<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 1996
REGISTRATION NOS. 333-15975 AND 333-15975-01
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MILLENNIUM AMERICA INC.
(EXACT NAME OF CO-REGISTRANT ISSUER AS SPECIFIED IN ITS CHARTER)
MILLENNIUM CHEMICALS INC.
(EXACT NAME OF CO-REGISTRANT GUARANTOR AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 2821 98-0045719
DELAWARE 2821 22-3436215
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBERS)
</TABLE>
<TABLE>
<S> <C>
MILLENNIUM AMERICA INC. MILLENNIUM CHEMICALS INC.
99 WOOD AVENUE SOUTH 99 WOOD AVENUE SOUTH
ISELIN, NEW JERSEY 08830 ISELIN, NEW JERSEY 08830
(908) 603-6600 (908) 603-6600
</TABLE>
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
GEORGE H. HEMPSTEAD, III, ESQ.
SENIOR VICE PRESIDENT -- LAW AND ADMINISTRATION
MILLENNIUM CHEMICALS INC.
99 WOOD AVENUE SOUTH
ISELIN, NEW JERSEY 08830
(908) 603-6600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE OF PROCESS)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
ELLEN J. ODONER, ESQ. LOIS HERZECA, ESQ.
WEIL, GOTSHAL & MANGES LLP FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
767 FIFTH AVENUE ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10153 NEW YORK, NEW YORK 10004
(212) 310-8000 (212) 859-8000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 21, 1996
$750,000,000
MILLENNIUM AMERICA INC.
$500,000,000 % SENIOR NOTES DUE NOVEMBER , 2006
$250,000,000 % SENIOR DEBENTURES DUE NOVEMBER , 2026
UNCONDITIONALLY GUARANTEED BY
MILLENNIUM CHEMICALS INC.
[LOGO]
----------------------------------------------------------
The % Senior Notes due November , 2006 (the 'Notes') and the %
Senior Debentures due November , 2026 (the 'Debentures' and, collectively with
the Notes, the 'Securities') are being offered by Millennium America Inc. (the
'Issuer'). Interest on the Securities will be payable semi-annually on
and of each year, commencing , 1997. The Securities will
not be redeemable prior to maturity (except for redemption at the option of the
Issuer in the event of certain changes involving taxation) and will not be
entitled to the benefit of any sinking fund. The Securities will be
unconditionally guaranteed by the Issuer's indirect parent, Millennium Chemicals
Inc. (the 'Company'). The guarantees of the Company to be endorsed on the
Securities are referred to as the 'Guarantees.'
The Securities and the Guarantees will be unsecured senior obligations of
the Issuer and the Company, respectively, and will rank pari passu with all
other existing and future unsecured and unsubordinated indebtedness of, and will
be senior in right of payment to all subordinated indebtedness of, the Issuer
and the Company, respectively. The Securities and the Guarantees will be
effectively subordinated to all existing and future indebtedness (including
guarantees) of subsidiaries of the Issuer and of the Company (other than the
Issuer) and all existing and future secured indebtedness of the Issuer and the
Company, to the extent of the value of the assets securing such indebtedness.
See 'Risk Factors -- Holding Company Structure.'
Each series of the Securities will be represented by one or more global
Securities registered in the name of the nominee of The Depository Trust Company
('DTC'). Beneficial interests in the global Securities will be shown on, and
transfers thereof will be effected only through, records maintained by DTC and
its participants. Except as described herein, Securities in definitive form will
not be issued. The Securities will be issued only in registered form in
denominations of $1,000 and integral multiples thereof. The Securities will
trade in DTC's Same-Day Funds Settlement System until maturity, and secondary
market trading activity for the Securities will therefor settle in immediately
available funds. All payments of principal of, and interest on, the Securities
will be made by the Issuer in immediately available funds. See 'Description of
the Securities -- Maturity, Principal and Interest.'
------------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) ISSUER(1)(3)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Per Note................................................. % % %
Total.................................................... $ $ $
Per Debenture............................................ % % %
Total.................................................... $ $ $
</TABLE>
- ------------
(1) Plus accrued interest, if any, from , 1996.
(2) The Issuer has agreed to indemnify the Underwriters, and the Company has
agreed to guarantee the Issuer's indemnity, against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
'Underwriting.'
(3) Before deducting estimated expenses of $ payable by the Issuer.
------------------------
The Securities offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the
Securities will be ready for delivery in book-entry form only through the
facilities of DTC in New York, New York, on or about , 1996,
against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SALOMON BROTHERS INC
------------------------
The date of this Prospectus is , 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
<PAGE>
AVAILABLE INFORMATION
The Issuer and the Company have filed with the Securities and Exchange
Commission (the 'Commission') a Registration Statement on Form S-1 (together
with all amendments and exhibits thereto, the 'Registration Statement') under
the Securities Act of 1933, as amended (the 'Securities Act'), with respect to
the Securities and the Guarantees offered hereby. This Prospectus, which forms a
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information about the Issuer, the Company, the
Securities and the Guarantees, reference is hereby made to the Registration
Statement and to such exhibits and schedules. Statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
In addition, the Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and, in
accordance therewith, files reports and other information with the Commission.
Reports, proxy and information statements and other information filed by the
Company with the Commission pursuant to the informational requirements of the
Exchange Act may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: New York
Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048,
and Chicago Regional Office, Suite 1400, Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661, and at the Commission website located at
(http://www.sec.gov). Copies of such material or any part thereof may also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company's Common
Stock, par value $.01 per share (the 'Common Stock'), is listed and traded on
The New York Stock Exchange, Inc. (the 'NYSE'). Reports, proxy and information
statements and other information concerning the Company may also be inspected at
the offices of the NYSE, 20 Broad Street, New York, New York 10005.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF EACH SERIES OF
SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
All statements other than statements of historical fact included in this
Prospectus, including without limitation the statements under 'Management's
Discussion and Analysis of Financial Condition and Results of Operations' and
'Business -- Strategy,' are, or may be deemed to be, forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Important factors that could cause actual results to differ
materially from those discussed in such forward-looking statements ('Cautionary
Statements') include: the balance between industry production capacity and
operating rates, on the one hand, and demand for the Company's products,
including polyethylene and titanium dioxide, on the other hand; the gross
national product in the United States and other countries, which also influences
demand for the Company's products; customer inventory levels; competitive
pricing pressures; the cost and availability of the Company's feedstocks and
other raw materials, including natural gas and ethylene; competitive technology
positions; and failure to achieve the Company's productivity improvement and
cost reduction targets or to complete construction projects on schedule. Some of
these Cautionary Statements are discussed in more detail under 'Risk Factors'
and 'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Historical Cyclicality of Significant Components of the Company's
Operations.' All subsequent written and oral forward-looking statements
attributable to the Issuer, the Company or persons acting on behalf of one or
both of them are expressly qualified in their entirety by such Cautionary
Statements.
2
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and is subject to,
the more detailed information and financial statements and notes thereto
contained elsewhere in this Prospectus. In this Prospectus, (i) unless otherwise
indicated, the terms 'Millennium' or 'the Company' refer collectively to
Millennium Chemicals Inc. and its consolidated subsidiaries and the terms
'Millennium America' or 'the Issuer' refer collectively to Millennium America
Inc. and its consolidated subsidiaries; (ii) references to the activities of,
and financial information with respect to, the Company prior to October 1, 1996
are to the historical activities and combined historical financial information
of the chemicals business (the 'Chemicals Business') and certain building
materials and materials handling businesses (the 'Discontinued Businesses') of
Hanson PLC ('Hanson') that were transferred to the Company by Hanson in
connection with the demerger (i.e., spin-off) of the Chemicals Business by
Hanson on that date (the 'Demerger'); (iii) the term 'Non-Chemical Businesses'
refers to businesses and assets of Hanson that were intended to remain with
Hanson (including, but not limited to, the Discontinued Operations), but which,
prior to commencement of the Demerger Transactions (as defined), were owned by
Hanson subsidiaries that were to become subsidiaries of the Company upon the
Demerger; (iv) the term 'Demerger Transactions' refers to the series of
transactions undertaken to effect the Demerger, including the sale of the
Non-Chemical Businesses (other than the Discontinued Operations) to Hanson on
September 30, 1996 and the sale of the Discontinued Businesses to Hanson on
October 6, 1996; (v) the term 'Suburban Propane' refers to the propane
operations of the Chemicals Business, which were transferred to Suburban Propane
Partners, L.P. ('Suburban Propane Partners') in contemplation of its initial
public offering of a 73.6% equity interest therein in March 1996; (vi) pro forma
information gives effect to the Demerger Transactions, this Offering and the
Tender Offer referred to below; (vii) references to '1995' and subsequent years
are to the applicable calendar year ended December 31, reflecting the fact that
the Company adopted a December 31 fiscal year-end effective as of January 1,
1995, and references to 'fiscal' 1994 and earlier years are to the applicable
fiscal year ended September 30; and (viii) references to 'tonnes' are to metric
tons, equal to 1,000 kilograms or 2,204.6 pounds.
MILLENNIUM CHEMICALS INC.
The Company is a major international chemicals company, with leading market
positions in a broad range of commodity, industrial, performance and specialty
chemicals. In 1995, the Company had pro forma net sales of approximately $3.2
billion and pro forma operating income of $776 million; for the nine months
ended September 30, 1996, the Company had pro forma net sales of approximately
$2.3 billion and pro forma operating income of $197 million (including $75
million of non-recurring charges relating to the Company's sulfate-process
titanium dioxide operations). At September 30, 1996, the Company had pro forma
total assets of approximately $5.5 billion.
Through its operating subsidiaries, Quantum Chemical Corporation ('Quantum
Chemical'), SCM Chemicals Inc. and its non-U.S. affiliates (collectively, 'SCM
Chemicals') and Glidco Inc. ('Glidco'), the Company is:
The largest producer of polyethylene products in the United States;
The second largest producer of titanium dioxide ('TiO2') in the United
States and the third largest producer of TiO2 in the world;
The second largest producer of acetic acid and vinyl acetate monomer in
the United States;
A leading producer of high value-added specialty polymers, color
concentrates and polymeric powders, and of titanium tetrachloride,
cadmium/selenium pigments and silica gel; and
A leading producer of fragrance and flavor chemicals derived from crude
sulfate turpentine.
In addition, a wholly-owned subsidiary of Quantum Chemical serves as the general
partner of Suburban Propane Partners, a publicly traded limited partnership
which, through an operating partnership, is the third largest retail marketer of
propane in the United States. Quantum Chemical owns a 2% general partnership
interest and an approximate 24% subordinated limited partnership interest, each
on a combined basis, in these partnerships. The Company accounts for its
interest in Suburban Propane Partners as a 26.4% equity investment.
The Company has been an independent, publicly owned company since October
1, 1996, when, in consideration for Hanson's transfer to it of the Chemicals
Business, the Company issued to Hanson's shareholders all of its then
outstanding Common Stock. On October 6, 1996, the Company sold the Discontinued
Businesses to Hanson and subsequently repaid all outstanding indebtedness to
Hanson.
3
<PAGE>
<PAGE>
At September 30, 1996, after giving pro forma effect to the Demerger
Transactions, the Company had consolidated indebtedness of approximately $2.5
billion, including approximately $1.0 billion accreted value of the Issuer's
2.39% Senior Exchangeable Discount Notes Due 2001 (the 'Pre-Demerger Notes').
The Demerger resulted in a change-in-control of the Issuer within the
meaning of the indenture governing the Pre-Demerger Notes. Accordingly, on
October 18, 1996, the Issuer commenced an offer to purchase any and all of the
outstanding Pre-Demerger Notes (the 'Tender Offer') for cash equal to 101% of
the accreted value of the Pre-Demerger Notes plus accrued interest (the
'Repurchase Price'). The Tender Offer will expire on December 17, 1996 unless
required by applicable law to be extended. If all outstanding Pre-Demerger Notes
are tendered and repurchased pursuant to the Tender Offer on that date, the
Repurchase Price will be approximately $1.1 billion. The Issuer will use the net
proceeds of the Offering, to the extent necessary, to pay the Repurchase Price.
Additional funds will be borrowed under the Issuer's credit facility with a
syndicate of banks (the 'Credit Facility'), if the net proceeds from the
Offering are not sufficient to repurchase all Pre-Demerger Notes tendered
pursuant to the Tender Offer. See 'Use of Proceeds.'
The Company's strategy is to maximize long-term cash flow and thereby
create value through improved efficiency at existing operations, disciplined
capital expenditures, selective dispositions, selective acquisitions of other
chemical businesses and reduction of leverage. In addition to building upon its
leading market positions in existing lines of business, the Company will seek to
expand its operations worldwide, focus its production on more profitable
value-added products and increase the proportion of its businesses that are less
cyclical in nature. The Company emphasizes stock ownership by management and
links a significant portion of management's compensation to the achievement of
performance targets, including targets based on 'economic value added' concepts
and the Company's performance relative to its industry peers. See 'Business --
Strategy.'
The Company's principal executive offices are located at 99 Wood Avenue
South, Iselin, New Jersey 08830, and its United States telephone number is (908)
603-6600. The Company also has executive offices located at Laporte Road,
Stallingborough, Grimsby, North East Lincolnshire, DN40 2PR, England, and its
United Kingdom telephone number is 01469-57-1000.
MILLENNIUM AMERICA INC.
The Issuer, an indirect wholly-owned subsidiary of the Company, is a
Delaware corporation organized in November 1980. It is a holding company for all
of the Company's operating subsidiaries other than the non-U.S. affiliates of
SCM Chemicals. In addition, it is the issuer of the Pre-Demerger Notes and a
borrower under the Credit Facility.
For the nine months ended September 30, 1996, the Issuer had net sales of
approximately $2.0 billion and operating income of $156 million (including $57
million of the non-recurring charges relating to the Company's sulfate-process
TiO2 operations). At September 30, 1996, the Issuer had pro forma total assets
of approximately $5.1 billion. For the nine months ended September 30, 1996, the
non-U.S. affiliates of SCM Chemicals, which are the only operating subsidiaries
of the Company that are not subsidiaries of the Issuer, had net sales of
approximately $291 million and operating income of $49 million (including the
remaining $18 million of the non-recurring charges). At September 30, 1996, the
non-U.S. affiliates of SCM Chemicals had pro forma total assets of approximately
$377 million.
The Issuer's principal executive offices are located at 99 Wood Avenue
South, Iselin, New Jersey 08830, and its telephone number at that address is
(908) 603-6600.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered........................... $ aggregate principal amount of % Senior Notes due
November , 2006.
$ aggregate principal amount of %
Senior Debentures due November , 2026.
Issuer....................................... Millennium America Inc.
Guarantor.................................... Millennium Chemicals Inc.
Interest Payment Dates....................... Semi-annually on and , commencing
, 1997.
Optional Redemption.......................... The Securities will not be redeemable prior to maturity (except
for redemption at the option of the Issuer in the event of
certain changes involving taxation).
</TABLE>
4
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Mandatory Sinking Fund....................... None
Ranking and Holding Company Structure........ The Securities and the Guarantees will be unsecured senior
obligations of the Issuer and the Company, respectively, and
will rank pari passu with all other existing and future
unsecured and unsubordinated indebtedness of, and will be senior
in right of payment to all subordinated indebtedness of, the
Issuer and the Company, respectively. The Securities and the
Guarantees will be effectively subordinated to (i) all existing
and future secured indebtedness of the Issuer and the Company,
to the extent of the value of the assets securing such
indebtedness, (ii) all existing and future indebtedness
(including guarantees) of any subsidiaries of the Issuer and of
the Company (other than the Issuer) and (iii) all existing and
future guarantees by subsidiaries of the Issuer and of the
Company (other than the Issuer) of the Issuer's and the
Company's indebtedness. At September 30, 1996, on a pro forma
basis after giving effect to the Demerger Transactions, the
Tender Offer and the Offering, the Issuer (on a consolidated
basis) had indebtedness of approximately $2.5 billion, of which
$51 million represented indebtedness of its subsidiaries. The
Company (on a consolidated basis) had additional indebtedness of
$40 million, all of which represented indebtedness of
subsidiaries other than the Issuer and its subsidiaries. See
'Risk Factors -- Limited Operating History as an Independent
Company; Significant Leverage,' 'Unaudited Pro Forma Combined
Financial Data,' 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and
Capital Resources' and 'Description of the
Securities -- Ranking.'
Certain Covenants............................ The Indenture under which the Securities will be issued (the
'Indenture') will contain certain covenants that limit, among
other things, (i) the ability of the Issuer and the Restricted
Subsidiaries (as defined) to grant liens or enter into sale and
lease-back transactions, (ii) the ability of the Restricted
Subsidiaries to incur additional indebtedness, and (iii) the
ability of the Issuer and the Company to merge, consolidate or
transfer substantially all of their respective assets. See
'Description of the Securities -- Restrictive Covenants' and
' -- Consolidation, Merger and Certain Sales of Assets.'
Use of Proceeds.............................. The net proceeds from the Offering, after deducting the estimated
underwriting discounts and expenses, are estimated to be
approximately $ million. The Issuer intends to use such net
proceeds, to the extent necessary, to pay the Repurchase Price
for Pre-Demerger Notes tendered pursuant to the Tender Offer.
Additional funds will be borrowed under the Credit Facility if
the net proceeds from the Offering are not sufficient to
repurchase all Pre-Demerger Notes tendered pursuant to the
Tender Offer. See 'Use of Proceeds.'
</TABLE>
RISK FACTORS
Prospective purchasers of the Securities should carefully consider the
information set forth under 'Risk Factors' beginning on page 8 and all other
information set forth in this Prospectus before making any investment in the
Securities.
5
<PAGE>
<PAGE>
SUMMARY COMBINED FINANCIAL DATA
The following table summarizes certain historical combined financial data
with respect to the Company and is qualified in its entirety by reference to,
and should be read in conjunction with, the Company's Historical Combined
Financial Statements and notes thereto included elsewhere in this Prospectus.
Historical combined financial information may not be indicative of the Company's
future performance as an independent company. See also 'Ratio of Earnings to
Fixed Charges,' 'Selected Combined Financial Data,' 'Unaudited Pro Forma
Combined Financial Data,' 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and 'Index to Financial Statements.'
For certain historical financial data with respect to the Issuer, see Note
12 to the Combined Financial Statements of the Company.
<TABLE>
<CAPTION>
THREE
NINE MONTHS ENDED YEAR MONTHS FISCAL YEAR ENDED
SEPTEMBER 30, ENDED ENDED SEPTEMBER 30,
---------------------------- DECEMBER 31, DECEMBER 31, ----------------------
1996 1995 1995 1994 1994 1993(1)
------- ----------- ------------ ------------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
INCOME STATEMENT DATA(2):
Net sales.................. $ 2,279 $ 2,939 $ 3,800 $ 908 $3,288 $ 862
Operating income........... 205(3) 690 842 203 344 139
Income from continuing
operations............... 103(3)(4) 276 331 84 66 103
Net (loss) income.......... (3,064)(3)(4)(5) 276 349 96 94 123
OTHER DATA (WITH RESPECT TO
CONTINUING OPERATIONS):
EBITDA (6)................. 357 870 1,083 262 591 183
Depreciation and
amortization............. $ 152 $ 180 $ 241 $ 59 $ 247 $ 44
Capital expenditures....... 223 201 276 30 109 28
</TABLE>
- ------------
(1) Excludes the results of Quantum Chemical, which was acquired by Hanson on
September 30, 1993.
(2) For certain historical combined balance sheet data, see page 15.
(3) Includes the effects of non-recurring charges of $75 ($48 after-tax) to
reduce the carrying value of certain facilities employed in the
sulfate-process manufacturing of TiO2 and provide for the costs associated
with the closure of certain of these facilities, as described in Note 4 to
the Combined Financial Statements of the Company.
(4) Includes the effects of an after-tax gain of $86 resulting from the
Company's sale in March 1996 of a 73.6% equity interest in Suburban Propane,
as described in Note 1 to the Combined Financial Statements of the Company.
Prior periods include Suburban Propane as a continuing operation.
(5) Includes the effects of a non-cash after-tax charge of $3,206 relating to
one of the Discontinued Businesses as a result of the Company's adoption of
the long-lived asset carrying value methodology provided by Statement of
Financial Accounting Standards No. 121 ('SFAS 121'), as described in Note 5
to the Combined Financial Statements of the Company. The Discontinued
Businesses were sold to Hanson on October 6, 1996.
(6) Earnings before interest, taxes, depreciation and amortization ('EBITDA')
for any relevant period presented above represents income (loss) before
interest, income taxes, depreciation, amortization of goodwill and
provisions for other non-operating charges or credits. For the nine months
ended September 30, 1996, EBITDA includes the effects of the non-recurring
charges referred to in footnote (3). While EBITDA should not be construed as
a substitute for operating income or a better indicator of liquidity than
cash flow from operating activities, which are determined in accordance with
Generally Accepted Account Principles ('GAAP'), it is included herein to
provide additional information with respect to the ability of the Company to
meet its future debt service, capital expenditure and working capital
requirements. EBITDA is not necessarily a measure of the Company's ability
to fund its cash needs.
6
<PAGE>
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following summary unaudited pro forma combined financial data reflect
the Demerger Transactions, the Tender Offer and the Offering as if all such
transactions had been completed as of January 1, 1996 and January 1, 1995,
respectively, for pro forma combined income statement data purposes and as of
September 30, 1996 for pro forma combined balance sheet data purposes. For a
summary of the Demerger Transactions, see 'Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Introduction.' These data do
not necessarily reflect the operating data or financial position of the Company
which would have been achieved had such transactions actually been consummated
as of such dates. Also, these data are not necessarily indicative of the future
results of operations or future financial position of the Company. See
'Capitalization' and 'Unaudited Pro Forma Combined Financial Data.'
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1996 1995
----------------- ------------
(IN MILLIONS)
<S> <C> <C>
PRO FORMA INCOME STATEMENT DATA:
Net sales............................................................ $ 2,279 $3,161
Operating income..................................................... 197(1) 776
Income from continuing operations.................................... 130(1)(2) 382
OTHER PRO FORMA DATA:
Adjusted EBITDA...................................................... 424(3) 983
Interest expense..................................................... 129 157
Interest income...................................................... 25 25
<CAPTION>
AT SEPTEMBER 30,
1996
-----------------
<S> <C>
PRO FORMA BALANCE SHEET DATA:
Cash and cash equivalents............................................ $ 388
Total assets......................................................... 5,522
Short-term debt...................................................... 233
Long-term debt(4).................................................... 2,283
Total liabilities.................................................... 4,225
Stockholders' equity (invested capital).............................. 1,297
</TABLE>
- ------------
(1) Includes the effects of non-recurring charges of $75 ($48 after-tax) to
reduce the carrying value of certain facilities employed in the
sulfate-process manufacturing of TiO2 and provide for the costs associated
with the closure of certain of these facilities, as described in Note 4 to
the Combined Financial Statements of the Company.
(2) Includes the effects of an after-tax gain of $86 resulting from the
Company's sale in March 1996 of a 73.6% equity interest in Suburban Propane,
as described in Note 1 to the Combined Financial Statements of the Company.
The prior period includes Suburban Propane as a continuing operation.
(3) Calculated as described in footnote (6) to the preceding table, adjusted to
exclude the effects of the non-recurring charges referred to in footnote (1)
above.
(4) Reflects a net capital contribution from Hanson to the Company as part of
the Demerger Transactions, so that the Company's combined indebtedness, net
of cash (including restricted cash) and cash equivalents, at October 1,
1996, after giving pro forma effect to the sale of the Discontinued
Businesses and the Tender Offer, would amount to $2.017 billion.
7
<PAGE>
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained in this Prospectus before purchasing the
Securities offered hereby. In connection with the forward-looking statements
which appear in this Prospectus, prospective purchasers of the Securities should
carefully review the factors discussed, or to which reference is made, below and
the Cautionary Statements referred to in 'Disclosure Regarding Forward-Looking
Statements.'
LIMITED OPERATING HISTORY AS AN INDEPENDENT COMPANY; SIGNIFICANT LEVERAGE
The Company became an independent public company on October 1, 1996. While
the Chemicals Business in the aggregate was profitable as part of Hanson, there
can be no assurance that it can be operated profitably as a stand-alone company.
Furthermore, while historically the Chemicals Business has financed its
operations and capital and other expenditures from a combination of cash
generated internally from operations, external borrowings and loans and invested
capital provided by Hanson or its United States affiliates, since the Demerger
the Company has been required to meet all of its cash requirements through funds
generated internally from operations and external borrowings (which could be
more costly).
At September 30, 1996, after giving pro forma effect to the Demerger
Transactions, the Tender Offer and the Offering, the Company had combined
indebtedness of approximately $2.5 billion and cash and cash equivalents of $388
million and the Company's ratio of total long-term debt to total capitalization
was .60 to 1.0. See 'Capitalization,' 'Selected Combined Financial Data' and
'Unaudited Pro Forma Combined Financial Data.'
The significant degree to which the Company is leveraged could have
important consequences to holders of the Securities, including the following:
(i) the Company's ability to obtain additional financing in the future for
working capital, capital expenditures, product development, acquisitions or
other purposes may be limited or the terms upon which it is available may be
more restrictive or costly; (ii) a portion of the Company's combined cash flow
from operations must be dedicated to the payment of interest expense; (iii) the
Company's operating flexibility with respect to certain matters is limited by
covenants contained in the Credit Facility, which limit its ability to incur
additional indebtedness and grant liens, and will be limited by covenants
contained in the Indenture, which will limit its ability to incur indebtedness
through certain of its subsidiaries, grant liens or enter into sale and
lease-back transactions; and (iv) the Company's degree of leverage may make it
more vulnerable to changes in general economic conditions and industry downturns
which, in the past, have affected significant components of the Chemicals
Business, and may limit the Company's ability to make capital expenditures and
acquisitions and pursue other business opportunities. See ' -- Historical
Cyclicality of Significant Components of the Company's Operations; Recent
Downturns' below.
The Issuer expects to generate sufficient cash flow from operations to meet
its debt service obligations for the foreseeable future. However, the Issuer's
ability to generate cash for the repayment of debt will be dependent upon the
future performance of the Issuer's businesses, which will in turn be subject to
financial, business and other factors affecting the business and operations of
the Issuer, including factors beyond its control, such as prevailing economic
conditions and the cyclicality of the principal sectors of the chemicals
industry in which the Company operates.
The Company may seek growth through selective acquisitions, which may
include significant acquisitions. The Company could incur substantial
indebtedness in connection with a significant acquisition, in which event the
Company's leverage would be increased. The Indenture does not (i) restrict the
incurrence of additional unsecured indebtedness by the Company or the Issuer
(although it does restrict the incurrence of additional unsecured indebtedness
by certain subsidiaries of the Issuer); (ii) prohibit a consolidation, merger,
sale of assets, dividend or other similar transaction that may adversely affect
the creditworthiness of the Company or the Issuer or the successor or combined
entity of either thereof; (iii) prohibit a change in control of the Company or
the Issuer; or (iv) restrict a highly leveraged transaction involving the
Company or the Issuer.
8
<PAGE>
<PAGE>
HOLDING COMPANY STRUCTURE
The Issuer is a holding company whose sole asset is 100% of the outstanding
capital stock of an intermediate holding company, which, in turn, is the parent
of each of Quantum Chemical, SCM Chemicals Inc. (which conducts SCM Chemicals'
U.S. operations) and Glidco. In repaying its indebtedness, including the
Securities, the Issuer must rely on cash flows from its subsidiaries, including
debt service and dividends from such subsidiaries.
The holders of the Securities will have no direct claims against the
Issuer's subsidiaries. The ability of the Issuer's subsidiaries to make payments
to the Issuer will be affected by the obligations of such subsidiaries to their
creditors. Claims of holders of indebtedness of the Issuer, including the
Securities, against the cash flow and assets of the Issuer's subsidiaries will
be effectively subordinated to claims of such creditors. At September 30, 1996,
on a pro forma basis after giving effect to the Demerger Transactions, the
Tender Offer and the Offering, subsidiaries of the Issuer had approximately $51
million of indebtedness outstanding. The Indenture will limit the ability of
certain subsidiaries of the Issuer to incur additional indebtedness. The ability
of the Issuer's subsidiaries to make payments to the Issuer will also be subject
to, among other things, applicable state corporate laws and other laws and
regulations. State corporate law applicable to the Issuer's principal
subsidiaries generally prohibits the payment of dividends by any given
subsidiary unless such subsidiary has capital surplus or net profits in the
current or immediately preceding year. In order to pay the principal amount at
maturity of the Securities, the Issuer may be required to adopt one or more
alternatives, such as a refinancing of the Securities.
The Securities will be unconditionally guaranteed on an unsecured basis by
the Company. The Company is a holding company whose sole asset is 100% of the
outstanding capital stock of an intermediate holding company, which, in turn, is
the indirect parent of the Issuer and the indirect parent of the subsidiaries
that hold the non-U.S. operations of SCM Chemicals. If the holders of the
Securities seek to enforce the Guarantees, the holders will have no direct
claims against the Company's subsidiaries. The ability of the Company's
subsidiaries to make payments to the Company will be affected by the obligations
of such subsidiaries to their creditors. Claims of holders of indebtedness of
the Company, including the Guarantees, against the cash flow and assets of the
Company's subsidiaries will be effectively subordinated to claims of such
creditors. At September 30, 1996, on a pro forma basis after giving effect to
the Demerger Transactions, the Tender Offer and the Offering, the Issuer and its
subsidiaries had approximately $2.5 billion of indebtedness outstanding. In
addition, subsidiaries of the Company other than the Issuer and its subsidiaries
had approximately $40 million of indebtedness outstanding. The ability of the
Company's subsidiaries to make payments to the Company will also be subject to,
among other things, corporate laws and other laws and regulations of the
applicable state or foreign jurisdiction. State corporate law applicable to the
Company's subsidiaries generally prohibits the payment of dividends by any given
subsidiary unless such subsidiary has capital surplus or net profits in the
current or immediately preceding year.
HISTORICAL CYCLICALITY OF SIGNIFICANT COMPONENTS OF THE COMPANY'S OPERATIONS;
RECENT DOWNTURNS
Quantum Chemical operates principally in the highly cyclical U.S. market
for polyethylene and related products. Demand for polyethylene has historically
fluctuated from year to year, although it has increased at average annual rates
of approximately 3.6% over the last five years and approximately 5.3% over the
last ten years. The industry is particularly sensitive to capacity additions,
especially capacity to manufacture ethylene, polyethylene's principal raw
material. Polyethylene producers have historically experienced alternating
periods of inadequate capacity, resulting in increased selling prices and
operating margins, followed by periods of large capacity additions, resulting in
decreased capacity utilization rates, selling prices and operating margins. For
example, from mid-1994 through mid-1995, selling prices and operating margins
for polyethylene increased significantly due to an unanticipated shortage of
ethylene. From mid-1995 through early 1996, selling prices and operating margins
decreased significantly due to the restoration of lost ethylene supply, expanded
manufacturing capacity and inventory reductions by customers. Selling prices
increased again during the second and third quarters of 1996 as a result of
significantly increased domestic demand for polyethylene, strong exports and
higher natural gas feedstock costs; notwithstanding these costs, operating
margins also increased. The Company expects that the operating results of this
segment for the fourth quarter of 1996 will be below
9
<PAGE>
<PAGE>
those for the third quarter due to a slight deterioration in selling prices
arising from softening demand and the effect of continuing feedstock cost
increases on operating margins. Due to competitive pressures and the decline in
demand, price increases intended to become effective in October 1996 have been
postponed. In the future, there can be no assurance that growth in demand for
polyethylene will be sufficient to absorb currently anticipated capacity
increases (including increases in ethylene capacity) without the industry
experiencing an overall reduction in utilization rates, which has in the past
caused selling prices and operating margins to decline. In addition, there can
be no assurance that the downward phase of the polyethylene industry's
cyclicality will not be exacerbated by unanticipated capacity additions, changes
in technology, price volatility of raw materials, changes in customer inventory
levels or other conditions.
The worldwide TiO2 industry in which SCM Chemicals participates also
experiences cyclical demand, supply and pricing, although to a lesser degree
than the polyethylene industry. TiO2 is considered to be a 'quality of life'
performance chemical, the demand for which is influenced by changes in the gross
domestic product of various regions of the world. A cyclical peak for average
annual TiO2 prices occurred in 1990. By mid-1994, TiO2 prices had declined by
approximately 22% from that peak. In late 1994, increased demand due to improved
economic conditions and limited capacity additions brought industry capacity
utilization rates above 90% and produced a turnaround in worldwide prices that
continued through most of 1995. The industry experienced price erosion and
reduced capacity utilization rates in late 1995 and the first half of 1996 due
to reduced economic growth, adverse weather conditions during the painting
season and consolidation of customers in the coating markets. In July 1996, SCM
Chemicals announced a program to address market conditions in the TiO2 industry
by, among other things, reducing sulfate-process manufacturing capacity both in
the United Kingdom and the United States and delaying chloride-process expansion
programs in the United Kingdom and Australia. As part of the program, SCM
Chemicals also announced increases in global selling prices for TiO2 products
effective October 1, 1996; however, due to competitive pricing pressures, such
increases will not be realized during the balance of 1996. The Company recorded
non-recurring charges of $75 million in the nine months ended September 30, 1996
for the costs of the program. If market conditions continue to deteriorate, it
may be necessary to further reduce operations at the Baltimore plant and accrue
for additional closure costs. SCM Chemicals' sulfate-process manufacturing
operations have historically operated at a marginal level, and made a negative
contribution of $5 million during the nine months ended September 30, 1996.
For additional information, see ' -- Price Volatility of Certain Raw
Materials' below, 'Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Historical Cyclicality of Significant Components of
the Company's Operations' and 'Business.'
PRICE VOLATILITY OF CERTAIN RAW MATERIALS
Quantum Chemical purchases large amounts of natural gas liquid feedstocks
(including ethane, propane and butane) for use in producing ethylene, which it
uses, in turn, as a raw material for producing polyethylene and polypropylene.
While Quantum Chemical has agreements providing for the supply of these
feedstocks, the contractual prices for these feedstocks vary with market
conditions and are at times highly volatile.
In addition to producing its own ethylene, Quantum Chemical has contracted
to purchase significant amounts of ethylene under certain long-term agreements
at prices based on market prices. Quantum Chemical sells ethylene supplies in
excess of its requirements on the spot market. Spot prices fluctuate and may be
significantly less than, or significantly greater than, the prices Quantum
Chemical has paid for the ethylene purchased under its long-term agreements.
Quantum Chemical's ethylene purchase obligations will begin to decline in
December 1996 and will be eliminated by December 2000, unless Quantum Chemical
decides to seek extensions or new agreements. See 'Business -- Polyethylene and
Related Products.'
While Quantum Chemical seeks to balance increases in feedstock and raw
material costs with corresponding increases in the prices of its polyethylene
and other products, there have been in the past, and may be in the future,
periods of time during which cost increases are not recovered by Quantum
Chemical because industry overcapacity prevents selling prices from being
raised.
10
<PAGE>
<PAGE>
From time to time, the results of SCM Chemicals may be affected by
increases in the price of TiO2 ores and the results of Glidco may be affected by
increases in the price of its principal raw material, crude sulfate turpentine
('CST').
For additional information, see 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.'
ENVIRONMENTAL MATTERS; LITIGATION
The Company's operations are subject to extensive federal, state, local and
foreign laws, regulations, rules and ordinances concerning, among other things,
emissions to the air, discharges and releases to land and water, the generation,
handling, storage, transportation, treatment and disposal of wastes and other
materials and the remediation of environmental pollution caused by releases of
wastes and other materials ('Environmental Laws'). The operation of any chemical
manufacturing plant and the distribution of chemical products entail risks under
Environmental Laws, many of which provide for substantial fines and criminal
sanctions for violations. Potentially significant expenditures could be required
in connection with the repair or upgrade of facilities in order to meet future
requirements under Environmental Laws as well as in connection with the
investigation and remediation of alleged or actual pollution. Certain
subsidiaries of the Company have been named as defendants, potentially
responsible parties ('PRPs') or both in a number of environmental proceedings
associated with waste disposal sites and facilities currently or previously
owned, operated or used by them or their predecessors, some of which disposal
sites or facilities are on the Superfund National Priorities List of the United
States Environmental Protection Agency (the 'EPA') or similar state lists. These
proceedings seek cleanup costs, damages for personal injury or property damage,
or both; certain of them involve claims for substantial amounts. In addition,
certain Company subsidiaries have contractual obligations to indemnify the
purchasers of certain discontinued operations against certain environmental
liabilities. No assurance can be given that actual costs will not exceed accrued
amounts for sites and indemnification obligations for which estimates have been
made, and no assurance can be given that costs will not be incurred with respect
to sites and indemnification obligations as to which no estimate presently can
be made. There also can be no assurance that additional environmental matters
will not arise in the future. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Certain Environmental Matters'
and 'Business -- Environmental Matters.'
Together with other alleged past manufacturers of lead pigments for use in
paint and lead-based paint, a former subsidiary of a Company subsidiary has been
named as a defendant or third party defendant in various legal proceedings
alleging that it (through a discontinued operation) and other manufacturers are
responsible for personal injury and property damage allegedly associated with
the use of lead pigments in paint. The liability that may result from these
proceedings or from similar proceedings that may be filed in the future is not
reasonably capable of estimation, although based upon the results of the pending
legal proceedings to date, the Company currently believes that the disposition
of such proceedings in the aggregate should not have a material adverse effect
on the Company's combined financial position, results of operations or
liquidity. However, there can be no assurance that laws or administrative
regulations will not be adopted that (i) impose various obligations on present
and former manufacturers of lead pigment and lead paint with respect to asserted
health concerns associated with the use of such products or (ii) effectively
overturn court decisions in which the defendants have to date been successful.
See 'Business -- Legal Proceedings.'
Certain of the Discontinued Businesses have also been named as defendants,
PRPs or both in environmental proceedings or have contractual liabilities to
indemnify the purchasers of certain discontinued operations thereof against
environmental liabilities. Hanson has agreed to indemnify the Company against
any losses relating to such liabilities. See 'Certain Structural Consequences of
the Demerger' below and 'Agreements between the Company and Hanson Relating to
the Demerger -- Indemnification Agreements.'
11
<PAGE>
<PAGE>
CERTAIN STRUCTURAL CONSEQUENCES OF THE DEMERGER
The Demerger Transactions were designed to separate the Chemicals Business,
which is now held by the Company, from Hanson's other businesses and operations,
which will continue to be held by Hanson or will be held by other
newly-established or to-be-formed entities which Hanson has spun-off or intends
to spin off to its shareholders as separate public companies. Hanson and certain
Hanson subsidiaries have agreed to indemnify the Company and the Company's
subsidiaries against all liabilities, litigation and claims arising out of
certain Hanson operations, including the Non-Chemical Businesses, and against
certain tax liabilities. See 'Agreements between the Company and Hanson Relating
to the Demerger -- Indemnification Agreements.' If an indemnifiable liability
were to be successfully established against the Company, the Company would look
to Hanson (or another appropriate indemnifying entity) to satisfy such liability
in accordance with the terms of the indemnification agreements. However, if
Hanson (or the other appropriate indemnifying entity) either refused to honor
its obligations under the indemnification agreements or, due to the size of the
claim and/or Hanson's (or such other entity's) financial condition at such time,
Hanson (or such other indemnifying entity) did not have sufficient financial
resources to satisfy such claim, the Company or Company subsidiaries could be
required to do so. Accordingly, the Company's ability to avoid liability for
indemnified claims could be subject to the ability of Hanson (or the appropriate
indemnifying entity), after giving effect to the Demerger, the demerger of
Hanson's tobacco business and the contemplated demerger of Hanson's energy
business, to satisfy such claims.
POSSIBLE EFFECTS OF DUAL RESIDENCE OF THE COMPANY
The Company is organized under the laws of Delaware and is subject to
United States federal income taxation. However, in order to obtain clearance
from the U.K. Inland Revenue as to the tax-free treatment for U.K. tax purposes
for Hanson and Hanson's shareholders of the stock dividend effectuating the
Demerger, Hanson agreed with the U.K. Inland Revenue that the Company would
continue to be centrally managed and controlled in the United Kingdom for at
least five years following the date of the Demerger (October 1, 1996). Hanson
also agreed with the U.K. Inland Revenue that the Company's Board of Directors
would be the only medium through which strategic control and policy making
powers were exercised, and that meetings of the Company's Board of Directors
almost invariably would be held in the United Kingdom during such five-year
period. In an agreement with Hanson, the Company agreed not to take, or fail to
take, during such five-year period, any action that would result in a breach of,
or constitute non-compliance with, any of the representations and undertakings
made by Hanson in Hanson's agreement with the U.K. Inland Revenue. The Company's
By-Laws provide for similar constraints.
Hanson's agreement with the U.K. Inland Revenue provides that if, at any
time during the five-year period following the date of the Demerger, the Company
ceases to be regarded as centrally managed and controlled in the United Kingdom,
the distribution of the Common Stock to Hanson's shareholders to effect the
Demerger will no longer be regarded as tax-free to Hanson under U.K. law
(although it will continue to be treated as tax-free under U.K. law to Hanson's
shareholders). The Company has agreed to indemnify Hanson against any liability
and penalties arising out of a breach of the agreement between Hanson and the
U.K. Inland Revenue referred to in the preceding paragraph. The Company
estimates that, if such indemnification obligation were to arise prior to
October 1, 1997, it would amount to approximately $421 million. Such obligation
will decrease by $84.2 million on each subsequent October 1 through October 1,
2001, when it will terminate in full. See 'Agreements between the Company and
Hanson Relating to the Demerger -- Indemnification Agreements.'
If the Company ceases to be a U.K. tax resident at any time, the Company
will be deemed for purposes of U.K. corporation tax on chargeable gains to have
disposed of all of its assets at such time. In such a case, the Company would be
liable for U.K. corporation tax on chargeable gains on the amount by which the
fair market value of those assets at the time of such deemed disposition exceeds
the Company's tax basis in those assets. The tax basis of the assets would be
calculated in pounds sterling, based on the fair market value of the assets (in
pounds sterling at the time of acquisition of the assets by the Company)
adjusted for U.K. inflation. Accordingly, in such circumstances, the Company
could incur a tax liability even though it has not actually sold the assets and
even though the underlying value of the assets may not have actually appreciated
(due to currency movements). Since it is
12
<PAGE>
<PAGE>
impossible to predict the future value of the Company's assets, currency
movements and inflation rates, it is impossible to predict the magnitude of such
liability, should it arise.
See 'Description of the Securities -- Redemption' and 'Certain Tax
Considerations -- United Kingdom Income Taxation.'
ABSENCE OF PUBLIC MARKET FOR THE SECURITIES
The Securities will be new issues of securities for which there is
currently no market. If the Securities are traded after their initial issuance,
they may trade at a discount from their initial offering price, depending upon
prevailing interest rates, the market for similar securities and other factors.
The Underwriters have informed the Issuer that, subject to applicable law, they
currently intend to make a market in the Securities. However, the Underwriters
are not obligated to do so, and any such market making may be discontinued at
any time without notice. Therefore, no assurance can be given as to whether an
active trading market will develop for the Securities or, if such a market
develops, whether it will continue. The Company does not intend to apply for
listing of the Securities on any securities exchange or on the National
Association of Securities Dealers, Inc. automated quotation system. See
'Underwriting.'
USE OF PROCEEDS
The estimated net proceeds of the Offering, after deducting the estimated
underwriting discounts and expenses, are approximately $ million. The net
proceeds of the Offering will be used, to the extent necessary, to pay the
Repurchase Price for Pre-Demerger Notes tendered pursuant to the Tender Offer.
The Pre-Demerger Notes have a stated interest rate of 2.39% per annum and a
yield to maturity of 6.0% per annum, and will mature on March 1, 2001 unless
previously redeemed. Any excess proceeds will be used to repay a portion of the
outstanding revolving credit indebtedness under the Credit Facility, which, as
of the date of this Prospectus, bears interest at approximately 5.60% per annum.
If, based on the level of tenders of Pre-Demerger Notes, the net proceeds of the
Offering are insufficient to pay the Repurchase Price, the balance will be
obtained from the Credit Facility. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources -- The Credit Facility.' Pending completion of the Tender Offer, the
net proceeds of the Offering will be invested in short-term instruments.
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS NINE MONTHS PRO FORMA
ENDED ENDED YEAR ENDED YEAR ENDED FISCAL YEAR ENDED SEPTEMBER 30,
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, -----------------------------------
1996 1996 1995 1995 1994 1993(1) 1992(1) 1991(1)
------------- ------------- ------------ ------------ ----- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Company................... 3.0:1 2.3:1 4.6:1 3.1:1 1.6:1 11.1:1 29.6:1 60.3:1
</TABLE>
- ------------
(1) Excludes Quantum Chemical, which was acquired on September 30, 1993, and the
debt balances associated with the acquisition.
For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income from continuing operations (excluding equity in income or
losses of Suburban Propane since January 1, 1996 but including distributed
income from Suburban Propane), before interest expense (including amortization
of deferred financing costs) and income taxes. Fixed charges consist of interest
expense (including amortization of deferred financing costs) and rent.
13
<PAGE>
<PAGE>
CAPITALIZATION
The following table, which is unaudited, sets forth, as of September 30,
1996, the capitalization of the Company, as adjusted to reflect completion of
the Demerger Transactions, the issuance of the Securities and the application of
the net proceeds thereof, together with additional borrowings under the Credit
Facility, to repurchase all outstanding Pre-Demerger Notes tendered pursuant to
the Tender Offer. This data should be read in conjunction with 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Introduction' and the Combined Financial Statements and notes
thereto of the Company included elsewhere in this Prospectus. See 'Index to
Financial Statements.'
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
------------------------------------
ACTUAL ADJUSTMENTS AS ADJUSTED
------ ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Short-term debt:
Notes.................................................................. $ 222 -- $ 222
Other.................................................................. 11 -- 11
------ ----------- -----------
Total short-term.................................................. $ 233 -- $ 233
------ ----------- -----------
Long-term debt:
Securities Offered Hereby.............................................. -- 750 750
Pre-Demerger Notes..................................................... 1,036 (1,036) --
Credit Facility........................................................ 300 1,197 1,497
Allocated Loan(1)...................................................... 2,250 (2,250) --
Other.................................................................. 64 (28) 36
------ ----------- -----------
Total long-term debt.............................................. $3,650 (1,367) 2,283
------ ----------- -----------
Stockholders' equity:
Preferred Stock, 25,000,000 shares, par value $.01 per share,
authorized; none issued and outstanding.............................. $ -- $-- $--
Common Stock, 225,000,000 shares, par value $.01 per share, authorized;
77,324,605 shares issued and outstanding (as adjusted)(2)............ -- 1 1
Paid-in capital........................................................ -- 1,296 1,296
Invested capital....................................................... 501 (501) --
------ ----------- -----------
Total capitalization(3)........................................... $4,384 $ (571) $ 3,813
------ ----------- -----------
------ ----------- -----------
</TABLE>
- ------------
(1) This loan (the 'Allocated Loan') was allocated to the Company in the
Combined Financial Statements because it related directly to the Chemicals
Business. It was repaid using the proceeds of the sale of certain
Non-Chemicals Businesses to Hanson (which are reflected in paid-in capital),
cash balances and additional borrowings under the Credit Facilty.
(2) Reflects the issuance on October 1, 1996, pursuant to the Demerger, of
74,408,257 shares of Common Stock to Hanson's shareholders and the issuance
on October 8, 1996, pursuant to the Stock Incentive Plan, of 2,912,322
shares of restricted Common Stock to the Company's executive officers and
other key employees and 4,026 shares of Common Stock to the Company's
non-employee directors. See 'Executive Compensation -- Company Incentive
Compensation and Benefit Plans.'
(3) As part of the Demerger Transactions, the Company repaid a $1.9 billion loan
from Hanson (the 'Hanson Loan') that was unrelated to the Chemicals Business
and therefore not allocated to the Company in the Combined Financial
Statements. Accordingly, the Hanson Loan and its subsequent repayment (using
the proceeds of the sale of the Discontinued Businesses to Hanson, cash
balances and additional borrowings under the Credit Facility), had no impact
on the capitalization of the Company.
14
<PAGE>
<PAGE>
SELECTED COMBINED FINANCIAL DATA
The historical selected combined financial data of the Company set forth
below are derived from the audited Combined Financial Statements of the Company
except for the data as at and for the periods ended September 30, 1996,
September 30, 1995, September 30, 1992 and September 30, 1991, which are derived
from the unaudited Combined Financial Statements of the Company. In the opinion
of the Company, the unaudited combined financial data have been prepared on a
basis consistent with that of the audited financial data and the interim
financial data include all adjustments necessary for a fair presentation of
interim results.
Income statement data and other data for fiscal 1993, fiscal 1992 and
fiscal 1991 and balance sheet data for fiscal 1992 and fiscal 1991 exclude
Quantum Chemical, which was acquired on September 30, 1993 in a transaction
accounted for as a 'purchase.' In addition, historical financial data may not be
indicative of the Company's future performance as an independent company.
Finally, the historical financial data presented below do not reflect certain
pro forma adjustments giving effect to the Demerger Transactions which are
included in 'Unaudited Pro Forma Combined Financial Data.'
The information set forth below should be read in conjunction with
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and the Combined Financial Statements and notes thereto of the
Company included elsewhere in this Prospectus. See 'Index to Financial
Statements.' Historical earnings per share and dividend data have not been
presented because there is no separate identifiable pool of capital for the
periods prior to incorporation upon which a per share calculation could be
based. For certain historical financial data with respect to the Issuer, see
Note 12 to the Combined Financial Statements of the Company.
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS
SEPTEMBER 30, YEAR ENDED ENDED
------------------------ DECEMBER 31, DECEMBER 31,
1996 1995 1995 1994
------- ------- ------------ ------------
(UNAUDITED) (IN MILLIONS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................ $ 2,279 $ 2,939 $ 3,800 $ 908
Operating income......... 205(1) 690 842 203
Income from continuing
operations............. 103(1)(2) 276 331 84
Net (loss) income........ (3,064)(1)(2)(3) 276 349 96
BALANCE SHEET DATA (AT PERIOD
END):
Total assets(4).......... $ 6,179 $10,130 $ 10,043 $ 10,024
Total liabilities........ 5,678 5,182 5,242 5,166
Invested capital(4)...... 501 4,948 4,801 4,858
OTHER DATA (WITH RESPECT TO
CONTINUING OPERATIONS):
Depreciation and
amortization........... $ 152 $ 180 $ 241 $ 59
Capital expenditures..... 223 201 276 30
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER
30,
------------------------------
1994 1993 1992 1991
------ ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................$3,288 $ 862 $ 920 $ 941
Operating income......... 344 139 181 213
Income from continuing
operations............. 66 103 138 160
Net (loss) income........ 94 123 194 142
BALANCE SHEET DATA (AT PERIOD
END):
Total assets(4)..........$9,691 $10,135 $5,182 $1,704
Total liabilities........ 5,053 4,692 663 639
Invested capital(4)...... 4,638 5,443 4,519 1,065
OTHER DATA (WITH RESPECT TO
CONTINUING OPERATIONS):
Depreciation and
amortization...........$ 247 $ 44 $ 38 $ 21
Capital expenditures..... 109 28 43 59
</TABLE>
- ------------
(1) Includes the effects of non-recurring charges of $75 ($48 after-tax) to
reduce the carrying value of certain facilities employed in the
sulfate-process manufacturing of TiO2 and provide for the costs associated
with the closure of certain of these facilities, as described in Note 4 to
the Combined Financial Statements of the Company.
(2) Includes the effects of an after-tax gain of $86 resulting from the
Company's sale in March 1996 of a 73.6% equity interest in Suburban Propane,
as described in Note 1 to the Combined Financial Statements of the Company.
Periods ended in 1995 and fiscal 1994 include Suburban Propane as a
continuing operation.
(3) Includes the effects of a non-cash after-tax charge of $3,206 relating to
one of the Discontinued Businesses as a result of the Company's adoption of
the long-lived asset carrying value methodology provided by SFAS 121, as
described in Note 5 to the Combined Financial Statements of the Company.
(4) Includes net assets of the Discontinued Businesses of $617 at September 30,
1996 (after giving effect to the adoption of the long-lived asset carrying
value methodology described in Note 3 above); $3,772 at December 31, 1995;
$3,757 at December 31, 1994; $3,757 at September 30, 1994; $3,935 at
September 30, 1993; $3,818 at September 30, 1992; and $337 at September 30,
1991. The Discontinued Businesses were sold to Hanson on October 6, 1996.
15
<PAGE>
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data reflect the
Demerger Transactions, the Tender Offer and the Offering as if all such
transactions had been completed as of September 30, 1996 for pro forma combined
balance sheet data purposes and as of January 1, 1995 and January 1, 1996,
respectively, for pro forma combined income statement data purposes. These data
do not necessarily reflect the results of operations or financial position of
the Company that would have resulted had such transactions actually been
consummated as of such dates. Also, these data are not necessarily indicative of
the future results of operations or future financial position of the Company.
See 'Capitalization.'
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................................. $ 388 $ $ 388
Trade receivables, net................................................. 514 514
Inventories............................................................ 454 454
Other current assets................................................... 115 (40)(D) 75
Net assets of Discontinued Businesses to be sold to Hanson............. 617 (617)(I) --
------ ---------
Total current assets.............................................. 2,088 1,431
------ ---------
Property, plant and equipment, net.......................................... 1,977 1,977
Investments and other assets................................................ 336 336
Goodwill.................................................................... 1,778 1,778
------ ---------
Total assets...................................................... $6,179 $ 5,522
------ ---------
------ ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable.......................................................... $ 222 $ 222
Current maturities of long-term debt................................... 11 11
Trade accounts payable................................................. 134 134
Income taxes payable................................................... 30 30
Accrued expenses and other liabilities................................. 443 443
------ ---------
Total current liabilities......................................... 840 840
Non-current liabilities:
Long-term debt......................................................... 3,650 (1,367)(B) 2,283
Deferred income taxes.................................................. 225 (96)(E) 129
Other liabilities...................................................... 963 10(L) 973
------ ---------
Total liabilities...................................................... 5,678 4,225
Invested capital/stockholders' equity....................................... 501 796(C) 1,297
------ ---------
Total liabilities and invested capital/stockholders' equity............ $6,179 $ 5,522
------ ---------
------ ---------
</TABLE>
(See foonotes on following page)
16
<PAGE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET:
To reflect the effects of the following transactions:
<TABLE>
<CAPTION>
CASH, CASH
EQUIVALENTS
AND
RESTRICTED STOCKHOLDERS'
CASH(A) DEBT(B) EQUITY
-------------- ------- -------------
<S> <C> <C> <C>
Actual........................................................ $ 499 $(3,883) $ 501
Financing Costs(D)............................................ (40)
Allocated Tax Attributes(E)................................... 96
Repayment of Allocated Loan and Other Debt(F)................. (2,278) 2,278
Credit Facility Borrowing(G).................................. 1,197 (1,197) --
Capital Contribution(H)....................................... 748 -- 748
Sale of Discontinued Businesses(I)............................ 676 -- 59
Repurchase of Pre-Demerger Notes(J)........................... (1,093) 1,036 (57)
Securities offered hereby(K).................................. 750 (750) --
Stock Incentive Awards(L)..................................... (10)
-------------- ------- -------------
Pro forma..................................................... $ 499 $(2,516) $ 1,297
-------------- ------- -------------
-------------- ------- -------------
</TABLE>
- ------------
(A) This column includes, on an actual and pro forma basis, restricted cash of
$111 included in investments and other assets.
(B) Debt includes notes payable, current maturities of long-term debt and
long-term debt.
(C) To reflect the adjustments shown in the Stockholders' Equity column above.
(D) To reflect the write-off of $40 of prepaid interest costs principally
related to the Allocated Loan.
(E) To reflect the alternative minimum tax credits that are allocable to the
Company and are likely to be realized subsequent to the Demerger.
(F) To reflect the repayment of the $2,250 Allocated Loan and other
indebtedness to Hanson.
(G) To reflect actual and anticipated borrowings under the Credit Facility to
complete the Demerger Transactions and give effect to the Offering and the
Tender Offer.
(H) To reflect the net capital contribution from Hanson as a result of the
Demerger Transactions (excluding the sale of Discontinued Businesses
discussed in footnote (I)) which principally include the pre-demerger sale
of certain Non-Chemicals Businesses to Hanson, the repayment of the Hanson
Loan and other intercompany indebtedness and the required payment so that
the Company's combined indebtedness, net of cash (including restricted
cash) and cash equivalents, at October 1, 1996, after giving pro forma
effect to the sale of the Discontinued Businesses and the repurchase of the
Pre-Demerger Notes pursuant to the Tender Offer, would be $2,017.
(I) To reflect the proceeds from the sale of the Discontinued Business to
Hanson at the fair market value thereof of $676 (net of assumed debt of
$431), all of which proceeds were used to repay a portion of the Hanson
Loan. The difference between the proceeds from the sale of Discontinued
Business and the underlying carrying value of the net assets of these
operations ($617 at September 30, 1996) has been reflected as a capital
transaction.
(J) On October 17, 1996, the Issuer commenced the Tender Offer for any and all
Pre-Demerger Notes at the Repurchase Price. At September 30, 1996, the
carrying value of the Pre-Demerger Notes plus accrued interest was
approximately $1,036. The difference between the Repurchase Price and the
carrying amount of the Pre-Demerger Notes of approximately $1,044 at
December 17, 1996 was included in the computation of the adjustment
described in note (H).
(K) To reflect the anticipated receipt and use of the net proceeds of the
issuance of the Securities pursuant to the Offering.
(L) To reflect the expected non-cash compensation expense that will arise as a
result of the non-performance-based portion of the award, on October 8,
1996, of restricted Common Stock to executive officers and other key
employees of the Company pursuant to the Stock Incentive Plan, which
portion of the award aggregated $16.25 ($10 after tax). This portion of the
award will vest in three equal tranches in each of October 1999, 2000 and
2001. See 'Executive Compensation -- Company Incentive Compensation and
Benefit Plans -- Long-Term Stock Incentive Plan.'
17
<PAGE>
<PAGE>
UNAUDITED PRO FORMA COMBINED INCOME STATEMENTS
(IN MILLIONS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
<S> <C> <C> <C>
Net sales............................................................ $3,800 $ (639)(A) $ 3,161
Operating costs and expenses:
Cost of products sold........................................... 2,458 (508)(A) 1,950
Depreciation and amortization................................... 241 (34)(A) 207
Selling, development and administrative expense................. 259 (43)(A) 228
5(B)
7(C)
------ ---------
Operating income..................................................... $ 842 $ 776
Interest expense................................................ 240 (83)(D) 157
Interest income................................................. (25) (25)
Other expense, net.............................................. 73 (11)(B) 62
Equity in earnings of Suburban Propane.......................... -- (54)(A) (54)
------ ---------
Income from continuing operations before provision for income
taxes.............................................................. 554 636
Provision for income taxes........................................... (223) (31)(E) (254)
------ ---------
Income from continuing operations.................................... $ 331 $ 382
------ ---------
Earnings per share from continuing operations........................ $ 5.08(F)
---------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
<S> <C> <C> <C>
Net sales......................................................... $2,279 $ -- $ 2,279
Operating costs and expenses:
Cost of products sold........................................ 1,711 1,711
Depreciation and amortization................................ 152 152
Selling, development and administrative expense.............. 136 3(B) 144
5(C)
Asset impairment and related closure costs................... 75 75
------ ---------
Operating income.................................................. $ 205 $ 197
Interest expense............................................. 171 (42)(D) 129
Interest income.............................................. (25) (25)
Gain on sale of Suburban Propane............................. (210) (210)
Equity in earnings of Suburban Propane....................... (32) (32)
Other expense, net........................................... 31 (10)(B) 21
------ ---------
Income from continuing operations before provision for income
taxes........................................................... 270 314
Provision for income taxes........................................ (167) (17)(E) (184)
------ ---------
Income from continuing operations................................. $ 103 $ 130
------ ---------
Earnings per share from continuing operations..................... $ 1.73(F)(G)
---------
</TABLE>
(See footnotes on following page)
18
<PAGE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED INCOME STATEMENTS:
(A) To reclassify the results of operations of Suburban Propane as equity in
earnings of Suburban Propane as a result of the sale by the Company of a
73.6% interest therein in March 1996.
(B) To reflect the estimated management, legal, accounting and investor
relations expenses associated with the Company's status as an independent
publicly-traded company.
(C) To reflect the expected non-cash compensation expense that will arise as a
result of the performance-based portion of the award, on October 8, 1996,
of restricted Common Stock to executive officers and other key employees of
the Company pursuant to the Stock Incentive Plan, which portion of the
award aggregated $48.75. Such portion of the award will vest in three equal
tranches, subject to the achievement of performance criteria established by
the Compensation Committee for each of three performance cycles commencing
January 1, 1997 and ending on December 31, 1999, 2000 and 2001,
respectively. If and to the extent such criteria are achieved, half of the
tranche relating to a particular performance cycle of the award will vest
and be immediately paid and the remainder will vest in five equal annual
installments commencing on the first anniversary of the end of the cycle.
For purposes of the unaudited pro forma combined income statement, it has
been assumed that the 'expected' level performance target will be achieved
and, therefore, that 60% of the performance-based portion of the restricted
Common Stock award subject to the meeting of performance criteria will be
issued. See 'Executive Compensation -- Company Incentive Compensation and
Benefit Plans -- Long-Term Stock Incentive Plan.'
(D) To reflect (i) the interest expense on outstanding indebtedness (including
the Securities offered hereby) of approximately 7.0% for both the year
ended December 31, 1995 and the nine months ended September 30, 1996; and
(ii) amortization of capitalized debt costs.
(E) To reflect the tax effect of the adjustments described in notes (A) through
(D) above at statutory rate of 38% (inclusive of federal and state taxes).
(F) Pro forma earnings per share from continuing operations has been determined
assuming 75,140,350 shares of Common Stock were outstanding. This reflects
(i) the issuance of shares to Hanson shareholders on October 1, 1996 and
(ii) the issuance pursuant to the Stock Incentive Plan, on October 8, 1996,
of 728,066 shares of restricted Common Stock to executive officers and
other key employees of the Company pursuant to the Stock Incentive Plan
(excluding 2,184,256 additional shares of restricted Common Stock subject
to performance criteria established by the Compensation Committee of the
Company's Board of Directors) and 4,026 shares of Common Stock to
non-employee directors of the Company. See 'Executive
Compensation -- Company Incentive Compensation and Benefit Plans.'
(G) Pro forma earnings per share for the nine months ended September 30, 1996
includes ($.62) per share and $1.14 per share reflecting the impact of the
non-recurring charges related to the TiO2 operations and the gain on sale
of the 73.6% interest in Suburban Propane, respectively.
19
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following information should be read in conjunction with the Company's
Combined Financial Statements and notes thereto and Quantum Chemical
Corporation's Consolidated Financial Statements and notes thereto included
elsewhere herein. See 'Index to Financial Statements.'
In connection with the forward-looking statements which appear in the
following information, prospective purchasers of the Securities should carefully
review the Cautionary Statements referred to in 'Disclosure Regarding
Forward-Looking Statements,' 'Risk Factors' and ' -- Historical Cyclicality of
Significant Components of the Company's Operations' below.
The Demerger Transactions. The Demerger was effected through the Demerger
Transactions between Hanson and certain subsidiaries of Hanson that remained
with Hanson following the Demerger ('Hanson Subsidiaries'), on the one hand, and
the Company and certain subsidiaries of Hanson that became subsidiaries of the
Company upon the Demerger ('Company Subsidiaries'), on the other hand. Prior to
the Demerger Transactions, certain Company Subsidiaries owned the Non-Chemicals
Businesses, which consisted of businesses and assets that were intended to
remain with Hanson, including the Discontinued Businesses. In addition, as of
September 30, 1996, the $2.25 billion Allocated Loan and the $1.9 billion Hanson
Loan were outstanding from certain Hanson Subsidiaries to certain Company
Subsidiaries. On September 30, 1996, a Company Subsidiary sold certain Non-
Chemicals Businesses to Hanson for a cash purchase price of approximately $1.8
billion. The proceeds of this sale, together with cash balances and borrowings
under the Credit Facility, were used to repay the Allocated Loan. Also, on
October 1, 1996, Hanson transferred the Chemicals Business to the Company in
consideration for the Company's issuance of 74,408,257 shares of Common Stock to
Hanson's shareholders. The Company Subsidiaries that held the Chemicals Business
also held the Discontinued Businesses at that time. On October 6, 1996, the
Discontinued Businesses were sold to Hanson for a cash purchase price of
approximately $676 million, net of assumed debt of $431 million. The proceeds of
this sale, together with cash balances and borrowings under the Credit Facility,
were used to repay the Hanson Loan. As part of the Demerger Transactions, Hanson
agreed to make a net payment to the Company so that the Company's combined
indebtedness, net of cash (including restricted cash) and cash equivalents,
would amount to $2.017 billion as of October 1, 1996, after giving pro forma
effect to the sale of the Discontinued Businesses and the Tender Offer.
Basis of Presentation. The Company's Combined Financial Statements reflect
the assets and liabilities of the Chemicals Business, including the Allocated
Loan and the Pre-Demerger Notes, and the assets and liabilities of the
Discontinued Businesses, which were not related to the Chemicals Business but,
pursuant to the Demerger Transactions, were owned by the Company until October
6, 1996. The Combined Financial Statements do not reflect the assets and
liabilities of the Non-Chemicals Businesses that were sold to Hanson prior to
October 1, 1996 pursuant to the Demerger Transactions or the Hanson Loan. See
Note 1 to the Combined Financial Statements of the Company.
Fiscal Year End. Consistent with Hanson's fiscal year-end, the financial
statements of the Chemicals Business were historically prepared on the basis of
a fiscal year ending September 30. Upon completion of the Demerger, the Company
adopted a December 31 fiscal year-end, effective as of January 1, 1995, to
conform to the business year most prevalent in the United States chemicals
industry. Accordingly, in the discussion of the results of operations of the
Chemicals Business presented below, results for calendar year 1995 are compared
with results for the fiscal year ended September 30, 1994.
Quantum Chemical. Hanson acquired Quantum Chemical on September 30, 1993 in
a transaction accounted for as a purchase. Accordingly, the Company's results of
operations do not reflect Quantum Chemical for periods prior to fiscal 1994.
Because of the significance of Quantum Chemical to the Chemicals Business, in
addition to the discussions of the Company's combined operations, set forth
below is a separate discussion of the results of Quantum Chemical's operations
for the nine months ended September 30, 1993.
20
<PAGE>
<PAGE>
HISTORICAL CYCLICALITY OF SIGNIFICANT COMPONENTS OF THE COMPANY'S OPERATIONS
The markets for Quantum Chemical's principal products are highly cyclical
and the global markets for SCM Chemical's principal products are also cyclical,
although to a slightly lesser degree. In contrast, the Company believes that,
over a business cycle, the markets for fragrance and flavor chemicals and other
specialty products are generally more stable in terms of industry demand,
selling prices and operating margins.
POLYETHYLENE AND RELATED PRODUCTS
In the nine months ended September 30, 1996, Quantum Chemical's
polyethylene and related operations contributed approximately 41% of the
Company's revenues and approximately 55% of its operating income with an
operating margin of approximately 12%. In 1995 and fiscal 1994, when Suburban
Propane was included as a continuing operation, polyethylene and related
operations contributed approximately 36% and 32%, respectively, of the Company's
revenues and approximately 45% and 7%, respectively, of its operating income
with operating margins of approximately 28% and 2%, respectively.
In the United States, demand for polyethylene has historically fluctuated
from year to year, although it has increased at average annual rates of
approximately 3.6% over the last five years and of 5.3% over the last ten years.
The industry is particularly sensitive to capacity additions, especially
capacity to manufacture ethylene, polyethylene's principal raw material.
Polyethylene producers have historically experienced alternating periods of
inadequate capacity, resulting in increased selling prices and operating
margins, followed by periods of large capacity additions, resulting in declining
capacity utilization rates, selling prices and operating margins. During the
mid-1980's, increases in new production facilities did not keep pace with demand
and by 1987-1988, U.S. producers were operating at high capacity utilization
rates. Accordingly, selling prices and operating margins increased substantially
in 1988-1989. Significant additional industry capacity came on stream during
1990-1992 and, as a consequence, the industry, including Quantum Chemical,
experienced lower capacity utilization rates, selling prices and operating
margins in 1990-1993. In addition, Quantum Chemical's income was adversely
affected in 1989 and 1990 by a fire and explosion at its Morris, Illinois
facility. An unanticipated shortage of ethylene resulting from Gulf Coast plant
outages due to cold weather, floods and mechanical failures led to significantly
increased selling prices and operating margins for polyethylene from mid-1994
through mid-1995. From mid-1995 through the first quarter of 1996, selling
prices and operating margins for polyethylene decreased significantly due to the
restoration of lost ethylene supply, expanded manufacturing capacity and
inventory reductions by customers. Selling prices increased again during the
second and third quarters of 1996 as a result of significantly increased
domestic demand for polyethylene, strong exports and higher natural gas
feedstock costs; notwithstanding these costs, operating margins also increased.
The Company expects that the operating results of this segment for the fourth
quarter of 1996 will be below those for the third quarter due to a slight
deterioration in selling prices arising from softening demand and the effect of
continuing feedstock cost increases on operating margins. Due to competitive
pressures and the decline in demand, price increases intended to become
effective in October 1996 have been postponed. In the future, there can be no
assurance that growth in demand for polyethylene will be sufficient to absorb
currently anticipated capacity increases (including increases in ethylene
capacity) without the industry experiencing an overall reduction in utilization
rates, which has in the past caused selling prices and operating margins to
decline, or that the downward phase of industry cyclicality will not be
exacerbated by unanticipated capacity additions, changes in technology, price
volatility of raw materials, changes in customer inventory levels or other
conditions. See 'Business.'
21
<PAGE>
<PAGE>
TIO2 AND RELATED PRODUCTS
In the nine months ended September 30, 1996, SCM Chemicals' TiO2 and
related operations contributed approximately 30% of the Company's revenues and
generated an operating loss of $6 million as a result of $75 million of
non-recurring charges to reduce the carrying value of certain assets employed in
the sulfate-process manufacturing of TiO2 and provide for the costs associated
with the closure of certain sulfate production. Excluding these charges, this
segment contributed approximately 25% to operating income with an operating
margin of approximately 10%. In 1995 and fiscal 1994, when Suburban Propane was
included as a continuing operation, these operations contributed approximately
23% and 24%, respectively, of the Company's revenues and approximately 21% and
31%, respectively, of its operating income with operating margins of
approximately 21% and 13%, respectively.
TiO2 is considered to be a 'quality of life' performance chemical, the
demand for which is influenced by the changes in the gross domestic product of
various regions of the world. The worldwide TiO2 industry, in which SCM
Chemicals participates, has experienced cyclical demand, supply and pricing,
although to a lesser degree than the polyethylene industry. A cyclical peak for
average annual TiO2 prices occurred in 1990. By mid-1994, TiO2 prices had
declined by approximately 22% from that peak. In late 1994, demand grew as a
result of improved economic conditions. Coupled with limited capacity additions,
this increased industry capacity utilization rates to above 90% and resulted in
a turnaround in worldwide prices, continuing through most of 1995. Demand growth
subsequently slowed due to reduced economic growth worldwide and rainy spring
seasons in 1995 and 1996, resulting in price erosion and reduction in capacity
utilization rates in late 1995 and the first half of 1996. In addition, recent
consolidation of customers in SCM Chemicals' coating markets further increased
price competition for certain of its products, putting increased pressure on
profitability. In July 1996, SCM Chemicals announced a program to address market
conditions in the TiO2 industry by, among other things, closing its 10,000 tonne
sulfate-process plant in Stallingborough, England, scaling back by about
one-third production at its 66,000-tonne sulfate-process plant in Baltimore,
Maryland (an overall capacity reduction for SCM Chemicals of approximately 6%)
and delaying chloride-process expansion programs in the United Kingdom and
Australia. As part of the program, SCM Chemicals also announced increases in
global selling prices for TiO2 products effective October 1, 1996; however, due
to competitive pricing pressures, such increases will not be realized during the
balance of 1996. The Company incurred non-recurring charges of $75 million in
the nine months ended September 30, 1996 for the costs of the program. If market
conditions continue to deteriorate, it may be necessary to further reduce
operations at the Baltimore plant and accrue for additional closure costs. SCM
Chemicals' sulfate-process manufacturing operations have historically operated
at a marginal level, and made a negative contribution of $5 million during the
nine months ended September 30, 1996.
22
<PAGE>
<PAGE>
RESULTS OF OPERATIONS
The Company's principal operations are grouped into five business segments:
polyethylene and related products, acetyls and alcohol and specialty polymer
products, which are produced by Quantum Chemical; TiO2 and related products,
which are produced by SCM Chemicals; and fragrance and flavor chemicals, which
are produced by Glidco. As shown in the table below, Suburban Propane (a 73.6%
equity interest in which was sold in March 1996) accounted for 17% and 21% of
the Company's net sales and 6% and 22% of its operating income in 1995 and
fiscal 1994, respectively.
The following table shows, for the periods indicated, sales (net of
intercompany transactions, which are not material) and operating income (before
interest and provision for income taxes) attributable to each of the Company's
business segments (excluding the Discontinued Businesses).
<TABLE>
<CAPTION>
NINE MONTHS
ENDED THREE MONTHS YEAR ENDED
SEPTEMBER 30, YEAR ENDED ENDED SEPTEMBER 30,
---------------- DECEMBER 31, DECEMBER 31, ----------------
1996 1995 1995 1994 1994 1993
------ ------ ------------ ------------ ------ ------
(UNAUDITED) (IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
NET SALES
Quantum Chemical(1):
Polyethylene and related products...... $ 944 $1,115 $1,374 $ 327 $1,061 $ --
Acetyls and alcohol.................... 294 366 461 105 347 --
Specialty polymer products............. 274 271 363 82 318 --
SCM Chemicals:
Titanium dioxide and related
products............................. 680 663 860 185 795 783
Glidco:
Fragrance and flavor chemicals......... 87 76 103 24 89 79
------ ------ ------------ ------------ ------ ------
2,279 2,491 3,161 723 2,610 862
------ ------ ------------ ------------ ------ ------
Propane(2).................................. -- 448 639 185 678 --
------ ------ ------------ ------------ ------ ------
Total Net Sales................... $2,279 $2,939 $3,800 $ 908 $3,288 $ 862
------ ------ ------------ ------------ ------ ------
------ ------ ------------ ------------ ------ ------
OPERATING INCOME
Quantum Chemical(1):
Polyethylene and related products...... $ 112 $ 337 $ 380 $ 92 $ 23 $ --
Acetyls and alcohol.................... 39 121 142 38 70 --
Specialty polymer products............. 32 47 59 13 42 --
SCM Chemicals:(3)
Titanium dioxide and related
products............................. (6) 136 177 27 106 113
Glidco:
Fragrance and flavor chemicals......... 28 23 31 7 27 26
------ ------ ------------ ------------ ------ ------
205 664 789 177 268 139
------ ------ ------------ ------------ ------ ------
Propane(2).................................. -- 26 53 26 76 --
------ ------ ------------ ------------ ------ ------
Total Operating Income............ $ 205 $ 690 $ 842 $ 203 $ 344 $ 139
------ ------ ------------ ------------ ------ ------
------ ------ ------------ ------------ ------ ------
</TABLE>
- ------------
(1) Quantum Chemical was acquired by Hanson on September 30, 1993 in a
transaction accounted for as a purchase.
(2) Suburban Propane is reflected as a continuing operation of the Company
(i.e., a division of Quantum Chemical) through December 31, 1995. In March
1996, Hanson sold a 73.6% interest in Suburban Propane in an initial public
offering. The Company has accounted for its continuing investment in
Suburban Propane under the equity method effective January 1, 1996.
(footnotes continued on next page)
23
<PAGE>
<PAGE>
(footnotes continued from previous page)
(3) The nine months ended September 30, 1996 includes non-recurring charges of
$75 ($48 after-tax) to reduce the carrying value of certain facilities
employed in the sulfate-process manufacturing of TiO2 and provide for the
costs associated with the closure of certain sulfate-process production, as
described in Note 4 to the Combined Financial Statements of the Company.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
The Company had operating income of $205 million for the nine months ended
September 30, 1996, a decrease of $485 million (70%) from the nine months ended
September 30, 1995, and net sales of $2.279 billion, a decrease of $660 million
(22%). The Company recorded non-recurring charges of $75 million during the 1996
period to reduce the carrying value of certain facilities employed in the
sulfate-process manufacturing of TiO2 products and to provide for the closure
costs of certain sulfate-process production. In addition, as a result of the
Company's sale of a 73.6% interest in Suburban Propane through an initial public
offering in March 1996, the Company's interest in the results of Suburban
Propane's operations have been reflected as equity in earnings of Suburban
Propane in the Combined Financial Statements since January 1, 1996. Suburban
Propane contributed $448 million to net sales and $26 million to operating
income for the nine months ended September 30, 1995. Excluding Suburban Propane
and the non-recurring charges referred to above, the Company's net sales
decreased $212 million (8.5%) and its operating income decreased $384 million
(58%) from the comparable period of the prior year. These decreases are
primarily due to lower average selling prices for polyethylene, acetyls and
specialty polymer product offerings as they declined from their 1995 peak levels
and declining selling prices for TiO2 as a result of excess capacity and
sluggish demand in the paper markets coupled with increasing costs for
feedstocks for ethylene (polyethylene's principal raw material) and TiO2 during
this period.
QUANTUM CHEMICAL. Quantum Chemical's operating income for the nine months
ended September 30, 1996 decreased $322 million (64%) to $183 million, and its
net sales decreased $240 (14%) to $1.512 billion, compared to the comparable
period in 1995. The substantial decreases in Quantum Chemical's net sales and
operating income were due to lower selling prices for all major product groups.
Average selling prices for polyethylene fell from its peak highs in 1995 and
were 23% lower than the comparable period of 1995 as a result of industry
inventory reductions, excess industry capacity and declining ethylene prices.
Ethylene prices on the spot market were 32% lower during the 1996 period
compared to the 1995 period as industry supply problems were resolved and
inventories were rebuilt. Average selling prices for the period for acetyls and
alcohols and specialty polymers also declined 16% and 10%, respectively,
compared to the comparable period of 1995. Somewhat mitigating the impact of
decreased selling prices on operating income was a 13% increase in overall unit
sales volume.
Net sales of polyethylene and related products were $944 million for the
nine months ended September 30, 1996, a decrease of $171 million (15%).
Operating income decreased $225 million (67%) to $112 million principally as a
result of a 23% reduction in average selling prices for polyethylene products.
The lower prices reflected competitive pressure arising from excess industry
capacity and the correction of ethylene inventory supplies during the first half
of 1996. In the 1995 period, industry ethylene inventories were extremely tight
due to unexpected industry outrages causing ethylene and consequently
polyethylene prices to rise dramatically; this situation corrected itself
towards the end of 1995. Within the 1996 period, average selling prices
increased during the second and third quarters (with the third quarter
representing a 15% increase over the second quarter) due to significantly
increased domestic demand, strong exports and higher natural gas feedstock costs
as discussed below. Polyethylene unit volumes for the 1996 period represented a
6.7% increase over the 1995 period.
Average unit costs for polyethylene increased due to increased feedstock
costs for ethylene (polyethylene's principal raw material). These costs rose
dramatically as a result of colder than normal winter temperatures experienced
in late 1995 and early 1996, which increased the demand for natural gas, and
remained at high levels during the 1996 period. Unit costs for ethylene rose 7%
during the third quarter of fiscal 1996 from the second quarter of fiscal 1996.
