-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D5roSMBYpIy4pyJgfN6RapOdO4+KqS0Dnwxq4AYglbKMQv7cvaBq5FYKwUr2l0wG YNoBm4ZPCQR5W8/Bsv0eyA== 0000950130-02-002166.txt : 20020415 0000950130-02-002166.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950130-02-002166 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SENSIENT TECHNOLOGIES CORP CENTRAL INDEX KEY: 0000310142 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 390561070 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-07626 FILM NUMBER: 02590827 BUSINESS ADDRESS: STREET 1: 777 EAST WISCONSIN AVENUE CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4142716755 MAIL ADDRESS: STREET 1: PO BOX 737 CITY: MILWAUKEE STATE: WI ZIP: 53201 FORMER COMPANY: FORMER CONFORMED NAME: UNIVERSAL FOODS CORP DATE OF NAME CHANGE: 19920703 10-K405 1 d10k405.txt FORM 10-K - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 10-K |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Year Ended December 31, 2001 Commission File Number 1-7626 Sensient Technologies Corporation WISCONSIN 39-0561070 (State of Incorporation) (IRS Employer Identification Number 777 EAST WISCONSIN AVENUE MILWAUKEE, WISCONSIN 53202-5304 (414) 271-6755 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF EACH CLASS NAME OF EXCHANGE ------------------- ON WHICH REGISTERED Common Stock, $.10 par value ------------------- Associated Preferred Share Purchase Rights New York Stock Exchange, Inc. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes |X| No |_| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X| There were 47,544,720 shares of Common Stock outstanding as of March 8, 2002. The aggregate market value of the voting Common Stock held by non-affiliates of the Registrant as of March 8, 2002, was $1,015,861,957. For purposes of this computation only, the Registrant's directors and executive officers were considered to be affiliates of the Registrant. Such characterization shall not be construed to be an admission or determination for any other purpose that such persons are affiliates of the Registrant. DOCUMENTS INCORPORATED BY REFERENCE Portions of: (1) the Company's Annual Report to Shareholders for the fiscal year ended December 31, 2001 (see Parts I, II and IV of this Form 10-K), and (2) the Company's Notice of Annual Meeting and Proxy Statement of the Company dated March 22, 2002 (see Part III of this Form 10-K). - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PART I Item 1. Business ................................................................................. 3 General .................................................................................... 3 Description of Business .................................................................... 4 Flavors & Fragrances Group ................................................................. 4 Color Group ................................................................................ 5 Asia Pacific Division ...................................................................... 6 Research and Development/Quality Assurance ................................................. 7 Products and Application Activities ........................................................ 7 Raw Materials .............................................................................. 8 Competition ................................................................................ 8 Foreign Operations ......................................................................... 9 Patents, Formulae and Trademarks ........................................................... 9 Employees .................................................................................. 9 Regulation ................................................................................. 9 Item 2. Properties .............................................................................. 10 Flavors & Fragrances Group ................................................................. 11 Color Group ................................................................................ 11 Asia Pacific ............................................................................... 11 Item 3. Legal Proceedings ....................................................................... 12 Item 4. Submission of Matters to a Vote of Security Holders ..................................... 12 Executive Officers of the Registrant .............................................................. 12 PART II .................................................................................................. 13 Item 5. Market For The Registrant's Common Stock and Related Stockholder Matters ................................................... 13 Item 6. Selected Financial Data ................................................................. 14 Item 7. Management's Discussion and Analysis of Financial ....................................... 14 Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk ............................... 14 Item 8. Financial Statements and Supplementary Data ............................................. 14 Item 9. Disagreements on Accounting and Financial Disclosure .................................... 14 PART III ................................................................................................. 14 Item 10. Directors and Executive Officers of the Registrant ...................................... 14 Item 11. Executive Compensation .................................................................. 15 Item 12. Security Ownership of Certain Beneficial Owners and Management .......................... 15 Item 13. Certain Relationships and Related Transactions .......................................... 15 PART IV .................................................................................................. 16 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ......................... 16 List of Financial Statements and Financial Statement Schedules Financial Statements ....................................................................... 16 Financial Statement Schedules Form 10-K .................................................... 17 Independent Auditors' Report ...................................................................... 17 Schedule II ....................................................................................... 18 Signatures ........................................................................................S-1 Exhibits ..........................................................................................E-1
2 PART I Item 1. Business General Sensient Technologies Corporation (NYSE: SXT), formerly known as Universal Foods Corporation (the "Company"), was incorporated in 1882 in Wisconsin. Its principal executive offices are located at 777 East Wisconsin Avenue, Suite 1100, Milwaukee, Wisconsin 53202-5304, telephone (414) 271-6755. The Company is a leading global supplier of colors, flavors and fragrances. The Company uses sophisticated technologies at facilities around the world to develop unique formulations that bring life to its customers' products. The Company manufactures ink-jet inks, technical colors, chemicals for laser printing and flat screen displays, cosmetic and pharmaceutical additives, as well as colors and flavors for many of the world's best-known foods and beverages. The Company has recently completed three acquisitions that have significantly expanded its worldwide technical colors, dyes and ink-jet ink businesses as well as one acquisition that has expanded the Company's worldwide flavors business. On November 19, 2001, the Company announced the acquisition of Kimberly-Clark Printing Technology, Inc., now known as Formulabs, Inc. ("Formulabs"), a manufacturer of specialty inks for ink-jet and industrial applications with annual revenues of approximately $20 million. Formulabs manufactures and markets wide-format graphic inks, textile inks and other industrial inks, and has production facilities located in Escondido, California, Piqua, Ohio, and Tijuana, Mexico. On December 3, 2001, the Company announced the acquisition of the industrial dye business of Crompton Colors, Incorporated, with annual revenues of approximately $40 million. This business, which includes facilities located in Gibraltar, Pennsylvania, provides the Company with significant new capabilities in the manufacture and sale of technical dyes and colors for non-food applications. On January 10, 2002, the Company announced the acquisition of SynTec GmbH, a manufacturer of specialty dyes and chemicals based in Wolfen, Germany with annual revenues of less than $10 million. On March 25, 2002, the Company announced the acquisition of the flavors and essential oil operations of C. Melchers GmbH & Company, a supplier of flavors for coffees and teas, as well as essential oils, aroma chemicals and other formulations for flavor, cosmetic and fragrance applications. The acquired businesses, headquartered in Bremen, Germany, reported revenues of approximately $14 million in 2001. The Company completed the sale of substantially all of the assets of its former Red Star Yeast & Products Division on February 23, 2001. The Company received cash proceeds from this sale of approximately $113 million. 3 Description of Business The Company is a manufacturer and marketer of high-performance components that add distinct characteristics and functional advantages to a wide range of products. The Company's principal products include: . Flavors, flavor enhancers and bionutrients, . Fragrances and aroma chemicals, . Dehydrated vegetables and other food ingredients, . Natural and synthetic colors, . Cosmetic and pharmaceutical additives, and . Ink-jet inks and specialty dyes, pigments and chemicals. The Company's operations, except for the Asia Pacific Division, are managed on a products and services basis. The Company's two reportable segments are the Flavors & Fragrances Group and the Color Group. Financial information regarding the Company's two reportable segments is incorporated by reference to the information set forth on pages 33 and 34 of the Company's 2001 Annual Report to Shareholders under the heading "Segment and Geographic Information." Flavors & Fragrances Group The Company is a leading manufacturer and supplier of flavors, ingredient systems and aroma chemicals to the dairy, food processing, beverage, personal care and household products industries worldwide. The Company has a broad, distinctive and fully integrated product offering, ranging from savory flavor components to fully formulated flavor systems for dairy, beverage, and processed food applications. The Flavors & Fragrances Group produces flavor and fragrance products that impart a desired taste, texture, aroma or other functionality to a broad range of consumer and other products. This Group includes the Company's dehydrated vegetable products business, which produces ingredients for food processors. The Flavors & Fragrances Group operates principally through the Company's subsidiaries, Sensient Flavors Inc. (formerly, Universal Flavor Corporation) and Rogers Foods, Inc. The Group's plants are located in California, Illinois, Indiana, Michigan, Ohio, Wisconsin, Belgium, Canada, France, Germany, Italy, Mexico, the Netherlands, Spain and the United Kingdom. During 1998 the Company integrated its bioproducts business (which was formerly operated as a separate division known as Red Star BioProducts) into its Flavors & Fragrances Group. The bioproducts business serves the food, animal feed processing, and bionutrient industries with a broad line of natural extracts and specialty flavors. The Company produces various specialty extracts from yeast, vegetable proteins, meat, milk protein and other natural products which are used primarily as savory flavor, texture modifiers and enhancers in processed foods. The nutritional and functional properties of these extracts also make them useful in enzyme and pharmaceutical production. 4 Strategic acquisitions have expanded the Company's flavors and fragrances product lines and processing capabilities. In January 1998, the Company acquired Arancia Ingredientes Especiales, S.A. de C.V., a manufacturer of savory flavors and other food ingredients, improving access to the rapidly growing Latin American savory flavor market. In April 1998, the Company acquired a British savory and seasonings flavor manufacturer, DC Flavours Ltd., which further expanded the Company's technology and worldwide market presence and also gave the Company access to the snack food market, the fastest growing segment in Europe's food market. In May 1998, the acquisition of substantially all of the assets and business of the beverage business of German flavor manufacturer Sundi GmbH, with its emphasis on all-natural flavor ingredients, provided the Company with a point of entry into Germany, Europe's largest flavor market. During the quarter ended June 30, 2000, the Company integrated its former Dehydrated Products Division into its Flavors & Fragrances Group. The Company believes it is the second largest producer of dehydrated onion and garlic products in the United States. The Company is also one of the largest producers and distributors of chili powder, paprika, chili pepper and dehydrated vegetables such as parsley, celery and spinach. Domestically, the Company sells dehydrated products to food manufacturers for use as ingredients and also for repackaging under private labels for sale to the retail market and to the food service industry. The Company believes it is one of the leading dehydrators of specialty vegetables in Europe, operating through its Sensient Specialty Vegetables business. Advanced dehydration technologies utilized by Sensient Specialty Vegetables permit faster and more effective rehydration of ingredients used in many of today's popular convenience foods. Color Group The Company believes that it is one of the world's largest producers of synthetic and natural colors, and that it is the world's leading manufacturer of certified food colors. The Company makes synthetic and natural colors for domestic and international producers of beverages, bakery products, processed foods, confections, pet foods, cosmetics and pharmaceuticals. Operating through its Sensient Technical Colors business, the Company also makes ink-jet inks and other high purity organic dyes used in a wide variety of non-food applications. The Company believes that its advanced process technology, state-of-the-art laboratory facilities and equipment, and a complete range of synthetic and natural color products constitute the basis for its market leadership position. Strategic acquisitions continue to enhance product and process technology synergies, as well as increasing its international presence. The Color Group operates principally through the Company's subsidiary, Warner-Jenkinson Company, Inc., which has its principal manufacturing facilities in Missouri. Other Color Group facilities are located in New Jersey, California, Pennsylvania, Ohio, Canada, Mexico, France, Germany, Italy and the United Kingdom. 5 Effective January 1, 2000, the Company expanded its European color business by acquiring Dr. Marcus GmbH, a leading manufacturer of natural colors located near Hamburg, Germany. On January 27, 2000, the Company acquired 100% of the ownership of Monarch Food Colors, a manufacturer of colors for the food, pharmaceutical and cosmetic industries located in High Ridge, Missouri. The Company had previously held a 24% ownership interest in Monarch Food Colors as a result of its April 1999 acquisition of Pointing Holdings Limited. In February 1999, the Company expanded its cosmetics business through the purchase of Les Colorants Wackherr, a Paris, France-based producer of colors for major cosmetics houses throughout Europe, Asia and North America. Also in February 1999, the Company further developed its natural colors offerings by acquiring certain assets of Quimica Universal, a Peruvian producer of carminic acid and annatto, natural colors used in food and other applications. The Company acquired Pointing Holdings Limited, a manufacturer of food colors located in the United Kingdom, in April 1999. The Pointing international color business significantly strengthened the Company's worldwide color capabilities. In August 1999, the Company acquired certain assets of Nino Fornaciari fu Riccardo SNC, an Italian producer of natural colors for the food and beverage industries. In September 1998, the Company acquired Italian natural color producer Reggiana Antociani S.R.L., a company which specializes in the production of anthocyanin, which is extracted from grape skins and black carrots for use in fruit juices, flavored teas, wine coolers and fruit fillings, strengthening the Company's offerings in natural colors, the fastest growing segment of the worldwide food colors market. The Company became a supplier of ink-jet inks for the ink-jet printer market with the acquisition of Tricon Colors in 1997. Also in 1997, the Company strengthened its presence in Latin America by acquiring certain assets of the food color business of Pyosa, S.A. de C.V., located in Monterrey, Mexico. Asia Pacific Division The Asia Pacific Division focuses on marketing the Company's diverse product line in the Pacific Rim under one name. Through its Sensient Asia Pacific Division, the Company offers a full range of products from its Flavors & Fragrances Group and Color Group, as well as products developed by regional technical teams to appeal to local preferences. Sales, marketing and technical functions are managed through the Asia Pacific Division's headquarters in Singapore. Manufacturing operations are located in Australia, China, New Zealand and the Philippines. In 2001, the Asia Pacific Division incorporated Sensient India Private Limited and opened a new sales office in Mumbai, India. Additional sales offices are located in Australia, China, Hong Kong, Japan and Thailand. 6 Research and Development/Quality Assurance The development of specialized products and services is a complex technical process calling upon the combined knowledge and talents of the Company's research, development and quality assurance personnel. The Company believes that its competitive advantage lies in its ability to work with its customers to develop and deliver high-performance products that address the distinct needs. The Company's research, development and quality assurance personnel make significant contributions toward improving existing products and developing new products tailored to customer needs, while providing on-going technical support and know-how to the Company's manufacturing activities. As of December 31, 2001, the Company employed approximately 258 people in research, development and quality assurance. Expenditures for research and development related to continuing operations in calendar year 2001 were $16,705,000, compared with $18,294,000 in the year ended December 31, 2000, and $18,245,000 in the year ended December 31, 1999. As part of its commitment to quality as a competitive advantage, the Company has undertaken efforts to achieve certification to the requirements established by the International Organization for Standardization in Geneva, Switzerland, through its ISO 9000 series of quality standards. Sites currently certified include Sensient Flavors & Fragrances Group plants in the United States, Spain, Italy, Mexico, Belgium, Germany, the United Kingdom, Canada and France and Sensient Color Group plants in the United States, Mexico and the United Kingdom. Products and Application Activities The Company's strategic focus is on the manufacture and marketing of high-performance components that bring life to products. Accordingly, the Company devotes considerable attention and resources to the development of product applications and processing improvements to support its customers' numerous new and reformulated products. Many of the proprietary processes and formulae developed by the Company are maintained as trade secrets and under secrecy agreements with customers. Lower calorie ingredients and sweeteners for dairy, food and beverage applications are subjects of development activity for the Flavors & Fragrances Group. Formulations for functional and textured beverages and flavors for snack and main meal items offer opportunities as well. Development of savory flavors accelerated with the integration of the Company's BioProducts Division in 1998 and the Dehydrated Products Division in 2000. The development of yeast derivatives and other specialty ingredients also provides growth opportunities in bionutrients and biotechnology markets, such as pharmaceuticals, vitamins, vaccines and bioremediation. 7 The natural food color market is an important target for the Color Group. The acquisitions of Reggiana, Forniciari and Dr. Marcus (as discussed above) have provided new technologies in the extraction and purification of natural colors and have enabled rapid growth in the beverage, dairy and snack food segments. Recent expansion of the Color Group's purification technology will also open further opportunities in the ink-jet market. Raw Materials The Company uses a wide range of raw materials in producing its products. Chemicals used to produce certified colors are obtained from several domestic and foreign suppliers. Raw materials for natural colors, such as carmine, beta-carotene, annatto and turmeric, are purchased from overseas and U.S. sources. In the production of flavors and fragrances, the principal raw materials include essential oils, aroma chemicals, botanicals, fruits and juices, and are primarily obtained from local vendors. Flavor enhancers and secondary flavors are produced from yeast and vegetable materials such as corn and soybean. Chili peppers, onion, garlic and other vegetables are acquired under annual contracts with numerous growers in the western United States and Europe. The Company believes that alternate sources of materials are available to enable it to maintain its competitive position in the event of an interruption in the supply of raw materials from a single supplier. Competition All Company products are sold in highly competitive markets. While no single factor is determinative, the Company's competitive position is based principally on process and applications expertise, quality, technological advances resulting from its research and development, and customer service and support. Because of its highly differentiated products, the Company competes with only a few companies across multiple product lines, and is more likely to encounter competition specific to an individual product. . Flavors and Fragrances. Competition to supply the flavors and fragrances industries has taken on an increasingly global nature. Most of the Company's customers do not buy their entire flavor and/or fragrance products from a single supplier and the Company does not compete with a single company in all product categories. Competition for the supply of flavors and fragrances is based on the development of customized ingredients for new and reformulated customer products, as well as on quality, customer service and price. Competition to supply dehydrated vegetable products is present through several large and small domestic competitors, as well competitors in other countries. Competition for the supply of dehydrated vegetables is based principally on product quality, customer service and price. . Color. Competition in the color market is diverse, with the majority of the Company's competitors specializing in either synthetic dyes or natural colors. The Company believes that it gains a competitive advantage as the only major basic manufacturer of a full range of color products, including synthetic dyes and pigments as well as natural colors. Competition in the supply of ink-jet inks is based principally upon price, quality and service, as well as product development and technical capabilities. The Company competes against two main domestic competitors in supplying ink-jet inks and believes it gains an advantage as a low cost, high quality supplier. 8 . Asia Pacific. Because of the broad array of products available to customers of the Asia Pacific Division, the Company is able to offer a wider product base than many of its competitors. Competition is based upon reliability in product quality, service and price as well as technical support available to customers. Foreign Operations The information appearing under the heading "Geographic Information" in Note 11 to the Consolidated Financial Statements of the Company, which appears on page 34 of the Company's 2001 Annual Report, is incorporated herein by reference. Patents, Formulae and Trademarks The Company owns or controls many patents, formulae and trademarks related to its businesses. The businesses are not materially dependent upon patent or trademark protection; however, trademarks, patents and formulae are important for the continued consistent growth of the Company. Employees As of December 31, 2001, the Company employed 3,454 persons worldwide. Regulation Compliance with government provisions regulating discharges into the environment, or otherwise relating to the protection of the environment, did not have a material adverse effect on the Company's operations for the year covered by this report. Compliance is not expected to have a material adverse effect in the succeeding two years as well. The production, packaging, labeling and distribution of certain of the products of the Company are subject to the regulations of various federal, state and local governmental agencies, in particular the U.S. Food & Drug Administration. 9 Item 2. Properties The locations and the nature of the primary production operations of the Company are as follows: Flavors & Fragrances Group: United States Amboy, IL: Ingredients and flavors Greenfield, CA: Dehydrated products Fairfield, OH: Flavors Harbor Beach, MI: Flavors and flavor enhancers Indianapolis, IN: Flavors Juneau, WI: Flavor enhancers and extracts Livingston, CA: Dehydrated products Turlock, CA: Dehydrated products Belgium Brussels: Natural health ingredients Heverlee: Ingredients and flavors Canada Cornwall, Ontario: Flavor enhancers and extracts Delta, B.C: Ingredients and flavors Rexdale, Ontario: Ingredients and flavors Tara, Ontario: Flavors and flavor enhancers France Marchais: Dehydrated products Strasbourg: Flavor enhancers and extracts Germany Bremen (two plants): Flavors, flavored products and essential oils Great Britain Bletchley: Flavors and extracts Lampeter (Wales): Flavors and flavor enhancers Italy Milan: Flavors Mexico Celaya: Flavor enhancers and extracts Tijuana: Inks Tlalnepantla: Ingredients and flavors Netherlands Elburg: Dehydrated products Spain Granada: Fragrances and aromatic chemicals 10 Color Group: United States Elmwood Park, NJ (two plants): Colors/dyes and ink-jet products Escondido, CA: Ink-jet products and specialty inks Gibraltar, PA: Technical dyes for non-food applications High Ridge, MO: Natural and synthetic colors Piqua, OH: Specialty inks South Plainfield, NJ (two plants): Cosmetic/pharmaceutical colors St. Louis, MO: Natural and synthetic colors Canada Kingston, Ontario: Synthetic and natural colors France Saint Ouen L'Aumone: Cosmetic colors Germany Geesthacht: Natural colors Wolfen: Specialty dyes and chemicals Great Britain King's Lynn: Natural and synthetic colors and dyes Italy Reggio Emilia (two plants): Natural colors Mexico Lerma: Synthetic and natural colors Tijuana: Specialty inks Asia Pacific: Australia Keysborough, Victoria: Colors and flavors China Guangzhou: Colors and flavors New Zealand Mt. Wellington: Flavors Philippines Pasig City/Manila: Flavors and color blending None of these properties is held subject to any material encumbrance. 11 Item 3. Legal Proceedings The Company is a party to various legal proceedings related to its business. The Company believes that adverse decisions in these proceedings would not, individually or in the aggregate, subject the Company to damages of a material amount. Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders during the fourth quarter of the year ended December 31, 2001. Executive Officers of the Registrant The executive officers of the Company and their ages as of March 1, 2002 are as follows:
Name Age Position ---- --- -------- Kenneth P. Manning 60 Chairman, President and Chief Executive Officer Richard Carney 52 Vice President - Human Resources Steven O. Cordier 46 Vice President - Administration John L. Hammond 55 Vice President, Secretary and General Counsel Richard F. Hobbs 54 Vice President, Chief Financial Officer & Treasurer Johannes Kleppers 45 President - Flavors & Fragrances Jack H. Koberstine 45 President - Dehydrated Products Richard J. Malin 35 Assistant Treasurer John R. Mudd 46 President - Color Ralph G. Pickles 55 President - Asia Pacific Stephen J. Rolfs 37 Vice President, Controller & Chief Accounting Officer Jorge E. Slater 54 Vice President, South America and Marketing Dr. Ho-Seung Yang 54 Vice President, Technologies
The Company has employed all of the individuals named above for at least the past five years, except Messrs. Hammond, Kleppers, Koberstine, Mudd, Rolfs and Yang. Mr. Hammond joined the Company in January 1998, as Vice President, Secretary and General Counsel. From 1992 to 1997, Mr. Hammond was employed by The Providence Journal Company, a newspaper, cable and broadcast television company, initially as Vice President - Legal, and subsequently as Vice President, General Counsel and Chief Administrative Officer. From 1989 to 1992, Mr. Hammond was Vice President, General Counsel and Secretary of Landstar System, Inc., a trucking company. Prior to that, Mr. Hammond was employed by The Singer Company for ten years and was Deputy General Counsel at the time of his departure. Mr. Kleppers joined the Company in June 2000 as General Manager of the Company's United Kingdom flavors business. In January 2001, Mr. Kleppers became General Manager of the Company's European flavors and fragrances business, and in September 2001, Mr. Kleppers was appointed as President of the Company's 12 Flavors & Fragrances Group. Prior to joining the Company, Mr. Kleppers had been Vice President, Flavors and Fragrances Europe, for Bush Boake Allen Ltd. since January 1996. Mr. Koberstine joined the Company in 1998 as Vice President/General Manager of the Dairy and Food Ingredients business of the Company's Flavor Division. In April 2000, Mr. Koberstine became President of the Company's Red Star Yeast & Products Division, and in February 2001, he became Vice President, Marketing. In April 2001, he became President of the Company's Dehydrated Products business. Prior to joining the Company, Mr. Koberstine was employed by Hercules, Inc. for 16 years, with his final assignment as Director of Sales and Marketing, North America, for that company's food ingredients business. Mr. Mudd re-joined the Company in January 2000 and became President of the Company's Color Division in February 2000. Mr. Mudd served as President of Monarch Food Colors from May 1993 until the Company acquired that business in January 2000. Prior to his service with Monarch Food Colors, Mr. Mudd was employed by the Company for approximately 12 years. Mr. Rolfs joined the Company as Manager-Corporate Development in 1997. In December 2001 he was appointed Vice President, Chief Accounting Officer and Controller. He had served as the Company's Vice President-Treasurer since September 2000 and, prior to that, as its Vice President-Corporate Development since June 2000. Prior to joining the Company, Mr. Rolfs was employed by Brown-Forman Corporation, a beverage and consumer products company, from 1993 to 1997, initially as a Financial Analyst and then as Assistant Vice President. Prior to that, Mr. Rolfs worked for the public accounting firm of Ernst & Young LLP from 1986 to 1991. Dr. Yang re-joined the Company and was elected Vice President - Technologies in January 1998. From 1990 to 1998, Dr. Yang was employed by SK Chemicals in Seoul, Korea, where he held the positions of managing director of corporate planning and development, managing director, group chairman's office and director, life science and development. Prior to his service with SK Chemicals, Dr. Yang was the Company's Director of Research from 1987 to 1989. PART II Item 5. Market For The Registrant's Common Stock and Related Stockholder Matters The only market in which the common stock of the Company is traded is the New York Stock Exchange. The range of the high and low sales prices as quoted in the New York Stock Exchange - Composite Transaction tape for the common stock of the Company and the amount of dividends declared for the fiscal years 2000 and 2001 appearing under "Common Stock Prices and Dividends" on page 38 of the 2001 Annual Report to Shareholders are incorporated by reference. In fiscal 2001, common stock dividends were paid on a quarterly basis, and it is expected that quarterly dividends will continue to be paid in the future. On February 10, 2000, the Board of Directors established a share repurchase program that authorizes the Company to repurchase up to five million shares of the Company's common stock. As of March 8, 2002, 3,941,400 shares had been repurchased under this program. On April 27, 2001, the Board 13 of Directors authorized the repurchase of an additional five million shares. As of March 8, 2002, no shares had been repurchased under this authorization. On June 25, 1998, the Board of Directors of the Company adopted a preferred stock shareholder rights plan which is described in Note 6 to the Consolidated Financial Statements - "Shareholders' Equity" on page 30 of the 2001 Annual Report to Shareholders, which is incorporated by reference. The number of shareholders of record on February 28, 2002 was 4,593. Item 6. Selected Financial Data The selected financial data required by this item is incorporated by reference from the "Five Year Review" and the notes thereto on page 37 of the 2001 Annual Report to Shareholders. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information required by this item is set forth under "Management's Analysis of Operations and Financial Condition" on pages 16 through 21 of the 2001 Annual Report to Shareholders and is incorporated by reference. Item 7A. Quantitative and Qualitative Disclosures About Market Risk The information required by this item is set forth under "Market Risk Factors" on pages 19 and 20 of the 2001 Annual Report to Shareholders and is incorporated by reference. Item 8. Financial Statements and Supplementary Data The financial statements and supplementary data required by this item are set forth on pages 22 through 36 of the 2001 Annual Report to Shareholders and are incorporated by reference. Item 9. Disagreements on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant Information regarding directors and officers appearing under "Election of Directors" (ending at "Committees of the Board of Directors") and "Section 16(a) Beneficial Ownership Reporting Compliance" on pages three through five and page 18, respectively, of the Proxy Statement for the Annual Meeting of Shareholders of the Company dated March 22, 2002 ("Proxy Statement"), is incorporated by reference. Additional information regarding executive officers appears at the end of Part I above. 14 Item 11. Executive Compensation Information relating to compensation of directors and officers is incorporated by reference from "Director Compensation and Benefits" on page seven of the Proxy Statement and "Executive Compensation" on pages 14 through 18 of the Proxy Statement. Information relating to the Compensation and Development Committee of the Company's Board of Directors is incorporated by reference from the third paragraph on page six of the Proxy Statement under the heading "Committees of the Board of Directors." Item 12. Security Ownership of Certain Beneficial Owners and Management The discussion of securities ownership of certain beneficial owners and management appearing under "Principal Shareholders" on pages ten and 11 of the Proxy Statement is incorporated by reference. Item 13. Certain Relationships and Related Transactions There are no family relationships between any of the directors, nominees for director and officers of the Company nor any arrangement or understanding between any director or officer or any other person pursuant to which any of the nominees has been nominated. No director, nominee for director or officer had any material interest, direct or indirect, in any business transaction of the Company or any subsidiary during the period January 1, 2001 through December 31, 2001, or in any such proposed transaction. In the ordinary course of business, the Company engages in business transactions with companies whose officers or directors are also directors of the Company. These transactions are routine in nature and are conducted on an arm's-length basis. The terms of any such transactions are comparable at all times to those obtainable in business transactions with unrelated persons. 16 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) Documents filed: 1. and 2: Financial Statements and Financial Statement Schedules. See below for "List of Financial Statements and Financial Statement Schedules." 3. Exhibits: See Exhibit Index following this report. With the exceptions of Exhibits 4.2 and 4.3, no other instruments defining the rights of holders of long- term debt of the Company and its consolidated subsidiaries are filed herewith because no other debt instrument authorizes securities exceeding 10% of the total consolidated assets of the Company. The Company agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request. (b) Reports on Form 8-K: A report on Form 8-K was filed on December 14, 2001 reporting the issuance of approximately $150 million of new debt through a private placement. List of Financial Statements and Financial Statement Schedules
Page Reference in 1. Financial Statements 2001 Annual Report To Shareholders --------------- The following consolidated financial statements of Sensient Technologies Corporation and subsidiaries are incorporated by reference from the Annual Report to Shareholders for the year ended December 31, 2001: Independent Auditors Report 36 Consolidated Balance Sheets-December 31, 2001 and 2000 23 Consolidated Statements of Earnings - Years ended December 31, 2001, 2000 and 1999 22 Consolidated Statements of Shareholders' Equity - Years ended December 31, 2001, 2000 and 1999 24 Consolidated Statements of Cash Flows-Years ended December 31, 2001, 2000 and 1999 25 Notes to Consolidated Financial Statements 26-35
17
Page Reference in 2. Financial Statement Schedules Form 10-K Form 10-K --------- Independent Auditors' Report 17 Schedule II - Valuation and Qualifying Accounts and Reserves 18
All other schedules are omitted because they are inapplicable, not required by the instructions or the information is included in the consolidated financial statements or notes thereto. Independent Auditors' Report To the Shareholders and Board of Directors of Sensient Technologies Corporation: We have audited the consolidated financial statements of Sensient Technologies Corporation and subsidiaries (the "Company") as of December 31, 2001 and 2000, and for each of the three years in the period ended December 31, 2001, and have issued our report thereon dated February 14, 2002, which report includes an explanatory paragraph as to the change in accounting in 2000 of amortizing unrecognized net gains and losses related to the Company's obligation for post-retirement benefits. Such consolidated financial statements and report are included in your 2001 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedule of Sensient Technologies Corporation, listed in Item 14. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Milwaukee, Wisconsin February 14, 2002 18 SCHEDULE II SENSIENT TECHNOLOGIES CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (IN THOUSANDS) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
Valuation Accounts Deducted in the Balance Additions - ------------------------------------------- Balance at Charged to Sheet From the Assets To Beginning of Costs and Additions Balance At - ------------------------------------------ Recorded During End of Which They Apply Period Expenses Acquisitions Deductions(A) Period - ---------------- ------ -------- ------------ ------------- ------ 1999 Allowance for Losses: $ 4,911 $ 283 $ --- $ 1,143 $ 4,051 Trade accounts receivable 2000 Allowance for losses: $ 4,051 $ 826 $ --- $ 2,029 $ 2,848 Trade accounts receivable 2001 Allowance for losses: $ 2,848 $ 782 $ 1,049 $ 619 $ 4,060 Trade accounts receivable (A) Accounts written off, less recoveries and reclassification of net assets held for sale in 2000.
