported waste allegedly generated by the Company from a New
Jersey landfill to an unauthorized site in ▇▇▇▇▇▇▇, New York, and that the
disposal of waste created a release of hazardous substances which necessitated
response costs and expenses. The Company has settled all of the alleged claims
against it by the United States Environmental Protection Agency, SCA Services,
Inc., Town of Tusten, and the State of New York. The settlement does contain a
provision to re-open the settlement under certain specific conditions. The
dollar amount of this settlement was $197,000 and was charged against the
reserve upon payment in 1993.
Fieldsboro, New Jersey Plant. The characterization study of the xylene
contamination most likely will not be completed until September 1993. The
Company cannot, at this time, estimate what its future potential liability, if
any, will be.
D'Imperio Site. The Company was named as a PRP with regard to the D'Imperio
site located in ▇▇▇▇▇▇▇▇ Township, New Jersey. The Company and other PRPs
declined to enter into an agreement with the Environmental Protection Agency to
perform remedial activities at this site. In November 1992, the USEPA, by the
United States Justice Department in an action entitled United States of America
v. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, et al. (92 CV 4710 (JBS), filed suit against the Company,
alleging that the Company was responsible, as a generator of waste, for the
clean-up costs at the D'Imperio site. The suit is requesting $5,000,000 from
approximately twenty companies as reimbursement for past costs incurred by the
USEPA at the D'Imperio site. As discussed further below, because of issues
relative to volumes, nexus, and credits at other sites, the Company, on December
31, 1992, could not estimate what its future liability might be.
Ewan Property Superfund Site located in Shamong Township, Burlington County, New
Jersey. The USEPA has made a demand to the group of PRPs to recover
approximately $2,000,000 in oversight cost which it has previously spent in
regard to this Site. This amount is over and above any sum which may be due to
remediate this site. The Company and approximately 20 other PRPs at this Site
are endeavoring to reach an allocation to apportion the USEPA's past costs among
themselves. The Company and other PRPs have agreed to a non-binding allocation
process. As
of December 31, 1992, the PRP group was in an arbitration proceeding to
determine its liability vis a vis another hauler which went to this site and the
hauler for the Company's and the other 20 companies' waste. As to the Company's
involvement at the D'Imperio site (noted above) and Ewan site, one hauler,
Lightman Drum, is responsible for the company's involvement at these sites, as
well as the Enterprise Avenue site in Pennsylvania (settled and reported in the
Company's 1982 Form 10-K). However, given the nature of the issues over nexus,
waste types, volumes, and in the case of Ewan per se, the liability between
Lightman Drum customers and customers of other waste haulers which used Ewan,
two sets of mediation are taking place which impact the obligations of the
Company. The parties in the D'Imperio suit are only Lightman Drum customers.
Hence, the Company cannot estimate what its probable liability will be because
the mediation process is not yet concluded. It is the Company's position that
any liability at the D'Imperio site will reduce the Company's liability at the
Ewan site and its liability at both sites will be further reduced by credits for
payments at the Enterprise Avenue site (settled 1982).
▇▇▇▇ Corporation. The Company received notification in November, 1992 from ▇▇▇▇
Corporation that ▇▇▇▇ Corporation has incurred costs in cleaning up a plant site
formerly owned by the Company in Wilmington, Massachusetts. ▇▇▇▇ Company is
asserting a claim against Stepan Company for reimbursement of a part of this
claim. The claim against Stepan Company did not specify a dollar amount being
sought and consequently, the Company cannot estimate what its future potential
liability, if any, will be.
DECEMBER 31, 1993 FORM 10-K
Maywood Site. The Company filed its Remedial Investigation Study on February
11, 1994 and has until March 16, 1994 to file its draft Feasibility Study with
the USEPA Region II. The Company expended and charged against its environmental
reserve $3,476,000 during the last three years. While it is probable that the
Company will incur some site cleanup costs, until the Feasibility Study is
completed, it is not possible to estimate what the Company's future liability,
if any, would be.
Fieldsboro, New Jersey Site. The Company plans to expend approximately $220,000
to perform capping activities at this site. The Company is awaiting reapproval
from the New Jersey Environmental Protection department. In addition, the
Company may spend up to $70,000 per year to perform well monitoring activities.