24
<PAGE>
<PAGE>
For information concerning the Company's expectations concerning the
operating results of the polyethylene and related products segment during the
fourth quarter of 1996, see ' -- Historical Cyclicality of Significant Portions
of the Company's Operations' above.
Net sales of acetyls and alcohols decreased $72 million (20%) to $294
million in the nine months ended September 30, 1996, while operating income
decreased $82 million (68%) to $39 million. The decline in operating income
primarily resulted from decreased average selling prices, which were 16% lower
than during the comparable period of 1995. This was primarily true for methanol,
which experienced historically high selling prices during 1995 due to strong
demand from reformulated gasoline producers to meet environmental requirements.
As some of these requirements were subsequently relaxed and additional capacity
became available, methanol prices fell 49%. Vinyl acetate also experienced a 24%
decline in average selling prices for the nine months ended September 30, 1996
as export markets were affected by oversupply and weakened demand.
Net sales of specialty polymer products were relatively flat compared to
1995 at $274 million for the 1996 period while operating income decreased $15
million (32%) to $32 million. The decline in operating income resulted from a
10% decline in average selling prices caused by lower polyethylene prices and
higher ethylene costs. Growth in the wire and cable markets was principally
responsible for a 12% increase in unit sales volume for the period. Unit costs
were slightly lower during the 1996 period primarily as a result of lower raw
material costs (mainly propylene and polyethylene).
During the nine months ended September 30, 1996, Quantum Chemical continued
to progress in its reengineering and cost reduction programs with savings during
the period of approximately $18 million toward a full year goal of $30 million.
The conversion of Quantum's Syngas plant from residuum oil to natural gas was
postponed until the end of 1996 in light of industry outages; when completed it
is expected to further improve the cost profile for acetic acid. In addition,
several expansion and improvement projects proceeded on target, with a restart
of 250 million pounds of LLDPE capacity at the Morris facility completed in June
1996, conversion of 300 million pounds of LLDPE production capacity to HDPE at
Port Arthur expected to be fully operational in February 1997 and a new 480
million pound LLDPE plant at the La Porte facility scheduled for start-up in
December 1996.
SCM CHEMICALS. SCM Chemicals' operating results for the first nine months
of 1996 decreased $142 million (104%) from $136 million in the comparable period
in 1995. This reflects non-recurring charges of $75 million to reduce the
carrying value of certain plant and equipment employed by SCM Chemicals in its
sulfate-process manufacturing of TiO2 and provide for the closure of certain
sulfate production facilities in light of the market conditions discussed below.
Excluding these non-recurring charges, operating income for the period decreased
$67 million (49%) compared to the 1995 period. Net sales for the first nine
months of 1996 increased 3% to $680 million compared to $663 million for the
first nine months of 1995.
The TiO2 industry has been undergoing severe price competition and, as a
consequence, global pricing has been deteriorating since late 1995. The price
erosion reflects a confluence of market factors, including customer destocking,
consolidations in the paint and coatings industry, a weak paper industry,
increased TiO2 capacity and a weak spring paint and coatings season. These
conditions resulted in average TiO2 selling prices in U.S. dollar terms to be 4%
lower during the nine months ended September 30, 1996 compared to the comparable
period of 1995 as producers attempted to maintain volume and market share. For
the third quarter of 1996 alone, average prices declined 12% compared to the
third quarter of 1995, with declines amounting to 8% in the United States, 15%
in Europe and 24% in the Asia/Pacific region.
These conditions had severe effects on SCM Chemicals' TiO2 sulfate-process
products, which have higher production costs and lower selling prices than its
chloride-process products. In response to these deteriorating market conditions,
in July 1996, SCM Chemicals announced its intention to close its sulfate-process
in Stallingborough, England and scale back production of its 66,000 tonne
sulfate-process facility in Baltimore, Maryland by approximately one-third. In
addition, completion of the expansion of the chloride-process facility in the
United Kingdom was delayed nine months until July 1998 and, while preparatory
work continues, expenditures for the 111,000 tonne expansion in Australia were
being rephased until market conditions and trends improve. SCM Chemicals also
announced global price increases to take effect on October 1, 1996; however, due
to competitive pricing pressures,
25
<PAGE>
<PAGE>
the increases will not be realized during the balance of 1996. Finally, SCM
Chemicals will undertake cost containment measures and reengineering efforts for
certain processes in order to reduce operating costs.
Also contributing to the decline in operating income were higher fixed
costs resulting from lower operating rates and higher variable costs due to
increased costs of titanium ore feedstocks, coke and utilities. During the nine
months ended September 30, 1996, SCM Chemicals' plants operated at 86.7% of
capacity compared to 97.8% during the comparable period of the prior year.
Decreased operating rates reflect both current market conditions and an increase
in operating capacity.
Sales volume for the nine months ended September 30, 1996 increased 6%
largely due to strong third quarter sales in the United States and Europe. For
the third quarter, sales volume increased 17%, reflecting strong demand in the
coatings and plastics markets with shipments to the sluggish paper market
continuing to lag behind.
GLIDCO. Glidco continued its growth trend with record operating income of
$28 million for the nine months ended September 30, 1996, an increase of $5
million (22%) compared to the comparable period in 1995. Net sales increased $11
million (14%) to $87 million. This continued growth reflected a 2.6% increase in
unit sales volume over 1995 as worldwide demand for fragrance chemicals
continued to increase. The impact of this strong demand more than offset
significant increases in the cost of CST, Glidco's principal raw material (59%
on a unit basis compared to the comparable period for 1995). Reflecting Glidco's
continued emphasis on higher-margin intermediate and upgrade products, gross
margins held steady at 46% in the first three quarters of both 1996 and 1995.
The price of CST is expected to continue to increase during the fourth quarter
of 1996.
In January 1996, a sales office and warehouse space were established in
Singapore to serve the growing market in the Pacific Rim. During the 1996
period, Glidco's ongoing 20% expansion plans progressed on target.
1995 COMPARED TO FISCAL 1994
The Company had operating income of $842 million in 1995, an increase of
$498 million (145%), and net sales of $3.8 billion, an increase of $512 million
(16%), from fiscal 1994. These increases are primarily attributable to the
quadrupling of Quantum Chemical's operating income (excluding propane
operations) to $581 million on a 27% increase in its net sales (excluding
propane operations) to $2.198 billion.
QUANTUM CHEMICAL. The substantial increases in Quantum Chemical's net sales
and operating income were due to higher selling prices for all major product
groups. Average 1995 unit net selling prices for polyethylene, acetyls and
alcohol and specialty polymers rose 46%, 25% and 17%, respectively, over fiscal
1994. Factors which mitigated the impact of increased selling prices on
operating margins were lower unit shipments of polyethylene (a 6% decline) and
specialty polymer products (a 2% decline) in 1995 compared to fiscal 1994
(partially offset by a 7% increase in unit shipments of acetyl and alcohol
products), the higher cost of raw materials (mainly purchased ethylene,
propylene and residuum oil), increased costs associated with higher margin
products and higher maintenance and other production costs.
Net sales of polyethylene and related products were $1.374 billion in 1995,
an increase of $313 million (29%) over fiscal 1994. Operating income increased
by $357 million to $380 million, principally as a result of a 46% increase in
average unit selling prices for polyethylene products. The higher prices
reflected continued tight ethylene supply due to competitors' plant shutdowns
and higher demand for ethylene through the first quarter of 1995. By mid-year,
the ethylene supply problems were resolved and the polyethylene market
experienced a correction as customers reduced inventories, leading to weakened
prices and margins for polyethylene. Such market changes also resulted in
polyethylene unit volumes declining 6% overall for the year. By the end of 1995,
average selling prices for polyethylene had dropped 25% compared to the
beginning of 1995. Polyethylene production costs were 5% higher on a unit basis
in 1995 compared to fiscal 1994, primarily due to higher prices for purchased
ethylene, reflecting tight supplies, and a shift in sales mix to higher
value-added products which have a higher cost structure.
26
<PAGE>
<PAGE>
Net sales of acetyls and alcohol increased $114 million (33%) to $461
million in 1995, while operating income doubled to $142 million. The increase in
operating income primarily resulted from increased average selling prices, which
were 38% higher for acetyl products and 10% higher for alcohol products. Higher
acetyls pricing was due to strong demand for methanol used in the manufacture of
gasoline additives to meet environmental requirements. In addition, there were
supply shortages in export markets and formula-based price increases from higher
methanol and acetic acid pricing. Beginning in the latter part of the first
quarter of 1995, however, methanol prices began to decline as a result of the
relaxation of certain environmental requirements for gasoline additives and the
addition of industry capacity. By the end of 1995, methanol prices had declined
by approximately 70% from late-1994 levels. The increase in demand for methanol
and acetic acid resulted in unit sales volumes for 1995 that were 7% higher
compared to fiscal 1994. On a unit basis, 1995 costs were 15% higher compared to
fiscal 1994 primarily due to higher feedstock costs (ethylene and residuum oil)
and higher maintenance costs.
Net sales of specialty polymer products were $363 million in 1995, an
increase of $45 million (14%) compared to fiscal 1994. Operating income
increased by $17 million (40%) to $59 million. The increase in operating income
reflected higher selling prices across all product lines due to increased demand
in the earlier part of the year and the increased price of polyethylene and
polypropylene, which are used as raw materials in the manufacture of certain
specialty polymer products. The effect of higher pricing was partially offset by
a 2% decline in volume and a 13% increase in costs primarily attributable to
purchased propylene and the cost mix of higher value-added products sold.
SCM CHEMICALS. SCM Chemicals had net sales of $860 million in 1995, an
increase of $65 million (8%) from fiscal 1994, and operating income of $177
million, an increase of $71 million (67%). The improved performance was
primarily attributable to a 15% overall increase in average selling prices for
TiO2 in U.S. dollar terms, with increased selling prices of 6% in the United
States, 23% in Europe and 16% in the Asia/Pacific region. SCM Chemicals' TiO2
1995 sales volume of 415,000 tonnes was 5% lower than in fiscal 1994. SCM
Chemicals' sales were constrained by capacity limitations early in 1995, when
plants were operating at 99% of capacity. Total industry demand during the
period from late 1994 through early 1995 was strong, driving prices higher
during that period. Later in 1995, sales volume and capacity utilization rates
fell as a result of a softening of demand in United States and European markets
and inventory reductions by customers.
In September 1995, SCM Chemicals announced TiO2 price increases of 7 cents
per pound in the United States and 9 cents per pound in Canada. Such price
increases were not realized due to competitive price discounting.
During 1995, SCM Chemical's TiO2 plants operated at an average of 97% of
capacity (with all chloride-process plants operating at an average of 98% of
capacity) compared to an estimated industry average of 89%. During the fourth
quarter of 1995, SCM Chemicals reduced operations to 91% of capacity to balance
production with weakening demand.
SCM Chemical's $75 million two-year capital investment program to increase
its global TiO2 production capacity by 52,000 tonnes per annum and its $48
million two-year program to improve environmental performance at its Ashtabula,
Ohio facilities continued on schedule for completion in 1996. In addition, plans
were underway to expand chloride capacity at SCM Chemicals' United Kingdom plant
in Stallingborough by 41,000 tonnes at a cost of approximately $120 million to
meet projected long term growth in demand in the European markets.
GLIDCO. Glidco had its sixth consecutive year of record profits in 1995,
with operating income increasing by $4 million (15%) to $31 million from fiscal
1994. Sales were $103 million, an increase of $14 million (16%) from fiscal
1994. Capacity for the production of fragrance chemicals was expanded by 17%
with the increased production almost immediately sold out. While aggregate unit
sales volumes were unchanged at 59 million pounds, higher margin intermediate
and upgrade products, which had an increase in unit sales volumes of 18%, were
the most significant factors in Glidco's increased profitability. Selling prices
increased by an average of 16% in 1995. The impact of such increases was
partially offset by a 23% average increase in raw material costs. Glidco
deemphasized certain product lines to redirect production to higher margin
products. The result was an increase in margin from 44.6% to 45.6%.
27
<PAGE>
<PAGE>
In order to meet expected worldwide demand growth in the fragrance and
flavor chemicals industry, Glidco implemented plans to increase capacity at its
facilities by an additional 20%.
SUBURBAN PROPANE. Suburban Propane, adversely affected by unseasonably mild
winter conditions throughout the United States, generated operating income of
$53 million in 1995, a $23 million (30%) decline from fiscal 1994. Sales for
1995 were $639 million, a 6% decline from fiscal 1994. The decrease in operating
income was primarily due to a 6% decrease in retail volume to 534 million
gallons. Wholesale volume also decreased by 8% to 174 million gallons. Such
declines were attributable to lower demand resulting from temperatures that were
approximately 9% warmer in 1995 than in fiscal 1994. Average retail margins
declined 4.8% from fiscal 1994, primarily due to the proportionately lower sales
volume of the higher-margin retail gallons.
FISCAL 1994 COMPARED TO FISCAL 1993
The Company had operating profit of $344 million in fiscal 1994, an
increase of $205 million (147%) from fiscal 1993, and sales of $3.288 billion,
an increase of $2.426 billion. The increases were primarily due to the first
time inclusion of results from the Quantum Chemical and Suburban Propane
operations, which were acquired by Hanson on September 30, 1993.
QUANTUM CHEMICAL. Quantum Chemical contributed $135 million of operating
profit and $1.726 billion of sales during fiscal 1994.
Polyethylene and related products accounted for $1.061 billion of net sales
and $23 million of operating income during fiscal 1994. Demand for polyethylene
products strengthened during fiscal 1994 as supply problems throughout the
ethylene industry disrupted ethylene availability. Quantum Chemical benefited
from these conditions, with polyethylene product volumes increasing 5%. In
addition, prices for all three major grades of polyethylene products recovered
during the latter part of fiscal 1994 from cyclical lows. Quantum Chemical
announced five different polyethylene price increases during calendar 1994, as
well as separate price increases for its acetyls, alcohol and specialty
products. The price recovery in polyethylene was due primarily to tight ethylene
supplies, improving economic conditions, competitor plant shut-downs and high
industry operating rates. Tight ethylene supplies, driven by increased demand
and competitor plant shutdowns, drove up ethylene prices. While Quantum
Chemical's polyethylene prices did benefit from the ethylene market conditions,
costs increased due to higher purchased ethylene prices in the second half of
the year.
Net sales of acetyls and alcohol were $347 million in fiscal 1994,
generating operating income of $70 million. In the latter part of fiscal 1994,
Quantum Chemical began to benefit from higher demand and prices for methanol.
Methanol sales volumes increased significantly to 52 million gallons from 11
million gallons in fiscal 1993 and its average selling price increased 72%.
Other acetyls products, including acetic acid and vinyl acetate, also
experienced double-digit sales volume growth arising from strong demand, low
inventories and competitor production difficulties.
Net sales of specialty polymer products of $318 million and operating
income of $42 million in fiscal 1994 reflected recovery of the polypropylene
market due to increased domestic demand compared to fiscal 1993.
SCM CHEMICALS. In fiscal 1994, SCM Chemicals had operating profit of $106
million, a decrease of $7 million (6%) from fiscal 1993, and sales of $795
million, an increase of $12 million (2%) from fiscal 1993. TiO2 volumes
increased approximately 5% to 436,000 tonnes, due to strong demand for the high
performance chloride-process TiONA'r' brand pigments. In the United States,
sales were constrained by lost production due to severe winter weather, while in
Western Australia a state-wide electricity outage caused plant operating
problems and equipment failure. Average selling prices of TiO2 were 2% lower
during fiscal 1994. The world average price turned upward in mid-year 1994 as a
result of increasing global demand for TiO2 and by December 1994 was
approximately 6% above the fiscal 1994 trough.
During fiscal 1994, SCM Chemicals operated at approximately 93% of
production capacity compared to an industry average of about 85%. In late fiscal
1994, SCM Chemicals initiated a $123 million capital program to reduce costs,
improve environmental performance and increase production. Capital investments
of $75 million are expected to improve efficiency at plants worldwide and
increase capacity by 52,000 tonnes per annum, or 11% to 505,000 tonnes annually
by 1996.
28
<PAGE>
<PAGE>
GLIDCO. Fiscal 1994 was Glidco's fifth consecutive year of record profit.
Operating profit increased 4% to $27 million from fiscal 1993 and sales
increased 13% to $89 million from fiscal 1993. The overall market for fragrance
and flavor chemicals continued to be strong worldwide with demand approaching
Glidco's capacity in certain products. Volume increased 10% over the prior
fiscal year to 58 million pounds with increases realized in most product
offerings. In addition, costs for its primary raw material declined 21% from the
prior fiscal year, reflecting an imbalance in supply and demand.
Glidco initiated a four phase capacity expansion program with such
expansion projects anticipated for start-up between November 1994 and June 1996.
SUBURBAN PROPANE. In fiscal 1994, Suburban Propane contributed $76 million
of operating profits and $678 million of sales. This represented a 30% increase
in operating profits over the prior year. Suburban Propane benefited from colder
winter weather in the United States after several years of unusually warm
conditions. Retail sales volumes for fiscal 1994 were 569 million gallons, an
increase of 1% over the prior fiscal year. Retail margins increased primarily
due to decreases in product costs during the period. Although average selling
prices were flat, propane costs were approximately 5% lower. Suburban Propane
met the increased heating demand for propane with supply arrangements with most
major producers and one of the largest rail car and transport fleets in the
industry operating from strategically located storage facilities.
QUANTUM CHEMICAL: NINE MONTHS ENDED SEPTEMBER 30, 1993
Quantum Chemical's operations (excluding propane operations) had net sales
of $1.218 billion, resulting in an operating loss of $22 million, for the nine
months ended September 30, 1993. Net sales from propane operations were $481
million, resulting in an operating profit of $38 million, for the period.
During the nine months ended September 30, 1993, domestic industry
overcapacity put pressure on polyethylene pricing and profit margins, resulting
in lower average selling prices for most products. Costs of $5 million
attributable to the shutdown of Quantum Chemical's ethylene oxide/glycol
operations in the first quarter of fiscal 1994 were charged against operations
at September 30, 1993, further contributing to Quantum's Chemical's operating
loss for the nine months ended September 30, 1993. The shutdown was part of a
cost reduction program implemented by Quantum Chemical to improve operating
performance in the future. Other cost reduction measures for the nine months
ended September 30, 1993 included the completion of a retubing project to
increase production volumes and lower costs at Quantum Chemical's ethylene plant
in La Porte, Texas.
Quantum Chemical's propane operations benefitted from higher average
selling prices for retail and wholesale shipments due to increases in the cost
of propane. The positive effect of these increases was partly offset by lower
sales of appliances and installation services.
LIQUIDITY AND CAPITAL RESOURCES
Through September 30, 1996, the Company financed its operations and capital
and other expenditures from a combination of cash generated from operations,
external borrowings and loans and invested capital provided by Hanson. Since the
Demerger, the Company has had to meet all of its cash requirements through
internally-generated funds and external borrowings. The Company's ability to
generate cash from operations and the servicing and repayment of debt will
depend upon numerous business factors, some which are outside the control of the
Company, including industry cyclicality (resulting from industry-wide capacity
additions, changes in general economic conditions and other conditions) and
price volatility of certain raw materials.
Net cash provided by operating activities was $280 million for the nine
months ended September 30, 1996, compared with net cash provided of $751 million
for the comparable period of the prior year. The decrease results from a 63%
decrease in income from continuing operations including non-recurring pre-tax
charges of $75 million to reflect an impairment of certain assets of the TiO2
and related products segment and related closure costs for certain
sulfate-process production. Net cash provided by operating activities was $795
million for 1995, compared with net cash provided of $232
29
<PAGE>
<PAGE>
million for fiscal 1994. The increase principally results from a 145% increase
in net operating results and changes in the operating assets and liabilities
from December 31, 1995 compared to September 30, 1994.
Net cash provided by investing activities was $517 million for the nine
months ended September 30, 1996, compared with net cash used of $175 million for
the comparable period of 1995. The increase principally results from the sale of
a 73.6% interest in Suburban Propane for proceeds of $733 million, partly offset
by a $22 million increase in capital expenditures. Net cash used in investing
activities was $246 million for 1995, compared with net cash used of $93 million
in fiscal 1994. The increase principally relates to the higher level of capital
expenditures in 1995.
Net cash used in financing activities was $822 million for the nine months
ended September 30, 1996, compared with net cash used of $227 million for the
comparable period of 1995. The increase principally relates to changes in the
level of funding and other transactions between the Company and its affiliates,
offset by increased proceeds from short-term borrowings. Net cash used in
financing activities was $503 million for 1995, compared with net cash used of
$222 million for fiscal 1994. The increase principally reflects the repayment of
short-term borrowings during 1995, using the additional net cash provided by
operations, a $1.6 billion dividend paid to Hanson and changes in the level of
net transactions with affiliates in 1995 compared to fiscal 1994.
The Credit Facility. The Issuer and the Company, as guarantor, entered into
a Credit Agreement, dated as of July 26, 1996 (the 'Credit Agreement'), with
Bank of America National Trust and Savings Association, as administrative agent
('Bank of America'), The Chase Manhattan Bank, as documentation agent, and
various participating banks and other institutional lenders for the provision of
the Credit Facility to the Issuer and certain other Company subsidiaries
designated from time to time by the Company (together with the Issuer, the
'Borrowing Subsidiaries'). A copy of the Credit Agreement governing the Credit
Facility has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. The following description of the Credit Facility
does not purport to be complete and is qualified in its entirety by the Credit
Facility.
The Credit Facility consists of a five-year unsecured revolving credit
facility in an amount up to $2.25 billion. Borrowings under the Credit Facility
may consist of standby loans (i.e., committed revolving credit loans) or
uncommitted competitive loans offered by syndicated banks through an auction
mechanism (or both, at the option of the respective Borrowing Subsidiary).
Standby loans and competitive loans may be borrowed in either U.S. dollars or
other currencies. The proceeds of the Credit Facility may be used to provide
working capital to the Borrowing Subsidiaries and for general corporate purposes
of the Borrowing Subsidiaries, including the repurchase of Pre-Demerger Notes
pursuant to the Tender Offer or otherwise. Certain proceeds were previously used
for repayment of portions of the Company's indebtedness to Hanson.
The interest rates under the standby loans are based upon, at the option of
the respective Borrowing Subsidiaries, (i) the London interbank offered rate
('LIBOR'), (ii) the New York interbank offered rate ('NIBOR') or (iii) in the
case of U.S. dollar loans, the higher of Bank of America's prime rate or the
federal funds rate plus 0.5% ('ABR'). Interest rates based on LIBOR or NIBOR
will be increased by a spread of between 13.5 and 47.5 basis points depending
upon the actual ratings (the 'Ratings') by Standard & Poor's Ratings Group and
Moody's Investors Service Inc. of senior unsecured non-credit enhanced long-term
debt issued by the Issuer and guaranteed by the Company (or issued directly by
the Company) or, if there is no such debt, the indicative rating of the Company
by such rating agencies. Based on the current Ratings, the spread over LIBOR is
presently 27.5 basis points. No spread is charged on ABR loans. The interest
rates under the competitive loans will be obtained from those bids selected by
the applicable Borrowing Subsidiary.
A commitment fee is payable to the lenders under the Credit Facility on the
aggregate amount of the commitments, whether used or unused, at a rate per annum
of between 6.5 and 25 basis points depending upon the Ratings. Loans under the
Credit Facility may be repaid and then reborrowed. Based on the current Ratings,
the commitment fee is presently 15 basis points.
The loans under the Credit Facility are guaranteed by the Company. However,
since the Company's only asset is the stock of a subsidiary that is the
intermediate holding company for the Company's operating subsidiaries and the
Company is completely reliant upon its operating subsidiaries for funds,
30
<PAGE>
<PAGE>
in the event the Borrowing Subsidiaries default on their payment obligations
under the Credit Facility and the lenders seek to enforce the Company's
guarantee, it is unlikely that the Company would be able to satisfy these
obligations in full. See 'Risk Factors -- Holding Company Structure.'
The Credit Agreement contains covenants and provisions that restrict, among
other things, the ability of the Company and its material subsidiaries to: (i)
create liens on any of its property or assets, or assign any rights to security
interests in future revenues; (ii) engage in sale and leaseback transactions;
(iii) engage in mergers, consolidations and sales of all or substantially all of
their assets on a consolidated basis; (iv) enter into agreements restricting
dividends and advances by their subsidiaries; and (v) engage in transactions
with affiliates other than those based on arm's-length negotiations. The Credit
Agreement also restricts the ability of Company subsidiaries (other than the
Issuer) to incur indebtedness or issue preferred stock. The Issuer received
permission under the Credit Agreement for certain Company subsidiaries which
held Non-Chemicals Businesses to incur, prior to the sales thereof to Hanson,
unsecured indebtedness not to exceed $600 million in the aggregate, which
indebtedness was subordinated to indebtedness under the Credit Facility prior to
the closing of such sales. These Company subsidiaries had incurred $599 million
of such indebtedness prior to the date of the sales to Hanson.
The Credit Agreement requires the Company and its subsidiaries on a
consolidated basis to satisfy certain financial performance criteria.
Specifically, the Company and its subsidiaries are not permitted: (i) to allow
the Leverage Ratio (as defined) to exceed 0.65 to 1 at any time on or before
December 31, 1997 and 0.60 to 1 at any time thereafter; or (ii) to allow the
Interest Coverage Ratio (as defined) for any period of four consecutive fiscal
quarters, commencing with the period ended September 30, 1996, to be less than
3.5 to 1. The Leverage Ratio was .61 to 1 and the Interest Coverage Ratio was 4
to 1 for the period ended September 30, 1996.
Events of default under the Credit Agreement include, in addition to
standard events of default, the failure of the Issuer to remain a direct or
indirect wholly owned subsidiary of the Company.
Hedging Activities. The Issuer has, from time to time, entered into forward
exchange contracts, currency swaps or other derivative products to hedge its
risk in foreign or other operations. In October 1996, the Issuer entered into a
number of interest rate protection agreements which have effectively fixed
interest rates on $750 million of floating rate debt. Under these agreements,
the Issuer will pay the counterparties interest at a fixed rate and the
counterparties will pay the Company subsidiary interest at a variable rate based
on LIBOR. The fixed rates payable under these agreements average 5.7875% with
terms expiring at various dates through October 1998. In addition, in October
1996 one of the Issuer's subsidiaries entered into forward contracts to hedge
the impact of exchange rate fluctuations on approximately `L'200 million of its
sterling cash deposits. As of the date of this Prospectus, the fair market value
of these agreements is not materially different than the value based on the
stated terms.
Repayment of Hanson Indebtedness and Receipt of Capital Contribution from
Hanson. Prior to the Demerger Transactions, the Company had indebtedness to
Hanson consisting of the Hanson Loan, the Allocated Loan and certain other
indebtedness. The Hanson Loan was a $1.9 billion loan from Hanson Aruba N.V. to
HM Anglo-American, Ltd. ('HM Anglo'), which was scheduled to mature on October
15, 2003 and bore interest payable quarterly at a rate equal to LIBOR plus 150
basis points. Such loan was reflected as a component of Invested Capital since
it did not represent debt directly related to the Chemicals Business. On October
7, 1996, HM Anglo prepaid the Hanson Loan using all the proceeds from the sale
of the Discontinued Businesses to Hanson, borrowings under the Credit Facility
and cash balances.
The Allocated Loan was a $2.25 billion loan from Hanson Antilles N.V. to
the Issuer, which was scheduled to mature on October 15, 2003 and bore interest
at a rate of 7% per annum. On October 1, 1996, the Issuer repaid the Allocated
Loan using all the proceeds from the sale of the Non-Chemicals Businesses sold
to Hanson on that date, borrowings under the Credit Facility and cash balances.
As part of the Demerger Transactions, Hanson agreed to make a net capital
contribution to the Company so that the Company's combined indebtedness, net of
cash (including restricted cash) and cash equivalents, would be $2.017 billion
as of October 1, 1996, after giving pro forma effect to the sale of the
Discontinued Businesses and the Tender Offer.
31
<PAGE>
<PAGE>
Pre-Demerger Notes. The Demerger resulted in a change-in-control of the
Issuer within the meaning of the indenture governing the Pre-Demerger Notes.
Accordingly, on October 18, 1996, the Issuer commenced the Tender Offer for any
and all Pre-Demerger Notes. The Tender Offer will expire on December 17, 1996
unless required by applicable law to be extended. If all outstanding
Pre-Demerger Notes are tendered and purchased on that date, the Repurchase Price
will be approximately $1.1 billion. The required funds will be provided by the
net proceeds of the Offering and, to the extent such net proceeds are
insufficient, borrowings under the Credit Facility.
Effective as of September 18, 1996, the instruments governing the terms of
the Pre-Demerger Notes were amended to (i) specifically permit the Demerger
without compliance by the Issuer or Hanson, as the case may be, with certain
covenants relating to consolidations, mergers or transfers of assets, (ii)
specifically permit the prepayment by the Issuer of the Allocated Loan, (iii)
provide that the delivery by the Company of certain financial information shall
satisfy the covenant to deliver financial information in respect of the Issuer,
and (iv) eliminate the limitations on the grant of security interests in the
assets and properties of the Issuer or its subsidiaries and the limitations on
incurrence of additional indebtedness by subsidiaries of the Issuer. In
connection with the solicitation of consents for the foregoing amendments, the
Issuer paid consenting holders a consent fee aggregating $1.5 million. On
October 1, 1996, the indenture governing the Pre-Demerger Notes was further
amended to provide that the Issuer's obligations thereunder are guaranteed by
the Company.
Capital Expenditure Commitments. The Company made capital expenditures for
its continuing operations of $223 million, $201 million, $276 million, $109
million and $28 million in the nine months ended September 30, 1996 and 1995,
and in 1995, fiscal 1994 and fiscal 1993, respectively. In addition, Quantum
Chemical made capital expenditures of $95 million for the nine months ended
September 30, 1993. The Company anticipates that it will make capital
expenditures totalling approximately $300 million during 1996 ($223 million of
which were made during the nine months ended September 30, 1996), including $160
million for production capacity expansion projects at Quantum Chemical, $42
million at SCM Chemicals and $14 million at Glidco, as described under
'Business.' The Company anticipates funding these capital expenditures with the
Company's internally generated cash and borrowings under the Credit Facility.
CERTAIN ENVIRONMENTAL MATTERS
The Company's costs and operating expenses relating to environmental
matters were approximately $67 million, $61 million and $60 million in 1995,
fiscal 1994 and fiscal 1993, respectively. These amounts cover, among other
things, the Company's routine measures to prevent, contain and clean up spills
of materials that may occur in the ordinary course of business. Capital
expenditures for environmental compliance and remediation were approximately $22
million and $7 million in 1995 and fiscal 1994, respectively, and are expected
to total $25 million in 1996. In addition, capital expenditures for projects in
the normal course of operations and major expansions include costs associated
with the environmental impact of those projects which are inseparable from the
overall project cost. Capital expenditures and, to a lesser extent, costs and
operating expenses relating to environmental matters for years after 1995 will
be subject to evolving regulatory requirements and will depend on the amount of
time required to obtain necessary permits and approvals.
Certain Company subsidiaries have been named as defendants, PRPs, or both,
in a number of environmental proceedings associated with waste disposal sites
and facilities currently or previously owned, operated or used by the Company
subsidiaries or their predecessors, some of which disposal sites or facilities
are on the Superfund National Priorities List of the EPA or similar state lists.
These proceedings seek cleanup costs, damages for personal injury or property
damage, or both. Certain of these proceedings involve claims for substantial
amounts individually ranging in estimates from $300,000 to $45 million. The
Company believes that the range of potential liability for the above matters,
collectively, which primarily relate to environmental remediation activities and
other environmental proceedings, is between $130 million and $180 million and
has accrued $180 million as of September 30, 1996. One potentially significant
matter in which a Company subsidiary is a PRP is alleged PCB contamination of a
section of the Kalamazoo River from Kalamazoo, Michigan to Lake Michigan for
which a remedial investigation/feasibility study is currently being undertaken.
Potential remediation
32
<PAGE>
<PAGE>
costs related to this matter that are reasonably probable have been included in
the collective range of potential liability referred to above, as well as in the
loss accrual on the Company's balance sheet. In addition, certain Company
subsidiaries have contractual obligations to indemnify the purchasers of certain
discontinued operations against certain environmental liabilities and the
Company has agreed to indemnify Hanson and the Hanson Subsidiaries against
certain of such contractual indemnification obligations pursuant to the Demerger
Transactions. See 'Agreements between the Company and Hanson Relating to the
Demerger -- Indemnification Agreements.' No assurance can be given that actual
costs will not exceed accrued amounts for sites and indemnification obligations
for which estimates have been made and no assurance can be given that costs will
not be incurred with respect to sites and indemnification obligations as to
which no estimate presently can be made.
Several Company subsidiaries have asserted claims and/or instituted
litigation against their insurance carriers alleging that all, or a portion, of
the past and future costs of investigating, monitoring and conducting response
actions at previously or currently owned and/or operated properties and off-site
landfills are the subject of coverage under various insurance policies. During
1995, a Company subsidiary entered settlement agreements in one such case with a
number of insurance carriers relating to coverage for environmental
contamination at present and former plant and landfill sites in the aggregate
amount of approximately $60 million, of which $47 million has been received,
with the balance of such payments being made over time. In addition, several
Company subsidiaries have asserted claims and/or instituted litigation against
various entities alleging that they are responsible for all or a portion of such
costs. Management is unable to predict the outcome of such claims and
litigation. Accordingly, for purposes of financial reporting and establishing
provisions, the Company has not assumed any such recoveries except where payment
has been received or the amount of liability or contribution by such other
parties has been agreed.
The Company cannot predict whether future developments in laws and
regulations concerning environmental protection will affect its earnings or cash
flow in a materially adverse manner or whether its operating units will be
successful in meeting future demands of regulatory agencies in a manner which
will not materially adversely affect the Company's combined financial condition,
results of operations or liquidity.
EFFECT OF INFLATION
Because of the relatively low level of inflation experienced in the United
States, inflation did not have a material impact on the Company's combined
results of operations for the first nine months of 1996 and in 1995, fiscal 1994
or fiscal 1993.
FOREIGN CURRENCY MATTERS
The functional currency of each of the Company's non-United States
operations (principally the operations of SCM Chemicals in the United Kingdom
and Australia), is the local currency. The impact of currency translation in
combining the results of operations and financial position of such operations
has not been material to the combined financial position of the Company.
Additionally, the Company generates revenue from exports (see Note 11 to the
Combined Financial Statements) and revenue from operations conducted outside the
United States which may be denominated in currencies other than the U.S. dollar,
British pound or Australian dollar. Results from such transactions aggregated a
$3 million loss in the first nine months of 1996 and gains of $13 million, $2
million and $2 million, respectively, in 1995, fiscal 1994 and fiscal 1993.
33
<PAGE>
<PAGE>
BUSINESS
The Company is engaged, through Quantum Chemical, SCM Chemicals and Glidco,
in the manufacture of a broad range of commodity, industrial, performance and
specialty chemicals. Each of these units has a long operating history and a
leading position in its markets.
In connection with the forward-looking statements which appear in the
following information, prospective purchasers of the Securities should carefully
review the Cautionary Statements referred to in 'Disclosure Regarding
Forward-Looking Statements', 'Risk Factors' and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Historical
Cyclicality of Significant Components of the Company's Operations.'
The following discussion includes trademarks of the Company and its
subsidiaries, such as QUANTUM'r', PETROTHENE'r', PUNCTILIOUS'r', PLEXAR'r',
SPECTRATECH'r', MICROTHENE'r', TiONA'r', SiLCRON'r' and SiL-PROOF'r', as well as
other trade names and product names.
STRATEGY
The Company's strategy is to maximize long-term cash flow and thereby
create value through improved efficiency at existing operations, disciplined
capital expenditures, selective dispositions, selective acquisitions of other
chemical businesses and the reduction of leverage. In addition to building upon
its leading market positions in existing lines of business, the Company will
seek to expand its operations worldwide, focus its production on more profitable
value-added products and increase the proportion of its businesses that are less
cyclical in nature. The Company emphasizes stock ownership by management and
links a significant portion of management's compensation to the achievement of
performance targets, including targets based on 'economic value added' concepts
and the Company's performance relative to its industry peers.
The following are the key elements of the Company's strategy:
Continue to Expand Existing Businesses. The Company will seek to
capitalize upon the leading market positions of Quantum Chemical, SCM Chemicals
and Glidco by expanding in domestic and international markets, particularly Asia
and the Pacific Rim, through capital expenditures and selective acquisitions. In
1995, Quantum Chemical and SCM Chemicals spent approximately $57 million and $55
million, respectively, on various expansion and debottlenecking projects; in the
first nine months of 1996, they spent approximately $136 million and $24
million, respectively, on such projects and they expect to spend a further $39
million and $18 million, respectively, during the balance of the year. Projects
completed or substantially completed during 1996 are expected to expand Quantum
Chemical's linear low density polyethylene and high density polyethylene
production capacity by approximately 17% and 11%, respectively, and SCM
Chemicals' TiO2 capacity (after reflecting the sulfate-process capacity
reductions announced in July 1996) by approximately 45%, in each case from 1995
levels. Another project, scheduled to be completed by the end of 1998, is
expected to increase Quantum Chemicals' acetic acid capacity by 33% from its
1995 level. To address current market conditions in the TiO2 industry, SCM
Chemicals has determined to delay the expansion of its Stallingborough, England
chloride-process plant until July 1998 and rephase the expansion of its
Kemerton, Western Australia chloride-process plant to delay start-up until such
time as market conditions improve, although preparatory work will continue.
Maintain Low-Cost Position in Commodity, Industrial and Performance
Chemicals. The Company will seek to increase the competitiveness of its
commodity, industrial and performance chemicals businesses by improving the
efficiency of existing operations through ongoing investment in technology, new
processes and equipment. Quantum Chemical will continue to pursue productivity
improvements and cost reductions to increase profitability throughout its
business cycle. Productivity measured as pounds produced per employee has
increased every year since 1990 for a cumulative improvement of 125% over the
five years ended September 30, 1995. Permanent annual savings of approximately
$18 million and $30 million, principally due to the reengineering of Quantum
Chemical's manufacturing and distribution facilities, were achieved in the nine
months ended September 30, 1996 and in 1995, respectively, bringing the total
savings since 1992 to approximately $125 million. Quantum Chemicals expects to
achieve improvements in the unit cost of acetic acid as a result of the
conversion of its Syngas
34
<PAGE>
<PAGE>
plant from residuum oil to natural gas, which is expected to be completed by the
end of 1996. SCM Chemicals has continued to improve its competitive cost
position by realizing increased economies of scale and through the installation
of improved manufacturing technologies.
Increase Production and Marketing of Value-Added Products. The Company
will seek to expand its position as a supplier of less cyclical value-added
specialty chemicals, which historically command higher margins than commodity,
industrial and performance chemicals, principally by developing and acquiring
new technology and applications. In the first nine months of 1996, Glidco
quadrupled its capacity to produce the specialty fragrance chemical
dihydromyrcenol and increased its linalool and geraniol capacity by 20% (in each
case from 1995 levels) in order to meet growing worldwide demand for these
products. In addition, in January 1996 Glidco established a sales office and
warehouse space in Singapore to serve the growing market in the Pacific Rim.
Emphasize Management Stock Ownership and Performance-Based Compensation.
In order to align the interests of the Company's management and stockholders,
the Company has established guidelines for significant investment by management
in Common Stock. In addition, management's annual incentive compensation is
dependent upon the achievement of targets based upon operating profit and return
on capital employed, and management's long-term compensation (including the
vesting of 75% of the awards of restricted stock made shortly following the
Demerger) is dependent upon the achievement of targets based on 'economic value
added' concepts and the Company's performance relative to industry peers. For
information relating to these guidelines and plans, see 'Executive
Compensation.'
Provide a Safe and Ethical Workplace. The Company seeks to provide a safe
and ethical workplace environment that encourages open communication, personal
development, teamwork and reward for positive contribution to the achievement of
its goals.
PRINCIPAL PRODUCTS
The principal products of the Company are as follows:
<TABLE>
<CAPTION>
PRODUCT USES
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
QUANTUM CHEMICAL
Polyethylene and Related Products
Low Density Polyethylene
('LDPE')..................... Packaging for meats and produce, household wraps, toys, housewares and
coatings for paper, milk and juice cartons.
High Density Polyethylene
('HDPE')..................... Blow-molded bottles for milk, juices and detergents, industrial drums,
injection-molded household goods and toys, consumer packaging and liners
for landfills.
Linear Low Density Polyethylene
('LLDPE').................... Heavy duty bags, stretch wrap, container lids, trash and merchandise bags
and toys.
Ethylene....................... A raw material for polyethylene and other chemical and polymer products.
Acetyls and Alcohol
Vinyl Acetate Monomer
('VAM')...................... A raw material for polymers used as a binder in adhesives and water-based
paints; in copolymer resin used in packaging films; and in the manufacture
of safety glass and in textile applications.
Acetic Acid.................... A raw material for VAM, plastics, dyes, pharmaceutical and other chemical
compounds.
Methanol....................... A raw material for acetic acid, MTBE, formaldehyde and solvents for
chemicals, coatings, inks and adhesives.
Ethyl Alcohol.................. Personal care products, pharmaceutical and household cleaning and other
consumer products.
Ethyl Ether.................... Laboratory reagents, gasoline and diesel engine starting fluids and
smokeless gun powder.
</TABLE>
35
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRODUCT USES
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Specialty Polymer Products
Polypropylene.................. Battery cases, automotive components, packaging materials, luggage,
housewares and appliance parts.
Colors and Concentrates........ Stock and customer colorants, anti-block, anti-static and slip additives,
ultraviolet inhibitors, foaming agents, processing aids and flame
retardants.
Wire and cable resins.......... Insulation for power cable, communications cable, CATV and automotive wire.
Adhesive tie layers............ Food and medical packaging.
Hot melt adhesive resins....... Sealants, caulks and adhesives.
Fuel additives................. Diesel fuel pour point depressants.
Rotomolding powders............ Tanks, ductwork, bins, toys and automotive parts.
Polymeric powders.............. Coatings for glass, metal, paper, textiles, carpets and other plastics, as
well as processing aids for polyesters.
SCM CHEMICALS
Titanium Dioxide and Related
Products
Titanium Dioxide ('TiO2')...... A pigment produced in differentiated forms used in a variety of consumer
and industrial products, including paints and coatings, paper, plastics and
elastomers.
Titanium Tetrachloride
('TiCl4').................... Used primarily to manufacture titanium metal for aerospace, anticorrosion
and medical applications.
Colored Pigments............... Artist's colors, durable plastics and automotive coatings.
Silica Gel..................... Coatings, food and personal care products.
GLIDCO
Fragrance and Flavor Chemicals
Turpentine derivatives......... Fragrance, flavor, pharmaceutical and industrial applications.
</TABLE>
QUANTUM CHEMICAL
The following table sets forth information concerning Quantum Chemical's
production capacity for certain of its products:
QUANTUM CHEMICAL RATED CAPACITY
(MILLIONS OF POUNDS PER ANNUM, EXCEPT AS INDICATED)
<TABLE>
<CAPTION>
ANTICIPATED
1995 CAPACITY BY DECEMBER
PRODUCT CAPACITY 31, 1996
- ---------------------------------------------------------------------- -------- --------------------
<S> <C> <C>
LDPE.................................................................. 1,555 1,555
LLDPE................................................................. 1,035* 1,215
HDPE.................................................................. 1,660 1,850
Ethylene.............................................................. 3,500 3,800
Acetic Acid........................................................... 900 1,200**
VAM................................................................... 800 800
Methanol.............................................................. 140*** 200***
</TABLE>
- ------------
* Includes 250 million pounds of recently restarted LLDPE capacity at Quantum
Chemical's Morris, Illinois facility.
** By December 31, 1998.
*** Millions of gallons.
36
<PAGE>
<PAGE>
POLYETHYLENE AND RELATED PRODUCTS
Quantum Chemical is the largest United States manufacturer of LDPE, the
second largest United States producer of HDPE and the fourth largest United
States producer of LLDPE, based on reported production capacities.
Quantum Chemical's polyethylene plants are capable of producing 1,555
million pounds of LDPE, 1,035 million pounds of LLDPE and 1,660 million pounds
of HDPE annually. Quantum Chemical currently manufactures all three types of
polyethylene at its La Porte, Texas production complex. In addition, it
manufactures LDPE at its Morris, Illinois, Port Arthur, Texas and Clinton, Iowa
complexes, HDPE at its Clinton, Port Arthur and Chocolate Bayou, Texas complexes
and LLDPE at its Morris complex. The Morris and Clinton complexes are the only
polyethylene facilities located in the Midwest and enjoy a freight cost
advantage over Gulf Coast producers in delivering products to customers in the
Midwest and on the East Coast of the United States. Quantum Chemical's
polyethylene manufacturing facilities operated at an average operating rate
(based on capacity) of 84% during the first nine months of 1996, 87% during
1995, 85% during fiscal 1994 and 81% during fiscal 1993.
In 1996, Quantum Chemical undertook capital projects to increase its
production capacity with respect to LLDPE and HDPE by approximately 17% and 11%,
respectively, from 1995 levels. These projects include the restart of 250
million pounds of LLDPE capacity at Morris, Illinois in June 1996, the
conversion of 300 million pounds of LLDPE capacity at Port Arthur to HDPE
production and construction of a 480 million pound gas phase LLDPE unit at La
Porte, which is expected to be fully operational in February 1997. Expenditures
for these projects were and are being funded by the Company's internally
generated cash and borrowings under the Credit Facility.
Ethylene is the principal raw material used in the production of
polyethylene. Quantum Chemical is currently capable of producing over 3.5
billion pounds of ethylene per annum at its La Porte, Morris and Clinton
complexes. Through plant expansions and debottlenecking projects, Quantum is on
target to increase its annual ethylene production capacity to approximately 3.8
billion pounds by December 1996.
In addition to producing its own ethylene, Quantum Chemical has contracted
to purchase significant amounts of ethylene from Gulf Coast producers under
certain long-term agreements at prices based on market prices. Quantum Chemical
sells on the spot market ethylene supplies in excess of its requirements. Spot
prices fluctuate and may be significantly less than, or significantly greater
than, the prices that Quantum Chemical has paid for the ethylene purchased under
its long-term agreements. Quantum Chemical's ethylene purchase obligations will
begin to decline in December 1996 and will be eliminated by December 2000,
unless Quantum Chemical determines to seek extensions or new agreements. Quantum
Chemical's purchases of ethylene under these contracts approximated $137 million
in the first nine months of 1996 and $194 million, $143 million and $200 million
in 1995, fiscal 1994 and fiscal 1993, respectively. Sales of lesser quantities
of excess ethylene into the spot market during the same periods resulted in
losses of $9.8 million, $260,000, $6.4 million and $16 million, respectively.
Quantum Chemical is currently participating in a feasibility study with
Lyondell Petrochemical Company and Union Carbide Corporation relating to a
jointly owned ethylene plant that would have an annual capacity of 1.5 to 2.0
billion pounds and be scheduled to be operational in 2000. If the parties agree
to proceed, as to which there can be no assurance, management estimates that the
Company's proportionate additional capacity would be approximately 500 to 667
million pounds per annum and its capital expenditure commitment would be in the
range of approximately $175 million to $200 million, to be spent over three
years.
The feedstocks for ethylene are natural gas liquids, including ethane,
propane and butane. Quantum purchases large amounts of these feedstocks from
outside sources and converts them into ethylene, propylene and a variety of
marketable by-products at La Porte, Morris and Clinton. While the Company has
agreements providing for the supply of these feedstocks, the contractual prices
of these feedstocks vary with market conditions and are at times highly
volatile. See 'Risk Factors -- Price Volatility of Certain Raw Materials.'
37
<PAGE>
<PAGE>
Polyethylene is manufactured in pellet form and shipped in North America
primarily by railcar in 180,000 pound lots. The remainder is shipped in 40,000
pound hopper trucks, 1,000 pound boxes and 50 pound bags.
Quantum Chemical sells its polyethylene products in the United States
primarily through its own sales organization. It generally engages export sales
agents to market its products in the rest of the world. Quantum Chemical's
polyethylene operations have an extensive customer base.
Quantum Chemical's polyethylene operations are subject to substantial
competition from other United States and non-United States producers, including
some of the world's largest chemical and integrated oil companies such as Dow
Chemical, Union Carbide Corporation, Phillips Petroleum Company, Novacor
Chemical, Chevron Chemical, Exxon Chemical, Lyondell Petrochemical Company,
Eastman Chemical Company, Solvay Polymers, Formosa Plastics and Westlake
Polymers. Quantum Chemical competes in the polyethylene market on the basis of
price, product performance and technical service.
ACETYLS AND ALCOHOL
Acetic Acid and VAM. Quantum Chemical is the second largest United States
producer of both acetic acid and VAM, based on reported production capacity. Its
acetic acid plant at La Porte has an annual capacity of approximately 900
million pounds. Quantum Chemical uses approximately 60% of its acetic acid
production to produce VAM at La Porte, which has an annual capacity of
approximately 800 million pounds. It is anticipated that proposed
debottlenecking projects will expand Quantum Chemical's annual acetic acid
production capacity to 1.2 billion pounds by 1998.
Quantum Chemical's principal competitors in the production of acetic acid
and/or VAM are Hoechst-Celanese, American Acetyls, Union Carbide Corporation and
E.I. Dupont de Nemours & Co.
Methanol. Quantum Chemical produces methanol and operates a synthesis gas
unit at La Porte. Synthesis gas, a mixture of carbon monoxide and hydrogen
formed by the partial oxidation of a hydrocarbon, is the principal feedstock for
methanol. The methanol plant has an annual capacity of 200 million gallons but
an effective capacity of approximately 140 million gallons due to insufficient
feedstock from the synthesis gas unit. Quantum Chemical is currently converting
the synthesis gas plant from using residual crude oil (residuum) to using
natural gas as a feedstock. When the conversion is completed, which is expected
to occur in November 1996, Quantum Chemical expects that its methanol plant will
have sufficient feedstock to operate at full capacity. Quantum Chemical uses
approximately 75 million gallons of the methanol it produces for other
production processes, including the manufacture of acetic acid.
Ethyl Alcohol and Ethyl Ether. Quantum Chemical produces synthetic ethyl
alcohol at its Tuscola, Illinois plant by a direct hydration process that
combines water and ethylene. Quantum Chemical also owns and operates plants at
Tuscola, Illinois, Newark, New Jersey and Anaheim, California for denaturing
ethyl alcohol by the addition of certain chemicals. In addition, it produces
small volumes of ethyl ether, a by-product of its ethyl alcohol production, at
Tuscola. Tuscola has an annual production capacity of approximately 50 million
gallons of synthetic ethyl alcohol and approximately 5 million gallons of ethyl
ether.
SPECIALTY POLYMER PRODUCTS
Quantum Chemical produces specialty polymer products, which are essentially
enhanced grades of polyethylene and polypropylene. The Company believes that,
over a business cycle, average selling prices and profit margins for specialty
polymers tend to be higher than selling prices and profit margins for
higher-volume commodity polyethylenes.
Polypropylene. Quantum Chemical manufactures polypropylene using propylene
produced as a by-product of its ethylene production, as well as purchased
propylene, at Morris. The plant has the capacity to produce 280 million pounds
annually for various applications in the automotive, housewares and appliances
industries.
38
<PAGE>
<PAGE>
Colors and Concentrates. Quantum Chemical produces color concentrates at
its facilities in Crockett, Texas, Fairport Harbor, Ohio and Heath, Ohio. Color
concentrates and compounds are specialty polyethylenes that are impregnated with
pigments for sale to converters, who mix the concentrates with larger volumes of
polymers, including polyethylene, to produce colored plastics.
Wire and Cable Resins. Quantum Chemical produces polyethylene and
polypropylene resins used in various wire and cable applications, including
insulation and jacketing for telecommunications, CATV, electrical power cable
and automotive wiring.
Adhesive Tie Layers. Quantum Chemical produces adhesive tie layer resins
which are extrudable adhesive resins used to bond dissimilar materials in
multi-layer structures, such as food and medical packages.
Hot Melt Adhesives. Quantum Chemical produces hot melt adhesive resins,
which are specialty resins used in the manufacture of sealants, caulks and
adhesives.
Rotomolding Powders. Quantum Chemical produces rotomolding polyethylene
powders, which are used in rotomolding, a specialized process for fabricating
large hollow plastic objects such as tanks, bins, toys and automotive parts.
Polymeric Powders. Quantum Chemical produces polymeric powders, which are a
form of powdered polyethylene used to coat glass, metal, paper, textiles,
carpets and other plastics.
39
<PAGE>
<PAGE>
QUANTUM CHEMICAL'S MANUFACTURING INTEGRATION
The following chart is a simplified illustration of Quantum Chemical's
integration of manufacturing processes and material flows.
[CHART]
SCM CHEMICALS
TITANIUM DIOXIDE AND RELATED PRODUCTS
Titanium Dioxide. SCM Chemicals is the third largest producer of TiO2 in
the world and the second largest producer of TiO2 in the United States. TiO2 is
a white pigment used for imparting whiteness, brightness and opacity in a wide
range of products, including paints and coatings, paper, plastics and
elastomers.
40
<PAGE>
<PAGE>
The following table sets forth information concerning SCM Chemicals'
present production capacity for TiO2 using the chloride-process and the
sulfate-process discussed below:
SCM CHEMICALS RATED CAPACITY
(TONNES PER ANNUM)
<TABLE>
<CAPTION>
ANTICIPATED
CAPACITY BY
PROCESS 1995 CAPACITY DECEMBER 31, 1996
- ----------------------------------------------------------------- ----------------- -------------------
<S> <C> <C>
Chloride......................................................... 377,000 (83%) 429,000 (90.6%)
Sulfate(1)....................................................... 76,000 (17%) 44,000 ( 9.4%)
</TABLE>
- ------------
(1) The reduction in profitability of SCM Chemicals' anatase business associated
with the sulfate-process operations led, in the nine months ended September
30, 1996, to a $60 million write-down of the carrying value of related
assets and provision of $15 million for the costs related to the closure of
certain sulfate-process production as discussed in Note 4 to the Combined
Financial Statements. In July 1996, SCM Chemicals announced its intention to
close its 10,000 tonne sulfate-process plant in Stallingborough, England and
to scale back production at its United States sulfate-process facility by
approximately one-third or 22,000 tonnes. SCM Chemicals will continue to
review its business and this could lead to a further reduction in its
sulfate-process TiO2 capacity and the eventual closure of its United States
sulfate-process facility if market conditions do not warrant its continued
operation. SCM Chemicals' sulfate-process manufacturing operations have
historically operated at a marginal level.
TiO2 is produced in two crystalline forms: rutile and anatase. Rutile TiO2
is a more tightly packed crystal that has a higher refractive index than anatase
TiO2 and, therefore, better opacification and tinting strength in many
applications. Some rutile TiO2 products also provide better resistance to the
harmful effects of weather. Rutile TiO2 is the preferred form for use in
coatings, ink and plastics. Anatase TiO2 has a bluer undertone and is less
abrasive than rutile TiO2. It is often preferred for use in paper, ceramics,
rubber and man-made fibers.
TiO2 producers process titaniferous ores that range from brown to black in
color to extract a white pigment, using one of two different technologies. The
older sulfate-process is a wet chemical process that uses concentrated sulfuric
acid to extract the TiO2 in either anatase or rutile form. The sulfate-process
generates significant volumes of by-products (including copperas, gypsum and
carbon dioxide) and waste iron sulfate and sulfuric acid. The newer
chloride-process is a high temperature process in which chlorine is used to
extract the TiO2 in rutile form, with greater purity and higher control over the
size distribution of the pigment particles than the sulfate-process permits. In
general, the chloride-process is also less intensive than the sulfate-process in
terms of capital investment, labor and energy and, because much of the chlorine
can be recycled, it produces less waste subject to environmental regulation.
Once an intermediate TiO2 pigment has been produced by either the chloride- or
sulfate-process, it is 'finished' into a product with specific performance
characteristics for particular end-use applications through proprietary
processes involving surface treatment with various chemicals and combinations of
milling and micronizing.
41
<PAGE>
<PAGE>
The following is a simplified illustration of SCM Chemicals' manufacturing
processes:
[CHART]
Due to customer preferences, as well as economic and environmental factors,
the proportion of TiO2 industry sales represented by chloride-process pigments
has increased significantly relative to sulfate-process pigments during the last
ten years and currently represents just over half of industry capacity. SCM
Chemicals is the world's second largest producer of TiO2 by the chloride
production process. Approximately 91% of SCM Chemicals' expected year-end
worldwide production capacity of 473,000 tonnes per annum will be based on
proprietary chloride-process technology.
SCM Chemicals' eight TiO2 plants are located in the three major world
markets for TiO2: North America, Western Europe and the fastest growing market,
the Asia/Pacific region. Its North American plants, consisting of two in
Baltimore, Maryland and three in Ashtabula, Ohio, have aggregate production
capacities of 241,000 tonnes using the chloride-process and 66,000 tonnes using
the sulfate-process, respectively. SCM Chemicals' two plants in Stallingborough,
England have production capacities of 109,000 tonnes (scheduled to increase to
150,000 tonnes by mid-1998) using the chloride-process and 10,000 tonnes using
the sulfate-process, respectively. In July 1996, SCM Chemicals announced its
intention to close its 10,000 tonne sulfate-process plant in Stallingborough,
England during the second half of 1996 and to scale back production at its
66,000 tonne sulfate-process facility in Baltimore, Maryland by approximately
one-third or 22,000 tonnes. SCM Chemicals' Kemerton plant in Western Australia
has a production capacity of 79,000 tonnes using the chloride-process. After
reflecting reductions in sulfate-process manufacturing capacity, approximately
60% of SCM Chemicals' TiO2 production capacity will be located in the North
American market, approximately 23% will be located in the Western European
market and approximately 17% will be located in the Asia/Pacific market.
SCM Chemicals' plants operated at an average of 87% of installed capacity
during the first nine months of 1996, 97% of installed capacity during 1995, 93%
during fiscal 1994 and 95% during fiscal 1993.
SCM Chemicals plans to spend approximately $120 million in 1998 for an
additional debottlenecking project at its Stallingborough chloride-process plant
that is expected to increase annual TiO2 capacity by 41,000 tonnes. SCM
Chemicals had previously announced plans for a $340 million expansion of its
Kemerton, Western Australia chloride-process plant, involving a new production
line, which would have increased annual TiO2 capacity by an additional 111,000
tonnes per annum by January 1999. While preparatory work continues, the project
has been rephased due to weaker
42
<PAGE>
<PAGE>
worldwide prices and its completion date will likely be extended until the
middle of 2000. Expenditures under a revised time frame will be funded by the
Company's internally generated cash and borrowings under the Credit Facility
and, possibly, under other credit facilities permitted under the Credit
Facility.
Titanium-bearing ores used in the TiO2 extraction process (ilmenite,
natural rutile and leucoxene) occur as mineral sands and hard rock in many parts
of the world. Mining companies increasingly treat these natural ores to extract
iron and other minerals and produce slags or synthetic rutiles with higher TiO2
concentrations, resulting in lower rates of waste by-products during the TiO2
production process. Ores are shipped by bulk carriers from terminals in the
country of origin to TiO2 production plants, usually located near port
facilities. SCM Chemicals obtains ores from a number of suppliers in South
Africa, Australia, Canada and Norway, generally pursuant to three-to-eight-year
term supply contracts. RTZ's QIT subsidiary, and its affiliate Richards Bay
Minerals, followed by RGC Limited, are the world's largest producers of titanium
ores and accounted for approximately 86% of the titanium ores and upgraded
titaniferous raw materials purchased by SCM Chemicals in 1995.
Other major raw materials used in the production of TiO2 are chlorine,
caustic soda, petroleum and metallurgical coke, aluminum, sodium silicate,
sulfuric acid, oxygen, nitrogen, natural gas and electricity. The number of
sources for and availability of these materials is specific to the particular
geographic region in which the facility is located. For SCM Chemicals'
Australian plant, chlorine and caustic soda are obtained exclusively from one
supplier. SCM Chemicals has experienced tightness in various raw material
markets, but not to an extent requiring curtailed production. There are certain
risks related to the utilization of raw materials sourced from less developed or
developing countries. For example, the titanium ore feedstock market is
currently tight, in part as a result of political instability in Sierra Leone,
which has forced the closure of a major natural rutile mine. SCM Chemicals
strives to maintain a balanced supply portfolio where possible. A number of SCM
Chemicals' raw material suppliers are significant to SCM Chemicals and,
accordingly, if one significant supplier or a number of significant suppliers
were unable to meet their obligations under present supply arrangements, SCM
Chemicals could suffer reduced supplies and/or be forced to incur increased
prices for its raw materials. Such an event could have a material adverse effect
on the Company's financial condition, results of operations or cash flows.
Of the total tonnes of TiO2 sold in 1995, approximately 63% was sold to
customers in the paint and coatings industry, approximately 17% to customers in
the plastics industry, approximately 17% to customers in the paper industry and
approximately 3% to other customers. SCM Chemicals' ten largest customers
accounted for approximately 31% of its TiO2 sales in 1995 and approximately 33%
of such sales in the nine months ended September 30, 1996. SCM Chemicals
experiences some seasonality in its sales because sales of paints and coatings
are highest in the spring and summer months.
TiO2 is sold either directly by SCM Chemicals to its customers or, to a
lesser extent, through agents or distributors. It is distributed by rail, truck
and ocean carrier in either dry or slurry form.
The global markets in which the Company's TiO2 business operates are all
highly competitive. SCM Chemicals competes primarily on the basis of price,
product quality (including the availability of high performance products) and
technical service. Certain of SCM Chemicals' competitors are vertically
integrated, producing titanium-bearing ores as well as TiO2. SCM Chemicals'
major competitors are E.I. DuPont de Nemours & Co., Tioxide (a unit of Imperial
Chemical Industries PLC), Kronos (a unit of NL Industries) and Kerr-McGee
Chemicals (both directly and through various joint ventures). DuPont, Tioxide,
SCM Chemicals, Kronos and Kerr-McGee Chemicals collectively account for
approximately 61% of world production capacity. New plant capacity additions in
the TiO2 industry are slow to develop because of the substantial capital
expenditure and the substantial lead time (3-5 years typically for a new plant)
needed for planning, obtaining environmental approvals, construction of
manufacturing facilities and arranging for raw materials supplies. TiO2 also
competes with other whitening agents which are generally less effective but
cheaper. Paper manufacturers have, in recent years, developed alternative
technologies which reduce the amount of TiO2 used in paper. For example, kaolin
and calcium carbonate are used extensively as fillers by paper manufacturers in
medium and lower priced products.
Titanium Tetrachloride. SCM Chemicals manufactures a metallurgical grade of
TiCl4 at its Ashtabula, Ohio plant, primarily for sale to United States titanium
metal producers. TiCl4 is produced
43
<PAGE>
<PAGE>
as an intermediate product in the chloride-process used for manufacturing TiO2.
The Company is the largest merchant seller of TiCl4 in the United States and,
perhaps, the world.
The majority of the Company's TiCl4 sales are of metallurgical grade sold
to titanium sponge producers who convert the product into titanium metal. Other
customers use TiCl4 to produce catalysts for chemical processes and pearlescent
pigments for metallic coatings and cosmetics. Sales are almost exclusively to
customers in the United States. TiCl4 is distributed by rail and truck as
anhydrous TiCl4 and as titanium oxychloride (an aqueous solution of TiCl4).
Silica Gel. SCM Chemicals produces several grades of fine-particle silica
gel at its St. Helena plant in Baltimore, Maryland, and markets them
internationally. Fine-particle silica gel is a chemically and biologically inert
form of silica with a particle size ranging from three to ten microns.
The Company's SiLCRON'r' brand of fine-particle silica is used in coatings
as a flattening (gloss reduction) agent and to provide mar-resistance.
SiLCRON'r' is also used in foods and creams, lotions, and pastes. SiL-PROOF'r'
grades of fine-particle silica gel are chill-proofing agents used to stabilize
chilled beer and prevent clouding. They are especially important in countries
that prohibit the use of chemical additives in beer. Fine-particle silica is
distributed in dry form in palletized bags by truck and ocean carrier.
Colored Pigments. SCM Chemicals manufactures a line of cadmium-selenium
based colored pigments at its St. Helena plant and markets them internationally.
In addition to their brilliance, cadmium colors are light stable, heat stable
and insoluble. These properties make them useful, even irreplaceable, in such
applications as artists' colors, plastics and glass colors. Due to concern for
the toxicity of heavy metals including cadmium, SCM Chemicals has introduced
low-leaching cadmium-based pigments that meet all United States government
requirements for landfill disposal of non-hazardous waste. Colored pigments are
distributed in dry form in drums by truck and ocean carrier.
GLIDCO
FRAGRANCE AND FLAVOR CHEMICALS
Glidco is one of the world's leading producers of chemicals derived from
crude sulfate turpentine ('CST'), a by-product of the kraft process of
papermaking, and is the largest purchaser and distiller of CST in the world.
Glidco's primary turpentine-based products are intermediate fragrance chemicals
such as linalool and geraniol, which provide the starting point for the
production of a number of other fragrance ingredients. In addition, Glidco
supplies materials for use as flavors and some specialty products for a number
of industrial applications.
Glidco operates manufacturing facilities in Jacksonville, Florida and
Brunswick, Georgia. The Jacksonville site has facilities for the fractionation
of turpentine into alpha and beta-pinene, sophisticated equipment to further
upgrade fragrance chemical products, as well as the manufacturing facilities for
synthetic pine oil, anethole, methyl chavicol and a number of other fragrance
chemicals. Brunswick produces linalool and geraniol from the much more plentiful
component of crude turpentine, alpha-pinene, utilizing a proprietary and, the
Company believes, unique technology. The Company believes that this provides
Glidco with a significant advantage in raw material availability. Linalool and
geraniol produced at Brunswick are further processed at the Jacksonville site to
produce fragrance chemicals including citral, citronellol and pseudoionone. In
addition, in 1996, to meet the growing worldwide demand for dihydromyrcenol,
Glidco commissioned the world's largest dihydromyrcenol facility with a capacity
of over four million pounds per year at Brunswick.
Glidco is in the process of upgrading and expanding its manufacturing
facilities in an effort to expand its production capacity and to insure
continued compliance with environmental regulations. Glidco spent approximately
$17 million on such improvements in 1995. In 1996, it anticipates spending a
total of approximately $13 million, of which $10 million was spent during the
first nine months of 1996, for projects including construction of new
fractionation columns at its Jacksonville plant and the additional
dihydromyrcenol capacity referred to above. These expenditures have been and
will be funded by the Company's internally generated cash and borrowings under
the Credit Facility.
44
<PAGE>
<PAGE>
CST, which is Glidco's key raw material, is a by-product of the kraft
pulping process. Glidco purchases CST from approximately 50 pulp mills in North
America. Additionally, Glidco purchases quantities of crude turpentine or its
derivatives from Asia, Europe and South America as business conditions dictate.
The Company believes that Glidco is the largest purchaser of CST in the world.
Generally, Glidco seeks to enter into long-term supply contracts with pulp
mills in order to ensure a stable supply of CST. However, since the sale of
turpentine generates relatively insignificant revenues and profits for the pulp
mills that serve as Glidco's principal suppliers, Glidco has experienced
tightness in CST supply, from time to time, together with corresponding price
increases. Glidco attempts to work closely and cooperatively with its suppliers
and provide them with incentives to produce turpentine. For example, Glidco
employs two full-time employees whose sole responsibility is to work with pulp
mills to permit pulp mills to capture CST more efficiently and economically.
The major use of fragrance chemicals is the production of perfumes, and the
major consumers of perfumes worldwide are the soap and detergent manufacturers.
Glidco sells directly worldwide to major soap, detergent and fabric conditioner
manufacturers and fragrance compounders and, to a lesser extent, producers of
cosmetics and toiletries. Approximately 80% of Glidco's sales are to the
fragrance chemicals market, with additional sales to the vitamin intermediates
market and the pine oil cleaners and disinfectant market. Approximately 60% of
Glidco's sales are outside the United States; in 1995 sales were transacted in
70 different countries. Sales are primarily done through its direct sales force,
while agents and distributors are used in outlying areas where volume does not
justify full-time sales coverage.
The markets in which Glidco competes are highly competitive. Glidco
competes primarily on the basis of quality, service and the ability to conform
its products to the technical and qualitative requirements of its customers.
Glidco works closely with many of its customers in developing products to
satisfy their specific requirements. Glidco's supply agreements with customers
are typically short-term in duration (up to one year). Therefore, its business
is substantially dependent on long-term customer relationships based upon
quality, innovation and customer service. Customers from time to time change the
formulations of an end product in which one of Glidco's fragrance chemicals is
used, which may affect demand for that particular product produced by the
Company. Glidco's ten largest customers accounted for approximately 47% of its
total sales in each of 1995 and the nine months ended September 30, 1996.
Glidco's major competitors are BASF, Hoffman LaRoche, Kuraray and Bush Boake
Allen.
RESEARCH AND DEVELOPMENT
The Company's expenditures for research and development totalled $31
million in the first nine months of 1996 and $42 million, $46 million and $7
million in 1995, fiscal 1994 and fiscal 1993 (excluding Quantum Chemical
expenditures for fiscal 1993), respectively. The substantial increase in
research and development expenditures from fiscal 1993 to fiscal 1994 is
attributable to the inclusion of Quantum Chemical's expenditures beginning in
1994. It is anticipated that, at least in the near term, research and
development expenditures should continue at levels comparable to, or slightly
higher than, those of 1995 and fiscal 1994. Quantum Chemical has research
facilities in Cincinnati, Ohio and Morris, Illinois. SCM Chemicals has research
facilities in Baltimore, Maryland, Stallingborough, U.K. and Kemerton, near
Bunbury, Western Australia. Glidco has research facilities in Jacksonville,
Florida. The Company's research effort is principally focused on improvements in
process technology, product development, technical service to customers,
applications research and enhancing product quality.
INTERNATIONAL EXPOSURE
The Company generates revenue from exports (i.e., U.S. dollar-denominated
sales outside the United States by domestic operations) as well as revenue from
operations conducted outside the United States. Export sales amounted to
approximately 13%, 12% and 8% of total revenues in the nine months ended
September 30, 1996 and in 1995 and fiscal 1994, respectively, reflecting sales
by Quantum Chemical, SCM Chemicals and Glidco in over 70 different countries.
Revenue from foreign operations amounted to approximately 13%, 10% and 10% of
total revenues in the nine months ended
45
<PAGE>
<PAGE>
September 30, 1996 and in 1995 and fiscal 1994, respectively, principally
reflecting the operations of SCM Chemicals in the United Kingdom and Western
Australia; identifiable assets of the foreign operations represented 13% of
total identifiable assets at September 30, 1996 and 7% of total identifiable
assets at each of December 31, 1995 and December 31, 1994, respectively,
principally reflecting the assets of these SCM Chemicals operations. In
addition, the Company obtains a portion of its principal raw materials from
sources outside the United States. SCM Chemicals obtains ores used in the
production of TiO2 under long-term contracts from a number of suppliers in South
Africa, Australia, Canada and Norway and Glidco obtains a portion of its
requirements for crude turpentine or its derivatives from suppliers in Indonesia
and other Asian countries, Europe and South America.
The Company's export sales and foreign manufacturing and sourcing are
subject to the usual risks of doing business abroad, such as fluctuations in
currency exchange rates, transportation delays and interruptions, political and
economic instability and disruptions, restrictions on the transfer of funds, the
imposition of duties and tariffs and import and export controls and changes in
governmental policies. The Company's exposure to the risks associated with doing
business abroad may increase if, as intended, the Company expands its worldwide
operations.
The functional currency of each of the Company's foreign operations is the
local currency. Historically, the net impact of currency translation has not
been material to the Company's results of operations or financial position. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Foreign Currency Matters.'
EQUITY INTEREST IN SUBURBAN PROPANE
A subsidiary of Quantum Chemical serves as general partner of Suburban
Propane Partners, a Delaware limited partnership whose common units trade on the
NYSE under the symbol 'SPH.' In 1996, in connection with its initial public
offering, Suburban Propane Partners acquired, through an operating partnership,
the propane business and assets of Quantum Chemical's former Suburban Propane
division. Suburban Propane is the third largest retail marketer of propane in
the United States, serving more than 700,000 active residential, commercial,
industrial and agricultural customers from more than 350 customer service
centers in more than 40 states. Suburban Propane's operations are concentrated
in the east and west coast regions of the United States. The retail propane
sales volume of Suburban Propane was approximately 567 million gallons during
its fiscal year ended September 28, 1996. Based on industry statistics, Suburban
Propane believes that its retail propane sales volume constitutes approximately
6% of the United States retail market for propane. For its fiscal year ended
September 28, 1996, Suburban Propane reported total revenues of approximately
$707.9 million and net income of approximately $26.9 million. At September 28,
1996, Suburban Propane Partners reported total assets of approximately $807.4
million.
Quantum Chemical has a 2% general partnership interest and an approximate
24% subordinated limited partnership interest, each on a combined basis, in
Suburban Propane Partners and the operating partnership. Quantum Chemical has
agreed, subject to certain limitations, to contribute up to $43.6 million, on a
revolving basis, to Suburban Propane Partners to enhance its ability to make
quarterly cash distributions to the limited partners through the quarter ending
March 31, 2001. Under the partnership agreement governing Suburban Propane
Partners, Suburban Propane Partners is managed by, or under the direction of, a
seven-member Board of Supervisors. Two of the supervisors are appointed by the
general partner; the holders of the limited partnership interests and
subordinated limited partnership interests, voting as a class, elect three of
the supervisors; and these five supervisors elect two executive officers of
Suburban Propane Partners as the remaining two supervisors.
EMPLOYEES
At September 30, 1996, the Company had approximately 6,980 full and
part-time employees and contractors, of whom approximately 5,740 were engaged in
manufacturing, 420 were engaged in sales and distribution and 820 had corporate
and administrative responsibilities. Approximately 15% of the Company's
employees are represented by various labor unions. Of the Company's 15
collective
46
<PAGE>
<PAGE>
bargaining agreements, 11 expire in 1997 and four expire in 1998. The Company
believes that the relations of its operating subsidiaries with employees and
unions are generally good.
ENVIRONMENTAL MATTERS
The Company's business is subject to extensive regulation under the
Environmental Laws in effect in the United States and other countries in which
it operates. The operation of any chemical manufacturing plant and the
distribution of chemical products entail risks under Environmental Laws, many of
which provide for substantial fines and criminal sanctions for violations and
there can be no assurance that material costs or liabilities will not be
incurred. In particular, the production of ethylene, methanol, TiO2 and certain
other chemicals involves the handling, manufacture or use of substances or
compounds that may be considered to be toxic or hazardous within the meaning of
certain Environmental Laws, and certain operations have the potential to cause
environmental or other damage. Potentially significant expenditures could be
required in connection with the repair or upgrade of facilities in order to meet
existing or new requirements under Environmental Laws as well as in connection
with the investigation and remediation of threatened or actual pollution.
The Company's costs and operating expenses relating to environmental
matters were approximately $67 million, $61 million and $60 million in 1995,
fiscal 1994 and fiscal 1993, respectively. These amounts cover, among other
things, the Company's routine measures to prevent, contain and clean up spills
of materials that may occur in the ordinary course of business. Capital
expenditures for environmental compliance and remediation were approximately $22
million and $7 million in 1995 and fiscal 1994, respectively, and are expected
to total $25 million in 1996. In addition, capital expenditures for projects in
the normal course of operations and major expansions include costs associated
with the environmental impact of those projects which are inseparable from the
overall project cost. Capital expenditures and, to a lesser extent, costs and
operating expenses relating to environmental matters for years after 1995 will
be subject to evolving regulatory requirements and will depend on the amount of
time required to obtain necessary permits and approvals.
From time to time, various agencies may serve cease and desist orders or
notices of violation on an operating unit or deny its applications for certain
licenses or permits, in each case alleging that the practices of the operating
unit are not consistent with the regulations or ordinances. In some cases, the
relevant operating unit may seek to meet with the agency to determine mutually
acceptable methods of modifying or eliminating the practice in question. The
Company believes that its operating units should be able to achieve compliance
with the applicable regulations and ordinances in a manner which should not have
a material adverse effect on its business or results of operations. The Illinois
Attorney General's Office has threatened to file a complaint seeking monetary
sanctions for releases into the environment at Quantum Chemical's Morris plant
in alleged violation of state regulations and a civil penalty in excess of
$100,000 could result.
Certain Company Subsidiaries have been named as defendants, PRPs, or both,
in a number of environmental proceedings associated with waste disposal sites
and facilities currently or previously owned, operated or used by the Company
Subsidiaries or their predecessors, some of which disposal sites or facilities
are on the Superfund National Priorities List of the U.S. EPA or similar state
lists. These proceedings seek cleanup costs, damages for personal injury or
property damage, or both. Certain of these proceedings involve claims for
substantial amounts individually ranging in estimates from $300,000 to $45
million. The Company believes that the range of potential liability for the
above matters, collectively, which primarily relate to environmental remediation
activities and other environmental proceedings, is between $130 million and $180
million and has accrued $180 million as of September 30, 1996. One potentially
significant matter in which a Company Subsidiary is a PRP is alleged PCB
contamination of a section of the Kalamazoo River from Kalamazoo, Michigan to
Lake Michigan for which a remedial investigation/feasibility study is currently
being undertaken. Potential remediation costs related to this matter that are
reasonably probable have been included in the collective range of potential
liability referred to above, as well as in the loss accrual on the Company's
balance sheet. The accrual also reflects the fact that certain Company
subsidiaries have contractual obligations to indemnify the purchasers of certain
discontinued operations against certain environmental liabilities and the
Company has agreed to indemnify Hanson and the Hanson Subsidiaries against
47
<PAGE>
<PAGE>
certain of such contractual indemnification obligations pursuant to the Demerger
Transactions. See 'Agreements Between the Company and Hanson Relating to the
Demerger.' No assurance can be given that actual costs will not exceed accrued
amounts for sites and indemnification obligations for which estimates have been
made and no assurance can be given that costs will not be incurred with respect
to sites and indemnification obligations as to which no estimate presently can
be made.
Several Company subsidiaries have asserted claims and/or instituted
litigation against their insurance carriers alleging that all, or a portion, of
the past and future costs of investigating, monitoring and conducting response
actions at previously or currently owned and/or operated properties and off-site
landfills are the subject of coverage under various insurance policies. During
1995, a Company subsidiary entered settlement agreements in one such case with a
number of insurance carriers relating to coverage for environmental
contamination at present and former plant and landfill sites in the aggregate
amount of approximately $60 million, of which $47 million has been received,
with the balance of such payments being made over time. In addition, several
Company subsidiaries have asserted claims and/or instituted litigation against
various entities alleging that they are responsible for all or a portion of such
costs. Management is unable to predict the outcome of such claims and
litigation. Accordingly, for purposes of financial reporting and establishing
provisions, the Company has not assumed any such recoveries except where payment
has been received or the amount of liability or contribution by such other
parties has been agreed.
The Company cannot predict whether future developments in laws and
regulations concerning environmental protection will affect its earnings or cash
flow in a materially adverse manner or whether its operating units will be
successful in meeting future demands of regulatory agencies in a manner which
will not materially adversely affect the Company's combined financial condition,
results of operations or liquidity.