19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SENSIENT TECHNOLOGIES CORPORATION By: /s/ John L. Hammond ------------------- John L. Hammond Vice President, Secretary & General Counsel Dated: March 28, 2002 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below as of March 28, 2002, by the following persons on behalf of the Registrant and in the capacities indicated. /s/Kenneth P. Manning /s/ James A.D. Croft - --------------------- -------------------- Kenneth P. Manning James A.D. Croft Chairman of the Board, President and Director Chief Executive Officer /s/ Alberto Fernandez /s/ Richard F. Hobbs --------------------- - -------------------- Alberto Fernandez Richard F. Hobbs Director Vice President, Chief Financial Officer and Treasurer /s/ James L. Forbes ------------------- /s/ Richard A. Abdoo James L. Forbes - -------------------- Director Richard A. Abdoo Director /s/ William V. Hickey --------------------- /s/ Michael E. Batten William V. Hickey - --------------------- Director Michael E. Batten Director /s/ Essie Whitelaw ------------------ /s/ John F. Bergstrom Essie Whitelaw - --------------------- Director John F. Bergstrom Director /s/ Fergus M. Clydesdale - ------------------------ Dr. Fergus M. Clydesdale Director S-1 SENSIENT TECHNOLOGIES CORPORATION EXHIBIT INDEX 2001 ANNUAL REPORT ON FORM 10-K
Exhibit Incorporated by Filed Number Description Reference From Herewith - ------ ----------- -------------- -------- 3.1 Amended and Restated Articles of Exhibit 3.1 to Quarterly Report on Form 10-Q for the Incorporation adopted January 21, 1999 as quarter ended March 31, 2001 amended as of April 26, 2001 (Commission File No.1-7626) 3.2 By-Laws of Sensient Technologies Corporation Exhibit 3.1 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (Commission File No.1-7626) 4.1 Rights Agreement, dated as of August Exhibit 1.1 to Registration Statement on 6, 1998 between Registrant and Firstar Form 8-A dated July 20, 1998 Trust Company (Commission File No. 1-7626) 4.1(1) Amendment dated as of November 6, 2000 Exhibit 4.1 to Quarterly Report on Form 10-Q for the to the Rights Agreement dated as of quarter ended September 30, 2000 August 6, 1998, between Registrant and (Commission File No. 1-7626) Wells Fargo Bank Minnesota, N.A. (as Successor to Firstar Trust Company), as Rights Agent 4.2 Indenture dated as of November 9, 1998 Exhibit 4.1 to Registration Statement on Form S-3 between Registrant and The First National dated November 9, 1998 Bank of Chicago, as Trustee (Commission File No. 333-67015) 4.3 Note Purchase Agreement dated as of November X 29, 2001, between the Registrant and Various Lenders 10 Material Contracts 10.1 Management Contracts or Compensatory Plans 10.1(a) Executive Employment Contract Exhibit 10.2(a) to Annual Report on Form 10-K between Registrant and Kenneth P. Manning for the fiscal year ended September 30, 1999 dated November 11, 1999 (Commission File No. 1-7626)
E-1 SENSIENT TECHNOLOGIES CORPORATION EXHIBIT INDEX 2001 ANNUAL REPORT ON FORM 10-K
Exhibit Incorporated by Filed Number Description Reference From Herewith - ------ ----------- -------------- -------- 10.1(b) Form of Amended and Restated Change of X Control Employment and Severance Agreement for Executive Officers 10.1(c) 1985 Stock Plan for Executive Exhibit 10.2(c) to Annual Report on Form 10-K Employees for the fiscal year ended September 30, 1998 (Commission File No. 1-7626) 10.1(d) Universal Foods Corporation 1990 Exhibit 10.2(d) to Annual Report on Employee Stock Plan, as amended Form 10-K for the fiscal year ended September 10, 1998 September 30, 1998 (Commission File No. 1-7626) 10.1(d)(1) Amendment of 1990 Employee Stock Plan Exhibit 10.1(d)(1) to Annual Report on Form 10-K for dated as of November 6, 2000 the fiscal year ended December 31, 2000 (Commission File No. 1-7626) 10.1(e) Universal Foods Corporation 1994 Exhibit 10.2(f) Annual Report on Form 10-K for the Employee Stock Plan, as amended fiscal year ended September 30, 1998 September 10, 1998 (Commission File No. 1-7626) 10.1(e)(1) Amendment of 1994 Employee Stock Plan dated Exhibit 10.1(e)(1) to Annual Report on Form 10-K for as of November 6, 2000 the fiscal year ended December 31, 2000 (Commission File No. 1-7626) 10.1(f) Universal Foods Corporation 1998 Exhibit 10.2(h) to Annual Report on Form 10-K for the Stock Option Plan, as amended fiscal year ended September 30, 1998 September 10, 1998 (Commission File No. 1-7626) 10.1(f)(1) Amendment of 1998 Employee Stock Plan Exhibit 10.1(f)(1) to Annual Report on Form 10-K for the dated as of November 6, 2000 fiscal year ended December 31, 2000 (Commission File No. 1-7626) 10.1(g) 1999 Non-Employee Director Stock Appendix A to Definitive Proxy Statement filed Option Plan on Schedule 14A on December 17, 1999. (Commission File No. 1-7626)
E-2 SENSIENT TECHNOLOGIES CORPORATION EXHIBIT INDEX 2001 ANNUAL REPORT ON FORM 10-K
Exhibit Incorporated by Filed Number Description Reference From Herewith - ------ ----------- -------------- -------- 10.1(g)(1) Amendment of 1999 Non-Employee Director Stock Exhibit 10.1(g)(1) to Annual Report on Form 10-K for Option Plan dated as of November 6, 2000 the fiscal year ended December 31, 2000 (Commission File No. 1-7626) 10.1(h) Amended and Restated Directors Appendix B to Definitive Proxy Statement filed Deferred Compensation Plan on Schedule 14A on December 17, 1999 (Commission File No. 1-7626) 10.1(h)(1) Amendment No. 1 to the Directors Deferred Exhibit 10.1(h)(1) to Annual Report on Form 10-K for Compensation Plan dated December 12, 2000 the fiscal year ended December 31, 2000 (Commission File No. 1-7626) 10. 1(i) Management Income Deferral Plan, Exhibit 10.2(k) to Annual Report on Form 10-K for the including Amendment No. 1 thereto fiscal year ended September 30, 1998 dated September 10, 1998 (Commission File No. 1-7626) 10.1(i)(1) Amendment No. 2 to Management Income Deferral Exhibit 10.1(i)(1) to Annual Report on Form 10-K for Plan dated June 15, 2000 the fiscal year ended December 31, 2000 (Commission File No. 1-7626) 10.1 (i)(2) Amendment No. 3 to Management Income Deferral Exhibit 10.1(i)(2) to Annual Report on Form 10-K for Plan dated December 12, 2000 the fiscal year ended December 31, 2000 (Commission File No. 1-7626) 10.1(j) Executive Income Deferral Plan, including Exhibit 10.2 (1) to Annual Report on Form 10-K for Amendment No. 1 thereto dated September 10, the fiscal year ended September 30, 1998 1998 (Commission File No. 1-7626) 10.1(j)(1) Amendment No. 2 to Executive Income Deferral Exhibit 10.1(j)(1) to Annual Report on Form 10-K for Plan dated June 15, 2000 the fiscal year ended December 31, 2000 (Commission File No. 1-7626) 10.1(j)(2) Amendment No. 3 to the Executive Income Exhibit 10.1(j)(2) to Annual Report on Form 10-K for Deferral Plan Dated December 12, 2000 the fiscal year ended December 31, 2000 (Commission File No- 1-7626) 10. 1(k) Amended and Restated Sensient Technologies X Corporation Rabbi Trust "A" Agreement dated March 1, 2002 between the Registrant and Marshall & Ilsley Trust Company E-3
SENSIENT TECHNOLOGIES CORPORATION EXHIBIT INDEX 2001 ANNUAL REPORT ON FORM 10-K
Exhibit Incorporated by Filed Number Description Reference From Herewith - ------ ----------- -------------- -------- 10.1(l) Trust Agreement, including Changes upon Exhibit 10.2(p) to Annual Report on Appointment of Successor Trustee dated as of Form 10-K for the fiscal year ended February 1, 1998 between Registrant and September 30, 1998 (Commission File No. 1-7626) Firstar Bank, Milwaukee, N.A. ("Rabbi Trust B") 10.1(m)(1) Amendment No. 1 to Rabbi Trust B Exhibit 10.1(m)(1) to Annual Report on Form 10-K for dated January 1, 2000 between Registrant and the fiscal year ended December 31, 2000 Marshall & Ilsley Trust Company (Commission File No- 1-7626) 10.1(m)(2) Changes upon Appointment of Successor Trustee Exhibit 10.1(m)(2) to Annual Report on Form 10-K for for Rabbi Trust B dated as of the fiscal year ended December 31, 2000 January 1, 2000 (Commission File No. 1-7626) 10.1(n) Trust Agreement, including Changes upon Exhibit 10.2(q) to Annual Report on Form 10-K for the Appointment of Successor Trustee, dated as of fiscal year ended September 30, 1998 February 1, 1998 between Registrant and (Commission File No. 1-7626) Firstar Bank, Milwaukee N.A. ("Rabbi Trust C") 10.1(n)(1) Amendment No. 1 to Rabbi Trust C dated as of Exhibit 10.1(n)(1) to Annual Report on Form 10-K for January 1, 2001 between Registrant and the fiscal year ended December 31, 2000 Marshall & Ilsley Trust Company (Commission File No. 1-7626) 10.1(n)(2) Changes upon Appointment of Successor Trustee Exhibit 10.1(n)(2) to Annual Report on Form 10-K for for Rabbi Trust C dated as of the fiscal year ended December 31, 2000 January 1, 2001 (Commission File No. 1-7626) 10.1(o) Incentive Compensation Plan for Elected Appendix C to Definitive Proxy Statement filed Corporate Officers on Schedule 14A on December 17, 1999 (Commission File No. 1-7626) 10.1(o)(1) Amendment No. 1 to the Incentive Compensation Exhibit 10.1(o)(1) to Annual Report on Form 10-K for Plan for Elected Corporate Officers dated the fiscal year ended December 31, 2000 December 12, 2000 (Commission File No. 1-7626) 10.1(p) Form of Management Incentive Plan for Exhibit 10.2 (s) to Annual Report on Form 10-K for Division Presidents the fiscal year ended September 30, 1998 (Commission File No. 1-7626)
E-4 SENSIENT TECHNOLOGIES CORPORATION EXHIBIT INDEX 2001 ANNUAL REPORT ON FORM 10-K
Exhibit Incorporated by Filed Number Description Reference From Herewith - ------ ----------- -------------- -------- 10.1(p)(1) Amendment No. 1 to the Management Incentive Exhibit 10.1(p)(1) to Annual Report on Form 10-K for Plan for Division Presidents dated December the fiscal year ended December 31, 2000 12, 2000 (Commission File No. 1-7626) 10.1(q) Form of Management Incentive Plan for Exhibit 10.2(t) to Annual Report on Corporate Management Form 10-K for the fiscal year ended September 30, 1998 (Commission File No. 1-7626) 10.1(q)1) Amendment No. 1 to Management Incentive Plan Exhibit 10.1(q)(1) to Annual Report on Form 10-K for for Corporate Management dated December 12, the fiscal year ended December 31, 2000 2000 (Commission File No. 1-7626) 10.1(r) Form of Management Incentive Plan for Exhibit 10.2(u) to Annual Report on Division Management Form 10-K for the fiscal year ended September 30, 1998 (Commission File No. 1-7626) 10.1(r)(1) Amendment No. 1 to Management Incentive Plan Exhibit 10.1(r)(1) to Annual Report on Form 10-K for for Division Management dated the fiscal year ended December 31, 2000 December 12, 2000 (Commission File No. 1-7626) 10.1(s) Form of Agreement for Executive Officers X (Supplemental Executive Retirement Plan A) 10.1(t) Form of Agreement for Executive Officers X (Supplemental Executive Retirement Plan B) 10.1(u) Universal Foods Corporation Supplemental Exhibit 10.2(w) to Annual Report on Form 10-K for the Benefit Plan, including Amendment No. 1 fiscal year ended September 30, 1998 thereto dated September 10, 1998 (Commission File No. 1-7626) 10.1(u)(1) Amendment No. 2 to Supplemental Benefit Plan Exhibit 10.1(u)(1) to Annual Report on Form 10-K for dated December 12, 2000 the fiscal year ended December 31, 2000 (Commission File No. 1-7626) 10.1(v) Universal Foods Corporation Transition Exhibit 10.2(x) to Annual Report on Form 10-K for the Retirement Plan, including Amendment No. 1 fiscal year ended September 30, 1998 thereto, dated September 10, 1998 (Commission File No. 1-7626)
E-5 SENSIENT TECHNOLOGIES CORPORATION EXHIBIT INDEX 2001 ANNUAL REPORT ON FORM 10-K
Exhibit Incorporated by Filed Number Description Reference From Herewith - ------ ----------- -------------- -------- 10.1(v)(1) Amendment No. 2 to the Transition Retirement Exhibit 10.1(v)(1) to Annual Report on form 10-K for Plan dated December 12, 2000 the fiscal year ended December 31, 2000 (Commission File No. 1-7626) 10.1(w) Sensient Technologies Corporation 2002 X Non-Employee Directors Stock Plan 13.1 Portions of Annual Report to Shareholders X for the year ending December 31, 2001 that are incorporated by reference 21 Subsidiaries of the Registrant X 23 Consent of Deloitte & Touche LLP X 99 Notice of Annual Meeting and Proxy Filed on Schedule 14A Statement dated March 22, 2002. Except to the dated March 22, 2002 extent specifically incorporated by reference (Commission File No. 1-7626). herein, the Proxy Statement shall not be deemed to be filed with the Securities and Exchange Commission as part of this Annual Report on Form 10-K.
E-6 EX-4.3 4 dex43.txt NOTE PURCHASE AGREEMENT DATED AS OF 11/29/01 EXHIBIT 4.3 ================================================================================ SENSIENT TECHNOLOGIES CORPORATION ---------------------- NOTE PURCHASE AGREEMENT ---------------------- DATED AS OF NOVEMBER 29, 2001 $30,000,000 5.85% SERIES A SENIOR NOTES DUE NOVEMBER 29, 2006 (euro)94,033,227 5.63% SERIES B SENIOR NOTES DUE NOVEMBER 29, 2006 (euro)40,000,000 5.63% SERIES C SENIOR NOTES DUE NOVEMBER 29, 2006 ================================================================================ TABLE OF CONTENTS
Page ---- 1. AUTHORIZATION OF NOTES................................................................... 1 2. SALE AND PURCHASE OF NOTES............................................................... 2 3. CLOSING.................................................................................. 2 4. CONDITIONS TO CLOSING.................................................................... 3 4.1. Representations and Warranties.................................................. 3 4.2. Performance; No Default......................................................... 3 4.3. Compliance Certificates......................................................... 3 4.4. Opinions of Counsel............................................................. 4 4.5. Purchase Permitted By Applicable Law, etc....................................... 4 4.6. Sale of Other Notes............................................................. 4 4.7. Payment of Special Counsel Fees................................................. 4 4.8. Private Placement Number........................................................ 5 4.9. Changes in Corporate Structure.................................................. 5 4.10. Proceedings and Documents....................................................... 5 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................ 5 5.1. Organization; Power and Authority............................................... 5 5.2. Authorization, etc.............................................................. 6 5.3. Disclosure...................................................................... 6 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates................ 6 5.5. Financial Statements............................................................ 7 5.6. Compliance with Laws, Other Instruments, etc.................................... 8 5.7. Governmental Authorizations, etc................................................ 8 5.8. Litigation; Observance of Agreements, Statutes and Orders....................... 8 5.9. Taxes........................................................................... 9 5.10. Title to Property; Leases....................................................... 9 5.11. Licenses, Permits, etc.......................................................... 9 5.12. Compliance with ERISA........................................................... 10 5.13. Private Offering by the Company................................................. 11 5.14. Use of Proceeds; Margin Regulations............................................. 11 5.15. Existing Indebtedness, Future Liens............................................. 12 5.16. Foreign Assets Control Regulations, etc......................................... 12 5.17. Status under Certain Statutes................................................... 13 5.18. Environmental Matters........................................................... 13
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Page ---- 6. REPRESENTATIONS OF THE PURCHASER........................................................ 13 6.1. Purchase for Investment........................................................ 13 6.2. Source of Funds................................................................ 14 7. INFORMATION AS TO COMPANY............................................................... 15 7.1. Financial and Business Information............................................. 15 7.2. Officer's Certificate.......................................................... 19 7.3. Inspection..................................................................... 20 8. PAYMENT OF THE NOTES.................................................................... 21 8.1. Payment at Maturity............................................................ 21 8.2. Optional Prepayments with Make-Whole Amount.................................... 21 8.3. Allocation of Partial Prepayments.............................................. 21 8.4. Maturity; Surrender,etc........................................................ 22 8.5. No Other Optional Prepayments or Purchase of Notes............................. 22 8.6. Make-Whole Amount.............................................................. 22 9. AFFIRMATIVE COVENANTS................................................................... 34 9.1. Compliance with Law............................................................ 34 9.2. Insurance...................................................................... 34 9.3. Maintenance of Properties...................................................... 34 9.4. Payment of Taxes and Claims.................................................... 34 9.5. Corporate Existence, etc....................................................... 35 9.6. Compliance with ERISA.......................................................... 35 9.7. Pari Passu Ranking............................................................. 35 10. NEGATIVE COVENANTS...................................................................... 35 10.1. Transactions with Affiliates................................................... 36 10.2. Merger, Consolidation, Etc..................................................... 36 10.3. Liens.......................................................................... 36 10.4. Sale of Assets................................................................. 39 10.5. Limitation on Incurrence of Funded Debt........................................ 39 10.6. Fixed Charge Coverage Ratio.................................................... 40 10.7. Consolidated Adjusted Net Worth................................................ 40 11. EVENTS OF DEFAULT....................................................................... 40 12. REMEDIES ON DEFAULT, ETC................................................................ 43 12.1. Acceleration................................................................... 44 12.2. Other Remedies................................................................. 44 12.3. Rescission..................................................................... 45 12.4. No Waivers or Election of Remedies, Expenses, etc.............................. 45
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Page ---- 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.......................................... 45 13.1. Registration of Notes......................................................... 45 13.2. Transfer and Exchange of Notes................................................ 46 13.3. Replacement of Notes.......................................................... 46 14. PAYMENTS ON NOTES...................................................................... 47 14.1. Place of Payment.............................................................. 47 14.2. Home Office Payment........................................................... 47 15. EXPENSES, ETC.......................................................................... 48 15.1. Transaction Expenses.......................................................... 48 15.2. Survival...................................................................... 48 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT........................... 48 17. AMENDMENT AND WAIVER................................................................... 49 17.1. Requirements.................................................................. 49 17.2. Solicitation of Holders of Notes.............................................. 49 17.3. Binding Effect, etc........................................................... 50 17.4. Notes held by Company; Conversion Rate........................................ 50 18. NOTICES................................................................................ 50 19. REPRODUCTION OF DOCUMENTS.............................................................. 51 20. CONFIDENTIAL INFORMATION............................................................... 52 21. SUBSTITUTION OF PURCHASER.............................................................. 53 22. TAX INDEMNIFICATION.................................................................... 54 23. MISCELLANEOUS.......................................................................... 58 23.1. Successors and Assigns........................................................ 58 23.2. Payments Due on Non-Business Days............................................. 58 23.3. Severability.................................................................. 58 23.4. Construction.................................................................. 58 23.5. Counterparts.................................................................. 59 23.6. Change of Currency............................................................ 59 23.7. Governing Law................................................................. 59 23.8. Waiver of Jury Trial; Consent to Jurisdiction................................. 59
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Page ---- EUR/USD Cross-Currency Swap...................................................................... 1 Indicative Terms and Conditions for Swap Transaction............................................. 1
iv SCHEDULES & EXHIBITS SCHEDULE A -- Purchaser Information SCHEDULE B -- Defined Terms SCHEDULE 3 -- Payment Instructions SCHEDULE 4.9 -- Changes in Corporate Structure SCHEDULE 5.3 -- Disclosure Materials SCHEDULE 5.4 -- Subsidiaries and Affiliates SCHEDULE 5.5 -- Financial Statements SCHEDULE 5.14 -- Use of Proceeds SCHEDULE 5.15 -- Existing Indebtedness and Liens SCHEDULE 8.6(c) -- Initial Swap Agreements SCHEDULE 10.5 -- Existing Funded Debt EXHIBIT 1-A -- Form of 5.85% Series A Note due November 29, 2006 EXHIBIT 1-B -- Form of 5.63% Series B Note due November 29, 2006 EXHIBIT 1-C -- Form of 5.63% Series C Note due November 29, 2006 EXHIBIT 4.4(a)(i) -- Form of Opinion of Special Counsel for Company EXHIBIT 4.4(a)(ii) -- Form of Opinion of General Counsel for the Company EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for Purchasers v SENSIENT TECHNOLOGIES CORPORATION $30,000,000 5.85% Series A Senior Notes Due November 29, 2006 (euro)94,033,227 5.63% Series B Senior Notes Due November 29, 2006 (euro)40,000,000 5.63% Series C Senior Notes Due November 29, 2006 Dated as of November 29, 2001 To the Purchaser Named on the Signature Page Hereto Ladies and Gentlemen: SENSIENT TECHNOLOGIES CORPORATION, a Wisconsin corporation (together with its successors and assigns, the "Company"), agrees with you as follows: 1. AUTHORIZATION OF NOTES The Company will authorize the issue and sale of (a) $30,000,000 aggregate principal amount of its 5.85% Series A Senior Notes due November 29, 2006 (the "Series A Notes", such term to include any such notes issued in substitution therefor pursuant to Section 14 of this Agreement or the Other Agreements (as hereinafter defined)); (b) (euro)94,033,227 aggregate principal amount of its 5.63% Series B Senior Notes due November 29, 2006 (the "Series B Notes", such term to include any such notes issued in substitution therefor pursuant to Section 14 of this Agreement or the Other Agreements (as hereinafter defined)); and (c) (euro)40,000,000 aggregate principal amount of its 5.63% Series C Senior Notes due November 29, 2006 (the "Series C Notes", such term to include any such notes issued in substitution therefor pursuant to Section 14 of this Agreement or the Other Agreements (as hereinafter defined)). The Series A Notes shall be substantially in the form set out in Exhibit 1-A, the Series B Notes shall be substantially in the form set out in Exhibit 1-B and the Series C Notes shall be substantially in the form set out in Exhibit 1-C, in each case with such changes therefrom, if any, as may be approved by you and the Company. The term "Notes", as used herein, shall include each of the Series A Notes, the Series B Notes and the Series C Notes (each a "Series") and any promissory note delivered in substitution or exchange for any Notes pursuant to Section 13, and the term "Note" shall refer to any one of such Notes. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement. 2. SALE AND PURCHASE OF NOTES Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and you will purchase from the Company, at the Closing provided for in Section 3, Notes in the principal amount specified below your name in Schedule A at the purchase price of 100% of the principal amount thereof. Contemporaneously with entering into this Agreement, the Company is entering into separate Note Purchase Agreements (the "Other Agreements") identical with this Agreement with each of the other purchasers named in Schedule A (the "Other Purchasers"), providing for the sale at such Closing to each of the Other Purchasers of Notes in the principal amount and the Series specified below its name in Schedule A. The sales of the Notes to you and to each Other Purchaser are to be separate sales; provided however, the Company and you agree that this Agreement and the Other Agreements shall constitute one single agreement for purposes of applying any statute otherwise limiting any choice of law, choice of forum, interest, fees or other contractual provision if the statute validates such contractual provision, or exempts from the statute's limitation on such contractual provision, a single agreement creating or evidencing obligations above a threshold amount specified in that statute. Your obligation hereunder and the obligations of the Other Purchasers under the Other Agreements are several and not joint obligations and you shall have no obligation under any Other Agreement and no liability to any Person for the performance or non-performance by any Other Purchaser thereunder. 3. CLOSING The sale and purchase of the Notes to be purchased by you and the Other Purchasers shall occur at the offices of [Bingham Dana LLP, 399 Park Avenue, New York, New York 10022 at 10:00 a.m., local time, at a closing (the "Closing") on November 29, 2001. At the Closing the Company will deliver to you the Notes to be purchased by you in the form of a single Note (or such greater number of Notes in denominations of at least (euro)1,000,000 (in the case of the Series B and Series C Notes) or $1,000,000 (in the case of Series A Notes) as you may request), dated the date of the Closing and registered in your name (or in the name of your nominee), as indicated in Schedule A, against payment by wire transfer in immediately available 2 funds of the currency in the amount of the purchase price therefor as directed by the Company in Schedule 3. If at the Closing the Company shall fail to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment. 4. CONDITIONS TO CLOSING Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions: 4.1. Representations and Warranties. The representations and warranties of the Company in this Agreement shall be correct when made and at the time of the Closing. 4.2. Performance; No Default. The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Schedule 5.14) no Default or Event of Default shall have occurred and be continuing. Neither the Company nor any Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by any of Sections 10.1, 10.2, 10.4 or 10.5 had such Sections applied since such date. 4.3. Compliance Certificates. (a) Officer's Certificate. The Company shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled. (b) Secretary's Certificate. The Company shall have delivered to you a certificate of its Secretary or one of its Assistant Secretaries, dated the date of the Closing, certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes, this Agreement and the Other Agreements. 3 4.4. Opinions of Counsel. You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing, from: (a) (i) Debevoise & Plimpton, counsel for the Company, substantially in the form set out in Exhibit 4.4(a)(i), and (ii) John L. Hammond, Esq., General Counsel for the Company, substantially in the form set out in Exhibit 4.4(a)(ii), and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs such counsel to deliver such opinion to you); and (b) Bingham Dana LLP, your special counsel in connection with such transactions, substantially in the form set out in Exhibit 4.4(b) and covering such other matters incident to such transactions as you may reasonably request. 4.5. Purchase Permitted By Applicable Law, etc. On the date of the Closing your purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (c) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted. 4.6. Sale of Other Notes. Contemporaneously with the Closing the Company shall sell to the Other Purchasers and the Other Purchasers shall purchase the Notes to be purchased by them at the Closing as specified in Schedule A. 4.7. Payment of Special Counsel Fees. Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the fees, charges and disbursements of your special counsel referred to in Section 4.4(b) to the extent reflected in a 4 statement of such counsel rendered to the Company at least one Business Day prior to the date of the Closing. 4.8. Private Placement Number. A Private Placement Number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for the Notes. 4.9. Changes in Corporate Structure. Except as specified in Schedule 4.9, the Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5. 4.10. Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request. 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to you, as of the date of the Closing, that: 5.1. Organization; Power and Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Other Agreements and the Notes and to perform the provisions hereof and thereof. 5 5.2. Authorization, etc. This Agreement, the Other Agreements and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5.3. Disclosure. The Company, through its agent, Deutsche Bank Securities Inc., has delivered to you and each Other Purchaser a copy of a Private Placement Memorandum, dated October, 2001 (the "Memorandum"), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, the Memorandum, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one of the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5, since December 31, 2000, there has been no change in the financial condition, operations, business or properties of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby. 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates. 6 (a) Schedule 5.4 contains (except as noted therein) complete and correct lists of (i) the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and (ii) the Company's Affiliates, other than Subsidiaries. (b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 that are owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4). (c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. (d) No Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the agreements listed in Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary. 5.5. Financial Statements. The Company has delivered to you and each Other Purchaser copies of the financial statements of the Company and its Subsidiaries listed in Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified 7 and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). 5.6. Compliance with Laws, Other Instruments, etc. The execution, delivery and performance by the Company of this Agreement and the Notes will not: (a) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or bylaws, or any other agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected; (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary; or (c) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary. 5.7. Governmental Authorizations, etc. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes. 5.8. Litigation; Observance of Agreements, Statutes and Orders. (a) There are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 8 (b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including, without limitation, Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 5.9. Taxes. The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (a) the amount of which is not individually or in the aggregate Material or (b) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and its Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended September 30, 1992. 5.10. Title to Property; Leases. The Company and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. 5.11. Licenses, Permits, etc. 9 (a) The Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others. (b) To the best knowledge of the Company, neither the conduct of its business nor any product of the Company or any Subsidiary infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person. (c) To the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries. 5.12. Compliance with ERISA. (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. (b) The present value of the aggregate benefit liabilities under each of the Plans subject to Title IV of ERISA (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities. The term 10 "benefit liabilities" has the meaning specified in section 4001 of ERISA and the terms "current value" and "present value" have the meaning specified in section 3 of ERISA. (c) The Company and the ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material. (d) The expected postretirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material. (e) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the Sources used to pay the purchase price of the Notes to be purchased by you. 5.13. Private Offering by the Company. Neither the Company nor anyone acting on its behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than you, the Other Purchasers and not more than 28 other Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of section 5 of the Securities Act. 5.14. Use of Proceeds; Margin Regulations. The Company will apply the proceeds of the sale of the Notes as set forth in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the 11 Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 1% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 1% of the value of such assets. As used in this Section, the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in said Regulation U. 5.15. Existing Indebtedness, Future Liens. (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Indebtedness of the Company and its Subsidiaries as of September 30, 2001 (and specifying, as to each such Indebtedness, the collateral, if any, securing such Indebtedness), since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (b) Except as disclosed in Schedule 5.15, neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.3. 5.16. Foreign Assets Control Regulations, etc. Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. 12 5.17. Status under Certain Statutes. Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Transportation Acts (49 U.S.C.), as amended, or the Federal Power Act, as amended. 5.18. Environmental Matters. Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed to you in writing: (a) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; (b) neither the Company nor any of its Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them or disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect. 6. REPRESENTATIONS OF THE PURCHASER 6.1. Purchase for Investment. You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account 13 of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes. 6.2. Source of Funds. You represent that at least one of the following statements is an accurate representation as to each source of funds (a "Source") to be used by you to pay the purchase price of the Notes to be purchased by you hereunder: (a) the Source is an "insurance company general account" as defined in United States Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (60 FR 35925, July 12, 1995) and in respect thereof you represent that there is no "employee benefit plan" (as defined in section 3(3) of ERISA and section 4975(e)(1) of the Code, treating as a single plan all plans maintained by the same employer or employee organization or affiliate thereof) with respect to which the amount of the general account reserves and liabilities of all contracts held by or on behalf of such plan exceeds 10% of the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the National Association of Insurance Commissioners' Annual Statement filed with your state of domicile and that such acquisition is eligible for and satisfies the other requirements of such exemption; or (b) if you are an insurance company, the Source is a separate account that is maintained solely in connection with your fixed contractual obligations under which the amounts payable, or credited, to such plan and to any participant or beneficiary of such plan (including any annuitant) are not affected in any manner by the investment performance of the separate account; or (c) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29,1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Company in writing pursuant to this paragraph 6.2(c), no employee benefit plan or group of plans maintained by the 14 same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (d) the Source constitutes assets of an "investment fund" (within the meaning of part V of PTE 84-14 (the "QPAM Exemption")) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph 6.2(d); or (e) the Source is a governmental plan; or (f) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph 6.2(f); or (g) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this Section 6.2, the terms "employee benefit plan", "governmental plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 7. INFORMATION AS TO COMPANY 7.1. Financial and Business Information. 15 The Company shall deliver to each holder of Notes that is an Institutional Investor: (a) Quarterly Statements -- within 45 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the consolidated financial position of the companies being reported on and their consolidated results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this paragraph (a); (b) Annual Statements -- within 90 days after the end of each fiscal year of the Company, duplicate copies of, (i) an audited consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and (ii) audited consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by 16 (A) an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the consolidated financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, and (B) a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit), provided that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission, together with the accountant's certificate described in clause (B) above, shall be deemed to satisfy the requirements of this Section 7.1(b); (c) SEC and Other Reports -- promptly upon their becoming available, one copy of (i) each financial statement, report (including, without limitation, the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act), notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission and of all press releases and other 17 statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material; (d) Notice of Default or Event of Default -- promptly, and in any event within five days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice with respect to a claimed Default or Event of Default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; (e) ERISA Matters -- promptly, and in any event within five days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(c) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date of the Closing; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event, transaction or condition that could reasonably result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; 18 (f) Notices from Governmental Authority -- promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; (g) Actions, Proceedings -- promptly after a Responsible Officer becomes aware of the commencement thereof, notice of any action or proceeding relating to the Company or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal as to which there is a reasonable probability of an adverse determination and that, if adversely determined, could reasonably be expected to have a Material Adverse Effect; and (h) Requested Information; Information Delivered to Other Creditors -- with reasonable promptness (i) such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes, or such information regarding the Company required to satisfy the requirements of 17 C.F.R.ss.230.144A, as amended from time to time, in connection with any contemplated transfer of the Notes and (ii) after being so furnished, any other information which is furnished by the Company or any Subsidiary to the holders of Debt of the Company or any Subsidiary, in each case where such information is not otherwise required to be delivered to the holders of Notes hereunder. 7.2. Officer's Certificate. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth: (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Sections 10.3 through 10.7, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, 19 permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (b) Event of Default -- a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review has not disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto. 7.3. Inspection. The Company shall permit the representatives of each holder of Notes that is an Institutional Investor: (a) No Default -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (b) Default -- if a Default or Event of Default then exists, at the expense of the Company, to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested. 20 8. PAYMENT OF THE NOTES 8.1. Payment at Maturity. (a) Series A Notes. The Company will pay all of the principal amount of the Series A Notes remaining outstanding, if any, on November 29, 2006. (b) Series B Notes. The Company will pay all of the principal amount of the Series B Notes remaining outstanding, if any, on November 29, 2006. (c) Series C Notes. The Company will pay all of the principal amount of the Series C Notes remaining outstanding, if any, on November 29, 2006. 8.2. Optional Prepayments with Make-Whole Amount. The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes (but if in part, in an amount not less than (euro)1,000,000 (in the case of the Series B Notes and the Series C Notes) or $1,000,000 (in the case of the Series A Notes) or such lesser amount as shall then be outstanding), at 100% of the principal amount so prepaid, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such prepayment date, the aggregate principal amount of the applicable Series of Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount (by Series) due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation for each Series. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount, by Series, as of the specified prepayment date. 8.3. Allocation of Partial Prepayments. In the case of each partial prepayment of the Notes of any Series pursuant to Section 8.2, the principal amount of the Notes of such Series to 21 be prepaid shall be allocated among all of the Notes of such Series at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment. 8.4. Maturity; Surrender, etc. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. 8.5. No Other Optional Prepayments or Purchase of Notes. The Company will not prepay (whether directly or indirectly by purchase, redemption or other acquisition) any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Section 8. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Section 8 and no Notes may be issued in substitution or exchange for any such Notes. 8.6. Make-Whole Amount. (a) Make-Whole Amount. The term "Make-Whole Amount" means, (i) with respect to the Series A Notes, the Series A Make-Whole Amount, (ii) with respect to the Series B Notes, the Series B Make-Whole Amount, and (iii) with respect to the Series C Notes, the Series C Make-Whole Amount. (b) Series A Make-Whole Amount. The term "Series A Make-Whole Amount" means, with respect to any Series A Note, an amount equal to the excess, if any, of the Series A Discounted Value of the Series A Remaining Scheduled Payments with respect to the Series A Called Principal of such Series A Note over the amount of such Series A Called Principal; provided that the Series A Make-Whole Amount may in no event be less than zero. For the purposes of determining the 22 Series A Make-Whole Amount, the following terms have the following meanings: "Series A Business Day" means any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed. "Series A Called Principal" means, with respect to any Series A Note, the principal of such Series A Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "Series A Discounted Value" means, with respect to the Series A Called Principal of any Series A Note, the amount obtained by discounting all Series A Remaining Scheduled Payments with respect to such Series A Called Principal from their respective scheduled due dates to the Series A Settlement Date with respect to such Series A Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Series A Notes is payable) equal to the Series A Reinvestment Yield with respect to such Series A Called Principal. "Series A Reinvestment Yield" means, with respect to the Series A Called Principal of any Series A Note, 0.50% over the yield to maturity implied by (a) the yields reported, as of 10:00 A.M. (New York City time) on the second Series A Business Day preceding the Series A Settlement Date with respect to such Series A Called Principal, on the display designated as "Page 678" on Bridge Telerate (or such other display as may replace Page 678 on Bridge Telerate) for actively traded U.S. Treasury securities having a maturity equal to the Series A Remaining Average Life of such Series A Called Principal as of such Series A Settlement Date, or (b) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Series A Business Day preceding the Series A Settlement Date with respect to such Series A Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. 