D'Imperio Site/United States of America v. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ et. al. (92 CV 4710
[JBS]). The court ordered non-binding mediation in this matter which concluded
February 17, 1994. The Company did not agree with the mediators' results and
conclusions, which in the Company's opinion, were arbitrary and inconsistent. As
a result, the Company made a separate offer to pay for what the Company believes
to be its share of past costs, or $638,000. The twenty other PRPs have submitted
their own proposal to the government. The government has 45 days from February
17, 1994 to accept or reject the Company's offer. If no resolution is reached,
the matter will be tried. At this time, the Company cannot estimate what its
future potential liability might be at this site.
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Chemical Control Site, Elizabeth, New Jersey. The only manifest linking the
Company to this site clearly showed that the waste shipment in question was
rejected. The PRP group for Chemical Control has reviewed this evidence and has
determined that this shipment was, in fact, rejected. Thus, while the Company
technically remains a PRP at this site, the Company believes it has no exposure
at this site based upon the PRP group ruling.
D'Imperio et. al. ▇. ▇▇▇▇▇▇▇▇ Drum Company, et. al., New Jersey ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇. ▇-▇▇▇▇▇-▇▇). This private suit alleges various defendants
improperly disposed of hazardous materials at property owned by D'Imperio
resulting in damage to D'Imperio's property, as well as tortious interference
with a real estate purchase contract. On February 19, 1994, the Court granted
the defendants' motions, including the Company's, for Summary Judgement. Unless
the plaintiff files an appeal within forty-five days from February 11, 1994,
this case is dismissed. The Company does not anticipate an appeal at this time.
MARCH 31, 1994 FORM 10-Q
Nor-Am Chemical Company and ▇▇▇▇ Corporation (Wilmington, Massachusetts). On
March 31, 1994, the Commonwealth of Massachusetts, Department of Environmental
Affairs, sent to the Company and four other parties, a Notice of Responsibility
and Interim Deadline for the Company's former National Polychem site in
Wilmington, Massachusetts. This site has been the subject of previous reports.
The Company has responded that it believes its obligation has been settled in
view of its settlement with ▇▇▇▇ Corporation. At this time, the Company cannot
estimate what its liability will be, if any, in view of the prior settlement
with ▇▇▇▇ Corporation.
JUNE 30, 1994 FORM 10-Q
On June 22, 1994, the Commonwealth of Pennsylvania, Department of Environmental
Resources, sent to the Company a request for information regarding the Company's
Fieldsboro, New Jersey plant use of Reclamation Resource, Inc. and its landfill
located at ▇▇▇▇▇▇▇ Road, ▇▇▇▇▇▇▇▇▇ Township, ▇▇▇▇▇▇▇▇▇▇ County, Pennsylvania.
The Company has responded that it has no knowledge of Reclamation Resource, Inc.
or the landfill and, to the Company's knowledge, no use of Reclamation Resource,
Inc. or the landfill and, to the Company's knowledge, no use of Reclamation
Resource, Inc. was ever made by the Company. Consequently, the Company cannot
determine what its liability, if any, will be.
SEPTEMBER 30, 1994 FORM 10-Q
Maywood Sites. Based on newspaper reports, the Company believes that during the
year, the United States Environmental Protection Agency ("EPA") and the United
States Department of Energy ("DOE") reached an agreement with regard to the
clean-up standards for mixed waste, (i.e. chemically and radiologically
contaminated waste.) Under the agreement, the DOE would clean-up to a standard
of 15 pico curries. The State of New Jersey has objected to this standard and
would like a clean-up standard of 5 pico curries. The impact of this split in
clean-up standards could have
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an impact on the costs which the Company may incur. The Company cannot now,
however, estimate what additional liability, if any, will be incurred. On
October 24, 1994, the Company received a Request for Information from the
Commonwealth of Massachusetts Department of Environmental Protection relating to
the Company's formerly-owned site at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇,
and alleged releases at this site. The Company is in the process of gathering
information and cannot make a determination as to what liability, if any, it may
have.
Ewan, Shamong Township, and D'Imperio, ▇▇▇▇▇▇▇▇ Township, sites in New Jersey.
Attempts to reach an allocation for costs at these sites among the various
parties by mediation have not been successful. As a consequence, the Company
believes that it will be involved in protracted litigation involving these
sites.
DECEMBER 31, 1994 FORM 10-K
Maywood Sites. The Company now believes that the Feasibility Study, which sets
forth alternative recommendations as to remediation at the sites, and the
Company's Maywood, New Jersey site, will be published for public comment in the
second calendar quarter of 1995. Following the public comment period, the United
States Environmental Protection Agency ("USEPA") will publish the Record of
Decision, which will set the remediation program to be followed at the sites,
and the Company's Maywood, New Jersey property. While it is probable that the
Company will incur some clean-up costs, until publication of the Record of
Decision, the Company cannot estimate what its future liability, if any, would
be.