PATENTS, TRADEMARKS AND LICENSES
The Company's subsidiaries have numerous United States and foreign patents,
registered trademarks and trade names, together with applications and licenses
therefor. Quantum Chemical holds available for license to responsible third
parties proprietary processes it has developed and has entered into a number of
licensing arrangements with respect to the manufacture of polyethylene,
polypropylene and vinyl acetate monomer. Quantum Chemical is also licensed by
others in the application of certain processes. Significant licenses held by
Quantum Chemical are the British Petroleum fluid bed polyethylene process for
the production of both LLDPE and HDPE, the Unipol process for the production of
LLDPE, certain processes for the production of polyethylene and polypropylene
and a British Petroleum process for the production of acetic acid. Generally,
upon expiration of the licenses, the licensee continues to be entitled to use
the technology without payment of a royalty. SCM Chemicals generally does not
license its proprietary processes to third parties or hold licenses from others.
While the patents, licenses, proprietary technologies and trademarks of the
Company Subsidiaries are considered important, particularly with regard to
processing technologies such as SCM Chemicals' proprietary chloride production
process, and provide certain competitive advantages, the Company does not
consider its business as a whole to be materially dependent upon any one
particular patent, license, proprietary technology or trademark.
48
<PAGE>
<PAGE>
PROPERTIES
Set forth below is a list of the Company's principal manufacturing
facilities, all but one of which is owned. The Company's operating subsidiaries
also lease warehouses, stores and offices.
<TABLE>
<CAPTION>
LOCATION PRODUCTS
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Quantum Chemical
Morris, Illinois................................... LDPE; LLDPE; polypropylene; ethylene
Clinton, Iowa...................................... LDPE; HDPE; ethylene; tie-layer resins
LaPorte, Texas..................................... Ethylene; methanol; LDPE; LLDPE; HDPE; VAM; acetic acid
Chocolate Bayou, Texas............................. HDPE
Port Arthur, Texas................................. LDPE; HDPE
Crockett, Texas.................................... Colors and concentrates; wire and cable compounds
Anaheim, California................................ Denatured ethyl alcohol
Newark, New Jersey................................. Denatured ethyl alcohol
Fairport Harbor, Ohio (leased)..................... Wire and cable compounds, colors and concentrates
Heath, Ohio........................................ Colors and concentrates
Tuscola, Illinois.................................. Ethyl alcohol; ethyl ether; wire and cable compounds;
polyethylene powders
SCM Chemicals
Baltimore, Maryland (Hawkins Point)................ TiO2
Ashtabula, Ohio.................................... TiO2
TiCl4
Stallingborough, England........................... TiO2
Bunbury, Western Australia......................... TiO2
Baltimore, Maryland (St. Helena)................... Colors and silicas
Glidco
Jacksonville, Florida.............................. Fragrance and flavor chemicals
Brunswick, Georgia................................. Fragrance and flavor chemicals
</TABLE>
The Company believes that its properties are well maintained and are in
good operating condition.
LEGAL PROCEEDINGS
Together with other alleged past manufacturers of lead pigments for use in
paint and lead-based paint, a former subsidiary of a present Company subsidiary
has been named as a defendant or third party defendant in various legal
proceedings alleging that it (through a discontinued operation) and other
manufacturers are responsible for personal injury and property damage allegedly
associated with the use of lead pigments in paint. These proceedings consist of
four cases in the State of New York, one of which has been brought by The City
of New York, a class action personal injury case filed on behalf of all
purportedly lead-poisoned children in Louisiana, a similar class action personal
injury case in Ohio, two personal injury cases in Maryland and one personal
injury case in each of Pennsylvania and West Virginia. There can be no assurance
that additional litigation will not be filed. The legal proceedings seek
recovery under a variety of theories, including negligence, failure to warn,
breach of warranty, conspiracy, market share liability, fraud and
misrepresentation. The plaintiffs in these actions generally seek to impose on
the defendants responsibility for alleged damages and health concerns associated
with the use of lead-based paints. These cases (except the Pennsylvania,
Maryland and Louisiana cases which are on appeal following judgments for the
defense) are in various pre-trial stages. The Company is vigorously defending
such litigation. Although liability, if any, that may result is not reasonably
capable of estimation, the Company currently believes that the disposition of
such claims in the aggregate should not have a material adverse effect on the
Company's combined financial position, results of operations or liquidity. The
pending legal proceedings referred to above are as follows: Brenner et. al. v.
American Cyanamid Company, et. al., commenced in the Supreme Court of the State
of New York on November 9, 1993; The City of New York et. al. v. Lead Industries
Association, Inc., et. al., commenced in the Supreme Court of the State of New
York on June 8, 1989; Omar J. Gates v. American Cyanamid Company, et. al.,
commenced in the Supreme Court of the State of New York on
49
<PAGE>
<PAGE>
March 13, 1996; Jennifer German, et. al. v. Federal Home Loan Mortgage Corp. et.
al. v. Lead Industries Association, Inc., et. al., commenced in the United
States District Court, Southern District of New York on July 26, 1993; Jackson,
et. al. v. The Glidden Co., et. al., commenced in the Court of Common Pleas,
Cuyahoga County, Ohio on August 12, 1992; Jefferson, et. al. v. Lead Industries
Association, Inc., et. al., commenced in the United States District Court,
Eastern District of Louisiana on November 28, 1995; Ritchie, et. al. v. The
Glidden Co., et. al., commenced in the Circuit Court of Marshall County, West
Virginia on September 24, 1996; Skipworth et. al. v. Lead Industries
Association, Inc., et. al., commenced in the Court of Common Pleas, Philadelphia
County on March 17, 1992; and Alvin Wright et. al. v. Lead Industries
Association Inc., et. al., commenced in the Circuit Court of Baltimore City,
Maryland on December 29, 1994.
In addition, various laws and administrative regulations have, from time to
time, been enacted or proposed at the federal, state and local levels and may be
proposed in the future that seek to (i) impose various obligations on present
and former manufacturers of lead pigment and lead paint with respect to asserted
health concerns associated with the use of such products and (ii) effectively
overturn court decisions in which the Company's former subsidiary and other
defendants have been successful. No legislation or regulations have been adopted
to date which are expected to have a material adverse effect on the Company's
combined financial position, results of operations or liquidity.
The Company and various Company subsidiaries are defendants in a number of
other pending legal proceedings incidental to present and former operations.
These include several proceedings alleging injurious exposure of the plaintiffs
to various chemicals manufactured by the Company's subsidiaries and other
materials; typically such proceedings involve large claims made by many
plaintiffs against many defendants in the chemicals industry. The Company does
not expect that the outcome of these proceedings, either individually or in the
aggregate, will have a material adverse effect upon the Company's combined
financial condition, results of operations or liquidity.
For information concerning the Company's environmental proceedings, see
'Environmental Matters' above.
AGREEMENTS BETWEEN THE COMPANY AND HANSON
RELATING TO THE DEMERGER
In connection with the Demerger Transactions, the Company and certain
Company Subsidiaries, and Hanson and certain Hanson Subsidiaries, entered into
several agreements for the purpose of giving effect to the Demerger and defining
their ongoing relationship. These agreements were not the result of arm's-length
negotiations, and there can be no assurance that each of such agreements, or
that each of the transactions provided for therein, were effected on terms at
least as favorable to the Company or to Hanson as could have been obtained from
unaffiliated third parties. Additional or modified agreements, arrangements and
transactions may be entered into by the Company, Hanson and/or their respective
subsidiaries. Any such future agreements, arrangements and transactions will be
determined, at such time, through arm's-length negotiation between the parties.
The following is a summary of certain agreements, arrangements and
transactions entered into between the Company and Hanson and their respective
subsidiaries. Certain of these agreements have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part, and, accordingly,
the following descriptions do not purport to be complete and are qualified in
their entirety by reference to such exhibits.
AGREEMENTS TO EFFECT THE TRANSFER OF THE CHEMICALS BUSINESS
Pursuant to various agreements, certain assets and liabilities relating to
the Non-Chemical Businesses were transferred by Company Subsidiaries to Hanson
and assets and liabilities of the Chemicals Business were transferred by Hanson
to the Company, which was incorporated for that purpose in April 1996. Hanson
and the Company and their respective subsidiaries each agreed, pursuant to such
agreements, to execute and deliver such further assignments, documents of
transfer, deeds and instruments as may be necessary for the more effective
implementation of such transfers.
Some assignments and transfers may require prior consent by third parties
and various filings or recordings with governmental entities. Some permits or
licenses may require reapplication by, and reissuance in the name of, the
Company or a Company Subsidiary. If consent to the assignment or reissuance of
any permit or license being transferred is not obtained, Hanson and the Company
have
50
<PAGE>
<PAGE>
agreed to develop alternative approaches so that, to the maximum extent
possible, the Company and the Company Subsidiaries receive the benefits of such
permit or license and discharge the duties and bear the costs and risks
thereunder. The Company has agreed to bear the risk that such alternative
arrangements will not provide the Company and the Company Subsidiaries with the
full benefits of such permit or license. The Company believes, however, that it
will be able to obtain all necessary consents and reissuances that are material
to the Company's business.
INDEMNIFICATION AGREEMENTS
In connection with the Demerger Transactions, Hanson and the Company and
certain of their respective subsidiaries entered into indemnification agreements
(the 'Indemnification Agreements'). Pursuant to the Indemnification Agreements,
subject to certain exceptions, the Company and the Company Subsidiaries agreed
to indemnify Hanson and the Hanson Subsidiaries against all liabilities,
litigation and claims arising out of the Chemicals Business and liabilities
arising out of certain discontinued operations of the Company Subsidiaries,
including contractual indemnification obligations to purchasers of certain
operations, as well as liabilities (including liabilities under the Exchange
Act) for statements included in the Information Statement furnished to Hanson
shareholders in connection with the Demerger (the 'Information Statement')
relating generally to the Company and the Chemicals Business, but excluding
liabilities arising out of certain discontinued operations associated with
businesses and assets being transferred by Company Subsidiaries to Hanson in
contemplation of the Demerger (the 'Retained D.O. Liabilities'). See
'Business -- Legal Proceedings' for a description of one such Retained D.O.
Liabilities relating to lead-paint litigation against which the Company
indemnified Hanson pursuant to these arrangements. Hanson and the Hanson
Subsidiaries agreed to indemnify the Company and the Company Subsidiaries
against all liabilities, litigation and claims arising out of all Hanson
continuing operations (other than the Chemicals Business) and all Hanson
discontinued operations (other than the Retained D.O. Liabilities), as well as
liabilities (including liabilities under the Exchange Act) for statements
included in the Company's Registration Statement on Form 10 other than those
relating generally to the Company and the Chemicals Business, and certain other
liabilities. In addition, the Company agreed to indemnify Hanson against any
liability and penalties arising out of a breach of the agreement between Hanson
and the U.K. Inland Revenue regarding the Company's status as a U.K. tax
resident. That agreement provides that an amount equivalent to U.K. advance
corporation tax at the rate in effect on October 1, 1996 (25% of the net
dividend), together with interest, would be payable in U.S. dollars by Hanson to
the U.K. Inland Revenue on the amount of the stock dividend for the Demerger
(which U.K. advance corporation tax, calculated as provided in the agreement
with the U.K. Inland Revenue in U.S. dollars using the average of the closing
prices of the Common Stock on the NYSE for the first ten trading days following
the Demerger, is estimated to be approximately $421 million and will decrease by
$84.2 million for each complete 12-month period that elapses between October 1,
1996 and the first date on which the Company ceases to be centrally managed and
controlled in the United Kingdom). See 'Risk Factors -- Possible Effects of Dual
Residence of the Company.' The foregoing obligations will not entitle an
indemnified party to recovery to the extent any such liability is covered by
proceeds received by such party from any third-party insurance policy.
In circumstances in which the potential liability to the Company and Hanson
is joint, the parties have agreed to share responsibility for such liability on
a mutually agreed basis consistent with the principles established in the
Indemnification Agreements.
The Indemnification Agreements also set forth various procedures relating
to the obligations of the parties thereunder, including procedures for
notification and payment of claims, use and preservation of records and
resolution of disputes. The respective liability of Hanson and the Company for
tax-related matters is governed by the Tax Sharing and Indemnification
Agreements described below.
TAX SHARING AND INDEMNIFICATION AGREEMENTS
A Company Subsidiary was the common parent of an affiliated group of
corporations that included the U.S. Chemicals Business as well as most of the
U.S. Non-Chemical Businesses and filed a consolidated United States federal
income tax return (the 'Consolidated Group').
Hanson and certain Hanson Subsidiaries (the 'Hanson Parties') and the
Company and certain Company Subsidiaries (the 'Company Parties') entered into
Tax Sharing and Indemnification
51
<PAGE>
<PAGE>
Agreements and, with respect to the foreign subsidiaries, a Deed of Tax Covenant
(collectively, the 'Tax Sharing Agreements'). Under the Tax Sharing Agreements,
the Company Parties generally are responsible for and have agreed to indemnify
the Hanson Parties with respect to (i) all federal tax liabilities and federal
tax obligations of the Consolidated Group for periods prior to October 1, 1996
(other than federal tax liabilities and obligations of certain companies
included in the Non-Chemical Businesses attributable to periods prior to the
acquisition of those companies by Hanson), and (ii) all state tax liabilities
and state tax obligations of any company included in the Non-Chemical Businesses
for any period in which such company was included in a combined, consolidated or
unitary state income tax return with any Company Party. In addition, the Company
Parties generally are responsible for and have agreed to indemnify the Hanson
Parties with respect to all tax liabilities and tax obligations, both United
States and foreign, imposed on the Company Parties attributable to periods after
October 1, 1996. The Hanson Parties have agreed to indemnify the Company Parties
with respect to (i) all tax liabilities and tax obligations imposed upon
Millennium Overseas Holdings, Ltd. (formerly Hanson Overseas Holdings, Ltd.), a
Company subsidiary, for periods prior to October 1, 1996; and (ii) all tax
liabilities and tax obligations, both United States and foreign, imposed upon
the Hanson Parties attributable to periods following completion of the Demerger
Transactions.
CORPORATE TRANSITION AGREEMENT
Hanson and certain Hanson Subsidiaries and the Company and certain Company
Subsidiaries entered into an agreement providing for the allocation of
retirement, medical, disability and other employee pension and welfare benefit
plan liabilities between the Company Subsidiaries, on the one hand, and the
Hanson Subsidiaries, on the other hand, for the transfer of certain corporate
assets and obligations by the Company and certain Company Subsidiaries to Hanson
and certain Hanson Subsidiaries and related matters (the 'Corporate Transition
Agreement'). The Corporate Transition Agreement generally provides that the
Company will continue to sponsor and maintain employee benefit plans (the
'Company Plans') for the benefit of the employees who will be employed by the
Company and Company Subsidiaries as of the completion of the Demerger
Transactions (the 'Company Employees'), and that Hanson shall establish and
maintain substantially identical 'mirror' plans to the Company Plans (the
'Hanson Plans') for the benefit of the employees who will continue to be
employed by Hanson and Hanson Subsidiaries as of the completion of the Demerger
Transactions (the 'Hanson Employees'). Upon completion of the Demerger
Transactions and satisfaction of certain conditions, one of the Hanson
Subsidiaries assumed sponsorship of and all responsibility for benefit
liabilities under each of the Hanson Plans with respect to the Hanson Employees.
In connection with the Demerger Transactions, assets attributable to the Hanson
Employees under the Company plans were transferred from the master trusts
maintained with respect to such plans to mirror trusts established by the Hanson
Subsidiaries. With respect to each Hanson Plan which is a 'welfare plan,'
including workers compensation, Hanson is responsible after completion of the
Demerger Transactions for all claims incurred by the Hanson Employees and their
dependents, regardless of when the claim was incurred. With respect to each
Hanson Plan which is a nonqualified pension plan and any other stock incentive
or bonus plan which is not funded, Hanson generally assumed liability and is
responsible for all benefits accrued through completion of the Demerger
Transactions with respect to the Hanson Employees and their beneficiaries.
OTHER AGREEMENTS
The Company and the Company Subsidiaries and Hanson and the Hanson
Subsidiaries also entered into certain other leases, operating agreements,
service agreements and other agreements that serve to define various aspects of
the relationship that would exist between the parties after the Demerger. These
agreements include a joint ownership agreement between a Hanson Subsidiary and a
Company Subsidiary relating to the joint ownership of two aircraft, an agreement
between a Hanson Subsidiary and a Company Subsidiary relating to consulting and
marketing services in Asia and two administrative services agreements between a
Hanson Subsidiary and Company Subsidiaries relating to the management of
insurance services and the management of certain non-U.S. subsidiaries. None of
such agreements is expected to materially affect the Company or its results of
operations.
52
<PAGE>
<PAGE>
MANAGEMENT
DIRECTORS
The Company Board currently consists of eight persons, who are divided into
three approximately equal classes with each class serving a three-year term. The
following table sets forth information as to those persons who are currently
directors.
<TABLE>
<CAPTION>
INITIAL
TERM
NAME EXPIRES POSITION
- -------------------------------------------------- ------- ----------------------------------------------------
<S> <C> <C>
William M. Landuyt................................ 1999 Chairman of the Board and Chief Executive Officer
Robert E. Lee..................................... 1998 President, Chief Operating Officer and Director
The Rt. Hon. Kenneth Baker CH MP.................. 1997 Director
Worley H. Clark, Jr............................... 1998 Director
Martin D. Ginsburg................................ 1997 Director
The Rt. Hon. The Lord Glenarthur.................. 1998 Director
David J.P. Meachin................................ 1997 Director
Martin G. Taylor.................................. 1999 Director
</TABLE>
Mr. Landuyt, 41, has served as Chairman of the Board and Chief Executive
Officer of the Company since the Demerger. Mr. Landuyt served as Director,
President and Chief Executive Officer of Hanson Industries from June 1995 until
the Demerger, as Director of Hanson from 1992 until the Demerger, as Finance
Director of Hanson from 1992 to May 1995, and as Vice President and Chief
Financial Officer of Hanson Industries from 1988 to 1992. He joined Hanson
Industries in 1983.
Mr. Lee, 40, has served as President, Chief Operating Officer and a
Director of the Company since the Demerger. Mr. Lee served as Director, Senior
Vice President and Chief Operating Officer of Hanson Industries from June 1995
until the Demerger, as an Associate Director of Hanson from 1992 until the
Demerger, as Vice President and Chief Financial Officer of Hanson Industries
from 1992 to June 1995, as Vice President and Treasurer of Hanson Industries
from 1990 to 1992, and as Treasurer of Hanson Industries from 1987 to 1990. He
joined Hanson Industries in 1982. Mr. Lee is a member of the Board of
Supervisors of Suburban Propane.
The Rt. Hon. Kenneth Baker, 61, has served as a Director of the Company
since the Demerger. Mr. Baker is a Member of Parliament in the United Kingdom
and serves as a member of the Nominations and Communications Committees of
Hanson's Board of Directors. He served as U.K. Secretary of State for the
Environment from 1985 to 1986, as U.K. Secretary of State for Education and
Science from 1986 to 1989, as Chairman of the U.K. Conservative Party from 1989
to 1990 and as U.K. Secretary of State for the Home Office from 1990 to 1992. He
is a director of Hanson, MTT plc and Bell Cablemedia plc, and an adviser to
Mercury plc, ICL plc and The Blackstone Group.
Mr. Clark, 64, has served as a Director of the Company since the Demerger,
as President and Chief Executive Officer of Nalco Chemical Company from 1982 and
as Chairman of Nalco Chemical Company from 1984 until his retirement in 1994.
Mr. Clark serves on the Board of Directors of Merrill Lynch & Co., Inc.; USG
Corporation; NICOR, Inc.; Diamond Shamrock Corporation and James River
Corporation. He is a Trustee of The Rush Presbyterian-St. Luke's Medical Center,
the Field Museum of Natural History and Chairman of the Board of Governors of
the Chicago Lighthouse for the Blind.
Mr. Ginsburg, 64, has served as a Director of the Company since October 8,
1996. He has been Professor of Law at Georgetown University Law Center since
1980. Mr. Ginsburg is of counsel to the law firm of Fried, Frank, Harris,
Shriver & Jacobson (a partnership including professional corporations), which
serves as counsel to the Company and the Issuer from time to time and is passing
upon certain legal matters for the Underwriters. See 'Legal Matters'.
The Rt. Hon. The Lord Glenarthur, 51, has served as a Director of the
Company since the Demerger, as an executive of Hanson since October 1989,
including as Deputy Chairman of Hanson Pacific Limited since March 1994. The
Lord Glenarthur served as United Kingdom Parliamentary Under-Secretary of State
at the Department of Health and Social Security from 1983 to 1985, as
53
<PAGE>
<PAGE>
Minister of State for Scotland from 1986 to 1987 and as U.K. Minister of State
for Foreign and Commonwealth Affairs from 1987 to 1989. He is Chairman of St.
Mary's Hospital NHS Trust and of the British Helicopter Advisory Board.
Mr. Meachin, 55, has served as a Director of the Company since the
Demerger. Mr. Meachin has been Chairman, Chief Executive and founder of Cross
Border Enterprises, L.L.C., a private international merchant banking firm, since
its formation in 1991. He was a Managing Director in the Investment Banking
Division of Merrill Lynch & Co., Inc. from 1981 to 1991. Mr. Meachin is a
director of The Spartek Emerging Opportunities of India Fund, Vice Chairman of
the University of Cape Town Fund in New York and a director and past Chairman of
the British American Educational Foundation.
Mr. Taylor, 61, has served as a Director of the Company since the Demerger.
He served as an executive of Hanson from 1969, as a Director of Hanson from
1976, and as Vice Chairman of Hanson from 1988, until his retirement in 1995.
Mr. Taylor served as an executive of Dow Chemical from 1963 to 1969, as a
director of UGI PLC from 1979 to 1982 and as a director of The Securities
Association LTD from 1987 to 1990. He is a director of National Westminster Bank
Plc, Deputy Chairman of Charter plc, a director of Vickers Plc and a member of
the Council of the Confederation of British Industry.
EXECUTIVE OFFICERS
The following individuals (in addition to Messrs. Landuyt and Lee) serve as
executive officers of the Company:
<TABLE>
<CAPTION>
NAME POSITION
- ---------------------------------------- ------------------------------------------------------------------------
<S> <C>
Donald V. Borst......................... Chairman, President and Chief Executive Officer of SCM Chemicals
George W. Robbins....................... Chairman, President and Chief Executive Officer of Glidco
Ronald H. Yocum......................... Chairman, President and Chief Executive Officer of Quantum Chemical
George H. Hempstead, III................ Senior Vice President -- Law and Administration and Secretary
John E. Lushefski....................... Senior Vice President and Chief Financial Officer
Marie S. Dreher......................... Vice President -- Corporate Controller
A. Mickelson Foster..................... Vice President -- Investor Relations
Francis V. Lloyd........................ Vice President -- Tax
James A. Lofredo........................ Vice President -- Corporate Development
Christine F. Wubbolding................. Vice President and Treasurer
</TABLE>
Mr. Borst, 60, has served as Chairman, President and Chief Executive
Officer of SCM Chemicals since 1990. Mr. Borst joined SCM Corporation in 1984 as
Vice President -- SCM Pigments -- U.S. and was appointed as President and Chief
Executive Officer of SCM Chemicals in 1986. He has over 38 years experience in
the fertilizer and inorganic chemicals sectors of the chemicals industry.
Mr. Robbins, 56, has served as Chairman, President and Chief Executive
Officer of Glidco since 1986, as an Associate Director of Hanson since May 1995
and as a Director of Hanson Industries since June 1995. Mr. Robbins joined SCM
Corporation in 1982 as Vice President and General Manager of the SCM Organic
Chemicals Division. He has been associated with the plastics and chemicals
industries for almost 30 years.
Mr. Yocum, 57, has served as President and Chief Executive Officer of
Quantum Chemical Company since 1993 and as Chairman since January 1995. He
joined Quantum Chemical Corporation in 1987 as a Group Vice President, Research
and Development. He has been associated with the petrochemicals industry for 30
years.
Mr. Hempstead, 53, has served as Senior Vice President -- Law and
Administration and Secretary of the Company since the Demerger, as Senior Vice
President -- Law and Administration of Hanson Industries from June 1995 until
the Demerger, as an Associate Director of Hanson from 1990 until the Demerger,
and as a Director of Hanson Industries from 1986 until the Demerger. Mr.
Hempstead was Senior Vice President and General Counsel of Hanson Industries
from 1993 to June 1995 and Vice
54
<PAGE>
<PAGE>
President and General Counsel of Hanson Industries from 1982 to 1993. He
initially joined Hanson Industries in 1976. Mr. Hempstead is a member of the
Board of Supervisors of Suburban Propane and a director of Smith Corona
Corporation.
Mr. Lushefski, 40, has served as Senior Vice President and Chief Financial
Officer of the Company since the Demerger, and as Senior Vice President and
Chief Financial Officer of Hanson Industries from June 1995 until the Demerger.
He was Vice President and Chief Financial Officer of Peabody Holding Company, a
Hanson Subsidiary which holds its coal mining operations, from 1991 to May 1995
and Vice President and Controller of Hanson Industries from 1990 to 1991. Mr.
Lushefski initially joined Hanson Industries in 1985. Mr. Lushefski is also a
director of Smith Corona Corporation.
Ms. Dreher, 38, has served as Corporate Controller of the Company since the
Demerger and was elected Vice President on October 8, 1996. She was Director of
Planning and Budgeting of Hanson Industries from November 1995 until the
Demerger. She joined Hanson Industries in January 1994 as Assistant Controller
with principal responsibilities focused on tax, environmental and financial
compliance matters. She is a certified public accountant. Prior to joining
Hanson Industries she was a senior manager of Ernst & Young LLP.
Mr. Foster, 40, has served as Vice President -- Investor Relations of the
Company since the Demerger, and as Vice President -- Investor Relations of
Hanson Industries from August 1992 until the Demerger. Mr. Foster held investor
relations positions with ARCO and Pacific Enterprises from 1983 to 1992. He is
the immediate past Chairman of the National Investor Relations Institute.
Mr. Lloyd, 57, has served as Vice President -- Tax of the Company since the
Demerger, and as Vice President -- Taxes of Hanson Industries from 1993 until
the Demerger. Mr. Lloyd joined Hanson Industries in 1987 and was Senior Director
of Taxes of Hanson Industries from 1987 to 1993.
Mr. Lofredo, 40, served as the Company's Director of Corporate Development
since the Demerger and was elected a Vice President on October 8, 1996. He was
Director of Corporate Development of Hanson Industries from March 1993 until the
Demerger, with his principal responsibilities focused on acquisitions and
divestitures. He joined Hanson Industries in June 1992 as Assistant Corporate
Controller. Prior to joining Hanson Industries he was a senior manager with
Price Waterhouse LLP.
Ms. Wubbolding, 44, has served as Vice President and Treasurer of the
Company since the Demerger. She was Vice President of Hanson Industries from
January 1996 until the Demerger, and Treasurer from June 1994 until the
Demerger. She joined Hanson Industries in 1976 and held various financial
positions, primarily in the treasury area, prior to 1994.
DIRECTORS' MEETINGS, COMMITTEES AND FEES
The Company Board has established four standing committees, an Audit
Committee, a Compensation Committee, an Executive Committee and a Nominations
Committee. Directors who are also officers or employees of the Company are not
permitted to serve on any committee other than the Executive Committee. The
functions of these standing committees are as follows:
Audit Committee. The Audit Committee is responsible for matters
relating to accounting policies and practices, financial reporting and
internal controls. It recommends to the Company's Board the appointment of
a firm of independent accountants to audit the Company's financial
statements and reviews with representatives of the independent accountants
the scope of the audit of the Company's financial statements, results of
audits, audit costs and recommendations with respect to internal controls
and financial matters. It also reviews non-audit services rendered by the
Company's independent accountants and periodically meets with or receives
reports from the Company's principal financial and accounting officers. The
current members of the Committee are The Rt. Hon. Kenneth Baker, David J.P.
Meachin and Martin G. Taylor (Chairman).
Compensation Committee. The Compensation Committee sets the
compensation of all executive officers, establishes policies concerning
stock ownership by executive officers and administers the Company's
executive corporation plans and programs, including the Stock Incentive
Plan and the Annual Plan (including setting performance targets and making
awards under such plans). It also reviews the competitiveness of the
Company's management and director
55
<PAGE>
<PAGE>
compensation and benefit programs and reviews principal employee relations
policies and procedures. All members of the Compensation Committee must be
'Non-Employee Directors' within the meaning of Rule 16b-3 under the
Exchange Act and 'outside directors' within the meaning of Section 162(m)
of the Code. The current members of the Committee are Worley H. Clark, Jr.
(Chairman), The Lord Glenarthur and David J.P. Meachin.
Executive Committee. The Executive Committee has the authority to act
for the full Board between regularly scheduled Board meetings with respect
to such matters as may be lawfully delegated by the Board under Delaware
law. The current members of the Committee are The Rt. Hon. Kenneth Baker,
The Lord Glenarthur, William M. Landuyt (Chairman) and Martin G. Taylor.
Nominations Committee. The Nominations Committee has authority to
nominate directors to fill vacancies on the Board and to nominate directors
to serve as members, including chairmen, of committees of the Board. The
duties of the Nominations Committee include determining the desirable
balance of expertise and composition of the Board, seeking out possible
candidates to fill positions on the Board, attracting such qualified
candidates to the Board, reviewing management's slate of directors to be
elected by shareholders at the annual meeting and recommending to the Board
the inclusion of the slate in the Company's proxy statement. The current
members of the Committee are The Rt. Hon. Kenneth Baker (Chairman), Martin
D. Ginsburg and Martin G. Taylor.
Directors who are also full-time employees of the Company do not receive
additional compensation for their services as directors. Non-employee directors
receive an annual cash retainer of $30,000. In addition, pursuant to the Stock
Incentive Plan, each non-employee director serving on October 31, 1996 was
automatically granted on such date 671 shares of Common Stock (the number
determined by dividing $15,000 by the average closing price of the Common Stock
during the twenty business days following the Demerger and, on each October 1,
commencing in 1997, each non-employee director serving on such date shall
automatically be granted the number of shares of Common Stock determined by
dividing $15,000 by the fair market value of the Common Stock on the business
day immediately preceding such date. Non-employee directors are reimbursed for
all reasonable expenses incurred in connection with Board and Committee
meetings. The Company also pays the premiums on directors' and officers'
liability and travel accident insurance policies for directors.
MILLENNIUM AMERICA
The directors of the Issuer are Messrs. Landuyt, Lee, Hempstead and
Lushefski. The executive officers of the Issuer are the same as the executive
officers of the Company.
56
<PAGE>
<PAGE>
EXECUTIVE COMPENSATION
HISTORICAL COMPENSATION
The following table sets forth certain information with respect to the
compensation for 1995, fiscal 1994 and fiscal 1993 of the individuals who became
the Company's five most highly compensated executive officers (including the
Chief Executive Officer) upon the Demerger. During the periods presented, these
individuals were compensated pursuant to Hanson's plans and policies (except
that, in fiscal 1993, Dr. Yocum was compensated pursuant to the plans and
policies of Quantum Chemical). All references in the following tables to stock
options relate to awards of options to purchase Ordinary Shares of Hanson
('Ordinary Shares'), including Ordinary Shares represented by American
Depositary Shares ('ADSs').
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------
ANNUAL COMPENSATION SECURITIES LTIP ALL OTHER
NAME AND PRINCIPAL --------------------- UNDERLYING PAYOUTS COMPENSATION
POSITION(1) YEAR SALARY($) BONUS($) OPTIONS(#)(4) ($)(5) ($)(6)
- ---------------------------------------- ---- --------- -------- ------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
W. M. Landuyt .......................... 1995 676,218 99,000 602,310 -- 228,403(7)
Chairman and Chief Executive Officer 1994 489,251 139,276 271,872 -- 16,406
1993 449,247 62,781 230,575 -- 15,755
R. E. Lee .............................. 1995 416,250 243,750 -- 59,228 12,281
President and Chief Operating Officer 1994 270,000 175,500 318,329 -- 17,138
1993 240,000 50,000 153,143 -- 12,904
R. H. Yocum ............................ 1995 391,250 512,050(2) -- 49,949 174,282(8)
Chairman and Chief Executive Officer 1994 335,000 381,062 361,347 -- 3,198
of Quantum Chemical 1993 325,000 -- 354,117 -- 4,077(8)
D. V. Borst ............................ 1995 424,375 294,350 -- 64,346 13,840
Chairman and Chief Executive Officer 1994 404,250 164,126 215,086 -- 15,925
of SCM Chemicals 1993 385,000 153,615 86,034 -- 15,837
G. W. Robbins .......................... 1995 334,998 438,900(3) -- 63,098 8,934
Chairman and Chief Executive Officer 1994 290,000 355,250 258,104 -- 9,649
of Glidco 1993 253,000 200,756 86,034 -- 9,599
</TABLE>
- ------------
(1) See 'Management' for information concerning positions held by Messrs.
Landuyt and Lee with Hanson Industries prior to the Dividend Payment Date.
(2) Includes $38,500 to be paid in December 1996, $38,500 to be paid in December
1997 and $127,050 to be paid in December 1998.
(3) Includes $33,000 to be paid in December 1996, $33,000 to be paid in December
1997 and $108,900 to be paid in December 1998.
(4) Amounts shown reflect the adjustments made in connection with Hanson's
demerger of U.S. Industries, Inc., the Demerger and the demerger of Hanson's
tobacco business. Fiscal 1994 amounts include securities underlying options
awarded during the fourth quarter of calendar 1994 and, in the case of Mr.
Landuyt, include 6,746 Ordinary Shares in fiscal 1994 and 5,721 Ordinary
Shares in fiscal 1993 which are held in the Hanson Employee Share Trust
established in 1995 to reflect the option adjustments made in connection
with the demerger of U.S. Industries, Inc. Hanson terminated the Hanson
Employee Share Trust in September 1996 and as a result Mr. Landuyt received
`L'2,443 (approximately $4,024 at the Noon Buying Rate on November 8, 1996
of `L'1 to $1.647.)
(5) Amounts shown represent payouts of one-third of the account balances under
the Hanson Industries 1993 Long-Term Incentive Plan (the 'Hanson 1993
LTIP'), which was terminated with regard to future grants as of September
30, 1995. The remaining account balances plus interest will be paid out in
equal installments in December 1996 and 1997.
(footnotes continued on next page)
57
<PAGE>
<PAGE>
(footnotes continued from previous page)
(6) The amounts shown in this column include the matching employer contributions
made under Hanson's defined contribution plans for 1995, 1994 and 1993,
respectively, as follows: Mr. Landuyt -- $4,620, $4,620 and $4,497; Mr.
Lee -- $4,220, $4,500 and $4,499; Mr. Yocum -- $4,500, $2,357, and $3,328;
Mr. Borst -- $4,620, $4,620 and $4,497; and Mr. Robbins -- $4,620, $4,620
and $4,497. Such contributions were invested in ADSs pursuant to the terms
of such plan. The amounts shown in this column also include the dollar value
of insurance premiums paid by or on behalf of the employer with respect to
disability insurance benefits and, in certain cases, club membership fees.
Excluded are certain health, medical and other non-cash benefits provided to
the individuals named above that are generally available to all salaried
employees.
(7) Of the total, $213,886 represents reimbursement of expenses (including
income tax reimbursement payments) incurred in connection with Mr. Landuyt's
relocation from the United Kingdom, where he served as Hanson's Finance
Director, to the United States.
(8) Other Compensation in 1995 includes $161,326 of value realized upon the
exercise of certain stock options. Dr. Yocum also received $5,381,245 (plus
excise tax payments of $1,997,654) pursuant to the change-in-control
provisions of employment agreements and benefit plans applicable to
directors and officers of Quantum Chemical as a result of its acquisition by
Hanson on September 30, 1993.
------------------------
Since the Demerger, each of the individuals named above has continued to
receive his base salary at the annual rate set in October 1995, subject to
review by the Compensation Committee. It is expected that the Compensation
Committee will review executive compensation in December of each year,
commencing in December 1996. See 'Change in Control Agreements' below.
OPTION GRANTS IN 1995
The following table sets forth information with respect to Mr. Landuyt, the
only individual named in the Summary Compensation Table to receive option grants
during 1995 pursuant to Hanson plans.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
----------------------------------------------------------------------- STOCK PRICE
% OF TOTAL APPRECIATION FOR
NUMBER OF OPTIONS OPTION
SECURITIES UNDERLYING GRANTED TO EXERCISE TERM ($)(2)(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
GRANTED FISCAL YEAR (PENCE/SHARE)(1) DATE(2) 5% 10%
--------------------- ------------ ---------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
W. M. Landuyt......... $ 602,310 1.51% 114.83 6/18/99 $ 209,568 $ 445,628
</TABLE>
- ------------
(1) At the Noon Buying Rate in effect on November 8, the exercise price of the
options was approximately $1.89 per Ordinary Share. The closing price of the
Ordinary Shares on the London Stock Exchange on November 8, 1996 was 81.25p
(approximately $1.34).
(2) The expiration date and potential realizable values shown reflect the
treatment of these options as a result of the Demerger. See 'Treatment of
Hanson Options and Other Hanson Benefits Following the Demerger' below.
(3) Potential gains are net of exercise price, but before taxes associated with
exercise. These potential gains represent certain assumed rates of
appreciation only, based on the rules and regulations of the Commission.
Actual gains, if any, on the exercise of stock options are dependent on the
future performance of the Ordinary Shares and overall market conditions. The
amounts reflected in this table may not necessarily be achieved.
58
<PAGE>
<PAGE>
OPTION EXERCISES IN 1995
The following table sets forth the number of Ordinary Shares covered by
stock options held by each of the individuals named in the Summary Compensation
Table on December 31, 1995. As a result of the Demerger, all such options are
exercisable.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON VALUE OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
NAME EXERCISE(#) REALIZED($) YEAR-END(#) YEAR-END($)
- ----------------------------------- ----------- ----------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
W.M. Landuyt....................... -- -- 1,892,837 17,953
R.E. Lee........................... -- -- 832,816 2,436
R.H. Yocum(1)...................... 129,360 161,326 361,347 --
D.V. Borst......................... -- -- 791,516 10,644
G.W. Robbins....................... -- -- 593,636 --
</TABLE>
- ------------
(1) Dr. Yocum holds options granted under a Hanson option plan and options
granted by Quantum Chemical prior to its acquisition by Hanson, which are
now exercisable for ADSs. For purposes of this table, ADSs have been
converted into Ordinary Shares.
TREATMENT OF HANSON OPTIONS AND OTHER HANSON BENEFITS FOLLOWING THE DEMERGER
All Hanson options held by executive officers and other employees of the
Company and Company Subsidiaries on October 1, 1996 (other than options held by
U.K. employees of Company Subsidiaries) immediately vested on that date and are
exercisable for Ordinary Shares until the later of October 1, 1997 and the date
which is 42 months from the respective date of grant. All Quantum Chemical
options now exercisable for ADSs will expire by January 2001. Adjustments to the
number of Ordinary Shares or ADSs subject to such options and to the exercise
prices thereof were made in accordance with the provisions of the option plan
under which the options were granted to reflect the stock dividend for the
Demerger, and the stock dividend for the demerger of Hanson's tobacco business
on October 1, 1996, and will be further adjusted to reflect the proposed stock
dividend for the demerger of Hanson's energy business. With respect to the
options of U.K. employees of Company Subsidiaries, which are governed by a
separate Hanson plan, Hanson received shareholder approval for an amendment to
such plan to provide for the same adjustment to such options.
In fiscal 1993 and fiscal 1994, certain individuals who became executive
officers or employees of the Company and Company Subsidiaries participated in
the Hanson 1993 LTIP, an unfunded deferred compensation plan of Hanson
Industries. Participants in the Hanson 1993 LTIP received bonus amounts equal to
30% of their year-end bonuses paid based on certain performance criteria. The
Hanson 1993 LTIP was terminated with regard to future grants on September 30,
1995 and participants became fully vested in all awards credited to their
accounts under the Hanson 1993 LTIP through that date, with such vested awards
to be paid out in three equal annual installments (with interest from September
30, 1995) commencing on December 15, 1995. Messrs. Lee, Yocum, Borst and Robbins
will receive $177,702, $149,850, $193,037 and $189,294, plus interest, as their
respective aggregate payouts under the Hanson 1993 LTIP.
During fiscal 1993, fiscal 1994 and 1995, Mr. Landuyt was a participant in
a Hanson deferred incentive plan. He is entitled to receive `L'47,758
(approximately $78,657 at the Noon Buying Rate on November 8, 1996) under such
plan. The obligation to pay such amount was retained by Hanson pursuant to the
Demerger Transactions. Hanson has decided to terminate the Hanson deferred
incentive plan. Accordingly, it is expected that Mr. Landuyt will receive 15% of
such amount in December 1996 and the balance thereof upon Hanson's demerger of
its energy business.
59
<PAGE>
<PAGE>
COMPANY STOCK OWNERSHIP GUIDELINES
In order to promote an ownership perspective on the part of the Company's
management and link management's accumulation of personal assets to the return
realized by the Company's stockholders, the Company established stock ownership
guidelines for the 32 executive officers and senior managers of the Company and
Company Subsidiaries who received initial awards of restricted stock pursuant to
the Stock Incentive Plan shortly following the Demerger. These executive
officers and employees are expected to achieve targeted ownership levels of
Common Stock within a five year period requiring personal investments ranging
from 75% of annual base salary to 300% of annual base salary. The Compensation
Committee will annually review progress toward achievement of the ownership
guidelines.
COMPANY INCENTIVE COMPENSATION AND BENEFIT PLANS
The following are descriptions of the current annual and long-term
incentive compensation and benefit plans of the Company and Company
Subsidiaries. These plans are intended to attract and retain employees and to
reward such employees through emphasis on performance and incentive criteria.
The descriptions are intended only as a summary and are qualified in their
entirety by reference to the respective plans, which have been filed as exhibits
to the Registration Statement of which this Prospectus forms a part.
ANNUAL PERFORMANCE INCENTIVE PLAN
The purpose of the Company's Annual Performance Incentive Plan (the 'Annual
Plan') is to attract, retain and motivate key employees of the Company and
Company Subsidiaries by providing annual performance-based cash awards to
executive employees of the Company and Company Subsidiaries who are selected to
participate by the Compensation Committee. It became effective commencing
October 1, 1996 for the fourth calendar quarter of 1996 and for the calendar
year commencing January 1, 1997 subject to stockholder approval at the Company's
1997 annual meeting.
Participants in the Annual Plan are eligible to receive an immediately
payable annual cash performance award ('Annual Performance Award') based on the
attainment of specified performance goals established annually by the
Compensation Committee. These performance goals will be based on specified
criteria selected by the Compensation Committee, which may include but not be
limited to, (i) the attainment of certain target levels of, or a percentage
increase in, after-tax or pre-tax profits of the Company including, without
limitation, that attributable to continuing and/or other operations of the
Company (or a subsidiary, division or other operational unit of the Company);
(ii) the attainment of certain target levels of, or a specified increase in,
operational cash flow of the Company (or a subsidiary, division or other
operational unit of the Company); (iii) the attainment of certain target levels
of, or a specified increase in return on invested capital; and/or (iv) the
attainment of certain target levels of, or a specified increase in, 'economic
value added' targets based on a cash flow return on investment formula of the
Company (or any subsidiary, division or other operational unit of the Company).
It is expected that the Compensation Committee will set for the 1997 plan
year, the performance goals applicable to all participants and the individual
levels for participation as a percentage of base pay (ranging from 7.7% to
100%). It is expected that the maximum Annual Performance Award attainable by
each of the individuals named in the Summary Compensation Table (expressed as a
percentage of base salary) will be as follows: Messrs. Landuyt and Lee -- 100%
and Messrs. Yocum, Borst and Robbins -- 75%. It is expected that a
participant's receipt of the maximum Annual Performance Award will require the
attainment of the 'full' performance goals to be established by the Compensation
Committee. It is expected that the Compensation Committee will also set minimum
'entry-level' performance goals, which, if attained, would provide for an Annual
Performance Award of 20% of the maximum Annual Performance Award target,
'expected' level performance goals which, if attained, would provide for an
Annual Performance Award of 60% of the maximum Annual Performance Award, and
that for attainments between the 'entry-level,' 'expected' and 'full'
performance goals, the Annual Performance Award would reflect the intermediate
level attained. Under the Annual Plan, no participant may receive an Annual
Performance Award in the event that entry-level performance
60
<PAGE>
<PAGE>
goals are not met (except as specifically provided in the Annual Plan in the
event of a Change in Control (as defined) or certain other circumstances) and no
participant may receive an Annual Performance Award in any plan year that
exceeds $3,000,000.
For the fourth calendar quarter of 1996, the Compensation Committee set
performance goals for that period utilizing a similar methodology to that to be
used for establishing annual levels and participants will be eligible to receive
awards based on a pro rata portion of applicable full-year goals.
It is expected that compensation paid under the Annual Plan for 1997 and
thereafter to participants who are 'covered employees' as defined in Section
162(m) of the Code and the applicable regulations thereunder will qualify as
tax-deductible pursuant to the performance-based compensation exception provided
by Section 162(m) of the Code.
1996 EXECUTIVE LONG-TERM INCENTIVE PLAN
The 1996 LTIP is an unfunded deferred compensation plan adopted by Hanson
Industries in October 1995. No future awards will be made under the 1996 LTIP.
Instead, it is expected that future deferred long-term incentive compensation
awards will be made under the comparable provisions of the Stock Incentive Plan
described below.
The purpose of the 1996 LTIP is to encourage long-term decision-making that
will enhance the economic value of the Company. Participants in the 1996 LTIP
are eligible to receive a cash award tied to the 'economic value added' to the
Company or, in the case of employees of certain Company Subsidiaries, the
'economic value added' to the relevant Company Subsidiary. The 'economic value
added' is measured as the product of (i) the total invested capital (as defined)
of the Company, or the relevant Company Subsidiary, and (ii) the difference
between (x) gross cash flow (as defined) divided by total invested capital and
(y) the 'estimated cost of capital' of the Company or relevant Company
Subsidiary. The 'estimated cost of capital' and the 'economic value added'
target levels for the Company and each of the relevant Company Subsidiaries have
been established for the three year period 1996-1998 (the '1996 Performance
Cycle'). Depending on how actual 'economic value added' over the 1996
Performance Cycle compares with the target levels established by Hanson's
Compensation Committee, the participants will be entitled to a 1996 LTIP award
of between 0% and 100% of the Annual Performance Award that such executive may
receive pursuant to the Annual Plan. As a Director of Hanson, Mr. Landuyt did
not participate in the 1996 LTIP for the 1996 Performance Cycle. The maximum
1996 LTIP award for the 1996 Performance Cycle that may be earned by each of the
other individuals named in the Summary Compensation Table is as follows: Mr. Lee
-- $367,500; Dr. Yocum -- $307,500; Mr. Borst -- $327,000; and Mr.
Robbins -- $262,500.
If a participant earns an award under the 1996 LTIP, 50% of the award
earned will vest on the day after the end of the 1996 Performance Cycle and will
be paid within 90 days of the end of the 1996 Performance Cycle. Payment of the
remaining 50% of the award will be deferred and (subject to vesting over a five
year period following the end of the 1996 Performance Cycle based on continued
employment, subject to certain exceptions) will be paid in five equal annual
installments commencing on the first anniversary of the initial payment.
LONG-TERM STOCK INCENTIVE PLAN
The purpose of the Stock Incentive Plan is to enhance the profitability and
value of the Company for the benefit of its stockholders by enabling the Company
(i) to offer employees of the Company and Company Subsidiaries stock based
incentives and other equity interests in the Company, thereby creating a means
to raise the level of stock ownership by employees in order to attract, retain
and reward such employees and strengthen the mutuality of interests between
employees and the Company's stockholders and (ii) to make equity based awards to
non-employee directors, thereby attracting, retaining and rewarding such
non-employee directors, and strengthening the mutuality of interests between
non-employee directors and the Company's stockholders. A maximum of 3,909,000
shares of Common Stock may be issued or used for reference purposes pursuant to
the Stock Incentive Plan. The Stock Incentive Plan provides for the following
types of awards: (i) stock options, including incentive stock options and
non-qualified stock options; (ii) stock appreciation rights; (iii) restricted
61
<PAGE>
<PAGE>
stock; (iv) performance units; and (v) performance shares. The Stock Incentive
Plan also provides for formula grants of Common Stock to non-employee directors
as part of their annual retainer, as described under 'Management -- Directors'
Meetings, Committees and Fees.'
In addition to the initial awards of restricted stock to approximately 32
executive officers and senior managers of the Company described below, it is
expected that the Compensation Committee, upon the recommendation of management,
will annually make awards of restricted stock to senior managers of the Company
and Company Subsidiaries that employ the same 'economic value added' performance
concepts as will apply to the initial awards of restricted stock and/or to make
awards of stock options. Management also plans to recommend to the Compensation
Committee that options to acquire Common Stock be granted to other key employees
of the Company and the Company Subsidiaries who did not receive awards of
restricted stock.
On October 8, 1996, the Compensation Committee awarded a total of 2,912,317
shares of restricted stock having a potential maximum undiscounted aggregate
fair market value on the date of the award (based upon the average of the
closing prices of the Common Stock on the NYSE on the first 20 days of 'regular
way' trading) of $65 million to 32 executive officers and senior managers of the
Company. The individuals named in the Summary Compensation Table received awards
of restricted stock with a potential maximum undiscounted fair market value on
the date of the award as follows: Mr. Landuyt -- 448,053 shares with a fair
market value of $10,000,000; Mr. Lee -- 313,637 shares with a fair market value
of $7,000,000; and each of Messrs. Yocum, Borst and Robbins -- 224,026 shares
with a fair market value of $5,000,000. The awards provide that (i) 25% of the
restricted stock will vest in equal installments (i.e. 8 1/3% of the total
award) on each of the third, fourth and fifth anniversaries of the date of the
award; (ii) 25% of the restricted stock may be earned based upon the level of
achievement of performance goals for a three-year performance period commencing
on January 1, 1997 established by the Compensation Committee; (iii) 25% of the
restricted stock may be earned based upon the level of achievement of
performance goals for a four-year performance period commencing on January 1,
1997 established by the Compensation Committee; and (iv) 25% of the restricted
stock may be earned based upon the level of achievement of performance goals for
a five-year performance period commencing on January 1, 1997 established by the
Compensation Committee. The performance goals employ the same 'economic value
added' formula as was established for the 1996 LTIP. The restricted stock awards
described in clauses (ii) through (iv) above qualify as performance-based
compensation under Section 162(m) of the Code.
Certain of the restricted stock awards provide that, at the end of the
relevant performance period, 50% of the earned performance related portion of
the restricted stock award shall fully vest and be released from additional
vesting restrictions and that the remainder shall vest in five equal annual
installments commencing on the first anniversary of the end of the relevant
performance period, subject to forfeiture under certain circumstances. Upon a
Change in Control (as defined) or if during a Pre-Change in Control Period (as
defined) the executive's employment is terminated by the executive for Good
Reason (as defined) or the executive has his employment terminated by the
Company without Cause (as defined) or as a result of his death or Disability (as
defined), all restricted stock then still subject to forfeiture will immediately
vest upon the Change in Control. The restricted stock awards provide that if the
executive's employment with the Company or, if applicable, a Company subsidiary,
is terminated prior to a Change in Control and not during a Pre-Change of
Control Period by reason of his death or Disability (as defined), at the time of
such termination there shall vest (i) the unvested shares of restricted stock
then subject to time vesting, (ii) any earned unvested award for any completed
performance period and, (iii) at the end of the applicable performance period, a
pro-rata portion of any earned award for a performance period that has commenced
but not yet ended, on the date of such termination. If the executive's
employment is terminated by the Company without Cause prior to a Change in
Control and not during a Pre-Change in Control Period, there shall vest (i) any
earned unvested award for any completed performance period and (ii) at the end
of the applicable performance period, a pro-rata portion of any earned award for
a performance period that has commenced but not yet terminated on the date of
such termination.
62
<PAGE>
<PAGE>
RETIREMENT PLANS
Each of the Company's operating subsidiaries presently sponsors its own
pension benefit plans. The Company intends to consider consolidation of such
plans.
Substantially all full-time United States non-union employees of the
Company and its Subsidiaries who are at least 21 years old and have completed
one year of service with Hanson or the Company or certain of the Company's
majority-owned subsidiaries are eligible to participate in their respective
retirement plan. Employees will become vested in their benefit under the
retirement plans after five years of service. Normal retirement typically will
be the later of age 65 or five years of service; however, employees who work
beyond their normal retirement age will continue to accrue benefits.
The following tables set forth the annual benefits upon retirement at age
65, without regard to statutory maximums, for various combinations of final
average earnings and lengths of service which would be payable to the
individuals named in the Summary Compensation Table under the respective plans
in which they participate assuming they retired in 1996 at the age of 65.
Millennium Chemicals Inc. Corporate Retirement Plan
The following table shows the estimated annual retirement benefits that
would be payable to Messrs. Landuyt and Lee under the Company's Corporate
Retirement Plan (the 'Corporate Retirement Plan') and the Company's Corporate
Supplemental Executive Retirement Plan (the 'Corporate SERP' and, collectively,
with the Corporate Retirement Plan, the 'Corporate Plans'). Messrs. Landuyt and
Lee have 13 and 14 years of Credited Service, respectively, under the Corporate
Plans.
CORPORATE PLANS
<TABLE>
<CAPTION>
ANNUAL BENEFIT FOR YEARS OF CREDITED SERVICE SHOWN(2)
FINAL 5-YEAR -------------------------------------------------------------------------------
AVERAGE EARNINGS(1) 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------------------------------- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000............................. 13,334 26,668 40,002 53,336 66,670 66,670 66,670
$200,000............................. 26,668 53,336 80,004 106,672 133,340 133,340 133,340
$300,000............................. 40,002 80,004 120,006 160,008 200,010 200,010 200,010
$400,000............................. 53,336 106,672 160,008 213,344 266,680 266,680 266,680
$500,000............................. 66,670 133,340 200,010 266,680 333,350 333,350 333,350
$600,000............................. 80,004 160,008 240,012 320,016 400,020 400,020 400,020
$700,000............................. 93,338 186,676 280,014 373,352 466,690 466,690 466,690
$800,000............................. 106,672 213,344 320,016 426,688 533,360 533,360 533,360
$900,000............................. 120,006 240,012 360,018 480,024 600,030 600,030 600,030
$1,000,000........................... 133,340 266,680 400,020 533,360 666,700 666,700 666,700
</TABLE>
- ------------
(1) Final Average Earnings includes base salary only.
(2) Annual Benefits are computed on the basis of straight life annuity amounts.
The pension benefit is calculated as follows: (a) plus (b) multiplied by
(c), where (a) is Final Average Earnings times 1.95%, (b) is that portion of
Final Average Earnings in excess of social security Covered Compensation
times .65%, and (c) is years of Credited Service to a maximum of 25 (the
'Corporate Retirement Plan formula'). Annual benefits under the Corporate
SERP are calculated as follows: (a) minus (b) multiplied by (c), where (a)
is Final Average Earnings times 2.67%, (b) is the Social Security Benefit
times 2%, and (c) is years of Credited Service to a maximum of 25. The
Corporate SERP benefit is calculated without regard for the limitations set
forth in Sections 415 and 401(a)(17) of the Code (the 'Corporate SERP
formula'). The net Corporate SERP benefit is the difference between the
benefits calculated under the Corporate Retirement Plan formula and the
Corporate SERP formula. The Social Security offset is not reflected in the
above table. All capitalized terms used in this paragraph and not otherwise
defined have the meanings ascribed to them as in the relevant Corporate Plan
documents.
63
<PAGE>
<PAGE>
Quantum Chemical Retirement Plan
The following table shows the estimated annual retirement benefits that
would be payable to Dr. Yocum under the Pension Plan for Eligible Salaried and
Non-Represented Employees of Quantum Chemical (the 'Quantum Retirement Plan')
and the Quantum Chemical Supplemental Executive Retirement Plan (the 'Quantum
SERP' and, collectively with the Quantum Retirement Plan, the 'Quantum Plans').
Dr. Yocum has 11 years of Credited Service under the Quantum Plans. However, Dr.
Yocum's benefits under the Quantum Plans are offset by his accrued benefit under
the retirement plan of a former employer.
QUANTUM PLANS
<TABLE>
<CAPTION>
FINAL 5-YEAR ANNUAL BENEFIT FOR YEARS OF CREDITED SERVICE SHOWN(2)
AVERAGE -------------------------------------------------------------------------------------
EARNINGS(1) 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------ ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 100,000 8,147 16,294 24,440 32,587 40,734 48,881 57,027
$ 200,000 16,897 33,794 50,690 67,587 84,484 101,381 118,277
$ 300,000 25,647 51,294 76,940 102,587 128,234 153,881 179,527
$ 400,000 34,397 68,794 103,190 137,587 171,984 206,381 240,777
$ 500,000 43,147 86,294 129,440 172,587 215,734 258,881 302,027
$ 600,000 51,897 103,794 155,690 207,587 259,484 311,381 363,277
$ 700,000 60,647 121,294 181,940 242,587 303,234 363,881 424,527
$ 800,000 69,397 138,794 208,190 277,587 346,984 416,381 485,777
$ 900,000 78,147 156,294 234,440 312,587 390,734 468,881 547,027
$ 1,000,000 86,897 173,794 260,690 347,587 434,484 521,381 608,277
</TABLE>
- ------------
(1) Final Average Earnings includes base salary only.
(2) Annual Benefits are computed on the basis of straight life annuity amounts.
The pension benefit is calculated as follows: the sum of (a) plus (b)
multiplied by (c), where (a) is that portion of final average earnings up to
125% of social security Covered Compensation times 1.4%, (b) is that portion
of final average earnings in excess of 125% of social security Covered
Compensation times 1.75%, and (c) is Credited Service up to a maximum of 35
years (the 'Quantum Retirement Plan formula'). Annual benefits under the
Quantum SERP are calculated in the same manner as the Quantum Retirement
Plan except for the inclusion of benefits that would otherwise exceed the
maximums provided under Sections 415 and 401(a)(17) of the Code (the
'Quantum SERP formula'). The net Quantum SERP benefit is the difference
between the benefits calculated under the Quantum Retirement Plan formula
and the Quantum SERP formula. All capitalized terms used in this paragraph
and not otherwise defined have the meanings ascribed to them in the relevant
Quantum Plan documents.
SCM Chemicals and Glidco Retirement Plans
The following table shows the estimated annual retirement benefits that
would be payable to Mr. Borst under the SCM Chemicals Salaried Employees'
Retirement Plan and the SCM Chemicals Supplemental Executive Retirement Plan and
to Mr. Robbins under the Glidco Salaried Employees' Retirement plan and the
Glidco Supplemental Executive Retirement Plan. The provisions of the two
Salaried Employees' Retirement Plans (the 'SCM Retirement Plans') and the two
Supplemental Executive Retirement Plans (the 'SCM SERPs' and, collectively with
the 'SCM Retirement Plans,' the 'SCM Plans') are virtually identical. Messrs.
Borst and Robbins have 12 and 14 years of Credited Service, respectively, under
the SCM Plans.
64
<PAGE>
<PAGE>
SCM PLANS
<TABLE>
<CAPTION>
FINAL 5-YEAR ANNUAL BENEFIT FOR YEARS OF CREDITED SERVICE SHOWN(2)
AVERAGE -------------------------------------------------------------------------------------
EARNINGS(1) 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------ ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 100,000 7,500 15,000 22,500 30,000 37,500 45,000 45,000
$ 200,000 15,000 30,000 45,000 60,000 75,000 90,000 90,000
$ 300,000 22,500 45,000 67,500 90,000 112,500 135,000 135,000
$ 400,000 30,000 60,000 90,000 120,000 150,000 180,000 180,000
$ 500,000 37,500 75,000 112,500 150,000 187,500 225,000 225,000
$ 600,000 45,000 90,000 135,000 180,000 225,000 270,000 270,000
$ 700,000 52,500 105,000 157,500 210,000 262,500 315,000 315,000
$ 800,000 60,000 120,000 180,000 240,000 300,000 360,000 360,000
$ 900,000 67,500 135,000 202,500 270,000 337,500 405,000 405,000
$ 1,000,000 75,000 150,000 225,000 300,000 375,000 450,000 450,000
</TABLE>
(1) The SCM Plans' definition of 'earnings' is W-2 pay, excluding severance pay,
prizes, awards, grievance settlements, overseas cost of living allowances,
relocation allowances, mortgage assistance, executive perquisites,
contributions or benefits under any plan of deferred compensation (except
salary deferrals under Code Sections 401(k) and 125), and compensation
realized under any current or former stock option plan.
(2) Annual benefits are computed on the basis of straight life annuity amounts.
The pension benefit is calculated as follows: the sum of (a) minus (b)
multiplied by (c), where (a) is Final Average Earnings times 1.5%, (b) is
the Social Security Benefit times 1.667%, and (c) is Credited Service up to
a maximum of 30 years (the 'SCM Retirement Plan formula'). Annual benefits
under the SCM SERPs are calculated in the same manner as the SCM Retirement
Plan formula except it includes benefits that would otherwise exceed the
maximums provided under Sections 415 and 401(a)(17) of the Code (the 'SCM
SERP formula'). The net SCM SERP benefit is the difference between the
benefits calculated under the SCM Retirement Plan formula and the SCM SERP
formula. The Social Security offset is not reflected in the above table. All
capitalized terms used in this paragraph and not otherwise defined have the
meanings ascribed to them in the relevant SCM Plan documents.
(3) In addition, certain other retirement benefits may become payable to Mr.
Borst pursuant to a prior agreement with Hanson. This agreement provides for
a guaranteed minimum level of annual retirement benefits (a percent of final
year's pay up to a dollar maximum) that may exceed those benefits described
in the formulas above. The guarantees are as follows: retirement at age 62
-- 25% of Annual Earnings (with a maximum of $129,200), retirement at age
63 -- 30% of Annual Earnings (with a maximum of $203,500), retirement at
age 64 -- 35% of Annual Earnings (with a maximum of $243,600) and
retirement at age 65 -- 50% of Annual Earnings (with a maximum of
$300,000).
CHANGE IN CONTROL AGREEMENTS
The following is a summary of the change in control agreements (the
'Agreements') that are in effect between each of the five individuals named in
the Summary Compensation Table and eight other executive officers of the Company
or a Company Subsidiary, on the one hand, and the Company or the Company
Subsidiary by which each such executive officer is employed (the 'Employer'), on
the other hand. Subject to certain surviving rights, the Agreements will
terminate on September 30, 2002, provided, that if a Change in Control (as
defined below) has taken place prior to termination of the Agreements, the
Agreements shall continue in full force and effect during the two year period
after a Change in Control (the 'Post-Change in Control Period'). In addition to
providing rights upon a Change in Control (as defined below), the Agreements
provide the executives certain rights of indemnification.
A 'Change in Control' is defined in the Agreements as (i) any person
(subject to certain exceptions) becoming the 'beneficial owner' (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting power
of the Company's outstanding securities, (ii) during any period of two (2)
consecutive years (not including any period prior to the consummation of the
Demerger), individuals who at the
65
<PAGE>
<PAGE>
beginning of such period constitute the Board of Directors of the Company, and
any new director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described in clause
(i), (iii) or (iv) of this clause or a director whose initial assumption of
office occurs as a result of either an actual or threatened election contest or
other actual or threatened solicitation of proxies or consents by or on behalf
of a person other than the Board of Directors of the Company) whose election by
the Board of Directors of the Company or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
two (2) year period or whose election or nomination for election was previously
so approved, cease for any reason to constitute at least a majority of the Board
of Directors of the Company; (iii) the merger or consolidation of the Company
with any other corporation (subject to certain exceptions), (iv) approval by the
Company's stockholders of a plan of complete liquidation of the Company or the
sale of all or substantially all of the Company's assets (subject to certain
exceptions), or (v) in the case of Messrs. Yocum, Borst and Robbins (x) any
person (subject to certain exceptions) becoming the 'beneficial owner' (within
the meaning of Rule 13d-3 under the Exchange Act) of securities of the
respective subsidiary of which he is chief executive officer representing more
than 50% of the combined voting power of its outstanding securities, or (y) the
sale of all or substantially all of the assets of such subsidiary (subject to
certain exceptions).
The Agreements provide that if during the 180 day period prior to a Change
in Control (the 'Pre-Change in Control Period') or the Post-Change in Control
Period (collectively with the Pre-Change in Control Period, the 'Change in
Control Protection Period') (i) the executive terminates his or her employment
for Good Reason (as defined below), (ii) a Change in Control occurs and during
the Post-Change in Control Period the executive, subject to a required 180 day
period of continued employment, in certain circumstances, terminates his or her
employment for any reason (including death), (iii) the executive's employment is
terminated by his or her Employer without Cause or due to disability during the
Change in Control Protection Period, or (iv) the executive's employment is
terminated by his or her Employer at or after the age of 65 (in certain
circumstances) during the Post-Change in Control Period, the executive (or, if
applicable, the executive's legal representative) shall be entitled to receive
(w) in a lump sum within five days after such termination (or, if within the
Pre-Change in Control Period, within five days after the Change in Control) (1)
three times the highest base salary paid within 180 days prior to such
termination (provided that if the termination is based on disability, such
payment shall be offset by the projected disability benefits to be paid by the
Employer or by Employer-provided insurance), and (2) three times the highest
annual bonus paid or payable to the executive for any of the previous three
completed fiscal years by the Employer (with the bonus for any years prior to
the Dividend Payment Date being deemed to equal the executive's maximum bonus
target), (x) three years of additional service and compensation credit for
pension purposes, (y) three years of the maximum Employer contribution under any
type of qualified or nonqualified defined contribution plan; and (z) provision
for the executive's and his dependents' health coverage for three years. In
addition, if the payment to the executive under the Agreements, together with
certain other amounts paid to the executive, exceeds certain threshold amounts
and results from a change in ownership as defined in Section 280G(b)(2) of the
Code, the Agreements provide that the executive will receive an additional
amount to cover the federal excise tax and any interest, penalties or additions
to tax with respect thereto on a 'grossed up' basis.
In the Agreements, 'Cause' is defined as the executive's (i) willful
misconduct with regard to the Employer or its affiliates which has a material
adverse effect in the aggregate on the Employer and its affiliates taken as a
whole, (ii) refusal to follow the proper written direction of the board of
directors of the Employer provided that the executive does not believe in good
faith that such direction is illegal, unethical or immoral and promptly notifies
the appropriate board, (iii) conviction for a felony (subject to certain
exceptions), (iv) breach of any fiduciary duty owed to the Employer or its
affiliates which has a material adverse effect on the Company and its affiliates
taken as a whole or (v) material fraud with regard to the Employer or its
affiliates. 'Good Reason' is defined (subject to certain exceptions) as (i) a
material diminution in the executive's position, duties or responsibilities from
the executive's highest position held during the Pre-Change in Control Period or
the assignment of duties or responsibilities inconsistent with such position,
(ii) removal from or the failure of the executive to be re-elected to any of his
positions as an officer with the Employer, (iii) relocation of the principal
United States executive
66
<PAGE>
<PAGE>
offices of the Employer to a location more than 25 miles from where they are
located at the time of a Change in Control or a relocation by the Employer of
executive's principal office away from such principal United States offices,
(iv) if a director during the Pre-Change in Control, executive's removal or
failure to be reelected to the Company's Board, (v) a failure to continue the
executive as a participant in, or to continue, any bonus program in which
executive was entitled to participate within the Pre-Change in Control Period,
(vi) any material breach by a party other than the executive of any provision of
the Agreement, (vii) a reduction by the Employer of executive's rate of annual
base salary within 180 days prior to a Change in Control or (viii) failure by
any successor to the Employer to assume the Agreement.
The Agreements do not apply to a termination of employment outside of the
Change in Control Protection Period. The Company Subsidiaries presently maintain
customary severance policies applicable to their respective employees.
In addition to the Agreements, approximately 45 executive officers and
management employees of the Company and the Company Subsidiaries have agreements
with their respective employer which provide severance protection upon a Change
in Control substantially similar to that provided by the Agreements, except that
(i) amounts payable and benefits provided will be determined by a multiple of
two rather than three and the payments thereunder will be subject to the
limitations of Section 280G(b)(2) of the Code, (ii) the definitions of 'Cause'
and 'Good Reason' in certain instances will have differences that afford the
Employer broader rights, and (iii) the rights of the executive upon a Change in
Control will in certain instances be less.
67
<PAGE>
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS OF COMMON STOCK
The following table, which is based upon information provided to the
Company, sets forth the beneficial ownership of Common Stock by each of the
directors, each of the executive officers named in the Summary Compensation
Table and all directors and executive officers as a group as of November 1,
1996. Based upon information available to the Company, as of the date of this
Prospectus no person is believed to own beneficially more than 5% of the
outstanding Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY % OF SHARES
NAME OWNED OUTSTANDING
- ------------------------------------------------------------------------------ ---------------- -----------
<S> <C> <C>
William M. Landuyt............................................................ 449,770(a) *
Robert E. Lee................................................................. 315,169(b) *
The Rt. Hon. Kenneth Baker CH MP.............................................. 742(c) *
Worley H. Clark............................................................... 813(c) *
Martin D. Ginsburg............................................................ 671(c) *
The Rt. Hon. The Lord Glenarthur.............................................. 971(c) *
David J.P. Meachin............................................................ 671(c) *
Martin G. Taylor.............................................................. 9,242(c) *
Donald V. Borst............................................................... 228,641(d) *
George W. Robbins............................................................. 226,845(e) *
Ronald H. Yocum............................................................... 224,587(f) *
All directors and executive officers as a group (18 persons).................. 1,909,556 2.5%
</TABLE>
- ------------
* Represents less than 1%.
(a) Includes 448,053 shares of restricted Common Stock awarded under the Stock
Incentive Plan, of which 336,040 are subject to vesting pursuant to
performance criteria and the remainder of which are subject to time
vesting; 306 shares of Common Stock held in the Company's 401(k) plan for
Mr. Landuyt's account as of September 30, 1996; and 885 shares of Common
Stock held in Mr. Landuyt's spouse's name.
(b) Includes 313,637 shares of restricted Common Stock awarded under the Stock
Incentive Plan, of which 235,406 are subject to vesting pursuant to
performance criteria and the remainder of which are subject to time
vesting; 392 shares of Common Stock held in the Company's 401(k) plan for
Mr. Lee's account as of September 30, 1996; 6 shares of Common Stock owned
directly by Mr. Lee's wife, as to which Mr. Lee disclaims beneficial
ownership; and 3 shares of Common Stock owned directly by Mr. Lee's son, as
to which Mr. Lee disclaims beneficial ownership.
(c) Includes 671 shares awarded under the Stock Incentive Plan.
(d) Includes 224,026 shares of restricted Common Stock awarded under the Stock
Incentive Plan, of which 168,020 are subject to vesting pursuant to
performance criteria and the remainder of which are subject to time
vesting; and 3,754 shares of Common Stock held in the Company's 401(k) plan
for Mr. Borst's account as of September 30, 1996.
(e) Includes 224,026 shares of restricted Common Stock awarded under the Stock
Incentive Plan, the 168,020 are subject to vesting pursuant to performance
criteria and the remainder of which are subject to time vesting; 1,600
shares of Common Stock held in the Company's 401(k) plan for Mr. Robbin's
account as of September 30, 1996; and 71 shares of Common Stock held in a
trust of which Mr. Robbins is trustee, as to which Mr. Robbins disclaims
beneficial ownership.
(footnotes continued on next page)
68
<PAGE>
<PAGE>
(footnotes continued from previous page)
(f) Includes 224,026 shares of restricted Common Stock awarded under the Stock
Incentive Plan, of which 168,020 are subject to vesting pursuant to
performance criteria and the remainder of which are subject to time
vesting; and 206 shares of Common Stock held in the Company's 401(k) plan
for Dr. Yocum's account as of September 30, 1996.
------------------------
Stock ownership guidelines have been established for the 32 executive
officers and senior managers of the Company and Company subsidiaries who
received awards of restricted stock shortly after the Demerger. Under these
guidelines, these individuals are expected to achieve, within a five year
period, targeted ownership levels of Common Stock requiring personal investments
ranging from 75% of annual base salary to 300% of annual base salary. See
'Executive Compensation -- Company Stock Ownership Guidelines.'
DESCRIPTION OF THE SECURITIES
The following is a description of the Notes and Debentures offered hereby.
Unless otherwise specified, the description applies to all of the Securities.
The Securities will be issued under the indenture to be dated as of
November , 1996 (the 'Indenture'), among the Issuer, the Company and The Bank
of New York, as trustee (the 'Trustee'). The Securities will be issued in two
series as the % Senior Notes due November , 2006 and the % Senior
Debentures due November , 2026, which will rank pari passu with each other.
Each series of Securities will bear interest at the respective rates per annum
set forth in ' -- Maturity, Principal and Interest.' The Securities will be
irrevocably and unconditionally guaranteed by the Company. See ' -- Guarantees.'
The terms of the Securities include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the 'Trust Indenture Act'). The Securities are subject to all such
terms, and Holders of Securities are referred to the Indenture and the Trust
Indenture Act for a statement of those terms. A copy of the Indenture has been
filed as an exhibit to the Registration Statement, of which this Prospectus is a
part.
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to the provisions of the Indenture and the
Securities, including the definitions therein of certain terms used below.
Capitalized terms used in this section and not otherwise defined in this section
have the respective meanings assigned to them in the Indenture. Unless otherwise
indicated, all references in this section to (i) the Company are to Millennium
Chemicals Inc. and not to its subsidiaries and (ii) the Issuer are to Millennium
America Inc. and not to its subsidiaries.
RANKING
The Securities and the Guarantees will be unsecured senior obligations of
the Issuer and the Company, respectively, and will rank pari passu with all
other existing and future unsecured and unsubordinated indebtedness of, and will
be senior in right of payment of principal and interest to all subordinated
indebtedness of, the Issuer and the Company, respectively. The Securities and
the Guarantees will be effectively subordinated to (i) all existing and future
secured indebtedness of the Issuer and the Company, to the extent of the value
of the assets securing such indebtedness, (ii) all existing and future
indebtedness (including guarantees) of any subsidiaries of the Issuer and of the
Company (other than the Issuer) and (iii) all existing and future guarantees by
the subsidiaries of the Issuer and of the Company (other than the Issuer) of the
Issuer's and the Company's indebtedness.
Each of the Issuer and the Company are holding companies that operate
through subsidiaries. Accordingly, the ability of each of the Issuer and the
Company to service their indebtedness, including the Securities, is dependent
upon the cash flow and ability to pay dividends of their respective
subsidiaries. The Issuer's and the Company's rights and the rights of their
respective creditors, including
69
<PAGE>
<PAGE>
Holders of the Securities, to participate in the assets of any subsidiary upon
such subsidiary's liquidation or recapitalization will be subject to the prior
claims of such subsidiary's creditors.
At September 30, 1996, on a pro forma basis after giving effect to the
Demerger Transactions, the Tender Offer and the Offering, the Issuer (on a
consolidated basis) had indebtedness of approximately $2.5 billion, of which $51
million represented indebtedness of its subsidiaries. The Company (on a
consolidated basis) had additional indebtedness of $40 million, all of which
represented indebtedness of subsidiaries other than the Issuer and its
subsidiaries.
The Indenture does not (i) restrict the incurrence of additional unsecured
indebtedness by the Company or the Issuer (although it does restrict the
incurrence of additional unsecured indebtedness by certain subsidiaries of the
Issuer); (ii) prohibit a consolidation, merger, sale of assets, dividend or
other similar transaction that may adversely affect the creditworthiness of the
Company or the Issuer or the successor or combined entity of either thereof;
(iii) prohibit a change in control of the Company or the Issuer; or (iv)
restrict a highly leveraged transaction involving the Company or the Issuer.
MATURITY, PRINCIPAL AND INTEREST
The Securities will be issued in the aggregate principal amount, bear
interest at the rate per annum and have the stated maturity of principal as
follows:
<TABLE>
<CAPTION>
PRINCIPAL
SERIES AMOUNT INTEREST RATE STATED MATURITY
- ------------------------------ ------------ --------------- -----------------
<S> <C> <C> <C>
Notes $500,000,000 % November , 2006
Debentures $250,000,000 % November , 2026
</TABLE>
The Securities will bear interest at the rate shown above until maturity,
payable semi-annually in arrears on and of each year,
commencing , 1997 to the persons who are registered Holders of
Securities at the close of business on the or immediately
preceding such interest payment date. The Indenture provides that interest on
the Securities will be computed on the basis of a 360-day year of twelve 30-day
months. Principal of, and interest on, the Securities will be payable in
immediately available funds, and, subject to the terms of the Indenture and the
limitations applicable to Global Securities, the Securities will be exchangeable
and transferable at an office or agency of the Issuer, one of which will be
maintained for such purpose in The City of New York (which initially will be the
Corporate Trust Office of the Trustee) or such other office or agency permitted
under the Indenture; provided, however, that payment of interest may be made at
the option of the Issuer by check mailed to the person entitled thereto as shown
on the Security Register on the Regular Record Date. The Securities will be
issued only in registered form without coupons, in denominations of $1,000 or
any integral multiple thereof. No service charge will be made for any
registration of transfer or exchange of Securities, except for any tax or other
governmental charge that may be imposed in connection therewith.
Settlement for the Securities will be made by the Underwriters in
immediately available funds. All payments of principal of, and interest on, the
Securities will be made by the Issuer to the Paying Agent in immediately
available funds. The Securities will trade in DTC's Same-Day Funds Settlement
System until maturity, and secondary market trading for the Securities will
therefor settle in immediately available funds.
GUARANTEES
Pursuant to the Guarantees, the Company irrevocably and unconditionally
will guarantee the performance of the Issuer under the Securities and the
punctual payment when and as due, whether upon maturity, acceleration, call for
redemption or otherwise, of principal of, and interest on, the Securities.
The Company will be released from the Guarantees, and the Guarantees will
terminate, if the obligations of the Issuer under the Indenture are assumed by
an acquiring or successor Person (that is not a direct or indirect Subsidiary of
the Company) pursuant to the consolidation, merger and sale provisions of the
Indenture. See ' -- Consolidation, Merger and Certain Sales of Assets.' (Section
1101)
70
<PAGE>
<PAGE>
REDEMPTION
Except as noted below, the Securities are not subject to redemption by the
Issuer prior to maturity.