23 Treasury securities having a constant maturity equal to the Series A Remaining Average Life of such Series A Called Principal as of such Series A Settlement Date. Such implied yield will be determined, if necessary, by (i) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (ii) interpolating linearly between (x) the actively traded U.S. Treasury security with the maturity closest to and greater than the Series A Remaining Average Life and (y) the actively traded U.S. Treasury security with the maturity closest to and less than the Series A Remaining Average Life. "Series A Remaining Average Life" means, with respect to any Series A Called Principal of any Series A Notes, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (x) such Series A Called Principal into (y) the sum of the products obtained by multiplying (a) the principal component of each Series A Remaining Scheduled Payment with respect to such Series A Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Series A Settlement Date with respect to such Series A Called Principal and the scheduled due date of such Series A Remaining Scheduled Payment. "Series A Remaining Scheduled Payments" means, with respect to the Series A Called Principal of any Series A Note, all payments of such Series A Called Principal and interest thereon that would be due after the Series A Settlement Date with respect to such Series A Called Principal if no payment of such Series A Called Principal were made prior to its scheduled due date, provided that if such Series A Settlement Date is not a date on which interest payments are due to be made under the terms of the Series A Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Series A Settlement Date and required to be paid on such Series A Settlement Date pursuant to Section 8.2 or Section 12.1. "Series A Settlement Date" means, with respect to the Series A Called Principal of any Series A Note, the date on which such Series A Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately 24 due and payable pursuant to Section 12.1, as the context requires. (c) Series B Make-Whole Amount. The term "Series B Make-Whole Amount" means, with respect to any Series B Note, an amount equal to (x) the Series B Interest Protection Amount plus (y) the Series B Currency Protection Amount; provided that the Series B Make-Whole Amount may in no event be less than zero. For the purposes of determining the Series B Make-Whole Amount, the following terms have the following meanings: "New Swap Agreement" means any cross-currency interest rate swap agreement in which the holder of a Series B Note will receive payment in US Dollars and which was entered in full or partial replacement of an Original Swap Agreement as a result of such Original Swap Agreement having terminated for any reason other than following a prepayment or repayment of any Series B Note prior to its scheduled maturity. "Original Swap Agreement" means, with respect to any Series B Note, (a) a cross-currency interest rate swap agreement (an "Initial Swap Agreement") in which any holder of a Series B Note will receive payment in US Dollars which was entered into by an original purchaser of such Series B Notes (or any affiliate thereof) in connection with and either prior to or contemporaneously with the execution of this Agreement and the issuance, sale and delivery of the Series B Notes, which relates to the scheduled payments by the Company of interest or principal on any Series B Note, and which is more particularly described on Schedule 8.6(c) hereto, (b) any Initial Swap Agreement which has been assumed (without any waiver, amendment, deletion or replacement of any material economic term or provision thereof) by a holder of a Series B Note in connection with a transfer of such Series B Note and (c) any Replacement Swap Agreement. As used herein, "Replacement Swap Agreement" means, with respect to any Series B Note, any swap or exchange agreement with payment terms and provisions (other than a reduction in notional amount, in the case of a partial prepayment or repayment) identical to those of an Initial Swap Agreement (including, without limitation, a modification or amendment of an existing Original Swap Agreement) and annexes and schedules thereto which (a) is in a notional amount not to exceed the aggregate outstanding 25 principal amount of the Series B Notes held by the holder of such Series B Notes entering into such agreement, (b) is in full or partial replacement of such holder's Initial Swap Agreement, and (c) is entered into as a result of, and following, a partial prepayment or repayment of any Series B Note prior to its scheduled maturity. "Series B Additional Benefits" means, with respect to any Series B Note, whenever any principal amount of such Series B Note is prepaid or repaid prior to its scheduled due date, the net gain (if any) expressed in US Dollars which is actually received (by payment, through off-set or netting or otherwise) by the holder of such Series B Note under the terms of the Original Swap Agreement (if any) to which such holder (or any affiliate thereof) is a party and arising as a result of the payment of the Series B Called Principal on the Series B Settlement Date, including, without limitation, early termination payments and, in the case when the Series B Called Principal is less than the outstanding principal amount of such Series B Note, the benefit, if any, of entering into a Replacement Swap Agreement; provided, that if such holder (or any affiliate thereof) was, but is not currently, party to an Original Swap Agreement and is party to a New Swap Agreement, then Series B Additional Benefits shall mean the lesser of (a) the net gain (if any) which would have been received (by payment, through off-set or netting or otherwise) by the holder of such Series B Note under the terms of the Original Swap Agreement (if any) to which such holder (or any affiliate thereof) was a party and which would have arisen as a result of the payment of the Series B Called Principal on the Series B Settlement Date and (b) the net gain (if any) actually received by the holder of such Series B Note, in connection with the payment of such Series B Called Principal on the Series B Settlement Date, under the terms of the New Swap Agreement to which such holder (or any affiliate thereof) is a party. "Series B Additional Costs" means, with respect to any Series B Note, whenever any principal amount of such Series B Note is prepaid or repaid prior to its scheduled due date, the net loss, cost or expense (if any), expressed in US Dollars, incurred (by payment, through off-set or netting or otherwise) by the holder of such Series B Note in connection with the payment of the Series B Called Principal on the Series B Settlement Date 26 with respect to a Swap Agreement (if any) to which such holder (or any affiliate thereof) is party, including, without limitation, early termination payments and, in the case when the Series B Called Principal is less than the outstanding principal amount of such Series B Note, the cost (if any) of entering into a Replacement Swap Agreement; provided, that, notwithstanding the foregoing, "Series B Additional Costs" shall mean the lesser of (a) any net loss, cost or expense incurred (by payment, through off-set or netting or otherwise) by the holder of a Series B Note with respect to any New Swap Agreement and (b) such net loss, cost or expense as would have been incurred under the Original Swap Agreement to which such holder was a party, as the case may be (or if such holder was never party to an Original Swap Agreement, then the last Original Swap Agreement to which the most recent predecessor in interest to such holder as a holder of Notes was party). "Series B Business Day" means any day other than a Saturday, a Sunday or a day on which commercial banks in New York City or London, England are required or authorized to be closed. "Series B Called Principal" means, with respect to any Series B Note, the principal of such Series B Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "Series B Called Swap Notional Amount" means, with respect to any Series B Note, the payment in US Dollars due to the holder of such Series B Note under the terms of the Swap Agreement to which such holder is party attributable to and in exchange for the Series B Called Principal of such Series B Note if such Series B Called Principal were paid on the scheduled due date for such Series B Called Principal; provided, that, if such Swap Agreement is not an Original Swap Agreement, then the "Series B Called Swap Notional Amount" shall not exceed the amount in US Dollars which would have been due to the holder of such Series B Note under the terms of the Original Swap Agreement to which such holder was party (or if such holder was never party to an Original Swap Agreement, then the last Original Swap Agreement to which the most recent 27 predecessor in interest to such holder as a holder of such Series B Notes was party). "Series B Currency Protection Amount" means an amount equal to the sum of (a) the Series B Exchange Difference, if any, plus (b) Series B Additional Costs, if any, less (c) Series B Additional Benefits, if any. The Series B Currency Protection Amount can be less than zero. "Series B Discounted Value" means, with respect to the Series B Called Swap Notional Amount of any Series B Note, the amount obtained by discounting all Series B Remaining Scheduled Swap Payments corresponding to the Series B Called Principal of such Series B Note and the interest thereon from their respective scheduled due dates to the Series B Settlement Date, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on such Series B Note is payable) equal to the Series B Reinvestment Yield with respect to such Series B Called Swap Notional Amount. "Series B Exchange Difference" means, with respect to any Series B Note, an amount equal to (a) the Series B Called Swap Notional Amount in respect of such Series B Note less (b) the amount of US Dollars which could be purchased by the holder of such Series B Note with the Series B Called Principal in London from Barclays Bank Plc at 11.00 A.M. on the Series B Settlement Date; provided, that in the case of a partial prepayment or repayment of any Series B Notes, "Series B Exchange Difference" will be zero if (i) the Series B Called Principal is exchanged for US Dollars by the holder with the counterparty to the Original Swap Agreement in connection with the early termination of the Original Swap Agreement and (ii) the amount of the difference of clauses (a) and (b) referred to above in this definition is encompassed within the determination of Additional Benefits or Additional Costs. Subject to the preceding proviso, the Series B Exchange Difference can be less than zero. "Series B Interest Protection Amount" means, with respect to any Series B Note, an amount equal to the excess, if any, of the Series B Discounted Value with respect to the Series B 28 Called Swap Notional Amount related to such Series B Note over such Series B Called Swap Notional Amount. "Series B Reinvestment Yield" means, with respect to the Series B Called Swap Notional Amount of any Series B Note, .50% over the yield to maturity implied by (a) the yields reported, as of 10:00 A.M. (New York City time) on the second Series B Business Day preceding the Series B Settlement Date with respect to such Series B Called Swap Notional Amount, on the display designated as "Page 678" on Bridge Telerate (or such other display as may replace Page 678 on Bridge Telerate) for actively traded U.S. Treasury securities having a maturity equal to the Series B Remaining Average Life of the Series B Called Principal corresponding to such Series B Called Swap Notional Amount as of such Series B Settlement Date, or (b) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Series B Business Day preceding the Series B Settlement Date with respect to such Series B Called Swap Notional Amount, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Series B Remaining Average Life of such Series B Called Principal as of such Series B Settlement Date. Such implied yield will be determined, if necessary, by (i) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (ii) interpolating linearly between (x) the actively traded U.S. Treasury security with the maturity closest to and greater than the Series B Remaining Average Life and (y) the actively traded U.S. Treasury security with the maturity closest to and less than the Series B Remaining Average Life. "Series B Remaining Average Life" means, with respect to any Series B Called Principal of any Series B Notes, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (x) the Series B Called Swap Notional Amount corresponding to such Series B Called Principal into (y) the sum of the products obtained by multiplying (a) the principal component of each Series B Remaining Scheduled Swap Payment corresponding to such Series B Called Swap Notional 29 Amount by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Series B Settlement Date with respect to such Series B Called Principal and the scheduled due date of such Series B Remaining Scheduled Swap Payment. "Series B Remaining Scheduled Swap Payments" means, with respect to the Series B Called Swap Notional Amount relating to any Series B Note, the payments due to the holder of such Series B Note in US Dollars under the terms of the Swap Agreement to which such holder is party which correspond to all payments of the Series B Called Principal of such Series B Note corresponding to such Series B Called Swap Notional Amount and interest on such Series C Called Principal (other than that portion of the payment due under such Swap Agreement corresponding to the interest accrued on the Series B Called Principal to the Series B Settlement Date with respect to such Series B Called Principal) that would be due after the Series B Settlement with respect to such Series B Called Principal if no payment of such Series B Called Principal were made prior to its scheduled due date; provided, that, if such Swap Agreement is not an Original Swap Agreement, then "Series B Remaining Scheduled Swap Payments" shall not exceed the payments which would have been due to the holder of such Note under the terms of the Original Swap Agreement to which such holder was party (or if such holder was never party to an Original Swap Agreement, then the last Original Swap Agreement to which the most recent predecessor in interest to such holder as a holder of Notes was party). "Series B Settlement Date" means, with respect to the Series B Called Principal of any Series B Note, the date on which such Series B Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "Swap Agreement" means any Original Swap Agreement or New Swap Agreement, as the case may be. (d) Series C Make-Whole Amount. The term "Series C Make-Whole Amount" means, with respect to any Series C Note, an amount equal to the excess, if any, of the Series C Discounted Value of the 30 Series C Remaining Scheduled Payments with respect to the Series C Called Principal of such Series C Note over the amount of such Series C Called Principal, provided that the Series C Make-Whole Amount may in no event be less than zero. For the purposes of determining the Series C Make-Whole Amount, the following terms have the following meanings: "Series C Business Day" -- means any day other than a Saturday, a Sunday or a day on which commercial banks in New York City or London, England are required or authorized to be closed. "Series C Called Principal" means, with respect to any Series C Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "Series C Discounted Value" means, with respect to the Series C Called Principal of any Series C Note, the amount obtained by discounting all Series C Remaining Scheduled Payments with respect to such Series C Called Principal from their respective scheduled due dates to the Series C Settlement Date with respect to such Series C Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on such Series C Note is payable) equal to the Series C Reinvestment Yield with respect to such Series C Called Principal. "Series C Reinvestment Yield" means, with respect to the Series C Called Principal of any Series C Note, .50% over the yield to maturity implied by (a) the Kassakurs published in the Boersen-Zeitung on the second Series C Business Day preceding the Series C Settlement Date with respect to such Series C Called Principal for Bundesobligationen having a maturity closest to the Series C Remaining Average Life of such Series C Called Principal as of such Series C Settlement Date, or (b) if (1) the Boersen-Zeitung is not published on such Series C Business Day, or (2) there is manifest error in such published Kassakurs, the Kassakurs set on such Series C Business Day by the Frankfurt Stock Exchange at (or approximately) 11:00 a.m. (Frankfurt time) on such Series C Business Day for actively 31 traded Bundesobligationen having a maturity closest to the Series C Remaining Average Life of such Series C Called Principal, or (c) if such Kassakurs are not reported as of such time or the Kassakurs reported as of such time are not ascertainable, by reference to the average of the rates as determined by Series C Recognized Market Makers as at 10:00 A.M. (New York City time) on the second Series C Business Day preceding the Series C Settlement Date. Such rate will be determined, if necessary, by interpolating linearly between (x) the actively traded Bundesobligationen with the closest maturity to and greater than the Series C Remaining Average Life and (y) the actively traded Bundesobligationen with the closest maturity to and less than the Series C Remaining Average Life. "Series C Recognized Market Makers" means three internationally recognised financial or banking institutions selected by the holders of a majority in principal amount of the Series C Notes. "Series C Remaining Average Life" means, with respect to any Series C Called Principal of any Series C Note, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (x) such Series C Called Principal into (y) the sum of the products obtained by multiplying (a) the principal component of each Series C Remaining Scheduled Payment with respect to such Series C Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Series C Settlement Date with respect to such Series C Called Principal and the scheduled due date of such Series C Remaining Scheduled Payment. "Series C Remaining Scheduled Payments" means, with respect to the Series C Called Principal of any Series C Note, all payments of such Series C Called Principal and interest thereon that would be due after the Series C Settlement Date with respect to such Series C Called Principal if no payment of such Series C Called Principal were made prior to its scheduled due date, provided that if such Series C Settlement Date is not a date on which interest payments are due to be made under the terms of the Series C Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Series C Settlement Date 32 and required to be paid on such Series C Settlement Date pursuant to Section 8.2 or Section 12.1. "Series C Settlement Date" means, with respect to the Series C Called Principal of any Series C Note, the date on which such Series C Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. (e) Excess Series B Currency Protection Amount. If, in the event of any prepayment of any Series B Notes (whether pursuant to an optional or mandatory prepayment or an acceleration of the maturity thereof), the Series B Currency Protection Amount in respect of such Series B Notes is greater than the Series B Interest Protection Amount in respect of such Series B Notes, then the holder of such Series B Notes shall, so long as all other amounts that are then due and owing by the Company or any Subsidiary Guarantor to such holder under this Agreement, the Notes and the Subsidiary Guarantees (including, without limitation, all costs and expenses referred to in Section 12.5 and Section 15.1) shall have been paid in full, pay to the Company an amount equal to (x) such Series B Currency Protection Amount minus (y) such Series B Interest Protection Amount. 33 9. AFFIRMATIVE COVENANTS The Company covenants that so long as any of the Notes are outstanding: 9.1. Compliance with Law. The Company will and will cause each of its Subsidiaries to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.2. Insurance. The Company will and will cause each of its Subsidiaries to maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. 9.3. Maintenance of Properties. The Company will and will cause each of its Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.4. Payment of Taxes and Claims. 34 The Company will and will cause each of its Subsidiaries to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes, assessments, charges or levies have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (a) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (b) the nonpayment of all such taxes, assessments, charges and levies in the aggregate could not reasonably be expected to have a Material Adverse Effect. 9.5. Corporate Existence, etc. The Company will at all times preserve and keep in full force and effect its corporate existence. Subject to Sections 10.2 and 10.4, the Company will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless merged into the Company or a Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. 9.6. Compliance with ERISA. The Company shall maintain each Plan in compliance in all material respects with all applicable requirements of ERISA and the Code, including all applicable rulings and regulations under ERISA and the Code. 9.7. Pari Passu Ranking. The Company covenants that its obligations under this Agreement, the Other Agreements and the Notes do and will at all times rank at least pari passu, without preference or priority, with all of its other outstanding unsecured Senior Indebtedness. 10. NEGATIVE COVENANTS 35 The Company covenants that so long as any of the Notes are outstanding: 10.1. Transactions with Affiliates. The Company will not, and will not permit any Subsidiary to, enter into directly or indirectly any transaction or group of related transactions (including, without limitation, the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary), except in the ordinary course and pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate. 10.2. Merger, Consolidation, Etc. The Company will not consolidate with or merge with any other corporation or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to any Person unless: (a) the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety, as the case may be (the "Successor Corporation"), shall be a solvent corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia; (b) if the Company is not the Successor Corporation, such corporation shall have executed and delivered to each holder of Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the Notes (pursuant to such agreements and instruments as shall be reasonably satisfactory to the Required Holders), and the Company shall have caused to be delivered to each holder of Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof; and (c) immediately after giving effect to such transaction no Default or Event of Default would exist. 10.3. Liens. 36 The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any property or asset (including, without limitation, any document or instrument in respect of goods or accounts receivable) of the Company or any such Subsidiary, whether now owned or held or hereafter acquired, or any income or profits therefrom or assign or otherwise convey any right to receive income or profits, except: (a) Liens for taxes, assessments or other governmental charges which are not yet due and payable or the payment of which is not at the time required by Section 9.4; (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens, in each case, incurred in the ordinary course of business for sums not yet due and payable, or which are being contested in good faith by appropriate proceedings; (c) Liens incurred or deposits made in the ordinary course of business (i) in connection with workers' compensation, unemployment insurance and other types of social security or retirement benefits, or (ii) to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety bonds, appeal bonds, bids, leases (other than Capital Leases), performance bonds, purchase, construction or sales contracts and other similar obligations, in each case not incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property; (d) any Lien created by or resulting from any litigation or legal proceedings which is currently being contested in good faith by appropriate proceedings; (e) leases or subleases granted to others, easements, rights-of-way, restrictions and other similar charges or encumbrances, in each case incidental to, and not interfering with, the ordinary conduct of the business of the Company or any of its Subsidiaries, provided that such Liens do not, in the aggregate, materially detract from the value of such property; (f) Liens on property or assets of the Company or any of its Subsidiaries securing Indebtedness owing to the Company or to another Subsidiary; 37 (g) Liens existing on the date of this Agreement and securing the Indebtedness of the Company and its Subsidiaries referred to in Schedule 5.15; (h) any Lien: (i) on Property or rights relating thereto to secure any rights granted with respect to such Property in connection with the provision of all or a part of the purchase price or cost of the construction of such Property created contemporaneously with, or within 120 days after, such acquisition or the completion of such construction, (ii) on Property existing on such Property at the time of acquisition thereof, whether or not the obligation secured thereby is assumed by the Company or such Subsidiary, or (iii) existing on the Property of a corporation at the time such corporation is merged into or consolidated with the Company or a Subsidiary or at the time of a sale, lease or other disposition of the Properties of a corporation or firm as an entity or substantially as an entity to the Company or a Subsidiary; provided that none of the obligations secured by any such Lien shall exceed 100% of the Fair Market Value of the related Property; (i) any Lien existing on property of a Person immediately prior to its being consolidated with or merged into the Company or a Subsidiary or its becoming a Subsidiary, or any Lien existing on any property acquired by the Company or any Subsidiary at the time such property is so acquired (whether or not the Indebtedness secured thereby shall have been assumed), provided that (i) each such Lien shall extend solely to the item or items of property so acquired and, if required by the terms of the instrument originally creating such Lien, other property which is an improvement to or is acquired for specific use in connection with such acquired property, and (ii) the Indebtedness secured by such Lien shall not exceed the Fair Market Value of the property subject to such Lien; (j) any Lien renewing, extending or refunding any Lien permitted by paragraphs (g), (h) or (i) of this Section 10.3 , provided that (i) the principal amount of Indebtedness secured by such Lien immediately prior to such extension, renewal or refunding is not 38 increased, (ii) such Lien is not extended to any other property, and (iii) immediately after such extension, renewal or refunding no Default or Event of Default would exist; (k) other Liens not otherwise permitted by paragraphs (a) through (j), inclusive, so long as Priority Debt shall not at any time exceed 20% of Consolidated Adjusted Net Worth. 10.4. Sale of Assets. Except as permitted under Section 10.2 , the Company will not, and will not permit any of its Subsidiaries to, make any Asset Disposition unless: (a) in the good faith opinion of the Company, the Asset Disposition is in exchange for consideration having a Fair Market Value at least equal to that of the property exchanged and is in the best interest of the Company or such Subsidiary; and (b) immediately after giving effect to the Asset Disposition, no Default or Event of Default would exist; and (c) immediately after giving effect to the Asset Disposition, the Disposition Value of all property that was the subject of any Asset Disposition occurring (x) in the period from the date of Closing to the date of such Asset Disposition would not exceed 25% of Consolidated Assets as of the end of the then most recently ended fiscal year of the Company, or (y) in the then current fiscal year of the Company would not exceed 10% of Consolidated Assets as of the end of the then most recently ended fiscal year of the Company. If the Net Proceeds Amount for any Transfer is applied to a Debt Prepayment Application in respect of such Transfer or a Property Reinvestment Application in respect of such Transfer within 356 days after such Transfer, then such Transfer, only for the purpose of determining compliance with subsection (c) of this Section 10.4 as of a date on or after such Net Proceeds Amount is so applied, shall be deemed not to be an Asset Disposition. 10.5. Limitation on Incurrence of Funded Debt. The Company will not, and will not permit any Subsidiary, to create, assume or incur any Funded Debt except: (a) the Notes; 39 (b) Funded Debt existing on the date of this Agreement and described in Schedule 10.5; and (c) other Funded Debt of the Company and its Subsidiaries; provided that upon giving effect to the creation, incurrence or assumption of any such Funded Debt (i) Consolidated Funded Debt shall not exceed 60% of Consolidated Total Capitalization and (ii) the aggregate amount of Priority Debt shall not exceed 20% of Consolidated Adjusted Net Worth. For all purposes of this Section 10.5, (i) any corporation which becomes a Subsidiary after the date hereof shall be deemed to have created, assumed or incurred on the last day of the fiscal quarter during which it becomes a Subsidiary all Funded Debt of such corporation then existing and (ii) the renewal, extension or refunding of any Funded Debt shall constitute the issuance of additional Funded Debt and shall be subject to the limitations of the provisions hereof applicable to the incurrence of additional Funded Debt. 10.6.Fixed Charge Coverage Ratio. The Company will not, at any time, permit the Fixed Charge Coverage Ratio to be less than 2.00 to 1.00. 10.7. Consolidated Adjusted Net Worth. The Company will at all times maintain Consolidated Adjusted Net Worth of no less than $325,000,000. 11. EVENTS OF DEFAULT An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing: (a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) the Company defaults in the payment of any interest on any Note or the payment of any amounts due pursuant to Section 22 for more than five (5) days after the same becomes due and payable; or 40 (c) the Company defaults in the performance of or compliance with any term contained in any of Sections 10.1 through 10.7, inclusive, or Section 7.1(d); or (d) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) and such default is not remedied within thirty (30) days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note; or (e) any representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in this Agreement or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or (f) (i) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness (other than Indebtedness under this Agreement and the Notes) beyond any period of grace provided with respect thereto, that individually or together with such other Indebtedness as to which any such failure exists has an aggregate outstanding principal amount of at least $10,000,000 or at least (euro)11,194,447.55, or (ii) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness (other than Indebtedness under this Agreement and the Notes), that individually or together with such other Indebtedness as to which any such failure exists has an aggregate outstanding principal amount of at least $10,000,000 or at least (euro)11,194,447.55, or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared (or one or more Persons are entitled to declare such Indebtedness to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the 41 right of the holder of Indebtedness to convert such Indebtedness into equity interests), (A) the Company or any Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $10,000,000 or at least (euro)11,194,447.55, or (B) one or more Persons have the right to require the Company or any Subsidiary so to purchase or repay such Indebtedness; or (g) the Company or any Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any Subsidiary, a custodian, receiver, trustee or other officer with similar powers with respect to the Company or any Subsidiary or with respect to any substantial part of the property of the Company or any Subsidiary, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any Subsidiary, or any such petition shall be filed against the Company or any Subsidiary and such petition shall not be dismissed within 60 days; or (i) a final judgment or judgments for the payment of money aggregating in excess of $10,000,000 or (euro)11,194,447.55 are rendered against one or more of the Company and its Subsidiaries and which judgments are not, within 45 days after entry thereof, bonded, 42 discharged or stayed pending appeal, or are not discharged within 45 days after the expiration of such stay; or (j) if (i) any Plan subject to Section 412 of the Code shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans subject to Title IV of ERISA, determined in accordance with Title IV of ERISA, shall exceed $10,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect. As used in this Section 11(j), the terms "employee benefit plan" and "employee welfare benefit plan" shall have the respective meanings assigned to such terms in section 3 of ERISA. 12. REMEDIES ON DEFAULT, ETC. 43 12.1. Acceleration. (a) If an Event of Default with respect to the Company described in Section 11(g) or 11(h) (other than an Event of Default described in clause (i) of Section 11(g) or described in clause (vi) of Section 11(g) by virtue of the fact that such clause encompasses clause (i) of 11(g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default has occurred and is continuing, any holder or holders of more than 51% in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (c) If any Event of Default described in Section 11(a) or 11(b) has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. 12.2. Other Remedies. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or 44 in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. 12.3. Rescission. At any time after any Notes have been declared due and payable pursuant to clause (b) or clause (c) of Section 12.1, the holders of not less than 51% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, due and payable on any Notes other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. 12.4. No Waivers or Election of Remedies, Expenses, etc. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements. 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES 13.1. Registration of Notes. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the 45 name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. 13.2. Transfer and Exchange of Notes. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibits 1-A, 1-B or 1-C, as applicable. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than (euro)1,000,000 (in the case of a Series B Note or a Series C Note) or $1,000,000 (in the case of a Series A Note) , provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than (euro)1,000,000 (in the case of a Series B Note or a Series C Note) or $1,000,000 (in the case of a Series A Note). Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2. 13.3. Replacement of Notes. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice 46 from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original purchaser or a Qualified Institutional Buyer, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. 14. PAYMENTS ON NOTES 14.1. Place of Payment. Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in Milwaukee, Wisconsin at the principal office of the Company. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction. 14.2. Home Office Payment. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note 47 held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 14.2. 15. EXPENSES, ETC. 15.1. Transaction Expenses. Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each Other Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Notes, or by reason of being a holder of any Note, and (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you). 15.2. Survival. The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement. 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or 48 transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof. 17. AMENDMENT AND WAIVER 17.1. Requirements. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of any of Sections 1, 2, 3, 4, 5, 6 and 21, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17, 20 and 22. 17.2. Solicitation of Holders of Notes. (a) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. 49 (b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. 17.3. Binding Effect, etc. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 17.4. Notes held by Company; Conversion Rate. (a) Notes Held by Company. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding. (b) Conversion Rate. For the purposes of calculating the principal amount of Notes held by any holder, all Notes outstanding at the time of such determination denominated in Euros shall be converted to US Dollars at the Conversion Rate. 18. NOTICES 50 All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing; (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing; or (iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of Treasurer, telecopier: (414) 347-3785, or at such other address as the Company shall have specified to the holder of each Note in writing. Notices under this Section 18 will be deemed given only when actually received. 19. REPRODUCTION OF DOCUMENTS This Agreement and all documents relating hereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or 51 from introducing evidence to demonstrate the inaccuracy of any such reproduction. 20. CONFIDENTIAL INFORMATION For the purposes of this Section 20, "Confidential Information" means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary, or (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to: (i) your directors, officers, trustees, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt 52 of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (A) to effect compliance with any law, rule, regulation or order applicable to you, (B) in response to any subpoena or other legal process, (C) in connection with any litigation to which you are a party, or (D) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20. 21. SUBSTITUTION OF PURCHASER 53 You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement. 22. TAX INDEMNIFICATION (a) Except to the extent required under applicable law, all payments made by the Company under this Agreement or any Note shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding taxes measured by or imposed upon the overall net income of any holder or its applicable lending office, or any branch or affiliate of either, and all franchise taxes, branch taxes, taxes on doing business or taxes measured by or imposed upon the overall capital or net worth of any holder or its applicable lending office, or any branch or affiliate of either, in each case imposed: (i) by the jurisdiction under the laws of which such holder, applicable lending office, branch or affiliate is organized or is located, or in which the principal executive office of the holder is located, or any nation within which such jurisdiction is located or any political subdivision thereof; or (ii) by reason of any connection between the jurisdiction imposing such tax and such holder, applicable lending office, branch or affiliate other than a connection arising from such holder having executed, delivered or performed its obligations under, or received payment under or enforced, this Agreement or any other Note. If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to ------------------ any holder hereunder or under any Note, the amounts so payable to such holder shall be increased to the extent necessary to yield to such holder (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the 54 amounts specified in this Agreement; provided however, that the Company shall be ---------------- entitled to deduct and withhold any Non-Excluded Taxes and shall not be required to increase any such amounts payable to any holder under the circumstances and to the extent set forth in Section 22(b). Whenever any Non-Excluded Taxes are paid by the Company, as promptly as possible thereafter the Company shall send to such holder a certified copy of an original official receipt received by the Company showing payment thereof or other evidence of payment reasonably satisfactory to such holder. If the Company fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit the required receipts or other required documentary evidence, the Company shall indemnify the holders for any incremental taxes, interest or penalties that may become payable by the holders as a result of any such failure. The agreements in this Section 22(a) shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. (b) Notwithstanding the provisions of Section 22(a), the Company shall be entitled to deduct and withhold Non-Excluded Taxes and shall not be required to increase any amounts payable to a holder in respect of (i) Non-Excluded Taxes that would not have been incurred but for the failure of such holder to comply with any certification, identification, information, documentation or other reporting requirement, if compliance is required by law, regulation, administrative practice or an applicable treaty as a precondition to exemption from, or reduction in the rate of, Non-Excluded Taxes; and (ii) Non-Excluded Taxes imposed by the United States of America, if such holder is not organized under the laws of the United States of America or a state thereof and fails to comply with requirements of Section 22(c). (c) Each holder that is not incorporated under the laws of the United States of America or a state thereof shall: (i) on or before the date of any payment by the Company under this Agreement or any Note to such holder, deliver to the Company two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, or successor applicable form, as the case may be; (ii) deliver to the Company two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Company; and 55 (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Company; unless in any such case, any change in treaty, law or regulation has occurred after the date such Person becomes a holder hereunder which renders all such forms inapplicable or which would prevent such holder from duly completing and delivering any such form with respect to it and such holder so advises the Company. Such holder shall certify on such Form W-8BEN or W-8ECI (i) that it is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes and (ii) that it is entitled to an exemption from United States backup withholding tax. Each Person that shall become a holder shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this Section 22(c). (d) Upon the request, and at the expense, of the Company, each holder to which the Company is required to pay any additional amount shall reasonably afford the Company the opportunity to contest, and reasonably cooperate with the Company in contesting, the imposition of any Non-Excluded Tax giving rise to such payment, provided that (i) such holder shall not be required to afford the -------- Company the opportunity to so contest unless the Company shall have confirmed in writing to such holder its obligation to pay such amounts pursuant to this Agreement and (ii) the Company shall reimburse such holder for its reasonable attorneys' and accountants' fees and disbursements incurred in so cooperating with the Company in contesting the imposition of such Non-Excluded Tax. (e) If a holder changes its applicable lending office or transfers Notes (other than pursuant to paragraph (f) below) and the effect of the change or transfer, as of the date of the change or transfer, would be to cause the Company to become obligated to pay any additional amount, the Company shall not be obligated to pay such additional amount. (f) If a condition or an event occurs which would, or would upon the passage of time or giving of notice, result in the payment of any additional amount to any holder by the Company, such holder shall take such steps as may reasonably be available to it and acceptable to the Company to mitigate the effects of such condition or event (which shall include efforts to transfer the Notes to another lending office, or to another branch or affiliate, of such holder), provided that such holder shall not be -------- 56 required to take any steps that, in its reasonable judgment, would be materially disadvantageous to its business or operations or would require it to incur additional costs (unless the Company agrees to reimburse such holder for the reasonable incremental out-of-pocket costs thereof). If a condition or event occurs which would, or would upon the passage of time or giving of notice, result in the payment of any additional amount to any holder by the Company, such holder shall promptly notify the Company, provided that a failure on the part of a holder to notify the Company shall not result in any liability to such holder and shall not reduce the amount of any additional amounts payable hereunder to such holder to the extent that such failure to notify the Company does not result in the payment of any additional amount by the Company, which payment could have been avoided or reduced had the holder notified the Company in accordance with this Section 22(f). (g) Except as provided in the next sentence, if the Company shall become obligated to pay additional amounts and any affected holder shall not have promptly taken steps necessary to avoid the need for payments, the Company shall have the right, for so long as such obligation remains, (i) to seek one or more substitute holders to purchase the affected Notes, in whole or in part, at an aggregate price not less than such Notes' principal amount plus accrued interest, and assume the affected obligations under this Agreement, or (ii) to prepay the affected Notes, in whole or in part, without premium or penalty. In the case of the substitution of a holder, the Company, the affected holder, and any substitute holder shall execute and deliver an appropriately completed assignment agreement to effect the assignment of rights to, and the assumption of obligations by, the substitute holder. In the case of a prepayment of an affected Note, the amount specified in the notice shall be due and payable on the date specified therein, together with any accrued interest to such date on the amount prepaid. In the case of each of the substitution of a holder and of the prepayment of an affected Note, the Company shall first pay the affected holder any additional amounts owing prior to such substitution or prepayment. (h) If the Company or any holder receives a refund in respect of taxes for which the Company has made additional payments pursuant to this Section 22, such holder shall promptly pay such refund (together with any interest with respect thereto received from the relevant taxing authority) to the Company; provided, -------- however, that the Company agrees promptly to return such refund (together with - ------- any interest with respect thereto due to the relevant taxing authority) (free of all Non-Excluded Taxes) to such holder, upon receipt of a notice that such refund is required 57 to be repaid to the relevant taxing authority. Notwithstanding anything to the contrary contained in this Section 22(h), no holder shall have any obligation to disclose to the Company any such holder's books, records or tax filings. (i) The obligations of each holder under this Section 22 shall survive the termination of this Agreement and the payment of the Notes and all amounts payable hereunder. 23. MISCELLANEOUS 23.1. Successors and Assigns. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. 23.2. Payments Due on Non-Business Days. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. 23.3. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. 23.4. Construction. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such 58 provision shall be applicable whether such action is taken directly or indirectly by such Person. 23.5. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 23.6. Change of Currency. The obligation of the Company to make payment in U.S. Dollars or Euros of its obligations under the Notes or this Agreement, as the case may be, shall not be discharged or satisfied by any tender, or any recovery pursuant to any judgment, which is expressed in or converted into any currency other than U.S. Dollars or Euros, except to the extent such tender or recovery shall result in the actual receipt by the holder of any Note of the full amount of U.S. Dollars or Euros expressed to be payable in respect of any such obligations. The obligation of the Company to make payment in U.S. Dollars or Euros, as the case may be, as aforesaid shall be enforceable as an alternative or additional cause of action for the purpose of recovery in U.S. Dollars or Euros, as the case may be, of the amount, if any, by which such actual receipt shall fall short of the full amount of U.S. Dollars or Euros, as the case may be, expressed to be payable in respect of any such obligations, and shall not be affected by judgment being obtained for any other sums due under the Notes or this Agreement, as the case may be. 23.7. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. 23.8. Waiver of Jury Trial; Consent to Jurisdiction. (a) Waiver of Jury Trial. THE PARTIES HERETO VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY. 59 (b) Consent to Jurisdiction. ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH UNDER THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY MAY BE BROUGHT BY SUCH PARTY IN ANY FEDERAL DISTRICT COURT LOCATED IN THE STATE OF NEW YORK OR ANY STATE COURT LOCATED IN THE CITY AND COUNTY OF NEW YORK AS SUCH PARTY MAY IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF EACH SUCH COURT, AND EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE IN PERSONAM JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY BROUGHT IN ANY SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. [Remainder of page intentionally blank; next page is signature page.] 60 If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company. Very truly yours, SENSIENT TECHNOLOGIES CORPORATION By: ------------------------------ Name: Title: The foregoing is hereby agreed to. [PURCHASER] By: --------------------------------- Name: Title: SCHEDULE B DEFINED TERMS ------------- As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: "Affiliate" means at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Company or any Subsidiary or any corporation of which the Company and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests. As used in this definition, "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of the Company. "Agreement, this" is defined in Section 18.3. "Asset Disposition" means any Transfer except : (a) any (i) Transfer from a Subsidiary to the Company or a Wholly-Owned Subsidiary; (ii) Transfer from the Company to a Wholly-Owned Subsidiary; and (iii) Transfer from the Company to a Subsidiary (other than a Wholly-Owned Subsidiary) or from a Subsidiary to another Subsidiary, which in either case is for Fair Market Value, Schedule B-1 so long as immediately before and immediately after the consummation of any such Transfer and after giving effect thereto, no Default or Event of Default exists; and (b) any Transfer made in the ordinary course of business and involving only property that is either (i) inventory held for sale or (ii) equipment, fixtures, supplies or materials no longer required in the operation of the business of the Company or any of its Subsidiaries or that is obsolete. "Business Day" means any day other than a Saturday, a Sunday or a day on which commercial banks in Milwaukee, Wisconsin or New York, New York or London England are required or authorized to be closed. "Capital Lease" means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. "Capital Lease Obligations" means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease which would, in accordance with GAAP, appear as a liability on a balance sheet of such Person. "Capital Stock" means any class of capital stock, share capital or similar equity interest of a Person. "Closing" is defined in Section 3. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "Company" is defined in the introductory sentence of this Agreement. "Confidential Information" is defined in Section 20. "Consolidated Adjusted Net Worth" means, as of any time of determination thereof, the result of (a) stockholders' equity (including preferred stock) and minority interests, less (b) goodwill and other intangible assets incurred after September 30, 1995, all as determined as at such time for the Company and its Subsidiaries on a consolidated basis in accordance with GAAP. For purposes of this definition, goodwill and other intangible assets shall be deemed incurred only to the extent that such stockholders equity is increased by goodwill and other intangible assets as Schedule B-2 a result of an acquisition of stock or assets in exchange for stock of the Company or any Subsidiary. "Consolidated Assets" means, at any time, the total assets of the Company and its Subsidiaries which would be shown as assets on a consolidated balance sheet of the Company and its Subsidiaries as of such time prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries. "Consolidated Current Liabilities" means, as of any time of determination thereof, the consolidated current liabilities of the Company and its Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated Funded Debt" means, at any time, the total of all Funded Debt of the Company and its Subsidiaries outstanding at such time, after eliminating all offsetting debits and credits between the Company and its Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and its Subsidiaries in accordance with GAAP. "Consolidated Indebtedness" means, as of the date of determination, the total of all Indebtedness of the Company and its Subsidiaries outstanding on such date, after eliminating all offsetting debits and credits between the Company and its Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and its Subsidiaries in accordance with GAAP. "Consolidated Net Income" means, with reference to any period, the net income (or loss) of the Company and its Subsidiaries for such period (taken as a cumulative whole), as determined in accordance with GAAP, after eliminating all offsetting debits and credits between the Company and its Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and its Subsidiaries in accordance with GAAP. "Consolidated Total Capitalization" means, at any time, the sum of Consolidated Adjusted Net Worth plus Consolidated Funded Debt, in each case determined at such time. "Conversion Rate" means a fixed exchange rate for the conversion of Euros into US Dollars equal to US $0.8933 per (euro) 1.00. "Debt" means, with respect to any Person, without duplication, Schedule B-3 (a) its liabilities for borrowed money; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) its Capital Lease Obligations; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); and (e) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (d) hereof, provided that, if such Person is the Company or a Subsidiary, Debt shall in no event include unfunded obligations with respect to the Company's or a Subsidiary's pension plans. "Debt Prepayment Application" means, with respect to any Transfer of property, the application by the Company or its Subsidiaries of cash in an amount equal to the Net Proceeds Amount with respect to such Transfer to pay Senior Indebtedness of the Company (other than Indebtedness owing to the Company, any of its Subsidiaries or any Affiliate and Indebtedness in respect of any revolving credit or similar credit facility providing the Company or any of its Subsidiaries with the right to obtain loans or other extensions of credit from time to time, except to the extent that in connection with such payment of Indebtedness the availability of credit under such credit facility is permanently reduced by an amount not less than the amount of such proceeds applied to the payment of such Indebtedness), provided that in the course of making such application the Company shall prepay each outstanding Note in accordance with Section 8.2 in a principal amount which, when added to the Make-Whole Amount applicable thereto, equals the Ratable Portion for such Note. As used in this definition, "Ratable Portion" for any Note means an amount equal to the product of (x) the Net Proceeds Amount being so applied to the payment of Senior Indebtedness of the Company multiplied by (y) a fraction the numerator of which is the outstanding principal amount of such Note and the denominator of which is the aggregate principal amount of Senior Indebtedness of the Company. Schedule B-4 "Default" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "Default Rate" means that rate of interest that is the greater of (i) 2% per annum above the rate of interest stated in clause (a) of the first paragraph of the Notes or (ii) 2% over the rate of interest publicly announced from time to time by The Bank of New York in New York, New York (or its successor) as its "base" or "prime" rate. "Disposition Value" means, at any time, with respect to any property: (a) in the case of property that does not constitute Subsidiary Stock, the book value thereof, valued at the time of such disposition in good faith by the Company, and (b) in the case of property that constitutes Subsidiary Stock, an amount equal to that percentage of book value of the assets of the Subsidiary that issued such stock as is equal to the percentage that the book value of such Subsidiary Stock represents of the book value of all of the outstanding capital stock of such Subsidiary (assuming, in making such calculations, that all Securities convertible into such capital stock are so converted and giving full effect to all transactions that would occur or be required in connection with such conversion) determined at the time of the disposition thereof, in good faith by the Company. "Environmental Laws" means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA Affiliate" means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code. "Euro" or "(euro)" means the single currency of the Participating Member States. Schedule B-5 As used in this definition: "Participating Member States" means the participating member states of the European Union signatory to the Treaty which adopted a single currency in accordance with the Treaty. "Treaty" means the Treaty establishing the European Community signed in Rome on March 25, 1957, as amended from time to time "Event of Default" is defined in Section 11. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "Fair Market Value" means, at any time and with respect to any property, the sale value of such property that would be realized in an arm's-length sale at such time between an informed and willing buyer and an informed and willing seller (neither being under a compulsion to buy or sell). "Fixed Charges" means, with respect to any period, the sum (without duplication) of the following (in each case, eliminating all offsetting debits and credits between the Company and its Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and its Subsidiaries in accordance with GAAP): (a) all interest in respect of Indebtedness of the Company and its Subsidiaries (including imputed interest on Capital Lease Obligations in respect of Capital Leases of such Persons) deducted in determining Consolidated Net Income for such period plus (b) all debt discount and expense amortized or required to be amortized in the determination of Consolidated Net Income for such period plus (c) all fixed amounts payable by the Company or any of its Subsidiaries in respect of such period under all leases (other than Capital Leases) of real or personal property having an original term (including any required renewals or renewals at the option of the lessor or the lessee) of one year or more, in each case deducted in the computation of such Consolidated Net Income. "Fixed Charge Coverage Ratio" means, at any time, the ratio of (a) net income plus interest expense plus Rentals plus taxes paid, to (b) interest expense plus Rentals, in each case for the period of four fiscal quarters then most recently ended, and determined on a consolidated basis for the Company and the Company's Subsidiaries in accordance with GAAP. Schedule B-6 "Funded Debt" means, with respect to any Person, all Debt of such Person with a maturity more than one year after the creation of such Debt. Notwithstanding the foregoing, in the case of the Company and a Subsidiary, (a) any current portion of Funded Debt included in Consolidated Current Liabilities shall not be considered Funded Debt and (b) any Debt outstanding under a working capital or revolving credit agreement or similar agreement providing for borrowings (and renewals and extensions thereof) shall not be considered Funded Debt if all such Debt has been concurrently fully repaid for a period of at least 30 consecutive days during the 12 consecutive calendar month period most recently ended as of the date of any determination. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America. "Governmental Authority" means (a) the government of (i) the United States of America or any state or other political subdivision thereof, or (ii) any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or that asserts jurisdiction over any properties of the Company or any Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "Guaranty" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including, without limitation, obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such indebtedness or obligation or any property constituting security therefor; (b) to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income Schedule B-7 statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation; (c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or (d) otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof. In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "Hazardous Material" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls). "holder" means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 14.1. "Indebtedness" means, with respect to any Person, without duplication, (a) its liabilities for borrowed money and its redemption obligations in respect of mandatorily redeemable Preferred Stock; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) all liabilities appearing on its balance sheet in accordance with GAAP in respect of Capital Leases; Schedule B-8 (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (e) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); (f) Swaps of such Person; and (g) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof. Without limitation of the foregoing, Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "Institutional Investor" means (a) any original purchaser of a Note, (b) any holder of a Note holding more than 5% of the aggregate principal amount of the Notes then outstanding, and (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "Lien" means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). "Make-Whole Amount" is defined in Section 8.6. "Material" means material in relation to the business, operations, affairs, financial condition, assets, properties, or prospects of the Company and its Subsidiaries taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Schedule B-9 Company to perform its obligations under this Agreement and the Notes, or (c) the validity or enforceability of this Agreement or the Notes. "Memorandum" is defined in Section 5.3. "Multiemployer Plan" means any Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "Net Proceeds Amount" means, with respect to any Transfer of any property by any Person, an amount equal to the difference of (a) the aggregate amount of the consideration (valued at the Fair Market Value of such consideration at the time of the consummation of such Transfer) received by such Person in respect of such Transfer, minus (b) all ordinary and reasonable out-of-pocket costs and expenses actually incurred by such Person in connection with such Transfer. "Note-Related Payment" is defined in Section 22.1. "Notes" is defined in Section 1. "Officer's Certificate" means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. "Other Agreements" is defined in Section 2. "Other Purchasers" is defined in Section 2. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "Person" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "Plan" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. Schedule B-10 "Preferred Stock" means any class of Capital Stock of a Person that is preferred over any other class of Capital Stock of such Person as to the payment of dividends or other equity distributions or the payment of any amount upon liquidation or dissolution of such Person. "Priority Debt" means, as of any date of determination, the sum of (a) Total Subsidiary Debt on such date and (b) all Debt of the Company outstanding on such date and secured by Liens not permitted by paragraphs (a) through (j), inclusive, of Section 10.3. "property or properties" means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate. "Property Reinvestment Application" means, with respect to any Transfer of any property by any Person, the application by such Person of funds in an amount equal to the Net Proceeds Amount with respect to such Transfer to the acquisition by the Company or any Subsidiary of operating assets of the Company or any Subsidiary to be used in the ordinary course of business of the Company or such Subsidiary. "PTE" is defined in Section 6.2(a). "QPAM Exemption" is defined in Section 6.2(d). "Qualified Institutional Buyer" means any Person who is a "qualified institutional buyer" within the meaning of such term as set forth in Rule 144A(a)(1) under the Securities Act (as in effect on the date of the Closing). "Rentals" means, with reference to any period, the aggregate fixed amounts payable by the Company and the Company's Subsidiaries, determined on a consolidated basis, under any leases of real or personal property having an original term (including any required renewals or any renewals at the option of the lessor or the lessee) of one year or more, but does not include any amounts payable under Capital Leases. "Required Holders" means, at any time, the holder or holders of at least 66-2/3% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates). "Responsible Officer" means any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this Agreement. Schedule B-11 "Securities Act" means the Securities Act of 1933, as amended from time to time. "Senior Indebtedness" means any Indebtedness of the Company other than any Indebtedness that is in any manner subordinated in right of payment or security in any respect to Indebtedness evidenced by the Notes. "Senior Financial Officer" means the chief financial officer, principal accounting officer, treasurer or controller of the Company. "Series" is defined in Section 1. "Series A Note" is defined in Section 1(a). "Series B Note" is defined in Section 1(b). "Series C Note" is defined in Section 1(c). "Source" is defined in Section 6.2. "Subsidiary" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. "Subsidiary Stock" means, with respect to any Person, the stock (or any options or warrants to purchase stock or other Securities exchangeable for or convertible into stock) of any Subsidiary of such Person. "Swaps" means, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had Schedule B-12 terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. "Total Subsidiary Debt" means, as of any date of determination, the total of all Debt of Subsidiaries of the Company outstanding on such date, after eliminating all offsetting debits and credits between the Company and its Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and its Subsidiaries in accordance with GAAP. "Transfer" means, with respect to any Person, any transaction in which such Person sells, conveys, transfers or leases (as lessor) any of its property, including, without limitation, Subsidiary Stock. For purposes of determining the application of the Net Proceeds Amount in respect of any Transfer, the Company may designate any Transfer as one or more separate Transfers each yielding a separate Net Proceeds Amount. In any such case, the Disposition Value of any property subject to each such separate Transfer shall be determined by ratably allocating the aggregate Disposition Value of all property subject to all such separate Transfers to each such separate Transfer on a proportionate basis. "US Dollars" or "$" means lawful money of the United States of America, "Wholly-Owned Subsidiary" means, at any time, any Subsidiary 100% of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly-Owned Subsidiaries at such time. Schedule B-13 EXHIBIT 1-A [FORM OF SERIES A NOTE] SENSIENT TECHNOLOGIES CORPORATION 5.85% SERIES A SENIOR NOTE DUE NOVEMBER 29, 2006 No. R-____ [Date] $_________ PPN: 81725T A* 1 FOR VALUE RECEIVED, the undersigned, SENSIENT TECHNOLOGIES CORPORATION (herein called the "Company"), a corporation organized and existing under the laws of the State of Wisconsin, hereby promises to pay to _____________ or registered assigns, the principal sum of ____________________ DOLLARS ($_________ ) on November 29, 2006, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 5.85% per annum from the date hereof, payable semiannually on the 29th day of November and May in each year, commencing with the November or May next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 7.85% or (ii) 2% over the rate of interest publicly announced from time to time by The Bank of New York in New York, New York (or its successor) as its "base" or "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the address shown in the register maintained by the Company for such purpose or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to separate Note Purchase Agreements, dated as of November 29, 2001 (as from time to time amended, the "Note Purchase Agreements"), between the Company and the respective purchasers named Exhibit 1-A-1 therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreements. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. THIS NOTE AND THE NOTE PURCHASE AGREEMENTS ARE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. SENSIENT TECHNOLOGIES CORPORATION By: -------------------- Name: Title: Exhibit 1-A-2 EXHIBIT 1-B [FORM OF SERIES B NOTE] SENSIENT TECHNOLOGIES CORPORATION 5.63% SERIES B SENIOR NOTE DUE NOVEMBER 29, 2006 No. R- [Date] ---- (euro) PPN: 81725T A@ 9 --------- FOR VALUE RECEIVED, the undersigned, SENSIENT TECHNOLOGIES CORPORATION (herein called the "Company"), a corporation organized and existing under the laws of the State of Wisconsin, hereby promises to pay to or ` ------------- registered assigns, the principal sum of EUROS -------------------- ((euro) ) on November 29, 2006, with interest (computed on the basis of ---------- a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 5.63% per annum from the date hereof, payable semiannually on the 29th day of November and May in each year, commencing with the November or May next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 7.63% or (ii) 2% over the rate of interest publicly announced from time to time by The Bank of New York in New York, New York (or its successor) as its "base" or "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the address shown in the register maintained by the Company for such purpose or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to separate Note Purchase Agreements, dated as of Exhibit 1-B-1 November 29, 2001 (as from time to time amended, the "Note Purchase Agreements"), between the Company and the respective purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreements. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. THIS NOTE AND THE NOTE PURCHASE AGREEMENTS ARE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. SENSIENT TECHNOLOGIES CORPORATION By: ------------------ Name: Title: Exhibit 1-B-2 EXHIBIT 1-C [FORM OF SERIES C NOTE] SENSIENT TECHNOLOGIES CORPORATION 5.63% SERIES C SENIOR NOTE DUE NOVEMBER 29, 2006 No. R- [Date] ---- (euro) PPN: 81725T A# 7 --------- FOR VALUE RECEIVED, the undersigned, SENSIENT TECHNOLOGIES CORPORATION (herein called the "Company"), a corporation organized and existing under the laws of the State of Wisconsin, hereby promises to pay to or ------------- registered assigns, the principal sum of EUROS -------------------- ((euro) ) on November 29, 2006, with interest (computed on the basis of ---------- a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 5.63% per annum from the date hereof, payable semiannually on the 29th day of November and May in each year, commencing with the November or May next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 7.63% or (ii) 2% over the rate of interest publicly announced from time to time by The Bank of New York in New York, New York (or its successor) as its "base" or "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the address shown in the register maintained by the Company for such purpose or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements referred to below. This Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to separate Note Purchase Agreements, dated as of November 29, 2001 (as from time to time amended, the "Note Purchase Exhibit 1-C-1 Agreements"), between the Company and the respective purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in Section 6.2 of the Note Purchase Agreements. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. THIS NOTE AND THE NOTE PURCHASE AGREEMENTS ARE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. SENSIENT TECHNOLOGIES CORPORATION By: ------------------ Name: Title: Exhibit 1-C-2 Exhibit 1-C-3 EXHIBIT 4.4(a)(i) [FORM OF OPINION OF SPECIAL COUNSEL TO COMPANY] November 29, 2001 To Each of the Addressees Listed in Schedule I Hereto: Sensient Technologies Corporation Dear Sirs: We have acted as special counsel to Sensient Technologies Corporation, a Wisconsin corporation (the "Company"), in connection with the negotiation, execution and delivery today of the separate Note Purchase Agreements, dated as of November 29, 2001 (the "Note Purchase Agreements"), entered into by the Company with each of the purchasers named in Schedule A thereto. The opinions expressed below are furnished to you at the request of the Company pursuant to Section 4.4(a)(i) of the Note Purchase Agreements. Capitalized terms used herein without definition have the respective meanings set forth in Schedule B to the Note Purchase Agreements. In arriving at the opinions expressed below, we have examined and relied on the following (including, but not limited to, the representations and warranties as to factual matters contained therein): (a) originals, or copies certified or otherwise identified to our satisfaction, of the Note Purchase Agreements and the Notes purchased by you today pursuant thereto (collectively, the "Documents"); and (b) such corporate documents and records of the Company and such other instruments and certificates of public officials, officers and representatives of the Company and other Persons as we have deemed necessary or appropriate for the purposes of this opinion; and (c) we have made such investigations of law as we have deemed appropriate as a basis for this opinion. In rendering the opinions expressed below, we have assumed, with your permission, without independent investigation or inquiry, (a) the - authenticity of all documents submitted to Exhibit 4.4(a)(i) us as originals, (b) the genuineness of all signatures on all documents that we - examined, (c) the conformity to authentic originals of documents submitted to us - as certified, conformed or photostatic copies, (d) that the Company is validly - existing as a Wisconsin corporation and has the corporate power and authority to enter into, and perform its obligations under, the Documents and (e) the due - authorization, execution and delivery of each of the Documents by each party thereto. Based upon and subject to the foregoing and the qualifications hereinafter set forth, we are of the following opinion: 1. Each of the Documents constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. 2. Neither the execution and delivery by the Company of the Documents nor the performance of the obligations thereunder by the Company (a) requires the - consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority of the United States or the State of New York, except for (i) any such consents, approvals, authorizations, registrations, - filings or declarations that have been obtained or made and remain in effect and (ii) any other consents, approvals, authorizations, registrations, filings or -- declarations that are not material and if not made, obtained or done, would not affect the enforceability of the Documents, or (b) violates any law, rule or - regulation of the United States or the State of New York known to us to be applicable to the Company or any of its material properties. 3. The registration of the Notes under the Securities Act is not required for the offer, issuance, sale and delivery of the Notes by the Company in the manner contemplated by the Note Purchase Agreements and the Memorandum. We express no opinion as to when and under what circumstances the Notes may otherwise be resold. No qualification of an indenture in respect of the Notes under the Trust Indenture Act of 1939, as amended, is required in connection with such offer and sale. Our opinion set forth above is subject to the effects of (a) bankruptcy, - insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium and other similar laws relating to or affecting creditors' rights or remedies generally, (b) general equitable principles (whether considered in a - proceeding in equity or at law), (c) an implied covenant of good faith, - reasonableness and fair dealing, (d) applicable state laws and interpretations - which may affect the validity or enforceability of certain remedies provided for in the Documents, which limitations, however, do not, in our opinion, make the remedies provided for therein inadequate for the practical realization of the rights and benefits intended to be provided thereby (subject to the other qualifications expressed herein), and (e) limitations on enforceability of - rights to indemnification under Federal or state securities laws or regulations or to the extent any indemnification would violate public policy. We express no opinion as to (1) the enforceability of any waiver of any statutory right, (2) - - the waiver of inconvenient forum set forth in Section 23.8(b) of the Note Purchase Agreements, or (3) the provisions of Section 23.6 of the Note Purchase - Agreements. Exhibit 4.4(a)-2 We express no opinion as to the validity, binding effect or enforceability of any provision of the Documents that purports to waive, release or vary any right of, or any duties owing to, any holder of any Notes, to the extent limited by provisions of applicable law. We express no opinion as to the laws of any jurisdiction other than the laws of the State of New York and those federal laws of the United States of America which, in our experience, are generally applicable to transactions of this type. In particular (and without limiting the generality of the foregoing), we express no opinion as to the laws of any country (other than the federal laws of the United States of America) or as to the effect of such laws (whether limiting, prohibitive or otherwise) on any of the rights or obligations of any holder of Notes. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any holder of any Notes is located which limits the rate of interest that such holder may charge or collect. The opinions expressed herein are solely for your benefit and, without our prior consent, neither our opinion nor this opinion letter may be disclosed publicly to or relied upon by any other person, except that any holder of a Note (a) may show this opinion letter to a prospective transferee, and provide a copy - of this opinion letter to a transferee, of a Note transferred in accordance with the applicable Note Purchase Agreement and (b) may show a copy of this opinion - letter to any governmental authority pursuant to requirements of applicable law or regulations or the United States National Association of Insurance Commissioners or any rating agency reviewing the investment holdings of such holder. Very truly yours, Exhibit 4.4(a)-3 EXHIBIT 4.4(a)(ii) [FORM OF OPINION OF GENERAL COUNSEL FOR THE COMPANY] November 29, 2001 To Each of the Addressees Listed on Schedule I Hereto: - ------------------------------ Sensient Technologies Corporation --------------------------------- Dear Sirs: I am Vice President, Secretary and General Counsel of Sensient Technologies Corporation, a Wisconsin corporation (the "Company"), and I am furnishing this opinion to you pursuant to Section 4.4(a)(ii) of the separate Note Purchase Agreements, dated as of November 29, 2001 (the "Note Purchase Agreements"), entered into by the Company with each of the purchasers named in Schedule A thereto. Unless otherwise defined herein, capitalized terms defined in the Note Purchase Agreements are used herein as defined therein. In arriving at the opinions expressed below, I have examined and relied on the following (including, but not limited to, the representations and warranties as to factual matters contained therein): 1. originals, or copies certified or otherwise identified to our satisfaction, of the Note Purchase Agreements and the Notes purchased by you today pursuant thereto (collectively, the "Documents"); 2. such corporate documents and records of the Company and such other instruments and certificates of public officials, officers and representatives of the Company and other Persons as I have deemed necessary or appropriate for the purposes of this opinion; and I have made such investigations of law as I have deemed appropriate as a basis for this opinion. In rendering the opinions expressed below, I have assumed, with your permission, without independent investigation or inquiry, (a) the authenticity - of all documents submitted to us as originals, (b) the genuineness of all - signatures on all documents that I examined and (c) the conformity to authentic - originals of documents submitted to us as certified, conformed or photostatic copies. Based upon and subject to the foregoing and the qualifications hereinafter set forth, I am of the opinion that: Exhibit 4.4(a)(ii) 1. The Company is duly incorporated, validly existing and in good standing under the laws of the State of Wisconsin and has the corporate power and authority to own and operate its respective property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged. The Company is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 2. The Company has the corporate power and authority to execute, deliver and perform its obligations under the Documents and to issue and deliver the Notes. The execution, delivery and performance by the Company of the Documents and the consummation of the transactions set forth therein have been duly authorized and approved by all necessary corporate action of the Company. 3. The Documents have been duly executed and delivered on behalf of the Company. 4. Except for (a) any consents, approvals, authorizations, registrations, filings or declarations that have been obtained or made and remain in effect and (b) any other consents, approvals, authorizations, registrations, filings or declarations that are not material and if not made, obtained or done, would not affect the enforceability of the Documents, no consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority of the United States or the State of Wisconsin is required to be obtained or made by the Company in connection with its execution, delivery or performance of the Documents. 5. The execution and delivery by the Company of the Documents, the issue and sale of the Notes, and the performance by the Company of its obligations under the Documents, all as provided therein, (x) will not violate (i) the articles of incorporation or bylaws of the Company, (ii) any existing judgment, order or decree known to me of any arbitrator, court or other governmental authority binding upon the Company or to which the Company is subject, (iii) any existing law, rule or regulation of the United States or the State of Wisconsin applicable to the Company or (iv) any material agreement known to me and binding upon the Company, and (y) will not result in, or require, the creation or imposition of any Lien on any of the properties or revenues of the Company. Neither the issuance of the Notes, nor the intended use of the proceeds of the Notes (as set forth in Section 5.14 of the Note Purchase Agreement), will violate Regulations T, U or X of the Federal Reserve Board. 6. To my knowledge, there are no pending or overtly threatened actions or proceedings against the Company before any court, governmental agency or other regulatory authority or arbitrator which purport to affect the legality, validity, binding effect or enforceability of the Documents or which could reasonably be Exhibit 4.4(a)-2 expected to have a Material Adverse Effect on the financial condition or operations of the Company. 7. None of the Company, any Person controlling the Company, or any Subsidiary of the Company is an "Investment Company" within the meaning of the Investment Company Act of 1940. 8. The Company is not a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 9. The rates of interest provided in the Documents do not violate any law, rule or regulation of the Sate of Wisconsin relating to interest or usury. I am admitted to the bar in the State of Connecticut. I express no opinion as to the laws of any jurisdiction other than the State of Connecticut and the laws of the United States of America, except that insofar as the foregoing opinions relate to matters of Wisconsin law, I have reviewed relevant areas of Wisconsin law and have satisfied myself with respect thereto to the extent necessary to express such opinions. This opinion speaks only as of the date hereof and I assume no responsibility to update my opinion due to any change in fact or law. The opinions expressed herein are solely for your benefit and, without my prior consent, neither my opinion nor this opinion letter may be disclosed publicly to or relied upon by any other person, except that any holder of a Note (a) may show this opinion letter to a prospective transferee, and provide a copy - of this opinion letter to a transferee, of a Note transferred in accordance with the applicable Note Purchase Agreement and (b) may show a copy of this opinion - letter to any governmental authority pursuant to requirements of applicable law or regulations or the United States National Association of Insurance Commissioners or any rating agency reviewing the investment holdings of such holder. Very truly yours, Exhibit 4.4(a)-3 EXHIBIT 4.4(b) [FORM OF OPINION OF SPECIAL COUNSEL TO PURCHASERS] November 29, 2001 To the Purchasers Listed on Annex 1 Hereto: Re: Sensient Technologies Corporation (the "Company") $30,000,000 5.85% Series A Senior Notes due November 29, 2006 (euro)94,033,000 5.63% Series B Senior Notes due November 29, 2006 (euro)40,000,000 5.63% Series C Senior Notes due November 29, 2006 Ladies and Gentlemen: We have acted as your special counsel in connection with (i) those certain separate Note Purchase Agreements (collectively, the "Note Purchase Agreement"), dated as of November 29, 2001, between the Company and you and (ii) the transactions contemplated thereby. Capitalized terms used herein and not otherwise defined shall have the respective meanings given such terms in the Note Purchase Agreement. This opinion is delivered to you pursuant to Section 4.4(b) of the Note Purchase Agreement. Our representation of you has been as special counsel for the purposes stated above. As to all matters of fact (including factual conclusions and characterizations and descriptions of purpose, intention or other state of mind), we have relied, with your permission, entirely upon (a) the representations and warranties of the Company and you set forth in the Note Purchase Agreement and (b) certificates of certain officers of the Company delivered in connection with the Closing, and have assumed, without independent inquiry, the accuracy of those representations, warranties, and certificates. In connection with this opinion, we have examined originals or copies of the following documents: (i) the Note Purchase Agreement; (ii) the Company's 5.85% Series A Senior Notes due November 29, 2006, in the aggregate principal amount of Thirty Million Dollars ($30,000,000) (the "Series A Notes"), dated the date hereof, in the form of Exhibit 1-A to the Note Purchase Agreement, issued by the Company and registered in the names, in the principal amounts, and with the registration numbers set forth in Schedule A to the Note Purchase Agreement; Exhibit 4.4(b) (iii) the Company's 5.63% Series B Senior Notes due November 29, 2006, in the aggregate principal amount of [Ninety-Four Million Thirty-Three Thousand Euros ((euro)94,033,000)] (the "Series B Notes"), dated the date hereof, in the form of Exhibit 1-B to the Note Purchase Agreement, issued by the Company and registered in the names, in the principal amounts, and with the registration numbers set forth in Schedule A to the Note Purchase Agreement; (iv) the Company's 5.63% Series C Senior Notes due November 29, 2006, in the aggregate principal amount of Forty Million Euros ((euro)40,000,000) (the "Series C Notes", and, together with the Series A Notes and the Series B Notes, the "Notes"), dated the date hereof, in the form of Exhibit 1-C to the Note Purchase Agreement, issued by the Company and registered in the names, in the principal amounts, and with the registration numbers set forth in Schedule A to the Note Purchase Agreement; (v) the certificate of incorporation of the Company (the "Company's Charter") certified by the Secretary of State of the State of Delaware; (vi) the bylaws of the Company (the "Company Bylaws") certified by its Secretary as of the date hereof as being true, complete and correct and in full force and effect (the Company's Bylaws and the Company's Charter being referred to sometimes herein as the "Company's Governing Documents"); (vii) a certificate of an officer of the Company, dated the date hereof, as required by Section 4.3(a) of the Note Purchase Agreement, with respect to the matters set forth therein; (viii) the opinion of Debevoise & Plimpton, special counsel for the Company, dated the date hereof and delivered to you pursuant to Section 4.4(a)(i) of the Note Purchase Agreement; and (ix) the opinion of John L. Hammond, Esq. General Counsel for the Company, dated the date hereof and delivered to you pursuant to Section 4.4(a)(ii) of the Note Purchase Agreement. The documents referenced in clauses (i) through (iv) above are hereinafter referred to collectively as the "Transaction Documents." In addition to the documents identified above, we have examined such corporate and public records and agreements, instruments, certificates and other documents as we have deemed necessary or appropriate for the purposes of this opinion. Based on such investigation as we have deemed appropriate, the opinions referred to in clauses (viii) and (ix) above are satisfactory in form and scope to us and, in our opinion, you are justified in relying thereon. Exhibit 4.4(b) We have assumed the genuineness of all signatures, the conformity to the originals of all documents reviewed by us as copies, the authenticity and completeness of all original documents reviewed by us in original or copy form, the legal competence of each individual executing any document and that each Person executing the Transaction Documents validly exists, has the power, authority and legal right to enter into and perform its obligations under the Transaction Documents, and is qualified to do business and in good standing under the laws of its jurisdiction of incorporation and each jurisdiction where such qualification is required generally or is necessary in order for such party to enforce its rights under such documents and that such Transaction Documents have been duly authorized, executed and delivered by, and, as to Persons other than the Company, are binding upon and enforceable against, such Persons. For purposes of this opinion, we have made such examination of law as we have deemed necessary. This opinion is limited solely to the internal substantive laws of the State of New York as applied by courts located in the State of New York without regard to choice of law and the federal laws of the United States of America and we express no opinion as to the laws of any other jurisdiction. In particular, our opinion in paragraph 2 below is based solely on a review of the Company's Governing Documents and not on any review or analysis of the law of the jurisdiction of organization of the Company, including statutes, rules or regulations or any interpretations thereof by any court, administrative body or other Governmental Authority. In addition, we note that the Transaction Documents contain provisions stating that they are to be governed by the laws of the State of New York (a "Chosen-Law Provision"). Except to the extent that such a Chosen-Law Provision is made enforceable by New York General Obligations Law section 5-1401 as applied by New York state courts or federal courts applying New York choice of law rules, no opinion is given herein as to any Chosen-Law Provision, or otherwise as to the choice of law or internal substantive rules of law that any court or other tribunal may apply to the transactions contemplated by the Transaction Documents. Further, except as set forth in paragraph 4 below, we express no opinions as to any federal or state tax, antitrust or securities or "blue sky" laws of any jurisdiction. Our opinion is further subject to the following exceptions, qualifications and assumptions, all of which we understand to be acceptable to you: (a) The enforcement of any obligations of any Person under the Transaction Documents or otherwise may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws and rules of law affecting the enforcement generally of creditors' rights and remedies (including such as may deny giving effect to waivers of debtors' rights); and we express no opinion as to the status under any fraudulent conveyance laws or fraudulent transfer laws of any of the obligations of any Person under the Transaction Documents or otherwise. (b) We express no opinion as to the availability of any specific or equitable relief of any kind. Exhibit 4.4(b) (c) The enforcement of any of your rights may in all cases be subject to an implied duty of good faith and fair dealing and to general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity). (d) We have assumed without any independent investigation that each of the Transaction Documents is a valid and binding obligation of the Company to the extent that laws other than those of the State of New York are relevant thereto (other than the laws of the United States of America, but only to the limited extent the same may be applicable to the Company and relevant to our opinions expressed below). (e) We express no opinion as to the enforceability of any particular provision of the Transaction Documents relating to (i) waivers of any applicable defenses, setoffs, recoupments, or counterclaims; (ii) waivers or variations of legal provisions or rights which are not capable of waiver or variation under applicable law; (iii) waivers of rights to object to jurisdiction or venue, or consents to jurisdiction or venue; (iv) waivers of rights to (or methods of) service of process, or rights to trial by jury, or other rights or benefits bestowed by operation of law; (v) exculpation or exoneration clauses and clauses relating to releases or waivers of unmatured claims or rights; and (vi) provisions of the Transaction Documents rendered ineffective or unenforceable by Sections 2A-303, 9-406, 9-407 and 9-408 of the Uniform Commercial Code of New York. (f) Our opinion in paragraph 3 below is based solely on a review of generally applicable laws of the State of New York and the United States of America and not on any search with respect to, or review of, any orders, decrees, judgments or other determinations specifically applicable to the Company. (g) We express no opinion as to the effect of suretyship defenses, or defenses in the nature thereof, with respect to the obligations of any guarantor, joint obligor, surety, accommodation party, or other secondary obligor. (h) This opinion speaks as of the date hereof and does not address additional or changed facts, or changes in law, of which we may become aware after the date hereof, and we assume no responsibility to inform you of additional or changed facts, or changes in law, of which we may become aware. (i) We assume that the statements regarding delivery and receipt of documents and money referred to in the cross-receipt between you and the Company are true and correct. Based upon the foregoing, and subject to the limitations and qualifications set forth below, we are of the opinion that: 1. Each of the Transaction Documents constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms. Exhibit 4.4(b) 2. The execution and delivery by the Company of the Transaction Documents on the date hereof does not, and the performance by the Company of its obligations under such Transaction Documents will not, constitute a violation of any of the provisions of the Company's Governing Documents or any applicable New York Statute, rule or regulation to which the Company is subject. 