In addition, the Company received from Region II of the USEPA, a demand for
payment of past oversight costs incurred by the government at the sites and the
Company's Maywood, New Jersey property. The demand is for approximately one
million seventy-six thousand dollars ($1,076,000.) The Company believes that
part of this amount is the responsibility of other PRPs at the sites, and is in
the process of meeting with the USEPA to resolve this issue.
D'Imperio Site/United States of America v. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, et. al. (92 CV 4710
[JBS]). The offer to settle, as previously reported, was not accepted because of
the inability of the PRPs at this site to resolve other outstanding issues.
Consequently, the Company and the other twenty PRPs are engaged in litigation
regarding each party's share of costs at this site.
Ewan Site, Shamong Township, New Jersey. The USEPA has combined operable unit 1
and operable unit 2 (drum removal and liquid/soil removal) into one operating
unit. The contractor hired by the PRP group has commenced remediation at this
site.
MARCH 31, 1995 FORM 10-Q
Maywood Sites. Following a meeting with the EPA, the company paid four hundred
seventy-eight thousand four hundred thirty-one dollars and 54 cents
($478,431.54) for past costs attributable to the sites. The company will seek
reimbursement for these costs from the other potentially responsible parties
("PRPs") at the sites. As to the balance of the past costs, as these costs
relate to
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the Stepan Company property for which a Subsection 106 Administrative Order is
in place, it is the company's position that under current Third Circuit
decisional law, most notably United States ▇. ▇▇▇▇ and ▇▇▇▇ ▇▇., ▇▇ ▇▇▇ ▇▇▇▇
(▇▇▇ ▇▇▇. 1993), the USEPA is precluded from collecting these amounts. As of
this date, no further demand has been made.
Chemical Control Site. On March 10, 1995, the State of New Jersey sent to the
company, along with about 200 other PRPs, a demand for thirty-four million
dollars ($34,000,000) in past costs regarding the Chemical Control Site in
Elizabeth, New Jersey. The company has maintained throughout these proceedings
that it is not a PRP at this site. This position is based on the fact that the
only documentation linking the company to this site is a manifest which clearly
demonstrates that the company's shipment was rejected. The company has notified
the State of New Jersey of this fact. The company is currently investigating
this demand and cannot make a determination as to what liability, if any, it may
have.
▇▇▇▇ ▇. D'▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ et. al (No. ATL-L-000810-95). On March 17,
1995, the company was served in an action in Atlantic County, New Jersey. The
company denies the allegations set forth in this action, and also believes it
has adequate defenses. Consequently, the company cannot determine what its
liability, if any, will be.
JUNE 30, 1995 FORM ▇▇-▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ of America v. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, 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.
Batavia Landfill located in Batavia, New York. On May 30, 1995, the Company
received notification that it might be a potentially responsible party at the
site. 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.
Chem-Trol Pollution Services Inc. 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.
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SEPTEMBER 30, 1995 FORM 10-Q
Maywood Sites. In August, 1995, the company has completed and presented to the
United States Environmental Protection Agency (USEPA) the Final Draft of the
Remedial Investigation Feasibility Study which contains alternatives for the
remediation of the company's site and theproperties known as the Sears and
Adjacent Properties. The company now anticipates that the remedial action plan
will be published by the USEPA for public comment in the second quarter of 1996.
Thereafter, a Record of Decision and designation of potentially responsible
parties (PRPs) to remediate the company's property and the Sears and Adjacent
Properties will be made. Although not currently a PRP to remediate, the company
believes that it will be named as a PRP, at least with regard to its property.
Ewan and D'Imperio and U.S. V. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ cases. The company anticipates
that a trial on the issues of nexus liability and divisibility of liability will
take place in the third quarter of 1996, pursuant to the terms of a Case
Management Order. As a result of the preceding items, the company has taken a
charge to more accurately reflect its best estimate of liability as of this
date.
Bofors Nobel Site in Muskegon, Michigan. On September 27, 1995, the company
received a 104(e) Request for Information from the United States Environmental
Protection Agency (USEPA). The company has reported that it has no knowledge of
use of this site by the company. Region V of the USEPA has since sent documents
to the company indicating that the company may be a potentially responsible
party. The company cannot, at this time, estimate what its liability, if any,
will be.