If, as the result of any change in or any amendment to the laws, including
any applicable double taxation treaty or convention, of the United Kingdom (or
any Other Jurisdiction, as defined below under ' -- Payment of Additional
Amounts'), or of any political subdivision or taxing authority thereof,
affecting taxation, or any change in the application or interpretation of such
laws, double taxation treaty or convention, which change or amendment becomes
effective on or after the original issuance date of any series of Securities (or
such later date on which any assignee of the Issuer, the Company or any
successor corporation to the Issuer or the Company becomes such), it is
determined by the Issuer, the Company or such assignee (which terms, for
purposes of the remainder of this paragraph, include any successor thereto) that
(i) the Issuer, the Company or an assignee, would be required to make additional
payments in respect of principal or interest on the next succeeding date for the
payment thereof, or (ii) based upon an opinion of independent counsel to the
Issuer, the Company or an assignee, as a result of any action taken by any
taxing authority of, or any action brought in a court of competent jurisdiction
in, the United Kingdom (or an Other Jurisdiction) or any political subdivision
or taxing authority thereof or therein (whether or not such action was taken or
brought with respect to the Issuer, the Company or its assignee), which action
is taken or brought on or after the original issuance date of such series (or,
in certain circumstances, such later date on which a corporation becomes an
assignee), the circumstances described in clause (i) would exist, the Issuer
may, at its option, redeem such series of Securities in whole at any time at a
redemption price (the 'Tax Redemption Price') equal to 100% of the principal
amount thereof plus accrued interest to the date fixed for redemption. (Section
1301)
RESTRICTIVE COVENANTS
Limitation on Liens
The Indenture provides that the Issuer will not, and will not permit any
Restricted Subsidiary to, issue, incur, create, assume or guarantee any Debt
secured by a mortgage, lien, pledge or other encumbrance (a 'Lien') upon any
Restricted Property ('Secured Debt') without effectively and concurrently
providing that the Securities (and, if the Issuer shall so determine, any other
Debt that is not subordinate in right of payment to the Securities) shall be
secured equally and ratably with (or prior to) such Debt so long as such Debt
shall be so secured. This restriction will not apply to:
<TABLE>
<S> <C>
(i) Liens existing on the date of the Indenture;
(ii) Liens affecting property of a Person existing at the time it becomes a Restricted Subsidiary or at
the time it is merged into or consolidated with the Issuer or a Restricted Subsidiary or at the time
of a sale, lease or other disposition of the properties of such Person as an entirety or
substantially as an entirety to the Issuer or a Restricted Subsidiary;
(iii) Liens on property existing at the time of acquisition or lease thereof or incurred to secure payment
of all or part of the purchase price thereof or to secure Debt incurred prior to, at the time of, or
within 185 days after the acquisition for the purpose of financing all or part of the purchase
price;
(iv) Liens on property to secure all or part of the cost of construction or improvements thereon or to
secure Debt incurred prior to, at the time of, or within 185 days after completion of such
construction or making of such improvements, to provide funds for any such purpose;
(v) Liens securing Debt of the Issuer or any Restricted Subsidiary owing to the Issuer or to another
Subsidiary of the Issuer;
(vi) Liens required by any contract or statute in order to permit the Issuer or its Subsidiaries to
perform any contract or subcontract made by it with or at the request of the United States, any
State of the United States, another country or any department, agency or instrumentality of the
foregoing;
(vii) Liens securing only the Securities and/or the Guarantees;
</TABLE>
71
<PAGE>
<PAGE>
<TABLE>
<S> <C>
(viii) Liens to secure bids, tenders, contracts (other than contracts for the repayment of borrowed money),
leases, statutory obligations, surety and appeal bonds, performance or return-of-money bonds,
progress payments, customs duties and other obligations of like nature arising in the ordinary
course of business; and
(ix) Any extension, renewal, refinancing, refunding or replacement (or successive extensions, renewals,
refinancings, refundings or replacements) of any Lien or Debt secured by any Lien, in whole or in
part, that is referred to in the foregoing clauses (i) through (viii); provided, however, that the
principal amount of Debt so secured pursuant to this clause (ix) shall not exceed the principal
amount of Debt so secured (plus the aggregate amount of premiums, other payments, costs, and
expenses required to be paid or incurred in connection with such extension, renewal, refinancing,
refunding or replacement) at the time of such extension, renewal, refinancing, refunding or
replacement, and that such extension, renewal, refinancing, refunding or replacement shall be
limited to all or the part of the property (including improvements, alterations and repairs on such
property) subject to the encumbrance so extended, renewed, refinanced, refunded or replaced (plus
improvements, alterations and repairs on such property).
</TABLE>
In addition, the Issuer and any Restricted Subsidiary may, without securing
the Securities, issue, incur, create, assume or guarantee Secured Debt in an
aggregate principal amount which, together with (without duplication) (a) the
aggregate principal amount of all other Secured Debt of the Issuer and the
Restricted Subsidiaries (other than Debt permitted to be secured under the
provisions described in clauses (i) through (ix) inclusive, above), (b) the
aggregate Value of Sale and Lease-Back Transactions of the Issuer and the
Restricted Subsidiaries (other than Sale and Lease-Back Transactions permitted
under the provisions described in clauses (i) and (ii) under ' -- Limitation on
Sale and Lease-Back Transactions'), and (c) the aggregate principal amount of
all Funded Debt of the Restricted Subsidiaries (other than Funded Debt permitted
to be incurred under the provisions described in clauses (i) through (vii)
inclusive under ' -- Limitation on Restricted Subsidiary Funded Debt'), does not
at the time of such incurrence exceed 15% of Consolidated Net Tangible Assets.
(Section 1007)
The term 'Consolidated Net Tangible Assets' means, at any date of
determination, the total amount of assets (less applicable reserves and other
properly deductible items) after deducting therefrom (i) all current liabilities
(excluding any thereof which are by their terms extendible or renewable at the
option of the obligor thereon to a time more than 12 months after the time as of
which the amount thereof is being computed and excluding current maturities of
long term debt), and (ii) the value (net of any applicable reserves) of all
goodwill, trade names, trademarks, purchased technology, patents, unamortized
debt discount and other like intangible assets, all as set forth on the most
recent balance sheet of the Issuer and its consolidated Subsidiaries, computed
in accordance with GAAP.
The term 'Debt' means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (i) every obligation of such Person for money borrowed (other
than letters of credit), (ii) every obligation of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) every obligation of
such Person issued or assumed as the deferred purchase price of property or
services, if and to the extent that such obligation would appear as a liability
upon a balance sheet of such Person prepared in accordance with GAAP (but
excluding trade accounts payable or accrued liabilities arising in the ordinary
course of business), and (iv) every obligation of the type referred to in
clauses (i) through (iii) above of another Person and all Debt of another Person
the payment of which, in either case, such Person has guaranteed or is
responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise.
The term 'Person' means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
The term 'Restricted Property' means (i) any land, land improvements,
buildings and fixtures (to the extent they constitute real property interests,
including any leasehold interest therein) constituting a principal corporate
office or a manufacturing, distribution or warehouse facility (other than such
as are determined in good faith by the Board of Directors of the Issuer to be
immaterial to the total business
72
<PAGE>
<PAGE>
conducted by the Issuer and the Restricted Subsidiaries as a whole) and (ii) any
shares of capital stock or indebtedness of a Restricted Subsidiary.
The term 'Restricted Subsidiary' means any Subsidiary of the Issuer which
owns Restricted Property and is organized under the laws of a jurisdiction in
the United States.
The term 'Subsidiary' means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of securities entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of such Person or a combination thereof.
Limitation on Sale and Lease-Back Transactions
The Indenture provides that the Issuer will not, and will not permit any
Restricted Subsidiary to, enter into any arrangement with any Person (other than
the Issuer or a Restricted Subsidiary), providing for the leasing to the Issuer
or a Restricted Subsidiary for a period of more than three years of any
Restricted Property which has been or is to be sold or transferred by the Issuer
or such Restricted Subsidiary to such Person or to any other Person (other than
the Issuer or a Restricted Subsidiary), to which funds have been or are to be
advanced by such Person on the security of the leased property (each such
arrangement, a 'Sale and Lease-Back Transaction') unless:
<TABLE>
<S> <C>
(i) The Issuer or such Restricted Subsidiary applies or commits to apply an amount equal to the Value of
such Sale and Lease-Back Transaction to the repayment, redemption or retirement (other than any
mandatory repayment, redemption or retirement or by way of payment at maturity) within 185 days of the
effective date of such Sale and Lease-Back Transaction of Debt of the Issuer or any Restricted
Subsidiary which by its terms (a) matures at (or is extendible or renewable, at the sole option of the
obligor without the consent of the obligee, to) a date more than 12 months after the date of creation
of such Debt, and (b) is not subordinated to the Securities or the Guarantees; or
(ii) The Issuer or such Restricted Subsidiary applies the net proceeds of the sale to investment in another
Restricted Property within 185 days prior or subsequent to such sale.
</TABLE>
In addition, the Issuer and any Restricted Subsidiary may enter into a Sale
and Lease-Back Transaction with a Value which, together with (without
duplication) (a) the aggregate Value of all other Sale and Lease-Back
Transactions of the Issuer and the Restricted Subsidiaries (other than Sale and
Lease-Back Transactions permitted under the provisions described in clauses (i)
and (ii) above), (b) the aggregate principal amount of all Secured Debt of the
Issuer and the Restricted Subsidiaries (other than Debt permitted to be secured
under the provisions described in clauses (i) through (ix) inclusive under
' -- Limitation on Liens'), and (c) the aggregate principal amount of all Funded
Debt of the Restricted Subsidiaries (other than Funded Debt permitted to be
incurred under the provisions described in clause (i) through (vii) inclusive
under ' -- Limitation on Restricted Subsidiary Funded Debt'), does not at the
time of entering into exceed 15% of Consolidated Net Tangible Assets. (Section
1008)
The term 'Value' means, with respect to a Sale and Lease-Back Transaction,
at the time of determination, the amount equal to the greater of (a) the net
proceeds of the sale or transfer of the property leased pursuant to such Sale
and Lease-Back Transaction and (b) the fair value of such property at the time
of entering into such Sale and Lease-Back Transaction; for purposes of clause
(b) of this sentence, fair value shall be determined by the Board of Directors
of the Issuer in its good faith judgment.
Limitation on Restricted Subsidiary Funded Debt
The Indenture provides that the Issuer will not permit any Restricted
Subsidiary to issue, incur, create, assume or guarantee any Funded Debt. This
restriction will not apply to:
(i) Funded Debt of any Restricted Subsidiary existing on the date of
the Indenture;
(ii) Funded Debt of a Person existing at the time it becomes a
Restricted Subsidiary or at the time it is merged into or consolidated with
a Restricted Subsidiary or at the time of a sale, lease or
73
<PAGE>
<PAGE>
other disposition of the properties of such Person as an entirety or
substantially as an entirety to a Restricted Subsidiary;
(iii) Funded Debt incurred prior to, at the time of, or within 185
days after the acquisition of property or assets for the purpose of
financing all or part of the purchase price;
(iv) Funded Debt incurred prior to, at the time of, or within 185 days
after the construction, improvement or development of property or assets to
provide funds for any such purpose;
(v) Funded Debt owing by a Restricted Subsidiary to the Issuer or
another Subsidiary of the Issuer (or to the Company or any other Subsidiary
of the Company during such time as the Guarantees remain in effect);
(vi) Funded Debt of a Restricted Subsidiary (a) that serves as a cash
management company for the Issuer and its Subsidiaries (or for the Company
and its Subsidiaries during such time as the Guarantees remain in effect)
and has no other material operations or business, (b) that, for every
transfer of funds to it, records a corresponding liability on its books and
records to the transferor thereof, and (c) whose assets will not materially
exceed its liabilities; and
(vii) Any extension, renewal, refinancing, refunding or replacement
(or successive extensions, renewals, refinancings, refundings or
replacements) of any Funded Debt referred to in any of the foregoing
clauses (i) through (vi); provided, however, that the principal amount of
the Funded Debt incurred pursuant to this clause (vii) shall not exceed the
principal amount of Funded Debt so extended, renewed, refinanced, refunded
or replaced (plus the aggregate amount of premiums, other payments, costs
and expenses required to be paid or incurred in connection with such
extension, renewal, refinancing, refunding or replacement) at the time of
such extension, renewal, refinancing, refunding or replacement.
In addition, a Restricted Subsidiary may issue, incur, create, assume
or guarantee Funded Debt in an aggregate principal amount which, together
with (without duplication) (a) the aggregate principal amount of all other
Funded Debt of the Restricted Subsidiaries (other than Funded Debt
permitted to be incurred under the provisions described in clauses (i)
through (vii) inclusive above), (b) the aggregate principal amount of all
Secured Debt of the Issuer and the Restricted Subsidiaries (other than Debt
permitted to be secured under the provisions described in clauses (i)
through (ix) inclusive under ' -- Limitation on Liens'), and (c) the
aggregate Value of Sale and Lease-Back Transactions (other than Sale and
Lease-Back Transactions described in clauses (i) and (ii) under
' -- Limitation on Sale and Lease-Back Transactions'), does not at the time
of such incurrence exceed 15% of Consolidated Net Tangible Assets. (Section
1009)
The term 'Funded Debt' means Debt that by its terms (i) matures more
than one year from the date of original issuance or creation or (ii)
matures within one year from such date, but is renewable or extendible at
the option of the obligor to a date more than one year from such date.
CONSOLIDATION, MERGER AND CERTAIN SALES OF ASSETS
The Indenture provides that the Issuer may merge or consolidate with or
into any other Person or sell or convey all or substantially all of its property
to any Person in a single transaction or a series of transactions, if (i) (a) in
the case of a merger or consolidation, the Issuer is the surviving Person or (b)
in the case of a merger or consolidation where the Issuer is not the surviving
Person and in the case of such a sale or conveyance, the successor or acquiring
Person is a corporation, partnership, trust or other entity organized and
validly existing under the laws of any domestic jurisdiction and expressly
assumes the due and punctual payment of the principal of, and interest on, the
Securities and the performance and observance of all of the covenants and
conditions of the Indenture to be performed and observed by the Issuer and (ii)
no default in the performance of any covenant or condition of the Indenture
shall arise as a result of such merger or consolidation, or such sale or
conveyance. In the event a successor Person (other than a direct or indirect
Subsidiary of the Company) assumes the obligations of the Issuer, all
obligations of the Issuer shall terminate. In addition, if the acquiring or
successor Person is not a direct or indirect Subsidiary of the Company, the
obligations of the Company under the Guarantees will terminate and be of no
further force and effect.
74
<PAGE>
<PAGE>
The Indenture also provides that the Company may merge or consolidate with
or into any other Person or sell or convey all or substantially all of its
property to any Person in a single transaction or a series of transactions, if
(i) (a) in the case of a merger or consolidation, the Company is the surviving
Person or (b) in the case of a merger or consolidation where the Company is not
the surviving Person and in the case of such a sale or conveyance, the successor
or acquiring Person is a corporation, partnership, trust or other entity
organized and validly existing under the laws of any domestic jurisdiction and
expressly assumes the Guarantees and the performance and observance of all of
the covenants and conditions of the Indenture to be performed and observed by
the Company and (ii) no default in the performance of any covenant or condition
of the Indenture shall arise as a result of such merger or consolidation, or
such sale or conveyance. In the event a successor Person (other than a direct or
indirect Subsidiary of the Company) assumes the obligations of the Company, all
obligations of the Company under the Indenture and the Guarantees shall
terminate. (Sections 801 and 802)
Although there is a developing body of case law interpreting the phrase
'substantially all,' as used in Section 909 of the New York Business Corporation
Law, there is no precise established definition of the phrase as used in
indentures under applicable New York law. Accordingly, the circumstances under
which a holder of the Securities would be able to prove a violation of the
foregoing covenant as a result of a sale, conveyance, transfer or lease or other
disposition of less than all of the assets of the Company or the Issuer to
another Person are uncertain.
EVENTS OF DEFAULT
The Indenture defines an Event of Default with respect to the Securities as
being any one of the following events:
<TABLE>
<S> <C>
(i) Default for 30 days in payment of any interest installment on the Securities when due and payable;
(ii) Default in payment of principal of, or Tax Redemption Price or Additional Amounts in respect of, the
Securities when due and payable;
(iii) Default for 60 days, after notice to the Company and the Issuer by the Trustee or to the Company and
the Issuer and the Trustee by Holders of not less than 25% in aggregate principal amount of the
outstanding Securities at any one time, in performance of any other covenant of the Issuer or the
Company in the Indenture;
(iv) Default resulting in acceleration of maturity of any Debt (other than the Securities) of the Company,
the Issuer, any material Subsidiary of the Company existing on the date of the Indenture or any
material Subsidiary of the Issuer in an amount aggregating in excess of $20,000,000, if such
acceleration has not been rescinded or annulled within 30 days after notice to the Company and the
Issuer by the Trustee or to the Company and the Issuer and the Trustee by the Holders of not less
than 25% in aggregate principal amount of the outstanding Securities at any one time;
(v) The rendering of a final judgment or judgments (not subject to appeal) against the Issuer, the
Company, any material Subsidiary of the Company existing on the date of the Indenture or any material
Subsidiary of the Issuer in an aggregate amount in excess of $50,000,000, which remain unstayed,
undischarged or unbonded for a period of 60 days thereafter; and
(vi) Certain events in bankruptcy, insolvency or reorganization with respect to the Issuer, the Company,
any material Subsidiary of the Company existing on the date of the Indenture or any material
Subsidiary of the Issuer. (Section 501)
</TABLE>
In case an Event of Default shall occur and be continuing, the Trustee or
the Holders of not less than 25% in aggregate principal amount of the Securities
then outstanding may declare the principal and interest on all the Securities to
be due and payable. Upon such declaration, such principal and interest shall be
due and payable immediately. Any Event of Default may be waived by the Holders
of a majority of the aggregate principal amount of the outstanding Securities,
except in the case of a failure to pay principal of or interest on, or the Tax
Redemption Price or Additional Amounts with respect to, the Securities. (Section
502)
75
<PAGE>
<PAGE>
The Indenture requires the Issuer and the Company to file annually with the
Trustee an Officers' Certificate as to the absence of certain defaults under the
terms of the Indenture. The Indenture provides that the Trustee may withhold
notice to the Holders of the Securities of any default (except in payment of
principal, interest, Tax Redemption Price or Additional Amounts) if it considers
it in the interest of the Holders of the Securities to do so. (Sections 1011 and
602)
Subject to the provisions of the Indenture relating to the duties of the
Trustee, including its duty to act with the required standard of care, in case
an Event of Default shall occur and be continuing, the Indenture provides that
the Trustee shall be under no obligation to exercise any of its rights or powers
under the Indenture at the request, order or direction of the Holders of the
Securities unless such Holders shall have offered to the Trustee reasonable
indemnity. Subject to such provisions for indemnification and certain other
rights of the Trustee, the Indenture provides that the Holders of a majority in
principal amount of the outstanding Securities shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee.
(Sections 603 and 512)
MODIFICATION AND WAIVER
Modifications of, and amendments to, the Indenture, the Securities and the
Guarantees may be made by the Issuer, the Company and the Trustee with the
consent of the Holders of not less than a majority in aggregate principal amount
of the Securities; provided, however, that no such modification or amendment
may, without the consent of the Holder of each outstanding Security affected
thereby: (i) extend the fixed maturity of the Securities, or reduce the rate or
extend the time of payment of interest thereon, (ii) reduce the principal
amount, the interest, the Additional Amounts or the Tax Redemption Price, (iii)
change the currency in which the Securities are payable, and (iv) impair the
right to institute suit for the enforcement of any payment on, or with respect
to, any Security. The Company may not be released from the Guarantees (except as
specifically provided for in the Indenture) without the consent of not less than
90% in aggregate principal amount of the Securities. See also ' -- Guarantees'
and ' -- Consolidation, Merger and Certain Sales of Assets.' (Section 902)
Modifications of, and amendments to, the Indenture, the Securities and the
Guarantees may be made by the Trustee without the consent of any Holder of the
Securities or the Issuer or the Company, to, among other things, cure any
ambiguity, defect or inconsistency, provide for the assumption of the Issuer's
or the Company's obligations to the Holders of Securities as contemplated above
under ' -- Consolidation, Merger and Certain Sales of Assets,' or make any
change that does not materially adversely affect the rights of any Holder of the
Securities. (Section 901)
SATISFACTION AND DISCHARGE; DEFEASANCE
The Issuer may terminate its obligations under the Indenture and the
Company's obligations under the Guarantees by, among other things, delivering
all outstanding Securities to the Trustee for cancellation and paying or causing
to be paid all sums payable under the Indenture and the Securities. (Section
401)
In addition, the Issuer may, at any time following the 91st day after the
applicable conditions set forth below have been satisfied, terminate (i) all its
obligations under the Securities and the Indenture ('legal defeasance option')
and the Company's obligations under the Indenture and the Guarantees or (ii) its
obligations and the Company's obligations, in each case, to comply with certain
restrictive covenants as described under 'Restrictive Covenants -- Limitation on
Liens,' 'Restrictive Covenants -- Limitation on Sale and Lease-Back
Transactions,' 'Restrictive Covenants -- Limitation on Restricted Subsidiary
Funded Debt' and ' -- Consolidation, Merger and Certain Sales of Assets'
('covenant defeasance option'). The Issuer may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
(Sections 1202 and 1203)
The Issuer may exercise its legal defeasance option or its covenant
defeasance option only if:
<TABLE>
<S> <C>
(i) The Issuer irrevocably deposits with the Trustee as trust funds in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the holders of the Securities (a) money or (b)
U.S. government obligations, which through the payment of interest and principal in respect thereof
in accordance with their terms will provide (without any reinvestment of such interest or principal),
not later than one day before the due date of any payment, money, in an amount, in the opinion of a
</TABLE>
76
<PAGE>
<PAGE>
<TABLE>
<S> <C>
nationally recognized firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee at or prior to the time of such deposit, sufficient to pay and
discharge each installment of principal and interest on the outstanding Securities on the dates such
installments of principal and interest are or may become due;
(ii) No Default or Event of Default with respect to the Indenture or the Securities shall have occurred
and be continuing on the date of such deposit, as evidenced to the Trustee in a certificate of a duly
authorized officer of the Issuer (an 'Officer's Certificate') delivered to the Trustee concurrently
with such deposit;
(iii) The Issuer delivers to the Trustee an opinion of legal counsel who shall be acceptable to the Trustee
(an 'Opinion of Counsel') to the effect that the trust arising from such deposit shall not constitute
an 'investment company' under the Investment Company Act of 1940, or such trust shall be qualified
under such Act or exempt from regulation thereunder;
(iv) In the case of the legal defeasance option, the Issuer delivers to the Trustee an Opinion of Counsel
stating that (a) the Issuer has received a ruling from the Internal Revenue Service, or (b) since the
date of the Indenture there has been a change in the applicable Federal income tax law, in either
case, to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders
of the Securities will not recognize income, gain or loss for Federal income tax purposes as a result
of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance had not occurred;
(v) In the case of the covenant defeasance option, the Issuer delivers to the Trustee an Opinion of
Counsel to the effect that the Holders of the Securities will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as would have been the case
if such covenant defeasance had not occurred;
(vi) The Issuer has paid or duly provided for payment of all amounts then due to the Trustee pursuant to
the terms of the Indenture; and
(vii) The Issuer has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each
stating that all conditions precedent to the defeasance of the Securities have been complied with as
required by the Indenture. (Section 1204)
</TABLE>
PAYMENT OF ADDITIONAL AMOUNTS
The Indenture provides that any amounts paid, or caused to be paid, by the
Company or its assignee (or any successor to the Company or such assignee) under
the Guarantees, or paid by any successor to the Issuer under the Indenture, will
be paid without deduction or withholding for any and all present and future
taxes, levies, imposts or other governmental charges whatsoever imposed,
assessed, levied or collected by or for the account of the United Kingdom
(including any political subdivision or taxing authority thereof) or the
jurisdiction of incorporation or residence (other than the United States or any
political subdivision thereof) of any assignee of the Company or any successor
to the Issuer or the Company, or any political subdivision or taxing authority
thereof (an 'Other Jurisdiction'), or, if deduction or withholding of any taxes,
levies, imposts or other governmental charges shall at any time be required by
the United Kingdom or an Other Jurisdiction, the Company, its assignee or any
relevant successor will (subject to timely compliance by the Holders or
beneficial owners of the relevant Securities with any relevant administrative
requirements) pay, or cause to be paid, such additional amounts ('Additional
Amounts') in respect of principal or interest as may be necessary in order that
the net amounts paid to the Holders of the Securities or the Trustee under the
Indenture, as the case may be, pursuant to the Indenture or the Guarantees,
after such deduction or withholding, shall equal the respective amounts of
principal and interest, as specified in the Securities, to which such Holders or
the Trustee are entitled; provided, however, that the foregoing shall not apply
to (i) any present or future taxes, levies, imposts or other governmental
charges which would not have been so imposed, assessed, levied or collected but
for the fact that the Holder or beneficial owner of the
77
<PAGE>
<PAGE>
relevant Security is or has been a domiciliary, national or resident of, engages
or has been engaged in business, maintains or has maintained a permanent
establishment, or is or has been physically present in, the United Kingdom or an
Other Jurisdiction, or otherwise has or has had some connection with the United
Kingdom or an Other Jurisdiction (other than the holding or ownership of a
Security, or the collection of principal of, and interest on, or the enforcement
of, a Security or Guarantee), (ii) any present or future taxes, levies, imposts
or other governmental charges which would not have been so imposed, assessed,
levied or collected but for the fact that, where presentation is required, the
relevant Security was presented more than thirty days after the date such
payment became due or was provided for, whichever is later, (iii) any present or
future taxes, levies, imposts or other governmental charges which are payable
otherwise than by deduction or withholding from payments on or in respect of the
relevant Security or Guarantee, (iv) any present or future taxes, levies,
imposts or other governmental charges which would not have been so imposed,
assessed, levied or collected but for the failure to comply, on a sufficiently
timely basis, with any certification, identification or other reporting
requirements concerning the nationality, residence, identity or connection with
the United Kingdom or an Other Jurisdiction or any other relevant jurisdiction
of the Holder or beneficial owner of the relevant Security, if such compliance
is required by a statute or regulation of the United Kingdom or an Other
Jurisdiction, or by a relevant treaty, as a condition to relief or exemption
from such taxes, levies, imposts or other governmental charges, (v) any present
or future taxes, levies, imposts or other governmental charges (A) which would
not have been so imposed, assessed, levied or collected if the beneficial owner
of the relevant Security had been the Holder of such Security, or (B) which, if
the beneficial owner of such Security had held the Security as the Holder of
such Security, would have been excluded pursuant to clauses (i) through (iv)
above, or (vi) any estate, inheritance, gift, sale, transfer, personal property
or similar tax, assessment or other governmental charge.
The Indenture does not provide for the payment of additional amounts with
respect to the Indenture or the Guarantees due to any deduction or withholding
requirement imposed by any governmental unit other than the United Kingdom or an
Other Jurisdiction (including any taxing authority or political subdivision
thereof). (Section 301)
PROVISION OF INFORMATION TO HOLDERS OF THE SECURITIES
So long as any of the Notes or Debentures are outstanding, the Company
shall file with the Commission, and shall provide to the Trustee, and upon
written request, the Holders of such Securities, with copies of the annual
reports, quarterly reports and other information, documents and reports that are
or would be required to be filed with the Commission pursuant to Sections 13(a)
or 15(d) of the Exchange Act, without cost to the Trustee or such Holders. In
the event that the Company is not permitted to file such documents with the
Commission, the Company shall file such documents with the Trustee and, upon
written request, provide Holders of such Securities copies thereof, without cost
to such Holders. If the Securities are no longer guaranteed, or if the Issuer is
required to file such information, documents and reports separately under the
applicable rules and regulations of the Commission, the Issuer will be required
to make such filings and to provide such materials to the Trustee and, upon
written request, to the Holders. (Section 1010)
NO PERSONAL LIABILITY OF OFFICERS, DIRECTORS, EMPLOYEES OR STOCKHOLDERS
No officer, director, employee or stockholder, as such, of the Issuer, the
Company or any of their respective Affiliates shall have any personal liability
in respect of the obligations of the Issuer or the Company under the Guarantees,
the Securities or the Indenture by reason of his, her or its status as such.
(Section 118)
BOOK-ENTRY; DELIVERY AND FORM
Each of the Notes and the Debentures will be issued in the form of one or
more fully registered certificates registered in the name of Cede & Co., the
nominee of DTC. Except as provided below, owners of beneficial interests in the
certificates for the Securities registered in the name of DTC ('Global
Securities') will not be entitled to have the Global Securities registered in
their names and will not receive or be entitled to receive physical delivery of
the Global Securities in definitive form. Unless and until definitive Securities
are issued to owners of beneficial interests in the Global Securities,
78
<PAGE>
<PAGE>
such owners of beneficial interests will not be recognized as Holders of the
Securities by the Trustee. Hence, until such time, owners of beneficial
interests in the Global Securities will only be able to exercise the rights of
Holders indirectly through DTC and its participating organizations. Except as
set forth below, the certificates may not be transferred except as a whole by
DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC
or by DTC or any nominee to a successor of DTC or a nominee of such successor.
DTC has advised the Issuer that it is a limited-purpose trust company
organized under the banking laws of the State of New York, a 'banking
organization' within the meaning of such banking laws, a member of the Federal
Reserve System, a 'clearing corporation' within the meaning of the New York
Uniform Commercial Code and a 'clearing agency' registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and to facilitate the clearance and settlement
of securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
direct participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of which (and/or their representatives) own DTC. Access to
DTC's book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Persons who are
not participants may beneficially own securities held by DTC only through
participants.
DTC advises that pursuant to procedures established by it (i) upon the
issuance of the Global Securities by the Issuer, DTC will credit, on its
book-entry registration and transfer system, the accounts of participants
designated by the Underwriters with the amount of the Global Securities
purchased by the Underwriters, and (ii) ownership of beneficial interests in the
certificates representing the Global Securities will be limited to participants
or persons that may hold interests through participants. Ownership of beneficial
interests by participants in the Global Securities will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by DTC (with respect to participants' interests) and the
participants. The laws of some states require that certain purchasers of
securities take physical delivery in definitive form of such securities. Such
laws may impair the ability to own, transfer or pledge beneficial interests in a
Global Security.
Neither the Issuer, the Company, the Trustee, any Paying Agent, nor the
Security Registrar will have any responsibility or liability for any aspect of
the records relating to, or payments made on account of, beneficial ownership
interests in the certificates representing the Global Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
Principal and interest payments on the Global Securities registered in the
name of DTC's nominee will be made by the Trustee to DTC's nominee as the
registered owner of the certificates relating to the Global Securities. The
Indenture provides that the Issuer, the Company and the Trustee will treat the
persons in whose names the Global Securities are registered (DTC or its nominee)
as the owners of the Global Securities for the purpose of receiving payment of
principal and interest on the Global Securities and for all other purposes
whatsoever. Therefore, neither the Issuer, the Company, the Trustee nor the
Paying Agent has any direct responsibility or liability for the payment of
principal or interest on the Global Securities to owners of beneficial interests
in the certificates relating to the Global Securities. DTC has advised the
Issuer, the Company, and the Trustee that its present practice is, upon receipt
of any payment of principal or interest, to immediately credit the accounts of
the participants with such payment in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the certificates
relating to the Global Securities, as shown on the records of DTC. Payments by
participants and indirect participants to owners of beneficial interests in the
certificates relating to the Global Securities will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in 'street name,' and
will be the responsibility of the participants or indirect participants.
If DTC is at any time unwilling or unable to continue as depository and a
successor depository is not appointed by the Issuer or the Company, the Issuer
will issue Securities in definitive form in exchange for the total amount of the
certificates representing the Global Securities. In addition, the Issuer may at
any time determine not to have Securities represented by Global Securities and,
in such
79
<PAGE>
<PAGE>
event, the Issuer will issue Securities in definitive form in exchange for the
total amount of the certificates representing the Global Securities. In
addition, if any event shall have happened and be continuing that constitutes an
Event of Default with respect to the Securities, the owners of beneficial
interests in certificates for the Global Securities will be entitled to receive
Securities in certificated form in exchange for the book-entry certificate or
certificates representing the Global Securities. In any such instance, an owner
of a beneficial interest in such certificates will be entitled to physical
delivery in definitive form of Securities equal in amount to such beneficial
interest and to have such Securities registered in its name.
The information in this section concerning DTC and DTC's system has been
obtained from sources that the Issuer and the Company believe to be reliable,
but is subject to any changes to the arrangements between the Issuer and DTC and
any changes to such procedures that may be instituted unilaterally by DTC, and
neither the Issuer or the Company takes responsibility for the accuracy thereof.
TRANSFER OR EXCHANGE
A Holder may transfer or exchange Securities in accordance with the
Indenture and subject to the limitations applicable to Global Securities. The
Security Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents, and the Issuer may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Security Registrar is not required to transfer or exchange any Security
selected for redemption, or any Security for a period of 15 days before mailing
of a notice of redemption. (Section 306)
NOTICE TO HOLDERS
Notice to Holders of Securities will be given in writing and mailed,
first-class postage prepaid or delivered by recognized overnight courier, to the
addresses of such Holders as they may appear in the Security Register. (Section
107)
TITLE
Prior to due presentment of a Security for registration of transfer, the
Company, the Issuer, the Trustee and any agent of the Company, the Issuer, or
the Trustee may treat the Person in whose name such Security is registered as
the owner thereof, whether or not such Security may be overdue, for the purpose
of making payment and for all other purposes. (Section 310)
GOVERNING LAW
The Indenture and the Securities will be governed by and construed in
accordance with the law of the State of New York. (Section 113)
TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. If an Event of Default has occurred and is continuing, the
Trustee will use the same degree of care and skill in its exercise of the rights
and powers vested in it by the Indenture as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs. (Section
601)
The Indenture contains limitations on the rights of the Trustee, should it
become a creditor of the Issuer or the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; provided, however, that if it acquires any conflicting
interest, it must eliminate such conflict or resign. (Section 608 and 613)
The Bank of New York is the Trustee under the Indenture. The Issuer and its
affiliates maintain banking relationships in the ordinary course of business
with the Trustee. Among other things, the Trustee is a lending bank under the
Credit Facility and the Trustee under the indenture relating to the Pre-Demerger
Notes. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations.'
80
<PAGE>
<PAGE>
CERTAIN TAX CONSIDERATIONS
The following discussion of taxation is intended only as a summary and does
not purport to be a complete analysis of all potential tax effects relevant to
the Securities. The statements of United Kingdom and United States tax law set
forth below are based on the laws, regulations and administrative and judicial
decisions applicable as of the date of this Prospectus, and are subject to any
changes in relevant United Kingdom or United States authorities, or in the
income tax treaty between the United States and the United Kingdom, occurring
after that date. Any such changes, which could be retroactive, could affect the
continuing validity of this discussion.
Persons considering the purchase of Securities should consult their own tax
advisors concerning the application of United States federal and United Kingdom
income tax laws, as well as the laws of any state, local, or other taxing
jurisdiction applicable to their particular situations.
UNITED STATES FEDERAL INCOME TAXATION
The following discussion summarizes the material United States federal
income tax ('income tax') aspects of the acquisition, ownership and disposition
of the Securities.
This discussion does not address the income tax consequences of ownership
of Securities not held as capital assets within the meaning of section 1221 of
the United States Internal Revenue Code of 1986, as amended (the 'Code'), the
income tax consequences to Holders of Securities not entitled to the benefit of
a United Kingdom double taxation treaty or convention which, like the double
taxation treaty between United States and the United Kingdom, provides for a
zero rate of withholding tax with respect to interest, or the income tax
consequences to investors subject to special treatment under the federal income
tax laws, such as dealers in securities or foreign currency, tax-exempt
entities, banks, insurance companies, persons that hold Securities as part of a
'straddle' or as a 'hedge' against currency risk or that have a 'functional
currency' other than the United States dollar, and investors in pass-through
entities. In addition, this discussion is generally limited to the income tax
consequences to initial holders of Securities, and does not describe any
consequences arising out of the tax laws of any state, local or other
jurisdiction or any estate or gift tax consequences.
Holders Who Are United States Persons. A 'US Holder' is a holder who or
which is (or is deemed to be, for income tax purposes) (i) a citizen or resident
of the United States, a corporation organized under the laws of the United
States or any political subdivision thereof, or an estate or trust, the income
of which is includible in gross income for income tax purposes regardless of
source, or (ii) otherwise subject to income tax on a net basis in respect of
income from the Securities. (For taxable years beginning after December 31, 1996
(or for a trust's preceding taxable year, if the trustee so elects), a trust is
a US Holder if, and only if (i) a court within the United States is able to
exercise primary supervision over the administration of the trust, and (ii) one
or more United States trustees have the authority to control all substantial
decisions of the trust).
Interest on a Security (and any additional amounts paid with respect to
interest) will be taxable to a US Holder as ordinary income at the time it
accrues or is received, in accordance with the US Holder's method of accounting
for income tax purposes. Upon the disposition of a Security by sale, exchange,
redemption or repayment, a US Holder will generally recognize gain or loss equal
to the difference between (i) the amount realized on the disposition (other than
amounts attributable to accrued interest and any additional amounts with respect
thereto), and (ii) the US Holder's tax basis for the Security. Because the
Security will have been held as a capital asset, any gain or loss will generally
constitute capital gain or loss, and will be long-term capital gain or loss if
the US Holder held the Security for more than one year. For certain US Holders,
long-term capital gains are subject to United States federal income tax at a
rate less than that applicable to ordinary income.
Holders Who Are Not United States Persons. Interest (and any additional
amounts paid with respect to interest) on a Security held by a holder who is not
a US Holder (a 'Non US Holder') will not be subject to United States federal
income or withholding tax, provided that (1) the Non US Holder does not actually
or constructively own 10% or more of the total combined voting power of all
classes of stock of the Issuer entitled to vote, (2) the Non US Holder is not
(a) a bank receiving interest pursuant to a loan agreement entered into in the
ordinary course of its trade or business, or (b) a controlled foreign
corporation related to the Issuer through a stock ownership, (3) interest on the
Securities is not
81
<PAGE>
<PAGE>
effectively connected with a United States trade or business of the holder (or
in the case of a treaty resident, not attributable to a permanent establishment,
or fixed base, in the United States), and (4) either (a) the beneficial owner of
a Security certifies to the Issuer or its agent, under penalties of purjury,
that it is not a US Holder and provides a completed Form W-8 ('Certificate of
Foreign Status'), or (b) a securities clearing organization, bank or other
financial institution which holds customers' securities in the ordinary course
of its trade or or business (a 'financial institution') certifies to the Issuer
or its agent, under penalties of perjury, that a Form W-8 has been received by
it from the beneficial owner or by an intermediate financial institution, and
furnishes the Issuer with a copy of the Form W-8.
If any of the requirements described in provisos (1), (2) or (4) of the
preceding paragraph are not satisfied with respect to a Non US Holder, the
otherwise applicable 30% income tax (generally payable by withholding) may be
reduced or eliminated if the Non US Holder is entitled to the benefit of a
United States income tax convention. If the Requirement described in proviso (3)
of the preceding paragraph is not satisfied, income tax will apply as if the
holder were a US Holder (i.e., on a net basis at ordinary graduated rates).
Subject to the discussion below concerning 'backup withholding,' a Non US
Holder will not be subject to income tax on gain realized on the disposition of
a Security by sale, exchange, redemption or repayment, unless (1) the gain is
effectively connected with a trade or business carried on by the holder within
the Untied States or, generally, if a United States income tax convention
applies, the gain is attributable to a United States permanent establishment
maintained by the holder, (2) subject to certain exceptions, the Non US Holder
is an individual (or a trust or estate) who or which is present in the United
States for 183 days or more in the taxable year of disposition, or (3) the
Non-U.S. Holder is subject to certain provisions of the U.S. tax law applicable
to certain former citizens and residents of the United States.
Information Reporting and 'Backup' Withholding. In general, as to a
beneficial owner who is a US Holder (other than a corporation), information
reporting will apply to payments of interest on, and proceeds of redemption,
sale or other disposition of, a Security. Backup withholding at a rate of 31%
with respect to the above payments will generally apply only when a US Holder
(again other than a corporation) fails to provide an accurate taxpayer
identification number or otherwise comply with the applicable rules.
The Company must report annually to the IRS and to each Non-U.S. Holder any
interest that is subject to withholding or that would be subject to withholding
but for the exceptions described above under the heading 'Holders Who are Not
United States Persons.' Copies of these information returns may also be made
available under the provisions of a specific treaty or agreement to the tax
authorities of the country in which the Non-U.S. Holder resides.
A beneficial owner who is a Non US Holder will be subject to information
reporting and backup withholding with respect to proceeds from the disposition
of, a Security to or through the United States office of a broker, unless the
Non US Holder certifies as to its foreign status or otherwise establishes an
exemption.
In the case of a payment of proceeds from the disposition of Securities to
or through a foreign office of a broker that is either a U.S. person or a 'U.S.
related' person (as defined), the regulations require information reporting on
the payment unless the broker has documentary evidence in its files that the
owner is a Non US Holder and the broker has no knowledge to the contrary. Backup
withholding will not apply to payments made through a foreign office of a broker
that is a U.S. person or a U.S. related person (absent actual knowledge that the
payee is a U.S. person).
Any amounts withheld from a payment to a beneficial owner under the backup
withholding rules will be returned or allowed as a credit against the beneficial
owner's income tax liability, provided that the required information is
furnished to the United States Internal Revenue Service.
Beneficial owners of Securities should consult their tax advisors as to
their qualification for exception from backup withholding and the procedure for
obtaining such an exemption.
82
<PAGE>
<PAGE>
UNITED KINGDOM INCOME TAXATION
Payments by the Company under the Guarantee of principal and interest on a
Security received by a beneficial owner not otherwise taxable in the United
Kingdom will generally be exempt from United Kingdom tax. However, the Company's
understanding of current Inland Revenue practice is that where a United Kingdom
company is obligated to make a payment of interest under a guarantee which in
default would be enforced in the United Kingdom, that payment will have a United
Kingdom source. Accordingly, the payment will be subject to United Kingdom
withholding tax in the absence of an available exemption under an applicable
double taxation treaty or convention.
Such an exemption should be available under the double taxation treaty
between the United States and the United Kingdom to beneficial owners of
Securities who timely satisfy the conditions for exemption therein and who
comply with the relevant administrative arrangements. If, however, an exemption
is not available and a United Kingdom withholding tax is imposed on a payment in
respect of interest (or any additional interest) under the Company Guarantees,
subject to the exceptions set forth above under 'Description of the
Securities -- Payment of Additional Amounts,' the Company or its successors or
assigns will be obligated to pay or cause to be paid such additional amounts in
respect of the relevant interest as may be necessary in order that the net
amount of interest (and additional amounts) paid to a Holder of a Security shall
equal the amount of interest to which such Holder is entitled. If the Company is
required to pay additional amounts by reason of current Inland Revenue practice,
the Issuer could not redeem the Securities. See 'Description of the
Securities -- Redemption.'
Beneficial owners of Securities should consult their own tax advisors as to
the conditions for exemption and the relevant administrative arrangements.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon by Weil,
Gotshal & Manges LLP, New York, New York. Certain legal matters will be passed
upon for the Underwriters by Fried, Frank, Harris, Shriver & Jacobson (a
partnership including professional corporations), New York, New York. Martin D.
Ginsburg, a director of the Company, is of counsel to the law firm of Fried,
Frank, Harris, Shriver & Jacobson, which serves as counsel to the Company and
the Issuer from time to time.
EXPERTS
The combined financial statements of the Company as of December 31, 1995
and 1994 and for the year ended December 31, 1995, the three months ended
December 31, 1994 and the two fiscal years in the period ended September 30,
1994, the consolidated financial statements of Quantum Chemical Corporation for
the nine months ended September 30, 1993, and the financial statement of the
Company as of April 18, 1996 included in this Prospectus have been so included
in reliance on the reports of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements of SCM Chemicals Limited for the fiscal year ended
September 30, 1993, not separately presented in this Prospectus, have been
audited by Ernst & Young, chartered accountants, whose report thereon appears
herein. Such financial statements, to the extent they have been included in the
financial statements of the Company, have been so included in reliance on their
report given on the authority of said firm as experts in auditing and
accounting.
The financial statements of HMB Holdings Inc. as of September 30, 1995 and
October 1, 1994 and for each of the three years in the period ended September
30, 1995, not separately presented in this Prospectus, have been audited by
Ernst & Young LLP, independent accountants, whose report thereon appears herein.
Such financial statements, to the extent they have been included in the
financial statements of the Company, have been so included in reliance on their
report given on the authority of said firm as experts in auditing and
accounting.
83
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
MILLENNIUM CHEMICALS INC. -- COMBINED FINANCIAL STATEMENTS:
Report of Price Waterhouse LLP........................................................................ F-2
Report of Ernst & Young LLP (HMB Holdings Inc.)....................................................... F-3
Report of Ernst & Young (SCM Chemicals Limited)....................................................... F-4
Combined Balance Sheets -- September 30, 1996, December 31, 1995 and 1994............................. F-5
Combined Statements of Operations -- Nine Months Ended September 30, 1996 and 1995, Years Ended
December 31, 1995, September 30, 1994 and 1993 and Three Months Ended December 31, 1994.............. F-6
Combined Statements of Changes in Invested Capital -- Nine Months Ended September 30, 1996, Year Ended
December 31, 1995, Three Months Ended December 31, 1994 and Years Ended September 30, 1994 and
1993................................................................................................. F-7
Combined Statements of Cash Flows -- Nine Months Ended September 30, 1996 and 1995, Years Ended
December 31, 1995 and September 30, 1994 and 1993 and Three Months Ended December 31, 1994........... F-8
Notes to Combined Financial Statements................................................................ F-9
Schedule II -- Valuation and Qualifying Accounts...................................................... F-31
QUANTUM CHEMICAL CORPORATION -- CONSOLIDATED FINANCIAL STATEMENTS:
Report of Price Waterhouse LLP........................................................................ F-32
Consolidated Statement of Operations -- Nine Months Ended September 30, 1993.......................... F-33
Consolidated Statement of Cash Flows -- Nine Months Ended September 30, 1993.......................... F-34
Notes to Consolidated Financial Statements............................................................ F-35
MILLENNIUM CHEMICALS INC. FINANCIAL STATEMENT:
Report of Price Waterhouse LLP........................................................................ F-40
Balance Sheet......................................................................................... F-41
Note to Balance Sheet................................................................................. F-41
</TABLE>
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
HANSON PLC
We have audited the combined financial statements of Millennium Chemicals
Inc. (the 'Company' -- see Note 1) listed in the accompanying index on Page F-1
as of December 31, 1995 and 1994, and for the year ended December 31, 1995, the
three months ended December 31, 1994 and the two fiscal years in the period
ended September 30, 1994. 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 did not audit the financial
statements of SCM Chemicals Limited for the fiscal year ended September 30,
1993, which statements reflect 23% of combined total revenues. The SCM Chemicals
Limited financial statements, which are prepared in accordance with accounting
principles generally accepted in the United Kingdom, were audited by other
auditors whose report thereon has been furnished to us, and our opinion
expressed herein, insofar as it relates to the amounts included for SCM
Chemicals Limited, is based solely on the report of the other auditors and audit
procedures performed by us in relation to management's conversion of certain
financial statement information of SCM Chemicals Limited determined in
accordance with accounting principles generally accepted in the United Kingdom,
into corresponding amounts determined in accordance with accounting principles
generally accepted in the United States. We also did not audit the financial
statements of HMB Holdings Inc. ('Cornerstone') for the fiscal years ended
September 30, 1995, 1994 and 1993, which statements reflect net assets, included
herein as net assets of Discontinued Businesses to be sold to Hanson PLC
('Hanson'), of $3,024 and $3,065 at September 30, 1995 and 1994, respectively
and income from discontinued operations of $15, $38 and $23 for the fiscal years
ended September 30, 1995, 1994 and 1993, respectively. Those statements were
audited by other auditors whose report thereon has been furnished to us, and our
opinion expressed herein, insofar as it relates to the amounts included for
Cornerstone, is based solely on the report of other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
combined financial statements referred to above, present fairly, in all material
respects, the financial position of the Company as of December 31, 1995 and
1994, and the results of its operations and its cash flows for the year ended
December 31, 1995, the three months ended December 31, 1994 and the two fiscal
years ended September 30, 1994, in conformity with generally accepted accounting
principles.
PRICE WATERHOUSE LLP
Morristown, New Jersey
July 2, 1996, except for Notes 12 and 13, as to
which the date is October 30, 1996
F-2
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
and Stockholders of
HMB HOLDINGS INC.
We have audited the consolidated balance sheets of HMB Holdings Inc. (the
'Company') as of September 30, 1995 and October 1, 1994 and the related
consolidated statements of income, changes in stockholder's equity, and cash
flows for each of the three years in the period ended September 30, 1995 (not
presented separately herein). These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of HMB Holdings
Inc. at September 30, 1995 and October 1, 1994 and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended September 30, 1995 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Hackensack, New Jersey
November 7, 1995, except for Note 12,
as to which the date is July 2, 1996.
F-3
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
SCM CHEMICALS LIMITED
We have audited the profit and loss account and statements of total
recognised gains and losses and cash flow of SCM Chemicals Limited for the
fiscal year ended September 30, 1993 (not presented separately herein). These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurances 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 the management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of the operations and cash flow of SCM
Chemicals Limited for the fiscal year ended September 30, 1993 in conformity
with accounting principles generally accepted in the United Kingdom.
ERNST & YOUNG
Chartered Accountants
Hull, England
February 10, 1994
F-4
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
COMBINED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA DECEMBER 31,
SEPTEMBER 30, SEPTEMBER 30, ------------------------
1996 (NOTE 2) 1996 1995 1994
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 388 $ 388 $ 412 $ 367
Trade receivables, net............................. 514 514 502 515
Inventories........................................ 454 454 554 462
Other current assets............................... 75 115 221 224
Net assets of Discontinued Businesses to be sold to
Hanson........................................... -- 617 3,772 --
------------- ------------- ----------- -----------
Total current assets.......................... 1,431 2,088 5,461 1,568
------------- ------------- ----------- -----------
Property, plant and equipment, net...................... 1,977 1,977 2,262 2,153
Investments and other assets............................ 336 336 278 451
Net assets of Discontinued Businesses to be sold to
Hanson................................................ -- -- -- 3,757
Goodwill................................................ 1,778 1,778 2,042 2,095
------------- ------------- ----------- -----------
Total assets.................................. $ 5,522 $ 6,179 $ 10,043 $ 10,024
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
LIABILITES AND INVESTED CAPITAL
Current liabilities:
Notes payable...................................... $ 222 $ 222 $ 113 $ 247
Current maturities of long-term debt............... 11 11 11 5
Trade accounts payable............................. 134 134 178 147
Income taxes payable............................... 30 30 -- (108 )
Accrued expenses and other liabilities............. 443 443 575 544
------------- ------------- ----------- -----------
Total current liabilities..................... 840 840 877 835
Non-current liabilities:
Long-term debt..................................... 2,283 3,650 3,304 3,274
Deferred income taxes.............................. 129 225 171 136
Other liabilities.................................. 973 963 890 921
------------- ------------- ----------- -----------
Total liabilities............................. 4,225 5,678 5,242 5,166
------------- ------------- ----------- -----------
Commitments and contingencies (Notes 9 & 10)
Stockholders' Equity/Invested capital................... 1,297 501 4,801 4,858
------------- ------------- ----------- -----------
Total liabilities and invested capital........ $ 5,522 $ 6,179 $ 10,043 $ 10,024
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
</TABLE>
See notes to combined financial statements.
F-5
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
COMBINED STATEMENTS OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS FISCAL YEAR
ENDED THREE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED ENDED SEPTEMBER 30,
----------------- DECEMBER 31, DECEMBER 31, --------------
1996 1995 1995 1994 1994 1993
------- ------ ------------ ------------ ------ ----
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Net sales.................................... $ 2,279 $2,939 $3,800 $908 $3,288 $862
Less operating costs and expenses:
Cost of products sold................... 1,711 1,866 2,458 589 2,470 595
Depreciation and amortization........... 152 180 241 59 247 44
Selling, development and administrative
expenses.............................. 136 203 259 57 227 84
Asset impairment and related closure
costs................................. 75 -- -- -- -- --
------- ------ ------------ ------ ------ ----
Operating income................... 205 690 842 203 344 139
Interest expense, primarily to a related
party...................................... 171 181 240 60 206 14
Interest income.............................. (25) (20) (25) (5) (19) (24)
Gain on sale of Suburban Propane............. (210) -- -- -- -- --
Equity in earnings of Suburban Propane....... (32) -- -- -- -- --
Other expense, net........................... 31 65 73 5 26 (2)
------- ------ ------------ ------ ------ ----
Income from continuing operations
before provision for income
taxes............................ 270 464 554 143 131 151
Provision for income taxes................... (167) (188) (223) (59) (65) (48)
------- ------ ------------ ------ ------ ----
Income from continuing
operations....................... 103 276 331 84 66 103
(Loss)/income from discontinued operations
(net of income taxes of ($1,269), $3, $22,
$5, $11 and $23)........................... (3,167) -- 18 12 28 20
------- ------ ------------ ------ ------ ----
Net (loss) income.................. $(3,064) $ 276 $ 349 $ 96 $ 94 $123
------- ------ ------------ ------ ------ ----
------- ------ ------------ ------ ------ ----
</TABLE>
See notes to combined financial statements.
F-6
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
COMBINED STATEMENTS OF CHANGES IN INVESTED CAPITAL
(IN MILLIONS)
<TABLE>
<S> <C>
Balance at October 1, 1992.............................................................................. $ 4,519
Net income.............................................................................................. 123
Contribution of capital................................................................................. 815
Net transactions with affiliates........................................................................ 8
Translation adjustment.................................................................................. (22)
-------
Balance at September 30, 1993........................................................................... 5,443
Net income.............................................................................................. 94
Net transactions with affiliates........................................................................ (912)
Translation adjustment.................................................................................. 13
-------
Balance at September 30, 1994........................................................................... 4,638
Net income.............................................................................................. 96
Net transactions with affiliates........................................................................ 136
Translation adjustment.................................................................................. (12)
-------
Balance at December 31, 1994............................................................................ 4,858
Net income.............................................................................................. 349
Dividend to parent...................................................................................... (1,617)
Net transactions with affiliates........................................................................ 1,212
Translation adjustment.................................................................................. (1)
-------
Balance at December 31, 1995............................................................................ 4,801
Net (loss) (unaudited).................................................................................. (3,064)
Net transactions with affiliates (unaudited)............................................................ (1,237)
Translation adjustment (unaudited)...................................................................... 1
-------
Balance at September 30, 1996 (unaudited)............................................................... $ 501
-------
-------
</TABLE>
See notes to combined financial statements.
F-7
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
COMBINED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS
YEAR ENDED ENDED
----------------------------------------- DECEMBER 31, DECEMBER 31,
1996 1995 1995 1994
------------------- ------------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Income from continuing operations.................. $ 103 $ 276 $ 331 $ 84
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 152 180 241 59
Asset impairment and related closure costs.... 75 -- -- --
Provision for deferred income taxes........... 64 34 35 17
Gain on sale of business...................... (210) -- -- --
Changes in assets and liabilities:
(Increase) decrease in trade receivables...... (12) 4 13 (29)
Decrease (increase) in inventories............ 66 (61) (92) (46)
Decrease (increase) in other current assets... 80 139 8 (150)
(Increase) decrease in investments and other
assets...................................... (66) 121 173 (129)
(Decrease) increase in trade accounts
payable..................................... (13) 43 32 5
(Decrease) increase in accrued expenses and
other liabilities and income taxes
payable..................................... (50) 102 86 33
Increase (decrease) in other liabilities...... 91 (87) (32) 26
Other -- net.................................. -- -- -- 6
-------- -------- ------------ ------
Net cash provided by (used in) operating
activities............................. 280 751 795 (124)
Cash flows from investing activities:
Capital expenditures............................... (223) (201) (276) (30)
Proceeds from sale of business..................... 733 -- -- --
Proceeds from sale of fixed assets................. 7 26 30 5
-------- -------- ------------ ------
Cash provided by (used in) investing
activities............................. 517 (175) (246) (25)
Cash flows from financing activities:
Dividend to parent................................. -- (1,617) (1,617) --
Net transactions with affiliates................... (1,237) 1,506 1,212 136
Proceeds from long-term debt....................... 306 -- 40 29
Repayment of long-term debt........................ -- (5) (4) (26)
Increase (decrease) in notes payable............... 109 (111) (134) 29
-------- -------- ------------ ------
Cash (used in) provided by financing
activities............................. (822) (227) (503) 168
-------- -------- ------------ ------
Effect of exchange rate changes on cash................. 1 14 (1) (12)
-------- -------- ------------ ------
(Decrease) increase in cash and cash
equivalents................................. (24) 363 45 7
Cash and cash equivalents at beginning of period........ 412 367 367 360
-------- -------- ------------ ------
Cash and cash equivalents at end of period.... $ 388 $ 730 $ 412 $ 367
-------- -------- ------------ ------
-------- -------- ------------ ------
<CAPTION>
FISCAL YEAR
ENDED SEPTEMBER
30,
---------------
1994 1993
------- -----
<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations.................. $ 66 $ 103
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 247 44
Asset impairment and related closure costs.... -- --
Provision for deferred income taxes........... 178 8
Gain on sale of business...................... -- --
Changes in assets and liabilities:
(Increase) decrease in trade receivables...... (90) 16
Decrease (increase) in inventories............ 97 (29)
Decrease (increase) in other current assets... 41 8
(Increase) decrease in investments and other
assets...................................... 206 (73)
(Decrease) increase in trade accounts
payable..................................... (18) (2)
(Decrease) increase in accrued expenses and
other liabilities and income taxes
payable..................................... (272) (40)
Increase (decrease) in other liabilities...... (227) 156
Other -- net.................................. 4 2
------- -----
Net cash provided by (used in) operating
activities............................. 232 193
Cash flows from investing activities:
Capital expenditures............................... (109) (28)
Proceeds from sale of business..................... -- --
Proceeds from sale of fixed assets................. 16 1
------- -----
Cash provided by (used in) investing
activities............................. (93) (27)
Cash flows from financing activities:
Dividend to parent................................. -- --
Net transactions with affiliates................... (912) 8
Proceeds from long-term debt....................... 3,205 15
Repayment of long-term debt........................ (2,658) --
Increase (decrease) in notes payable............... 143 (87)
------- -----
Cash (used in) provided by financing
activities............................. (222) (64)
------- -----
Effect of exchange rate changes on cash................. 13 (22)
------- -----
(Decrease) increase in cash and cash
equivalents................................. (70) 80
Cash and cash equivalents at beginning of period........ 430 350
------- -----
Cash and cash equivalents at end of period.... $ 360 $ 430
------- -----
------- -----
</TABLE>
See notes to combined financial statements.
F-8
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN MILLIONS)
NOTE 1 -- BASIS OF PRESENTATION AND DESCRIPTION OF COMPANY
In contemplation of the demerger (the 'Demerger') of the Chemicals Business
(as defined below) from Hanson PLC, all the issued and outstanding common stock
or net operating assets of Quantum Chemical Corporation, SCM Chemicals Inc., SCM
Chemicals Limited, and SCM Chemicals Ltd. and Glidco Inc. and certain other
assets and interests will be transferred to Millennium Chemicals Inc. (the
'Company'). The Company will, in turn, issue shares representing all of its then
outstanding common stock, par value $.01 per share, together with associated
preferred stock purchase rights (collectively the 'Common Stock') to Hanson's
shareholders on a pro rata basis on the payment date for the dividend (the
'Stock Dividend') declared by Hanson, on October 1, 1996 (the 'Dividend Payment
Date'). At September 30, 1996, the Company had no separate legal status or
existence. These financial statements are presented on a going concern basis and
include only the historical net assets and results of operations that are
directly related to the Company's operations. Consequently, the financial
position, results of operations and cash flows may not be indicative of what
would have been reported if the Company had been a separate entity. All
significant intercompany accounts and transactions have been eliminated.
The accompanying combined financial statements include the combined
operations, assets and liabilities of the chemical businesses currently held by
Hanson PLC ('Hanson') and conducted by Quantum Chemical Corporation ('Quantum
Chemical'), SCM Chemicals Inc., SCM Chemicals Limited and SCM Chemicals Ltd.
(collectively 'SCM Chemicals') and Glidco Inc. ('Glidco') and certain other
interests currently owned, directly or indirectly, by Hanson (collectively, the
'Chemicals Business'). Not included in the combined financial statements are net
assets of certain other non-chemicals businesses which have historically been
owned by the Company but which will be sold to Hanson in a series of
transactions prior to the Dividend Payment Date and a $1.9 billion loan (the
'Hanson Loan'), not associated with the Chemicals Businesses which will be
repaid as part of the demerger transactions. See Note 2 for a description of the
demerger transactions and the pro forma capitalization of the Company upon their
completion.
In addition, the combined financial statements include the combined
operations and net assets of certain non-chemicals businesses ('Discontinued
Businesses') which the Company owned at September 30, 1996, but which upon
completion of the Demerger was sold to Hanson on October 6, 1996.
As part of the Demerger transactions, on the day before the Dividend
Payment Date, the Company entered into an agreement to sell to Hanson, on the
fifth day following the Stock Dividend, the stock and net operating assets of
the Discontinued Businesses of which it had legal ownership for cash aggregating
their fair market value. The Discontinued Businesses consist of the building
materials operations of HMB Holdings Inc. ('Cornerstone') and the materials
handling business of Grove North America ('Grove Worldwide'). Since these
operations will not be part of the Company upon completion of the demerger
transactions, their historical net assets and results of operations have been
presented in the accompanying financial statements as discontinued operations
for all periods presented. Any difference between the proceeds from these
transactions and the underlying carrying value of the net assets of these
operations will be accounted for as a capital transaction and, accordingly, will
not affect the Company's results of operations. See Note 5 for the composition
of the net assets of these operations.
Combined herein are the net operating assets and results of operations of
Suburban Propane ('Suburban') which was acquired as a division of Quantum
Chemical on September 30, 1993. In March 1996, the Company sold a 73.6% interest
in Suburban through an initial public offering of 21,562,500 common units in a
new master limited partnership ('MLP'), Suburban Propane Partners, L.P., and
received aggregate proceeds from the sale of common units and issuance of notes
of the Suburban Propane operating partnership, Suburban Propane, L.P., of
approximately $831 (including approximately $98 of accounts receivable which the
Company retained ownership in at the time of sale),
F-9
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 1 -- BASIS OF PRESENTATION AND DESCRIPTION OF COMPANY -- CONTINUED
resulting in a pre-tax gain of $210. The Company will retain a combined
subordinated and general partnership interest of 26.4% in Suburban Propane
Partners L.P., and Suburban Propane, L.P., and has accounted for this continuing
interest on an equity basis effective January 1, 1996.
The Company provided certain corporate, general and administrative services
to certain other indirect wholly-owned subsidiaries of Hanson ('Affiliates'),
including legal, finance, tax, risk management and employee benefits services.
Charges for these services, which were allocated to the Affiliates based on the
respective revenues of the Company and the Affiliates, reduced the Company's
selling and administrative expense by $14 and $22 for the nine months ended
September 30, 1996 and 1995, respectively, $26 for the year ended December 31,
1995, $35 and $43 for the fiscal years ended September 30, 1994 and 1993,
respectively, and $7 for the three months ended December 31, 1994. The Company's
management believes such method of allocation is reasonable. In addition, a
subsidiary of the Company has controlled, on a centralized basis, all cash
receipts and disbursements received or made by such Affiliates. The net results
of such transactions are included in the combined balance sheets as Invested
Capital.
Hanson acquired the common stock of Quantum Chemical on September 30, 1993
in exchange for consideration consisting of 42 million Hanson American
Depositary Shares ('ADSs'), representing 210 million Hanson ordinary shares
which had a market value at that date of $815. The acquisition of Quantum
Chemical was accounted for under the purchase method and, accordingly, the value
of the purchase consideration of $815 plus the fair market value of Quantum
Chemical's liabilities was allocated to the assets of Quantum Chemical based on
their fair market value. As a result of this allocation, goodwill arose in an
original amount of $2,097, representing the excess of purchase consideration
over the fair value of Quantum Chemical's net assets excluding previously
recorded goodwill. Following the merger all the outstanding common shares of
Quantum Chemical were contributed to a subsidiary of the Company in the form of
additional paid-in-capital valued at approximately $815.
Had the acquisition and related contribution by Hanson of Quantum Chemical
occurred as of the beginning of fiscal 1993, the Company's results of operations
on a pro forma, unaudited basis for fiscal 1993 would have been as follows:
<TABLE>
<S> <C>
Net sales.......................................... $3,194
Net loss........................................... (88)
</TABLE>
The accompanying financial statements at September 30, 1996 and 1995 and
all references made to the amounts for the periods then ended are unaudited and
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission. They include all adjustments which the
Company considers necessary for a fair statement of the results of operations
and financial position for the interim periods presented. Such adjustments
consisted only of normal recurring items except as otherwise disclosed in Notes
4 and 5.
NOTE 2 -- PRO FORMA FINANCIAL DATA (UNAUDITED)
Presented together with the historical Combined Balance Sheet at September
30, 1996 is a pro forma balance sheet of the Company as of that date giving
effect to the completion of a series of transactions in order to effectuate the
Demerger and the recapitalization of the Company assuming completion of the
Tender Offer and issuance of new debt securities. Such transactions include (i)
the transfer of the Non-Chemicals Businesses to Hanson on September 30, 1996 and
the repayment of the Allocated Loan (as defined in Note 7) on October 1, 1996,
(ii) the transfer of the Discontinued Businesses to Hanson and repayment of the
Hanson Loan on October 6, 1996, (iii) a net capital contribution from Hanson
pursuant to the demerger agreements to arrive at debt of the Company, net of
cash and cash equivalents, upon Demerger of $2.017 billion, (iv) 100% acceptance
of the Tender
F-10
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 2 -- PRO FORMA FINANCIAL DATA (UNAUDITED) -- CONTINUED
Offer for the Exchangeable Notes and (v) the issuance of $750 million of new
debt securities. These transactions will change the capitalization of the
Company upon Demerger. The following details the capitalization of the Company
on a historical and pro forma basis as of September 30, 1996.
<TABLE>
<CAPTION>
(IN MILLIONS)
AS OF SEPTEMBER 30, 1996
--------------------------
PRO
ACTUAL FORMA
----- -----
<S> <C> <C>
Short-term debt:
Notes payable........................... $222 $222
Other................................... 11 11
----- -----
Total short-term................... $233 $233
----- -----
----- -----
Long-term debt:
New Credit Facility..................... 300 1,497
Exchangeable Notes...................... 1,036 --
New Senior Notes and Debentures......... -- 750
Allocated Loan.......................... 2,250 --
Other................................... 64 36
----- -----
Total long-term debt............... $3,650 $2,283
----- -----
----- -----
Stockholders' equity:
Preferred Stock, 25,000,000 shares, par
value $.01 per share, authorized; none
issued and outstanding................. -- --
Common Stock, 225,000,000 shares, par
value $.01 per share, authorized;
77,324,605 shares issued and
outstanding (as adjusted).............. -- 1
Paid-in capital......................... -- 1,296
Invested capital........................ 501 --
----- -----
Total stockholders' equity......... $501 $1,297
----- -----
----- -----
</TABLE>
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES
Year End: Prior to January 1, 1995, the fiscal year of the Company's
subsidiaries ended on the Saturday nearest to September 30 and is designated
herein as having ended on September 30 for the convenience of reference.
Effective January 1, 1995, the Company's reporting period was changed to a
calendar year to conform with the business year most prevalent in the Chemical
industry. Accordingly, interim December 31, 1994 data contained herein reflects
results of operations for the 13 week period ended on the Saturday closest to
December 31, and is designated as December 31 for convenience of reference.
Operating results for the three months ending December 31, 1993 were as
follows:
<TABLE>
<CAPTION>
(UNAUDITED)
<S> <C>
Sales.......................................... $ 789
Operating income............................... 67
Net income..................................... 17
</TABLE>
During the three months ended December 31, 1993 (unaudited) cash and cash
equivalents used for continuing operations and investing activities were $477
and $16, respectively. Cash and cash equivalents provided by financing
activities were $425. The net effect of these activities resulted in cash and
cash equivalents decreasing from $544 at September 30, 1993 to $476 at December
31, 1993.
F-11
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
The reporting year end of the Discontinued Businesses which will be
transferred to Hanson on the fifth day following the Stock Dividend has been and
will continue to be upon demerger September 30. Accordingly, the financial
position and results of operations for these businesses have been included in
the combined financial statements of the Company using their fiscal reporting
periods and thereby reflecting a three-month lag to the Company's reporting
period beginning with the period ending December 1994.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amount of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Cash and Cash Equivalents: Cash and Cash equivalents include investments in
short-term deposits and commercial paper with banks which have original
maturities of ninety days or less. Approximately $327 at September 30, 1996 is
represented by sterling denominated deposits carried at then current exchange
rates. In addition, investments and other assets include approximately $111 in
restricted cash at September 30, 1996.
Trade Receivables: Trade receivables consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------
1996 1995 1994
------------- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Trade receivables........................ $ 522 $518 $530
Allowance for doubtful accounts.......... (8) (16) (15)
------ ---- ----
$ 514 $502 $515
------ ---- ----
------ ---- ----
</TABLE>
Inventories: Inventories are stated at the lower of cost or market value.
For certain U.S. operations cost is determined under the last-in, first-out
(LIFO) method. The first-in, first out (FIFO) method is used by all other
subsidiaries. Inventories valued on a LIFO basis were approximately $30, $22 and
$17 less than the amount of such inventories valued at current cost at September
30, 1996 and December 31, 1995 and 1994, respectively.
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------
1996 1995 1994
------------- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Finished products........................ $ 234 $337 $261
In-Process products...................... 13 17 19
Raw materials............................ 146 144 138
Other inventories........................ 61 56 44
------ ---- ----
$ 454 $554 $462
------ ---- ----
------ ---- ----
</TABLE>
Property, Plant and Equipment: Property, plant and equipment is stated on
the basis of cost. Depreciation is provided by the straight-line method over the
estimated useful lives of the assets, generally 20 to 40 years for buildings and
5 to 25 years for machinery and equipment.
F-12
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------
1996 1995 1994
------------- ------ ------
(UNAUDITED)
<S> <C> <C> <C>
Land and buildings......................................... $ 285 $ 341 $ 313
Machinery and equipment.................................... 2,472 2,612 2,364
Leasehold improvements..................................... 4 6 6
------------- ------ ------
2,761 2,959 2,683
Allowance for depreciation and amortization................ 784 697 530
------------- ------ ------
$ 1,977 $2,262 $2,153
------------- ------ ------
------------- ------ ------
</TABLE>
Goodwill: Goodwill represents the excess of the purchase price over the
fair value of assets allocated to acquired companies including $2,097 and $94
originally allocated to Quantum Chemical and SCM Chemicals, respectively.
Goodwill is being amortized using the straight-line method over forty years.
Management periodically evaluates goodwill for impairment based on the
anticipated future cash flows attributable to its operations. Such expected cash
flows, on an undiscounted basis, are compared to the carrying value of the
tangible and intangible assets, and if impairment is indicated, the carrying
value of goodwill is adjusted. In the opinion of management, no impairment of
goodwill exists at September 30, 1996. Accumulated amortization aggregated $164,
$149 and $96 at September 30, 1996, December 31, 1995 and 1994, respectively.
Amortization of goodwill amounted to $35 and $44 for the nine months ended
September 30, 1996 and 1995, respectively, $58 for the year ended December 31,
1995, $58 and $3 for the fiscal years ended September 30, 1994 and 1993,
respectively, and $14 for the three months ended December 31, 1994.
Environmental Liabilities and Expenditures: Accruals for environmental
matters are recorded in operating expenses when it is probable that a liability
has been incurred and the amount of the liability can be reasonably estimated.
Accrued liabilities are exclusive of claims against third parties (except where
payment has been received or the amount of liability or contribution by such
other parties, including insurance companies, has been agreed) and are not
discounted. In general, costs related to environmental remediation are charged
to expense. Environmental costs are capitalized if the costs increase the value
of the property and/or mitigate or prevent contamination from future operations.
Foreign Currency Translation: Assets and liabilities of the Company's
foreign subsidiaries are translated at the exchange rates in effect at the
balance sheet dates, while revenue, expenses and cash flows are translated at
average exchange rates for the reporting period. Translation gains and losses
are reported as a component of Invested Capital in the combined balance sheets.
Gains (losses) resulting from foreign currency transactions are included in
Other expense, net and aggregated $3.0 for the nine months ended September 30,
1996, $12.9 for the year ended December 1995, $2.3 and $2.0 for the fiscal years
ended September 30, 1994 and 1993, respectively, and ($1.0) for the three months
ended December 31, 1994.
Federal Income Taxes: Deferred tax assets and liabilities are computed
based on the difference between the financial statement and income tax bases of
assets and liabilities using the enacted marginal tax rate. Deferred income tax
expenses or credits are based on the changes in the asset or liability from
period to period.
The United States earnings of the Company have been included in the
consolidated federal income tax return filed by Hanson's ultimate U.S. parent
which will be a subsidiary of the Company following the Demerger and which is
combined herein. Pursuant to an informal tax allocation agreement, the Company
provided for income taxes as if it filed separate income tax returns.
Accordingly, the Company has not reflected in the historical financial
statements certain tax benefits arising out of the
F-13
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
consolidated tax group (including certain predecessor entities, the
'Consolidated Group') that will become allocable to the Company once the
Demerger is completed.
Upon completion of the Demerger, certain other operations of Hanson
previously included in the Consolidated Group will no longer qualify to be
members of the Consolidated Group and, accordingly, will file the applicable
income tax returns in the appropriate jurisdictions. The Company and certain of
its subsidiaries will enter into tax sharing and indemnification agreements with
Hanson or its subsidiaries in which the Company and/or its subsidiaries
generally will agree to indemnify Hanson or its subsidiaries for income tax
liabilities attributable to periods when such other operations were included in
the consolidated tax returns of the Consolidated Group.
Dual Residence: The Company is organized under the laws of Delaware and is
subject to United States federal income taxation of corporations. However, in
order to obtain clearance from the U.K. Inland Revenue as to the tax-free
treatment of the Stock Dividend for U.K. tax purposes for Hanson and Hanson
shareholders, Hanson agreed with the U.K. Inland Revenue that the Company will
continue to be centrally managed and controlled in the United Kingdom for at
least five years following the Dividend Payment Date. Hanson also agreed with
the U.K. Inland Revenue that the Company's Board of Directors will be the only
medium through which strategic control and policy making powers are exercised,
and that board meetings almost invariably will be held in the United Kingdom
during such five-year period. In the agreement to effect the Demerger, the
Company will agree not to take, or fail to take, during such five-year period,
any action that would result in a breach of, or constitute non-compliance with,
any of the representations and undertakings made by Hanson in Hanson's agreement
with the U.K. Inland Revenue. The Company's By-Laws provide for similar
constraints.
Hanson's agreement with the U.K. Inland Revenue provides that if at any
time during the five-year period following the Dividend Payment Date, the
Company ceases to be regarded as centrally managed and controlled in the United
Kingdom, the Stock Dividend will no longer be regarded as tax-free to Hanson
under U.K. law (although the Stock Dividend will continue to be treated as
tax-free under U.K. law to Hanson shareholders). The Company will indemnify
Hanson against any liability and penalties arising out of a breach of the
agreement between Hanson and the U.K. Inland Revenue referred to in the
preceding paragraph. The Company and Hanson estimate that, if such
indemnification obligation were to arise immediately after the Dividend Payment
Date, it would amount to approximately $421.
If the Company ceases to be a U.K. tax resident at any time, the Company
will be deemed for purposes of U.K. corporation tax on chargeable gains to have
disposed of all of its assets at such time. In such a case, the Company would be
liable for U.K. corporation tax on chargeable gains on the amount by which the
fair market value of those assets at the time of such deemed disposition exceeds
the Company's tax basis in those assets. The tax basis of the assets would be
calculated in pounds sterling, based on the fair market value of the assets (in
pounds sterling at the time of acquisition of the assets by the Company)
adjusted for U.K. inflation. Accordingly, in such circumstances, the Company
could incur a tax liability even though it has not actually sold the assets and
even though the underlying value of the assets may not have actually appreciated
(due to currency movements). Since it is impossible to predict the future value
of the Company's assets, currency movements and inflation rates, it is
impossible to predict the magnitude of such liability, should it arise.
Research and Development: The cost of research and development efforts is
expensed as incurred. Such costs aggregated $31 and $31 for the nine months
ended September 30, 1996 and 1995, respectively, $42 for the year ended December
31, 1995, $46 and $7 for the fiscal years ended September 30, 1994 and 1993,
respectively, and $9 for the three months ended December 31, 1994.
Fair Value of Financial Instruments: The fair value of all short-term
financial instruments are estimated to approximate their carrying value because
of their short maturity. The Company has from
F-14
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
time to time utilized forward exchange contracts, currency swaps or other
derivative products to hedge its risk in foreign or other operations.
Earnings Per Share: Historical earnings per share are not presented because
there is no separate identifiable pool of capital for the periods prior to
incorporation upon which a per share calculation could be based.
Long-Term Incentive Plan: The Company has adopted a Stock Incentive Plan
for the purpose of enhancing the profitability and value of the Company for the
benefit of its stockholders. A maximum of 3,909,000 shares of Common Stock may
be issued or used for reference purposes pursuant to the Stock Incentive Plan.
The Stock Incentive Plan provides for the following types of awards: (i)
stock options, including incentive stock options and non-qualified stock
options; (ii) stock appreciation rights; (iii) restricted stock; (iv)
performance units; and (v) performance shares. On October 8, 1996, the
Compensation Committee of the Company's Board of Directors awarded restricted
stock having an undiscounted fair market value on the date of grant of
approximately $65 to 32 executive officers. The vesting schedule for the award
is as follows: (i) three equal tranches aggregating 25% of the total award will
vest in each of October 1999, 2000 and 2001; and (ii) three equal tranches
aggregating 75% of the total award will be subject to the achievement of
'economic value added' performance criteria to be established by the
Compensation Committee for each of three performance cycles commencing January
1, 1997 and ending December 31, 1999, 2000 and 2001, respectively. If and to the
extent such criteria are achieved, half of the 25% tranche relating to a
particular performance cycle of the award will vest immediately and the
remainder will vest in five equal annual installments commencing on the first
anniversary of the end of the cycle.
In addition to the initial awards of restricted stock to the above
officers, it is expected that the Compensation Committee, upon recommendation of
management, annually will make awards of restricted stock to senior managers of
the Company that employs the same 'economic value added' performance concepts.
NOTE 4 -- IMPAIRMENT OF LONG-LIVED ASSETS AND RELATED CLOSURE COSTS
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 (SFAS 121), 'Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of.' SFAS 121
established guidelines for reviewing recoverability of long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Impairment losses under SFAS 121 are measured by comparing the
estimated fair value of the assets to their carrying amount. Except for certain
assets of one of the Discontinued Businesses to be sold to Hanson, the effect of
adoption was not material. (See Note 5 -- Net Assets of Discontinued Business to
be Sold to Hanson).
During the nine months ended September 30, 1996, the Company recorded a $60
non-cash charge ($39 after-tax) to reduce the carrying value of certain
property, plant and equipment employed in sulfate-process manufacturing of TiO2
caused by changes in current market conditions. Intense price competition has
been experienced, and is expected to continue as customers of the anatase
products associated with the sulfate-process operations seek more cost efficient
manufacturing inputs to their applications. As a result of the deterioration of
market conditions in the TiO2 industry, in July 1996 the Company decided to
implement a program which includes a reduction of its sulfate-process
manufacturing capacity both in the UK and US, rephasing chloride-process
expansion programs in the UK and Australia and announced increases in global
selling prices for TiO2. The 10,000 tonne sulfate-process plant in
Stallingborough, England will be closed and production at its 66,000 tonne
F-15
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 4 -- IMPAIRMENT OF LONG-LIVED ASSETS AND RELATED CLOSURE COSTS -- CONTINUED
sulfate-process facility in Baltimore, Maryland will be reduced by approximately
one-third. The carrying value of plant and equipment associated with
sulfate-process manufacturing was reduced by $60 in the nine months ended
September 30, 1996 as a result of evaluating the recoverability of such assets
under the unfavorable market conditions existing at that time. In addition, $15
of closure costs associated with the implementation of this plan have been
accrued in the quarter ended September 30, 1996. The amount of the write-down
was determined by comparison to the fair value of the related assets as
determined based on the projected discounted cash flows identified to such
assets. If market conditions continue to deteriorate, it may be necessary to
further reduce operations at the Baltimore facility and accrue for additional
closure costs.