3. No consent, approval or authorization of, or designation, declaration, filing, registration, qualification or recordation with, any Governmental Authority is required under the laws of the State of New York or the United States of America in connection with (a) the execution and delivery by the Company of each of the Transaction Documents, or (b) the offer, issue, sale or delivery of the Notes by the Company under the circumstances contemplated by the Note Purchase Agreement. 4. It is not necessary in connection with the offering, issuance, sale and delivery of the Notes delivered to you today under the circumstances contemplated by the Transaction Documents, to register the Notes under the Securities Act of 1933, as amended, or to qualify an indenture in respect of the issuance of the Notes under the Trust Indenture Act of 1939, as amended. This opinion is delivered solely to you and for your benefit in connection with the Transaction Documents and may not be relied upon by you for any other purpose or relied upon by any other person or entity (other than future holders of Notes acquired in accordance with the terms of the Transaction Documents) for any reason without our prior written consent. Very truly yours, BINGHAM DANA LLP Exhibit 4.4(b) EX-10.1(B) 5 dex101b.txt FORM OF AMENDED & RESTATED CHANGE OF CONTROL EXHIBIT 10.1(b) AMENDED AND RESTATED CHANGE OF CONTROL -------------------------------------- EMPLOYMENT AND SEVERANCE AGREEMENT ---------------------------------- AGREEMENT by and between Sensient Technologies Corporation, a Wisconsin corporation (the "Company"), and (the "Executive"), dated ------------ as of the day of , 2001. ---- -------------- WHEREAS, the Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board caused the Company to enter into an Agreement with the Executive, dated as of February 2, 1998, as amended and restated as of September 10, 1998 (the "Prior Agreement"); and WHEREAS, the Board and the Executive desire to amend the Prior Agreement to provide certain modifications to the terms and conditions of the Prior Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the first ------------------- date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date -------------- immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. 2. Change of Control. For the purpose of this Agreement, a "Change of ----------------- Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person"), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (D) any acquisition pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or (b) Individuals who, as of September 10, 1998, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to September 10, 1998, whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting 2 from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 3. Employment Period. The Company hereby agrees to continue the ----------------- Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of such date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the ------------------- ------------------- Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office location less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the ------------ ----------- Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed and increased a minimum of 3% no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at 3 least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement and shall be commensurate with increases given to peer executives. Annual Base Salary shall not be reduced after any such increase and the term "Annual Base Salary" as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the ------------ Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's highest bonus, if any, earned under the Company's Management Incentive Plan for Division Presidents or the Company's Incentive Compensation Plan for Elected Corporate Officers, or any comparable bonus under any predecessor or successor plan, during the last five fiscal years of the Company which end immediately preceding or coinciding with the Effective Date (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year or in the event of a short fiscal year consisting of less than twelve months) (the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Incentive, Savings and Retirement Plans. During the --------------------------------------- Employment Period, the Executive shall be entitled to participate in all qualified and non-qualified incentive (cash and stock related), savings and retirement plans, and/or comparable practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (iv) Welfare Benefit Plans. During the Employment Period, the --------------------- Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and pro- 4 grams provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (v) Expenses. During the Employment Period, the Executive shall -------- be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vi) Fringe Benefits. During the Employment Period, the Executive --------------- shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Office and Support Staff. During the Employment Period, the ------------------------ Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (viii) Vacation. During the Employment Period, the Executive -------- shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (ix) Change of Control. ----------------- A. In the event of a Change of Control, for purposes of calculating the Executive's lump sum benefit under the Company's Supplemental Executive Retirement Plan A and B (collectively, the "SERP") the Executive will be deemed to have received three additional 5 years of base salary in amounts equal to the Executive's Annual Base Salary as of the Effective Date as increased for purposes of this subparagraph in each of such three years by the percentage increase (if positive) in the Executive's Annual Base Salary from the year prior to the year which the Effective Date occurs to the year in which the Effective Date occurs. Notwithstanding anything in the SERP or in the Company's Executive Income Deferral Plan (the "EIDP") to the contrary, for purposes of determining the "annual bonus" amount for Final Compensation under Section 2.D. of the SERP in the event of a payment under the SERP in connection with a Change of Control, the measurement period over five fiscal years referred to in Section 2.D. of the SERP shall be the five-year period which ends immediately preceding or coinciding with the Effective Date as set forth in Section 4(b)(ii) of this Agreement, and the lump sum distribution payments under Sections 14(A)(1) and (2) of the SERP and Section X.A.(i) of the EIDP shall be made on the date of the Change of Control (if such lump sum distributions cannot be made with complete accuracy on the date of the Change of Control, the Company shall pay an estimate of the lump sum amounts on the date of the Change of Control and pay the balance as soon as practicable thereafter). B. If upon a Change of Control the Executive vests in any of the Executive's restricted stock grants under any of the Company's equity plans or arrangements and becomes subject to income and/or employment taxes as a result of such vesting (the "Vesting Taxes"), the Company shall pay to the Executive, on the Effective Date (or as soon as practicable thereafter), an additional payment (a "Restricted Stock Reimbursement") in an amount such that after payment by the Executive of all income and employment taxes imposed on such Restricted Stock Reimbursement, the Executive retains an amount of the Restricted Stock Reimbursement equal to the Vesting Taxes. 5. Termination of Employment. (a) Death or Disability. The Executive's ------------------------- ------------------- employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within ------------- the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) Cause. The Company may terminate the Executive's employment during ----- the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness or 6 following the Executive's delivery of a Notice of Termination for Good Reason), after a written demand for performance is delivered to the Executive by the Chief Executive Officer of the Company which specifically identifies the manner in which the Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. Any termination of the Executive's employment by the Company during the Employment Period (other than a termination under Section 5(a)) shall be deemed to be a termination other than for Cause unless it meets all requirements of this Section 5(b). (c) Good Reason. The Executive's employment may be terminated by the ----------- Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities (whether or not occurring solely as a result of the Company's ceasing to be a publicly traded entity), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; 7 (iii) the Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason where the Date of Termination (as defined below) is during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement. The Executive's mental or physical incapacity following the occurrence of an event described above in clauses (i) through (v) shall not affect the Executive's ability to terminate employment for Good Reason. (d) Notice of Termination. Any termination by the Company for Cause, --------------------- or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the ------------------- Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligations of the Company upon Termination. (a) Good Reason, Other ------------------------------------------- ------------------ Than for Cause, Death or Disability. If, during the Employment Period, the - ----------------------------------- Company shall ter- 8 minate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash on or within ten days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including any bonus or portion thereof which has been earned but deferred (and annualized for any fiscal year consisting of less than twelve full months or during which the Executive was employed for less than twelve full months), for the most recently completed fiscal year during the Employment Period, if any (such higher amount being referred to as the "Highest Annual Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year of the Company through the Date of Termination, and the denominator of which is 365 and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to the product of (1) three and (2) the sum of (x) the Executive's Annual Base Salary and (y) the Highest Annual Bonus; and C. the amount equal to the product of (x) three and (y) the highest aggregate annual amount contributed by the Company (as a Company contribution, and not a salary reduction) on behalf of the Executive, during the last three full fiscal years prior to the Effective Date, to the Company's Transition Retirement Plan, Savings Plan, Retirement Employee Stock Ownership Plan, and Supplemental Benefits Plan, or any successor or replacement defined contribution plans. (ii) for three years after the Executive's Date of Termination, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the 9 time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; (iii) for three years after the Executive's Date of Termination, the Company shall continue fringe benefits and perquisites for the Executive and/or the Executive's family equal to those that, as of the Executive's Date of Termination, were in effect in accordance with the plans, programs, practices and policies described in Section 4(b)(vi) of this Agreement; (iv) the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in his sole discretion; (v) the exercise period for each outstanding stock option held by the Executive (or by any transferee of the Executive) under any of the Company's equity plans or arrangements shall continue for two years after the Executive's Date of Termination, or for such longer period provided for with respect to such stock option, provided, that such exercise period shall not extend beyond the scheduled exercise period of the stock option; and (vi) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided, or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If the Executive's employment is terminated by reason of ----- the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries. (c) Disability. If the Executive's employment is terminated by reason ---------- of the Executive's Disability during the Employment Period, this Agreement shall terminate without 10 further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term "Other Benefits" as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. (d) Cause; Other than for Good Reason. If the Executive's employment --------------------------------- shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 7. Nonexclusivity of Rights. Nothing in this Agreement shall prevent ------------------------ or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify (provided, that the Executive hereby waives any right to participate in any severance plan, program, or policy of the Company during the Employment Period), nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits, or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination, shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 8. Full Settlement. The Company's obligations to make the payments --------------- provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. Each and every payment made hereunder by the Company shall be final, and the Company will not seek to recover all or any part of such payment from the Executive for any reason. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasona- 11 bly incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). 9. Certain Additional Payments by the Company. (a) Anything in this ------------------------------------------ Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code, or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto), employment taxes and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP or such certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within ten days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. 12 (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which said claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and - -------- ------- expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or Income Tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or to contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or Income Tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as 13 the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information. The Executive shall hold in a fiduciary ------------------------ capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. Successors. (a) This Agreement is personal to the Executive and ---------- without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) The captions of this Agreement are not part of ------------- the provisions hereof and shall have no force or effect. This Agreement may not be amended or 14 modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) Notices given pursuant to this Agreement shall be in writing and shall be deemed given when actually received by the Executive or actually received by the Company's secretary. If mailed, such notices shall be mailed by United States registered or certified mail, return receipt requested, addressee only, postage prepaid, if to the Company, to Attention: Secretary (or President, if the Executive is then Secretary), or if to the Executive, at the address set forth below the Executive's signature to this Agreement, or to such other address as the party to be notified shall have theretofore given to the other party in writing. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof, including the Prior Agreement. 13. Governing Law; Resolution of Disputes. This Agreement and the ------------------------------------- rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Wisconsin. Any dispute arising out of this Agreement shall, at the Executive's election, be determined by arbitration under the rules of the American Arbitration Association then in effect (in which case both parties shall be bound by the arbitration award) or by litigation. Whether the dispute is to be settled by arbitration or litigation, the venue for the arbitration or litigation shall be in the judicial district encompassing the city in which the Executive resides; provided that, if the Executive is not then residing in the United States, the election of the Executive with respect to such venue shall be Wisconsin. The parties consent to personal jurisdiction in each trial court in the selected venue having subject matter jurisdiction, and each party irrevocably consents to service of process in the manner provided hereunder for the giving of notices. 15 IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name and on its behalf, all as of the day and year first above written. SENSIENT TECHNOLOGIES CORPORATION By ----------------------------------------------- Kenneth P. Manning Chairman, President & Chief Executive Officer Address: 16 EX-10.1(K) 6 dex101k.txt AMENDED & RESTATED RABBI TRUST "A" AGREEMENT EXHIBIT 10.1(K) AMENDED AND RESTATED SENSIENT TECHNOLOGIES CORPORATION RABBI TRUST "A" AGREEMENT ------------------------- This Trust Agreement is made effective as of the 1st day of March, 2002 by and between Sensient Technologies Corporation, a Wisconsin corporation (the "Company"), and Marshall & Ilsley Trust Company (collectively with any successor in interest, the "Trustee"). WHEREAS, the Company is obligated in accordance with the terms of various agreements listed on Appendix A, as the same may be amended from time-to-time (collectively the "Contracts"), to make certain payments for the benefit of selected Company executives (the "Executives") in the event of a change of control of the Company; and WHEREAS, as the Company has incurred or expects to incur liability under the terms of such Contracts, the Company established a trust (the "Trust") and entered into a trust agreement dated January 1, 2001 (the "Prior Trust Agreement") with Trustee, with the intention that the Company would make contributions to such Trust to provide itself with a source of funds to assist it in meeting its liabilities under the Contracts (the "Executives"); and WHEREAS, it is the intention of the Company that the Trust shall constitute an unfunded arrangement and shall not affect the status of any Contract as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended; and WHEREAS, the Company and the Trustee have determined to amend the Prior Trust Agreement, effective as of March 1, 2002, and the Prior Trust Agreement may be amended by a written instrument signed by the Company and the Trustee because a Change in Control has not yet occurred; and NOW, THEREFORE, in consideration of the mutual agreements of the parties as contained in this Trust Agreement, the Trust shall be comprised, held and disposed of as follows: 1 Section 1. Successor Trust (a) The Company and Trustee hereby acknowledge the deposit with the Trustee of assets previously held under the Prior Trust Agreement, which shall continue as the principal of the Trust. (b) The Trust shall become irrevocable upon a Change of Control, as defined herein. (c) The Trust is intended to be a grantor trust, of which the Company is the grantor, within the meaning of subpart E, part 1, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (d) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of the Company and shall be used exclusively for the uses and purposes of paying benefits to Executives as required by the Contracts and claims of general creditors, as herein set forth. Executives shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Contracts and this Trust Agreement shall be mere unsecured contractual rights of Executives against the Company. Any assets held by the Trust will be subject to the claims of the Company's general creditors under federal and state law in the event the Company is Insolvent, as defined in Section 3(a) herein. (e) The Company, in its sole discretion, may at any time, or from time to time, make additional deposits of cash or other property in trust with the Trustee to augment the principal to be held, administered and disposed of by the Trustee as provided in this Trust Agreement. Neither the Trustee nor any Executive shall have any right to compel such additional deposits. (f) Upon a Change of Control as defined herein, the Company shall, immediately prior to such Change of Control, make an irrevocable contribution to the Trust in an amount that is sufficient to pay the Executives the benefits to which Executives would be entitled pursuant to the terms of the Contract(s) as of the date on which the Change of Control occurred; provided, however, payment of benefits through this Rabbi Trust A shall not duplicate any benefits payable to Executives through Rabbi Trust B or C (which provide for payment of benefits for several non-qualified benefit plans of the Company) or any other irrevocable trust arrangement providing for secured payment of benefits to Executives, notwithstanding that the benefits shall be payable upon a Change of Control pursuant to the terms of the Contracts. Section 2. Payments to Executives (a) Immediately prior to a Change of Control, the Company shall deliver to the Trustee a schedule (the "Payment Schedule") that indicates the amounts payable in respect of each Executive, that provides a formula or other instructions acceptable to Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for under the Contracts), and the time of commencement for payment of such amounts. Except 2 as otherwise provided herein, the Trustee shall make payments to the Executives in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Contracts and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by the Company. (b) In the event that an Executive reasonably believes that the Payment Schedule, as provided initially or modified, does not properly reflect the amount payable to such Executive or the time or form of payment from the Trust corpus in respect of the Contracts, such Executive shall be entitled to deliver to the Trustee an affidavit (the "Executive's Notice") setting forth payment instructions for the amount the Executive believes will be or is due under the relevant terms of the Contracts. The Executive shall also deliver a copy of the Executive's Notice to the Company within three (3) business days following the date the Executive's Notice is delivered to the Trustee. Unless the Trustee receives written objection from the Company within ten (10) business days after receipt by the Trustee of such notice, the Trustee shall make the payment distribution in accordance with the amount and instructions set forth in the Executive Notice to the extent the funds necessary to make any such payments due are available within the Trust. If the Company makes an objection during the ten (10) business days referred to in the preceding sentence, the Trustee shall retain any disputed amounts pending the determination of an arbitrator pursuant to Section 14 hereof. (c) The entitlement of an Executive to benefits under a Contract shall be determined by the Company or such party as it shall designate, and any claim for such benefits shall be considered and reviewed under procedures determined by the Company and uniformly applied. (d) The Company may make payment of benefits directly to Executives as they become due under the terms of the Contracts. The Company shall notify the Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to Executives. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Contracts, the Company shall make the balance of each such payment as it falls due. The Trustee shall notify the Company where principal and earnings are not sufficient. Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary When The Company Is Insolvent (a) The Trustee shall cease payment of benefits to Executives if the Company is Insolvent. The Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to pay its debts as they become due, (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code, or (iii) the Company is determined to be insolvent by any state or federal regulatory authority. 3 (b) At all times during the continuance of this Trust, as provided in Section l(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of the Company under federal and state law as set forth below. (1) The Board of Directors and the Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing that the Company is Insolvent. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall determine whether the Company is Insolvent and, pending such determination, the Trustee shall discontinue payment of benefits to Executives. (2) Unless the Trustee has actual knowledge that the Company is Insolvent, or has received notice from the Company or a person claiming to be a creditor alleging that the Company is Insolvent, the Trustee shall have no duty to inquire whether the Company is Insolvent. The Trustee may in all events rely on such evidence concerning whether the Company is Insolvent as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination whether the Company is Insolvent. (3) If at any time the Trustee has determined that the Company is Insolvent, the Trustee shall discontinue payments to Executives and shall hold the assets of the Trust for the benefit of the Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Executives to pursue their rights as general creditors of the Company with respect to benefits due under the Contracts or otherwise. (4) The Trustee shall resume the payment of benefits to Executives in accordance with Section 2 of this Trust Agreement only after the Trustee has determined that the Company is not Insolvent (or is no longer Insolvent). (c) Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Executives under the terms of the Contracts for the period of such discontinuance, less the aggregate amount of any payments made to Executives by the Company in lieu of the payments provided for hereunder during any such period of discontinuance. Section 4. Payments to Company Except as provided in Section 3 hereof, after a Change of Control, the Company shall have no right or power to direct the Trustee to return to the Company, or to divert to others, any of the Trust assets before all payment of benefits have been made to Executives pursuant to the terms of the Contracts, except in the case of a termination of the Trust pursuant to Section 12. Section 5. Investment Authority (a) Investments of the Trust shall be limited to cash, cash equivalents and other short time fixed income securities (including any such security from which the Trustee or an 4 affiliate receives any compensation or fee). Prior to a Change in Control, the Company shall have sole authority to direct the Trustee as to such specific securities in which Trustee shall invest such Trust Fund assets. Following a Change in Control, such powers and authority regarding investments shall rest solely with the Trustee who shall invest such Trust Fund assets in its sole discretion in cash equivalents and other short time fixed income securities (including any such security from which the Trustee or an affiliate receives any compensation or fee). In no event shall any investment authority be exercisable by or rest with Executives; provided that, voting rights with respect to Trust assets will be exercised by the Company prior to a Change in Control and will be exercised by the Trustee after a Change in Control. (b) The Company shall have the right at anytime, and from time to time in its sole discretion, to substitute assets of equal fair market value for any assets held by the Trust. This right is exercisable by the Company in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity. (c) The Trustee shall also have the following additional powers: (1) To receive and hold all contributions paid to it by the Company; provided, however, that the Trustee shall have no duty to require any contributions to be made to it; (2) To effectuate the written investment instructions given by the Company or its designee without regard to any law now or hereafter in force limiting investments of fiduciaries; (3) To retain in the Trust for investments any property deposited by the Trustee hereunder; (4) To have the authority to invest and reinvest assets of the Trust in cash, cash equivalents and other short time fixed income securities (including any such security from which the Trustee or an affiliate receives any compensation or fee); (5) To retain in the Trust for investment or pending distributions, any portion of the Trust in cash deemed appropriate by the Trustee; (6) To establish accounts in any affiliate of the Trustee and in such other banks and financial institutions as the Trustee deems appropriate to carry out the purpose of the Trust; (7) To deposit securities with a clearing corporation as defined in Article Eight of the Uniform Commercial Code; to hold the certificates representing securities, including those in bearer form, in bulk form with and to merge such certificates into certificates of the same class of the same issuer which constitutes assets of other accounts or owners, without certification as to the ownership attached; and to utilize a book-entry system for the transfer or pledge of securities held by the Trustee or by a clearing corporation, provided that the records of the Trustee shall indicate the actual ownership of the securities and other property of the Trust Fund; 5 (8) To participate in and use the Federal book-entry account system, a service provided by the Federal Reserve Bank for its member banks for deposit of Treasury securities; and (9) To hold securities or property in the name of the Trustee or its nominee or nominees or in such other form as it determines best with or without disclosing the Trust relationship, providing the records of the Trust shall indicate the actual ownership of such securities or other property. Section 6. Disposition of Income As determined in the sole discretion of the Company prior to a Change of Control, all or part of the income received by the Trust, net of expenses and taxes, shall be returned to the Company, as determined by the Company. Following a Change in Control, all income shall be accumulated and reinstated. Section 7. Accounting by Trustee The Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between the Company and the Trustee. Within thirty (30) days after the removal or resignation of the Trustee, the Trustee shall deliver to the Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. Section 8. Responsibility of Trustee (a) The Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; provided, however, that the Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by the Company which is contemplated by, and in conformity with, the terms of the Contracts or this Trust and is given in writing by the Company. In the event of a dispute between the Company and a party, the Trustee may apply to a court of competent jurisdiction to resolve the dispute. (b) If the Trustee undertakes or defends any litigation arising in connection with this Trust, the Company agrees to indemnify the Trustee against the Trustee's costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If the Company does not pay such costs, expenses and liabilities in a reasonably timely manner, the Trustee may obtain payment from the Trust. 6 (c) The Trustee may consult with legal counsel (who may also be counsel for the Company generally) with respect to any of its duties or obligations hereunder. (d) The Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. (e) The Trustee shall have, without exclusion, all powers conferred on Trustees by applicable law, unless expressly provided otherwise herein; provided, however, that if an insurance policy is held as an asset of the Trust, the Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. (f) Notwithstanding any powers granted to the Trustee pursuant to this Trust Agreement or to applicable law, the Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. (g) The Company hereby agrees to indemnify and to hold Trustee harmless from and against all claims, expenses (including reasonable attorney fees), liabilities, damages, actions or other charges incurred by or assessed against Trustee, other than on account of Trustee's own gross negligence or willful misconduct, as a direct or indirect result of anything done or omitted by Trustee in reliance upon the directions, or absence of directions, of the Company, any investment advisor or manager, or as a direct or indirect result of any act or omission of a predecessor trustee or any other person charged under any agreement affecting the assets of the Trust for investment responsibility with respect to such assets. Section 9. Compensation and Expenses of Trustee The Company shall pay all administrative costs and the Trustee's fees and expenses. If not so paid, the costs, fees and expenses shall be paid from the Trust. Section 10. Resignation and Removal of Trustee (a) The Trustee may resign at any time by written notice to the Company, which shall be effective no less than thirty (30) days after receipt of such notice unless the Company and the Trustee agree otherwise. (b) The Trustee may be removed by the Company on fifteen (15) days notice or upon shorter notice accepted by the Trustee. (c) Upon resignation or removal of the Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall 7 be completed within thirty (30) days after receipt of notice of resignation, removal or transfer, unless the Company extends such time limit. (d) If the Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 11 hereof, by the effective date of resignation or removal under paragraphs (a) or (b) of this section. If no such appointment has been made, the Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. Section 11. Appointment of Successor (a) If the Trustee resigns or is removed in accordance with Section 10 (a) or (b) hereof, the Company may appoint any third party, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace the Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the Company or the successor Trustee to evidence the transfer. The successor Trustee need not examine the records and any acts of any prior Trustee and may retain or dispose of any existing Trust assets, subject to Sections 7 and 8 hereof. The successor Trustee shall not be responsible for, and Company shall indemnify and defend the successor Trustee from, any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee. (b) Notwithstanding Section 11(a) above, if the Trustee resigns or is removed within three (3) years following a Change in Control, the Company may appoint such third party as Trustee only with the approval of 2/3 or more of the Executives (who were employees of Company immediately before the Change in Control, but determining such 2/3 considering only those Executives who at the time of the Trustee's resignation or removal continue to have Contracts funded by the Trust). If the Company and such Executives are unable to agree on a successor trustee within forty-five (45) days following the notice of the Trustee's departure, the Trustee shall be entitled to petition a court of competent jurisdiction to appoint its successor. All reasonable expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. Section 12. Amendment or Termination (a) Prior to a Change of Control, this Trust Agreement may be amended by a written instrument executed by the Trustee and the Company. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Contracts or shall make the Trust revocable after it has become irrevocable in accordance with Section l(b) hereof. This Trust Agreement may be amended in a manner adverse to Executives only by an instrument in writing executed by the Trustee and the Company, together with the consent of 2/3 of the Executives (who were 8 employees of the Company immediately before the Change in Control, but determining such 2/3 considering only those Executives who at the time of the Trustee's resignation or removal continue to have Contracts funded by the Trust). (b) The Trust shall not terminate until the date on which Executives are no longer entitled to benefits pursuant to the terms of the Contracts, unless approved as provided in Section 12(c) hereof. (c) Upon written approval of all Executives who remain entitled to payment of benefits pursuant to the terms of the Contracts, the Company may terminate this Trust prior to the time all benefits payable under the Payment Schedule have been made. All assets in the Trust at termination shall be returned to the Company. Section 13. Miscellaneous (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. (b) Benefits payable to Executives under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. (c) This Trust Agreement shall be governed by and construed in accordance with the laws of Wisconsin. (d) For purposes of this Trust, Change of Control shall mean: (1) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of 20% or more of either (A) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control: (I) any acquisition directly from the Company, (II) any acquisition by the Company, (III) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (IV) any acquisition pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (3) of this paragraph (d); or (2) individuals who, as of March 1, 2002, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to March 1, 2002 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but 9 excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or (3) consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such business combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or of such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or the action of the Board, providing for such Business Combination; or (4) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. Section 14. Arbitration Any dispute between the Executives and the Company or the Trustee as to the interpretation or application of the provisions of this Trust, and any questions concerning Benefits payable hereunder, shall be determined exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect. Such determination shall be final, conclusive and binding upon the parties. Judgment may be entered on the arbitrator's award in any court of competent jurisdiction. All fees and expenses of such arbitration (including, without limitation, those incurred by the Executives and Trustee) shall be paid by the Company. Section 15. Effective Date The effective date of this Trust Agreement shall be March 1, 2002. 10 IN WITNESS WHEREOF, the Company and Trustee have caused this Trust Agreement to be duly executed as of the Effective Date indicated above. SENSIENT TECHNOLOGIES CORPORATION By: ------------------------------------------------- Title: ------------------------------------------------- Title: ------------------------------------------------- MARSHALL & ILSLEY TRUST COMPANY By: ------------------------------------------------- Title: ------------------------------------------------- Attest: ------------------------------------------------- Title: ------------------------------------------------- 11 Appendix A SENSIENT TECHNOLOGIES CORPORATION RABBI TRUST "A" AGREEMENT ------------------------- 1. Executive Employment Contract, dated as of November 11, 1999, by and between Sensient Technologies Corporation and Kenneth P. Manning. 2. Change of Control and Severance Agreements entered into between Sensient Technologies and certain Executives from time to time, benefits under which are to be provided to the Trustee upon a Change of Control, as provided in Section 2 of the Trust Agreement. 12 EX-10.1(S) 7 dex101s.txt FORM OF AGREEMENT FOR EXECUTIVE OFFICERS EXHIBIT 10.1(s) SENSIENT TECHNOLOGIES CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN A (Including All Amendments Through June 14, 2001) SECTION 1. PURPOSE The purpose of the Sensient Technologies Corporation Supplemental Executive Retirement Plan A (the "Plan") is to enable Sensient Technologies Corporation (the "Company") to attract, retain, and motivate certain key employees and to provide retirement and survivor benefits for the employees, their surviving spouses and designated beneficiaries. The Company intends the Plan to be a non-qualified supplemental executive retirement plan for certain key employees, as designated and described herein. SECTION 2. DEFINITIONS For the purpose of this Plan, certain words or phrases used herein will have the following meanings: A. "Board of Directors" means the board of directors of the Company. B. "Disability" means permanent long-term disability for which the Executive would be entitled to long-term disability benefits under the Company's Disability Income Plan. Determination of such Disability applied to this Plan shall be made at the sole discretion of the Company and the decision of the Company shall be final. During periods of determined Disability, the Executive shall be considered to be in the full employ of the Company for the purpose of this Plan. C. "Executive" means a selected employee of the Company designated to participate in the Plan by the Chief Executive Officer. D. "Final Compensation" means the greater of: 1. the Executive's annual base salary as in effect, prior to reduction for the Executive's contributions to this Plan, as of, as applicable, the date of his or her death or retirement, or the date immediately preceding the Company's change of control, plus 50% (100% if the Executive has at any time been the Company's Chief Executive Officer, Chief Operating Officer or Chief Financial Officer) of the highest bonus award, if any, paid to the Executive pursuant to, as applicable, the Sensient Technologies Corporation Management Incentive Plan for Division Presidents or the Sensient Technologies Corporation Incentive Compensation Plan for Elected Corporate Officers during the last five fiscal years of the Company immediately preceding or coinciding with, as applicable, the date of the Executive's death or retirement, or the date immediately preceding the Company's change of control (annualized in the event the Executive was not employed by the Company for the entire fiscal year of any such fiscal year or in the event any such fiscal year was a short fiscal year consisting of less than 12 full months); or 2. the Executive's average annual base salary as in effect, prior to reduction for the Executive's contributions to this Plan, during the 60 highest paid consecutive calendar months of the last 120 calendar months immediately preceding, as applicable, the date of his or her death or retirement, or the date immediately preceding the Company's change of control, plus 50% (100% if the Executive has at any time been the Company's Chief Executive Officer, Chief Operating Officer or Chief Financial Officer) of the highest bonus award, if any, paid to the Executive pursuant to, as applicable, the Sensient Technologies Corporation Management Incentive Plan for Division Presidents or the Sensient Technologies Corporation Incentive Compensation Plan for Elected Corporate Officers during the last five fiscal years of the Company immediately preceding or coinciding with, as applicable, the date of the Executive's death or retirement, or the date immediately preceding the Company's change of control (annualized in the event the Executive was not employed by the Company for the entire fiscal year of any such fiscal year or in the event any such fiscal year was a short fiscal year consisting of less than 12 full months). E. "Fiscal Year" means: (i) on or after January 1, 2001, each twelve (12) consecutive month period commencing on January 1 and ending the following December 31; (ii) on or after October 1, 2000, but prior to January 1, 2001, the three (3) consecutive month period commencing October 1, 2000 and ending December 31, 2000; and (iii) prior to October 1, 2000, each twelve (12) consecutive month period beginning October 1 and ending the following September 30. F. "Company" means Sensient Technologies Corporation, and shall include all of its wholly-owned subsidiaries. G. "Normal Retirement Date" means the date the Executive attains age 62; or such date after the Executive attains age 55 and his or her age and years of continuous service with the Company equals or exceeds 85. H. "Early Retirement Date" means the date the Executive attains age 55 and has completed 10 or more years of continuous service with the Company. 2 I. "Benefits Administrative Committee" means the Benefits Administrative Committee of the Company, members of which are appointed by the Chief Executive Officer of the Company. J. "Benefits Investment Committee" means the Benefits Investment Committee of the Company, members of which are appointed by the Chief Executive Officer of the Company. SECTION 3. DESIGNATION OF EMPLOYEE PARTICIPATING IN PLAN The Chief Executive Officer shall have the sole discretion, from time to time, to designate which employees shall participate in the Plan. Such a designated employee shall be called "Executive" and participation shall be evidenced by Executive's execution of this Agreement. If an Executive declines participation in the Plan at the time of the offer from the Company, a Waiver of Participation form must be signed (Exhibit A attached hereto and incorporated herein by reference). SECTION 4. EXECUTIVE CONTRIBUTION A. PRE APRIL 1, 1991 Executives who have participated in the Company's Management Split Dollar Life Insurance Plan prior to April 1, 1991 will, in each of the first seven years of participation hereunder, contribute an amount, based on IRS tables, equal to the term insurance premium applicable to a life insurance benefit of two times the Executive's base salary in effect for that Fiscal Year. B. POST APRIL 1, 1991 Executives beginning participation on or after April 1, 1991 will, in each year until death or retirement, whichever occurs earlier, contribute, on a payroll basis through a reduction in base salary, an amount equal to the Northwestern Mutual Life Insurance Company's non-rated term insurance premium applicable to a life insurance benefit of two times the Executive's base salary in effect on the date of acceptance into the Plan. (For purposes of this Plan "base salary" or "average base salary" means the Executive's gross base salary prior to reduction for the Executive's contribution pursuant to this Section 4.) SECTION 5. BENEFITS Participating Executives and/or their spouses and designated beneficiaries shall be entitled to benefits under this Plan if the Executive is employed by the Company at the time of his or her death or until his or her retirement, or in the event of the Company's change of control, whichever occurs earlier. 