Insurance Recovery Case. On October 11, 1995, the Circuit Court of ▇▇▇▇ County,
Illinois, Chancery Division, ruled that the company's primary insurance company,
The Hartford, has a duty to defend the company at environmental sites at which a
lawsuit has been filed.
DECEMBER 31, 1995 FORM 10-K
Maywood Site. No remediation action has occurred at this site, but the company
still anticipates that the Record of Decision will be issued in the calendar
year 1996.
Ewan and D'Imperio and U.S. v. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (92 cv 4710 (JBS)) cases. The
government in this case has indicated a willingness to settle this case and
settlement discussions are underway. However, even if the case with the
government is settled, the case regarding issues of liability and allocation
between the company and other potentially responsible parties will continue and
is still scheduled for trial in the third or fourth quarter of 1996.
Insurance Recovery Case brought by the company against its insurers to recover
the cost of remediation at various sites. On February 23, 1996, the Chancery
Court ▇▇▇▇ County, State of Illinois, ruled that the Hartford Insurance Company
is "foreclosed" from contesting coverage under the policies which it wrote over
a period of 14 years. The company has made a demand upon the Hartford which has
not responded. After issuance of a final judgement order, the Hartford may
appeal the decision and the company cannot at this time estimate what the
outcome of such appeal, if any, will be.
C-6
JUNE 30, 1996 FORM 10-Q
Stepan vs. Admiral Insurance ▇▇.▇▇. An action against the company's insurers to
recover the cost of remediation expenses at various sites. The company has
reached a settlement agreement with the sole remaining primary insurance company
defendant in this lawsuit. The terms of the settlement are confidential, but as
a result of this and earlier settlements, the company has now exhausted all of
its primary coverage. As a result, the company will call upon its excess
insurance companies to pay its defense and indemnity costs. Certain of the
excess insurance policies at issue in the action contain provisions regarding
the payment of defense costs which differ from those of the primary policies.
The trial in this matter is scheduled for August 12, 1996.
SEPTEMBER 30, 1996 FORM 10-Q
▇▇▇▇▇▇ ▇. Admiral ▇▇.▇▇. The company has reached an agreement for settlement of
its claim against three additional insurers in this action. In addition, on
August 13th, the date the case was scheduled to go to trial, the presiding judge
in the Chancery Court removed the case to the Law Division of ▇▇▇▇ County. A
new trial judge was assigned. The company cannot at this time estimate the new
trial date for this action, if any. In addition, certain sites were excluded
from the case filed in the State of Illinois. The company has filed an action
in New Jersey against the remaining insurers in this case for sites that were
excluded in Illinois but for which the company believes proper venue and
jurisdiction lies in New Jersey.
D'Imperio and U.S. v. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (92 CV 4710)(JBS)) cases. As reported
previously, the Government had indicated a willingness to settle this case and
settlement discussions were underway. In response to an offer made by the
Government, the company has rejected the offer and the government has withdrawn
its offer to settle. Other PRPs involved in this action may or may not wish to
settle with the Government and at this time, the company has no opinion as to
whether or not the other parties will settle. In any event, because of the
company's rejection of the Government's offer, this case is proceeding to trial.
The company cannot predict the outcome of this case but believes it has defenses
to all of the Government's allegations.
Maywood Site. No remediation has occurred at this site and the company
anticipates now that the Record of Decision will be issued sometime in 1997.
The company has undertaken to remove drums from adjacent property which drums
were accumulated in the process of the remedial investigation feasibility stage
pursuant to the terms and conditions of an Administrative Order on Consent.
DECEMBER 31, 1996 FORM 10-K
▇▇▇▇▇▇ ▇. Admiral ▇▇.▇▇. The Company has now reached an agreement for
settlement of its claim against all insurers in this action with the exception
of one insurer. The case against this one insurer is scheduled to go to trial
December, 1997 with a back-up trial date in July, 1997. At the present time, the
Company anticipates that it will be going to trial on this action in July, 1997
C-7
unless it reaches a settlement agreement with the last remaining defendant. In
addition to which, as the Company noticed previously, the Company is pursuing
its action in New Jersey against the remaining insurer in this case for sites
that were excluded in the Illinois action but for which the Company believes
that proper venue and jurisdiction lies in New Jersey.