NOTE 5 -- NET ASSETS OF DISCONTINUED BUSINESSES TO BE SOLD TO HANSON
Net assets of Discontinued Businesses to be sold to Hanson include the
historical net assets of the Cornerstone and Grove Worldwide businesses which
are not intended to be a part of the Company following the demerger
transactions. Cornerstone is engaged in the production and sale of aggregates
products and concrete and in construction contracting. Grove Worldwide's
business is the manufacture and sale of hydraulic cranes. The stock and net
assets of such companies will be sold to Hanson on the fifth day following the
Stock Dividend and accordingly have been reflected herein as Discontinued
Operations. (See Note 1.) In January 1996, Hanson announced its plan to demerge
the Chemicals Businesses; such plan includes the sale of the Discontinued
Businesses by the Company. Because adoption of SFAS 121 on January 1, 1996
precedes the date this plan was announced, the SFAS 121 charge predates the date
at which such businesses may be accounted for as discontinued operations under
APB 30. As presented in the accompanying combined balance sheets, the historical
net assets of these businesses are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------
1996 1995 1994
------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Current assets............................................. $ 738 $ 710 $ 584
Non-current assets......................................... 2,078 7,126 7,126
Current liabilities........................................ (378) (364) (346)
Non-current liabilities.................................... (1,821) (3,700) (3,607)
------------- ------- -------
Net assets of Discontinued Businesses to be sold to
Hanson................................................... $ 617 $ 3,772 $ 3,757
------------- ------- -------
------------- ------- -------
</TABLE>
The following represents the results of operations of the Discontinued
Businesses.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED
--------------------------------------- DECEMBER 31,
1996 1995 1995
----------------- ------------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Sales......................... $ 1,444 $1,216 $1,722
-------- ------- ------------
Pre-tax (loss) income......... (4,436) 3 40
Tax (benefit) provision....... (1,269) 3 22
-------- ------- ------------
Net (loss) income............. $(3,167) $ 0 $ 18
-------- ------- ------------
-------- ------- ------------
<CAPTION>
FISCAL YEAR
ENDED SEPTEMBER 30,
-----------------------------
1994 1993
--------- -----------------
<S> <C> <C>
Sales.........................$ 1,589 $ 1,835
--------- -------
Pre-tax (loss) income......... 39 43
Tax (benefit) provision....... 11 23
--------- -------
Net (loss) income.............$ 28 $ 20
--------- -------
--------- -------
</TABLE>
As discussed in Note 4, on January 1, 1996, the Company adopted SFAS 121,
'Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of.' Prior to the adoption of this pronouncement, asset impairment
was evaluated at an operating company level based on the contribution of
operating profits and undiscounted cash flows being generated from those
operations. Under this policy, assets used in Cornerstone's operations, which
are comprised of approximately 20 separate operating companies, were evaluated
for impairment based on gross margins and cash flows
F-16
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 5 -- NET ASSETS OF DISCONTINUED BUSINESSES TO BE SOLD TO
HANSON -- CONTINUED
generated by each separate operating company in a given business cycle.
Evaluation of Cornerstone's assets at this level does not result in any
impairment.
SFAS 121 requires the impairment review to be performed at the lowest level
of asset grouping for which there are identifiable cash flows which represents a
change from the level at which the previous accounting policy measured
impairment. In the case of Cornerstone, economic groupings of assets were made
based on local marketplaces and could consist of both active and inactive quarry
operations and hot mix asphalt facilities managed together as a single operating
unit. Evaluation of assets at this lower grouping level indicated an impairment
of certain of those assets. The impairment loss was measured based on the
difference between estimated discounted cash flows and the carrying value of
such assets. Considerable management judgement is necessary to estimate
discounted future cash flows and, accordingly, actual results could vary
significantly from such estimates.
The initial non-cash charge resulting from adopting the evaluation
methodology provided by SFAS 121, was $4,497 ($3,206 after income taxes),
principally related to certain of Cornerstone's aggregate related assets.
NOTE 6 -- INCOME TAXES
Combined income from continuing operations before income taxes consists of
the following:
<TABLE>
<CAPTION>
NINE MONTHS FISCAL YEAR
ENDED SEPTEMBER 30, YEAR ENDED THREE MONTHS ENDED SEPTEMBER 30,
----------------------- DECEMBER 31, ENDED DECEMBER 31, ------------------------
1996 1995 1995 1994 1994 1993
----------- -------- ------------ ------------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Pretax income
United States......... $ 251 $401 $473 $133 $ 102 $122
Foreign............... 19 63 81 10 29 29
----------- -------- ------ ------ ---------- ----------
$ 270 $464 $554 $143 $ 131 $151
----------- -------- ------ ------ ---------- ----------
----------- -------- ------ ------ ---------- ----------
</TABLE>
The components of income taxes are:
<TABLE>
<CAPTION>
NINE MONTHS FISCAL YEAR
ENDED SEPTEMBER 30, YEAR ENDED THREE MONTHS ENDED SEPTEMBER 30,
----------------------- DECEMBER 31, ENDED DECEMBER 31, ------------------------
1996 1995 1995 1994 1994 1993
----------- -------- ------------ ------------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Federal
Current............... $ 73 $ 90 $145 $ 27 $ (127) $ 1
Deferred.............. (1,209) 69 54 30 188 45
Foreign income taxes....... 9 21 29 4 8 14
State and local income
taxes.................... 25 11 17 3 7 11
----------- -------- ------ ------ ---------- ----------
$(1,102) $191 $245 $ 64 $ 76 $ 71
----------- -------- ------ ------ ---------- ----------
----------- -------- ------ ------ ---------- ----------
</TABLE>
Income taxes are included in the financial statements as follows:
<TABLE>
<CAPTION>
NINE MONTHS FISCAL YEAR
ENDED SEPTEMBER 30, YEAR ENDED THREE MONTHS ENDED SEPTEMBER 30,
----------------------- DECEMBER 31, ENDED DECEMBER 31, ------------------------
1996 1995 1995 1994 1994 1993
----------- -------- ------------ ------------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Continuing Operations...... $ 167 $188 $223 $ 59 $ 65 $ 48
Discontinued Operations.... (1,269) 3 22 5 11 23
----------- -------- ------ --- --- ---
$(1,102) $191 $245 $ 64 $ 76 $ 71
----------- -------- ------ --- --- ---
----------- -------- ------ --- --- ---
</TABLE>
F-17
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 6 -- INCOME TAXES -- CONTINUED
The Company's effective income tax rate differs from the amount computed by
applying the statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
NINE MONTHS FISCAL YEAR
ENDED SEPTEMBER 30, YEAR ENDED THREE MONTHS ENDED SEPTEMBER 30,
---------------------- DECEMBER 31, ENDED DECEMBER 31, -----------------------
1996 1995 1995 1994 1994 1993
----------- -------- ------------ ------------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Statutory federal income tax rate... 35.0% 35.0% 35.0% 35.0% 35.0% 34.0%
Basis difference relating to
Suburban.......................... 21.4 -- -- -- -- --
State and local income taxes, net of
federal benefit................... 6.1 4.4 4.2 4.5 3.0 2.2
Provision for nondeductible
expenses, primarily goodwill
amortization...................... 4.8 3.7 4.0 3.4 15.8 0.5
Non-taxable foreign interest
income............................ (2.5) (1.2) (1.2) (1.2) (4.2) (5.0)
Utilization of net operating
losses............................ (7.2) (4.6) (3.3) (4.0) -- --
Other............................... 4.3 3.2 1.6 3.6 (0.7) 0.2
----------- -------- ----- ----- ----- -----
Effective income tax rate for
continuing operations............. 61.9 40.5 40.3 41.3 48.9 31.9
----------- -------- ----- ----- ----- -----
----------- -------- ----- ----- ----- -----
Discontinued operations effective
income tax rate................... 28.6 98.7 55.4 29.4 28.3 53.9
----------- -------- ----- ----- ----- -----
----------- -------- ----- ----- ----- -----
</TABLE>
The difference between the effective income tax rate on discontinued
operations and the statutory federal income tax rate primarily relates to
non-deductible goodwill amortization and tax depletion.
Deferred income taxes reflect the net tax effects of tax attributes and
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------
1996 1995 1994
------------- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Environmental and legal obligations................................. $ 37 38 26
Other postretirement benefits and pension obligations............... 118 118 116
Net operating loss carryforwards.................................... -- 70 115
Other accruals...................................................... 128 111 112
------ ---- ----
Total deferred tax assets...................................... 283 337 369
------ ---- ----
Deferred tax liabilities:
Excess of book over tax basis in property, plant and equipment...... 392 470 467
Other............................................................... 116 28 28
------ ---- ----
Total deferred tax liabilities................................. 508 498 495
------ ---- ----
Net deferred tax liabilities ($10 in 1995 and 1994 classified
in current assets)........................................... $ 225 $161 $126
------ ---- ----
------ ---- ----
</TABLE>
Certain of the federal income tax returns of the Consolidated Group and
certain of the state income tax returns of the Company's subsidiaries are
currently under examination by the Internal Revenue Service. In the opinion of
management, any assessments which may result will not have a material adverse
effect on the financial condition or results of operations of the Company.
F-18
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 7 -- LONG-TERM DEBT AND CREDIT ARRANGEMENTS
The debt included in the combined balance sheets reflects the obligations
directly related to the Company. Excluded from such amounts are other
obligations which, upon the Demerger, are not anticipated to carryover to the
Company as a separate entity.
The detail of long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------
1996 1995 1994
------------- ------ ------
(UNAUDITED)
<S> <C> <C> <C>
New credit facility.................................................. $ 300 -- --
2.39% Senior Exchangeable Discount Notes, Due 2001 (net of
unamortized discount of $219, $251 and $291)....................... 1,036 $1,004 $ 964
Allocated Loan bearing interest at 7.0% Due 2003..................... 2,250 2,250 2,250
Debt payable through 2007 at interest rates ranging from 4% to 11%... 75 61 65
Less current maturities of long-term debt............................ (11) (11) (5)
------------- ------ ------
$ 3,650 $3,304 $3,274
------------- ------ ------
------------- ------ ------
</TABLE>
The Issuer (as defined in Note 12) and the Company, as guarantor, entered
into a Credit Agreement, dated as of July 26, 1996 (the 'Credit Agreement'),
with Bank of America National Trust and Savings Association, as administrative
agent ('Bank of America'), The Chase Manhattan Bank, as documentation agent, and
various participating banks and other institutional lenders for the provision of
a credit facility (the 'Credit Facility') to the Issuer and certain other
Company subsidiaries designated from time to time by the Company (together with
the Issuer, the 'Borrowing Subsidiaries').
The Credit Facility consists of a five-year unsecured revolving credit
facility in an amount up to $2.25 billion. Borrowings under the Credit Facility
may consist of standby loans (i.e., committed revolving credit loans) or
uncommitted competitive loans offered by syndicated banks through an auction
mechanism (or both, at the option of the respective Borrowing Subsidiary).
Standby loans and competitive loans may be borrowed in either U.S. dollars or
other currencies. The proceeds of the Credit Facility may be used to provide
working capital to the Borrowing Subsidiaries and for general corporate purposes
of the Borrowing Subsidiaries, including the repurchase of Exchangeable Notes
pursuant to the Tender Offer or otherwise. Certain proceeds were previously used
for repayment of portions of the Company's indebtedness to Hanson.
The interest rates under the standby loans are based upon, at the option of
the respective Borrowing Subsidiaries, (i) the London interbank offered rate
('LIBOR'), (ii) the New York interbank offered rate ('NIBOR') or (iii) in the
case of U.S. dollar loans, the higher of Bank of America's prime rate or the
federal funds rate plus 0.5% ('ABR'). Interest rates based on LIBOR or NIBOR
will be increased by a spread of between 13.5 and 47.5 basis points depending
upon the actual ratings (the 'Ratings') by Standard & Poor's Ratings Group and
Moody's Investors Service Inc. of senior unsecured non-credit enhanced long-term
debt issued by the Issuer and guaranteed by the Company (or issued directly by
the Company) or, if there is no such debt, the indicative rating of the Company
by such rating agencies. Based on the current Ratings, the spread over LIBOR is
presently 27.5 basis points. No spread is charged on ABR loans. The interest
rates under the competitive loans will be obtained from those bids selected by
the applicable Borrowing Subsidiary.
A commitment fee is payable to the lenders under the Credit Facility on the
aggregate amount of the commitments, whether used or unused, at a rate per annum
of between 6.5 and 25 basis points depending upon the Ratings. Loans under the
Credit Facility may be repaid and then reborrowed. Based on the current Ratings,
the commitment fee is presently 15 basis points.
F-19
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 7 -- LONG-TERM DEBT AND CREDIT ARRANGEMENTS -- CONTINUED
During March 1994, one of the Company's subsidiaries issued $1,255 of 2.39%
Senior Exchangeable Discount Notes Due 2001. The notes were issued at an
original issue discount to par ('OID') of 20.326%, reflecting an issue price of
$796.74 per $1,000 principal amount at maturity. The stated interest rate of
2.39% per annum combined with the implicit interest yield attributable to the
OID represent a yield to maturity of 6.0%. The notes are not callable until
March 1, 1999. The aggregate net proceeds from this issue were approximately
$988, of which approximately $923 was paid to the Company for the notes and the
difference (less expenses) was paid to an affiliate in consideration of the
grant of the ADS Rights described below and considered part of the OID. Each
holder of a note has a benefit of a right (an 'ADS Right'), not separately
tradeable, which is exercisable at the holder's option until March 1, 2001 to
cause the holder's notes to be exchanged for ADSs, with each ADS representing
five ordinary shares of 25 pence in the capital of Hanson, currently set at
33.741 ADSs per $1,000 principal amount of maturity of the notes. The ADS Rights
are exercisable through an affiliate of Hanson. As a consequence of the
Demerger, the Company's subsidiary is obligated under the provisions of the
indenture governing such notes to provide a notice to the holders of the notes
specifying that it will repurchase notes from holders who exercise their
'change-in-control rights' under the indenture for cash at 101% of their
accreted value plus accrued interest. (See Note 13 -- Subsequent Events)
In conjunction with the acquisition of Quantum Chemical, a subsidiary of
the Company established a long term financing agreement with Hanson under which
$2,250 was borrowed in October 1993 ('Allocated Loan'). The agreement, as
amended, provides for such borrowings to be repaid in October 2003, and bears
interest at 7.0% per annum payable annually. The proceeds from this funding as
well as other available funds were used to repurchase approximately $2,657 of
Quantum Chemical debt and pay related expenses.
On September 30, 1996, December 31, 1995 and 1994, the Company had
outstanding notes payable of $222, $113 and $247, respectively, bearing interest
at average rates of approximately 6.1% with maturities of thirty days or less.
At September 30, 1996, the Company and its subsidiaries had outstanding
standby letters of credit amounting to $90.
The maturities of long-term debt during the next five years are as follows:
1996 -- $11, 1997 -- $33, 1998 -- $13, 1999 -- $2, and 2000 -- $17.
Interest paid for the nine months ended September 30, 1996, the year ended
December 31, 1995, fiscal years ended September 30, 1994 and 1993, and the three
months ended December 31, 1994 was $35, $380, $275, $14 and $4, respectively.
NOTE 8 -- PENSION AND OTHER POSTRETIREMENT BENEFITS
Domestic Pension Plans: The Company has several noncontributory defined
benefit pension plans covering substantially all its U.S. employees. The
benefits for these plans are based primarily on years of credited service and
average compensation as defined under the respective plan provisions. The
Company's funding policy is to contribute amounts to the plans sufficient to
meet the minimum funding requirements set forth in the Employee Retirement
Income Security Act of 1974, plus such additional amounts as the Company may
determine to be appropriate from time to time.
The Company also sponsors defined contribution plans for its salaried and
certain union employees. Contributions relating to defined contribution plans
are made based upon the respective plans' provisions.
The components of net periodic pension cost for continuing operations for
the Company's U.S. defined benefit plans and the total contributions charged to
pension expense for the Company's U.S. defined contribution plans are as
follows:
F-20
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 8 -- PENSION AND OTHER POSTRETIREMENT BENEFITS -- CONTINUED
<TABLE>
<CAPTION>
FISCAL YEAR
THREE MONTHS ENDED
YEAR ENDED ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, -----------------
1995 1994 1994 1993
------------- ------------ ----- ------
<S> <C> <C> <C> <C>
Defined benefit plans:
Service cost -- benefit earned during the
period..................................... $ 15 $ 3 $ 16 $ 6
Interest cost on projected benefit
obligation................................. 54 14 56 22
Actual return on plan assets................. (79) (11) (83 ) (34)
Net amortization and deferral................ -- (8) -- 8
Curtailment gain............................. -- (1) (2 ) (1)
----- ----- ----- ------
Net periodic pension (income) expense for
defined benefit plans...................... (10) (3) (13 ) 1
Defined contribution plans........................ 4 1 4 2
----- ----- ----- ------
Total pension (income) expense.......... $ (6) $ (2) $ (9 ) $ 3
----- ----- ----- ------
----- ----- ----- ------
</TABLE>
Assumptions used in the actuarial calculations relating to the defined
benefit plans were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Weighted-average discount rates............................................ 7.50% 8.50%
Rates of increase in compensation levels................................... 4.25 5.25
Expected long-term rate of return on assets................................ 9.00 9.00
</TABLE>
The following table sets forth the funded status and amounts recognized in
the combined balance sheets for the Company's U.S. defined benefit pension
plans:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
-------------------------- --------------------------
PLANS WHOSE PLANS WHOSE PLANS WHOSE PLANS WHOSE
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.......................... $(632) $ (51) $(556) $ (41)
Nonvested benefit obligation....................... (21) (5) (19) (4)
----------- ----- ----------- -----
Accumulated benefit obligation.......................... $(653) $ (56) $(575) $ (45)
----------- ----- ----------- -----
----------- ----- ----------- -----
Projected benefit obligation............................ (703) (60) (621) (49)
Plan assets at fair value............................... 865 36 784 31
----------- ----- ----------- -----
Projected benefit obligation less than (in excess) of
plan assets........................................... 162 (24) 163 (18)
Add (deduct):
Unrecognized prior service cost.................... (2) 6 (1) 3
Unrecognized net (gain) loss....................... 15 3 1 (2)
Unrecognized net asset at date of adoption, net of
amortization..................................... (1) -- (3) --
Adjustment required to recognize minimum
liability........................................ -- (6) -- (1)
----------- ----- ----------- -----
Prepaid (accrued) pension costs (included in Investments
and other assets)..................................... $ 174 $ (21) $ 160 $ (18)
----------- ----- ----------- -----
----------- ----- ----------- -----
</TABLE>
F-21
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 8 -- PENSION AND OTHER POSTRETIREMENT BENEFITS -- CONTINUED
The plans' assets are primarily included in a master trust, which
principally invests in listed stocks and bonds, including ordinary shares of
Hanson (including ordinary shares represented by ADSs) which, at market value,
comprise 2.5% and 2.7% of the master trust's assets at December 31, 1995 and
1994, respectively.
Postretirement Benefits: The Company provides unfunded health care and life
insurance benefits to certain groups of retirees. In 1994, the Company adopted
Financial Accounting Standards Board SFAS No. 106, 'Employers' Accounting for
Postretirement Benefits Other Than Pensions.' Adoption of SFAS 106 did not have
a material effect on the Company's financial statements as the Company had
provided for the unfunded obligation for other post-employment benefits as part
of its accounting for certain business combinations.
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
THREE MONTHS FISCAL YEAR
YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1994 1994
------------ ------------ -------------
<S> <C> <C> <C>
Service cost................................... $ 3 $ 1 $ 3
Interest cost.................................. 9 2 10
--- --- ---
Net periodic postretirement benefit cost....... $ 12 $ 3 $13
--- --- ---
--- --- ---
</TABLE>
The following table presents the plan's unfunded status reconciled with
amounts recognized in the Company's combined balance sheets:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1994
----- -----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.......................................................................... $(253) $(249)
Fully eligible active plan participants........................................... (38) (20)
Other active plan participants.................................................... (14) (43)
----- -----
Accumulated postretirement benefit obligation..................................... (305) (312)
Unrecognized net gain.................................................................. (30) (23)
----- -----
Accumulated postretirement benefit obligation (included in other liabilities).......... $(335) $(335)
----- -----
----- -----
</TABLE>
The weighted average annual assumed rates of increase in the health care
cost trend rate is 9.4%-12.5% and is assumed to decrease .5% a year to
5.0%-6.0%. The effect of increasing the assumed health care cost trend rates by
1% in each year would increase the accumulated postretirement benefit obligation
as of December 31, 1995 by $35 and the aggregate of service and interest
components of net periodic postretirement benefit cost for 1995 by $1.
The weighted average discount rate used in determining the accumulated post
retirement benefit obligation was 7.5% and 8.5% at December 31, 1995 and 1994,
respectively.
Foreign Benefit Arrangements: Pension and other employee benefits of the
Company's foreign subsidiaries are primarily provided by government sponsored
plans and are being accrued currently over the period of active employment. Such
amounts are not material.
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
The Company's Chemicals business is subject, among other things, to several
proceedings under the Federal Comprehensive Environmental Response Compensation
and Liability Act and other federal and state statutes or agreements with third
parties. These proceedings are in various stages ranging from
F-22
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 9 -- COMMITMENTS AND CONTINGENCIES -- CONTINUED
initial investigation to active settlement negotiations to implementation of the
clean-up or remediation of sites.
Additionally, certain of the Company's subsidiaries are defendants or
plaintiffs in lawsuits that have arisen in the normal course of business
including those relating to commercial transactions and product liability. While
certain of the lawsuits involve allegedly significant amounts, it is
management's opinion, based on the advice of counsel, that the ultimate
resolution of such litigation will not have a material adverse effect on the
Company's financial position or results of operations.
The Company believes that the range of potential liability for the above
matters, collectively, which primarily relates to environmental remediation
activities, is between $130 and $180 and has accrued $180 as of September 30,
1996.
The Company has various contractual obligations to purchase raw materials
used in its production of polyethylene, titanium dioxide and fragrance
chemicals. Commitments to purchase ethylene used in the production of
polyethylene are based on market prices and expire from 1996 through 2000.
Commitments to purchase ore used in the production of titanium dioxide are
generally three to eight year contracts with competitive prices generally
determined at a fixed amount subject to escalation for inflation. Total
commitments to purchase ore aggregate approximately $1,300 for titanium dioxide
and expire between 1997 and 2002. Commitments to acquire crude sulfate
turpentine, used in the production of fragrance and flavor chemicals, are
generally pursuant to one to five year contracts with prices based on the market
price and which expire from 1996 through 2000.
Certain of the Discontinued Businesses have also been named as defendants,
PRPs or both in environmental proceedings or have contractual liabilities to
indemnify the purchasers of certain environmental liabilities. Hanson or a
Hanson subsidiary will agree to indemnify the Company against any losses
relating to such liabilities.
NOTE 10 -- LEASES
Rental expense for operating leases is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED ENDED SEPTEMBER 30,
---------------------------- DECEMBER 31, DECEMBER 31, ------------------------
1996 1995 1995 1994 1994 1993
------------- ------------- ------------ ------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Minimum rentals................. $ 38 $ 32 $ 59 $15 $ 56 $ 4
</TABLE>
Future minimum rental commitments under noncancellable operating leases as
of December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996................................................................ $50
1997................................................................ 42
1998................................................................ 33
1999................................................................ 27
2000................................................................ 14
Thereafter.......................................................... 14
</TABLE>
NOTE 11 -- OPERATIONS BY INDUSTRY SEGMENTS AND GEOGRAPHIC AREA
The Company's principal operations (excluding its interest in Suburban
Propane) will be grouped into five business segments: polyethylene and related
products, acetyls and alcohol and specialty polymer products, which are produced
by Quantum Chemical; TiO2 and related products, which are produced by SCM
Chemicals; and fragrance and flavor chemicals, which are produced by Glidco.
F-23
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 11 -- OPERATIONS BY INDUSTRY SEGMENTS AND GEOGRAPHIC AREA -- CONTINUED
The following is a summary of the Company's continuing operations by
industry segment and geographic area:
<TABLE>
<CAPTION>
NINE MONTHS FISCAL YEAR
ENDED THREE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED ENDED SEPTEMBER 30,
---------------- DECEMBER 31, DECEMBER 31, --------------------
1996 1995 1995 1994 1994 1993
------ ------ ------------ ------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
NET SALES:
Quantum Chemical(1):
Polyethylene and related
products....................... $ 944 $1,115 $1,374 $ 327 $ 1,061 $ --
Acetyls and alcohol.............. 294 366 461 105 347 --
Specialty polymer products....... 274 271 363 82 318 --
------ ------ ------------ ------------ ------- -------
Subtotal.................... 1,512 1,752 2,198 514 1,726 --
SCM Chemicals:
Titanium dioxide and related
products....................... 680 663 860 185 795 783
Glidco:
Fragrance and flavor chemicals... 87 76 103 24 89 79
------ ------ ------------ ------------ ------- -------
2,279 2,491 3,161 723 2,610 862
------ ------ ------------ ------------ ------- -------
Propane(2)............................ -- 448 639 185 678 --
------ ------ ------------ ------------ ------- -------
Total....................... $2,279 $2,939 $3,800 $ 908 $ 3,288 $ 862
------ ------ ------------ ------------ ------- -------
------ ------ ------------ ------------ ------- -------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS FISCAL YEAR
ENDED THREE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED ENDED SEPTEMBER 30,
--------------------- DECEMBER 31, DECEMBER 31, --------------
1996 1995 1995 1994 1994 1993
----------- ------ ------------ ------------ ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING INCOME:
Quantum Chemical(1):
Polyethylene and related products... $ 112 $337 $380 $ 92 $ 23 $ --
Acetyls and alcohol................. 39 121 142 38 70 --
Specialty polymer products.......... 32 47 59 13 42 --
----------- ------ ------ ------ ---- ----
Subtotal....................... 183 505 581 143 135 --
SCM Chemicals(3):
Titanium dioxide and related
products.......................... (6) 136 177 27 106 113
Glidco:
Fragrance and flavor chemicals...... 28 23 31 7 27 26
----------- ------ ------ ------ ---- ----
205 664 789 177 268 139
----------- ------ ------ ------ ---- ----
Propane(2)............................... -- 26 53 26 76 --
----------- ------ ------ ------ ---- ----
Total.......................... $ 205 $690 $842 $203 $344 $139
----------- ------ ------ ------ ---- ----
----------- ------ ------ ------ ---- ----
</TABLE>
- ------------
(1) Quantum Chemical was acquired on September 30, 1993 in a transaction
accounted for as a purchase.
(2) Suburban Propane is reflected as a continuing operation of the Company
(i.e., division of Quantum Chemical) through December 31, 1995. In March
1996, the Company sold a 73.6% interest in
(footnote continued on following page)
F-24
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
(footnote continued from previous page)
NOTE 11 -- OPERATIONS BY INDUSTRY SEGMENTS AND GEOGRAPHIC AREA -- CONTINUED
Suburban Propane in an initial public offering. The Company has accounted for
its continuing investment under the equity method effective January 1, 1996.
(3) The nine months ended September 30, 1996 includes non-recurring charges of
$75 to reduce the carrying value of certain facilities employed in the
sulfate-process manufacturing of TiO2 and to provide for the costs
associated with the closure of certain sulfate process production, as
described in Note 4.
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------
1996 1995 1994
------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
IDENTIFIABLE ASSETS:
Quantum Chemical:
Polyethylene and related products...................................... $ 2,699 $ 2,622 $ 2,676
Acetyls and alcohol.................................................... 725 704 681
Specialty polymer products............................................. 483 448 414
------------- ------- -------
Subtotal.......................................................... 3,907 3,774 3,771
SCM Chemicals:
Titanium dioxide and related products.................................. 829 907 733
Glidco:
Fragrance and flavor chemicals......................................... 87 77 56
Propane..................................................................... -- 733 731
Businesses held for sale.................................................... 617 3,772 3,757
Corporate(a)................................................................ 739 780 976
------------- ------- -------
Total............................................................. $ 6,179 $10,043 $10,024
------------- ------- -------
------------- ------- -------
</TABLE>
- ------------
(a) Corporate assets consist primarily of cash and cash equivalents, prepaid
interest to an affiliate and other assets.
<TABLE>
<CAPTION>
NINE MONTHS FISCAL YEAR
ENDED THREE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED ENDED SEPTEMBER 30,
------------------------ DECEMBER 31, DECEMBER 31, ------------------
1996 1995 1995 1994 1994 1993
----------- ----------- ------------ ------------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
DEPRECIATION AND AMORTIZATION:
Quantum Chemical:
Polyethylene and related products..... $ 77 $ 82 $109 $ 28 $113 $ --
Acetyls and alcohol................... 19 22 31 6 32 --
Specialty polymer products............ 15 16 21 5 24 --
----------- ----------- ------ --- ------ ------
Subtotal......................... 111 120 161 39 169 --
SCM Chemicals:
Titanium dioxide and related
products............................ 37 33 42 10 40 39
Glidco:
Fragrance and flavor chemicals........ 4 2 3 1 3 4
Propane.................................... -- 25 34 9 34 --
Corporate.................................. -- -- 1 -- 1 1
----------- ----------- ------ --- ------ ------
Total............................ $ 152 $ 180 $241 $ 59 $247 $ 44
----------- ----------- ------ --- ------ ------
----------- ----------- ------ --- ------ ------
</TABLE>
F-25
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 11 -- OPERATIONS BY INDUSTRY SEGMENTS AND GEOGRAPHIC AREA -- CONTINUED
<TABLE>
<CAPTION>
NINE MONTHS FISCAL YEAR
ENDED THREE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED ENDED SEPTEMBER 30,
------------------------ DECEMBER 31, DECEMBER 31, ------------------
1996 1995 1995 1994 1994 1993
----------- ----------- ------------ ------------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CAPITAL EXPENDITURES:
Quantum Chemical:
Polyethylene and related products..... $ 108 $ 41 $ 62 $ 7 $ 28 $ --
Acetyls and alcohol................... 49 19 30 5 11 --
Specialty polymer products............ 3 10 13 2 2 --
----------- ----------- ------ --- ------ ------
Subtotal......................... 160 70 105 14 41 --
SCM Chemicals:
Titanium dioxide and related
products............................ 54 96 124 7 41 24
Glidco:
Fragrance and flavor chemicals........ 9 13 17 3 7 2
Propane.................................... -- 21 29 6 19 --
Corporate.................................. -- 1 1 -- 1 2
----------- ----------- ------ --- ------ ------
Total............................ $ 223 $ 201 $ 276 $ 30 $ 109 $ 28
----------- ----------- ------ --- ------ ------
----------- ----------- ------ --- ------ ------
NET SALES:
United States......................... $ 2,008 $ 2,674 $3,462 $840 $2,992 $578
Foreign............................... 291 287 368 82 322 309(1)
Inter-area elimination................ (20) (22) (30) (14) (26) (25)
------ ------ ------------ ------ ------ ----
Total............................ $ 2,279 $ 2,939 $3,800 $908 $3,288 $862
------ ------ ------------ ------ ------ ----
------ ------ ------------ ------ ------ ----
Operating income:
United States......................... $ 156 $ 619 $ 743 $188 $ 297 $106
Foreign............................... 49 71 99 15 47 33
------ ------ ------------ ------ ------ ----
Total............................ $ 205 $ 690 $ 842 $203 $ 344 $139
------ ------ ------------ ------ ------ ----
------ ------ ------------ ------ ------ ----
</TABLE>
- ------------
(1) $194 is attributable to Europe and $115 to Asia/Pacific.
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------
1996 1995 1994
------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Identifiable assets:
United States -- Continuing......................................... $ 4,745 $ 5,525 $ 5,607
-- Discontinued..................................... 617 3,772 3,757
Foreign............................................................. 817 746 660
------------- ------- -------
Total.......................................................... $ 6,179 $10,043 $10,024
------------- ------- -------
------------- ------- -------
</TABLE>
Most of the Company's foreign operations are conducted by subsidiaries in
the United Kingdom and Australia. Sales between the Company's United States
operations and its foreign operations are made on terms similar to those of its
third-party distributors. Sales between geographic areas are not significant.
Income and expenses not allocated to industry segment in computing
operating income include interest income and expense and other income and
expense of a general corporate nature.
F-26
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 11 -- OPERATIONS BY INDUSTRY SEGMENTS AND GEOGRAPHIC AREA -- CONTINUED
Export sales from the United States for the nine months ended September 30,
1996 and 1995, the year ended December 31, 1995, the three months ended December
31, 1994 and the fiscal years ended September 30, 1994 and 1993 were
approximately $289, $348, $379, $80, $277 and $60, respectively.
NOTE 12 -- INFORMATION ON MILLENNIUM AMERICA
Millennium America Inc. (the 'Issuer') is a wholly owned subsidiary of the
Company and is a holding company for all of the Company's operating subsidiaries
other than the non-U.S. affiliates of SCM Chemicals. For the nine months ended
September 30, 1996, the non-U.S. affiliates of SCM Chemicals Inc. had sales of
approximately $291 million and operating income of $49 million; at September 30,
1996, they had total assets of approximately $377 million. The Issuer is
obligated for the borrowings under the 2.39% Senior Exchangeable Discount Notes
and will be the principal issuer of the senior notes and debentures subject to
this Offering. Accordingly, the following financial information is provided for
the Issuer: Proforma Combined Balance Sheet as of September 30, 1996, Combined
Balance Sheets as of September 30, 1996, December 31, 1995 and December 31, 1994
and the Combined Statements of Operations of the Issuer for the Nine Months
Ended September 30, 1996, the Year Ended December 31, 1995, the Three Months
Ended December 31, 1994 and the Fiscal Years Ended September 30, 1994 and 1993.
F-27
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
MILLENNIUM AMERICA INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
PRO FORMA SEPTEMBER 30, ----------------
SEPTEMBER 30, 1996 1996 1995 1994
------------------ ----------- ------ ------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 356 $ 356 $ 346 $ 336
Trade receivables, net................................. 440 440 438 455
Inventories............................................ 362 362 468 397
Other current assets................................... 69 109 221 220
Net assets of Discontinued Businesses to be sold to
Hanson............................................... -- 617 3,766 0
------- ----------- ------ ------
Total current assets.............................. 1,227 1,884 5,239 1,408
------- ----------- ------ ------
Property, plant and equipment net........................... 1,804 1,804 2,103 2,022
Investments and other assets................................ 336 336 278 451
Net assets of Discontinued Businesses to be sold to
Hanson.................................................... -- -- 0 3,757
Goodwill.................................................... 1,778 1,778 2,042 2,095
------- ----------- ------ ------
Total assets...................................... $5,145 $ 5,802 $9,662 $9,733
------- ----------- ------ ------
------- ----------- ------ ------
LIABILITIES & INVESTED CAPITAL
Current liabilities:
Notes payable.......................................... $ 219 $ 219 $ 113 $ 193
Current maturities of long-term debt................... 11 11 11 5
Trade accounts payables................................ 117 117 161 122
Income taxes payable................................... 29 29 0 (108)
Accrued expenses and other liabilities................. 421 421 555 523
------- ----------- ------ ------
Total current liabilities......................... 797 797 840 735
Non-current liabilities:
Long-term debt......................................... 2,246 3,622 3,304 3,274
Deferred income taxes.................................. 111 207 150 115
Other liabilities...................................... 947 937 881 919
------- ----------- ------ ------
Total liabilities................................. 4,101 5,563 5,175 5,043
------- ----------- ------ ------
Commitments and contingencies
Invested capital............................................ 1,044 239 4,487 4,690
------- ----------- ------ ------
Total liabilities and invested capital............ $5,145 $ 5,802 $9,662 $9,733
------- ----------- ------ ------
------- ----------- ------ ------
</TABLE>
F-28
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
MILLENNIUM AMERICA INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR
NINE MONTHS ENDED YEAR THREE MONTHS ENDED
------------------------------ ENDED ENDED SEPTEMBER 30,
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, --------------
1996 1995 1995 1994 1994 1993
------------- ------------- ------------ ------------ ------ ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net sales......................... $ 1,988 $ 2,652 $3,432 $826 $2,967 $553
Less operating costs and expenses:
Cost of products sold........ 1,480 1,685 2,229 534 2,241 369
Depreciation and
amortization............... 141 167 223 54 231 29
Selling, development and
administrative expenses.... 136 181 236 51 198 49
Asset impairment and related
closure costs.............. 75 -- -- -- -- --
------------- ------------- ------------ ------ ------ ----
Operating income........ 156 619 744 187 297 106
Interest expense, primarily to a
related party................... 171 180 240 59 204 14
Interest income................... (21) (20) (24) (5) (19) (26)
Gain on sale of Suburban
Propane......................... (210) -- -- -- -- --
Equity in earnings of Suburban
Propane......................... (32) -- -- -- -- --
Other expense, net................ 9 53 56 1 11 (2)
------------- ------------- ------------ ------ ------ ----
Income from continuing
operations before provision
for income taxes........... 239 406 472 132 101 120
Provision for income taxes........ (160) (167) (196) (55) (55) (38)
------------- ------------- ------------ ------ ------ ----
Income from continuing
operations................. 79 239 276 77 46 82
(Loss)/income from discontinued
operations (net of income taxes
of ($1,269), $3, $22, $5, $11
and $23)........................ (3,167) -- 18 12 28 20
------------- ------------- ------------ ------ ------ ----
Net (loss) income............ $(3,088) $ 239 $ 294 $ 89 $ 74 $102
------------- ------------- ------------ ------ ------ ----
------------- ------------- ------------ ------ ------ ----
</TABLE>
NOTE 13 -- SUBSEQUENT EVENTS
In October, 1996, one of the Company's subsidiaries entered into a number
of interest rate protection agreements which have effectively fixed interest
rates on $750 million of floating rate debt. Under these agreements, the Company
subsidiary will pay the counterparties interest at a fixed rate and the
counterparties will pay the Company subsidiary interest at a variable rate based
on LIBOR. The fixed rates payable under these agreements average 5.7875% with
terms expiring at various dates through October, 1998. In addition, one of the
Company's subsidiaries entered into forward contracts to hedge the impact of
exchange rate fluctuations on approximately `L'200 million of its sterling cash
F-29
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 13 -- SUBSEQUENT EVENTS -- CONTINUED
deposits. Since these agreements have been recently entered into, the fair
market value of these agreements is not materially different than the value
based on the stated terms.
On October 18, 1996, as required by the Exchangeable Note Indenture, a
subsidiary of the Company commenced a Tender Offer to repurchase any and all
Exchangeable Notes from holders who exercise their 'change in control' rights
under the indenture for cash of 101% of their accreted value plus accrued
interest. It is anticipated that such repurchase will be funded with the net
proceeds of a new issuance of debt securities and additional long-term
borrowings under the New Credit Facility.
NOTE 14 -- UNAUDITED QUARTERLY DATA
The following table sets forth unaudited combined financial data of the
Company for the first three quarters of fiscal 1996. In the opinion of the
Company, the unaudited combined financial data have been prepared on a basis
consistent with that of the audited financial data and include all adjustments
necessary for a fair presentation of interim results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
SEPTEMBER 30, 1996 JUNE 30, 1996 MARCH 31, 1996
------------------ ------------- --------------
<S> <C> <C> <C>
Net sales........................................... $769 $ 780 $ 730
Gross profit........................................ 204 192 172
Income (loss) before extraordinary items and
cumulative effects of a change in accounting...... 47(1) (33)(2) (3,078)(3)(4)
Net income (loss)................................... 47(1) (33)(2) (3,078)(3)(4)
</TABLE>
Earnings per share data have not been presented because there is no
separate identifiable pool of capital for periods prior to incorporation upon
which a per share calculation could be based.
- ------------
(1) Includes a non-recurring charge of $15 ($9 after tax) to provide for the
closure costs of certain facilities employed in the sulfate-process
manufacturing of TiO2.
(2) Includes a non-recurring charge of $60 ($39 after tax) to reduce the
carrying value of certain facilities employed in the sulfate-process
manufacturing of TiO2.
(3) Includes the effects of a gain of $210 ($86 after tax) resulting from the
Company's sale in March 1996 of a 73.6% equity interest in Suburban Propane.
(4) Includes the effects of a non-cash charge of $4,497 ($3,206 after tax)
relating to one of the Discontinued Businesses as a result of the Company's
adoption of the long-lived asset carrying value methodology provided by SFAS
121.
F-30
<PAGE>
<PAGE>
SCHEDULE II
MILLENNIUM CHEMICALS INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
<TABLE>
<CAPTION>
COLUMN C
--------------------------------
COLUMN B ADDITIONS
------------ -------------------------------- COLUMN D COLUMN E
COLUMN A BALANCE AT CHARGED TO ----------- -------------
- ------------------------------------------- BEGINNING OF COSTS CHARGED TO OTHER DEDUCTIONS- BALANCE AT
DESCRIPTION PERIOD AND EXPENSES ACCOUNTS-DESCRIBE DESCRIBE END OF PERIOD
- ------------------------------------------- ------------ ------------ ----------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Fiscal year ended September 30, 1993
Deducted from asset accounts:
Allowance for doubtful accounts....... $7 -- -- -- $ 7
Fiscal year ended September 30, 1994
Deducted from asset accounts:
Allowance for doubtful accounts....... 7 10 -- 3(a) 14
Three months ended December 31, 1994
Deducted from asset accounts:
Allowance for doubtful accounts....... 14 1 -- -- 15
Year ended December 31, 1995
Deducted from asset accounts:
Allowance for doubtful accounts....... 15 5 -- 4(a) 16
Nine months ended September 30, 1996
Deducted from asset accounts:
Allowance for doubtful accounts....... 16 -- -- (8)(a)(b) 8
</TABLE>
- ------------
(a) Uncollectible accounts written off, net of recoveries
(b) Sale of Suburban Propane
F-31
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
QUANTUM CHEMICAL CORPORATION
In our opinion, the accompanying consolidated statements of operations and
of cash flows of Quantum Chemical Corporation and subsidiary companies present
fairly, in all material respects, the results of their operations and their cash
flows for the nine months ended September 30, 1993, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
October 29, 1993
Morristown, New Jersey
F-32
<PAGE>
<PAGE>
QUANTUM CHEMICAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1993
(IN MILLIONS)
<TABLE>
<S> <C>
Net sales...................................................................................... $1,699
Cost of goods sold............................................................................. 1,576
Selling and administrative expenses............................................................ 74
Research and development expense............................................................... 33
Corporate and general expenses................................................................. 117
------
Operating loss................................................................................. (101)
Interest on borrowings -- net.................................................................. (199)
Other income................................................................................... 1
------
Loss before income tax benefit................................................................. (299)
Income tax benefit............................................................................. 105
------
Net loss....................................................................................... $ (194)
------
------
</TABLE>
F-33
<PAGE>
<PAGE>
QUANTUM CHEMICAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1993
(IN MILLIONS)
<TABLE>
<S> <C>
Cash flow from operating activities:
Net loss................................................................................... $(194)
Adjustments to reconcile loss to net cash provided by operations:
Depreciation and amortization......................................................... 145
Other................................................................................. 22
Change in assets and liabilities:
Receivables........................................................................... 64
Inventories........................................................................... (12)
Prepaid expenses and other current assets............................................. 90
Accounts payable and accrued liabilities.............................................. 83
Deferred income taxes................................................................. (96)
-----
Cash provided by operating activities................................................. 102
-----
Cash flow from investing activities:
Capital expenditures....................................................................... (95)
Other...................................................................................... 9
-----
Cash used for investing activities:................................................... (86)
-----
Cash flow from financing activities:
Proceeds from issuance of long-term debt................................................... 300
Payments of long-term debt and capital lease obligations................................... (334)
Payments of debt issue costs............................................................... (8)
Proceeds from issuance of common stock..................................................... 69
-----
Cash provided by financing activities................................................. 27
-----
Net increase in cash and cash equivalents....................................................... 43
Cash and cash equivalents at beginning of year.................................................. 108
-----
Cash and cash equivalents at end of year........................................................ $ 151
-----
-----
</TABLE>
Supplemental disclosures -- Income tax refunds of $74 were received in
1993. Interest payments were $225 in 1993.
F-34
<PAGE>
<PAGE>
QUANTUM CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS)
NOTE 1 -- DESCRIPTION OF MERGER AND BASIS OF PRESENTATION
Quantum Chemical Corporation ('QCC') became a wholly-owned indirect
subsidiary of Hanson PLC, an English public limited company ('Hanson'), as a
result of the consummation on September 30, 1993, of the merger (the 'Merger')
provided for in an Agreement and Plan of Merger dated as of June 29, 1993, as
amended (the 'Merger Agreement').
QCC was the surviving corporation in the Merger; where appropriate below,
QCC as it existed before the Merger is referred to as the 'predecessor company'
and QCC as it existed after the Merger is referred to as the 'successor
company.' Subsequent to the Merger, QCC changed its fiscal year end from
December 31 to a 52-53 week fiscal year ending September 30.
Pursuant to the Merger, a Hanson subsidiary acquired all of the outstanding
shares of common stock of QCC in a tax free exchange of approximately 42 million
new American Depositary Shares of Hanson ('Hanson ADSs') at an exchange rate of
1.176 ADS per common share of the predecessor company. The Hanson ADSs were
issued for the benefit of the merged corporation in consideration of $815 paid
to Hanson in the pound sterling equivalent thereof. Prior to the Merger, the
merged corporation was capitalized with the issuance of 1,000 shares for a
nominal amount on June 29, 1993, and the issuance of 1,200 shares for $815 on
September 30, 1993. In accordance with the Merger Agreement, the shares of the
merged corporation were, upon the Merger, converted into the sole outstanding
shares of the successor company, all of which shares were acquired by Hanson
America Inc., a wholly-owned indirect subsidiary of Hanson ('Hanson America').
Hanson America accounted for the merger as a purchase, effective September
30, 1993, in accordance with Accounting Principles Board Opinion No. 16 ('APB
No. 16'). The fair values of the assets acquired and liabilities assumed were
fully allocated to QCC.
The consolidated statements of operations and cash flows for the period
ended September 30, 1993, are presented using the predecessor company's
historical basis of accounting.
NOTE 2 -- SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of all majority-owned
companies.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost has been
determined for the various categories of inventory using the first-in,
first-out; last-in; first-out; or average cost methods as deemed appropriate.
PROPERTY, PLANT AND EQUIPMENT
Depreciation is determined for the related groups of assets under the
straight-line method based upon their estimated useful lives. Certain interest
costs are capitalized as part of the cost of major construction projects.
Interest cost capitalized was $3 in 1993. Minor renewals or replacements and
maintenance and repairs are expensed. Major replacements and improvements are
capitalized. Gains or losses on disposal of assets are credited or charged to
income.
GOODWILL AND OTHER INTANGIBLE ASSETS
The excess of the cost of acquired businesses to the predecessor company
over values assigned to the net tangible and identifiable assets has been
classified as goodwill and amortized to income over
F-35
<PAGE>
<PAGE>
QUANTUM CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 2 -- SUMMARY OF ACCOUNTING POLICIES -- CONTINUED
periods of not more than 40 years. The cost of the identifiable intangible
assets to the predecessor company has been amortized to income over their
estimated lives, which are not more than 15 years. Amortization of historical
goodwill and other intangible assets charged to income was $5 for the nine
months ended September 30, 1993.
The Merger discussed in Note 1 resulted in the full allocation of the
purchase price to the fair value of the acquired assets and assumed liabilities
of the successor company. Goodwill at September 30, 1993, arising from the
Merger, will be amortized straight-line over 40 years by the successor company.
TAXES ON INCOME
The income tax benefit includes the tax effects of revenue and expense
transactions included in the determination of financial statement income. Where
such transactions are included in the determination of taxable income in a
different year, the tax effects are deferred.
PENSIONS
Pension costs are actuarially determined under the projected unit credit
cost method and include amounts for current service and interest on projected
benefit obligations and plan assets.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The cost of postretirement medical health care and other insurance benefits
is accrued over the period during which active employees become eligible for
such benefits.
NET LOSS PER COMMON SHARE
As of September 30, 1993, QCC is a wholly-owned subsidiary of Hanson
America. Accordingly, the requirements of Accounting Principles Board of Opinion
No. 15 do not apply, and net loss per share has not been computed for the period
ended September 30, 1993.
NOTE 3 -- INFORMATION BY SEGMENT
QCC's operations have been classified into industry segments based on the
sale of related products as follows:
Petrochemicals (Quantum Chemical) -- principally polyethylene,
polypropylene, acetic acid, vinyl acetate and ethyl alcohol.
Propane marketing (Suburban Propane) -- liquid petroleum gases, principally
propane.
No individual customer's purchases exceeded 10% of sales. Foreign
operations and assets and transfers between segments were not significant.
Operating results for each segment were determined by deducting from net
sales the cost of goods sold, and the selling and administrative and research
and development expenses attributable to segment operations.
F-36
<PAGE>
<PAGE>
QUANTUM CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 3 -- INFORMATION BY SEGMENT -- CONTINUED
The following table summarizes selected financial data by industry segment
for the nine month period ended September 30, 1993:
<TABLE>
<S> <C>
Net sales
Petrochemicals........................................................ $1,218
Propane marketing..................................................... 481
------
Total............................................................ $1,699
------
------
Operating (loss) profit
Petrochemicals........................................................ $ (22)
Propane marketing..................................................... 38
Corporate and general................................................. (117)
------
Total............................................................ $ (101)
------
------
Capital expenditures
Petrochemicals........................................................ $ 72
Propane marketing..................................................... 23
------
Total............................................................ $ 95
------
------
Depreciation and amortization expense
Petrochemicals........................................................ $ 113
Propane marketing..................................................... 27
Corporate............................................................. 5
------
Total............................................................ $ 145
------
------
</TABLE>
NOTE 4 -- TAXES ON INCOME
The following is a reconciliation of the U.S. statutory corporate federal
income tax rate to the effective income tax rate:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1993
-------------
<S> <C>
Federal income tax rate (35.0)%
Changes in the tax rate resulting from:
State and local taxes (net of federal benefit)............................ (4.3)
Change in federal tax rate................................................ 3.5
Other..................................................................... .6
------
Effective income tax rate............................................ (35.2)%
------
------
</TABLE>
F-37
<PAGE>
<PAGE>
QUANTUM CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 4 -- TAXES ON INCOME -- CONTINUED
The following table gives details of the income tax benefit for the nine
months ended September 30, 1993:
<TABLE>
<S> <C>
Current income taxes:
U.S. federal........................................................................ $ --
State, local and foreign............................................................ --
Deferred income taxes (refundable) payable:
U.S. -- net effect of timing differences:
Depreciation expense........................................................... 16
Tax loss carryforwards......................................................... (44)
Insurance recoveries........................................................... (10)
Postretirement benefits other than pensions.................................... (1)
Pensions/severance............................................................. (27)
Casualty and other insurance expense........................................... 1
Plant shutdown costs........................................................... 5
Federal tax rate change........................................................ 10
Partnership benefits (reversal)................................................ (40)
Other.......................................................................... (15)
------
Income tax benefit....................................................................... $(105)
------
------
</TABLE>
At September 30, 1993, QCC had a tax net operating loss carryforward of
$44, which will expire in 2008. The Merger is not expected to limit the
utilization of this net operating loss carryforward.
NOTE 5 -- PENSION AND SAVINGS PLANS
QCC has noncontributory defined benefit plans covering most employees. The
benefits of these plans are based primarily on years of service and employees'
pay near retirement. QCC's funding policy is consistent with the minimum funding
requirements of ERISA. Plan assets consist principally of common stocks and U.S.
government and corporate obligations. Net pension credit for the nine months
ended September 30, 1993 included the following components:
<TABLE>
<S> <C>
Service cost -- benefits earned during the period.................... $ 9
Interest cost on projected benefit obligation........................ 25
Actual return on assets.............................................. (51)
Amortization of unrecognized amounts, net............................ (7)
Deferral of gain..................................................... 11
Curtailment gain..................................................... 4
-----
Net pension credit.............................................. $ (9)
-----
-----
</TABLE>
QCC has defined contribution plans covering most employees, which include a
savings feature and an employee stock ownership feature (ESOP). Under the
savings feature, participant contributions are matched by QCC contributions in
cash or QCC common stock. The ESOP feature permits QCC to make stock bonus
awards, in cash or QCC common stock, to eligible employees, based on QCC's
performance. There was no stock bonus award in 1993.
F-38
<PAGE>
<PAGE>
QUANTUM CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS)
NOTE 6 -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
QCC provides, or makes available at low cost, welfare benefits for most of
its retired employees. Substantially all of QCC's employees become eligible for
such benefits if they reach retirement age while still working for QCC. The
benefits are provided through insurance companies whose charges are based on
benefits paid during the year. QCC has the right to modify or terminate these
benefits.
The periodic expense for postretirement benefits included the following
components for the nine month period ended September 30, 1993:
<TABLE>
<S> <C>
Service cost for benefits earned during the year............................. $ 1
Interest cost on accumulated benefit obligation.............................. 8
Amortization of unrecognized prior service cost.............................. (5)
Curtailment loss............................................................. 8
Accelerated recognition of prior service cost................................ (2)
----
Total expense........................................................... $ 10
----
----
</TABLE>
The 1993 accumulated benefit obligation was based on claim data for
calendar year 1992.
The effect on the present value of the accumulated benefit obligation at
January 1, 1993, of a 1% increase each year in the health care cost trend used,
would increase the amount of the net periodic expense (service cost and interest
cost) by $1 for 1993.
NOTE 7 -- COMMITMENTS
QCC's principal lease commitments are for railroad cars, automobiles, data
processing equipment and warehouse space. These leases generally contain renewal
options and provide that QCC will pay utility, insurance, tax and maintenance
costs.
Rental expense for all operating leases (except those with terms of a month
or less, that were not renewed) was $45 for the nine month period ended
September 30, 1993. The effect of contingent rentals and sublease rentals
included therein was not significant.
Minimum payments required under leases with initial or remaining
noncancellable terms in excess of one year as of September 30, 1993 were as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED OPERATING
SEPTEMBER 30, LEASES
- ------------------------------------------------------------------------- ---------
<S> <C>
1994................................................................ $ 50
1995................................................................ 41
1996................................................................ 28
1997................................................................ 21
1998................................................................ 18
Later years......................................................... 26
---------
Total minimum lease payments................................... $ 184
---------
---------
</TABLE>
The minimum payments have not been reduced by sublease rentals due in the
future under noncancellable subleases, which are considered insignificant.
QCC has other commitments, including those related to the construction and
development of facilities, all made in the normal course of business.
F-39
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
MILLENNIUM CHEMICALS INC.
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of Millennium Chemicals Inc. at April
18, 1996, in conformity with generally accepted accounting principles. This
financial statement is the responsibility of the Company's management; our
responsibility is to express an opinion on this financial statement based on our
audit. We conducted our audit of this statement in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Morristown, New Jersey
July 2, 1996
F-40
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
BALANCE SHEET
<TABLE>
<CAPTION>
APRIL 18,
1996
---------
<S> <C>
Assets:
Cash......................................................................... $ 3
---
---
Shareholder's Equity:
Common Stock, $.01 par value per share;
1,000 authorized, 3 shares issued.......................................... $ 3
---
---
</TABLE>
NOTE
Millennium Chemicals Inc. (the 'Company') was incorporated on April 18, 1996 to
serve as the holding company of the chemicals business of Hanson PLC to be spun
off in a stock dividend to Hanson PLC's stockholders.
F-41
<PAGE>
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated the date hereof, the Issuer has agreed to sell to each of the Underwriters
named below, and each of such Underwriters has severally agreed to purchase, the
respective principal amount of each series of the Securities set forth opposite
its name below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
UNDERWRITER NOTES DEBENTURES
- ---------------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Goldman, Sachs & Co. ....................................................... $ $
Bear, Stearns & Co. Inc. ...................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .................................................
J.P. Morgan Securities Inc. ................................................
Salomon Brothers Inc .......................................................
---------- ----------
Total.................................................................. $ $
---------- ----------
---------- ----------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of each series of the
Securities, if any are taken.
The Underwriters propose to offer each series of the Securities in part
directly to the public at the respective initial public offering price set forth
on the cover page of this Prospectus and in part to certain securities dealers
at such prices less a concession not to exceed % of the principal amount
of the Notes and not to exceed % of the principal amount of the
Debentures. The Underwriters may allow, and such dealers may reallow, a
concession not to exceed % of the principal amount of the Notes and not to
exceed % of the principal amount of the Debentures to certain brokers and
dealers. After the Securities are released for sale to the public, the offering
prices and other selling terms may from time to time be varied by the
Underwriters.
The Securities will be new issues of securities with no established trading
market. The Issuer has been advised by the Underwriters that, subject to
applicable law, the Underwriters currently intend to make a market in each
series of the Securities, but are not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for each series of Securities.
From time to time in the ordinary course of their businesses, affiliates of
certain of the Underwriters have engaged and may in the future engage in general
financing and banking transactions with the Company, the Issuer and their
affiliates. If the net proceeds of the Offering exceed the amount necessary to
pay the Repurchase Price for Pre-Demerger Notes tendered pursuant to the Tender
Offer, such excess will be used to repay indebtedness under the Credit Facility.
J.P. Morgan Securities Inc. is an affiliate of Morgan Guaranty Trust Company of
New York, a lender under the Credit Facility. In addition, certain other dealers
which may participate in the Offering may be affiliates of lenders under the
Credit Facility.
Certain of the Underwriters have provided from time to time, and expect to
provide in the future, investment banking services to the Company, the Issuer
and their affiliates, for which such Underwriters have received and will receive
customary fees and commissions.
The Issuer has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. The Company
has agreed to guarantee such indemnification obligations of the Issuer.
U-1
<PAGE>
<PAGE>
___________________________________ ___________________________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information..................................................................................................... 2
Disclosure Regarding Forward-Looking Statements........................................................................... 2
Prospectus Summary........................................................................................................ 3
Risk Factors.............................................................................................................. 8
Use of Proceeds........................................................................................................... 13
Ratio of Earnings to Fixed Charges........................................................................................ 13
Capitalization............................................................................................................ 14
Selected Combined Financial Data.......................................................................................... 15
Unaudited Pro Forma Combined Financial Data............................................................................... 16
Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 20
Business.................................................................................................................. 34
Agreements Between the Company and Hanson Relating to the Demerger........................................................ 50
Management................................................................................................................ 53
Executive Compensation.................................................................................................... 57
Security Ownership of Certain Beneficial Owners of Common Stock........................................................... 68
Description of the Securities............................................................................................. 69
Certain Tax Considerations................................................................................................ 81
Legal Matters............................................................................................................. 83
Experts................................................................................................................... 83
Index to Financial Statements............................................................................................. F-1
Underwriting.............................................................................................................. U-1
</TABLE>
THROUGH AND INCLUDING , 1997 (THE DAY AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
$750,000,000
MILLENNIUM AMERICA INC.
$500,000,000
% SENIOR NOTES DUE
NOVEMBER , 2006
$250,000,000
% SENIOR DEBENTURES DUE
NOVEMBER , 2026
UNCONDITIONALLY GUARANTEED BY
MILLENNIUM CHEMICALS INC.
------------------
[LOGO]
------------------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SALOMON BROTHERS INC
___________________________________ ___________________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an estimate of the expenses that will be
incurred by the Registrant in connection with the distribution of the securities
being registered hereby:
<TABLE>
<S> <C>
SEC registration fee...................................................................... $ 227,273
Blue Sky fees and expenses (including legal fees)......................................... 50,000
Printing, engraving and postage fees...................................................... 160,000
Fees of trustee........................................................................... 5,000
Legal fees and expenses................................................................... 300,000
Accounting fees and expenses.............................................................. 150,000
Miscellaneous............................................................................. 7,727
----------
Total........................................................................... $1,000,000
----------
----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Generally, Section 145 of the General Corporation Law of the State of
Delaware (the 'GCL') permits a corporation to indemnify certain persons made a
party to an action, by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or enterprise. To the extent that person has been successful in any
such matter, that person shall be indemnified against expenses actually and
reasonably incurred by him. In the case of an action by or in the right of the
corporation, no indemnification may be made in respect of any matter as to which
that person was adjudged liable unless and only to the extent that the Delaware
Court of Chancery or the court in which the action was brought determines that
despite the adjudication of liability that person is fairly and reasonably
entitled to indemnity for proper expenses.
The By-laws of both the Company and the Issuer provide for indemnification
of its directors and officers to the fullest extent permitted by law.
Section 102(b)(7) of the GCL enables a Delaware corporation to include a
provision in its certificate of incorporation limiting a director's liability to
the corporation or its stockholders for monetary damages for breaches of
fiduciary duty as a director. Both the Company and the Issuer have adopted
provisions in their Certificates of Incorporation that provide for such
limitation to the fullest extent permitted under Delaware law.
The directors and officers of the Company and the Issuer are covered by
insurance policies indemnifying against certain liabilities, including certain
liabilities arising under the Securities Act which might be incurred by them in
such capacities and against which they may not be indemnified by the Company or
the Issuer.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On April 18, 1996, as part of its original incorporation, the Company
issued and sold three shares of its Common Stock, for a total consideration of
$3.00, to three directors of Hanson (the 'Initial Stockholders'), who were the
Company's sole stockholders until date of the Stock Dividend. Such issuance was
exempt from registration under the Securities Act pursuant to Section 4(2)
thereunder. The Initial Stockholders sold all such shares to the Company for a
total consideration of $3.00 contemporaneously with the Demerger.
On October 1, 1996, as part of the Demerger, the Company issued 74,408,257
shares of its Common Stock to Hanson Shareholders pro rata and without the
payment of any consideration by them, in consideration for the transfer by
Hanson of the Chemicals Business to the Company. In Hanson PLC/Millennium
Chemicals Inc. (available August 15, 1996), the Staff of the Commission
confirmed
II-1
<PAGE>
<PAGE>
that it would not take enforcement action if such issuance was made without
registration under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------------------
<C> <S>
1.1 -- Form of Underwriting Agreement**
3.1 (a) -- Restated Certificate of Incorporation of the Issuer**
3.1 (b) -- Certificate of Merger of Millennium America Inc. (a name-saver company) into the Issuer**
3.2 -- Amended and Restated By-laws of the Issuer**
3.3 -- Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to
the Company's Registration Statement on Form 10 (File No. 1-12091) (the 'Form 10'))*
3.4 -- By-laws of the Company (filed as Exhibit 3.2 to the Form 10)*
4.1 -- Form of Indenture, dated as of November , 1996, among the Issuer, the Company and The
Bank of New York, as trustee, in respect of the % Senior Notes due November , 2006 and
the % Senior Debentures due November , 2026**
4.2 -- Form of Note (included in the Indenture filed as Exhibit 4.1 to this Registration
Statement)*
4.3 -- Form of Debenture (included in the Indenture filed as Exhibit 4.1 to this Registration
Statement)*
4.4 (a) -- Indenture, dated as of March 1, 1994, between Millennium America, as issuer, and The Bank
of New York, as Trustee (Filed as Exhibit 4.4(a) to the Form 10)*
4.4 (b) -- First Supplemental Indenture, dated as of May 16, 1994, between Millennium America, as
issuer, and The Bank of New York, as Trustee (Filed as Exhibit 4.4(a) to the Form 10)*
4.4 (c) -- Second Supplemental Indenture, dated as of September 18, 1996, between Millennium America,
as issuer, and The Bank of New York, as Trustee (Filed as Exhibit (c)(3) to the Issuer
Tender Offer Statement on Schedule 13E-4, dated October 18, 1996, of Hanson, the Issuer and
Hanson (Bermuda) Limited (the '13E-4'))*
4.4 (d) -- Third Supplemental Indenture, dated as of October 1, 1996, among Millennium America, as
issuer, Millennium, as Guarantor, and The Bank of New York, as Trustee (Filed as Exhibit
(c)(4) to the 13E-4)*
4.5 (a) -- ADS Rights Agreement (the 'ADS Rights Agreement'), dated as of March 1, 1994, among
Hanson, HBL and Citibank, N.A., as ADS Rights Agent (Filed as Exhibit 4.4(c) to the Form
10)*
4.5 (b) -- First Amendment to the ADS Rights Agreement, dated as of September 18, 1996, among Hanson,
HBL and Citibank, N.A., as ADS Rights Agent (Filed as Exhibit (c)(6) to the 13E-4)*
4.6 (a) -- ADS Issuance Agreement (the 'ADS Issuance Agreement'), dated as of March 1, 1994, between
Hanson and HBL (Filed as Exhibit 4.4(b) to the Form 10)*
4.6 (b) -- First Amendment to the ADS Issuance Agreement, dated as of September 18, 1996, between
Hanson and HBL (Filed as Exhibit (c)(8) to the 13E-4)*
4.7 -- Keepwell Agreement, dated as of March 1, 1994, between Hanson and HBL (Filed as Exhibit
4.4(d) to the Form 10)*
4.8 -- Allocation Agreement, dated as of August 28, 1996, among Hanson, HBL and Millennium
America (Filed as Exhibit (c)(10) to the 13E-4)*
5.1 -- Opinion of Weil, Gotshal & Manges LLP, as to the legality of the Securities and
Guarantees**
</TABLE>
II-2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------------------
<C> <S>
10.1 -- Form of Pre-Demerger Stock Purchase Agreement, dated as of September 16, 1996, between HM
Holdings, Inc. and Hanson (including related form of Indemnification Agreement and Tax
Sharing and Indemnification Agreement) (Filed as Exhibit 10.1 to the Form 10)*
10.2 -- Form of Pre-Demerger Stock Purchase Agreement, dated as of September 16, 1996, between HM
Holdings, Inc. and Hanson relating to Peabody Holding Company, Inc. (including related form
of Indemnification Agreement and Tax Sharing and Indemnification Agreement) (Filed as
Exhibit 10.2 to the Form 10)*
10.3 -- Form of Pre-Demerger Stock Purchase Agreement, dated as of September 16, 1996, between HM
Holdings, Inc. and Hanson relating to certain Canadian subsidiaries (including related form
of Indemnification Agreement) (Filed as Exhibit 10.3 to the Form 10)*
10.4 -- Form of Pre-Demerger Stock Purchase Agreement, dated as of September 30, 1996, between HM
Holdings, Inc. and Hanson relating to Lynton Group, Inc. (Filed as Exhibit 10.4 to the Form
10)*
10.5 -- Form of Post-Demerger Stock Purchase Agreement, dated as of September 30, 1996, between
HMB Holdings Inc. and Hanson (including related form of Indemnification Agreement and Tax
Sharing and Indemnification Agreement) (Filed as Exhibit 10.5 to the Form 10)*
10.6 -- Form of Post-Demerger Stock Purchase Agreement, dated as of September 30, 1996, between
Hanson and MHC Inc. (including related form of Indemnification Agreement and Tax Sharing
and Indemnification Agreement) (Filed as Exhibit 10.6 to the Form 10)*
10.7 -- Demerger Agreement, dated as of September 30, 1996, between Hanson, Hanson Overseas
Holdings Ltd. and the Company (Filed as Exhibit 10.7 to the Form 10)*
10.8 -- Form of Indemnification Agreement, dated as of September 30, 1996, between Hanson and the
Company (Filed as Exhibit 10.8 to the Form 10)*
10.9 (a) -- Form of Tax Sharing and Indemnification Agreement, dated as of September 30, 1996, between
Hanson, Hanson Overseas Holdings Ltd., HM Anglo American Ltd., Hanson North America Inc.
and the Company (Filed as Exhibit 10.9(a) to the Form 10)*
10.9 (b) -- Form of Deed of Tax Covenant, dated as of September 30, 1996, between Hanson, Hanson
Overseas Holdings Ltd. and the Company (Filed as Exhibit 10.9(b) to the Form 10)*
10.10 -- Form of Corporate Transition Agreement, dated as of September 30, 1996, between Hanson
North America Inc. and HM Anglo American Ltd. (Filed as Exhibit 10.10 to the Form 10)*
10.11 -- Form of Joint Ownership Agreement, dated as of September 30, 1996, between Hanson North
America Inc. and HM Anglo American Ltd. (Filed as Exhibit 10.11 to the Form 10)*
10.12 -- Form of Agreement, dated as of October 1, 1996, between Hanson Pacific Limited and HM
Holdings, Inc. (Filed as Exhibit 10.12 to the Form 10)*
10.13 -- Form of Management Agreement, dated as of September 30, 1996, among MHC Inc., Quantum
Chemical Corporation and Welbeck Management Limited (Filed as Exhibit 10.13(a) to the Form
10)*
10.14 -- Credit Agreement, dated as of July 26, 1996, among Hanson America Inc., the Company, as
Guarantor, the borrowing subsidiaries party thereto, the lenders party thereto, The Chase
Manhattan Bank, as Documentation Agent, and Bank of America National Trust and Savings
Association, as Administration Agent (Filed as Exhibit 10.14 to the Form 10)*
10.15 -- Agreement, dated as of July 1, 1996, between HM Anglo American, Ltd. and William M.
Landuyt (Filed as Exhibit 10.15 to the Form 10)*
10.16 -- Agreement, dated as of July 1, 1996, between HM Anglo American, Ltd. and Robert E. Lee
(Filed as Exhibit 10.16 to the Form 10)*
10.17 -- Agreement, dated as of July 1, 1996, between HM Anglo American, Ltd. and George H.
Hempstead III (Filed as Exhibit 10.17 to the Form 10)*
10.18 -- Agreement, dated as of July 1, 1996, between HM Anglo American, Ltd. and John E. Lushefski
(Filed as Exhibit 10.18 to the Form 10)*
</TABLE>
II-3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------------------
<C> <S>
10.19 -- Agreement, dated as of July 1, 1996, between Quantum Chemical Corporation and Ronald H.
Yocum (Filed as Exhibit 10.19 to the Form 10)*
10.20 -- Agreement, dated as of July 1, 1996, between SCM Chemicals Inc. and Donald V. Borst (Filed
as Exhibit 10.20 to the Form 10)*
10.21 -- Agreement, dated as of July 1, 1996, between Glidco Inc. and George W. Robbins (Filed as
Exhibit 10.21 to the Form 10)*
10.22 -- Form of Change-in-Control Agreement, dated as of July 1, 1996, between HM Anglo American
Ltd. and each of A. Mickelson Foster, Francis V. Lloyd, Christine F. Wubbolding, Marie S.
Dreher and James A. Lofredo (Filed as Exhibit 10.22 to the Form 10)*
10.23 -- Millennium Chemicals Inc. Annual Performance Incentive Plan (Filed as Exhibit 10.23 to the
Form 10)*
10.24 -- Hanson Industries 1996 Long-Term Incentive Plan (Filed as Exhibit 10.24 to the Form 10)*
10.25 -- Millennium Chemicals Inc. Long-Term Stock Incentive Plan (Filed as Exhibit 10.25 to the
Form 10)*
10.26 -- Hanson Industries Supplemental Retirement Plan (Filed as Exhibit 10.26 to the Form 10)*
10.27 -- Quantum Chemical Corporation Supplemental Executive Retirement Plan (Filed as Exhibit
10.27 to the Form 10)*
10.28 -- SCM Chemicals Inc. Supplemental Executive Retirement Plan (Filed as Exhibit 10.28 to the
Form 10)*
10.29 -- Glidco Inc. Supplemental Executive Retirement Plan (Filed as Exhibit 10.29 to the Form
10)*
11.1 -- Statement re: computation of per share earnings**
12.1 -- Statement re: computation of ratios**
21.1 -- Subsidiaries of the Company**
23.1 -- Consent of Price Waterhouse LLP***
23.1 (a) -- Consent of Price Waterhouse LLP**
23.2 -- Consent of Ernst & Young***
23.3 -- Consent of Ernst & Young LLP***
23.4 -- Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1)**
24.1 -- Powers of attorney (set forth on the signature pages to the Registration Statement)***
25.1 -- Statement of eligibility of trustee**
99.1 -- Form of Letter Agreement, dated July 3, 1996, between Hanson and U.K. Inland Revenue
(Filed as Exhibit 99.2 to the Form 10)*
</TABLE>
- ------------
* Incorporated by reference
** Filed herewith
*** Previously filed
(b) Financial Statement Schedules:
Schedule II -- Millennium Chemicals Inc. Valuation and Qualifying
Accounts
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the provisions in Item 14 above, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director or officer or
II-4
<PAGE>
<PAGE>
controlling person of the Registrants in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrants will, unless
in the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by them is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
have duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized in the City of
Iselin, State of New Jersey, on November 21, 1996.
MILLENNIUM AMERICA INC.
By: /S/ GEORGE H. HEMPSTEAD, III
..................................
NAME: GEORGE H. HEMPSTEAD, III
TITLE: SENIOR VICE PRESIDENT -- LAW
& ADMINISTRATION
MILLENNIUM CHEMICALS INC.
By: /S/ GEORGE H. HEMPSTEAD, III
..................................
NAME: GEORGE H. HEMPSTEAD, III
TITLE: SENIOR VICE PRESIDENT -- LAW
& ADMINISTRATION
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
MILLENNIUM AMERICA INC.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ WILLIAM M. LANDUYT* Chairman of the Board, Chief Executive November 21, 1996
......................................... Officer and Director (principal executive
(WILLIAM M. LANDUYT) officer)
/s/ ROBERT E. LEE* President, Chief Operating Officer and November 21, 1996
......................................... Director
(ROBERT E. LEE)
/s/ GEORGE H. HEMPSTEAD, III Senior Vice President -- Law & November 21, 1996
......................................... Administration and Director
(GEORGE H. HEMPSTEAD, III)
/s/ JOHN E. LUSHEFSKI* Senior Vice President, Chief Financial November 21, 1996
......................................... Officer and Director (principal financial
(JOHN E. LUSHEFSKI) officer)
/s/ MARIE S. DREHER* Vice President-Corporate Controller November 21, 1996
......................................... (principal accounting officer)
(MARIE S. DREHER)
</TABLE>
II-6
<PAGE>
<PAGE>
MILLENNIUM CHEMICALS INC.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ WILLIAM M. LANDUYT* Chairman of the Board, Chief Executive November 21, 1996
......................................... Officer and Director (principal executive
(WILLIAM M. LANDUYT) officer)
/s/ ROBERT E. LEE* President, Chief Operating Officer and November 21, 1996
......................................... Director
(ROBERT E. LEE)
/s/ JOHN E. LUSHEFSKI* Senior Vice President and Chief Financial November 21, 1996
......................................... Officer (principal financial officer)
(JOHN E. LUSHEFSKI)
/s/ KENNETH BAKER* Director November 21, 1996
.........................................
(THE RT. HON. KENNETH BAKER CH MP)
/s/ WORLEY H. CLARK, JR.* Director November 21, 1996
.........................................
(WORLEY H. CLARK, JR.)
/s/ MARTIN D. GINSBURG* Director November 21, 1996
.........................................
(MARTIN D. GINSBURG)
Director November , 1996
.........................................
(THE RT. HON. THE LORD GLENARTHUR)
Director November , 1996
.........................................
(DAVID J.P. MEACHIN)
/s/ MARTIN G. TAYLOR* Director November 21, 1996
.........................................
(MARTIN G. TAYLOR)
/s/ MARIE S. DREHER* Vice President -- Corporate Controller November 21, 1996
......................................... (principal accounting officer)
(MARIE S. DREHER)
*By /s/ GEORGE H. HEMPSTEAD, III
.........................................