3 A. Survivor Income Benefit ----------------------- In the event of the Executive's death prior to his or her retirement, a survivor income benefit will be payable to the Executive's designated beneficiary for a guaranteed period of 20 years. The annual survivor income benefit for such period will be equal to the product of the Executive's designated percentage indicated on the Appendix hereto and his or her Final Compensation. B. Retirement Benefit ------------------ At the Executive's retirement, the survivor income benefit in paragraph A. above shall no longer be available, and the Executive shall elect among one of the alternatives described below. 1. The Executive may elect a retirement income benefit payable in the form of a lump sum distribution but only if the Executive makes such election at least one full calendar year prior to his or her Early Retirement Date or Normal Retirement Date, as applicable, or in lieu of such advance election, elects that his or her retirement income benefit be actuarially reduced by six percent (6%) at retirement. If the Executive makes a lump sum distribution election, his or her retirement income benefit will be the lump sum actuarial equivalent of a benefit, payable for a guaranteed 20 year period, equal to the product of the Executive's designated percentage indicated on the Appendix hereto and his or her Final Compensation, actuarially reduced, as applicable, by: (i) the early retirement provision in paragraph C. below based on the Executive's retirement date; and (ii) six percent (6%) if timely advance election of the lump sum form of payment is not made. The actuarial assumptions to be applied in calculating the actuarial equivalent of an Executive's retirement income benefit under this provision shall be determined as of the date of the Executive's retirement by the Chief Executive Officer of the Company based upon the recommendations of the Benefits Investment Committee. (or) 2. The Executive may elect to continue in effect the survivor income benefit to be payable to his or her designated beneficiary following the Executive's death for a guaranteed 20 year period. The annual survivor income benefit for such period will be equal to the product of the Executive's designated percentage indicated on the Appendix hereto and his or her Final Compensation, actuarially reduced, if applicable, by the early retirement provision in paragraph C. below based on the Executive's retirement date. (or) 4 3. The Executive may elect to receive following his or her retirement a retirement income benefit to be payable to the Executive or his or her designated beneficiary for a guaranteed 20 year period. The annual retirement/survivor income benefit for such period will be equal to the product of the Executive's designated percentage indicated on the Appendix hereto and his or her Final Compensation, actuarially reduced, if applicable, by the early retirement provision in paragraph C. below based on the Executive's retirement date. (or) 4. The Executive may elect to receive an actuarially equivalent lifetime retirement/survivor income benefit to be payable in the form of a joint and survivor annuity. If elected, the amount payable will be reduced to cover the cost for providing the annuity over the life of the Executive and his or her spouse. The survivor income benefit for the surviving spouse will be 50% of the retirement income benefit for the Executive. The minimum benefit to be paid to the Executive, his or her spouse and designated beneficiary will be equal to the aggregate dollar amount which would have been payable in the guaranteed 20 year payout in paragraph 3. above. Therefore, after the death of the later to die of the Executive and the Executive's spouse, the designated beneficiary shall receive the remainder of the minimum benefit. If the aggregate payments to the Executive and the Executive's spouse were made for at least 20 years, the remainder of the minimum benefit shall be paid in a lump sum. If the aggregate payments to the Executive and the Executive's spouse were made for less than 20 years, the remainder of the minimum benefit shall be paid in equal monthly installments over the period necessary such that the aggregate payout period of all benefits related to the Executive equals 20 years. The actuarial reductions, from the guaranteed 20 year amount in paragraph 3. above, to obtain the 50% joint and survivor annuity are: % Age Reduction --- --------- 55 8 56 7 57 6 58 5 59 4 60 3 61 2 62 0 5 C. Early Retirement Benefit ------------------------ The retirement income benefit will be actuarially reduced by three percent (3%) for each full year the Executive's Early Retirement Date precedes his or her Normal Retirement Date. SECTION 6. MANNER OF PAYING BENEFITS Within 60 days following the death or retirement of the Executive, an initial benefit payment shall be made as defined under Section 5. All subsequent benefits under this Plan shall accrue on the first day of each succeeding month after death or retirement and shall be made on or about such day during the period for which benefits are payable. SECTION 7. BENEFICIARY DESIGNATION The benefits payable by the Company under Section 5 shall be paid as they become due to the beneficiary or beneficiaries as designated by the Executive in writing on the Beneficiary Designation form (Exhibit B attached hereto and incorporated herein by reference). The Executive shall have the right to change or amend such beneficiary designation from time to time (without the consent of any prior beneficiary) by a writing similarly filed. If the Executive fails to make such beneficiary designation or if no beneficiary so designated survives the Executive, payments shall be made as they become due to the duly appointed personal representative of the estate of the Executive. SECTION 8. TERMINATION OF EMPLOYMENT If an Executive's employment with the Company is terminated prior to the Executive's Early Retirement Date, either by the Company or by the Executive, with or without cause, no amounts shall be paid under any provision of this Plan. Disability or death shall not be deemed a termination of employment for purposes of this Section. SECTION 9. DISABILITY If the Executive becomes disabled under the Plan, Executive's contributions will be waived until the Executive returns to full employment. Retirement benefits will not be payable under this Plan if the Executive is receiving benefits under the Company's Disability Income Plan. SECTION 10. TITLE TO LIFE INSURANCE If the Company elects to purchase a life insurance contract to provide the Company with funds to make payments hereunder, the Company shall at all times be the sole owner of and the beneficiary under such contract, and shall have the unrestricted right to use all amounts and to exercise all options and privileges thereunder without knowledge or consent of the Executive, his 6 or her designated beneficiary or any third party. It is expressly agreed that neither the Executive, designated beneficiary, nor any third party shall have any right, title or interest whatsoever in or to any such contract. SECTION 11. PAYMENTS ARE NOT SECURED The Executive, his or her designated beneficiary or any third party having or claiming a right to payments hereunder or to any interest in this Plan shall rely solely on the unsecured promise of the Company and nothing herein shall be construed to give the Executive, his or her designated beneficiary or any third party any right, title, interest or claim in or to any specific asset, fund, reserve, account or property of any kind whatsoever owned by the Company or in which it may have any right, title or interest now or in the future. The Executive shall have the right to enforce his or her claim against the Company in the same manner as any unsecured creditor. SECTION 12. NON-ASSIGNABILITY OF BENEFITS Except as permitted by Section 7, no rights of any kind under this Plan shall, without the written consent of the Company, be transferable or assignable by the Executive or any designated beneficiary or be subject to alienation, encumbrance, garnishment, attachment, execution, levy or seizure by legal process of any kind, voluntary or involuntary. SECTION 13. AMENDMENT This Plan may be amended at any time or from time to time by the Company. Any amendment shall not reduce the benefit of any participating Executive, or any party receiving benefits under this Plan without a consent in writing by the affected Executive or party. The failure of either the Company or any Executive to enforce any of the provisions hereof shall not be deemed a waiver thereof. No provision of this Plan shall be deemed to have been waived or modified unless such waiver or modification shall be in writing, and signed by the appropriate party. The Company reserves the right to terminate the Plan at any time. The termination of the Plan shall not affect the benefits of any Executive, Executive's spouse or designated beneficiary covered by the Plan, prior to termination. SECTION 14. CHANGE OF CONTROL OF THE COMPANY A. 1. Notwithstanding any other provision of the Plan, including specifically Sections 5. and 8., in the event of the change of control of the Company, each Executive employed with the Company as of the date of the change of control shall receive, in lieu of any benefit accrued under any other provision of the Plan (other than paragraph 4. below of this subsection A., if applicable), a change of control benefit as calculated under paragraph 3. below of this subsection A. payable in the form of a lump sum distribution as soon as administratively feasible after the date of such change of 7 control, regardless of the Executive's age or period of continuous service as of the date of the change of control. 2. Notwithstanding any other provision of the Plan, including specifically Section 5., in the event of the change of control of the Company, each Executive who terminated employment before the date of the change of control (except for an Executive of a division of the Company divested before the change of control, unless otherwise determined by the Benefits Investment Committee in its discretion) who has not received full payment of his or her accrued benefit under Section 5. (or if any such Executive is deceased, such Executive's spouse or other designated beneficiary) shall receive, in full satisfaction of such accrued benefit, a lump sum distribution of the actuarial equivalent of such accrued benefit (or a lump sum distribution of the actuarial equivalent of his or her remaining payments if already in pay status) as soon as administratively feasible after the date of such change of control. 3. The change of control benefit calculated under this subsection A. will be the lump sum actuarial equivalent of a benefit, payable for a guaranteed 20 year period, equal to the product of the Executive's designated percentage indicated on the Appendix hereto and his or her Final Compensation (without imposition of a reduction of 3% for each full year the payment date precedes the Executive's Normal Retirement Date, if applicable). 4. Subject to Section 3., each Executive employed with the Company as of the date of the change of control shall continue to be eligible to participate in this Plan until his or her termination of employment, and upon such Executive's termination he or she shall be eligible for any benefits accrued under the Plan subsequent to the payment of the change of control benefit, regardless of the Executive's age or period of continuous service as of the date of his or her termination of employment. With respect to any such accrued benefit, the Executive may elect retirement benefits under subsection B. of Section 5. payable at any time following his or her termination of employment and attainment of age 55, and the survivor income benefit in subsection A. of Section 5. shall apply until such election is made. The calculation of the Executive's accrued benefit following the change of control will be the actuarial equivalent of a benefit, payable for a guaranteed 20 year period, equal to the product of the Executive's designated percentage indicated on the Appendix hereto and his or her Final Compensation, actuarially reduced for the change of control benefit determined under paragraph 3. above of this subsection A. (but without imposition of a reduction of 3% for each full year the payment date precedes the Executive's Normal Retirement Date, if applicable). After termination of employment, no further contributions shall be required of the Executive under Section 4. 8 5. The actuarial assumptions to be applied in calculating the actuarial equivalent of an Executive's benefit under this subsection A. shall be determined as of the date of the change of control or the Executive's termination of employment, as applicable, by the Chief Executive Officer of the Company based upon the recommendations of the Benefits Investment Committee. B. For purposes of subsection (A) of this Section, the term "change of control of the Company" means: 1. the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the Exchange Act) (a Person) of beneficial ownership (within the meaning of Rule l3d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (4) any acquisition pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section; or 2. individuals who, as of September 10, 1998, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to September 10, 1998 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or 3. consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding 9 Company Common Stock and Outstanding Company Voting Securities immediately prior to such business combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or of such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or the action of the Board, providing for such Business Combination; or 4. approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. SECTION 15. FORFEITURE OF BENEFITS Executive shall forfeit any right to receive benefits hereunder (including any benefits payable to Executive's spouse or designated beneficiary), and all benefit payments hereunder shall terminate, if, at any time during the period in which Executive, his/her spouse and designated beneficiaries shall be entitled to benefits under this Plan or benefits are being paid hereunder, Executive, directly or indirectly, either individually or as an employee, officer, principal, agent, partner, shareholder, owner, trustee, beneficiary, co-venturer, distributor or consultant or in any other capacity: (1) in a capacity that could reasonably be expected to cause Executive to use or disclose confidential information of the Company acquired by Executive during the term of Executive's employment with the Company, and in a manner materially detrimental to the business of the Company, participates in, becomes associated with, provides assistance to, or has a financial or other interest in any business, activity or enterprise which competes (with any product or product lines of the Company) for Active Customers of the business of the Company or any successor or assign of the Company; (2) induces or attempts to induce any employee, officer, director, sales representative, consultant or other personnel of the Company to terminate his or her relationship or breach his or her agreements with the Company; or (3) induces or 10 attempts to induce any Active Customer of the Company to cease doing business, in whole or in part, with or through the Company, or to do business with any other person, firm, partnership, corporation or any other entity competitive with the business of the Company. The ownership of less than a five percent (5%) interest in a corporation whose shares are traded in a recognized stock exchange or traded in the over-the-counter market, even though that corporation may be a competitor of the Company, shall not be deemed financial participation in a competitor. "Active Customer" shall mean any customer of the Company which purchased any of the Company's products or services during the one-year period preceding the date Executive engages in any activity specified in subsection (1) or (3) above. In the event of a change of control of the Company (as defined in Section 14 above), this forfeiture provision shall be void. SECTION 16. SUCCESSORS AND ASSIGNS If the Company sells, assigns or transfers all or substantially all of its business and assets to any party, excluding affiliates of the Company, or if the Company merges into or consolidates or otherwise combines with any party which is a continuing or successor entity, then the Company shall assign all of its right, title and interest in this Plan as of the date of such event to the party which is either the acquiring or successor corporation, and such party shall assume and perform from and after the date of such assignment all of the terms, conditions and provisions imposed under this Plan upon the Company. In case of such assignment by the Company and such assumption and agreement by such party all further rights as well as all other obligations of the Company under this Plan thenceforth shall cease and terminate and thereafter the expression "the Company" wherever used herein shall be deemed to mean such party. SECTION 17. NON-GUARANTEE OF EMPLOYMENT This Plan shall not be construed as giving the Executive the right to be retained as an employee of the Company for any period. SECTION 18. VESTING There is no vesting under the Plan. 11 SECTION 19. MISCELLANEOUS The Plan supersedes and modifies in all respects the Company's Management Split Dollar Life Insurance Plan, as amended through November 1, 1988, and any prior version of the Company's Supplemental Executive Retirement Plan A and any amendments thereto. The Plan is executed by Executive in consideration of continued employment with the Company, Company's continuation of the Plan and Executive's potential receipt of benefits under the Plan. SECTION 20. ADMINISTRATION A. The Benefits Investment Committee shall be responsible for the general operation and administration of the Plan and shall have the full authority to interpret and construe the Plan. The Benefits Investment Committee's interpretation and construction of the Plan, and actions thereunder, shall be binding and conclusive on all persons and for all purposes. B. The Benefits Administrative Committee shall have the full authority to determine and review claims for benefits under this plan. The Benefits Administrative Committee's determination of benefit claims under this plan, and actions thereunder, shall be binding and conclusive on all persons and for all purposes. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of June 14, 2001. Sensient Technologies Corporation By: ------------------------------------ Richard Carney, Vice President-Human Resources (CORPORATE SEAL) Attest: ------------------------------------------- John L. Hammond, Secretary ------------------------------------------- Executive 12 Exhibit A SENSIENT TECHNOLOGIES CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN A WAIVER OF PARTICIPATION On , I was given the opportunity to participate in ----------------------------- the Sensient Technologies Corporation Supplemental Executive Retirement Plan A. In accordance with the policy established under the Plan, each designated Executive is given 60 days from the notice of designation (the "Notice") to participate before the offer is withdrawn, unless at a later date the offer is reinstated by Sensient Technologies Corporation. I acknowledge and understand this limitation relative to my participation in the Plan. Because the elapsed time since receipt of the Notice exceeds 60 days, there will be no benefits available to me or to any of my beneficiaries under the Plan. I further understand that my future participation in the Plan is solely within the discretion of Sensient Technologies Corporation. Date: -------------------------------- - --------------------------------------- ------------------------------------- (Witness) (Signature)(Print Name) 13 Exhibit B SENSIENT TECHNOLOGIES CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN A Beneficiary Designation ----------------------- I, , hereby designate the following as my Primary --------------------------- Beneficiary under my Supplemental Executive Retirement Plan A with Sensient Technologies Corporation: - --------------------------------------- ------------------------------------- Primary Beneficiary's Name Relationship to me If the Primary Beneficiary does not survive me or survives me, but dies before actual payment in full of my benefits, or if there be no named Primary Beneficiary, the remaining portion of my benefits shall be paid in equal shares to the following Contingent Beneficiaries. - --------------------------------------- ------------------------------------- Contingent Beneficiary's Name Relationship to me - --------------------------------------- ------------------------------------- Contingent Beneficiary's Name Relationship to me - --------------------------------------- ------------------------------------- Contingent Beneficiary's Name Relationship to me Upon the death of a Contingent Beneficiary, any remaining portion of said benefits shall be paid in equal shares to his or her children living at the time each payment is to be made in accordance with the Plan. Upon the death of a Contingent Beneficiary who is not survived by a child or children, or upon the death of the last surviving child of a Contingent Beneficiary, any remaining portion of his or her beneficial interest shall be paid in equal shares to the then living Contingent Beneficiaries and the children of any then deceased Contingent Beneficiaries, any such child or children to be paid (as described in the preceding sentence) only the share the parent would receive if living. If none of the foregoing persons are living when any benefits under the Plan are payable, any remaining installments shall be paid to the personal representative of the last to die of me or any designated beneficiary. This form constitutes a revocation in full of any Beneficiary Designations previously made by me and may be changed or revoked by me at any time, provided that such subsequent designations be in writing and filed with Sensient Technologies Corporation. Witness: Date: -------------------------------- - --------------------------------------- ------------------------------------- (Cannot be a Beneficiary) Signature of Employee Receipt of the above Beneficiary Designation is hereby acknowledged by: SENSIENT TECHNOLOGIES CORPORATION Date: -------------------------------- By: ---------------------------------- 14 APPENDIX DESIGNATED PERCENTAGES Executive's Name Designated Percentage ---------------- --------------------- 15 EX-10.1(T) 8 dex101t.txt FORM OF AGREEMENT FOR EXECUTIVE OFFICERS EXHIBIT 10.1(t) SENSIENT TECHNOLOGIES CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN B (Including All Amendments Through June 14, 2001) SECTION 1. PURPOSE The purpose of the Sensient Technologies Corporation Supplemental Executive Retirement Plan B (the "Plan") is to enable Sensient Technologies Corporation (the "Company") to attract, retain, and motivate certain key employees and to provide retirement and survivor benefits for the employees, their surviving spouses and designated beneficiaries. The Company intends the Plan to be a non-qualified supplemental executive retirement plan for certain key employees, as designated and described herein. SECTION 2. DEFINITIONS For the purpose of this Plan, certain words or phrases used herein will have the following meanings: A. "Board of Directors" means the board of directors of the Company. B. "Disability" means permanent long-term disability for which the Executive would be entitled to long-term disability benefits under the Company's Disability Income Plan. Determination of such Disability applied to this Plan shall be made at the sole discretion of the Company and the decision of the Company shall be final. During periods of determined Disability, the Executive shall be considered to be in the full employ of the Company for the purpose of this Plan. C. "Executive" means a selected employee of the Company designated to participate in the Plan by the Chief Executive Officer. D. "Final Compensation" means the greater of: (i) the Executive's annual base salary as in effect, prior to reduction for the Executive's contributions to this Plan, as of, as applicable, the date of his or her death or retirement, or the date immediately preceding the Company's change of control, plus 50% (100% if the Executive has at any time been the Company's Chief Executive Officer, Chief Operating Officer or Chief Financial Officer) of the highest bonus award, if any, paid to the Executive pursuant to, as applicable, the Sensient Technologies Corporation Management Incentive Plan for Division Presidents or the Sensient Technologies Corporation Incentive Compensation Plan for Elected Corporate Officers during the last five fiscal years of the Company immediately preceding or coinciding with, as applicable, the date of the Executive's death or retirement, or the date immediately preceding the Company's change of control (annualized in the event the Executive was not employed by the Company for the entire fiscal year of any such fiscal year or in the event any such fiscal year was a short fiscal year consisting of less than 12 full months); or (ii) the Executive's average annual base salary as in effect, prior to reduction for the Executive's contributions to this Plan, during the 60 highest paid consecutive calendar months of the last 120 calendar months immediately preceding, as applicable, the date of his or her death or retirement, or the date immediately preceding the Company's change of control, plus 50% (100% if the Executive has at any time been the Company's Chief Executive Officer, Chief Operating Officer or Chief Financial Officer) of the highest bonus award, if any, paid to the Executive pursuant to, as applicable, the Sensient Technologies Corporation Management Incentive Plan for Division Presidents or the Sensient Technologies Corporation Incentive Compensation Plan for Elected Corporate Officers during the last five fiscal years of the Company immediately preceding or coinciding with, as applicable, the date of the Executive's death or retirement, or the date immediately preceding the Company's change of control (annualized in the event the Executive was not employed by the Company for the entire fiscal year of any such fiscal year or in the event any such fiscal year was a short fiscal year consisting of less than 12 full months). E. "Company" means Sensient Technologies Corporation, and shall include all of its wholly-owned subsidiaries. F. "Normal Retirement Date" means the earlier of (i) the date the Executive attains age 62 or (ii) the later of (A) the date the Executive attains age 55 and (B) the date his or her age and years of continuous service with the Company equals or exceeds 85. G. "Early Retirement Date" means the later of (i) the date the Executive attains age 55 and (ii) the date the Executive has completed 10 or more years of continuous service with the Company. H. "Benefits Administrative Committee" means the Benefits Administrative Committee of the Company, members of which are appointed by the Chief Executive Officer of the Company. I. "Benefits Investment Committee" means the Benefits Investment Committee of the Company, members of which are appointed by the Chief Executive Officer of the Company. 2 SECTION 3. DESIGNATION OF EMPLOYEE PARTICIPATING IN PLAN The Chief Executive Officer shall have the sole discretion, from time to time, to designate which employees shall participate in the Plan. Such a designated employee shall be called "Executive" and participation shall be evidenced by Executive's execution of this Agreement. If an Executive declines participation in the Plan at the time of the offer from the Company, a Waiver of Participation form must be signed (Exhibit A attached hereto and incorporated herein by reference). SECTION 4. EXECUTIVE CONTRIBUTION While employed with the Company, Executive will contribute on a payroll basis, through a reduction in base salary, an annual amount equal to the Northwestern Mutual Life Insurance Company's non-rated term insurance premium applicable to a life insurance benefit of two times the Executive's base salary in effect on the date of acceptance into the Plan. SECTION 5. BENEFITS Except as otherwise provided in Section 14, participating Executives, their spouses and designated beneficiaries shall only be entitled to benefits under this Plan if the Executive is employed by the Company at time of death or until his or her Early Retirement Date, whichever occurs earlier. A. In the event the Executive dies while employed by the Company, the Executive will have a survivor income benefit payable to his or her designated beneficiary for a guaranteed period (Section 19). The benefit will equal the designated percentage of the Executive's Final Compensation (see Section 19). B. At retirement, the benefit in paragraph A shall no longer be available, and the Executive shall elect one of the alternatives in paragraphs 1, 2, 3 and 4 below. 1. The Executive may elect to continue in effect a survivor income benefit payable to his or her designated beneficiary for a guaranteed period (see Section 19) commencing after the Executive's death. The benefit will equal the designated percentage (see Section 19) of the Executive's Final Compensation, reduced if applicable by the early retirement provision in paragraph C below based on the Executive's retirement date. 2. The Executive may elect to receive a supplemental retirement income benefit payable for a guaranteed period (see Section 19) to the Executive or, in the event of the Executive's death, his or her designated beneficiary. The benefit will be the designated percentage (see Section 19) of the Executive's Final Compensation, reduced if applicable by the early retirement provision in paragraph C below. Payments cease after an aggregate of the guaranteed period of payments have been made to the Executive and the beneficiary. 3 3. The Executive may elect to receive an actuarially equivalent lifetime supplemental retirement income benefit in a joint or survivor form with the Executive's spouse on the date of retirement as the contingent beneficiary. The benefit will be the designated percentage of the Executive's Final Compensation (see Section 19), reduced, if applicable, by the early retirement provision in paragraph C below and further reduced to cover the cost for providing the benefit over the lives of the Executive and the spouse. The benefit for a surviving spouse will be 50% of the monthly benefit for the Executive. The minimum benefit to be paid in the aggregate to the Executive, spouse, and designated beneficiary will be equal to the aggregate dollar amount which would have been payable in the guaranteed period of payout in paragraph 2 above. Therefore, after the death of the later to die of the Executive and the Executive's spouse the designated beneficiary shall receive the remainder of the minimum benefit. If the aggregate payments to the Executive and the Executive's spouse were made for at least the guaranteed period, the remainder of the minimum benefit shall be paid in a lump sum. If the aggregate payments to the Executive and the Executive's spouse were made for less than the guaranteed period, the remainder of the minimum benefit shall be paid in equal monthly installments over the period necessary such that the aggregate payment period for all benefits related to the Executive equals the guaranteed period. The actuarial reductions, from the guaranteed period amount in paragraph 2 above, to obtain the 50% joint and survivor benefit are: Executive's Age at Retirement % Reduction --------------- ----------- 55 8 56 7 57 6 58 5 59 4 60 3 61 2 62 0 4. The Executive may elect a retirement income benefit payable in the form of a lump sum distribution but only if the Executive makes such election at least one full calendar year prior to his or her Early Retirement Date or Normal Retirement Date, as applicable, or in lieu of such advance election, elects that his or retirement income benefit be actuarially reduced by six percent (6%) at retirement. If the Executive makes a lump sum distribution election, his or her retirement income benefit will equal the lump sum actuarial equivalent of a benefit, payable for a guaranteed 20 4 year period, equal to the designated percentage of the Executive's Final Compensation, reduced, as applicable, by: (i) the early retirement provision in subsection C. below based on the Executive's retirement date; and (ii) an actuarial reduction of six percent (6%) if timely advance election of the lump sum form of payment is not made. The actuarial assumptions to be applied in calculating the actuarial equivalent of an Executive's retirement income benefit under this paragraph 4. shall be determined as of the date of the Executive's retirement by the Chief Executive Officer of the Company based upon the recommendations of the Benefits Investment Committee. 5. In the event that the Executive retires after the Early Retirement Date but prior to the Normal Retirement Date, the retirement benefit in paragraph B.1, 2, 3 and 4 above will be reduced by 3% for each full year the retirement precedes the Executive's Normal Retirement Date. SECTION 6. MANNER OF PAYING BENEFITS Within 60 days following the death or retirement of the Executive eligible under Section 5, an initial benefit payment shall be made as defined under Section 5. All subsequent benefits under this Plan shall accrue on the first day of each succeeding month after such payment and shall be made on or about such day during the period for which benefits are payable. SECTION 7. BENEFICIARY DESIGNATIONS The benefits payable by the Company under Section 5 shall be paid as they become due to the beneficiary or beneficiaries as designated by the Executive in writing on the Beneficiary Designation form (Exhibit B attached hereto and incorporated herein by reference). The Executive shall have the right to change or amend such beneficiary designation from time to time (without the consent of any prior beneficiary) by submitting a newly executed Exhibit B to the Company. If the Executive fails to make such beneficiary designation or if no beneficiary so designated survives the Executive, payments shall be made as they become due to the duly appointed personal representative of the estate of the Executive. SECTION 8. TERMINATION OF EMPLOYMENT Except as otherwise provided in Section 14, if an Executive's employment with the Company is terminated prior to the Executive's Early Retirement Date, either by the Company or by the Executive, with or without cause, no amounts shall be paid under any provision of this Plan. Disability or death shall not be deemed a termination of employment for purposes of this Section. SECTION 9. DISABILITY If the Executive incurs a Disability, Executive contributions will be waived unless and until the Executive returns to full employment. Retirement benefits will not be payable under this Plan 5 while the Executive is receiving benefits under the Company's Disability Income Plan. Retirement benefits will commence with the later of the cessation of such Disability Income Plan payments or the Executive's Normal Retirement Date, such later date being the Executive's retirement for purposes of this Plan. SECTION 10. TITLE TO LIFE INSURANCE If the Company elects to purchase a life insurance contract to provide the Company with funds to make payments hereunder, the Company shall at all times be the sole owners of and the beneficiary under such contract, and shall have the unrestricted right to use all amounts and to exercise all options and privileges thereunder without knowledge or consent of the Executive, his or her designated beneficiary or any third party. It is expressly agreed that neither the Executive, designated beneficiary, nor any third party shall have any right, title, or interest whatsoever in or to any such contract. SECTION 11. PAYMENTS ARE NOT SECURED The Executive, his or her designated beneficiary or any third party having or claiming a right to payments hereunder or to any interest in this Plan shall rely solely on the unsecured promise of the Company, and nothing herein shall be construed to give the Executive, his or her spouse or designated beneficiary or any third party any right, title, interest, or claim in or to any specific asset, fund, reserve, account or property of any kind whatsoever owned by the Company or in which it may have any right, title or interest now or in the future. The Executive shall have the right to enforce his or her claim against the Company in the same manner as any unsecured creditor. SECTION 12. NON-ASSIGNABILITY OF BENEFITS No rights of any kind under this Plan shall be transferable or assignable by the Executive, spouse or any designated beneficiary or be subject to alienation, encumbrance, garnishment, attachment, execution, levy or seizure by legal process of any kind, voluntary or involuntary. SECTION 13. AMENDMENT This Plan may be amended at any time or from time to time by the Company. Any amendment shall not reduce the benefit of any participating Executive, or any party receiving benefits under this Plan without a consent in writing by the affected Executive or party, as applicable. The failure of either the Company or the Executive to enforce any of the provisions hereof shall not be deemed a waiver thereof. No provision of this Plan shall be deemed to have been waived or modified unless such waiver or modification shall be in writing and signed by the appropriate party. The Company reserves the right to terminate the Plan at any time. The termination of the Plan shall not affect the payment of benefits due to or accrued by any Executive, Executive's spouse, or designated beneficiary covered by the Plan prior to termination. 6 SECTION 14. CHANGE OF CONTROL OF THE COMPANY A. 1. Notwithstanding any other provision of the Plan, including specifically Sections 5. and 8., in the event of the change of control of the Company, each Executive employed with the Company as of the date of the change of control shall receive, in lieu of any benefit accrued under any other provision of the Plan (other than paragraph 4. below of this subsection A., if applicable), a change of control benefit as calculated under paragraph 3. below of this subsection A. payable in the form of a lump sum distribution as soon as administratively feasible after the date of such change of control, regardless of the Executive's age or period of continuous service as of the date of the change of control. 2. Notwithstanding any other provision of the Plan, including specifically Section 5., in the event of the change of control of the Company, each Executive who terminated employment before the date of the change of control (except for an Executive of a division of the Company divested before the change of control, unless otherwise determined by the Benefits Investment Committee in its discretion) who has not received full payment of his or her accrued benefit under Section 5. (or if any such Executive is deceased, such Executive's spouse or other designated beneficiary) shall receive, in full satisfaction of such accrued benefit, a lump sum distribution of the actuarial equivalent of such accrued benefit (or a lump sum distribution of the actuarial equivalent of his or her remaining payments if already in pay status) as soon as administratively feasible after the date of such change of control. 3. The change of control benefit calculated under this subsection A. will equal the lump sum actuarial equivalent of a benefit, payable for a guaranteed 20 year period, equal to the product of the designated percentage of the Executive's Final Compensation and such Executive's Final Compensation as of the date of the change of control (without imposition of a reduction of 3% for each full year the payment date precedes the Executive's Normal Retirement Date, if applicable). 4. Subject to Section 3., each Executive employed with the Company as of the date of the change of control shall continue to be eligible to participate in this Plan until his or her termination of employment, and upon such Executive's termination he or she shall be eligible for any benefits accrued under the Plan subsequent to the payment of the change of control benefit, regardless of the Executive's age or period of continuous service as of the date of his or her termination of employment. With respect to any such accrued benefit, the Executive may elect retirement benefits under subsection B. of Section 5. payable at any time following his or her termination of employment and attainment of age 55, and the survivor income benefit in subsection A. of Section 5. shall apply until such election is made. The calculation of the Executive's accrued benefit 7 following the change of control will equal the actuarial equivalent of a benefit, payable for a guaranteed 20 year period, equal to the product of the designated percentage of the Executive's Final Compensation and such Executive's Final Base Salary as of the date of the Executive's termination of employment, actuarially reduced for the change of control benefit determined under paragraph 3. above of this subsection A. (but without imposition of a reduction of 3% for each full year the payment date precedes the Executive's Normal Retirement Date, if applicable). After termination of employment, no further contributions shall be required of the Executive under Section 4. 