D'Imperio Site/U.S. v. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (92CV4710)(JBS). As reported previously,
this case is proceeding to trial, most likely in the third quarter of 1997. The
Company cannot at this time predict the outcome of this case but believes it has
defenses to all of the Government's and other PRPs' allegations.
Maywood Site. The Company has submitted a plan to perform remedial investigation
of a pile of leather scraps appearing at this site. Other than this, no
remediation has occurred at this site and the Company anticipates that the
Record of Decision will be issued in the third or fourth quarter of 1997. The
Company estimates that the cost for this leather scrap remediation will be non-
material.
MARCH 31, 1997 FORM 10-Q
Twins Inn. On April 30, 1997, the company received from the U.S. Environmental
Protection Agency, Region VIII, Denver, Colorado, a Notice of Request for
Information Pursuant to Section 104(e) of CERCLA for the Twins Inn Site in
Arvada, Jefferson County. The company has responded to this request for
information and based upon the information available to the company at this
time, the company does not believe it has any liability with regard to this
site. The company has no record of being at this site although it did do
business with the operator of the Twin Inns Site, but at a geographically
different site which is not part of the Twins Inn investigation.
JUNE 30, 1997 FORM 10-Q
On June 15, 1997 the company received a Section 107(e) letter from the United
States Environmental Protection Agency, Atlanta, Georgia, (USEPA) requesting
information about the company's use of a site entitled, Memphis Container Drum
Site (Tri-State Drums), located in Memphis, Shelby County, Tennessee, to dispose
of waste. The company has no record of using this particular site and so
informed the USEPA. At this time, the company can not estimate what its
liabilities of this site will be, if any.
▇▇▇▇▇▇ ▇. Admiral. The company has settled with the last remaining defendant in
this case, and as such, this action has now been dismissed. The company's
insurance recovery action in New Jersey continues to be prosecuted.
DECEMBER 31, 1997 FORM ▇▇-▇
▇'▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇/▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ et al. C.A. No. 92 CV4710
(JVS). On December 12, 1997, the Court enforced a proposed settlement of the
United States past cost claims and bound the company to payment of approximately
$639,000. The company has the right to
C-8
appeal this decision at a later date. For now, the company will make the payment
of approximately $639,000. The allocation action between the company and other
PRPs is continuing and discovery at the site is proceeding.
MARCH 31, 1998 FORM 10-Q
Stepan Company is aware of the fact that three plaintiffs' law firms located in
New Jersey have filed a complaint in the Superior Court of New Jersey, Middlesex
County, annexing approximately 270 separate case captions, collectively referred
to as ▇▇▇▇▇▇▇, et. al. ▇. ▇▇▇▇▇▇, et al. and ▇▇▇▇▇▇▇, et al. ▇. ▇▇▇▇▇▇, et al.,
Civil Action No. 98-139 (KSH), alleging personal and property injury as well as
wrongful death, on behalf of certain citizens of Maywood, ▇▇▇▇▇▇▇▇ Park and
Lodi, New Jersey. Stepan Company has accepted service in ▇▇▇▇▇▇▇, et al.
pursuant to a court request. The injuries and deaths are alleged to have been
the result of radiological and chemical contamination from the company's
Maywood, New Jersey site. The company has asserted in legal papers filed by it
that plaintiffs did not follow proper procedure under State Court rules and that
the multiple suits therefore were not properly filed. The complaint and annexed
captions, consistent with applicable federal law, have been removed to the
Federal District Court in Newark where the issue of jurisdiction will be
determined. The company believes it did not cause the alleged contamination.
In addition, the company believes it has other valid defenses. Moreover, as it
is uncertain as of this date how many, if any, lawsuits have been properly filed
or when the company will be served in any or all of the lawsuits, the company
cannot estimate what its liability, if any, will be.
JUNE 30, 1998 FORM 10-Q
Reference is made to the company's Report 10-Q for the quarter ending March 31,
1998, with regard to an action entitled ▇▇▇▇▇▇▇, et al.▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, et
al. ▇. ▇▇▇▇▇▇. The company attempted to remove all the cases which had been
filed in Middlesex County in New Jersey to the Federal District Court, Newark,
New Jersey. The Federal District Court remanded all but 15 cases to Middlesex
County. The company sought to appeal this decision to the Third Circuit Court
of Appeals by filing a Writ of Mandamus. On July 23, 1998, the Third Circuit
Court denied the company's petition. Consequently, at this time, there appear
to be 256 cases pending in Middlesex County, New Jersey, and 15 cases pending in
the Federal District Court, Newark, New Jersey.
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