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
- ------ ------------------------------------------------------------------------------------------------ --------------------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement**
3.1 (a) -- Restated Certificate of Incorporation of the Issuer**
3.1 (b) -- Certificate of Merger of Millennium America Inc. (a name-saver company) into the Issuer**
3.2 -- Amended and Restated By-laws of the Issuer**
3.3 -- Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the
Company's Registration Statement on Form 10 (File No. 1-12091) (the 'Form 10'))*
3.4 -- By-laws of the Company (filed as Exhibit 3.2 to the Form 10)*
4.1 -- Form of Indenture, dated as of November , 1996, among the Issuer, the Company and The Bank
of New York, as trustee, in respect of the % Senior Notes due November , 2006 and the
% Senior Debentures due November , 2026**
4.2 -- Form of Note (included in the Indenture filed as Exhibit 4.1 to this Registration Statement)*
4.3 -- Form of Debenture (included in the Indenture filed as Exhibit 4.1 to this Registration
Statement)*
4.4 (a) -- Indenture, dated as of March 1, 1994, between Millennium America, as issuer, and The Bank of
New York, as Trustee (Filed as Exhibit 4.4(a) to the Form 10)*
4.4 (b) -- First Supplemental Indenture, dated as of May 16, 1994, between Millennium America, as
issuer, and The Bank of New York, as Trustee (Filed as Exhibit 4.4(a) to the Form 10)*
4.4 (c) -- Second Supplemental Indenture, dated as of September 18, 1996, between Millennium America, as
issuer, and The Bank of New York, as Trustee (Filed as Exhibit (c)(3) to the Issuer Tender
Offer Statement on Schedule 13E-4, dated October 18, 1996, of Hanson, the Issuer and Hanson
(Bermuda) Limited (the '13E-4'))*
4.4 (d) -- Third Supplemental Indenture, dated as of October 1, 1996, among Millennium America, as
issuer, Millennium, as Guarantor, and The Bank of New York, as Trustee (Filed as Exhibit
(c)(4) to the 13E-4)*
4.5 (a) -- ADS Rights Agreement (the 'ADS Rights Agreement'), dated as of March 1, 1994, among Hanson,
HBL and Citibank, N.A., as ADS Rights Agent (Filed as Exhibit 4.4(c) to the Form 10)*
4.5 (b) -- First Amendment to the ADS Rights Agreement, dated as of September 18, 1996, among Hanson,
HBL and Citibank, N.A., as ADS Rights Agent (Filed as Exhibit (c)(6) to the 13E-4)*
4.6 (a) -- ADS Issuance Agreement (the 'ADS Issuance Agreement'), dated as of March 1, 1994, between
Hanson and HBL (Filed as Exhibit 4.4(b) to the Form 10)*
4.6 (b) -- First Amendment to the ADS Issuance Agreement, dated as of September 18, 1996, between Hanson
and HBL (Filed as Exhibit (c)(8) to the 13E-4)*
4.7 -- Keepwell Agreement, dated as of March 1, 1994, between Hanson and HBL (Filed as Exhibit
4.4(d) to the Form 10)*
4.8 -- Allocation Agreement, dated as of August 28, 1996, among Hanson, HBL and Millennium America
(Filed as Exhibit (c)(10) to the 13E-4)*
5.1 -- Opinion of Weil, Gotshal & Manges LLP, as to the legality of the Securities and Guarantees**
10.1 -- Form of Pre-Demerger Stock Purchase Agreement, dated as of September 16, 1996, between HM
Holdings, Inc. and Hanson (including related form of Indemnification Agreement and Tax Sharing
and Indemnification Agreement) (Filed as Exhibit 10.1 to the Form 10)*
10.2 -- Form of Pre-Demerger Stock Purchase Agreement, dated as of September 16, 1996, between HM
Holdings, Inc. and Hanson relating to Peabody Holding Company, Inc. (including related form of
Indemnification Agreement and Tax Sharing and Indemnification Agreement) (Filed as Exhibit
10.2 to the Form 10)*
10.3 -- Form of Pre-Demerger Stock Purchase Agreement, dated as of September 16, 1996, between HM
Holdings, Inc. and Hanson relating to certain Canadian subsidiaries (including related form of
Indemnification Agreement) (Filed as Exhibit 10.3 to the Form 10)*
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
- ------ ------------------------------------------------------------------------------------------------ --------------------
<S> <C> <C>
10.4 -- Form of Pre-Demerger Stock Purchase Agreement, dated as of September 30, 1996, between HM
Holdings, Inc. and Hanson relating to Lynton Group, Inc. (Filed as Exhibit 10.4 to the Form
10)*
10.5 -- Form of Post-Demerger Stock Purchase Agreement, dated as of September 30, 1996, between HMB
Holdings Inc. and Hanson (including related form of Indemnification Agreement and Tax Sharing
and Indemnification Agreement) (Filed as Exhibit 10.5 to the Form 10)*
10.6 -- Form of Post-Demerger Stock Purchase Agreement, dated as of September 30, 1996, between
Hanson and MHC Inc. (including related form of Indemnification Agreement and Tax Sharing and
Indemnification Agreement) (Filed as Exhibit 10.6 to the Form 10)*
10.7 -- Demerger Agreement, dated as of September 30, 1996, between Hanson, Hanson Overseas Holdings
Ltd. and the Company (Filed as Exhibit 10.7 to the Form 10)*
10.8 -- Form of Indemnification Agreement, dated as of September 30, 1996, between Hanson and the
Company (Filed as Exhibit 10.8 to the Form 10)*
10.9 (a) -- Form of Tax Sharing and Indemnification Agreement, dated as of September 30, 1996, between
Hanson, Hanson Overseas Holdings Ltd., HM Anglo American Ltd., Hanson North America Inc. and
the Company (Filed as Exhibit 10.9(a) to the Form 10)*
10.9 (b) -- Form of Deed of Tax Covenant, dated as of September 30, 1996, between Hanson, Hanson Overseas
Holdings Ltd. and the Company (Filed as Exhibit 10.9(b) to the Form 10)*
10.10 -- Form of Corporate Transition Agreement, dated as of September 30, 1996, between Hanson North
America Inc. and HM Anglo American Ltd. (Filed as Exhibit 10.10 to the Form 10)*
10.11 -- Form of Joint Ownership Agreement, dated as of September 30, 1996, between Hanson North
America Inc. and HM Anglo American Ltd. (Filed as Exhibit 10.11 to the Form 10)*
10.12 -- Form of Agreement, dated as of October 1, 1996, between Hanson Pacific Limited and HM
Holdings, Inc. (Filed as Exhibit 10.12 to the Form 10)*
10.13 -- Form of Management Agreement, dated as of September 30, 1996, among MHC Inc., Quantum
Chemical Corporation and Welbeck Management Limited (Filed as Exhibit 10.13(a) to the Form
10)*
10.14 -- Credit Agreement, dated as of July 26, 1996, among Hanson America Inc., the Company, as
Guarantor, the borrowing subsidiaries party thereto, the lenders party thereto, The Chase
Manhattan Bank, as Documentation Agent, and Bank of America National Trust and Savings
Association, as Administration Agent (Filed as Exhibit 10.14 to the Form 10)*
10.15 -- Agreement, dated as of July 1, 1996, between HM Anglo American, Ltd. and William M. Landuyt
(Filed as Exhibit 10.15 to the Form 10)*
10.16 -- Agreement, dated as of July 1, 1996, between HM Anglo American, Ltd. and Robert E. Lee (Filed
as Exhibit 10.16 to the Form 10)*
10.17 -- Agreement, dated as of July 1, 1996, between HM Anglo American, Ltd. and George H. Hempstead
III (Filed as Exhibit 10.17 to the Form 10)*
10.18 -- Agreement, dated as of July 1, 1996, between HM Anglo American, Ltd. and John E. Lushefski
(Filed as Exhibit 10.18 to the Form 10)*
10.19 -- Agreement, dated as of July 1, 1996, between Quantum Chemical Corporation and Ronald H. Yocum
(Filed as Exhibit 10.19 to the Form 10)*
10.20 -- Agreement, dated as of July 1, 1996, between SCM Chemicals Inc. and Donald V. Borst (Filed as
Exhibit 10.20 to the Form 10)*
10.21 -- Agreement, dated as of July 1, 1996, between Glidco Inc. and George W. Robbins (Filed as
Exhibit 10.21 to the Form 10)*
10.22 -- Form of Change-in-Control Agreement, dated as of July 1, 1996, between HM Anglo American Ltd.
and each of A. Mickelson Foster, Francis V. Lloyd, Christine F. Wubbolding, Marie S. Dreher
and James A. Lofredo (Filed as Exhibit 10.22 to the Form 10)*
10.23 -- Millennium Chemicals Inc. Annual Performance Incentive Plan (Filed as Exhibit 10.23 to the
Form 10)*
10.24 -- Hanson Industries 1996 Long-Term Incentive Plan (Filed as Exhibit 10.24 to the Form 10)*
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
- ------ ------------------------------------------------------------------------------------------------ --------------------
<S> <C> <C>
10.25 -- Millennium Chemicals Inc. Long-Term Stock Incentive Plan (Filed as Exhibit 10.25 to the Form
10)*
10.26 -- Hanson Industries Supplemental Retirement Plan (Filed as Exhibit 10.26 to the Form 10)*
10.27 -- Quantum Chemical Corporation Supplemental Executive Retirement Plan (Filed as Exhibit 10.27
to the Form 10)*
10.28 -- SCM Chemicals Inc. Supplemental Executive Retirement Plan (Filed as Exhibit 10.28 to the Form
10)*
10.29 -- Glidco Inc. Supplemental Executive Retirement Plan (Filed as Exhibit 10.29 to the Form 10)*
11.1 -- Statement re: computation of per share earnings**
12.1 -- Statement re: computation of ratios**
21.1 -- Subsidiaries of the Company**
23.1 -- Consent of Price Waterhouse LLP***
23.1 (a) -- Consent of Price Waterhouse LLP**
23.2 -- Consent of Ernst & Young***
23.3 -- Consent of Ernst & Young LLP***
23.4 -- Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1)**
24.1 -- Powers of attorney (set forth on the signature pages to the Registration Statement)***
25.1 -- Statement of eligibility of trustee**
99.1 -- Form of Letter Agreement, dated July 3, 1996, between Hanson and U.K. Inland Revenue (Filed
as Exhibit 99.2 to the Form 10)*
</TABLE>
- ------------
* Incorporated by reference
** Filed herewith
*** Previously filed
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as.... SS
<PAGE>
<PAGE>
DRAFT DATED 11/21/96
MILLENNIUM AMERICA INC.
[ ]% SENIOR NOTES DUE NOVEMBER __, 2006
[ ]% SENIOR DEBENTURES DUE NOVEMBER __, 2026
---------------------------
UNCONDITIONALLY GUARANTEED BY
MILLENNIUM CHEMICALS INC.
UNDERWRITING AGREEMENT
.................., 1996
Goldman, Sachs & Co.,
Bear, Stearns & Co. Inc.,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
J.P. Morgan Securities Inc.,
Salomon Brothers Inc
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Millennium America Inc., a Delaware corporation (the "Issuer"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
$_______ principal amount of the Issuer's __% Senior Notes due November __, 2006
(the "Notes") and an aggregate of $________ principal amount of the Issuer's __%
Senior Debentures due November __, 2026 (the "Debentures" and, together with the
Notes, the "Securities"). The Securities are unconditionally guaranteed (the
"Guarantees") by Millennium Chemicals Inc., a Delaware corporation (the
"Company").
1. The Company and the Issuer represent and warrant to, and agree with,
each of the Underwriters that:
<PAGE>
<PAGE>
(a) A registration statement on Form S-1 (File No. 333-15975 and
333-15975-01) (including all pre-effective amendments thereto, if any,
the "Initial Registration Statement") in respect of the Securities has
been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement and any post-effective
amendment thereto, each in the form heretofore delivered to you, and,
excluding exhibits thereto, to you for each of the other Underwriters,
have been declared effective by the Commission in such form; other than
a registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended (the "Act"), which will
become effective upon filing, no other document with respect to the
Initial Registration Statement has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the
Initial Registration Statement, any post-effective amendment thereto or
the Rule 462(b) Registration Statement, if any, has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in the Initial
Registration Statement and incorporated by reference in the Rule 462(b)
Registration Statement, if any, or filed with the Commission pursuant to
Rule 424(a) of the rules and regulations of the Commission under the
Act, is hereinafter called a "Preliminary Prospectus"; the various parts
of the Initial Registration Statement and the Rule 462(b) Registration
Statement, if any, including all exhibits thereto but excluding Form T-1
and including the information contained in the form of final prospectus
filed with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 5(a) hereof and deemed by virtue of Rule 430A
under the Act to be part of the Initial Registration Statement at the
time it was declared effective or the Rule 462(b) Registration
Statement, if any, at the time it became or hereafter becomes effective,
each as amended at the time such part of the registration statement
became effective, are hereinafter collectively called the "Registration
Statement"; and such final prospectus, in the form first filed pursuant
to Rule 424(b) under the Act, is hereinafter called the "Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply
to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company or the Issuer by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply
to any statements or omissions made in
2
<PAGE>
<PAGE>
reliance upon and in conformity with information furnished in writing to
the Company or the Issuer by an Underwriter through Goldman, Sachs & Co.
expressly for use therein;
(d) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in
the Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Prospectus or
such as singly or in the aggregate do not have a material adverse effect
on the financial position, stockholders' equity, or results of
operations of the Company and its subsidiaries, taken as a whole; and,
since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any change
in the capital stock or long-term debt of the Company and its
subsidiaries, taken as a whole, or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Prospectus;
(e) The Company and each of its Significant Subsidiaries (as such
term is defined in Rule 1-02 of Regulation S-X under the Act) has good
and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by it, in each case free
and clear of all liens, encumbrances and defects except such as are
described in the Prospectus or such as could not reasonably be expected
to, singly or in the aggregate, have a material adverse effect on the
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole; and any real property
and buildings held under lease by the Company and its Significant
Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material to the Company and its
subsidiaries taken as a whole;
(f) Each of the Company and the Issuer has been duly incorporated
and is validly existing as a corporation in good standing under the laws
of the State of Delaware, with corporate power and authority to own its
properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, except where the failure
to be so qualified or in good standing could not reasonably be expected
to, singly or in the aggregate, have a material adverse effect on the
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole; and each Significant
Subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with corporate power and authority to own
its properties and conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the transaction
of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, except where the failure
to be so qualified or in good standing could not reasonably be expected
to, singly or in the aggregate, have a material adverse effect on the
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole;
3
<PAGE>
<PAGE>
(g) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully
paid and non-assessable; and all of the issued shares of capital stock
of each Significant Subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and (except for
directors' qualifying shares) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims;
(h) (i) The Securities have been duly authorized and, when issued
and delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Issuer, enforceable in accordance
with their terms and entitled to the benefits provided by the indenture
to be dated as of ___________, 1996 (the "Indenture") among the Company,
the Issuer and The Bank of New York, as Trustee (the "Trustee"), under
which they are to be issued, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; (ii) the Indenture will be substantially in the form filed
as an exhibit to the Registration Statement; (iii) the Guarantees have
been duly authorized and, upon due execution, authentication and
delivery of the Securities and the endorsement of the Guarantees
thereon, the Guarantees will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of
the Company, enforceable in accordance with their terms and entitled to
the benefits provided by the Indenture, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; (iv) the Indenture has been duly authorized and duly
qualified under the Trust Indenture Act and, when executed and delivered
by the Company, the Issuer and the Trustee, will constitute a valid and
legally binding instrument, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles; (v) this Agreement
has been duly authorized, executed and delivered by the Company and the
Issuer; and (vi) the Securities, the Guarantees and the Indenture will
conform to the descriptions thereof in the Prospectus;
(i) The issue and sale of the Securities, the endorsement of the
Guarantees on the Securities by the Company and the compliance by the
Company and the Issuer with all of the provisions of the Securities, the
Guarantees, the Indenture and this Agreement and the consummation of the
transactions herein and therein contemplated will not (i) conflict with
or result in a breach or violation of any of the terms or provisions of,
or constitute a default under any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company or
any of its Significant Subsidiaries is a party or by which the Company
or any of its Significant Subsidiaries is bound or to which any of the
property or assets of the Company or any of its Significant Subsidiaries
is subject, (ii) result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or the Issuer or
(iii) result in any violation of any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its Significant Subsidiaries or
any of their properties, which conflicts, breach or violations, in the
case of Clauses (i) and (iii), could reasonably be expected to, singly
or in the aggregate, have a material adverse effect on the financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries, taken as a whole; and no consent, approval,
4
<PAGE>
<PAGE>
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issue and sale
of the Securities and the Guarantees or the consummation by the Company
and the Issuer of the transactions contemplated by this Agreement or the
Indenture, except the registration under the Act of the Securities and
the Guarantees, such as have been obtained under the Trust Indenture Act
and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Securities
by the Underwriters;
(j) Neither the Company nor any of its Significant Subsidiaries is
(i) in violation of its Certificate of Incorporation or By-laws or (ii)
in default in the performance or observance of any obligation, covenant
or condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a party
or by which it or any of its properties may be bound, which defaults, in
the case of this Clause (ii), could reasonably be expected to, singly or
in the aggregate, have a material adverse effect on the financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries, taken as a whole;
(k) The statements set forth in the Prospectus under the caption
"Description of the Securities", insofar as they purport to constitute a
summary of the terms of the Securities, the Guarantees and the
Indenture, are accurate, complete and fair;
(l) Other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any
of its subsidiaries is the subject which could reasonably be expected
to, singly or in the aggregate, have a material adverse effect on the
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole; and, to the best of the
Company's and the Issuer's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others;
(m) Neither the Company nor the Issuer is and, after giving effect
to the offering and sale of the Securities, will be an "investment
company" or an entity "controlled" by an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(n) Neither the Company, the Issuer nor any of their affiliates
does business with the government of Cuba or with any person or
affiliate located in Cuba within the meaning of Section 517.075, Florida
Statutes;
(o) Price Waterhouse LLP, who have certified certain financial
statements of the Company and its subsidiaries, and Quantum Chemical
Corporation and its subsidiaries, and Ernst & Young LLP, who have
certified certain financial statements of HMB Holdings Inc. and SCM
Chemicals Limited, are each independent public accountants as required
by the Act and the rules and regulations of the Commission thereunder;
(p) All intangibles (including, but not limited to, trademarks,
service marks, trade names, copyrights, patents, patent rights,
inventions and know-how) that the Company or its
5
<PAGE>
<PAGE>
Significant Subsidiaries own or have pending, or under which any of them
are licensed, and which are material to the business of the Company and
its subsidiaries, taken as a whole, are in good standing and uncontested
in all respects material to the Company and its subsidiaries, taken as a
whole, and not subject to any material liens or encumbrances or rights
thereto or therein by third parties, other than license agreements
entered into by the Company or any of its subsidiaries. All of the
trademarks and trade names used by the Company and its subsidiaries and
their respective licensees to identify their products and services,
which are material to the Company and its subsidiaries, taken as a whole
("Trademarks"), are protected by registration or applications for
registration in the name of the Company or its subsidiaries on the
principal register in the United States Patent and Trademark Office and
by rights in the United States accorded the Company and its subsidiaries
by virtue of the common law, as well as, where applicable, by issued and
existing registrations or applications for registration in the name of
the Company or its subsidiaries (or their nominees) and rights accorded
the Company and its subsidiaries by virtue of common or civil law in
foreign jurisdictions in which the Company or its subsidiaries currently
conducts its or their business, except where the failure to be so
registered could not reasonably be expected to, singly or in the
aggregate, result in a material adverse effect upon the financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries, taken as a whole. To the best of the Company's
knowledge, the Company and its subsidiaries and their respective
licensees have the right to use the Trademarks and there are no
oppositions, cancellations or other proceedings challenging such right
of use which, singly or in the aggregate, could reasonably be expected
to have a material adverse effect on the Company and its subsidiaries,
taken as a whole. To the best of the Company's knowledge, no claims are
pending challenging or questioning the use, ownership or validity of any
intangibles owned or used by the Company or any of its subsidiaries
material to the business of the Company and its subsidiaries taken as a
whole;
(q) Except as disclosed in the Prospectus or as could not
reasonably be expected to, singly or in the aggregate, result in a
material adverse effect on the financial position, stockholders' equity
or results of operations of the Company and its subsidiaries, taken as a
whole, (i) neither the Company nor any of its subsidiaries is in
violation of any Environmental Laws (as defined below), (ii) the Company
and its subsidiaries have all permits, authorizations and approvals
required under all applicable Environmental Laws and are each in
compliance with their requirements, (iii) there are no pending or, to
the Company's knowledge, threatened administrative, regulatory or
judicial actions, suits, demands, notices of noncompliance or violation,
proceedings or, to the Company's knowledge, investigations relating to
any Environmental Law against the Company or any of its subsidiaries,
and (iv) there have been no releases, spills or discharges of Hazardous
Materials (as defined below) on or underneath any of the properties
currently or formerly owned, leased or operated by the Company or any of
its subsidiaries. For purposes of this Agreement, the term
"Environmental Law" means any federal, state, local or foreign statute,
law, rule, regulation, ordinance, code, policy or rule of common law and
any judicial or administrative interpretation thereof including any
judicial or administrative order, consent decree or judgment, relating
to pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened
release of Hazardous Materials or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Materials. The term "Hazardous Materials" means any
chemical, pollutants, contaminants,
6
<PAGE>
<PAGE>
wastes, toxic substances, hazardous substances, petroleum or petroleum
products, asbestos, polychlorinated biphenyls, caustic substances,
radioactive materials, or any other substance defined as hazardous,
toxic, or dangerous by, or regulated under, any Environmental Law; and
(r) The Unaudited Pro Forma Combined Financial Data set forth in
the Registration Statement and the Prospectus with respect to the
Company has been prepared in accordance with the applicable requirements
of Rule 11-02 of Regulation S-X promulgated by the Commission, has been
compiled on the pro forma basis described therein, and in the opinion of
the Company, the assumptions used in the preparation thereof were
reasonable at the time made and the adjustments used therein are based
on good faith estimates and assumptions believed by the Company to be
reasonable at the time made.
2. Subject to the terms and conditions herein set forth, the Issuer
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Issuer, (a)
at a purchase price of ____% of the principal amount thereof, plus accrued
interest, if any, from ____________, 1996 to the Time of Delivery hereunder, the
principal amount of the Notes set forth opposite the name of such Underwriter in
Schedule I hereto under column (A), and (b) at a purchase price of ___% of the
principal amount thereof, plus accrued interest, if any from _________, 1996 to
the Time of Delivery hereunder, the principal amount of the Debentures set forth
opposite the name of such Underwriter in Schedule I hereto under column (B).
3. Upon the authorization by the Underwriters of the release of the
Securities, the several Underwriters propose to offer the Securities for sale
upon the terms and conditions set forth in the Prospectus.
4. (a) The Securities to be purchased by each Underwriter hereunder will
be represented by one or more definitive global Securities in book-entry form
which will be deposited by or on behalf of the Issuer with The Depository Trust
Company ("DTC") or its designated custodian. The Issuer will deliver the
Securities to Goldman, Sachs & Co., for the account of each Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
wire transfer of Federal (same day) funds, to the account specified by the
Issuer, by causing DTC to credit the Securities to the account of Goldman, Sachs
& Co. at DTC. The Issuer will cause the certificates representing the Securities
to be made available to Goldman, Sachs & Co. for checking at least twenty-four
hours prior to the Time of Delivery (as defined below) at the office of DTC or
its designated custodian (the "Designated Office"). The time and date of such
delivery and payment shall be 9:30 a.m., New York City time, on ____________,
1996 or such other time and date as Goldman, Sachs & Co., the Company and the
Issuer may agree upon in writing. Such time and date are herein called the "Time
of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by the
Underwriters pursuant to Section 7(i) hereof, will be delivered at the offices
of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New
York 10004 (the "Closing Location"), and the Securities will be delivered at the
Designated Office, all at the Time of Delivery. A meeting will be held at the
Closing Location at 2:00 p.m., New York City time, on the New York Business Day
next preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the
7
<PAGE>
<PAGE>
parties hereto. For the purposes of this Section 4, "New York Business Day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York City are generally authorized or
obligated by law or executive order to close.
5. Each of the Company and the Issuer agrees with each of the
Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's
close of business on the second business day following the execution and
delivery of this Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further amendment or any
supplement to the Registration Statement or Prospectus which shall be
disapproved by you promptly after reasonable notice thereof; to advise you,
promptly after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any supplement to
the Prospectus or any amended Prospectus has been filed and to furnish you with
copies thereof; to advise you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus, of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or suspending any
such qualification, to promptly use its best efforts to obtain the withdrawal of
such order;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Securities and the Guarantees for offering and sale under
the securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Securities, provided that in connection therewith neither the Company nor
the Issuer shall be required to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to furnish
the Underwriters with copies of the Prospectus in New York City in such
quantities as you may reasonably request, and, if the delivery of a prospectus
is required at any time prior to the expiration of nine months after the time of
issue of the Prospectus in connection with the offering or sale of the
Securities and the Guarantees and if at such time any event shall have occurred
as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary during such same
period to amend or supplement the Prospectus in order to comply with the Act or
the Trust Indenture Act, to notify you and upon your request to prepare and
furnish without charge to each Underwriter and to any dealer in securities as
many copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such statement
or omission or effect such compliance; and in case any Underwriter is required
to deliver a prospectus in connection with sales of any of the Securities at any
time nine months or more after the time of issue of the Prospectus, upon your
request but at the expense of
8
<PAGE>
<PAGE>
such Underwriter, to prepare and deliver to such Underwriter as many copies as
you may request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c)), an earnings
statement of the Company and its subsidiaries (which need not be audited)
complying with Section 11(a) of the Act and the rules and regulations of the
Commission thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the later of the Time of Delivery and such earlier time as you may
notify the Company and the Issuer, not to offer, sell, contract to sell or
otherwise dispose of, except as provided hereunder any securities of the Company
or the Issuer that are substantially similar to the Securities and the
Guarantees;
(f) To furnish to the holders of the Securities all of the documents
specified in Section 1010 of the Indenture, all in the manner specified therein;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders of the Company,
and to deliver to you (i) as soon as they are available, copies of any reports
and financial statements which the Company or the Issuer furnishes to or files
with the Commission or any national securities exchange on which the Securities
or any class of securities of the Company or the Issuer are listed;
(h) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds;" and
(i) If the Company and the Issuer elect to rely upon Rule 462(b), to
file a Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this Agreement,
and at the time of filing either to pay to the Commission the filing fee for the
Rule 462(b) Registration Statement or to give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the Act.
6. The Company and the Issuer covenant and agree with one another and
the several Underwriters that the Company and the Issuer (without duplication)
will pay or cause to be paid the following: (i) the fees, disbursements and
expenses of the Company's and the Issuer's counsel and accountants in connection
with the registration of the Securities and the Guarantees under the Act and all
other expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Indenture, the Blue Sky
and Legal Investment Memoranda, closing documents (including any compilations
thereof) and
9
<PAGE>
<PAGE>
any other documents in connection with the offering, purchase, sale and delivery
of the Securities and the Guarantees; (iii) all expenses in connection with the
qualification of the Securities and the Guarantees for offering and sale under
state securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky and legal investment surveys;
(iv) any fees charged by securities rating services for rating the Securities
and the Guarantees; (v) the filing fees incident to, and the fees and
disbursements of counsel for the Underwriters in connection with, any required
review by the National Association of Securities Dealers, Inc. of the terms of
the sale of the Securities and the Guarantees; (vi) the cost of preparing the
Securities and the Guarantees; (vii) the fees and expenses of the Trustee and
any agent of the Trustee and the fees and disbursements of counsel for the
Trustee in connection with the Indenture, the Securities and the Guarantees; and
(viii) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section. It is understood, however, that, except as provided in this Section,
and Sections 8 and 11 hereof, the Underwriters will pay all of their own costs
and expenses, including the fees of their counsel, transfer taxes on resale of
any of the Securities and the Guarantees by them, and any advertising expenses
connected with any offers they may make.
7. The obligations of the Underwriters hereunder shall be subject, in
their discretion, to the condition that all representations and warranties and
other statements of each of the Company and the Issuer herein are, at and as of
the Time of Delivery, true and correct, the condition that each of the Company
and the Issuer shall have performed all of its obligations hereunder theretofore
to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by the
rules and regulations under the Act and in accordance with Section 5(a) hereof;
if the Company and the Issuer have elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 p.m.
Washington, D.C. time on the date of this Agreement; no stop order suspending
the effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Fried, Frank, Harris, Shriver & Jacobson, counsel for the
Underwriters, shall have furnished to you such opinion (a draft of such opinion
is attached as Annex II(a) hereto), dated the Time of Delivery, with respect to
the valid existence of the Company and the Issuer, this Agreement, the validity
of the Indenture, the Securities and the Guarantees, the Registration Statement,
the Prospectus and such other related matters as you may reasonably request, and
such counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(c) Weil, Gotshal & Manges LLP, counsel for the Company and the Issuer,
shall have furnished to you their written opinion (a draft of such opinion is
attached as Annex II(b) hereto), dated the Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of Delaware, with
corporate power and authority to own its properties and conduct its
business as described in the Prospectus;
10
<PAGE>
<PAGE>
(ii) The Issuer has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus;
(iii) The Company has authorized capital stock as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable;
(iv) This Agreement has been duly authorized, executed and
delivered by each of the Company and the Issuer;
(v) The Securities have been duly authorized, executed and
delivered by the Issuer, and, when authenticated by the Trustee and paid
for by you in accordance with the terms of the Underwriting Agreement,
will constitute valid and legally binding obligations of the Issuer,
entitled to the benefits provided by the Indenture, enforceable against
the Issuer in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights and
remedies generally, and, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith
and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity);
(vi) The Guarantees have been duly authorized, executed and
delivered by the Company and, when the Securities have been
authenticated by the Trustee and paid for by you in accordance with the
terms of the Underwriting Agreement, will constitute valid and legally
binding obligations of the Company, entitled to the benefits provided by
the Indenture, enforceable against the Company in accordance with their
terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting
creditors' rights and remedies generally, and, as to enforceability, to
general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity);
(vii) The Indenture has been duly authorized, executed and
delivered by the Company and the Issuer and (assuming its due
authorization, execution and delivery by the Trustee) constitutes a
valid and legally binding obligation of the Company and the Issuer,
enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights and
remedies generally and, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith
and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity); and the Indenture has been duly
qualified under the Trust Indenture Act;
(viii) The issue and sale of the Securities by the Issuer and the
Guarantees by the Company and the compliance by the Company and the
Issuer with all of the provisions of the Securities, the Guarantees, the
Indenture and this Agreement and the consummation by them of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to us which is
material to the Company and its subsidiaries, taken as a whole,
11
<PAGE>
<PAGE>
to which the Company or the Issuer is a party or by which the Company or
the Issuer is bound or to which any of the property or assets of the
Company or the Issuer is subject, nor will such actions result in any
violation of the provisions of the Certificate of Incorporation or
By-laws of the Company or the Issuer or any New York, Delaware corporate
or federal statute, rule or regulation (other than foreign and state
securities or Blue Sky laws, as to which such counsel need not express
an opinion, and other than federal securities laws, as to which such
counsel need not express an opinion except as otherwise set forth
herein) or any order of any court or governmental agency or body having
jurisdiction over the Company or the Issuer or any of their properties
of which we are aware;
(ix) No consent, approval, authorization, order, registration or
qualification of or with any New York, Delaware corporate or federal
governmental agency or body or, to our knowledge, any New York or
federal court, is required for the issue and sale of the Securities by
the Issuer or of the Guarantees by the Company or the consummation by
the Company and the Issuer of the transactions contemplated by this
Agreement or the Indenture, except such as have been obtained under the
Act and the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Securities and the Guarantees by the Underwriters
(as to which such counsel need not express an opinion);
(x) The statements set forth in the Prospectus under the caption
"Description of the Securities", insofar as they purport to constitute a
summary of the terms of the Securities and the Guarantees or of the
Indenture, are accurate summaries in all material respects;
(xi) Neither the Company nor the Issuer is an "investment company"
as such term is defined in the Investment Company Act; and
(xii) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company and the Issuer
prior to the Time of Delivery (other than the financial statements and
related notes, financial statement schedules and the other financial and
accounting data therein and Exhibit 25.1 to the Registration Statement,
as to which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Act and the rules and
regulations thereunder.
In addition, Weil, Gotshal & Manges LLP shall state that it has
participated in conferences with directors, officers and other representatives
of the Company and the Issuer, representatives of the independent public
accountants for the Company and the Issuer, representatives of the Underwriters
and representatives of counsel for the Underwriters, at which conferences the
contents of the Registration Statement and the Prospectus and related matters
were discussed, and, although it has not independently verified and is not
passing upon and assumes no responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus (except to the extent specified in subsection (x) of this Section
7(c)), no facts have come to its attention which lead it to believe that the
Registration Statement, on the effective date thereof, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading or that the Prospectus, on the date thereof or at the Time of
Delivery, contained or contains an untrue statement
12
<PAGE>
<PAGE>
of a material fact or omitted or omits to state a material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading (it being
understood that such counsel expresses no view with respect to the financial
statements and related notes, financial statement schedules and the other
financial and accounting data included in the Registration Statement or
Prospectus, or with respect to Exhibit 25.1 to the Registration Statement).
(d) George H. Hempstead, III, Esq., Senior Vice President-Law and
Adminstration, of the Company and the Issuer, shall have furnished to you his
written opinion (a draft of such opinion is attached as Annex II(c) hereto),
dated the Time of Delivery, in form and substance satisfactory to you, to the
effect that:
(i) Each of the Company and the Issuer has been duly qualified as a
foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such
qualification, except where the failure to be so qualified or in good
standing could not reasonably be expected to, singly or in the
aggregate, have a material adverse effect on the financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of local counsel and
in respect of matters of fact upon certificates of officers of the
Company, provided that such counsel shall state that they believe that
both you and they are justified in relying upon such opinions and
certificates and a copy of such opinions and certificates are furnished
to you);
(ii) Each Significant Subsidiary of the Company that is an
operating company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation; and all of the issued shares of capital stock of each
Significant Subsidiary of the Company that is an operating company have
been duly and validly authorized and issued, are fully paid and
non-assessable, and (except for directors' qualifying shares) are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims (such counsel being entitled to rely
in respect of the opinion in this clause upon opinions of local counsel
and in respect of matters of fact upon certificates of officers of the
Company or its subsidiaries, provided that such counsel shall state
that they believe that both you and they are justified in relying upon
such opinions and certificates and a copy of such opinions and
certificates are furnished to you);
(iii) To the best of such counsel's knowledge, (i) the Company and
each of its Significant Subsidiaries have good and marketable title in
fee simple to all real property owned by them, in each case free and
clear of all liens, encumbrances and defects, except such as are
described in the Prospectus or such as could not reasonably be expected
to, singly or in the aggregate, have a material adverse effect on the
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole; and (ii) any real
property and buildings held under lease by the Company and its
Significant Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material to the
Company and its subsidiaries, taken as a whole (in giving the opinion in
this clause, such counsel may state that no examination of record titles
for the purpose of such opinion has been made, and that they are relying
upon a general review of the titles of the Company and its subsidiaries,
upon opinions of local counsel and abstracts, reports and
13
<PAGE>
<PAGE>
policies of title companies rendered or issued at or subsequent to the
time of acquisition of such property by the Company or its Significant
Subsidiaries, upon opinions of counsel to the lessors of such property
and, in respect of matters of fact, upon certificates of officers of the
Company or its Significant Subsidiaries, provided that such counsel
shall state that they believe that both you and they are justified in
relying upon such opinions, abstracts, reports, policies and
certificates and copies thereof are furnished to you); and
(iv) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or of
which any property of the Company or any of its subsidiaries is the
subject which could reasonably be expected to, singly or in the
aggregate, have a material adverse effect on the financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole.
In addition, such counsel shall state that no facts have come to his
attention which lead him to believe that the Registration Statement, on the
effective date thereof, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading or that the Prospectus, on
the date thereof or at the Time of Delivery, contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel expresses no view with respect
to the financial statements and related notes, the financial statement schedules
and the other financial data included in the Registration Statement or
Prospectus, or with respect to Exhibit 25.1 to the Registration Statement).
(e) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at the Time of Delivery, Price Waterhouse LLP
shall have furnished to you a letter, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set forth in
Annex I(a) hereto (the executed copy of the letter delivered by Price Waterhouse
LLP prior to the execution of this Agreement is attached as Annex I(b) hereto
and a draft of the form of letter to be delivered by Price Waterhouse LLP on the
effective date of any post-effective amendment to the Registration Statement and
as of each Time of Delivery is attached as Annex I(c) hereto;
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been any
change in the capital stock or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in Clause (i) or (ii), is in your
judgment so material and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Securities and the
Guarantees on the terms and in the manner contemplated in the Prospectus;
14
<PAGE>
<PAGE>
(g) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's or the Issuer's debt securities by any
"nationally recognized statistical rating organization", as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
or the Issuer's debt securities;
(h) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange; (ii) a suspension or material
limitation in trading in the Company's securities on the New York Stock
Exchange; (iii) a general moratorium on commercial banking activities declared
by either Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such event
specified in this Clause (iv) in your judgment makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Securities and the Guarantees on the terms and in the manner contemplated in the
Prospectus;
(i) The Company and the Issuer shall have furnished or caused to be
furnished to you at the Time of Delivery certificates of officers of the Company
and the Issuer satisfactory to you as to the accuracy of the representations and
warranties of the Company and the Issuer herein at and as of such Time of
Delivery, as to the performance by the Company and the Issuer of all of its
respective obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in subsections (a) and (f) of this Section
and as to such other matters as you may reasonably request; and
(j) The Company and the Issuer shall have complied with the provisions
of Section 5(c) hereof with respect to the furnishing of prospectuses on the New
York Business Day next succeeding the date of the Agreement.
8. (a) The Issuer will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Issuer shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company or the Issuer by
any Underwriter through Goldman, Sachs & Co. expressly for use therein. The
Company irrevocably and unconditionally guarantees the prompt performance and
payment of the indemnification obligations of the Issuer set forth in this
Section 8(a), when and as the same shall become due and payable in accordance
with the terms of this Section 8(a) (and if any payments
15
<PAGE>
<PAGE>
made by the Company pursuant to such guarantee are subject to any withholding
tax, the Company shall gross up the payments for the withholding tax).
(b) Each Underwriter will indemnify and hold harmless the Company and
the Issuer against any losses, claims, damages or liabilities to which the
Company or the Issuer may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company or the Issuer by
such Underwriter through Goldman, Sachs & Co. expressly for use therein; and
will reimburse the Company and the Issuer for any legal or other expenses
reasonably incurred by the Company and the Issuer in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Issuer on the one hand and the
16
<PAGE>
<PAGE>
Underwriters on the other from the offering of the Securities and the
Guarantees. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (c) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company and the Issuer on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Issuer on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company and the Issuer bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and the Issuer on the one hand or
the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Issuer and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities and the Guarantees underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Issuer under this Section 8
shall be in addition to any liability which the Company and the Issuer may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the Act; and
the obligations of the Underwriters under this Section 8 shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company or the Issuer and to each person, if any, who controls the Company
within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Securities and the Guarantees which it has agreed to purchase hereunder, you
may in your discretion arrange for you or another party or other parties to
purchase such Securities and Guarantees on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Securities and Guarantees, then the Company and the Issuer
shall be entitled to a further period of thirty-six hours within which to
procure another party or other parties satisfactory to
17
<PAGE>
<PAGE>
you to purchase such Securities and Guarantees on such terms. In the event that,
within the respective prescribed periods, you notify the Company and the Issuer
that you have so arranged for the purchase of such Securities and Guarantees, or
the Company and the Issuer notify you that they have so arranged for the
purchase of such Securities and Guarantees, you or the Company and the Issuer
shall have the right to postpone the Time of Delivery for a period of not more
than seven days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company and the Issuer agrees to file
promptly any amendments to the Registration Statement or the Prospectus which in
your opinion may thereby be made necessary. The term "Underwriter" as used in
this Agreement shall include any person substituted under this Section with like
effect as if such person had originally been a party to this Agreement with
respect to such Securities and Guarantees.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you, the Company and
the Issuer as provided in subsection (a) above, the aggregate principal amount
of such Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities, then the Company and the
Issuer shall have the right to require each non-defaulting Underwriter to
purchase the principal amount of Securities which such Underwriter agreed to
purchase hereunder and, in addition, to require each non-defaulting Underwriter
to purchase its pro rata share (based on the principal amount of Securities
which such Underwriter agreed to purchase hereunder) of the Securities of such
defaulting Underwriter or Underwriters for which such arrangements have not been
made; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you, the Company and
the Issuer as provided in subsection (a) above, the aggregate principal amount
of Securities which remains unpurchased exceeds one-eleventh of the aggregate
principal amount of all the Securities, or if the Company and the Issuer shall
not exercise the right described in subsection (b) above to require
non-defaulting Underwriters to purchase Securities of a defaulting Underwriter
or Underwriters, then this Agreement shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter, the Company or the
Issuer, except for the expenses to be borne by the Company and the Issuer and
the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Issuer and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, the
Company or the Issuer, or any officer or director or controlling person of the
Company or the Issuer, and shall survive delivery of and payment for the
Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company and the Issuer shall not then be under any liability to any
Underwriter except as provided in Sections 6 and 8 hereof; but, if for any other
reason, the Securities are not delivered by or on behalf of the Issuer as
provided herein, the Company and the Issuer will reimburse the Underwriters
through you for all out-of-pocket expenses approved in writing by you, including
fees and disbursements of counsel, reasonably incurred by the Underwriters in
making preparations for the purchase, sale and delivery of
18
<PAGE>
<PAGE>
the Securities, but the Company and the Issuer shall then be under no further
liability to any Underwriter except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company and the Issuer by
you upon request. Any such statements, requests, notices or agreements shall
take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company, the Issuer and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and the Issuer and each person who controls the Company or the Issuer or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Securities and the
Guarantees from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.
19
<PAGE>
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us eight counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement between each of the Underwriters,
the Company and the Issuer. It is understood that your acceptance of this letter
on behalf of each of the Underwriters is pursuant to the authority set forth in
a form of Agreement among Underwriters, the form of which shall be submitted to
the Company and the Issuer for examination upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
MILLENNIUM AMERICA INC.
By: ......................................
Name:
Title:
MILLENNIUM CHEMICALS INC.
By: ......................................
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
J.P. Morgan Securities Inc.
Salomon Brothers Inc
By: ...........................................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
20
<PAGE>
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
(A) (B)
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
NOTES DEBENTURES
TO BE TO BE
UNDERWRITER PURCHASED PURCHASED
--------- ---------
<S> <C> <C>
Goldman, Sachs & Co. ..................................... $ $
Bear, Stearns & Co. Inc. .................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................
J.P. Morgan Securities Inc. ..............................
Salomon Brothers Inc .....................................
Total...................................... ------------ ------------
$ $
============ ============
</TABLE>
21
<PAGE>
<PAGE>
ANNEX I(a)
Pursuant to Section 7(e) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and
the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement comply
as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified Public
Accountants of the unaudited consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have been
separately furnished to the Underwriters;
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus as indicated in their reports thereon copies of which have
been separately furnished to the Underwriters and on the basis of
specified procedures including inquiries of officials of the Company who
have responsibility for financial and accounting matters regarding
whether the unaudited condensed consolidated financial statements
referred to in paragraph (vi)(A)(i) below comply as to form in all
material respects with the applicable accounting requirements of the Act
and the related published rules and regulations, nothing came to their
attention that cause them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Prospectus
agrees with the corresponding amounts (after restatements where
applicable) in the audited consolidated financial statements for such
five fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and
on the basis of limited procedures specified in such letter nothing came
to their attention as a result of the foregoing procedures that caused
them to believe that this information does not conform in all material
respects with the disclosure requirements of Items 301, 302, 402 and
503(d), respectively, of Regulation S-K;
<PAGE>
<PAGE>
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of
the minute books of the Company and its subsidiaries since the date of
the latest audited financial statements included in the Prospectus,
inquiries of officials of the Company and its subsidiaries responsible
for financial and accounting matters and such other inquiries and
procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash
flows included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of
the Act and the related published rules and regulations, or (ii)
any material modifications should be made to the unaudited
condensed consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included in the
Prospectus for them to be in conformity with generally accepted
accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included
in the Prospectus;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived any unaudited
condensed financial statements referred to in Clause (A) and any
unaudited income statement data and balance sheet items included
in the Prospectus and referred to in Clause (B) were not
determined on a basis substantially consistent with the basis for
the audited consolidated financial statements included in the
Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in
all material respects with the applicable accounting requirements
of the Act and the published rules and regulations thereunder or
the pro forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock
upon exercise of options and stock appreciation rights, upon
earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest financial statements included in the
Prospectus) or any increase in the consolidated long-term debt of
the Company and its subsidiaries, or any decreases in
consolidated net current assets or stockholders' equity or other
items specified by the Underwriters, or any increases in any
items specified by the Underwriters, in each case as compared
with amounts shown in the
<PAGE>
<PAGE>
latest balance sheet included in the Prospectus, except in each
case for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in
such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date
referred to in Clause (E) there were any decreases in
consolidated net revenues or operating profit or the total or per
share amounts of consolidated net income or other items specified
by the Underwriters, or any increases in any items specified by
the Underwriters, in each case as compared with the comparable
period of the preceding year and with any other period of
corresponding length specified by the Underwriters, except in
each case for decreases or increases which the Prospectus
discloses have occurred or may occur or which are described in
such letter; and
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of
minute books, inquiries and other procedures referred to in paragraphs
(iii) and (vi) above, they have carried out certain specified
procedures, not constituting an examination in accordance with generally
accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Underwriters,
which are derived from the general accounting records of the Company and
its subsidiaries, which appear in the Prospectus, or in Part II of, or
in exhibits and schedules to, the Registration Statement specified by
the Underwriters, and have compared certain of such amounts, percentages
and financial information with the accounting records of the Company and
its subsidiaries and have found them to be in agreement.
<PAGE>
<PAGE>
ANNEX I(b)
[Executed Comfort Letter to Come]
<PAGE>
<PAGE>
ANNEX I(c)
[Form of Bring-Down Comfort Letter to Come]
<PAGE>
<PAGE>
ANNEX II(a)
[Fried, Frank Opinion to Come]
<PAGE>
<PAGE>
ANNEX II(b)
[Weil, Gotshal Opinion to Come]
<PAGE>
<PAGE>
ANNEX II(c)
[Hempstead Opinion to Come]
<PAGE>
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
HANSON AMERICA INC.
HANSON AMERICA INC., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
1. The name of the Corporation is HANSON AMERICA INC.
The date of filing of its original Certificate of Incorporation with the
Secretary of State, under the name H M Investments, Ltd., was November 19, 1980.
2. This Restated Certificate of Incorporation restates and integrates the
Certificate of Incorporation and does not further amend the provisions of the
Certificate of Incorporation.
3 The text of the Certificate of Incorporation as heretofore amended or
supplemented is hereby restated without further amendments as set forth in full:
FIRST: The name of the Corporation is Hanson America Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange St., City of Wilmington, County of New Castle,
State of Delaware. The name of the registered agent of the Corporation in the
State of Delaware at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware, as from time to time amended.
FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is seventeen thousand, seven hundred and fifty
(17,750), of which ten thousand (10,000) shares having a par value of One Dollar
($1.00) per share shall be of a class designated as 'Common Stock', two hundred
and fifty (250) shares having a par value of One Thousand Dollars ($1,000) per
share shall be of a class designated as 'Series A Cumulative Preferred Stock',
one thousand five hundred (1,500) shares having no par value shall be of a class
designated as 'Series B Noncumulative Preferred Stock' and six thousand (6,000)
shares having no par value shall be of a class designated as 'Series C
Noncumulative
<PAGE>
<PAGE>
Preferred Stock'.
The designations, voting powers, preferences, and optional or other special
rights, and the qualifications, limitations, or restrictions, of the
aforementioned classes of stock shall be as follows:
(1) Series A Cumulative Preferred Stock
(a) Shares of the Series A Cumulative Preferred Stock shall be
issued at such time or times and for such consideration or
considerations as the Board of Directors may determine. All shares of
Series A Cumulative Preferred Stock shall be of equal rank and identical
in all respects.
(b) The holders of Series A Cumulative Preferred Stock shall be
entitled to receive dividends in cash, when and as declared by the Board
of Directors of the Corporation out of funds legally available therefor,
at the rate per share of One Hundred Twenty Dollars ($120) per annum,
and no more, which dividends, if declared, shall be payable on each
issued and outstanding share of Series A Cumulative Preferred Stock
annually on the thirty-first day of August (the 'Dividend Date') of each
year, commencing on the first Dividend Date occurring at least ten (10)
days after the date of original issue of such share (its 'Original Issue
Date'), and, if not declared, shall be cumulative, without interest,
from the Original Issue Date.
(c) Any share of Series A Cumulative Preferred Stock may be
redeemed at the option of the Corporation by resolution of its Board of
Directors, at any time and from time to time on or after the fifth
anniversary of its Original Issue Date, at the redemption price of One
Thousand Dollars ($1,000) per share, in each case plus an amount equal
to any accumulated and unpaid dividends thereon to the date fixed for
redemption. In the event that at any time less than all of the issued
and outstanding shares of the Series A Cumulative Preferred Stock are to
be redeemed, the shares to be redeemed may be selected pro rata, or by
lot, or by such other equitable method as may be determined by the Board
of Directors of the Corporation. Notice of any such redemption,
specifying the time and place of redemption, shall be mailed or caused
to be mailed by the Corporation, addressed to each holder of record of
Series
-2-
<PAGE>
<PAGE>
A Cumulative Preferred Stock to be redeemed, at his last address
appearing on the books of the Corporation, at least thirty (30) days
prior to the date designated for redemption. If less than all of the
Shares of the Series A Cumulative Preferred Stock owned by such holder
are then to be redeemed, the notice shall also specify the number-of
shares thereof which are to be redeemed and the number or numbers of the
certificate or certificates representing such shares. If such notice of
redemption shall have been duly mailed to a holder of shares of Series A
Cumulative Preferred Stock to be redeemed, or irrevocable instructions
to effect such mailing shall have been given to the transfer agent or
agents, if any, for such Series A Cumulative Preferred Stock, and if on
or before the redemption date named in such notice all funds necessary
for such redemption shall have been set aside by the Corporation in
trust for the account of such holder, so as to be available therefor,
then, from and after the mailing of such notice or the giving of such
irrevocable instructions and the setting aside of such funds,
notwithstanding that any certificate for shares of Series A Cumulative
Preferred Stock so called for redemption shall not have been surrendered
for cancellation, the shares so called for redemption shall no longer be
deemed outstanding, and the holder of any such certificate shall have
with respect to such shares no rights in or with respect to the
Corporation except the right to receive the redemption price of such
shares, without interest, plus an amount equal to any accumulated and
unpaid dividends thereon to the date fixed for redemption, upon the
surrender of such certificate; and after the date designated for
redemption, such shares shall not be transferable on the books of the
Corporation.
(d) In the event of any liquidation, dissolution, distribution of
assets or winding up of the Corporation, whether voluntary or
involuntary, before any distribution or payment shall be made to any
holder of one or more shares of the Series B Noncumulative Preferred
Stock or the Series C Noncumulative Preferred Stock or the Common Stock
in the nature of a distribution of the assets of the Corporation, each
of the holders of the Series A Cumulative Preferred Stock shall be
entitled to receive One Thousand Dollars ($1,000) per share of Series A
Cumulative Preferred Stock held by such holder, plus an amount equal to
any accumulated and unpaid dividends thereon to the date of payment.
-3-
<PAGE>
<PAGE>
In the event that the assets of the Corporation available for distribution
to the holders of shares of the Series A Cumulative Preferred Stock upon any
voluntary or involuntary liquidation, dissolution, distribution of assets or
winding up of the Corporation shall be insufficient to pay in full all amounts
to which such holders are entitled pursuant to the immediately preceding
paragraph, proportionate distributive amounts shall be paid ratably on account
of the issued and outstanding shares of the Series A Cumulative Preferred Stock.
(e) No shares of the Series A Cumulative Preferred Stock shall be
convertible into any other security at the option of either the
Corporation or the holder of such share.
(f) The holders of shares of the Series A Cumulative Preferred
Stock shall not be entitled to the benefit of any sinking fund to be
applied to the possible redemption of such shares.
(g) Except as otherwise may be required by law, the holders of
Series A Cumulative Preferred Stock shall not be entitled to vote at any
meeting of stockholders or election of members of the Board of Directors
of the Corporation, or otherwise to participate in any matter or issue
to be determined by vote or consent of stockholders of the Corporation.
(2) Series B Noncumulative Preferred Stock and Series C Noncumulative
Preferred Stock.
(a) Shares of the Series B Noncumulative Preferred Stock and of the
Series C Noncumulative Preferred Stock shall be issued at such time or
times and for such consideration or considerations as the Board of
Directors may determine. All shares of Series B Noncumulative Preferred
Stock and Series C Noncumulative Preferred Stock shall be of equal rank
and identical in all respects, except as to their redemption prices, as
hereinafter provided.
(b) After the requirements with respect to cumulative preferential
dividends on the Series A Cumulative Stock (as provided in Paragraph (1)
(b) of this Article FOURTH) shall have been met, then and not otherwise,
before any dividend shall be declared on the
-4-
<PAGE>
<PAGE>
Common Stock, the holders of Series B Noncumulative Preferred Stock and
Series C Noncumulative Preferred Stock shall be entitled to receive
dividends in cash, when and as declared by the Board of Directors of the
Corporation out of funds legally available therefor, at the rate per
share of $15,000 per annum for each share of Series B Noncumulative
Preferred Stock and $13,000 per annum for each share of Series C
Noncumulative Preferred Stock, and no more, which dividends, if
declared, shall be payable on each issued and outstanding share of
Series B Noncumulative Preferred Stock and Series C Noncumulative
Preferred Stock on the Dividend Date (which term is defined in Paragraph
(1) (b) of this Article FOURTH), commencing on the first Dividend Date
occurring at least ten (10) days after the day of original issue of such
share, and shall not be cumulative.
(c) Any share of Series B Noncumulative Preferred Stock or Series C
Noncumulative Preferred Stock may be redeemed at the option of the
Corporation by resolution of its Board of Directors, at any time and
from time to time, at the redemption price of $100,000 per Share,
provided that for all redemptions of Series B Noncumulative Preferred
Stock after April 1, 1982, the redemption price per share shall equal
the amount in U.S. Dollars ('Dollars') on the date of redemption
equivalent to forty-one thousand five hundred and forty-five and
one-half (41,545.5) British pounds sterling ('Pounds') and provided
further that for all redemptions of Series C Noncumulative Preferred
Stock after April 1, 1984, the redemption price per share shall equal
the amount in Dollars which at the Rate of Exchange, as hereinafter
defined, in effect on the date of redemption of that share is equal to
the amount in Pounds, which at the Rate of Exchange in effect on the
date of issue of that share, was equal to $100,000. For the purpose of
any such redemption of shares of Series C Noncumulative Preferred Stock,
the rate of exchange will be the noon buying rate for Pounds for cable
transfers in New York City as reported by the Federal Reserve Bank of
New York (the 'Rate of Exchange'). Unless prohibited by law, within each
period of twelve months commencing with the twelve months ending
December 31, 1982, the Corporation shall be required to redeem twenty
(20) shares of the Series B Noncumulative Preferred Stock at the
redemption price provided for in this Paragraph (2) (c). Except with
respect to such required redemption, shares of Series C Noncumulative
Preferred Stock shall be redeemed at the
-5-
<PAGE>
<PAGE>
redemption price provided for in this Paragraph 2(c) in Preference and
priority to the redemption of Series B Noncumulative Preferred stock;
provided, however, that the redemption obligation imposed by this
sentence with respect to Series B Noncumulative Preferred Stock shall be
cumulative so that if for any reason the Corporation shall not have
redeemed on or before December 31, in any of such years, all of the
Shares of the Series B Noncumulative Preferred Stock which are required
to be redeemed as provided in this sentence, the obligation of the
Corporation to redeem those Shares which were not redeemed as provided
for in this sentence shall continue until those shares have been
redeemed. In the event that at any time less than all of the issued and
outstanding shares of the Series B Noncumulative Preferred Stock or
Series C Noncumulative Preferred Stock are to be redeemed, the shares to
be redeemed may be selected pro rata, or by lot, or by such other
equitable method as may be determined by the Board of Directors of the
Corporation. Notice of any such redemption, specifying the time and
place of redemption, shall be mailed or caused to be mailed by the
Corporation, addressed to each holder of record of Series B
Noncumulative Preferred Stock and Series C Noncumulative Preferred Stock
to be redeemed, at his last address appearing on the books of the
Corporation, at least thirty (30) days prior to the date designated for
redemption. If less than all of the shares of the Series B Noncumulative
Preferred Stock and Series C Noncumulative Preferred Stock owned by such
holder are then to be redeemed, (i) the notice shall also specify the
number of shares thereof which are to be redeemed and the number or
numbers of the certificate or certificates representing such shares and
(ii) in the case of Series C Noncumulative Preferred Stock, each
subsequently issued certificate representing any unredeemed shares shall
bear a legend indicating the date of original issue of those shares for
the purpose of determining the applicable Rate of Exchange in the event
that those shares late are redeemed in accordance with this Paragraph 2
(c). If such notice of redemption shall have been duly mailed to a
holder of shares of Series B Noncumulative Preferred Stock or Series C
Noncumulative Preferred Stock to be redeemed, or irrevocable
instructions to effect such mailing shall have been given to the
transfer agent or agents, if any, for such Series B Noncumulative
Preferred Stock and Series C Noncumulative Preferred Stock, and if on or
before the redemption date named in such notice all funds necessary
-6-
<PAGE>
<PAGE>
for such redemption shall have been set aside by the Corporation in
trust for the account of such holder, so as to be available therefor,
then, from and after the mailing of such notice or the giving of such
irrevocable instructions and the setting aside of such funds,
notwithstanding that any certificate for shares of Series B
Noncumulative Preferred Stock or Series C Noncumulative Preferred Stock
so called for redemption shall not have been surrendered for
cancellation, the shares so called for redemption shall no longer be
deemed outstanding, and the holder of any such certificate shall have
with respect to such shares no rights in or with respect to the
Corporation except the right to receive the redemption price of such
shares, without interest, upon the surrender of such certificate; and
after the date designated for redemption, such shares shall not be
transferable on the books of the Corporation.
(d) In the event of any liquidation, dissolution, distribution of
assets or winding up of the Corporation, whether voluntary or
involuntary, after the requirements with respect to liquidation
preferences of the Series A Cumulative Preferred Stock (as provided in
Paragraph (1) (d) of this Article FOURTH) shall have been met, then and
not otherwise, before any distribution or payment shall be made to any
holder of one or more shares of the Common Stock in the nature of a
distribution of the assets of the Corporation, each of the holders of
the Series B Noncumulative Preferred Stock and Series C Noncumulative
Preferred Stock shall be entitled to receive $100,000 per share of
Series B Noncumulative Preferred Stock or Series C Noncumulative
Preferred Stock, provided that for all distributions after April 1,
1982, each holder of shares of the Series B Noncumulative Preferred
Stock shall be entitled to receive the amount in Dollars at the Rate of
Exchange on the date of distribution equivalent to 41,545.5 Pounds per
share of Series B Noncumulative Preferred Stock held by such holder and
each holder of shares of the Series C Noncumulative Preferred Stock
shall be entitled to receive the amount in Dollars which at the Rate of
Exchange in effect on the date of distribution with respect to that
share is equal to the amount in Pounds which at the Rate of Exchange in
effect on the date of issue of that share was equal to $100,000.
In the event that the assets of the Corporation available for
distribution to the holders of shares of
-7-
<PAGE>
<PAGE>
the Series B Noncumulative Preferred Stock or Series C Noncumulative
Preferred Stock upon any voluntary or involuntary liquidation,
dissolution, distribution of assets or winding up of the Corporation
shall be insufficient to pay in full all amounts to which such holders
are entitled pursuant to the immediately preceding paragraph,
proportionate distributive amounts shall be paid ratably on account of
the issued and outstanding shares of the Series B Noncumulative
Preferred Stock and Series C Noncumulative Preferred Stock.
(e) No share of the Series B Noncumulative Preferred Stock or
series C Noncumulative Preferred Stock shall be convertible into any
other security at the option of either the corporation or the holder of
such share.
(f) The holders of shares of the Series B Noncumulative Preferred
Stock and Series C Noncumulative Preferred Stock shall not be entitled
to the benefit of any sinking fund to be applied to the possible
redemption of such shares.
(g) Except as otherwise may be required by law, the holders of
Series B Noncumulative Preferred Stock and Series C Noncumulative
Preferred Stock shall not be entitled to vote at any meeting of
stockholders or election of members of the Board of Directors of the
Corporation, or otherwise to participate in any matter or issue to be
determined by vote or consent of stockholders of the Corporation.
(3) Common Stock.
(a) After the requirements with respect to preferential dividends
on the Series A Cumulative Preferred Stock and Series B Noncumulative
Preferred Stock and Series C Noncumulative Preferred Stock, respectively
(as provided for in Paragraphs (1) (b) and (2) (b) of this Article
FOURTH), shall have been met, then and not otherwise the holders of
Common Stock shall be entitled to receive, to the extent permitted by
law, such dividends as may be declared from time to time by the Board of
Directors; provided, that dividends in cash if declared, shall be
payable on each issued and outstanding share of Common Stock on a
Dividend Date (which term is defined in Paragraph (1) (b) of this
-8-
<PAGE>
<PAGE>
Article FOURTH), commencing on the first Dividend Date occurring at
least ten (10) days after the date of original issue of such share.
(b) After distribution in full of the preferential amounts (as
provided in Paragraphs (1) (d) and (2) (d) of this Article FOURTH) to be
distributed to the holders of Series A Cumulative Preferred Stock and
Series B Noncumulative Preferred Stock and Series C Noncumulative
Preferred Stock, respectively, in the event of the voluntary or
involuntary liquidation, dissolution, distribution of assets or winding
up of the Corporation, then and not otherwise the holders of the Common
Stock shall be entitled to receive all of the remaining assets of the
Corporation, of whatever kind available for distribution to
stockholders, ratably in proportion to the number of shares of Common
Stock respectively held by them.
(c) Except as otherwise may be required by law, each holder of
Common Stock shall have one vote in respect of each share of such Common
Stock held by him on all matters voted upon by the stockholders.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add or to repeal the By-Laws of the
Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed, by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless the
By-Laws so provide.
(4) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as
-9-
<PAGE>
<PAGE>
may be exercised or done by the Corporation, subject, nevertheless, to the
provisions of the statutes of Delaware, this Restated Certificate of
Incorporation, and any By-Laws adopted by the stockholders; provided,
however, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if
such By-Laws had not been adopted.
SIXTH: Meeting of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers anointed for this Corporation under the
provisions of Section 291 of the GCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of the GCL, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or thereafter prescribed by statute, and all rights conferred upon
stock-
-10-
<PAGE>
<PAGE>
holders herein are granted subject to this reservation.
4. This Restated Certificate of Incorporation was duly adopted in
accordance with the applicable provisions of Section 245 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said HANSON AMERICA INC. has caused this Certificate to
be signed by George H. MacLean, its Vice President, and attested by Steven C.
Barre, its Assistant Secretary, this 3rd day of March, 1994.
HANSON AMERICA INC.
By: /s/ GEORGE H. MACLEAN
-----------------------------------
George H. MacLean
Vice President
ATTEST:
By: /s/ STEVEN C. BARRE
----------------------------------
Steven C. Barre
Assistant Secretary
-11-
<PAGE>
<PAGE>
CERTIFICATE OF MERGER
OF
MILLENNIUM AMERICA INC.
(a Delaware corporation)
INTO
HANSON AMERICA INC.
(a Delaware corporation)
Under Section 251 of the
General Corporation Law of
The State of Delaware
Pursuant to Section 251(c) of the General Corporation Law of the State of
Delaware, HANSON AMERICA INC., a Delaware corporation, hereby certifies the
following information relating to the merger of MILLENNIUM AMERICA INC., a
Delaware corporation, with and into HANSON AMERICA INC. (the 'Merger').
1. The names and states of incorporation of HANSON AMERICA INC. and
MILLENNIUM AMERICA INC., which are the constituent corporations in this Merger
(the 'Constituent Corporations'), are:
<TABLE>
<CAPTION>
NAME STATE
------- ---------
<S> <C>
MILLENNIUM AMERICA INC. Delaware
HANSON AMERICA INC. Delaware
</TABLE>
2. The Agreement and Plan of Merger, dated as of September 30, 1996 (the
'Merger Agreement'), among HANSON
<PAGE>
<PAGE>
AMERICA INC. and MILLENNIUM AMERICA INC., setting forth the terms and conditions
of the Merger, has been approved, adopted, certified, executed and acknowledged
by each of the corporations party to the Merger Agreement in accordance with the
provisions of Section 251(c) of the General Corporation Law of the State of
Delaware.
3. The name of the corporation surviving the Merger is HANSON AMERICA INC.
(the 'Surviving Corporation').
4. Pursuant to the Merger Agreement, the Certificate of Incorporation of
HANSON AMERICA INC. shall be the Certificate of Incorporation of the Surviving
Corporation, except that the Certificate of Incorporation shall be amended by
changing Article 1 thereof so that, as amended, said Article shall be and read
as follows:
'1. The name of the corporation is
MILLENNIUM AMERICA INC.'
5. The executed Merger Agreement is on file at the principal place of
business of the Surviving Corporation, which is located at 99 Wood Avenue South,
Iselin, New Jersey 08830.
6. A copy of the Merger Agreement will be furnished by the Surviving
Corporation, on request and without cost, to any stockholder of either of the
Constituent Corporations.
2
<PAGE>
<PAGE>
7. The Merger shall become effective on October 1, 1996, as specified in
the Merger Agreement.
3
<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Certificate of Merger has been executed as of the
30th day of September, 1996.
HANSON AMERICA INC.
By: /s/ GEORGE H. HEMPSTEAD, III
-----------------------------------
George H. Hempstead, III
Senior Vice President
ATTEST:
/s/ C. WILLIAM CARMEAN
- --------------------------------------
C. William Carmean
Assistant Secretary
4
<PAGE>
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
Millennium America Inc.
(a Delaware corporation)
ARTICLE I
Stockholders
SECTION A. Annual Meetings. (a) All meetings of the
Stockholders for the election of directors shall be held in the County of New
Castle, State of Delaware, at such place as may be fixed from time to time by
the Board of Directors, or at such other place either within or without the
State of Delaware as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting. Meetings of Stockholders for
any other purpose may be held at such time and place, within or without the
State of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
(b) Annual meetings of Stockholders shall be held on such
date and at such time as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting, at which they shall elect by
a plurality vote a Board of Directors, and transact such other business as may
properly be brought before the meeting.
(c) Written notice of the annual meeting stating the place,
date, and hour of the meeting shall be given to each Stockholder entitled to
vote at such meeting not less than ten days nor more than sixty days prior to
the date of the meeting.
(d) The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
Stockholders, a complete list of the Stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
Stockholder and the number of shares registered in the name of each Stockholder.
Such list shall be open to the examination of any Stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any Stockholder who is
present. The stock ledger shall be the only evidence as to the Stockholders
entitled to examine the stock ledger, the list required by this section or the
books of the Corporation, or to vote in person or by proxy at any meeting of
Stockholders.
SECTION B. Special Meetings. (a) Special meetings of the
Stockholders, for any purpose or purposes, unless otherwise prescribed by
statute or by the certificate of incorporation of the Corporation, may be called
by the President and shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors, or at the request in
writing of a Stockholder or Stockholders owning a majority in amount of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed meeting.
(b) Written notice of a special meeting stating the place,
date, and hour of the meeting and, in general terms, the purpose or purposes for
which the meeting is called, shall be given not less than ten days nor
<PAGE>
<PAGE>
more than sixty days prior to the date of the meeting, to each Stockholder
entitled to vote at such meeting. Whenever the directors shall fail to fix such
place, the meeting shall be held at the principal executive offices of the
Corporation.
(c) Business transacted at any special meeting of Stockholders
shall be limited to the purpose or purposes stated in the notice.
SECTION 3. Quorums. (a) The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
Stockholders for the transaction of business except as otherwise provided by
statute or by the certificate of incorporation. If, however, such quorum shall
not be present or represented at any meeting of the Stockholders, the
Stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting, at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each Stockholder of
record entitled to vote at the meeting. When a quorum is once present it is not
broken by the subsequent withdrawal of any Stockholder.
(b) When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one on which by express provision of the Delaware General
Corporation Law or of the certificate of incorporation, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
SECTION 4. Organization. Meetings of Stockholders shall be
presided over by the Chairman, if any, or if none or in the Chairman's absence
the President, if any, or if none or in the President's absence, by a Chairman
to be chosen by the Stockholders entitled to vote who are present in person or
by proxy at the meeting. The Secretary of the Corporation or in the Secretary's
absence an Assistant Secretary, shall act as Secretary of every meeting, but if
neither the Secretary nor an Assistant Secretary is present, the presiding
officer of the meeting shall appoint any person present to act as Secretary of
the meeting.
SECTION 5. Voting; Proxies; Required Vote. (a) At each meeting
of Stockholders, every Stockholder shall be entitled to vote in person or by
proxy appointed by an instrument in writing, subscribed by such Stockholder or
by such Stockholder's duly authorized attorney-in-fact (but no such proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period), and, unless the Certificate of Incorporation
provides otherwise, shall have one vote for each share of stock entitled to vote
registered in the name of such Stockholder on the books of the Corporation on
the applicable record date fixed pursuant to these By-Laws. At all elections of
directors the voting may but need not be by ballot and a plurality of the votes
cast there shall elect. Except as otherwise required by law or the Certificate
of Incorporation, any other action shall be authorized by a majority of the
votes cast.
(b) Any action required or permitted to be taken at any
meeting of Stockholders may, except as otherwise required by law or the
Certificate of Incorporation, be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of record of the issued and outstanding capital
stock of the Corporation having a majority of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted, and the writing or writings are filed with the
permanent records of the Corporation. Prompt notice of the taking of corporate
action without a meeting by less than unanimous written consent shall be given
to those Stockholders who have not consented in writing.
2
<PAGE>
<PAGE>
(c) Where a separate vote by a class or classes, present in
person or represented by proxy, shall constitute a quorum entitled to vote on
that matter, the affirmative vote of the majority of shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class, unless otherwise provided in the Corporation's Certificate of
Incorporation.
SECTION 6. The Board of Directors, in advance of any meeting,
may, but need not, appoint one or more inspectors of election to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not so
appointed, the person presiding at the meeting may, but need not, appoint one or
more inspectors. In case any person who may be appointed as an inspector fails
to appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors, if any, shall determine the number of shares of stock
outstanding and the voting power of each, the shares of stock represented at the
meeting, the existence of a quorum, and the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all Stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by such
inspector or inspectors and execute a certificate of any fact found by such
inspector or inspectors.
ARTICLE II
Board of Directors
SECTION 1. General Powers. The business, property and affairs
of the Corporation shall be managed by, or under the direction of, the Board of
Directors.
SECTION 2. Qualification; Number; Term; Remuneration. (a)
Each director shall be at least 18 years of age. A director need not be a
Stockholder, a citizen of the United States, or a resident of the State of
Delaware. The number of directors constituting the entire Board shall be one or
such other number not greater than ten as may be fixed from time to time by the
Board of Directors or the Stockholders. One of the directors may be selected by
the Board of Directors to be its Chairman, who shall preside at meetings of the
Stockholders and the Board of Directors and shall have such other duties, if
any, as may from time to time be assigned by the Board of Directors. In the
absence of formal selection, the President of the Corporation shall serve as
Chairman. The use of the phrase "entire Board" herein refers to the total number
of directors which the Corporation would have if there were no vacancies.
(b) Directors who are elected at an annual meeting of
Stockholders, and directors who are elected in the interim to fill vacancies and
newly created directorships, shall hold office until the next annual meeting of
Stockholders and until their successors are elected and qualified or until their
earlier resignation or removal.
(c) Directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing Committees may be allowed like compensation for attending
Committee meetings.
SECTION 3. Quorum and Manner of Voting. Except as otherwise
provided by law, a majority of the entire Board of Directors shall constitute a
quorum. A majority of the directors present, whether or not a quorum is present,
may adjourn a meeting from time to time to another time and place without
notice. The vote
3
<PAGE>
<PAGE>
of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
SECTION 4. Places of Meetings. Meetings of the Board of
Directors may be held at any place within or without the State of Delaware, as
may from time to time be fixed by resolution of the Board of Directors, or as
may be specified in the notice of meeting.
SECTION 5. Annual Meeting. Following the annual meeting of
Stockholders, the newly elected Board of Directors shall meet for the purpose of
the election of officers and the transaction of such other business as may
properly come before the meeting. Such meeting may be held without notice
immediately after the annual meeting of Stockholders at the same place at which
such Stockholders' meeting is held.
SECTION 6. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as the Board of Directors shall
from time to time by resolution determine.
SECTION 7. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, President,
or by a majority of the directors then in office.
SECTION 8. Notice of Meetings. A notice of the place, date and
time and the purpose or purposes of each meeting of the Board of Directors shall
be given to each director by mailing the same at least two days before the
meeting, or by telephoning or faxing the same or by delivering the same
personally not later than the day before the day of the meeting.
SECTION 9. Organization. At all meetings of the Board of
Directors, the Chairman or in the Chairman's absence or inability to act, the
President, or in the President's absence, a Chairman chosen by the directors,
shall preside. The Secretary of the Corporation shall act as secretary at all
meetings of the Board of Directors when present, and, in the Secretary's
absence, the presiding officer may appoint any person to act as Secretary.
SECTION 10. Resignation. Any director may resign at any time
upon written notice to the Corporation and such resignation shall take effect
upon receipt thereof by the President or Secretary, unless otherwise specified
in the resignation. Any or all of the directors may be removed, with or without
cause, by the holders of a majority of the shares of stock outstanding and
entitled to vote for the election of directors.
SECTION 11. Vacancies. Unless otherwise provided in these
By-Laws, vacancies on the Board of Directors, whether caused by resignation,
death, disqualification, removal, an increase in the authorized number of
directors or otherwise, may be filled by the affirmative vote of a majority of
the remaining directors, although less than a quorum, or by a sole remaining
director, or at a special meeting of the Stockholders, by vote of the
Stockholders required for the election of directors generally.
SECTION 12. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all the directors consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors.
SECTION 13. Electronic Communication. Any member or members of
the Board of Directors may participate in a meeting of the Board by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear and speak to each other.
4
<PAGE>
<PAGE>
ARTICLE III
Committees
SECTION 1. Appointment. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or more
Committees, each Committee to consist of two or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any Committee, who may replace any absent or disqualified
member at any meeting of the Committee. Any such Committee, to the extent
provided in the resolution, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the Corporation
and may authorize the seal of the Corporation to be affixed to all papers which
may require it. Such Committee or Committees shall have such name or names as
may be determined from time to time by resolution adapted by the Board of
Directors.
SECTION 2. Procedures. Quorum and Manner of Acting. Each
Committee shall fix its own rules of procedure, and shall meet where and as
provided by such rules or by resolution of the Board of Directors. Except as
otherwise provided by law, the presence of a majority of the then appointed
members of a Committee shall constitute a quorum for the transaction of business
by that Committee, and in every case where a quorum is present the affirmative
vote of a majority of the members of the Committee present shall be the act of
the Committee. Each Committee shall keep minutes of its proceedings, and actions
taken by a Committee shall be reported to the Board of Directors.
SECTION 3. Action by Written Consent. Any action required or
permitted to be taken at any meeting of any Committee of the Board of Directors
may be taken without a meeting if all the members of the Committee consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Committee.
SECTION 4. Electronic Communication. Any member or members of
a Committee of the Board of Directors may participate in a meeting of a
Committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear and speak to
each other.
SECTION 5. Termination. In the event any person shall cease to
be a director of the Corporation, such person shall simultaneously therewith
cease to be a member of any Committee appointed by the Board of Directors.
ARTICLE IV
Officers
SECTION 1. Election and Qualifications. The Board of Directors
at its first meeting held after each annual meeting of Stockholders shall elect
the officers of the Corporation, which shall include a President and a
Secretary, and may include, by election or appointment, one or more
Vice-Presidents (any one or more of whom may be given an additional designation
of rank or function), a Treasurer and such Assistant Secretaries, such Assistant
Treasurers and such other officers as the Board of Directors may from time to
time deem proper. Each officer shall have such powers and duties as may be
prescribed by these By-Laws and as may be assigned by the Board of Directors or
the President. Any two or more offices may be held by the same person.
SECTION 2. Term of Office and Remuneration. The term of office
of all officers shall be one year and until their respective successors have
been elected and qualified, but any officer may be removed from office, either
with or without cause, at any time by the Board of Directors. Any vacancy in any
office arising from any cause may be filled for the unexpired portion of the
term by the Board of Directors. The remuneration
5
<PAGE>
<PAGE>
of all officers of the Corporation may be fixed by the Board of Directors or in
such manner as the Board of Directors shall provide.
SECTION 3. Resignation; Removal. Any officer may resign at any
time upon written notice to the Corporation and such resignation shall take
effect upon receipt thereof by the President or Secretary, unless otherwise
specified in the resignation. Any officer shall be subject to removal, with or
without cause, at any time by vote of a majority of the entire Board of
Directors.
SECTION 4. Powers and Duties of Officers.
(a) The Chairman of the Board of Directors, if there be one,
shall preside at all meetings of the Board of Directors and shall have such
other powers and duties as may from time to time be assigned by the Board of
Directors.
(b) The President shall be the chief executive officer of the
Corporation and shall preside at all meetings of the Stockholders and, if there
is no Chairman, of the Board of Directors and shall have general management of
and supervisory authority over the property, business and affairs of the
Corporation and its other officers. The President may execute and deliver in the
name of the Corporation powers of attorney, contracts, bonds and other
obligations and instruments, and shall have such other authority and perform
such other duties as from time to time may be assigned by the Board of
Directors. The President shall see that all orders and resolutions of the Board
of Directors are carried into effect and shall perform such additional duties
that usually pertain to this office.
(c) A Vice President may execute and deliver in the name of
the Corporation powers of attorney, contracts, bonds and other obligations and
instruments pertaining to the regular course of such Vice President's duties,
and shall have such other authority and perform such other duties as from time
to time may be assigned by the Board of Directors or the President.
(d) The Treasurer shall in general have all duties and
authority incident to the position of Treasurer and such other duties and
authority as may be assigned by the Board of Directors or the President. The
Treasurer shall keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation and shall deposit all moneys and other
valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by or at the direction of the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors or the President, and shall render, upon
request, an account of all such transactions.
(e) The Secretary shall in general have all the duties and
authority incident to the position of Secretary and such other duties and
authority as may be assigned by the Board of Directors or the President. The
Secretary shall attend all meetings of the Board of Directors and all meetings
of Stockholders and record all the proceedings thereat in a book or books to be
kept for that purpose. The Secretary shall give, or cause to be given, notice of
all meetings of the Stockholders and special meetings of the Board of Directors.
The Secretary shall have custody of the seal of the Corporation and any officer
of the Corporation shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by the signature of the
Secretary or any other officer.
(f) Any assistant officer shall have such duties and authority
as the officer such assistant officer assists and, in addition, such other
duties and authority as the Board of Directors or President shall from time to
time assign.
6
<PAGE>
<PAGE>
ARTICLE V
Contracts. Etc.
SECTION 1. Contracts. The Board of Directors may authorize any
person or persons, in the name and on behalf of the Corporation, to enter into
or execute and deliver any and all deeds, bonds, mortgages, contracts and other
obligations or instruments, and such authority may be general or confined to
specific instances.
SECTION 2. Proxies: Powers of Attorney: Other Instruments. (a)
The Chairman, the President, any Vice President, the Treasurer or any other
person designated by any of them shall have the power and authority to execute
and deliver proxies, powers of attorney and other instruments on behalf of the
Corporation in connection with the execution of contracts, the purchase of real
or personal property, the rights and powers incident to the ownership of stock
by the Corporation and such other situations as the Chairman, the President,
such Vice President or the Treasurer shall approve, such approval to be
conclusively evidenced by the execution of such proxy, power of attorney or
other instrument on behalf of the Corporation.
(b) The Chairman, the President, any Vice President, the
Treasurer or any other person authorized by proxy or power of attorney executed
and delivered by any of them on behalf of the Corporation may attend and vote at
any meeting of Stockholders of any company in which the Corporation may hold
stock, and may exercise on behalf of the Corporation any and all of the rights
and powers incident to the ownership of such stock at any such meeting, or
otherwise as specified in the proxy or power of attorney so authorizing any such
person. The Board of Directors, from time to time, may confer like powers upon
any other person.
ARTICLE VI
Books and Records
SECTION 1. Location. The books and records of the Corporation
may be kept at such place or places within or outside the State of Delaware as
the Board of Directors or the respective officers in charge thereof may from
time to time determine. The record books containing the names and addresses of
all Stockholders, the number and class of shares of stock held by each and the
dates when they respectively became the owners of record thereof shall be Accept
by the Secretary as prescribed in the By-Laws or by such officer or agent as
shall be designated by the Board of Directors.
SECTION 2. Addresses of Stockholders. Notices of meetings and
all other corporate notices may be delivered personally or mailed to each Stock-
holder at the Stockholder's address as it appears on the records of the
Corporation.
SECTION 3. Fixing Date for Determination of Stockholders of
Record. (a) In order that the Corporation may determine the Stockholders
entitled to notice of or to vote at any meeting of Stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors and which record date shall not be more
than 60 days nor less than 10 days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
Stockholders entitled to notice of or to vote at a meeting of Stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of Stockholders
of record entitled to notice of or to vote at a meeting of Stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
7
<PAGE>
<PAGE>
(b) In order that the Corporation may determine the
Stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors and which date shall not be more than 10 days after
the date upon which the resolution fixing the record date is adopted by the
Board of Directors. lf no record date has been fixed by the Board of Directors,
the record date for determining Stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of Stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining Stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution talcing such prior action.
(c) In order that the Corporation may determine the
Stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the Stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action not contemplated by paragraph (a) or (b) of this Section
3, the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted and
which record date shall be not more than 60 days prior to such action. If no
record date is fixed, the record date for determining Stockholders for any such
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
ARTICLE VII
Certificates Representing Stock
SECTION 1. Certificates; Signatures. The shares of the
Corporation shall be represented by certificates, provided that the Board of
Directors of the Corporation may provide by resolution or resolutions that some
or all of any or all classes or series of its stock shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock represented by certificates and upon request every holder
of uncertificated shares shall be entitled to have a certificate, signed by or
in the name of the Corporation by the Chairman or Vice Chairman of the Board of
Directors, or the President or Vice-President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, representing the number of shares registered in certificate form.
Any and all signatures on any such certificate may be facsimiles. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue. The name of the holder of record of the
shares represented thereby, with the number of such shares and the date of
issue, shall be entered on the books of the Corporation. The Board of Directors
shall have power and authority to make all such rules and regulations as it may
deem expedient concerning the issue, transfer and registration of certificates
representing shares of the Corporation.