5. The actuarial assumptions to be applied in calculating the actuarial equivalent of an Executive's benefit under this subsection A. shall be determined as of the date of the change of control or the Executive's termination of employment, as applicable, by the Chief Executive Officer of the Company based upon the recommendations of the Benefits Investment Committee. B. For purposes of paragraph A of this Section, the term "change of control of the Company" means: (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the Exchange Act) (a Person) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subparagraph (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (4) any acquisition pursuant to a transaction which complies with Clauses (A), (B) and (C) of subparagraph (iii) of this paragraph B; or (ii) individuals who, as of September 10, 1998, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided, however, that any individual becoming a director subsequent to September 10, 1998 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or 8 threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case unless, following such Business Combination (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or of such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or the action of the Board, providing for such Business Combination; or (iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. SECTION 15. FORFEITURE OF BENEFITS Executive shall forfeit any right to receive benefits hereunder (including any benefit payable to Executive's spouse or designated beneficiary), and all benefit payments hereunder shall terminate, if, at any time during the period in which Executive, his/her spouse and designated beneficiaries shall be entitled to benefits under this Plan or benefits are being paid hereunder, Executive, directly or indirectly, either individually or as an employee, officer, principal, agent, partner, shareholder, owner, trustee, beneficiary, co-venturer, distributor or consultant or in any other capacity: (1) within the continental United States, in a capacity that could reasonably be 9 expected to cause Executive to use or disclose confidential information of the Company acquired by Executive during the term of Executive's employment with the Company, and in a manner materially detrimental to the business of the Company, participates in, becomes associated with, provides assistance to, or has a financial or other interest in any business, activity or enterprise which competes (with any product or product lines of the Company) for Active Customers of the business of the Company or any successor or assign of the Company; (2) induces or attempts to induce any employee, officer, director, sales representative, consultant or other personnel of the Company to terminate his or her relationship or breach his or her agreements with the Company; or (3) within the continental United States induces or attempts to induce any Active Customer or the Company to cease doing business, in whole or in part, with or through the Company, or to do business with any other person, firm, partnership, corporation or any other entity competitive with the business of the Company. The ownership of less than a five percent (5%) interest in a corporation whose shares are traded in a recognized stock exchange or traded in the over-the-counter market, even though that corporation may be a competitor of the Company, shall not be deemed financial participation in a competitor. "Active Customer" shall mean any customer of the Company which purchased any of the Company's products or services during the one-year period preceding the date Executive engages in any activity specified in subsection (1) or (3) above. In the event of a change in control of the Company (as defined in Section 14 above), this forfeiture provision shall be void. SECTION 16. SUCCESSORS AND ASSIGNS If the Company sells, assigns or transfers all or substantially all of its business and assets to any party, excluding affiliates of the Company, or if the Company merges into or consolidates or otherwise combines with any party which is a continuing or successor entity, then the Company shall assign all of its right, title and interest in this Plan as of the date of such event to the party which is either the acquiring or successor corporation, and such party shall assume and perform from and after the date of such assignment all of the terms, conditions and provisions imposed under this Plan upon the Company. In case of such assignment by the Company and such assumption and agreement by such party all further rights as well as all other obligations of the Company under this Plan thenceforth shall cease and terminate and thereafter the expression "the Company" wherever used herein shall be deemed to mean such party. SECTION 17. NON-GUARANTEE OF EMPLOYMENT This Plan shall not be construed as giving the Executive the right to be retained as an employee of the Company for any period. SECTION 18. VESTING There is no vesting under the Plan. 10 SECTION 19. DESIGNATED PERCENTAGES AND GUARANTEED PERIOD The designated percentage under Section 5 for the Executive is %. -- The designated guaranteed period under Section 5 for the Executive is 20 years. SECTION 20. ADMINISTRATION A. The Benefits Investment Committee shall be responsible for the general operation and administration of the Plan and shall have the full authority to interpret and construe the Plan. The Benefits Investment Committee's interpretation and construction of the Plan, and actions thereunder, shall be binding and conclusive on all persons and for all purposes. B. The Benefits Administrative Committee shall have the full authority to determine and review claims for benefits under this plan. The Benefits Administrative Committee's determination of benefit claims under this plan, and actions thereunder, shall be binding and conclusive on all persons and for all purposes. SECTION 21. NOTICES All notices, requests, demands, and other communications under this Plan shall be in writing and delivered in person or by certified mail, postage prepaid as follows: Company ------- Sensient Technologies Corporation 777 E. Wisconsin Avenue Milwaukee, WI 53202 Attn: Vice President - Human Resources Executive --------- 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of June 14, 2001. Sensient Technologies Corporation By: -------------------------------------- Richard Carney, Vice President - Human Resources (CORPORATE SEAL) Attest: ------------------------------------------- John L. Hammond, Secretary ------------------------------------------- Executive 12 EXHIBIT 10.1(t) Exhibit A SENSIENT TECHNOGIES CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN B WAIVER OF PARTICIPATION On , I was given the opportunity to participate in the --------------------- Sensient Technologies Corporation Supplemental Executive Retirement Plan B. In accordance with the policy established under the Plan, each designated Executive is given 60 days from the notice of designation (the "Notice") to participate before the offer is withdrawn, unless at a later date the offer is reinstated by Sensient Technologies Corporation. I acknowledge and understand this limitation relative to my participation in the Plan. Because the elapsed time since receipt of the Notice exceeds 60 days, there will be no benefits available to me or to any of my beneficiaries under the Plan. I further understand that my future participation in the Plan is solely within the discretion of Sensient Technologies Corporation. Date: ------------------------------- - ------------------------------------ ------------------------------------ (Witness) (Signature) (Print Name) Exhibit B SENSIENT TECHNOLOGIES CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN B Beneficiary Designation ----------------------- I, , hereby designate the following as my Primary ---------------------- Beneficiary under my Supplemental Executive Retirement Plan B with Sensient Technologies Corporation: - ------------------------------------ ------------------------------------ Primary Beneficiary's Name Relationship to me If the Primary Beneficiary does not survive me or survives me, but dies before actual payment in full of my benefits, or if there be no named Primary Beneficiary, the remaining portion of my benefits shall be paid in equal shares to the following Contingent Beneficiaries. - ------------------------------------ ------------------------------------ Contingent Beneficiary's Name Relationship to me - ------------------------------------ ------------------------------------ Contingent Beneficiary's Name Relationship to me - ------------------------------------ ------------------------------------ Contingent Beneficiary's Name Relationship to me Upon the death of a Contingent Beneficiary, any remaining portion of said benefits shall be paid in equal shares to his or her children living at the time each payment is to be made in accordance with the Plan. Upon the death of a Contingent Beneficiary who is not survived by a child or children, or upon the death of the last surviving child of a Contingent Beneficiary, any remaining portion of his or her beneficial interest shall be paid in equal shares to the then living Contingent Beneficiaries and the children of any then deceased Contingent Beneficiaries, any such child or children to be paid (as described in the preceding sentence) only the share the parent would receive if living. If none of the foregoing persons are living when any benefits under the Plan are payable, any remaining installments shall be paid to the personal representative of the last to die of me or my designated beneficiary. This form constitutes a revocation in full of any Beneficiary Designations previously made by me and may be changed or revoked by me at any time, provided that such subsequent designations be in writing and filed with Sensient Technologies Corporation. Witness: Date: ------------------------------ - ------------------------------------ ------------------------------------ (Cannot be a Beneficiary) Signature of Employee 2 Receipt of the above Beneficiary Designation is hereby acknowledged by: SENSIENT TECHNOLOGIES CORPORATION Date: By: ------------------------------ --------------------------------- 3 EX-10.1(W) 9 dex101w.txt NON-EMPLOYEE DIRECTORS STOCK PLAN EXHIBIT 10.1(w) SENSIENT TECHNOLOGIES CORPORATION 2002 DIRECTORS STOCK PLAN Adopted December 6, 2001 ARTICLE ONE ESTABLISHMENT, PURPOSE AND EFFECTIVE DATE OF PLAN Section 1.1 Establishment. Sensient Technologies Corporation, a Wisconsin ------------- corporation (the "Company"), hereby establishes the "Sensient Technologies Corporation 2002 Non-Employee Director Stock Plan" (the "Plan") which provides for the grant of stock to Non-Employee Directors of the Company. For purposes of this Plan, a "Non-Employee Director" means any individual who is a "non-employee director" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1936, as amended (the "Exchange Act"). Section 1.2 Purpose. The purpose of this Plan is to advance the interests ------- of the Company by aligning the interests of the Company's stockholders and Non-Employee Directors, and by enabling the Company to attract and retain the services of directors upon whose judgment, interest and special effort the successful conduct of its operations is largely dependent. Section 1.3 Term of Plan. This Plan shall become effective upon its ------------ adoption by the Company's Board of Directors (the "Board"). This Plan shall remain in effect, subject to the right of the Board to earlier terminate this Plan pursuant to Section 6.1 hereof, until all shares of Common Stock subject to it shall have been issued pursuant to the provisions hereof. ARTICLE TWO ELIGIBILITY AND PARTICIPATION Section 2.1 Eligibility and Participation. Participants (the ----------------------------- "Participants") in this Plan shall include each member of the Board who is a Non-Employee Director at the time Common Stock of the Company is issued pursuant to this Plan. ARTICLE THREE ADMINISTRATION Section 3.1 Administration. This Plan shall be administered by the -------------- Nominating Committee of the Board. Section 3.2 Powers and Authority of the Nominating Committee. The ------------------------------------------------ Nominating Committee, by majority action thereof, shall have complete and sole authority to: (a) Interpret this Plan and apply its provisions, and prescribe, amend and rescind rules, regulations, procedures, and forms relating to this Plan; (b) Authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of this Plan; (c) Amend any outstanding agreement relating to any Common Stock issued pursuant to this Plan, subject to legal restrictions and to the consent of the Participant who entered into such agreement; and (d) Make all other determinations and take all other actions deemed necessary or advisable for the administration hereof and provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company in connection herewith; but only to the extent that any of the foregoing are not contrary to the express provisions hereof. Determinations, interpretations or other actions made or taken by the Nominating Committee pursuant to the provisions hereof shall be final, binding and conclusive for all purposes and upon all persons. The Nominating Committee's decisions need not be uniform and may be made selectively among Participants, whether or not they are similarly situated. Notwithstanding the foregoing, the Nominating Committee shall have no discretion or authority to: (i) designate the Participants to be issued Common - Stock; (ii) determine the number of shares of Common Stock to be issued to each -- such Participant; (iii) determine the terms and conditions of such Common Stock --- relating to restrictions or lapse thereof; or (iv) prescribe the consideration -- for the issuance of Common Stock hereunder and determine the sufficiency of such consideration, which matters shall be as hereafter provided. Section 3.3 Composition of Nominating Committee. The Nominating Committee ----------------------------------- shall consist of no less than two members of the Board who shall be appointed by the Board. ARTICLE FOUR STOCK SUBJECT TO PLAN Section 4.1 Number. The total number of shares of Common Stock reserved and ------ available for issuance under this Plan shall initially be 30,000. The number of shares of Common Stock reserved and available for issuance hereunder shall be subject to adjustment upon occurrence of any of the events indicated in Section 4.2 hereof. The shares to be issued under this Plan shall consist of treasury Common Stock, not reserved for any other purpose. In the event any shares of Common Stock that are granted under the Plan are forfeited, such shares again shall become available for issuance under the Plan. Section 4.2 Adjustment in Capitalization. In the event of any change in the ---------------------------- outstanding shares of Common Stock that occurs, whether prior to or after the effective 2 date of this Plan, by reason of a Common Stock dividend or split, recapitalization, merger, consolidation, combination, spin-off, split-up, exchange of shares or other similar corporate change, the aggregate number of shares of Common Stock authorized for issuance hereunder shall be appropriately adjusted by the Nominating Committee, whose determination shall be conclusive; provided, however, that fractional shares shall be rounded to the nearest whole share. In such event, the Nominating Committee shall also have the discretion to make appropriate adjustments in the number of shares of Common Stock authorized for issuance to Participants hereunder. ARTICLE FIVE SHARE AWARDS Section 5.1 Grant of Common Stock. Subject to this Section and Sections --------------------- 1.3, 4.1 and 4.2 hereof, each person who was a Non-Employee Director of the Company immediately following each annual meeting of shareholders of the Company shall, without further action by the Board or the Nominating Committee, be issued 300 shares of the Company's Common Stock (subject to appropriate adjustment as provided in Section in Section 4.2 hereof) as soon as reasonably practicable, but in no event later than [5 days], following such date. Such shares of Common Stock shall be evidenced by a written agreement to be entered into between the Company and the Participant. Such shares of Common Stock shall not be transferable and be immediately and automatically forfeited to the Company in the event the Participant ceases to serve as a member of the Board, provided, however, that such forfeiture provision shall lapse with respect to - -------- one-third of the shares of Common Stock so issued on the date of each of the next three annual meetings of stockholders, if the participant continuously serves as a member of the Board until such annual meeting date (such period until the forfeiture provision on the shares shall lapse, the "Period of Restriction"). The Nominating Committee shall have no discretion in determining the number of shares of Common Stock issued to each Participant. Section 5.2 Cessation of Service. -------------------- (a) Death, Disability or Retirement. Upon cessation of service as a ------------------------------- Non-Employee Director of the Company due to death, disability, voluntary retirement or retirement required under any mandatory policy of the Company then in effect, or for any other reason other than removal of the Participant from the Board as set forth in Section 5.2(b) below, the Period of Restriction shall immediately lapse. (b) Removal. Upon cessation of service as a Non-Employee Director of the ------- Company due to removal from the Board in accordance with the procedures set forth in Sections 180.0808 and 180.0809 of the Wisconsin Business Corporation Law or the Company's Bylaws, as amended from time to time, any shares of Common Stock with respect to which the Period of Restriction has not yet lapsed shall be immediately and automatically forfeited to the Company. 3 Section 5.3 Change of Control. ----------------- (a) In the event of a "Change of Control" (as hereinafter defined), the Period of Restriction shall be deemed to have lapsed immediately prior to the consummation of the transaction constituting the Change of Control. (b) A "Change of Control" of the Company means: (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of 20% or more of either (A) the then - outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then outstanding - voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, -------- however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition - directly from the Company, (2) any acquisition by the Company, (3) any - - acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (4) any acquisition pursuant to a transaction which complies with clauses - (A), (B) and (C) of subsection (iii) of this Section 5.3(b); or (ii) individuals who, as of December 6, 2001, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a -------- director subsequent to December 6, 2001 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (iii) consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities - who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as 4 a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no person (excluding any employee benefit plan (or related trust) of - the Company or of such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the - corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or the action of the Board, providing for such Business Combination; or (iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. Section 5.4 Restrictions on Common Stock. Notwithstanding the foregoing, ---------------------------- the Company may delay the issuance of Common Stock under the Plan until applicable Federal, "blue sky" and state securities law requirements and any stock exchange requirements are satisfied. The Nominating Committee shall impose such restrictions on any shares of Common Stock issued pursuant to this Plan as it may deem necessary or advisable to comply with restrictions under applicable Federal securities laws, under the requirement of any stock exchange upon which such shares of Common Stock are then listed, and under any "blue sky" or state securities laws applicable to such shares. Section 5.5 Registration. Any Common Stock granted hereunder to a ------------ Participant may be evidenced in such manner as the Nominating Committee may deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of shares of Common Stock granted hereunder to a Participant, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend (as determined by the Nominating Committee) referring to the terms, conditions and restrictions applicable to such Common Stock. In the event such Common Stock is issued in book-entry form, the depository and the Company's transfer agent shall be provided with notice referring to the terms, conditions and restrictions applicable to such Common Stock, together with such stop-transfer instructions as the Nominating Committee deems appropriate. Section 5.6 Removal of Restrictions. Except as otherwise provided in ----------------------- Sections 5.1, 5.2, 5.3 and 5.7 hereof, shares of Common Stock covered by each Common Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the Period of Restriction. Once the shares are released from the restrictions, the Participant shall be entitled to have the legend required by Section 5.5 removed from his or her stock certificates, to the extent such legend is no longer applicable. 5 Section 5.7 Voting Rights. During the Period of Restriction, Participants ------------- holding shares of Common Stock granted hereunder may exercise full voting rights with respect to those shares. Section 5.8 Dividends and Other Distributions. During the Period of --------------------------------- Restriction, Participants holding shares of Common Stock granted hereunder shall be entitled to receive all dividends and other distributions paid with respect to those shares while they are so held. If any such dividends or distributions are paid in shares of Stock, the shares shall be subject to the same restrictions on transferability as the shares of Common Stock with respect to which they were paid. Section 5.9 Nontransferability of Common Stock. No shares of Common Stock ---------------------------------- granted under the Plan may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, otherwise than by will or by the laws of decent and distribution, until the termination of the applicable Period of Restriction. All rights with respect to the Common Stock granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. ARTICLE SIX GENERAL PROVISIONS Section 6.1 Amendment and Termination. The Board may at any time amend, ------------------------- alter, suspend, discontinue or terminate this Plan. Section 6.2 Taxes. The Company shall be entitled to withhold the amount of ----- any tax attributable to shares of Common Stock deliverable under this Plan after giving the person entitled to receive such shares of Common Stock notice as far in advance as practicable, and the Company may defer delivery if any such tax may be pending unless and until indemnified to its satisfaction. A Participant may elect to pay all or a portion of the federal, state and local withholding taxes arising in connection with the lapse of restrictions on Common Stock, by electing to (i) have the Company withhold shares of Common Stock, (ii) tender - -- back shares of Common Stock received in connection with such benefit, or (iii) --- deliver other previously owned shares of Common Stock, having a fair market value equal to the amount to be withheld; provided, however, that the amount to -------- be withheld shall not exceed the Participant's estimated total federal, state and local tax obligations associated with the transaction. The written election must be made on or before the date as of which the amount of tax to be withheld is determined. The fair market value of fractional shares of Common Stock remaining after payment of the withholding taxes shall be paid to the Participant in cash. Section 6.3 Indemnification. Each person who is or shall have been a member --------------- of the Nominating Committee or of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under this Plan and against and from any and all 6 amounts paid in settlement thereof, with the Company's approval, or paid by him in satisfaction of any judgment in any such action, suit or proceeding against him, provided, however, that he shall give the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. Section 6.4 Rights of Board Members. Nothing in this Plan shall interfere ----------------------- with or limit in any way the rights of stockholders of the Company or the Board to elect or remove members of the Board at any time nor confer upon any Participant any right to continue as a member of the Board. Section 6.5 No Right to Specific Assets. Nothing contained in the Plan and --------------------------- no action taken pursuant to the Plan shall create or be construed to create a trust of any kind or any fiduciary relationship between the Company and any Participant, the executor, administrator or other personal representative or designated beneficiary of such Participant, or any other persons. To the extent that any Participant or his executor, administrator, or other personal representative, as the case may be, acquires a right to receive any benefit from the Company pursuant to the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. Section 6.6 Rights as a Stockholder. A Participant shall have no rights as ----------------------- a stockholder with respect to any Common Stock until he shall have become the holder of record of such Common Stock. Section 6.7 Headings and Captions. The headings and captions herein are --------------------- provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. Section 6.8 Controlling Law. The issuance of Common Stock shall be subject --------------- to all applicable laws, rules and regulations, and to such approvals and any governmental agencies or national securities exchanges as may be required. This Plan shall be construed and enforced according to the laws of the State of Wisconsin without regard to conflict of laws. 7 EX-13.1 10 dex131.txt PROTIONS OF ANNUAL REPORT Exhibit 13.1 Management's Analysis of Operations and Financial Condition OVERVIEW 2001 represents a successful year of transition for Sensient Technologies Corporation ("the Company"). During the year, the Company completed the sale of Red Star Yeast for a total business value of $122 million. Annualized savings of $20 million were achieved through the consolidation of facilities and a reduction of 400 positions. The Company also completed two acquisitions that extend the technical color and digital imaging product lines of the Color Group. This transition is reflected in the financial results of the Company, which were stronger in the second half of 2001 than the first half. The sale of Red Star Yeast was completed on February 23, 2001 for a total business value of $122 million. As a result of this transaction, the Company received cash proceeds of $113 million, of which $4 million was received in the third quarter of 2000. The cash proceeds have been used to fund acquisitions, repurchase stock and pay down debt. The results of the Yeast business through February 23, 2001, and the related gain on the sale are reported separately from continuing operations. The Company announced a plan in the second quarter of 2001 to reduce costs, streamline the workforce and increase operating efficiencies. The plan has reduced Company expenses by $10 million on an annualized basis, with $5.7 million of savings realized in 2001. Expenses of $3 million were recorded as special charges in the second quarter of 2001 for employee separation costs associated with the reduction of 200 positions. All of these separation costs have been paid as of December 31, 2001. In 2001, the Company also completed a facility consolidation plan that was announced in December 2000. Two manufacturing facilities were closed, which resulted in a reduction of an additional 200 positions. These actions will deliver annualized savings of $10 million starting in 2002, $3.5 million of which were realized in 2001. The Company recorded special charges of $19 million in the fourth quarter of 2000 related to this plan (see Note 13 to the Consolidated Financial Statements). A modification of this plan in the second quarter of 2001 and lower than estimated costs for certain items in the original plan resulted in a reversal of $3.2 million of the special charges reserve. This change is primarily reflected in the Special Charges line in the Consolidated Statements of Earnings. The Company completed two acquisitions in the fourth quarter of 2001 in the Color Group and announced a third acquisition in January 2002. These acquisitions strengthen the Company's presence in specialty dyes and ink-jet inks and allow the Company to enter additional specialty markets in digital imaging and laser printing applications. The Company achieved operating income in 2001 of $121.5 million, compared to $112.2 million in 2000. Net earnings were $73.6 million in 2001, compared to $62.0 million in 2000. Earnings from discontinued operations of $8.6 million and $3.3 million are included in 2001 and 2000 net earnings, respectively. Diluted earnings per share, including earnings from discontinued operations, were $1.54 and $1.26 in 2001 and 2000, respectively. RESULTS OF OPERATIONS 2001 vs. 2000 - Continuing Operations Revenue from continuing operations for 2001 was $816.9 million, an increase of $7.8 million, or 1.0%, over 2000. The increase in revenue is attributable to an increase of $14.5 million, or 2.8%, in the Flavors & Fragrances Group. Color Group revenue was 2.7% lower than 2000 due to the strengthening U.S. dollar and the divestiture of non-strategic businesses in 2000. Excluding foreign exchange and the divestitures, revenue for the Company would have increased approximately 4%. Both the Flavors & Fragrances and Color Groups were negatively impacted by lower demand as customers had fewer new product introductions and reduced inventory levels. Sales initiatives in the fourth quarter resulted in improved revenue. Fourth quarter 2001 revenue increased 10.6% over the fourth quarter of the prior year. Gross margin for 2001 was 32.8% compared to 35.1% in 2000. Gross margin in the Flavors & Fragrances Group declined 2.7% primarily due to the impact of higher energy costs in the dehydrated products business. In November 2001, the dehydrated products business implemented price increases to mitigate the negative effect of higher energy costs. The gross margin for the Color Group declined 1.6% due to a shift in product mix. Selling and administrative expenses were $146.1 million in 2001, a decrease of $6.9 million, or 4.5%, from 2000. The Company's December 2000 and April 2001 programs to consolidate facilities and streamline the workforce were the primary reasons for this reduction in expenses. Lower contributions to benefit plans in 2001 and continued emphasis on controlling costs also reduced selling and administrative expenses. Operating income was $121.5 million compared to $131.2 million in 2000, excluding special charges in 2000. The strengthening of the U.S. dollar reduced 2001 operating income by $1.4 million. Operating income decreased $6.4 million in the Flavors & Fragrances Group primarily due to the increase in energy costs. Operating income decreased $1.5 million in the Color Group due to a shift in product mix. The full year benefits of facilities consolidation, workforce reduction, price increases and improved efficiencies will be seen in 2002 in both the Flavors & Fragrances Group and the Color Group. Both Groups reported increases in operating income in the fourth quarter of 2001 compared to the same period in 2000. Interest expense decreased $2.6 million to $31.5 million in 2001. The decrease was due to lower average outstanding debt and lower average interest rates. The proceeds from the Red Star Yeast divestiture were used primarily to reduce outstanding debt, repurchase the Company's stock and to fund acquisitions of companies with high growth potential. The effective tax rate was 27.8% in 2001. The 2001 tax rate was reduced as a result of the expected settlement of certain tax liabilities and an adjustment of the valuation allowance made possible by the ability to utilize state and foreign net operating loss carryforwards. Excluding these reductions, the effective tax rate in 2001 would have been approximately 33.8%. The effective tax rate in 2000 was also 27.8%, which included a one-time tax benefit realized from ceasing dehydrated operations in Ireland. Excluding this benefit and other minor one-time items, the effective tax rate would have been approximately 32.6% in 2000. Earnings from continuing operations were $65.0 million, or $1.36 per share diluted, in 2001 compared to $1.15 in 2000. Diluted earnings per share from continuing operations in 2000 included special charges of $19.0 million ($13.3 million, or $.27 per share, after tax). Without the special charges, 2000 diluted earnings per share from continuing operations were $1.42. 2000 vs. 1999 - Continuing Operations Revenue for 2000 increased $12.9 million, or 1.6%, to $809.2 million from $796.3 million in 1999. This revenue increase reflects growth in the Color Group of $34.3 million, which resulted from greater sales volume and the acquisition of two color companies, Dr. Marcus GmbH and Monarch Food Colors, L.P. The Flavors & Fragrances Group reported 3.0% lower revenue, as prices for dehydrated products declined industry-wide in 2000. Volumes of dehydrated products increased 10% from 1999, resulting in market share gain. Revenue was significantly affected by unfavorable currency exchange rates, primarily a declining Euro, reducing reported revenue by approximately $31 million. Lower prices for dehydrated products also affected revenue unfavorably; excluding these two factors, reported revenue for 2000 would have increased by 7% over the prior year. Gross margin was 35.1% in 2000 compared to 33.9% in 1999. Gross margin in the Color Group rose 0.3% from increased sales of higher-margin color products. Gross margin in the Flavors & Fragrances Group increased 0.5% as margins improved in traditional flavors, but were partially offset by reduced margins for dehydrated products. In addition, margins for flavors, fragrances and color products sold in the Asia Pacific region improved in 2000. Selling and administrative expenses rose $7.4 million to $153.0 million, a 5.1% increase. The Flavors & Fragrances Group reported a 0.5% decrease and the Color Group reported a 6.8% increase, primarily as a result of acquisitions. Higher intangible asset amortization expense also increased selling and administrative expenses in 2000. Operating income, excluding special charges in 2000, increased $6.9 million to $131.2 million, or 5.6%. Operating income for the Color Group increased $11.6 million, or 19.6%, as volumes and margins increased substantially. Operating income for the Flavors & Fragrances Group declined $1.9 million as gains in traditional flavors only partially offset lower operating income from dehydrated products. Excluding the effect on operating income of lower prices for dehydrated products, the Flavors & Fragrances Group operating profit increased by 14% over the prior year. Interest expense increased $6.7 million to $34.2 million in 2000. The increase was primarily due to additional outstanding borrowings, which were used to fund acquisitions. The effective tax rate for 2000 was 27.8% compared to 31.3% in 1999. The 2000 tax rate includes the tax benefit from ceasing dehydrated operations in Ireland and other minor one-time items, and the 1999 tax rate includes the benefit from settlement of prior years' issues. Excluding the effect of these items, the effective tax rate would have been approximately 32.6% in 2000 and 33.5% in 1999. Earnings from continuing operations, excluding special charges in 2000, were $69.6 million, or $1.42 per share diluted, an increase of 8.4% over 1999. LIQUIDITY AND FINANCIAL POSITION The Company realized a strong improvement in cash provided by operating activities of continuing operations in the fourth quarter of 2001. The Company also took advantage of strong investor demand and historically low interest rates by issuing approximately $150 million of privately placed debt. Cash provided by operating activities of continuing operations was $58.9 million in 2001, $75.1 million in 2000 and $61.8 million in 1999. Operating cash flow provided the primary source of funds to finance operating needs, capital expenditures and shareholder dividends. Cash provided by continuing operations in 2001 was reduced as a result of tax payments and other transactional costs from the disposal of the Yeast business and costs paid as part of the December 2000 and April 2001 programs that consolidated facilities and streamlined the workforce. Excluding these items, cash provided by continuing operations would have been approximately $86.7 million, which represents a 15.4% increase over the prior year. Cash provided by investing activities was $25.2 million in 2001 compared to cash used for investing activities of $90.1 million in 2000 and $121.0 million in 1999. Cash proceeds from the sale of assets were $114.6 million in 2001 and $11.7 million in 2000, primarily a result of the sale of Red Star Yeast. Cash used for acquisitions was $50.7 million in 2001 and $50.2 million in 2000. Current year acquisitions include Kimberly-Clark Printing Technology, Inc. (now known as Formulabs, Inc.), a manufacturer of specialty inks for ink-jet and industrial applications, and the technical dye business of Crompton Colors Incorporated, which manufactures technical dyes and colors for paper, ink-jet printing applications, plastics and a number of specialty markets. Capital expenditures for continuing operations totaled $38.0 million in 2001 and $45.2 million in 2000. Cash used in financing activities was $85.5 million in 2001 compared to cash provided by financing activities of $1.4 million in 2000 and $37.8 million in 1999. The Company had a net reduction in debt of $31.9 million in 2001 versus net borrowings of $56.1 million in 2000. In November 2001, the Company issued $30 million of U.S. dollar-denominated notes with a coupon rate of 5.85% and (euro)134 million Euro-denominated notes with a coupon rate of 5.63% due in November 2006. Cash received from the sale of Red Star Yeast and the proceeds from the additional borrowings were used to refinance existing short-term debt and fund acquisitions, as well as for general corporate purposes. The Company maintains debt levels considered prudent based on its cash flows, interest coverage and percentage of total debt to total capital. The Company has a share repurchase program under which it is authorized to repurchase up to 10.0 million shares of Company stock. As of December 31, 2001, 6.1 million shares were available under the authorization. During 2001 and 2000, the Company repurchased 1.7 million and 2.4 million shares at a cost of $37.0 million and $46.7 million, respectively. The Company has paid uninterrupted quarterly cash dividends since commencing public trading in its stock more than 36 years ago. In 2001 and 2000, dividends paid per share were $0.53. The impact of inflation on both the Company's financial position and results of operations has been minimal and is not expected to adversely affect 2002 results. The Company paid net cash of $50.7 million for the two acquisitions in 2001. If the acquired companies meet specific performance targets in the first year following the acquisition, the Company will pay up to an additional $9.0 million. The Company's financial position remains strong, enabling it to meet cash requirements for operations, capital expansion programs and dividend payments to shareholders. The Company intends to fund acquisitions, working capital requirements, principal and interest payments and other liabilities with cash provided by operations, to the extent available, and short-term and long-term borrowings under existing credit facilities. MARKET RISK FACTORS The Company is exposed to market risks, including changes in interest rates, currency exchange rates and commodity prices. To manage the volatility relating to these exposures on a consolidated basis, the Company nets the exposures to take advantage of natural offset. The Company also enters into various derivative transactions for some of the remaining exposures pursuant to the Company's policies covering hedging practices. The financial impacts of these hedging instruments are offset by corresponding changes in the underlying exposures being hedged. The Company does not hold or issue derivative financial instruments for trading purposes. Note 1 to the Consolidated Financial Statements includes a discussion of the Company's accounting policies for financial instruments. The Company has performed strongly as a result of its global reach. Because the Company manufactures and sells its products throughout the world, it is exposed to movements in foreign currency exchange rates. The major foreign currency exposures involve the markets in Western Europe, Mexico and Canada. The primary purpose of the Company's foreign currency hedging activities is to protect against the volatility associated with foreign currency sales, purchases of materials and other assets and liabilities created in the normal course of business. The Company utilizes foreign exchange contracts with durations of generally less than 12 months that qualify as cash flow hedges under Statement of Financial Accounting Standards ("SFAS") No.133, "Accounting for Derivative Instruments and Hedging Activities," as amended. At December 31, 2001 and 2000, the fair values of these instruments, based on dealer quotes, were liabilities of $0.5 million and $3.6 million, respectively. At December 31, 2001 and 2000, the potential gain or loss in the fair value of the Company's outstanding foreign exchange contracts, assuming a hypothetical 10% fluctuation in the currencies of such contracts, would be approximately $6.4 million and $6.0 million, respectively. However, any change in the value of the contracts, real or hypothetical, would be significantly offset by an inverse change in the value of the underlying hedged items. In addition, this hypothetical calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. The Company manages its debt structure and interest rate risk through the use of fixed rate and floating rate debt and through the use of derivatives. The Company's primary exposure is to interest rates in the U.S. and Western Europe. The Company uses interest-rate swaps to hedge its exposure to interest rate changes, manage the level of fixed and floating interest exposure and also to lower its financing costs. In December 2001, the Company entered into a series of interest rate swap agreements to manage the mix of fixed and floating interest rate debt. These instruments are accounted for as fair value hedges under SFAS No. 133. The notional amount of the interest rate swaps at December 31, 2001, was $148.0 million with varying maturities through December 2008. In 2000, certain foreign currency interest rate swaps were designated as partial hedges of the Company's investments in its foreign operations. At December 31, 2000, no interest rate swaps were outstanding. The fair value of the interest rate swaps at December 31, 2001, was not material. The potential gain or loss in the fair value of the outstanding interest rate swaps at December 31, 2001, assuming a hypothetical 10% fluctuation in interest rates of such contracts would be approximately $3.4 million. In November 2001, the Company issued (Euro)134 million Euro-denominated notes. These non-derivative instruments have been designated as a partial hedge of the Company's Euro net asset position. The weighted-average interest rate on fixed rate debt obligations outstanding in each of the five years subsequent to December 31, 2001, and cumulative amounts for years thereafter, range from 6.3% to 6.7%. All of the outstanding debt is denominated in U.S. dollars, with the exception of $119,491,000 maturing in 2006 which is denominated in Euros with an interest rate of 5.63%. The fair values of the debt obligations approximated the recorded values as of December 31, 2001. The aggregate amounts of maturities on long-term debt each year for the five years subsequent to December 31, 2001 are as follows: 2002, $41,794,000; 2003, $11,599,000; 2004, $11,557,000; 2005, $17,701,000; and 2006, $167,044,000. The Company is the purchaser of certain commodities such as corn, sugar, soybean meal and fruits. The Company generally purchases these commodities based upon market prices that are established with the vendor as part of the purchase process. In general, the Company does not use commodity financial instruments to hedge commodity prices due to a high correlation between the commodity cost and the ultimate selling price of the product. On occasion, the Company may enter into non-cancelable forward purchase contracts, as deemed appropriate, to reduce the effect of price fluctuations on future manufacturing requirements. NEW PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." The statements eliminate the pooling-of-interests method of accounting for business combinations and require that the amortization of goodwill and other intangibles with indefinite useful lives cease. Instead, the carrying value will be evaluated for impairment on an annual basis. SFAS No. 141 is effective for business combinations initiated after June 30, 2001. The Company will adopt SFAS No. 142 on January 1, 2002. Amortization of goodwill recorded by the Company in 2001 was approximately $8.9 million. The Company anticipates that the goodwill impairment provisions of SFAS No. 142 will not have a significant impact on its financial statements. OUTLOOK The Company seeks to increase revenue and profits through a number of strategic actions. Strategies for growth include further development of existing markets and entry into new product and geographic markets. In addition, the Company continues to enhance its technologies and broaden its product base. The Company has built strong relationships with market leaders in each of the industries that it serves by providing superior technical support and service. The Company continues to seek opportunities to grow in both food and non-food markets. Current non-food applications include cosmetics, personal care products, pharmaceutical ingredients, inks for ink-jet printers and a variety of other products. The Company believes that the technologies of the Color Group provide the greatest opportunities for growth in non-food applications. In the food markets, the Company is continually developing new products to provide higher margin ingredient systems to its customers. The Company completed two acquisitions in 2001 and two acquisitions in 2000. The 2001 acquisitions of the stock of Kimberly-Clark Printing Technology, Inc. (now known as Formulabs, Inc.) and the technical dye business of Crompton Colors Incorporated, increased the Company's market position in technical dyes and ink-jet inks and allow the Company to enter new specialty markets. The 2000 acquisition of Dr. Marcus GmbH expanded the Company's natural color capabilities and increased the Company's market position in Germany. In 2000, the Company also completed the acquisition of Monarch Food Colors, L.P., a color manufacturer for the food, pharmaceutical and cosmetics industries. Acquisitions remain an important part of the Company's overall plan for growth. The Company completed the acquisition of SynTec GmbH in early 2002 which expands the Company's technical capabilities in highly purified organic chemicals and electronic imaging technologies. The Company continues to aggressively pursue attractive acquisition opportunities and expects to add additional new businesses during 2002. FORWARD-LOOKING STATEMENTS This report contains forward-looking statements that reflect management's current assumptions and estimates of future economic circumstances, industry conditions, Company performance and financial results. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements. A variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results. These factors and assumptions include the pace and nature of new product introductions by the Company's customers; execution of the Company's acquisition program; industry and economic factors related to the Company's domestic and international business; the outcome of various productivity-improvement and cost-reduction efforts; currency exchange rate fluctuations; and success in integrating acquired businesses. Consolidated Statements of Earnings In thousands except per share amounts
YEARS ENDED DECEMBER 31, 2001 2000 1999 Revenue $ 816,947 $809,163 $ 796,250 Cost of products sold 549,327 524,960 526,367 Selling and administrative expenses 146,130 153,010 145,618 Special charges (see Note 13) -- 19,000 -- Operating income 121,490 112,193 124,265 Interest expense 31,531 34,165 27,425 Earnings from continuing operations before income taxes 89,959 78,028 96,840 Income taxes 24,996 21,681 30,329 Earnings from continuing operations 64,963 56,347 66,511 Earnings from discontinued operations 8,639 3,265 15,250 Accounting change -- 2,431 -- Net earnings $ 73,602 $ 62,043 $ 81,761 Basic earnings per share Continuing operations $ 1.36 $ 1.15 $ 1.32 Discontinued operations .18 .07 .30 Accounting change -- 05 -- Net earnings $ 1.54 $ 1.27 $ 1.63 Diluted earnings per share Continuing operations $ 1.36 $ 1.15 $ 1.31 Discontinued operations .18 .07 .30 Accounting change -- .05 -- Net earnings $ 1.54 $ 1.26 $ 1.61 Average common shares outstanding - basic 47,671 48,898 50,296 Average common shares outstanding - diluted 47,926 49,166 50,791
See notes to consolidated financial statements. Consolidated Balance Sheets Dollars in thousands except per share amounts DECEMBER 31, 2001 2000 Assets Current Assets: Cash and cash equivalents $ 2,317 $ 3,217 Trade accounts receivable less allowance for losses of $4,060 and $2,848 134,626 121,719 Inventories 240,955 235,363 Prepaid expenses and other current assets 29,473 32,234 Deferred income taxes 7,851 16,023 Net assets held for sale -- 82,842 Total current assets 415,222 491,398 Other assets 72,124 63,742 Intangibles - at cost, less accumulated amortization of $68,857 and $59,675 305,174 293,600 Property, Plant and Equipment: Land and buildings 169,491 162,196 Machinery and equipment 410,370 392,065 579,861 554,261 Less accumulated depreciation 267,561 238,753 312,300 315,508 Total assets $1,104,820 $1,164,248 Liabilities and Shareholders' Equity Current Liabilities: Short-term borrowings $ 26,672 $ 99,347 Accounts payable and accrued expenses 95,897 115,615 Salaries, wages and withholdings from employees 10,164 12,086 Income taxes 17,661 17,284 Current maturities of long-term debt 41,794 7,800 Total current liabilities 192,188 252,132 Deferred income taxes 18,071 35,707 Other deferred liabilities 21,718 19,475 Accrued employee and retiree benefits 18,890 22,735 Long-term debt 423,137 417,141 Commitments and contingencies -- -- Shareholders' Equity: Common stock par value $.10 a share, authorized 250,000,000 shares; issued 53,954,874 shares 5,396 5,396 Additional paid-in capital 72,493 72,870 Earnings reinvested in the business 566,374 518,128 Treasury stock, 6,545,176 and 5,403,015 shares, respectively, at cost (132,355) (106,472) Unearned portion of restricted stock (2,623) (1,964) Accumulated other comprehensive income (loss) (78,469) (70,900) 430,816 417,058 Total liabilities and shareholders' equity $1,104,820 $1,164,248 See notes to consolidated financial statements. Consolidated Statements of Shareholders' Equity Dollars in thousands except per share amounts
Unearned Additional Earnings reinvested Treasury stock portion of Common stock paid-in capital in the business Shares Amount restricted stock Balances at December 31, 1998 $5,396 $74,751 $427,055 2,943,851 $ (56,047) $(1,437) Net earnings 81,761 Currency translation Total comprehensive income Cash dividends paid - $.53 a share (26,735) Stock options exercised (428) (118,967) 2,229 Benefit plans (154) (193,660) 3,822 Restricted stock 106 (39,000) 769 (434) Other 4 (1) 5,627 (111) Purchase of treasury stock 1,492,500 (31,708) Balances at December 31, 1999 5,396 74,279 482,080 4,090,351 (81,046) (1,871) Net earnings 62,043 Currency translation Total comprehensive income Cash dividends paid - $.53 a share (25,997) Stock options exercised (1,931) (722,654) 14,126 Benefit plans 493 (348,441) 6,865 Restricted stock 31 (21,000) 445 (93) Other (2) 2 5,859 (113) Purchase of treasury stock 2,398,900 (46,749) Balances at December 31, 2000 5,396 72,870 518,128 5,403,015 (106,472) (1,964) Net earnings 73,602 Cumulative effect of accounting change, net of tax of $363 Unrealized gain on cash flow hedges, net of tax of $289 Currency translation Total comprehensive income Cash dividends paid - $.53 a share (25,356) Stock options exercised (552) (416,323) 8,022 Benefit plans 261 (105,716) 2,087 Restricted stock (86) (52,000) 970 (659) Other (200) 4 Purchase of treasury stock 1,716,400 (36,966) Balances at December 31, 2001 $5,396 $72,493 $566,374 6,545,176 $(132,355) $(2,623) Accumulated other Total comprehensive comprehensive income (loss) income (loss) Balances at December 31, 1998 $(37,127) Net earnings $ 81,761 Currency translation (10,839) (10,839) Total comprehensive income $ 70,922 Cash dividends paid - $.53 a share Stock options exercised Benefit plans Restricted stock Other Purchase of treasury stock Balances at December 31, 1999 (47,966) Net earnings $ 62,043 Currency translation (22,934) (22,934) Total comprehensive income $ 39,109 Cash dividends paid - $.53 a share Stock options exercised Benefit plans Restricted stock Other Purchase of treasury stock Balances at December 31, 2000 (70,900) Net earnings $ 73,602 Cumulative effect of accounting change, net of tax of $363 (3,264) (3,264) Unrealized gain on cash flow hedges, net of tax of $289 2,837 2,837 Currency translation (7,142) (7,142) Total comprehensive income $ 66,033 Cash dividends paid - $.53 a share Stock options exercised Benefit plans Restricted stock Other Purchase of treasury stock Balances at December 31, 2001 $(78,469)
See notes to consolidated financial statements. Consolidated Statements of Cash Flows Dollars in thousands