SECTION 2. Transfers of Stock. Upon compliance with provisions
restricting the transfer or registration of transfer of shares of stock, if any,
shares of capital stock shall be transferable on the books of the Corporation
only by the holder of record thereof in person, or by duly authorized attorney,
upon surrender and cancellation of certificates for a like number of shares,
properly endorsed, and the payment of all taxes due thereon.
8
<PAGE>
<PAGE>
SECTION 3. Fractional Shares. The Corporation may, but shall
not be required to, issue certificates for fractions of a share where necessary
to effect authorized transactions, or the Corporation may pay in cash the fair
value of fractions of a share as of the time when those entitled to receive such
fractions are determined, or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Corporation or of
its agent, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a Stockholder except as therein
provided.
SECTION 4. Lost, Stolen or Destroyed Certificates. The
Corporation may issue a new certificate of stock in place of any certificate,
theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the Board of Directors may require the owner of any lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of any such new certificate.
ARTICLE VIII
Dividends
Subject to the provisions of applicable law and the
Certificate of Incorporation, the Board of Directors shall have full power to
determine whether any, and, if any, what part of any, funds legally available
for the payment of dividends shall be declared as dividends and paid to
Stockholders; the division of the whole or any part of such funds of the
Corporation shall rest wholly within the lawful discretion of the Board of
Directors, and it shall not be required at any time, against such discretion, to
divide or pay any part of such funds among or to the Stockholders as dividends
or otherwise; and before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems proper
as a reserve or reserves to meet contingencies or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Stockholders shall receive dividends pro rata in proportion to the number of
shares of Common Stock respectively held by them. A holder of Common Stock shall
be deemed to share pro rata in all dividends declared by the Board of Directors
within the meaning of the preceding sentence if such Stockholder receives assets
(whether consisting of cash, securities, real property, equipment, inventory or
other assets) the fair market value of which is in the same proportion to the
fair market value of the total assets of the Corporation available for
distribution as a dividend as the number of shares of Common Stock held by such
holder of Common Stock is to the total number of issued and outstanding shares
of Common Stock of the Corporation. A Stockholder shall not have the right to
receive a pro rata share of each or any such asset available for distribution as
a dividend; however, the Corporation shall not be prohibited hereby for making a
pro rata distribution of each or any such asset available for distribution as a
dividend. The fair market value of any and all assets of the Corporation
distributed as a dividend shall be determined in the sole discretion of the
Corporation's Board of Directors.
ARTICLE IX
Ratification
Any transaction, questioned in any lawsuit on the ground of
lack of authority, defective or irregular execution, adverse interest of
director, officer or Stockholder, non-disclosure, miscomputation, or the
application of improper principles or practices of accounting, may be ratified
before or after judgment, by the Board of Directors or by the Stockholders, and
if so ratified shall have the same force and effect as if the questioned
transaction had been originally duly authorized. Such ratification shall be
binding upon the Corporation and its Stockholders and shall constitute a bar to
any claim or execution of any judgment in respect of such questioned
transaction.
9
<PAGE>
<PAGE>
ARTICLE X
Corporate Seal
The corporate seal shall be in either of the following forms:
(a) the letters "L.S." or (b) a circular inscription which contains the words
"Corporate Seal" and such additional information as the officer inscribing such
seal shall determine in such officer's sole discretion. The corporate seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise displayed or it may be manually inscribed.
ARTICLE XI
Fiscal Year
The fiscal year of the Corporation shall be fixed, and shall
be subject to change, by the Board of Directors. Unless otherwise fixed by the
Board of Directors, the fiscal year of the Corporation shall end on the Saturday
closest to September 30.
ARTICLE XII
Waiver of Notice
Whenever notice is required to be given by these By-Laws or by
the Certificate of Incorporation or by law, a written waiver thereof, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
ARTICLE XIII
Amendments
The Board of Directors shall have power to adopt, amend or
repeal By-Laws. By-Laws adopted by the Board of Directors may be repealed or
changed, and new By-Laws made, by the Stockholders, and the Stockholders may
prescribe that any By-Law made by them shall not be altered, amended or repealed
by the Board of Directors.
ARTICLE XIV
Indemnification
SECTION 1. Power To Indemnify In Actions, Suits Or Proceedings
Other Than Those By Or In the Right Of The Corporation. Subject to Section 3 of
this Artiicle XIV, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys
and other professionals' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe the conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner
10
<PAGE>
<PAGE>
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that the conduct was unlawful.
SECTION 2. Power To Indemnify In Actions, Suits Or Proceedings
By Or In The Right Of The Corporation. Subject to Section 3 of this Article XIV,
the Corporation shall indemnify any person who was or is a party or is
threatened to be made party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' and
other professionals' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner reasonably believed to be in or not opposed
to the best interests of the Corporation except tbat no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
SECTION 3. Authorization of Indemnification. Any
indemnification under this Article XIV (unless ordered by a court) shall be made
by the Corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because such person has met the applicable standard of conduct
set forth in Section 1 or Section 2 of this Article XIV, as the case may be.
Such determination shall be made (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) if the Board of Directors so directs, by
the Stockholders. To the extent, however, that a director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' and other professionals' fees) actually and
reasonably incurred by such person in connection therewith, without the
necessity of authorization in the specific case.
SECTION 4. Good Faith Defined. For purposes of any
determination under Section 3 of this Article XIV, a person shall be deemed to
have acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal action or proceeding, to have had no reasonable cause to believe the
conduct was unlawful, if the action is based on (a) the records or books of
account of the Corporation or another enterprise (as defined below in this
Section 4), or on information supplied to such person by the officers of the
Corporation or another enterprise in the course of their duties, unless such
person had reasonable cause to believe that reliance thereon would not be
justifiable, or on (b) the advice of legal counsel for the Corporation or
another enterprise, or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant,
independent financial adviser, appraiser or other expert, as to matters
reasonably believed to be within such other person's professional or expert
competence. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust or other
enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, employee or agent. The provisions of this
Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 1 or 2 of this Article XIV, as the
case may be.
SECTION 5. Indemnification By A Court. Notwithstanding any
contrary determination in the specific case under Section 3 of this Article XIV,
and notwithstanding the absence of any determination thereunder, any director,
officer, employee or agent may apply to any court of competent jurisdiction
in the State of Delaware for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article XIV.
11
<PAGE>
<PAGE>
The basis of such indemnification by a court shall be a determination by such
court that in indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable standards of
conduct set forth in Sections 1 or 2 of this Article XIV, as the case may be.
Notice of any application for indemnification pursuant to this Section 5 shall
be given to the Corporation promptly upon the filing of such application.
SECTION 6. Expenses Payable In Advance. Expenses (including
attorneys' and other professionals' fees) incurred by an officer or director in
defending any threatened or pending civil, criminal, administrative or
investigative action, suit or proceeding may, but shall not be required to, be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director or
officer, to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation as authorized in
this Article XIV. Such expenses (including attorneys' and other professionals'
fees) incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
SECTION 7. Non-exclusivity and Survival of indemnification.
The indemnification and advancement of expenses provided by or granted pursuant
to this Article XIV shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-Law, agreement, contract, vote of Stockholders or of disinterested
directors, or pursuant to the direction (howsoever embodied) of any court of
competent jurisdiction or otherwise, it being the policy of the Corporation that
indemnification of the persons specified in Sections 1 and 2 of this Article XIV
(as distinguished from advancement of funds pursuant to Section 6 of this
Article XIV) shall be made to the fullest extent permitted by law. The
provisions of this Article XIV shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 and 2 of this
Article XIV but whom the Corporation has the power or obligation to indemnify
under the provisions of the General Corporation Law of the State of Delaware, or
otherwise. The indemnification provided by this Article XIV shall continue as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors, administrators and other
comparable legal representatives of such person. The rights conferred in this
Article XIV shall be enforceable as contract rights, and shall continue to exist
after any rescission or restrictive modification hereof with respect to events
occurring prior thereto.
SECTION 8. Meaning of "other enterprises" in connection with
Employee Benefit Plans, etc. For purposes of this Article XIV (including
Sections 1, 2, 4 and 9 hereof), references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; references to
"serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person who
has acted in good faith and in a manner reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article XIV.
SECTION 9. Insurance. The Corporation may, but shall not be
required to, purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another Corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's status as
such, whether or not the Corporation would have the power or the obligation to
indemnify such person against such liability under the provisions of this
Article XIV.
Dated: October 8, 1996
12
<PAGE>
<PAGE>
[Draft--11/19/96]
================================================================================
MILLENNIUM AMERICA INC., as Issuer,
MILLENNIUM CHEMICALS INC., as Guarantor
and
THE BANK OF NEW YORK, as Trustee
------------
INDENTURE
Dated as of , 1996
------------
$500,000,000 [ ]% Senior Notes Due November __, 2006
$250,000,000 [ ]% Senior Debentures Due November ___, 2026
================================================================================
<PAGE>
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939,
as amended, and Indenture dated as of [ ], 1996
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
<S> <C>
SS 310 (a)(1).......................................609
(a)(2).......................................609
(a)(5).......................................609
(b)..........................................608, 610
SS 311 (a)..........................................613
312 (a)..........................................701
(b)..........................................702
(c)..........................................702
SS 313 (a)..........................................703
(c)..........................................703, 704
SS 314 (a)..........................................704
(a)(4).......................................1010
(c)(1).......................................103
(c)(2).......................................103
(e)..........................................103
SS 315 (a)..........................................601(b)
(b)..........................................602
(c)..........................................601(a)
(d)..........................................601(c), 603
(e)..........................................514
SS 316 (a)(last sentence)...........................101 ("Outstanding")
(a)(1)(A)....................................502, 512
(a)(1)(B)....................................513
(b)..........................................508
(c)..........................................105
SS 317 (a)(1).......................................503
(a)(2).......................................504
(b)..........................................1003
SS 318 (a)..........................................108
</TABLE>
- -----------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
<PAGE>
TABLE OF CONTENTS
PAGE
PARTIES....................................................1
RECITALS...................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions.................................2
"Affiliate".................................2
"Agent Member"..............................2
"Applicable Procedures".....................2
"Bankruptcy Law"............................3
"Board of Directors"........................3
"Board Resolution"..........................3
"Business Day"..............................3
"Capital Stock".............................3
"Cash Equivalents"..........................3
"Commission"................................3
"Company"...................................4
"Company Guarantees"........................4
"Consolidated Net Tangible Assets"..........4
"Consolidation".............................4
"Corporate Trust Office"....................4
"Debt"......................................4
"Default"...................................5
"Depositary"................................5
"DTC".......................................5
"Exchange Act"..............................5
"Funded Debt"...............................5
"GAAP"......................................5
"Global Security"...........................5
"Guaranty"..................................5
"Holder"....................................5
"Incur".....................................6
"Indenture".................................6
"Indenture Obligations".....................6
"Interest Payment Date".....................6
"Issuer"....................................6
"Issuer Request" or "Issuer Order"..........6
(i)
<PAGE>
<PAGE>
"Lien"......................................6
"Maturity"..................................7
"Moody's"...................................7
"Officers' Certificate".....................7
"Opinion of Counsel"........................7
"Opinion of Independent Counsel"............7
"Other Jurisdiction"........................7
"Outstanding"...............................7
"Paying Agent"..............................8
"Person"....................................8
"Predecessor Security"......................8
"Regular Record Date".......................8
"Responsible Officer".......................9
"Restricted Property".......................9
"Restricted Subsidiary".....................9
"S&P".......................................9
"Securities Act"............................9
"Stated Maturity"...........................9
"Subsidiary"...............................10
"Trustee"...................................9
"Trust Indenture Act".......................9
"U.S. Government Obligations"..............10
"Value"....................................10
Section 102. Other Definitions..........................10
Section 103. Compliance Certificates and Opinions.......11
Section 104. Form of Documents Delivered to Trustee.....12
Section 105. Acts of Holders............................13
Section 106. Notices, etc., to the Trustee, the
Issuer and the Company...................14
Section 107. Notice to Holders; Waiver..................15
Section 108. Conflict with Trust Indenture Act..........15
Section 109. Effect of Headings and Table of
Contents.................................15
Section 110. Successors and Assigns.....................15
Section 111. Separability Clause........................16
Section 112. Benefits of Indenture......................16
Section 113. Governing Law..............................16
Section 114. Legal Holidays.............................16
Section 115. Independence of Covenants..................16
Section 116. Schedules, Exhibits and Annexes............16
Section 117. Counterparts...............................17
Section 118. No Personal Liability of Directors,
Officers, Incorporators, Employees
and Stockholders.........................17
(ii)
<PAGE>
<PAGE>
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally............................17
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms............................18
Section 302. Denominations..............................21
Section 303. Execution, Authentication, Delivery
and Dating...............................21
Section 304. Temporary Securities.......................23
Section 305. Global Securities..........................23
Section 306. Registration, Registration of
Transfer and Exchange....................25
Section 307. Mutilated, Destroyed, Lost and
Stolen Securities........................26
Section 308. Payment of Interest; Interest
Rights Preserved.........................27
Section 309. CUSIP Numbers..............................28
Section 310. Persons Deemed Owners......................28
Section 311. Cancellation...............................29
Section 312. Computation of Interest....................29
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of
Indenture................................29
Section 402. Application of Trust Money.................31
ARTICLE FIVE
REMEDIES
Section 501. Events of Default..........................31
Section 502. Acceleration of Maturity;
Rescission and Annulment.................33
Section 503. Collection of Debt and Suits for
Enforcement by Trustee...................34
Section 504. Trustee May File Proofs of Claim...........35
Section 505. Trustee May Enforce Claims without
Possession of Securities.................36
Section 506. Application of Money Collected.............36
Section 507. Limitation on Suits........................37
Section 508. Unconditional Right of Holders to
Receive Principal and Interest...........38
Section 509. Restoration of Rights and Remedies.........38
(iii)
<PAGE>
<PAGE>
Section 510. Rights and Remedies Cumulative.............38
Section 511. Delay or Omission Not Waiver...............38
Section 512. Control by Holders.........................39
Section 513. Waiver of Past Defaults....................39
Section 514. Undertaking for Costs......................40
Section 515. Waiver of Stay, Extension or Usury
Laws.....................................40
Section 516. Remedies Subject to Applicable Law.........40
ARTICLE SIX
THE TRUSTEE
Section 601. Duties of Trustee..........................40
Section 602. Notice of Defaults.........................42
Section 603. Certain Rights of Trustee..................42
Section 604. Trustee Not Responsible for
Recitals, Dispositions of
Securities or Application of
Proceeds Thereof.........................44
Section 605. Trustee and Agents May Hold
Securities; Collections; etc.............44
Section 606. Money Held in Trust........................44
Section 607. Compensation and Indemnification of
Trustee and Its Prior Claim..............44
Section 608. Conflicting Interests......................45
Section 609. Corporate Trustee Required;
Eligibility..............................46
Section 610. Resignation and Removal;
Appointment of Successor Trustee.........46
Section 611. Acceptance of Appointment by
Successor................................48
Section 612. Merger, Conversion, Consolidation
or Succession to Business................48
Section 613. Preferential Collection of Claims
Against Issuer...........................49
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUER
Section 701. Issuer to Furnish Trustee Names and
Addresses of Holders.....................49
Section 702. Disclosure of Names and Addresses
of Holders...............................50
Section 703. Reports by Trustee.........................50
Section 704. Reports by Issuer and the Company..........50
(iv)
<PAGE>
<PAGE>
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Issuer and Company May Consolidate,
etc., Only on Certain Terms..............51
Section 802. Successor Substituted......................53
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and
Agreements without Consent of
Holders..................................54
Section 902. Supplemental Indentures and
Agreements with Consent of Holders.......55
Section 903. Execution of Supplemental
Indentures and Agreements................56
Section 904. Effect of Supplemental Indentures..........56
Section 905. Conformity with Trust Indenture
Act......................................57
Section 906. Reference in Securities to
Supplemental Indentures..................57
Section 907. Notice of Supplemental Indentures..........57
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal and Interest..........57
Section 1002. Maintenance of Office or Agency............57
Section 1003. Money for Security Payments to Be
Held in Trust............................58
Section 1004. Corporate Existence........................59
Section 1005. Payment of Taxes and Other Claims..........60
Section 1006. Maintenance of Properties..................60
Section 1007. Limitation on Liens........................61
Section 1008. Limitation on Sale and Leaseback
Transactions.............................62
Section 1009 Limitation on Restricted Subsidiary
Funded Debt..............................63
Section 1010. Provision of Financial Statements..........64
Section 1011. Statement by Officers as to
Default..................................65
Section 1012. Waiver of Certain Covenants................66
ARTICLE ELEVEN
COMPANY GUARANTEES OF SECURITIES
Section 1101. Unconditional Company Guarantees...........66
Section 1102. Execution of Company Guarantees............67
Section 1103. Form of Company Guarantees.................68
(v)
<PAGE>
<PAGE>
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
Section 1201. Issuer's Option to Effect
Defeasance or Covenant Defeasance........69
Section 1202. Defeasance and Discharge...................69
Section 1203. Covenant Defeasance........................70
Section 1204. Conditions to Defeasance or
Covenant Defeasance......................71
Section 1205. Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions...........72
Section 1206. Reinstatement..............................72
ARTICLE THIRTEEN
REDEMPTION OF SECURITIES
Section 1301. Tax Redemption.............................73
Section 1302. Applicability of Article...................74
Section 1303. Election to Redeem; Notice to
Trustee..................................74
Section 1304. Notice of Redemption.......................74
Section 1306. Deposit of Tax Redemption Price............75
Section 1307. Securities Payable on Redemption
Date.....................................75
SIGNATURES............................................... 76
(vi)
<PAGE>
<PAGE>
ACKNOWLEDGMENTS
EXHIBIT A Form of Notes
EXHIBIT B Form of Debentures
(vii)
<PAGE>
<PAGE>
INDENTURE dated as of [ ], 1996, among MILLENNIUM AMERICA INC., a
Delaware corporation (the "Issuer"), MILLENNIUM CHEMICALS INC., a Delaware
corporation, as guarantor (the "Company"), and THE BANK OF NEW YORK, a New York
banking corporation, as trustee (the "Trustee").
RECITALS OF THE ISSUER AND COMPANY
The Issuer has duly authorized the creation of (i) an issue of [ ]%
Senior Notes Due November __, 2006 (the "Notes") and (ii) an issue of [ ]%
Senior Debentures Due November __, 2026 (the "Debentures", and together with the
Notes, the "Securities"), of substantially the tenor and amounts hereinafter set
forth, and to provide therefor the Issuer has duly authorized the execution and
delivery of this Indenture and the Securities.
The Company is the indirect parent of the Issuer and indirectly owns
beneficially and of record 100% of the Capital Stock of the Issuer and the
Company will derive direct and indirect economic benefit from the issuance of
the Securities. Accordingly, the Company has duly authorized the execution and
delivery of this Indenture to provide for the guarantees by the Company (the
"Company Guarantees") with respect to the Securities as set forth in this
Indenture.
This Indenture is subject to, and shall be governed by, the provisions
of the Trust Indenture Act that are required to be part of and to govern
indentures qualified under the Trust Indenture Act.
All acts and things necessary have been done to make (i) the
Securities, when duly issued and executed by the Issuer and authenticated and
delivered hereunder, the valid obligations of the Issuer, (ii) the Company
Guarantees, when duly issued and executed by the Company and delivered
hereunder, the valid obligations of the Company, and (iii) this Indenture a
valid agreement of the Issuer and the Company in accordance with the terms of
this Indenture.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
<PAGE>
<PAGE>
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with
GAAP;
(d) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(e) all references to $, US$, dollars or United States dollars
shall refer to the lawful currency of the United States of America; and
(f) all references herein to particular Sections or Articles
refer to this Indenture unless otherwise so indicated.
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person. For purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Global Security to the extent
applicable to such transaction and as in effect from time to time.
-2-
<PAGE>
<PAGE>
"Bankruptcy Law" means title 11, United States Bankruptcy Code of
1978, as amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
"Board of Directors" means the board of directors of the Issuer or the
Company, as the case may be, or any duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Issuer or the Company, as the case
may be, to have been duly adopted by its Board of Directors and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions or trust companies in
The City of New York or the city in which the Corporate Trust Office of the
Trustee is located are authorized or obligated by law, regulation or executive
order to close.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.
"Cash Equivalents" means (i) any evidence of Debt, maturing not more
than six months after the date of acquisition, issued by the United States of
America, or an instrumentality or agency thereof and guaranteed fully as to
principal, premium, if any, and interest by the United States of America, (ii)
any certificate of deposit, time deposit, money market account or bankers'
acceptance, maturing not more than six months after the date of acquisition,
issued by any commercial banking institution that is a member of the Federal
Reserve System and that has combined capital and surplus and undivided profits
of not less than $500,000,000, whose debt has a rating, at the time as of which
any investment therein is made, of "P-1" (or higher) according to Moody's or "A-
1" (or higher) according to S&P, or (iii) commercial paper, maturing not more
than three months after the date of acquisition, issued by any corporation
(other than an Affiliate of the Issuer) organized and existing under the laws of
the United States of America with a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
-3-
<PAGE>
<PAGE>
"Company" means Millennium Chemicals Inc., a Delaware corporation,
until a successor corporation shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Company" shall mean such successor
corporation.
"Company Guarantees" means the unconditional guarantees by Millennium
Chemicals Inc. of the due and punctual payment of principal of, and interest
on, the Securities, as provided pursuant to Article Eleven.
"Consolidated Net Tangible Assets" means, at any date of
determination, the total amount of assets (less applicable reserves and other
properly deductible items) after deducting therefrom (i) all current liabilities
(excluding any thereof which are by their terms extendible or renewable at the
option of the obligor thereon to a time more than 12 months after the time as of
which the amount thereof is being computed and excluding current maturities of
long term debt), and (ii) the value (net of any applicable reserves) of all
goodwill, trade names, trademarks, purchased technology, patents, unamortized
debt discount and other like intangible assets, all as set forth on the most
recent balance sheet of the Issuer and its Consolidated Subsidiaries, computed
in accordance with GAAP.
"Consolidation" means, with respect to any Person, the consolidation
of the accounts of such Person and each of its Subsidiaries if and to the extent
the accounts of such Person and each of its Subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a similar meaning.
"Corporate Trust Office" means the office of the Trustee or an
Affiliate thereof at which at any particular time the corporate trust business
for the purposes of this Indenture shall be principally administered, which
office at the date of execution of this Indenture is located at 101 Barclay
Street, Floor 21 West, New York, New York 10286.
"Debt" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (i) every obligation of such Person for money borrowed (other
than letters of credit), (ii) every obligation of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) every obligation of
such Person issued or assumed as the deferred purchase price of property or
services, if and to the extent that such obligation would appear as a liability
upon the balance sheet of such Person, prepared in accordance with GAAP (but
excluding trade accounts payable or accrued liabilities arising in the ordinary
course of business), and (iv) every obligation of the type referred to in
clauses (i) through (iii) above of another Person and all Debt of another Person
the payment of
-4-
<PAGE>
<PAGE>
which, in either case, such Person has Guaranteed or is responsible or liable,
directly or indirectly, as obligor, Guarantor or otherwise.
"Default" means any event which is, or after notice or passage of any
time or both would be, an Event of Default.
"Depositary" means, with respect to the Securities issued in the form
of one or more Global Securities, DTC, its nominees and successors, or another
Person designated as Depositary by the Issuer, which must be a clearing agency
registered under the Exchange Act.
"DTC" means The Depository Trust Company, a New York corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute.
"Funded Debt" means Debt that by its terms (i) matures more than one
year from the date of original issuance or creation or (ii) matures within one
year from such date, but is renewable or extendible at the option of the obligor
to a date more than one year from such date.
"GAAP" means generally accepted accounting principles in the United
States, consistently applied.
"Global Security" means a Security that is registered in the Security
Register in the name of a Depositary or a nominee thereof.
"Guaranty" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing any Debt of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and including,
without limitation, any obligation of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt or to purchase
(or to advance or supply funds for the purchase of) any security for the payment
of such Debt, (ii) to purchase property, securities or services for the purpose
of assuring the holder of such Debt of the payment of such Debt, or (iii) to
maintain working capital, equity capital or other financial statement condition
or liquidity of the primary obligor so as to enable the primary obligor to pay
such Debt (and "Guaranteed" and "Guarantor" shall have meanings correlative to
the foregoing); provided, however, that the Guaranty by any Person shall not
include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
-5-
<PAGE>
<PAGE>
"Incur" means, with respect to any Debt of any Person, to create,
issue, incur (by conversion, exchange or otherwise), assume, Guaranty or
otherwise become, directly or indirectly, liable in respect of such Debt or the
recording, as required pursuant to GAAP or otherwise, of any such Debt or other
obligation on the balance sheet of such Person (and "Incurrence" and "Incurred"
shall have meanings correlative to the foregoing); provided, however, that a
change in GAAP that results in an obligation of such Person that exists at such
time becoming Debt shall not be deemed an Incurrence of such Debt.
"Indenture" means this instrument as originally executed (including
all annexes thereto) and as it may from time to time be supplemented or amended
by one or more indentures supplemental hereto entered into pursuant to the
applicable provisions hereof, including, for all purposes of this instrument and
any such supplemental indenture, the provisions of the Trust Indenture Act that
are deemed to be a part of and govern this instrument and any such supplemental
indenture, respectively.
"Indenture Obligations" means the obligations of the Company and any
other obligor under this Indenture or under the Securities, including any
Guarantor, to pay principal of and interest on the Securities when due and
payable, and all other amounts due or to become due under or in connection with
this Indenture, the Securities and performance of all other obligations to the
Trustee and the Holders under this Indenture and the Securities, according to
the terms hereof and thereof.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Issuer" means Millennium America Inc., a corporation incorporated
under the laws of Delaware, until a successor corporation shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter "Issuer"
shall mean such successor corporation.
"Issuer Request" or "Issuer Order" means a written request or order
signed in the name of the Issuer by any one of its Chairman of the Board, its
Vice Chairman, its President, its Chief Executive Officer, its Chief Operating
Officer, its Chief Financial Officer or a Vice President, and by any one of its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Lien" means, with respect to any property or assets, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such
-6-
<PAGE>
<PAGE>
property or assets (including, without limitation, any conditional sale or other
title retention agreement having substantially the same economic effect as any
of the foregoing).
"Maturity" means, when used with respect to any Security, the date on
which the principal of such Securities becomes due and payable as therein
provided or as provided in this Indenture, whether at the Stated Maturity or by
declaration of acceleration or otherwise.
"Moody's" means Moody's Investors Service, Inc. or any successor
rating agency.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, Vice Chairman, the President, the Chief Executive Officer, the Chief
Operating Officer, the Chief Financial Officer or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of
the Issuer or the Company, as the case may be, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of legal counsel, who may
be counsel for the Issuer, the Company or the Trustee, unless an Opinion of
Independent Counsel is required pursuant to the terms of this Indenture, and who
shall be acceptable to the Trustee.
"Opinion of Independent Counsel" means a written opinion of counsel,
who may be regular outside counsel for the Issuer, but which is issued by a
Person who is not an employee or consultant (other than non-employee legal
counsel) of the Issuer or the Company, and who shall be reasonably acceptable to
the Trustee.
"Other Jurisdiction" has the meaning given it in Section 301.
"Outstanding" when used with respect to Securities means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(a) Securities theretofore cancelled by the
Trustee or delivered to the Trustee for cancellation;
(b) Securities, or portions thereof, payment for which money in
the necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Issuer) in trust or set aside and segregated
in trust by the Issuer (if the Issuer shall act as the Paying Agent) for
the Holders of such Securities;
-7-
<PAGE>
<PAGE>
(c) Securities, except to the extent provided in Sections 1202
and 1203, with respect to which the Issuer has effected defeasance or
covenant defeasance as provided in Article Twelve; and
(d) Securities which have been paid pursuant to Section 308 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee and the
Issuer proof reasonably satisfactory to each of them that such Securities
are held by a bona fide purchaser in whose hands the Securities are valid
obligations of the Issuer;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Issuer, the Company or any other obligor upon the Securities or any
Affiliate of the Issuer, the Company or such other obligor shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee actually knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the reasonable satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Issuer, the Company or any other obligor upon the Securities or any
Affiliate of the Issuer, the Company or such other obligor.
"Paying Agent" means any Person (including the Issuer) authorized by
the Issuer to pay the principal of or interest on, any Securities on behalf of
the Issuer.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security. For purposes of this definition, any Security authenticated
and delivered under Section 307 in exchange for a mutilated Security or in lieu
of a lost, destroyed or stolen Security shall be deemed to evidence the same
debt as the mutilated, lost, destroyed or stolen Security.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the [ ] or [ ] (whether or not a Business Day) next preceding
such Interest Payment Date.
-8-
<PAGE>
<PAGE>
"Responsible Officer" when used with respect to the Trustee means any
officer assigned to the Corporate Trust Office or any agent of the Trustee
appointed hereunder, including any vice president, assistant vice president, or
any other officer or assistant officer of the Trustee or any agent of the
Trustee appointed hereunder to whom any corporate trust matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"Restricted Property" means (i) any land, land improvements, buildings
and fixtures (to the extent they constitute real property interests, including
any leasehold interest therein) constituting a principal corporate office or a
manufacturing, distribution or warehouse facility (other than such as are
determined in good faith by the Board of Directors of the Issuer to be
immaterial to the total business conducted by the Issuer and the Restricted
Subsidiaries as a whole) and (ii) any shares of capital stock or indebtedness of
a Restricted Subsidiary.
"Restricted Subsidiary" means any Subsidiary of the Issuer which owns
Restricted Property and is organized under the laws of a jurisdiction in the
United States.
"S&P" means Standard & Poor's Rating Group, a division of McGraw-Hill,
Inc., or any successor rating agency.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, or any successor statute.
"Stated Maturity" when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest, as the case may be, is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of securities entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of such Person or a combination thereof.
"Trustee" means, except as set forth in Section 1205, the Person named
as the "Trustee" in the first paragraph of this Indenture, until a successor
trustee shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Trustee" shall mean such successor trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, or any successor statute.
-9-
<PAGE>
<PAGE>
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such U.S.
Government Obligation, or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal of or interest on the U.S. Government Obligation evidenced by such
depository receipt.
"Value" means, with respect to a Sale and Lease-Back Transaction, at
the time of determination, the amount equal to the greater of (i) the net
proceeds of the sale or transfer of the property leased pursuant to such Sale
and Lease-Back Transaction and (ii) the fair value of such property at the time
of entering into such Sale and Lease-Back Transaction; for purposes of clause
(ii) of this sentence, fair value shall be determined by the Board of Directors
of the Issuer in its good faith judgment.
Section 102. Other Definitions.
Term Defined in Section
"Act" 105
"Additional Amounts" 301
"covenant defeasance" 1203
"Defaulted Interest" 308
"defeasance" 1202
"Defeased Securities" 1201
"Event of Default" 501
"Required Filing Dates" 1010
"Sale and Lease-Back Transaction" 1008
"Secured Debt" 1007
"Securities" Recitals
"Security Register" 306
"Security Registrar" 306
"Special Payment Date" 308
-10-
<PAGE>
<PAGE>
"Special Record Date" 308
"Surviving Entity" 801
"Surviving Guarantor Entity" 801
"Tax Event" 1301
"Tax Redemption" 1301
"Tax Redemption Date" 1301
"Tax Redemption Price" 1301
Section 103. Compliance Certificates and Opinions.
Upon any application or request by the Issuer or the Company to the
Trustee to take any action under any provision of this Indenture, the Issuer and
the Company (if applicable) and any other obligor on the Securities (if
applicable) shall furnish to the Trustee an Officers' Certificate in form and
substance reasonably acceptable to the Trustee stating that all conditions
precedent, if any, provided for in this Indenture (including any covenant
compliance with which constitutes a condition precedent) relating to the
proposed action have been complied with, and an Opinion of Counsel in form and
substance reasonably acceptable to the Trustee stating that in the opinion of
such counsel all such conditions precedent, if any, have been complied with,
except that, in the case of any such application or request as to which the
furnishing of such certificates or opinions is specifically required by any
provision of this Indenture relating to such particular application or request,
no additional certificate or opinion need be furnished.
Every certificate or Opinion of Counsel or Opinion of Independent
Counsel with respect to compliance with a condition or covenant provided for in
this Indenture shall comply with the requirements of the Trust Indenture Act.
Every certificate or Opinion of Counsel or Opinion of Independent
Counsel with respect to compliance with a condition or covenant provided for in
this Indenture shall include:
(a) a statement that each individual signing such certificate or
individual or firm signing such opinion has read such covenant or condition
and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual or
such firm, he or it has made such examination or investigation as is
necessary to
-11-
<PAGE>
<PAGE>
enable him or it to express an informed opinion as to whether
or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
individual or such firm, such condition or covenant has been complied with.
Section 104. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Issuer, the Company or
other obligor on the Securities may be based, insofar as it relates to legal
matters, upon a certificate or opinion of, or representations by, counsel,
unless such officer knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to the matters
upon which his certificate or opinion is based are erroneous. Any such
certificate or opinion may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or officers
of the Issuer, the Company or other obligor on the Securities stating that the
information with respect to such factual matters is in the possession of the
Issuer, the Company or other obligor on the Securities, unless such officer or
counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous. Opinions of Counsel required to be delivered to the Trustee may have
qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Issuer or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact, including that various
financial covenants have been complied with.
Any certificate or opinion of an officer of the Issuer, the Company or
other obligor on the Securities may be based, insofar as it relates to
accounting matters, upon a certificate or opinion of, or representations by, an
accountant or firm of accountants in the employ of the Issuer, unless such
officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the accounting matters
upon which his certificate or opinion may be based are erroneous. Any
certificate or opinion of any independent firm of public accountants filed with
the Trustee shall contain a statement that such firm is independent with respect
to the Issuer.
-12-
<PAGE>
<PAGE>
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 105. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Issuer or the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and conclusive in favor of the Trustee, the Issuer and
the Company, if made in the manner provided in this Section 105.
(b) The ownership of Securities shall be proved by the
Security Register.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other Act by the Holder of any Security shall bind every future Holder
of the same Security or the Holder of every Security issued upon the transfer
thereof or in exchange therefor or in lieu thereof, in respect of anything done,
suffered or omitted to be done by the Trustee, any Paying Agent or the Issuer,
the Company or any other obligor of the Securities in reliance thereon, whether
or not notation of such action is made upon such Security.
(d) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate of affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(e) If the Issuer shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Issuer may,
at its option, by or pursuant to a Board Resolution, fix in advance a record
date for the determination
-13-
<PAGE>
<PAGE>
of such Holders entitled to give such request, demand, authorization, direction,
notice, consent, waiver or other Act, but the Issuer shall have no obligation to
do so. Notwithstanding Trust Indenture Act Section 316(c), any such record date
shall be the record date specified in or pursuant to such Board Resolution,
which shall be a date not more than 30 days prior to the first solicitation of
Holders generally in connection therewith and no later than the date such first
solicitation is completed.
If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other Act may be given before or after
such record date, but only the Holders of record at the close of business on
such record date shall be deemed to be Holders for purposes of determining
whether Holders of the requisite proportion of Securities then Outstanding have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for this purpose the
Securities then Outstanding shall be computed as of such record date; provided,
however, that no such request, demand, authorization, direction, notice,
consent, waiver or other Act by the Holders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.
Section 106. Notices, etc., to the Trustee, the Issuer and
the Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Issuer or the Company or
any other obligor on the Securities shall be sufficient for every purpose
(except as provided in Section 501(c)) hereunder if in writing and mailed,
first-class postage prepaid, or delivered by recognized overnight courier,
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Administration, or at any other address previously furnished in
writing to the Holders or the Issuer, the Company or any other obligor on
the Securities by the Trustee; or
(b) the Issuer or the Company by the Trustee or any Holder shall
be sufficient for every purpose (except as provided in Section 501(c))
hereunder if in writing and mailed, first-class postage prepaid, or
delivered by recognized overnight courier, to the Issuer or the Company
addressed to it c/o Millennium Chemicals Inc., 99 Wood Avenue South,
Iselin, New Jersey 08830, or at any other address previously furnished in
writing to the Trustee by the Issuer or the Company.
-14-
<PAGE>
<PAGE>
Section 107. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, or delivered by
recognized overnight courier, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Any notice when mailed to a Holder in the aforesaid manner shall
be conclusively deemed to have been received by such Holder whether or not
actually received by such Holder. Where this Indenture provides for notice in
any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any event
as required by any provision of this Indenture, then any method of giving such
notice as shall be reasonably satisfactory to the Trustee shall be deemed to be
a sufficient giving of such notice.
Section 108. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, the provision or requirement of the Trust Indenture Act shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.
Section 109. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 110. Successors and Assigns.
All covenants and agreements in this Indenture by the Issuer and the
Company shall bind their respective successors and assigns, whether so expressed
or not.
-15-
<PAGE>
<PAGE>
Section 111. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 112. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person (other than the parties hereto and their successors
hereunder, any Paying Agent or the Holders) any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 113. Governing Law.
THIS INDENTURE, THE SECURITIES AND THE COMPANY GUARANTEES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
Section 114. Legal Holidays.
In any case where any Interest Payment Date, Maturity or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date or at the Maturity or Stated Maturity and no interest shall accrue with
respect to such payment for the period from and after such Interest Payment
Date, Maturity or Stated Maturity, as the case may be, to the next succeeding
Business Day.
Section 115. Independence of Covenants.
All covenants and agreements in this Indenture shall be given
independent effect so that if a particular action or condition is not permitted
by any such covenants, the fact that it would be permitted by an exception to,
or be otherwise within the limitations of, another covenant shall not avoid the
occurrence of a Default or an Event of Default if such action is taken or
condition exists.
Section 116. Schedules, Exhibits and Annexes.
All schedules, exhibits and annexes attached hereto are by this
reference made a part hereof with the same effect as if herein set forth in
full.
-16-
<PAGE>
<PAGE>
Section 117. Counterparts.
This Indenture may be executed with counterpart signature pages or in
any number of counterparts, each of which counterparts shall be an original; but
such counterparts shall together constitute but one and the same instrument.
Section 118. No Personal Liability of Directors, Officers,
Incorporators, Employees and Stockholders.
No recourse under or upon any obligation, covenant or agreement of
this Indenture or any indenture supplemental hereto or of any Security or
Company Guarantee, or for any claim based thereon or otherwise in respect
thereof, shall be had against any incorporator, stockholder, officer, director
or employee, as such, past, present or future, of the Issuer or the Company or
any of their respective Affiliates or of any successor corporation thereof,
either directly or through the Issuer, the Company or any such successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the obligations issued hereunder are solely
corporate obligations, and that no such personal liability whatever shall attach
to, or is or shall be incurred by, the incorporators, stockholders, officers,
directors or employees, as such, of the Issuer or the Company or of any
successor corporation thereof, or any of them, because of the creation of the
Debt hereby authorized, or under or by reason of the obligations, covenants or
agreements contained in this Indenture or in any of the Securities or the
Company Guarantees or implied therefrom; and that any and all such personal
liability of every name and nature, either at common law or in equity or by
constitution or statute, of, and any and all such rights and claims against,
every such incorporator, stockholder, officer, director or employee, as such,
because of the creation of the indebtedness hereby authorized, or under or by
reason of the obligations, covenants or agreements contained in this Indenture
or in any of the Securities or the Company Guarantees or implied therefrom, are
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of this Indenture and the issue of such Securities and the
Company Guarantees.
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.
The (i) Notes and the Trustee's certificate of authentication thereon
shall be in substantially the form of Exhibit A hereto; and (ii) the Debentures
and the Trustee's certification of authentication thereon shall be in
substantially the form of Exhibit B
-17-
<PAGE>
<PAGE>
hereto, each Security with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted hereby and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange, any organizational document or governing instrument or
applicable law or as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution of the Securities.
Any portion of the text of any Security may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the Security.
The definitive Securities, if any, and the Company Guarantees to be
endorsed thereon shall be printed, lithographed or engraved or produced by any
combination of these methods or may be produced in any other manner permitted by
the rules of any securities exchange on which the Securities may be listed, all
as determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
The terms and provisions contained in the form of the Securities set
forth in Exhibits A and B shall constitute, and are hereby expressly made, a
part of this Indenture and, to the extent applicable, the Issuer, the Company
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby.
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $500,000,000 in
principal amount of Notes and $250,000,000 in principal amount of Debentures,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Sections
303, 304, 305, 306, 307 or 906.
The Notes shall be known and designated as the "[ ]% Senior Notes Due
November __, 2006" of the Issuer. The Stated Maturity of the Notes shall be [ ],
2006, and the Notes shall each bear interest at the rate of [ ]% per annum, from
[ ], 1996, or from the most recent Interest Payment Date to which interest has
been paid, payable semi-annually in arrears on __________ and __________ in each
year, commencing ______________, to persons who are registered Holders of
Securities at the close of business on the __________ or __________ immediately
preceding such Interest
-18-
<PAGE>
<PAGE>
Payment Date, until the principal thereof is paid or duly provided for. Interest
on any overdue principal shall be payable on demand.
The Debentures shall be known and designated as the "[ ]% Senior
Debentures Due November __, 2026" of the Issuer. The Stated Maturity of the
Debentures shall be [ ], 2026, and the Debentures shall each bear interest at
the rate of [ ]% per annum, from [ ], 1996, or from the most recent Interest
Payment Date to which interest has been paid, payable semi-annually in arrears
on __________ and __________ in each year, commencing _______________, to
persons who are registered Holders of Securities at the close of business on the
__________ or __________ immediately preceding such Interest Payment Date, until
the principal thereof is paid or duly provided for. Interest on any overdue
principal shall be payable on demand.
Principal of, and interest on, the Securities shall be payable in
immediately available funds and, subject to the limitations applicable to Global
Securities, the Securities will be exchangeable and transferable at an office or
agency of the Issuer, one of which will be maintained for such purposes in The
City of New York (which initially will be the Corporate Trust Office of the
Trustee) or such other office or agency permitted under this Indenture;
provided, however, that payment of interest may be made at the option of the
Issuer by check mailed to the Persons entitled thereto as shown on the Security
Register on the Regular Record Date.
Any amounts paid, or caused to be paid, by the Company or its assignee
(or any successor to the Company or such assignee) under the Company Guarantees,
or paid by any successor to the Issuer under the Indenture, will be paid without
deduction or withholding of any and all present and future taxes, levies,
imposts or other governmental charges whatsoever imposed, assessed, levied or
collected by or for the account of the United Kingdom (including any political
subdivision or taxing authority thereof) or the jurisdiction of incorporation or
residence (other than the United States or any political subdivision or taxing
authority thereof) of any assignee of the Company or any successor to the Issuer
or the Company, or any political subdivision or taxing authority thereof (an
"Other Jurisdiction"), or, if deduction or withholding of any taxes, levies,
imposts or other governmental charges shall at any time be required by the
United Kingdom or an Other Jurisdiction, the Company, its assignee or any
relevant successor will (subject to timely compliance by the Holders or
beneficial owners of the relevant Securities with any relevant administrative
requirements) pay, or cause to be paid, such additional amounts ("Additional
Amounts") in respect of principal or interest as may be necessary in order that
the net amounts paid to the Holders of the Securities or the Trustee under the
Indenture, as the case may be, pursuant to the Indenture or the Company
Guarantees, after such deduction or withholding, shall equal the respective
amounts of principal and interest, as specified in the Securities to which such
Holders or the Trustee are entitled; provided, however, that the foregoing shall
not apply to (i) any present or future taxes,
-19-
<PAGE>
<PAGE>
levies, imposts or other governmental charges which would not have been so
imposed, assessed, levied or collected but for the fact that the Holder or
beneficial owner of the relevant Security is or has been a domiciliary, national
or resident of, engages or has been engaged in business, maintains or has
maintained a permanent establishment, or is or has been physically present in,
the United Kingdom or an Other Jurisdiction, or otherwise has or has had some
connection with the United Kingdom or an Other Jurisdiction (other than the
holding or ownership of a Security, or the collection of principal of, and
interest on, or the enforcement of, a Security or Company Guarantee), (ii) any
present or future taxes, levies, imposts or other governmental charges which
would not have been so imposed, assessed, levied or collected but for the fact
that, where presentation is required, the relevant Security was presented more
than thirty days after the date such payment became due or was provided for,
whichever is later, (iii) any present or future taxes, levies, imposts or other
governmental charges which are payable otherwise than by deduction or
withholding from payments on or in respect of the relevant Security or Company
Guarantee, (iv) any present or future taxes, levies, imposts or other
governmental charges which would not have been so imposed, assessed, levied or
collected but for the failure to comply, on a sufficiently timely basis, with
any certification, identification or other reporting requirements concerning the
nationality, residence, identity or connection with the United Kingdom or an
Other Jurisdiction or any other relevant jurisdiction of the Holder or
beneficial owner of the relevant Security, if such compliance is required by a
statute or regulation of the United Kingdom or an Other Jurisdiction, or by a
relevant treaty, as a condition to relief or exemption from such taxes, levies,
imposts or other governmental charges, (v) any present or future taxes, levies,
imposts or other governmental charges (A) which would not have been so imposed,
assessed, levied or collected if the beneficial owner of the relevant Security
had been the Holder of such Security, or (B) which, if the beneficial owner of
such Security had held the Security as the Holder of such Security, would have
been excluded pursuant to clauses (i) through (iv) above, or (vi) any estate,
inheritance, gift, sale, transfer, personal property or similar tax, assessment
or other governmental charge.
No payments of Additional Amounts with respect to the Indenture or the
Company Guarantees will be made due to any deduction or withholding requirement
imposed by any governmental unit other than the United Kingdom or an Other
Jurisdiction (including any taxing authority or political subdivision thereof).
Except with respect to a Tax Redemption (as defined in Section
1301(a)), the Securities shall not be redeemable prior to Maturity and shall not
have the benefit of any sinking fund obligations.
The Securities shall be subject to defeasance or covenant defeasance
at the option of the Company as provided in Article Twelve.
-20-
<PAGE>
<PAGE>
The Securities shall be guaranteed by the Company Guarantees pursuant
to the provisions of Article Eleven including, without limitation, the provision
for the release of the Company Guarantees under the conditions provided for
therein.
For all purposes hereunder, the Notes and the Debentures will be
treated as one class, including with respect to any amendment, waiver,
acceleration or any other Act of the Holders. The Notes and the Debentures rank
pari passu in right of payment with each other and rank pari passu in right of
payment of principal and interest with all other existing and future unsecured
and unsubordinated obligations of, and will be senior in right of payment and
interest to all subordinated obligations of, the Issuer and the Company,
respectively.
Section 302. Denominations.
The Securities shall be issuable only in fully registered form without
coupons, in denominations of $1,000 and any integral multiple thereof.
Section 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Issuer by one of its
Chairman of the Board, its President, its Chief Executive Officer, its Chief
Operating Officer, its Chief Financial Officer or one of its Vice Presidents
under its corporate seal reproduced thereon attested by its Secretary or one of
its Assistant Secretaries. The signatures of any of these officers on the
Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Securities executed by the Issuer to the
Trustee (with the Company Guarantees endorsed thereon) for authentication,
together with an Issuer Order for the authentication and delivery of such
Securities; and the Trustee in accordance with such Issuer Order shall
authenticate and make available for delivery such Securities as provided in this
Indenture and not otherwise.
Each Security shall be dated the date of its authentication.
No Security or Company Guarantee endorsed thereon shall be entitled to
any benefit under this Indenture or be valid or obligatory for any purpose
unless there appears on such Security a certificate of authentication
substantially in the form provided
-21-
<PAGE>
<PAGE>
for herein duly executed by the Trustee by manual signature of an authorized
signatory, and such certificate upon any Security or Company Guarantee shall be
conclusive evidence, and the only evidence, that such Security or Company
Guarantee has been duly authenticated and delivered hereunder and is entitled to
the benefits of this Indenture.
In case the Issuer or Company, pursuant to Article Nine, shall, in a
single transaction or through a series of related transactions, be consolidated
or merged with or into any other Person or shall sell, assign, convey, transfer,
lease or otherwise dispose of all or substantially all of its properties and
assets on a Consolidated basis to any Person, and the successor Person resulting
from such consolidation or surviving such merger, or into which the Issuer or
the Company shall have been merged, or the successor Person which shall have
participated in the sale, assignment, conveyance, transfer, lease or other
disposition as aforesaid, shall have executed an indenture supplemental hereto,
in a form satisfactory to the Trustee, with the Trustee pursuant to Article
Nine, any of the Securities authenticated or delivered prior to such
consolidation, merger, sale, assignment, conveyance, transfer, lease or other
disposition may, from time to time, at the request of the successor Person, be
exchanged for other Securities executed in the name of the successor Person with
such changes in phraseology and form as may be appropriate, but otherwise in
substance of like tenor as the Securities surrendered for such exchange and of
like principal amount; and the Trustee, upon Issuer Request of the successor
Person, shall authenticate and deliver Securities as specified in such request
for the purpose of such exchange. If Securities shall at any time be
authenticated and delivered in any new name of a successor Person pursuant to
this Section 303 in exchange or substitution for or upon registration of
transfer of any Securities, such successor Person, at the option of the Holders
but without expense to them, shall provide for the exchange of all Securities at
the time Outstanding for Securities authenticated and delivered in such new
name.
The Trustee may appoint an authenticating agent acceptable to the
Issuer to authenticate Securities on behalf of the Trustee. Unless limited by
the terms of such appointment, an authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Security Registrar or Paying
Agent to deal with the Company, the Issuer and its Affiliates.
If an officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates such Security, such Security shall
be valid nevertheless.
If an officer whose signature is on this Indenture no longer holds
office at the time the Trustee authenticates a Security on which the Company
Guarantee is endorsed, such Company Guarantee shall be valid nevertheless.
-22-
<PAGE>
<PAGE>
Section 304. Temporary Securities.
Subject to limitations with respect to Global Securities, pending the
preparation of definitive Securities with the Company Guarantees endorsed
thereon, the Issuer and the Company may execute, and upon Issuer Order the
Trustee shall authenticate and make available for delivery, temporary Securities
with temporary Company Guarantees endorsed thereon, which are printed,
lithographed, typewritten or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities with the Company
Guarantees endorsed thereon in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Securities may determine, as conclusively evidenced by
their execution of such Securities.
If temporary Securities are issued, the Issuer and the Company will
cause definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Issuer designated for such purpose
pursuant to Section 1002, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities, the Issuer shall execute
and the Trustee shall authenticate and make available for delivery in exchange
therefor a like principal amount of definitive Securities of authorized
denominations with the Company Guarantees endorsed thereon. Until so exchanged
the temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
Section 305. Global Securities.
(a) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated by Issuer and the Company
for such Global Security or a nominee thereof and delivered to such Depositary
or a nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (i) such Depositary (A) has notified the Issuer and the Company
that it is unwilling or unable to continue as Depositary for such Global
Security, or (B) has ceased to be a clearing agency registered as such under the
Exchange Act, (ii) there shall have occurred and be continuing an Event of
Default with respect to such Global Security, or (iii) the Issuer executes and
delivers to the Trustee an Issuer Order stating that all Global Securities shall
-23-
<PAGE>
<PAGE>
be exchanged in whole for Securities that are not Global Securities (in which
case such exchange shall be effected by the Trustee). Upon the occurrence in
respect of any Global Security of any one or more of the conditions specified in
clauses (i), (ii) or (iii) of the preceding sentence, such Global Security may
be registered for transfer or exchange for Securities registered in the name of,
or authenticated and delivered to, such Persons as the Depositary shall direct.
All or any portion of a Global Security may be exchanged for a Security that has
a like aggregate principal amount and is not a Global Security, upon 20 days
prior written request made by the Depositary or its authorized representative to
the Trustee.
(c) If any Global Security is to be exchanged for other Securities or
cancelled in whole, it shall be surrendered by or on behalf of the Depositary or
its nominee to the Trustee, as Security Registrar, for exchange or cancellation
as provided in this Article Three. If any Global Security is to be exchanged for
other Securities or cancelled in part, or if another Security is to be exchanged
in whole or in part for a beneficial interest in any Global Security, then
either (i) such Global Security shall be so surrendered for exchange or
cancellation as provided in this Article Three, or (ii) the principal amount
thereof shall be reduced or increased by an amount equal to the portion thereof
to be so exchanged or cancelled, or equal to the principal amount of such other
Security to be so exchanged for a beneficial interest therein, as the case may
be, by means of an appropriate adjustment made on the records of the Trustee, as
Security Registrar, whereupon the Trustee, in accordance with the Applicable
Procedures, shall instruct the Depositary or its authorized representative to
make a corresponding adjustment to its records. Upon any such surrender or
adjustment of a Global Security, the Trustee shall, subject to Section 305(b)
and as otherwise provided in this Article Three, authenticate and make available
for delivery any Securities issuable in exchange for such Global Security (or
any portion thereof) to or upon the order of, and registered in such names as
may be directed by, the Depositary or its authorized representative. Upon the
request of the Trustee in connection with the occurrence of any of the events
specified in Section 305(b), the Issuer shall promptly make available to the
Trustee a reasonable supply of Securities that are not in the form of Global
Securities. The Trustee shall be entitled to rely upon any order, direction or
request of the Depositary or its authorized representative which is given or
made pursuant to this Article Three if such order, direction or request is given
or made in accordance with the Applicable Procedures.
(d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Article Three, Section 906 or otherwise, shall
be authenticated and delivered in the form of, and shall be, a Global Security,
unless such Security is registered in the name of a Person other than the
Depositary for such Global Security or a nominee thereof.
-24-
<PAGE>
<PAGE>
(e) The Depositary or its nominee, as registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under
this Indenture, the Securities and the Company Guarantees, and owners of
beneficial interests in a Global Security shall hold such interests pursuant to
the Applicable Procedures. Accordingly, any such owner's beneficial interest in
a Global Security will be shown only on, and the transfer of such interest shall
be effected only through, records maintained by the Depositary or its nominee or
its Agent Members.
Section 306. Registration, Registration of Transfer and Exchange.
The Issuer shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Issuer shall provide for the
registration of Securities and of transfers and exchanges of Securities. The
Trustee is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided.
Subject to the limitations applicable to Global Securities, upon
surrender for registration of transfer of any Security at an office or agency of
the Issuer designated pursuant to Section 1002 for such purpose, the Issuer
shall execute, and the Trustee shall authenticate and make available for
delivery, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations, of a like aggregate principal
amount and tenor, each such new Security having endorsed thereon the Company
Guarantee executed by the Company.
At the option of the Holder, Securities (except Global Securities) may
be exchanged for other Securities of any authorized denominations, of a like
aggregate principal amount and tenor, each such new Security having endorsed
thereon the Company Guarantee executed by the Company, upon surrender of the
Securities to be exchanged at such office or agency. Whenever any Securities are
so surrendered for exchange, the Issuer shall execute, and the Trustee shall
authenticate and make available for delivery, the Securities having endorsed
thereon the Company Guarantees executed by the Company which the Holder making
the exchange is entitled to receive.
All Securities and the Company Guarantees endorsed thereon issued upon
any registration of transfer or exchange of Securities shall be the valid
obligations of the Issuer and the Company, evidencing the same Debt, and
entitled to the same benefits under this Indenture, as the Securities and
Company Guarantees endorsed thereon, respectively, surrendered upon such
registration of transfer or exchange.
-25-
<PAGE>
<PAGE>
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by Issuer or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Issuer and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Issuer may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Sections 303, 304, 305, 306 or 906 not involving any
transfer.
The Security Registrar is not required to transfer or exchange any
Security selected for redemption or any Security for a period of 15 days before
the mailing of a notice of redemption.
Except as provided in the preceding paragraph, any Security
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, any Global Security, whether pursuant to this Section,
Sections 304, 305, 306 and 906 or otherwise, shall also be a Global Security and
bear the legend specified in Exhibits A and B.
Section 307. Mutilated, Destroyed, Lost and Stolen Securities.
If (a) any mutilated Security is surrendered to the Trustee, or (b)
the Issuer, the Company and the Trustee receive evidence to their satisfaction
of the destruction, loss or theft of any Security, and there is delivered to the
Issuer, the Company and the Trustee, such security or indemnity, in each case,
as may be required by them to save each of them harmless, then, in the absence
of actual notice to the Issuer, the Company or the Trustee that such Security
has been acquired by a bona fide purchaser, the Issuer shall execute, and upon a
Issuer Request the Trustee shall authenticate and make available for delivery,
in exchange for any such mutilated Security or in lieu of any such destroyed,
lost or stolen Security, a replacement Security of like tenor and principal
amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Issuer in its discretion may,
instead of issuing a replacement Security, pay such Security.
Upon the issuance of any replacement Securities under this Section,
the Issuer may require the payment of a sum sufficient to pay all documentary,
stamp or similar issue or transfer taxes or other governmental charges that may
be imposed in relation thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith.
-26-
<PAGE>
<PAGE>
Every replacement Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Issuer and the Company, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 308. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on the Stated Maturity of such interest shall be paid to the
Person in whose name the Security (or any Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest payment
date.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on the Stated Maturity of such interest, and interest
on such defaulted interest at the then applicable interest rate borne by the
Securities, to the extent lawful (such defaulted interest and interest thereon
herein collectively called "Defaulted Interest") shall forthwith cease to be
payable to the Holder on the Regular Record Date; and such Defaulted Interest
may be paid by the Issuer, at its election in each case, as provided in
subsection (a) or (b) below:
(a) The Issuer may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or any relevant
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Issuer shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be
paid on each Security and the date (not less than 30 days after such
notice) of the proposed payment (the "Special Payment Date"), and at
the same time the Issuer shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the Special Payment Date, such money
when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this subsection provided.
Thereupon the Trustee shall fix a date (the "Special Record Date") for
the payment of such Defaulted Interest which shall be not more than 15
days and not less than 10 days prior to the date of the Special
-27-
<PAGE>
<PAGE>
Payment Date and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Issuer in writing of such Special Record Date. In
the name and at the expense of the Issuer, the Trustee shall cause
notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first-class postage
prepaid, to each Holder at his address as it appears in the Security
Register, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the
Special Record Date and Special Payment Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Securities are registered on such Special Record Date and
shall no longer be payable pursuant to the following subsection (b).
(b) The Issuer may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after written
notice given by the Issuer to the Trustee of the proposed payment
pursuant to this subsection, such payment shall be deemed practicable
by the Trustee.
Subject to the foregoing provisions of this Section each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 309. CUSIP Numbers.
The Issuer in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and the Issuer, or the Trustee on behalf of the Issuer, shall
use CUSIP numbers in notices of exchange or redemption as a convenience to
Holders; provided, however, that any such notice shall state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of exchange or redemption and
that reliance may be placed only on the other identification numbers printed on
the Securities; provided further, however, that failure to use CUSIP numbers in
any notice of exchange or redemption shall not affect the validity or
sufficiency of such notice. The Issuer shall promptly inform the Trustee of any
change in the CUSIP numbers.
Section 310. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Issuer, the Trustee and any agent of the Company, the Issuer or the Trustee
may treat the Person
-28-
<PAGE>
<PAGE>
in whose name such Security is registered as the owner thereof, whether or not
such Security may be overdue, for the purpose of making payments and for all
other purposes whatsoever, and neither the Issuer, the Company, the Trustee nor
any agent of the Issuer, the Company or the Trustee shall be affected by notice
to the contrary.
No holder of any beneficial interest in any Global Security held on
its behalf by a Depositary shall have any rights under this Indenture with
respect to such Global Security, and such Depositary may be treated by the
Issuer, Company, the Trustee, and any agent of the Issuer, Company or the
Trustee as the owner of such Global Security for all purposes whatsoever. None
of the Issuer, Company, the Trustee nor any agent of the Issuer, Company or the
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Section 311. Cancellation.
All Securities surrendered for payment, purchase, registration of
transfer or exchange shall be delivered to the Trustee and, if not already
cancelled, shall be promptly cancelled by it. The Issuer and the Company may at
any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Issuer or the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Securities held
by the Trustee shall be delivered to the Issuer. The Trustee shall provide the
Issuer a list of all Securities that have been cancelled from time to time as
requested by the Issuer.
Section 312. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture.
This Indenture shall be discharged and shall cease to be of further
effect (except as to (a) the surviving rights of registration of transfer or
exchange of Securities, as expressly provided for herein and (b) the right to
receive Additional Amounts) as to all Outstanding Securities hereunder, and the
Trustee, upon Issuer Request and at the
-29-
<PAGE>
<PAGE>
expense of the Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(a) either
(1) all the Securities theretofore authenticated and
delivered (other than (i) lost, stolen or destroyed Securities which have
been replaced or paid as provided in Section 307 or (ii) all Securities for
whose payment United States dollars have theretofore been deposited in
trust or segregated and held in trust by the Issuer and thereafter repaid
to the Issuer or discharged from such trust, as provided in Section 1003)
have been delivered to the Trustee for cancellation; or
(2) all such Securities not theretofore delivered to the
Trustee canceled or for cancellation (x) have become due and payable, or
(y) will become due and payable at their Stated Maturity within one year or
(z) are called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Issuer, or the Issuer in
the case of (x), (y) and (z) above, has irrevocably deposited or caused to
be deposited with the Trustee as trust funds in trust an amount in United
States dollars sufficient to pay and discharge the entire Debt on such
Securities not theretofore delivered to the Trustee canceled or for
cancellation, including the principal of, and accrued interest on (and, if
applicable, the Tax Redemption Price and Additional Amounts with respect
to), such Securities at such Maturity or Stated Maturity or Tax Redemption
Date, as the case may be;
(b) the Issuer or the Company has paid or caused to be paid all
other sums payable hereunder by the Issuer and the Company with respect to
such Securities; and
(c) the Issuer has delivered to the Trustee an Officers'
Certificate and an Opinion of Independent Counsel, in form and substance
reasonably satisfactory to the Trustee, each stating that (i) all
conditions precedent herein relating to the satisfaction and discharge
hereof have been complied with, and (ii) such satisfaction and discharge
will not result in a breach or violation of, or constitute a default under,
this Indenture or any other material agreement or instrument to which the
Issuer, the Company or any Subsidiary is a party or by which the Issuer,
the Company or any Subsidiary is bound.
Upon compliance by the Issuer with this Section 401, and if the Issuer
has paid or caused to be paid all sums payable under this Indenture, this
Indenture and any
-30-
<PAGE>
<PAGE>
Company Guarantees issued hereunder shall cease to be of any effect (except as
otherwise provided herein).
Notwithstanding the satisfaction and discharge hereof, the obligations
of the Issuer to the Trustee under Section 606 and, if United States dollars
shall have been deposited with the Trustee pursuant to subclause (2) of
subsection (a) of this Section 401, the obligations of the Trustee under Section
402 and the last paragraph of Section 1003 shall survive.
Section 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
United States dollars deposited with the Trustee pursuant to Section 401 shall
be held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Issuer acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal of, and
interest on, the Securities for whose payment such United States dollars have
been deposited with the Trustee.
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(a) default for 30 days in the payment of any
interest installment on the Securities when due and payable;
(b) default in the payment of the principal of,
or Tax Redemption Price or Additional Amounts in respect of,
any Security when due and payable;
(c) default for 60 days, after written notice has been given, by
certified mail, (i) to the Issuer and the Company by the Trustee, or (ii)
to the Issuer, the Company and the Trustee by the Holders of not less than
25% in aggregate principal amount of the Outstanding Securities (which
notice shall specify that it is a "notice of default" and shall demand that
such a default be remedied) in the performance of any covenant of the
Issuer or the Company in this
-31-
<PAGE>
<PAGE>
Indenture (other than a default in the performance, or breach, of a
covenant or agreement which is specifically dealt with in clauses
(a) or (b) of this Section 501);
(d) default resulting in acceleration of maturity of any Debt
(other than the Securities) of the Company, the Issuer or any material
Subsidiary of the Company existing on the date of this Indenture or any
material Subsidiary of the Issuer in an amount aggregating in excess of
$20,000,000, if such acceleration has not been rescinded or annulled within
30 days after notice to the Issuer and the Company by the Trustee or to the
Issuer, the Company and the Trustee by the Holders of not less than 25% in
aggregate principal amount of the outstanding Securities at any one time;
(e) the rendering of a final judgment or judgments (not subject
to appeal) against the Issuer, the Company or any material Subsidiary of
the Company existing on the date of this Indenture or any material
Subsidiary of the Issuer in an aggregate amount in excess of $50,000,000,
which remains unstayed, undischarged or unbonded for a period of 60 days
thereafter;
(f) there shall have been the entry by a court of competent
jurisdiction of (i) a decree or order for relief in respect of the Issuer
or the Company or any material Subsidiary of the Company existing on the
date of this Indenture or any material Subsidiary of the Issuer in an
involuntary case or proceeding under any applicable Bankruptcy Law, or (ii)
a decree or order adjudging the Issuer or the Company or any material
Subsidiary of the Company existing on the date of this Indenture or any
material Subsidiary of the Issuer bankrupt or insolvent, or ordering
reorganization, arrangement, adjustment or composition of or in respect of
the Issuer or the Company or any material Subsidiary of the Company
existing on the date of this Indenture or any material Subsidiary of the
Issuer under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or
other similar official) of the Issuer or the Company or any material
Subsidiary of the Company existing on the date of this Indenture or any
material Subsidiary of the Issuer or of any substantial part of their
respective properties, or ordering the winding up or liquidation of their
respective affairs, and any such decree or order for relief shall continue
to be in effect, or any such other decree or order shall be unstayed and in
effect, for a period of 75 consecutive days; or
(g) (i) the Issuer or the Company or any material Subsidiary of
the Company existing on the date of this Indenture or any material
Subsidiary of the Issuer commences a voluntary case or proceeding under any
applicable Bankruptcy Law or any other case or proceeding to be adjudicated
bankrupt or insolvent, (ii) the Issuer or the Company or any material
Subsidiary of the
-32-
<PAGE>
<PAGE>
Company existing on the date of this Indenture or any material
Subsidiary of the Issuer consents in writing to the entry of a
decree or order for relief against the Issuer or the Company or such
material Subsidiary of the Company existing on the date of this Indenture
or any material Subsidiary of the Issuer in an involuntary case or
proceeding under any applicable Bankruptcy Law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, (iii) the
Issuer or the Company or any material Subsidiary of the Company existing on
the date of this Indenture or any material Subsidiary of the Issuer files a
petition or answer or consent seeking reorganization or relief under any
applicable Bankruptcy Law, (iv) the Issuer or the Company or any material
Subsidiary of the Company existing on the date of this Indenture or any
material Subsidiary of the Issuer (A) consents to the filing of such
petition or the appointment of, or taking possession by, a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official
of the Issuer or the Company or such material Subsidiary of the Company
existing on the date of this Indenture or any material Subsidiary of the
Issuer or of any substantial part of their respective properties, (B) makes
an assignment for the benefit of creditors, or (C) admits in writing its
inability to pay its debts generally as they become due, or (v) the Issuer
or the Company or any material Subsidiary of the Company existing on the
date of this Indenture or any material Subsidiary of the Issuer takes any
corporate action in furtherance of any such actions in this clause (g).
Section 502. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default (other than an Event of Default specified in
Sections 501(f) and (g)) shall occur and be continuing, then and in every such
case the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Securities then Outstanding may, and the Trustee at the request of
such Holders shall, declare all unpaid principal of, and accrued interest on
(and, if applicable, the Tax Redemption Price or Additional Amounts in respect
of), all Securities then Outstanding, to be due and payable immediately, by a
notice in writing to the Issuer (and to the Trustee if given by the Holders of
the Securities) specifying the relevant Event of Default and that it is a
"notice of acceleration", and upon any such declaration, such principal and
interest shall become immediately due and payable. If an Event of Default
specified in Section 501(f) or 501(g) occurs and is continuing, then all the
Securities shall ipso facto become and be due and payable immediately in an
amount equal to the principal amount of the Securities together with accrued and
unpaid interest, if any, to the date the Securities become due and payable,
without any declaration or other act on the part of the Trustee or any Holder.
Thereupon, the Trustee may, at his or her discretion, proceed to protect and
enforce the rights of the Holders of the Securities by appropriate judicial
proceedings.
-33-
<PAGE>
<PAGE>
After such declaration of acceleration with respect to the Securities
has been made, but before a judgment or decree for payment of the money due has
been obtained by the Trustee as hereinafter in this Article provided, the
Holders of a majority in aggregate principal amount of the Securities
Outstanding by written notice to the Issuer and the Trustee, may rescind and
annul such declaration and its consequences if:
(a) the Issuer has paid or deposited with the
Trustee a sum sufficient to pay
(i) all sums paid or advanced by the Trustee under Section
607 and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel,
(ii) all overdue interest on all Outstanding
Securities,
(iii) the principal of any Outstanding Securities which have
become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Securities, and
(iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities;
and
(b) all Events of Default, other than the non-payment of
principal of, or interest on (and, if applicable, the Tax Redemption Price
or Additional Amounts in respect of), the Securities which have become due
solely by such declaration of acceleration, have been cured or waived as
provided in Section 513.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon.
Section 503. Collection of Debt and Suits for Enforcement
by Trustee.
The Issuer and the Company covenant that if:
(a) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the
principal of any Security at the Stated Maturity thereof,
then the Issuer and the Company will, upon demand of the Trustee, pay to the
Trustee, for the benefit of the Holders of such Securities, the whole amount
then due and payable on
-34-
<PAGE>
<PAGE>
such Securities for principal and interest, with interest upon the overdue
principal and, to the extent that payment of such interest shall be legally
enforceable, upon overdue installments of interest, at the rate borne by the
Securities; and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If the Issuer or the Company, as the case may be, fails to pay such
amounts forthwith upon such demand, the Trustee, in its own name and as trustee
of an express trust, may institute a judicial proceeding for the collection of
the sums so due and unpaid and may prosecute such proceeding to judgment or
final decree, and may enforce the same against the Issuer or the Company or any
other obligor upon the Securities and collect the moneys adjudged or decreed to
be payable in the manner provided by law out of the property of the Issuer, the
Company or any other obligor upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders under this Indenture or the Company Guarantees by such appropriate
private or judicial proceedings as the Trustee shall deem most effectual to
protect and enforce such rights, including, without limitation, seeking recourse
against the Company pursuant to the terms of the Company Guarantees, whether for
the specific enforcement of any covenant or agreement in this Indenture or in
aid of the exercise of any power granted herein or therein, or to enforce any
other proper remedy, subject, however, to Section 512. No recovery of any such
judgment upon any property of the Issuer or the Company shall affect or impair
any rights, powers or remedies of the Trustee or the Holders.
Section 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Issuer or any other obligor, including the
Company, upon the Securities or the property of the Issuer or of such other
obligor or their creditors, the Trustee (irrespective of whether the principal
of, Tax Redemption Price, if any, or Additional Amounts, if any, of the
Securities shall then be due and payable as therein expressed or by declaration
or otherwise and irrespective of whether the Trustee shall have made any demand
on the Issuer for the payment of any such overdue amounts) shall be entitled and
empowered, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of principal,
Tax Redemption Price if any, or Additional Amounts, if any, and interest
owing and unpaid in respect of the Securities and to file such other papers
or documents
-35-
<PAGE>
<PAGE>
as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive moneys or other
property payable or deliverable on any such claims and to
distribute the same; and
any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar
official in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 505. Trustee May Enforce Claims without Possession of Securities.
All rights of action and claims under this Indenture, the Securities
or the Company Guarantees may be prosecuted and enforced by the Trustee without
the possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name and as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the Securities in
respect of which such judgment has been recovered.
Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article or
otherwise on behalf of the Holders or the Trustee pursuant to this Article or
through any proceeding or any arrangement or restructuring in anticipation or in
lieu of any proceeding contemplated by this Article shall be applied, subject to
applicable law, in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
or interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
-36-
<PAGE>
<PAGE>
FIRST: To the payment of all amounts due the
Trustee under Section 607;
SECOND: To the payment of the amounts then due and unpaid upon
the Securities for principal, Tax Redemption Price, if any, Additional
Amounts, if any, and interest, in respect of which or for the benefit of
which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Securities for principal and interest; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto, including the Issuer and the Company, provided that all sums due
and owing to the Holders and the Trustee have been paid in full as required
by this Indenture.
Section 507. Limitation on Suits.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or the
Securities, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(a) such Holder has previously given written
notice to the Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the
then Outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own
name as trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer (and if requested, provision) of indemnity has failed to
institute any such proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture, any
-37-
<PAGE>
<PAGE>
Security or the Company Guarantees to affect, disturb or prejudice the rights of
any other Holders, or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, any Security or
the Company Guarantees, except in the manner provided in this Indenture and for
the equal and ratable benefit of all the Holders.
Section 508. Unconditional Right of Holders to Receive
Principal and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right based on the terms stated herein, which is
absolute and unconditional, to receive payment of the principal of and (subject
to Section 308) interest on, such Security on the respective Stated Maturities
expressed in such Security and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder.
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or the Company Guarantees and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case the Issuer, the Company, any other obligor on the Securities, the Trustee
and the Holders shall, subject to any determination in such proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
307, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the
-38-
<PAGE>
<PAGE>
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
Section 512. Control by Holders.
The Holders of not less than a majority in aggregate principal amount
of the then Outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for exercising any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, provided that:
(a) such direction shall not be (i) in conflict with any rule of
law or with this Indenture (including, without limitation, Section 507), or
(ii) be unduly prejudicial to Holders not joining therein; and
(b) subject to the provisions of Trust Indenture Act Section 315,
the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities may on behalf of the Holders of all Outstanding
Securities waive any past Default hereunder and its consequences, except a
Default:
(a) in the payment of the principal of, or
interest on, any Security; or
(b) in respect of a covenant or a provision hereof which under
Section 902 cannot be modified or amended without the consent of the Holder
of each Security Outstanding, affected by such modification or amendment.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable
-39-
<PAGE>
<PAGE>
attorneys' fees and expenses, against any party litigant in such suit, having
due regard to the merits and good faith of the claims or defenses made by such
party litigant, but the provisions of this Section shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of, or interest on, any Security on
or after the respective Stated Maturities expressed in such Security.
Section 515. Waiver of Stay, Extension or Usury Laws.
Each of the Issuer and the Company covenants (to the extent that it
may lawfully do so) that it will not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury or other law wherever enacted, now or at any time
hereafter in force, which would prohibit or forgive the Issuer or the Company
from paying all or any portion of the principal of, or interest on, the
Securities contemplated herein or in the Securities or which may affect the
covenants or the performance of this Indenture; and each of the Issuer and the
Company (to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
Section 516. Remedies Subject to Applicable Law.
All rights, remedies and powers provided by this Article Five may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law in the premises, and all the provisions of this
Indenture are intended to be subject to all applicable mandatory provisions of
law which may be controlling in the premises and to be limited to the extent
necessary so that they will not render this Indenture invalid, unenforceable or
not entitled to be recorded, registered or filed under the provisions of any
applicable law.
ARTICLE SIX
THE TRUSTEE
Section 601. Duties of Trustee.
Subject to the provisions of the Trust Indenture Act Sections 315(a)
through 315(d):
(a) if a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested
in it by
-40-
<PAGE>
<PAGE>
this Indenture and use the same degree of care and skill in its exercise
thereof as a prudent person would exercise or use under the circumstances
in the conduct of his own affairs.
(b) except during the continuance of a Default or
an Event of Default:
(1) the Trustee need perform only those duties as are
specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture that are adverse to the
Trustee; and
(2) in the absence of bad faith or willful misconduct on its
part, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture. However, in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) the Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) this subsection (c) does not limit the
effect of subsection (b) of this Section 601;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith, in accordance with a
direction of the Holders of a majority in principal amount of
Outstanding Securities, relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power confirmed upon the Trustee under this
Indenture.
(d) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of
its rights or powers if it shall have reasonable grounds for believing that
repayment of such
-41-
<PAGE>
<PAGE>
funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(e) whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
subsections (a), (b), (c) and (d) of this Section 601.
(f) the Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Issuer. Assets held in trust by the Trustee need not be segregated from
other assets except to the extent required by law.
Section 602. Notice of Defaults.
Within 90 days after a Responsible Officer of the Trustee receives
notice of the occurrence of any Default, the Trustee shall transmit by mail to
all Holders and any other persons entitled to receive reports pursuant to
Section 313(c) of the Trust Indenture Act, as their names and addresses appear
in the Security Register, notice of such Default hereunder known to the Trustee,
unless such Default shall have been cured or waived; provided, however, that,
except in the case of a Default in the payment of the principal of, or interest
on, any Security, the Trustee shall be protected in withholding such notice if
and so long as a trust committee of Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interest of the
Holders.
Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601 and Trust Indenture Act
Sections 315(a) through 315(d):
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of Debt or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request or direction of the Issuer mentioned herein shall
be sufficiently evidenced by a Issuer Request or Issuer Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) the Trustee may consult with counsel of its selection and any
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by
-42-
<PAGE>
<PAGE>
it hereunder in good faith and in reliance thereon in accordance with such
advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee security or indemnity
satisfactory to the Trustee against the costs, expenses and liabilities
which might be incurred therein or thereby in compliance with such request
or direction;
(e) the Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or within
the discretion, rights or powers conferred upon it by this Indenture other
than any liabilities arising out of the negligence, bad faith or willful
misconduct of the Trustee;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
approval, appraisal, bond, debenture, note, coupon, security or other paper
or document unless requested in writing to do so by the Holders of not less
than a majority in aggregate principal amount of the Securities then
Outstanding; provided, however, that, if the payment within a reasonable
time to the Trustee of the costs, expenses or liabilities likely to be
incurred by it in the making of such investigation is, in the opinion of
the Trustee, not reasonably assured to the Trustee by the security afforded
to it by the terms of this Indenture, the Trustee may require reasonable
indemnity against such expenses or liabilities as a condition to
proceeding; the reasonable expenses of every such investigation shall be
paid by the Issuer or, if paid by the Trustee or any predecessor Trustee,
shall be repaid by the Issuer upon demand; provided further, however, the
Trustee in its discretion may make such further inquiry or investigation
into such facts or matters as it may deem fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Issuer,
personally or by agent or attorney;
(g) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate; and
(h) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys
-43-
<PAGE>
<PAGE>
and the Trustee shall not be responsible for any misconduct or negligence
on the part of any agent or attorney appointed with due care by it
hereunder.
Section 604. Trustee Not Responsible for Recitals,
Dispositions of Securities or Application of Proceeds Thereof.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Issuer or the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Securities and perform its obligations hereunder and that the
statements made by it in any Statement of Eligibility on Form T-1 supplied to
the Issuer are true and accurate subject to the qualifications set forth
therein. The Trustee shall not be accountable for the use or application by the
Issuer of Securities or the proceeds thereof.
Section 605. Trustee and Agents May Hold Securities;
Collections; etc.
The Trustee, any Paying Agent, Security Registrar or any other agent
of the Issuer, in its individual or any other capacity, may become the owner or
pledgee of Securities, with the same rights it would have if it were not the
Trustee, Paying Agent, Security Registrar or such other agent and, subject to
Sections 608 and 613 and Trust Indenture Act Sections 310 and 311, may otherwise
deal with the Issuer and receive, collect, hold and retain collections from the
Issuer with the same rights it would have if it were not the Trustee, Paying
Agent, Security Registrar or such other agent.
Section 606. Money Held in Trust.
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
mandatory provisions of law. Except for funds or securities deposited with the
Trustee pursuant to Article Twelve, the Trustee shall be required to invest all
moneys received by the Trustee, until used or applied as herein provided, in
Cash Equivalents upon receipt of, and in accordance with, the specific written
directions of the Issuer.
Section 607. Compensation and Indemnification of Trustee
and Its Prior Claim.
The Issuer covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, such compensation as the Issuer and
the Trustee shall, from time to time, agree in writing, for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation
-44-
<PAGE>
<PAGE>
of a trustee of an express trust) and the Issuer covenants and agrees to pay or
reimburse the Trustee and each predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by or on behalf
of the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all agents and other persons not regularly in its employ) except
any such expense, disbursement or advance as may arise from its negligence, bad
faith or willful misconduct. The Issuer also covenants and agrees to indemnify
the Trustee and each predecessor Trustee for, and to hold it harmless against,
any and all claim, loss, damage, liability, tax, assessment or other
governmental charge (other than taxes applicable to the Trustee's compensation
hereunder) or expense incurred without negligence, bad faith or willful
misconduct on its part, arising out of or in connection with the acceptance or
administration of this Indenture or the trusts hereunder and its duties
hereunder, including enforcement of this Section and also including any
liability which the Trustee may incur as a result of failure to withhold, pay or
report any tax, assessment or other governmental charge, and the costs and
expenses of defending itself against or investigating any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The obligations of the Issuer under this Section to compensate and
indemnify the Trustee and each predecessor Trustee and to pay or reimburse the
Trustee and each predecessor Trustee for reasonable expenses, disbursements and
advances shall constitute an additional obligation hereunder and shall survive
the satisfaction and discharge of this Indenture and the resignation or removal
of the Trustee and each predecessor Trustee.
The Trustee shall have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 607, except with respect to funds
held in trust for the benefit of the Holders of particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(f) or Section 501(g), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.
Section 608. Conflicting Interests.
The Trustee shall comply with the provisions of Section 310(b) of the
Trust Indenture Act.
-45-
<PAGE>
<PAGE>
Section 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
corporation that is eligible to act as trustee under Trust Indenture Act Section
310(a)(5) and which shall have an office in The City of New York, a combined
capital and surplus of at least $50,000,000, to the extent there is an
institution eligible and willing to serve. If the Trustee does not have an
office in The City of New York, the Trustee shall appoint an agent in The City
of New York reasonably acceptable to the Issuer (which may be an Affiliate of
the Trustee) to conduct any activities which the Trustee may be required under
this Indenture to conduct in The City of New York. If the Trustee publishes
reports of condition at least annually, pursuant to law or to the requirements
of federal, state, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of the Trustee shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 610. Resignation and Removal; Appointment of
Successor Trustee.
(a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor trustee under Section 611.
(b) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign by giving written notice thereof to the Issuer. Upon
receiving such notice or resignation, the Issuer shall promptly appoint a
successor trustee by written instrument executed by authority of the Board of
Directors, a copy of which shall be delivered to the resigning Trustee and a
copy to the successor trustee. If an instrument of acceptance by a successor
trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may, or any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper, appoint a
successor trustee.
(c) The Trustee may be removed at any time for any cause or for no
cause by an Act of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities, delivered to the Trustee and to
the Issuer. If an instrument of acceptance by a successor trustee shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may, or any Holder who has been a bona fide
Holder of a Security for at least six months may, on
-46-
<PAGE>
<PAGE>
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor trustee.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of Trust
Indenture Act Section 310(b) after written request therefor by the Issuer
or by any Holder who has been a bona fide Holder of a Security for at least
six months,
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Issuer or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any case, (i) the Issuer by a Board Resolution may remove the Trustee,
or (ii) subject to Section 514, the Holder of any Security who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Issuer, by a Board Resolution, shall promptly appoint a successor trustee and
shall comply with the applicable requirements of Section 611. If, within one
year after such resignation, removal or incapability, or the occurrence of such
vacancy, the Issuer has not appointed a successor Trustee, a successor trustee
shall be appointed by the Act of the Holders of a majority in principal amount
of the Outstanding Securities delivered to the Issuer and the retiring Trustee.
Such successor trustee so appointed shall forthwith upon its acceptance of such
appointment become the successor trustee and supersede the successor trustee
appointed by the Issuer. If no successor trustee shall have been so appointed by
the Issuer or the Holders of the Securities and accepted appointment in the
manner hereinafter provided, the Holder of any Security who has been a bona fide
Holder for at least six months may, subject to Section 514, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor trustee.
-47-
<PAGE>
<PAGE>
(f) The Issuer shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
Securities as their names and addresses appear in the Security Register. Each
notice shall include the name of the successor trustee and the address of its
Corporate Trust Office or agent hereunder.
Section 611. Acceptance of Appointment by Successor.
Every successor trustee appointed hereunder shall execute, acknowledge
and deliver to the Issuer and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee as if originally named as Trustee hereunder;
but, nevertheless, on the written request of the Issuer or the successor
trustee, upon payment of its charges pursuant to Section 607 then unpaid, such
retiring Trustee shall pay over to the successor trustee all moneys at the time
held by it hereunder and shall execute and deliver an instrument transferring to
such successor trustee all such rights, powers, duties and obligations. Upon
request of any such successor trustee, the Issuer shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor trustee all such rights and powers.
No successor trustee with respect to the Securities shall accept
appointment as provided in this Section 611 unless at the time of such
acceptance such successor trustee shall be eligible to act as trustee under the
provisions of Trust Indenture Act Section 310(a) and this Article Six and shall
have a combined capital and surplus of at least $50,000,000 and have a Corporate
Trust Office or an agent selected in accordance with Section 609.
Upon acceptance of appointment by any successor trustee as provided in
this Section 611, the Issuer shall give notice thereof to the Holders of the
Securities, by mailing such notice to such Holders at their addresses as they
shall appear on the Security Register. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
610. If the Issuer fails to give such notice within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be given at the expense of the Issuer.
Section 612. Merger, Conversion, Consolidation or
Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation
-48-
<PAGE>
<PAGE>
succeeding to all or substantially all the corporate trust business of the
Trustee (including the trust created by this Indenture) shall be the successor
of the Trustee hereunder, provided such corporation shall be eligible under
Trust Indenture Act Section 310(a) and this Article Six and shall have a
combined capital and surplus of at least $50,000,000 and have a Corporate Trust
Office or an agent selected in accordance with Section 609, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee and deliver such
Securities so authenticated; and, in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Securities either in the name of any predecessor hereunder or in the name
of the successor trustee; and in all such cases such certificate shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have; provided that the right to adopt
the certificate of authentication of any predecessor Trustee or to authenticate
Securities in the name of any predecessor Trustee shall apply only to its
successor or successors by merger, conversion or consolidation.
Section 613. Preferential Collection of Claims Against Issuer.
If and when the Trustee shall be or become a creditor of the Issuer
(or other obligor under the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Issuer (or any such other obligor). A Trustee who has resigned or been
removed shall be subject to the Trust Indenture Act Section 311(a) to the extent
indicated therein.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUER
Section 701. Issuer to Furnish Trustee Names and Addresses of Holders.
The Issuer will furnish or cause to be furnished to the Trustee:
(a) semiannually, not more than 10 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may reasonably request in
writing, within 30 days after receipt by the Issuer of any such request, a
list of
-49-
<PAGE>
<PAGE>
similar form and content to that in subsection (a) hereof as of a date not
more than 15 days prior to the time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Security
Registrar, no such list need be furnished.
Section 702. Disclosure of Names and Addresses of Holders.
Holders may communicate pursuant to Trust Indenture Act Section 312(b)
with other Holders with respect to their rights under this Indenture or the
Securities, and the Trustee shall comply with Trust Indenture Act Section
312(b). The Issuer, the Company, Trustee, the Security Registrar and any other
Person shall have the protection of Trust Indenture Act Section 312(c). Further,
every Holder of Securities, by receiving and holding the same, agrees with the
Issuer, the Company and the Trustee that neither the Issuer nor the Trustee or
any agent of either of them shall be held accountable by reason of the
disclosure of any information as to the names and addresses of the Holders in
accordance with Trust Indenture Act Section 312, regardless of the source from
which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
Trust Indenture Act Section 312.
Section 703. Reports by Trustee.
(a) Within 60 days after May 15 of each year commencing with the first
May 15 after the issuance of Securities, the Trustee, if so required under the
Trust Indenture Act, shall transmit by mail to all Holders, in the manner and to
the extent provided in Trust Indenture Act Section 313(c), a brief report dated
as of such May 15 in accordance with and with respect to the matters required by
Trust Indenture Act Section 313(a). The Trustee shall also transmit by mail to
all Holders, in the manner and to the extent provided in Trust Indenture Act
Section 313(c), a brief report in accordance with and with respect to the
matters required by Trust Indenture Act Section 313(b)(2).
(b) A copy of each report transmitted to Holders pursuant to this
Section 703 shall, at the time of such transmission, be mailed to the Issuer and
the Company and filed with each stock exchange, if any, upon which the
Securities are listed and also with the Commission. The Issuer will notify the
Trustee promptly if the Securities are listed on any stock exchange.
Section 704. Reports by Issuer and the Company.
The Issuer and the Company, as the case may be, shall:
-50-
<PAGE>
<PAGE>
(a) file with the Trustee and the Commission, in accordance with
the rules and regulations prescribed from time to time by the Commission,
such additional information, documents and reports with respect to
compliance by the Issuer or the Company, as the case may be, with the
conditions and covenants of this Indenture as are required from time to
time by such rules and regulations (including such information, documents
and reports referred to in Trust Indenture Act Section 314(a));
(b) within 15 days after the filing thereof with the Trustee,
transmit by mail to all Holders in the manner and to the extent provided in
Trust Indenture Act Section 313(c), such summaries of any information,
documents and reports required to be filed by the Issuer or the Company, as
the case may be, pursuant to Section 1010 hereunder and subsections (a) and
(b) of this Section as are required by rules and regulations prescribed
from time to time by the Commission; and
(c) file with the Trustee and the Commission, and transmit to
Holders such other information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act
at the times and in the manner provided pursuant to such Act; provided that
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act shall be filed
with the Trustee within 15 days after the same is so required to be filed
with the Commission.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Issuer and Company May Consolidate, etc.,
Only on Certain Terms.
(a) The Issuer shall not, in a single transaction or through a series
of related transactions, consolidate with or merge with or into any other Person
or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets to any Person, unless at the time
and after giving effect thereto:
-51-
<PAGE>
<PAGE>
(1) either (A) in the case of merger or consolidation, the Issuer
will be the surviving Person or (B) in the case of a merger or
consolidation where the Issuer is not the surviving Person and in the case
of a sale, assignment, conveyance, transfer, lease or other disposition,
the Person formed by such consolidation or into which the Issuer is merged
or the Person which acquires by sale, assignment, conveyance, transfer,
lease or disposition all or substantially all of the properties and assets
of the Issuer (the "Surviving Entity") will each be a corporation duly
organized and validly existing under the laws of the United States of
America, any state thereof or the District of Columbia and will expressly
assume, by a supplemental indenture, in a form satisfactory to the Trustee,
the due and punctual payment of the principal of and interest on (and, if
applicable, the Tax Redemption Price or Additional Amounts in respect of)
the Securities and the performance and observance of all the covenants and
conditions of the Indenture to be performed and observed by the Issuer, and
the Securities and this Indenture, as the case may be, will remain in full
force and effect as so supplemented;
(2) immediately before and immediately after giving effect to
such transaction on a pro forma basis, no Default or Event of Default will
have occurred and be continuing; and
(3) at the time of the transaction, the Issuer or the Surviving
Entity will have delivered, or caused to be delivered, to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an Officers'
Certificate and an Opinion of Counsel, each to the effect that such
consolidation, merger, sale, assignment, conveyance, transfer, lease or
other disposition and the supplemental indenture in respect thereof comply
with this Indenture and that all conditions precedent herein provided for
relating to such transaction have been complied with. In delivering any
such Opinion of Counsel, counsel may rely as to factual matters on
certificates of officers of the Issuer.
(b) The Company shall not in a single transaction or through a series
of related transactions, consolidate with or merge with or into any other Person
or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets to any Person, unless at the time
and after giving effect thereto:
(1) either (A) in the case of merger of consolidation, the
Company will be the surviving Person or (B) in the case of a merger or
consolidation where the Company is not the surviving Person and in the case
of a sale, assignment, conveyance, transfer, lease or other disposition,
the Person formed by such consolidation or into which the Company is merged
or the Person or group of affiliated Persons which acquires by sale,
assignment, conveyance, transfer, lease or disposition all or substantially
all of the properties and assets of
-52-
<PAGE>
<PAGE>
the Company (the "Surviving Guarantor Entity") will each be a corporation
duly organized and validly existing under the laws of the United States of
America, any state thereof or the District of Columbia and will expressly
assume, by a supplemental indenture, in a form satisfactory to the Trustee,
the Company Guarantees and the performance and observance of all the
covenants and conditions of the Indenture to be performed and observed by
the Company, and such Company Guarantees will remain in full force and
effect;
(2) immediately before and immediately after giving effect to
such transaction, on a pro forma basis, no Default or Event of Default
shall have occurred and be continuing; and
(3) at the time of the transaction the Company or the Surviving
Guarantor Entity will have delivered, or caused to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each to the effect that
such consolidation, merger, sale, assignment, conveyance, transfer, lease
or other disposition and the supplemental indenture in respect thereof
comply with this Indenture and that all conditions precedent therein
provided for relating to such transaction have been complied with, and
thereafter all obligations of the predecessor shall terminate.
Section 802. Successor Substituted.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Issuer or the Company, if any, in accordance with Section 801, the
successor Person formed by such consolidation or into which the Issuer or the
Company, as the case may be, is merged or the successor Person or Persons to
which such sale, assignment, conveyance, transfer, lease or disposition is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Issuer or the Company, as the case may be, under this Indenture in the
Securities and/or the Company Guarantees, as the case may be, with the same
effect as if such successor had been named as the Issuer or the Company, as the
case may be, herein, in the Securities and/or in the Company Guarantees, as the
case may be. When a successor (other than a successor that is a direct or
indirect Subsidiary of the Company) assumes all the obligations of its
predecessor under this Indenture, the Securities or the Company Guarantees, as
the case may be, the predecessor shall be released from those obligations and
covenants hereof and the Securities. In addition, if the acquiring or successor
Person to or of the Issuer is not a
-53-
<PAGE>
<PAGE>
direct or indirect Subsidiary of the Company, the obligations of the Company
under the Company Guarantees and this Indenture shall terminate and be of no
further force and effect and all references to the Company shall be deleted.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements
without Consent of Holders.
Without the consent of any Holders, the Issuer, the Company and any
other obligor upon the Securities when authorized by a Board Resolution, and the
Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto or agreements or other instruments with respect
to the Company Guarantees, in form and substance satisfactory to the Trustee,
for any of the following purposes:
(a) to evidence the succession of another Person to the Issuer,
the Company or any other obligor upon the Securities, and the assumption by
any such successor of the covenants of the Issuer or the Company or obligor
herein and in the Securities or in the Company Guarantees in accordance
with Article Eight;
(b) to add to the covenants of the Issuer, the Company or any
other obligor upon the Securities for the benefit of the Holders, or to
surrender any right or power conferred upon the Issuer or the Company or
any other obligor upon the Securities, as applicable, herein, in the
Securities or in the Company Guarantees;
(c) to cure any ambiguity, or to correct or supplement any
provision herein or in any supplemental indenture, the Securities or the
Company Guarantees which may be defective or inconsistent with any other
provision herein or in any supplemental indenture, the Securities or the
Company Guarantees or to make any other provisions with respect to matters
or questions arising under this Indenture or any supplemental indenture,
the Securities or the Company Guarantees; provided that, in each case, such
provisions shall not materially adversely affect the interest of the
Holders;
(d) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act, as contemplated by Section 905 or otherwise;
(e) provide for the assumption of the Issuer's or
the Company's obligations to the Holders of Securities as
contemplated under Article Eight;
-54-
<PAGE>
<PAGE>
(f) to evidence and provide the acceptance of the
appointment of a successor trustee hereunder; or
(g) to mortgage, pledge, hypothecate or grant a security interest
in favor of the Trustee for the benefit of the Holders, as additional
security for the payment and performance of the Issuer's or the Company's
obligations hereunder, in any property or assets, including any of which
are required to be mortgaged, pledged or hypothecated, or in which a
security interest or other Lien is required to be granted to the Trustee
pursuant to this Indenture or otherwise.
Section 902. Supplemental Indentures and Agreements with Consent of
Holders.
Except as permitted by Section 901, with the consent of the Holders of
at least a majority in aggregate principal amount of the Outstanding Securities,
by Act of said Holders delivered to the Issuer, the Company and the Trustee, the
Issuer and the Company, when authorized by Board Resolutions, and the Trustee
may (1) enter into an indenture or indentures supplemental hereto in form and
substance satisfactory to the Trustee, for the purpose of adding any provisions
to or amending, modifying or changing in any manner or eliminating any of the
provisions of this Indenture, the Securities or the Company Guarantees
(including, but not limited to, for the purpose of modifying in any manner the
rights of the Holders under this Indenture, the Securities or the Company
Guarantees), or (2) waive compliance with any provision in this Indenture, the
Securities or the Company Guarantees (other than waivers of past Defaults
covered by Section 513 and waivers of covenants which are covered by Section
1012); provided, however, that no such supplemental indenture, agreement or
instrument shall, without the consent of not less than 90% in aggregate
principal amount of the Outstanding Securities affected thereby, release the
Company from its obligations under the Company Guarantees; provided, further,
however, that no such supplemental indenture, agreement or instrument shall,
without the consent of the Holder of each Outstanding Security affected thereby:
(a) change the Stated Maturity of the principal of, or any
installment of interest on, or any Additional Amounts due pursuant to
Section 301 with respect to, any such Security, or reduce the principal
amount thereof or the rate of interest thereon, or change the place or time
of payment where, or the coin or currency in which, the principal of any
Security or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof;
(b) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver or compliance with certain provisions of this Indenture;
-55-
<PAGE>
<PAGE>
(c) reduce the Tax Redemption Price of any
Security;
(d) modify any of the provisions of this Section 902 or Section
513 or 1012, except to increase the percentage of such Outstanding
Securities required for any such actions or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each such Security affected thereby; or
(e) except as otherwise permitted under Article Eight, consent to
the assignment or transfer by the Issuer or the Company of any of its
rights and obligations hereunder.
Upon the written request of the Issuer and the Company accompanied by
copies of Board Resolutions authorizing the execution of any such supplemental
indenture and upon the filing with the Trustee of evidence of the consent of
Holders as aforesaid, the Trustee shall join with the Issuer and the Company in
the execution of such supplemental indenture.
It shall not be necessary for any Act of Holders under this Section
902 to approve the particular form of any proposed supplemental indenture or
agreement, but it shall be sufficient if such Act shall approve the substance
thereof.
Section 903. Execution of Supplemental Indentures and Agreements.
In executing, or accepting the additional trusts created by, any
supplemental indenture, agreement, instrument or waiver permitted by this
Article Nine or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to the Trust
Indenture Act Sections 315(a) through 315(d) and Section 602) shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
stating that the execution of such supplemental indenture, agreement or
instrument is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture, agreement
or instrument which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
-56-
<PAGE>
<PAGE>
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article Nine
shall conform to the requirements of the Trust Indenture Act as then in effect.
Section 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article Nine may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Issuer shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Board of Directors, to any such supplemental indenture may be prepared and
executed by the Issuer and the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities.
Section 907. Notice of Supplemental Indentures.
Promptly after the execution by the Issuer, the Company and the
Trustee of any supplemental indenture pursuant to the provisions of Section 902,
the Issuer shall give notice thereof to the Holders of each Outstanding Security
affected, in the manner provided for in Section 106, setting forth in general
terms the substance of such supplemental indenture. Any failure of the Issuer to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture.
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal and Interest.
The Issuer shall duly and punctually pay the principal of, and
interest on, the Securities in accordance with the terms of the Securities and
this Indenture.
Section 1002. Maintenance of Office or Agency.
The Issuer shall maintain an office or agency where, subject to the
limitations applicable to Global Securities, Securities may be presented or
surrendered for payment. The Issuer also will maintain in The City of New York
an office or agency where, subject to the limitations applicable to Global
Securities, Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Issuer or the Company in
respect of the Securities and this Indenture may be served. The Corporate Trust
Office of the Trustee shall be such office or agency of the
-57-
<PAGE>
<PAGE>
Issuer, unless the Issuer shall designate and maintain some other office or
agency for one or more of such purposes. The Issuer will give prompt written
notice to the Trustee of the location and any change in the location of any such
offices or agencies. If at any time the Issuer shall fail to maintain any such
required offices or agencies, such presentations, surrenders, notices and
demands may be made or served at the office of the Trustee and the Issuer hereby
appoints the Trustee such agent as its agent to receive all such presentations,
surrenders, notices and demands.
The Issuer may from time to time designate one or more other offices
or agencies (in or outside of The City of New York) where, subject to the
limitations applicable to Global Securities, the Securities may be presented or
surrendered for any or all such purposes, and may from time to time rescind such
designation. The Issuer will give prompt written notice to the Trustee of any
such designation or rescission and any change in the location of any such office
or agency.
The Trustee shall initially act as Paying Agent for the Securities.
Section 1003. Money for Security Payments to Be Held in Trust.
If the Issuer or any of its Affiliates shall at any time act as Paying
Agent, it will, on or before each due date of the principal of, or interest on,
any of the Securities, segregate and hold in trust for the benefit of the
Holders entitled thereto a sum sufficient to pay the principal or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided, and will promptly notify the Trustee of its action or
failure so to act.
If the Issuer or any of its Affiliates is not acting as Paying Agent,
the Issuer will, on or before each due date of the principal of, or interest on,
any of the Securities, deposit with a Paying Agent a sum in same day funds
sufficient to pay the principal or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal or interest,
and (unless such Paying Agent is the Trustee) the Issuer will promptly notify
the Trustee of such action or any failure so to act.
If the Issuer is not acting as Paying Agent, the Issuer will cause
each Paying Agent other than the Trustee to execute and deliver to the Trustee
an instrument in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of,
or interest on, the Securities in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided;
-58-
<PAGE>
<PAGE>
(b) give the Trustee notice of any Default by the Issuer or the
Company (or any other obligor upon the Securities) in the making of any
payment of principal or interest on the Securities;
(c) at any time during the continuance of any such Default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all aspects with
the provisions of this Indenture relating to the duties, rights and
disabilities of such Paying Agent.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Issuer Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Issuer or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Issuer or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Issuer, in trust for the payment of the principal of, or interest on, any
Security and remaining unclaimed for two years after such principal or interest
has become due and payable shall promptly be paid to the Issuer on Issuer
Request, or (if then held by the Issuer) shall be discharged from such trust;
and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Issuer for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Issuer as trustee thereof, shall thereupon cease; provided, however, that
the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Issuer cause to be published once, in the
New York Times and The Wall Street Journal (national edition), and mail to each
such Holder, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification, publication and mailing, any unclaimed balance of such money then
remaining will promptly be repaid to the Issuer.
Section 1004. Corporate Existence.
Subject to Article Eight, the Issuer and the Company shall do or cause
to be done all things necessary to preserve and keep in full force and effect
the corporate existence and related rights and franchises (charter and
statutory) of the Company, the Issuer and the Issuer's Subsidiaries; provided,
however, that the Company, the Issuer and the Issuer's Subsidiaries shall not be
required to preserve any such right or franchise or
-59-
<PAGE>
<PAGE>
the corporate existence of any such Subsidiary if the Board of Directors of the
Issuer shall determine that the preservation thereof is no longer necessary or
desirable in the conduct of the business of the Company, the Issuer and the
Issuer's Subsidiaries taken as a whole and that the loss thereof would not
reasonably be expected to have a material adverse effect on the ability of the
Issuer or the Company to perform its obligations hereunder.
Section 1005. Payment of Taxes and Other Claims.
The Issuer and the Company shall pay or discharge or cause to be
paid or discharged, on or before the date the same shall become due and payable,
(a) all taxes, assessments and governmental charges levied or imposed upon the
Issuer, the Company or any of the Issuer's Subsidiaries shown to be due on any
return of the Issuer, the Company or any of the Issuer's Subsidiaries or
otherwise assessed or upon the income, profits or property of the Issuer, the
Company or any of the Issuer's Subsidiaries if failure to pay or discharge the
same could reasonably be expected to have a material adverse effect on the
ability of the Issuer or the Company to perform its obligations hereunder and
(b) all lawful claims for labor, materials and supplies, which, if unpaid, would
by law become a Lien upon the property of the Issuer, the Company or any of the
Issuer's Subsidiaries, except for any Lien permitted to be Incurred under
Section 1007, if failure to pay or discharge the same could reasonably be
expected to have a material adverse effect on the ability of the Issuer or the
Company to perform its obligations hereunder; provided, however, that the Issuer
and the Company or any of the Issuer's Subsidiaries shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings properly instituted and diligently conducted
and in respect of which appropriate reserves (in the good faith judgment of
management of the Issuer or the Company, as applicable) are being maintained in
accordance with GAAP.
Section 1006. Maintenance of Properties.
The Issuer and the Company shall cause all material properties owned
by the Issuer, the Company or any of the Issuer's Subsidiaries or used or held
for use in the conduct of their respective businesses to be maintained and kept
in good condition, repair and working order (ordinary wear and tear excepted)
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the reasonable judgment of the Issuer and the Company may be
consistent with sound business practice and necessary so that the business
carried on in connection therewith may be properly conducted at all times;
provided, however, that nothing in this Section shall prevent the Issuer and the
Company from discontinuing the maintenance of any of such properties if such
discontinuance is, in the reasonable judgment of the Issuer or the Company,
desirable in the conduct of the business of the Company, the Issuer and the
Issuer's Subsidiaries, taken as a whole, and
-60-
<PAGE>
<PAGE>
not reasonably expected to have a material adverse effect on the ability of
the Issuer or the Company to perform its obligations hereunder.
Section 1007. Limitation on Liens.
The Issuer shall not, and shall not permit any Restricted Subsidiary
to, Incur Debt secured by a Lien upon any Restricted Property ("Secured Debt")
without effectively and concurrently providing that the Securities (and, if the
Issuer shall so determine, any other Debt that is not subordinate in right of
payment to the Securities) shall be secured equally and ratably with (or prior
to) such Debt so long as such Debt shall be so secured. This restriction will
not apply to:
(1) Liens existing on the date of the Indenture;
(2) Liens affecting property of a Person existing at the time it
becomes a Restricted Subsidiary or at the time it is merged into or
consolidated with the Issuer or a Restricted Subsidiary or at the time of a
sale, lease or other disposition of the properties of such Person as an
entirety or substantially as an entirety to the Issuer or a Restricted
Subsidiary;
(3) Liens on property existing at the time of acquisition or
lease thereof or Incurred to secure payment of all or part of the purchase
price thereof or to secure Debt Incurred prior to, at the time of, or
within 185 days after the acquisition for the purpose of financing all or
part of the purchase price;
(4) Liens on property to secure all or part of the cost of
construction or improvements thereon or to secure Debt Incurred prior to,
at the time of, or within 185 days after completion of such construction or
making of such improvements, to provide funds for any such purpose;
(5) Liens securing Debt of the Issuer or any
Restricted Subsidiary owing to the Issuer or to another
Subsidiary of the Issuer;
(6) Liens required by any contract or statute in order to permit
the Issuer or its Subsidiaries to perform any contract or subcontract made
by it with or at the request of the United States, any State of the United
States, another country or any department, agency or instrumentality of the
foregoing;
(7) Liens securing only the Securities and/or the
Company Guarantees;
(8) Liens to secure bids, tenders, contracts (other than
contracts for the repayment of borrowed money), leases, statutory
obligations, surety and
-61-
<PAGE>
<PAGE>
appeal bonds, performance or return-of-money bonds, progress payments,
customs duties and other obligations of like nature arising in the ordinary
course of business; and
(9) Any extension, renewal, refinancing, refunding or replacement
(or successive extensions, renewals, refinancings, refundings or
replacements) of any Lien or Debt secured by any Lien, in whole or in part,
that is referred to in the foregoing clauses (1) through (8); provided,
however, that the principal amount of Debt so secured pursuant to this
clause (9) shall not exceed the principal amount of Debt so secured (plus
the aggregate amount of premiums, other payments, costs, and expenses
required to be paid or Incurred in connection with such extension, renewal,
refinancing, refunding or replacement) at the time of such extension,
renewal, refinancing, refunding or replacement, and that such extension,
renewal, refinancing, refunding or replacement shall be limited to all or
the part of the property (including improvements, alterations and repairs
on such property) subject to the encumbrance so extended, renewed,
refinanced, refunded or replaced (plus improvements, alterations and
repairs on such property).
In addition, the Issuer and any Restricted Subsidiaries may, without
securing the Securities, Incur Secured Debt in an aggregate principal amount
which, together with (without duplication) (a) the aggregate principal amount of
all other Secured Debt of the Issuer and the Restricted Subsidiaries (other than
Debt permitted to be secured under the provisions described in clauses (1)
through (9) inclusive, above), (b) the aggregate Value of Sale and Lease-Back
Transactions of the Issuer and Restricted Subsidiaries (other than Sale and
Lease-Back Transactions permitted under the provisions described in clauses (1)
and (2) inclusive of Section 1008), and (c) the aggregate principal amount of
all Funded Debt of the Restricted Subsidiaries (other than Funded Debt permitted
to be Incurred under provisions described in clauses (1) through (7) inclusive
of Section 1009), does not at any one time exceed 15% of Consolidated Net
Tangible Assets.
Section 1008. Limitation on Sale and Leaseback Transactions.
The Issuer shall not, and shall not permit any Restricted Subsidiary
to, enter into any arrangement with any Person (other than the Issuer or a
Restricted Subsidiary), providing for the leasing to the Issuer or a Restricted
Subsidiary for a period of more than three years of any Restricted Property
which has been or is to be sold or transferred by the Issuer or such Restricted
Subsidiary to such Person or to any other Person (other than the Issuer or a
Restricted Subsidiary), to which funds have been or are to be advanced by such
Person on the security of the leased property (each such arrangement, a "Sale
and Lease-Back Transaction") unless:
-62-
<PAGE>
<PAGE>
(1) the Issuer or such Restricted Subsidiary applies or commits to
apply an amount equal to the Value of such Sale and Lease-Back Transaction to
the repayment, redemption or retirement (other than any mandatory repayment,
redemption or retirement or by way of payment at maturity) within 185 days of
the effective date of such Sale and Lease-Back Transaction of Debt of the Issuer
or any Restricted Subsidiary which by its terms (a) matures at (or is extendible
or renewable, at the sole option of the obligor without the consent of the
obligee, to) a date more than 12 months after the date of creation of such Debt,
and (b) is not subordinated to the Securities or the Company Guarantees; or
(2) the Issuer or such Restricted Subsidiary applies the net proceeds
of the sale to investment in another Restricted Property within 185 days prior
or subsequent to such sale.
In addition, the Issuer and any Restricted Subsidiary may enter into a
Sale and Lease-Back Transaction with a Value which, together with (without
duplication) (a) the aggregate Value of all other Sale and Lease-Back
Transactions of the Issuer and the Restricted Subsidiaries (other than Sale and
Lease-Back Transactions permitted under the provisions described in clauses (1)
and (2) above), (b) the aggregate principal amount of all Secured Debt of the
Issuer and the Restricted Subsidiaries (other than Debt permitted to be secured
under the provisions described in clauses (1) through (9) inclusive under
Section 1007), and (c) the aggregate principal amount of all Funded Debt of the
Restricted Subsidiaries (other than Funded Debt permitted to be Incurred under
the provisions described in clause (1) through (7) inclusive under Section
1009), does not at the time of entering into exceed 15% of Consolidated Net
Tangible Assets.
Section 1009. Limitation on Restricted Subsidiary Funded Debt.
The Issuer shall not permit any Restricted Subsidiary to Incur any
Funded Debt. This restriction shall not apply to:
(1) Funded Debt of any Restricted Subsidiary existing on the date of
the Indenture;
(2) Funded Debt of a Person existing at the time it becomes a
Restricted Subsidiary or at the time it is merged into or consolidated with a
Restricted Subsidiary or at the time of a sale, lease or other disposition of
the properties of such Person as an entirety or substantially as an entirety to
a Restricted Subsidiary;
(3) Funded Debt Incurred prior to, at the time of, or within 185 days
after the acquisition of property or assets for the purpose of financing all or
part of the purchase price;
-63-
<PAGE>
<PAGE>
(4) Funded Debt Incurred prior to, at the time of, or within 185 days
after the construction, improvement or development of property or assets to
provide funds for any such purpose;
(5) Funded Debt owing by a Restricted Subsidiary to the Issuer or
another Subsidiary of the Issuer or, during such time as the Company Guarantees
remain in effect, to the Company or to any other Subsidiary of the Company;
(6) Funded Debt of a Restricted Subsidiary (a) that serves as a cash
management company for the Issuer and its Subsidiaries (or for the Company and
its Subsidiaries during such time as the Company Guarantees remain in effect)
and has no other material operations or business, (b) that, for every transfer
of funds to it, records a corresponding liability on its books and records to
the transferor thereof, and (c) whose assets will not materially exceed its
liabilities; and
(7) Any extension, renewal, refinancing, refunding or replacement (or
successive extensions, renewals, refinancings, refundings or replacements) of
any Funded Debt referred to in any of the foregoing clauses (1) through (6);
provided, however, that the principal amount of the Funded Debt Incurred
pursuant to this clause (7) shall not exceed the principal amount of Funded Debt
so extended, renewed, refinanced, refunded or replaced (plus the aggregate
amount of premiums, other payments, costs and expenses required to be paid or
Incurred in connection with such extension, renewal, refinancing, refunding or
replacement) at the time of such extension, renewal, refinancing, refunding or
replacement.
In addition, a Restricted Subsidiary may issue, incur, create, assume
or guarantee Funded Debt in an aggregate principal amount which, together with
(without duplication) (a) the aggregate principal amount of all other Funded
Debt of the Restricted Subsidiaries (other than Funded Debt permitted to be
Incurred under the provisions described in clauses (1) through (7) inclusive
above), (b) the aggregate principal amount of all Secured Debt of the Issuer and
the Restricted Subsidiaries (other than Debt permitted to be secured under the
provisions described in clauses (1) through (9) inclusive under Section 1007),
and (c) the aggregate Value of Sale and Lease-Back Transactions (other than Sale
and Lease-Back Transactions described in clauses (1) and (2) under Section 1008,
does not at the time of such incurrence exceed 15% of Consolidated Net Tangible
Assets.
Section 1010. Provision of Financial Statements.
Whether or not the Issuer is subject to Section 13(a) or 15(d) of
the Exchange Act (or any successor provision thereto), the Issuer will, to the
extent permitted under the Exchange Act, file with the Commission the annual
reports, quarterly reports
-64-
<PAGE>
<PAGE>
and other documents which the Issuer would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) (or any successor provision
thereto) if the Issuer were so subject, such documents to be filed with the
Commission on or prior to the respective dates (the "Required Filing Dates") by
which the Issuer would have been required so to file such documents if the
Issuer were so subject. The Issuer also will: (1) within 15 days of each
Required Filing Date file with the Trustee copies of the annual reports,
quarterly reports and other documents (excluding exhibits) which the Issuer
would have been required to file with the Commission pursuant to Section 13(a)
or 15(d) of the Exchange Act if the Issuer were subject to such Sections; and
(2) if filing such documents by the Issuer with the Commission is not permitted
under the Exchange Act, promptly upon written request supply copies of such
documents to any Holder. The Issuer will be deemed to have satisfied the
requirements set forth above if (i) the Company prepares, files, mails and
supplies reports and other documents prepared on a Consolidated basis of the
types required above, in each case within the applicable time periods and (ii)
the Issuer is not required to file such reports and other documents separately
under the applicable rules and regulations of the Commission (after giving
effect to any exemptive relief) because of the filings by the Company.
Section 1011. Statement by Officers as to Default.
(a) The Issuer shall deliver to the Trustee, on or before a date not
more than 120 days after the end of each fiscal year of the Issuer ending after
the date hereof, a written statement signed by two executive officers of the
Issuer, one of whom shall be the principal executive officer, principal
financial officer or principal accounting officer of the Issuer, as to
compliance herewith, including whether or not, after a review of the activities
of the Issuer during such year and of the Issuer's and the Company's performance
under this Indenture, to the best knowledge, based on such review, of the
signers thereof, the Issuer and the Company have fulfilled all of their
respective obligations and are in compliance with all conditions and covenants
under this Indenture throughout such year, as the case may be, and, if there has
been a Default specifying each Default and the nature and status thereof and any
actions being taken by the Issuer with respect thereto.
(b) When any Default or Event of Default has occurred and is
continuing, or if the Trustee or any Holder or the trustee for or the holder of
any other evidence of Debt of the Issuer or any Subsidiary gives any notice or
takes any other action with respect to a claimed default relating to Debt in an
amount aggregating in excess of $20,000,000, the Issuer shall deliver to the
Trustee by registered or certified mail or facsimile transmission followed by
hard copy an Officers' Certificate specifying such Default, Event of Default,
notice or other action, the status thereof and what actions the Issuer is taking
or proposes to take with respect thereto, within five Business Days of becoming
aware of its occurrence.
-65-
<PAGE>
<PAGE>
Section 1012. Waiver of Certain Covenants.
The Issuer may omit in any particular instance to comply with any
covenant or provision set forth in Sections 1006 through 1010 inclusive, if,
before or after the time for such compliance, the Holders of not less than a
majority in aggregate principal amount of the Securities at the time Outstanding
shall, by Act of such Holders, waive such compliance in such instance with such
covenant or provision, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Issuer and the duties of
the Trustee in respect of any such covenant or condition shall remain in full
force and effect.
ARTICLE ELEVEN
COMPANY GUARANTEES OF SECURITIES
Section 1101. Unconditional Company Guarantees.
The Company hereby irrevocably and unconditionally guarantees to each
Holder of a Security authenticated and delivered by the Trustee, and to the
Trustee, the performance under, and the due and punctual payment of the
principal of, and interest on (and, if applicable, the Tax Redemption Price or
Additional Amounts in respect of) such Security, when and as the same shall
become due and payable, whether upon maturity, acceleration, call for redemption
or otherwise in accordance with the terms of such Security and of this
Indenture.
The Company hereby agrees that its obligations hereunder shall be
absolute and unconditional and as if it were principal debtor and not merely
surety, irrespective of, and shall be unaffected by, any invalidity,
irregularity or unenforceability of any such Security or this Indenture, any
failure to enforce the provisions of any such Security or this Indenture, any
waiver, modification, or indulgence granted to the Issuer with respect thereto,
by the Holder of such Security or the Trustee, or any other circumstances which
may otherwise constitute a legal or equitable discharge of a surety or
guarantor; provided, however, that, notwithstanding the foregoing, no such
waiver, modification, indulgence or circumstance shall without the consent of
the Company increase the principal amount of a Security or the interest rate
thereon except as provided in said Security. The Company hereby agrees that
these Company Guarantees shall be enforceable without any demand, suit or
proceeding first against the Issuer. The Company hereby agrees to pay any and
all expenses (including reasonable counsel fees and expenses) incurred by the
Trustee in enforcing rights under the Company Guarantees. The Company hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of merger or bankruptcy of the Issuer, any right to require a
proceeding first against the
-66-
<PAGE>
<PAGE>
Issuer, protest or notice with respect to any such Security or the indebtedness
evidenced thereby and all demands whatsoever and covenants that the Company
Guarantees will not be discharged as to any such Security except by payment in
full of the principal thereof and interest thereon or as set forth below.
The Company Guarantees set forth in this Section 1101 shall not be
valid or become obligatory for any purpose with respect to a Security until the
certificate of authentication on such Security shall have been signed by the
Trustee.
If the obligations of the Issuer under this Indenture are assumed by
an acquiring or successor Person (other than a direct or indirect Subsidiary of
the Company) pursuant to Section 801, or upon the release of the Company
Guarantees in accordance with the provisions of Section 902, the Company
Guarantees shall terminate (without any action or consent required by the
Holders or the Trustee) and be of no further force and effect, the obligations
of the Company thereunder and under the Indenture shall be released, and the
Company shall cease to be a party to, or have rights or obligations under, this
Indenture and all references to the Company shall be deleted.
Section 1102. Execution of Company Guarantees.
Subject to Section 201, the Company hereby agrees to execute the
Company Guarantees in substantially the form set forth in Section 1103 to be
endorsed on each Security authenticated and delivered by the Trustee. The
Company Guarantees shall be executed and the corporate seal of the Company shall
be affixed, prior to the authentication of the Security on which it is endorsed,
and the delivery of such Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Company Guarantees on
behalf of the Company. Such signature may be a manual or facsimile signature and
may be imprinted or otherwise reproduced on the Company Guarantees, and for that
purpose the Company may adopt and use the facsimile signature of any such
officer, and in case any such officer who shall have signed the Company
Guarantees shall cease to be a duly authorized officer of the Company before the
Security on which the Company Guarantee is endorsed shall have been
authenticated and delivered by the Trustee or disposed of by the Issuer, such
Security nevertheless may be authenticated and delivered or disposed of as
though the officer who signed the Company Guarantees had not ceased to be a duly
authorized director or attorney of the Company.
Section 1103. Form of Company Guarantees.
The Company Guarantees to be endorsed on the Securities shall, subject
to Section 201, be in substantially the form set forth below:
-67-
<PAGE>
<PAGE>
[FORM OF COMPANY GUARANTEES]
GUARANTEE OF MILLENNIUM CHEMICALS INC.
For value received, Millennium Chemicals Inc., a Delaware corporation
(the "Company"), hereby irrevocably and unconditionally guarantees to the Holder
of the Security upon which this Company Guarantee is endorsed the performance
under, and the due and punctual payment of the principal of, Tax Redemption
Price and Additional Amounts with respect to, and interest, if any, on, said
Security, when and as the same shall become due and payable, whether upon
maturity, acceleration, call for redemption thereof or otherwise, according to
the terms thereof and of the Indenture referred to therein.
The Company hereby agrees that its obligations hereunder shall be
absolute and unconditional, irrespective of, and shall be unaffected by, any
invalidity, irregularity or unenforceability of said Security or said Indenture,
any failure to enforce the provisions of said Security or said Indenture, any
waiver, modification or indulgence granted to the Issuer with respect thereto by
the Holder of said Security or said Trustee, or any other circumstances which
may otherwise constitute a legal or equitable discharge of a surety or
guarantor; provided, however, that, notwithstanding the foregoing, no such
waiver, modification, indulgence or circumstance shall, without the consent of
the Company, increase the principal amount of said Security or increase the
interest rate thereon except as provided in said Security. The Company hereby
agrees that this Company Guarantee shall be enforceable without any demand, suit
or proceeding first against the Issuer. The Company hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
merger or bankruptcy of the Issuer, any right to require a proceeding first
against the Issuer, protest or notice with respect to said Security or the
indebtedness evidenced thereby and all demands whatsoever, and covenants that
this Company Guarantee will not be discharged except by payment in full of the
principal of and interest on said Security or pursuant to the provisions of
Article Eleven of the Indenture providing for release of this Company Guarantee
under the conditions provided for therein.
This Company Guarantee shall not be valid or become obligatory for any
purpose until the certificate of authentication on said Security shall have been
signed manually by the Trustee under the Indenture referred to in said Security.
Terms used herein which are defined in such Indenture shall have the respective
meanings assigned thereto in the Indenture.
THIS COMPANY GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.
-68-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers and its
corporate seal to be affixed or reproduced hereon.
Dated: [ ] MILLENNIUM CHEMICALS INC.
By:______________________________________
Name:
Title:
[SEAL]
Attest:
_______________________________________
Authorized Officer
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
Section 1201. Issuer's Option to Effect Defeasance or Covenant Defeasance.
The Issuer may, at its option by Board Resolution, at any time
following the 91st day after the applicable conditions set forth below in this
Article Twelve have been satisfied, with respect to the Securities, elect to
have either Section 1202 or Section 1203 be applied to all of the Outstanding
Securities (the "Defeased Securities").
Section 1202. Defeasance and Discharge.
Upon the Issuer's exercise under Section 1201 of the option applicable
to this Section 1202, the Issuer, the Company and any other obligor upon the
Securities, if any, shall be deemed to have been discharged from its obligations
with respect to the Defeased Securities on the date the conditions set forth in
Section 1204 below are satisfied (hereinafter, "defeasance"). For this purpose,
such defeasance means that the Issuer, the Company and any other obligor upon
the Securities shall be deemed to have paid and discharged the entire Debt
represented by the Defeased Securities, which shall thereafter be deemed to be
"Outstanding" only for the purposes of Section 1205 and the other Sections of
this Indenture referred to in clauses (a) and (b) below, and to have satisfied
all its other obligations under such Securities and this Indenture insofar as
such Securities are concerned (and the Trustee, at the expense of the Issuer and
upon Issuer Request, shall execute proper instruments acknowledging the same),
except for the following which shall survive until otherwise terminated or
discharged hereunder: (a) the
-69-
<PAGE>
<PAGE>
rights of Holders of Defeased Securities to receive, solely from the trust fund
described in Section 1204 and as more fully set forth in such Section, payments
in respect of the principal of, and interest on, such Securities, when such
payments are due from the trust referred to below, (b) the Issuer's obligations
with respect to such Defeased Securities under Sections 304, 305, 308, 1002 and
1003, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder, and (d) the defeasance provisions under this Article Twelve. Subject
to compliance with this Article Twelve, the Issuer may exercise its option under
this Section 1202 notwithstanding the prior exercise of its option under Section
1203 with respect to the Securities.
Section 1203. Covenant Defeasance.
Upon the Issuer's exercise under Section 1201 of the option applicable
to this Section 1203, the Issuer and the Company shall be released from its
obligations under any covenant or provision contained or referred to in Sections
1005 through 1011 inclusive, and the provisions of clause (3) of Section 801(a),
with respect to the Defeased Securities on and after the date the conditions set
forth in Section 1204 below are satisfied (hereinafter, "covenant defeasance"),
and the Defeased Securities shall thereafter be deemed to be not Outstanding for
the purposes of any direction, waiver, consent or declaration or Act of Holders
(and the consequences of any thereof) in connection with such covenants, but
shall continue to be deemed Outstanding for all other purposes hereunder. For
this purpose, such covenant defeasance means that, with respect to the Defeased
Securities, the Issuer and the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
Section or Article, whether directly or indirectly, by reason of any reference
elsewhere herein to any such Section or Article or by reason of any reference in
any such Section or Article to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 501(c), but, except as specified above, the remainder
of this Indenture and such Defeased Securities shall be unaffected thereby.
Section 1204. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
1202 or Section 1203 to the Defeased Securities:
(1) The Issuer irrevocably deposits with the Trustee as trust
funds in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of the Securities (a) money or (b) U.S.
Government Obligations, which through the payment of interest and principal
in respect thereof in accordance with their terms will provide (without any
reinvestment of such interest or principal), not later than one day before
the due date of any payment,
-70-
<PAGE>
<PAGE>
money, in an amount, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee at or prior to the time of such deposit,
sufficient to pay and discharge each installment of principal and interest
on the outstanding Securities on the dates such installments of principal
and interest are or may become due;
(2) No Default or Event of Default with respect to the Indenture
or the Securities shall have occurred and be continuing on the date of such
deposit, as evidenced to the Trustee in an Officers' Certificate from the
Issuer delivered to the Trustee concurrently with such deposit;
(3) The Issuer delivers to the Trustee an Opinion of Counsel who
shall be acceptable to the Trustee to the effect that the trust arising
from such deposit shall not constitute an "investment company" under the
Investment Company Act of 1940, or such trust shall be qualified under such
Act or exempt from regulation thereunder;
(4) In the case of the defeasance under Section 1202, the Issuer
delivers to the Trustee an Opinion of Counsel stating that (a) the Issuer
has received a ruling from the Internal Revenue Service, or (b) since the
date of the Indenture there has been a change in the applicable Federal
income tax law, in either case, to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders of the Securities will
not recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such defeasance had not occurred;
(5) In the case of the covenant defeasance, the Issuer delivers
to the Trustee an Opinion of Counsel to the effect that the Holders of the
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred;
(6) The Issuer has paid or duly provided for payment of all
amounts then due to the Trustee pursuant to the terms of the Indenture; and
(7) The Issuer has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance of the Securities have been complied with as
required by the Indenture.
-71-
<PAGE>
<PAGE>
Opinions of Counsel or Opinions of Independent Counsel required to be
delivered under this Section shall be in form and substance reasonably
satisfactory to the Trustee and may have qualifications customary for opinions
of the type required and counsel delivering such opinions may rely on
certificates of the Issuer or government or other officials customary for
opinions of the type required, which certificates shall be limited as to matters
of fact, including that various financial covenants have been complied with.
Section 1205. Deposited Money and U.S. Government Obligations to be Held in
Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
United States dollars and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 1204 in respect of the
Defeased Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (excluding the Issuer or
any of its Affiliates acting as Paying Agent), as the Trustee may determine, to
the Holders of such Securities of all sums due and to become due thereon in
respect of principal and interest, but such money need not be segregated from
other funds except to the extent required by law.
The Issuer shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is
imposed, assessed or for the account of the Holders of the Defeased Securities.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuer from time to time upon Issuer Request
any United States dollars or U.S. Government Obligations held by it as provided
in Section 1204 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect defeasance or covenant defeasance.
Section 1206. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or U.S. Government Obligations in accordance with Section 1202 or 1203,
as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Issuer's obligations under this Indenture and the
Securities and the Company's obligations under
-72-
<PAGE>
<PAGE>
the Company Guarantees shall be revived and reinstated, with present and
prospective effect, as though no deposit had occurred pursuant to Section 1202
or 1203, as the case may be, until such time as the Trustee or Paying Agent is
permitted to apply all such United States dollars or U.S. Government Obligations
in accordance with Section 1202 or 1203, as the case may be; provided, however,
that if the Issuer makes any payment to the Trustee or Paying Agent of principal
or interest on any Security following the reinstatement of its obligations, the
Trustee or Paying Agent shall promptly pay any such amount to the Holders of the
Securities and the Issuer shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the United States dollars and U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE THIRTEEN
REDEMPTION OF SECURITIES
Section 1301. Tax Redemption.
(a) Upon the occurrence of a "Tax Event," the Issuer may, at its
option and subject to the procedures set forth below, redeem (a "Tax
Redemption") the Securities, in whole only, at any time (the "Tax Redemption
Date") at a redemption price (the "Tax Redemption Price") of 100% of the
principal amount thereof plus accrued interest to the date fixed for redemption.
(b) A Tax Event occurs if, as the result of any change in or any
amendment to the laws, including any applicable double taxation treaty or
convention, of the United Kingdom (or any Other Jurisdiction) or of any
political subdivision or taxing authority thereof, affecting taxation, or any
change in the application or interpretation of such laws, double taxation treaty
or convention, which change or amendment becomes effective on or after the
original issuance date of any series of the Securities (or such later date on
which any assignee of the Issuer, the Company or any successor corporation to
the Issuer or the Company becomes such), it is determined by the Issuer, the
Company or such assignee (which terms, for purposes of the remainder of this
paragraph, include any successor thereto) that (i) the Issuer, the Company or an
assignee would be required to make additional payments in respect of principal
and interest on the next succeeding date for the payment thereof, or (ii) based
upon an Opinion of Independent Counsel to the Issuer, the Company or an
assignee, as a result of any action taken by any taxing authority of, or any
action brought in a court of competent jurisdiction in, the United Kingdom (or
an Other Jurisdiction) or any political subdivision or taxing authority thereof
or therein (whether or not such action was taken or brought with respect to the
Issuer, the Company or its assignee), which action is taken or brought on or
after the original issuance date of such series (or, in certain circumstances,
such later date on which a corporation becomes an assignee), the circumstances
described in clause (i) would exist.
-73-
<PAGE>
<PAGE>
(c) A Tax Redemption shall be for not less than all of
the Securities.
Section 1302. Applicability of Article.
Redemption of Securities at the election of the Issuer, the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article Thirteen.
Section 1303. Election to Redeem; Notice to Trustee.
The election of the Issuer to redeem Securities pursuant to Section
1301 shall be evidenced by an Issuer Order and an Officers' Certificate. In case
of any redemption at the election of the Issuer, the Issuer shall, not less than
45 nor more than 60 days prior to the Tax Redemption Date fixed by the Issuer
(unless a shorter notice period shall be satisfactory to the Trustee), notify
the Trustee in writing of such Tax Redemption Date.
Section 1304. Notice of Redemption.
In order to redeem the Securities, notice of redemption must be given
by first-class mail, postage prepaid, mailed not less than 30 nor more than 60
days prior to the Tax Redemption Date, to each Holder of Securities to be
redeemed, at his address appearing in the Security Register.
All notices of redemption shall state:
(a) the Tax Redemption Date;
(b) the Tax Redemption Price;
(c) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Tax Redemption Price;
(d) that on the Tax Redemption Date the Tax Redemption Price will
become due and payable upon each such Security, and that (unless the Issuer
shall default in payment of the Tax Redemption Price) interest thereon shall
cease to accrue on and after said date;
(e) subject to procedures with respect to Global Securities, the place
or places where such Securities are to be surrendered for payment of the Tax
Redemption Price; and
(f) the CUSIP number, if any, relating to such
Securities.
Notice of redemption of Securities to be redeemed at the election of
the Issuer shall be given by the Issuer or, at the Issuer's written request, by
the Trustee in the
-74-
<PAGE>
<PAGE>
name and at the expense of the Issuer. If the Issuer elects to give notice of
redemption, it shall provide the Trustee with a certificate stating that such
notice has been given in compliance with the requirements of this Section 1304.
The notice, if mailed in the manner herein provided, shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Security designated for repurchase as a whole
shall not affect the validity of the proceedings for the redemption of any other
Security.
Section 1306. Deposit of Tax Redemption Price.
On or prior to any Tax Redemption Date, the Issuer shall deposit with
the Trustee or with a Paying Agent (or, if the Issuer or any of its Affiliates
is acting as Paying Agent, segregate and hold in trust as provided in Section
1003) an amount of money in same day funds sufficient to pay the Tax Redemption
Price of, and (except if the Tax Redemption Date shall be an Interest Payment
Date or Special Payment Date) accrued interest on, all of the Securities which
are to be redeemed on that date. All money earned on funds held in trust by the
Trustee or any Paying Agent shall be remitted to the Issuer.
Section 1307. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Tax Redemption Date, become due and payable at the
Tax Redemption Price therein specified and from and after such date (unless the
Issuer shall default in the payment of the Tax Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Issuer at the Tax Redemption Price together with accrued interest
to the Tax Redemption Date; provided, however, that installments of interest
whose Stated Maturity is on or prior to the Tax Redemption Date shall be payable
to the Holders of such Securities, or one or more Predecessor Securities,
registered as such on the relevant Regular Record Dates and Special Record Dates
according to the terms and the provisions of Section 308.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid, bear interest
from the Tax Redemption Date at the rate borne by such Security.
-75-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
MILLENNIUM AMERICA INC.
By: _____________________________________
Name:
Title:
MILLENNIUM CHEMICALS INC.
By: _____________________________________
Name:
Title:
THE BANK OF NEW YORK, AS TRUSTEE
By: _____________________________________
Name:
Title:
-76-
<PAGE>
<PAGE>
MILLENNIUM AMERICA INC.
[---]% SENIOR NOTE DUE NOVEMBER __, 2006
GUARANTEED AS TO PAYMENT OF PRINCIPAL
AND INTEREST BY MILLENNIUM CHEMICALS INC.
CUSIP NO. ______________
No. __________ $_______________________
[If the Security is a Global Security, then insert --THIS SECURITY IS
A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO
AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS
SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND
NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME
OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
[If the Security is a Global Security and DTC is to be the Depositary
therefor, then insert -- UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
Millennium America Inc., a Delaware corporation (the "Issuer", which
term includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to ________________ or
registered assigns, the principal sum of ______________________ United States
dollars, [If the Security is a Global Security, then insert -- or such other
principal amount (which, when taken together with the principal amounts of all
other Outstanding Securities, shall not exceed $[ ] in the aggregate at any
one time) as may be set forth in the records of the Trustee hereinafter referred
to in accordance with
A-1
<PAGE>
<PAGE>
the Indenture,] on [ ], 2006, at the office or agency of the Issuer
referred to below, and to pay interest thereon from [ ], or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, semiannually on [ ] and [ ] in each year,
commencing [ ] at the rate of [ ]% per annum, in United States
dollars, until the principal hereof is paid or duly provided for. Interest shall
be computed on the basis of a 360- day year comprised of twelve 30-day months.
Any amount of interest on this Security which is overdue shall bear
interest (to the extent that payment thereof shall be legally enforceable) at
the rate per annum borne by this Security from the date such amount is due to
the day it is paid or made available for payment, and such overdue interest
shall be payable on demand.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or any Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest, which
shall be the [ ] or [ ] (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Any such interest not so punctually
paid or duly provided for shall forthwith cease to be payable to the Holder on
the relevant Regular Record Date, and may either be paid to the Person in whose
name this Security (or any Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture.
Payment of the principal of, Tax Redemption Price and Additional
Amounts with respect to, and interest on, this Security, and exchange or
transfer of this Security, will be made at the office or agency of the Issuer in
The City of New York maintained for that purpose (which initially will be the
Corporate Trust Office of the Trustee), or at such other office or agency as may
be maintained for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Issuer by check mailed to the address of the Person entitled
thereto as such address shall appear on the Security Register.
Additional Amounts in respect of principal and interest, if any, may
be made by the Company under circumstances relating to tax withholding by
certain foreign jurisdictions, such circumstances set forth in Section 301 of
the Indenture.
Except with respect to a Tax Redemption pursuant to Article Thirteen
of the Indenture, the Securities shall not be subject to redemption prior to
Maturity and shall not have the benefit of any sinking fund obligations.
A-2
<PAGE>
<PAGE>
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Security is entitled to the benefits of the Company Guarantees of
the punctual payment when due of the Indenture Obligations made in favor of the
Trustee for the benefit of the Holders, which Company Guarantees are subject to
release. Reference is hereby made to Article Eleven of the Indenture for a
statement of the respective rights, limitations of rights, duties and
obligations under the Company Guarantees. Each Holder, by holding this Security,
agrees to all terms and provisions of the Company Guarantees.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature of an authorized
signer, this Security shall not be entitled to any benefit under the Indenture,
or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers and its
corporate seal to be affixed or reproduced hereon.
MILLENNIUM AMERICA INC.
By:______________________________________
[SEAL] Name:
Title:
Attest:
_______________________________________
Authorized Officer
A-3
<PAGE>
<PAGE>
FORM OF REVERSE OF SECURITIES
MILLENNIUM AMERICA INC.
[ ]% SENIOR NOTE DUE NOVEMBER __, 2006
This Security is one of a duly authorized issue of Securities of the
Issuer designated as its [ ]% Senior Notes Due November __, 2006 (the
"Securities"), limited (except as otherwise provided in the Indenture referred
to below) in aggregate principal amount to $[ ], issued under and
subject to the terms of an indenture (the "Indenture") dated as of [ ],
among the Issuer, Millennium Chemicals Inc. (the "Company", which term includes
any successor corporation under the Indenture) and The Bank of New York, as
trustee (the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties, obligations and immunities thereunder of the Issuer, the Company, the
Trustee and the Holders of the Securities, and of the terms upon which the
Securities, with the Company Guarantees endorsed thereon, are, and are to be,
authenticated and delivered.
The Indenture contains provisions for defeasance at any time of (a)
the entire Debt on the Securities, and (b) certain restrictive covenants, in
each case upon compliance with certain conditions set forth therein.
If an Event of Default shall occur and be continuing, the principal
amount of all the Securities may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders) as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the Company and the rights of the Holders of the Securities under the
Indenture at any time by the Issuer, the Company and the Trustee with the
consent of the Holders of a majority in aggregate principal amount of the
Securities at the time Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Securities at the time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Issuer and the Company with certain
provisions of the Indenture and certain past Defaults under the Indenture and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
A-4
<PAGE>
<PAGE>
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Issuer, the
Company or any other obligor on the Securities (if the Company or such other
obligor is obligated to make payments in respect of the Securities), which is
absolute and unconditional, to pay the principal of, Tax Redemption Price and
Additional Amounts with respect to, and interest on, this Security at the times,
place and rate, and in the coin or currency, herein prescribed.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding a direction inconsistent with such request and shall have
failed to institute any such proceeding for 30 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to certain
suits described in the Indenture, including any suit instituted by the Holder of
this Security for the enforcement of any payment of principal hereof or interest
hereon on or after the respective due dates expressed herein.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Issuer may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Issuer in The City of New York, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
A-5
<PAGE>
<PAGE>
Prior to due presentment of this Security for registration of
transfer, the Issuer, the Company, the Trustee and any agent of the Issuer, the
Company or the Trustee may treat the Person in whose name this Security is
registered as the owner hereof for all purposes, whether or not this Security is
overdue, and neither the Issuer, the Company, the Trustee nor any such agent
shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
Dated: ____________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the [ ]% Senior Notes Due November __, 2006 referred to
in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By: _____________________________________
Authorized Signatory
A-6
<PAGE>
<PAGE>
FORM OF [ ]% SENIOR DEBENTURES DUE NOVEMBER __, 2026
MILLENNIUM AMERICA INC.
[ ]% SENIOR DEBENTURE DUE NOVEMBER __, 2026
GUARANTEED AS TO PAYMENT OF PRINCIPAL
AND INTEREST BY MILLENNIUM CHEMICALS INC.
CUSIP NO. ______________
No. __________ $_______________________
[If the Security is a Global Security, then insert --THIS SECURITY IS
A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO
AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS
SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND
NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME
OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]
[If the Security is a Global Security and DTC is to be the Depositary
therefor, then insert -- UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
Millennium America Inc., a Delaware corporation (the "Issuer", which
term includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay __________ to or registered
assigns, the principal sum of ________________ United States dollars, [If the
Security is a Global Security, then insert -- or such other principal amount
(which, when taken together with the principal amounts of all other Outstanding
Securities, shall not exceed $[-------] in the aggregate at any one time) as
B-1
<PAGE>
<PAGE>
may be set forth in the records of the Trustee hereinafter referred to in
accordance with the Indenture,] on [ ], 2026, at the office or agency
of the Issuer referred to below, and to pay interest thereon from [ ], or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, semiannually on [ ] and [ ] in each year,
commencing [ ] at the rate of [ ]% per annum, in United States dollars,
until the principal hereof is paid or duly provided for. Interest shall be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Any amount of interest on this Security which is overdue shall bear
interest (to the extent that payment thereof shall be legally enforceable) at
the rate per annum borne by this Security from the date such amount is due to
the day it is paid or made available for payment, and such overdue interest
shall be payable on demand.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or any Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest, which
shall be the [ ] or [ ] (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Any such interest not so punctually
paid or duly provided for shall forthwith cease to be payable to the Holder on
the relevant Regular Record Date, and may either be paid to the Person in whose
name this Security (or any Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture.
Payment of the principal of, Tax Redemption Price and Additional
Amounts with respect to, and interest on, this Security, and exchange or
transfer of this Security, will be made at the office or agency of the Issuer in
The City of New York maintained for that purpose (which initially will be the
Corporate Trust Office of the Trustee), or at such other office or agency as may
be maintained for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at the
option of the Issuer by check mailed to the address of the Person entitled
thereto as such address shall appear on the Security Register.
Additional Amounts in respect of principal and interest, if any, may
be made by the Company under circumstances relating to tax withholding by
certain foreign jurisdictions, such circumstances set forth in Section 301 of
the Indenture.
B-2
<PAGE>
<PAGE>
Except with respect to a Tax Redemption pursuant to Article Thirteen
of the Indenture, the Securities shall not be subject to redemption prior to
Maturity and shall not have the benefit of any sinking fund obligations.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Security is entitled to the benefits of the Company Guarantees of
the punctual payment when due of the Indenture Obligations made in favor of the
Trustee for the benefit of the Holders, which Company Guarantees are subject to
release. Reference is hereby made to Article Eleven of the Indenture for a
statement of the respective rights, limitations of rights, duties and
obligations under the Company Guarantees. Each Holder, by holding this Security,
agrees to all terms and provisions of the Company Guarantees.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature of an authorized
signer, this Security shall not be entitled to any benefit under the Indenture,
or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers and its
corporate seal to be affixed or reproduced hereon.
MILLENNIUM AMERICA INC.
By: _____________________________________
[SEAL] Name:
Title:
Attest:
_______________________________________
Authorized Officer
B-3
<PAGE>
<PAGE>
FORM OF REVERSE OF SECURITIES
MILLENNIUM AMERICA INC.
[ ]% SENIOR DEBENTURE DUE NOVEMBER __, 2026
This Security is one of a duly authorized issue of Securities of the
Issuer designated as its [ ]% Senior Debentures Due November __, 2026 (the
"Securities"), limited (except as otherwise provided in the Indenture referred
to below) in aggregate principal amount to $[ ], issued under and
subject to the terms of an indenture (the "Indenture") dated as of
[ ], among the Issuer, Millennium Chemicals Inc. (the "Company",
which term includes any successor corporation under the Indenture) and The Bank
of New York, as trustee (the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties, obligations and immunities thereunder of the
Issuer, the Company, the Trustee and the Holders of the Securities, and of the
terms upon which the Securities, with the Company Guarantees endorsed thereon,
are, and are to be, authenticated and delivered.
The Indenture contains provisions for defeasance at any time of (a)
the entire Debt on the Securities, and (b) certain restrictive covenants, in
each case upon compliance with certain conditions set forth therein.
If an Event of Default shall occur and be continuing, the principal
amount of all the Securities may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders) as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the Company and the rights of the Holders of the Securities under the
Indenture at any time by the Issuer, the Company and the Trustee with the
consent of the Holders of a majority in aggregate principal amount of the
Securities at the time Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Securities at the time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Issuer and the Company with certain
provisions of the Indenture and certain past Defaults under the Indenture and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
B-4
<PAGE>
<PAGE>
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Issuer, the
Company or any other obligor on the Securities (if the Company or such other
obligor is obligated to make payments in respect of the Securities), which is
absolute and unconditional, to pay the principal of, Tax Redemption Price and
Additional Amounts with respect to, and interest on, this Security at the times,
place and rate, and in the coin or currency, herein prescribed.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding a direction inconsistent with such request and shall have
failed to institute any such proceeding for 30 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to certain
suits described in the Indenture, including any suit instituted by the Holder of
this Security for the enforcement of any payment of principal hereof or interest
hereon on or after the respective due dates expressed herein.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Issuer may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Issuer in The City of New York, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
B-5
<PAGE>
<PAGE>
Prior to due presentment of this Security for registration of
transfer, the Issuer, the Company, the Trustee and any agent of the Issuer, the
Company or the Trustee may treat the Person in whose name this Security is
registered as the owner hereof for all purposes, whether or not this Security is
overdue, and neither the Issuer, the Company, the Trustee nor any such agent
shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
Dated: ____________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the [ ]% Senior Debentures Due November __, 2026
referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By: _____________________________________
Authorized Signatory
B-6
<PAGE>
<PAGE>
[LETTERHEAD OF WEIL, GOTSHAL & MANGES LLP]
NOVEMBER 21, 1996
MILLENNIUM AMERICA INC.
MILLENNIUM CHEMICALS INC.
99 WOOD AVENUE SOUTH
ISELIN, NEW JERSEY 08830
RE: MILLENNIUM AMERICA INC. AND MILLENNIUM
CHEMICALS INC. REGISTRATION STATEMENT ON
FORM S-1 (REGISTRATION NOS. 333-15975 AND 333-15975-01)
Ladies and Gentlemen:
We have acted as counsel to Millennium America Inc., a Delaware corporation
('Millennium America'), and Millennium Chemicals Inc., a Delaware corporation
('Millennium'), in connection with the preparation and filing with the
Securities and Exchange Commission (the 'Commission') of a Registration
Statement on Form S-1 (Registration Nos. 333-15975 and 333-15975-01) (as
amended, the 'Registration Statement') under the Securities Act of 1933, as
amended (the 'Securities Act'), and will act as counsel to Millennium America
and Millennium in connection with any future Registration Statement on Form S-1
which may be filed with the Commission pursuant to Rule 462(b) under the
Securities Act (a '462(b) Registration Statement'), with respect to (i) debt
securities to be issued by Millennium America in an aggregate principal amount
of $750,000,000 or such other amount as may be set forth in a pre-effective
amendment to the Registration Statement and any additional securities which may
be registered pursuant to Rule 462(b) under the Securities Act (the
'Securities') and (ii) guarantees to be endorsed on the Securities by Millennium
(the 'Guarantees'). The Securities will be issued, and the Guarantees will be
endorsed on the Securities, pursuant to the terms of an Indenture (the
'Indenture'), to be entered into among Millennium America, Millennium and The
Bank of New York, as trustee (the 'Trustee'), filed as Exhibit 4.1 to the
Registration Statement.
<PAGE>
<PAGE>
MILLENNIUM AMERICA INC.
MILLENNIUM CHEMICALS INC.
NOVEMBER 21, 1996
PAGE ?
In so acting, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of the Registration Statement, the Indenture,
the forms of Note and Debenture included in the Indenture, and such corporate
records, agreements, documents and other instruments, and such certificates or
comparable documents of public officials and of officers and representatives of
Millennium America and Millennium, and have made such inquiries of such officers
and representatives, as we have deemed relevant and necessary as a basis for the
opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such latter documents. As to all
questions of fact material to this opinion that have not been independently
established, we have relied upon certificates or comparable documents of
officers and representatives of Millennium America and Millennium.
Based on the foregoing, and subject to the qualifications stated herein, we
are of the opinion that:
1. The Securities are duly authorized and, when duly executed and
delivered by Millennium America, authenticated by the Trustee in accordance
with the terms of the Indenture, and sold and delivered by Millennium
America as contemplated by the Registration Statement and any 462(b)
Registration Statement, and paid for by the purchasers thereof, will
constitute the legal, valid and binding obligations of Millennium America,
enforceable against it in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a proceeding
at law or in equity).
2. The Guarantees are duly authorized and, when endorsed on the
Securities by Millennium and sold and delivered by Millennium as
contemplated by the Registration Statement and any 462(b) Registration
Statement, will constitute the legal, valid and binding obligations of
Millennium, enforceable against it in
<PAGE>
<PAGE>
MILLENNIUM AMERICA INC.
MILLENNIUM CHEMICALS INC.
NOVEMBER 21, 1996
PAGE ?
accordance with their terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
The opinions expressed herein are limited to the laws of the State of New
York, the corporate laws of the State of Delaware and the federal laws of the
United States, and we express no opinion as to the effect on the matters covered
by this letter of the laws of any other jurisdiction.
The opinions expressed herein are rendered solely for your benefit in
connection wit the transactions described herein. Those opinions may not be used
or relied upon by any other person, nor may this letter or any copies thereof be
furnished to a third party, quoted, cited or otherwise referred to without our
prior written consent, except that we hereby consent to the use of this opinion
as an exhibit to (i) the Registration Statement, (ii) any 462(b) Registration
Statement which may be filed by Millennium America and Millennium, and (iii)
applications to the securities commissioners of various states of the United
States for registration or qualification of the Securities and the Guarantees
under the securities laws of such states. We further consent to the reference to
our firm under the caption 'Legal Matters' in the Prospectus which is a part of
the Registration Statement or any 462(b) Registration Statement.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
<PAGE>
<PAGE>
EXHIBIT 11.1
Computation of per share earnings from continuing operations:
<TABLE>
<S> <C>
Shares of Common Stock outstanding based on actual Hanson
ordinary shares and ADSs outstanding and stock dividend ratio
of one for every 70.......................................... 74,408,257
Non performance based portion of restricted shares
issued to executive officers and key employees............... 728,067
Shares issued to the Company's non employee
directors.................................................... 4,026
----------
Shares outstanding............................................. 75,140,350
----------
----------
YEAR ENDED DECEMBER 31, 1995
Pro forma income from continuing operations 382,000,000
----------- = 5.08
Shares Outstanding 75,140,350
NINE MONTHS ENDED SEPTEMBER 30, 1996
Pro forma income from continuing operations 130,000,000
----------- = 1.73
Shares outstanding 75,140,350
</TABLE>
Historical earnings per share were not presented because the Company was
comprised of direct or indirect subsidiaries of Hanson PLC.
<PAGE>
<PAGE>
Exhibit 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1996 FISCAL YEAR ENDED SEPTEMBER 30,
PROFORMA ACTUAL PROFORMA ACTUAL 1994 1993 1992 1991
-------- ------ -------- ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRE-TAX INCOME 314 270 636 554 131 151 200 237
ADJUST FOR:
SUBURBAN EARNINGS (32) (32)
SUBURBAN CASH DISTRIBUTION 5 5
INTEREST EXPENSE (A) 129 171 157 240 206 14 6 3
RENT EXPENSE (A) 13 13 20 20 19 1 1 1
-------- ------ -------- ------ ----- ------ ------ ------
TOTAL 429 427 813 814 356 166 207 241
(A) FIXED CHARGES 142 184 177 260 225 15 7 4
-------- ------ -------- ------ ----- ------ ------ ------
3.0:1 2.3:1 4.6:1 3.1:1 1.6:1 11.1:1 29.6:1 60.3:1
</TABLE>
<PAGE>
<PAGE>
SIGNIFICANT SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION IN
NAME WHICH ORGANIZED PARENT OR INVESTOR LINE OF BUSINESS
- -------------------------------- --------------- --------------------------------- ------------------------
<S> <C> <C> <C>
Millennium Overseas Holdings United Kingdom Millennium Chemicals Inc. Chemical company
Limited
Delaware Millennium Overseas Holdings Chemical company
Millennium America Holdings Inc. Limited
Millennium America Inc. Delaware Millennium America Holdings Inc. Chemical company
Millennium Holdings Inc. Delaware Millennium America Inc. Chemical company
Quantum Chemical Corporation Virginia Millennium Holdings Inc. Chemical company
SCM Chemicals Inc. Delaware Millennium Holdings Inc. Chemical company
HMB Holdings Inc. Delaware SCM Chemicals Inc. Holding company
MHC Inc.(1) Delaware HMB Holdings Inc. Discontinued operations
<CAPTION>
UNNAMED WHOLLY-OWNED
SUBSIDIARIES OF NAMED
SUBSIDIARIES CARRYING ON
THE SAME LINE OF
BUSINESS
--------------------------------------------
NAME DOMESTIC FOREIGN
- -------------------------------- -------------------- --------------------
<S> <C> <C>
Millennium Overseas Holdings 8
Limited
Millennium America Holdings Inc.
Millennium America Inc.
Millennium Holdings Inc. 3
Quantum Chemical Corporation 11 6
SCM Chemicals Inc. 2
HMB Holdings Inc.
MHC Inc.(1) 46 27
</TABLE>
- ------------
(1) The discontinued operations held by MHC Inc. include subsidiaries which, if
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary as of the end of the year covered by this report.
<PAGE>
<PAGE>
EXHIBIT 23.1(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of (i) our report dated July 2, 1996, except
as to the subsequent events described in Notes 12 and 13 which are as of October
30, 1996, relating to the combined financial statements of Millennium Chemicals
Inc., (ii) our report dated October 29, 1993 related to the consolidated
financial statements of Quantum Chemical Corporation, and (iii) our report dated
July 2, 1996 related to the financial statement of Millennium Chemicals Inc.,
all of which appear in such Prospectus. We also consent to the application of
the report on the combined financial statements of Millennium Chemicals Inc. to
the Financial Statement Schedule for the year ended December 31, 1995, the three
months ended December 31, 1994 and the two fiscal years in the period ended
September 30, 1994 listed under Item 16(b) of this Registration Statement when
such schedule is read in conjunction with the financial statements referred to
in our report. The audits referred to in such report also included this
schedule. We also consent to the reference to us under the heading 'Experts' in
the Prospectus.
PRICE WATERHOUSE LLP
Morristown, NJ
November 20, 1996
<PAGE>
<PAGE>
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
MILLENNIUM AMERICA INC.
(Exact name of obligor as specified in its charter)
Delaware 98-0045719
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
99 Wood Avenue South
Iselin, New Jersey 08830
(Address of principal executive offices) (Zip code)
----------------------
MILLENNIUM CHEMICALS INC.
(Exact name of obligor as specified in its charter)
Delaware 22-3436215
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
99 Wood Avenue South
Iselin, New Jersey 08830
(Address of principal executive offices) (Zip code)
----------------------
% Senior Notes Due 2006
% Senior Debentures Due 2026
(Title of the indenture securities)
================================================================================
<PAGE>
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10004
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None. (See Note on page 3.)
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24
OF THE COMMISSION'S RULES OF PRACTICE.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
1a and 1b to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
-3-
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 8th day of November, 1996.
THE BANK OF NEW YORK
By: /S/MARY LAGUMINA
-------------------------------
Name: MARY LAGUMINA
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
<PAGE>
Exhibit 7
================================================================================
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 1996,
published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ........................... $ 2,461,550
Interest-bearing balances .................................................... 835,563
Securities:
Held-to-maturity securities .................................................. 802,064
Available-for-sale securities ................................................ 2,051,263
Federal funds sold in domestic offices of the bank:
Federal funds sold ............................................................. 3,885,475
Loans and lease financing receivables:
Loans and leases, net of unearned income ..................................... 27,820,159
LESS: Allowance for loan and lease losses .................................... 509,817
LESS: Allocated transfer risk reserve......................................... 1,000
Loans and leases, net of unearned income, allowance, and reserve ........... 27,309,342
Assets held in trading accounts ................................................ 837,118
Premises and fixed assets (including capitalized leases) ....................... 614,567
Other real estate owned ........................................................ 51,631
Investments in unconsolidated subsidiaries and associated companies ............ 225,158
Customers' liability to this bank on acceptances outstanding ................... 800,375
Intangible assets .............................................................. 436,668
Other assets ................................................................... 1,247,908
-----------
Total assets ................................................................... $41,558,682
===========
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C>
LIABILITIES
Deposits:
In domestic offices .......................................................... $18,851,327
Noninterest-bearing .......................................................... 7,102,645
Interest-bearing ............................................................. 11,748,682
In foreign offices, Edge and Agreement subsidiaries, and IBFs ................ 10,965,604
Noninterest-bearing .......................................................... 37,855
Interest-bearing ............................................................. 10,927,749
Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs:
Federal funds purchased ...................................................... 1,224,886
Securities sold under agreements to repurchase ............................... 29,728
Demand notes issued to the U.S. Treasury ....................................... 118,870
Trading liabilities ............................................................ 673,944
Other borrowed money:
With original maturity of one year or less ................................... 2,713,248
With original maturity of more than one year ................................. 20,780
Bank's liability on acceptances executed and outstanding ....................... 803,292
Subordinated notes and debentures .............................................. 1,022,860
Other liabilities .............................................................. 1,590,564
-----------
Total liabilities .............................................................. 38,015,103
-----------
EQUITY CAPITAL
Common stock ................................................................... 942,284
Surplus ........................................................................ 525,666
Undivided profits and capital reserves ......................................... 2,078,197
Net unrealized holding gains (losses) on available-for-sale securities ........ 3,197
Cumulative foreign currency translation adjustments ............................ (5,765)
------------
Total equity capital ........................................................... 3,543,579
------------
Total liabilities and equity capital ........................................... $41,558,682
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot |
Thomas A. Renyi | Directors
Alan R. Griffith |
===============================================================================
<PAGE>