YEARS ENDED DECEMBER 31, 2001 2000 1999 Cash Flows from Operating Activities Earnings from continuing operations $ 64,963 $ 56,347 $ 66,511 Adjustments to arrive at net cash provided by operating activities: Depreciation and amortization 46,290 45,554 40,804 Special charges -- 19,000 -- Gain on sale of assets (3,230) (4,211) -- Changes in operating assets and liabilities (net of effects from acquisition of businesses): Trade accounts receivable (9,865) (4,002) (10,220) Inventories 8,007 (17,363) (17,890) Prepaid expenses and other assets (2,225) (7,357) (2,052) Accounts payable and accrued expenses (28,691) (7,595) (16,562) Salaries, wages and withholdings from employees (1,762) (621) (1,866) Income taxes (3,580) (7,672) (3,817) Deferred income taxes (9,496) 4,829 10,190 Other liabilities (1,540) (1,818) (3,268) Net cash provided by operating activities of continuing operations 58,871 75,091 61,830 Net cash provided by operating activities of discontinued operations 707 16,554 21,256 59,578 91,645 83,086 Cash Flows from Investing Activities Acquisition of property, plant and equipment (38,001) (55,525) (61,662) Acquisition of businesses - net of cash acquired (50,749) (50,190) (58,361) Proceeds from sale of assets 114,606 11,681 4,465 (Increase) decrease in other assets (671) 3,951 (5,476) Net cash provided by (used in) investing activities 25,185 (90,083) (121,034) Cash Flows from Financing Activities Proceeds from additional borrowings 254,179 131,337 259,359 Reduction in debt (286,051) (75,188) (169,628) Purchase of treasury stock (37,385) (47,531) (30,505) Dividends (25,356) (25,997) (26,735) Proceeds from options exercised and other equity transactions 9,115 18,776 5,281 Net cash (used in) provided by financing activities (85,498) 1,397 37,772 Effect of exchange rate changes on cash and cash equivalents (165) 144 (118) Net (decrease) increase in cash and cash equivalents (900) 3,103 (294) Cash and cash equivalents at beginning of year 3,217 114 408 Cash and cash equivalents at end of year $ 2,317 $ 3,217 $ 114 Cash paid during the year for: Interest $ 32,102 $ 33,054 $ 25,172 Income taxes 35,986 28,349 29,803 Liabilities assumed in acquisitions 4,774 1,841 34,868
See notes to consolidated financial statements. Notes to Consolidated Financial Statements Tabular amounts in thousands except per share data Years ended December 31, 2001, 2000 and 1999 1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of Sensient Technologies Corporation and its subsidiaries (the "Company"). All significant intercompany accounts and transactions are eliminated. Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Revenue Recognition The Company recognizes revenue upon shipment of goods to customers. Cash Equivalents Highly liquid investments with maturities of three months or less when acquired are considered cash equivalents. Inventories Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. Property, Plant and Equipment Property, plant and equipment are recorded at cost reduced by accumulated depreciation. Depreciation is provided over the estimated useful life using the straight-line method for financial reporting. Intangibles Intangibles, primarily goodwill, are generally amortized using the straight-line method over primarily 40 years. In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 prohibits pooling-of-interest accounting for acquisitions and was effective on July 1, 2001. SFAS No. 142 requires that upon adoption, amortization of goodwill and other intangibles with indefinite useful lives will cease and instead, the carrying value of goodwill will be evaluated for impairment on an annual basis. The Company will adopt SFAS No. 142 on January 1, 2002. Amortization of goodwill recorded by the Company in 2001 was $8,906,000. The Company has not yet completed its assessment of the additional effects of adopting SFAS No. 142, but anticipates that there will not be a material impact on the consolidated financial statements, other than the elimination of amortization of goodwill discussed above. Impairment of Long-lived Assets The Company reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company performs undiscounted cash flow analyses to determine if an impairment exists. If an impairment is determined to exist, any related impairment loss is calculated based on discounted operating cash flows. Financial Instruments The Company uses derivative financial instruments for the purpose of hedging currency and interest rate exposures which exist as part of ongoing business operations. As a policy, the Company does not engage in speculative or leveraged transactions, nor does the Company hold or issue financial instruments for trading purposes. On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, which requires that all derivative instruments be reported on the consolidated balance sheet at fair value and establishes criteria for designation and effectiveness of hedging relationships. The cumulative effect of adopting SFAS No. 133 was a decrease in accumulated other comprehensive income (loss) ("OCI") at January 1, 2001 of $3,264,000, net of tax of $363,000. Interest Rate Hedging The Company is exposed to interest rate risk through its corporate borrowing activities. The objective of the Company's interest rate risk management activities is to manage the levels of the Company's fixed and floating interest rate exposure to be consistent with the Company's preferred mix. The interest rate risk management program consists of entering into approved interest rate derivatives, which qualify as cash flow hedges or fair value hedges, when there is a desire to modify the Company's exposure to interest rates. Gains and losses on cash flow hedges are deferred in accumulated OCI until the underlying transaction is recognized in earnings. Gains or losses on fair value hedges are recognized in earnings, net of gains and losses on the hedged instruments. Currency Rate Hedging The primary objectives of the foreign exchange risk management activities are to understand and mitigate the impact of potential foreign exchange fluctuations on the Company's financial results and its economic well-being. Generally, these risk management transactions will involve the use of foreign currency derivatives to protect against exposure resulting from recorded receivables and payables. The Company primarily utilizes forward exchange contracts with maturities of less than 12 months, which qualify as cash flow hedges. These are intended to offset the effect of exchange rate fluctuations on recorded intercompany receivables and payables. Effective January 1, 2001, gains and losses on these instruments are deferred in accumulated OCI until the underlying transaction is recognized in earnings. Hedge effectiveness is determined by how closely the changes in the fair value of the hedging instrument offset the changes in the fair value or cash flows of the hedged item. Hedge accounting is permitted only if the hedging relationship is expected to be highly effective at the inception of the hedge and on an on-going basis. Any ineffective portions are to be recognized in earnings immediately. The Company's existing cash flow hedges are 100% effective. As a result, there is no current impact to earnings due to hedge ineffectiveness. Net Investments Hedging The Company may enter into foreign-denominated debt to be used as a non-derivative instrument to hedge the Company's net investment in foreign subsidiaries. The change in the carrying amount of the foreign-denominated debt on the Company's books, attributable to changes in the spot foreign exchange rate, is a hedge of the net investment in its foreign subsidiaries. Commodity Purchases The Company purchases commodities during the normal course of business which result in physical delivery and hence, are excluded from SFAS No. 133, as amended. Translation of Foreign Currencies For all significant foreign operations, the functional currency is the local currency. Assets and liabilities of foreign operations are translated into U. S. dollars at current exchange rates. Income and expense accounts are translated into U. S. dollars at average exchange rates prevailing during the year. Adjustments resulting from the translation of assets and liabilities to U.S. dollars are included as foreign currency translation adjustments in OCI. Transaction gains and losses are included in earnings and were not significant for the three year period ended December 31, 2001. Stock-Based Compensation The Company accounts for its stock-based compensation plans using the intrinsic value-based method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Earnings Per Share The difference between basic and diluted earnings per share is the dilutive effect of stock options and restricted stock. Diluted earnings per share assumes that all dilutive stock options are exercised and restricted stock has vested. All earnings per share amounts are presented on a diluted basis unless otherwise noted. Accumulated Other Comprehensive Income (Loss) Accumulated OCI is comprised of currency translation and unrealized gains and losses on cash flow hedges. The components of accumulated OCI at December 31 were: 2001 2000 Currency translation $ (78,042) $ (70,900) Unrealized losses on cash flow hedges (net of tax) (427) -- Accumulated other comprehensive income (loss) $ (78,469) $ (70,900) Research and Development Research and development costs are charged to selling and administrative expenses in the year they are incurred. Research and development costs related to continuing operations were $16,705,000, $18,294,000 and $18,245,000 for the years ended December 31, 2001, 2000 and 1999, respectively. New Pronouncements In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses the accounting for and the reporting of the impairment or disposal of long-lived assets. This statement will be adopted effective January 1, 2002. The impact of this pronouncement on the Company's consolidated financial statements is not expected to be material. 2] ACQUISITIONS In the fourth quarter of 2001, the Company acquired two businesses for cash of $50,879,000. Acquisitions made during 2001 were Formulabs, a manufacturer of specialty inks for ink-jet and industrial applications, and the technical dye business of Crompton Colors Incorporated, a manufacturer of technical dyes and colors for paper, ink-jet printing applications, plastics and a number of specialty markets. The Company may be required to pay up to $9,000,000 of additional cash consideration for the 2001 acquisitions subject to specific performance targets in the first year following the acquisition. The preliminary allocation of the purchase prices resulted in identifiable intangibles of $4,400,000 amortizable over a period of 19 years and goodwill of $22,867,000. The identifiable intangibles were primarily customer lists and technology. The final allocation of the purchase price will be completed during 2002. During 2000, the Company acquired two businesses for cash of $49,425,000. The allocation of purchase price resulted in goodwill of $43,505,000. Acquisitions made during 2000 were Dr. Marcus GmbH, a leading manufacturer of natural colors, and Monarch Food Colors, L.P., a color manufacturer for the food, pharmaceutical and cosmetic industries. During 1999, the Company acquired businesses for a total of $93,205,000. The allocations of purchase price resulted in goodwill of $73,594,000. Acquisitions made during 1999 include Les Colorants Wackherr, a manufacturer of colors and ingredients for the cosmetic industry, and Pointing Holdings Ltd., primarily a manufacturer of food colors. The Company also made other smaller acquisitions during the year. All acquisitions have been accounted for as purchases and, accordingly, their results of operations have been included in the consolidated financial statements since their respective dates of acquisition. On an unaudited pro-forma basis, the effects of the acquisitions were not significant to the Company's results of operations. 3] Inventories Inventories include finished and in-process products totaling $173,223,000 and $157,680,000 at December 31, 2001 and 2000, respectively, and raw materials and supplies of $67,732,000 and $77,683,000 at December 31, 2001 and 2000, respectively. 4] DEBT Long-term debt consists of the following unsecured obligations at December 31: 2001 2000 9.06% senior notes due through July 2004 $ 18,000 $ 24,000 7.59% senior notes due through December 2008 30,000 30,000 7.06% senior notes due through December 2002 30,000 30,000 6.99% senior notes due through December 2007 40,000 40,000 6.77% senior notes due through January 2010 15,000 15,000 6.68% senior notes due through January 2011 15,000 15,000 5.85% senior notes due November 2006 30,000 -- 5.63% Euro-denominated senior notes due November 2006 119,491 -- 6.60% notes due April 2009 149,118 149,026 Commercial paper and other short-term notes -- 100,000 Various other notes 18,322 21,915 464,931 424,941 Current maturities 41,794 7,800 Total long-term debt $423,137 $417,141 In November 2001, the Company issued notes totaling approximately $150 million, through a private placement of debt. The debt offering consisted of $30 million of U.S. dollar-denominated notes with a coupon rate of 5.85% and (euro)134 million of Euro-denominated notes with a coupon rate of 5.63%. The notes mature on November 29, 2006. Proceeds were used for general corporate purposes and to refinance existing short-term debt. The Company has a $150 million dual-currency unsecured revolving loan agreement with a group of five banks, of which $100 million matures in June 2005 and $50 million matures in June 2002. Interest rates are determined based upon the LIBOR rate plus margin. A facility fee is payable on the total amount of the commitment. The Company issues short-term commercial paper obligations supported by committed lines of credit included in the revolving loan agreement. The Company had outstanding commercial paper obligations of $21.4 million and $57.7 million at December 31, 2001 and 2000, respectively. There were no direct borrowings under the revolver at December 31, 2001. The Company has $128.6 million available under the revolving loan agreement and $34.0 million available under other uncommitted lines of credit from several banks at December 31, 2001. The aggregate amounts of maturities on long-term debt each year for the five years subsequent to December 31, 2001 are as follows: 2002, $41,794,000; 2003, $11,599,000; 2004, $11,557,000; 2005, $17,701,000; and 2006, $167,044,000. At December 31, 2000, $100 million of short-term borrowings were classified as long-term debt reflecting the Company's intent and ability, through the revolving loan agreement, to refinance these borrowings. Substantially all of the senior loan agreements contain restrictions concerning interest coverage, borrowings, investments and tangible net worth amounts. Earnings reinvested of $56,085,000 at December 31, 2001 were unrestricted. Short-term borrowings consist of commercial paper, uncommitted loans and loans to foreign subsidiaries denominated in local currencies which are borrowed under various foreign uncommitted lines of credit. The weighted-average interest rates on short-term borrowings, including amounts reclassified to long-term debt in 2000, were 3.84% and 7.57% at December 31, 2001 and 2000, respectively. 5] FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Interest Rate Swap Agreements In December 2001, the Company entered into a series of interest rate swap agreements to manage the mix of fixed and floating interest rate debt. As of December 31, 2001, the notional principal amounts of outstanding interest rate swap agreements (accounted for as fair value hedges) were $148,000,000 with varying maturities through December 2008. The notional amounts are used to calculate interest payments which are exchanged over the life of the swap transactions and are equal to the dollar principal exchanged. The fair value of the swaps, based on dealer quotes, at December 31, 2001 was a liability of $84,000. Foreign Currency Contracts The Company uses forward exchange contracts to reduce the effect of fluctuating foreign currencies on short-term foreign currency-denominated intercompany transactions and other known foreign currency exposures. At December 31, 2001 and 2000, the Company had forward exchange contracts (accounted for as cash flow hedges), generally with maturities of one year or less, of $115,551,000 and $83,130,000, respectively. The fair values of these instruments, based on dealer quotes, were liabilities of $501,000 and $3,627,000 at December 31, 2001 and 2000, respectively. Foreign-denominated Debt In November 2001, the Company entered into a e134 million Euro-denominated note agreement (see Note 4). This non-derivative instrument has been designated as a partial hedge of the Company's Euro net asset position. Concentrations of Credit Risk Counterparties to currency exchange and interest rate swap contracts consist of large major international financial institutions. The Company continually monitors its positions and the credit ratings of the counterparties involved and limits the amount of credit exposure to any one party. While the Company may be exposed to potential losses due to the credit risk of non-performance by these counterparties, losses are not anticipated. Concentrations of credit risk with respect to trade accounts receivable are limited by the large number of customers, generally short payment terms, and their dispersion across geographic areas. Fair Values The carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses and short-term borrowings approximated fair value as of December 31, 2001 and 2000. The fair value of the Company's long-term debt, including current maturities, is estimated using discounted cash flows based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. The carrying value of long-term debt at December 31, 2001 and 2000 was $464,931,000 and $424,941,000, respectively. The fair value of long-term debt at December 31, 2001 and 2000 was approximately $465,318,000 and $412,271,000, respectively. 6] Shareholders' Equity On June 25, 1998, the Board of Directors declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of common stock, par value of $.10 per share, of the Company. The dividend was paid on August 6, 1998, to the shareholders of record on that date. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Participating Cumulative Preferred Stock, without par value (the "Preferred Share"), of the Company at a price of $125 per one one-thousandth of a Preferred Share, subject to adjustment. The Right becomes exercisable and tradable ten days after a person or group acquires 20% or more, or makes an offer to acquire 20% or more of the Company's outstanding common stock. When exercisable, each Right entitles the holder to purchase $250 worth of Company common stock for $125. Further, upon the occurrence of a merger or transfer of more than 50% of the Company's assets, the Right entitles the holder to purchase common stock of an acquiring company having a market value equivalent to two times the exercise price of the Right. At no time does the Right have any voting power. The Right is subject to redemption by the Company's Board of Directors for $.01 per Right at any time prior to the date on which a person or group acquires beneficial ownership of 20% or more of the Company's common stock. The Rights expire on September 30, 2008. The Rights replace rights issued under a prior rights plan, which were redeemed on August 6, 1998. The Company is authorized to issue 250,000 shares of cumulative preferred stock, of which 100,000 shares are classified as Series A Participating Cumulative Preferred Stock and were initially reserved for issuance under the Rights plan. 7] STOCK PLANS Under the 1998 Stock Option Plan, up to 2,400,000 shares of common stock are available for awards, of which no more than 600,000 shares may be restricted stock. The Company may also issue up to 2,400,000 shares of common stock pursuant to the exercise of stock options or the grant of restricted stock under the 1994 Employee Stock Plan. Under the 1994 Plan, up to 500,000 shares may be awarded as restricted stock. Generally, stock options become exercisable over a three year vesting period and expire 10 years from the date of grant. Awarded shares of restricted stock become freely transferable at the end of five years. During the period of restriction, the employee has voting rights and is entitled to receive all dividends and other distributions paid with respect to the stock. The 1994 Plan also authorizes the grant of up to 800,000 stock appreciation rights in connection with stock options. The Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the Company's stock option plans. If the Company had elected to recognize compensation cost based on the fair value of the options granted at grant date as prescribed by SFAS No. 123, net earnings and earnings per share would have been reduced to the pro forma amounts indicated below: 2001 2000 1999 Pro forma net earnings $71,864 $60,542 $79,856 Pro forma net earnings per share: Basic $ 1.51 $ 1.24 $ 1.59 Diluted 1.50 1.23 1.57 The weighted-average fair value per share of options granted was $6.40 in 2001, $7.06 in 2000 and $6.25 in 1999. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: 2001 2000 1999 Dividend yield 2.5% 2.3% 2.6% Volatility 39.5% 36.1% 24.0% Risk-free interest rate 4.5% 5.0% 6.4% Expected term (years) 6 6 6 The changes in outstanding stock options during the three years ended December 31, 2001 are summarized below:
Shares Weighted- Outstanding average options Available price Balances at December 31, 1998 3,262 2,447 $ 17.62 Granted 618 (618) 22.70 Restricted stock -- (39) 22.19 Exercised (168) -- 15.65 Cancelled (35) 35 21.35 Balances at December 31, 1999 3,677 1,825 18.53 Granted 693 (693) 20.60 Restricted stock -- (41) 22.00 Exercised (783) -- 16.28 Cancelled (219) 219 21.30 Balances at December 31, 2000 3,368 1,310 19.30 Granted 624 (624) 18.31 Restricted stock -- (75) 18.54 Exercised (498) -- 17.89 Cancelled (277) 277 20.64 Balances at December 31, 2001 3,217 888 $ 19.22
Weighted- Options average exercisable price December 31, 1999 2,527 $17.09 December 31, 2000 2,226 $18.25 December 31, 2001 2,140 $19.00 The following summarizes information concerning currently outstanding and exercisable options:
Range of exercise price $14.13- $17.50- $21.01- 17.49 21.00 23.50 Number outstanding 918 1,127 1,172 Weighted-average remaining contractual life, in years 3.4 8.1 7.5 Weighted-average exercise price $16.14 $18.75 $22.08 Number exercisable 918 403 819 Weighted-average exercise price $16.14 $19.45 $22.00
8] RETIREMENT PLANS The Company provides benefits under defined contribution plans including a savings plan and an employee stock ownership plan ("ESOP"). The savings plan covers substantially all domestic salaried and certain non-union hourly employees and provides for matching contributions up to 4% of each employee's salary. The ESOP covers substantially all domestic employees not covered by a defined benefit plan and provides for contributions based on a percentage of each employee's compensation as determined by the board of directors. Total expense related to continuing operations for the Company's defined contribution plans was $2,263,000, $6,402,000 and $6,170,000 in 2001, 2000 and 1999, respectively. 9] OTHER POSTRETIREMENT BENEFITS The Company provides certain health insurance benefits to eligible retirees and their dependents. Effective January 1, 2000 the Company began amortizing unrecognized net actuarial gains over a five year period. Prior to 2000, net actuarial gains were amortized over the average remaining service lives of active employees of approximately 19 years. The new method is preferable because it accelerates recognition of events that have already occurred. The cumulative effect of this change was a pre-tax credit of $3,953,000. The proforma retroactive effect of this change is not material. During the fourth quarter of 2000, the Company amended the plan to require future retirees to pay 100% of the cost of health care coverage. This amendment resulted in a curtailment gain of $4,251,000 relating to continuing operations and $2,459,000 relating to discontinued operations. The net unrecognized prior service credit will be amortized over the estimated remaining lives of the retirees. The Company funds benefit costs on a pay-as-you-go basis. The funded status of the postretirement benefit plan at December 31 was:
2001 2000 Benefit obligation at beginning of year $ 5,928 $ 12,961 Service cost -- 381 Interest cost 406 902 Plan amendment -- (7,808) Benefits paid (1,641) (497) Actuarial loss (gain) 3,100 (11) Benefit obligation at end of year 7,793 5,928 Plan assets -- -- Funded status (7,793) (5,928) Unrecognized prior service credit (7,157) (7,808) Unrecognized net actuarial gain (1,803) (5,980) Net amount recognized $ (16,753) $(19,716)
Components of net periodic benefit cost for continuing operations were:
2001 2000 1999 Service cost $ -- $ 253 $ 275 Interest cost 406 526 498 Amortization of prior service credit (651) (343) (343) Curtailment -- (4,251) -- Recognized actuarial gain (1,077) (674) (295) Postretirement benefit (income) expense $ (1,322) $ (4,489) $ 135
The weighted-average discount rates used in determining the accumulated postretirement benefit obligation at December 31, 2001 and 2000 were 7.25% and 7.50%, respectively. The health care cost trend rates were assumed to be 6.25% in 2001 and 7.00% in 2000, declining to 5.50% in the year 2002 and remaining at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one percentage point change in assumed health care cost trend rates would have the following effects:
1% 1% increase decrease Effect on total of service and interest cost components $ 45 $ (40) Effect on postretirement benefit obligation 855 (771)
10] INCOME TAXES The provision for income taxes for continuing operations is as follows: 2001 2000 1999 Currently payable: Federal $ 4,961 $ 2,603 $ 7,292 State (108) 1,152 2,212 Foreign 13,445 16,659 12,462 Deferred (benefit): Federal 6,432 3,932 6,308 State 243 534 988 Foreign 23 (3,199) 1,067 $24,996 $21,681 $30,329 The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities consist of the following: 2001 2000 Deferred tax assets: Benefit plans $ (10,375) $(12,841) Liabilities and reserves (5,028) (8,922) Foreign operating loss carryovers (17,241) (11,586) Other (8,601) (5,207) Gross deferred tax assets (41,245) (38,556) Valuation allowance 11,536 12,364 Total deferred tax assets (29,709) (26,192) Deferred tax liabilities: Property, plant and equipment 19,987 29,283 Other assets 12,875 12,140 Other 7,067 4,453 Total deferred tax liabilities 39,929 45,876 Net deferred tax liabilities $ 10,220 $ 19,684 At December 31, 2001 foreign operating loss carryovers were $54,043,000. Included in the total are losses of $14,234,000 that expire through 2011 and $39,809,000 that do not expire. The effective tax rate for continuing operations differs from the statutory federal income tax rate of 35% as described below:
2001 2000 1999 Taxes at statutory rate 35.0% 35.0% 35.0% State income taxes, net of federal income tax benefit 1.2 1.9 2.1 Tax credits (5.7) (6.4) (4.9) Foreign tax rate 4.3 2.8 1.1
Tax benefit of business closure -- (4.1) -- Actual and expected settlements of prior years' issues (3.4) -- (2.2) Other, net (3.6) (1.4) 0.2 Effective tax rate 27.8% 27.8% 31.3%
The "Other, net" reported in 2001 and 2000 is primarily attributable to the reversal of certain valuation allowances against state and foreign net operating loss carryovers. The effective tax rates would have been 33.8%, 32.6% and 33.5% in 2001, 2000, and 1999, respectively, excluding the favorable impact of actual and expected prior years' settlements, adjustments to the valuation allowance and the tax benefit of a business closure. Earnings from continuing operations, before income taxes, are summarized as follows: 2001 2000 1999 United States $58,575 $45,730 $61,236 Foreign 31,384 32,298 35,604 $89,959 $78,028 $96,840 Domestic income taxes have not been provided on undistributed earnings of foreign subsidiaries which are considered to be permanently invested. If undistributed foreign earnings were to be remitted, foreign tax credits would substantially offset any resulting domestic tax liability. 11] SEGMENT AND GEOGRAPHIC INFORMATION The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on operating income of the respective business units before goodwill amortization, interest expense and income taxes. Total revenue and operating income by business segment and geographic region include both sales to customers, as reported in the Company's consolidated statements of earnings, and intersegment sales, which are accounted for at prices which approximate market prices and are eliminated in consolidation. Corporate and other revenue consist primarily of flavor, fragrances and color products sold by the Asia Pacific division. Assets by business segment and geographic region are those assets used in the Company's continuing operations in each segment and geographic region. Corporate and other assets consist primarily of property, investments and goodwill. Capital expenditures are reported exclusive of discontinued operations and acquisitions. Segment Information The Company's operations, except for the Asia Pacific division, are managed on a products and services basis. The Company's reportable segments consist of Flavors & Fragrances and Color. The Company's Flavors & Fragrances segment produces flavor and fragrance products that impart a desired taste or smell to a broad range of consumer products. The Color segment produces color products which are used by manufacturers of various food and other consumer products.
Flavors & Corporate Fragrances Color and Other Consolidated 1999 Revenue from external customers $509,721 $237,016 $ 49,513 $ 796,250 Intersegment revenue 17,473 12,315 -- 29,788 Total revenue 527,194 249,331 49,513 826,038 Operating income (loss) 82,501 59,363 (17,599) 124,265 Interest expense -- -- 27,425 27,425 Earnings (loss) from continuing operations before income taxes 82,501 59,363 (45,024) 96,840 Assets 444,010 222,170 362,613 1,028,793 Capital expenditures 31,380 12,359 7,081 50,820 Depreciation and amortization 21,535 8,756 10,513 40,804 2000 Revenue from external customers $488,976 $263,813 $ 56,374 $ 809,163 Intersegment revenue 22,148 19,838 -- 41,986 Total revenue 511,124 283,651 56,374 851,149 Operating income (loss) 80,598 70,986 (39,391) 112,193
Interest expense -- -- 34,165 34,165 Earnings (loss) from continuing operations before income taxes 80,598 70,986 (73,556) 78,028 Assets 451,547 235,383 394,476 1,081,406 Capital expenditures 26,546 12,834 5,819 45,199 Depreciation and amortization 23,117 9,712 12,725 45,554 Special charges -- -- 19,000 19,000
2001 Revenue from external customers $505,197 $255,131 $ 56,619 $ 816,947 Intersegment revenue 20,476 20,864 -- 41,340 Total revenue 525,673 275,995 56,619 858,287 Operating income (loss) 74,209 69,443 (22,162) 121,490 Interest expense -- -- 31,531 31,531 Earnings (loss) from continuing operations before income taxes 74,209 69,443 (53,693) 89,959 Assets 434,853 266,887 403,080 1,104,820 Capital expenditures 22,099 10,498 5,404 38,001 Depreciation and amortization 24,298 9,830 12,162 46,290
Geographic Information The Company has manufacturing plants or sales offices in North and South America, Europe, Asia, Australia and Africa. 2001 2000 1999 Revenue from external customers U.S.A. $397,268 $407,329 $ 401,405 Europe 209,048 204,452 208,913 Asia Pacific 67,356 65,708 57,946 Other 143,275 131,674 127,986 Consolidated $816,947 $809,163 $ 796,250 Long-lived assets U.S.A. $345,643 $306,311 $ 292,563 Europe 261,619 281,638 269,751 Asia Pacific 11,104 11,829 11,588 Other 71,232 73,072 72,761 Consolidated $689,598 $672,850 $ 646,663 12] DISCONTINUED OPERATIONS In June 2000, the Company's Board of Directors approved a plan to dispose of the operations of its Yeast business. On February 23, 2001 the Company completed the sale of substantially all of its Yeast business for approximately $113 million in cash, of which $4 million was received in August 2000. Accordingly, the operating results of the Yeast business have been reported separately from continuing operations and reported as a separate line item on the consolidated statements of earnings. Summarized financial information for the discontinued operation is as follows: 2001 2000 1999 Revenue $16,810 $120,232 $141,291 Earnings before income taxes 15,399 5,264 24,597 Income taxes 6,760 1,999 9,347 Earnings from discontinued operations $ 8,639 $ 3,265 $ 15,250 Earnings from July 1, 2000 to December 31, 2000 were $2,188,000. The effective tax rates for all years presented is higher than the statutory rate of 35% because of state income taxes. The assets and liabilities of the Yeast business at December 31, 2000 are reported net, as assets held for sale, on the consolidated balance sheet. The components of net assets held for sale at December 31, 2000 are as follows: Current assets $20,130 Total assets 95,018 Current liabilities 12,176 Net assets held for sale $82,842 13] SPECIAL CHARGES In April 2001, the Company announced a plan to reduce its workforce by 200 employees. The separation costs were recognized in the second quarter and included in the line Special Charges in the 2001 consolidated statements of earnings. These employees were terminated as of December 31, 2001. The Company announced a facilities consolidation plan in December 2000. This plan was implemented to improve manufacturing efficiencies in both the Flavors & Fragrances and the Color businesses. The cost of the plan and other non-recurring items such as name and fiscal year change costs and separation costs incurred in 2000 were reported as special charges in the fourth quarter of 2000. Based on a review of the business outlook in the second quarter of 2001, this plan was modified. This modification and lower than estimated costs and cash outlays for certain items in the original plan resulted in a reversal of a portion of the special charges reserve. This is included primarily in the line Special Charges in the 2001 consolidated statements of earnings. The employees associated with this plan have been terminated as of December 31, 2001. The following summarizes the programs:
Asset Separations Impairments Other Total December 2000 facilities consolidation plan Charges $ 10,500 $ 6,500 $ 2,000 $ 19,000 Cash spent (850) -- (2,000) (2,850) Reductions of assets -- (6,500) -- (6,500) Balances at December 31, 2000 9,650 -- -- 9,650 Reversal of special charges reserve (3,200) -- -- (3,200) Cash spent (6,150) -- -- (6,150) Balances at December 31, 2001 $ 300 $ -- $ -- $ 300 April 2001 workforce reduction program Charges $ 3,000 $ -- $ -- $ 3,000 Cash spent (3,000) -- -- (3,000) Balances at December 31, 2001 $ -- $ -- $ -- $ --
14] CONTINGENCIES The Company is involved in various claims and litigation arising in the normal course of business. In the opinion of management and Company counsel, the ultimate resolution of these actions will not materially affect the consolidated financial statements of the Company. Management's Responsibility for Financial Statements Years ended December 31, 2001, 2000 and 1999 The management of Sensient Technologies Corporation is responsible for preparation of the financial statements and other financial information included in this annual report. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. It is management's policy to maintain a control-conscious environment through an effective system of internal accounting controls. These controls are supported by the careful selection of competent and knowledgeable personnel and by the communication of standard accounting and reporting policies and procedures throughout the Company. These controls are adequate to provide reasonable assurance that assets are safeguarded against material loss or unauthorized use and to produce the records necessary for the preparation of reliable financial information. There are limits inherent in all systems of internal control based on the recognition that the costs of such systems should be related to the benefits to be derived. Management believes that its systems provide this appropriate balance. The control environment is complemented by the Company's internal audit function, which evaluates the adequacy of the controls, policies and procedures in place, as well as adherence to them, and recommends improvements for implementation when applicable. In addition, the Company's independent auditors, Deloitte & Touche LLP, have developed an understanding of the Company's accounting and financial controls and have conducted such tests as they considered necessary to render an opinion on the Company's financial statements. The Board of Directors pursues its oversight role with respect to the Company's financial statements through the Audit Committee, which is composed solely of outside directors. The Audit Committee recommends selection of the Company's auditors and meets with them and the internal auditors to review the overall scope and specific plans for their respective audits and results from those audits. The Committee also meets with management to review overall accounting policies relating to the reporting of financial results. Both the independent auditors and internal auditors have unrestricted access to the Audit Committee. Kenneth P. Manning Chairman, President and Chief Executive Officer Richard F. Hobbs Vice President, Chief Financial Officer and Treasurer Independent Auditors' Report To the Shareholders and Board of Directors of Sensient Technologies Corporation: We have audited the accompanying consolidated balance sheets of Sensient Technologies Corporation and subsidiaries (the "Company") as of December 31, 2001 and 2000, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 9 to the Consolidated Financial Statements, effective January 1, 2000, the Company changed its method of amortizing unrecognized net gains and losses related to the Company's obligation for postretirement benefits. Milwaukee, Wisconsin February 14, 2002 Five Year Review
In thousands except per share data 2001 2000 1999 1998 1997 Summary of Operations Revenue $816,947 100.0% $809,163 100.0% $796,250 100.0% $719,808 100.0% $686,317 100.0% Cost of products sold 549,327 67.2 524,960 64.9 526,367 66.1 475,330 66.0 463,311 67.5 Selling and administrative expenses 146,130 17.9 153,010 18.9 145,618 18.3 136,633 19.0 136,118 19.8 Special charges -- 0.0 19,000 2.3 -- 0.0 -- 0.0 -- 0.0 Operating income 121,490 14.9 112,193 13.9 124,265 15.6 107,845 15.0 86,888 12.7 Interest expense 31,531 3.9 34,165 4.3 27,425 3.4 21,977 3.1 18,077 2.7 Earnings from continuing operations before income taxes 89,959 11.0 78,028 9.6 96,840 12.2 85,868 11.9 68,811 10.0 Income taxes 24,996 3.0 21,681 2.6 30,329 3.8 26,467 3.6 17,456 2.5 Earnings from continuing operations 64,963 8.0 56,347 7.0 66,511 8.4 59,401 8.3 51,355 7.5 Earnings from discontinued operations 8,639 1.0 3,265 0.4 15,250 1.9 14,847 2.0 14,721 2.1 Accounting change -- 0.0 2,431 0.3 -- 0.0 -- 0.0 -- 0.0 Net earnings $ 73,602 9.0% $ 62,043 7.7% $ 81,761 10.3% $ 74,248 10.3% $ 66,076 9.6% Basic earnings per share Continuing operations $ 1.36 $ 1.15 $ 1.32 $ 1.16 $ 1.01 Discontinued operations .18 .07 .30 .29 .29 Accounting change -- .05 -- -- -- Net earnings $ 1.54 $ 1.27 $ 1.63 $ 1.45 $ 1.29 Diluted earnings per share Continuing operations $ 1.36 $ 1.15 $ 1.31 $ 1.14 $ 1.00 Discontinued operations .18 .07 .30 .29 .29 Accounting change -- .05 -- -- -- Net earnings $ 1.54 $ 1.26 $ 1.61 $ 1.43 $ 1.28 Other Related Data Dividend per share, declared and paid $ .53 $ .53 $ .53 $ .53 $ .52 Average common shares outstanding: Basic 47,671 48,898 50,296 51,168 51,062 Diluted 47,926 49,166 50,791 51,883 51,476 Book value per common share $ 9.09 $ 8.59 $ 8.64 $ 8.09 $ 7.44 Price range per common share 15.55 - 23.99 16.00 - 23.19 18.25 - 27.38 19.44 - 27.75 16.00 - 21.47 Share price at December 31 20.81 22.75 20.38 27.44 21.13 Capital expenditures from continuing operations 38,001 45,199 50,820 52,505 54,230 Depreciation from continuing operations 37,019 35,507 32,709 30,810 26,622 Amortization from continuing operations 9,271 10,047 8,095 6,229 5,463 Total assets 1,104,820 1,164,248 1,131,713 995,865 889,530 Long-term debt 423,137 417,141 380,378 291,304 282,554 Shareholders' equity 430,816 417,058 430,872 412,591 378,522 Return on average shareholders' equity 17.7% 14.7% 19.4% 18.5% 17.7% Total debt to total capital 53.3% 55.7% 52.1% 45.7% 43.3% Employees 3,454 3,722 3,900 3,943 3,896
The 2000 results include special charges related to a facilities consolidation plan of $19.0 million and the effect of a postretirement health care plan amendment (see Notes 9 and 13). The 1997 results include a pretax charge of $7.5 million for integrating two divisions. Quarterly Data Dollars in thousands except per share amounts
Continuing Continuing Earnings operations operations from earnings earnings Gross continuing Net per share per share [UNAUDITED] Revenue profit operations earnings basic diluted 2001 First Quarter $195,693 $62,900 $11,004 $18,784 $.23 $.23 Second Quarter 203,927 69,955 18,273 18,273 .38 .38 Third Quarter 204,083 65,582 15,729 16,588 .33 .33 Fourth Quarter 213,244 69,183 19,957 19,957 .42 .42 2000 First Quarter $205,163 $70,943 $19,208 $22,780 $.39 $.39 Second Quarter 204,149 73,864 17,914 17,850 .36 .36 Third Quarter 206,991 73,038 17,456 18,385 .36 .36 Fourth Quarter 192,860 66,358 1,769 3,028 .04 .04
The 2000 fourth quarter operating results include special charges (see Note 13) and the effect of a postretirement plan amendment (see Note 9). Common Stock Prices and Dividends
Market price Dividends High Low per share 2001 First Quarter $23.99 $20.50 $.1325 Second Quarter 22.79 17.00 .1325 Third Quarter 22.65 18.15 .1325 Fourth Quarter 21.15 15.55 .1325 2000 First Quarter $21.38 $17.00 $.1325 Second Quarter 21.25 16.00 .1325 Third Quarter 21.75 18.63 .1325 Fourth Quarter 23.19 19.00 .1325
EX-21 11 dex21.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 SUBSIDIARIES SENSIENT TECHNOLOGIES CORPORATION AND AFFILIATES
NAME LOCATION %OWNED - --------------------------------------------------------------------------------------------- DOMESTIC SENSIENT TECHNOLOGIES CORPORATION MILWAUKEE, WI PARENT FELTON CENTRAL & SOUTH AMERICA, INC.(Dormant) DELAWARE, USA 100% FELTON FLAVOUR & FRAGRANCES (THAILAND) LTD(Dormant) NEW YORK, USA 100% FELTON MEXICO, INC. (Dormant) DELAWARE, USA 100% FLAVOR BURST, INC. ILLINOIS, USA 100% INTER-AGRO, USA, INC. MILWAUKEE, WI 100% MINN-DAK YEAST COMPANY, INC. WAHPETON, ND 20% ROGERS FOODS, INC. CALIFORNIA, USA 100% SENSIENT TECHNICAL COLORS, LLC ELMWOOD PARK, NJ 100% UNIVERSAL BIOVENTURES, INC. (Dormant) MILWAUKEE, WI 100% SENSIENT FLAVORS INC. INDIANAPOLIS, IN 100% SENSIENT FLAVORS INTERNATIONAL, INC. INDIANAPOLIS, IN 100% UNIVERSAL HEALTH CARE MANAGEMENT CO. MILWAUKEE, WI 60% UNIVERSAL HOLDING CO., INC. NEVADA, USA 100% WARNER-JENKINSON COMPANY, INC. ST. LOUIS, MO 100% 2526 BALDWIN REDEVELOPMENT CORPORATION ST. LOUIS, MO 100% FORMULABS, INC. CALIFORNIA, USA 100% POINTING COLOR, INC. (US) MINNESOTA, USA 100% MONARCH FOOD COLORS L.P. (US) MISSOURI, USA 100% FOREIGN UNIVERSAL FOOD PRODUCT INTERNATIONAL CO., LTD. SAN JOSE, COSTA RICA 100% BIOLUX FINANCE, N.V. BELGIUM 100% SENSIENT FLAVORS BIOLUX, N.V. (BELGIUM) BELGIUM 100% PROMAVIL N.V. BELGIUM 100% SENSIENT FLAVORS STRASBOURG SAS (FRANCE) FRANCE 100% SENSIENT FLAVORS (WALES) LTD (UK) UNITED KINGDOM 100% SENSIENT SPECIALTY VEGETABLES (IRELAND), LTD. IRELAND 100% FRESHFIELD FOODS LIMITED IRELAND 100% OWENACURRA LIMITED (Dormant) IRELAND 100% SENSIENT SPECIALTY VEGITABLES SARL FRANCE 100% WARNER-JENKINSON EUROPE GmbH GERMANY 100% SENSIENT SPECIALTY VEGETABLES BV (NETHERLANDS) NETHERLANDS 100% WARNER-JENKINSON (CANADA), LTD. KINGSTON ONTARIO CANADA 100% WARNER-JENKINSON EUROPE S.A.R.L., FRANCE FRANCE 100% WARNER-JENKINSON, S.A. DE C.V. ESTADO DE MEXICO, MEXICO 99.31% WARNER-JENKINSON UNIVERSAL FOODS BV NETHERLANDS 100% WARNER-JENKINSON (EUROPE) UNITED KINGDOM 100% VISIONRULE LTD. (Dormant) UNITED KINGDOM 100% SENSIENT FLAVORS NV (BELGIUM) BRUSSELS, BELGIUM 100% SENSIENT FLAVORS CANADA, INC. REXDALE, ONTARIO 100% SENSIENT FLAVORS FRANCE SARL FRANCE 100% SENSIENT FLAVORS DEUTSCHLAND GMBH GERMANY 100% SENSIENT FLAVORS SRL (ITALY) MILANO, ITALY 100% SENSIENT FLAVORS MEXICO, S.A. DE C.V. EDO DE MEXICO, MEXICO 100% SENSIENT FRAGRANCES, S.A. DE C.V. MEXICO 100% SENSIENT FRAGRANCES, S.A. (SPAIN) GRANADA, SPAIN 100% SENSIENT FLAVORS LIMITED (UK) BLETCHLEY, UNITED KINGDOM 100%
DC FLAVORS LIMITED UNITED KINGDOM 100% SENSIENT TECHNOLOGIES CORPORATION (AUSTRALIA) PTY, LTD. VICTORIA, AUSTRALIA 100% SENSIENT TECHNOLOGIES HONG KONG LTD CHINA 100% SENSIENT TECHNOLOGIES CORPORATION JAPAN, LTD. TOKYO, JAPAN 100% SENSIENT TECHNOLOGIES ASIA PACIFIC PTE, LTD SINGAPORE 100% SENSIENT TECHNOLOGIES (PHILIPPINES), INC. QUEZON CITY, PHILIPPINES 100% SENSIENT TECHNOLOGIES (THAILAND), LTD. THAILAND 100% SENSIENT TECHNOLOGIES CANADA, INC. REXDALE, ONTARIO 100% SENSIENT TECHNOLOGIES (LUXEMBOURG) SARL LUXEMBOURG 100% SENSIENT TECHNOLOGIES HOLDING (LUX) SARL LUXEMBOURG 100% SENSIENT TECHNOLOGIES LIMITED (UK) UNITED KINGDOM 100% SENSIENT TECHNOLOGIES (UK) LIMITED CHESHIRE, UNITED KINGDOM 100% RATINA PARTICIPATIONS, S.A. LUXEMBOURG 100% REGGIANA ANTOCIANI ITALIA SRL ITALY 100% FINANCIERE WACKHERR SA (FRANCE) FRANCE 100% LES COLORANTS WACKHERR SA (FRANCE) FRANCE 100% LCW DO BRASIL LTD. BRAZIL 50% LCW IBERICA (SPAIN) SPAIN 51% LCW POLSKA POLAND 60% SCI CESAR FRANCE 100% SCI GRISEDA FRANCE 100% POINTING HOLDINGS LTD. (UK) UNITED KINGDOM 100% POINTING INTERNATIONAL LTD. (UK) UNITED KINGDOM 100% POINTING LIMITED (UK) UNITED KINGDOM 100% POINTING CHEMICALS LTD. (UK) (Dormant) UNITED KINGDOM 100% DINOVAL CHEMICALS LTD. (UK) (Dormant) UNITED KINGDOM 100% FLAVEX LTD. (UK) (Dormant) UNITED KINGDOM 100% DINOVAL CHEMICALS (UK) LTD. (Dormant) UNITED KINGDOM 100% DINOVAL LTD. (UK) (Dormant) UNITED KINGDOM 100% RIKEM LTD. (UK) (Dormant) UNITED KINGDOM 100% POINTING ASIA LTD. (HONG KONG) HONG KONG 100% POINTING CANADA LTD. CANADA 100% POINTING HODGSONS PTY. LTD. (AUSTRALIA) AUSTRALIA 50% POINTING MEXICO S.A. DE C.V. MEXICO 100% WARNER-JENKINSON POINTING (PTY) LTD. (SOUTH AFRICA) SOUTH AFRICA 100% SENSIENT TECHNOLOGIES CORP. (CHINA) LTD - GUANGZHOU CHINA 100% WARNER-JENKINSON, S.A. (ARGENTINA) ARGENTINA 100% DR. MARCUS BETEILIGUNGS GMBH GERMANY 100% DR. MARCUS VERWALTUNGS GMBH GERMANY 100% DR. MARCUS CZ S.R.O. CZECH REPUBLIC 100% DR. MARCUS FRANCE SARL FRANCE 100% DR. MARCUS HUNGARIA KFT HUNGARY 100% DR. MARCUS POLSKA SP.ZO.O POLAND 100% DR. MARCUS COM.ROM. SRL ROMANIA 100% WARNER-JENKINSON BRASIL LTDA. BRAZIL 100% SENSIENT INDIA PRIVATE LIMITED INDIA 100% FORMULABS S.A. DE C.V. MEXICO 100% DR. MARCUS GMBH & CO. KG GERMANY 100% SENSIENT TECH. CORP. IRELAND ("IRISH FINANCE CO.") IRELAND 100% SENSIENT TECHNOLOGIES HOLDING DEUTCHLAND GMBH GERMANY 100% SENSIENT HOLDINGS (MALTA) LTD MALTA 100% UNIVERSAL HOLDINGS CAYMAN BRITISH WEST INDIES 100%
SENSIENT FRANCE SAS FRANCE 100% REGGIANA-WARNER JENKINSON SRL ITALY 100% SENSIENT TECHNOLOGIES FOREIGN SALES CORPORATION ST. THOMAS, VIRGIN ISLANDS 100% WARNER-JENKINSON EUROPE-GOLDMANN GMBH & CO. KG GERMANY 50% SYN TEC GMBH GERMANY 100% AC MA RI GMBH GERMANY 100%
EX-23 12 dex23.txt CONSENT OF DELOITTE & TOUCHE LLP Exhibit 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Amendment No. 1 to Registration Statements No. 33-34555 and 33-55437 and Registration Statements No. 333-95991, 333-95993, 33-27356, 333-35877 and 333-45931 on Form S-8 and Registration Statement No. 333-67015 on Form S-3 of Sensient Technologies Corporation, of our reports dated February 14, 2002 (which report includes an explanatory paragraph as to the change in accounting in 2000 of amortizing unrecognized net gains and losses related to the Company's obligations for post-retirement benefits), appearing and incorporated by reference in this Annual Report on Form 10-K of Sensient Technologies Corporation for the year ended December 31, 2001. DELOITTE & TOUCHE LLP Milwaukee, Wisconsin March 27, 2002 -----END PRIVACY-ENHANCED MESSAGE-----